Big Banks Paid $110 Billion in Mortgage-Related Fines. Where Did the Money Go?
Big Banks Paid $110 Billion in Mortgage-Related Fines. Where Did the Money Go?
The largest U.S. banks were penalized for their role in inflating a mortgage bubble that helped cause the financial crisis. Who got that money?
New York state is spending $50 million of bank-settlement money to build a new horse barn and make other upgrades to the grounds at the state fair. PHOTO: HEATHER AINSWORTH FOR THE WALL STREET JOURNAL
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By Christina Rexrode and Emily Glazer
Updated March 9, 2016 4:07 p.m. ET
The nation’s largest banks paid fines totaling about $110 billion for their role in inflating a mortgage bubble that helped cause the financial crisis. Where did that money go?
In New York, the annual state fair is using bank-settlement money to build a new horse barn and stables. In Delaware, proceeds are being used to subsidize email accounts for local police. In New Jersey, a mortgage firm owned by a former reality-television star collected $8.5 million as a reward for reporting a bank’s misconduct.
Banks also helped tens of thousands of homeowners with their mortgages in neighborhoods from Jacksonville, Fla., to Riverside County, Calif., funded loans for low-income borrowers and donated to dozens of community groups and legal-aid organizations.
Yet some of the biggest chunks of money stayed with the entity that levied the fines in the first place. Of $109.96 billion of federal fines related to the housing crisis since 2010, roughly $50 billion ended up with the U.S. government with little disclosure of what happened next, according to a Wall Street Journal analysis.
The Journal reviewed the terms of more than 30 settlements, filed public-records requests with a dozen agencies at the federal and state level and spoke to dozens of homeowners and others who obtained payouts, tried to or were otherwise involved with the distribution of the settlements. The results represent the most detailed breakdown yet of the billions paid out in the unprecedented deals.
WHERE DID THE MONEY GO?
The Wall Street Journal analyzed more than 30 settlements from the nation’s six largest banks. See an in-depth breakdown of who received the funds.
Out of the $110 billion, the Journal found that:
• The Treasury Department received almost $49 billion of the funds, including money the agency received directly and sums funneled to it by other departments, including government-chartered housing associations Fannie Mae and Freddie Mac. How the money is spent isn’t specified.
• About $45 billion was earmarked for “consumer relief,” a category that includes money dedicated to helping borrowers and funding housing-related community groups.
• The Justice Department, whose prosecutors led many of the negotiations with banks, collected at least $447 million. How it spends the money isn’t specified.
• States received more than $5.3 billion, usually to spend as they saw fit. Almost all states received payments from a national settlement in 2012 over mortgage-servicing abuses, and seven also received payments in the Justice Department’s blockbuster mortgage-securities settlements that started in 2013.
• Roughly $10 billion went to other recipients, including housing-related federal agencies, two federal agencies responsible for cleaning up failed banks or credit unions, and whistleblowers who helped the Justice Department. Some funds from these deals typically revert to the Treasury.
The White House said tens of billions of dollars have been recovered for American consumers since 2009, including funds that went to government agencies and programs and the Treasury, according to Deputy White House Press SecretaryJen Friedman.
The lack of detailed disclosure bothers some people. “The government has a responsibility to its citizens to be transparent about where its revenues are going,” said Aaron Klein, who focuses on financial regulatio