“officials were so worried that they might be accused of helping the undeserving that they ended up helping almost nobody.” – Paul Krugman

“The irony is that in their determination to punish the undeserving, voters are punishing themselves: by rejecting fiscal stimulus and debt relief, they’re perpetuating high unemployment. They are, in effect, cutting off their own jobs to spite their neighbors.” Paul Krugman

EDITOR’S COMMENT: It’s very simple and very clear now: the mortgage scheme from Wall Street was rotten from one end to the other. They bagged the investors who put up the money, misused the money and then bagged the homeowners. Economists and studies from all end of the political spectrum now agree that the recession, unemployment and the stifling of innovation is directly and solely attributable to the mortgage mess. Google it yourself and you’ll see. But a misplaced sense of “morality” stops us from doing the only practical thing: fix the problem.

My philosophy is skip the morality issue for now and fix the problem. Stop the blame issue and correct the mortgages. Stop the lies to investors and give them a fighting chance to recover at least some of their money. Stop demonizing people who come up with possible real-life solutions instead of ideological politically acceptable policies that obviously have done nothing and will continue to do nothing to stop our recession, unemployment and prospects for a brighter future. Wall Street stole the money. Now they must return it.

If you insist on considering morality, then apply it fairly to everyone. If a company declares bankruptcy or otherwise requires a lending institution to adjust the terms of the obligation, interest rate or term, we don’t consider that immoral. Nobody blames the company for mismanagement or bad judgment or says they have to crumble and die.

If the Supreme Court says companies are “people” and can therefore contribute to political campaigns, then why shouldn’t all “people” be treated the same? Fairness or morality dictates that either you take away the ability of companies to strip the lien down to market value or you give it to individual homeowners. Take away the speculator who bought 30 homes who can petition for chapter 11 reorganization and strip the liens or give the same right to individual homeowners who own one home, the one they live in.

If we gave relief to Wall Street banks that misused and abused the system, why not give the same consideration to the investors who actually lost the money and homeowners actually losing their homes? If Wall Street arranged the system around the BIG LIE that the homes were worth more than the loan product sold to homeowners and investors, why should Wall Street get to keep the money, get more from taxpayers and then get the homes too? How moral does that sound?

THAT is why the proper term is “MORTGAGE CORRECTION” because they were wrong in the first place. “Reduction” implies a gift. “Correction,” implies justice. Which do you want?


October 31, 2010

Mugged by the Moralizers


“How many of you people want to pay for your neighbor’s mortgage that has an extra bathroom and can’t pay their bills?” That’s the question CNBC’s Rick Santelli famously asked in 2009, in a rant widely credited with giving birth to the Tea Party movement.

It’s a sentiment that resonates not just in America but in much of the world. The tone differs from place to place — listening to a German official denounce deficits, my wife whispered, “We’ll all be handed whips as we leave, so we can flagellate ourselves.” But the message is the same: debt is evil, debtors must pay for their sins, and from now on we all must live within our means.

And that kind of moralizing is the reason we’re mired in a seemingly endless slump.

The years leading up to the 2008 crisis were indeed marked by unsustainable borrowing, going far beyond the subprime loans many people still believe, wrongly, were at the heart of the problem. Real estate speculation ran wild in Florida and Nevada, but also in Spain, Ireland and Latvia. And all of it was paid for with borrowed money.

This borrowing made the world as a whole neither richer nor poorer: one person’s debt is another person’s asset. But it made the world vulnerable. When lenders suddenly decided that they had lent too much, that debt levels were excessive, debtors were forced to slash spending. This pushed the world into the deepest recession since the 1930s. And recovery, such as it is, has been weak and uncertain — which is exactly what we should have expected, given the overhang of debt.

The key thing to bear in mind is that for the world as a whole, spending equals income. If one group of people — those with excessive debts — is forced to cut spending to pay down its debts, one of two things must happen: either someone else must spend more, or world income will fall.

Yet those parts of the private sector not burdened by high levels of debt see little reason to increase spending. Corporations are flush with cash — but why expand when so much of the capacity they already have is sitting idle? Consumers who didn’t overborrow can get loans at low rates — but that incentive to spend is more than outweighed by worries about a weak job market. Nobody in the private sector is willing to fill the hole created by the debt overhang.

