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DOJ and state AGs encourage moral hazard

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Have you been a saver over the last few decades, investing in broad-based mutual funds or stocks of banks? Did you responsibly refuse to buy more house than you could afford? Did you structure your mortgage so that you had significant equity in the underlying property? Did, notwithstanding adverse financial circumstances, you keep up with payments on a mortgage? Well, you're a sucker. The DOJ is taking tens of billions of dollars from bondholders and stockholders, and engaging in an arbitrary wealth transfer to homeowners who benefited from buying larger houses than they could afford, regardless of whether they are victims of allegedly deceptive practices in foreclosures (most of which aren't actually deceptive). [Furchtgott-Roth]

As abusive as the mortgage settlement is, it's better than the abusive and counterproductive litigation that led to it in the first place.

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

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