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Is A “Strategic Default” Of A Mortgage Now A Moral Imperative? (February 28, 2011)

Posted in Bailout/Bribe, Banks and Banking System, Courts, Crime/Punishment, Economics, Housing, Kleptocracy, Law, Society, Supreme Court, TARP on February 28, 2011 by e-commentary.org

. . .

S          “You have heard of them.  A ‘strategic default’ is a default by a person who could make the monthly payments on the mortgage yet elects to cease making the payments because the property is underwater financially.”

D          “There are a flood of them today.”

S          “A strategic default may be de rigueur today.  Look at the law.  Start with the indoctrination process in law school.  Young law students are taught the theory of ‘efficient breach’ which counsels one to breach a contract if breaching the contract is worth more than performing the contract.  That is defined as ‘efficiency.’  The students who answer obediently get on the law review, clerk for the Supreme Court and make millions representing banks, big businesses and insurance companies.”

D          “And assist in running them into the ground.”

S          “That’s the plan.  They don’t even understand ‘efficiency.’  In practice, the party breaching the contract is not spawning a more efficient use of global resources.  The breaching party simply does not want to pay or perform and usually has far more money and can overwhelm the non-breaching party in court.  The party not receiving payment or performance loses big and usually has little judicial relief.”

D          “With a few exceptions, the legal system seems to exist to protect and serve the interests of the wealthy and the well-connected. I’ll take my direction from no one other than the MBAs at the MBA (Mortgage Bankers Association) who recommend defaulting on your mortgage if it is not working for you.  The banksters decided not to pay the mortgage on the MBA office building in D.C. (Washington, D.C.), even though the group had the funds to pay.  The banksters strategically defaulted.”

S          “They are indeed an example for all.  When the government bribed and bailed out the banks and other institutions, some contended that the government could not breach the contracts providing for unwarranted and illegal bonuses.  How un-American.  The government should have disregarded every contract and required the banksters to bring suit.  How American.”

D          “Allowing the banksters to file suit would allow them to file in a sympathetic Republican Federal District Court and possibly steer the case to a receptive judge.”

S          “Always a risk in the legal game.  However, before the banksters brought suit, their legion of lawyers would remind them that they could confront defenses and counterclaims.  In court, the government could assert a dozen affirmative defenses and also counterclaim for fraud, deceit, perjury, conspiracy, embezzlement, racketeering, misrepresentation, breach of fiduciary duty, obstruction of justice, etc.  Some of the banksters would not file suit which is the least expensive and, yes, the most efficient way of reaching a just resolution.”

D          “Seems that the courts are stacked against the public.  Nonetheless, there is a small chance that an independent judge might hear some of the cases and hold that the bonuses are illegal.  An affirmative award against the banksters is improbable but not impossible.”

S          “Neither the Republicans nor the Democrats ever intended to bring criminal charges against the criminals.  We seem at times to be alone in a lawless world with millions of laws on the books.  We in America have moved from a democracy to a kleptocracy.”

D          “And no one to throw the book at them.  Except that the law and morality are clear.  Homeowners are morally obligated to default on the payment of their mortgages if the property is underwater financially.  The government is morally obligated to default on the payment of the bankster’s bonuses.  In today’s amoral America, a strategic default is both an economic necessity and a moral imperative.”

S          “Perhaps a provision should be added to Title 18 of the United States Code making it a crime not to strategically default if the property is underwater financially.  Not to strategically default is so un-American.  And inefficient.  We just can’t have that.”

D          “Strategically defaulting immanentizes the eschaton.”

S          “Indeed.”

. . .

Mortgage Bankers Association Defaults:  http://www.thedailyshow.com/watch/thu-october-7-2010/mortgage-bankers-association-strategic-default

Home Sales Data Is Overstated:  http://online.wsj.com/article/SB10001424052748704476604576158452087956150.html

“Three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that’s wrong.”  Charles Ferguson upon receiving the Oscar along with Audrey Marrs for the Best Documentary for the movie “Inside Job.”

