Category: Capitalism

“Foreclosure Fiasco”

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

I borrowed my title from an article series on CBS Moneywatch. I can’t improve on it. It covers eloquently and briefly the situation.

Here’s the lead paragraphs from the article –

After three years of terrible news about the housing market, you’d think it couldn’t get much worse. But over the past week, a whole new can of awful has opened up. It turns out that the banks who lent money with reckless abandon during the real estate bubble were just as incompetent on the way down as they had been on the way up. Big lenders and mortgage servicers have been forced to acknowledge that, as they rushed to foreclose on hundreds of thousands of properties, they didn’t always check to make sure that they actually held the mortgages.

In one case, a Florida man who had paid cash for house was foreclosed upon for defaulting on a loan he never took out. In other cases, mortgage documents have been forged. So-called “robo-signers” have been churning out affidavits without checking to see if they are true. In response, foreclosures are all but frozen in 23 states, House Speaker Nancy Pelosi has called for a federal investigation, and attorneys general around the country are seeking to halt foreclosures. One major title insurer has announced it won’t insure homes foreclosed upon by J.P. Morgan Chase. That may sound like a technicality, but if the trend spreads, it could send the housing market into a tailspin.

CBS provides a slide show to give you a quick overview of the crisis. I recommend it.

Do not read the comments on the CBS web site! Trust me. Life is too short for that kind of reading.

The CBS report is a seven parter. If you are interested in how this came about and what is likely to happen, it is the best thing at the moment. I’m sure as time goes by, we’re going to get some better stuff because we’ll have more information, but CBS was first and it’s a good job.

James Pilant

White House Has Supernatural Powers!

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

“White House doubts need to stop all home foreclosures” reads the headline. David Axelrod spinning the story like a top explains… well, let’s just let him tell us – from Yahoo News –

A top White House adviser questioned the need Sunday for a blanket stoppage of all home foreclosures, even as pressure grows on the Obama administration to do something about mounting evidence that banks have used inaccurate documents to evict homeowners.

“It is a serious problem,” said David Axelrod, who contended that the flawed paperwork is hurting the nation’s housing market as well as lending institutions. But he added, “I’m not sure about a national moratorium because there are in fact valid foreclosures that probably should go forward” because their documents are accurate.

Axelrod said the administration is pressing lenders to accelerate their reviews of foreclosures to determine which ones have flawed documentation.

“It’s a serious problem.” he says. I get that. So, since the story broke in the middle of last week you are dismissing a moratorium based on virtually no real information? Unless you, kind reader, think a giant national crisis, has run its course and everything is out on the table in the seven days since the story broke. If you don’t, you are with me in the disbelief column. Apparently the White House can see into the future and knows that no information will come out meriting action. I don’t know whether Axelrod has the “sight.” Perhaps, the White House has the super deluxe, limited edition, one of kind, ultimate ouija board. I hear it’s got a presidential seal on it.

But don’t worry, the White House has a plan. Let me run that line past you again – Axelrod said the administration is pressing lenders to accelerate their reviews of foreclosures to determine which ones have flawed documentation That’s right. They are going to go to the guys who lied to the court system roughly one million plus times and ask them to check their numbers. The people who have profited billions of dollars by cutting out those inconvenient legal requirements are gonna’ fix everything.

Fool me once, shame on you. Fool me twice, shame on me. – Maybe someone should send that in to our President?

“Hey, Mr. President, a massive wrong has been done to the American people. Send out the Attorney General! Mobilize the federal government, your regulators, your advisers, every friend you can muster! Let justice fall from Heaven like rain!”

“Oh? You can’t do that, Mr. President? Wouldn’t be prudent? Might upset the financial markets? That justice thing overrated anyway? Oh, I’m sorry I didn’t understand the burdens of your office. I’m sorry to bother you. Thanks for the engraved napkin.”

Yeah, everything going just fine.

James Pilant

Foreclosure Moratorium – Let’s Not Do Anything Rash?

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

Well, it’s begun. Editorialists, columnists, bloggers, all explaining why we must not have a moratorium. They further explain that most foreclosures were done correctly. Most of these homeowners had defaulted on their loans.

Now, poor stupid me, can’t help but wonder where you get your statistics on who should have been removed from the their home and was it justified. Those numbers aren’t public and since the mortgage companies didn’t look at these foreclosure records, they don’t know either. No one knows. But we are repeatedly assured the vast majority of home foreclosures were done properly.

