Time for Deal on Banks’ Misconduct

IT’S BEEN months since the nation learned that some of America’s biggest banks engaged in dubious practices regarding loan modifications and foreclosures, including the now notorious “robo-signing” of what were supposed to be individually vetted documents. Yet in all that time, no one has produced evidence that large numbers of homeowners who were current on their mortgages were cast out of their homes because of bank misconduct. This looks like a case of spectacular wrongdoing with hardly any victims.

How do you handle a situation like that? For the 50 state attorneys general, the answer was: Use the specter of legal liability, however vague, to extract concessions from the banks. The banks, meanwhile, would prefer to make the whole embarrassing mess go away if they can do so for less than it would cost to litigate the principle of “no harm, no foul.”

And so the attorneys general — backed by the Obama administration — have been working on a settlement that would grant the banks legal immunity in return for reforms in their mortgage business and a large amount of cash to bail out underwater homeowners. The number under discussion reportedly is $20 billion from 14 large banks.

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