I’ve seen this is various forms the past few days since Axelrod was on one of the Sunday bobblehead shows, but it will be fun watching this baby grow and metastasize:
I’m so tired of hearing these results-oriented “activists” blaming the President of the United States for all of the negatives in this country.
I mean, he says he’s against DADT that should settle that…he’s only the President for chrissakes.
Just like this nationwide mortgage fraud scandal. Sure, the President’s top advisor said on national television he’s against a moratorium on foreclosures – thus, seemingly siding with the Banking Industry – but the President of the United States has speechified many times against the Banksters.
And that goes for all of you Health Care Reform naysayers. The HCR Law has the word “Reform” in it, dipshits. What else do you want?
Axelrod never came out against moratoriums, he came out against a national, immediate moratorium on foreclosures:
The Obama administration opposes a moratorium on home foreclosures, but wants problems involving improper paperwork resolved as quickly as possible, senior adviser David Axelrod said Sunday.
“I’m not sure about a national moratorium,” Axelrod said on the CBS program “Face the Nation.” He said valid foreclosures with proper paperwork should go forward, and that questionable foreclosures need to be addressed right away.
“Our hope is that this moves rapidly and that this gets unwound very, very quickly,” Axelrod said.
That isn’t taking the side of the banksters, that is taking the side of common sense. What possible use could there be for a nationwide halt to foreclosures?
I can understand selective moratoriums where states deem it necessary, but wouldn’t a nationwide moratorium on foreclosures be disastrous? Is there any precedent for this? Do they even have the authority to wave a pen and halt all foreclosures? Or is this where the magical bully pulpit comes in again?
homerhk
the sad thing is that the “results-orientated” activists actually don’t care too much about actual results – for example increasing healthcare coverage to about 31 million people – if those results weren’t achieved the “right” way, i.e. by punishing insurance companies, bitchslapping republicans and generally wielding the Presidential hammer around in every direction. It may be true that you catch far more flies with honey but the side effect of actually feeding the flies is just too horrible to contemplate. Much rather all out attack even if that means less flies are caught.
steviez314
There is a bloodlust in the country right now.
Where the Right won’t be satisfied until we kill some more brown people (Mexicans, Moslems, Persians, etc.), the Left won’t be happy until we kill some banks and bankers.
No halfway measures, like regulations or policies, but full on death marches.
geg6
Just a guess? Since BoA is the only mortgager that has announced a 50 state voluntary moratorium (which just might lead to the suspicion that they might be the most widespread and egregious of the violators in perpetrating fraudulant foreclosures…but doesn’t prove it!), they not only see great peril (again! and so soon after the last!) but see money going down the drain as their competitors are not hit as hard. So they would have a motive to want cover by having a national, governmentally imposed moratorium.
Regardless, such an action will absolutely implode the real estate market, such as it exists at this point. Talk about your complete and utter disaster.
Or maybe I’m just conspiracy minded.
superking
There is no way to enact a federal moratorium. It basically has to be on a state-by-state and even case-by-case basis. But what we’ve seen is that in the 2000s, the bankers created their own alternative system for keeping track of home loans. It is arguable that our title systems are generally outdated and inconsistent across state lines, but the banks decided that instead of pushing for reform of the laws, that they could simply dodge the laws and make money off of it. For me, there is a serious rule of law problem here, because the banks were allowed to do this.
I know we’re always fighting the last war, and always correcting the last crisis, but we really can’t let crap like this happen again. We can’t let private parties avoid public institutions. I’m getting to a point where I kind of don’t think we should even have a secondary market for loans. Or at least not a national secondary market.
We are fucked, people, really fucked.
superking
@geg6:
BOA isn’t necessarily the worst, they’re just the largest. They are by far the biggest mortgage servicer in the country. They have also tried to be out in front on a lot of these issues as part of their press strategy. They try very hard to be involved in the administration’s modification program, and they tout their successes better than anyone. From my view, the moratorium is part of that strategy, not indicative of their flawed process.
Walker
Yves was one of the people who really started with this. What she takes issue with is this Axelrod quote:
This is possibly just an issue of bad phrasing, but it doesn’t sound good.
Ron
I hope the firebaggers will enjoy the Senate with senators Miller, Angle, Buck, etc, and the house run by Speaker Boehner. Goddamn morons.
Emma
Not to mention that he vetoed a bill that would require courts to accept all sort of questionable documents across state lines in foreclosure cases.
Chase and GMAC have been doing the same as BofA, at least here in Florida. They got their faces smacked here for problem paperwork.
Belafon (formerly anonevent)
The closest things I can see that might come close to matching this are:
1. Truman’s attempt to take control of the steel industry.
2. Nixon’s price controls.
The first one was ruled unconstitutional, and the second resulted in massive inflation when it was lifted. I would say that doing this will probably result in some additional
volatilityuncertainty in the housing market which wouldn’t help.The best the government can do is throw the DOJ at it, and help the states that want to investigate.
dmsilev
@steviez314: How about if we kill some Mexican bankers? Will that be the bipartisan solution?
dms
cybrestrike
@Walker:
Yeah, it looks like bad phrasing, but that’s a problem the Administration has had for a while.
Steve
The scope of the President’s emergency powers is theoretically untested, but I’m talking about a genuine emergency, not “wow, the economy is pretty crappy.” Even something like a bank holiday happens because the banks are federally regulated. The oil drilling moratorium, another outgrowth of federal regulation.
Could the President say something like “no foreclosures on any FHA mortgage”? Not sure. I sort of doubt the legal authority exists.
Congress could pass a law providing for a nationwide moratorium, since Congress is allowed to impair the obligation of contracts if it wants to. Honestly, it doesn’t make much sense as a policy proposal unless it’s coupled with some kind of national workout scheme, and the ship sailed on that one long ago.
But I’m pretty sure the President doesn’t have the power to simply wave his magic wand and make it happen, in any event.
wilfred
Horseshit. The unemployment rate is 9.6% and people are getting thrown out on the street every day – why don’t you ask them what possible use there is? Nah. We’re all just stupid motherfuckers because we just can’t see the light like you can.
Of course, the possibility that Obama may just be pawned by the banks is absolutely crazy, right?
Joe Beese
No, not taking the side of the banksters at all.
Justin
Look, the banks have been running roughshod over the American people for the last decade or so. They’re ignoring all the rules and regulations and pretty much doing whatever will make them the most money. With the crash of housing market and Wall Street, all of their sloppy clerical errors and underwriting became evident. And now they’re trying to fix the foreclosure mess they caused using the same sloppy behavior.
Maybe Obama can’t get a national moratorium on foreclosures, but I’D LIKE TO SEE HIM FUCKING TRY! Can he for once act like he’s on the progressive side; the side of the American people.
I agree that the progressive base is killing their own party, much to their own detriment. But that doesn’t mean that everything Obama touches is gold. He needs to act like he’s trying to help Americans, and not act like being bi-partisan is the path to nobility.
