Where did the billions go when banks settled with our government?


In 2011, Bank of America agreed to pay $8.5 billion to mortgage bond holders like Blackrock and Pimco for loans mostly originated by Countrywide, so obviously something went terribly wrong there.  In 2012, the five largest banks agreed to pay $25 billion in penalties and “borrower relief,” so very well done there.

That same year, HSBC was hit with a $1.9 billion fine for money-laundering and other assorted niceties, and UBS AG forked over $1.5 billion for manipulating LIBOR, no less. 

Then in 2013, JPMorgan Chase agreed to pay another $13 billion to settle a variety of legal headaches, a couple billion of which was a fine paid directly to the Justice Department, and that same year another $9.3 billion was agreed to by Bank of America, Wells Fargo, JPMorgan and 10 others. 

(Oh wait… in that agreement with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve, the bankers listed both “cash” and “non-cash relief,” including loan assistance to homeowners alleging foreclosure abuses, in their total of $9.3 billion… so, as numbers go, it’s a bit squishy.)

In 2014, it was Credit Suisse AG agreeing to pay $2.6 billion to settle again, with our Department of Justice… but wait a second here… Huff Post has some interesting totals.  Like, Bank of America settling to the tune of just over $60 billion since 2009.  JPMorgan throwing down $31 billion to settle whatever resulted from the presumably stellar behavior the bankers obviously exhibited to bring them to the settlement table in the first place.

There’s Citigroup for another $10 billion… Wells Fargo for about $6 billion… and a couple of billion in U.S. dollars from Deutsche Bank.  All of that just since 2009 and up to 2014… so there are probably a few settlements-with-our-government missing from the list above.

In fact, I’d be surprised if there weren’t a few forgotten, considering the impact that’s been felt as a result of any of the multi-billion dollar settlements.  I’m shocked when anyone actually remembers any of the big banks settling charges for billions having to do with mortgage and securities fraud that led to the collapse of the U.S. and even global housing markets… and so much more.  I think most Americans know very little about what did and/or didn’t happen as a result of the financial and economic meltdown that began in 2007 and continues to fit us like a heavy wet woolen blanket today.

My questions, however, are… where did all this “settlement money” go?  How much of it went anywhere near actual troubled homeowners?  How was it delivered?  Like, in cash or check?  Or was it lower profile, like a barter deal exchanging styrofoam cups for rubber bands?  Where did the countless billions from banker settlements go, government people?

It’s not a small amount of money that we’re talking about here… it’s billions for sure and for certain, and I’d have to say tens of billions, which is a respectable sum regardless of what you’re trying to accomplish… so where’s the settlement money, fearless leaders? 

I’m not sure any of it’s real, to be totally honest.  For all we regular folk know all those settlements have never been paid by the bankers.  I mean, maybe JPMorgan owes $13 billion, but since they have Cracker Jack credit at JPMorgan, they’ve got some time to pay it off, same as cash.  Like, what if you heard they were given 20 years to pay the $13 billion?  Would you even feel the least bit surprised?  I would not.  I’d say it was to be expected, and wonder why they didn’t make a deal for payment over 30 or even 40 years.

Now, I realize that there’s plenty of Tom Foolery going on with those settlement numbers.  They’re all squishy to varying degree, and in a variety of ways.  For example, as Newsweek reported back in October of 2014, under the headline: Too Big to Tax – Settlements Are Tax Write-offs for Banks 

“Big banks such as Bank of America and JPMorgan Chase will receive deductions against the corporate tax that will amount to between half and nearly three-quarters of their multibillion-dollar settlements, at least.”

Wow, that is so cool how they get to do that, don’t you think?  I don’t mean how they get to get away with not paying actual money when settling, I mean, how they get to shovel dirt right into our faces thus making it abundantly clear that they think of us, in terms of intellectual capacity, as toddlers.

According to Newsweek, the close enough total for (almost) all bank settlements is around $144 billion… and that’s just more than high enough to support any of my points so let’s just stop right there.  So what if JPMorgan can deduct $7 billion of the $13 billion for which they settled, as Newsweek says they can and I have no reason to doubt?  It still leaves $6 billion to be paid presumably in something that at least loosely resembles U.S. currency, and that’s still enough dough with which to accomplish a thing or two, so where’s the money, darn it? 

Where did it go and who has it now? 

I’ll understand if some went to pay bonuses at the Justice Department or whatever.  I’m nothing if not reasonable, but I’m going to need to know where all this settlement money went, and I have the feeling I’m about to be taken on a long journey to nowhere.  No one’s going to know, isn’t that about right?  That’s what I’m going to find out, aren’t I?  I’ve gone down rat holes like this one before, you know. Fool me once (insert whatever is normally said there, I think it fits.)

