Remember that
historic settlement with Bank of America this past summer?
Attorney General Eric Holder and Associate Attorney General Tony West announced today that the Department of Justice has reached a $16.65 billion settlement with Bank of America Corporation – the largest civil settlement with a single entity in American history...
It was a big deal at the time for BOA since they had clearly defrauded the American public, contributing in no small fashion to our epic financial crisis. Turns out it's an even
bigger deal than you think.
Because settlements can be deducted from tax liabilities, for nearly every dollar a bank or lender has pledged to pay in cash or pony up in other ways—such as through buying back soured mortgage-backed securities, extending cheaper loans or forgiving failed loans held by struggling homeowners—up to 35 cents will find its way back into bank coffers, a reflection of the 35 percent federal corporate tax rate.
That makes the "historic settlement" less historic in actual dollars and cents—about
$5.8275 billion less cents actually. But don't worry, in some cases it won't be
that bad.
Deep in the legalese weeds of the settlement documents lies buried treasure. Big banks such as Bank of America and JPMorgan Chase will receive deductions against the corporate tax that will amount to between half and nearly three-quarters of their multibillion-dollar settlements, at least. Meanwhile, midsized banks and nonbank lenders generally get to deduct the whole shebang.
[bold my emphasis]
Newsweek estimates the tax jackpot for banks at around $44 billion. Here's another gem:
Asked by Newsweek the grand total of all mortgage-related settlements between the agency and banks and nonbank lenders since the 2008 crisis, an agency spokeswoman says, “A global figure? We just don’t have that.”
That's not a "let me get back to you with those numbers," or a "I don't know the exact number offhand but it's in the blanks of billions." Is there any way we can synthesize this information?
Says Dennis Kelleher, the chief executive of Better Markets, a nonprofit Wall Street watchdog group: “It’s PR crap. These banks caused the biggest crash since 1929 and they get civil settlements with immunity and tax deductions, all behind closed doors? It’s outrageous.”
But don't worry, choosing to pursue these cases as "civil" and not "criminal"
have their benefits.
Notwithstanding Section 3302 OF TITLE 31, United States Code, or any other statute affecting the crediting of collections, the Attorney General may credit, as an offsetting collection, to the Department of Justice Working Capital Fund up to 3 percent of all amounts collected pursuant to civil debt collection litigation activities of the Department of Justice.
That's the DOJ's Working Capital Fund. Gotta fund your agency, baby!