Abigail Caplovitz Field at Firedoglake writes a good post explaining why the blame-the-borrowers meme is ultimately misguided—and dangerous:
Houses are not like tulips, shares of stock, dolls, or any other mass-market consumer product. They just cost too much. The only people who can buy a house simply because they want to are cash buyers. No one will argue that cash buyers drove the housing bubble of 2005 onward (or whatever year you want to peg its start.) Cash buyers don’t fuel a foreclosure crisis either, though banks have been known to foreclose on cash buyers anyway.
We didn’t have a housing bubble in the ordinary sense because consumers don’t buy houses; banks buy houses. The housing market cannot undergo a demand-driven bubble without lender collusion and complicity…
Or to put it another way: what evidence is there that circa 2005 wannabe homebuyers became so sophisticated-nationwide, simultaneously-that they could con bankers who cared about ensuring loans made against sufficient collateral would be repaid into making huge numbers of loans that couldn’t be, against collateral that today’s market exposes was worth nowhere near the amounts claimed?…
Why did lenders’ incentives change? That’s a long story for another day, but it boils down to this: lenders no longer faced consequences if the loans weren’t repaid. They’d offloaded that risk to securities investors.
— The Wall Street Journal ran an awfully ham-handed news story on Saturday:
Scandals Undercut Obama’s Message
Secret Service, GSA Cases Fuel Dissatisfaction, Make It Harder to Argue That Government Helps People
What exactly does the Secret Service scandal have to do with the government helping people? Not a thing. The GSA scandal, as outrageous as it is, involves some $800,000—not all of which was misspent. You can bet that unlike, say, Wall Street’s scandals, this government scandal will be fully investigated, those responsible for it will be punished, and oversight will be increased. And it should be.
Here’s the Journal’s lede, which shouldn’t have used this dog-whistle quote (emphasis mine):
The scandals simultaneously plaguing the Secret Service and General Services Administration have been disconcerting enough for the Obama administration. But beyond that, they have the potential to be a political liability for Democrats, who are making an election pitch to voters that the government is here to help.
And when you find yourself writing “no shit” stuff like this, it might be a sign that you’re on the wrong track:
While there’s general agreement that the Secret Service is necessary, limited-government advocates see these scandals as evidence the federal bureaucracy should be scaled back. Republicans and Democrats are divided over how much government is too much, sparring over issues ranging from the auto bailout to the health-care law.
— The New York Times’s David Carr calls the TV news business on the carpet for failing to practice one of the most basic tenets of journalism: Correcting your mistakes.
Carr notes that NBC News failed to issue an on-air correction for its egregious misreporting of George Zimmerman’s 911 call. The lede is smart.
After broadcasting an audio clip on the “Today” show about George Zimmerman last month that hit the trifecta of being misleading, incendiary and dead-bang wrong, NBC News management took serious action: it fired the producer in charge and issued a statement apologizing for making it appear as if Mr. Zimmerman had made overtly racist statements.
The only thing NBC didn’t do was correct the report on the “Today” show.
That nifty setup shows just how foreign corrections are to the TV news business.
Ryan pinches a leftist blog rant: "Or to put it another way: what evidence is there that circa 2005 wannabe homebuyers became so sophisticated-nationwide, simultaneously-that they could con bankers who cared about ensuring loans made against sufficient collateral would be repaid into making huge numbers of loans that couldn’t be, against collateral that today’s market exposes was worth nowhere near the amounts claimed?…"
padikiller responds: Just the latest iteration of the silly leftist "average slob is too stupid to be responsible meme".
Thimbilistic Chittumism posits that although the average American is far too stupid to be permitted to buy a home, a car, or health insurance on his own and without the Gubmint supervising him, nonetheless, through some magical (and thoroughly inexplicable) collectivist process, these same hapless dupes somehow, en masse, are entitled to more political power and a greater say in the allocation of capital.
Far too stupid to buy a used car on their own, but smart enough to wrestle control of "Wall Street" from the "vampires"...
Such silly nonsense typifies leftist ideology.
#1 Posted by padikiller, CJR on Tue 24 Apr 2012 at 07:41 AM
This is yet another episode of "LEAVE THE BANKERS ALONE! Starring padiCrocker".
In today's episode, padicrock pretends banks somehow were simultaneously tricked by homebuyers who, by using responsible and innocuous loan products in ways beyond their intended use, nearly destroyed their lenders and the global financial system.
And the threats to blacklist appraisers and ratings agencies who didn't inflate the value and deflate the risk? Just a common misunderstanding.
