And there were those who thought that the $20 billion demanded by state and federal officials of banks caught in various acts of robosigning fornication was a joke. According to the WSJ, "The nation's biggest banks are willing to pay as much as $5 billion to settle claims by federal and state officials of improper mortgage-servicing practices." Needless to say this is a sham of a farce of a "settlement", and amounts to one quarter in trading perfection for the likes of the afore discussed JPM, BofA or Goldman. Recall that Goldman pays well over three times this amount in bonuses each year. On the other hand, this is merely a counteroffer to the $20 billion preliminary bid. Which means that the final number to put the entire robosigning affair behind us will be about $10 billion give or take. And banks can go back to doing what they do best: post 0 trading losses per quarter, and other such infinite sigma events.
From the WSJ:
Bank representatives met Tuesday with state and federal officials in the latest round of negotiations. On Friday, banks received revised term sheets from government negotiators. One sheet revised proposed changes in mortgage-servicing practices. The second term sheet governs how penalties would be allocated; among other things, it details how they would have to reduce loan balances for certain borrowers.
The banks intend to propose that as much as $5 billion be used to compensate any borrowers previously wronged in the foreclosure process and provide transition assistance for borrowers who are ousted from their homes, according to people familiar with the matter. One idea is that foreclosed borrowers could receive several months of free rent once they find new housing, one of these people said.
Not only that, but the $5 billion token amount is supposed to be a broad release, in essence granting banks immunity from any and all future related lawsuits:
They must also reach an agreement on the claims state officials and federal regulators will surrender as part of any settlement. Banks are less likely to sign off on any deal that doesn't provide a broad release of claims from state attorneys general in the most populous states.
In April, bank regulators sent 14 institutions orders that required the banks to improve foreclosure practices but didn't include fines. Banks have 60 days to set up plans that would clean up their mortgage-servicing processes. They also have to hire an independent third-party consultant that will examine all foreclosure cases in 2009 and 2010 for any errors.
This development is naturally precisely what the Attorney Generals, who have been in on this from the beginning are looking for. They will next be able to extract a few more billion in pocket change from the banks which at last check had about $1.3 trillion in excess reserves, declare themselves fighter for the common man, and proclaim victory against the banker scourge. And from that point on, banks will merely use the Buffett defense: "if questioned about this matter in the future, [they] will simply refer the questioner back to this release."
And so they win again.