The Banks Win Again

prospect.org — Last February, the big banks agreed to a major “settlement” to protect themselves from litigation by state attorneys general stemming from fraudulent documentation of mortgages. Though some, such as New York’s crusading attorney general Eric Schneiderman, believed that the government had leverage to get a lot more, the settlement required the banks to pony up some $25 billion to settle outstanding charges. The banks, without admitting wrongdoing, agreed to reform fraudulent practices, such as “robo-signing” and proceeding with foreclosures on one track while supposedly helping borrowers to adjust terms on another. The settlement reserved the government’s right to continue criminal prosecutions. Schneiderman was made co-director of a federal task force on banking and mortgage abuses headquartered at the Justice Department. Schneiderman’s hope was that the leverage of increased prosecution efforts would compel the banks to part with a lot more money in a second round of settlement talks. But now, the other shoe has dropped and the banks have won again.

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