Wednesday, September 17, 2008

Equal time frustration at bailouts without sanction

Wall Street has been bailed out again, this time with the G taking over AIG. Freddie Mac and Fannie Mae were rescued -- what -- two weeks ago? Not even?

So... what do our presidential candidates have to say about it? If I understand the soundbites correctly, Senator McCain says he'll appoint a commission to look into what happened and tighten regulations to make sure it doesn't happen again. Senator Obama says the problem is "leadership." It's just another failure of the Bush Administration.

Nobody is talking about sending anybody to jail.

Now come with me, for just a minute, on an imaginary journey. We are in a law library now. On your left you will see volume after volume of statute books. I'm pointing you toward the maroon volumes of the United States Code Annotated. See the shelves groaning under the weight of these books?


Now look over there: Row after row of volumes entitled Code of Federal Regulations (CFR) for short. These are the regulations promulgated by federal agencies under authority granted them by those Acts of Congress set out in the U.S.C.A. Isn't it amazing how much room these books take up?

(And to think: Moses got by with just two tablets.)

Those of you who own homes: Think back to when you bought your house. In many U.S. states you may not have the services of a lawyer, but in all states you had large piles of paper to sign because (unless you're Bill Gates) you took on a mortgage along with the house. Most of the paper you signed had to do with those loans.

A lot of those papers are prescribed by some of those statutes and regulations we were marveling at a moment ago. That's why you may have had to sign a separate closing statement and a RESPA or HUD-1. That's why you signed a disclosure statement that said how much interest you'd pay on the loan, assuming you made all your payments just as they were due and just in that amount. (Wasn't that a big number?) That's why you signed a new loan application, detailing again all the information you provided your lender.

Or did it?

I don't do real estate closings for a living. I do them occasionally, basically when forced to because of friendship or family obligation. But even I know that misrepresentations on many of these documents constitutes a federal crime. Right now. Without need for a commission. Without need for greater "leadership."

Our current mortgage crisis isn't the result of unfortunate circumstance. It is the collapse of a house of cards. Lenders, mortgage brokers, appraisers and, yes, even some lawyers, conspired and colluded to 'flip' properties to straw purchasers to drive up prices, to skim money from transactions, to kite appraisals, to put people into loans they had no chance of ever repaying. Banks looked the other way on these -- lending money on fraudulent transactions because the bank knew it would sell these stinking loans as quickly as possible. Dubious debts were bundled together and rechristened as securities (talk about putting lipstick on a pig!). And the financial houses that have collapsed in recent weeks have been the last ones holding this paper.

You want to restore confidence in the financial system of this country? Start prosecuting the bums who engaged in this conduct. Loudly. Publicly. Every night on the TV news announce a new indictment. Let's do what they do in political prosecutions: Offer deals to the lower level players who can provide solid evidence pointing up the chain. Let it be known that the first guys on the Federal bus will get out of jail soonest... or maybe even get probation.

But our presidential candidates -- neither of them -- call for this. And Wall Street, whimpering now, cowering, is already dreaming of when next it can sneakily sink its fangs into the necks of the American people. Because Wall Street sees that, once the crisis is past, it will be back to plunder as usual.


Empress Bee (of the high sea) said...

ab-soooo-lut-ly curmy!!! great post and so true. i worked in real estate for 26 years, some in a huge real estate firm in palm beach and the last 12 in a palm beach real estate law firm. dirty deals? ha ha ha ha ha

you are ON the money!!!

smiles, bee

Jean-Luc Picard said...

AIG sponsor a soccer team over here in Britain. They are worn on theor team shirts.

Shelby said...

"Start prosecuting the bums who engaged in this conduct." Hello, yes. That is it. Seriously.

Ralph said...

It's easy to understand how Greed is one of the seven deadly sins. Even easier to understand why old Joe Kennedy was the first Chairman of the SEC - he fully understood the avarice in the trading world before Black Tuesday...and where the criminal behavior lied!

I note that Obama (ever the populist) actually has received more money of the two from Wall Street. Barak may be much easier to fleece, according to the New York financiers...