I’m cynical. You can’t have much to do with the field of business ethics and be anything else. I was outraged for days after Congress passed the act that would have legalized much of the mortgage industry’s wrong doing. When Obama vetoed it, I had a rare moment of gratitude. But I’m still cynical always waiting for the knife in the back, a sell out, a deal behind close doors … There is always someone waiting to make a deal no matter what crawling excreted maggot they have to deal with. Always someone.

But this guy is more cynical than I am. And he might be right. John Carney in an article entitled, “Sorry Folks, The Put-Back Apocalypse Ain’t Gonna Happen,” says that Congress will not let Bank of American get in real trouble.

Here’s an excerpt from this article –

But Bank of America’s recent decline—down almost 10% this week—is driven by fears that the bank could be hit with huge liabilities for faulty mortgage pools. And I’m pretty sure that is not going to happen.

Why not?

Because the politicians will not let the financial stability of the largest bank in the nation be threatened by contractual rights. Not when there’s an easy fix available that won’t cost taxpayers a dime.

Here’s what is going to happen: Congress will pass a law called something like “The Financial Modernization and Stability Act of 2010” that will retroactively grant mortgage pools the rights in the underlying mortgages that people are worried about. All the screwed up paperwork, lost notes, unassigned security interests will be forgiven by a legislative act.

He may be right. I’ll bet the other way. Fifty state Attorney Generals and countless other officials are on the prowl right now and bad stuff is coming out every minute. The Public is in a bad mood. Saving the banks under these circumstances could delegitimize our system of government in a way we haven’t seen before. It is true that people have virtually no faith in Congress and only somewhat more in the President. But that is different from active hate. It’s different because the government will essentially be putting a sign on its front lawn, “You have a dispute with a bank and you’re right – WRONG, bank wins. You’re less than nothing. Go home and suck it up.”

I don’t think that’s going to go over well. Further, I don’t think it will go away in time for 2012.

We’re about to see how much power public opinion has. John Carney says it does not have the power to stop Congress from saving the bank by abrogating their legal rights. Carney hopes he’s wrong about this. From his work, it is easy to see that he is no defender of the banking industry and, is probably, one of those people I speak of as a ally in the “good fight.” But I hope he is wrong too.

The possibilities of the results of such an action by the federal government offer only two possibilities, acceptance by the public or another kind of response. I am not happy with my speculations on what that response might be.

James Pilant