They were all just honest folk, trying hard to earn a bonus. It's amazing to me that padi's defense of bankers is "They weren't frauds! (evidence shmevidence) They were stupid!" Geez, if we can't trust financial institutions to put people smart enough not to be conned by millions of tricksie borrowers, maybe the governemnt should step in and certify that these people in charge of trillions can pass a basic intelligence test - maybe make these institutions wards of the state while trillions of dollars are at risk from millions of ebil borrowers.
Because that sure beats assuming that bankers motivated by bonuses based on someone else's risk would ever do anything criminal.
#2 Posted by Thimbles, CJR on Tue 24 Apr 2012 at 12:25 PM
Let me be clear in dealting with Thimbles' latest bit of lying silliness.
ANY person who committed any fraud should face prosecution. PERIOD.
Bankers, bakers or candlestick makers.
I don't know how much clearer I can be than this. Thimbles always tries to distort my position because he can't defend his own.
However... There were LOADS of people who LIED on mortgage applications in the bubble build up, and these people should be prosecuted too.
This is where the lefties and I part company. I believe that any lender who committed fraud AND any borrower who committed fraud should be prosecuted.
Of course, in terms of numbers, there were tons more fraudulent borrowers than lenders, so a fair and judicious prosecution of the pervasive mortgage fraud that led to the collapse of the industry will ensnare many more borrowers than lenders.
However... Thimbilistic Chittumism gives a pass to borrowers. It posits that they are far too stupid to be accountable for their formation of contracts and that, consequently, they need the Gubmint to look after them and that they deserve absolution for their fraudulent transgressions.
The silly thing is that the proponents of this idiotic position want these same stupid people to have more power. They argue that while these hapless dupes are individually intellectually incapable of even buying a used car on their own, that somehow (magically, we must suppose) these same morons collectively gain an intelligence worthy of a greater voice in the affairs of politics and business.
THIS is the patently absurd claim of the Thimbilistic Chittumites - and their inability to defend this nonsense is what sends Thimbles off to evade, obfuscate and distort the points made by those denizens of Realityland who point out the truth.
#3 Posted by padikiller, CJR on Tue 24 Apr 2012 at 02:00 PM
Hey, I got an idea. Instead of attacking us for saying "the average American is far too stupid to be permitted to buy a home, a car, or health insurance on his own and without the Gubmint supervising him" (ooh whatta straw man! BUUUURN!)
Why don't you defend your position " the average American banker is far too stupid to be permitted to lend out money for a home without the Gubmint supervising him"
I mean if the borrowers were primarily the actors here, and bankers were primarily the victims, that would mean the bankers are criminally stupid instead of just criminal.
And that it's just a coincidence that their stupidity fed into a broken securitization scheme that made them all huge bonuses.
#4 Posted by Thimbles, CJR on Tue 24 Apr 2012 at 03:41 PM
Whoa there, Thimbo!
What part of "prosecute crooked bankers" are you not understanding, pal?
Who (besides you) says that "the average American banker is far too stupid to be permitted to lend out money for a home without the Gubmint supervising him"? HUH?
Certainly not me!
I have consistently advocated getting the Gubmint out of the financial markets. Indeed I have been hammering away the REALITY the chief causes of the mortgage meltdown was the Gubmint's meddling into the mortgage business.
REGULATION OF FINANCIAL MARKETS DOESN'T WORK!
The SEC knew about Madoff's Ponzi operation for more than 10 years and did... NOTHING...
Enron? MCI?
Same thing. Either regulators actually knew about malfeasance, or should have known about it if they had been doing their jobs. And they did NOTHING but make things worse.
Regulation gives both borrowers and lenders a false sense of security regarding the risk inherent in investment.
So... Let's do this one more time, and maybe if you keep reading until your lips stop moving, the point will take hold in one of your neurons....
PUT CROOKED LENDERS IN JAIL!
How much clearer can I make it, Dude?
OH, AND ALSO PUT CROOKED BORROWERS IN JAIL!
Finally, Thimbles...
How can you claim a "straw man" argument in my point that you lefties think the average American is too stupid to buy a house or a used car without Gubmint supervision, but argue that these stupid people should be given more power in business and politics?
This is EXACTLY what you guys claim!
#5 Posted by padikiller, CJR on Tue 24 Apr 2012 at 04:28 PM
"What part of "prosecute crooked bankers" are you not understanding, pal?"
