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Home Publications Blogs CEPR Blog Is the Obama Administration Soft on Crime?

Is the Obama Administration Soft on Crime?

Written by Dean Baker   
Tuesday, 24 January 2012 06:21

That would seem to be the case from the leaks about a mortgage settlement which would reportedly give the banks and their executives immunity for all their misdeeds connected with the housing bubble in exchange for $20 billion in principle write-downs on underwater mortgages. And, Naked Capitalism reminds us that this $20 billion need not even come out of the banks' pockets. This includes write downs on mortgages that they are servicing, which means that the money would come out of investors' pockets.

Apart from the limited money at stake, the question is why would there be a reason to grant immunity for criminal wrong-doing? If people at these banks committed fraud, for example by lying about possessing documents that they did not possess, lying about the terms of loans to mortgage applicants or misrepresenting the mortgages in pools to investors, then why would we want to give them a get out of jail free card?

If no such fraud was committed, then there is no reason to include this sort of immunity in a settlement. The only reason to grant immunity of this type is if fraud was committed and the Obama administration wants to let the bankers off the hook.

Comments (2)Add Comment
written by PeonInChief, January 25, 2012 2:34
"We" don't want to give the banks a free pass. The Obama Administration does.
written by Jack MacMillan, January 28, 2012 1:14
Why doesn't the government just bypass the banks and give the $20 billion directly to the homeowners in the form of vouchers that they could apply to reduce the principal on their loans? That would achieve the same amount of principal reduction and make it apparent that the banks are contributing nothing in the proposed deal.
Of course the transparent approach would unmask the pretense that the bankers have done anything to deserve immunity, so perhaps I've answered my own question.

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