Thursday, February 9, 2012

Foreclosure Fraud Settlement Demonstrates the Power of Capital Relative to the State

Let's say I hire an armed gang to expel you from your house.  My gang removes all of your belongings, changes the locks, and warns you that you'd better not try to come back.  I then sell your house to someone else. 

You might have called the police, but the armed gang I hired actually are the police.  You might have gone to court to stop me, but the court is on my side, because I deliberately mislead the courts.

Now let's say I did the same thing thousands and thousands of times to other people as well.

And you can prove it.

I'd be in pretty big trouble, wouldn't I?  And you'd be entitled to a pretty substantial damages award, wouldn't you?

Not if I'm Bank of America or Wells Fargo.  Then, I simply negotiate from my position of incredible strength, relative to both the state and the individual, and move on.

$1500 to $2000 per home.  That's what people who were wrongfully driven from their homes at gunpoint get under the settlement agreement.  I suppose it will go to the estates of the ones who committed suicide. 




As Yves Smith points out over at Naked Capitalism, $1500-2000 is less than the legal expenses banks incur when a foreclosure is challenged.  It's less than title insurance on homes worth over $200K.

Do you remember that scene in a Tale of Two Cities, when the rich man's carriage, speeding through the marketplace, runs down and kills a young boy?  He throws a coin out the window of the carriage and moves on.  That's the settlement agreement.

And the saddest thing is that it makes no sense to be angry with the attorneys general for reaching this agreement.  Given the power differential, they did the best they could.

At least they didn't negotiate away civil suits by private parties -- although they will be much harder to bring, because states will be closing their civil investigations.

Mark A. Edwards

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