QE Infinity: What Is It Really About?

Ellen Brown

QE3, the Federal Reserve’s third round of quantitative easing, is so open-ended that it is being called QE Infinity.  Doubts about its effectiveness are surfacing even on Wall Street.  The Financial Times reports:

Among the trading rooms and floors of Connecticut and Mayfair [in London], supposedly sophisticated money managers are raising big questions about QE3 — and whether, this time around, the Fed is not risking more than it can deliver.

Which raises the question, what is it intended to deliver?  As suggested in an earlier article here, QE3 is not likely to reduce unemployment, put money in the pockets of consumers, reflate the money supply, or significantly lower interest rates for homeowners, as alleged.  It will not achieve those things because it consists of no more than an asset swap on bank balance sheets.  It will not get dollars to businesses or consumers on Main Street.

So what is the real purpose of this exercise?  Catherine Austin Fitts recently posted a revealing article on that enigma.  She says the true goal of QE Infinity is to unwind the toxic mortgage debacle, in a way that won’t bankrupt pensioners or start another war:

The challenge for Ben Bernanke and the Fed governors since the 2008 bailouts has been how to deal with the backlog of fraud – not just fraudulent mortgages and fraudulent mortgage securities but the derivatives piled on top and the politics of who owns them, such as sovereign nations with nuclear arsenals, and how they feel about taking massive losses on AAA paper purchased in good faith.

On one hand, you could let them all default. The problem is the criminal liabilities would drive the global and national leadership into factionalism that could turn violent, not to mention what such defaults would do to liquidity in the financial system. Then there is the fact that a great deal of the fraudulent paper has been purchased by pension funds. So the mark down would hit the retirement savings of the people who have now also lost their homes or equity in their homes. The politics of this in an election year are terrifying for the Administration to contemplate.

How can the Fed make the investors whole without wreaking havoc on the economy?  Using its QE tool, it can quietly buy up toxic mortgage-backed securities (MBS) with money created on a computer screen.

Good for the Investors and Wall Street, But What about the Homeowners and Main Street?

 The investors will get their money back, the banks will reap their unearned profits, and Fannie and Freddie will get bailed out and wound down.  But what about the homeowners?  They too bought in good faith, and now they are either underwater or are losing or have lost their homes.  Will they too get a break?  Fitts says we’ll have to watch and see.  Perhaps there was a secret agreement to share in the spoils.  If so, we should see a wave of write-downs and write-offs aimed at relieving the beleaguered homeowners.

A nice idea, but somehow it seems unlikely.  The odds are that there was no secret deal.  The banks will make out like bandits as they have before.  The never-ending backdoor bailout will keep feeding their profit margins, and the banks will keep biting the hands of the taxpayers who feed them.

How can Wall Street be made to play well with others and share in their winnings?  In a July 2012 article in The New York Times titled “Wall Street Is Too Big to Regulate,” Gar Alperovitz observed:

With high-paid lobbyists contesting every proposed regulation, it is increasingly clear that big banks can never be effectively controlled as private businesses.  If an enterprise (or five of them) is so large and so concentrated that competition and regulation are impossible, the most market-friendly step is to nationalize its functions. . . .

Nationalization isn’t as difficult as it sounds.  We tend to forget that we did, in fact, nationalize General Motors in 2009; the government still owns a controlling share of its stock.  We also essentially nationalized the American International Group, one of the largest insurance companies in the world, and the government still owns roughly 60 percent of its stock.

Bailout or Receivership?

Nationalization also isn’t as radical as it sounds.  If nationalization is too loaded a word, try “bankruptcy and receivership.”  Bankruptcy, receivership and nationalization are what are SUPPOSED to happen when very large banks become insolvent; and if the toxic MBS had been allowed to default, some very large banks would have wound up insolvent.

Nationalization is one of three options the FDIC has when a bank fails.  The other two are closure and liquidation, or merger with a healthy bank.  Most failures are resolved using the merger option, but for very large banks, nationalization is sometimes considered the best choice for taxpayers.  The leading U.S. example was Continental Illinois, the seventh-largest bank in the country when it failed in 1984.  The FDIC wiped out existing shareholders, infused capital, took over bad assets, replaced senior management, and owned the bank for about a decade, running it as a commercial enterprise.  In 1994, it was sold to a bank that is now part of Bank of America.

