DFS Force-Placed Insurance Legislation is a Joke

By Brian Penny

"As long as they look good when they be doin' bad;/Then the separation from the truth is getting' vast - fast." - Lupe Fiasco, "Strange Fruition"

NEW YORK ( MainStreet)--I saw Force-Placed Insurance, the practice where banks force mortgage borrowers to have insurance, bubbling in the media again toward the end of March, but I was busy with my van renovation, yoga, and a few other projects I'm working on. Last night I finally had a moment to read what the commotion is all about. I chuckled for a moment as I read about how the New York Department of Financial Services slapped Assurant (AIZ) with a $14 million "blow" of a fine. There was a time I applauded the NY DFS. I looked up to it way before it was cool (and for the record, I was a hipster way before it was cool too), but if you ask me, $14 million is hardly even a slap on the wrist.

Keep in mind the NY DFS is run by Benjamin Lawsky. Last year people acted like Lawsky was the new Harvey Dent on Wall Street when he fined the British bank Standard Charter $340M for allegedly laundering $250 billion of Iranian money. I did some quick math:

Force-Placed Insurance Profits = ~$45 Billion @$5B per year since 2007 (and going back to 1994)

Around 1996, I got caught stealing a $2.50 X-Men Cyclops action figure from Walmart (WMT). I was fined $102.50, didn't get to keep the action figure, and got 60 days of probation, during which I had to submit to random drug tests, write an essay about why shoplifting is wrong and serve 16 hours of community service.

Ignoring the fact that I'm the only one who didn't get to keep what he stole (which I'm not bitter about in the least) and focusing only on the numbers, here's a breakdown of the crime/punishment ratio:

Crime |Fine |Crime/Fine
  • Standard Charter: $250B | $340 | 0.14%
  • Force-Placed Insurance: $45B | $14< | 0.03%
  • Brian Penny: $2.50 | $102.50 | 4100%

At this point I feel the need to point out that I'm not a professional accountant or a renowned economist. I'm not some sort of Will Hunting level math genius either. I didn't attend MIT and never saw a need to progress beyond calc I. I see a few problems with this chart though.

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