“Almost everyone counted publicly each and every single day of the event known as the ‘Iran hostage crisis,’ yet no one is counting publicly the days that have passed since September 15, 2008 without a single major criminal indictment of the banksters and their ilk who caused the financial crisis that continues to plague this country today.”

[See the “e-ssay” titled “1000 AUSAs (February 9, 2009).”]

Bumper stickers of the week:

Do as I do not as I say

Mortgage Bankers Association: Strategically Default Today

Free $1000 an hour legal advice:  Strategically Default On Your Mortgage Today

Efficiency uber alles

Efficiency is Inefficient

If your property is underwater, should you plant seaweed in the front yard this spring?

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Interesting Thing About Interest Rates (November 29, 2010)

Posted in Banks and Banking System, Economics, Federal Reserve, Inflation on November 29, 2010 by e-commentary.org

. . .

K         “It really is hard to get rich when they are paying .000000001 percent per annum interest.”

J          “Unless it is compounded every second.”

K         “We are told that we should save, yet there is no economic incentive.  There is no interest when there is no interest.  Senior citizens who counted on a five to ten percent interest rate for their money to fund their retirements are being flat lined by the flat line interest rates.”

J          “Some of the negative economic impact of the contemporary economic excess is being inflicted on the current generation.  Doesn’t seem unfair.  Although there is more saving, only a thin sliver of the populace is saving because there is no other safe haven for the money.  The money is just parked.  Another problem may be brewing.  The banks are given free money by the federal government and are loaning it at positive but low rates to a few apparently credit-worthy borrowers.  What will happen in three years when interest rates are forced to go up and the rate of return on the current mortgages and deeds of trust is less sexy?  Will the banks try to call the loans early?  I assume the banks will enforce provisions precluding assignment of the obligations to get them off the books as quickly as possible.”

K         “They will find a way.  Some astute homeowners will secure a low interest rate mortgage and use the funds to invest in savings accounts that should start paying substantial interest rates.  That stratagem may be the only way to ride rising interest rates in the safest investments in a broken economy.  With so much money in the system and an unresponsive economy, we will see inflation.  Recent purchases of Treasury securities suggest that the smart money anticipates inflation.  When bread rises to $100.00 a loaf, the attendant changes in the economy will lead to interest on your bread rising from the current 00.001%.”

J          “Inflation will make all the current debt much less of an expense in real economic terms.  Inflation will expunge debt.”

K         “Anyone who saves is spent.”

. . .

Bumper stickers of the week:

Paying the highest rate allowed by law (but nothing is allowed?)

Anyone who saves is spent

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Rational Fear: Still “Unusually Uncertain” (November 8, 2010)

Posted in "L" Shaped Economy, Bailout/Bribe, Banks and Banking System, Bernanke, Depression, Federal Reserve, Greenspan, Kleptocracy, Technology, Unemployment, Volker with tags on November 8, 2010 by e-commentary.org

. . .

K         “Think about it.  Some maintain the blind conviction that the business cycle is ordained by nature like the tides to rise after it falls.”

J          “Faith in nature.  This season is bad so that the next season will be good because that is the way it is.  Good luck.”

K         “Some desire to return to unrestrained personal consumption and unbridled economic growth.  Even if it is attainable at this time it is not sustainable over time.”

J          “Faith in unchecked consumption.  With oil peaking and a world population that has not peaked, the prospects are not promising.  America had its opportunity to consume.  Other countries, particularly China and India, now want and have earned their opportunity to consume.  If the oil holds out.  And if the coal does not kill us.”

K         “Some believe that new technology will be pulled out of the hat and pull us out of this mess.”

J          “Faith in technological salvation.  The technology sector likely will continue to grow but not enough to propel the entire economy.  The tech world is producing some sexy developments and neat gadgets.”

K         “I’ve always supported free trade when it is truly free.  Decades ago, I could see that globalization would shift massive numbers of American jobs overseas.  They said the solution is to train and retool the America workforce.  The workforce is not retrained and retooled and may not be retrainable and retoolable.  Not many commentators in academic economics or in the financial press have a clue.”