Insolvent banks should be put through receivership and bankruptcy before the government takes them over.  That would mean making the creditors bear the losses, standing in line and taking whatever money was available, according to seniority.  But that would put the losses on the pension funds, the Chinese, and other investors who bought supposedly-triple-A securities in good faith—the result the Fed is evidently trying to avoid.

How to resolve this dilemma?  How about combining these two solutions?  The money supply is still SHORT by $3.9 trillion from where it was in 2008 before the banking crisis hit, so the Fed has plenty of room to expand the money supply.  (The shortfall is in the shadow banking system, which used to be reflected in M3, the part of the money supply the Fed no longer reports.  The shadow banking system is composed of non-bank financial institutions that do not accept deposits, including money market funds, repo markets, hedge funds, and structured investment vehicles.)

Rather than a never-ending windfall for the banks, however, these maneuvers need to be made contingent on some serious quid pro quo for the taxpayers.  If either the Fed or the banks won’t comply, Congress could nationalize either or both.  The Fed is composed of twelve branches, all of which are 100% owned by the banks in their districts; and its programs have consistently been designed to benefit the banks—particularly the large Wall Street banks—rather than Main Street.  The Federal Reserve Act that gives the Fed its powers is an act of Congress; and what Congress hath wrought, it can undo.

Only if the banking system is under the control of the people can it be expected to serve the people.  As Seumas Milne observed in a July 2012 article in the UK Guardian:

Only if the largest banks are broken up, the part-nationalised outfits turned into genuine public investment banks, and new socially owned and regional banks encouraged can finance be made to work for society, rather than the other way round.  Private sector banking has spectacularly failed – and we need a democratic public solution.

_______________________

Ellen Brown is an attorney and president of the Public Banking Institute.  In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://WebofDebt.com, http://EllenBrown.com, andhttp://PublicBankingInstitute.org.

Libertarians File Antitrust Suit Against Democrats, Republicans & Commission on Presidential Debates

Daily Paul

Breaking news: The Gary Johnson/Judge Jim Gray Campaign has filed an antitrust lawsuit against the Democrats, Republicans, & the Commission on Presidential Debates for antitrust and anticompetitive acts. The voters deserve competition.
https://www.facebook.com/JudgeJimGrayLPVP/posts/526500074031484
Press Release below:

http://en.reddit.com/r/Libertarian/comments/109eiq/breaking_...

*Thanks to JackTanner for this Link to an actual copy of the lawsuit.
http://www.buzzfeed.com/zekejmiller/gary-johnson-files-anti-...

Press Release:

JOHNSON CAMPAIGN FILES ANTI-TRUST ACTION AGAINST NATIONAL COMMISSION ON PRESIDENTIAL DEBATES

Sept. 21, 2012, Saint Paul, Minn. — Libertarian presidential candidate Gary Johnson’s campaign today filed an anti-trust lawsuit in the United States District Court for the Central District of California challenging Johnson’s exclusion from upcoming debates sponsored by the Commission on Presidential Debates. The Commission announced earlier Friday that invitations to the debates were being extended only to Mitt Romney and Barack Obama.

Announcing the campaign’s legal action, senior Johnson advisor Ron Nielson said, “There is nothing remotely surprising in the fact that a private organization created by and run by the Republican and Democratic Parties has only invited the Republican and Democratic candidates to their debates. It is a bit more disturbing that the national news media has chosen to play the two-party game, when a full one-third of the American people do not necessarily identify with either of those two parties.

“American voters deserve a real debate between now and Election Day. By excluding Gov. Johnson, the Commission on Presidential Debates has guaranteed that there will be no one on the stage challenging continued wars, calling for a balanced budget now — as opposed to decades down the road, and who has never advocated government-run health care.

“Someone has to stand up and call this what it is: A rigged system designed entirely to protect and perpetuate the two-party duopoly. That someone will be the Johnson campaign. We are today filing a lawsuit in Federal Court charging that the National Commission and the Republican and Democratic Parties, by colluding to exclude duly qualified candidates outside the Republican and Democratic Parties, are in violation of the nation’s anti-trust laws.

“It is unfortunate that a successful two-term governor who is already assured of being on the ballot in 47 states and the District of Columbia is forced to turn to the courts to break up a rigged system, but it appears that fairness is not to be found otherwise.”

Johnson’s running mate and retired California Superior Court Judge Jim Gray, who is also a plaintiff, will argue the motion on the campaign’s behalf.

