Fining the Banks

Goldman Sachs has evidently bought their way out of jail, as did the others, with a headline billion-dollar settlement for financial wrongdoing leading up to the 2008 financial crisis. Case closed, we are told.

 “The Residential Mortgage-Backed Securities Working Group has already reached historic settlements with JPMorgan Chase and Bank of America. They agreed to pay $13 billion and $16.6 billion respectively. Citibank settled for $7 billion and Morgan Stanley agreed to pay $3.2 billion.”

Goldman Sachs finished off the list with a $5 billion fine. They have admitted to several shortcomings on their part in exchange for the penalty. 

The sum total of the bank fines mentioned now totals $44.8 Billion. 

The collection of these monies is due to the efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group. But once settled, where does the money go, and who decides? Regarding the Goldman settlement:

The $2.385 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud.  The settlement expressly preserves the government’s ability to bring criminal charges against Goldman, and does not release any individuals from potential criminal or civil liability. In addition, as part of the settlement, Goldman agreed to fully cooperate with any ongoing investigations related to the conduct covered by the agreement.

Of the $875 million Goldman has agreed to pay to settle claims by various other federal and state entities: Goldman will pay $575 million to settle claims by the National Credit Union Administration, $37.5 million to settle claims by the Federal Home Loan Bank of Des Moines as successor to the Federal Home Loan Bank of Seattle, $37.5 million to settle claims by the Federal Home Loan Bank of Chicago, $190 million to settle claims by the state of New York, $25 million to settle claims by the state of Illinois and $10 million to settle claims by the state of California.

Goldman will pay out the remaining $1.8 billion in the form of relief to aid consumers harmed by its unlawful conduct.  $1.52 billion of that relief will be paid out pursuant to an agreement with the United States that Goldman will provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country, as well as financing for affordable rental and for-sale housing throughout the country.  This agreement represents the largest commitment in any RMBS agreement to provide financing for affordable housing—a crucial need following the turmoil of the financial crisis.  $280 million will be paid out by Goldman pursuant to an agreement separately negotiated with the state of New York.”

In a story from the Chicago Sun Times we get more details.

The bank (Goldman Sachs) will pay nearly $23.8 million to the Teachers Retirement System of the State of Illinois, $472,500 to the State Universities Retirement System of Illinois, and $737,500 to the Illinois State Board of Investment, which oversees the State Employees’ Retirement System, General Assembly Retirement System and Judges’ Retirement System, according to the statement.

Regarding the JP Morgan fine:

“The FHFA accused JPMorgan and its affiliates of making false statements and omitting material facts in selling $33 billion in mortgage bonds to Fannie Mae and Freddie Mac from Sept. 7, 2005, through Sept. 19, 2007. Those two firms, regulated by FHFA, have taken $187.5 billion in federal aid since then.”

Here is the breakdown of the disbursement of the 13 billion dollar JP Morgan fine:

$7 Billion goes to state and federal agencies:

  • $4 billion for the Federal Housing Finance Agency goes to Fannie Mae and Freddie Mac. This deal was announced in October.
  • $1.4 billion for the National Credit Union Association to reduce assessments for credit unions.
  • $515 million for the Federal Deposit Insurance Corporation
  • $613 million to New York attorney general
  • $299 million to California attorney general
  • $101 million to Illinois attorny general for state pension funds.
  • $100 million to New York attorney general for expanding homeowner assistance programs.
  • $20 million to Delaware attorney general
  • $34 million to Massachusetts attorney general. The office has not decided how to spend the money.

$4 Billion goes to consumer relief:

  • $2 billion credit for JPMorgan to reduce the balance of mortgages in foreclosure-racked areas like Detroit and certain neighborhoods in New York.
  • Up to $500 million credit for JPMorgan briefly halting the collection of mortgage payments.
  • Credit for JPMorgan to reduce interest rates on existing loans, offer new loans to low-income home buyers and keep those loans on its books.
  • Credit for JPMorgan to demolish abandoned homes and other efforts focused on curbing urban blight.

$2 billion goes to Justice Department:

  • $2 billion fine goes to United States Treasury. Federal prosecutors in Sacramento led an inquiry into JPMorgan’s mortgage practices

There are two things very clear. No one goes to jail, and the federal government and this administration has a pot of money that no one in particular is monitoring. Incarceration of Wall Streeters doesn’t fill the money pot, does it? Additionally, many of the components of the fine are tax deductible therefore the headline numbers don’t truly reflect the “real” penalties incurred.

Fairness and pragmatism would dictate that the money should go to reduce the federal costs of the financial crisis and, where possible, financially assist those specifically and uniquely harmed by the admitted fraudulent activities. But everyone was harmed by the crisis, weren’t they? So who decides exactly where the money goes? Did Chrysler bondholders get covered? Did you?

Yet in these provided settlement details, very few states seem to be involved in the disbursement of the money. Mentioned are the New York attorney general, the Illinois attorney general, the California attorney general, the Massachusetts and Delaware attorneys general. All Democrat-controlled states with some hefty electoral vote totals. What of the other 45 States? Did they forget to join in on this legal matter?

Illinois comes out very nicely in this Goldman Sachs fine disbursement. Their underfunded, overpromised pension systems get some fresh oxygen. Any money for the Border Patrol Union? Curious that so many other states aren’t benefiting. What of Texas or Arizona? 

California gets a largess, and the manner in which the money is to be spent is a little “clouded”. Transparency, only to a point, then “poof”.

The entire matter smacks of criminals bankrolling, via their fines, a slush fund for the administration’s pet projects, with some Democrat electoral vote gathering thrown in. All fines should have been promptly deposited into the national treasury. There is plenty of room.  

