Tuesday, December 14, 2010

A PUBLIC SERVICE ANNOUNCEMENT: Prosecuting the Banksters, and the Mortgage Mess

As many of you know, I’ve written a lot about the Mortgage Mess—see here in my blog’s directory, for a rundown of the posts I’ve written on the subject.

Yves Smith, whom I respect, posted the following at naked capitalism:

Tomorrow, a group of homeowners is meeting with Iowa’s attorney general Tom Miller, who is leading the 50-state effort which is investigating foreclosure and mortgage lending abuses.

This group is presenting a letter to Miller asking them to prosecute bank executives for mortgage fraud and wants to show broad-based support for this idea via having concerned citizens sign it.

Here is the text of their letter:

Dear Attorneys General,
We, the undersigned thank you for investigating fraudulent and illegal foreclosure practices by the nation’s biggest banks.
Your investigation is the best hope for homeowners and communities since this crisis began. Americans are watching. Our expectations are high that we will see justice for the millions of families who have lost their homes, the millions more who are at risk of foreclosure, and the neighborhoods across the country devastated by falling housing values and vacant properties as a result of widespread mortgage fraud.
The bank executives who committed fraud should be prosecuted. Any settlement needs to go beyond fixing paperwork, fully addressing ongoing abuse and ending the flood of unnecessary foreclosures.
We demand that any overarching settlement agreement contain mandatory loan modification programs, including principal reduction for owner-occupant families facing foreclosure and remedies for those families who have already lost their homes.
Now is the time for bold leadership from the nation’s Attorney Generals to hold big banks accountable for the damage they have done to families, communities and the nation’s economy.
I have signed this letter and strongly encourage you to do so. Please visit the site, www.crimeshouldntpay.com to support this effort. Thanks!

Gonzalo here (to borrow a phrase from Yves): I fully support her call, which is why I have signed this letter, and am now passing it along to my readers, so that they might do the same.

Bitching and moaning never ever achieved anything—in a democracy, numbers count. So please sign up—at least go on record that you support sticking it to these bankster fraudsters. 

This is important—and time is short. Thank you. 



  1. I wouldn't sign it because of this part:

    "We demand that any overarching settlement agreement contain mandatory loan modification programs, including principal reduction for owner-occupant families facing foreclosure and remedies for those families who have already lost their homes."

    WTF is that about?
    Nobody put a gun to these peoples heads and forced them to buy something they could not afford.
    They need to pound sand.
    No free rides.
    That's not to say that the criminal banksters shouldn't be let off the hook.

  2. I fully agree with Anonymous 9.21 PM.

    Everyone has to be punished for its own wrongdoings.

    The bankers encouraged practices such as faking loan documentation. They didn't check the documents and they sold the loans with a "waterproof" guarantee.

    That should be enough to prosecute them.

    On the other hand, the borrowers decided to believe in miracles, when they didn't knowingly tried to take advantage of the system. What about people with no income signing for a 400K loan?

    Click on my name to visit my blog.

  3. I signed it because I hate banks; I want all bank executives to be prosecuted for the evil ways they make their money. Over the years I have been charged $29 here and there, just for miscalculating on my checking account.

    However, the two posters above have valid points.

    As they state, no one held a gun to them and forced them to sign. If you’re too stupid to research mortgages, or calculate the interest, then you should not be in the house ownership club.

    The below link is an appropriate description of bankers...


  4. While I agree that folks who bought houses they could not afford should bear at least some of the losses involved in the declining job/housing markets, it is not clear to me that principle reduction is completely out of order in all cases.

    As I am coming to understand the debt-money system, it is not like the banks actually had in hand (and are now out) the money that they loaned for the property; rather they agreed to credit the seller and have the borrower/purchaser owe them the value of the property (minus down-payment, plus lots of fees) in exchange for the right to take the property if the borrower didn't pay.

    So if the value of the property has fallen drastically and is unlikely to recover in the foreseeable future, what is so unfair about the borrower owing the current "value of the property" rather than the number of dollars it was appraised at when they bought it?


  5. GL,

    Sorry but I can not sign the petition for the same reasons Anonymous 9.21 and Brunolem cited - among a couple of my own.

    That does not mean that the banksters should not be criminally prosecuted. The two gentlemen at the University of Missouri (Black and I forget the other's name) have cited the facts are there and if, in case of Black, were in charge atleast 1,000 convictions would have been had by now - and Black was the prosecuter in the S&L Debacle so he would know.

