But they had to limit the priciple write-downs somehow. The vast majority of mortgages are current... so if you allowed writedowns on current mortgages, BofA would go bankrupt.

I think its fair. The banks were clearly predatory and it will help the economy as Krugman claims.

National Mortgage Settlement: States, Big Banks Reach $25 Billion Deal -Huff Post

The U.S. government announced Thursday a $25 billion settlement with five of the nation's largest banks over charges of systemic and widespread mortgage fraud, in what is being billed as the largest-ever deal on such charges.

The settlement could potentially help more than 1 million struggling homeowners, according to government officials. It is the largest multi-state agreement since the nationwide tobacco settlements in 1998.

Though the deal does offer some money -- up to $2,000 -- for those who lost their homes during the housing bust, its primary thrust is forward-looking, offering partial loan forgiveness or "principal reduction," to struggling homeowners. More details on the agreement can be found at this government website.

"[The deal] benefits struggling homeowners now, not some time in the future when the help they need may be too late," said Bob Ryan, a senior official at the Department of Justice in a call on Thursday morning.

Officials were careful to note that the deal does not end the government's investigation into the housing bust.