John Wayne +1
Punchy
If you think the outright graft, theft, corruption, and fraud that is rampant in FL will stay in FL, especially when lawyers see what their colleagues are raking in, you’re insane. This will spread like smallpox to other states. Nationwide ban until the banks come clean is necessary.
wonkie
John, you are right.
But…
The thing is the Magic Bully Pulpit is an effective political tool. Being magic, it doesn’t effect real events, but it does effect perceptions. And in politics perceptions matter very much. In fact, to many voters, magically-produced perceptions matter more than reality.
I don’t know if Obama could actually call a moratorium or not, but looking as if he had called one would be a smart political ploy that might get more votes for our team and translate into a race won here or there which would have a real effect on policy.
This particular issue mighht not be the best one for the use of the Magic Bully Pulpit, but that doesn’t mean the Pulpit shouldn’t be used.
It’s magic is that it gives the impression of strong leadership and lots of people like that. They like it even if they can’t tell the difference between real leadership and the mere impression of it.
The magic Bully Pulpit is a tool and it is one that Obama does need to use more often.
Steve
@Walker: I would call that good phrasing. Freezing all the bad foreclosures would be reasonable. Freezing all the foreclosures, both good and bad, seems like a dumb idea, as Axelrod said.
homerhk
Walker, sorry I’m being thick but what’s bad about that sentence?
Michael
How dare you expect the heroic progressive mouthpieces to actually get out and sell progressive ideas to the general public, when they can instead lazily whine to elected officials about it, and then work to tank the elected officials for catering to the whims of a public that doesn’t want to understand the benefits to progressive ideas?
Walker
I stand corrected. The quote is from David Stevens (FHA), not Axelrod. My bad.
TJ
You’re complaining about the left again when your Dem gov wannabe is shooting holes in the HIR bill on TV? Really tough to take the conservadems seriously.
Why don’t you ask the admin to stop putting their feet in their mouths during an election season? Try just not talking on TV.
Omnes Omnibus
@Punchy:
Try to buy or sell a house if that happens. You won’t be able to because no mortgages will be offered.
Walker
@homerhk:
The problem is if you read this having followed the mess going on in Florida, and what appears to be a complete lack of due process in order to keep foreclosures going. A superficial reading of this statement makes it sound like the administration agrees with the sentiments of these courts.
It is probably bad phrasing, but I am seeing a lot of people take it this way.
Bullsmith
The banks are committing fraud, fresh on the heels of getting bailed out for….. committing fraud. This is a big big problem that causes an enormous amount of anger. That anger would be much less intense if perhaps a couple of bankers were facing fraud charges but so far the accumulated jail time for all malefactors in this entire crisis appears to be zero.
So the charge of being in the pocket of the banks is sort of already sitting there, waiting to be applied to anyone in government who seems to be downplaying the ongoing crime fest. This is sort of politics 101. The admin doesn’t need to jump on the national moratorium bandwagon, but it would be expedient to do something other than say “we understand no one likes forcible anal penetration, but we hope the banks will get this over with very, very quickly.”
Nick
@Justin:
No, no you wouldn’t
EDIT:
Actually, you probably would, so you can whine about how its all election year kabuki
Justin
@Nick
Yes, yes I would.
EDITED TO ADD:
Thanks for offering no substantive rebuttal to my argument. You and Cole are made for each-other.
wilfred
@Omnes Omnibus:
So? I bought and sold one house and bought another with the owner carrying the paper in each case; me when I sold.
There are other possibilities. People are just conditioned to think that banks are indispensable – they’re not.
superking
@Steve:
How about we freeze all the foreclosures until we figure out which ones are good and which ones are bad?
Montysano
Gawd almighty, what a mess is created when outright fraud is allowed to run rampant for several years.
Would a national freeze on foreclosures cause the banks to crash? There’s no way to know, since most financial derivatives were, and still are, outside of any meaningful regulation. Whocoodanode that having a multi-trillion dollar shadow banking industry would cause problems?
Karl Denninger is right: until the “bezzle” is flushed out of the system, we’re fucked. And flushing the bezzle, if even possible, will not be fun.
New Yorker
PUBLICOPTIONPUBLICOPTIONPUBLICOPTIONPUBLICOPTION
Omnes Omnibus
@wilfred: Seller financed sales are possible, as your case indicates, but a move to that as a system will probably crash the housing market completely.
Montysano
@superking:
What if it’s not possible to do this? Try to wrap your head around that scenario.
mclaren
To halt the massive ongoing criminal enterprise of fraudulent foreclosure mills?
I’ll take “Cole doesn’t have a clue about the extent of foreclosure fraud” for $400, Alex!
Michael
@wilfred:
Fucking dumb shit. You really want to hose the real estate market for all time? Gosh, I can’t imagine what a legal moratorium would do for those who have HELOCs that they routinely draw on, considering that 80% of mortgage loans are compliant and current.
Do me a favor, “progressive activimist” – quit voting and more important, quit talking. You’re obviously too fucking stupid for the task.
homerhk
Walker, what I understand you and others to be arguing is a moratorium on foreclosures on the basis that a proportion of foreclosures – somewhere around 20% I have read – in Florida have had serious procedural issues. What about the remaining 80%? are you just against foreclosures per se? I know that it is a horrible thing and I wish we could stop them all but is it really true that all the people being foreclosed upon have been duped? can’t some of them be people who overreached and now can’t afford the payments? When I bought my flat with my wife in 2007, I was offered a mortgage of 7 times our joint salary. I thought that was crazy and told the guy that if he lent me that much I wouldn’t be able to make the payments. But, what if I had taken that loan and now found that I couldn’t keep up the payments? I don’t know whether this puts me on the side of the bankers or main street, but I think it’s not too much to ask for people to have a certain responsibility where possible.
Steve
@superking: There have been a lot of Ponzi schemes in the news lately. How about if we freeze the securities markets until we figure out which investments are sound and which aren’t?
Who is “we” in your scenario? Is the Foreclosure Czar going to personally review the paperwork from every foreclosure around the country and say “hmm, your notary stamp looks valid, I guess you can proceed”?
I’m not sure if a federal remedy is necessary in order to deal with the fraud that’s been occurring in state court foreclosure proceedings, but a nationwide foreclosure freeze would be like using an atomic bomb as a flyswatter. We’re not going to fix the economy by grinding an entire sector to a halt.
Michael
@Justin:
Drenched with bone-numbing stupid. Jesus Christ, it really is spreading.
Nick
@Justin:
You want a substantive rebuttal? Here’s one I’ve been making for weeks.
YOU PEOPLE NEVER GIVE HIM CREDIT WHEN HE DOES ACTUALLY TRY. Why would this be any different?
The last few months proves when you say you want him to at least “try,” you’re bullshitting.
Left Coast Tom
Foreclosures are really a state matter, but I can think of three federal roles here:
1) It’d be nice if Fannie and Freddie were required to stop using what appear to be bottom-feeder law firms. The federal government controls them now, this should be something the federal government could require.
2) Some federally chartered banks appear to have adopted perjury as a business model. Considering the interstate nature of the banks in question, I think some federal perp-walks would be in order, even if the courts in question are state courts.
