Obama to Use Pension Funds of Ordinary Americans to Pay for Bank Mortgage “Settlement”

[PA Democrat]

11. This is an important issue that could affect the retirement funds of millions of Americans.

I posted part of a press release issued by Senator Sherrod Brown's office in which he expressed his opposition to how the settlement was structured. Here is an excerpt from a letter Brown wrote to Associate Attorney General Perrelli, Secretary Donovan, Director Cordray, and Attorney General Miller on the issue:

A settlement must also impose adequate penalties on servicers who broke the law. There are reports that the settlement could permit servicers to receive credit for writing down the value of mortgage-backed securities (MBS) owned by investors, without requiring servicers to reduce principal on the mortgages and second liens that they own. Ohio’s public employee pension funds have significant investments in MBS, and therefore have significant interest in the terms of the settlement. The reported settlement terms would allow banks to write down the investments of many of my constituents, without sacrificing anything. And, depending upon the scope, any settlement could potentially preclude these funds from pursuing actions to recoup more than $457 million in losses, allegedly due to credit ratings agencies improperly rating MBS. Such terms are unacceptable.

Teachers, first responders, law enforcement, and other pensioners and retirees should not be penalized for wrongdoing by Wall Street. An adequate loss-sharing arrangement would acknowledge the reality that there is no penalty for servicers writing down the value of assets that belong to someone else. There is also no penalty associated with servicers writing down a portion of their assets – in this case, their second lien holdings – that actually have no value. It is often in investors’ best interest to reduce mortgage principal, but this settlement must penalize the servicers who broke the law.

http://brown.senate.gov/newsroom/press_releases/release/?id=d318a589-e27c-4b33-93c8-83d26e2b61ae