The Justice Department proudly announced a multimillion dollar settlement of a suit against Countrywide for discriminating against minorities when originating mortgages. The comments that follow this article suggest that justice was not served by this settlement.
Countrywide was engaged in predatory behavior. Its brokers were given the freedom to take advantage of poorly educated customers. It is a classic example of market failure under conditions of asymmetric information. Predatory behavior of this sort was common practice during the housing bubble. It started with mortgage origination and it continued as the mortgages were packaged into securities and sold to customers who knew less about the products than the investment banks that sold them. In other words, predation became common practice within the banking system. This makes the idea of consumer sovereignty a joke. It also demonstrates what happens when those who benefit from predation are not punished for their behavior. The management of Countrywide, Washington Mutual, and other mortgage originators walked away with millions and they were punished by fines that were largely paid for by the corporations that they ruined. The same can be said for the investment bankers who either failed to manage their businesses or were actively involved in encouraging predatory behavior. Justice has not been served and the public has lost confidence in our system of justice.