Shame if somethin’ happened to it:
Obama Administration officials and various state Attorneys General looked gleeful yesterday announcing a $25 billion settlement with five big tobacco—er, banks—and why not? The bankers coughed up shareholder money to settle a pseudo-foreclosure scandal, while the White House moved closer to its political goal of guaranteeing every home mortgage.
Rarely have so many politicians cashed in so blatantly on so little wrong-doing. In 2010, a group of AGs led by Iowa’s Tom Miller spotted political gold in reports that some bank employees had approved legal documents without proper review. They quickly spun this into the fairy tale that evil banks were kicking borrowers out of their homes for no good reason. Former Ohio Attorney General Richard Cordray, who parlayed his scare campaign into a job running the new Consumer Financial Protection Bureau, said banks had “a business model based on fraud.”
The banks did have sloppy paperwork practices, but they were also dealing with a historic wave of foreclosures created in large part by government-backed Fannie Mae and Freddie Mac. To date there’s no evidence that borrowers current on their mortgage payments were improperly ejected from their homes. Federal regulators have already stepped in, conducted lengthy audits, forced banks to change their internal procedures and yesterday levied $394 million in fines against four of them.
You might think $394 million is a lot of money, and it is. Don’t don’t forget the vig:
At least $10 billion will go toward principal reduction for delinquent borrowers or those on the brink of foreclosure with loans issued by private lenders. In other words, Washington is taking money from bank shareholders and investors in mortgage-backed securities, who will see the value of their holdings fall, and giving it to people who aren’t paying their bills. Welcome to the “fairness” era.
The settlement also has at least $3 billion to refinance homeowners who pay their bills but owe more than their home is worth—in other words, people who bought more home than they could afford. Another $7 billion will go to “other forms of relief,” including loan forbearance for the unemployed, “anti-blight programs,” “transitional assistance” and other political transfer payments.
Incredibly, the settlement doesn’t prevent states or the feds from pursuing more criminal cases, civil-rights or securitization lawsuits, or more claims against the Mortgage Electronic Registration Systems. So even after this round of political extortion, the banks will be asked to pay again and again. They have little ability to say no because Mr. Cordray and regulators now have life-or-death control over nearly every bank product. Ma and Pa Barker should have gone to law school and run for office.
Put another way:
Now, what this is, folks, is social justice at work, because after all, the banks were forced by the government at the point of a gun to loan to people they knew couldn’t afford the mortgages. That’s what really happened. That’s the root of the subprime mortgage crisis. It was the government forcing the banks to lend money to people that never had a chance, would never be able to repay the loans. Social justice, affordable housing, the so-called good intentions and don’t judge us on the failure of our results.
So now the banks have the pay the price for making those bad loans. This is all part of continuing the ruse that the banks were the originators of this scandal and the originators of the problem. And so now there’s a $25 billion shakedown. I’m gonna tell you, Snerdley, you can apply for it, but I’m gonna tell you — all of you mortgage people — you are not gonna see a dime. This is nothing but a slush fund. What Obama has done was gone to the bank, ’cause they’re having trouble fundraising. They’re nowhere near their billion dollars they’ve been bragging about. You ought to see what they’re gonna do at their convention. They’re gonna charge, what is it, a million dollars for a skybox. A million-dollar donation or something like that, to witness Obama’s acceptance speech. I think there’s a million-dollar charge or donation for something.
Now, this is Obama servicing his constituents. He is fulfilling that campaign promise he made to pay their mortgages. You may think, “Come on, Rush, he didn’t promise that.” We ought to dig out sound bites from one of his early town halls in 2009, the famous one that was in I think Tampa where a woman, who it turned out had a couple of houses or whatever, stood up and wanted a new kitchen. She thought that’s what the election of Obama meant. That’s what she thought it meant. I’m sure a lot of people that voted for Obama thought that’s what their lives held in store for them. Obama was gonna give them a house. Obama was gonna make sure that all the transgressions and all the discrimination and all the evil that had been perpetrated against these people in all of these years since the country was founded is gonna be fixed here.
And just for fun:
OBAMA: Millions of Americans who did the right thing and the responsible thing — shopped for a house, secured a mortgage that they could afford, made their payments on time — were nevertheless hurt badly by the irresponsible actions of others.
RUSH: Stop the tape! Stop the tape! Stop! Stop! Stop the tape! I love this. This is the setup: “Millions of Americans who did the right thing … were nevertheless hurt badly by the irresponsible actions of others.” Now, normally in the real world that would be a setup for the irresponsible citizens who took advantage of a program that they didn’t need. But, no, that’s not who he’s talking about, the irresponsible actions of others. Here’s is who he’s talking about.
OBAMA: Lenders who sold loans to people, uh, who couldn’t afford them — by buyers who knew they couldn’t afford them, by speculators who were looking to make a quick buck; by banks that took risky mortgages, packaged them up, uh, and traded them off for large profits. It was wrong, and it cost more than four million families their homes to foreclosure.
RUSH: That’s right. They were tricked! These poor schlubs, they were tricked into this, but now Obama’s getting even with the tricksters. Obama is getting even with these evil bankers, the lenders who sold loans to people that couldn’t afford them. I can’t tell you how big a lie all of this is. All of this is a lie.
This is what happens when the government intervenes in the market (beyond regulation). By rewarding, even demanding, bad behavior, the government required banks to make loans that they wouldn’t have otherwise made—for financial reasons alone. But Obama learned well from his former chief of staff: a crisis is a terrible thing to waste.