The Obama Administration’s $20 billion proposal to try to force banks to modify mortgages looks an awful lot like an attempt to revive the $20 billion bank tax that was rejected during the negotiations over Dodd-Frank.
The Obama Administration and attorneys general from all 50 states are reportedly urging major mortgage lenders to settle claims of foreclosure abuses that would reportedly cost lenders over $20 billion dollars. The idea is that money from the settlement would be used to reduce principal balances of borrowers facing foreclosure.
The plan has been criticized both by Bank of America's Brian Moynihan and by housing groups who don't think it goes far enough. Georgetown law professor Adam Levtin, a leading critic of foreclosure abuse, describes terms included in a leaked document said to be the term sheet for the settlement as "astonishingly strong."
But what few seem to have noticed is that the settlement accomplishes a goal that was explicitly rejected by Congress as it reached a deal to enact Dodd-Frank. In the final days of negotiations over the financial reform law, an amendment was proposed that would have created a $20 billion "Financial Crisis Special Assessment" tax on banks. Dropping this amendment was a key part in getting Dodd-Frank passed. Bringing it back in the form of a foreclosure gate settlement looks like an attempt to retrade on this bargain.
Democrats have been very vocal in opposition to attempts by the Republican controlled House of Representatives to pare back certain parts of Dodd-Frank. The proposed foreclosure settlement shows that it's not just House Republicans who want to open Dodd-Frank up once again.
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