Audit Notes: Hamster Wheel: Chile; Carney, Ritholtz on the Foreclosure Scandal

The Wall Street Journal just bragged (I think) on Twitter that “We have three reporters at the San Jose mine in Chile, and they’re liveblogging the rescue operation.”

It’s unfortunate that the Journal is pouring prescious journalistic resources into an event being covered by 997 other reporters. Think we could get a pool report from them?

Nobody really cares what The Wall Street Journal has to live blog on miners getting pulled out of a mine in Chile. They want to read it on business, the economy, and the widening foreclosure scandal that it has barely touched.

The same can be said for other papers, too, though none of them are the nation’s business paper of record. We don’t need 1,000 reporters at the Super Bowl and we don’t need 1,000 reporters at the Chile mine rescue.

Time to re-read Dean Starkman’s “Hamster Wheel.”

— Still confused about what exactly that foreclosure scandal mentioned above entails?’s John Carney has an excellent primer on that. Here he knocks down this disingenuous Wall Street Journal editorial (but I repeat myself):

The requirement that banks be able to prove ownership of mortgages by producing notes and assignments reflects a long-settled view about the necessity of written contracts in real estate transactions. Long before the founding of our Republic, England adopted what is commonly called the “Statute of Frauds.” It required that real estate conveyances be recorded in writing and signed. Similar laws apply in almost every state in the Union.

Part of the point of the writing requirement is to allow the government the transparency it needs to enforce property rights, including the right to foreclose on a home. If courts were to treat this as mere “paperwork” that was irrelevant to the cases, both property rights and the rule-of-law would suffer. It’s surprising that the Journal’s editorial page would take this stance.

Now, if the problem truly is just sloppy work on the part of robo-signers, banks can likely resume foreclosures before too long. But many suspect that the reason banks were falsifying their knowledge about the possession of loan documents is that the banks do not actually have the documents and don’t know where to find them. This could permanently impair their ability to foreclose on some properties.

— Barry Ritholtz makes the case that this scandal is about the sanctity of property rights (another reason to gape at the WSJ edit board’s intellectual dishonesty), and the financial industry’s disregard for them and for the law itself:

It is a legal impossibility for someone without a mortgage to be foreclosed upon. It is a legal impossibility for the wrong house to be foreclosed upon, It is a legal impossibility for the wrong bank to sue for foreclosure.

And yet, all of those things have occurred. The only way these errors could have occurred is if several people involved in the process committed criminal fraud. This is not a case of “Well, something slipped through the cracks.” In order for the process to fail, many people along the chain must commit fraud.

That it is being done for expediency and to save a few dollars on the process is why the full criminal prosecution must occur.

Ritholtz also takes to CNBC to school Diana Olick—who’s one of the best reporters on the network, but who pushes the bank line here—on why this is so important. Even Larry Kudlow is sympathetic.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.