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Dennis M. Kelleher Headshot

First Bank Fraud, Now Political Fraud

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First the banks committed massive fraud in originating and packaging mortgages, leaving the country littered with millions of little mortgage time bombs set to explode in the years after they lined their pockets and made their get-away. The poster child for this unconscionable conduct is Countrywide (now owned by Bank of America) and its CEO Angelo Mozilo, but they were just one of many, many culprits.

Then when those mortgage time bombs exploded a few years later, those very same banks committed more massive fraud, this time by improperly charging homeowners fees and other costs, commencing unjustified foreclosures, and knowingly and intentionally filing false documents in court to foreclose on people when they never even bothered to check to see if they owned the mortgage they were trying to foreclose on.

That is lying, cheating and stealing that would get anyone else in this country thrown in jail for many years. And, this was even worse than that because they filed falsely sworn documents in courts throughout the country as a routine practice. That is perjury (not that any of this is called criminal; no, these crimes are covered up with euphemisms). This is very, very serious criminal conduct that was engaged in for years by the biggest banks in this country as a routine business practice. People go to prison for many, many years for crimes much less serious than that and these crimes merit long prison sentences and crippling fines. But, not if you're a big bank.

That is why people are so mad in this country. There is one standard for hard-working people and there is another standard for the wealthy, well connected, powerful, and, almost always, the big campaign contributors. The law gets applied to the former, often mercilessly and ruthlessly, but the law doesn't apply to the latter, who get off time and again for nothing, next to nothing or by paying a window-dressing fine usually with other people's money.

As if that isn't enough insult and injury to the American people, almost always you have politicians, prosecutors and sundry others racing to the microphones to claim a great victory for "punishing" those wealthy, well connected, powerful, and, almost always, the big campaign contributors. It is as if they think the country is populated by idiots who cannot see through the transparent PR political fraud that they spin to cover the fact that the big shots and their buddies are getting away with it again.

Yesterday was no different as 49 state AGs, the U.S. AG and the White House all raced to the cameras to tout their claims that the mortgage settlement with 5 banks was a great victory for victimize homeowners. $26 billion, they all blared, coming to a neighborhood near you. Wahooo! Finally, relief, justice and help to beleaguered homeowners and other victims across the country.

The problem is that the facts, the actual terms of the deal, as near as they can be determined from what little information was disclosed, suggest that this great victory isn't going to help hardly anyone. True, it does appear to be better than nothing, but is that really the standard? And, none of those politicians said it was merely better than nothing. No, they claimed that this is going to help millions of homeowners across the country.

First, only $5 billion of the settlement was cash (a mere $1 billion from each mega-bank, which is nothing to them) and the other $21 billion will come in the form of mortgage modifications, which isn't anything like cash and will cost them almost certainly less than half of that cost.

Second, as many have pointed out, $26 billion (even if it was real) isn't much and won't help much. For example, as a New York Times story today shows, even if all $26 billion was actually used as claimed, it will help, at most, 10 percent of the 20 percent of homeowners under water and even those homeowners aren't likely to be helped much. Don't miss the graph. Nothing beats seeing how little the help will be. There are approximately 11 million homes under water by an average of $50,000. The huge victory will help at most 1 million for an average amount of $20,000. So, nothing for 10 million and the 1 million will get to reduce the amount underwater on average to $30,000. It's like saying rather than drowning in a lake 50 feet deep, you get to drown in a lake that is only 30 feet deep. And, people are taking victory laps?

You don't believe any of that and still think what the politicians said about punishing the banks was true? If this was a real punishment, then the stock of those banks would have taken a hit. They did not. The announcement had no effect. You could say that was because the settlement had been talked about for some time so the cost was already priced into the stock days before, but there wasn't any hit during that time either.

Thus, the markets confirm the facts of the settlement and rip the PR spin off the political fraud that compounds the banks' fraud and, once again, victimizes the American people by falsely raising their hopes for relief and dashing -- again -- the claims that the criminals, liars, cheaters and scammers were finally going to be held accountable. Sadly, this is yet another example of the double standard that has been so painfully obvious to everyone in this country since the 2008 financial crisis: pain on Main Street, bonuses, bailouts, and arrogant whining on Wall Street, and nothing but PR spin from Washington, D.C. and elected officials.