The lawsuit, filed only hours after the Commission’s announcement, charges that the Republican National Committee and the Democratic National Committee and an organization they set up, the Commission on Presidential Debates, have conspired together to restrain trade, both in ideas and in commerce. The lawsuit maintains that the Republican and Democratic Parties, through the CPD, indefensibly limits access of other candidates to the marketplace of ideas and the opportunity to be employed in these highest offices in the land, and in so doing are violating the Sherman Anti-Trust Act of 1890.

The lawsuit seeks an order of the Court enjoining the debates from proceeding unless all candidates who will appear on the ballot in enough states to win in the Electoral College are allowed to participate.

Nielson said the Johnson campaign would likely file additional lawsuits in additional jurisdictions challenging the exclusion of Johnson and Gray from the debates on other grounds.

Auditing the Fed Is a Sideshow: Who Audits the Auditors?

Daily Bell
Anthony Wile

No To Transparency:  Harry Reid vows to kill
bill to audit the Federal Reserve

On Wednesday, Ron Paul's bill to audit the Federal Reserve was overwhelmingly passed by the U.S. House of Representatives. The vote was 327 to 98. You would think that a bill with such overwhelming support would easily become law. But it won't, because Barack Obama and the Democrats plan to kill it. Senate Majority Leader Harry Reid has already said that the Senate will not even consider the bill. But of course if Barack Obama called Harry Reid and told him that he wants this bill to get through the Senate so that he could sign it then Harry Reid would be singing a much different tune. Sadly, we all know that is not going to happen. Barack Obama's good buddy Ben Bernanke called the Audit the Fed bill a "nightmare scenario" last week, and Obama is certainly not going to do anything to upset Bernanke - especially this close to the election. – Daily Caller


An audit of the Federal Reserve would be nice but really it wouldn't change anything. In fact, it would likely prove a kind of sideshow from reality, which is that monopoly central banking should simply be abolished.
And that probably won't happen until people get so sick and tired of being driven into bankruptcy and despair that they begin to kick the doors down and arrest the criminals cowering inside.

And they ARE real criminals. The system is responsible for debasing currency the world over and driving billions into poverty and even suicide. In the West it has blighted the hopes and dreams of millions who scratched and saved and then found their portfolios devalued by half or whole on a single day.

But it is worse in Third World countries. The money never even trickles down in these countries. Billions of people live on literally a couple of dollars a day.

This despite the United Nations and other international institutions that are supposedly dedicated to eradicating poverty. In fact, these institutions create the poverty they supposedly wish to remove. They do so via institutionalized violence costing trillions. War is the health of the state but it sickens everyone else.
It's not as if people don't already know the depths of the depravity that is the modern money system.

There's really no justification for the Fed, a monopoly central bank that issues fiat money as it chooses.
The exposure is irrelevant to the evident reality. The reality is that a small group of white, middle aged men can never figure out how much money an economy needs at what price.

The reason to audit the Fed is to find out what "they" are up to. But we already know that. A limited audit examined transactions during 2008 when the world's financial system froze up. It found the Fed had loaned out more than 16 trillion dollars, almost interest free, to the "too big to fail" banks.

This is not exactly astonishing. The same men who have built this dysfunctional system handed out trillions to various cronies when the system was in danger of collapsing.

So here is what a Fed audit would discover: More of the same. It would likely also discover that a shadowy group of dynastic families control the workings of the Fed, as they do of other central banks, and use money-from-nothing to further implement world government.

Of course, even if an audit-the-Fed bill passed by some miracle it still wouldn't be effectively implemented. The best we've got is the "fox guarding the hen house," and that effectively precludes any real investigation into central banking, specifically or generally.

We can see this at work even with the audit-the-Fed bill the House just passed. Eight co-sponsors of the legislation actually voted against the bill and most of them, when contacted, refused to explain why.
This is to be expected. Money Power is a vast and intimidating force. If you want to get ahead in this world, one way to do it is to advance the agenda of Money Power, which seeks world government.

Money Power flourishes because it is resistant to the kinds of investigations offered by Ron Paul's audit. Money Power works busily many layers deep.

Money Power in aggregate is not fazed by an audit. An audit that blows up the current system would probably usher in a state-run gold standard or some new form of money, perhaps SDRs, also controlled by the power elite. Out of chaos, order ...

We don't know what societies would look like absent monopoly central bank money stimulation. The past 100 years have hyped the world's banking and industrial systems into overdrive. It's considered normal but there is nothing normal about China's empty cities or the razing of Detroit.

