Feds need to charge those responsible for financial crisis and enforce consumer financial protection laws now
It’s good news for consumers that President Obama is holding discussions about stepping up enforcement of new rules to carry out Wall Street regulations.
Obama urged regulators on Monday to act swiftly and finish writing rules designed to prevent a recurrence of the 2008 financial crisis that helped bring about a damaging recession from which the country is still recovering.It’s also positive for consumers that the U.S. Department of Justice is planning to bring charges against banks and others who are responsible for the financial meltdown.
Eric Holder, U.S. attorney general, told The Wall Street Journal Tuesday that “anybody who's inflicted damage on our financial markets should not be of the belief that they are out of the woods because of the passage of time.”
One case is underway. Earlier this month, JPMorgan Chase disclosed in a regulatory filing that it was facing a criminal investigation over its sale of mortgage securities.
U.S. Senator Elizabeth Warren (D-Mass.) said she’s concerned about the government’s weak enforcement of big banks.
Warren sent a letter to Holder Tuesday asking for more information about the federal government's decision to settle false claims submitted to the Federal Housing Administration by the nation's largest mortgage lenders.
Warren expressed concerns about the adequacy of the settlement, especially since FHA is currently having financial difficulties.
She said she’s concerned this might be another example of the federal government's timid enforcement strategy against the nation's largest financial institutions.
"Settlements are important and play a necessary role in any enforcement regime, but it is critical that the government take steps to maximize its leverage and avoid settling on the cheap,” Warren said. “Rushed and inadequate settlements fail to fully compensate victims and taxpayers and insufficiently deter future misconduct."
Last year, the department, 49 state attorneys general, and the Department of Housing and Urban Development entered into a settlement agreement with the nation's five largest mortgage lenders.
As part of the agreement, the lenders paid about $225 million to get releases from False Claims Act liability related to their pervasive submission of fraudulent mortgage insurance claims to the FHA and other agencies from 2008 to 2010, she said. Part of the $225 million settlement payment was deposited in FHA's Capital Reserve Fund.
In the letter, Warren said damages collected represent only .6% of what appears to have been the total potential liability faced by the lenders for defrauding the government based on the public record.
She asked the department for an explanation of how the settlement figure was determined, any analysis of the cost to the taxpayer of lenders' fraudulent conduct, documents related to the department's settlement decision, and an accounting of how much of the settlement payment has been made to FHA to date and what the total will be.
Also on Tuesday, the Consumer Financial Protection Bureau released a report showing that bank and nonbank mortgage servicers are using practices that can be harmful to consumers. They include:
- Sloppy account transfers.
- Poor payment processing.
- Inconsistent and poor procedures in helping qualified borrowers who are struggling.
America’s financial institutions failed consumers in the runup to the Great Recession. They’re continuing to use practices that harm consumers. The Obama administration and federal regulators have a duty to charge those responsible for the country's financial meltdown and improve their enforcement of consumer protection financial laws – now.