3) This seems like it’d be a great first test for the consumer protection agency Elizabeth Warren is supposed to be setting up.
At this point I don’t think a national moratorium on all foreclosures would help with any of these roles.
General Stuck
I like threads that cause the nihilistic crazies to surface so we can get a good look at them and it. Well played Cole!
wilfred
@Michael:
Go fuck yourself. Apologist for a decaying, dead system that has brought misery to more people than ever before. Defend it all you want, it’s days are numbered, along with its apologists.
Dick Durbin had the balls to tell the truth. People don’t need banks – politicians do.
Michael
@Omnes Omnibus:
Of course, with the moratorium on foreclosures, it isn’t as if the sellers would have any security in the sales of their homes. The aftermath of all this progressive “win” will be be awesome – we can go to scavenging dumps for remnants of food in cans, but you’ll be able to buy a house for three dead rats and a scrawny chicken.
Justin
Jesus Christ, people. Instead of just calling me stupid, could you please explain to me why it would be so bad for Obama to call for a National Moratorium on Foreclosures. Oh right. You can’t. Because, you don’t know why it’s bad. You just can’t imagine anyone attacking your fearless leader.
Whatever. No one ever accused John Cole of having the brightest readers.
Matt Taibbi is right. This country has a peasant mentality, and we won’t be content until the banks own everything.
wilfred
@General Stuck:
Nihilism is buying a house without cringing before a bank manager.
Right. Cliffside is approaching.
Pink Snapdragon
One big reason Obama can’t issue a moratorium on foreclosures is that real estate law and foreclosures are matters of state law. The federal government simply doesn’t have jurisdiction over them. To do anything the federal government would have to find some legal basis under federal law. Since Fannie Mae and Freddie Mac, which we all should remember we own, are heavily involved in this, although you do not see them mentioned very often, perhaps he can find some hook there, at least for mortgages those entities are involved in. It has long seemed quite wrong to me that these government entities are involved in the sorts of denial of due process and fraudulent documents that we have been reading about for months. They are intimately involved in what is going on and they should be held accountable for their actions.
homerhk
@Justin, @Nick (for support),
When Obama doesn’t TRY (must be in caps…) do you think that he does so because (a) he just likes to piss on progressives and enjoys seeing people kicked out of their homes, (b) he is in hock to bankers as they all gave him about 1% of his campaign cash or (c) because he has considered the issue carefully and decided it’s not the best course of action for a variety of reasons, one of which happens to be that he doesn’t want the housing market to crash further which would lead to a further recession, which would lead to further job losses etc etc.
Do you reject (c) because Obama can’t possibly know more about this than you or some blogger named Yves or other members of the blogosphere?
If you answered (a) or (b) to the question above and Yes to the final question, congratulations, you’re an idiot.
Nick
@Justin:
could you like read the comments on this thread, there are people making that case. You’re just not paying attention because it doesn’t fit your professional lefty Obama-hate mentality. God forbid there might be a valid reason the administration is right.
General Stuck
@wilfred: No. nihilism is burn it down, all of it. And worry about the consequences later, after the pyrrhic victory celebration dining on sparrow under the bridge. It’s all you wilfred, and your shown ass.
eemom
@General Stuck:
It’s like the epidemic of stink bugs currently happening here in the northeast, right down to the icky smell they make when you squash them.
Michael
@wilfred:
*snore*
Dumb is skin deep, but stupid goes to the bone. I realize that the bloody fucking revolution you’re trying to foment is supposed to raise up the masses in peace and harmony and that the “Peace and Reconciliation” commissions that you imagine will meet in the rubble that used to be Wall Street will bring joy to all, but the reality is far different.
You’ll be lined up on a wall by a drumhead tribunal, after being shanghaied against your will and dragged to our new national capital of New Jerusalem, formerly known as Columbia, South Carolina.
mclaren
John Cole went on to ask:
Now that’s an excellent argument. There was no precedent for TARP, so the sensible thing to have done would have been to let the world financial system collapse. No precedent, no action. Good thinking. We can retreat to caves in the hills when the banking system freezes up and we can spend our time banging rocks and eating dirt because the world financial system just disintegrated.
While that’s an excellent piece of reasoning, the implication that the federal government doesn’t even have the authority to halt ongoing rampant lawbreaking by fraudulent foreclosure mills is an even more impressive line of argument.
That one, I really like. Bank robbers should use that argument. You can stroll down the street blowing out the windows of banks with your shotgun and walk in and grab some money off the tellers’ counters and then when a cop runs at you with a gun you can laugh, “Do they even have the authority to wave a pen and halt these kinds of withdrawals?”
Clearly not. The federal government has shrunk down to a wart on an ant’s ass, apparently, and now lacks even the power to enforce the law. Hallelujah! Praise the free market and pass the fraudulent foreclosure affadavits. Arrrrrrrrr! Shiver me timbers, matey, it’s clear sailing ahead.
Steve
@Justin: It would also be a great idea for Obama to call for everyone to get a pony. Can you argue against that? Of course you can’t! People like ponies, and it would show he’s on the side of pony-lovers. I think he should get right on that.
Svensker
@wilfred:
I’ve got mine, fuck you? Yeah, brilliant idea to put the country on a cash basis and do away with banks overnight. Would do WONDERS for the housing market and then the economy. When we put our house on the market in a few weeks we’ll be more than eager to carry the mortgage ourselves, yessirree.
Ron
I do not understand the idea that ALL foreclosures ought to be halted, period. Yes, there are some that ought to be halted because of questionable documentation. On the other hand, “I can’t afford to pay my mortgage because I lost my job” isn’t a reason to stop the foreclosure. It sucks, but mortgages aren’t and shouldn’t be “pay when you can, and we understand when you can’t”. I think when possible it makes sense to restructure loans, especially the ones that were really ridiculous. But nothing can really be done to help someone making $50K who has a $200K mortgage.
Justin
If you consider how much love the Federal Government gives the banks right now through the Fed Discount Window, interest rates and through TARP, it would be very easy for the government to put pressure on the banks to stop all foreclosures. If of course, they really wanted to put pressure on the banks. (which they don’t)
Second, the Federal Government owns Fannie and Freddie. And they own roughly half of the home mortgages in the country. So stopping foreclosures on that end would be simple.
Third, since when does rule of law really stop this government from doing anything? see Glenn Greenwald.
Montysano
I’ll admit to knowing enough about this to know that I don’t know very much about this.
A question: is the soundness of a mortgage affected by the dicing, bundling, and securitization of said mortgage? I’m hoping the answer is “No”.
Ron
@wilfred: People don’t need banks? Um, bullshit. I personally happen to like having a house and think it’s perfectly reasonable that I took a loan out so that I can live in my house. Do you really believe that nobody ever needs a loan? Do you really think its practical that everyone keeps their money in a jar and pays cash for every bill? This has to be one of the dumbest things I’ve ever seen.
Omnes Omnibus
@Ron: Yes, basically arguing against a blanket moratorium on all foreclosures =/= arguing in favor of foreclosure fraud.
