Just A Few Bank Burglaries?

On December 22, 2010December 22, 2010 By southwerkIn business ethics, ethics, Government Failure, White Collar Crime

Felix Salmon writing in Reuters’ Analysis and Opinion –

In order to know that cases like these are “a tiny percentage of foreclosures,” you need to know what that percentage is, n’est-ce pas? So this defense is not particularly convincing, unless and until we can see some numbers. Surely, mistakes like these would happen occasionally even during the boom years. But if the percentages are rising, that’s clear empirical evidence that overwhelmed servicers are doing an increasingly shoddy job.

Next time a newspaper wants to write about this particular trend, then, let’s get the names of those bank representatives on the record, let’s ask them how they know that the proportion of dreadful mistakes they make is “tiny” or “minuscule,” and let’s be a bit more determined that we should be the ones making the determination as to how small the percentage is, rather than the bank’s own flacks.

Exactly. I made the same point several months ago when the banks said that only a handful of mortgages had been mishandled. The banks were lying about the scale of the problem. It turned out there were minimally hundreds of thousands. This does not give one confidence in bank claims of “just a few cases,” “a few bad apples,” and all those other things you say when you don’t want to admit the scale of your crimes.

I don’t believe Mr. Salmon is mistaken in his assessment. Breaking into people’s homes and taking their stuff is an extremely intimidating tactic. You can just imagine the desk bound suits chortling over a business lunch about how they forced the deadbeats out.

Let’s get some lawsuits going. They are the public’s last line of defense and we can be quite sure law enforcement, politicians and regulatory agencies will sit this one out.

James Pilant

Will Wall Street Ever Pay For Its Crimes? Or Just Its Fair Share Of Taxes?

On December 22, 2010 By southwerkIn business ethics, Capitalism, Corporate Social Responsibility, ethics, Government Failure, Philosophy of Business, President Obama, White Collar Crime

These are brief interviews with Les Leopold. Here is a sample of his writing from Huffington Post –

We got into this crisis because Wall Street invented and pedaled fantasy financial instruments that turned out to be junk. While their party lasted, those complex derivatives were a gold mine for the largest financial institutions. According to the New York Times, the profits from the nine largest commercial banks “from early 2004 until the middle of 2007 were a combined $305 billion. But since 2007, those banks have marked down their valuations on loans and other assets by just over that amount.” In other words, the profits weren’t real.

He also has a book called The Looting of America: How Wall Street’s Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity—and What We Can Do About It.

Deficit Commission Recommends Further Destruction Of The Middle Class

On December 2, 2010December 2, 2010 By southwerkIn business ethics, Capitalism, Corporate Social Responsibility, ethics, Government Failure, Philosophy of Business, President Obama, White Collar Crime2 Comments

illu_1sm — The future of the Middle Class - ruins.

From the BBC –

A presidential panel set up to help trim the US budget deficit has called for steep spending cuts and tax rises.

The proposal would cut defence, social security and other spending, slashing a total of $4.1tn (£2.62tn) from the budget deficit by 2020.

But analysts say the panel is unlikely to ratify the plan with a vote, calling into question whether the US Congress will act on its recommendations.

“The solution will be painful,” the plan reads. “There is no easy way out.”

The US had a budget deficit of $1.3tn in the year to September, and critics have said the government should do more to narrow the gap.

Social Security pays for itself for another twenty years and its surplus is used in the U.S. to fund things like defense. Social Security taxes are only taken out of the first, 100,000 dollars or so out of income. If we raised the limit even slightly the fund would be intact for many decades.

Why is social security under attack? It’s doctrinal. Friedman economics says that government can do nothing right. Therefore, social security must by its very government nature be a failure. The numbers, the facts, the experience, – mean nothing. It’s very similar to a religion.

It’s why instead of the military rebuilding the Iraqi infrastructure, we used private firms. By the Friedman doctrines, this colossal incompetence and theft of government funds would have been much worse if the government had done the job.

Private and public means to accomplish ends are choices. There is no complete superiority of one over another. There never will be. There are just tools to accomplish things, no more.

That people are able to build a strange worshipful doctrine toward “free enterprise” is a symptom of larger moral and ethical problems. But above all, it’s the result of a successful sales job paid for over decades with millions and billions of dollars and preached by dozens of well financed foundations and other advocacy organizations.