I want to see some proof. I want some numbers. Taking the word of the mortgage companies on this issue doesn’t strike me as a particularly smart move.

We have been lied to, manipulated and played. I don’t like it.

Mortgage companies only had to assert to the courts that they had reviewed the necessary document. They did not have to proof knowledge in court because it was assumed that they knew the basic fast of the case. The lawyers for these firms affirmed that this was the case. They were lying. We don’t know if they owned the property. We don’t know if their numbers bear any passing resemblance to reality.

But the thing I’m curious about is that old Watergate question. Do you remember? Howard Baker asked it during the Watergate hearings. “What did the President know and when did he know it?”

Okay, I want to know. “What did the CEO’s and directors of the mortgage companies know and when did the know it?”

You can add. “Why didn’t they stop it.”

You see, the mortgage companies conduct is not legal. It is reckless behavior and unconscionable. You can get sued for this and put in jail for criminal acts associated with it. (Taking people’s homes when you don’t own them sounds remarkably like grand larceny, doesn’t it?)

Let’s get some justice!

James Pilant

Anectdotal Evidence Or Life In The Skycastle!

On By southwerkIn business ethics, Capitalism, ethics, Philosophy of Business, White Collar Crime4 Comments

You wake up in the morning hoping and praying that some justice will be meted out to the giant foreclosure industry for the crimes they have committed. In that hope is mixed the great sorrow for all the people who have suffered the loss of their homes and their cruel treatment.

But don’t worry, it’s all overblown. Oh, excuse me, it “has become a bit overblown in some tellings.“ You see, “there’s little evidence that this has resulted in improper foreclosures..” I feel better all ready! Must not have been that big a deal?! You see, “Anectdotally, these things do seem to have happened…” You see we’ve only heard the occasional, once in a while, sort of, story about some poor schmuck losing his property but in the larger scheme of things, what’s the big deal?

This is from the Atlantic Monthly, an article called – The Real Scandal of the Foreclosure Mess – by Megan McCardle –

The story on the foreclosure mess has become a bit overblown in some tellings. It’s clear that banks have been taking some shortcuts in preparing their foreclosure documents. The banks are obviously overwhelmed with the volume of foreclosures, and the (apparently) many instances in which sloppy securitization has resulted in lost paper trails, obscuring who, exactly has a right to foreclose. Rather than seeking legislative or judicial clarification, they’ve resorted to dubious practices that seem (to my non-legally-trained eye) illegal.

That is bad. But as Arnold Kling points out, there’s little evidence that this has resulted in improper foreclosures: evicting people who’ve paid, or who never had a mortgage with your company. Anectdotally, these things do seem to have happened, but there’s no evidence that they’re frequent, or that they are connected to the procedural irregularities that we’re now discovering with foreclosure documents.

Arnold says that the real scandal is our antiquated title system:

The real scandal is that the process of recording property title is so antiquated, and there are so many interest groups that resist modernizing it. The MERS mortgage database shows what a modern system could look like. But all of the counties that charge fees for title recording, the title “insurance” companies that shake down home buyers to buy “protection” from getting sued to prove that they own their property–these interest groups want to keep the title recording system as expensive and unreliable as possible.

. . . and that it’s taking so long to get people out of homes they can’t afford.

These are my comments on the Atlantic web site –

What!? You don’t see much but “anectdotal” evidence? What were you going to see? No one knew to look until now. You can’t have statistical evidence until you know there is a problem and can look at the numbers.
Anecdotal evidence is the beginning of discovery. Sometimes it turns out that the stories lead nowhere. This time they scored big. And now, and only now, can we find out how big the problem is.
“Only anecdotal evidence” Oh, PLEASE!

And then, about five minutes later, when I got even more angry –

The saddest thing about this article is that in two years after this disaster, this legal catastrophe, when the facts and the numbers are available, no one is going to pull this article out of their Windows’ recycle bin, and wonder what in the hell possessed the author to write it.

According to the article, the “real” scandal of the mortgage crisis is 1) our antiquated title system and 2) “. . . and that it’s taking so long to get people out of homes they can’t afford.” Now, Ms. McArdle is all in agreement with Arnold Kling on the title system being the real scandal but on the second statement (getting the people out of homes…) she disagrees. I give her full credit for disagreeing with the second statement and therefore my scorn for her writing is only for the first statement.

