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Thursday, September 29, 2016

Neil M. Barofsky served as the special inspector general in charge of oversight of the Troubled Asset Relief Program and is currently a senior fellow at New York University’s School of Law. This is an excerpt from his book, “Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street,” which will be published July 24 by Free Press, an imprint of Simon & Schuster.

July 23 (Bloomberg) — In the year since I stepped down as the special inspector general of the Troubled Asset Relief Program, the sadly predictable consequences of the government’s disparate treatment of Wall Street and Main Street have only become worse. As the banks amass size and power, Main Street continues to get pummeled.

Part of the current economic malaise can be traced directly to Treasury’s betrayal of its promise to use TARP to “preserve homeownership.” The Home Affordable Modification Program has brought little meaningful improvement, with fewer than 800,000 ongoing permanent modifications as of March 31, 2012, a number that is growing at the glacial pace of just 12,000 per month.

In June 2011, Treasury appeared to take a tentative step toward holding the mortgage servicers accountable for the widespread misconduct in the program by pledging to withhold the incentive payments to three of the largest banks — Wells Fargo & Co., Bank of America Corp. and JPMorgan Chase & Co. — until they came into compliance with HAMP’s rules.

Treasury couldn’t even keep this modest commitment. Although Wells Fargo had improved its performance and was awarded all of its withheld incentive payments, JPMorgan Chase and Bank of America continued to fail to meet the baseline standard. Nonetheless, in March 2012, as part of a broader settlement of the so-called robo-signing scandal, Treasury released all of the withheld payments, totaling more than $170 million. As a result, the government hasn’t held any servicer responsible for the widespread abuses of HAMP applicants, nor is it ever likely to do so.

In return for what was touted as a $25 billion payout, the banks received broad immunity from future civil cases arising out of their widespread use of forged, fraudulent or completely fabricated documents to foreclose on homeowners.

The headline number sounds impressive, yet the banks only had to cough up $1.5 billion to provide a paltry $2,000 to each borrower wrongfully foreclosed upon, a few billion dollars more in penalties to the states, and a few billion to provide for borrower refinancing. The remaining $17 billion, however, won’t involve payouts of money, but will be met in the form of the banks receiving “credits” for certain activities. This includes $7 billion that will be “earned” for routine tasks related to the housing crisis, such as bulldozing worthless houses, donating homes to charity, and agreeing not to pursue deficiency judgments against homeowners, whereby banks seek to force a homeowner to pay the difference between the balance of the loan at the time of foreclosure and what is recovered by the bank from a foreclosure sale. This sounds good, but it should be noted that these are all part of the normal course of business for the banks.

The remaining $10 billion in credits are supposed to be scraped together through principal reductions on “underwater” mortgages, but that doesn’t mean that the banks themselves will be taking $10 billion in losses. The settlement grants them partial credit for reducing the principal on loans that they service but don’t own, such as those contained in mortgage- backed securities. Worse still, they can earn additional “credits” toward the settlement through taxpayer-funded HAMP modifications. For example, if a servicer reduces $100,000 in principal for a mortgage through HAMP and receives a taxpayer incentive check for $40,000, it will still be able to claim $60,000 in credit toward meeting its obligations under the settlement.

As a result, the settlement will actually involve money flowing, once again, from taxpayers to the banks.

  • William Deutschlander

    Typical conservative principle, those that has get, those that don’t, get nothing!

  • Joseph Hemphill

    4 years I tried to refinance my underwater mortgage with BofA, I’m not asking for a hand out, just a fair shake, a lower rate to make my house more affordable, I was turned down at every step, made to provide 6 months worth tax returns, bank statements, etc. only to be stymied every time even though I qualified for the program. BofA then sold my loan to another servicer who will not participate in any program, typical, they are just bleeding me out until I eventually pull it together somehow, or default. I am a small business owner and saw a 50% to 70% decrease in business with the onset of the recession, we have come back some, but not like it was. Neither party has the average Americans interest in mind, we are all being played.

  • Geithner must go – he has always had the best intrests of his peeps at heart.

  • Former President Bush’s decision to bailout the investment banks that gambled with our money and lost their subprime and derivatives bets was consistent with what President Reagan did when he bailed out the S&L and what our government has done, time and again, when the big boys get burned. As for the rest of us, we get enough crumbs to ensure we can afford the trinckets made in China that our elite makes abroad with the tax breaks we given them in a futile attempt to benefit from their bonanza.

  • I am surprised the National Memo has not featured the Senate vote last week to strike down President Obama’s proposal to punish companies that outsource jobs overseas, and help those that create jobs in the USA. 42 GOP senators voted against it, and since 60 votes are needed to debate a presidential proposal nothing will be done. The senators decision confirm their priorities are in line with those of Bain Capital, and that outsourcing, laying off American workers, and closing plants in the USA is, to them, a small price to pay when compared to the pleasure of exceeding shareholder expectations, paying high dividends, and expanding our global market share. When are people going to wake up and stop supporting the morons whose actions are destroying our country and the American dream? I say, let’s vote every single scumbag that voted against that proposal out of office.

