Understanding the scale of the ripoff in the Robosigning Settlement

Barry Ritholtz sez, "The Washington Post has been kind enough to allow me to vent about what is wrong with Wall Street and Washington DC. Today's episode: Robosigning Bank Settlement."

Before the settlement, we learned that nearly every aspect of the robosigned documents was false. None of the details were ever reviewed. The signatures attesting to the review of the documents were fabricated — made by someone other than the person whose name was on the document. Neither person — the supposed signatory to the document nor the hired forger — ever validated the facts of each case. All of the safeguards put in place to make sure foreclosures were done correctly and legally were bypassed. Even the notary stamps were bogus — they were not real, and not signed by a notary to validate that the signer and the signature matched...

The bigger issue is the economics of criminality. Most people who get caught committing crimes are punished. Commit a felony — if you run a bank — and your shareholders pay a monetary fine. Violating the law has merely become the banker’s cost of doing business.

Thus, the robosigning agreement has allowed the mass production of perjury. It has gone unrecognized and unpunished. It has made perjury a business expense, like travel or office furniture. The same reckless approach to giving loans to unqualified people was institutionalized, leading to another reckless approach to foreclosing homes.

Foreclosure settlement a failure of law, a triumph for bank attorneys (Thanks, Barry!)


  1. Let me just be clear as to what this article is saying.  Banks deliberately and criminally circumvented the legal checks on foreclosure, using forged documents and fake signatures?
    Where on earth are the arrests? You can spin the wool about who’s responsible for the financial crisis until no one knows what’s what any more, but this is a (fully actionable) crime.

    Ugh. My opinion of some parts of humanity just went down.

    1. Exactly.  Hate on the banks all you want.  They certainly deserve it.  But save a little bit of your disgust for those who are supposed to keep the banks in check and those who are supposed to prosecute these crimes.  My guess is that the banks would be much less likely to commit the crimes if they didn’t have a green light from the politicians down the road.

    2. That’s the point of the settlement. The justice department has caught the banks red-handed when it comes to the robo-signing of the mortgages.

      It’s pretty clear that the banks are guilty of a hell of a lot more (insider trading, fraud, etc…) but the SEC and the Justice department at this time do not seem to have any proof of these other more serious crimes.

      So, instead of leveraging the open and shut case on the robo-signing to get the banks to admit to the other crimes they have committed, the DoJ is instead offering the banks AMNESTY in exchange for a cash settlement that is dwarfed by the obscene profits they’ve been making.

      BTW: Due to the hesitation on the part of the DoJ to prosecute the banks for the robo-signing, the statute of limitations has run out on the more obscene securities crimes the banks have perpetrated.

  2. As I see it, this is a direct result of two things.

    The first being the increased protection that corporations give to employees, even in criminal fraud cases — and the larger the corporation, the easier it is to dilute responsibility to nothing, and the higher up in the hierarchy an employee is, the easier it gets to throw someone lower down to the wolves.

    The second being the revolving door practice between executive fraudsters and government regulators.

    Unless those two things are solved, this will just keep happening. Sadly, there’s way too much money involved, and in a plutocracy like ours, there’s no reason to change short of bloody revolution.

  3. Harry Shearer on KCRW’s LeShow has been on this for quite away, including some awesome interviews with Yves Smith. It’s well worth tracking down the podcast for those interested.

  4. >>Violating the law has merely become the banker’s cost of doing business

    This was one of those light-bulb moments for me. Something I’ve probably thought of before, but only in the back of my mind. So, let’s solve the problem by fixing this. Change the cost of doing business – make the fine exponential. Most people would only have the ability to do something like this once or twice, you’d have to be a bankster to do it a lot. So, if you do it a thousand times, you’re paying tens of millions in fines. That’ll make the investors think.

    1. Yes, but they already own the legislatures that would have to pass such a change.

      The legal situation is so fundamentally corrupt in the USA that the lower classes are unable to achieve even the most generous interpretation of equality in their ability to resolve legal matters. There are two separate legal systems – one for the rich and the other, where 90% of criminal cases in this country are plead out and mass fraud is carried out without nobody really caring.

      The media, the public, the courts and your government knew this was going on last year, yet instead of actually punishing these people for their criminal behavior – whether within the legal system or outside of it – virtually nothing happened. The DOJ handled the case with kids gloves – even offering immunity.

      God forbid Americans would actually find their collective balls and do something to see these people punished – because as good as it feels to pour a bag of concrete into the drains of your illegally foreclosed home, it doesn’t do a damn thing for the machine that is raping the masses. Until that starts happening, the USA deserves everything that is happening to it.

      America Uber Alles.

      1.  None of this kind of thing is exactly new, but the process of dissemination of information has changed so much that we actually get to hear about it now instead of having it all shuffled off the back page of the corporate mouthpieces we call “a free press”. Unfortunately, finding the “balls” to do something against such entrenched privilege would, I suspect, involve pitchforks, torches and an aristocracy toppling revolution. As for the USA “deserving” all this- what a meaningless bit of self-righteous fluff.

