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Institutional Risk Analytics Co-Founder Chris Whalen breaks down the headwinds the banks will face with the housing foreclosure settlement.
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Thank you -- much.
We have been listening to the president United States he was just wrapping up remarks the 25 billion dollar settlement deal between the biggest banks in this country.
And state attorneys general over mortgage and foreclosure abuses that.
Has been concluded sixteen months this has taken the president taken that moment to say that.
Will not let the people of this country be -- He says in those comments is now the president says that this was the right thing to do in the banks are going to pay but was this the right thing.
For the banks -- up that Chris Whalen co-founder and managing director of institutional risk analytics and author of inflated.
You were shaking your head during the president's remarks he did not like what you were hearing why why did this bonding with the.
Presidents well the president said there's no excuse for inaction but that's exactly what he's stolen from last three years he's done nothing.
And the attorneys general have in fact been doing all the work so -- very late in the game.
He appoints search snyderman that had this working group which he started in 2000 on York state attorney general right.
But there was no action the Obama administration -- ignored this problem the last moment because some banks we're gonna get away with murder.
Do you think the banks are getting away with murder the banks are paying 25 billion dollar of the banks.
In many of these homeowners be worth the moral hazard amenities homeowners Chris Moore we're already behind -- their payments whether the paperwork was done and run or not I mean I got -- -- that would view but still -- meet twice a billion dollars is not nothing.
But that it's a smallest.
In financial terms -- for the banks today.
What is the biggest issue that we think is the biggest threat right now the banks well noting that on -- -- -- investors suing them for tens of billions of dollars and securities fraud.
Private suits private suits by banks -- insurance companies search not have been for example represents all insurance companies based in New York.
Who were suing the big banks -- -- regulator.
You keep bringing up the near exit attorney general right one of the things that surprised me yesterday if you're going through this deal we're expecting.
At any moment filing -- it today was that if you look at the ten top states that foreclosure issues.
New on the list so why is -- snyderman what was he one of the the big things that we needed to see we didn't do -- us for us to have a deal why why do you.
Excellent point -- he has a much broader mandate he's not just worried about -- close reviews he's worried about Wall Street creating -- securities.
He's worried about do insurers who -- put rappers -- securities have a huge liabilities are also in one another of course.
And it's also worried about New York State law.
Did people do the right thing when they created dismissed in the order of magnitude of the numbers we're talking about this is ten times what we're talking about with this settlement.
So it's funny that the Obama administration is focused on for -- because that's where the political heat is.
But the banks are going to -- this is immigrant settlement for the banks by the way no released a litigation no dismissal of the suit involving -- registry for -- titles.
So really you know we it could've been better for the banks really.
It could have been better but at the same time investors I would have thought would have been giving a reading this -- believe that does is -- latest figures saying if you following a America -- -- wells the other big servicers ally.
We're talking about pre partly pay -- I don't know we're talking about a prepared bankruptcy filing for -- risk caps and suited opportunity given the in the press.
Through word out there and yet -- -- is applicable I obviously realize the analysts -- in the mornings in the analyst knows that I read that cover the banks have this would not be overall a significant hit.
To earnings for the banks and you're looking at things that a quarter by quarter basis for a that the dividends restaurants that shareholders get.
Up but you're saying that the cloud of uncertainty has not been -- No not at all and in fact disagree with what this settlement reminds me of -- suit the tire litigation we used to see the Ford Explorer.
Really redeemed coupons to owners who -- bed tires dispense with this reminds trio of that the amount of money that's actually going -- families who sober suffered abuse of process.
As a -- or resulting foreclosures is miniscule.
Mobile finally got -- ask you this these five banks are holding 55% of outstanding loans in this country now that is a manner and amount.
If I mean isn't there on the other side of this I would hope that Washington and understand this on the other assignment is to create hazard for those loans from -- for the banks as well of course because -- gonna continue to -- them I mean we need a housing recovery bottom line lighthouse recovery.
But a -- look at it this way the amount of people helped by the settlement is less than 10% of the total.
Body of Americans out there that have mortgages are underwater that they can't -- finance.
In many cases these are people who book paying their mortgage every month and -- been locked up by the big banks have -- so if you think of it into the most firms this is nice it's good that we have the settlement but now we have to get onto the really difficult issues.
And real quick that's going to big -- -- -- settlements with the investors okay and another issue nobody's thought about taxes.
If all of these deals were put together correctly somebody owes taxes to -- to new York and also to the federal government.
That's where retirement comes as well I -- -- -- how we got Al Capone and actress -- and got out of managing director institutional risk analytics thank you very much like -- even -- for the.
