This month marks the third anniversary of the end of America's financial system as we know it. No one is celebrating. Everyone is outraged. And the aggrieved are lined up seeking unprecedented billions of dollars in compensation.
The foreclosure mess that resulted from reckless subprime lending and the subsequent packaging of those patently unsound mortgage loans into toxic mortgage-backed securities continues to plague our housing markets like a deepwater oil spill.
The federal government, which just three years ago was bailing out so-called too big to fail financial institutions, is now suing 17 of the largest financial firms for allegedly selling Fannie Mae and Freddie Mac $196 billion in sow's ears illegally disguised as silk purses.
The financial institutions and the amount of questionable securities they allegedly dealt to Fannie and Freddie include Bank of America/Countrywide/Merrill Lynch ($57.5 billion), JPMorgan Chase ($33 billion), Royal Bank of Scotland ($30.4 billion), Deutsche Bank ($14.2 billion), Goldman Sachs ($11.1 billion) and Morgan Stanley ($10.6 billion).
The feds aren't the only ones seeking redress. Remember AIG, the too-big-to-fail insurance giant that we the people kept afloat with a $182.3 billion bailout? It's seeking $10 billion from Bank of America for "massive fraud" over mortgage-backed securities. Individual investors as well are taking the banks to court for selling them risky mortgage securities.
State attorneys general also are pursuing claims against banks for robosigning court affidavits in foreclosures and for servicing abuses against homeowners over loan modifications. Opinions vary on whether the $20 billion settlement proposed by the banks is fair or outrageous given that investigations into those banks' mortgage practices would cease as part of the deal.
Don't worry about the banks, those downtrodden big guys who've spent the last three years crying on our shoulder, claiming they're teetering on the brink. As Phil Angelides, who chaired the Financial Crisis Inquiry Commission, points out in a recent op-ed, the 10 largest publicly traded U.S. banks have more than $600 billion in common shareholder equity, their profits topped $62 billion in 2010 and they shelled out $464 million in compensation to the top five execs at each of those banks. Heck, they spent $52 million in the first quarter alone on federal lobbying to protect their interests.
Meanwhile, down here in reality, America's middle class continues to wrestle with the consequences. Twenty-four million of us are unemployed or unable to find full-time work. Wages as a percent of gross domestic product haven't been this low since the 1930s. And foreclosures continue to eat away at our home values.
I'm looking for some daybreak in this darkness, people. Ray of hope, anyone?
Or is that light up ahead merely an oncoming train?
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