So if your so-called "service" is unnecessary or harmful, and there are literally dozens of folks who will replace you should you disappear, the idea that you can prosper without resorting to cheating falls into the realm of the highly unlikely. (Of course, the LAST folks to admit that they are so unnecessary that the only way to survive and proper is to cheat will be the moneychangers themselves.)
If the sanctions on cheating are weak, eventually everyone must cheat to survive. After all, the number ONE reason why regulated capitalism outperforms deregulated capitalism is that well-written rules, effectively applied, make it possible for honest business folks to survive.
The Five Stages of Grief, MOTU (masters of the universe) Edition
By: Peterr Saturday October 16, 2010 9:00 am
As happens in the life of a pastor, I’ve been doing a number of funerals lately. I’ve been dealing with people who are terminally ill, grieving families, funeral homes, church musicians, neighbors, friends, and the folks who prepare the meals for the mourners after the funeral. To take a break from all of this, I’ll check out the news. You know, something absolutely different, like what’s happening with the banks around the mortgage meltdown. Something to get my mind off of all this death and dying.
And I realized that what’s going on with the MOTUs isn’t at all different.
It is exactly the same thing I see with these people in my parish who are dying and with their grieving families. Back in 1969, Elisabeth Kübler-Ross described a pattern of behavior that many people exhibit around death and dying:
- Denial — we’ve got no problem here . . .
- Anger — it’s not my fault; someone else is to blame.
- Bargaining — maybe we can work out a deal . . .
- Depression — nevermind, it’s all hopeless.
- Acceptance — OK, I’m dying.
The death of major failed institutions like Enron, Bear Stearns, Lehman Brothers, WorldCom, and AIG was greeted by their compatriots in the MOTU universe with denial: “This could never happen to us. We’ve got better judgment. We’ve got better people. We’ve got more smarts. We’ve got better technology. We’ve got . . .” To the MOTUs on Wall Street, the death of IndyMac, Washington Mutual and hundreds of other banks in the last three years is proof of the inadequacy of those other, lesser bankers.
The MOTU refrain of “We survived, because we’re better than they are” is actually true, in a way. Bill Black would say that what they’re better at is not getting caught:
My research specialty is “control fraud.” These are frauds led by those that control seemingly legitimate entities and use them as a “weapon” to defraud. Financial control frauds’ “weapon of choice” is accounting. Lenders optimize accounting fraud by following a four-part recipe:
- Extreme growth
- Making bad loans at high interest rates
- Extreme leverage
- Trivial loss reserves
The [Senate Banking] Committee’s findings show that WaMu’s business operations followed this recipe. The result was what Akerlof & Romer described in their classic 1993 article – “Looting: Bankruptcy for Profit.” This is also why I titled my book: The Best Way To Rob A Bank Is to Own One. more
Yes, Fortune, Wall Street Fraud Is A Problem
By Zach Carter
October 15, 2010 - 12:01pm ET
A lot of frequently credible publications have been pumping out drivel lately blaming borrowers for the ever-widening foreclosure fraud scandal. Fortune Magazine has the latest of these blame-the-borrower narratives. It would be nice to be able to dismiss this kind of nonsense as mere journalistic laziness, but at this point in the crisis, blaming the borrowers is an act of willful ignorance.
The Fortune scribe resorting to this grotesque journalistic vice is Fortune's Duff McDonald. McDonald's argument? Pretty lousy. He openly acknowledges that he hasn't done his homework:
"I find it very hard to process the notion that the onslaught of foreclosures in this country does not have more to do with a failure of conservative financial planning than with some insidious criminality by lenders . . . . I'm amazed that the country has congealed into the belief that every single borrower who signed a mortgage document has an escape hatch that somehow puts blame on their lender when they can't pay their debts . . . . I am at a loss to understand how so many individual homeowners signing loan documents for debt they could ultimately not afford were somehow the victims of a crime."