J          “It is one thing to listen to Greenspan and know that everything he says is wrong, yet who is getting it right.  Knowing which way not to go in a maze is not the same as knowing which way to go.  Volker has a clue, yet he is on the sidelines.”

K         “Bernanke* has a clue.  Now that monetary policy has effectively failed, he is enacting what is effectively fiscal policy.  Fiscal policy is the province of the legislature, the Congress.  But Congress is broken.  The Humphrey-Hawkins Full Employment Act, an act of Congress, requires the Fed to promote full employment.  Perhaps he is actually trying to stimulate employment.”

J          “But there are no jobs, now or in the future.  Quantitative Easing II is nothing more and nothing less than TARP II implemented by the Fed rather than Congress.  The Fed’s purchase of bonds is nothing more and nothing less than a slick way to provide another bribe and bailout to Wall Street.”

K          “That is hard to dispute unless there are a few random hires here and there.  And he continues a tradition at the Fed of lying or at least deceiving the public.  He can do something.  He and the Fed regularly issue ‘Remarks’ and ‘Speeches’ on all manner of topics.  He should direct the Fed to issue a finding that a single bank with deposits and assets of more than 100 billion is a clear and present danger to the American economy and to the security and well-being of the Republic.  If a bank or other financial institution does not enter into an Enforcement Action with the Fed, close the resources of the Federal Reserve to the bank or financial institution.  In effect, require banks to downsize to manageable sizes.  They must be small enough to fail and to play well with others.”

J          “Won’t happen.  Our democracy is now a kleptocracy.”

K         “That won’t help employment, however.  But he could pull it off.  He can be bold.  He would have to play all his capital.  But for us citizens, however, the only things we have to fear are so many very real fears.”

. . .

Bumper stickers of the week:

The only things we have to fear are so many very real fears.

Don’t end the Fed, mend the Fed.

“And as things fell apart/Nobody paid much attention.”  “(Nothing But) Flowers” – Talking Heads

“This country’s hard on people, you can’t stop what’s coming.”  No Country for Old Men movie (2007)

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On The Bribe/Bailout And Financial Reform (July 26, 2010)

Posted in Bailout/Bribe, Banks and Banking System, Bernanke, Federal Reserve, Journalism, Press/Media, TARP on July 26, 2010 by e-commentary.org

. . .

K          “So many commentators contend that the bailout/bribe of 2008 saved the American economy, yet they do not provide any detailed discussion or explanation.  Few seem to be challenging the conclusion.”

J          “When you think about it, no one has offered a coherent explanation of two things.  No one has explained the exposure of the economy and the problems encountered in September, 2008; no one has traced the impacts and consequences of the bailout, good and bad.”

K          “Spewing money randomly was unwise and counterproductive.  The market was the only way to purge the excesses of the market.  Purging the economy of the poison would have been painful, yet we as a country would be much better off in the intermediate and long runs.”

J          “Not many commentators were sounding warnings in 2005 or earlier.  I recall some warnings and misgivings from a few writers with the conventional press.  I also recall scattered concerns shared in some of these things called ‘blogs.’  Yet there was not enough chatter to capture the public imagination and stir any action or pause.”

K          “Some reports suggest that the some government funds have been repaid.  There is no way to verify the claims.  The Federal Reserve in particular is exempt by statute from any effective scrutiny, oversight and regulation.”

J          “The financial reform bill may be one of those bills that has not been read carefully by its proponents or by its opponents.  However, I believe that a small group of connected individuals is making far too much money to allow any meaningful reform to pass.”

K          “Aren’t we in worse economic trouble now because things have not changed.  Yet no one is really worried.”

J          “Too few journalists, even economic journalists, understand the economy.  Just reading and digesting the public statements issued by the Federal Reserve is almost a full time job.  The popular press may summarize some of the information in the Beige Book and G.19 Consumer Credit reports, yet there is not much analysis.  Who has the background and the experience to connect the dots.  And who do you trust.”

. . .

