Author: Steve Schaefer
This article mentions the attorney generals in California and New York pursuit to take back money for families in foreclosed homes. The five major banks in the U.S.: Bank of America, Citigroup, JPMorgan, Wells Fargo, and Ally Financial, agreed to payout a total of $25 billion. This money will be used to provide relief for families that have delinquent mortgages. The lawsuit was sparked because of the accusations of robosigning during the housing crisis. Robo signing is the illegal act of a bank signing on the behalf of the mortgage owner. This signature allowed for the bank to foreclose on homes that were in fact not delinquent. The article states that this $25 billion settlement will allow $300,000 home owners to refinance their homes. This is a small portion of the housing crisis considering that 750,000 people lost their homes in foreclosure from September 2008 to the end of 2011. These 750,000 people will receive a check for $2,000 for their loss. These banks are able to give such a large payout because it is partially offset by reserves they put in for such settlements. Although the banks are being fined their stocks have been increasing in value at a high speed rate and the financial industry keeps improving.
I believe this $25 billion payout is actually beneficial for the banking industry. The banks have easily agreed to payout this settlement which shows that they admit they were wrong and are trying to improve the housing market that they have destroyed. This payout also shows that the banks have enough cash on hand to payout $25 billion without being financially hurt. These banks have come out of the banking crisis stronger and leaner. Banking stocks have increased at high speeds since the beginning of 2012. The improvement in the economy and stock market will encourage these banks to take the large amounts of cash on hand and invest into the stock market. However the Forbes article mentions that the uncertainty in Greek debt deals will keep uncertainty on U.S. banks fresh. I believe that once the Greek debt is settled then these banks will be able to see real growth.