US To Settle Fraudclosure For $25 Billion Even As It Channels Fake Tough Guy In Meaningless Lawsuit Against Very Same Banks

Tyler Durden's picture

Remember robosigning and the whole fraudclosure scandal? In a few days you can forget it. Because in America, the cost of contractual rights was just announced, and it is $25 billion: this is the amount of money that banks will pay to settle the fact that for years mortgages were issued and re-issued without proper title and liens on the underlying paper, courtesy of Linda Green et al. Why is this happening? Because staunch hold outs for equitable justice (at least until this point), the AGs of NY and California folded like cheap lawn chairs (we can't wait to find what corner office of Bank of America they end up in), but not before the one and only intervened. From the WSJ: "The Obama administration made a full-court press over the past four days to secure the support of key state attorneys general, including those from Florida, California and New York." Nothing like a little presidential persuasion to help one with overcoming one's conscience. Because in America the push to abrogate the very foundation of contractual agreements comes from the very top. But wait, there's more - just to wash its hands of the guilt associated with this settlement which shows once and for all that the Democratic administration panders as much if not more to the banking syndicate as any republican administration, as it announces one settlement with one hand, with the other the US will sue banks over the mortgage reps and warranties issue covered extensively here, in the most glaringly obtuse way to distract that it is gifting trillions worth of contingent liabilities right back to the banks, not to mention discarding the whole concept of justice. From the WSJ: "Federal securities regulators plan to warn several major banks that they intend to sue them over mortgage-related actions linked to the financial crisis, according to people familiar with the matter. The move would mark a stepped-up regulatory effort to hold Wall Street accountable for its sale of bonds linked to subprime mortgages in 2007 and 2008. At issue is whether the banks misrepresented the poor quality of loan pools they bundled and sold to investors, the people said." Wait, let us guess -that particular lawsuit will end up in a... settlement? Ding ding ding. We have a winner. All today's news succeed in doing is finally wrapping up any and all legal loose ends, so that banks can finally wrap all outstanding litigation overhangs at pennies on the dollar. And if at the end of the day, they find themselves cash strapped, why the US will simply loan them more cash of course.

First, here is the WSJ, on the banks that will benefit from the fraudclosure settlement:

Government officials are on the verge of an agreement worth as much as $25 billion with five major banks, capping a yearlong push to settle federal and state probes of alleged foreclosure abuses by lenders.


The deal would represent the largest government-industry settlement since a multistate deal with the tobacco industry in 1998.


The agreement covers five banks: Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co., and Wells Fargo & Co. Together, the five handle payments on 55% of all outstanding home loans, or around 27 million mortgages, according to Inside Mortgage Finance.

These are the banks benefitting from Uncle Sam's decision to finally unclog the foreclosure pathway, as banks will no longer have to prove in court they are in fact the title owners.

But just in case popular outrage at this act is a little much, at the same time banks sued over fabricating Reps and Warranties will be: "Ally Financial Inc., Bank of America Corp., Citigroup Inc., Deutsche Bank AG and Goldman Sachs Group Inc." What an odd coincidence: gift with one hand, and take away with the other from virtually all the same banks.

Only it is not really taking away: it is merely putting the wheels in motion that will ultimately result in the same type of settlement that will make a mockery of the legal process in the US, and expose all the state Attorneys General as banker puppets, doing the bidding of the highest bidder... and of Obama of course.

Some more, on the "gifting"

The planned pact would involve around $5 billion in cash penalties, payable to borrowers, states and the federal government. That includes $1.5 billion in cash payments to borrowers who went through foreclosure between September 2008 and December 2011. Borrowers could receive $1,500 to $2,000 each, with the actual amount paid depending on the number of borrowers filing a claim.


The agreement is expected to call on the banks to provide $20 billion in other aid—by cutting loan balances for tens of thousands of homeowners and by refinancing thousands of borrowers who are current on their loans but owe more than their homes are worth.


