The Great Housing Swindle

October 8, 2010 8:09 AM

New allegations of Widespread foreclosure fraud on the part of major US banks: As the housing crisis has unfolded, some of the biggest banks lenders have reportedly been so eager to reposses homes that, in some cases, they've changed the locks on occupied homes that hadn't even been foreclosed yet. Meanwhile, congress quietly passed little noticed bipartisan legislation that would have made it harder for home owners to contest foreclosure proceedings in some cases--legislation which President Obama vetoed despite it's legislative support among both parties. On a related topic: It's finally becoming clearer that widespread mortgage fraud, not ordinary homeowners living beyond their means, caused the housing collapse.
posted by saulgoodman (130 comments total)

The unusual pocket veto came up on AskeMe.
posted by exogenous at 8:11 AM on October 8, 2010 [2 favorites]

Yeah, not everyone agrees that the bill was actually vetoed.
posted by MrMoonPie at 8:12 AM on October 8, 2010

Just beat me to it...

Yes, it's a pocket veto - not an actual one. The ramifications of which are...

Well, no one seems sure about that.
posted by Joe Beese at 8:13 AM on October 8, 2010

From the lock-changin' link:

"As GMAC, JPMorgan Chase and Bank of America suspend foreclosure proceedings because of doubts about the legitimacy of some foreclosure documents, the nation's foreclosure process could face a massive stall, which in turn could further hinder a housing market recovery."

The banks are literally devouring themselves from the toes up in their urgency to eat SOMETHING, ANYTHING, MOAR MOAR.
posted by hermitosis at 8:14 AM on October 8, 2010 [6 favorites]

I didn't even know I could dance the apocalypso!
posted by The Whelk at 8:16 AM on October 8, 2010 [3 favorites]

GAWDDAMN ACORN IS IN OUR BANKS BLOWIN UP OUR MORTGAGES?!
posted by Fezboy! at 8:17 AM on October 8, 2010 [5 favorites]

Why are banks suddenly in a rush to foreclose on properties? I remember an earlier story that banks were refusing to take foreclosed properties due to the high cost and low resale potential. With this lock changing story and the story of a man losing his home even though he didn't have a mortgage and this bit from the lock-changing story "More Americans lost their homes to foreclosure in August than in any other month on record, as banks repossessed 25 percent more homes that month than in August of last year," it seems like something has changed to make foreclosure more attractive to banks.
posted by msbrauer at 8:18 AM on October 8, 2010 [13 favorites]

I don't have a link to share - but I might also add that people who bought mortgage backes securties that turned out to be filled with fradulent loans are forcing BofA et al. to pony up for the money they've lost due to fraud.
posted by JPD at 8:19 AM on October 8, 2010

In Florida there are a huge number of affidavits of lost summons being filed, leading people to think that they are fraudulent and that foreclosees were never actually served.
posted by enn at 8:19 AM on October 8, 2010 [2 favorites]

the nation's foreclosure process could face a massive stall, which in turn could further hinder a housing market recovery. obviate any need for a housing market recovery as millions of homes suddenly don't come on the market.

I mean, surely at this point, with a 12 month housing supply, the last thing we need is more houses for sale? How about any mortgagee whose purported lender doesn't have their paperwork in order is just granted their deed and we move on.

("Oh no! Banks might take a bath!" Fuck 'em.)
posted by rusty at 8:22 AM on October 8, 2010 [25 favorites]

Msbrauer has asked the relevant question. The housing market is paralyzed. No one wants to buy at the prices sellers are asking, so what do banks gain by foreclosing on all of these houses? The only thing I can think is that this is an attempt to get the market to bottom out faster, so that the buying and selling of real estate will resume.
posted by dortmunder at 8:22 AM on October 8, 2010 [3 favorites]

Breaking: Bank of America suspends foreclosures nationwide
posted by East Manitoba Regional Junior Kabaddi Champion '94 at 8:22 AM on October 8, 2010 [5 favorites]

I'm skeptical of a single-cause explanation for the housing collapse. I could think of at least 3 or 4 really solid reasons, and they probably are all interconnected in complex nuanced ways.
posted by stbalbach at 8:23 AM on October 8, 2010 [13 favorites]

The fraud didn't cause the bubble and subsequent collapse -- it was a magnifier, not a source. Had everyone been scrupulously honest throughout, which typically doesn't happen in bubbles (lots of money flowing around pulls the roaches in from every direction), it would have peaked sooner, and wouldn't have collapsed as far, but it would still have done the same basic thing.

The overall bubble was driven by a excess of liquidity and ridiculously low interest rates, as the Fed tried to dodge the fallout from the PRIOR bubble in the Dow and Nasdaq. They did, indeed, manage to keep stock prices from falling to something resembling true value, but the consequences of that intervention were terrible. And they're doing the same thing again now, but on a much larger scale.

The only good solution to bubbles is not to have them; once they've happened, the economy takes it in the shorts, because of the huge malinvestment that has to be liquidated. Trying to avoid that liquidation just exacerbates the fundamental damage.

Bubbles have to be prevented, not treated. Widespread fraud is just a symptom of a deeper problem.
posted by Malor at 8:24 AM on October 8, 2010 [12 favorites]

msbrauer brings up exactly the question I have been pondering. What is in this for banks to be foreclosing so heavily?

Or is this a case of once you get the corporate machinery well-oiled and running, you can't stop the damn thing?
posted by Thorzdad at 8:25 AM on October 8, 2010

Next: massive law suits against the large banks responsible for fraud. Banks going under. Govt bails them out.
posted by Postroad at 8:25 AM on October 8, 2010 [1 favorite]

" It's finally becoming clearer that widespread mortgage fraud, not ordinary homeowners living beyond their means, caused the housing collapse."

Oh, the facts against the bullshit narrative about irresponsible home-owners and hopefuls spread by a sociopathic industry have become so incontrovertible, so irrefutable that they are compelled to note that it is "becoming clearer"? Well goddamn. We're halfway to acknowledging as a country that "there may have been isolated incidents that this may have allegedly happened".

Hey, here's a quote from a 2005 FBI report on fraud:

Based on existing investigations and mortgage fraud reporting, 80 percent of all reported fraud losses involve collaboration or collusion by industry insiders

Eighty. Percent. Insider. Fraud. Finally clearer indeed.
posted by boo_radley at 8:27 AM on October 8, 2010 [42 favorites]

FWIW, Firedoglake - infamous in lefty-blog circles for its vigorous criticism of the President - says it's 99% likely the bill won't become law.

Still, would any of you willingly take a 1% chance of having your house stolen by banksters? He should have vetoed it outright "to leave no doubt" - as he did with H.R. 3326.

Now that the bill is (probably) stalled, Harry Reid has discovered he's on our side after all and is calling for a moratorium on foreclosures in Nevada. Alan Grayson is calling for a national moratorium.
posted by Joe Beese at 8:27 AM on October 8, 2010

I wrote a brief for the sentencing phase of this case while working for the Department of Justice in 2007. The defendant was a mortgage broker who was part of a scheme whereby sellers would "gift" money to buyers--the amount would be tacked on to the mortgage--and the broker would come up with a fictitious "gift letter" to account for the money. The FHA, seeing the appropriate documents, would approve the mortgage, and HUD apparently ate about half a million in damages (p. 19) when ten mortgages defaulted.

Yeah, this is common.

Also, I just noticed that the 3d Circuit totally bought my argument, which made my day.
posted by valkyryn at 8:28 AM on October 8, 2010 [12 favorites]

Oh hey by the way, if millions of previously underwater homeowners suddenly found themselves with a clear title to their house, think of all the extra disposable income they suddenly have. Remember how consumer spending is the biggest economic driver in the U.S.? Remember how no one's spending any more than they absolutely have to right now, because everything is such a mess?
posted by rusty at 8:29 AM on October 8, 2010 [11 favorites]

Based on existing investigations and mortgage fraud reporting, 80 percent of all reported fraud losses involve collaboration or collusion by industry insiders

Sometimes people (well on the Internet) call me an anti-capitalist and I say "No, I'd love to have to capitalistic system. It beats the monopolist oligarchy we've got."
posted by The Whelk at 8:30 AM on October 8, 2010 [13 favorites]

NPR brought up an interesting scenario the other day. Suppose the authorities decide this pile of houses over here were foreclosed on fraudulently. Some of these houses have been resold and have new people living in them. How do you sort out who owns the house, or even who gets to live in it?
posted by backseatpilot at 8:31 AM on October 8, 2010 [3 favorites]

valkyryn: That's really interesting. I almost did that (the gifted money scheme) when I bought my house, because I could afford a bigger mortgage (I got a good deal on the house) and the house needed some work I didn't have the money to finance at the moment. Ultimately I decided not to, partly because I was told it wasn't legal, and partly because I decided I'd rather wait and save than pay 30 years of interest on the extra money.

