In February, 49 attorneys general reached a $2.5 billion settlement with five major lenders — Bank of America, JP Morgan Chase, Citigroup, Wells Fargo and Ally Financial — for the banks’ improper handling of home loans. An example of this type of impropriety would be robo-signing, where financial institutions set up assembly lines of folks to illegally sign mortgage documents. Banks engaged in robo-signing to keep the momentum going for the frenzy that was the whole sub-prime securities bubble.
Most of this settlement, called the National Mortgage Settlement, will go toward things like loan refinancing for the victims of the shady lending practices. The 49 state attorneys general, however, got to split up some of the money, which they can use as they see fit.
According to an article from al.com’s Montgomery Bureau, Strange will use $19.6 million of the $26 million his office received to plug holes in the state’s general fund.
Technically, Strange’s office is using the $19 million to fund its own law enforcement operations and district attorneys offices in Alabama. State leaders, however, will place the funds intended for those efforts back into the General Fund.
To be fair to Strange, a lot of AGs are using the settlement money to prop up state budgets. Maryland’s AG is using about $6 million of his state’s $60 million settlement check to put toward the state’s General Fund. The only state I found that rivaled Strange’s nerve, however, is Wisconsin, which will use $25.6 million of its $31.6 million check to pad the state budget.
The Pennsylvania Legislature passed a bill that would earmark 90 percent of the settlement funds for programs that would actually benefit home-owners affected by the widespread scam. I wish Alabama’s Legislature would do that. But if the response in al.com’s piece is any gauge, the budget leaders on Goat Hill are happy to shut their mouths and cash the checks.
I know Alabama’s budget is facing crippling shortfalls, and I know district attorneys’offices across the state are in desperate need of funds. They deserve every penny they’re asking for. But not like this.
Strange and attorneys general throughout the country were entrusted with those funds with the understanding that the money would set up programs to help people who were harmed by improper lending practices. These victims were straight-up lied to. Some of them received crappy loans just because of the color of their skin. Others were given mortgages with interest rates that were set to explode after a few years.
Some people are quick to sneer at the settlement, calling the victims of robo-signing losers because they couldn’t afford their house payment. While it’s indisputable that some individual buyers took advantage of the housing market, the National Mortgage Settlement wasn’t about those grifters. This agreement punished the world-class swindlers, massive banks who skirted their responsibilities in order to illegally throw families out of their homes. In fact, many of the robo-signing victims were U.S. soldiers serving in Iraq and Afghanistan.
I don’t think it’s too much to ask that the money from the settlement goes to help home-buyers who fell victim to these scams.
These people were told they could have the American dream. Then, they had that dream taken away from them by gargantuan financial institutions. Then, they got to see those banks get billions of dollars in bailout money and interest-free loans from the government. Then, they got to see those same banks settle out of court for a fraction of the money made from the shady deals. And then, as the victims’ shaky hands strained to get those settlement money crumbs to their mouths, a politician who campaigned on his Christian morals and family values snatched even those morsels away from them.
Thanks a lot Luther.
Daniel Gaddy is a reporter for the Daily Mountain Eagle. He can be reached at 205-221-2840 or firstname.lastname@example.org.