Wednesday, October 20, 2010

Foreclosure And The Banks

From the Naked Capitalism blog this commentary on the illegality of the banks and their greed. I find it interesting that blatant fraud by the banks merits a cover up and protection from the people in power. It is perhaps the definition, the true definition of fascism, the bringing together or corporate and political interests at the expense of the people.

By Russ, aka Attempter, a sustainability activist trying to help figure out solutions to America’s crisis, who blogs at Volatility.

As Foreclosuregate, the legal crisis, looms ever larger and becomes a major political issue, the banks and government have scrambled to mount a counteroffensive against the consequences of their crimes. We can see how flat-footed they were caught. They seem to have become so comfortable with cutting every legal corner and evading every requirement which was even mildly inconvenient that they’re truly surprised this has escalated with such abruptness and violence. Their plan is to try to bluster and bully their way through by any means possible. They expect lies and lawlessness to prevail as always.

The first line of defense is the propaganda line that this is just a technical glitch, not a fundamental problem with the loan or the security, or any kind of systematic intentional fraud. So far this has been the preferred PR line for the administration and the mainstream media. But the banks are also working the line that no matter what the flaw, it can simply be legalized by legislative brute force.

Rather than deal with the considerable consequences of these abuses, the banks are prepared to bulldoze well settled state laws to give them an easy way out. And I’m not basing my view on this story alone; I had a conversation yesterday with a Congressional staffer who matter-of-factly said (but with little understanding of the underlying issues) that Congress would intervene on behalf of the industry, via its authority over national banks.

Congress took one step in this direction by frantically grabbing and unanimously passing a pre-existing bill which would require all states to accept the weakest state-authorized electronic notarizations. This would be only a minor fix of one of the technical issues, and isn’t very important in itself. But it probably foreshadows the far more expansive legislation we can expect to see after the election. Bolstering all of this, the banks are making extortionate threats against the real economy. They promise to wreck it even further if they aren’t given a clear path on this.

At the same time a concurrent propaganda line, seeming to somewhat contradict the other, is a hectic emphasis on speed.

Federal regulators sought Wednesday to prevent the growing furor over improper foreclosures from escalating, pressing mortgage lenders to replace flawed and fraudulent court documents while insisting that foreclosures continue apace.

It’s unclear why they’re simultaneously trying to downplay the significance of all this but also to drum up a sense of crisis which requires a stampede. You’d think they’d at least pretend to want to slow things down in order to make sure all those alleged “technical glitches” are properly fixed.

Demonstrating that the banks understand the significance of how the blogosphere has driven this story, the PR offensive has descended to the comment thread level, as we’re seeing the biggest surge yet of pro-bank commenters, many repeating the same talking points with suspicious discipline.

As Yves Smith at Naked Capitalism observed,

One regular reader has noticed that every time I put up a foreclosure post, the first comment, suspiciously close to the post time, is always a version of “deadbeat borrower”. He reads enough blogs that he is pretty convinced that NC is being targeted for this sort of message.

Perhaps the most insidious propaganda line, and certainly the most scabrous, is the bashing of alleged “deadbeats”. While the subprime borrower – powerless, often a minority – has long been an easy target, and the contempt has been spreading up the income scale as more people are engulfed in the catastrophe, the fact remains that few people intentionally bought more house than they could afford. Most were induced by the massive propaganda barrage from the banks, government, MSM, and even consumer groups, to see a house as a guaranteed investment which could only appreciate in price. More importantly, the main cause of inability to keep up the mortgage is losing one’s job or suffering a medical disaster. It’s the banks themselves who have presided over the destruction of America’s jobs, especially over the last two years. And it’s the government which refuses to counteract the banks’ campaign of socioeconomic scorched earth. (That’s the same government which also pointedly refused to reform the health care system, choosing instead to further entrench the existing larcenous dysfunction under a facade of lies and misdirection.)

