Following the 2008 crash, government enforcement action extracted $110 billion from lenders and other players over a variety of alleged sins relating to the rise and collapse of the mortgage bubble. Where did it go? Governments held on to a lot of it, a lot went to the government-sponsored Fannie and Freddie mortgage enterprises, favored “housing-related community groups” got some, some went to homeowners with mortgage struggles or to new low-interest loans. In New York, money is going to rebuild the Tappan Zee bridge and “the annual state fair is using bank-settlement money to build a new horse barn and stables.” But no one has kept track of where a lot of the money went, there being no overall effort to account for it. [Christina Rexrode and Emily Glazer, WSJ]
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Good! Because the people who _least_ deserved it were the folks who lied about their financial situation and took out mortgages they had no chance of every paying back (and in many cases lived in houses rent- and mortgage-free for years until the property was foreclosed and never paying income tax on this imputed income).
What was the great mystery with the mortgage meltdown? Mortgages are not complex financial transactions. You borrow money on a promise to pay it back. The end. I kept hearing about the need for “more regulations” to prevent such things in the future, but what regulation, exactly? Seems it’s not too hard to figure out who’s a good bet and who’s not. But it’s damned-if-you-do, damned-if-you-don’t: tighter lending restrictions will inevitably lead to cries of discrimination.
[…] Overlawyered reports on a WSJ story (behind a paywall, unfortunately) discussing the fate of the $110 billion in fines paid by mortgage banks to settle with the Justice Dept.: […]