What?!, the antiquated title system is the real scandal? I cannot generate enough invective for this statement. The world is too short of obscenities for me to throw at it. Sorry! Let’s just go to the next one.

“… and that it’s taking so long to get people out of homes they can’t afford.”

Let me tell you a story… About ten years ago, housing prices began to go up but strangely the ease of buying them multiplied. Banks began to demand less and less evidence of credit history and salary down to the point where they eventually just filled in the blanks. This lack of oversight was because the great financial institutions of this nation were packaging mortgages as securities and using them as chips in the great game of casino capitalism. It was a strange time, in which the Internet was utterly blanketed by ads calling upon you to refinance your credit card debts – mortgage your home or to refinance your home for a lower rate. By about 2005, that something was terribly wrong was becoming clear. But the the regulatory agencies, the Congress, the Presidency, the financial press or the “Fed” did nothing about it. The selling if anything became more frenzied. Banks hired celebrities to participate in sales meetings in the black communities. Phone banks and mailings to those who rented and those who owned their own homes or even to those who were about to finish paying their mortgages proliferated. The messages was always the same, re-mortgage for lower rates, re-mortgage to pay off debts and the best one, buying a home is cheaper than rent. Many of the ads were carefully aimed at first time home buyers counting on their lack of financial sophistication to smooth the process. In 2006, the boom was pretty much exhausted, but the great financial institutions nursed it along for the next year by trading securities based on mortgages to the foolish as good investments and to each other simply to keep the market going. And then it all fell down.

“… and that it’s taking so long to get people out of homes they can’t afford.”

Simple statement. Factually correct.

They signed the contract, didn’t they. They’re adults. They got in too deep. They have to pay the price.

That is what it looks like if you live in a skycastle. Skycastles, that’s where people live so high and so far above the common herd, that they and only they can see what’s real. Where the air is clear and the thoughts razor sharp.

From there they watch the little people like bacteria on a petri dish and wonder why God made so many, unless their cold hard intellects have freed them from religious delusions.

I’m down here with the other “bacteria.” I say that these people were victimized and deserve mercy. These people did what the government, the media, and the financial industry told them was the intelligent, the correct and the best decision. These people were generally misled, lied to directly and were often the victims of fraud.

Getting them out of their homes should not be the first priority. Helping them to refinance and punishing those who committed crimes during this disgraceful episode should be the priorities.

But I don’t live in a skycastle.

James Pilant

Inside Job (Film)

On By southwerkIn business ethics, Capitalism, Government Failure, Philosophy of Business, White Collar Crime2 Comments

I want you to look at the trailer. I will be discussing this film more at it reaches more people. What I have heard about it is impressive. I know its conclusions mirror my own.

James Pilant

Competitor Sites!

On By southwerkIn business ethics, Capitalism, ethics, Philosophy of Business, White Collar Crime2 Comments

I don’t have any. Anyone who fights for business ethics is my friend and ally, not my competitor. If you are out there and I can help you with my web site, you let me know. If you are more famous, more read, more educated, more experienced, more moneyed, more anything, – so much the better. Our chances for making a difference in a society where a philosophy of relativism and amorality have become the rule of business are improved by your success.

For it is written –

From the Bible – Luke 10:2 Therefore said he to them, The harvest truly is great, but the laborers are few: pray you therefore the Lord of the harvest, that he would send forth laborers into his harvest.

From the Koran – And from among you there should be a party who invite to good and enjoin what is right and forbid the wrong, and these it is that shall be successful. {Qur’an: Chapter 3 (Aale-Imraan – Family of Imraan): Verse 104}

Whoever joins himself (to another) in a good cause shall have a share of it, and whoever joins himself (to another) in an evil cause shall have the responsibility of it, and Allah controls all things. {Qur’an: Chapter 4 (An-Nisa – The Women) : Verse 85}

I want more laborers, more warriors, more friends, more allies, more people with guts and talent, to fight and to make a difference. I call you to work in this field – to make your voice heard. I call upon you to do the impossible, to fight a hopeless battle against unimaginable odds – and I call upon you to win that battle. All successful struggles begin with one thought and one person eventually joined by one and then another. Slowly surely, the impossible becomes implausible, hopeless, ridiculous, unlikely, controversial, maybe, probably, inevitably, and finally: what is normal, expected and the law of the land.

