“The investigators have yet to gather many documents, conduct depositions or assemble tallies of aggrieved homeowners. They don’t yet have a good handle on the number of wrongful foreclosures, the amount of fraudulent documents filed in local courts or the volume of legal instruments processed by so-called “robo-signers,” the agents that lenders employed to process foreclosure filings en masse without examining the underlying paperwork.”


You call that an investigation?

Why on earth would the AGs settle if they have not done any serious sort of workm into the underlying crimes ?

To start getting towards that answer, have a go at tonight’s must read muckraking via Shahien Nasiripour, who writes:

State and federal prosecutors are pressing to complete a proposed settlement with the nation’s five largest home loan companies over alleged mortgage abuses, even though they’ve only initiated a limited investigation that hasn’t examined the full extent of the alleged wrongdoing, according to interviews with more than two dozen officials and others familiar with the state and federal probes.

The deal with the mortgage companies would broadly absolve the firms of wrongdoing in exchange for penalties reaching $30 billion and assurances that the firms will adhere to better practices going forward, these sources told The Huffington Post. Negotiators met in Washington last week to hash out the settlement.”

Its a sad situation, and it appears that whatever hopes we may have had that the Attorneys General were not like the whores in Congress appear to be starting to fade. (At least NY and California AGs are showing some spine).


As Government Nears Accord With Banks, Questions Swirl Over Scope Of Investigation
Shahien Nasiripour
The Huffington Post, July 2011

Category: Bailouts, Legal, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

23 Responses to “Will the AGs Turn the US into a Banktocracy?”

  1. joeyfishface says:

    “Its a sad situation, and it appears that whatever hopes we may have had that the Attorneys General were not like the whores in Congress appear to be starting to fade. (At least NY and California AGs are showing some spine).”

    Perhaps the AGs, Feds, Regulators, etc. knew damn well what they would find and can’t risk the fallout of possibly collapsing the market? Given that the Fed has little firepower left, maybe they figure it’s a necessary (albeit ugly) evil?

    Or not.

  2. uzer says:

    joeyff, do your powers of rationalization help you sleep?

  3. Mike in Nola says:

    Why do you phrase the question as if we are not already a banktocracy?

  4. “Why do you phrase the question as if we are not already a banktocracy?”

    Mike in H-town,

    Good Q: !

  5. Andy T says:

    “At least NY and California AGs are showing some spine.”

    Not really. NY and CA just need the cash more … you just need to put out a little bit of work to strong arm the banks into paying you some money.

  6. Bob is still unemployed   says:

    From the quoted article:

    Despite failing to marshal a strong case proving misconduct during the foreclosure crisis, the government is seeking to craft a settlement quickly, in the hopes that this will inject greater certainty into the financial system, stabilize home prices and add vigor to a flagging economy.

    In my most humble opinion, if you want to inject greater certainty into the financial system, then you appropriately punish those who are responsible for crashing said financial system.

    If you let those who have crashed the system off lightly (as this settlement appears to do), then you are sending the signal that the financial system will never be robust and reliable because crooks can easy scam the system and get way with little more than a wrist slap.

    Those who swear to protect the financial system need to send the message, “do not mess with the financial system.

    This proposed settlement sends the opposite message.

  7. dsawy says:

    Why would you think that the AG’s weren’t political whores like those in Congress?

    Where do you think AG’s go when they get tired of being AG’s?

  8. [...] Will the AGs Turn the US into a Banktocracy? Barry Ritholtz (hat tip reader John M) [...]

  9. wisedup says:

    hey, wiseup you guys.
    You think that anyone with any amount of capital is going to piss off the people who can make or break his future?

    The AG’s are somewhat smarter than those who invested in Uncle Bernie, but not by much. They need the reassurance that what money they have can be magically enlarged – without risk if they are good little boys.

  10. barbacoa666 says:

    Our current ZIRP is a subsidy to banks. Unless I am mistaken, the SS and Medicare Trust Funds will earn lower rates of return due to ZIRP. So, in order for these trust funds to remain solvent, current and future American retirees must either pay higher taxes, see reductions in their SS checks, or retire later. So, in essence, the working people of America are being charged a back-door tax that is being used to float our zombie banks.

  11. rktbrkr says:

    (unemployed Bob)… This proposed settlement sends the opposite message.

    Ditto Paulson’s pulpitizing about about “moral hazard” and then the Treasury and Fed proceed to punish predent savers to rescue and reward reckless risk takers.

    I’m sure the states AGs are being pressured to be “team players”. CA and NY will be able to squeeze a lot out of them, CA was ground zero for bad behavior. I’m surprised FL,AZ,NV aren’t playing hardball too – grassroots politics overruling big banks lobbyists.

  12. Anthony says:

    more importantly, Europe is in meltdown mode.

    Italian bonds moved 42bps in a day. That is an enormous move. That also means an enormous drop in the price of Italian bonds (in the range of 3%). Banks holding Italian bonds just saw the value of their assets go down a lot. Who thinks European banks are in such good shape that they can withstand declines in asset values? From an accounting perspective if the assets are categorized as ‘held to maturity’ a bank wouldn’t have to recognize the decline in value but that doesn’t change the reality that the value of their assets dropped.