Bumper stickers of the week:

Don’t end the Fed; mend the Fed

ABCNNBCBS does not have many answers; Faux/Fox does not even ask the right questions.

“Ever since my husband began listening to NPR, he is so informed . . . and so depressed.”

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The Dow Is The Canary (April 26, 2010)

Posted in Bailout/Bribe, Banks and Banking System, Boycott Series, Economics, Uncategorized with tags on April 26, 2010 by e-commentary.org

. . .

“You don’t buy it.”

“I concede the Beige Book presents a rosy picture of the economy.  Consumer spending is up.  But the rising Dow is not a sign of economic recovery.  The rising stock prices are not a function of sound economic fundamentals, they are a result of far too much free money in the hands of a small circle chasing comparatively few stocks backed by an implicit government guarantee in an economic universe without other viable investment options.  The stock market is the leading economic indicator of the coming inflation.”

“They call it productivity.  Companies/employers are reporting greater earnings resulting from firing more employees.  However, the current price/earnings ratios are somewhat more in line with historic averages.  Although there may be no one left to buy the products or use the services.”

“Inflated stock prices today, bread at a $100 a loaf in the next few years.”

“However, if there are fewer consumers with less disposable income, the economy should enter a deflationary period.”

“That seems plausible.  Consumers always consume even if they don’t have money.  The dislocations in the economy may not produce enough goods to meet growing demand from individuals, albeit individuals without the wherewithal in their pockets to fund their demands.”

“So there may be deflationary prices then inflationary prices?”

“Citizens will discover that the market will decline precipitously in due course leading to more now inevitable bribes/bailouts from the government for those at the top.  Some say that the American people simply will not tolerate another engineered decline.  What will they do if they don’t want to tolerate a decline?”

“Vote out the incumbents?”

“Or self-medicate?  The economic performance this summer will significantly impact the outcome of the elections this fall.  If the Wile E. Coyote Economy does not drop for the next six months and those who gave up searching for work also give up voting and drop out of the debate, the Democrats may not drop in the polls.  However, there may be a bad turn particularly if the financial virus made in the USA that spread to Europe infects Europe or if the Black Plague in the Gulf of Mexico engulfs the East Coast.  This could be a hot summer.”

. . .

Bumper stickers of the week:

Trust me.  I’m a banker.

Trust me.  I’m an investment banker.

Trust me.  I’m an investment adviser.

Drill, baby, drill.

Boycott Arizona

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Boycott Big Banks (February 1, 2010)

Posted in Bailout/Bribe, Banks and Banking System, Boycott Series on February 1, 2010 by e-commentary.org

. . .

P          “That’s the answer.  Boycott Big Banks.  The government bribes and bails them out while the people boycott them.  Shift support, transfer dollars and take business to credit unions.”

Q          “Makes sense and may make dollars and cents.  Dollars are votes.  Vote your dollars.”

P          “There are times when you may want to retain shares if you can vote the shares and shape the institution.  However, the only way to vote your shares – your dollars – is to transfer them to another institution.  I have banked at credit unions for as long as I can remember.”

Q          “I transferred my bank account to a credit union last year.  At the time, I was driven away by the bank rather than being attracted to a credit union.  The third time that the Big Bank changed its name from Big Bank to Big Bank, I transferred my accounts.”

P          “You still need to compare services and costs.  The NCUA (National Credit Union Association) rarely has to cover credit union failures whereas the FDIC (Federal Deposit Insurance Association) is regularly taking over failing banks and may be bankrupt itself.  When the stuff hits the fan, there may be a period of time when the FDIC may not be able to cover losses and claims despite claims about full faith and credit.”

. . .

[See the “e-ssay” dated November 2, 2009 titled “Sagacious Financial Advice From A Financial Sage” on banking and the financial world.]

Bumper stickers (and buttons) of the week:

Boycott Big Banks.

Boycott Big Banks.  Support credit unions.

I bank with a credit union.

Credit unions you can bank on.

I boycotted.  Have you?

I transferred (to a credit union).  Have you?

My money is in a credit union.

I [heart symbol] credit unions.

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