So it’s the banks and government themselves who are overwhelmingly responsible for the wave of defaults. The defaults are the knock-on effects of the bank crimes, and now the banks want to seize the homes by further criminal means. Even after all this, few people fight foreclosures if they can’t afford to pay. The great majority of them say they can pay if they get a promised modification, or claim to be the victims of servicer error. So by any measure – moral, rational, or legal – the “deadbeat borrower” talking point is a sham.

But it’s no surprise, given the scurrilous character of the banks and their functionaries. A good indication of the kind of “legal” recourse they assume they can take are the kangaroo courts of Florida. These are not really courts of law but dedicated foreclosure machines manned by judges pulled out of retirement, apparently selected specifically for their bank-friendliness and/or ignorance of mortgage law and existing programs like the HAMP. These were given the mandate to process foreclosures as fast and lawlessly as possible. That puts the administration rhetoric about the need for speed in a new light. Evidently Florida’s rocket docket is the federal government’s dream solution as well.

But even this is failing to work for them. Political scrutiny and demands for legality are becoming more insistent, and the rocket docket has had to slow down and at least pretend to respect the law.

Underlying all of this, the foreclosures continue in spite of the vaunted moratoria. Perhaps they think they can still fool the judges this way: “We announced our moratorium, so obviously we’re only going ahead with fully legit foreclosures. Here’s the lost note affidavit on this one…” Now that this scam has been exposed, they’re spouting a reprise of the original lies – it’s a mistake, it’s miscommunication, we don’t know what’s happening with those bad apples….(Anyone who actually took anything they said seriously would have to wonder how it’s possible to be such a Master of the Universe, and warrant such a “bonus”, and yet make so many self-admitted mistakes and be so ignorant of everything all the time.)

This preference for lawlessness, this knee-jerk recourse to lies and crimes, is however no joke. At the lower levels, outside the regular media eye, the banks have repeatedly demonstrated their comfort with pure brutality. The examples proliferate of thugs threatening people, breaking and entering, bashing in doors, terrorizing occupants. So long as government at every level is the waterboy of the banks while people on the ground remain unorganized, atomized, and vulnerable, this will only get worse. We hear rhetoric, “joking” of course, about how they need to start burning houses down.

“The question to me is not do you foreclose or do you not foreclose. The question is when and with what philosophy you foreclose,” the man on the bank restructuring team said. “If you want to reduce the amount of leveraged homeowners you have, you need to ultimately kick them out of their homes.” A colleague walked up: His recommendation was to burn houses. It would lower the supply.

Even if that’s still a joke at the moment, how long can it remain so? It’s certainly in the mainstream of the logic.

Look, our hope is is that this moves rapidly and that this gets unwound very, very quickly and that if they can go back, reconstruct their paperwork and what we’ve stressed to them is that they need to expedite that process and work very, very quickly to get it done. we’re going to continue to push for that.

That’s Obama factotum Axelrod. And more from the firebugs:

“The first thing that needs to happen, I think, is to get these people out of their homes,” a man wearing a bespoke blue-striped shirt, a Hermés tie patterned with elephants and Ferragamo loafers said recently. “Correct! I’ll explain,” the veteran member of a bank restructuring and advisory team said.

Right here at Naked Capitalism we may have seen the pro-bank handiwork, a shot across the bow. Yves was the target of a Denial of Service attack. Now that’s taking trolling to a whole new level. If it was organized on behalf of the banks, it’s part of the logic.

All of this, from the original predatory lending, to flippancy about conveying the titles and legally securing the trusts, to the Bailout dedicated to propping up those toxic MBS, which we now know are probably nothing but unsecured loans, to the government-led propaganda campaign and legislative hankering to cover up and eventually “legalize” this latest revelation, down to the brutish violence and dirty tricks of the gutter, is one coherent whole, one simple train of logic. It’s simply the logic of might makes right, feudal greed, and total nihilism vis the law and democracy. The mortgage debacle reveals so many abdications of the system, and this abdication of the rule of law is one of the most thorough.

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