The real foreclosure mess: Lack of accountability for banks

[mahatmakanejeeves]

I like Allan Sloan. His column is always worth reading. This was already posted at Americablog, but in case you don't read that blog, here's the column.

The real foreclosure mess: Lack of accountability for banks

By Allan Sloan
Fortune
Wednesday, October 27, 2010; 12:27 AM

The biggest danger to the U.S. capitalist system doesn't come from communists or community activists or left-wing academics. It comes from some of the nation's biggest financial institutions. These companies, which helped create the financial meltdown that touched off the Great Recession, have found yet another way to undermine the public's faith in capitalism and markets: the foreclosure fiasco.
....

People in this country may be uninformed or misinformed, but they're not stupid. They'll catch on to the message soon, if they haven't already: There's one deal for average people but a far better deal for the really big and powerful.

[dkf]

1. Well either there is accountability for not paying back loans or for sloppy paperwork.

Problem is that it is rare to find a foreclosure where both sides got it right.

[ljm2002]

3. And by "sloppy paperwork"...

...are you referring to the documented cases where banks and foreclosure mills notarized documents without going through the technicality of actually having a notary to do the notarizing? Are you referring to the documented cases where banks and mortgage companies falsified employment records, tax forms etc. just the right amount to make the borrower qualified for their mortgage -- often without any knowledge on the part of the borrower? Are you referring to the collusion between banks and other financial institutions where they bundled mortgages, sliced and diced them and misrepresented them to buyers both foreign and domestic? Are you referring to the MERS system, that was put together in order to facilitate the wheeling and dealing, in contradiction of over a hundred years of real estate law at the state level where a signed note is a required part of the package when a mortgage is transferred?

Yeah, but it's those damned deadbeat borrowers who are all at fault. The system is rigged, many mortgages were sold in full knowledge that they would almost certainly default, and all in pursuit of the almighty dollar by the institutions who held all the cards. But you know, it's all those pesky borrowers' fault.

Right.

[dkf]

4. Except the other side probably isn't a bank but a pension fund.

The banks were just the middleman and the scam was on the investors.

Right now the pension system is severely underfunded and if the funding isn't there we will either see higher taxes to pay out public workers pensions, or decreased benefits.

[ljm2002]

5. I see...

...so in your moral universe, we are to follow the letter of the law only if it does not affect pension funds adversely. So the way it works out is, it's the letter of the law for you and me, bub, but not for the banksters because their wrongdoing was cleverly intertwined with the financial structures of the whole society. So now they can claim "you can't do anything to unravel this -- why, it might hurt Grandma!"

But see, here's the thing. When the whole damned edifice is rotten, it hurts Grandma and all the rest of us already. Well, except for the super rich who seem to get on just fine, thank you, especially when they never have to account for their ill-gotten gains.

I'll take my chances on the rule of law being applied evenly to EVERYONE, thank you very much. Pension funds don't seem to be all that safe these days anyway. Seems every time a good part of the work force reaches retirement age in companies with pensions, the company conveniently declares bankruptcy and the first thing to go is the pensions. Yes I know you mentioned public pension funds, so you could bring up another bugaboo of potentially higher taxes. Yawn.

I'm totally through listening to scare tactics like "Oooh, if you hold the banksters accountable, then someone might get hurt!" Well guess what, many people have already been hurt by the system we have in place. They just keep tightening the screws, and telling us if we squawk that it would be worse if we got our way. Well you know what? Let's try it another way for awhile, this way ain't working.

[dkf]

6. The point is that unless the investors recover from the banks then the victims are

Still the public. Just thinking that the banks will eat it is completely unrealistic. Even if you did sock it to the banks and cause them all to fail the FDIC will have to pick up the tab. Any way you look at it someone gets screwed and some Government entity is on the line.

[ljm2002]

7. "Any way you look at it someone gets screwed"...

...why yes, that's exactly it.

In fact, many have already been screwed.

Time to find a way for a reset.

Jubilee year. Or, renegotiate all mortgages based on the current market. Or, just renegotiate all mortgages where the paperwork is not in order - that ought to cover about 90% of them, or so it seems.

Our society cannot function when there is such an obvious unfair situation that is built in. It just cannot. People without jobs, people thrown out of their homes, documented crimes by the banks and mortgage companies (for starters), yet none of them has been punished.

Remember: the S&L crisis years ago was on a much smaller scale than this current financial meltdown. There were over 1,000 successful prosecutions in the S&L crisis and many of those did jail time. To date, no one has gone to jail for the massive mortgage fraud that occurred. I believe I did hear of a few prosecutions started against people who falsified records, don't remember what state they were in. But it is paltry compared to the situation at hand.

I guess where we differ most is this: you say someone will get screwed. I say many have already been screwed, so when it comes to holding the bastards accountable, damn the torpedoes and full speed ahead.

[dkf]

8. And cut all the pensions and worker benefits?

That is probably the realistic trade off here.

[ljm2002]

9. Truth is truth, justice is justice...

...and right now the system is corrupt from top to bottom. The structures are teetering because the foundations are rotten. It needs to be revamped.

You can talk all you want about your idea of what is "realistic" and about who will be hurt. You claim that any justice for the banksters will mean workers' pensions get hurt -- I don't believe that is necessarily the case, but I must ask you: do we base our laws on pragmatic considerations like this? Would we decline to prosecute a murderer because he is rich and powerful and if he goes down his employees are all out of a job?

C'mon, at some point you have to stand on principles. These people have committed massive FRAUD and have already harmed many, yet so far they have gotten away with it. The FRAUD they committed was already against existing laws and only a handful to date have had cases opened against them. As far as the paperwork thing -- you know, those pesky state laws that require an actual signed document in order to transfer a real estate title, those laws that have served us well for over 100 years now, those laws that made real estate in this country a solid prospect that was attractive to investors in the first place -- Congress already tried to paper it over and legalize these practices ex post facto, and the only reason Obama gave it the old pocket veto is because people got wind of it. But no amount of papering over will cover the stench, and until we pop the boil we will continue to live with the infection.

[DirkGently]

2. They're not too big to fail. They're too big to TRUST. Big, sloppy, careless, greedy giants.