Long ago, the Rothschild family helped found the system under which we now labor but they've been aided and abetted by hundreds and thousands and then millions of others. The men at the top understand full well what is going on. Congress, both House and Senate, are complicit in what's taking place, which is no less than the slow-motion rape of the American people.

A Federal Reserve facility that can issue US$ 15 trillion in a weekend to preferred clients is not an entity that should stand another minute. And the political institutions that tolerate this sort of facility should be removed as well.

Congress is a bastion of bought-and-paid for front men. Those in Congress have created a US$ 3 trillion Leviathan that bestrides the world with tax collectors, murderous Intel agents, endless warfare and the poisoning of millions, including US vets, with depleted uranium.

Now this same Congress has brought down the curtain of fascism on the American people via "Homeland Security" with its groping, ID checks and poisonous radiation machinery.

This is the group that is supposed to audit the engine of this dysfunctional, murderous funding?
Even if it did, it wouldn't make any difference.

The cleansing must go far deeper. It starts with ... you.

Big Cable’s Plan to Lock Down Your Future

Portland Observer

There are two paths to choose from and two destinies for television viewers: one better, the other far worse. The path taken will have lasting political consequences.

One leads to a future where new technology offers millions of video channels streaming in and out of American homes via fast online networks. The other involves a handful of local cable monopolies controlling what programming is aired — and blocking anything that might loosen their grip on viewers.

One future looks like the people-powered Internet, where choice is boundless and the audience is in charge. The other is a throwback to cable television’s “gilded age,” where powerful gatekeepers picked what people watched, when they watched it, and how much they paid for the privilege.
One future spreads power over information to the many, while the other concentrates it back into the hands of the few.

According to a recent comScore survey, the number of people watching long-form videos via the Internet grew by 47 percent in just the last year. This trend is the driving force for online video services like Netflix, YouTube, and Amazon, companies that allow viewers to bypass Big Cable — with its costly bundles of channels — and go straight to the videos they want to see.

The rise of online video is causing fits among executives at cable giants like Comcast and Time Warner Cable. They aren’t about to abandon monthly subscriber rates and premium packages to indiscriminately move data for Internet-empowered users.

They’ve instituted “data caps” to stifle the budding population of people who’ve tossed their cable remotes in favor of a browser-based television experience. Caps make it expensive for anyone wishing to tear down the artificial divide that separates a television screen from an Internet monitor.

And the cable companies aren’t stopping there. They’ve rolled out plans to disadvantage the upstarts that are building these alternatives to cable. In March, Comcast announced that some videos viewed on its own Xfinity service wouldn’t count against its customers’ Internet data caps. If you’re accustomed to using popular movie and television streaming services like Netflix, however, you’re out of luck.
Cable companies are also implementing verification systems to ensure that only cable subscribers are able to access certain types of online programming. These schemes allow cable companies to favor their online content while penalizing people who prefer going elsewhere.

Mark Crispin Miller "Mainstream Media in the U.S. is Disgusting"

These 6 Corporations Control 90% Of The Media In America

Business Insider
Ashley Lutz

This infographic created by Jason at Frugal Dad shows that almost all media comes from the same six sources.

That's consolidated from 50 companies back in 1983.

NOTE: This infographic is from last year and is missing some key transactions. GE does not own NBC (or Comcast or any media) anymore. So that 6th company is now Comcast. And Time Warner doesn't own AOL, so Huffington Post isn't affiliated with them.

But the fact that a few companies own everything demonstrates "the illusion of choice," Frugal Dad says. While some big sites, like Digg and Reddit aren't owned by any of the corporations, Time Warner owns news sites read by millions of Americans every year.
Here's the graphic:

Online news readership overtakes newspapers

MSNBC
Suzanne Choney

For the first time, more of us are getting our news from the Web than from newspapers, according to a new report, which finds that the Internet now "trails only television among American adults as a destination for the news."

And that "gap" between the Internet and TV is "closing," according to a new report on "The State of the News Media 2011" by Pew Project for Excellence in Journalism.

"Financially the tipping point also has come," wrote Tom Rosenstiel and Amy Mitchell in the report. "When the final tally is in, online ad revenue in 2010 is projected to surpass print newspaper ad revenue for the first time. The problem for news is that by far the largest share of that online ad revenue goes to non-news sources, particularly to aggregators," such as Google and Yahoo news.

Nearly half of all American Adults — 47 percent — report getting "at least some local news and information" on their cell phones or tablets. But when it comes to paying for online local news, be it via subscription or buying "apps,"  few of us are doing that or are thinking of doing it.