Anyway, the point being that a fairly naive non-professional buyer (me) without any lawyers or real estate agents involved was able to easily find out that that plan was not legal, or at the very least not legally enforceable. And with a tiny bit of thought it seemed pretty clear that it was also ethically wrong.
posted by rusty at 8:33 AM on October 8, 2010

would any of you willingly take a 1% chance of having your house stolen by banksters?

Yes, because the chances that a bill will become law are directly correlated to the odds of your house being foreclosed.

The pocket veto stems from the fact that there's no Congress right now to override an actual veto. Not that that should stop you from looking for ANY reason to bitch about Obama and he's not progressive enough. Sheesh.

Harry Reid, on the other hand, can go fuck himself.
posted by dry white toast at 8:34 AM on October 8, 2010 [3 favorites]

"As GMAC, JPMorgan Chase and Bank of America suspend foreclosure proceedings because of doubts about the legitimacy of some foreclosure documents, the nation's foreclosure process could face a massive stall, which in turn could further hinder a housing market recovery."

I don't know that that conclusion necessarily follows. The US still has an unsold new home inventory of roughly 9 months. It's not like we desperately need to get foreclosed properties back on the market in order to have enough houses to go around. Indeed, a lot of the potential foreclosures are homes that will be very difficult to sell, as many of them are overpriced McMansions that nobody can afford or were built in now largely vacant subdivisions that nobody wants to live in.

It's also not like the banks desperately need to foreclose in order to free up money for new lending. Bank of America, for instance, pulled in over $3 billion in profit in the second quarter and almost as much in the first.

This has more to do with the banks wanting to make more money than they already are, even if it means some 'collateral damage' in the form of screwing over individual homeowners. Well I say nuts to that. Yes, properly handling hundreds of thousands of foreclosures is difficult and time-consuming, but that's a risk they took when they issued hundreds of thousands of questionable home loans. I have no sympathy for the banks whatsoever. They knew or should have known what they were getting into, and they must be forced to do this right.
posted by jedicus at 8:34 AM on October 8, 2010 [3 favorites]

*and how he's not progressive enough...
posted by dry white toast at 8:35 AM on October 8, 2010

backseatpilot: How do you sort out who owns the house, or even who gets to live in it?

Some clusterfuck involving courts, owners, former owners, lenders, former lenders, and title insurance companies.
posted by rusty at 8:35 AM on October 8, 2010

The pocket veto stems from the fact that there's no Congress right now to override an actual veto.

This is debatable.
posted by MrMoonPie at 8:36 AM on October 8, 2010 [1 favorite]

backseatpilot: NPR brought up an interesting scenario the other day. Suppose the authorities decide this pile of houses over here were foreclosed on fraudulently. Some of these houses have been resold and have new people living in them. How do you sort out who owns the house, or even who gets to live in it?

I'm pretty sure one of the two owners would be reasonably happy with accepting a settlement in the amount of the house's appraised value, courtesy of the illegally foreclosing bank. Perhaps with some additional money to compensate for the difficulties they've put them through.
posted by Mitrovarr at 8:37 AM on October 8, 2010 [4 favorites]

One (acronym) word: RICO.
posted by LastOfHisKind at 8:39 AM on October 8, 2010 [6 favorites]

Based on existing investigations and mortgage fraud reporting, 80 percent of all reported fraud losses involve collaboration or collusion by industry insiders

I think most of the "collaboration or collusion" was with the home buyers.
posted by exogenous at 8:40 AM on October 8, 2010 [1 favorite]

backseatpilot: "How do you sort out who owns the house, or even who gets to live in it?"

well uh ray i ran some numbers and googled some law books and basically it looks like we're gonna have to upgrade from GoddamnThing Lite to ClusterFuck Pro, maybe set up a server farm to ensure our fuck gets clustered at optimal rates, but even then basically uh this will take until well after all the participants in the matter are dead.

So probably you don't and just say that what is, goes. But with law.
posted by boo_radley at 8:44 AM on October 8, 2010 [14 favorites]

boo_radley: The thing is, though, the former owner who got foreclosed on has very little to lose in pushing a lawsuit against the bank that foreclosed on them improperly, assuming they can find a lawyer who'll take it on spec (and really I wish I were a lawyer so I could take some cases like this for 75% of any eventual proceeds). The most likely outcome is that a lot of banks are going to lose whatever they recouped in the foreclosure resale.

If you'll pardon me a moment, I have to stop typing now so I can do a full-body happy dance of joy about this possibility.
posted by rusty at 8:47 AM on October 8, 2010 [1 favorite]

Jon Stewart Takes On Big Banks For Accidental Foreclosures.
posted by ericb at 8:50 AM on October 8, 2010 [2 favorites]

Oh hey by the way, if millions of previously underwater homeowners suddenly found themselves with a clear title to their house,

Unfortunately, when the bank can't prove ownership in order to foreclose, it does nothing to clear the title. The original mortgage is still recorded in the probate office, and until the lender records a mortgage satisfaction, the property is still subject to the mortgage.

In other words, the bank can't prove it owns the debt, so it can't foreclose (and the homeowner can get away with not making payments), but the title to the property also can't be cleared (since there's no entity with clear ownership of the debt to satisfy the mortgage), so the homeowner has an unsellable house.

Fun times for title insurance companies, I suppose.
posted by fogovonslack at 8:56 AM on October 8, 2010

exogenous: "I think most of the "collaboration or collusion" was with the home buyers."

Well, sort of, but not really. The collusion happens among agency actors: the agent, the mortgage broker, the escrow agent, etc . The report talks about two classes of fraud: "Fraud for Housing" and "Fraud for Profit" -- the former being home-buyer driven fraud and the latter being the part that is the Huge National Problem.

If I defraud a broker to get a house, that's an isolated incident -- $300k to $500k. Yes, you can say there's aggregate data that makes it worse, and I'd agree with you. That's the kind of fraud a home owner can collaborate on.

Now, take a look at Section II: Significant Cases. 5 cases listed, with a handful of bad actors. The losses are (exceeding) $15 million, $18 million, $23 million, $150 million. The names of participants: "Mortgage broker J. R. Parker and closing attorney Dale Beardsley". There's the collusion -- it's between the broker and an attorney, not with the the sad sack buying a house and his agent.
posted by boo_radley at 9:00 AM on October 8, 2010 [3 favorites]

so the homeowner has an unsellable house.

I'm not a real estate attorney, but presumably some sort of statute of limitations, laches, adverse possession, or other mechanism would eventually kick in to quiet title.
posted by jedicus at 9:01 AM on October 8, 2010

Fuck the banks.
posted by nj_subgenius at 9:01 AM on October 8, 2010

Fuck the title insurance companies.
posted by nj_subgenius at 9:03 AM on October 8, 2010

In other words, the bank can't prove it owns the debt, so it can't foreclose (and the homeowner can get away with not making payments), but the title to the property also can't be cleared (since there's no entity with clear ownership of the debt to satisfy the mortgage), so the homeowner has an unsellable house.

...which he or she can live in for free, or at least for not very much.
posted by vibrotronica at 9:04 AM on October 8, 2010

My wife used to work as a real estate closing agent for a law firm that handles closings and had to coordinate title searches and all that stuff. She was the one who first tipped me off to the fact that fraud was such a major driver of the crisis in the Florida real estate market, despite the overwhelming rush to pin the blame on a complex of interrelated factors ultimately stemming from "misguided" political attempts to expand poor and minority home ownership. I can only imagine she's greatly relieved at this point to have taken a step down to an office administration position with her current employer, given the title clearing clusterfuck to come.
posted by saulgoodman at 9:04 AM on October 8, 2010 [1 favorite]

The fundamental problem can be resolved only one way: jail time for Chief Executives. There is supposed to be a reason for their astoundingly high paycheques: they set the direction and character of the company. If there is rampant fraud, it is ultimately due to the CE-class of management enabling it.

Jail. Time.

