So Little Asked Of Those Who Have Received So Much


It's critical to the conservative myth to blame government and consumers and hold financial institutions blameless, always. And Rush Limbaugh does it more entertainingly and consistently than almost anyone, claiming Thursday

The Wall Street Journal has a story running today, the headline: "US Pushes Mortgage Deal." Now, if you've been paying attention and you hear that headline, you say, "Uh, what mortgage deal? How many have we had?" "The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns that could force America's largest banks to pay for reductions in loan principal worth billions of dollars." So this is mortgage forgiveness. This is the regime's way of dealing with the foreclosure problem. Punish banks for making loans by making them eat not just the interest but a good deal of the principle of some of these underwater mortgages. So once again you have the regime tearing up and making it impossible for a segment of the economy to do business. Punish the banks for making the loans in the first place and then eat the loan, not just the interest but a good deal of the principal of some of these underwater mortgages.

The charge that Obama wants to "Punish banks for making loans by making them eat not just the interest but a good deal of the principle of some of these underwater mortgages" is extraordinary not only in light of the track record of these behemoths the last several years, but also considering the proposal. Reuters reports

The proposed reforms will likely help the bank industry, especially larger firms, by allowing them to raise the prices that they charge consumers for mortgages, analyst Paul Miller of FBR Capital Markets said.

Before the collapse of the banking industry, when Wall Street was handing out NINJA loans to anyone with a pulse, subprime loans went from 8.6 percent of all mortgages to 20.1 percent. Meanwhile, Nomi Prins explains in "It Takes A Pillage,"

Consumer protections were simultaneously chucked. On April 20, 2005, President George W. Bush signed the 2005 Bankruptcy Abuse and Consumer Protection Act, sponsored by Senator Charles Grassley (R-IA), which worsened the quietly growing housing crisis for consumers. Borrowers facing bankruptcy could no longer negotiate down the principal of their mortgages with their creditors if the market declined, meaning that they had no way to avoid foreclosure, even if they wanted to.

Prins found that when the economy began to tank, credit became tight and by the summer of 2008, American banks kept $44 billion in reserves with the Fed, which increased to $821 billion by the end of 2008, and slightly below $1 trillion by May 2009. Those banks were being "punished" by accepting perhaps as much as $2.875 trillion from the American taxpayer. Little credit was available, though, as the banks were increasingly reluctant to make loans to would-be home buyers or business owners.

This reluctance comes amidst enormous profits at the major financial institutions which have made fewer efforts at reform of their compensation formula than have most European nations. Bank of America, through reporting in January $3 billion in settlement with Fannie Mae and Freddie Mac, claimed losses of $2.2 billion in 2011. However, its CEO described 2011 as "a necessary repair and rebuilding year." Profits reported for 2011 were $10.6 billion for Citigroup, $12.4 billion for Wells Fargo, $17.4 billion for JP Morgan Chase, and $2.39 billion for Goldman Sachs. And although figures are hard to come by, we do know that while Bank of America Chief Executive Officer will receive a base salary of only (only!) $250,000, the comparable figures for CEO Vikram Pankdit of Citigroup is $1.75 million and CEO Lloyd Blankfein of Godman Sachs, $2million.

This comes on top of the hefty bonuses they're used to. And now, as these institutions are being asked to help the American public, which saved them from destruction only a few years ago, the leader of the GOP takes yet another opportunity to vilify the American consumer and fetishize Wall Street.

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