    But as I see it (with the petition) it is boot-strapping to another conclusion, reduction of principle, etc, that seem to justify the ends by supporting two-wrongs-make-it right. I just do NOT AGREE as many like myself who chose to rent and not CLEARLY OVERPAY for a home that anyone who cared to look would have determined this was all going to end very badly. Atleast portions of this scam could not have occured if some buyers had not been guilty of greed themselves.

    As to Jeremy Bunn above, you seem to make a logical argument on the surface using the theory of actual money creation but once one considers the broader implications it is quite easy to see your justification would undermine our rule of law and private property rights via circumvention of the court house.

    A better resolution, and if the underlying facts are there to support it the States AG's should and would pursue same, would be to "unwind" the Mortgages via Fraud Prosecutions which would come with treble damages and deem the mortgage invalid. The next, AND MORE APPROPRIATE STEP OF CRIMINAL PROSECUTIONS OF BANKSTERS, would then be paved for easy prosecutions.

    Let's not ourselves be guilty of what we find so repugnant of the banksters.


  6. Why is it when companies walk away from unpayable debts, it's considered "risk" and "the cost of doing business", but for individual homeowners, it's a moral failing? I call bullsh*t. I signed the petition.

  7. No gun to the head as such ... but when it's fraudulent and unprincipled 'Masters of the Universe' on the one hand and trusting but not very financially sharp types on the other it might as well have been. So who should take the most responsibility for doing due-diligence on borrowers ability to pay?

    As long ago as 2004 the FBI warned that there was an epidemic of mortgage fraud but did Bush & Co listen? Of course not. Normal, decades-old consumer protection legislation was made for just such cases and indeed the Attorneys General of every single state moved to invoke such laws but Bush under pressure from the bank lobby ruled it was a federal matter so not for them - a ruling later disgracefully ratified by Obama.

    As for loan modifications that is definitely the way to go. It is standard practice on the basis that half a cake - principle outstanding reduced to the ability to pay - is better than no cake at all - house foreclosed, boarded and neighbourhood blighted, not to mention the social problems arising.

    And if the banks lent more than they should have on NINJA and self-cert loans (which they certainly knew were mostly fraudulent) then they have only themselves to blame if the principle is reduced to what it should have been in the first place.

  8. WTF! I am sick and tired of poor 'homeowners' bitching about the fraudulent loans shoved down their throats. No one forced them to pretend that they make more money than they actually do. No one in their right mind would take on a loan they can't pay, unless they find a bigger fool to sell their stupid 'investment' property to! Now that they can't somehow it's someone else's fault.

    What about us, the responsible people who did not buy like the idiots. No one is offering to bail out the renters who get kicked out of foreclosed properties! How about we get to keep them (not that I want to own some depreciating piece of crap or deal with crooked realtors to sell it...).

    It's time to call a spade a spade. If you are stuck with a foreclosure or a loan you can't carry, you are a f**king idiot and should rightfully lose the property you never owned. You are responsible for the paperwork you sign, so you should read it. WTF!

    The idiocy in this country! These morons carrying a million dollar mortgage actually thought they were millionaires!

  9. I'm not participating in this ridiculous exercise. Why do we need to sign letters to encourage highly paid officials to enforce laws?

    Though I appreciate the effort here, I am tired of this stupidity. I'm asked to sign a letter weekly to influence lawmakers. It usually gets rejected anyway.

    The bankers are far more responsible than the people who got these loans. Any person expecting Americans -- many of whom read at an 8th grade level -- to understand complicated loan documents is the real idiot. These bankers used the funds of wall street investors to finance these loans. They breached laws and good-faith at an unforgivable level.

    They must be prosecuted but call me a cynic. I don't understand how my humble signature on this petition would have any influence over a banker's bucket of money.

  10. I understand and agree in many respects with theultimateoutcast's comment on Dec.14, 12:46pm.

    I too often think, "What's the point of outrage? What's the point of getting all riled up, when nothing will be accomplished, and the banksters will get their way."

    At the same time, I recognize that I must make an effort—however puny, however knowingly ineffectual it will be—because I recognize that cynicism is a path of death.


  11. GL,

    Frankly, I appreciate the effort but I've been disappointed to see much of these letters get our citizens nowhere.

    Saying "cynicism is a path of death" is a tad dramatic considering I'm only cynical about using methods that have clearly not been working. As Eistein said, this is the very definition of insanity.