It's the only solution.
posted by five fresh fish at 9:05 AM on October 8, 2010 [19 favorites]

And, most of all, fuck the mortgage originators from 2002-2007 who were the real villains.
posted by nj_subgenius at 9:07 AM on October 8, 2010 [1 favorite]

tl;dr version is last night's Daily Show.
posted by Oddly at 9:16 AM on October 8, 2010

Not that that should stop you from looking for ANY reason to bitch about Obama and he's not progressive enough.

Trust me - if that's what I was doing, I'd have quite a few other things to place ahead of this on the list.

The issue is whether he has effectively acted to stop a bill that we probably all agree needed very badly to be stopped.

As MrMoonPie quoted in that AskMe thread:

The extent of pocket veto authority has not been definitively decided by the courts.

In other words, he chose the less reliably effective method of stopping the bill. And I can't think of any reason why that doesn't involve placing the needs of legislators ahead of the needs of the people who elected him.

For example: might an actual veto have required the senators - among whom the spirit of bipartisanship so suddenly and dramatically flowered - to go on record, rather than use the dodge of a voice vote?
posted by Joe Beese at 9:17 AM on October 8, 2010

It's finally becoming clearer that widespread mortgage fraud EXPLOITING ordinary homeowners living beyond their means, caused the housing collapse.
posted by philip-random at 9:17 AM on October 8, 2010 [4 favorites]

The fundamental problem can be resolved only one way: jail time for Chief Executives.

Most of the fraud that's being talked about here wasn't committed by the banks. It was committed by mortgage brokerages, who are completely distinct organizations from the actual lenders. I helped send one such broker to jail, and I'm completely for jailing all the people who were involved in this sort of scam. But the "CEO" you'd want to target here would be someone at the FHA office at HUD. Banks, though they certainly don't seem to have done due diligence, were at best willfully blind to the fraud committed by others, but having lax underwriting standards is not the same thing as deliberately attempting to defraud the people enforcing said standards.

This is a complex problem, and simple solutions to complex problems are usually bad solutions, i.e. they may provide some satisfying emotional relief, but they aren't likely to actually solve anything.

I mean, yeah, populist furor, etc., but come on. I'll need to see some credible evidence of actual knowledge in the boardroom before I want to take that step.
posted by valkyryn at 9:18 AM on October 8, 2010 [4 favorites]

And, most of all, fuck the mortgage originators from 2002-2007 who were the real villains.

Like I just said, I'm not sure that's true. I'd want to lay most of the blame at the people trying to sell the mortgages, i.e. the brokers, not the banks, because they're the ones most likely to have engaged in the actual fraud. I'm not saying that the banks are guiltless here, but credit/blame where it's due.
posted by valkyryn at 9:19 AM on October 8, 2010

fogovonslack: ...so the homeowner has an unsellable house.

I'm suggesting that what we need is legislation, not to paper over the failure of the banks and lenders to keep track of their documents, but to simply grant title to homeowners whose supposed lender can't actually prove it owns the mortgage. I think you're saying that how it works right now, the title would be left in limbo. I'm saying we should change the way it works. If you've been paying someone for your mortgage, or not paying them but they're claiming they have the right to take your house because of that, and they can't prove they own the mortgage, you should be given the deed, and the zombie debt wiped off the official books. Let the banks sort out whose loss it is amongst themselves. I couldn't possibly be persuaded to care, and I doubt many other people could either.
posted by rusty at 9:19 AM on October 8, 2010 [4 favorites]

Joe Beese: For example: might an actual veto have required the senators - among whom the spirit of bipartisanship so suddenly and dramatically flowered - to go on record, rather than use the dodge of a voice vote?

Quoted for accuracy. I tried to look up how my representatives voted on this bill, and much to my surprise I could not. Unrecorded voice vote. The pocket veto is to preserve the political cover of the tireless champions of the little guy for whom it is so very very important we vote in November, rather than risk the bill being put to a recorded vote.
posted by rusty at 9:22 AM on October 8, 2010 [3 favorites]

I'd want to lay most of the blame at the people trying to sell the mortgages, i.e. the brokers, not the banks, because they're the ones most likely to have engaged in the actual fraud.

By that argument, the record companies weren't guilty of payola, it was third-party "independent promoters" who were to blame. Blaming sock puppets is all very well, but the hand up the puppet's ass still stinks.
posted by bonehead at 9:27 AM on October 8, 2010 [4 favorites]

It would be an interesting thing to see the population of this country revolt. Not against the government, but against the corporations and banks that have time and again proven that they just could not care less about people as anything other than a walking wallet to be exploited.

A violent uprising to remove the lobbyists which allow the government to be unduly influenced by corporations? I honestly can't imagine what America might look like after something like that.

But whatever it started as, it would end as class warfare and that nearly always ends badly for those on the bottom.
posted by quin at 9:29 AM on October 8, 2010 [2 favorites]

And I can't think of any reason why that doesn't involve placing the needs of legislators ahead of the needs of the people who elected him.

Since those legislators were themselves elected by the people who elected him, it seems reasonable to take their concerns into consideration. I know, I know, congress liars crooks scoundrels robble robble, but the real world relationship between the president and the congress actually has some nuance. Go figure.
posted by Riki tiki at 9:31 AM on October 8, 2010

Mad as hell... not going to take it anymore... anyone? No?
posted by dazed_one at 9:34 AM on October 8, 2010 [2 favorites]

Like I just said, I'm not sure that's true. I'd want to lay most of the blame at the people trying to sell the mortgages, i.e. the brokers, not the banks, because they're the ones most likely to have engaged in the actual fraud.

Valkyrn: In Florida (and presumably other states), there's a special category of player in the real estate market called a loan originator--they're private, at one time unlicensed parties who set up loans for the banks. In Florida, it turned out that thousands of them had criminal histories, and there was no oversight of their practices whatsoever. Unless I miss my guess, that's who nj_subgenius is aiming his ire at, not necessarily the banks who serviced the mortgages but the thousands of unscrupulous loan originators who brokered them.
posted by saulgoodman at 9:35 AM on October 8, 2010

The Daily Show's Wyatt Cenac visits the good people of the Mortgage Bankers Association at their foreclosed headquarters rented headquarters luxurious corporate retreat to find out why it's okay for them to strategically default on their mortgage while claiming it's a moral imperative for regular homeowners not to do so.
posted by Rhaomi at 9:41 AM on October 8, 2010 [14 favorites]

"Pro forma. From the Latin, meaning 'Lawyers jacking each other off.'"
posted by organic at 9:43 AM on October 8, 2010 [4 favorites]

Unless I miss my guess, that's who nj_subgenius is aiming his ire at, not necessarily the banks who serviced the mortgages but the thousands of unscrupulous loan originators who brokered them.

So "originators" more or less equal "brokers" at this point.

Works for me.
posted by valkyryn at 9:51 AM on October 8, 2010

MsBrujer: Why are banks suddenly in a rush to foreclose on properties? I remember an earlier story that banks were refusing to take foreclosed properties due to the high cost and low resale potential.

Yeah. This just stinks to high heaven. Great point.

It's very strange that the institutions who will be defacto default owners of these foreclosed properties will also be the institutions who will make the loans to potential new owners??

Seem to me if I owned the property and were making the loans the utterly unethical reppellent unwritten laws of scumminess that are the unspoken code of Real Estate "dictates of the market," would compel me to only make that loan to that buyer willing to pay my price. Like it or not, or no loan...sorry Charlie....
posted by Skygazer at 9:52 AM on October 8, 2010

valkyryn: "I'd want to lay most of the blame at the people trying to sell the mortgages, i.e. the brokers, not the banks, because they're the ones most likely to have engaged in the actual fraud."

This is actually a good point, and bears repeating. In Colorado (where I live) our Mortagage Broker -- the individual who put his name on the line which is dotted -- is culpable for fraud across the life of the mortgage. If there's a fuckup of some kind, he can lose his license, or be subject to more mundane punishments.


Whoa, you argued before the 3rd circuit?
posted by boo_radley at 9:56 AM on October 8, 2010

Can we please, please, please throw some of these sleazy motherfuckers in jail now?

Please?






Please?
posted by felix betachat at 9:58 AM on October 8, 2010 [3 favorites]

Can we please, please, please throw some of these sleazy motherfuckers in jail now?

Yes.
posted by valkyryn at 10:00 AM on October 8, 2010

start with the president
posted by clavdivs at 10:03 AM on October 8, 2010

I wish I were a lawyer so I could take some cases like this for 75% of any eventual proceeds

Try 33%. Courts aren't generally willing to permit contingency fees greater than a third of the total award, particularly when we aren't talking about mass torts.