Let’s read another section from the BBC coverage –

The panel’s chairman, Mr Bowles, said the panel’s work had – at the very least – made America engage in substantive debate on the deficit issue.

“The era of debt denial and the denial of its consequences is over,” he said. “We have started an adult conversation that will dominate the debate until the elected leadership in Washington does something real.”

This is nonsense. These measures have been preached for decades by “free market” conservatives.

Besides the real issues aren’t even on the table. Why do we allow companies based and operating in the United States to offshore their tax burden? What is fair tax code and what do we need to do to enforce it? I could go on.

But if you want to quickly discover the intellectual and moral absence in the committee’s recommendations, you only have to examine the question of a bank tax.

What is a bank tax, you say?

It is the phrase that must not be spoken.

Formerly, the United States was a manufacturing giant, so it gathered its taxes from a well paid middle class and by taxes on goods. Now we live in a nation based on finance and “play” money. Financial speculation is the rule of the day. Since our economy is now based on finance, doesn’t it make sense to change the nature of our tax structure to reflect our current realities? What we have now is a shrinking manufacturing base and a deteriorating middle class. We also have a banking and financial industry wedded at the hip to tax rescues and government guarantees. That merits taxation. Yet, a tax to raise a mere twenty billion dollars to help pay for another bailout was defeated in the middle of this year.

Let’s try another phrase, financial transaction tax.

No one seems to talk about this one either. Did the debt commission talk about this for page after page? You’re going to read more about it here.

A report on this kind of tax suggests that even a small, simple tax will produce 100 billion dollars in revenue each. Obviously, a trillion in a decade.

That’s deficit reduction.

There is much more to talk about. But there seems little likelihood of a genuine discussion outside of the limits established by the beltway pundits. We can only talk about Medicare, Social Security and a PR campaign of little significance to rein in defense spending. I see nothing else in the proposals likely of actual action except the mortgage deduction.

President Obama stacked the committee with those who had long wanted to attack social programs. Those programs that benefit the middle class are those that will be successfully attacked. The middle class has been targeted for four decades with continued success. There is no reason for Washington to stop now.

James Pilant

Matt Taibbi Shoots And Hits!!

On November 27, 2010November 27, 2010 By southwerkIn business ethics, Capitalism, ethics, Government Failure, Philosophy of Business, White Collar Crime

Matt Taibbi is as usual dead on target. He does a veritible Indian War Dance on the horrors of the foreclosure crisis. Read the paragraph below and then go spend a delightful (quality of writing) and painful (financial corruption) story.

The moral angle to the foreclosure crisis — and, of course, in capitalism we’re not supposed to be concerned with the moral stuff, but let’s mention it anyway — shows a culture that is slowly giving in to a futuristic nightmare ideology of computerized greed and unchecked financial violence. The monster in the foreclosure crisis has no face and no brain. The mortgages that are being foreclosed upon have no real owners. The lawyers bringing the cases to evict the humans have no real clients. It is complete and absolute legal and economic chaos. No single limb of this vast man-eating thing knows what the other is doing, which makes it nearly impossible to combat — and scary as hell to watch.

Excellent, exactly. This is not a moral crisis where six million Americans suddenly decided to buy too much house. This is a moral crisis where the biggest financial institutions in the world decided to take the home owners of America on a little trip into world finance. The banks had a hell of a vacation. The home owners never made it back.

James Pilant

The Homeowner As Victim, Not Deadbeat (via Chasing Fat Tails)

On November 27, 2010November 27, 2010 By southwerkIn business ethics, Capitalism, Government Failure, White Collar Crime3 Comments

Amen!!

I’ve blogged on this exact subject.

You can be a mortgage company or a bank and your moral status is unchanged by the destroying the world economy and by using mortgages as play money in the global securities market. But if you are a consumer who falls behind in payments on your house, you’re evading your personal responsibility and should be booted out, children, furniture, pets and all.

James Pilant

One thing that annoys me to no end is the constantly espoused view that purportedly delinquent homeowners "deserve" to get foreclosed on. The idea is that when a homeowner defaults on his payments, he loses moral claims to "justice" when it comes to foreclosure, since he violated an agreement. In the context of the current foreclosure crisis, the view seems to be that ownership of the note is a purely legalistic issue; it doesn't get over the mor … Read More

via Chasing Fat Tails

A Thirty Dollar Fee?

