Fusion IQ’s Barry Ritholtz shares his thoughts on a report that five of the biggest mortgage lenders will pay a $30 billion settlement and pledge to do better going forward when it comes to foreclosure and mortgage-servicing homeowners.
The Dylan Ratigan Show video, July 13, 2011
>>> failure to modify loans. that is the tip of an iceberg to a raft of potential fraudulent loans that currently sit inside the federal government, thus causing us to hit the debt ceiling “the washington post” reporting that the five biggest lenders will be asked to pay a settlement on a multitrillion dollar prosh. in exchange they’ll pledge to do better —
>> can’t do worse —
>> you cannot do worse when you comes to practices. in exchange they’ll be absolved of any wrongdoing in the aspects of the crisis if it wasn’t so outrageous — if it wasn’t a tv show, i would be yelling and screaming, but i have to behave in a manner that’s reasonably appropriate most of the time, so i maintain my exposures, on the brink of disasters because of the actions of these individuals. barry is joining us. why is a proposal like this so insulting?
>> how much time do we have? it lets people who helped create the whole crisis off the hook. it lets people who knowingly engaged in criminality, knowingly engaged in fraud, it’s just write a check, you want to murder, rape, rampage, as long as you can write a check for a couple billion which, by the way, we gave them. we’ve given all these companies much more money than they’re paying in fines, so ultimately we find ourselves in a situation that nothing is going to be prevented from happening in the future.
>> let’s talk about the firing of the investigators in florida.
>> all know it’s home for the medicare fraud industrial complex, but also home to the fraud closure housing —
>> robo-signing, that’s the ground zero, all the foreclosure mills down there. all the parts of the country hit by the worst of the real estate bust, south florida, vegas, california really the worst zones. so you have these two investigators who did yeoman’s work finding out who was engaged in criminality.
>> naming names, getting the documents.
>> put together. there’s a seminal piece that went out, a powerpoint that explained exactly here is how the fraud happened, here’s how it was done, the florida ag decided, for whatever reason, we’re going to fire these people.
>> newly electedisms this is just shameful. if i was in florida, i would start a recall motion immediately. this is absolutely unacceptable.
>> the biggest story in america obviously is the debt ceiling, will we default? will we not default? should we raise taxes? should we cut funding for poor people no one seems to want to talk about how we got — you’ve done tremendous cover with your book “bailout nation” and also before, going back to the 1990s and then connecting the dots between that household debt to ultimately the banks. so now the banks end up with this debt at which point the ratings agencies go and say you’re ensuring the debts, that’s the aig sundays, blah blah blah, and we give the bank debt to uncle sam and wonder how this could happen.
>> i’ve been writing a lot about the two economists who warned about this back in january 2008. this is before bear stearns, before lehman, before everything. they said, prepare yourself, credit crises cause very severe dislocations in stock markets, in real estate markets, but it also really causes a huge increase in debt because on a government level, tax revenues drop, unemployment goes up, and then there’s always an attempt to throw money at it. it’s not necessarily all the money that’s spent on the bailout, which was a substantial sum, though less than originally believed. it’s just suddenly the economy grinds to a halt, but the expenditures keep going.
>> unemployment goes up, house values go down, which means less tax money.
>> and all of this ends up on sungle sam. even things like madoff, uncle sam has to cover. on top of all that, you have the bailouts and everything else. don’t forget fannie and freddie have become the back-door bailouts for the banks that very likely will be a couple hundred billion as they off-load their bad mortgages to fannie and freddie, who really are the only game in town.
>> is there any way to solve the debt problems of our country that doesn’t include cancelling debt?
>> yes, there’s a slow, painful way. we missed the first opportunity, which is to take insolvent banks, put them into, you know — like what we did with general motors, put them into a prepackaged bankruptcy. we missed that window. now what we’re stuck with is this bad debt and the question is who will eat it? is it going to be the banks? the taxpayers? the bondholders? i suspect it would be us taxpayers and not the banks or bondholders?
>> just because wall street pretty much owns congress, that if you look at what’s been going on, we were talking earlier, the democrats are completely inept, and it takes the republicans to be so far out in left field to make the inept democrats look good, that’s what we have in d.c., there is no leadership. it’s let’s see which way the wind is blowing, someone has to grow a spine and say this is wrong, we have to put a stop to this, and so far no one has cup up and done that. i’m talking about the congress and white house, there’s a dearth of leadership missing.
>>> and ron paul said we have to change the direction of the wind?
>> well, so far nothing has been able to do that.
>> listen, a delight to see you. happy summer to you.
>> same here. pleasure to see you again.
>> bare aryholtz, coming up on “hardball,” chris is asking whether the government is too big to fail, but first til