The Los Angeles Times has an article by Michael Hiltzik that casts the recent settlement between several major U.S. banks and 49 state attorneys general in a pessimistic and cynical light. Among his main points: (1) The supposed $25B price tag is misleading, because it is comprised mostly of a rosy estimate of future principal write-downs and interest-rate reductions for non-foreclosed mortgagors; (2) the states will receive only approximately $5B in direct payouts from the deal; (3) of the two million owners who have lost homes to foreclosure since 2008, only about 750,000 will receive compensation– at a grand total of $2,000 each; and (4) a separate suit by the federal Office of Comptroller of the Currency has been quietly settled for nothing, so long as the defendant banks follow through with their agreements in the main settlement with the states.
My sense, after hearing a passing summary of the deal on N.P.R., was that the settlement was very modest. Reading this article, and a few other news reports, has not changed my mind. One bit of a silver lining: Attorney General Schneiderman’s MERS action, filed last week in Brooklyn, will go forward, in spite of this settlement– and so will a number of other state actions. So, this agreement may turn out to be just one piece of a larger puzzle.