Four years after the subprime meltdown began, Duff McDonald still hasn't bothered to investigate fraud in the selling of mortgages. I'm getting pretty tired of writing thisstatement: In 2004, the FBI warned of an "epidemic" in mortgage fraud, 80 percent of which is committed by lenders. There was an entire Congressional hearing devoted to fraud at Washington Mutual. Loan officers and mortgage brokers are perfectly capable of falsifying a borrower's loan application, and they're perfectly capable of telling a borrower they're getting a great 30-year fixed-rate mortgage while selling them a subprime mortgage with exploding payments, adding a zero to the value of the house, or anything else. That's fraud, it's illegal, it happened all the time, and it was perpetrated by handsomely paid financial professionals. more
Is Wall St. Imploding, Again? Krugman: It's "very, very bad."
Fri Oct 15, 2010 at 01:10:26 AM CDT
It's all there in Friday's NY Times. The lede atop today's business section of the gray lady tells us: "Mortgage Mess May Cost Big Banks Billions." And, it sure is beginning to look like this was the week when the ongoing U.S. foreclosure fraud crisis pivoted from bad to worse. In fact, while the "retail" side of this matter is what's capturing all the headlines; and, that chapter of the foreclosure mess will certainly cost the banks many billions, the real, "big money" story, IMHO, is about what's slowly (and much more quietly)unfolding in the Wall Street investment community.
I used the word, "unfolding," in the opening graph, but the proper word, IMHO, is "unwinding." (In fact, I think I'll refer to it as "The Great Unwinding.") Because that's what is, apparently, likely to happen as far as our nation's markets are concerned, with regard to Wall Street-issued, mortgage-backed securitizations (MBS'), as well as a significant amount of the paper created, sold and/or held by ourgovernment-sponsored enterprises, a/k/a the "GSE's" (a significant chunk of the many trillions of dollars in mortgages currently held by Fannie Mae, Freddie Mac, et al). Much of it stands a good chance of being "unwound," wherein banks will be forced to take back, and/or provide "refunds" for, significant amounts of paper (a report--see blockquote, below--was widely-circulated on Wall Street on Thursday, indicating that this could cost Bank of America, alone, more than $70 billion) that they had originally sold to investors and the GSE's.
This process could take up to a decade to fully play out, according to one of the quotes in the Times' business lede.
The paper does a better job of explaining this--and Krugman tops it off in his op-ed column, "The Mortgage Morass," today--than I ever could. more
Banksters Lash Out as Wall Street Comes to Realization About Their Exposure
By: David Dayen Friday October 15, 2010 6:15 am
That’s Josh Rosner on Parker/Spitzer talking about the mortgage bond fraud, which is just a part of all the separate and interlocking frauds performed by the financial industry over the last decade, which is swiftly leading us to a reckoning that could be catastrophic for the second time. L. Randall Wray calls it the biggest scandal in human history, and something he’s been aware of for the past several years.
We have long known that lender fraud was rampant during the real estate boom. The FBI began warning of an “epidemic” of mortgage fraud as early as 2004. We know that mortgage originators invented “low doc” and “no doc” loans, encouraged borrowers to take out “liar loans”, and promoted “NINJA loans” (no income, no job, no assets, no problem!). All of these schemes were fraudulent from the get-go. Property appraisers were involved, paid to overvalue real estate. That is fraud. The securitizers packaged trash into bundles that ratings agencies blessed with the triple A seal of approval. By their own admission, raters worked with securitizers to provide the rating desired, never looking at the loan tapes to see what they were rating. Fraud. Venerable investment banks like Goldman Sachs packaged the trashiest securities into collateralized debt obligations at the behest of hedge fund managers–who were allowed to choose the most toxic of the toxic waste—then sold the CDOs on to their own customers and allowed the hedge funds to bet against them. More fraud [...]
Now we know that it was not just the mortgage brokers, and the appraisers, and the ratings agencies, and the accountants, and the investment banks that were behind the fraud. It was the securitization process itself that was fraudulent. Indeed, the securities themselves are fraudulent. Many, perhaps most, maybe all of them.
The foreclosure fraud is merely the last link in this chain, the final fraud that the banks hoped could get these toxic assets (we didn’t know how toxic) off the books. They got caught. more