U.S Banks and Government agree to a $25 Billion Settlement

In a landmark agreement, five major US banks, State and Federal Governments made a deal for $25 billion over foreclosure abuses. The five banks namely Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup Inc and Ally Financial Inc will now reduce loans for over 1 Million households and will also send $2,000 checks to about 750,000 households that were foreclosed improperly.

Such a huge deal involving one industry has not happened since the 1988 multi-state tobacco deal. Out of the 50 states, 49 of them agreed to the deal amicably except Oklahoma. They came to an agreement on their own.

The deal comes at a crucial time, when the President is seeking re-election and the deal could act in his favor. Especially, the settlement in the public eye appears to be strict action taken by the Government on banks that have rarely been questioned before. What the deal will also do is to try to put the housing sector back on its feet. At this moment it appears to be the biggest weak-link in the economy. The depreciation value of homes is about 33% from 2006 and many homeowners owe more money than their houses are worth.

 

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