When I was a young, hard-headed kid my mother often told me: “If you don’t hear then you have to feel.” Translation: if you insist on making imprudent choices then you’d better be prepared to suffer the consequences. Mom was no Tiger Mother, but she knew how to immunize me against the next outbreak of stupidity. A swat upside the head took care of both retribution and deterrence.
When I first read about the provisional National Mortgage Settlement announced 10 days ago, it was obvious that we were in a-slap-on-the-wrist territory. There would be de minimis consequences for the five major mortgage banks accused of massive lawbreaking on foreclosures. Once again, policymakers would protect them from the painful institutional memories that might one day protect us from their tendency to crisis. But new details released on Friday make clear that it’s even worse than that. Continue Reading