Yowza. It's probably a combination of JP Morgan Chase coughing up $13 billion in fines and the Justice Department getting bolder on the back of recent successes, but apparently there's a whisper number circulating in bank boardrooms about how much it's going to take to make the whole mortgage mess go away: $50 Billion - and that doesn't include the $13 billion from JPM. Think about that for a minute. That's almost 10% of the original TARP program. In fines.
It's not that the banks don't deserve to pay - they do. But there are a lot of mitigating factors involved, not the least of which is the fact that the majority of the problems were caused by a handful of bad actors who are no longer in existence. It's also important to note that the acquisition of those companies by their present owners wasn't always completely voluntary, either. Now I know you take the good with the bad in any acquisition, but if you ended up owning Countrywide or WaMu, you bought some substantial losses. Nevermind Fannie and Freddie, because you know they're not paying a red cent for their part in all the shenanigans.
So $63 billion. Wow. Who thinks this number is high? Anyone brave enough to buck the conventional wisdom and say the fines won't amount to that much? It was often bandied about in late 2008 that the $700 billion they (initially) spent to save the banks could have brought every underwater mortgage in America current. I don't know if that's true, exactly, but I don't see any compelling reason to doubt it either. When I see something like $63 billion in fines, and all the difficulties that TARP created, I have to think the money might have been better spent just paying those mortgages and being done with it. The problem with that is that a large number of those mortgages would have gone back into default the following month.
So it'll be interesting to see how this plays out. It really makes me wonder how anyone buys into the stock of any of the major players in the mortgage business a decade ago. The fines and penalties those companies are facing are just such a wild card right now, and the Justice Department is on a roll.
If Liz Warren becomes President in 2016 all bets are off, though. Those fines will easily double.
Methinks bankers would decide $63 billion would be cheap when counterbalanced with oblivion. Frankly, given the pervasive principal-agent conflicts in the American banking system, the employees are probably more than willing to pay up to put this behind them.
Eddie, you have to remember that bringing mortgages current and making the payments affordable to someone who doesn't have a job/makes substantially less than prior to the crisis are two totally different things. Its useless if in 6 months everyone is in the same place because the affordability factor hasn't changed.
I'm was under the impression that FMCC and FNMA pay out all dividends to senior preferred (i.e. US gov't).
I am waiting for lawsuits against the Fed and SEC for their role in all this.
And if Liz Warren becomes President we are all fucked.
EDIT - I take that back. She will be as ineffectual as Obama.
RE SEC, Ratings agencies, Fannie, and Freddie - I don't understand why they haven't gone after the executives there yet. Slam dunk cases. It took a while to get the ball rolling on cracking down on banks, so I'll hold off on becomming cynical just yet. Besides, judging by the "fucking duh obvious" levels on my politocalculator, these are good marks to parade before the public around election time.
RE amount of fines - we keep hearing "A fine, eh? Whatever, that's nothing. We make that every quarter". So the gov't is wising up....fine them til it hurts, and then fine them some more. It's like German speeding tickets: if you make more money, the fine is higher so they know it hurts the same. Will make the entire industry think twice about fucking up again, and they got off lucky: have you seen what happens to corrupt bankers in some other countries? OFF WITH THEIR HEADS!
RE people who lost their homes - they already got their punishment. I think it's totally fine that banks now get what's coming to them: the little guy screwed up too but the banks should know better, or so we're always told. As an employee of an institution that had no part in the crisis and took no bailout money, I'm all for it. Why should my competition get a break? Bend them over and give it to them good. Not sure why this idea is "debatable". You breaks the law, you pays the price.
RE punishing the politicians for their part in the crisis - they were punished. Do you see any Republicans in the White House? Did you see the GOP get their ass handed to them last fall? And last spring? And basically every year since 2008? Sure some dems were involved, and sure a fair share of them make my skin crawl, but the blame for the debacle lays squarely on the shoulders of the GOP. They're the party of "holding people accountable", yes? Good, no GOP in the White House for the better part of a decade. Maybe they'll get their heads out of their asses and go back to doing things the way they've talked about since Reagan but haven't done. The dems get an even worse punishment: they have to spend their days fixing the damn mess. I'll give them this....they're working a lot harder than they thought they'd have to.
