In Part I of this series we discussed the media’s failure to accurately report the scope and nature of the banker crime wave around foreclosure fraud, and talked about the confusion over reports that the Administration has proposed a framework for settling the fifty-state lawsuit against the banks. (Hmm … wonder why there wasn’t a Federal lawsuit, too?)
Is there really an Administration proposal for a deal? Given the number of reports and the absence of denials from the White House, the answer appears to be … sort of. It seems clear that the Administration’s proposing to create a $20 billion fund at the banks’ expense which would be used to help underwater homeowners, and that the banks would administer this fund themselves (we’ll respond to the proposal outline in Part III of this series). But even that’s not 100% certain, since reports suggest that there’s still infighting among government agencies.
Reuters reports that the Consumer Financial Protection Bureau (CFPB) and Federal Deposit Insurance Corporation (FDIC) folks are pushing for a larger settlement, but that the Office of Comptroller of the Currency (OCC) thinks the proposed settlement is already too big. All of this alphabet soup is beginning to spell out a slang expression that describes the government’s handling of this situation with pinpoint accuracy. That expression begins with “cluster” and ends with the word Melissa Leo introduced to the Academy Awards last Sunday night.
The virtual ink was barely dry on the initial reports of an Administration proposal when Reuters reported that “regulators’ efforts to settle with banks over improper mortgage foreclosures are being hampered by disagreements among the groups involved over the size and shape of an accord.” Other stories then elaborated on the squabbles among Federal agencies over the scope and nature of the proposed settlement. It seems as if everybody in the Federal government is running to the press so they can put their own spin on a proposed deal.
It looks like we’re observing a serious vacuum in leadership during a time of crisis. This vacuum, together with the confusion that’s been created in the press as everybody pushed their own agenda, has left the public becalmed in fog-shrouded waters somewhere between Conflicting Viewpoints, Absolute Bewilderment, and WTF.
(Hey, you know what would be great? It would be great if all of these Federal agencies reported to a single person – and that person was empowered to make an executive decision on behalf of the entire executive branch of government. You could call that person the “Chief Executive,” or … but I digress.)
Despite all the confusion, the outlines of the Administration’s proposal seem to be coalescing around three main provisions: Banks would have to write down the principal on underwater mortgages with $20 billion of their own money (investors in mortgage-backed securities and other instruments would not be held responsible), and they would implement their own mortgage modification programs. No government money would be used to reduce principal.
Any proposal from the Federal government would have to be accepted by the states before being presented to the banks. Based on what we’ve learned so far, does this proposal provide the right framework for a comprehensive settlement? We’ll save our conclusion for the third and final installment of this series, but here’s a sneak preview: