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Bank of America settlement not better than nothing

America under water
America under water

WASHINGTON -- Bank of America gets off with a slap on the wrist paying a $16.65 billion settlement for selling toxic mortgage bonds. Although $7 billion of it is slated for consumer relief, the remedy is little more than a tincture to homeowners who lost a combined $13 trillion in home equity. For some families the damage may be permanent.

U.S. Attorney General Eric Holder said Thursday at a news conference that the relief package was "appropriate given the size and scope of the wrongdoing at issue."

Bank of America is not the only lending institution to pay up. JPMorgan Chase & Co. agreed to a $13 billion settlement while Citigroup reached a separate $7 billion deal. Before agreeing to settlements, all three banks had more than five years of record profits by borrowing at rates as low as 0.25 percent and then charging consumers around 4.25 percent for a thirty-year mortgage with 20 percent down.

The BOA settlement requires the second-largest U.S. bank to reduce some homeowners' loan balances, provide new loans to low-income buyers and address areas of neighborhood blight. It is unclear as to the number of borrowers that would be helped. One thing is certain: this settlement comes too late for Americans who already lost their homes to foreclosure. Despite bailing out the banking industry with taxpayer dollars, remedies contained in all settlements so far are little more than lipstick on porcine greed that brought the U.S. economy to its knees in 2008.

While Bank of America is often blamed with selling the bulk of worthless mortgage bonds to the secondary market after it purchased of Countrywide, many economists would admit our banking system was doomed when the Glass-Stegall Act was repealed in 1999, and replaced with laissez faire legislation called the Gramm-Leach Act. The supplanted bill had maintained a strict separation between commercial and investment banking. The collapse took almost ten years but those responsible, namely members of the Clinton Administration and a Republican dominated Congress, should hold their heads in shame for causing the greatest economic downturn since the Great Depression.

Historians in the future will muse over the titular differences between Democrats and Republicans. They will discover when it came to banking, both sides of Congress supported supply-side economics to solve a crisis caused by Wall Street and not borrowers encouraged by so-called mortgage professionals to insert puffery instead of facts on their loan applications.

For detailed information on the genesis leading American capitalism to its worst hour, please read “The Financial Crisis Inquiry Report.”

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