Still sounds like an awesome way to make some money though... Hmm... Maybe it's time to hang out that shingle...
posted by valkyryn at 10:04 AM on October 8, 2010 [2 favorites]

The pocket veto
When Congress is adjourned, the president can reject a bill by simply refusing to sign it. This action is known as a "pocket veto," coming from the analogy of the president simply putting the bill in his pocket and forgetting about it. Unlike a regular veto, Congress has neither the opportunity or constitutional authority to override a pocket veto.

Since as noted up-thread, the legislation was so uncontroversial among legislators it passed easily on a simple voice vote, what on earth makes you think you can say confidently that a formal veto wouldn't be overridden by the full congress?

You might say, "Sure--but that would put the congress on the record and allow voters to punish them come election time," but then: A) voters don't reliably do that; and B) in the event of a congressional override, the bill would absolutely become law and mortgage holders would immediately be out a crucial legal tool in their arsenal against foreclosure, putting actual people out of their homes who might otherwise keep them in service to making a symbolic political point. A pocket veto kills it, end of story. Of course, you're perfectly willing to bet on real outcomes that immediately impact actual people's lives to argue the point, right?

But fuck it. I already regret contributing to this derail.
posted by saulgoodman at 10:05 AM on October 8, 2010 [1 favorite]

A pocket veto kills it, end of story.

I don't have my Oleszek bible handy, but IIRC the House and Senate can just pass the same bill content again with another set of voice votes when they get back and send it back to Obama's desk.
posted by ROU_Xenophobe at 10:16 AM on October 8, 2010

A pocket veto kills it, end of story.

If by "end of story" you mean "I refuse to think about this any more", OK.

But if you are asserting a fact of legislative procedure, you are talking out of your ass.

Again:

The extent of pocket veto authority has not been definitively decided by the courts.

In other words, whether this pocket veto kills the bill is the decision of that bastion of consumer protection: the Roberts Supreme Court.
posted by Joe Beese at 10:16 AM on October 8, 2010

Is that a veto in your pocket?
posted by Kabanos at 10:19 AM on October 8, 2010 [2 favorites]

Joe Beese: "In other words, whether this pocket veto kills the bill is the decision of that bastion of consumer protection: the Roberts Supreme Court."

I didn't realize you could get things to the SC immediately. That's... surprising.
posted by boo_radley at 10:24 AM on October 8, 2010 [3 favorites]

I don't have my Oleszek bible handy, but IIRC the House and Senate can just pass the same bill content again with another set of voice votes when they get back and send it back to Obama's desk.

Well. they could always do that, in any veto scenario.
posted by saulgoodman at 10:24 AM on October 8, 2010 [1 favorite]

Change the name, same substance, put it back up to vote. There's no mechanism to prevent that in any case.
posted by saulgoodman at 10:25 AM on October 8, 2010

Glad to be a renter.
posted by thsmchnekllsfascists at 10:30 AM on October 8, 2010

MrMoonPie: "Yeah, not everyone agrees that the bill was actually vetoed."

But Senate leaders agreed last week to schedule pro-forma sessions of the chamber every week until the lame-duck session in November. The deal prevented Obama from making recess appointments.

What The Fuck???

1) Who are these "leaders"?
2) Why the fuck are they doing such deals -- if congress is supposed to be closed (why aren't they closing it? "Pro Forma" is basically saying "as a formality, we're 'holding it open' but they aren't ACTUALLY going to be in session? Just like those "filibusters" where they don't actually filibuster? Or, I'm guessing, governing and leading when they aren't actually leading? I think I fucking understand everything now. Jesus, how could I have been so blind.)
3) No, really. What is the logic behind this?
posted by symbioid at 10:30 AM on October 8, 2010

What makes you think Obama would be any more likely to sign it the next time than this time? Even taking the most cynical view of his intentions and personality, passing this bill would be a PR disaster.
posted by vibrotronica at 10:31 AM on October 8, 2010

1) Who are these "leaders"?

Harry Reid.
posted by vibrotronica at 10:32 AM on October 8, 2010

Why the fuck are they doing such deals?

To placate Republican legislators.

I expect this strategy to yield dividends any day now.
posted by Joe Beese at 10:37 AM on October 8, 2010 [4 favorites]

What makes you think Obama would be any more likely to sign it the next time than this time?

It would be after the election.

Or do you suppose the Catfood Commission chose December to release their findings because it will help make the holidays more festive?
posted by Joe Beese at 10:39 AM on October 8, 2010 [1 favorite]

I can think of a lot of reasons why a bank would foreclose on houses eagerly, in this market where houses aren't selling. Most of them require the banks to have a long-view profit position based on the market recovering, or knowledge of an upcoming law that will cost them even more than foreclosing and sitting on the assets will, or being in a position where a firm asset on the books is more valuable than a sketchy mortgage is, and they believe housing prices have firmed up.

A car dealership may hem and haw and claim you're getting a great deal and they're not making money on the car, but of course they are, or they wouldn't sell it to you, period. You just can't see where their profit is coming from. One thing you can count on in this whole mortgage situation: if banks are going out of their way to do something that seems counterintuitive, they know (or believe they know) something that you don't, something that (short or long term, with or without risk) will make them money.
posted by davejay at 10:39 AM on October 8, 2010 [5 favorites]

vibrotronica: "1) Who are these "leaders"?

Harry Reid."

Exactly. Remember guys, if we don't vote for democrats then republicans will... hold congress open pro-forma and the big O can't implement the truly progressive vision he really really wants to by performing recess appointments. Yeah... Keep fuckin' that chicken.
posted by symbioid at 10:43 AM on October 8, 2010 [3 favorites]

The housing market collapse is bad, but the broader Great Collapse was caused by the finance sector. The total amount of all the failed mortgages is dwarfed by the amount of bailing out the government had to do - because financial firms were making hundreds of side bets on each of these mortgages.
posted by r_nebblesworthII at 11:01 AM on October 8, 2010

I have no sympathy for the banks whatsoever.

The question is do you have any sympathy for the millions of Americans who's retirement funds were invested in the banks by their pension funds? These banks aren't self-owned, they aren't primarily owned by the CEO's, they aren't even primarily owned by the Chinese. As I understand it, they are owned by a lot of American people, just in very small individual amounts.
posted by nomisxid at 11:06 AM on October 8, 2010

The problem is simply that many of the Dems in congress have never been fully on board with a truly liberal or progressive agenda. Period. They don't care what the agenda is--they just want to do what they think their constituents want them to, and in many cases, they just don't want to rock the boat when it comes to their local constituencies. The Dems are and have always been only willing to go along with progressive policies when the most prominent figure calling for progressive movement is perceived as popular--a vote winner--in the current news cycle. That's why they've been so easily cowed into helping obstruct the admin's actual policy aims since his core supporters almost immediately turned on him at the first sign of challenges implementing his agenda, and it's also why the Republican establishment strategy from day one has been to use its formidable media apparatus to make Obama the sole focus of criticism and controversy as he's the most prominent political figure popularly identified with a liberal/progressive agenda. And Republican partisans are nothing if not masters at character assassination. They once almost even managed to convince me that Clinton played a role in Vince Foster's suicide and dozens of other suspicious deaths, although it's since become clear (and been substantiated by key players) that the entire affair was a carefully orchestrated, fully-knowing propaganda campaign (the Arkansas Project) orchestrated by Scaife, the Koch Brothers, the Federalist Society.

It's a simple political triangulation, and as much as we might like to credit voters with being smart enough to know better, or not to mistake Obama himself for the causes of progressivism, it always works: erode support for the guy most visibly associated with progressive policy goals (regardless of whether he's actually as far left as advertised or not--which I still maintain is not as simple a question as the Beeses of the world declaim) and the Dems, who by their nature are oriented toward riding on whatever they think popular opinion is, will move away from what's perceived to be the unpopular position. To paraphrase George C. Scott's Patton: "America hates a loser."

Carter's political defeats paved the way for nearly two decades of unimpeded right wing political ascendancy, and the emergence of a conventional Washington establishment view that America is a center right nation. The message is deliberately confused with the messenger, and already, all the popular media accounts are focusing on how, now, suddenly, the electorate is predominantly conservative and the voters want to see the country become more conservative.
posted by saulgoodman at 11:10 AM on October 8, 2010 [6 favorites]

It would be after the election.

Or do you suppose the Catfood Commission chose December to release their findings because it will help make the holidays more festive?

