Attorney General Kamala Harris was quick to trumpet her role in securing a nationwide mortgage settlement last week with a handful of major banks, citing her decision to walk away from talks with the banks and the federal government in the fall as a bargaining coup that landed more money for California homeowners. Some disappointingly lazy press accounts of the deal have echoed that line. But other reporters are actually asking what seem to be the vital questions on this story:
Was the settlement a good deal for distressed homeowners? And how important was Harris, the former district attorney of San Francisco, in forcing the Obama administration to abandon an earlier deal that was even more favorable to financial institutions?
Pulitzer Prize-winning Los Angeles Times business columnist Michael Hiltzik wrote an excellent analysis of the settlement over the weekend that goes a long way toward answering both questions. Hiltzik asserts that the settlement is nothing for Harris or anybody else to be proud of. He suggests that despite the "rosy parade of self-congratulation" attending the deal, it was less of a boon for homeowners than for the banks and for President Obama and Harris, who benefited from it politically.
Hiltzik first dissects the $26 billion settlement figure being tossed around:
The only cold cash the banks are paying is a combined $5 billion, including $1.5 billion to compensate borrowers whose homes were foreclosed on from 2008 through the end of last year, with the rest going to the federal and state governments to pay for regulatory programs.He continues,
Most of the balance is in mortgage relief for stressed or underwater mortgage holders, including principal reductions, refinancings and other modifications.
How much of this will translate into an outlay of cash by the five banks? Not much, if any.
The provisions mostly require mortgage lenders and servicers to comply with what I would have thought was already the law, which prohibits, you know, criminal fraud...
What the standards do accomplish is to expose how sad our enforcement of the law has been up to now, and how hard it will be to enforce it in the future if this is the best we can do in the face of manifestly illegal behavior. The lesson is: Break the law, and the full weight of the state and federal governments will come down on your head to make you agree not to break the law -- in the future.
"It seemed from the outside perspective like it took a lot of work to get her where we needed her to be," said one person who was involved in the groups' campaign but spoke on condition of anonymity to preserve future relations with the attorney general. Leaving the table "was a political decision" for Ms. Harris, he said. "It wasn't like she was some hard-charging A.G. that wanted to take on the banks."