Eric Holder is on his way out as Attorney General. It’s unlikely that his recent adventure into pursuing criminal charges against bankers will redefine the legacy of timidness and fear that he has worked so long to create.

At Salon, friend of the show David Dayen recently broke down the many ways that the Department of Justice’s strategy of resolving illegal activity on the part of banks using civil penalties is blowing up in the DoJ’s face.

He highlights a recent settlement scheme by Wells Fargo to essentially pull a bait-and-switch on people over what were known as “pick-a-pay” loans. Wells Fargo had agreed to settle allegations that it had been hustling people into unfair home loans that were designed to fail. The bank entered into settlements with a number of states individually, in those settlements, injured homeowners retained their right to sue Wells Fargo for their injuries. At the same time though, Wells Fargo had entered into a class action settlement and was issuing checks for $178.04. If injured homeowners deposited that check, they were barred from suing Wells Fargo in the future. In fact, the bank went so far as to argue that the defrauded homeowners also gave up their right to fight future foreclosure against the bank.

Dayen goes on:

Getting tens of thousands of homeowners to deceptively sign away their rights for $178.04, and then rip off their homes, is bad enough, but it gets worse. Wells Fargo never complied with the minimal obligations in the class action settlement. They were supposed to offer loan modifications to every Pick-a-Pay loan customer who qualified. But according to Wells Fargo, the homeowners had to affirmatively apply for the loan modifications first in order to trigger the bank’s obligations.

There’s an ongoing crusade being fought by New Jersey attorney Joshua Denbeaux to try and obtain justice for those wronged by the Wells Fargo deal. They aren’t alone though. The practice of profiting off of what was supposed to be a punishment for wrongdoing goes much further according to Dayen:

And the Wells Fargo case is only one example. In the year since the Justice Department made a ballyhooed “$13 billion” mortgage settlement with JPMorgan Chase, only 2,633 borrowers received principal reductions on their loans. JPMorgan has satisfied the majority of the “consumer relief” in that settlement by making loans to low- and moderate-income borrowers. In other words, JPMorgan profits off their “penalty.” This is like sentencing a shoplifter to opening a lemonade stand.

There’s no reason to think that Eric Holder’s brand of supposed “settlement justice” works. In fact, just like the markets the banks gamed to the bring to the brink of destruction, it looks like they’ve gamed the settlements and court system too.


Joshua is a writer and researcher with Ring of Fire. You can follow him on Twitter @Joshual33.