Let us make a good start. Let’s make some racket. Let us be heard.

James Pilant

Do Case Studies In Business Ethics Increase Ethical Behavior?

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

Only if the examples are of a particular type and taught in a particular way. Back in 2006, a group of professors from a variety of business disciplines got together to teach a class using the examples of Enron, Worldcom, Tyco and Shell.

From the article at SmartPros –

At the end of the semester, the number of students in a simulated trading room who were caught in misconduct or misusing information for insider trading was significantly higher than at the beginning. The students said, “You taught us how to do it,” Buono recalled.

“For those of us who’ve spent our careers teaching this, it’s been a disappointing time,” said Buono, who has taught at the Waltham, Mass., college for 27 years. “Some of the most renowned names in the corporate world are now jokes at cocktail parties. And they were led by graduates of our business programs.

Obviously, the teaching of unfortunate case studies is not the best route to ethical behavior. The professors decided to try a new tack and taught examples from a perspective of moral heroism.

Their initial studies indicated some success.

What’s my take? I loath case studies. My favorite example is a case in which the employee is put crossways with his boss over a fairly minor issue that would however, result in the loss of his job. The study goes on to explain that his wife is in the hospital and his children are in an expensive private school. The case study is loaded for one side. It is obvious students will do the correct and moral thing on a test but take away from the class, the real lesson, the lesson of getting along.

In other words, this kind of ethics teaching is negative ethics teaching. This example clearly indicated that a moral life is expensive and damaging to a career, and that it really doesn’t matter anyway. After all, management will get someone to do the immoral act anyway. Just Great! We desperately need a generation of ethically sound business leaders and our business schools can’t even get ethics case studies right.

How much change in the case study movement do you think has happened since 2006? Why do we have case studies anyway? Simple, it is good class discussion and easy to teach. So we wind up with generations of moral phonies, because business ethics teachers are unwilling to do their job because it’s hard.

My contempt for standard textbooks and standard business ethics teaching is hard to put into words. I write my own class material emphasizing individual moral development. Each individual student charts out an ethical course for their life path. As the semester progresses the students are asked what changes occur because of their exposure to Catholic Social Doctrine, etc. An individual with a thought out moral system is much more likely to make the right decision when confronted with an ethical problem. You prepare a student to be a good human being. That’s the heart of teaching. You don’t teach him silly examples that he will quickly discard as not being part of the real world, you teach that a life lived nobly and honestly is better than the other choices.

James Pilant

Jon Stewart’s Take On The Mortgage Foreclosure Crisis – WARNING, Strong Language

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Philosophy of Business, White Collar Crime1 Comment

Jon Stewart sums up the crisis brilliantly in a little more than seven minutes.

I am submitting to you the link. This is to an article talking about the Jon Stewart show. I cannot show a clip from Comedy Central and expect it to be up on my site for more than thirty seconds. You have to scroll down to the Stewart video in You Tube format.

This is the link.

Have fun and see how pointed humor can be.

James Pilant

What Happens Now?

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure, Philosophy of Business2 Comments

The upcoming crisis in mortgage foreclosures has me thinking. I consider there to have been five crises for the capitalist system in the United States from 2007.

The first was the near collapse of the banking system in 2008. It demonstrated that the free market absolutism of a generation of cock sure Chicago economists made no more sense than an epigram found randomly in a fortune cookie. What was revealed was not a system of skillful investors protecting the interests of their clients but casino capitalism, a system where yearly bonuses drove behavior, annihilated Ethics, and discouraged any sort of patriotism and responsibility. The exposure of a system that tens of millions depended upon for their retirements, educations, and investments as an essentially gambling operation was not conducive to faith in capitalism.

The second was the bailout. The bailout was a disaster. While the government should and did act to prevent the financial industry from collapsing, the bailout was extremely favorable to the financial industry It was not just a case of stopping the decline, it was also a case in which the firms became immensely profitable with public money. I repeat, we had to do something as a nation because if the financial industry had perished we would all have gone down with that ship. But the government attached no conditions. They bought these companies bad investments at full market value rather than negotiating a fair price. There was no limit placed on executive salaries or bonuses. Add to this, the hard fact that the government officials in charge of these matters were loaded top to bottom with former employees of the financial industry, and it gives an impression of unfair influence. The companies clearly had regular repeated contacts with the Department of the Treasury and the White House, giving the impression that all other Americans with a stake in these issues had no representation. There is little evidence that this impression of powerlessness on the part of working America is any way incorrect.

