Liberal Democrats are pushing back this week against news that the Obama administration is finalizing a multi-billion dollar settlement with the banks that bungled mortgage loans at the expense of homeowners.
The Department of Justice and the 50 state attorneys general are nearing a deal to apply $25 billion in foreclosure-abuse penalties to the nation's largest mortgage servicers — the companies that buy the rights to manage loans from mortgage lenders – according to numerous reports.
But Reps. Raul Grijalva (D-Ariz.) and Keith Ellison (D-Minn.), the co-chairs of the Congressional Progressive Caucus, say that figure is a drop in the bucket compared to the wealth homeowners lost when the housing bubble burst, creating the conditions that led to the Great Recession.
The banks, the lawmakers maintain, are getting off much too easy.
"We applaud President Obama and the Justice Department for this effort to hold these banks accountable. However, a $25 billion settlement pales in comparison to the trillions of dollars in lost home equity, retirement savings and exploding public debt caused by these institutions," Grijalva and Ellison said Friday in a joint statement.
"Instead of immunity for Wall Street banks, let’s stand with the American people and demand a fair deal for homeowners."
Since the fall of the housing market, consumer advocates and a number of Democrats have accused mortgage lenders and servicers of precipitating the crisis by pushing risky loans on borrowers who couldn't afford them. In many cases, borrowers reported that they were victims of mortgage fraud, their incomes falsified by mortgage originators to justify the terms and to make the loans look less risky than they were to entice the servicers vying to buy them up — situations that proved disastrous to all parties when the housing market tanked and home prices went underwater.
Nationwide, an estimated 11 million homeowners are currently underwater on their mortgage loans, meaning they owe more than their home is worth.
Grijalva and Ellison said Friday that the discrepancy between homeowners, who are still suffering from the crisis, and the banks – which were bailed out and are now posting multi-billion dollar profits – is one of the reasons for the Occupy Wall Street movement has gained so much steam.
"Across the country, Americans are outraged and taking to the streets to demand accountability from the big Wall Street banks whose reckless actions cost millions of families their homes and wreaked havoc on the American middle class," they said.