That may be, but it doesn't solve the basic problem: If he signs this legislation, it will be used against him come re-election time by both the left and the right. Even assuming Obama is a 100% craven politician, and I don't believe he is, there's no upside for him in signing this legislation into law.
posted by vibrotronica at 11:26 AM on October 8, 2010

The Dems are and have always been only willing to go along with progressive policies when the most prominent figure calling for progressive movement is perceived as popular--a vote winner--in the current news cycle. That's why they've been so easily cowed into helping obstruct the admin's actual policy aims since his core supporters almost immediately turned on him at the first sign of challenges implementing his agenda...

You're being over-inclusive. "Dems" are not nearly so monoculture, there are many cookiecutter versions that fit your bill, but there are just as many Conservative/Corporatist wolves in sheeps clothing that just happen to have a 'D' next to them.
posted by T.D. Strange at 11:31 AM on October 8, 2010 [1 favorite]

Widespread mortgage fraud, not ordinary homeowners living beyond their means, caused the housing collapse.

So says RealEstateChannel.com, but I will remain just a tad skeptical about this claim. When homes increased in value much faster than than incomes year after year, something had to give. The lenders had their hand in it, but realtors pocketed commissions on many bad house investments and they knew it in their hearts that this couldn't last.

There was a lot of blame to go around and mortgage fraud is just one leg of the stool and not likely the major one.
posted by dgran at 11:48 AM on October 8, 2010

nomisxid: they are owned by a lot of American people, just in very small individual amounts.

ORLY? Where's my ten million dollar bonus check for the year then? Where's my cut of BoA's three billion in profits? If you handed me a pen and said "sign here to trade your investment stake in the US banking sector for the title to your house" you would be knocked over by the sonic boom made by the tip of the pen, is how fast I would sign that deal.

You know who would lose bigger than they gained by this deal? Really rich people. That's it. Whatever possible tiny slice of my already exceedingly small mutual fund investment is in the financial sector would be irrelevant compared to the amount of money that trade would save me. I doubt any other regular middle-class mortgagee would do otherwise, either. Our individual tiny piece of US banking nets us squat every year. Owning my house outright: priceless.
posted by rusty at 11:49 AM on October 8, 2010

We need a national foreclosure and loan servicing agency. No more state judges and a million overlapping rules. One federal system that services the loans and can foreclose in the event of non-payment through a fair process. We cab charge the banks during the process and insure the loans appropriately.
posted by humanfont at 11:51 AM on October 8, 2010

You're being over-inclusive. "Dems" are not nearly so monoculture, there are many cookiecutter versions that fit your bill, but there are just as many Conservative/Corporatist wolves in sheeps clothing that just happen to have a 'D' next to them.

Fair point. There are also genuine liberal/progressive crusaders who are absolutely committed to liberal/progressive goals.

There are, to my knowledge, absolutely no progressive/liberal Republicans anymore, despite the original progressive party having been a Republican off-shoot (no Teddy Roosevelts or even Abraham Lincolns). That's actually a pretty bizarre historical circumstance.
posted by saulgoodman at 11:52 AM on October 8, 2010

You guys are missing the bigger, even yuckier issue...

Problem #1: All these messed-up mortgages where the paperwork never got properly recorded or transferred (and in some cases was sent to overseas storage facilities, or even outright shredded) don't just affect the relationship between the homeowner and the original bank or lender. That's because the mortgages were bundled into MBS's (mortgage-backed securities) which were sliced up and sold to lots of pension funds and hedge funds and states and cities/municipalities and stuff like that. So the damage can spread so much wider than just the more localized headache between a homeowner and the guys who claim they own his mortgage.

Problem #2: And these messed-up mortgages don't just affect people who can't make their monthly mortgage payments and who are being foreclosed upon. Consider a real-life situation like, say, mine. I bought a house in 2005 with a nice normal 30-year fixed-rate mortgage. Got a loan through Metrocities Mortgage, here in town. The loan was sold within one month to Countrywide, also in town. Countrywide's loans were then bought/absorbed by Bank of America, and there is lots of legal and financial documentation out there that Countrywide was terrible about moving or recording their notes. On top of that, my original mortgage paperwork has a MERS number printed on it, but according to the MERS look-up website, it is no longer owned by MERS, so it was moved again at some point. Question: who owns my mortgage and where is my title? Bank of America is their servicer, i.e. the company to whom I make monthly payments, but I think at this point one has to suspend the benefit of the doubt and assume that they don't actually have it. So when it comes time to sell my house in a few more years, can I get a clear title? Until recently, I would have thought this was crazy-talk, but now I don't know. What if the wannabe-future-purchaser of my home cannot get title insurance, because title insurance companies refuse to touch titles that were passed around like hot potatoes among known-to-be-unsavory firms in the late 2000's? And since he can't get title insurance, he can't get a decent loan from the bank, or any loan?

Crazy-talk, right? Well, we'll see.

And if your answer to the question is to say, well, just go to your county recorder's office and look up the title, you're missing the point of this awful mess: many times the title changes by these financial companies were never recorded. And some are being recorded now, ex-post-facto, by outright notary fraud, as cited in numerous depositions.

Which leads to Problem #3: the unpleasant fact that it is possible -- though not proven yet -- that in some cases the same house could have been bundled into multiple mortgage-backed securities. And the banks could have made money (fees) each time this happened -- which could have given them even more incentive (beyond just being lazy) for not correctly recording the paperwork and keeping the papertrail clean. So if three different MBS's each say they have a specific mortgage in them, who really does? And conversely, if the mortgage goes into default, aren't the bad effects then multiplied throughout the system?

Now, remember how many MBS's the Federal Reserve bought?

Look, I'm happy to be talked down from my worries, but at every step and every turn of this mortgage mess, since the beginning, worst-case scenarios and ridiculous fraud and sloppiness and corruption have come to light, and I just can't muster up giving the benefit of the doubt anymore.
posted by Asparagirl at 12:00 PM on October 8, 2010 [27 favorites]

Question: who owns my mortgage and where is my title?

Stop paying and start the clock running on adverse possession. In 25 years, you will.

(only half-kidding, sadly. something like this is looking more and more rationally daily. )
posted by T.D. Strange at 12:12 PM on October 8, 2010

People should read the articles more carefully:

the most prevalent type of mortgage fraud - 53% of all claims -- was something called "occupancy fraud." This fraud involved an investor who falsely claimed on the mortgage application that he/she intended to occupy the property as a primary residence.

and

The analysis found that 90% of all the applicants had exaggerated their income and more than half of these borrowers had inflated their actual incomes by more than 50%.

This is the very definition of people living beyond their means. The buyer knows the house is beyond their means.

And certainly their was fraud and unfair dealing on the part of banks, lenders, and brokers. So while I appreciate that people were breaking and bending rules, I am not convinced that the rule-breaking caused the crisis, nor am I convinced that the simultaneity of the rule-breaking and the looking-the-other-way by regulators wasn't itself an product of the market.

It is important for vested interests, like banks, etc, to convince you that the crisis was caused because some bad actors broke the rules. Because the message they need to send is that the rules if followed would never have led to this. They make a lot of money on the system remaining intact.

But what if the crises happened and the rules by-and-large weren't broken (or the rule breaking was not consequential)? What happens if the structure of the system (maximization of profit and commoditization of everything including homes) led to everyone breaking the rules at the same time, causing everyone to look the other way at others' wrongdoing?

Then it means that an economic disaster like this is a normal, possible outcome of the free market. It means that the system encouraged the speculation and then encouraged everyone to break the rules when their anticipated profit exceeded some threshold. If people realize that, they will want to change the system, not just the rules. and that would be very bad for business.
posted by Pastabagel at 12:26 PM on October 8, 2010 [1 favorite]

the hand up the puppet's ass still stinks.

Ah, Metafilter. You never fail me.
posted by mmrtnt at 12:36 PM on October 8, 2010

Can we please, please, please throw some of these sleazy motherfuckers in jail now?

It's not Fitzmas yet.


posted by mmrtnt at 12:41 PM on October 8, 2010

PB: You missed something pretty crucial in the passage you quoted (emphasis mine) and it completely destroys the thrust of your point:

the most prevalent type of mortgage fraud - 53% of all claims -- was something called "occupancy fraud." This fraud involved an investor who falsely claimed on the mortgage application that he/she intended to occupy the property as a primary residence.

