Cash-Starved States Look To Foreclosure Settlements For Relief
Missouri is set to become the second state to divert millions of dollars in funds from the mortgage fraud settlement between state attorneys general and the nation’s largest banks to help balance the state budget. Last week Wisconsin Gov. Scott Walker (R) announced the same thing.
But unlike Wisconsin, Missouri elected a Democrat Governor and Attorney General. Missouri Gov. Jay Nixon and Attorney General Chris Koster want the money that is supposed to go to consumer protection relief to go to higher education spending.
The details of the settlement are still being hammered out, but in principle the money recovered in settlement is supposed to be used by states to “help fund consumer protection and state foreclosure protection efforts”. The fact that both a Republican administration and a Democratic administration are pouncing on this infusion of cash tells us quite a bit about both the settlement and the state of our states.
Our states are in critical need of cash. The instability of low corporate tax burdens, wage stagnation and slashing support for public services has almost overwhelmed completely state government. In fact, states are so desperate for cash that even Democratic administrations that pushed the mortgage fraud investigations and claims are grabbing at it the first chance they get. If this doesn’t add to the compelling argument for tax reform I don’t know what else would.
It’s not clear yet that Missouri and Wisconsin actually have the ability to do what their governors propose. But if they do what does that say about the settlement? We already know it’s woefully inadequate in terms of ameliorating the financial impact of the financial fraud perpetrated by the big banks. If there’s no provision that guarantees the settlement funds go to the victims as restitution and towards consumer protection efforts then the entire exercise was meaningless.
Photo from tracy o via flickr.