Private fraud, public force

It's a win-win/public-private partnership.
In our attempt to keep focused on the real issue as the airwaves and the postlady's pouch are filled with distractions and irritations, the bad mortgage undertow is getting stronger with time. Will the elections matter on this issue? According to Open Secrets, the Republican candidate for the 18th congressional district also received a nice, fat check from the National Association of Realtors ($10,800).
Badlands Journal editorial board

10-21-10
CommonDreams.org
Too Pig to Jail? Ban Foreclosures Now
by Ted Rall
http://www.commondreams.org/view/2010/10/21
SAN FRANCISCO--What would happen to you if you got caught forging a mortgage application? You'd go to jail. And rightly so.
In one case in Florida, an employee of GMAC Mortgage admitted under oath that he personally forged 10,000 foreclosure affidavits. This low-level schlub is the tip of the tip of a massive iceberg, one of countless "robo-signers" whom voracious banks including GMAC, Bank of America, Citibank and JPMorganChase hired in order to kick American families out of their homes as quickly as possible.
Ignoring state banking laws, which require bank officers to review each foreclosure document to make sure all the facts are correct, banks instead hired low-wage "Burger King kids," as B of A execs called them, to sign thousands of foreclosures they never looked at. Many were signed under someone else's name.
Hundreds of thousands of foreclosures--maybe millions--were processed illegally by these huge banks gone wild. "Behind the question of improper foreclosure documentation lies a more important issue of whether lenders even have legal standing to foreclose because they lack the original mortgage note as required by law," reports The New York Times.
One guy got evicted from his house in Florida despite the fact that his mortgage had been completely paid off years earlier. Thousands of people who purchased illegally foreclosed properties may not have legal title.
Prosecutors in Ohio, Florida and at least 20 other states are investigating one of the biggest acts of wholesale fraud in the history of American business.
When the scandal broke on October 8th the banks declared a temporary moratorium on foreclosures. Two weeks later, they declared the whole fuss a simple matter of paperwork and resumed their happy work of reducing millions of jobless Americans to homelessness.
"There is not a single case where a foreclosure was made in error," said Bank of America spokesman Dan Frahm (if that's his real name). "The facts supporting the foreclosures are correct."
Bank of America plans to evict 102,000 families next month alone.
Adam Levitin, an associate law professor at Georgetown University, expressed doubt that the same banks that effectively rejected 99 percent of loan-modification applications by intentionally "losing" paperwork had suddenly become efficient. "The banks have dragged their feet and taken forever to do loan modifications, yet within less than two weeks they have managed to review hundreds of thousands of foreclosure cases," he said. "It is simply not credible."
"These are banks going to court and committing fraud," said Ira Rheingold of the National Association of Consumer Advocates. "For them to say this is a minor technical problem is mind-boggling."
Meanwhile, Florida officials are looking into charges that Fannie Mae and Freddie Mac foreclosed on 70,000 homes in the state during 2009 using forged court documents.
Enough is enough.
It is time to stop foreclosures.
Not for a few weeks. Not temporarily.
Forever.
Foreclosure has always been terrible for America. It's bad enough to fall on hard times, whether it's due to a medical catastrophe or a job loss. Getting kicked out of your house forces you to couch-surf or camp outside, struggling to survive day to day. This makes it even harder to get back on your feet.
Foreclosures penalize spouses and innocent children. And, as studies have shown, shuttered houses reduce property values in the surrounding neighborhood.
At this writing millions of American families are in default on their mortgages. It's only going to get worse. The real unemployment rate is over 20 percent and rising. The global economy is still tanking. And the Obama Administration hasn't even bothered to propose a single jobs program. If this keeps up, we'll all be living outside while our empty former homes fall apart.
Flint, Michigan: America's glorious future?
It's not as though banks don't have other ways to induce people to meet their monthly nut. If you default, they can trash your credit rating. Good luck getting another mortgage later.
Even if you don't care about common decency or social stability, consider the cause of justice: The banks are criminal enterprises. Their executives are gangsters who think nothing of charging 40 percent interest on credit cards and lines of credit.
The banks don't deserve to get "their" houses back through foreclosure. (We don't even know if they're "their" houses.)
Don't look to Obama or the Democrats for help. They work for the banks. We need neighborhoods to form mutual-defense organizations. When a family gets evicted, everyone should help them move their stuff back in and guard the house to keep out the fraud-happy banksters and their rent-a-cops.
What of the banks? These corporate maniacs should be treated as harshly as the individuals they pretend to be for the purpose of buying campaign ads. What they've done is the equivalent of robbing a million convenience stores.
