Both Congress and the Administration have a duty and responsibility to prevent a light touch mortgage accord in favor of financial sector restitution as suggested below.
Invariably, settlement accords between federal and state prosecutors and regulators and powerful financial entities and corporations effectively "reward" the miscreants with very modest penalties in relation to the vast profits wrongfully gained and the damage caused.
Instead of relatively small penalties, all parties (banks, Wall Street houses, hedge funds, mortgage servicers, rating agencies, insurers, and individuals) that engaged in irresponsible lending; toxic subprime mortgage securities; fraudulent securities rating and packaging, and deceptive sales promotion activities; fraudulent foreclosure practices; risky credit default obligation (CDO) trading; and credit default swap scams which helped cause the recession and global financial crisis, must be required to make full restitution to: (a) the Federal Government and its agencies for their bailout costs (including the Federal Reserve, the Treasury, the FDIC, Fanny Mae, and Freddie Mac for: government loans to domestic and foreign banks and insurers; toxic asset acquisitions; the resulting expansion of the national debt and its related costs to finance said loans, bailouts, and toxic acquisitions; the devaluation of said Fannie and Freddie subprime mortgage portfolios and their related foreclosure costs and homeowner bailouts; and financial institution and credit default swap insurer failures), (b) wrongfully foreclosed homeowners, and (c) duped pension funds and trusts.
UNTIL THERE IS FULL RESTITUTION (which should be dedicated to paying down the national debt):
(1) All Bank, Wall Street, Hedge Fund, and financial institution bonuses, stock options, and perks should be prohibited
(2) Excessive executive compensation, partnership distributions, and stockholder dividends should be strictly limited.
(a) Special hedge fund tax rates, benefits, and loopholes must be permanently eliminated.
(b) All banks, financial institutions, and insurers must maintain minimum reserves of Tier One Capitol Assets of 12% and maximum leverage of 8 times said minimum reserve.
(c) Credit Default swaps should be banned. (If a deal is too risky, it should not be made. Otherwise, the insurer should be required to maintain a 40% tier one asset reserve for the amount each high risk insured.)
(d) Former Usury Laws (7-8% interest) and former Personal Bankruptcy Regulations (with judicial cram-downs of underwater home mortgages) must be restored.
(e) Civil and criminal charges should be brought against the culpable parties.
Restitution of said government losses and expenses is fully justified on a "quid pro quo" basis for the hundreds of billions of dollars of government bailout assistance and the $Trillions of unrestricted essentially interest and condition free funds (via the printing press) previously and currently being supplied to banks and financial institutions from the Federal Reserve Open Market Window Facility.
The continued supply of said unrestricted interest and condition free Federal Reserve funds still enable Banks, Wall Street, and other financial entities to make obscene profits and bonuses from merger and acquisition fees and investments and stock market speculation (at taxpayer risk and expense) from the fiscal and economic crises which they caused. Moreover, banks still deny or restrict loans and credit lines to credit worthy small and mid-sized companies except on onerous terms and interest rates. This compounds the unemployment crisis and hampers economic recovery. Also, bailed out credit card and finance companies ungratefully continue to charge usurious interest rates and excessive fees. The entire financial sector must be subject to the usury regulations with respect to interest rates, fees, and penalties.
Ending these unjust practices should have been made a condition of the federal bailouts, loans and credit facilities and must be done now. These outrageous abuses and the needless financial sector favoritism and indulgence must end and any funds obtained from the Federal Reserve Open Window Facility be restricted to normal and traditional bank operating needs and for domestic individual, business and mortgage lending at fair interest rates, terms, and conditions (however, said government loss reimbursements by the banks, hedge funds, and financial institutions could be individually scheduled, if necessary, to preserve financial sector stability and prevent undo hardship).
Unfortunately banks and the financial sector have transitioned from lenders and servicers of businesses, individuals, and governments to exploiters of their customers and the economy. Furthermore, they don't create jobs (other than their own staffing) or make anything. Now, they primarily suck the wealth and vitality out of economies, domestically and world wide and must be appropriately regulated in the public interest.
U.S. Attorney General Eric H. Holder Jr., State Attorneys General, and the federal and state prosecutors and regulators involved in these matters must be directed to obtain full restitution from all entities responsible for this national and global fiscal disaster and pursue criminal and civil charges against all culpable individuals.