The part where you don't every time it is brought up. EVERY TIME there's an article or a new bit of evidence which surfaces blaming the bankers within the corrupt banking system, you've put yourself down on the side of blaming the government, blaming the borrower, blaming the whistleblower, blaming the inversion of the global magnetic field, anything but blaming the subject of the piece.
No, the people who want to actually prosecute the "crooked bankers" within the "crooked banks" you claim are listening to the sounds of "4000 Chittimistic Black Helicopters" as they bring evidence of "nonexistent fraud" to attention because they believe "that the proper role of the government is to actually oppose business. Indeed, he equates "business" with "criminal activity"."
Sure you believe in the concept of "prosecuting criminal bankers". You just think anyone who actually supports actually doing that must believe " "business" = "criminal behavior" that must be "opposed" by the Gubmint."
You support deregulation which makes markets unstable, drives honest players out of the market, subjects investors to fraud without recourse, subjects clients and consumers to rampant abuses without recourse, and then blame regulation for the results.
There's a reason why financial markets stayed stable from the depression up until Reagan and went to pot in bubble after bust after bubble after that. There's reasons why the S&L crisis was allowed to get so bad, but then was stopped from getting worse when a real regulator with real resources was put in charge.
There are reasons why we do not accept a world of risk every time we turn on the tap, every time we buy a chunk of hamburger at the store, and every time we put money in our banks. These our essentials to our survival. We need to have some trust in them. The government's job is to protect the public from harm both internally and externally.
You don't. You think Joe Scumbag McLawyerBroker should be able to write up an onerous contract full of incomprehensible jargon which he can misrepresent as a simple contract, use whiteout to remove and fill in essential information such as income statements, forge signatures, forge notarizations, hire crooked appraisal agents, lie about the products a customer qualifies for based on their credit rating, and then churn the client as he defaults promising help and delivering fees.
And, according to you, we must think "the average American is far too stupid to be permitted to buy a home, a car, or health insurance on his own" if we object to Joe Scumbag's practices and suggest some form of cop should be examining his work.
Deregulation doesn't work, it merely legalizes consumer and investor abuse and makes it very profitable.
Which is why, in practice, you will never support "PUTTING CROOKED LENDERS IN JAIL" because doing so would be an admission that the law (and its enforcers) have a role to play in financial markets. If you "have consistently advocated getting the Gubmint out of the financial markets. Indeed [you] have been hammering away the REALITY the chief causes of the mortgage meltdown was the Gubmint's meddling into the mortgage business," then you cannot let any of the real responsibility go to the banks and bankers. Responsibility would require reaction, government reaction.
#6 Posted by Thimbles, CJR on Tue 24 Apr 2012 at 06:30 PM
And we know your feelings on government reaction:
"PUT CROOKED BORROWERS IN JAIL!"
Good, you and Eric Holder (of Covington and Burling) agree. That's pretty much all who they have been arresting and prosecuting.
"The Justice Department’s reinvention of history to defend – rather than prosecute – the fraudulent members of the industry that made millions of fraudulent liar’s loans is one of the great problems. The rot is so deep that the FBI announced its “partnership” with the Mortgage Bankers Association (MBA) to respond to the epidemic of mortgage fraud – the trade association of the “perps” – under Mukasey. Holder has left this obscene partnership in place even though it has proven worse than useless. The FBI and the Justice Department adopted, with no critical analysis, the MBA’s ridiculous “definition” of mortgage fraud. The MBA “definition”, which the Justice Department repeatedly parrots, defines accounting control fraud out of existence...
The Department of Justice is broken when it comes to prosecuting control frauds. It no longer even understands that they exist and cause greater financial losses than all other forms of property crime – combined. In addition to Perez’ befuddlement at the pervasive and persistent collapse of internal controls at the control frauds that made liar’s loans, consider three similarly revealing comments by senior Justice Department officials.
The U.S. Attorney in one of epicenters of mortgage fraud has a crippling conceptual failure because of his inability to understand the concept of looting...
Not everyone agrees that such a case can be successful. Benjamin Wagner, a U.S. Attorney who is actively prosecuting mortgage fraud cases in Sacramento, Calif., points out that banks lose money when a loan turns out to be fraudulent. An investor in loans who documents fraud can force a bank to buy the loan back. But convincing a jury that executives intended to make fraudulent loans, and thus should be held criminally responsible, may be too difficult of a hurdle for prosecutors.
“It doesn’t make any sense to me that they would be deliberately defrauding themselves,” Wagner said.
