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At Salon, David Dayen writes JPMorgan’s bait-and-switch: The ballyhooed settlement is just a scam!

The first thing you need to know about JPMorgan Chase’s long-awaited $13 billion deal with the Justice Department — to settle a number of civil lawsuits related to the fraudulent sale of mortgage-backed securities — is that it’s not a $13 billion deal. $4 billion of this figure, over 30 percent, was announced almost a month ago as the conclusion of a lawsuit between JPMorgan and the Federal Housing Finance Agency.

David Dayen
David Dayen
Attorney General Eric Holder, wanting to stand at a podium and give out a really big settlement number, simply folded the FHFA settlement into the Justice Department’s. Why news editors who have already reported on the FHFA settlement would let the Justice Department use it again in its headline figure is completely beyond me. They aren’t obligated to do the Justice Department’s P.R. for them. We don’t say the Miami Heat beat the San Antonio Spurs 200-98, but 100 of those points came from a previous game.

So, let’s talk about this $9 billion settlement. Even that headline number doesn’t really reflect the actual penalty to JPMorgan Chase’s bottom line. Nearly half of the figure comes in the form of “mortgage relief,” which an independent monitor (and what’s so independent about a monitor chosen by the bank?) has four years to distribute. Any time you extend the time horizon of a penalty, you’re reducing its real value. And in this case, there’s not much value here to begin with.

The bank only has to put $1.2 billion of the $4 billion into first-lien principal reductions for homeowners facing foreclosure. $300 million goes toward extinguishing second liens, like a home equity line of credit. Another $300 million is earmarked for principal forbearance, where the homeowner still owes the money but gets to skip a few immediate payments. $2 billion would go toward interest-rate reductions or refinancing or even writing new mortgages for moderate-income borrowers (that’s a penalty, writing mortgages that pay the bank interest?), and the balance toward anti-blight provisions like bulldozing homes or buying out properties where the bank has delayed foreclosure.

Almost none of this represents a real penalty for the bank. It performs anti-blight procedures annually in its normal course of business. Principal forbearance has minuscule long-term cost. Second liens that typically cannot be recouped are worthless to a bank, and it’s hard to say it “costs” anything to extinguish them. The bank is even credited for writing down principal on loans owned by mortgage-backed securities investors, paying off their fine with other people’s money (the other people in this case being the very investors they defrauded!). And all the measures to help struggling homeowners actually help JPMorgan Chase in the long run, because it makes financial sense to modify loans rather than foreclose. It’s good to align financial incentives properly to force the bank to help homeowners now instead of kicking them out of their homes. But as a penalty for misconduct, it’s less than meets the eye, all told maybe 10 cents on the dollar to JPMorgan’s bottom line. Factor that in and you get a $5.4 billion deal. [...]


Blast from the Past. At Daily Kos on this date in 2009The Fox, the bow-gate poll, and the crickets:

So Fox conducts a poll on whether or not Americans approve of President Obama's bow while meeting the Emperor of Japan. Given that they attacked President Obama mercilessly over the bow on Monday, it's likely they wanted to excoriate him once again, this time using poll results showing how much America hated the bow.

But there's a problem for Fox: it turns out their very own poll shows Americans don't have a problem with bow-gate. Indeed, 67% said they think it is appropriate for the American president "to bow to a foreign leader if that is the country's custom" and only 26% felt it was "never appropriate for the president to bow to another leader."

Perhaps the most notable thing is not just that Fox failed to manufacture outrage over bow-gate, it's that as I can tell, Fox never put their poll on the air. I've searched through their transcripts and watched much of their coverage since the poll was released in a PDF on their website, seen by approximately 5 people from their target audience of conservatives.

Perhaps Fox should change their slogan: we report and you decide, but only if it's something that we think will make you hate President Obama.


Tweet of the Day:

Then Google Maps was like, "turn right on Malcolm Ten Boulevard" and I knew there were no black engineers working there
@alliebland



On today's Kagro in the Morning show, lots of filibuster reform discussion today, right through our discussions with Greg Dworkin and Joan McCarter. Greg rounded up the day's ACA news, punditry & polling, and told us about the "forbidden words" in ACA reporting: wait and see. Joan covered the state of play on filibuster reform, what we were likely to see & when. And yes, we hedged a little bit when it came to the bottom line question of whether or not it would really happen. Then, an check-in on comments from jimstaro, enemy of the people, and Doctor Who. Lastly, David Dayen's "JPMorgan's bait-and-switch: The ballyhooed settlement is just a scam!"


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