Officials say the deal will help provide immediate benefits to around one million homeowners, while raising accountability for banks that work with borrowers facing foreclosure. The foreclosure process has been snarled since late 2010, after allegations that banks had serially submitted bogus mortgage documents when attempting to repossess homes from delinquent borrowers.

Why the push now?

The bank payments would unlock a large new source of housing funding at a time when Congress doesn't appear likely to approve new spending measures to tackle lingering problems facing housing markets, such as a refinance program that President Obama unveiled last week.

30 pieces of silver? Or a corner office.

The three key states overcame misgivings about the plan in recent days, people familiar with the situation said. The inclusion of California is especially important: People familiar with the discussions say the banks would have been willing to pay just $19 billion without the participation of the nation's most-populous state.


The office of California Attorney General Kamala Harris declined to comment. A spokeswoman for Florida Attorney General Pam Bondi said that "while Attorney General Bondi has not yet joined the settlement, she is hopeful that a resolution will be reached soon."

The beneficiaries:

"It is frankly a headline victory for both banks and attorneys general with a modest impact on the housing market," said Joshua Rosner, managing director of investment firm Graham Fisher & Co.


"It's not new money. It's all soft dollars to the banks," said Paul Miller, a bank analyst at FBR Capital Markets.

And of course, the president, who ends up buying a few cheap votes for $2000 a pop:

could receive $1,500 to $2,000 each, with the actual amount paid
depending on the number of borrowers filing a claim

This is also the cost per individual to rescind in perpetuity any actual claims about one's mortgage paperwork. Will Americans go for it? You betcha.

As for the so-called punishment:

In a meeting with reporters last month, Robert Khuzami, the SEC's enforcement chief, said the agency's mortgage-bond investigation was looking for evidence that firms "failed to disclose important information when selling these securities."


Mr. Khuzami declined further comment on the investigation.


The planned regulatory actions come at a critical juncture. The SEC, Justice Department and state prosecutors are pushing to complete a number of financial-crisis cases by the end of this year, partly to avoid having enforcement action curbed by statutes of limitations, the people said.

In reality all this action will do is provide a benefit for private plaintiffs against banks like Bank of America, such as MBIA, whose case that banks have misrepresented terms of sold securities, will be strengthened. The ultimate cost, however to banks, will be miniscule compared to the fact that the foreclosure pathway will again be unclogged, and the banks are allowed to deficiency mark houses sold from REO, and use fungible excess reserves to plug the difference.

All in all, just a day's work for the administration as it does everything in its power to push the housing market higher at all costs, and further and further away from equilibrium pricing, which is what should be for a true and normal price appreciation to occur... something which will never happen of course as it would take far longer than the 4 years allotted to the president. If the process entails bending the law beyond recognition, so be it.

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Mae Kadoodie's picture

Heckova job Brownie. Mission accomplished.

Future Tense's picture

The banks are always taken care of first.  If they charged them $100 billion dollars it would just come from tax payer money any way.  Or would they pull from their $1.6 trillion in reserves given to them from the Fed?  All this does is open the floodgates for the pent up mortgages that did not come through last year to hit the market.  The shadow inventory is now much greater because of fraudclosure.  $25 billion off the banks books, and about another $3 trillion in homeowner equity soon to vanish around the country.  Excellent discussion on shadow inventory here:

smithcreek's picture

This is to remove the "fraudclosure" that occured on The Obamessiah's watch as a campaign issue, while letting him campaign on what will be a constant barrage of nightly news about the lawsuit concerning the "housing bubble that occured before I got here."  People have said for a couple years they can't believe no one has gone to prison for the housing bubble, but they were just saving it for a rainy day.

WonderDawg's picture

I don't even really know what to think. I'm beyond pissed. I mean, this is just par for the course. Fuck. My mind is completely numb. Disbelief turned to awe months ago for me.

