The $8.5 billion mortgage settlement agreed to by ten major banks on January 7 reveals, once more, the coercive power of government to expropriate assets from businesses judged guilty by public opinion without proof of legal wrongdoing. Eligible home owners will receive from hundreds of dollars up to $125,000 -- another case where the government “throws a little money at everyone and hopes the problem will go away.” (New York Times The Foreclosure Disaster).
Following a familiar pattern, ten accused mortgage lenders caved to demands of the Office of the Controller of Currency (OCC) and the Federal Reserve rather than face the wrath of the regulators who rule over them. In violation of basic legal principles, settlement funds are to be distributed in small portions to all who had the potential to be harmed, not in proportion to actual damages. Such an arrangement is akin to distributing Hurricane Sandy Funds to all residents of the affected states on the grounds that they could potentially have been harmed, whether they were or not.
So much for the rule of law.