So what should we be doing? First, governments should be spending while the private sector won’t, so that debtors can pay down their debts without perpetuating a global slump. Second, governments should be promoting widespread debt relief: reducing obligations to levels the debtors can handle is the fastest way to eliminate that debt overhang.

But the moralizers will have none of it. They denounce deficit spending, declaring that you can’t solve debt problems with more debt. They denounce debt relief, calling it a reward for the undeserving.

And if you point out that their arguments don’t add up, they fly into a rage. Try to explain that when debtors spend less, the economy will be depressed unless somebody else spends more, and they call you a socialist. Try to explain why mortgage relief is better for America than foreclosing on homes that must be sold at a huge loss, and they start ranting like Mr. Santelli. No question about it: the moralizers are filled with a passionate intensity.

And those who should know better lack all conviction.

John Boehner, the House minority leader, was widely mocked last year when he declared that “It’s time for government to tighten their belts” — in the face of depressed private spending, the government should spend more, not less. But since then President Obama has repeatedly used the same metaphor, promising to match private belt-tightening with public belt-tightening. Does he lack the courage to challenge popular misconceptions, or is this just intellectual laziness? Either way, if the president won’t defend the logic of his own policies, who will?

Meanwhile, the administration’s mortgage modification program — the program that inspired the Santelli rant — has, in the end, accomplished almost nothing. At least part of the reason is that officials were so worried that they might be accused of helping the undeserving that they ended up helping almost nobody.

So the moralizers are winning. More and more voters, both here and in Europe, are convinced that what we need is not more stimulus but more punishment. Governments must tighten their belts; debtors must pay what they owe.

The irony is that in their determination to punish the undeserving, voters are punishing themselves: by rejecting fiscal stimulus and debt relief, they’re perpetuating high unemployment. They are, in effect, cutting off their own jobs to spite their neighbors.

But they don’t know that. And because they don’t, the slump will go on.

10 Responses

  1. “Laws without enforcement are not laws at all … The only solution is to prosecute”!!!

  2. We have huge problems until we the people get common-sense decision-makers in place of Bernacke and Geithner.

  3. I really wouldn’t recommend relying on government to “fix” this problem. Unfortunately it is going to have to be fought the same way it is being waged now, one by one in the courts.

    If government does anything, it will certainly not be for the benefit of the people whom have suffered actual damages, it will be for the benefit of the goverment.

    That IS the embodiement of the tea party. Government isn’t your friend, no matter how much they tell you they are.

    Look at the people in control of fiscal policy, Geithner , Paulson, Bernanke. They have ALL made loads of cash off of this ‘crisis’ and all have friends in high places at virtually all of these firms. If you really believe that this administration is going to do anything meaningful as far as relief for home owners goes, then I have a great mortgage deal for you (*wink, wink).

    One more thing. People may want to really start looking at the notary signatures on their original closing docs (not assignments) the actual closing docs.

    I’m amazed that this hasn’t been caught previously but… There are cases where the notary that notarized the closing documents was NOT present.

    Ask to see the notaries journals for the day of your closing. I just caught this in my own personal documents. The guy that closed us was an old college friends father, he was the ONLY person present at the closing. Teh copies of our documents that AHMSI sent us are notarized by someone entirely else and I have no idea who the notary is that appears on my docs.

  4. […] This post was mentioned on Twitter by Susan Jones and Alan, kim thomas. kim thomas said: CORRECTION OF ILLEGAL MORTGAGES IS THE ONLY ANSWER: […]

  5. This is another great link about Attorney Richard Fine and why the Judges in Southern California are litteraly Pissing on us.

  6. Dying Truth The Investors are probably in on it from the beginning. You think for a minute they do not have their own people in the field. High paying analysts working for Deutshce Bank of HSBC etc… You dont think unlike us they had the resources to check out the Banksters?

    Maybe not but who cares they are now doing the work for us and demanding the Accounting.

    Neil Garfield and Company is an America SuperHero.

    Let us not Forget Richard Fine, Esq who at the age of 71 was willing to go to jail and sit in solitary confinement for at least a 18 months and fight for years for our Rights.


  7. Well now that it is out in the open , that the banks caused all of this people losing jobs, companies going under, ect.
    So may i sue the banks for my losses that the banks have caused me?
    for example the company i worked for went under and we lost our jobs thus it took me 8 months to find one but i had to file bankruptcy to save the house but thats still in question if i can or not, my credit is shot and you all know the rest ect.
    So can i sue the banks for misconduct that caused injury to me?

