What good are settlements if no one admits wrongdoing?

On Monday, as MPR’s Martin Moylan reported, U.S. Bank paid $200 million to make a federal probe into its shoddy mortgage lending practices go away. The firm ignored lending rules from 2006 through 2011.

People lost their homes. Taxpayers lost millions covering the loans. The bank lost some petty cash in the settlement.

“By misusing government programs designed to maintain and expand homeownership, U.S. Bank not only wasted taxpayer funds, but inflicted harm on homeowners and the housing market that lasts to this day,” Stuart F. Delery, the assistant attorney general for the Justice Department’s Civil Division said.

“U.S. Bank’s lax mortgage underwriting practices contributed to home foreclosures across the country,” United States Attorney for the Eastern District of Michigan Barbara L. McQuade said in a press release. “This settlement recovers funds for taxpayers and demonstrates that lenders will be held accountable for engaging in irresponsible lending practices.”

But the bank admitted no wrongdoing. And that’s the problem.

Despite pressure to remove the provisions admitting no wrongdoing, financial institutions continue to skate on the most basic of facts. Can you be held accountable if you don’t admit what you did was wrong?

Today, another settlement on a despicable situation also let the perpetrator off the hook.

New York Attorney General Eric Schneiderman announced the settlement Quadriga Art and Convergence Direct Marketing, two fundraising organizations that are behind many of the appeals you receive to help disabled veterans. But they didn’t help disabled veterans. They got rich by using them. The fundraising firms made $100 million on solicitations from people who thought they were helping the vets, according to Schneiderman.

According to CBS News:

The tactics Quadriga and Convergence used to raise that money were shady. The direct mail campaigns that solicited money from consumers used a moving — but fake — story about a veteran who had purportedly been wounded and helped by the charity. The firms also made claims about services DVNF provided around the country that didn’t exist.

“This investigation sheds light on some of the most troublesome features of direct-mail charitable fundraising as it is practiced in the United States today,” Attorney General Eric Schneiderman said in a statement. “Taking advantage of a popular cause and what was an unsophisticated startup charity, these direct mail companies used cleverly designed but misleading mailers to raise tens of millions of dollars in donations from generous Americans, nearly all of which went to the fundraisers and their agents, and left the charity nearly $14 million in debt.”

It was a scam, basically.

The settlement includes 74 provisions, including #70:

Under the settlement, some of the money — a fraction of it — will go to disabled veterans organizations.

It’s not as if some judges aren’t trying to end the wrist slaps. U.S. District Judge Jed Rakoff rejected a $285 million settlement the Securities and Exchange Commission reached with Citigroup in 2011 on allegations of mortgage fraud.

“A consent judgment that does not involve any admissions and that results in only very modest penalties is just as frequently viewed, particularly in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies,” Judge Rakoff wrote.

Last month, Rakoff got his comeuppance when a U.S. appeals court panel ruled he’d overstepped his authority in demanding an admission of wrongdoing.

  • MrE85

    Many who are guilty profess their innocence to the end. I think we all know who the bad players are here. If the settlement cash hurts them, good. If the money is used to help victims, even better.

    • Moylan’s story said the fine was “no big deal” to the bank. The analyst in the story said it won’t hurt business because people don’t care.

      So what exactly is the motivation for US Bank to change its ways, given that the federal housing program has insurance (at taxpayer expense) in the event a mortgage goes south?

      • MrE85

        A valid question. I know when MN and Blue Cross got its big payoff from the tobacco industry, Joe Camel didn’t change his ways, either. But at least some of the money was used to help smokers quit (Clearway Minnesota) and teens not start (Target Market). As you know, most of that money is gone forever, with the exception of ClearWay (created by the court) and the cash the Blues got.

      • theoacme

        There isn’t any motivation, now…

        …however, thanks to the injustices of the Supreme Court, it will soon be possible to carry out a death sentence against a corporation, to include all shareholders, including those holding mutual funds that own shares in such a corporation…

        …and self-defense homicide, by a person hurt by the actions of a corporation, where the executives of the corporation are killed, will be legally recognized too.

  • DavidG

    A run of the mill criminal who takes a plea bargain usually has to make a convincing allocution that is acceptable to both the prosecutor and the judge before said bargain will be accepted by the court…

  • John O.

    The fine somehow gets written off and the lawyers on all sides get a payday. The real victims get bupkis because most have picked up the pieces and moved on.

  • kevinfromminneapolis

    What does the fine go toward? US Bank holds my mortgage and it’s so far underwater that refinancing is impossible. Will I get a decrease in my interest rate? A little spiff for my efforts? Doubt it.

    And who fines the government?