Imagine if someone punched you in the face, broke into your home to steal, or was responsible for the manslaughter or negligent homicide of someone you loved. There is no doubt of their guilt, but instead of jail time, they pulled out their fat wallets and paid a massive fine to the court and a few bucks trickled down to you.
This week, federal regulators let 10 mortgage servicers off the hook with no punishment of any consequences regarding massive foreclosure abuse. Instead, fines exceeding more than $10 billion will be paid, though not from those who made the decisions and provided oversight creating the problems.
There’s no personal accountability. This fine will be paid from stockholder dividends and higher fees for customers. Individual bankers will face no indictments and lawyers reviewing internal documents won’t lose licenses to practice law. Fines, no matter how large, do not change the culture.
Rep. Elijah E. Cummings (D-Md.), Ranking Member of the House Committee on Oversight and Government Reform, issued the following statement, about the settlement:
“I am deeply disappointed that the Office of the Comptroller of the Currency (OCC) and the Federal Reserve finalized this settlement and effectively terminated the Independent Foreclosure Review process before providing Congress answers to serious questions about how this settlement amount was determined, who these funds will go to, and what will happen to other families who were abused by these mortgage servicing companies, but have not yet had their cases reviewed.”
He went on to note:
"I do not know what the rush was to make this settlement without answering these key questions, and although I look forward to obtaining information about how this deal may assist homeowners, I have serious concerns that this settlement may allow banks to skirt what they owe and sweep past abuses under the rug without determining the full harm borrowers have suffered.”
Once again government regulators have enabled bad behavior. It’s a bit like a dysfunctional family where one member has been conditioned to allow the bad conduct of the other. It is a vicious, incestuous cycle. Government bureaucrats have been conditioned by wrongdoers to react with fine settlements. It’s a game the industry plays while helping Washington bureaucrats close files to provide the veneer of justice and resolution. This is unethical.
Banks and corporations don’t break laws or engage in wrongdoing. Individuals, who happen to be bankers and lawyers, break laws, find loopholes, and make risky investments with major consequences for ordinary Americans. Once again, federal regulators will hold no individual accountable under the agreement reached. It sets the stage for it to happen again. Federal bureaucrats must give greater thought to ethical considerations in determining if the only consequence for a bank is a fine.
It’s time to start considering criminal indictments for bankers and reporting lawyers to licensing oversight organizations. If either is not practical, then new laws are necessary to provide for it.
Paul Jesep is an attorney, policy analyst, and author of “Lost Sense of Self & the Ethics Crisis: Learn to Live and Work Ethically”; “Credit Card Usury and the Christian Failure to Stop It”; and “Crucifying Jesus and Secularizing America – the Republic of Faith without Wisdom.”