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<div class="timestamp">April 5, 2012</div>
<h1>Banks Always Win</h1>
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<p>
Citing “unsafe and unsound” foreclosure practices, the Federal Reserve said recently that it plans to <a title="Times article" href="http://www.nytimes.com/2012/04/02/business/fed-targets-eight-more-firms-in-foreclosure-probe.html?_r=1&scp=3&sq=federal%20reserve&st=cse">penalize eight financial firms</a>
— HSBC’s United States bank division, SunTrust Bank, MetLife, U.S.
Bancorp, PNC Financial Services, EverBank, OneWest and Goldman Sachs.
We’ll believe it when we see it. </p>
<p>
If recent history is any guide, regulators are more likely to offer the
banks a way to avoid fines for harmful and egregious behavior. That
means there will be no deterrent against future misbehavior. </p>
<p>
A year ago, the Federal Reserve and the Office of the Comptroller of the
Currency entered into legal agreements with the nation’s biggest banks
and with many of those cited above, requiring them to clean up their
sloppy foreclosure processes. In February, they finally got around to
assessing a total of $1.2 billion in penalties against the big guys,
including JPMorgan Chase, Bank of America, Wells Fargo and Citigroup.
</p>
<p>
The banks do not have to actually pay the fines. The regulators said
that no money will be owed as long as the banks fulfill their
obligations under a separate $26 billion foreclosure settlement with
state attorneys general and the Department of Justice. Most of that
obligation can be met through loan modifications and other relief.
</p>
<p>
The eight banks now in the Fed’s sights have not signed on to the
foreclosure settlement. But regulators have urged them to do so, and you
can bet that if they do, penalties against them will also be waived.
</p>
<p>
The Treasury Department is also determined to coddle the banks. Under
the Obama administration’s antiforeclosure program, banks receive
taxpayer-provided incentive payments when they successfully modify
troubled loans. Last year, the Treasury withheld $89.1 million in
payments from JPMorgan Chase and $81.8 million from Bank of America,
citing widespread problems with processing and customer service. In
March, the Treasury announced that as part of the foreclosure
settlement, it has agreed to release the withheld incentives. </p>
<p>
Some regulators have said that waiving the fines helped to get the banks
to settle — no kidding! — and that the most important thing is for the
banks to provide the relief called for in the settlement. Banks should
have to live up to the settlement and pay stiff fines. With anything
less, regulators are planting the seeds for future crises. </p>
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<div style="width:310px" class="element1"><h6>More in Opinion <span class="num">(12 of 22 articles)</span></h6><h3><a href="http://www.nytimes.com/2012/04/06/opinion/a-good-education-with-the-gi-bill.html?src=un&feedurl=http%3A%2F%2Fjson8.nytimes.com%2Fpages%2Fopinion%2Findex.jsonp">Editorial: A Good Education With the G.I. Bill</a></h3>
<p class="refer"><a href="http://www.nytimes.com/2012/04/06/opinion/a-good-education-with-the-gi-bill.html?src=un&feedurl=http%3A%2F%2Fjson8.nytimes.com%2Fpages%2Fopinion%2Findex.jsonp">Read More »</a></p></div><br style="clear:both">
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