Justin
It would be nice if Obama and the Federal Government put the same amount of effort into stopping foreclosures that they put into assassinating Americans, bailing out Wall Street, torturing prisoners and escalating foreign wars.
Thank-You and I’m Out!
Bullsmith
The national moratorium may be a terrible idea, maybe the worst idea in the history of the whole world, but the fact remains that the status quo is that fraud goes unpunished, even when it’s exposed to the light of day. Notice this current foreclosure mess is happening right after financial reform, and yet no one is even mentioning the new law as in any way relevant or helpful to the issue of banks committing fraud.
The problem isn’t whether to have a moratorium or not, it’s whether to have a rule of law that applies to bankers too. Right now both parties are clearly and firmly dead set against any kind of accountability. The DOJ’s had a couple of years to look at mortgage fraud, any charges laid yet? No. Civil suits are coming from defrauded investors, but the federal government from all appearances works for the banks. On the bright side, they’re completely bipartisan about it.
Ron
@mclaren: I don’t think John ever said that the government doesn’t have the authority to stop foreclosures based on faulty paperwork. He said, and I agree with him that they don’t have the authority to simply halt all foreclosures. TARP is a completely different animal. TARP had to do with authorizing funds from the federal government to be loaned. Yes, the housing/mortgage situation is a disaster right now, but I don’t think the response is to just stop all foreclosures, even including legitimate ones.
Nick
@Justin: I see you decided to not take on the “crashing the housing market will trigger another recession and more unemployment” argument. Telling.
wilfred
@Ron:
I bought 2 houses and sold one with the owner carrying the mortgage; me in one case. It must be.
@Svensker:
What the hell are you talking about? I’m suggesting an alternative for people who don’t want to deal with banks. It involves trusting other human beings and keeping your word. It worked for me. But you’d better not try it.
It’s a big world out there. You’re all so pathetically mean spirited and despairing because you can’t imagine any possibilities beyond the dilemmas constantly thrust in front of as either/or propositions.
Omnes Omnibus
@Justin: Shorter Justin: Look over there! Something shiny!
DecidedFenceSitter
@mclaren: Dude, at least to me it sounds like people want Obama to wave a pen (i.e., executive order or some form of regulatory ban ala the deep-water drilling moratorium) not make a law, which is what the TARP was.
Obama and Congress could probably do a national moratorium ban on foreclosures if there was political motivation to do so in the Senate.
But there isn’t.
kc
I’ve seen so much idiotic, uninformed commentary on this one issue on liberal blogs that it makes me want to bang my head on the desk. Or just give up altogether.
superking
@Steve:
The housing sector isn’t moving in any case, Steve, so there isn’t much harm here. And yes, we should have someone looking over securities to make sure they are valid. That person is called the Securities and Exchange Commission. On the foreclosure level, it’s judges. There is no effective foreclosure process in this country. On the one hand, we have 27 states with a non-judicial process where your mortgage servicer can sell your home without ever proving a default. On the other hand, we have 23 judicial states where judges are so overwhelmed that they disregard legitimate defenses to foreclosure and where individuals are often subject to default judgments on the mere allegation of having fallen behind on a mortgage.
There really should be a process where the foreclosing party has to a) prove default, not merely allege it, b) prove standing to foreclose, not merely allege it, and c) lenders are forced to discuss loss mitigation before going to a foreclosure sale, and d) the entire process is overseen by a neutral arbiter that is willing to enforce the rights of both parties.
Your proposal seems to be to let all the wrongful foreclosures go forward for fear of slowing down a market that has been dead for three years. What country are you living in where it is acceptable for people to not follow the law?
kc
@wilfred:
Bully for you. That is not an option for most sellers.
Omnes Omnibus
@wilfred: It worked fine because you paid. If in this type of transaction the debtor stops paying, for whatever reason, what can the lender do? Restructure, ignore, or foreclose, right? If you halt all foreclosures, the individual lender who sold his own house loses a remedy.
Aggressive steps to stop and to prosecute foreclosure fraud are needed. I just think the risks to the economy of a total moratorium on all foreclosures outweigh the potential gains.
cat48
The economy will implode again if a moratorium is called & it drags on forever. There’s a long economic explanation for it, but this foreclosure drain has been going on since 2007 & the economy will not improve until they are all worked thru. Read an Econ blog…it’s pretty damn scary. If O’s going to walk & leave Joe in charge, now would be the time to desert ship. It is so over for him & the economy anyway….the cake is baked. He didn’t cause this shit; but our “politically engaged elite hate the man & he will be blamed.”
Kirk Spencer
@Michael: What you seem to not understand is that the housing market is already hosed. It’s just taking time to realize it.
What MERS did was create a second set of books that allowed financial and property actions to be tracked without being recorded on the official books. Every property that went through their hands — and that’s an estimated 60% of all current home loans — is tainted with questions of true ownership. MERS isn’t the big crook here, it’s just the accountant for them.
It is going to take major action to clean the titles to the properties. A lot of innocents are going to get hurt in the process. The thing is that fewer will be hurt in the cleaning than in allowing this to continue.
What, you don’t see how that’s the housing market? OK, let’s make two distinct examples.
Example one: selling a house without clean title. Your buyer has the distinct risk that someone with a title will show up and take the home, for which the buyer has no recourse. It makes people less willing to purchase.
Example two: the foreclosure craze. Servicers are pushing foreclosures because servicers get more money from those than from workouts, even if the workouts go to full maturity. The problem is that foreclosures have two negative effects on the market. First, they increase supply of homes, and they’re lower priced homes at that. Second, they tend to create bankruptcies which decreases the number of buyers available. So increased supply plus a decrease in the number of buyers leads to a severely depressed housing market.
The housing market is already hosed. It needs fixed. That bit about fucking dumb shit? Maybe you need to look in a mirror.
General Stuck
How to make the changes necessary without setting off a chain reaction in the economy that melts it down, and us with it? All the while, 100 percent opposed by the opposition party and media, and some numbnuts on your own side.
Why any sane person would want to be president right now is beyond me. It’s like shoveling shit in a windstorm always in your face.
Kirk Spencer
re a foreclosure moratorium…
Ironically, I think it’ll actually benefit home sales.
The supply of very cheap houses will be stopped. The depressive effect of bankruptcies will be reduced. This means you’ll have more people able to buy who will have a significantly reduced pool of houses available for purchase.
Pink Snapdragon
People, you are seeing trees, not the forest. The problem goes far beyond mortgages in foreclosure. The problem potentially involves all mortgages that have been securitized, whether in foreclosure or not. At the end of the day, you have to have a clear and complete title trail when you sell or buy real estate. People are locked on the fraudulent documents being used in foreclosures, but the paperwork involved applies to all mortgages. The securitizers didn’t just lose/destroy the mortgages for loans in foreclosures — they did it to all of them. That means that the problems here extend to everyone who holds a mortgage that has been securitized. The entity that says you have paid off your mortgage is no more likely to have the documents and paper trail to say that it is paid than they do to start a foreclosure. So one of the big problems here that people aren’t yet talking about is that there is going to be a real problem showing clear title to property, and that means that title insurance companies, (which by the way, are undercapitalized anyway) aren’t going to write title insurance.