    This quickly become a self-fulfilling prophecy. Market participants know this so they stop transacting with each other. There’s an article in the WSJ about that very point (European banks are pulling back their exposure to each other).

    This could get ugly fast.

  13. HEHEHE says:

    Government sanctioned fraud is all it was so now lets sweep it all under the carpet.

    I have a tiny amount of sympathy for BAC and JPM simply because we don’t know the entire story re their taking over Countrywide and IndyMac – the institutions were the fraud was widespread. Were they really arm lengths deals that were willingly entered into or were the acquisitions forced down their throats ala Merrill and BAC by the Fed and Treasury? Btw what ever happened to Ken Lewis? He’s kind of disappeared ever since he accused Bernanke and Paulson of threatening him.

  14. DC says:

    [But Harris announced last week that the special unit will likely lose its investigative abilities, a consequence of a debilitating $71 million budget cut. Her office will lose the ability to follow up on open investigations ranging from foreclosure scams to "multi-million dollar corporate fraud," she said in a statement.

    "It's all about their budgets," Senator Tom Coburn (R-Okla.) said last week about the state attorneys general and their settlement talks with the banks while rubbing his thumb against his fingers.

    "We need a full-fledged investigation," said Alabama Republican Sen. Richard Shelby, the ranking member on the committee. "There's no substitute for a thorough investigation and finding of fact."]

    Classic Republicanism from Coburn and Shelby. Just as with the SEC, FCC, FEC, etc., the goal is to starve the enforcers at the federal level and push that responsibility to the states. States of course are out of money and don’t stand a chance of making up the difference.

    But these stalwarts of stupidity demand action! Investigation! What a reeking load of bullshit from self-righteous, corporation-owned senators-for-life who long since forgot what it’s like to be an “average American.”

  15. [...] what some sharp observers, like Barry Ritholtz, are terming a “Banktocracy” (see “Will The AGs Turn The US Into A Banktocracy?” at The Big Picture [...]

  16. lambert says:

    Can we avoid the “politicians are whores” trope? It’s insulting to whores. Thank you!

  17. Julia Chestnut says:

    Government of the corps, by the corps, for the corps. Now playing at a kabuki theater near you.

  18. DeDude says:


    You are absolutely right. It is all about not having the resources to do the fight, because the GOPsters behind the door have slashed the budget. It is such an easy scam to get passed the idiots of this idiocracy. Why doesn’t/didn’t the gobinment do X !!! ??? – because you idiots voted for corporate sock puppets who cut the budget such that the gobinment does not have the resources to do X. When things go wrong the GOPsters can always come back and claim we don’t need to change anything because it was all the fault of gobinment (not enforcing current laws). Look at the joke of outrage about illegal immigrants. They had a law banning companies from hiring illegals, and then they had 100 people total in the only agency charged with enforcing that law – how could that go wrong.

  19. Lugnut says:

    let me translate the AG position: “We can’t be arsed to actually conduct a proper investigation on something so massive, so how about you guys just give us a whole bunch of money, since we need it; no one goes to jail, and we call it even? Sound like a plan?” Ptui.

    I would just loooove to see any one of these so called news networks chasing down some of these AGs down the steps of their office buildings, stick a mic and a camera in there face ala Madoff, and ask why they’re offering payoffs in exchange for criminal prosecutions. Everyone points the fingers at the banks, but if the government offers no checks and balances for criminal behavior, or worse yet, leans towards what amounts to federal bribery for malfeance, whos really the worse actor in this play? The banks? I say the regulators and justice officials, as well as the Congressman who sell out for kleptocratic legislation bear equal top billing.

  20. AHodge says:

    a useful deal is possible
    which would include punishment for foreclosure fee adding and lying
    writing off second mortgages and
    serious cramdowns and capital writedowns for banks and big pressure to short sale
    but allowing cases where the house is vacant to go forward on inadequate docs

    if the AGs want to do penalties and fines that are applied to writedowns and loan forgiveness?
    i cant object, though its something the banks should do anyway

    however if the AGs get little but a pot of tens of billions of penalties to farm out how they like?
    they will be whores that a russian oligarch or chinese party official would have nothin to top

  21. Bracton says:


    money recovered by a state AG in a situation such as this goes to the state treasury, usually the general fund or a dedicated consumer protection fund. no state legislator or governor would let the state AG hand out the money himself.

    @DeDude, @DC:

    you hit the nail on the head in terms of resources available to a state AG. any enforcement action or civil litigation started against the banks, etc. would be hugely complicated, time-consuming, and expensive for a state AG’s office. california and new york can take the lead in a case like this because the respective AG offices are large, and there are attorneys in those offices with experience in financial regulation.

  22. Senka says:

    Prosecuting Wall Street investment banks and their “geniuses” is not only a matter of democracy, but more importantly, it is about survival of America that we all love…and the only path for our kids’ future.
    How did we become just one big hypnotized mass, even after the truth has been revealed? We’re walking around as if we’re mesmerized, not standing up, not demanding justice, still paying our mortgages to lenders who don’t even legally own them…
    MA citizens stood up together on July 18th, demanding answers and justice- http://tinyurl.com/3qsu87x