Just. Fucking. Speechless.

macholatte's picture

Nothing got be upset about and really not even news. Had someone been held accountable, THAT would have been news. What has happened,is happening, would be criminal if therre was a rule of law. But there isn't.  so move on and be sure to get that 1040 filed on time to avoid any penalties and interest.

{wish I could post this}


LetThemEatRand's picture

Did I mention that I think America went bankrupt when it went off the gold standard?  

To think I once supported the fucking blue team.  I was wrong.  

What a fucking crock of shit.

The Facebook guy is collecting $5B more than this for his IPO so the kids can play fucking farmville.  He could pay off the entire bank settlement and have $5B left.  That's a lot of blow for the Wallstreet guys.  Or 2.5 stealth bombers.

This is the equivalent of taking the online traffic course for the banksters.  No points.  No increased insurance premiums.  And they fucking deliberately rammed into a school bus full of nuns while guzzling scotch.  But their dad is friends with the judge.

Truth, Justice and the American Way baby.

Comay Mierda's picture

this is why i've been saying the bank stocks will keep going up. they will get bailed out anyway possible. through favorable settlements that the fed will just print money for them to pay.

Welcome to Amerika. The SPX will crash only in terms of Au and Ag. But I'm just waiting for the day owning gold and silver is officially declared a terrorist activity and your neighbors will be paid $1000 to rat you out as a possible goldbug.

nickt1y's picture

If they are doing this kind of shit, do you think they will let you keep your precious metals? BWAHAHAHA! Snowballs chance in hell. It will be a crime to traffic in Ag and Au, resulting in a dose of 2 other metals Lead and Brass!

The Limerick King's picture



The Banksters have settled their fraud

Elites of the nation applaud

Justice impaired

Citizens scared

One (percent of) Nation Over God!

blindfaith's picture


America grew up on a constant drip feed of Superman, The Lone Ranger, Zoro, Sky King, bla-bla-bla.  Waiting for the superhero to settle accounts, staring off into space looking for a force to over come world evil, and acquiescing their rights away in the interim.

People have no idea how or if they can change anything anymore, they forgot how to ride their bikes.

The Republicans can now run a corpse held up by two brooms and win the Whitehouse, and Congress too.

stirners_ghost's picture

There is a rule of law, as healthy and vibrant as ever. Just try to go one year without paying the tribute that is due your law-givers; you'll see how effectively the law is enforced. The law rules you. That is the rule of law; same as it ever was.

Michael's picture

The Federal Reserve and Obama only spent $35 trillion so far to fix the problem they caused. $25 billion seems about right.

Chump's picture

"Everything's fucked up and nobody goes to jail."  Except us, just like you said.

pods's picture

I agree WD.  I think the saddest thing to me will be tomorrow when I notice that nobody sees the implications in this.


blindfaith's picture


I  quote from the article : These are the banks benefitting from Uncle Sam's decision to finally unclog the foreclosure pathway, as banks will no longer have to prove in court they are in fact the title owners.

"no longer have to prove in court they are in fact the title owners"

So get ready for massive filings to take over property and sell/give it as Christmas bonuses to the bank heads and prop traders...and a select bunch of politians.

Even then, all these properties will have a clouded title forever unless the US Government gives a blanket "Special Warranty deed" or "Magistrates Deed" wipping out all encumberances.

Good Luck with that. 


StychoKiller's picture

"Some daze, it just does NOT pay to gnaw through the leather straps!"

slewie the pi-rat's picture


spark on this

if yer gonna get pre-verbal, ya gotta fly air america, dawg!

ChrisFromMorningside's picture

How the hell can liberals keep supporting and defending Obama? Do they actually agree with this kind of corporatocracy or are they too stupid to even understand whats going on? The state AGs were off to a good start by investigating all the fraudclosures. The banks didn't give a shit about who held title when they were fiipping these mortgages and slicing and dicing them into new revenue streams. Now, when their fraud is exposed, they have the President on their side, pushing elected state officials around like a Tammany Hall boss, and they get to settle for the equivalent of pennies on the dollar.

