Wednesday, January 16, 2013

Mad Libs: The Financial Settlement


Mad Libs:  The Financial Settlement

A few days ago I wrote about the growing number of bank settlements, especially at Bank of America.  As Joe Nocera pointed in his column yesterday[1], these settlements seems to be more about public relations and business as usual than addressing wrongs.  It seems to me that financial institutions, regulators, prosecutors, and politicians could save a bit of money by simply using all-purpose press release, since most of settlements follow the same script.  Set out below is a standard template, and I invite you to play Mad Libs with it.  As you’ll see, I played the game toward the end of this post.

The [Agency Name] and [Financial Institution] have reached a settlement in which [Financial Institution] will pay [amount] to [name of beneficiaries].  The settlement marks the conclusion of a [time period] investigation into the business practices of [Financial Institution].

[Financial Institution] is alleged to have [ten words or less description of the activity] from [date] to [date].

[Name and Title] of the [Agency Name] said, “We are pleased to announce this ground breaking agreement with [Financial Institution].  It marks an important step forward in restoring our faith in the financial markets.  I want to commend out staff for all their hard work in bringing this matter to a successful resolution.”

[Name and Title] of [Financial Institution] remarked, “We are happy to have this matter behind us.  This settlement allows [Financial Institution] to move forward without incurring the ongoing legal expenses and uncertainty surrounding this matter.”  ([Potential, but not required addition to the quote, “We are sorry about any harm that may have come to [name of beneficiaries]”).

[Financial Institution] has agreed to this settlement without admitting or denying the underlying allegations, and the [Agency Name] has agreed to terminate the investigation.  The agreement is subject to approval by [Name of Court or Board], and the precise timing and amount of any payments is subject to further proceedings.

Listen to the Acquirer (1997)

All right, let’s enter into a settlement between the US Treasury and a bank.  You might prefer to try this out with a money manager and the SEC, or an insurance company and the district attorney.  The form always works.

The United States Treasury and First Bank of Raleigh-Durham have reached a settlement in which First Bank will pay $1 million to school children.  The settlement marks the conclusion of a three-year investigation into the business practices of First Bank.

First Bank is alleged to have improperly and systematically solicited milk money under the TARP program from 2006 to 2008.

Timothy J. Geithner, Secretary of the Treasury said, “We are pleased to announce this ground breaking agreement with First Bank.  It marks an important step forward in restoring our faith in the financial markets.  I want to commend our staff for all their hard work in bringing this matter to a successful resolution.”

 I. M. Relieved, Chairman of First Bank remarked, “We are happy to have this matter behind us.  This settlement allows First Bank to move forward without incurring the ongoing legal expenses and uncertainty surrounding this matter.  We are sorry about any harm that may have come to the children.

First Bank has agreed to this settlement without admitting or denying the underlying allegations, and the US Treasury has agreed to terminate the investigation.  The agreement is subject to approval by the Federal Reserve, and the precise timing and amount of any payments is subject to further proceedings.

These settlements are what now pass for progress in resolving the financial transgressions among our financial intermediaries.  The enforcement agency gets a high-minded press release.  The financial institution pays a few cents on the dollar for its wrongdoing, and the victims get to wait for several more years before they receive a tiny fraction of their losses.  Everyone but the victims gets to move on with their businesses and careers.  Case closed.



[1] “Foreclosure Fiasco” at http://www.nytimes.com/2013/01/15/opinion/nocera-the-foreclosure-fiasco.html?hp

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