  8. Yeah! I’m with ANONYMOUS,
    Investors have also been complicit with servicers in knowing the illegalities from the Fraudclosures and unlawful evictions WHICH THEY SIGNED OFF ON AND APPROVED. They were hoping to profit at the risk of being exposed to criminal liability for knowingly engaging in fraudulent activity and willful deprivation of Peoples’ Liberty, Property and Due Process of Law!

  9. Zoe

    The “deadbeat” thing was just to focus away from financial institution fraud – and blame the home owner instead. They needed an outlet – and the media helped them. But, we have let the media promote THEIR agenda.

    And, as far as the above post – yes. But, investors should NOT be lumped into the same boat as home owner victims.
    First, investors are held to higher standards than borrowers – they are considered SOPHISTICATED – and therefore competent of ascertaining what kind of investment they are investing in. Now, who their right mind would invest in mortgages with sub-par FICO scores? But, that is what they did. Hey – investors thought – better to fund retirement accounts with 13% – rather than market rate of say 6 or 7%.

    And, investors have been paid back their principal. They just still want the 13% – they want to be made whole – on what they lost as INCOME on their investment. But, no investor lawsuit demands damages that subtract foreclosure recovery proceeds. Why? because the investors were never entitled to foreclosure recovery proceeds – they were entitled to receivable income pass-through.ONLY – which they BELIEVED was high – due to the sub-par risk assessed borrowers. Hmmmm– Great Investment right?? Could do better in a casino.

  10. What would an acceptable mortgage correction be? If they don’t own the note, how can they correct anything?

    I’m so sick of the deadbeat thing. According to the news reports, the ruthless, business-minded rich are far more likely to default. Probably some of them are Krugman’s “deadbeat” buddies.

    These are some of several same-type articles online:

    “… The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like this one in Silicon Valley.

    Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

    More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

    By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent….

    Why the Rich Are Most Likely to Default on Mortgages

    By Max Fisher | July 09, 2010 11:29am

    Wealthy U.S. homeowners are now the most likely to default on their mortgages, the New York Times reports. This upends the long-held assumption that the widespread defaults that contributed to the 2007 mortgage crisis were owned by low-income or minority homeowners. Here’s what writers and experts are concluding from this surprising story.

    * Rich ‘Dumping’ Underwater Mortgages The New York Times’ David Streitfeld writes, “the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population. More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic. By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent….

    * Defaults Are Probably Strategic Business Decisions
    The Big Picture’s Barry Ritholtz suggests, “My best guess is, this is likely due to a more business-like, less emotional approach to home ownership by the top 10% of earners. Amongst the rich, any single home is probably not their biggest single asset — the way it is for most Americans. Hence, any buy or sell decision is more likely to be more rational and less sentimental.”

    * They Have the Luxury to Default Outside the Beltway’s
    James Joyner explains, “the wealthy are more able to walk away from a mortgage and still have a place to live. If you’ve already got two houses, though, you can just move into the other one! For that matter, if you’re wealthy, you’re much more likely to be able to get a second loan on a comparable but cheaper house — levering the housing market’s crash — and then dump the first one. Those options tend not to be available to people making average incomes.”

    * Rich Defaults in California Enjoy Special Protections

    Reuters’s Felix Salmon writes of the wealthy defaulters, “they’re disproportionately likely to live in California, or other non-recourse states where you can default on your seven-figure mortgage without any realistic worry that the bank will come after your other assets.” He sighs, “I think it’s pretty clear which direction we’re headed in, and moralistic exhortations aren’t going to turn the tide.”

    * The Cultural Difference
    EconoBlogger Yves Smith writes, “the affluent are far less burdened by consideration of morality in their financial decisions, including their mortgages.” Additionally, “the rich both borrowed more than in past cycles and took on more risk to boot.” Their defaulting loans and mortgages are for more money and thus are causing more damage to the financial system as a whole.

    * Media Got It All Wrong Liberal blogger Duncan “Atrios” Black scoffs, “It’s a bit hard to comprehend that this housing/foreclosure crisis stuff has been going on for … years already. As is so often the case, the maintstream media got it completely wrong initially, painting it as a ‘subprime’ crisis due to bad behavior by unworthy brown people.” John Cole adds, “I can’t wait to hear how Republicans try to pin this … on black people and Fannie Mae and Barney Frank.”

Contribute to the discussion!

%d bloggers like this: