Robo-signing Settlement Still Has Obstacles

Posted on September 6, 2011

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Axsmith Law on Robo-Sigining Deal

The banks, Bank of America, JPMorganChase, Ally Financial, Wells Fargo, Citigroup, have been offered a possible settlement deal about the robo-signing done to foreclose on homes. Robo-signing is when a document was signed without the signer reading it or ascertaining the truth of its contents, as is required by law. Then that document is used to foreclose on a home. Right now, banks are looking at a lot of costs from their liability related to the robo-signing. Which means they are looking for a deal to get them out of responsibility, or liability, for the robo-signing actions.

The banks are happy, though. This is why:

The settlement offer gives a limited liability to banks for the robo-signing in exchange for billions of dollars. The banks want full immunity. After all, they did break the law. They want full immunity for everything and will not agree to only a partial limit on liability for themselves.

In light of the major lawsuit filed Friday by the boss agency of Fannie Mae and Freddie Mac, the banks are getting a lot of heat for their illegal activities. Their stock prices are falling, and will continue to do so until there is a single number for what they owe.

This is where we get into “too big to fail” again. These banks are not “too big to fail.” No bank is. And the bank negotiators want to make sure none of the bankers go to jail, on top of limiting their liability. That may not happen.

Therein lies the rub, as Shakespeare would say. The bank stock prices will continue to fall until there is a concrete limit on amount owed by the banks. The state Attorneys General want to leave the criminal option open. The bankers don’t want to go to jail and they want to get away with fraud. They are not inclined to agree to anything which means jail time. So, while it may look like agreement is close at hand, it is not. (Thank you AG Schneiderman) That means bank stock prices will continue to fall until they are bought, or pieces of them are chopped off and sold. Voila! The end of too big to fail, since no banks in the world now have the money to one of our huge banks.

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