Lock them in prison. Throw away the key. And seize their property. Shut them down. Or, if they're "too big to fail," rescue them--through nationalization.
A nationalized bank might still do evil things. But their profits would belong to us--not corporate criminals.
A Pulitzer Prize finalist and twice the winner of the Robert F. Kennedy Journalism Award, Ted Rall is a syndicated political cartoonist, opinion columnist, graphic novelist and occasional war correspondent whose work appears in hundreds of publications, including The New York Times, The Washington Post, The Village Voice, and Los Angeles Times.
10-20-10
CounterPunch.com
Fairy Tales on the Housing Market
Mortgage Mayhem
By DEAN BAKER
http://www.counterpunch.com/baker10202010.html
Treasury Secretary Timothy Geithner is good at telling fairy tales. Mr. Geithner first became known to the general public in September of 2008. Back then he was head of the New York Federal Reserve Board. He was part of the triumvirate, along with Federal Reserve Board Chairman Ben Bernanke and then Treasury Secretary Henry Paulson, who told Congress that it had to pass the TARP or the economy would collapse.
This was an effective fairy tale, since Congress quickly handed over $700 billion to lend to the banks with few questions asked. Of course, the economy was not about to collapse, just the major Wall Street banks. To prevent the collapse of the banks Congress could have given the money but with the sort of conditions that would ensure the financial sector never would be the same. Alternatively, it could have allowed the collapse and then rushed in with the liquidity to bring the financial system back to life.
But the Geithner fairy tale did the trick. Terrified members of Congress tripped over each other to make sure that they got the money to the banks as quickly as possible.
Now Geithner has a new fairy tale. This time it is that if the government imposes a foreclosure moratorium it will lead to chaos in the housing market and jeopardize the health of the recovery.
For the gullible, which includes most of the Washington policy elite, this assertion is probably sufficient to quash any interest in a foreclosure moratorium. But those capable of thinking for themselves may ask how Geithner could have reached this conclusion.
The point of a foreclosure moratorium would be to ensure that proper procedures are being followed. We know that this is not the case at present. There have been several outstanding stories in the media about law firms that specialize in filing documents for short-order foreclosures. They hire anyone they can find to sign legal documents assuring that the papers have been properly reviewed and are in order.
In some cases, this has led to the wrong house being foreclosed. People who are current on their mortgage, and in one case did not even have a mortgage, have been foreclosed by this process. The more common problem would be the assignment of improper fees and penalties to mortgage holders. Or, in many cases foreclosures have probably occurred where the servicer did not actually possess the necessary legal documents.
A moratorium would give regulators the time needed to review servicers’ processes and ensure that they have a system in place that follows the law and will not be subject to abuse. This is the same logic the Obama Administration used when it imposed a moratorium on deep sea drilling after the BP oil spill.
No one can seriously dispute that there is a real problem. Three of the largest servicers – Bank of America, JP Morgan, and Ally Financial – have already imposed their own moratorium to get their procedures in order. This is just a question of whether we should have regulators oversee the process or “trust the banks.”
If the argument for a moratorium is straightforward, it is difficult to see any basis for Geithner’s disaster fairy tale. If there were a moratorium in place for 2-4 months then banks would stop adding to their inventory of foreclosed properties.
But most banks already have a huge inventory of unsold properties. Presumably they would just sell homes out of this inventory. This “shadow inventory” of foreclosed homes that were being held off the market has been widely talked about by real estate analysts for at least two years. It is difficult to see the harm if it stops growing for a period of time.
Of course it actually was the Obama Administration’s policy to try to slow the process of foreclosure. This has repeatedly been given as a main purpose of its HAMP program, the idea being that this would give the housing market more time to settle down. Now we have Geithner issuing warnings of Armageddon if a foreclosure moratorium slows down the foreclosure process.
It doesn’t make sense to both push a policy intended to slow the foreclosure process and then oppose a policy precisely because it would slow the process. While this is clearly inconsistent, there has been a consistent pattern to Geithner’s positions throughout this crisis.
Support for the TARP, support for HAMP, and opposition to a foreclosure moratorium are all positions that benefit the Wall Street banks. I’m just saying.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.
 
 
10-17-10
New York Times
The Great Deflation
Japan Goes From Dynamic to Disheartened
By MARTIN FACKLER
http://www.nytimes.com/2010/10/17/world/asia/17japan.html?src=me&ref=general
OSAKA, Japan — Like many members of Japan’s middle class, Masato Y. enjoyed a level of affluence two decades ago that was the envy of the world. Masato, a small-business owner, bought a $500,000 condominium, vacationed in Hawaii and drove a late-model Mercedes.
