Mortgage Meltdown: Right and Wrong and the Law

Mortgage Meltdown: Right and Wrong and the Law

Salmon Chase was part of the solution during the civil war when he made decisions and advised the President and lent his formidable name to plans that salvaged the currency of the young Republic, the economy of the nation, and the unity of a government experiment. Chase Bank bears his name. He was writing about slavery which he abhorred, but his words ring true on many subjects. His comments are completely congruent with JP Morgan when he told the Senate Finance Committee 100 years ago that no group of figures or facts on paper can match the importance of personal character. And character, Chase and Morgan would agree, was integrity and accountability: 

“Every law…so wrong and mean that it cannot be executed, or felt, if executed, to be oppressive and unjust,” said Chase, “tends to the overthrow of all law, by separating in the minds of the people, the idea of law from the idea of right.”

The real meltdown occurred when we accepted the notion that the workings of human society could be reduced to numbers and indexes. Accountability went out the window along with personal judgment when decisions were judged to be right or wrong based upon their congruency with accepted grades of performance which were averaged into scores. FICO scores encourage people to accumulate debt rather than savings. Cut up your credit card and you have just increased your debt to credit ratio making you a “higher risk.” Thus the industry gets what it wants — a system that encourages and coerces the population to accumulate credit, tempting them to use it regardless of the cost of the interest, and punishing the person who responsibility demonstrated a wish to use earned money rather than borrowed money.

We are stuck in this admixture somewhere between Gulliver’s World and an Orwellian loss of privacy and identity — while others are invited to freely steal our identities and use it to their own advantage. 

In a society run by business interests that have bought their way into the halls of power political power no other outcome is possible. This must be done with centralized banking and financial services because the decision-makers can never meet you. So as long as they stay within the artificial bounds of these scores, whether they are FICO, SAT, ACT, Moody’s ratings or S&P Ratings or the DJIA or an index fund, or anything else, the decision-maker has no personal responsibility for the outcome. In fact he too is punished if he strays from the boundaries of these markers. 

Hence, both borrower and lender are punished if they don’t play by the rules or laws set down by people who had no interest or accountability for the rights of American citizens. And thus the creation of rules and laws that are so “oppressive and unjust.” So here we are — stuck in a place where we know right from wrong but where laws are separated from the unalienable rights of Jefferson’s pen, and the natural knowledge of all human beings as to what is fair and just. 

It can be no surprise then that we have recreated slavery under the guise of a nation of laws, subject to a Constitution which guarantees our rights, and a government that ignores principles of our laws and smothers the pitiful sounds of distress of those who attempt to remind us the existence of the Constitution. 

Every banker will tell you, every lender knows, even if they are predatory payday lenders, that personal contact reduces the risk of default on a loan. When towns were small and branch banking was restricted, deposits and loans stayed local, while the banker who made the loans knew his customers and even visited them frequently. As social and economic relationships grew and deeper and wider, so did the favorable economic consequences to each locale where the people had great personal character.

Today, in some of the most unlikely places, like subSaharan Africa, banking is just so. Small areas, spreading all over through new technologies (they use their cell phones for banking and payments) and loans, where the default rate is zero despite social unrest,  political upheaval, and sometimes outright chaos and genocide. 

I ask a simple question: Why can “backward” “undeveloped” countries and their people create an expanding, profitable and low risk banking system when the supposedly mightiest country in the world cannot? And why do we all have the suspicion that when things get big enough, they will get complicated enough for big business to buy their way into the halls of power in more nations governed by “laws” and constitutions” and maybe even a “Bill of Rights?”

The answer is in the simple phrase “by the consent of the governed.” We pretend we are subject to the government while in fact it is the government that is subject to us. Government and business and Wall Street and bankers don’t get out of hand because of their conspiracies and bad human nature (although surely that exists). No, the real problem is you and me. When I failed to learn the details of a proposition before voting on it. When I failed to investigate who this person was that I was voting into office, and when I failed to speak out, assemble and insist that the press give us the real facts and numbers — not just the self serving announcements of government that the country is prosperous and we are safe. 

It’s time to get back into the driver’s seat. It is time to get involved the way everyone was involved in politics when this country opened for business. And it is time to do what is right and avoid what is wrong and not just talk about it. The laws will change when we stand up for our natural rights and make them change. Politicians will only be moved to do our bidding if the threat of their being thrown out of office is real. And real people that we really want to represent us in our republican form of government might be attracted to a job of satisfaction, recognition and stature.

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