New York Attorney General Eric Schneiderman, who headed a group of state attorneys general that won homeowners and former homeowners a $26 billion settlement from five mega-banks over their foreclosure abuses, announced yesterday that he’d sue two of the banks—Wells Fargo and Bank of America—for allegedly violating the terms of the settlement.
When the financial crisis struck in 2008, nearly every state legislature was left contending with massive revenue shortfalls. Every state legislature, that is, except North Dakota’s. In 2009, while other states were slashing budgets, North Dakota enjoyed its largest surplus. All through the Great Recession, as credit dried up and middle-class Americans lost their homes, the conservative, rural state chugged along with a low foreclosure rate and abundant credit for entrepreneurs looking for loans.
In a 2009 poll conducted by the BBC, only one out of every four Americans thought that capitalism in its current form was working well. Then came Occupy Wall Street (OWS), a physical manifestation of the anger of millions of Americans at an economic system in which big banks are bailed out by taxpayers only to turn around and pay billions in bonuses while filing record home foreclosures. Between the second quarter of 2009 and the fourth quarter of 2010, our nation's total income rose by $528 billion, but of that economic growth, 88 percent went to corporate profits and just 1 percent—that's right, 1 percent—went to workers.
Bank of America has been one of the least cooperative banks participating in Treasury's slow-going program to modify mortgages and prevent foreclosure, but last week I received a lending report from BofA with a fishy paragraph:
University of Chicago economist Casey Mulligan writes an attack on the controversial program last fall to inject equity into the banks using TARP funds, arguing that a recent government report [PDF] confirms that it did not work. Unfortunately, his selective quotes and out-of-context citations undermine his point -- not to mention his credibility -- and confuse what the Special Inspector General of the Troubled Asset Relief Program is trying to say.
Bank of America is trying to convince government regulators that it is solvent enough to repay the government's rescue funding. Here's how one financial analyst characterizes the situation:
“What the bank is trying to show is that it’s come back to health and that it’s operated solely as a private entity in the marketplace,” said Richard X. Bove, a banking analyst at Rochdale Securities. “But the bank is still under this enormous political pressure from Congress, the S.E.C. and the attorney general of New York.”