Good Thing We Can Get Free Contraceptives Now...

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While young and poor women were finally given a chance to procure birth control devices this week, millions of homeowners took it up the ass. Thanks to a combination of the Obama Administration not being motivated to do anything to upset its most important supporters, and the relatively few state attorneys general who gave a crap finally giving up on trying to get the banks to pay for what they broke when they bought and then foreclosed on hundreds of thousands of fraudulent mortgages, a really crappy deal is about to be struck. As Yves Smith explains:

Why is it deeply troubling that the attorneys general have gone along with the Administration’s messaging and have all fallen in line with the “biggest Federal-state settlement ever” when no such settlement in fact exists? This isn’t just acceding to the Administration’s pet wish to build on its State of the Union PR. They’ve completely abandoned their negotiating leverage at a critical stage.

Let’s look at this equation. The Administration and the banks both want a pro-bank deal (the only minor point of difference is how much in populist gestures the banks have to submit to in order to get the much more valuable bennies they want). The only parties that cared to any degree about ordinary citizens were the dissident AGs. But they now have now given up any bargaining leverage over how this deal turns out.

The only power any party has in a negotiation is his threat to leave the bargaining table. The AGs can no longer do that. They’ve taken star turns, made ringing pronouncements of how great this pact is. They can’t possibly reverse themselves mere weeks down the road and say, whoops, this deal isn’t go great after all.

Mortgage Settlement as Attorney General Sellout: Deal is Not Done, and Final Version Guaranteed to be Worse Than Advertised

That means, as she goes on to say, that the deal will be no better than the one we see right now. How good is that deal? Here are a few numbers, courtesy Los Angeles Times reporter Michael Hiltzik:

Then there are the banks. The signatories to the deal are Bank of America, Citibank, Wells Fargo & Co., JPMorgan Chase and Ally Financial (formerly GMAC), which handle payments on more than half the nation’s outstanding 27 million home loans and therefore have been at the center of the servicing and foreclosure abuses the settlement is supposed to end.

If you don’t listen too closely, it sounds as if they’re putting up the $25 billion. Not so. 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.

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.
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What about homeowners? They don't get much, especially in relation to the scale of the housing crisis. More than 2 million owners have lost their homes to foreclosure during the last four years; this deal will provide 750,000 with a payment of $2,000 each.

Some 11 million homeowners are underwater by about $700 billion combined, or an average of nearly $65,000 each. In a transport of optimism, federal officials are projecting that this deal will help 2 million of them, to the tune of perhaps $20,000 each. By the way, loans owned by the government-sponsored firms Fannie Mae and Freddie Mac aren't eligible for this relief. Since they own or control the majority of all outstanding mortgages, that's a rather large black hole.

Mortgage settlement is great — for politicians and banks

Based on the complete lack of action on this matter by the Obama Administration, I can pretty well imagine what the conversation was like between the dissident AGs and the federal government. I can boil it down to four words: "You're on your own." With their budgets already in the red, the states can't afford to pay for a long, drawn out battle that the U.S. Department of Justice should really be waging.

Image credit: Occupy Together/Twitpic

I've mentioned before the sorry record of this administration when it comes to defending us from the banks. Back during the George H.W. Bush Administration, they put hundreds of bankers behind bars for a far smaller fraud. This time, the Democrats are satisfied to not do a damn thing.

As usual, Dusty sums things up pretty well:

Still not addressed..accountability by the banks for what they did to homeowners, pension plan holders and the economy in general. None, nada, zilch. Add to that, this deal is really pure horeshit when it comes to what the lenders pay out…it’s pocket change to those fucks and you know you have a deal that stinks when it makes Wall St so fucking happy the Dow went batshit yesterday.

New Mortgage deal sucks but CA AG spins it as a win.

Enjoy your contraceptives, ladies, because we're all screwed, and none of us can really afford the consequences anymore.