  12. Paul Harvey once said, “Self government doesn’t work without self discipline.” It doesn’t matter if you hate bankers or not I’m not to fond of them but as Anonymous 9:21Pm said nobody put a loaded .357 to the heads of these people. As long as house prices where going up things were peachy people where fat dumb and sassy. How many of these people bought thier house knowing in the long run they couldn’t afford the payment but thought prices would go up and they would make money? How many slapped on seconds, HELOCS, took money out bought cars, went on vacations, ran up credit cards took out a refi paid off the cards and ran them up again.
    That said if there was fraud people need to go to jail, but now suddenly every body is a victim?

  13. I agree none put a gun to those heads that got in over their ability to repay yet........

    Many were folks who had always heard/read about the American dream but were never able to get a seat at the table.

    Suddenly a large meal was placed in front of these starving folks & told ...eat up you can always refi later & besides look at how this market is burning up....

    You will probably be able to sell at a profit in a year.

    Well yes the hungry did eat & no I was not one of them. I am a builder & saw it all happening & my question back then was....

    What the hell are these banks thinking? Don't they know that these folks will fold?

    Don't they know that these prices are aberrations & destined to drop to pre 2006 prices shortly?

    Then when these folks are defaulting who do these banks think will be stuck with over values homes?

    Well the joke was on me because I guess the banks all knew they were too big to fail & the ones stuck holding the bag would be the same as always....The Tax Payers of today & many future generations.

    Hanging would be too good for these bankers

  14. So let me see if I have this right: The buyer has stopped making payments. The banks hold the mortgage and the contract says if the buyer stops making payments that the bank can legally take the house back. If the bank is stopped from taking the house back they will go bankrupt and all of the depositers will lose their deposits. The federal government as the insurer of last resort will have to bail the banks out. And contract law will be turned on it's head. Did I get all that right? Oh yeah! I forgot the buyer who defaulted gets rewarded and all of us taxpayers get to pay for that. I think that's it! Kind of reminds me of new math...

  15. Ireland Just Approved The IMF Bailout. Of course, as expected.


  16. Anonymous said...on 12/14/10 at 10:32pm
    " If the bank is stopped from taking the house back they will go bankrupt and all of the depositers will lose their deposits. "

    No the banks will go bust & are going bust at a snappy pace both this year & last.
    They are left holding mark to fantasy assets.
    Reality is they are in fact getting back their mark to fantasy assets....Now What?

    Dont be distracted.....The homes were just the product wrapped in the over priced bundles that went all over the world like counterfeit money.

    None is stopping the banks from taking them back. That is not the source of their problems

  17. So lemme get this straight. The banks making all these mortgages were making bets on said mortgages? And they got greedy and made mortgages to anyone breathing, just so they could make more bad bets, exponentially? And did this on purpose knowing the U.S. Government would backup their bets?


    Meanwhile, you have a mix of honest homeowners and dishonest homeowners tossed in the middle of this, causing a systemic economic collapse? I can understand the confusion.

  18. "Nobody put a gun to these peoples heads and forced them to buy something they could not afford."

    The banks executives owed their stockholders due diligence, they didn't exercise it. Many people bought loans they could have afforded if the economy hadn't crashed, which happened in large measure because the banks did not exercise due diligence. Forcing the principal of the loans down would be a mechanism to cause the worst banks to fail, and in return for being bailed out for around 80 cents on the dollar, the sum compensation of the fraudulent executives should be forfeited. If they can get a better deal, that's fine. It also prevents it from being a bill of attainder if 'it's optional. The sweet part of the deal for the execs is the bank's stockholders agree not to bring civil suit against them if the execs take the deal.

    The bankers need a haircut, they deserve it. I have not heard a good argument as to why forcing loan principals down is not a good way to do it.

  19. well from what i have read, the value of the dollar is what inflates or deflates the economy, so lets see if you drop the price of the dollar then companies dont want to hire more employees and trim the ones they already have. many people bought their homes in good faith knowing they had a good job that they assumed would last for sometime. then the dollar drops you lose your job you find out that the price you paid for the home you live in is not what the big bank said it was. and then you realize the big banks are in trouble and the govt needs to bail them out, then after they recieve the tax dollars we the people have faithfully paid in to our govt. the ceo's retire with record breaking bonuses and pensions. people losing their homes, jobs and basically their very existence. and our govt sits up there and says we will look into this. come on lets really put the blame where it belongs. GREED because if you didnt know it youi do now the banksters control the dollar and until it is taken away from them they will be able to manipulate the economy any way they see fit. OH yes i say hangin is too good for them.


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