The Department of Housing is Wall Street’s Latest Clean-Up Crew

What’s a government agency to do when a major source of profits for two big banks is at risk? If you’re the Department of Housing and Urban Development (HUD), you just try and make the problem go away for them!

Mortgages are still big business to the nation’s biggest banks. And most banks rely on the government to help in case things go wrong, through insurance that reimburses the bank if the borrower defaults — called FHA insurance.

The government form banks must fill out in order to get this insurance to have a checkbox on it where banks certify they haven’t been convicted of a crime for the last three years. So, right before six major Wall Street banks pled guilty to FX rigging in May, the government agency in charge of this form (HUD)…just changed the form!

Alan Pyke reports for Think Progress:

Luckily, three lawmakers noticed the change: Rep. Maxine Waters and Senators Sherrod Brown and Elizabeth Warren. The three wrote a letter calling out HUD for trying to sneak this change through, and erase any consequences for the banks’ criminal guilty plea.

Not only did HUD propose taking away the checkbox regarding past criminal convictions, they tried to sneak the change past the public. In the notice HUD is required to file to tell the public about any changes, they didn’t even MENTION that the checkbox was going away!

David Dayen reports for The Intercept:

HUD could have used this opportunity to create real, immediate penalties for the banks After all, as Pyke noted, “JP Morgan and Citigroup — currently hold a combined $2 billion in mortgage loans insured by the Federal Housing Administration.” Can you imagine the deterrent effect it would’ve had, if HUD had denied these banks future FHA insurance, due to their recent guilty pleas?

Instead, it’s just yet another entry in a long series of regulators burying Wall Street’s bodies for them, and helping them avoid any consequences for bad behavior.


Bull Market

A collection of finance and business writing by @alexisgoldstein, @delong, @dsquareddigest, @DuncanWeldon, @felixsalmon, @jamesykwak, @Mark__Buchanan, @WhelanKarl

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Alexis Goldstein

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Alexis is a former Wall Street worker who now advocates for a safer & fairer economy.

Bull Market

A collection of finance and business writing by @alexisgoldstein, @delong, @dsquareddigest, @DuncanWeldon, @felixsalmon, @jamesykwak, @Mark__Buchanan, @WhelanKarl