An investor fraudulently buying a home to flip as an investment vehicle doesn't qualify as an "ordinary homeowner" by any sensible definition of the term. The message about blame from the big guys on Wall Street has consistently been to foist responsibility onto actual Joe Schmo residential homeowners who got in over their heads.

Actual homeowners weren't lying on mortgage applications about their plans to occupy the houses they bought (that's not even sensible). No, ordinary homeowners were actually living in their homes like, you know, ordinary people tend to do with their real-life homes that are not merely over-leveraged investment vehicles.
posted by saulgoodman at 12:44 PM on October 8, 2010 [2 favorites]

You know who would lose bigger than they gained by this deal?

Yeah, all those really rich teachers with their fat cat pensions, living in apartments, I'm sure they'd be happy to give up their retirement security for you. I get it, you want what you didn't pay for, because you're pissed at rich people, and you don't care how many people in the middle class you'd screw over to make no noticeable dent in the fortunes of the truly rich. Thing is, that attitude sounds a lot like the fraudsters you are railing against, to this apartment dweller.
posted by nomisxid at 12:45 PM on October 8, 2010

The problem is simply that many of the Dems in congress have never been fully on board with a truly liberal or progressive agenda.

saulgoodman: What would a truly liberal or progressive agenda be? In relation to the housing market? Would it be affordable housing? Affordable to own? Or merely to rent and live in?

Does the progressive agenda go so far as to attack the American Dream of home ownership as a threat to liberty and democracy (in the sense that losing 50% of your after tax income to a mortgage prevents anyone from being truly free)?

The fact that the right has dodged, to my utter stupefaction, full responsibility for engendering a system that led to this crisis not as an aberration but as a natural consequence demonstrates the utter failure of the progressives, or liberals, or whatever you want to call them.

Ultimately, they can blame Katrina on the weather. They can blame the wars on the 9/11 attacks. The can blame high defense spending on Iranian nukes and China. The right has always had something external to themselves to point to as the scapegoat for why the middle class gets screwed.

But this was the one time it was different. The 2008 crises was a product of the free market of 19??-2007. It was not an accident, or a natural disaster. It is a man-made disaster that has destroyed people's lives, but the disaster was a product of something--"the free market"--that is nothing more than some relationships.

I'm not a Marxist. but I'm also not a Wall Street hedge fund, so I'd rather see my friends and neighbors lead normal happy lives than see their lives upended because of some slavish adherence to free market ideology. But the fact that Marxists beginning with Karl predicted this outcome should have given the left the confidence to challenge the prevailing system. Instead, the left was so happy that they got elected that they abandoned the progressive rhetoric in favor of appeasing the institutions with all the money and the power to keep them elected.

The people skew right. This isn't Europe. All else being equal, they'd rather have a right-wing guy than a left wing guy. When they elect a democrat to the presidency, they pick a centrist and only in an unusual historical context. You need to seize the opportunity to make the argument that in 2008 the system wasn't broken, it did exactly what is was supposed to do. 2008 is the free market working normally after working normally for the previous 25+ years.
posted by Pastabagel at 12:47 PM on October 8, 2010 [3 favorites]

From the "fraud, not irresponsible homebuyers" link:

The M.O. described is exactly the same M.O. used in the savings & loan debacle in the 1980s - which heavily involved a Bush brother. The huge difference this time around was the very existence of no-documentation mortgages, due to the convenient removal of regulations, which also happened to involve a Bush brother. I never bought the "those poor homebuyers did it" argument because that class was just not that big, nor that smart, no way. It was obviously an inside job, and we paid for it just like the savings & loan mess. Back then, a few key profiteers were charged, and then got immunity for turning in all their underlings, many of whom made zero money from the transactions but just managed to keep their jobs or that bank as a customer. This time, looks like nobody's even being charged.
posted by lphoenix at 12:54 PM on October 8, 2010

nomisxid: Seriously, I urge you to consult your own words: "tiny pieces." Specifically: "Tiny." Banks taking a hit in share price would pass a hit along in the value of mutual fund stakes, including pension funds. This is true. But if even several banks collapsing bankrupts a major pension fund, then my idea would not be what screwed over the stakeholders in that fund. What kind of asshole would you have to be to leave your investors exposed to that kind of risk? I'm sorry if they are (I don't think they are, of course) but Jesus, how do you run an economy if you have to pretend something like that isn't the dumbest thing imaginable?

What I'm saying here is that I think you're repeating the conventional wisdom that we must protect banks because after all, the bank is owned by elderly retired kindergarten teachers and crossing guards. I'm saying that is bullshit, and we'd be better able to dig out of this mess if perfectly well-meaning people like you didn't believe it. So... I don't know. Don't believe it. At least examine the idea for plausibility.
posted by rusty at 12:58 PM on October 8, 2010

PB: You missed something pretty crucial in the passage you quoted (emphasis mine) and it completely destroys the thrust of your point:

I actually understood that when I wrote my comment above. The thrust of my point was the "living beyond ones means" part - investors/flippers couldn't answer honestly because they couldn't afford the financial terms of a mortgage for flippers. I was reading "living beyond one's means" to simply mean "greedy." But I understand that you were using it in the more conventional sense.

Furthermore, if the ordinary homeowners weren't lying on their applications, why are so many underwater in their houses? Because many are out of jobs. Or because the rates adjusted from very low to relatively high in a very short span of time. They aren't the cause of the crisis, but they can't escape it by not being the cause.

The cause is not cheating. Yes, cheating may have contributed. So may have other things. These are proximate causes--what people did from late 2005-mid 2008.

The underlying cause of the 2008 crisis is the application of free market ideology to the financial industry. Period.
posted by Pastabagel at 12:59 PM on October 8, 2010 [1 favorite]

Fraud caused the mortgage crisis! The free market caused the mortgage crisis!

Girls, girls. you're both pretty. Now stop fighting and go back to insulting the assholes who got us into this mess.
posted by Asparagirl at 1:16 PM on October 8, 2010 [6 favorites]

It is a man-made disaster that has destroyed people's lives, but the disaster was a product of something--"the free market"--that is nothing more than some relationships.

Remember, Pastabagel, that bubble would not have inflated without the low interest rates and massive liquidity that was made available. A free market, one that wasn't being manipulated from a central authority, would never have gotten into a housing bubble at all, because we'd have been in a mini-Depression starting about Y2K.

The Fed had primary oversight of the banking industry, and completely, utterly, absolutely failed in its duties. The central job of the central banker is to take away the punchbowl whenever a party gets started, and Greenspan was in there spiking it with Bacardi 151.

We do not have a free market. Free markets have to be free to go down. It is an absolutely critical process to free markets and capitalism in general that bad players be removed rom the system. If bad players are not allowed to fail, if stocks are only allowed to go up, then the economy will gradually disintegrate.

Never argue that this was a failure of the free market. The housing bubble was DRIVEN BY the regulators and the government agencies. There were three main legs driving the bubble; liquidity, low lending standards, and cheap, worthless insurance. The government was two of those three legs, and when the third leg failed (AIG blew up), they took that over too.

A free market would never have gotten that fucked up... there's no way that fraud and stupidity could happen at that enormous scale without being driven directly by the government. The GSEs functioned precisely like an arm of the government because the market believed -- correctly, as it turns out -- that they'd be bailed out if they ever ran into trouble. And they had all the matches they wanted to play with, courtesy of the Fed. AIG was the only private party in the great triumvirate, and they didn't stay private for long.
posted by Malor at 1:18 PM on October 8, 2010 [5 favorites]

PB: Progressivism as a coherent political movement has been out of the picture for many years now, though there will always be attempts to rekindle it, but here's a rundown of some of the history of attempts to promote progressive housing goals though legislation. Progressivism has historically been defined in terms of its aims, not its specific approaches to policy. Progressives established the first housing codes and helped create the first public housing programs, but then, even at the outset, they had to make difficult compromises with the real estate industry. I'd say the basic progressive aim has always been to make sure people have clean, healthy, and comfortable places to live regardless of what "market forces" dictate. Specific policy prescriptions will always be a challenge. But the progressive position has generally been that humans have the power to solve any problem the markets or nature creates through the application of well-designed public policy that enjoys the good-faith support of the public.