  • ObozoMustGo

    Off topic, but important, because The Memo will NEVER cover this since they are an arm of the Obozo campaign propaganda machine…..

    Sen. Diane Feinstein (D-CA), Chairwoman of the Senate Intelligence Committee, on Monday said the White House appears to be responsible for leaking classified national security information.

    ‘‘I think the White House has to understand that some of this is coming from their ranks,’’ Feinstein said at a World Affairs Council forum, according to the Associated Press (AP).

    Obozo will sell out American security for his own reelection bid. For all American’s sake, Obozo Must Go!!!!!!

    Have a nice day!

    • Would you mind telling us what classified information has been leaked lately? When it comes to national security I much rather have the man who ordered the raid that ended the days of OBL sitting in the Oval Office than the one who ignored warnings and allowed 9/11 to happen. The worst foreign attack on U.S. soild occurred when a Republican was in the WH, with a GOP-controlled Congress. Add Iran Contra, and the cut and run in Lebanon after more than 400 U.S. Marines were slaughtered in the 1980s and what you will find is that national security and/or foreign policy are topics that should be off limits for the GOP for many years to come…unless you think the American people suffer from a severe case of amnesia…

      • ObozoMustGo

        Dommy….. why would a US Senator, a rotten leftist US Senator, Diane Feinstein, be making comments about “leaks” comming from a rotten leftist US President’s Administration if there were no leaks???????????

        Hmmmmmmmm???????????

        Have a nice day!

        PS> you’d vote for Obozo if there photos of him performing lewd acts with underage boys. To the leftist nutjob, the end’s justify the means.

    • greghilbert

      Sig Heil Herr Bozo Clown! The Republican National Committee’s Amerikaner Nazi Party Sub-Committee for the Support of Nazi Brown Shirt Trolls salutes you for taking attention away from the information being published by the Memo. We do not want the American public to understand how we divert money from their Treasury into the coffers of our wealthy sponsors! We do not want the American public to understand any of the ways we serve our wealthy sponsors! It is our duty to obey their wishes! PS In answer to your question: You must post 6 more comments to earn the Clown merit badge for your official Nazi Brown Shirt uniform, and your dues must be paid in full. PSS You must also conform to the secret instructions enclosed in your monthly box of Cracker Jacks. The new official closing for all Nazi Brown Shirt Troll comments is “Have a Nice Herr Day!”

      • ObozoMustGo

        greg… great post! Very funny!!! 🙂 I mean that. I’m still laughing.

        But, of course, it’s waaaayyy off base, as would be expected by any novice like yourself that has NOT considered the plain meaning of words. So, in y0ur ignorant honor, I will repost what I have posted many times, and will do so many more times………

        And for all of you leftist nutjobs out there who are incapable of simple thought, let’s review the basic meaning of the term ‘Nazi’…. NAZI is an acronym for National Socialist Party. Knowing that, which of our 2 parties is most likely to be a home to people who identify more closely with the ideas of socialism? Come on…. be h0nest… which one? That’s riiiiiiiiight… The DemocRATS are the party for socialists in America. In fact, it can be argued quite well that the old party called ‘Democrat’ sould be called the Socialist Party in modern times. So, before all you leftist nutjobs start trying hurl the ‘Nazi” label around, remember what it REALLY means!

        Nazi = Socialist = DemocRAT

        You’re only casting dispersions on yourself, you stupid moron.

        Have a nice day!

        • greghilbert

          “You’re only casting DISPERSIONS on yourself, you stupid moron.”
          –Nazi Brown Shirt Troll Herr Bozo

  • howa4x

    Geithner was in the thick of the initial bailout by Paulson during the last year of Bush. He is in no position to ride heard on the banks that he despertally tried to save. Part of the problem is that the republican controlled house has been a major obsticle to getting the monitoring apparatus of the ground. Obama had to make a recess appointment of the agency director since the house wouldn’t do it. Wall st is trying to kill Dodd-Frank and is giving the republican super pacs millions in the hope Romney will win and the games can start all over again. To ask a Romney administration to police Wall st is silly since that is the place where he made his millions. If we want any regulations to succed we not only need Obama to win but the democrats need the house too. otherwise it will be deja vu with the banks

  • JohnDoner

    I wonder if it isn’t time for President Obama to appoint a new Treasury secretary! But the NO! party would undoubtedly filibuster any decent appointee!

  • People Seem To Forget That Bush Signed Most Of The Bailouts Before He Left Office!!!

  • overpaidCS

    A perfect of an attorney over his head in the financial area and then points his fingers at everyone else but not himself. There is no reason for the taxpayers to be on the hook for crooks who obtained loans fraudulently knowing full well they could not only never repay the loan but unable to make even 1 monthly payment.
    The banks should be prosecuting these people and sending them to jail