  5. Now, now, hadn’t we established that this was all the fault of Barney Frank, ACORN, and poor black people?

    Stop hating the Job Creators and get on to hating . . . who is it this week? Uh, Iran, right?

    1.  It’d be nice if the “Job Creators” would start creating something other than crappy jobs in “developing economies”. But if you can replace workers faster than their suicide rate, why bother?

  6. This is simply so disappointing. In the shadow of the enormous debacle that was the banking crisis, they can’t even meet out justice in a case so clear and concise. How are we to understand that they could not be criminally punished? Because the banking industry would not permit it? Just who would object? How else are we to feel, except that we are so totally owned by those who can shrug off our laws. So discouraging. 

    1. Oh, I think that it’s working exactly like it’s been designed to do over the last eight centuries or so.

  7. I feel as though I am owed a comically corrupt and unaccountable leader like Putin or Berlusconi at this point. 

    Obama, your banal technocratic competence is too muted for the rampant, hilarious, epaulettes-with-nine-stars level of banana republic we have become.

    1. “I feel as though I am owed a comically corrupt and unaccountable leader like Putin or Berlusconi at this point.”

      Oh, you’ve got those – the Koch brothers spring to mind. Or maybe the Waltons. Rupert Murdoch, perhaps?

      We’ve got Lord Ashcroft filling the role of shadowy puppet-master in the UK. ( http://en.wikipedia.org/wiki/Michael_Ashcroft,_Baron_Ashcroft#Conservative_Party )

      The English-speaking world is steered by the corrupt & unaccountable just as much as the rest of the world, it’s just ours have the PR sense to try to stay out of the limelight & put their puppets into government instead of themselves.

    2. “Obama, your banal technocratic competence”

      I take it the “Bush’s fault” card has not yet expired??

  8. The banks are to big to fail!  We have to prop them up to make sure they stay profitable!
    The banks contracts can’t be changed they were arranged beforehand, but teachers and other workers should have no such protections. (THANKS WI)
    The banks are to important to have rules over them, get a quickie settlement arranged that won’t hurt them at all.  Give some scraps to the people we screwed over and call it a day! 
    Sorry we illegally took your house, here’s up to $2000.  And we have this huge amount of the settlement that just lets us reduce the principle of several over valued homes, which in the long run will just help us anyways.  And somewhere I am sure there are some lawyers and accountants looking for a way that the banks can write off the “settlement” and somehow manage to get a tax refund for loosing money in all of this.

    The real problem is how we accept the “news” spoonfed to us by our various preferred media outlets that call this a real change and a good thing.  This is not change, this is not a good thing, this is just a way to let the banks screw over the people again.  Can’t wait to hear how much it will end up costing “We the People” to clean up their latest plan.

  9. The foxes have been in the henhouse so long that they become offended when a chicken voices opposition. Just remember: everyone is equal under the law………….bwa hahahahaha

  10. From where in the Constitution does the Federal Government derive the authority to broker settlement of a state criminal case?

    Further, who authorized the President of the United States or any member of his Cabinet to interfere in a state criminal matter?

    Since when can any authority other than a jury “settle” a criminal case?

    Have the legislatures of these states simply conceded the legal matters here?  

    What about the courts?  Were there not fraudulent documents submitted into evidence? How does this settlement not violate separation of powers?

    Can someone please explain to me how this kind of nationwide blanket settlement is not usurping of authority?  Since when can any Attorney General pardon a defendant?  Especially in another state?

    Can someone please explain to me how issuing a blanket pardon for crimes that may not have yet been reported isn’t obstruction of justice?  

    The complete disregard of the concept of justice in this country is breathtaking.   I fear that if America is not already lost, it may yet be irretrievably soiled.

  11. “Violating the law has merely become the banker’s cost of doing business.”  Cory, there are days when my man-love for you astounds and frightens me.  This is one of those days.  Keep up the good writing.

    1.  Not to dim your man-love or say anything to diminish Cory’s writing skills, but that line was written by Barry Ritholtz, as attributed…

  12. A judge had to sign off on every robo-signed foreclosure. So, are the judges also at fault or can we add perjury to the list as well?

  13. Eric Holder (the US Attorney General) and  his top criminal prosecutor both worked for Covington & Burling prior to being appointed to their present post.  Apparently that law firm represents some/most of the banks engaged in this criminal activity.  So if your boss used to represent a bank, are you going to start an aggressive criminal prosecution of his former customers?  Reuters does a nice job of explaining it:  http://www.reuters.com/article/2012/01/20/us-usa-holder-mortgage-idUSTRE80J0PH20120120

  14. Calm down, folks, the national settlement provides no criminal immunity.  Missouri’s AG has instituted some criminal prosecutions.  Will the criminal prosecutions and results rise to the level sufficient to satisfy the public?  That remains to be seen.  Breath holding not recommended.

    1.  Dear Jury look at these poor bankers, don’t they look sorry.  And they have already paid out BILLIONS to people hurt by their actions, why keep piling onto them when they are down.  The economy is bad and several of these men had to give up their 5 star escorts and settle for 3 star escorts.
      How many times do they have to apologize?

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