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Foreclosure-Gate: Federal/”50″ State Attorneys General Mortgage Fiasco

You don’t negotiate price without negotiating terms, and yet this exactly what is happening. The dollar figure utterly meaningless unless you know what is being traded off against it. A bigger dollar figure means the banks will demand a broader waiver against liability, which is precisely what we warned against (actually, we advised this craven political exercise be dropped, since no investigations had been conducted and hence the Federal/state negotiators had no bargaining leverage). You don’t give a waiver unless you have an idea the depth and nature of the abuses and the likely costs associated with them. As Dave Dayen at FireDogLake points out, the Abigail Field report, based on one person’s work, suggest the mortgage chain of title abuses are pervasive. We’ve been told that other investigations under way are coming up with similar results. That confirms that banks have a sinkhole of exposure. As we said early on, they’d be getting a fantastic deal if they got a broad waiver for a mere $20 billion. And any “$20 billion” is likely to be a lot less in real economic terms. It’s not hard to imagine that any costs would be spread out over years, reducing its value in current dollar term, or might come the form of promises to change business practices, or fund certain activities, and those actions might not take place (how much monitoring do you think really will take place once the settlement team takes its photo op?) But the banks may be playing the negotiators for fools...

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