Wagner has confused himself with his pronouns. “They” refers to the CEO. “Themselves” refers to the bank. The CEO has a “sure thing” – he can grow wealthy very quickly by looting the bank through the accounting fraud recipe. He is not looting himself. The title of George Akerlof and Paul Romer’s famous 1993 article (“Looting: the Economic Underworld of Bankruptcy for Profit”) says it all. The CEO is quickly enriched by looting “his” bank."
#7 Posted by Thimbles, CJR on Tue 24 Apr 2012 at 06:53 PM
In other news, there's a thing called separation of powers and, according to this separation, legislators write law and regulators enforce it.
Now here's the thing, law is written with an intent. If someone doesn't approve of the intent, they can 'influence' the carrying out of intent through the law's writers and/or the law's enforcers.
So we have here derivatives and proprietary trading. When it comes to the Volcker rule:
http://www.propublica.org/thetrade/item/whale-of-a-problem-regulators-subvert-will-of-congress
"The original language of the rule had a broad exception: banks couldn't trade for their own account, but they could hedge to mitigate their risks.
The authors quickly realized that the exemption was absurdly broad. After moving these businesses to other divisions, banks would then argue that their bets were either market-making activities or simply hedges that offset risks.
Such "hedges" could encompass a lot of trades that looked awfully proprietary...
So Congress tightened the language. It wrote that the hedges had to be specific...No macro-hedging, only micro-hedging. That is the will of Congress.
But then federal regulators got their hands on Volcker and set about interpreting the meaning of Dodd Frank. This has been a Talmudic exercise in reverse: It has taken the clear and simple intent and made it muddy and complicated.
Regulators decided that banks could say that they were hedging for an overall portfolio. And the banks could argue that a hedge was legitimate if it merely had a "reasonable correlation" with the security or position being hedged. It was as if the regulators had not only questioned the basis for the rules of being kosher, but had also served up a cheeseburger — with bacon on top — all very nonkosher."
And then we have derivatives:
http://www.bloomberg.com/news/2012-04-17/derivatives-lobby-has-u-s-regulators-on-the-run.html
"The derivatives industry is squeezing Washington like a python. Desperate to control the tone and thrust of derivatives regulation, industry lobbyists have been swarming over the Commodity Futures Trading Commission and the Securities and Exchange Commission, each of which is writing derivatives rules as mandated by the Dodd-Frank reform law...
Not satisfied with that, influential lawmakers have been not so subtly warning regulators to go easy on derivatives. This is incredibly intimidating: Congress controls the agencies’ budgets, and the increase in workload mandated by Dodd-Frank leaves them woefully short on funds...
The intent of Dodd-Frank is to bring the derivatives business out of the shadows -- first to get a handle on systemic risk, second to create greater price transparency and narrower margins in a business dominated by a handful of banks, and third to protect the sort of customers who shouldn’t be playing with matches...
Derivatives regulation has too long gone undone. The agencies should be permitted to do their job. Congress should lay off the intimidation tactics, which in the past have embarrassed Congress itself. "
So sometimes the intent is thwarted by regulators, other times its thwarted by legislators (in Keating five-esque fashion). What's the commonality? The direction of money. Honesty and the public interest doesn't pay.
How does that problem get solved?
#8 Posted by Thimbles, CJR on Tue 24 Apr 2012 at 07:51 PM
Wow, I just got lucky and caught some of this on the local pbs:
http://www.pbs.org/wgbh/pages/frontline/money-power-wall-street/
Watching it now as it talks about Georgia's attempt to regulate predatory lending. Incredible program so far.
#9 Posted by Thimbles, CJR on Wed 25 Apr 2012 at 12:34 AM
Thimbles blithers: EVERY TIME there's an article or a new bit of evidence which surfaces blaming the bankers within the corrupt banking system, you've put yourself down on the side of blaming the government, blaming the borrower, blaming the whistleblower, blaming the inversion of the global magnetic field, anything but blaming the subject of the piece.
padikiller responds: BULLSHIT
PURE BULLSHIT.
I have consistently stated that ANYONE who has committed a crime should be prosecuted. PERIOD.
You lefties are the ones who want to give a pass to criminal conduct (specifically, of borrowers who committed mortgage fraud). Not me.
Any lender who lied to a borrower to do business should be prosecuted.
And any borrower who lied to a lender to get credit should be prosecuted.
This has been my position forever.
You guys, on the other hand, have nothing but a hypocritical, one-sided position, and so all you can do is lie, obfuscate and misrepresent my fairhanded approach - ANYONE who committed a crime should be prosecuted.
#10 Posted by padikiller, CJR on Thu 26 Apr 2012 at 11:44 AM