This was a little surprising to see this rather negative story about the new program President Obama announced today to help struggling homeowners. Any risk associated with the refinancing of all these underwater mortgages will be born by current and future taxpayers.
FHFA $200 Billion Lawsuit Against 17 Banks Already Being Discounted – No Big Deal – Time to Move Along Folks
When the FHFA dropped the bomb on Friday afternoon before Labor Day, it was initially met with commentary in the financial world as a nuclear bomb going off. Many figured it would implode many of the banks sued – particularly Bank of America, JP Morgan Chase and Citi…all of which seem particularly vulnerable due to the mortgage irregularities . Then we had worsening news over the weekend with regard to the financial problems in Europe. Europe crashed on Monday while Americans bar-b-qued. Everyone figured Tuesday would be a bloodbath and it looked like it was going to be, but then the market staged a rally all day long and dramatically cut it’s losses.
It turns out the FHFA is already backtracking on the extent of the law suit and there are others who are very skeptical of the relationship between our government and the banks that they figure this is just cover anyway. I don’t think anyone really thinks this suit is going anywhere. It will get settled for pennies on the dollar and despite accusations of fraud, no one will be prosecuted for criminal activity. Everything will be good. Things will go on generally as they normally have and while the taxpayers will continue to pay for these defaults and fraudulent investments, the taxpayers will remain uninformed as to what has happened.