On November 15, 2010 By southwerkIn business ethics, Capitalism, Corporate Social Responsibility, ethics, Government Failure, Philosophy of Business, President Obama, White Collar Crime

Now you, common middle class citizen, you have to pay a thirty dollar fee at a court house in most states for them to record a change in ownership in property. They have to do paperwork and change that little county map that shows who owns what. Now suppose you change the ownership again. You transfer it your spouse, your child, or you’re paying the fee as part of a sales contract. You have to pay a second thirty dollar fee.

Annoying, right? Of course, but has to be done. You have to know who owns what, right?

What if you don’t want to pay the second time? Well, you are out of luck there too. The state is not going to let you out of the fee. Besides without paying the fee, the records won’t show who owns the property, so it’s a good idea to pay it, right?

Everybody has to pay the fees, right??

No, they don’t.

If you are a bank using the MERS system, you don’t have to pay a second fee. (MERS = Mortgage Electronic Registry System)

You see all the transactions are done by computer therefore there is no fee for any transaction after the first one. The banks often transferred these properties dozens of times, but every transfer after the first one was free. Isn’t that great?

Now, you probably would like to say something dumb like, “Isn’t that state law?” Then you might follow it up with, “Doesn’t that mean they don’t own the property?!”

You silly person, don’t you realize this a is a banking institution? They are not like you.

They just decided not to pay.

See, when you want to change a law, you have to lobby and talk to people and ask the legislature to consider a bill changing the law, then it has to go through both houses and then be signed by the governor.

But when you are a bank, you simply decide not to pay the fees. It makes everything simple.

Now, there are those in this country who are bizarre individuals. Those strange people want the banks to cough up the money. So, the banks, their feelings deeply injured, have run to their friends in the United States Congress who are planning a surprise party for you.

At the surprise party a thinly clad financial industry lobbyist will leap out of a cake and tell you that Congress has legalized all that stuff that the banks have been doing for, Oh, about five years now.

Now you might ask another question at this point and it is not “Why aren’t I getting any cake?” Your question is “Doesn’t those payments to the country, those thirty dollars each time, aren’t those part of my county’s taxes?”

Why, yes, they are.

But remember, Virginia, there is a Santa Claus and he just took your county’s money and gave it to the banks.

What a sad story!

And it’s all true!!

From the Associated Press –

It used to be that every time a bank sold a mortgage, the county land recording office received a fee. It wasn’t much — $30 or so — but then real estate boomed in the 1990s and banks pooled millions of mortgages into securities that investors bought and sold.

One mortgage transaction became a dozen or more, and the tab grew ever larger. So the banks came up with a way around the fees. And now they are fighting to avoid perhaps tens of billions of dollars in penalties that have added up over the years.

From further down in the article –

MERS is “an admitted fee-avoidance scheme,” says Robert Hager, the Nevada lawyer who, along with his partner Treva Hearne, is filing the suits against MERS and its bank owners, including the government-backed mortgage-finance companies Fannie Mae and Freddie Mac. Fannie and Freddie provide a low-cost flow of funding to the nation’s mortgage markets by buying mortgages from lenders, packaging them into securities and then selling them to investors.

The suits were filed in California, Nevada and Tennessee and 14 undisclosed states where the cases are still under court seal. Hager and Hearne chose the states because their laws allow what are called false claims suits, in which citizens can take legal action against companies that may have cheated the government.

The suits allege that by privatizing public records, MERS enabled banks to circumvent American property law and bypass the counties’ fee and paperwork requirements, costing billions of dollars in lost revenue over more than a decade. MERS says its process is legal, and that the fees are not required under its system.

If only we were all banks!

James Pilant

MERS And Ownership

On November 15, 2010 By southwerkIn business ethics, Capitalism, ethics, Government Failure, Philosophy of Business, President Obama, White Collar Crime5 Comments

MERS, Mortgage Electronic Registry System, is a system used by the banks to evade paying fees or having to do the traditional paperwork necessary to change the ownership of property.

To quote the Associated Press –

MERS’ owners are all the big mortgage companies, including Bank of America, Citigroup, Wells Fargo, JPMorgan Chase and GMAC. They are all facing a foreclosure-fraud investigation launched by all 50 state attorneys general, and all took government bailout money after the financial meltdown in 2008.