Weddings in Osaka, Japan, now tend to be small, low-budget affairs, not the lavish celebrations once favored by couples.
But his living standards slowly crumbled along with Japan’s overall economy. First, he was forced to reduce trips abroad and then eliminate them. Then he traded the Mercedes for a cheaper domestic model. Last year, he sold his condo — for a third of what he paid for it, and for less than what he still owed on the mortgage he took out 17 years ago.
“Japan used to be so flashy and upbeat, but now everyone must live in a dark and subdued way,” said Masato, 49, who asked that his full name not be used because he still cannot repay the $110,000 that he owes on the mortgage.
Few nations in recent history have seen such a striking reversal of economic fortune as Japan. The original Asian success story, Japan rode one of the great speculative stock and property bubbles of all time in the 1980s to become the first Asian country to challenge the long dominance of the West.
But the bubbles popped in the late 1980s and early 1990s, and Japan fell into a slow but relentless decline that neither enormous budget deficits nor a flood of easy money has reversed. For nearly a generation now, the nation has been trapped in low growth and a corrosive downward spiral of prices, known as deflation, in the process shriveling from an economic Godzilla to little more than an afterthought in the global economy.
Now, as the United States and other Western nations struggle to recover from a debt and property bubble of their own, a growing number of economists are pointing to Japan as a dark vision of the future. Even as the Federal Reserve chairman, Ben S. Bernanke, prepares a fresh round of unconventional measures to stimulate the economy, there are growing fears that the United States and many European economies could face a prolonged period of slow growth or even, in the worst case, deflation, something not seen on a sustained basis outside Japan since the Great Depression.
Many economists remain confident that the United States will avoid the stagnation of Japan, largely because of the greater responsiveness of the American political system and Americans’ greater tolerance for capitalism’s creative destruction. Japanese leaders at first denied the severity of their nation’s problems and then spent heavily on job-creating public works projects that only postponed painful but necessary structural changes, economists say.
“We’re not Japan,” said Robert E. Hall, a professor of economics at Stanford. “In America, the bet is still that we will somehow find ways to get people spending and investing again.”
Still, as political pressure builds to reduce federal spending and budget deficits, other economists are now warning of “Japanification” — of falling into the same deflationary trap of collapsed demand that occurs when consumers refuse to consume, corporations hold back on investments and banks sit on cash. It becomes a vicious, self-reinforcing cycle: as prices fall further and jobs disappear, consumers tighten their purse strings even more and companies cut back on spending and delay expansion plans.
“The U.S., the U.K., Spain, Ireland, they all are going through what Japan went through a decade or so ago,” said Richard Koo, chief economist at Nomura Securities who recently wrote a book about Japan’s lessons for the world. “Millions of individuals and companies see their balance sheets going underwater, so they are using their cash to pay down debt instead of borrowing and spending.”
Just as inflation scarred a generation of Americans, deflation has left a deep imprint on the Japanese, breeding generational tensions and a culture of pessimism, fatalism and reduced expectations. While Japan remains in many ways a prosperous society, it faces an increasingly grim situation, particularly outside the relative economic vibrancy of Tokyo, and its situation provides a possible glimpse into the future for the United States and Europe, should the most dire forecasts come to pass.
Scaled-Back Ambitions
The downsizing of Japan’s ambitions can be seen on the streets of Tokyo, where concrete “microhouses” have become popular among younger Japanese who cannot afford even the famously cramped housing of their parents, or lack the job security to take out a traditional multidecade loan.
These matchbox-size homes stand on plots of land barely large enough to park a sport utility vehicle, yet have three stories of closet-size bedrooms, suitcase-size closets and a tiny kitchen that properly belongs on a submarine.
“This is how to own a house even when you are uneasy about the future,” said Kimiyo Kondo, general manager at Zaus, a Tokyo-based company that builds microhouses.
For many people under 40, it is hard to grasp just how far this is from the 1980s, when a mighty — and threatening — “Japan Inc.” seemed ready to obliterate whole American industries, from automakers to supercomputers. With the Japanese stock market quadrupling and the yen rising to unimagined heights, Japan’s companies dominated global business, gobbling up trophy properties like Hollywood movie studios (Universal Studios and Columbia Pictures), famous golf courses (Pebble Beach) and iconic real estate (Rockefeller Center).