Goldman Sachs has evidently bought their way out of jail, as did the others, with a headline billion-dollar settlement for financial wrongdoing leading up to the 2008 financial crisis. Case closed, we are told.

 “The Residential Mortgage-Backed Securities Working Group has already reached historic settlements with JPMorgan Chase and Bank of America. They agreed to pay $13 billion and $16.6 billion respectively. Citibank settled for $7 billion and Morgan Stanley agreed to pay $3.2 billion.”

Goldman Sachs finished off the list with a $5 billion fine. They have admitted to several shortcomings on their part in exchange for the penalty. 

The sum total of the bank fines mentioned now totals $44.8 Billion. 

The collection of these monies is due to the efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group. But once settled, where does the money go, and who decides? Regarding the Goldman settlement:

The $2.385 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud.  The settlement expressly preserves the government’s ability to bring criminal charges against Goldman, and does not release any individuals from potential criminal or civil liability. In addition, as part of the settlement, Goldman agreed to fully cooperate with any ongoing investigations related to the conduct covered by the agreement.

Of the $875 million Goldman has agreed to pay to settle claims by various other federal and state entities: Goldman will pay $575 million to settle claims by the National Credit Union Administration, $37.5 million to settle claims by the Federal Home Loan Bank of Des Moines as successor to the Federal Home Loan Bank of Seattle, $37.5 million to settle claims by the Federal Home Loan Bank of Chicago, $190 million to settle claims by the state of New York, $25 million to settle claims by the state of Illinois and $10 million to settle claims by the state of California.

Goldman will pay out the remaining $1.8 billion in the form of relief to aid consumers harmed by its unlawful conduct.  $1.52 billion of that relief will be paid out pursuant to an agreement with the United States that Goldman will provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country, as well as financing for affordable rental and for-sale housing throughout the country.  This agreement represents the largest commitment in any RMBS agreement to provide financing for affordable housing—a crucial need following the turmoil of the financial crisis.  $280 million will be paid out by Goldman pursuant to an agreement separately negotiated with the state of New York.”

In a story from the Chicago Sun Times we get more details.

The bank (Goldman Sachs) will pay nearly $23.8 million to the Teachers Retirement System of the State of Illinois, $472,500 to the State Universities Retirement System of Illinois, and $737,500 to the Illinois State Board of Investment, which oversees the State Employees’ Retirement System, General Assembly Retirement System and Judges’ Retirement System, according to the statement.

Regarding the JP Morgan fine:

“The FHFA accused JPMorgan and its affiliates of making false statements and omitting material facts in selling $33 billion in mortgage bonds to Fannie Mae and Freddie Mac from Sept. 7, 2005, through Sept. 19, 2007. Those two firms, regulated by FHFA, have taken $187.5 billion in federal aid since then.”

Here is the breakdown of the disbursement of the 13 billion dollar JP Morgan fine:

$7 Billion goes to state and federal agencies:

  • $4 billion for the Federal Housing Finance Agency goes to Fannie Mae and Freddie Mac. This deal was announced in October.
  • $1.4 billion for the National Credit Union Association to reduce assessments for credit unions.
  • $515 million for the Federal Deposit Insurance Corporation
  • $613 million to New York attorney general
  • $299 million to California attorney general
  • $101 million to Illinois attorny general for state pension funds.
  • $100 million to New York attorney general for expanding homeowner assistance programs.
  • $20 million to Delaware attorney general
  • $34 million to Massachusetts attorney general. The office has not decided how to spend the money.

$4 Billion goes to consumer relief:

  • $2 billion credit for JPMorgan to reduce the balance of mortgages in foreclosure-racked areas like Detroit and certain neighborhoods in New York.
  • Up to $500 million credit for JPMorgan briefly halting the collection of mortgage payments.
  • Credit for JPMorgan to reduce interest rates on existing loans, offer new loans to low-income home buyers and keep those loans on its books.
  • Credit for JPMorgan to demolish abandoned homes and other efforts focused on curbing urban blight.

$2 billion goes to Justice Department:

  • $2 billion fine goes to United States Treasury. Federal prosecutors in Sacramento led an inquiry into JPMorgan’s mortgage practices

There are two things very clear. No one goes to jail, and the federal government and this administration has a pot of money that no one in particular is monitoring. Incarceration of Wall Streeters doesn’t fill the money pot, does it? Additionally, many of the components of the fine are tax deductible therefore the headline numbers don’t truly reflect the “real” penalties incurred.

Fairness and pragmatism would dictate that the money should go to reduce the federal costs of the financial crisis and, where possible, financially assist those specifically and uniquely harmed by the admitted fraudulent activities. But everyone was harmed by the crisis, weren’t they? So who decides exactly where the money goes? Did Chrysler bondholders get covered? Did you?

Yet in these provided settlement details, very few states seem to be involved in the disbursement of the money. Mentioned are the New York attorney general, the Illinois attorney general, the California attorney general, the Massachusetts and Delaware attorneys general. All Democrat-controlled states with some hefty electoral vote totals. What of the other 45 States? Did they forget to join in on this legal matter?

Illinois comes out very nicely in this Goldman Sachs fine disbursement. Their underfunded, overpromised pension systems get some fresh oxygen. Any money for the Border Patrol Union? Curious that so many other states aren’t benefiting. What of Texas or Arizona? 

California gets a largess, and the manner in which the money is to be spent is a little “clouded”. Transparency, only to a point, then “poof”.

The entire matter smacks of criminals bankrolling, via their fines, a slush fund for the administration’s pet projects, with some Democrat electoral vote gathering thrown in. All fines should have been promptly deposited into the national treasury. There is plenty of room.