Karl Denninger, "Consumers Learning From Banksters"
"Consumers Learning From Banksters"by Karl Denninger
"No surprise here... Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino. Yes, the tone of the article is rather negative toward these individuals. Guess what - I disagree.
The banksters haven't exactly acted in a fashion that is worthy of ethical conduct by borrowers. Let's count (some of) the ways: They intentionally marketed loans to people they had no expectation would be paid as agreed (Option ARMs, 2/28s and 3/27s, etc) yet called them "mortgages", which envisions amortization and ultimately a fee-simple title for the borrower. But that was not the intent of a lot of these loans - indeed it was mathematically impossible for many of them to be paid on the original terms.
They then got Henry Paulson and Ben Bernanke (both of whom either were previously or at the time banksters themselves!) to go to Congress and claim that there would be literal martial law if they did not hand over hundreds of billions of dollars to "recapitalize" the banks. Congress gave them the money. Did they recapitalize? Well, no - they instead lobbied. When all this game-playing threatened to blow them all up and lead to their bankruptcy (despite the bailout funds!) they then got Congress to literally force FASB to change the accounting rules so that they could intentionally mis-state asset valuations - without which they would have all been rendered insolvent (that is broke, kaput, bust, bankrupt, well, you get the idea.)
Having accomplished that they then paid out over $100 billion in compensation in 2009 - money they could have used to actually attempt to recapitalize. They also failed to sell off the assets that would have further stabilized their balance sheets. In addition these same firms are alleged to have engaged in rigging bids and bribing people in the municipal securities market. That's the money your state and local government borrows to fund things necessary for your local community, like schools, police department buildings, bridges, sewer plants and similar. YOU got hosed by these crooked practices - directly - in the form of higher taxes. When caught they argued (successfully thus far) that the banks themselves couldn't be charged with a crime without causing them to fail (again) and thus in some cases they got immunity, throwing individuals under the bus but keeping the ill-gotten gains from these schemes. We have a multi-year history of the banks dissembling and threatening the government - and by extension the people, effectively robbing the taxpayer both originally and on an ongoing basis.
A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.
Why not? The banks are doing it. They're lying about asset valuations, they are intentionally "extending and pretending" that value exists in various loans and property when it does not, and they have undertaken getting that crooked policy turned into a legal act so as to be able to continue doing so. If the banks can refuse to admit that a defaulted loan is in fact in default and get away with it why should the person responsible for paying that loan in fact pay? There is no need to do so for the bank to claim it's good! Sauce for the goose, Mr. Bankster.
While there are no firm figures on how many households are following the Pemberton-Reboyras path of passive resistance, real estate agents and other experts say the number of overextended borrowers taking the “free rent” approach is on the rise. Again, why not? The banks can do it and in fact are - why shouldn't the people do it? If you can manage to get away with it legally, there's no reason to deal with these people on an ethical or moral basis. These institutions have demonstrated repeatedly that they will screw the people at the drop of a hat, that they will lie to their investors and the public (witness Dick Fuld's "burn the shorts" comments) and that they will play "extend, pretend and extort" when it comes to their reporting of losses and dealings with the government - and thus you, the taxpayer. They will even go so far as to rig bids and lie about that too, then "negotiate" to not be indicted in exchange for throwing certain individuals under the bus while they keep the ill-gotten gains they literally stole from the taxpayers.
From the lenders’ standpoint, people who stay in their homes without paying the mortgage or actively trying to work out some other solution, like selling it, are “milking the process,” said Kyle Lundstedt, managing director of Lender Processing Service’s analytics group. LPS provides technology, services and data to the mortgage industry. You mean like the banks that have done the same thing to the taxpayer, stealing every nickel they're able, changing the accounting rules after the fact so as to make legal carrying a defaulted loan over recovery value and then crying poverty - and "bailout needed or the world ends tomorrow morning at 9:30 ET sharp when the market opens"?
You cannot deal with an immoral and unethical entity or bunch of entities in a moral or ethical manner. If you do you will wind up broke - every time.
This industry has demonstrated time and time again the willingness to market products they know are toxic and cannot possibly be paid as agreed, to sell paper to investors claiming to have good titles on each loan when they in fact have "in blank" assignments that are not recordable, to use firms like MERS to get around state law requirements and cheat state, county and local governments out of their legitimately-owed recording fees and then to craft "loss share" deals with the government when they get in trouble (or buy out other failed institutions) so they have no incentive to deal with the public on a fair and equitable basis in modifying loans that are in trouble. Nor was this sort of rookery limited to housing. We have naked CDS written without ability to pay, we have auto loans written on a "rollover" basis by GMAC and others (again, without any reasonable expectation of ability to pay), we have outright bribery and bid-rigging in the GIC (municipal debt) markets and we have credit products sold to municipalities that included proved felonious conduct (in the form of guilty pleas in Jefferson County Alabama.) That's the short list my friends!
Sorry, no dice on the morals plea folks. Get good legal and accounting advice and then do what's right for you as a pure business decision without regard to morals or ethics. Ignore those who claim a need for you to behave "ethically" or "morally" - that's nonsense. You have no obligation nor should you ever deal in an ethical and moral manner with an entity and industry that has demonstrated time and time again that it will not deal ethically and honestly with you. All you have left when transacting with such an entity is to screw them at every opportunity just as they have and will attempt to rip you off should the opportunity arise.
I'll change my opinion when I see indictments for the bid-rigging scams aimed at the banks and their officers, when I see mark-to-market reinstated and every insolvent institution closed, and when I see those who have lied thus far prosecuted for their frauds - up and down the line. Until then my view toward the banking industry can best be summed up as this:
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