Foreclosure-Gate Whitewash: $20 Billion “Get Out of Jail Free” Settlement Floated

02-24-2011 • NakedCapitalism.com/

In Saudi Arabia, the royal family has just offered $36 billion worth of concessions in an effort to placate an increasingly unruly public (this appears to be in addition to pledges to spend $400 billion on education, health care, and infrastructure by 2014). This is in a country with a population just under 26 million, including over 5 million non-nationals who presumably aren’t eligible. Now you can easily pooh pooh this comparison, since Saudi Arabia is an autocratic country desperately throwing around money to buy off dissidents, right? But this is the kind of money a leadership group will shell out when pressed to defend an existing order. And the US was very quick to hand out funds right, left, and center during the financial crisis. It’s continuing to do so now in less obvious ways, by continued life support for the mortgage market through Fannie and Freddie, the Fed’s super low interest rates and QE2, and non-monetary measures, most important its refusal to make any sort of serious investigation into what happened in the crisis and prosecute key actors. Even so, the mortgage “settlement” trial balloon floated in the Wall Street Journal this evening is an offense to common sense and decency. Notice how the word “fraud” is pretty much verboten in the MSM; the latest code word for what went awry is “breakdown”. This implies a benign sort of neglect, simply of not doing sufficient maintenance which led fussy machinery to quit working. It is mean to avoid contemplating, let along uncovering, Pinto-type decisions of weighing the costs of making the vehicle safer versus the litigation losses resulting from incineration by exploding gas tanks. The magic number across the industry is a mere $20 billion in civil fines or payments to fund loan mods.