The third was the health care bill. An idea considered literally for generations became not universal health care but forced purchases of insurance policies. To make it worse, the most important provisions were decided behind closed doors. A bill was created whose major elements were negotiated by the White House with the insurance and pharmaceutical companies. What people saw was a corrupt system in action placing them into subservience to private interests. That there is no election bounce for the Democrats this Fall is not surprising in any way. It is only surprising only to the White House. The clear view of corporate interests acting through their political proxies made most American sick at heart.

The fourth was the oil spill in the gulf of Mexico. This was a disaster unseen in world history up to that time. Yet, the government did not act to protect the public, it acted to prevent proper investigation and reporting of the crisis. The President of the United States was seen as unwilling to act. This undermined public confidence in the President, and as more of the ugly facts about the government – industry cooperation in these matters comes to light, it will not look any better. Politicians rushed forward to defend what should have not been defensible. It was obvious early on that the companies involved in the drilling had flouted regulations and acted with little regard to risk management, trusting to luck since they had gotten away with it in the past. One politician had the nerve to describe a crisis clearly created by poor management and violation of the law as an “accident.” The public did not feel defended. There was a sense of betrayal for many Americans.

I thought there would be a public outcry on these matters. The only clearly visible one is Fox News’ Tea Party movement, a spontaneous outpouring of populist rage heavily funded by industry, and directed at the government while exempting business for any responsibility for our current crises.

Why is there no electoral action to exploit the wild and reckless corporate behavior of the last two years? The answer is simple and disturbing. There are two political parties in this country and neither is willing to take action in regard to these matters. There is no one to vote for. The leadership that should arise from the disaster, angry and ready for battle, is not viable in today’s media markets.

The government is more heavily influenced by well paid lobbyists than it is by Americans.

I have been watching this for a while and I listen to what people are saying. At the moment, blame rests heavily on the government, and a great deal of blames belongs quite properly to the government. But not all of it. We can change the government down to the last brick of the capital building and nothing will change. Only if the private organizations that have acted illegally and recklessly are brought under control will there be effective change. I do not mean their destruction. What I want to see is their removal from the political process. Only human beings have rights. Organizations do not. A corporation is no more a person than my toaster. (However, there are many people who may have better and more effective solutions. Please let me hear them.)

But there is some change happening. The American public is in many ways like a landslide. You see a few pebbles fall down a slope. Nothing to worry about. But over time there are more pebbles and then stones.

I love my country. I am not leaving to escape to a different place in the light of the social turmoil we are likely to see. I believe in this people and their ability to solve problems and accomplish great things. They are being called upon right now. The call is quiet and can be barely heard. But it is there. And in time it will grow louder and more distinct.

Our government is failing us. The great corporations are rogue having no sense of patriotism, no burden of belonging; they hear no call of righteousness. They evade the law, act against their nation’s interest, and pursue a philosophy recognizing no moral burden.

We can not long survive this.

Change is coming. The beginnings of that change will be ugly. It will be difficult. Many will suffer. But there is a strong chance that this nation will rise to the challenge and become a better place.

James Pilant

Obama Refuses To Sign Mortgage Bill

On By southwerkIn business ethics, Capitalism, ethics, Philosophy of Business, White Collar Crime1 Comment

The President (against all my expectations) declined to sign a bill that would have provided those financial institutions protection from their use of robo signers and their violations of the law.

I am grateful to the President and surprised that I have an opportunity to be grateful to the President.

Now, lawsuits filed by Attorney Generals across the nation can continue. I predict 25 states will file lawsuits by the end of the year. Why? Because the kind of fines you can get from giant financial institutions for lying to the court system hundreds of thousands of times make it a big revenue raiser for the state and an upward leap in status for the state’s Attorney General who then can think about Congress or maybe a Governorship.

There is also this strange idea, that these companies, that these individuals in charge of these companies, no matter who they are, should face justice. I am as surprised to see this happen as you are. I am used to disappointment in the government and in private industry. Very used to it.

But today was different. Praise God! Today was different. I’ll treasure it.

James Pilant

(Please forgive my occasional bursts of religiosity. I know how offensive this stuff can sound since you usually here it in the context of pushing some strange social agenda. But I am a practicing Christian and on rare occasions I will refer to in this in my writing.)