DN Editorial: Mortgage settlements: Obama's plan falls short

MAYBE what's not in the $28 billion settlement among 49 states' attorneys general and the nation's five biggest banks is more important than what is in it.

We have to hope so, since what is in it represents a weak rap on the knuckles for the nation's five largest banks, with woefully inadequate aid for Americans whose homes are "underwater," and minimal help for the still-crippled housing market.

As part of the settlement, the banks will pay $28 billion (most of it Other People's Money), $17 billion of which will be used to either (1) write down the mortgages of some homeowners whose houses are worth less than is owed on them or (2) help them refinance. Compare this to the fact that 11 million homeowners are "underwater" with $700 billion in lost equity.

As for people who lost their homes to banks that foreclosed even when they lacked proper documentation, they will get an average $1,800 each. That'll go far in helping them rebuild their lives. In exchange, the banks escape full liability for a host of improper and even fraudulent practices, including the use of robo-signers to forge mortgage documents.

Further reducing confidence, President Obama announced the "landmark" agreement on Thursday even though the actual document with the actual settlement terms hasn't been written down yet. Instead, we have an agreement of principle with the details to come later. To paraphrase Sam Goldwyn, an oral "agreement of principle" isn't worth the paper it's printed on.

Everyone agrees that this is a better deal than the Obama administration was pressuring the attorneys general to take just a few months ago. For that, New York Attorney General Eric Schneiderman gets a lot of credit, and a whole lot of responsibility going forward. Schneiderman led a handful of attorneys general who refused to sign on to an earlier agreement since it would have short-circuited an investigation into the practices that led to the economic meltdown.

So, Schneiderman joining the agreement provides it with some credibility. Recently named to co-chair a federal investigation into the banks, Schneiderman has been all over the news pointing out what isn't in the deal: any limit on the scope of his investigation. Schneiderman has said he feels confident that he will have the necessary support to match the banks' army of lawyers and lobbyists, but, so far, the Department of Justice has assigned only 55 people to it, including 10 FBI agents. About 1,000 FBI agents were assigned to the savings-and-loan crisis of the 1990s, which was 40 times smaller in scope.

So, whether this agreement is a tiny step on the way to finally exacting justice from the people who so far have escaped accountability for blowing up the academy relies in large part on Schneiderman's savvy. It also depends, as it always does, on pressure from ordinary Americans to provide him with the public support he will need to make it happen.