Yesterday there were reports of an agreement between the nation's five biggest banks, a number of state Attorneys General, and several Federal agencies. The specifics weren't available, but the agreement appeared to settle a number of potential civil and criminal charges for an amount that ranges between $19 billion and $25 billion. By contrast, the total estimated mortgage loan amount being repaid to banks for housing value that no longer exists is $700 billion, and that figure hasn't been adjusted for further declines in the real estate market.
We discussed these reports on Rick Smith's radio show about that afternoon, shortly before new reports surfaced which suggested the deal may not close anytime soon. Whoever hyped the agreement apparently did so prematurely.
The settlement would allegedly allow one million homeowners to receive a principal reduction of $20,000 each. That's less than one in ten of the more than 11 million underwater homes. currently underwater. (That's a growing number too.) Another 750,000 would supposedly receive $1,800 each, an insulting figure for wrongful foreclosure.
The banks would be able to choose which mortgages to write down, which means they'll almost certainly pick mortgages they bundled and sold - often deceptively - to investors that include pension funds.
Worst of all, it would leave potentially lawbreaking behavior uninvestigated, although some reports said that individual state lawsuit investigations might proceed.
A number of news stories announced the deal this morning, saying that it was about to be sent to the states for review and adding that the President intended to to announce it tomorrow night in his State of the Union address. Then later yesterday afternoon the office of Iowa Attorney General Tom Miller, who is leading the investigations, announced that there is no deal and it may not be completed this week. Let's hope that no deal like this is ever consummated. The recorded interview (below) has more about what's wrong with it.