Neil Barofsky, former Special Inspector General of the TARP, weighs in on the mortgage settlement at Bloomberg. One intriguing little aspect of this deal is the degree to which the Administration, particularly HUD, is frustrated that its PR efforts are landing with a thud. I’ve been told of HUD efforts to push back against my post, “The Top Twelve Reasons Why You Should Hate the Mortgage Settlement,” as well as an important article by Shahien Nasiripour at the Financial Times on how the administration’s mortgage modification program HAMP would wind up providing taxpayer subsidies to the settlement.
The Bloomberg reporter Erik Schatzker mentions how HUD has disputed the Financial Times reporting and Barofsky explains why the FT got it right.
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You will know them by the weakness of their argument.
Yves, Someone should do a thoroughgoing investigation of this settlement as regards “takings of private property.” Who did the banksters rip off through robosigning mortgage transfer documents? The nation’s counties. How do counties fund themselves? Sales and property taxes. Further, some counties incorporate special districts with the ability to levy taxes to cover district expenses (think Jefferson County Alabama). Hence, by ripping off my county government, the banks created additional liability for me. Are Attorneys General empowered to take action to eliminate the banks’ liabilities? Swell, could they please pay my property taxes as well?
How about defective trusts? If a bank used robosigning to back-date postings of mortgages into trusts, how does this settlement make the trust whole? I haven’t a clue. I cannot believe TPTB believe this will cure the mess – it only sweeps it under the rug – to show up as a nasty lump someone is certain to trip over. This is not over.
You are making a legal argument from ‘economic substantive due process.’ In the early part of the 20th century it was an obstacle to labor-friendly legislation (among other things) on the theory that anything that interfered with a factory owner’s ability to make profit from his property (such as wage, hour and child-labor laws) amounted to an unconstitutional taking of private property. The crises of the 30s caused courts to largely abandon economic substantive due process. I guess the moral of the story is be careful what you wish for (as property-rights-based jurisprudence favors those with more property than you or me).
Thank you for your smart reply. You are helping me learn the history of property rights law – and you are surely right – I would prefer that the law not consider labor laws to be a taking of industrialist property – though I sense that rights to health and welfare should trump property rights, I am not so cavalier that there are no process-induced takings where human welfare is not an issue. But seriously, thanks.
Two things come to mind.
There seem to be two good guys we keep hearing about, Neil Barofksy & Sheil Bair. Not to disrupt the narrative, but these guys were Bush appointees. I bring this up because the issue of right and wrong and political affiliation is a little more complicated than some would have you believe.
And as far as Barofsky is concrned on the settlement.–Spot on!
Reminder of Bush’s conduct directly regarding the mortgage scandal: http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html
he sounds like a real tim massad fan at the end there.
I want to state that I will not take up valuable space from intelligent comments on this terrific post! Oops, I just did.
Ouch…said it again…
Credits?! More nudge-inflected bank shots from The Drone King…
There’s a more fundamental problem with what the press releases and speeches describe as a done deal.
It looks like the banks will receive credit for losses which they should have recognized already, or will have to recognize in any event.
Mark-to-market accounting?
We need a battalion of Neil Barofskys and Sheila Bairs. Where are they?
A Few Platoons of Levitins, Smiths, Ritholtzes and others would be good, too.
Don’t wise people (in NY, DC, CHI, SF, etc.) understand what is really going on here? What’s at stake? Paricularly since the SF/Aequitas report? Good gracious!
We may need an army of Neil Barofsky’s and Sheila Bair’s, but they’d better be led by General William K. Black.
Oh, and we could use a Captain Brooksley Born, too.
Fair Play: I did not mean to infer that anyone outside those regions are *not* wise…only that the power centers tend to reside in them.
Good job Neil!
I’m surprised Obama thinks another coat of whitewash on the Wall St bailout will get him votes in 2012.
Only the Republican candidate can elect Obama in 2012.
See comment on firedoglake yesterday:
Note: While Holder and Donovan went thud, Bill Black’s live chat on firedoglake Friday soared — over 350 comments in a couple of hours. So while H&D (Smoke & Mirrors :-) are vapor, Bill Black is for real, measured democratically.
Part of Donovan’s problem is he is a hypocrite of the highest order. While he urges the banks and the GSEs to offer principal forgiveness, the FHA under his control has over 700K insured mortgages that are seriously delinquent, but yet there has been no talk of the FHA forgiving principal. Why is principal forgiveness so good for everyone BUT the FHA???
Bill Black was asked about Holder & Donovan’s column. Here’s his reply:
You know I know that Holder is a politically-minded person as are people like Kamala Harris. At first I thought that they were trying to screw this up for the benefit of the banks. And while I still think that is true I’m beginning to believe that they, like Obama, also just believe this stuff. That is they believe, at least in part, that this is a solution and they don’t get why we are unhappy.
Yep. Of course we don’t know what they’re being told by the likes of Rubin, Geitner, and Bernanke (and likely it is a very good sales job bent on funneling even more taxpayer money toward the banks and elite), but in part at least, Obama seems to not get the big picture. I suppose this is the lesson we always get from the apex of complexity (failures of intelligence), and the reason the solution is to decomplexify, decentralize authority, and move to a collection of states.
I’m in agreement that permitting reductions under HAMP to be credited under the settlement fundamentally vitiates the notion of the settlement as punitive (slight punishment as it was already was). But I don’t see how one would have segregated reductions under the settlement from reductions under HAMP. As Barofsky notes, why would the servicers not opt HAMP? Or would termination of HAMP been the appropriate course of action?
Termination of HAMP would have been the appropriate course of action. With the Stick in place there is no need for the Carrot. HAMP is nothing but a giveaway to banks, and is designed to give away taxpayer money – unlike TARP, there is no expectation of any return of funds.
Frankly I am surprised there hasn’t been more backlash against HAMP, it is a poorly designed and administrated giveaway of taxpayer dollars whose costs far outweigh its benefits.