Where did the money go from all those mortgage settlements? Mostly the government.

Image courtesy of DollarPhotoClub.com
Image courtesy of DollarPhotoClub.com

Yes, the majority of the cash from those multi-billion dollar settlements was kept by the federal government.

The Wall Street Journal wonders Big Banks Paid $110 Billion in Mortgage-Related Fines. Where Did the Money Go?

The reporters researched the 30 largest settlements, tracking down the disposition of all the dollars they could find. The discovered minimal information of how the federal government spent its take.

Here is my summary of their numbers. The total haul is $110B.

Of note is that most of the money divvied out to Fannie, Freddie, their regulator, and other housing agencies went back to the US Treasury. I’ll guess on the transfer amount from Fannie and Freddie to the Treasury since the WSJ article says Treasury wound up with about $49B.

Here’s my chart of their numbers:


 initial  transfer  total  percent
 Fannie Freddie FHFA       38.99    (34.5)         4.49 4.1%
 Treasury       14.49      34.5       48.99 44.6%
 other feds agencies         4.11         4.11 3.7%
 states         5.35         5.35 4.9%
 subtotal, gov’n take       62.94            –       62.94 57.3%
 consumer relief      44.68       44.68 40.6%
 unknown         1.18         1.18 1.1%
 other         1.16         1.16 1.1%
 non-government       47.02            –       47.02 42.8%
 Total penalties     109.96            –     109.96 100.1%


A few observations. Note that government agencies combined kept 57% of the take, with $49B (45%) going to the Treasury.

Federal agencies combined kept 52% with states getting 5% to spend as they wish. That money, based on what little info the WSJ reporters could find, is characterized as a slush fund by one quoted observer.

Only about 41% of the $110B went for consumer relief.

Feds share of the take in terms of DoJ annual budget.

Let’s look at the fed’s share of the fines in relation to budget.

The budget for the entire US Department of Justice for 2017 is $28.7B.

It took several years of effort, but the mortgage related settlements raked in $49B to the Treasury, which represents 1.7 years of the budget for the entire DoJ.

Of course, consumers (or consumer advocates) only got $45B.

Four or five years effort by a small portion of the DoJ staff covered the entire agency’s budget for a year and a half. Not a bad haul.

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