If we were to dig into our pockets, 23 percent of us would be willing to pay $5 a month for full access to a local newspaper online. Another 18 percent would be open to paying $10 a month.

"Both figures are substantially higher than the percentage of adults (5 percent) who currently pay for online local news content. Nonetheless, roughly three-quarters say they would not pay anything," according to "How mobile devices are changing community information environments." The report was done by the Pew Research Center’s Project for Excellence in Journalism, Pew Internet & American Life Project and the Knight Foundation as part of "The State of the News Media" research.

Dallas Fed: Top five U.S. banks hold over half of industry’s assets

Raw Story
Stephen C. Webster

 In its annual report for 2011, issued on Wednesday, the Federal Reserve Bank of Dallas released a startling report revealing that 52 percent of all the assets held by the entire banking industry have now become aggregated into the hands of just five companies, and the top 10 institutions have swollen so large that they possess wealth that equates to roughly half of America’s annual gross domestic product (GDP).

It is for those reasons that Dallas Fed president Richard Fisher, who’s otherwise known as a conservative budget hawk, has embraced the radical cause of breaking up the nation’s largest banks and forever ending “too big to fail.” In a letter introducing the 2011 report, he cautions that Congress may not have gone far enough with prior attempts at financial reforms, and that those bills may even be working against the struggling economic recovery underway.

Alarming as that sounds, it’s the Dallas Fed’s chart of U.S. banking assets that’s most startling.

In his letter, Fisher adds that if the wealthiest sample group is expanded to the top 10 banks, their total assets are worth approximately half of America’s annual GDP, which eclipsed $14.5 trillion in 2010.
He goes on to suggest that Congress did not go far enough with the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act (PDF) because it did not effectively deal with the problem of institutions growing to such heights that their fall threatens the whole economy.

Darpa director leaving the Pentagon for Google

Russia Today

One of the most top-secret Pentagon departments — the same that spawned America’s drones, military robots, electromagnetic guns and other sci-fi weaponry — is about to lose its top officer to Google.

Regina Dugan oversaw the development of some of the US military’s most marvelous high tech accomplishments as director of Darpa, but the head of the DoD’s research lab is parting ways with the Pentagon to take on a role with Google. Not even three years after she took on the role as the first female director of the America’s Defense Advanced Research Projects Agency, or Darpa, Regina Dugan is now walking away to join the ranks of America’s other innovative powerhouse. Dugan will be relinquishing her top roll at the Defense Department’s Darpa program and trading in the Potomac River for Silicon Valley, and says it is a natural decision to move somewhere where the possibilities seem endless. Apparently within the cogs of the war machine, there is only so much left to explore.

Confirming the move to a “senior executive position” with Google, Darpa spokesman Eric Mazzacone tells Wired that Dugan couldn’t refuse an offer with such an “innovative company” as the search engine giant. Until the latest news broke, however, Darpa had been touted as a creative — yet controversial — research lab for space-age technology only once imaginable. Darpa has developed technologies used across the globe that can take away lives and, as seen with cutting-edge robotic limbs, practically create them.

With the Defense Department scaling back on many operations and Google seemingly only growing, Dugan’s departure only makes sense given the timing. Both US President Barack Obama and Defense Secretary Leon Panetta have thrown their weight behind a shift in the Pentagon’s budget in an effort to save billions over the next few years. Google, on the other hand, has only increased its outreach, operating countless new endeavors and taking on new mediums.

That’s not to say, of course, that Dugan avoided trouble while with Darpa. She has been the subject of an investigation after awarding pricey contracts to a defense research company she partially owns, a deal which prompted the Pentagon’s Office of the Inspector General to open a probe. Lt. Col. Melinda Morgan, a spokesperson for the Office of the Secretary of Defense, says that the change in command and ongoing investigation into Dugan’s RedX Defense company are unrelated, but aside that there is little known about her career change. On their part, a Google rep tells PC Mag, "Regina is a technical pioneer who brought the future of technology to the military during her time at DARPA," adding, "She will be a real asset to Google, and we are thrilled she is joining the team."

In a statement from the Pentagon, Frank Kendall for Defense for Acquisition, Technology and Logistics, adds, “Regina Dugan’s leadership at Darpa has been extraordinary and she will be missed throughout the Department.

“We are all very grateful for the many contributions she has made in advancing the technologies that our war fighters depend on.” 

