Because of the multiple guilty parties in any one MBS transaction – and the 1940’s act exclusion for sophisticated investors, and because this is mainly at the request of the lobbyists for the hedge funds so as to get the reward of justice for wrongs done others (MBS sold for 30 cents on the dollar and now the hedge funds want 100 cents on the dollar for those purchases made this year), we will get PR about righting a wrong, but the reality will be that no one that did wrong will face the courts.
Instead the hedge funds will steal a few dollars as the banks are made weaker, and regulation – the thing that is needed – remains as soft as in 2006 Because this will take 30 years of civil suits the mortgage world will be dead for 30 years, home prices will be dead for 30 years, and the economy will enter a Japan no growth phase for 30 years (Japan also refused to change the regulatory world – to get tough with its banks – weakening its banks in the long run – and entering a no growth phase that has lasted 20 years).
Meanwhile the left cheers the political AG’s for leading us down this path.
But http://latimesblogs.latimes.com/money_co/2011/09/moynihan-.html suggests BAC will put Countrywide – the company that did the fraud and was purchased by BofA at the request of Treasury in 2008 – into bankruptcy rather than pay the hedge funds their blood money, giving the finger to the AG’s
Angelo Mozilo – the real crook – not Bank of America – reached a settlement on 10/15/2010 with the Obama Securities and Exchange Commission, over securities fraud and insider trading charges, agreeing to pay $67.5 million in fines out of his $600 million from Countrywide and accepting a lifetime ban from serving as an officer or director of any public company – all for being per the Division of Enforcement “a corporate executive who deliberately disregarded his duties to investors by concealing what he saw from inside the executive suite.”, and with the settlement avoiding a trial that could have provided fodder for future criminal charges. Indeed the Obama folks did not fight the agreement Mozilo had to have Countrywide pay $20 million of the $67.5 million penalty because of the indemnification agreement he put in his employment contract. The terms of the settlement allow Mr. Mozilo to avoid acknowledging any wrongdoing and the Obama folks in February 2011 dropped its criminal investigation into the facts behind that civil settlement.
So we crow about how the AG’s are going to hurt the banks and give us “justice” – as the crook – the CEO Mozilo of Countrywide – walk away with a half billion and a smile – admitting no wrong and with a closed criminal investigation that resulted in no charges.
While a settlement among AGs has no effect on private action by individuals, the AG’s threatening action in effect supports those private suits by the hedge funds – so I do not applaud AG’s Beau Biden, Catherine Cortez Masto, Lori Swanson, Eric Schneiderman and Martha Coakley as they go forth, “following the facts wherever they lead”, not convicting the really guilty, not changing the regulations or methods used by the banks, and causing economic harm to the nation compared to a settlement that could achieve changes in process without Obama’s lobbyists watering down the rules and without giving the hedge funds a few more dollars of bank shareholder money.