Personally, I don't know how best to answer these problems, but it does seem painfully tragic to me that while we have record surpluses of unoccupied housing, we also have record numbers of people without access to housing. The non-progressive response would simply be to demur, "Well, the market says we'll have to burn 'em all down, so burn 'em all down, boys." But the progressive position would be to say wait--we can't just submit ourselves to "market forces" that dictate letting these problems go unsolved and these resources go to waste. Because for all its merits as an efficient creator and distributor of value and resources, the market is also quite clearly the most efficient destroyer of value and resources.
posted by saulgoodman at 1:19 PM on October 8, 2010 [1 favorite]

Apparently it's not exactly a pocket veto.
posted by rusty at 1:28 PM on October 8, 2010 [1 favorite]

Thanks for posting this, saulgoodman. It is important to clearly understand what happened, so we can prevent repreats. I do question your assertion that it is regulators and government agencies who DROVE the bubble, especially since, as you point out, the drivers were "liquidity, low lending standards, and cheap, worthless insurance." Only the first is a result of the government; the latter two are on the industries heads, no? I mean, you would hope that regulators would catch that they were doing these things, but you can't blame regulators for them behaving badly, can you? Or are you saying something different?
posted by Mental Wimp at 1:40 PM on October 8, 2010

Sorry, saulgoodman, that quote was from Malor. My reading comprehension has gone to shit today.
posted by Mental Wimp at 1:53 PM on October 8, 2010

NP, Mental Wimp. And I agree with your point, FWIW. When regulatory gaps are exploited, the culpable are still the exploiters in my book. No regulatory system will or ever could be airtight against bad-faith actors.
posted by saulgoodman at 2:00 PM on October 8, 2010

Never argue that this was a failure of the free market.

Oh for fucks sake Malor, there is always this dogma at the center of your pretty damn expert analysis/commentary that weakens your whole argument and makes it collapse in on itself.

There is no such thing, and will NEVER be, any such thing as a truly perfect free market, because capital is not free and is not like a water table, it does not rush to find a level, or some sort of mythic equalization that keeps everything fair and equal. Capital if anything rushes upstream, always seeking out the greatest concentration of activity and stays there. Period. End of story. The people behind that capital further encroach themselves via political power, and the natural oligarchic society that accrues in the furtherance of said, allow to make up the term, SUPER-capital and just feeds itself.

And just becomes more and more unreachable by the places were it can do the most good. "Good" here, being a equitable free market that rewards the good actors and punishes the bad actors.

Without a government that's independent of that it's always going to be a disaster waiting to happen as corruption turns into the concentration of capital becoming predatory as those with it identify a system whereby to game the system simply from the illusory temporary equitable movement of capital...

The housing boom was just rotten at its core. Anyone who was not in a fucking haze of orgiastic greed could see it and knew it was going to come down like a house of shite. When everyone is becoming rich on a a great big mob induced lie, no one is getting rich, and sure as I'm sitting here foaming at the mouth and wanting payback for this, a new scheme is being concocted even now...it's going to get to the point (actually we may already be there..HELL we already are there), where there are NO GOOD actors in the long run because everyone's part of the same shit show and, everyone realizes there's a new gimmick in play and the trick is to identify it, put down your money, get the fuck out early enough to make a mint but not get ruined and run for cover while the whole thing falls the fuck apart again.
posted by Skygazer at 2:17 PM on October 8, 2010 [1 favorite]

Malor wrote: "The overall bubble was driven by a excess of liquidity and ridiculously low interest rates, as the Fed tried to dodge the fallout from the PRIOR bubble in the Dow and Nasdaq. They did, indeed, manage to keep stock prices from falling to something resembling true value, but the consequences of that intervention were terrible. And they're doing the same thing again now, but on a much larger scale. "

You don't think the sudden change from very little securitization of subprime to half a trillion a year in subprime securitizations had something to do with it? Not all of the buyers of that paper were US-based, you know.

I think it had more to do with bankers finding sheep to fleece than the fed injecting too much cash into the economy.
posted by wierdo at 2:56 PM on October 8, 2010

Malor, this is your problem-- you still seem to think that this Platonic ideal of a free market can ever exist in the world. It can't, and won't, and all the hand waving to the contrary only serves the interest of people who want to dismantle what remains of the idea of a common good.

Even if we could magically disappear the government and create the "night watchman state" beloved by David Friedman and his ilk, so what? What would stop a few oligarchs from getting together to eliminate the night watchman state and install their own preferred version? The court system would stop them? How would that work? The political naivety displayed by people who advocate the night watchman state is breathtaking; I wonder how many of them have ever litigated in a county Superior Court. Frankly, ask yourself this question-- who calls the shots in legal education? Say you build your night watchman state. Then the schools will all be private, and what is to stop a network of powerful people from sponsoring the ideology they prefer, and getting those people onto the bench? In fact, that has already happened in the American legal system, just check out the law and economics movement. In fact, we already know what happens when you eliminate the state, surprise, it's a disaster. Just look at that post regarding the Somali pirates on the front page right now. Libertarians always freak out about "men with guns" coming to force you to do stuff you don't want to do. Somalia pretty much sounds like "men with guns" telling you what to do, but oh wait hey they don't call themselves the government, they are private so therefore it must be okay. Like Jack Nicholson's character says in The Departed, when you are looking down the barrel of a loaded gun, does it make much of a difference?

What's the alternative? I know some people are saying, ah ha, wuwei, we've caught you, you're some kind of Maoist, you want total control by the state! No, not at all. We talk a lot about the balance of powers in the American government, between the executive, legislature and judiciary. But, what about in the private sphere? Where is the balance between the few and the many? Paraphrasing other people smarter than I, how can we have a democratic practice in our government when most people spend eight hours a day in the dictatorship of a private company? You really can't. Look at the typical disaster in corporate America that precipitated the crisis. There are plenty of people coming forward now in depositions, saying that their bosses pushed them to fabricate the foreclosure files, and yet, at the time, people stood by and did it. Why? Because they're cognitive debt slaves, that's why. They are up to their ears in debt (housing, student loans, credit card) and they depend on the job to pay the bills. Management only wants to hear happy talk, and it's not happy to talk about how we can't just go around fabricating stuff and taking people's houses. America is quite unlike other places, where people just work to get paid; no, in the USA we want you to believe in the righteousness of your job, you have to drink the Kool-aid. The reason for that is that, actually, the American system of government lets voters nominally have the power, and therefore, the voters must be kept in line.
posted by wuwei at 3:29 PM on October 8, 2010 [6 favorites]

Well, it's finally come to this. I started building this guy about ten years ago. It's hard to keep such a big thing a secret, but I did it.

*loquacious presses giant shiny red button. A 300 foot tall fire breathing robot George Bailey appears from a nearby volcano and it looks pissed off*

"Where's that money, you silly stupid old fools? Where's that money? Do you realize what this means? It means bankruptcy and scandal and prison! That's what it means. One of us is going to jail - well, it's not gonna be me!"
posted by loquacious at 3:42 PM on October 8, 2010 [3 favorites]

Malor wrote: "Never argue that this was a failure of the free market. The housing bubble was DRIVEN BY the regulators and the government agencies. There were three main legs driving the bubble; liquidity, low lending standards, and cheap, worthless insurance. The government was two of those three legs, and when the third leg failed (AIG blew up), they took that over too."

How do you figure? Lending standards are controlled by lenders, not the government. Unfortunately, several private lenders decided to not even worry about whether the borrower had a job. Which government regulations require(d) they be complete morons and have lower standards than FHA? Which government regulation requires that they lose the documentation on the mortgage so that the lender can prove it owns the loan (or servicer prove that it is entitled to foreclose on behalf of the owner(s) of the loan)?
posted by wierdo at 4:34 PM on October 8, 2010

There were three main legs driving the bubble; liquidity, low lending standards, and cheap, worthless insurance.

I would add that there was one more "main leg" - a horde of reckless consumers of various stripes:

- People who were panicked into thinking that they had better "buy now or be priced out forever"

- People who thought they would be real-estate tycoons; buying several houses and renting them out, to sell in a couple of years after they had appreciated even more.

- People who found out that after they bought a house, they could go back in a year and refinance to get cash out; jet-skis, flat-screens, boob-jobs for all!

- People who borrowed way more than they could ever pay off in the hopes that they could sell for a profit before the loan adjusted.

Loose lending standards, liquidity, bad insurance, a peanut and some cups were not enough to start the Bubble; you still needed suckers.


posted by mmrtnt at 5:12 PM on October 8, 2010 [1 favorite]

This pocket veto is a studied outrage on the legislative authority of the people ... oh, wait, thinking of Wade-Davis here sorry.

Obama has gone ahead and sent the thing back to leave no doubt it's being vetoed. In accordance with prophecy.