All you Dems who are still pushing for Obama in 2012 as the "lesser of two evils" need to wake up, you rubes.


LetThemEatRand's picture

There is inevitable pushback when complete douchebags make it into a red team/blue team issue and forget that fucking Henry Paulson (former CEO of Goldman) extracted 750 billion from U.S. taxpayers while former unibrow Bush told us it was necessary to save the world.

zhandax's picture

"too stupid to even look"  There, fixed it for ya.

tarsubil's picture

You do realize that the zaniness is going to get much worse, right? Might want to get a prescription for xanax.

oklaboy's picture

great links, mucho gracias!!

oklaboy's picture

great links, mucho gracias!!

yabyum's picture

This is sad pennies on the dollar.

bankonzhongguo's picture

They are "paying" this settlement with the free POMO and ZIRP profits they WERE GIVEN these past years.

Never mind that it also only protects those politically connected banks at the top; all the regional and community banks are getting the same shaft as the taxpayers.

The banks are out nothing, in fact they are ahead of all of us.

I never thought any other administration would act as disgracefully as Bush 2, but this Obama Wreaking Krew wipes their asses with the American Flag each and every day.

And to think I used to be a Democrat!

The creeps that shower these Beasts with campaign contributions for more fun and games are killing the Republic with each check signed, sealed and delivered.


blindfaith's picture





I thought I was reasonably smart and could see events shaping up inadvance, but this is so shocking that I am speackless.  Our Constitutional expert President just side swipped Americans, and thru due process law under the bus.  

I don't know what is going on anymore and my Tarot cards and ouija board aren't talking.  Another sad decision with a bad outcome for all but the banks.

By the way, say HI to Warren Buffett next time you see him giving his pandering speak about income taxes. 

rcintc's picture

Welcome to the New Amerika, Komrads!

DaveyJones's picture

if they were real attorneys and we were real clients, we could sue them for malpractice

LetThemEatRand's picture

Remember that really cool thing called tort reform?  So sorry.

Lazane's picture

Obamy justice dept prosecutions are not worth reporting as they are nearly nonexistent, the fraud and deceit goes on and on and just never seems to end

deepsouthdoug's picture

Republicans would have been no better - hell they would have been worse. 

pods's picture

God this is SOOOO much bigger than that silly left-right meme.

But, stick to what is comforting.


LetThemEatRand's picture

We now have absolute proof that the red team and the blue team are all playing for the same owner.

LetThemEatRand's picture

Exactly right.  Koch.  Murdoch.  Dimon.  Blankfein.   

They are all Rand's heroes, yes?

StychoKiller's picture

You can't pin this on Ayn Rand, more like Mussolini and Stalin!

Thomas Jefferson's picture

I, for one, welcome my new overlords.

Get the Borrow's picture

Overlords?  You mean liberators,  right?

azengrcat's picture

Corrupt Government is Corrupt

mikla's picture

Fraud.  Wholesale raping of the taxpayer.  Violation of all securities laws.

No wonder Great-Grannie that lived through the Depression never trusted "Dem Damn Banks!" for the next eighty years.

pods's picture

Exactly.  Why is it the government is settling clear cases of fraud and perjury?


One big team.


nickt1y's picture

The word you are looking for is Fascism.

blindfaith's picture



No, the word is Plutocracy.  And SADLY it is what Rand Paul  ( Ron Paul's son) preaches.  My only hold back to 100% support of Ron Paul is HIS son.

StychoKiller's picture

Please explain HOW voting against the NDAA (for example), is "supporting" the Plutocracy.

SillySalesmanQuestion's picture

Despicable scoundrels...all of them.

The final nail in the coffin of justice...HA!

mayhem_korner's picture



Real justice has been six feet under for a long, long time.  That's an imposter in that thar coffin.

vote_libertarian_party's picture

So in 6 months there will be 5 million home squatters suddenly having to write rent checks? 


Oh wait, let me guess, there will be a new 'rent subsidy' program starting in....6 months.