pa2970c.jpg Paul Lachine

Financial Stars Behind Bars?

Hardly a day goes by without a financial settlement between a bank and a US government agency, which invariably brings an end to the investigation. But recent academic research points to widespread, purposeful misrepresentation by banks, highlighting the need to address the industry's culture of deception by prosecuting wrongdoers.

CHICAGO – Hardly a day goes by without a settlement between a bank and a US government agency or regulator. The latest one is between Bank of America and the government-backed mortgage underwriter Fannie Mae: $3.55 billion in cash; $6.75 billion in repurchases of bad mortgages that Countrywide, later acquired by BoA, sold to Fannie; and an additional $1.3 billion in cash to resolve Fannie’s servicing issues with BoA.

And yet, as in most settlements, BoA did not admit any fault. Was BoA tripped up by bad luck or sloppiness? Or did it and other financial institutions behave with intent to defraud investors?

As a result of the settlement, we will never learn the truth (at least the version that is established beyond a reasonable doubt in open court). In each settlement, the investigations are stopped, and whatever has been found is sealed.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

http://prosyn.org/bhiVHwR;
  1. verhofstadt40_PAULFAITHAFPGettyImages_borisjohnsonspeakingarms Paul Faith/AFP/Getty Images

    Boris’s Big Lie

    Guy Verhofstadt

    While Boris Johnson, the likely successor to British Prime Minister Theresa May, takes his country down a path of diminished trade, the European Union is negotiating one of the largest free-trade agreements in the world. One really has to wonder what the "buccaneering" Brexiteers have to complain about.

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.