RE Liz Warren - no one will vote for her. Period, end of story, just no. She thinks she has a career in politics, and a very small and vocal minority does as well, but she'll be lucky to survive after Obama leaves office. I see her as maybe a Senator long term, but there's absolutely no hope for her at all as president. I'm not even sure she could hack it as a running mate. Obama has effectively put every major democratic pet idea of the last three generations into action (or soon will), so there's nothing left for a pissed off crusader like Warren to be all "cluck cluck cluck" about anymore.
I fail to see how banks did get punished. Bear and Lehman failed. Merrill Lynch no longer exists as a separate entity. WAMU no longer exists. Thousands and thousands of bankers left the industry. Citi and BoA struggled for years. Banks paid. Now the government is just looking to milk some easy money from them. Yet they ignore the Fed that kept rates too low for too long (wow, thought they were there to prevent, not cause, bubbles).
Banks paid? Justice has been done? The bad guys are all in jail? Tell me more.
And we're still on the FED? They cooperated with Bush. If you want to drag Greenspan out of retirement and kick his ass, go for it. Fuck him up, I'm not going to get in your way.
Always love the "jail bankers" comment. Please point out the individual that broke criminal law and if it can be proven in court. Taking on too much risk isn't a criminal offense.
If I accidentally fall in an antique shop and break your shit, causing you to lose a lot of money, I am not arrested and put in jail. I have a civil liability, not a criminal one. I understand the desire for revenge, I mean all these innocent people that were forced to buy mansions and have the intelligence of a tangerine because they do whatever a fucking mortgage banker (aka turd) tells them.
Cooperated with Bush? Is that supposed to be an excuse? Who let Obama in this thread. Blaming Bush, c'mon.
Jail bankers? You said that not me. Listen, this conversation has been done to death and if you want to argue just to argue....go for it. "BAD GUYS" as in people like Angelo Mizillo, or BAD GUYS as in an entity like the gift that keeps on giving he left for everyone: Countrywide. I'm not splitting hairs, I don't have to, I'm not a lawyer.
As for blaming Bush....hell fucking yeah. Who's administration pushed for an "ownership society" as a means of juicing the economy? Who's administration looked the other way on basically every misdeed in the financial sector? Who's overarching policy agenda led to this? You want to blame the gov't....HE WAS LEADING THE GOV'T AT THE TIME. Sure Clinton undid Glass-Seigel and he gets some blame too, just ask Sandy Weil. But it's one thing to make a lousy policy decision in the 90's and it's another to see that error and raise you a huge crash and burn a decade later. When Paul Krugman said that Bush's only logical move to continue on his trajectory of error was a housing bubble, it was a warning, not a prescription! Hell, up until 2003, I was Bush's biggest fan, I even worked on his election as a student. Not anymore. Maybe you should wise up too. Think of it this way: if they hadn't screwed up, our industry wouldn't be the mess it is now, and we wouldn't be seeing the crap 'solutions' we're seeing now.
Pushed an ownership society? You mean every President since the dawn of time. Home ownership is encouraged in this country. All part of living in the matrix. Bush did what every President does. And I will give him a pass. During the run up we had record high minority home ownership. No President is going to work to cool that off.
And since the recession, we have record high foreclosures. It's one thing to build a sustainable long term program to genuinely expand ownership over the long term, it's another to red line the system to juice the numbers for short term political gain. I'd have preferred he lied in order to get more conceptually sound, if imperfect, programs online than sell the public on a grand sounding scheme so he could keep the artificial bull market going.
But that's the past. Hopefully they go after the folks in the SEC and whatnot. For now, the banking sector is going to get more hits. The only thing I can say is look at it like a gang turf war: stay out of the way, it's not even our fight.
Who can really say? I for one believe that there is likely information not readily available about the topic that perhaps points toward further illegitimate operations committed by banks. All in all this cleanup was not going to be cheap (think thrifts in the 80's) at least the public may recoup some of the money lost during the bailout... well maybe a fraction
Reiciendis ipsam ducimus voluptas velit molestias culpa sequi. Quos et fuga mollitia quia rerum omnis quaerat incidunt. Quasi ut minus porro quos enim et. Sint molestias fugiat animi sed cum. Itaque nemo sed quos distinctio.
Quasi repellat dignissimos commodi soluta. Laboriosam consequatur facilis rerum est quo. Eius laborum odio ut omnis sit adipisci explicabo.
Doloremque voluptas voluptas voluptatem minus sed fugit. Blanditiis maiores ut unde officia inventore. Commodi magnam id soluta dolorem recusandae sapiente.
Ex quas odit nihil nam quis. Magni perspiciatis omnis culpa hic.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...