All that cleared up - there are plenty of ways to make big money on foreclosures and there's little question many banks have been engaging in illegal practices pursuing that cash.
Even without the human element, and the suffering this has caused has been outrageous, there's little question that once you can't trust contracts, there's not going to be any commerce or any trust in value because of the loss of the perception of legitimacy.
Perceived or otherwise - doesn't much matter.
In these kinds of matters perception is reality. People stop believing 'x' is valuable. It stops being valuable.

I find it disturbing that so much wealth is being tied up in gold (and formerly firearms and ammunition) right now.
Of course, I find it more of a self-fulfilling prophecy than genuine wisdom in anticipating a disaster. But getting hosed over a misconception is the same as getting hosed over a valid concern.
This needs to be stomped on hard with both feet as soon as possible. But the best way to do that is with gray matter, not gonads or adrenals.
posted by Smedleyman at 5:13 PM on October 8, 2010

Loose lending standards, liquidity, bad insurance, a peanut and some cups were not enough to start the Bubble; you still needed suckers.

Contrary to perception, an honest person can be cheated.
posted by Smedleyman at 5:21 PM on October 8, 2010 [1 favorite]

Most of the wealth of the nation is held by a sliver if the population. It makes no sense to claim the lower classes would be hit harder than the uppermost class should the banks fail. The wealthiest own most of everything, including the banks.
posted by five fresh fish at 5:25 PM on October 8, 2010 [1 favorite]

I think maybe a scale applies here, where the upper class getting "hit hard" and losing most of their luxuries somehow seems less severe than the lower classes getting "hit hard" and losing their jobs, homes, and ability to put food in their mouths.
posted by Benjy at 7:27 PM on October 8, 2010

Yeah, all those really rich teachers with their fat cat pensions, living in apartments, I'm sure they'd be happy to give up their retirement security for you. I get it, you want what you didn't pay for, because you're pissed at rich people, and you don't care how many people in the middle class you'd screw over to make no noticeable dent in the fortunes of the truly rich. Thing is, that attitude sounds a lot like the fraudsters you are railing against, to this apartment dweller.

So what you're saying is that you've invested in a bunch of criminal enterprises so people have no right to take your money away?

Malor, this is your problem-- you still seem to think that this Platonic ideal of a free market can ever exist in the world. It can't, and won't, and all the hand waving to the contrary only serves the interest of people who want to dismantle what remains of the idea of a common good.

It's just like listening to college Marxists. "Never mind Stalin, Mao, and Year Zero, pure Marxism will work!"
posted by rodgerd at 9:03 PM on October 8, 2010 [2 favorites]

I just don't see the the lower and middle classes have enough invested in the banking and mortgage industry to be affected.
posted by five fresh fish at 12:16 AM on October 9, 2010

mmrtnt wrote: "Loose lending standards, liquidity, bad insurance, a peanut and some cups were not enough to start the Bubble; you still needed suckers."

As Michael Lewis wrote in "The Big Short," Whenever Wall Street people tried to argue--as they often did--that the subprime lending problem was caused by the mendacity and financial irresponsibility of ordinary Americans, he'd [Eisman] say, 'What--the entire American population woke up one morning and said "Yeah, I'm going to lie on my loan application"? Yeah, people lied. They lied because they were told to lie
posted by wierdo at 8:30 AM on October 9, 2010

If you handed me a pen and said "sign here to trade your investment stake in the US banking sector for the title to your house" [..] You know who would lose bigger than they gained by this deal? Really rich people. That's it.

So what you're proposing is:

• take some money from the upper class
• take some money from the lower-middle class
• give a large windfall to certain upper-middle class households

That sounds like a fairly regressive wealth transfer. You might argue about the magnitudes, but I think I've got the directions right.
posted by ryanrs at 9:54 AM on October 9, 2010

Smedleyman: "This pocket veto is a studied outrage on the legislative authority of the people ... oh, wait, thinking of Wade-Davis here sorry.

Obama has gone ahead and sent the thing back to leave no doubt it's being vetoed. In accordance with prophecy."

I think that when I'm elected president, I will send it back with a memorandum of disapproval, but that memorandum will not be three paragraphs, not even two... Nay, not even one whole paragraph. No no. I will be an efficient president. I will send one simple little emoticon and it shall be quite clear my disapproval:

ಠ_ಠ
posted by symbioid at 10:54 AM on October 9, 2010

Disclaimer: I'm not YOUR lawyer. But I AM a lawyer, and I spend pretty much all day, every day, dealing with the fallout of what the banks have done.

Long story short, everything Asparagirl says is true. And the effects will be devastating for those whose pension funds, etc. invested in this garbage.

The truth is slowly coming out—but you need to know that the banks are every day fighting to keep it from coming under public scrutiny. For example, you may know that many of these "robo-signers" have admitted to signing affidavits they didn't even read. The banks like to call this "flawed" paperwork, a mere "technicality"—but in reality it's much worse. These folks have committed perjury—no different than if you testified, in open court, that you saw the defendant commit murder, when in reality you weren't even in the same state. Legally, there's no difference, and in both cases, the stakes are severe.

But we would never have known about this but for the efforts of a handful of attorneys who fought back and got to cross-examine these robo-signers under oath. Many of these transcripts are coming put of Florida, where the banks are trying to get foreclosures taken out of the court system entirely and convert Florida to a non-judicial state. They regularly and routinely stonewall investigation attempts by defense attorneys to gather exculpatory information. Foreclosure mill partner Roy Diaz—who has since been fined $49,000 by a Manatee County Court for his firm's litigation practices—admitted to a room full of lawyers at the Florida Bar Convention that he only gives up information he thinks is useful to help prove HIS side of the case. And even the courts let them get away with it too often.

In most cases, we've only been able to scratch the surface of what the bank have wrought. But know this: If they're willing to lie about something so easily preventable—whether or not they even read the records they claim to rely on—what happens when they are tempted to lie about something that REALLY matters?
posted by mikewas at 2:54 PM on October 9, 2010 [10 favorites]

How Hank Paulson's inaction helped Goldman Sachs
posted by homunculus at 1:02 PM on October 10, 2010

House Minority Whip Eric Cantor (R. - VA) Opposes Foreclosure Moratorium: ‘People Have To Take Responsibility For Themselves’.
posted by ericb at 4:11 PM on October 10, 2010

Cantor is right of course. People have been taking responsibility for themselves-- and those people would be bank executives, who are taking responsibility for all of our stuff. That is, they're gonna take out stuff.
posted by wuwei at 7:31 PM on October 10, 2010

It's just like listening to college Marxists. "Never mind Stalin, Mao, and Year Zero, pure Marxism will work!"

The Cold War is over. You can leave your shelter now.
posted by Skygazer at 8:15 AM on October 11, 2010

PS: Capitalism is the unquestioned superior economic system. "Communist" China loves it. So does Russian mafia.
posted by Skygazer at 8:20 AM on October 11, 2010

Kind of late, but...

So what you're proposing is:

* take some money from the upper class
* take some money from the lower-middle class
* give a large windfall to certain upper-middle class households

Yes. That's it exactly. Provided you define the "some" in point 1 to be about 6 orders of magnitude larger than the "some" in point 2, which you haven't because for some reason you want it to seem like the lower classes even have anywhere close to the kind of "some" that the wealthy have. Also provided you intended the "lower-middle class" in point 2 to represent the same people as "certain upper-middle class households" in point 3. Which, by and large, they are.

I would explain it more simply by saying that what I'm proposing is to render a small part of the notional (not realized) value of the lower classes future (not present) retirement investments worthless, in exchange for a valuable piece of real property right now.

Or, to simplify even more: I would like to give everyone the real estate they currently occupy and assume that the money they've given to the financial markets has already been stolen. I think that's a fair trade.
posted by rusty at 8:38 AM on October 11, 2010 [2 favorites]

I think that's a fair trade.

Your ridiculous plan inordinately benefits recent homebuyers and wealthy homebuyers. (You do realize that rich people have mortgages too, don't you? Bigger ones, too. Even if a welthy person could purchase their house outright, they wouldn't pass up an offer for a multi-million dollar, government-subsidized loan, with tax-deductible interest.)

I would like to give everyone the real estate they currently occupy

Renters, too?
posted by ryanrs at 12:28 PM on October 11, 2010

Renters, too?

Sure, cause I'm proposing magic ponies for everyone! Your questions bear no relevance to my idea at all.
posted by rusty at 2:24 PM on October 11, 2010