Financial Times: State Prosecutors to Offer Bankers Grant of Immunity From Serious Charges
I don’t think anyone’s surprised. The powers that be have already decided to let the banks off with a slap on the wrist and an exemption from serious criminal prosecution. Who wouldn’t take that deal? Big US banks in talks with state prosecutors to settle claims of improper mortgage practices have been offered a deal that is proposed to limit part of their legal liability in return for a multibillion dollar payment. Pocket change! One round of yearly bonuses! The talks aim to settle allegations that the companies – Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial – illegally seized the homes of delinquent borrowers and broke state laws by employing so-called “robosigners”, workers who signed off on foreclosure documents en masse without reviewing the paperwork. State prosecutors have proposed effectively releasing the companies from legal liability for allegedly wrongful securitisation practices , according to five people with direct knowledge of the discussions. Some state officials have expressed concern that they have offered the banks far too broad a release from liability. Others say the broad language was perhaps inadvertently crafted and will be tightened as negotiations continue. Participants on both sides stressed the talks remain fluid. “Perhaps inadvertently.” Heh. What a sense of humor! Still, the banks called the states’ counterproposal, sent to the lenders about a month ago after the companies initially requested an in effect grant of immunity from a raft of alleged civil violations, a “non-starter”. A “non-starter”. You have to love their audacity! They say the proposals from the state prosecutors will need to be expanded before the banks are willing to reach an accord with government agencies that will involve a probable payment ranging anywhere from $10bn to perhaps as high as $25bn. The two sides will meet again this week to iron out their differences. They are close to an agreement on future standards governing the servicing of home loans, yet remain far apart on other issues, such as legal liability claims, compliance and enforcement , and the amount of cash it will take to settle the allegations. It’s pretty simple. They want no liability, no compliance and no enforcement. What’s to negotiate? They’ve said what they want, now the prosecutors have to give it to them! The worry over the states’ counterproposal stems from its treatment of loan documents. The term sheet proposes to release the banks from legal liability over how mortgage documents were maintained, prepared and transferred , people familiar with the matter said. Though the counteroffer attempts to release the banks from liability with respect to home repossessions, and explicitly states that the release does not include securitisation claims, the language is broad enough in that it could prevent state officials from bringing securitisation claims in the future should they sign up to the agreement. At the heart of securitisation claims, which involve missteps in how home mortgages were bundled into bonds, are allegations that the banks did not properly maintain and transfer documents from one step in the complicated chain to the next. If banks are released from liability regarding documentation practices, some industry officials believe they would be able to evade state lawsuits directed at how they bundled the loans into securities. “Documentation practices”? They mean the rampant fraud, misleading claims and illegal home repossessions, even of people who never even had mortgages. Why should the banks have to suffer? Banks consider accountability of any sort to be a “non-starter.” The attorneys-general of New York, Delaware, Massachusetts and Nevada are probing such securitisation matters, and have already indicated to the other states that they did not agree with the counterproposal .
Financial Times: State Prosecutors to Offer Bankers Grant of Immunity From Serious Charges
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on September 6, 2011. Filed under