The banks made this mess trying to be too clever by half. They need to pay the price for this.
mclaren
@Montysano:
I’m afraid it very much is. One of the basic problems here is that assignees like MERS are foreclosing on the basis of part ownership of repackaged securities which contain only a tiny sliver of the mortgage in question. Most of the nominal owners of those repackaged sliced-and-diced subprime mortgages can’t foreclose because they’ve gone belly-up: for example, Washington Mutual, which owned vast numbers of subprime mortgages. Owned being the operative word here: WaMu originated the mortgages but quickly sold ’em off to other financial groups which sliced and diced those crappy subprime mortgages and packaged ’em together with many thousands of other bits of other subprime mortgages, and then those agglomerated financial instruments were in turn repackaged and sold off to yet other parties.
As bank after bank has gone broke, like firecrackers blowing up in a chain, only the skeezy assignee far down the line of ownership even remains solvent in order to try to press foreclosure proceedings. Many a homeowner has stalled foreclosure by demanding of the process server, “Show me the proof that you own the note.” Unable to do so, the process server goes away. Then the bogus financialized securitized subprime mortgage (actually just a tiny sliver of one bundled with many other tiny slivers of many other bad mortgages) gets sold for even fewer pennies on the dollar to even skeezier foreclosure mills, and the process begins over again.
When the last man standing goes into court to foreclosure it’s by no means certain who owns how much of any given subprime mortgage, or whether the assignee even has legal standing to bring foreclosure proceedings. Because, you see, the title has been clouded by all the slicing and dicing and reselling and repackaging of the original mortgage.
That’s the entire point here. The foreclosure mills are making out fraudulent affadivits because they don’t have a clue who actually owns what part of the mortgage they’re trying to foreclose on. Nobody does. It’s a Mexican fire drill. The damn mortgage market has undergone the financialization and securitzation that blew up the whole stock market with those CDOs 2 years ago.
People, you had better understand that whether or not Obama or the DOJ or Liz Warren’s consumer protection agency shut down these foreclosures, our legal system is in the process of shutting ’em down right now. Judges are throwing out affadivts and ending proceedings en masse in state after state because the judges are pointing out that the MERS assignees don’t even have legal standing to foreclose since they aren’t owed any money.
This whole Mexican fire drill is grinding to a screeching halt not because of point-headed lib-er-al in-tell-eck-shew-als with bleeding hearts, but because judges are demanding to know exactly who owns the mortgage note, and the lawyers who are trying to foreclose can’t answer that question.
Source: “Florida Lawyer Warns of Deepening Foreclosure Mess,” Kevin Gray, Reuters News Service, October 6, 2010.
In fact, the lawyers who get asked by judges who actually owns the note on the property they’re trying to foreclose on typically say “It’s impossible to know, your honor.” These subprime notes have been sliced and diced and repackaged and resold to the point where nobody has a ghost of a clue who owns what. Even if the courts didn’t shut this process down, the title insurers are calling a halt to it because they’re refusing to insure titles that get transferred in these proceedings.
Why? Because the title is so clouded that the schmuck who buys a foreclosed home can’t be sure s/he really owns it. That’s not a “technicality,” that’s not bleeding-heart-liberal-impracticality, that’s the entire system grinding to a halt because the process has fallen off a cliff.
Source: “GMAC troubles threaten to halt foreclosure sales,” Kimberly Miller, The Palm Beach Post, September 24, 2010.
Michael
@Kirk Spencer:
Another fucking moron heard from.
I do some foreclosures for seller financed homes. I also do a bunch of lien work, enforcing and foreclosing to collect mechanics’/materialmens’ liens, and have, in the soi-disant past, done some closing work.
I was bitching about MERS before bitching about MERS was cool, but got zero traction with courts at the time. Don’t even fucking tell me that I don’t know what’s going on – I had A-grade mortgage guys moaning back the shoddy players in 2007, not to mention the contract underwriters and appraisers whisper about pressure from all the pissant mortgage brokerages that sprang up from nowhere.
Steve
@superking: Wait, so because I don’t want the federal government to freeze every foreclosure proceeding in the country, that means I want “to let all the wrongful foreclosures go forward” and I believe “it is acceptable for people to not follow the law.” That’s some amazing strawman you’re kicking the crap out of, over there.
You mentioned that we have an agency called the SEC to combat securities fraud. Quite right. Now, do you see the SEC ordering a blanket freeze on the securities markets because there’s been a recent episode of Ponzi schemes? Funny, you don’t see anything like that, probably because it would be insane.
Now, could we create an agency akin to the SEC to oversee the state foreclosure process and go after people who commit foreclosure fraud? Maybe. I’m not convinced there’s something intrinsic about the housing foreclosure process that requires dual state/federal regulation, though; what we’re going through now strikes me as more of a short-term crisis. Rather than set up a whole new agency, I’d probably ask Congress to grant the DOJ some additional tools to empower it to go after foreclosure fraud at the state level. That seems more reasonable to me than the overkill that a national ban on foreclosures would represent.
mclaren
@Pink Snapdragon:
Exactamundo. Finally! Thank you! Someone gets it.
Justin
@Omnes
Heh. True Story.
@Nick
Yes, another housing crisis will likely cause increased unemployment. But we’re getting another housing crisis whether we want it or not. The government can’t continue to prop up housing prices. They tried with the tax credit for new buyers, and that stopped the bleeding for a short time, but they could never keep that going forever.
We’re about to see home prices drop another %5-10 nationally. And since housing usually leads the country out of a recession, this means that we’re in for increased unemployment and more foreclosures.
I tend to follow the Krugman/Atrios philosophy that since consumer demand and housing aren’t going to get us out of this recession, then we need a massive stimulus plan, focused primarily on improving the country’s infrastructure. Again, I know that Obama can’t probably get anything like this passed through the Congress, but it be “ear delicious” if I could at least hear him talking about the pressing need for more stimulus. (And yes, he has definitely improved on this subject the last few months.)
Bottom line: The Economy is to Obama what Iraq was to Bush. He’d better figure out a way to improve it in two years, or you can say hello to President Romney.
cat48
This was the simpilist explanation I read at first & then continued on. It’s at Ezra’s blog….(Rortybomb.com gives a very detailed lesson which I havent finished) Ezra & Rep Brad Miller:
BM: Right. They’ll have to buy them one mortgage at a time. Someone said there might be a second round of bank insolvencies because of this and there might need to be more TARP. There is no chance that Congress would pass more TARP.
EK: What does this mean for the economy? When people first hear about it, it almost sounds good. No more foreclosures? Great! Let the banks suffer for a while.
BM: It’s kind of easy to take pleasure in all this and think the banks are being hoisted on their own petard, but it’s all bad for the economy for the mortgage market to be in such turmoil, to not know whether the right to foreclose will be enforceable. It’s a great deal of uncertainty and makes it much harder for private investors to get back into the mortgage market. It will probably make home buyers more uncertain because there’ll be a lot of mortgage holders who are not going to be paying their mortgages or be foreclosed upon.
