Editorial: Settlement doesn't settle it

Bank of America's agreement to pay $8.5 billion to investors who lost money on its mortgage securities isn't small potatoes. But it's still chump change against the costly disaster of the financial crisis caused in large part by America's big banks.

Sure, this is the biggest such settlement yet, and will assuage some of the hurt suffered by those who bought bundled mortgages that turned out to be riskier than they looked. Most of the damage flowed from the bank's Countrywide Financial unit, the subprime mortgage outfit it rashly acquired in 2008.

Yet large as it is, the settlement pales next to the harm that resulted from the near-meltdown of our financial system. That crisis, made of too many bad mortgages packaged into booby-trapped securities, spawned a brutal recession, costly taxpayer bailouts, large government deficits and persistently high unemployment.

The settlement also pales against investor losses, since it amounts to 2 cents on the dollar of original principal in the bond deals it covers.

The financial crisis was a catastrophe from which the world has yet to recover. And despite evidence of widespread mortgage fraud, to this day hardly anyone has been prosecuted.

The financial institutions that were at fault do face further civil penalties. State attorneys general were reportedly asking $17 billion in talks with the big banks, who were offering $5 billion.

Those are large sums. But they won't go very far to make the rest of us whole. hN