As I mentioned in my last posting, our lame duck Congress is thinking (if you could ever refer to their processing as having thought) of legalizing this system now, years after the major banks began using it with full knowledge of its legal problems. (Being a bank is very much like being in love in the movie, Love Story, you never have to say you are sorry.)

This is from the Washington Post. It explains why MERS is a problem.

I very much appreciate the Washington Post for developing this little picture and trust it was useful to you.

James Pilant

“Inside Job” The Director Speaks

On November 12, 2010 By southwerkIn business ethics, Capitalism, ethics, Government Failure, Philosophy of Business, Teaching, White Collar Crime3 Comments

Charles Ferguson directed the documentary “Inside Job.” He writes about his thoughts and conclusions from creating the documentary.

One of the things he found puzzling (as do I), doesn’t doing serious long term damage to the nation’s infrastructure like roads, bridges and education become a concern for the financial elites since over time it damages their American investments?

Here’s the answer. (from the article) –

The financial services industry and the most successful American multinational firms now obtain rapidly increasing fractions, often already the majority, of their investment, employees, and revenues from (a) other wealthy individuals and corporations and/or (b) outside the United States. Over the last two decades their political interests, contributions, and lobbying have gradually followed these larger trends. As a result, the political duopoly has overseen a massive disinvestment in the future of the United States and the American people, and a massive transfer of wealth from the bottom 90% of the population to the top 1%. Taxes on dividends, high incomes, capital gains, and estates have sharply declined, while tuition at public universities, hours worked per family, household debt, and government deficits have all increased.

They have no interest in the long term future of the nation. This nation is similar to the Wild West idea of Robbers’ Roost.

Robbers’ Roost is a town hidden in the hills where the outlaws go to hang out. There is no law there. They do what they feel like. They are safe from the sheriff and all those people they took stuff from.

The United States is going to be a great big friendly place for people with lots of money and few morals. One law for them. One law for us.

James Pilant

The trailer –

Foreclosure Judges Fight The Good Fight

On November 10, 2010November 10, 2010 By southwerkIn business ethics, ethics, Government Failure, Philosophy of Business, President Obama, White Collar Crime

Alain Sherter (who I do not write enough about) has a excellent column titled, “How Local Judges are Putting the Feds to Shame In Halting Improper Foreclosures.”

Here’s a selection from it –

Consider this astonishing stat drawn from a WaPo story today: Courts in the area are estimated to be dismissing upwards of 50 percent of foreclosure cases against homeowners because of slipshod — or outright fraudulent — paperwork filed by lenders. Banks are appealing many of these decisions, a sign of just how afraid they are the rulings could embolden courts around the country to follow suit:

In millions of cases across the United States, local judges have wide latitude to impose sanctions on banks, free homeowners from their mortgage debts or allow the companies to proceed with flawed foreclosures. Ultimately, the industry is likely to face a messy scenario — different resolutions by courts in all 50 states.

Sherter puts his finger on what I try to communicate to my classes. Attorneys and Judges are not the Ogres portrayed on television. It is true that are some very, very bad attorneys. I hold them in contempt. But you would be astonished and impressed by the attorneys I’ve met who fight for their clients for little money, sometimes no money. This whole mortgage foreclosure mess would never have come to light, if it weren’t for attorneys working for next to nothing trying to keep people in their home.

He makes another point in both the title and inside the article.

Federal bank regulators are equally intent on keeping the foreclosure assembly line moving. That’s no surprise, given that they’re deeply implicated in the foreclosure mess. For instance, state financial supervisors turned to the OCC in 2007 after JPMorgan Chase (JPM) and Wells Fargo (WFC) stonewalled their investigations into improper foreclosures.

Not content to simply ignore the problem, the OCC actually made it worse. Protecting its authority to oversee national banks, a doctrine known as “preemption,” the agency shooed the state enforcers away. Then it asked the banks to look into the matter.

I said exactly the same thing in one of my posts – If you are waiting for the Obama administration to come your rescue, you are going to be waiting a long time.

James Pilant

Pilant's Business Ethics Blog

Category: White Collar Crime

Just A Few Bank Burglaries?

Matt Taibbi Shoots And Hits!!

The Homeowner As Victim, Not Deadbeat (via Chasing Fat Tails)

MERS And Ownership

“Inside Job” The Director Speaks

Foreclosure Judges Fight The Good Fight

Share this:

Share this:

Share this:

Share this:

Share this:

Share this:

Share this:

Share this:

Share this:

Share this: