$26 billion foreclosure abuse settlement A record agreement with big banks is only a slap on the wrist, say some experts.'Too small to really help'

After months of wrangling, the long-awaited foreclosure settlement between the government and the banks appears to be at hand.

A $26 billion settlement was announced Thursday morning between the federal government, state attorneys general and the five biggest banks in the mortgage market: Ally Financial (the old GMAC), Bank of America, Wells Fargo, JP Morgan and Citigroup. (Editor's note: An earlier version incorrectly identified Ally Financial as being the old GE Capital.)

The settlement is being hailed as the biggest multi-state settlement since the 1998 tobacco agreement. But as Henry and I note in the accompanying video, the settlement is too small to really help the housing market, or even do much for individual victims of fraud and abuse. The deal may, in fact,hurt housing by sending a message to people who've stayed current on their mortgages thatirresponsible behavior is what gets rewarded in America. That, presumably, is not the intention of policymakers but the "moral hazard" fallout from the settlement. More Americans may "walk away" from uneconomic loans, which will put additional pressure on local housing markets.

Furthermore, several experts note that for all the rhetoric about punishing corporate crimes and helping victims of abuse, the banks have once again gotten away with a slap on the wrist and may end up benefiting most of all from the settlement.

According to The Wall Street Journal, the settlement will be broken down as follows:

$5 billion in cash payments, including $1.5 billion to borrowers who were wrongly or illegally foreclosed on between September 2008 and December 2011. Borrowers could receive up to $2,000, depending on the number filing claims.

$20 billion in "credits" the banks will receive for principal write-downs and other aid to homeowners at risk of default, up to $20,000 per. This tally includes $3 billion for refinancing of mortgages currently under water.

(Yes, I know 20 + 5 = 25, not 26. It's unclear what the "extra" $1 billion will be earmarked for as details are still emerging on the plan.)

A Drop in the Bucket

Now, $26 billion is a lot of money but it's a drop in the bucket compared with the trillions of dollars of household wealth that's been lost since the bursting of the credit bubble in 2008. Furthermore, $2,000 is a small price to pay to homeowners who lost their homes in illegal foreclosures. The $20,000 mortgage modification is great, except the average deficit for underwater mortgages in America is $50,000.

In addition, the $20 billion isn't coming out of the banks' pockets; it's coming from investors and, ultimately, taxpayers.

"The mortgage principal write-downs are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401 (k)s," writes Yves Smith at Naked Capitalism. "That $20 billion actually makes bank second liens sounder, so this deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public." (See: Obama's Refi Plan Is Another Bank Bailout, Stockman Says: "The Worst Kind of Crony Socialism")

Meanwhile, several Fed watchers believe the central bank is gearing up for another round of quantitative easing that will focus on (wait for it) mortgage-backed securities. If QE3 is focused on MBS, it will further ease pressure on bank balance sheets and make any hit from modifications easier to digest.

Every state AG, with the exception of Oklahoma, has reportedly agreed to the settlement. One housing expert speculates key holdouts such as New York Eric Schneiderman and California's Kamala Harris agreed to the settlement in return for promises that the banks aren't being completely left off the hook.

During the State of the Union address last month, President Obama called for a new financial crimes unit to pursue mortgage-related fraud.

Not coincidentally, the SEC is now reportedly stepping up its investigations of illegal marketing and selling of mortgage-backed securities during the boom. The Journal reports Ally, Bank of America, Citigroup, Goldman Sachs and Deutsche Bank are among the firms being examined in the civil investigation.

Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com

Iran to unveil 'big new' nuke achievements President Mahmoud Ahmadinejad promises an announcement in the next few days.Says negotiations possible

TEHRAN, Iran (AP) — Iran will soon unveil "big new" nuclear achievements, President Mahmoud Ahmadinejad said Saturday while reiterating Tehran's readiness to revive talks with the West over the country's controversial nuclear program.

Ahmadinejad spoke at a rally in Tehran as tens of thousands of Iranians marked the 33rd anniversary of the Islamic Revolution that toppled the pro-Western monarchy and brought Islamic clerics to power.

Ahmadinejad did not elaborate on the upcoming announcement but insisted Iran would never give up its uranium enrichment, a process that makes material for reactors as well as weapons.

The West suspects Iran's nuclear program is aimed at producing atomic weapons, a charge Tehran denies, insisting it's geared for peaceful purposes only, such as energy production.

Four rounds of U.N. sanctions and recent tough financial penalties by the U.S. and the European Union have failed to get Iran to halt aspects of its atomic work that could provide a possible pathway to weapons production.

"Within the next few days the world will witness the inauguration of several big new achievements in the nuclear field," Ahmadinejad told the crowd in Tehran's famous Azadi, or Freedom, square.

Iran has said it is forced to manufacture nuclear fuel rods, which provide fuel for reactors, on its own since international sanctions ban it from buying them on foreign markets. In January, Iran said it had produced its first such fuel rod.

Apart from progress on the rods, the upcoming announcement could pertain to Iran's underground enrichment facility at Fordo or upgraded centrifuges, which are expected to be installed at the facility in the central town of Natanz. Iran has also said it would inaugurate the Russian-built nuclear power plant in the southern port of Bushehr in 2012.

Iran's unchecked pursuit of the nuclear program scuttled negotiations a year ago but Iranian officials last month proposed a return to the talks with the five permanent U.N. Security Council members plus Germany.

"Iran is ready for talks within the framework of equality and justice," Ahmadinejad repeated on said Saturday but warned that Tehran "will never enter talks if enemies behave arrogantly."

In the past, Iran has angered Western officials by appearing to buy time through opening talks and weighing proposals even while pressing ahead with the nuclear program.

Washington recently levied new penalties aimed at limiting Iran's ability to sell oil, which accounts for 80 percent of its foreign revenue, while the European Union adopted its own toughest measures yet on Iran, including an oil embargo and freeze of the country's central bank assets.

Israel is worried Iran could be on the brink of an atomic bomb and many Israeli officials believe sanctions only give Tehran time to move its nuclear program underground, out of reach of Israeli military strikes. The U.S. and its allies argue that Israel should hold off on any military strike on Iranian nuclear facilities to allow more time for sanctions to work.

Before Ahmadinejad spoke Saturday, visiting Hamas prime minister from Gaza, Ismail Haniyeh, also addressed the crowd, congratulating Iranians on the 1979 anniversary and vowing that his militant Palestinian group would never recognize Iran's and Hamas' archenemy, Israel.

Also at the Tehran rally, Iran displayed a real-size model of the U.S. drone RQ-170 Sentinel, captured by Iran in December near the border with Afghanistan. Iran has touted the drone's capture as one of its successes against the West.

The state TV called the drone is a "symbol of power" of the Iranian armed forces "against the global arrogance" of the U.S.

The report broadcast footage of other rallies around Iran, saying millions participated in the anniversary celebrations, many under heavy snowfall.