I don’t think any member of Congress has been more critical of the Obama administration to do more about foreclosures. I introduced the cram-down legislation, I’ve written pieces saying TARP funds should be used to buy mortgages and modify them. I’ve been very vocal that the housing sector is an enormous part of our ongoing financial pain. But this does not accomplish the solution to the mortgage problem. It’s hard even to see how it ends. But I’ve got to think it creates more uncertainty about the health of the banks. [Treasury] Secretary [Timothy] Geithner testified before the Financial Services Committee a few weeks ago and I asked him whether this litigation had been taken into account in the stress tests, and he said he wasn’t sure. At the least, we now have resolution authority that we can take out for a spin.
EK: Granting that Congress won’t touch anything like TARP, could it create any momentum behind addressing the housing market in a more systemic way? It seems to me that there’ll eventually need to be some action to let banks work off their contracts, but at the same time, there’s no way Congress can let the banks off the hook here without helping homeowners. What about something like “cram down,” where homeowners can go to court to get their principal brought down?
BM: The politics of bankruptcy modification was that every Republican was against it, and then we lost a lot of Democrats. We got it through the House, but it had a lot of compromises, and it was very hard. It failed in the Senate. Senator [Richard] Durbin [D-Ill.] was its champion, and he says he thinks we’ll eventually come back to it. He hates the term “cram down,” by the way. But if we lose several seats in the Senate, it’s hard to see them getting the votes to do that with every Republican being against it. I think we’ve got a terrible economic problem at a time in our politics when we have political paralysis.
Scott P.
Fine. That’s a state issue. Go bitch about it to your state reps and your governor. Obama has nothing to do with it.
Cat
@Omnes Omnibus:
Listen, The only people making mortgages are people planning on selling them to the GSEs. The GSEs are the only people buying mortgages right now. The can continue to buy mortgages even if their is a halt on foreclosures because they are GSEs.
You want to see imagine real disaster? Think about what would be happening right now if the GOP had manages to get the GSEs killed.
El Cid
@mclaren: I would like to mention that once I actually saw a Mexican fire drill, and it was quite orderly.
Montysano
@mclaren: Thanks a million for that.
And further: if I understand correctly, because of the Commodity Futures Modernization Act Of 2000, the whole CDS/CDO market is completely outside of any regulation (and remains so even after Fin Reg), meaning that any attempt to sort this out will be virtually impossible.
Between the CFMA and Gramm-Leach-Bliley, Phil Gramm has visited quite a pile of misery on our heads.
Kirk Spencer
@Michael: I believe you are in the industry. Those seem to be the people who don’t try to argue the facts but instead tell everyone the other side is just a bunch of “fucking morons”.
What’s actually funny is the rest of your comments actually tend to support my (and the others you’re calling morons) position. MERS system is screwed up, and it’s causing complications everywhere.
bayville
And I hope I hit the lottery for $25 million tomorrow.
The fact is these banks – many of which, incredibly, placed a moratorium on themselves (think about that)- have been committing fraud. Fraud!
The victims are tens of thousands of homeowners. The banks have passed the Notes around so much they’ve lost track of them.
How many? Who knows?
And, as inferred by Axelrod (and Scheiffer), Who cares? As long as “this gets unwound very, very quickly.”
Yup, you’re right. The President has no real power in this instance. All those Executive branch departments such as FHA, DOJ, HUD…just cute Acronyms with no real power either.
The feds need to find out who has been committing the fraud. It’s a long process that shouldn’t be “unwound quickly.” Make a case against them. Prosecute them. If their entity goes belly-up – so be it. Should’ve had better, more honest people running the company. That’s the price you pay when you commit Fraud.
There are a lot of banks out there that can fill in the void.
Unfortunately for the masses, that’s not going to happen.
El Cid
@Justin: Roubini had been saying from the very beginning (maybe earlier, I don’t know) of the global near-collapse that until housing prices generally dropped about 25% on average of their inflated value, the housing market would not recover.
Nick
@Justin:
And so your solution is, what? nuke the place?
Yeah well all agree with that, what does this have to do with a nationwide foreclosure moratorium?
El Cid
I don’t quite get how any company can pursue a foreclosure if they can’t clearly prove that they own the house. I mean, I’m sure that there are procedures under which it does happen, but it goes against a sort of basic logic of proof of ownership.
All sorts of poor people over the centuries have had land stolen from them under the argument that they didn’t produce a legal document of a title to their land.
Kirk Spencer
My personal mencken solution (simple, obvious and wrong) would be to change all existing home loans to unsecured loans and watch the dominoes fall.
The people who cannot afford their homes still face bankruptcy and eviction. The people who can pay and want to keep their homes, can.
The major hammer hits the various instruments built on the mortgages. They’re still based on those notes, but the underlying notes are no longer secured. That’s ~$8Trillion in direct notes and another ~$1,300T (estimated, and yes, that large) in derivatives. The collapse would have inevitable consequences.
superking
@Scott P.:
Scott, please review every comment I’ve made on this thread and show me the one where I said Obama should do something about this. That sentence I just wrote is the first one where I even mentioned Obama.
I hate arguing with morons.
Kirk Spencer
@El Cid: It depends on the state law.
For example, there’s Georgia, which is one of what I call the ‘greased skids’ states. In that state the servicer can act on the behalf of the lender (or note holder) even if that entity cannot be clearly identified at the time the foreclosure is begun. Further, the servicer is the servicer unless and until the note-holder orders a change. Finally, it’s a non-judicial state where foreclosures can be done without touching a court beyond the steps at the time of the sale.
superking
@Steve:
Steve, you are dumb. Please see my initial post on this thread. It’s the 4th post.
mclaren
@cat48:
It’s unclear what this means for the economy. The whole situation is complicated, both legally and financially.
In many cases the banks aren’t trying to foreclose for two reasons — one, often the original bank has gone belly-up and sold off the securitized note to someone else, and it’s someone else who bought the securitized mortgage for pennies on the dollar who’s trying to foreclose. For instance, some law firms combine with collection agencies to buy up almost-impossible-to-collect bad loans. Most of these loans will never be recovered, but it, say, 5% of them can be recovered, then paying 2% of the net value on the outstanding balance is still a good profit-maker. But this recession is so bad that even those bottom-feeding types of law-firm/collection-agency outfits have gone broke because they can’t even collect on 5% of the bad loans they bought…so they wound up reselling those securitized mortgages to even lower bottom-feeders.
The second issue is that banks are still locked into extend-and-pretend. The longer banks can avoid foreclosing, the better off they are financially because that means they don’t have to write off the loan as a bad debt. As long as bank doesn’t foreclose it can technically carry the loan as an asset on its books. That makes the bank look more solvent than it is. As a matter of brutal fact today, most of America’s financial institutions are insolvent. The amount of debt outstanding is so much bigger than the financial institutions’ assets that they’re completely underwater. Citigroup, B of A, GE Financial, you name it…they’re all bleeding red ink for every orifice. The only reason our entire financial system hasn’t completely melted down yet is that all these financial entities are playing accounting games to make it seem like a lot of those bad loans aren’t really bad. They can do that with extend-and-pretend, by extending new terms to the mortgagee and rolling over the loan and not calling it in and basically doing the fast shuffle to avoid foreclosing.
