Massachusetts Senator Elizabeth Warren targets DOJ settlements with banks over forged documents and illegal practices
Senator Elizabeth Warren (D-Mass.) call the latest deal “settling cheap” in her letter to Attorney General Eric Holder Wednesday questioning whether a major government settlement with the nation’s largest mortgage companies is a “timid enforcement strategy.”
Elizabeth Warren speaks out again over penalties to financial companies which created consumers
photo David Shankbone
Warren has been a consistent critic over weak penalties imposed on banks accused of defrauding consumers and investors. She has denounced settlement strategies that allow financial firms to set aside past violations without acknowledging wrongdoing.
Wednesday’s letter addresses a settlement among the U.S. Department of Justice, the Federal Housing Administration and 49 state attorneys general over charges that major banks submitted a torrent of false claims in pursuit of government benefits. In February 2012, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial agreed to pay $25 billion to settle allegations that they forged signatures, fabricated documents and engaged in other illegal practices during foreclosures.
The DOJ claimed the violations allowed banks to push through improper evictions, and receive government compensation for loans that homeowners did not repay. In the worst cases, homeowners were evicted without actually defaulting on their loans.
In many others, banks instructed families to miss loan payments in order to apply for bank and government assistance, only to foreclose on them once the loan entered default proceedings.
“I am concerned that this might be yet another example of the federal government’s timid enforcement strategy against the nation’s largest financial institutions,” wrote Warren. “I believe that if DOJ and our banking regulatory agencies prove unwilling over time to take the big banks to trial or even require admission of guilt when they cheat consumers and break the law — either out of timidity or because of a lack of resources — then the agencies lose enormous leverage in settlement negotiations.”
Warren called on the DOJ to avoid “settling on the cheap,” and said that “rushed and inadequate settlements fail to fully compensate victims and taxpayers, and insufficiently deter future misconduct.”
Warren’s letter takes specific aim at one type of violation included in the settlement deal, in which banks paid $225 million to get off the hook for submitting false mortgage insurance claims to the government. In Warren’s calculations, the number of total insurance claims submitted by the banks between October 2008 and September 2010 would have subjected them to $37 billion in total liability, had every claim been fraudulent — indicating that the government had only been compensated for 0.6 percent of the potential maximum.
[…] and Wall Street did to cause so much grief. And, aided and abetted by Congress (with a few notable exceptions), the Justice and Treasury departments, the President and the colluding “regulators,” […]