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Matt Taibbi - Obama Goes All Out For Dirty Banker Deal

By Matt Taibbi

Rolling Stone

Excerpted below.

A power play is underway in the foreclosure arena.

On the one side is Eric Schneiderman, the New York Attorney General, who is conducting his own investigation into the era of securitizations – the practice of chopping up assets like mortgages and converting them into saleable securities – that led up to the financial crisis of 2007-2008.

On the other side is the Obama administration, the banks, and all the other state attorneys general.

This second camp has cooked up a deal that would allow the banks to walk away with just a seriously discounted fine from a generation of fraud that led to millions of people losing their homes.

The idea behind this federally-guided “settlement” is to concentrate and centralize all the legal exposure accrued by this generation of grotesque banker corruption in one place, put one single price tag on it that everyone can live with, and then stuff the details into a titanium canister before shooting it into deep space.

This is all about protecting the banks from future enforcement actions on both the civil and criminal sides. The plan is to provide year-after-year, repeat-offending banks like Bank of America with cost certainty, so that they know exactly how much they’ll have to pay in fines (trust me, it will end up being a tiny fraction of what they made off the fraudulent practices) and will also get to know for sure that there are no more criminal investigations in the pipeline.  

This deal will also submarine efforts by both defrauded investors in MBS and unfairly foreclosed-upon homeowners and borrowers to obtain any kind of relief in the civil court system. The AGs initially talked about $20 billion as a settlement number, money that would “toward loan modifications and possibly counseling for homeowners,” as Gretchen Morgenson reported the other day.

To give you an indication of how absurdly small a number even $20 billion is relative to the sums of money the banks made unloading worthless crap subprime assets on foreigners, pension funds and other unsuspecting suckers around the world, consider this: in 2008 alone, the state pension fund of Florida, all by itself, lost more than three times that amount ($62 billion) thanks in significant part to investments in these deadly MBS. 

So this deal being cooked up is the ultimate Papal indulgence. By the time that $20 billion (if it even ends up being that high) gets divvied up between all the major players, the broadest and most destructive fraud scheme in American history, one that makes the S&L crisis look like a cheap liquor store holdup, will be safely reduced to a single painful but eminently survivable one-time line item for all the major perpetrators.

In Schneiderman we have at least one honest investigator who doesn’t agree, which is to his great credit. But everyone else is on Wylde’s side now. The Times story claims that HUD Secretary Shaun Donovan and various Justice Department officials have been leaning on the New York AG to cave, which tells you that reining in this last rogue cop is now an urgent priority for Barack Obama.

Why?  My theory is that the Obama administration is trying to secure its 2012 campaign war chest with this settlement deal.  If Barry can make this foreclosure thing go away for the banks, you can bet he’ll win the contributions battle against the Republicans next summer.

Read the rest at Rolling Stone...



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Reader Comments (7)

The administration also says that the proposed settlement would require the banks to write down the principal balance on underwater loans. According to news reports, the banks are likely to pay around $20 billion in the deal. With 14.6 million homeowners owing $753 billion more on their mortgages than their homes are worth, how far does the administration think $20 billion would go?

Aug 25, 2011 at 3:06 PM | Registered CommenterDailyBail
Obama does love those banksters. Wouldn't you if they patted you on the head, and said "Good Boy"?
Aug 26, 2011 at 1:33 PM | Unregistered CommenterJohn Mack
The change we got: dysfunctional "negotiations," and cynical fund raising tactics. Yikes!
Aug 26, 2011 at 1:36 PM | Unregistered CommenterJohn Mack
How did this morass of fraud come to be? Machiavelli says, ' A king's realm is much like the lawn in front of his manor. Rebellion is the dissemination of the seeds from a weed. If there is rebellion in the air, it is because of the weed in the lawn. To stop dissemination of a weed, a wise king will have his gardener remove the weed and be sure to get the roots. To neglect removing the root guarantees a return of the weed and its negative impact on the lawn. (Approximate quote. Not exact)
In the past, a reasonably loyal government existed in the U.S.. Who benefits from this one we now own?? They are the weeds in our lawns and gardens. Long live the Constitution. Dump the Fed. Dr. Ron Paul for president. Dig weeds TODAY. Don't write. Dig.
Aug 26, 2011 at 3:39 PM | Unregistered CommenterHoward T. Lewis III
A simple matter of the criminal enterprise in chief protecting his criminal enterprise and felonious cronies. He and they are evil incarnate.
Aug 27, 2011 at 8:41 PM | Unregistered CommenterDwayne
They are going to need to print more money next week to cover the hurricane damage. More to follow.

Aug 28, 2011 at 9:19 AM | Unregistered Commenterjohn
... the American consumer class that matters to the global economy knows full well that anything less than a combination of real principle reductions AND rate reductions, with no change in length of term and no APR (anal penetration rate) reset will just be another boon to the banks spun as a great deal negotiated by the democratic party of social and economic justice.

The wrist slap, and the refi, are the same steaming pile of hosre shit being served up as interventionist caviar.

Anything to twist, bend or circumvent the RULE OF LAW--the ONLY intervention we really need ...
Aug 29, 2011 at 11:41 AM | Unregistered CommenterWil Martindale

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