Weekly Wrap: The foreclosure settlement
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Weekly Wrap: The foreclosure settlement
FT’s Cardiff Garcia and Reuter’s Felix Salmon wrap up the week’s big news: The $25 billion settlement between the government and big banks.
On the details of the deal, and whether it will help the housing industry:
Felix Salmon: As part of the deal, no one can sue these banks for robo-signing. And that means that this big multi-billion contingent liability — the amount of money that they could lose if they got sued — has been lifted from them. At the same time, they actually want to do principal reductions on the bunch of people who owe much more than their homes are worth because that’s going to make those people more likely to repay their loans. But by waiting until the deal was signed, they get to have their cake and eat it. They get to do the principal reductions they were going to do anyway and they get the immunity from prosecution.
Cardiff Garcia: I actually mostly agree with Felix’s take on it. It was a pretty good deal. It was time to put this behind us. It was unclear exactly how much more the government could have gotten, so rather than let it drag out, you just get it done. In terms of its overall impact, though, I guess I would still emphasize that so much more could be done for the housing market. In terms of its macroeconomic impact, this is still pretty small. My sort of hope is that what doesn’t get lost here is how much could be done.
For more analysis, listen to the audio above.
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