Dugan, however, had blasted Darpa for not doing enough only a year earlier. “There is a time and a place for daydreaming. But it is not at Darpa,” she told a congressional panel in March 2011. “Darpa is not the place of dreamlike musings or fantasies, not a place for self-indulging in wishes and hopes. Darpa is a place of doing.”

The transition also raises further questions about what relationship the federal government has with Google. As RT reported yesterday, an advocacy group will be taking the US National Security Agency to court later this month in hopes of finding details on what ties, if any, the NSA has with Google. The NSA has refused to disclose any details in the past that discuss a relationship, despite a series of Freedom of Information Act requests.

Facebook will Require Social Security Number for Member Log In

Editor's Note:  First the monopoly, then the squeeze.

Free Wood Post
Ronnie Morrow

February seemed to be the month of Facebook, with new updates and new privacy settings. Today, Facebook announced a new procedure to address the recent wave of spam that has plagued the website. Starting April 2nd, users will be required to enter their social security numbers to log in to their Facebook accounts. Facebook’s media relations department released this statement.

The new member log in format will be both safe and efficient for our users who fear having their Facebook identity stolen. The requirement for users to enter their social security numbers during log in, will completely take away the element of spam from unauthorized access. With cooperation from the United States government, we have compiled a database to verify that each person’s social security is accurate. Also, the last four digits of each users social will be displayed in their info section of their profile. Further upgrades to security are currently being planned, and will be announced as more information is given.

The announcement will for sure create outrage across the internet, where tensions are already high due to Facebook’s new privacy policies. Google has also hinted to a similar procedure to verify user identification.

Calls to the Facebook corporate offices have not been returned.

Too Big To Jail

Slate
Simon Johnson

Why did the Obama administration agree to a "robo-signing" settlement that barely punishes the huge banks behind the foreclosure crisis?

The government reached a settlement with five major banks regarding mortgage-servicing abuses during the foreclosure criss

Earlier this month, the federal government and most states agreed to  a $25 billion settlement with Bank of America, JPMorgan Chase, Citibank, Wells Fargo, and Ally Financial for carrying out fraudulent foreclosures on mortgages. The settlement will direct $20 billion toward mortgage relief for borrowers and $5 billion to the government. As Dennis Kelleher of Better Markets has argued, this deal is a complete sell-out to the financial industry.

First, there was no serious criminal prosecution, meaning that no one will be charged with a felony and no one will go to jail. In terms of affecting executives’ incentives, this is the only thing that matters.

Even the terminology used to frame the discussion is wrong. Kelleher, an attorney with extensive experience in private practice and the public sector, tells it like it is: “ ‘Robo-signing’ is massive, systematic, fraudulent, criminal conduct.” Alternatively, as he points out, we could just call it “lying, cheating, and stealing.”

Second, the civil penalties in this settlement—a form of fine—are minuscule relative to the size of the companies involved. As Shahien Nasiripour, one of the best reporters on this issue, dryly put it: “None of the five lenders have said they expect to incur a material charge due to the settlement.” In other words, from a corporate perspective, the penalty is a trifling affair.

Third, such fines are, in any case, paid by the companies’ shareholders, not by their executives or board members (all of whom carry insurance). In the rare cases in which fines have been levied on individuals, either their insurance policies picked up most of the bill, or the penalties were trivial relative to the cash compensation that they received while committing their crimes—or both.

As if all of this weren’t bad enough, the banks reportedly will be able to use government money to write down the value of mortgages, which amounts to subsidizing them to pay their own meaningless fines.

The Obama administration and its allies have worked hard to sell its settlement with the banks as one that will have a meaningful impact on the housing market. But nothing could be further from the truth. As Kelleher points out, the United States has “more than 10 million homes under water” (the outstanding mortgage exceeds the house’s value). “Twenty billion dollars doesn’t make a dent in that: one million homes at $20,000 loan forgiveness is it.”

In fact, the Obama administration’s settlement with the mortgage lenders is consistent with its track record on all of its policies related to the financial sector, which has been abysmal. But it is also puzzling. Why would the administration continue to bend over backward to be lenient toward top bankers under these circumstances?

I honestly do not believe that the administration’s stance reflects any form of corruption—payments made to individuals or even to political campaigns. And, in this case, it does not even appear to reflect the lobbying power of big financial players. That power certainly explains why the Dodd-Frank financial reforms enacted in 2010 were not stronger, and why there is now so much opposition to effective implementation of that legislation (for example, there is currently a huge fight around the “Volcker rule,” which would limit proprietary trading by megabanks). But mortgage lenders’ criminal activities are another matter.