Banks aren’t paying for transgressions

Five major banks recently agreed to a $40 billion deal to resolve claims of abusing borrowers while pursuing home foreclosures. Taxpayer money could end up paying a big part of the banks’ bill, according to a Feb. 17 Financial Times article. The deal requires the banks to pay $5 billion in cash fines and reduce $35 billion in monthly payments and loan balances for distressed U.S. borrowers.

The catch is that these banks can count future loan modifications against a federal $30 billion 2009 Home Affordable Modification Program, shifting most of the financial burden to us taxpayers.

The U.S. Treasury Department’s acceptance of that previously undisclosed clause in the settlement effectively opens the door for these banks to use federal taxpayer dollars from the HAMP program to settle the claims of the delinquent homeowners.

The agreement under the guise of holding the big banks accountable for the mortgage fiasco is really a ruse by Treasury. What the Obama administration has done is give the appearance that the big banks are paying for their past transgressions. While the public perception is that the Republican Party is aligned with big bank interests, in reality it is Washington’s current administration that is in bed with the big banks.

Past and future campaign contributions for the incumbent party and lobbying costs to shore up the Obama administration’s crony capitalism are more likely the big banks’ primary costs for the gargantuan settlement. Once again that leaves us taxpayers picking up a majority of the costs of the $40 billion settlement.

Mike Tennis

Sleepy Hollow