Thursday, October 21, 2010

The rule of law

The issue, for anyone who has any shred of a belief in free markets left, is not whether or not the homeowners owe the money. The issue is that the FIRE sector of our economy has been growing by leaps and bounds at the same time that our manufacturing jobs were leaving. As an economy, we were, in fact, growing our labor force, we just weren't hiring them.

Free markets, effecient markets, would have demanded that the labor and expertise necessary to comply with due process of law would be employed. That labor force would quite necessarily be educated, which may require a change in strategy when it comes to starving our education system to death. They would have, for the last 10 years, been building the infrastructure required to properly administer the monster they were all being paid so much to create. They would have been concerned that the court system (which pretty much holds their fate in its hands, at this point) was properly funded, staffed with competent people.

The free market hasn't failed here, the law has. Start a hue and cry about how most of these homeowners are trying to gain a windfall on a technicality RIGHT AFTER you put some serious resources in play to prosecute predatory lending. Worry about the homeowners RIGHT AFTER you open a serious investigation into the rape and pillage of America's finest companies by the Private Equity guys.

Conservatives are always going on about how everything has to have consequences. You buy more house than you can afford, you're going to lose it. That's life. Well, fine. All I ask is that the CEO's and Goldman Partners who skimmed everything off the top leaving an unkempt, broken shell in its wake, have to pay their consequences. If the way to make them pay is through the courts, that works for me.

“We cannot allow the courts in New York State to stand by idly and be party to what we now know is a deeply flawed process, especially when that process involves basic human needs — such as a family home — during this period of economic crisis,” Judge Lippman said in a statement. (New York Times, 10/22/10)

"To maximize investment returns, private equity firms often squeeze down costs in the operations they acquire. And some legal experts suggest that could be a factor in the quality of legal documents generated by foreclosure mills." (New York Times, 10/22/10)

"As staggering as the projected stakes are in the housing crisis, at least you can put a number on them. What's incalculable is the psychic cost of a legal system that may well have let banks skirt the law. "The whole financial system is becoming a lot less transparent," says Hernando de Soto, a Peruvian economist who has written on the importance of well-defined property rights. "You can't size up risk anymore."(Business Week, 10/21/10, "Mortgage Mess: Shredding the Dream"

"Bank of America accused executives at Taylor Bean, Colonial and Platinum of having fraudulently schemed to "double- and triple-pledge mortgages and steal assets" to hide their faltering conditions as the housing market declined." Reuters, 10/20/10 "BofA sues FDIC over Taylor Bean mortgage losses"