So not foreclosing is actually a benefit for the financial institutions. The longer they can extend and pretend, the greater the likelihood that they’ll make enough money off the carry trade of borrowing at essentially zero interest from the Feds’ discount window and then charging some real interest rate to their customers to pay down all those bad loans. That’s why the Fed is locked into this death spiral of near-zero interest rates: if the Fed didn’t do that, the banks and other insolvent financial institutions would have no way of making enough money to ever pay off those bad debts, because normal loan activity in this recession just isn’t going on.
Also, if foreclosures get halted or significantly slowed down, the fall in home values will be forestalled, at least for a while.
People who talk about the danger of insolvency of the entire American financial system if the foreclosure process shuts down need to get a clue. The entire American financial system is already insolvent. There are so many mountains of bad debt in black holes like GE Financial that there’s no possibility these entities are actually worth more in assets than their outstanding debts. The rot behind the walls of the global financial system is pervasive. It’s a complete Potemkin village situation. There are currently some 65 trillion in toxic loans outstanding in the “shadow banking system,” meaning the securitized CDO secondary market, which is exactly what we’re talking about when we bring up these sliced-and-diced repackaged mortgages. These kinds of financial instruments can’t even be valued, because no one knows what you actually own when you buy a piece of one of these securitized repackaged mortgages that’s passed through three or four or five or six different buyers before it got to you.
El Cid
@Kirk Spencer: Like I said, I get that it can be legally done — I meant that it’s just basically wrong in concept. But then, corporations are people, just superpowered, virtually untouchable ones.
Cat
@El Cid:
All you need is a Lawyer willing to file an affidavit notarized by a Notary willing to let anyone use their stamp on a document prepared by some $12 an hour drone who is willing to say anything to make ends meet.
It doesn’t take long for these 3 people to find each other when there is $$$ to be made.
The rich and powerful will continue to steal from the lower classes because the system is biased in favor of them.
Michael
@El Cid:
Gutless, lazy and craven conservatard judges. There really has been an epic change – they’re afraid of being deemed “liberal”, and the vast majority of them have bent over backwards to coddle institutions in all sorts of litigation – insurance, banking, finance and the like – all in order to screw individual claimants. For me, I see it as a fundamental issue of standing – but they get caught on the whole “free house” thing.
Had they dealt with it honestly early on, and not been terrified of being seen as “giving somebody a free house”, this would have been contained at a much lower level. Instead, being lazy, they punted it over and over again.
Despite those who say that it is the end of the world and we need to go ahead and blow it up, this really is resolvable on a title basis, but there will have to be some adjustments to lien priorities along the way.
Zandar
I’ve written extensively on this over at my place. I think like B of A, the banks will have no choice but to do this voluntarily.
TJ
@Kirk Spencer:
No action probably required. This could be the trigger that blows up the “mark to myth” derivatives the big banks (and the Fed) hold. Well, denial worked for Geithner for two years, maybe he can keep it going a while longer. Or maybe the Fed can move up QE2 a month.
ricky
Ninety comments and not one idiot gets it. Obama can’t doing anything becasue Rahm left.
Scott P.
Sorry, it’s impossible to keep track of who’s who without faces.
Steve
@superking: Maybe I’m as dumb as a box of hammers, but I don’t think I could ever write anything as dumb as your comment #29. Possibly you should have quit while you were ahead.
ricky
@Montysano:
I have long fantasized that the reason the Obamacrats failed to move on Cheney was they were saving their political and legal capital for the trial of Phil Gramm. After which they deport Wendy.
cat48
superking
@Steve:
Maybe I’m dumb, but I’m having trouble understanding what’s so dumb about that comment.
My point throughout has been that people should have to prove that a foreclosure is legitimate before they get to proceed. You suggested at #18 that “we” “freeze all the bad foreclosures.” But you didn’t suggest how we would figure out which ones were bad and which were good, which led me to suggest in # 29 that we need to stop foreclosing until we know which are bad and which are good. Then you jumped down my throat for saying “we”–the exact same phrasing you had used.
It’s a strange world, Steve, but less strange when you don’t make dumb assumptions about what other people are saying.
What did you think I was saying in #29?
cat48
@ricky:
Phil Gramm goes down & I’m in on that. I lost a good amt of money when Enron went down and I’m still very pissed.
Steve
@superking: Courts can decide which foreclosures are valid on a case-by-case basis, just like always. The idea that some external power should halt each and every one of them until each and every one of them has been reviewed is dumb.
ricky
I guess that is better than a fire drill in Obion County, Tennessee.
mclaren
The most powerful argument against a nationwide foreclosure moratorium hasn’t even been made. It’s that slowing the process down isn’t going to help anyone figure out who actually owns what. The title has been clouded to the point where it’s now totally unclear. Taking more time isn’t going to help. Doesn’t matter how much time you take to nail jell-o to the wall, you still can’t do it.
Some kind of process will develop eventually to resolve this. These securitized mortgage-based instruments are going to have to be valued at some arbitrary amount, even though there won’t be any way to verify that it’s what they’re actually worth. Then the securitized mortgages can be sold and some kind of partial ownership of the underlying real property can be assigned and at some point, an assignee can be given the right to foreclose based on what percentage they actually own.
The real retort to the “Obama should do [X]” claim is that neither Obama nor anyone else has a ghost of a clue what these bogus securitized marked-to-market repackaged mortgages are actually worth, or what someone actually owns when they buy one. Some formula will probably eventually settle that, and it’ll be a formula someone pulls out of their ass. It will have to be. The valuation will ultimately be completely arbitrary because there just isn’t any good way of figuring out what the true market value of these sliced-and-diced repackaged securitized mortgage-derivatives really is.
ty.
Cat
@Steve:
The fact you think the courts involvement in a foreclosure case means the court actually decided anything shows how incredibly naive you are and that you haven’t actually been paying attention to this issue until it showed up as regular topic on this blog a few days ago.
TJ
@cat48:
From what I read QE2 comes in November. The Fed will buy $500 billion in securities (mostly MBS) from the big banks. Like now, this will essentially do bupkiss for the real economy but will keep funneling cash to the investment banks.
gene108
Nationwide moratorium on foreclosures is just a green-light for deadbeats to keep skipping mortgage payments. I worked with someone, who bought a house to flip right at the time the bubble burst, and its value dropped below what he could sell it for. He stopped his mortgage payments, so the bank would foreclose and he’d not have to pony up the difference, if he sold it for less than the mortgage amount.
For all the hard luck cases of guys being laid off and walking away from mortgages, there are also plenty of people who are strategically defaulting because it’s the more prudent business decision for them. I don’t want the latter group rewarded by a freeze on foreclosures.
Cat
@gene108:
I’ll take “unsubstantiated facts reinforced by personal anecdote so it must be true” for $1000 Alex.
