The Obama administration will have a tough time keeping the banking system stable without angering the Americans people
For politicians in Washington, doing the right thing can be hard: sometimes it isn't even clear what is meant by "the right thing." Although elected representatives are put in power to carry out what their constituents want, what happens if policymakers know that the action being called for will result in more harm than good? Right now, the Obama administration finds itself in such a pickle. Will it choose anger to Americans and go easy on the banks despite their foreclosure misdeeds for the sake of financial stability?
The Foreclosuregate Dilemma
As you probably know, the state attorneys general in conjunction with the Justice Department have sued a number of big banks in conjunction with their allegedly flawed foreclosure practices. This case must end in a settlement, because it's a logistical nightmare to deal with each mortgage lawsuit separately. To create a settlement, however, the states, the federal government, and the banks all have to come to an agreement. That is proving to be a challenge.
At this point, the banks can be pretty sure they'll end up having to pay something. Obviously, they want to keep the amount of damages as small as possible. But perhaps more importantly, they want to ensure that their liability is limited as a part of the settlement: they don't want to face additional lawsuits in connection with these botched foreclosures.