Foreclosure deal only a beginning

If the $25 billion deal struck Thursday by five major banks, 49 states and the federal government is viewed as no more than a down payment on the financial sector’s clear responsibility to clean up the mess that it made of the American housing market, and thus of the whole economy, then it is good news.

But if the big banks think they are now in the clear because of a program to help maybe a million homeowners save their homes from foreclosure, or receive some small recompense for properties they have already lost, often under dubious circumstances, it should be up to the various attorneys general who signed off on this deal to disabuse them of that notion.

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Utah Attorney General Mark Shurtleff was among those offering hope that the banks have not yet heard the end of the clamor for justice. He stressed Thursday that the deal would end some legal actions filed or contemplated by various agencies. But it would not let the banks off the hook for other criminal probes and individual damage suits filed by those who have lost, or are near losing, their homes.

And Shurtleff has a point when he says that there is a balance to be struck. Come down too lightly on the banks, and there is no incentive for them to clean up their act or avoid another economy-destroying round of foolish gambling on housing prices and government-funded bailouts. Come down too strong, and the banks might collapse, which would be even worse for the economy and for the taxpayers.

But even with an agreement to pony up $25 billion in principal write-downs, interest refinances and settlements, we are still a very long way from threatening the five major banks — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — with insolvency. Or even with justice.

Compared to the $700 billion value of all the underwater mortgages in America, and considering that those who have already lost their homes to mass foreclosures by institutions that have admitted to sloppy and illegal practices may stand to gain a puny $2,000 each, the new move is a small step forward.

The blame for the housing mess may be shared by individual buyers whose eyes were larger than their wallets, and by government agencies and operations that stood by in the face of widespread foolishness.

But the responsibility lies with the banks that created, marketed — and expected the taxpayers to rescue them from — a global house of financial cards.

The titans of this industry still owe the American people a lot more for the crisis they created. Utah’s attorney general is among those who must never let them forget it.