Category: business ethics

Could A Foreclosure Freeze Damage The Housing Market?

On By southwerkIn business ethics, Capitalism, ethics, Philosophy of Business, Teaching, White Collar Crime

Well, of course, it will. Massive wrong doing has consequences for the innocent. That is the nature of illegal acts. That is the nature of speculation and greed. People without fault are injured.

So, we have competing values here. Should the health of the economy and the suffering of the innocent be a bar on prosecuting thousands upon thousands of mortgages done outside the rules of the law.

I’m going to come down on the side of the rule of law.

I teach business ethics. You can’t have business ethics just through teaching and exhortation. They have to be backed up by penalties. If the suffering of the innocent is a bar to prosecution, it sends a clear signal that cutting corners, skirting the law, deliberately disobeying the law, have little or no consequences as long as the perpetrators can point at economic hostages and say, “Oh, but we can’t harm them.”

You cannot avoid prosecuting the guilty in the business community over and over again without them getting the message that there are no consequences. They will realize (or have realized) that the law does not apply to them.

Once they know this, what will happen to the rest of us?

Here’s the CBS News Story – Beware it has a commercial.

James Pilant

A View On The Mortgage Fiasco From A Georgia Professor

On By southwerkIn business ethics, Capitalism, ethics, White Collar Crime

What’s the academic view point on this disaster you might ask. Well, one sign is this professor’s comments from the University of Georgia. It’s a brief comment and there are no commercials. Enjoy –

James Pilant

Narcissistic Mindset in Financial Institutions (via Sonia Jaspal’s RiskBoard)

On By southwerkIn business ethics, Capitalism, ethics, Philosophy of Business1 Comment

I exchanged e-mails with Alain Sherter and asked him what he thought about the amazing sense of entitlement among Wall Street executives. Although, he replied very politely and tactfully, there was a certain element of “What planet have you been on?” And he was right, I should have picked up on it a long time ago. Once I did, I encountered more and more examples of this phenomenon. It was astonishing. These individuals who had every advantage from birth could swear on a Bible that every last atom of their success had been earned through their hard labor. They knew that they were the important producers of value in this society and flew in unimaginable higher intellectual circles than the poor ingrates beneath them. They know that everyone who is not in their class is lazy and undeserving. They know that any, down to the tiniest amount, of taxation is a blow to their productive capability, totally unfair, and an unearned charity to the great mass of lazy, unmotivated citizenry.

Sonia Jaspal blogs on this mindset. It’s a fine article. She writes a blog from an extremely well educated background, not an assumed or pretentious academic style, but an educated approach as hard as stone. You know that her evidence is strong and her facts correct.

I recommend the article to your attention.

James Pilant

Financial institutions are again grabbing headlines for the wrong reasons. This time it is because of the foreclosure of mortgages without adequate due diligence.  As Senator Robert Menendez wrote to the heads of JPMorgan Chase and Co, Bank of America Corp and Ally Financial Inc- “It is simply inexcusable that proper oversight proceedings were not in place, especially when dealing with matters as monumental as the seizure of a family’s home.”  Wh … Read More

via Sonia Jaspal's RiskBoard

Does History Repeat Itself – The Stock Market Crash?

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure, White Collar Crime

“The past is prologue?” Are we in the same place that America was in during the first years of the Depression? I worry that this economic downturn is just the beginning of long term destabilization of the economy.

(You should probably avoid my blog if you want to put a happy face on the economic situations because I find it hard to find things just to be content about.)

I found a wonderful set of history films about the early days of the Great Depression. They provide a lot of insight into how people thought and reacted to the events as they unfolded day by day. We look at what people were saying, what they were reading, what music they were listening to. We can wonder if we wouldn’t have done the same things. It’s a better way to understand history than the summaries in textbooks.

If you listen to the incredible confidence that the moneyed and political class had in the economy and the sureness they had in an immediate recovery, you have to wonder about those in out system today, who say we’ve turned the corner.

We have not.