Rick Taylor
I doubt a blanket moratorium on foreclosures is a good idea. But we should see people facing criminal charges and eventually going to jail. The reoccurring theme of the last couple years has been no looking back, but when it gets to the point where people are committing fraud to take peoples’ houses, it’s too much.
Montysano
@mclaren:
Again, if I understand correctly, we would first have to determine how many of these instruments there are and who owns them. Since these transactions occurred outside of any regulation or oversight, there is not AFAIK any central registry of these securities.
This is where I blame, and detest, G.W. Bush. This shadow banking industry exploded into the tens of trillions of dollars. You can’t make me believe that there wasn’t a financial “control room” somewhere in DC where there were sirens going off, steam was spurting from pipes, and every gauge was pegged wide open. But as far as I can tell, the strategy was to kick the can down the road, hopefully past 11/2008. They almost made it.
Steve
@Cat: Of course. All judges do is rubber-stamp paperwork for The Man. Only the Foreclosure Czar can actually determine if evidence is fraudulent. When, oh when, will Obama appoint him?
Steve
@superking:
By the way, since for some reason you decided to turn this into a pissing contest over who said “we” first, you might note that my comment #18 didn’t use the word – even though you put it in quotes to suggest I did.
El Cid
This may be relevant.
Of course, this also could have the effect of making these investigations all suddenly be Obama Luo Stalinism taking over the economy and destroying all bidness.
ricky
@El Cid:
“This may be relevant.”
Sounds like another attempt to kiss ass against a Republican group fighting the health insurance give away bailout bonanza. When will the ghost of Rahm leave the building.
ricky
@Steve:
Hammers come in bags or sacks. Rocks come in boxes.
Dummy.
sparky
@mclaren: true, but from another perspective (perception) it might be useful. i tend to agree with your points, but i think a moratorium would be quite useful.
a moratorium would (a) slow down public perception problems (b) allow some breathing room for those getting rolled in the process (c) be good for the banks/investors/servicers. by the last one i mean that–
–it would stop, temporarily, the pressure to push more crap through the system, which itself is a distorting pressure;
–it would give the servicers time to either clean up/tidy/renegotiate
–it would also provide cover for some kind of global settlement that you’re talking about. maybe it would be a new accounting rule. we could call it mark-to-make-believe! the US will have to do something like that at the end of the day, as it simply will not be able to manage an economy when such a large supposedly stable sector is in fact nothing more than a nightmarish consequence of free market fever dreams.
in any case, the current situation is, as you observe, really a system starting to collapse under an unknowable (and un-unwindable (sorry)) mountain of obligations. given that extend and pretend is starting to crumble,* there’s really no reason not to have one at the moment, one that would stay in force at least until the powers that be arrive at a negotiated compromise that will shift the burden from the investors and banks to the american public.**
it might also make some people realize that this is not a “normal” situation, no matter how hard people pretend otherwise, or how many newly printed USDs the UST hands over to Wall St.
*i don’t think the general public quite gets what has been going on under both Bush and Obama. and i may well be wrong in the timing, in that fever dreams of speculation seem to hold on far beyond where i think they will, but i think the collapse of extend and pretend is not far off.
**one might say this is unfair. given that america’s largest industries appear to be killing people outside the border and wealth redistribution inside the border (via a market fetish that, like a virus, the US exported to other countries), it’s not clear to me that the burden should not be placed upon a country that has inflicted so much upon the rest of the planet. on the other hand, if China wants to buy up the discounted notes so the US can continue to buy toxic goods, well then, who am i to say nay?
Kirk Spencer
@gene108: Ah. So you are in the camp that it is better 100 innocents suffer than one guilty should escape justice.
Me, I’m in the camp that believes it’s better the other way.
sparky
@El Cid: yes, we should be against lawbreaking! how stirring! that’ll show everyone i’m doing something!
for me, these repeats of Bush-admin-dosie-does would be amusing if not for their rather poignant demonstration of who actually runs the US.
sparky
oh, and one last thing for our operator:
if you are gonna troll us, couldn’t you do it with more Glenzilla? or, hell, skip him and do it yourself.
unless of course this is actually the Econ editor posing. hmmmm
/trips on meta-shovel
El Cid
@ricky: Wait, what? On the one hand, I was being purposefully understated, presuming that this would have to do with the political aspects of the discussion on this post but not presuming to know directly its actual effects on the state level actions, since I don’t know what the effects of this PR statement by Gibbs.
El Cid
@sparky: The super-rich have always run the US. Their mode of doing so and the amount of national wealth accessible to various parts of the majority are what varies.
superking
@Steve:
I bow to your superior pissing skills.
Steve
@ricky: I believe that only serves to reinforce my point!
mclaren
@sparky:
This is Nouriel Roubini’s point, which most economists seem to have been ignoring. Roubini has noted that the U.S. hasn’t really begun to deleverage yet. While some toxic debts got sold off in TARP and some bad mortgages have been resold and foreclosed, there’s a gigantic mountain of “extend and pretend” bad debts that institutions are just kicking on down the road.
Home mortgages are only part of that gigantic mountain of bad debt. The commercial real estate sector is even bigger and more toxic than the home mortgage sector. Commercials loans are even more problematic, in many cases, than the mortgage market.
The commercial sectors are worse than the private home mortgage bad debt because A) businesses which own devalued commercial real estate have a lot more legal and financial methods of evading liquidation and restructuring — i.e., creative accounting games to make themselves look solvent when they’re really not; B) since the loan amounts are much bigger for commercial real estate that’s gone sour, banks have a lot bigger incentive to work with the businesses that own crappy commercial real estate to try to make those underwater commercial properties seem like they’re performing loans when they’re actually bad non-performing loans and should be written off; C) business has fallen off a cliff in this recession so commercial real estate and particularly mall owners are hurting bad. The rate of mall vacancy is even worse than the unemployment rate for individuals, so commercial real estate is getting hit worse than individual homes in this downturn.
See “Commercial real estate: the next bubble?”
The other point commenters here tend to overlook is that the lending policies at a lot of financial institutions were an open invitation to fraud. This wasn’t a case where the poor innocent banks got burned by sharp real estate operators — the banks actively colluded in massive criminal fraud with their real estate lending policies.
Source: “At top subprime mortgage lender, policies were invitation to fraud,”, Huffington Post, David Heath, 21 December 2009.
Why didn’t the banks care if the loans were fraudulent? Because the banks didn’t intend to own the mortgage loans for more than a few days. Their scheme involved slicing up the subprime mortgages, repackaging ’em, and reselling ’em. The financialization process that’s caused all these headaches wasn’t a bug for the banks that originated the loans…it was a feature. As with the Wall Street scammers who sold bogus CDOs and then betted against their own clients and walked away making trillions while their clients lost their life savings, in the subprime mortgage market, the banks sold toxic junk mortgages that were worth less than nothing but made money by repackaging those bad loans and reselling ’em as financial instruments to third parties. The originating mortgage lender banks made money off the resale of the toxic mortgages, never off the worthless mortgages themselves.