Ally Financial Inc., the auto and home lender majority owned by the U.S. government, said its mortgage unit reached a $462 million settlement to resolve repurchase claims by Fannie Mae on $292 billion in home loans.
Excuse me, but a fine that low is insulting. Let's tell originators to go ahead and take the chance with shoddy paper - even if you get caught you'll only get a minor slap on the wrist. Where are the subpoenas? What about an appropriate level of penalty for the problem? Why can't we charge people in the financial industry for creating paper that had to be knowingly fraudulent?
Turning to "Why" points to the fact that Ally wants to have a share sale. Well we can't have a sale when there are major questions about put-backs. No problem, we'll have the government controlled mortgage backer basically give a pass to the government owned/backed mortgage originator. Great, we have now made sure that bankers get to take excessive risks (again) and possibly even commit fraud. Based on this the penalties would seem to say take the chance.
Normally I worry about government policies and the unintended consequences. This appears to just stupid policy.
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