Part 1 –

Part 2 –

Part 3 –


Part 4 –

Part 5 –

I want to be wrong about all this. I want the economy to thrive, everyone to have a job, and as much as possible for people to become prosperous.

We’ll see.

James Pilant

President Obama Is Lagging Behind Public Opinion

On By southwerkIn business ethics, Capitalism, ethics, Government Failure, Philosophy of Business, White Collar Crime

I’ve been saying this for several days. The public, the states, the courts, are all moving toward a consensus that a foreclosure freeze is necessary. The President does not think so and he has sent his minions to be sure we understand his position.

Andrew Leonard writing in Salon, an article entitled “Obama’s foreclosure nightmare,” describes the situation in terms very similar to mine.

Once again, the President lines up with the financial industry and the banks against the interest of middle class Americans.

Drawing on Leonard’s article and adding my own spin, the situation is like this. Now, generally speaking, I do not waste my time on the Wall Street Journal Editorial Page, but have heard a rumor that their take on this situation is that all this stuff about not having the proper documents is just a matter of procedure and is really not something to get that excited about.

This is the United States. In this country you cannot transfer any land whatsoever without a written contract, that’s LAW 101, the statute of frauds. If you can’t produce your paperwork, you don’t get the property. Why? Because in Western Civilization, land has been considered the primary measure of wealth and status for hundreds of years. Therefore, the law was made to protect those interests.

How come the banks don’t have good records of who owns the property? Well, that has to do with the enormous speculation(casino capitalism) of the latter part of this decade. The great wall street investment houses were buying and packaging mortgages into packages of securities. But if they followed careful procedures they wouldn’t have had as much as they wanted. So, they “cut some corners,” “skipped a few steps,” “overlooked a rule here or there,” to get those mortgages as quickly as possible. What was the result? Incomplete paperwork, missing documents, and general confusion were the result of that speculative era. So, the banks had a problem with foreclosures. If they followed proper procedures they were hit with a double whammy. First, there was no way they could process the number of mortgages they wanted foreclosed without hiring a lot more staff and spending a lot more time doing the work right. Second, if they examined the documents carefully they would run across all the problems bequeathed them by the previous financial speculators. So, they solved both problems. They processed the mortgages without looking at them. It was an elegant solution. It was thrifty, cost effective almost beyond belief, and not legal.

I am outraged. I’m not the only one. The general public is only at the edge of this issue. It’s only been running hot in the media for almost two weeks. This issue has built up power in a politically brief period of time. But it’s not hard to tell the direction that public opinion is going. On one side we have banks refusing to obey the rules, while on the other we have story after story of homeowners tossed from their homes without legal justification. How do you think it’s going to go? If this were a Western, who’s wearing the black hats and bushwhacking their enemies?

The President should declare a moratorium on mortgage foreclosures. It does not have to be a blanket ban. He could ban the ones where it is known that there have been problems with a provision to extend it to other firms if similar wrongdoing is found. That would be adequate. In my opinion, a full blanket ban is the smarter move politically but that’s really not important.

I know the President is worried that this will stall the recovery. Of course, if you follow my blog, you know that I believe this is a lull before more serious problems appear and not a recovery at all.

To the President I would say, “This nation can handle a steeper economic downturn better than the continued wrong doing by some of the most important and most influential people in the financial industry. At some point, justice has to take priority over economics.”

I might add.

“Mr. President, I can feel the anger out there. How much more can people take? The basic facts appear to be out. The financial industry breaks the rules and knows that nothing will be done. The money will continue to flow. Their stock will go up. The bonuses will get bigger. The great mass of American citizens do not believe that if they did these things that they would be handled so gently and rewarded so thoroughly.”

“So, what’s it gonna’ be. Are you going to confirm to the great majority of Americans that there are two kinds of law, one for them and another for the foreclosure industry?”

“At what point, will you decide to enforce the law, seek out the guilty and bring them to justice?”

James Pilant

Robot Trading – Money Maker Or Formula For Disaster?

