Two weeks ago Bank of America reached a settlement with the U.S. Department of Justice to the tune of $16.65 billion for its role in selling faulty mortgages in the financial crisis. Such big-dollar settlements with large banks — including, in the past year, Citigroup and JPMorgan Chase — sound like harsh punishments but in actuality amount only to slaps on the wrist.

For one, those colossal dollar figures are rarely the actual prices the banks will pay. The real costs to these companies is muddled by tax deductions, unclear directives and accounting loopholes. The secretive negotiation process for settlements is also inconsistent with the civil and criminal process the average American faces.

It’s no wonder, then, that the nation has settlement fatigue; the feeling among consumer advocates and the public is that these agreements have negligible impact on the lives of homeowners affected by the financial crisis.

But the tactics used to sell homeowners loans that the Securities and Exchange Commission filing described as “toxic waste” should inspire outrage, not ennui. This settlement, the heftiest in U.S. history was, after all, brought on by intentional practices that ignored the needs of American consumers. Ironically, the Bank of America settlement and the many others like it largely ignore their needs too.

A Need for Transparency

The first problem with settlements is that they have both cash and noncash elements. The Bank of America settlement, for example, includes $7 billion in so-called consumer relief.

Noncash activities — say, making and modifying loans in hard-hit areas — allow the company to write off much of its settlement as tax deductible. One bank even reported a part of the required consumer relief as if it were a charitable donation. What’s worse, borrowers with modified loans, even through a settlement, may have to pay income tax on the forgiven mortgage debt, nullifying intended relief.

Settlements (and their aftermath) must be more transparent. Recent estimates from 2010 to 2013 show that the six biggest U.S. banks paid $86 billion in settlements with federal officials to remedy actions that led to the fiscal crisis. But where has all that money gone? It’s unclear, because the basic questions about how settlements work remain unanswered.

The cessation of the Independent Foreclosure Review, established to review individual cases for evidence of foreclosure abuses, illustrates the problem. That review process got shut down when 13 mortgage companies — including Bank of America and Wells Fargo — and federal regulators (in this case, the Federal Reserve and the Office of the Comptroller of the Currency) agreed to an $8.5 billion settlement.

Instead of a full review that could have tailored relief to a borrower’s individual circumstances and helped repair damaged credit reports, victims of wrongful foreclosure got pennies.

Regulators never truly explained how they moved to settle, how they decided on $8.5 billion or who got how much relief. During a subcommittee hearing of the Senate Banking Committee last year, Sen. Elizabeth Warren grilled representatives from both agencies, who tellingly turned to legalese to avoid answering such questions.

There is no excuse for how ineffective these settlements have been for consumers still on the mend.

Similarly, consumers need clarity on how public agencies that receive funds, such as the Department of Justice (DOJ) and state attorneys general, spend the money.

For instance, a March 2014 audit of the DOJ’s efforts to address mortgage fraud found that it grossly misreported case outcomes. Before the audit, the DOJ publicly reported that the Financial Fraud Enforcement Task Force charged 503 criminal defendants whose actions were tied to $1 billion in total losses for distressed homeowners.

But the audit found that only 107 alleged offenders were actually charged and homeowners’ total losses were $95 million. The report made it clear that the DOJ desperately needs better methods for requesting, collecting and reviewing data.

Making matters worse, restitution for consumers consistently appears to be an afterthought. Decisions on who gets relief, outreach to inform consumers about potential relief and execution of funds disbursement are haphazard, with no public verification of dollars received by consumers.

Settlement after settlement shows similar problems, but the botched and aborted Independent Foreclosure Review illustrates the worst cases of this: three extended deadlines because of poor outreach, more money spent on independent consultants conducting initial reviews than on affected homeowners and bounced restitution checks from the government. What could have been a good and useful process was instead haphazard and largely unsuccessful.

Changing the Status Quo

It has been almost a decade since the start of the crisis. Short of the Dodd-Frank Act (which has not been fully implemented), federal agencies have done little to make consumers whole again. Platitudes about fining big banks won’t fix the problem. And they most certainly won’t restore the public’s confidence in our regulatory system.

To be fair, agencies such as the DOJ have uncovered and started to rectify serious problems that caused the crisis — helping expose lenders that steered borrowers into high-cost, subprime loans on the basis of their race, not their financial capability; streamlining how companies handle delinquent borrowers; getting some dollars, though not enough, to borrowers harmed by poor practices. And many observers note that some money to consumers is better than none.

Even so, there is no excuse for how ineffective these settlements have been for consumers still on the mend. We need transparency and accountability, and we need agencies to prioritize the worst-hit homeowners.

Federal negotiators, for their part, can take control by putting language into settlements that prohibits banks from writing off incurred fees and protecting borrowers from being taxed on their mortgage relief. In addition, Congress can protect borrowers from paying taxes on canceled or forgiven debts by re-extending mortgage debt forgiveness. Sadly, the Expire Act, which extends this provision, is deadlocked because of polarization in Congress, with little sign that it will move forward.

In his recent book “The Divide: American Injustice in the Age of the Wealth Gap,” Matt Taibbi writes about how big dollars buy big lawyers who negotiate big settlements for big companies, while the little guy — the consumer — gets hung out to dry.

Well, that status quo isn’t cutting it. Federal agencies must rethink their strategies and put the American people first. Perhaps then consumers will pay closer attention to the big settlements and their stake in the awards.

*

MEANWHILE, Renee Lewis reported for Al Jazeera America that Halliburton agreed this week to a $1.1 billion settlement for its role in the Gulf oil spill, absolving the company of further punitive damages even if its "gross negligence" is found to have contributed to the disaster:

The U.S. District Court for the Eastern District of Louisiana must still approve the settlement, Halliburton said. The amount will be paid in three installments over the next two years, and will be kept in a trust until all appeals are resolved, the company said.

In April 2010, an explosion and blowout occurred at BP’s Macondo well, killing 11 workers and spilling millions of barrels of oil for months after the disaster. The full economic and environmental impact of the spill remains unknown.

Under the settlement, Halliburton is protected from further punitive damages, if the court rules in the future that the company had been negligent for its role in the blowout, said Mark McCollum, the company's chief financial officer.

If a federal judge found Halliburton’s gross negligence to be a major factor in the blowout, plaintiffs could choose to hold out for a larger settlement. In that case, Halliburton would most likely appeal the decision, which would further delay payments.

Halliburton provided cementing services for BP’s well, and placed the “centralizers” responsible for stabilizing the drilled hole during cementing. The company said the spill was BP's fault because it had decided to use only six centralizers, which Halliburton said was an effort by BP to save “time and money.”

The companies sued each other over which was responsible in 2011, and in October 2013 a former Halliburton manager, Anthony Badalamenti, plead guilty to accusations that he destroyed evidence related to the spill. Badalamenti, who was given one year of probation, said it was discovered after the spill that the use of fewer centralizers on the well made little difference, and he ordered the program manager to destroy the results of the simulation.

BP has so far paid about $28 billion for its part in the blow out.

April marked the spill’s fourth anniversary, and the National Wildlife Federation (NWF) released a report cataloging persistent health and environmental effects of the incident.

More than 8,000 birds, sea turtles, and marine mammals were injured or killed in the months following the disaster, according to the NWF report.

The report called special attention to the effects of controversial dispersants used to clean up the spill. Two million gallons of chemical dispersants were used after the blow out, according to the NWF, which merely cause oil to attach to the powder and sink to the bottom of the Gulf.

That’s why oil continues to wash up on wetlands and beaches and continues to contaminate the food chain in the Gulf region, NWF said.

Originally published by Al Jazeera America