Okay, so the point is that I don’t think anyone would claim to know where all those billions in settlements went exactly, but I can say three things about that situation. 

  1. A significant portion of those dollars should have found their way into helping homeowners find alternatives that prevent foreclosure.  (If I have to explain why that’s the case, then you’ll have to do some catch-up reading of articles from a few years back.)
  2. I haven’t noticed or heard about any new or significant amounts of dollars being spent to help homeowners, and you would think if there were billions flowing, you’d have to feel or hear something as a result, right?
  3. Assuming this is one of those numbers that everyone hopes never comes to light, then aren’t we obligated to ask our elected representatives for the right numbers?  Aren’t we entitled to know about the tax dollars spent however ineffectively?  It’s a collective “our” money, is it not? 

Where’s the money, government people?

What if there had been $50 billion to spend on helping homeowners avoid foreclosure… well, that would be a whole lot more than our government has spent to-date on foreclosure prevention efforts and programs.  If they had access to another $50 billion, it would seem that we could expect the whole crisis to be over in a relatively short period of time.

Of course, they’d have to have some ideas on where and how to spend it, and none of that seems likely.  It’s been eight years… I think if there were any ideas lurking in the shadows, they would have popped out by now.  It’s pretty clear that as a nation, especially when it comes to foreclosures, we are idea-less.

See that… this whole foreclosure crisis is so screwed up that it can’t even be fixed with money.  That’s seriously screwed up, by the way.  The Gulf of Mexico, after the worst oil spill in history, got cleaned up after we spent $26 billion over a couple of years.  So money really made a difference there.  But not so much when it comes to stopping foreclosures, apparently.  That is a task that, it would appear, is impervious to monetary stimuli. 

When it comes to foreclosure prevention, we slash budgets by billions even as the underlying problems remain unsolved or are worsening.  We started with $75 billion for Making Home Affordable… then once we saw that it was a hot and holy mess of inadequacy, we reduced its budget to $50 billion…

… and then later it was slashed yet again, this time to $37.5 billion…

… and I don’t think to-date we’ve spent anywhere close to $10 billion since day one of the crisis, making this the only government funded program I can remember that needed less than it was given…

… and it’s for sure the only government program I’ve ever seen have its funding cut by 50 percent and not complain about it.  To the contrary, and maybe it’s just me, but I felt the reaction to the budget being cut was something closer to a enormous sigh of relief.

So, what should we all say about the countless billions that were settled out of the banks for charges that harmed homeowners at least as much as they harmed any other group, and yet… where did the money go?  I’m serious… it was billions… just like last time.  You’re not going to tell me that you completely lost track of tens of billions twice in a row, are you? 

Surely after losing track of TARP funds, you’d have put some sort of mechanism in place somewhere so we could keep a better count than we did last time when we went… 1, 2, 3, 4… 9 trillion, and then it was all lost.  We did better than that this time though, didn’t we.  Say we did, I need to hear it.

Well, I could try to do a bunch of research on how we have spent money on foreclosure prevention, but I really don’t see a good reason for looking up any of it.  Because whatever it’s been, it’s either not been enough… or its been spent, shall we say, less than optimally. 

In truth, I don’t care where the money went anymore.  I only want to point out that with $50 billion, you could have given each of ten million homeowners $5,000 in cash.  I bet that would have been enough for each one of them to pay a CPA or some other expert to help them correctly put their numbers together the very first time. 

Or, you could have given quite a few of them hefty checks to move out of their underwater tombs… or you could have granted principal reductions to a whole bunch… it’s $50 billion we’re talking about.  Surely we could have something to show for $50 billion, right?  Tell me I’m right about that… I need to hear that I’m right about that.

Oh, never mind.  Why should I care?  You guys keep the money… have a party to end all parties at the Justice Department.  Or, maybe use some of it to fix something done by Wall Street banks.  Anything at all will do.  And let us know when you plan to commence fixing whatever it is you’re planning to fix so we can all watch, while we clap and cheer.

So, how about it?  Send your elected representative a note asking him where all the bank settlement money went, and whether some of it might one day find its way to helping homeowners?  It’s worth asking, isn’t it?  Just out of curiosity?   You might also inquire as to whether we’re out of money for saving homes from foreclosure, or whether HAMP still has funds available…

… and whether, since everyone agrees that HAMP has not quite cut the mustard, to say the very least, we can expect any sort of improvements that might benefit the homeowners still being dragged under by our increasingly robust economy?


Be polite and sincere.  And feel free to add anything else that comes to mind… I’m just thinking out loud over here.


Mandelman out.

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