On By southwerkIn business ethics, Economic measurement, ethics, Philosophy of Business

I went to You Tube and ran the search, “robot trading.” I was looking for a journalistic take on the dangers of this kind of trading. I didn’t get it. There are innumerable sales pitches for just such trading mechanisms. I watched one and they are “exuberant.” They appear absolutely convinced that these things will make you rich. Apparently this is similar in the trading world to the “second coming.”

I found an actual news story by getting a link from a blog. I just couldn’t get one off You Tube. I have virtually never had difficulty finding an appropriate video for an economic comment. The sales pitches simply dominate the results of the search. I haven’t seen that before.

The CBS news program, Sixty Minutes, has a report on the subject. It is a daunting report on the implications of robot trading. It can be very dangerous to whole system. If one robot goes in one direction. It is possible that they will all go in that direction. You should hope that they are all buying because selling could be painful. I recommend you watch the program.

I warn you, there are commercials. However, the report is elegantly done and will maintain your interest.

Let me ask a question –

Is it ethical to use super computers to get a fraction of a second (sometimes, hundreds of a second or less) advantage over your competition?

I want you to understand that only a very few people can afford a “super” computer. Generally speaking, that is probably not you. If you, as a human, attempt to compete with one of these machines (and you’re not, you’re competing with dozens or hundreds of them), are you on a level playing field.

As a society, we might find the costs of this trading to be higher than the benefits, if one is willing to think of the interests of the nation as a whole, something currently not in fashion.

But it should be.

James Pilant

Mark Thoma – The Lessons Of The Economic Crisis Of 2008

On By southwerkIn business ethics, Capitalism, Government Failure, Teaching

Mark Thoma is a distinguished academic. His take on the vital lessons the banking collapse and the poorly executed bailout are similar to my own.

The overarching lesson in all of this is that getting government out of the way isn’t always the best path to prosperity. The crisis should have taught us that government has an essential role to play in preventing problems from occurring in the economy, and in correcting problems when they occur despite our attempts to prevent them. But, unfortunately, due to poorly executed policy, political posturing, obstructionism in Congress, and ineffective rebuttal from the administration, that’s not the lesson that has been learned.

He maintains a largely academic web page, which is worth a read. He also has a Facebook page which I recommend you join.

This is an example of his rhetoric.

This man has full sized lectures available on You Tube. He is an expert on econometrics, but don’t worry he is not always that high on academic difficulty when he speaks or writes.

Attorney General, Beau Biden, Of Delaware Calls For Foreclosure Stop

On By southwerkIn business ethics, ethics, Government Failure, Philosophy of Business, White Collar Crime

This is a Fox News item. Biden explains that as an Attorney General, his job is not to consider the economic impact of taking action against the mortgage foreclosure industry. His job is to make sure the banks follow the rules.

We’re not hearing this much. There is a duty on the part of public officials to enforce the law. These companies have failed to follow the rules for more than two years and they have caused real harm. They have abused the legal process and lied to the courts.

Here’s the video – I warn you that the Fox News people keep trying to get him to talk about the economic impact of taking on the banks. It becomes annoying after a while. To his credit Biden doesn’t give any ground.

Watch –

James Pilant

Mayor Of Lansing, Michigan Came Out For Moratorium In 2009!

On By southwerkIn business ethics, ethics, Government Failure, Philosophy of Business, White Collar Crime

On the Ed Show, the Mayor of Lansing, Michigan explains why he favors a foreclosure freeze. Well, fortune favors the brave. The mayor knew something was wrong and called it like he saw it. Kudos to the citizens of Lansing for electing a fighter!

He’s calling for a two year freeze!

Should President Obama Enforce The Law Against The Great Mortgage Companies?

On By southwerkIn business ethics, Capitalism, ethics, Government Failure, White Collar Crime

The banks will suffer if a moratorium is declared on foreclosures and this will cause economic problems that will filter down into the rest of the country making our recession worse. This is probably true.

If we penalize, punish these huge financial organizations for their violations of the law, we will also have economic problems very similar to those associated with a moratorium. Mortgage companies will have to slow down foreclosures reducing bank profits across the nation. If there are prosecutions, key players who understand the system and have repeatedly proved themselves moneymakers would be out of play and their vital skills unavailable to maintain bank profits at the current high level.

It is said that while the violations of the law were especially cruel to the occasional mortgage holder, generally speaking the process is sound and few were actually harmed. Their are no statistics bearing this out because mortgage companies did not look at (in fact, ignored) the records before they foreclosed. Nevertheless this is a common belief. And common beliefs are often true.

And while the courts were directly lied to on hundreds of thousands of occasions, these were purely procedural matters. In the vast majority of cases, nothing would have changed, the foreclosures would have taken place. Should we penalize the great financiers upon which this nation’s prosperity depends on for what is really a purely procedural violation? While obviously there is some moral failing in filing cases without any actual knowledge of the facts, the facts were generally routine.

Further, no large organizations were harmed. Without any large corporations or other large economic players damaged the recovery can proceed. Does it really matter that there were procedural irregularities in which only small economic units were harmed? Can this really be really worth actual prosecutions costing time and money? Can we afford to damage the reputations of the top figures in American finance during this period of slow growth and economic uncertainty?

Is it not reasonable to pass over this unpleasant episode with as little fanfare as possible, of course, having some review of some mortgages that have gone wrong? There was no intent to defraud these individuals. The only reason documents were processed without examination was to speed the process. Looking at the documents would not have allowed the firms to foreclose on tens of thousands of homes a month. Let me ask you, really, how can a mortgage company compete with other companies doing as little process as possible? Following the law would have cost billions of dollars and threatened the very existence of companies in compliance. Have some compassion! These companies employ tens of thousands of individuals whose salaries and expenditures go to support this economy.

Be reasonable. The law is merely a tool, sometimes to be raised (perhaps when there a bank robbery, you know a violent crime) but at other times to be laid aside. Sometimes the harm of enforcement is greater than that of justice.

Reasonable! When did that word become a tool for those contemptuous of the law.


When did threatening our economy with ruin become a successful strategy to avoid prosecution?

When did lying to the court become a routine matter? When did taking peoples’ home become so routine that when we don’t know whether they should have been taken or not, no one is supposed to care?

When did the importance of competition become so important that it overrode the needs of the nation’s people and simple justice?

Where is justice? Can it be found? Does it exist?

Here, listen to this fellow and his thoughts on the law –

Let reverence for the laws, be breathed by every American mother, to the lisping babe, that prattles on her lap — let it be taught in schools, in seminaries, and in colleges; let it be written in Primers, spelling books, and in Almanacs; — let it be preached from the pulpit, proclaimed in legislative halls, and enforced in courts of justice. And, in short, let it become the political religion of the nation; and let the old and the young, the rich and the poor, the grave and the gay, of all sexes and tongues, and colors and conditions, sacrifice unceasingly upon its altars.
–January 27, 1838 Lyceum Address

Let every American, every lover of liberty, every well wisher to his posterity, swear by the blood of the Revolution, never to violate in the least particular, the laws of the country; and never to tolerate their violation by others.
–January 27, 1838 Lyceum Address

That was Lincoln.

And then there was this guy –

“If the people cannot trust their government to do the job for which it exists – to protect them and to promote their common welfare – all else is lost.”

“In the absence of sound oversight,responsible businesses are forced to compete against unscrupulous and underhanded businesses, who are unencumbered by any restrictions on activities that might harm the environment, or take advantage of middle-class families, or threaten to bring down the entire financial system.”

We didn’t become the most prosperous country in the world just by rewarding greed and recklessness. We didn’t come this far by letting the special interests run wild. We didn’t do it just by gambling and chasing paper profits on Wall Street. We built this country by making things, by producing goods we could sell.

That guy was Barack Obama.

Where’s justice?

James Pilant