Held Hostage By John Galt
by digby
We’ve heard quite a few lectures from political and financial elites these last couple of years about “tough love” and sacrifice and “moral hazard.” The Tea Party movement itself was launched by a tirade from a CNBC celebrity spokesmodel ranting about irresponsible homeowners being “bailed out” by the government. The prevailing wisdom is that individuals must be held accountable for the failures; to do otherwise would encourage bad behavior in the future and otherwise weaken the moral fiber of our nation.
But oddly, when it’s revealed that financial institutions have behaved irresponsibly (and in some cases criminally) casting their own industry into disrepute, ruining countless lives and (further) destroying the economy, we are told that they cannot be held responsible, or even be required to stop their irresponsible and criminal behavior, because it will slow the recovery and the poor average worker will be hurt. We’ve been told for two years now, as wave after wave of financial wrongdoing and malfeasance has been revealed, that it is in our best interest and the best interest of the country that we allow the big banks and their various affiliates to continue on unmolested lest something even worse happens. (And anyway, the average Americans who will be caught in the crossfire need some lessons in tough love so it’s for the best.)
The Securities Industry and Financial Association issued a brief statement Monday morning warning against growing calls to halt foreclosure nationwide.
Tim Ryan, CEO of SIFMA, said such an action would be catastrophic to the housing recovery. Furthermore, the damage will also extend to the the average American wage earner, he said.
“It must be recognized that the mortgage market, investors and the health of the economy are all inter-related,” he said. “Investors in the housing market — including American workers with pension funds, 401(k) plans, and mutual funds — would unjustly suffer losses in their savings from these actions.”
Recently, several state attorneys general started calling for a moratorium on foreclosure. Several large servicers are voluntarily suspending foreclosures, as well, citing the need to review documents. Allegations have surfaced that foreclosure filings may be going through the system without adequate review. Despite the pressure to join the chorus, so far the Obama adminstration is resisting calls for a nationwide foreclosure moratoria.
The trend to slow the foreclosure process greatly is already weighing on senior bond holders in securitizations. This development is one of the several ways the entire situation is negatively impacting the nascent private-label securitization rebound.
You have to love the idea that average Americans should stand pat while the mortgage industry continues to defraud them so they can protect their alleged investments in mortgage securities. I guess there’s a sucker born every minute.
At some point one would hope that this racket would become obvious to the American people: they are being held hostage by financial elites who insist that they be allowed to get away with murder or they’ll blow the whole place up and take everyone down with them.
President Obama defined this well very early on:
“It’s almost like they’ve got — they’ve got a bomb strapped to them and they’ve got their hand on the trigger,” President Obama said on Thursday of the banks he’s chosen to bail out. “You don’t want them to blow up. But you’ve got to kind of talk [to] them, ease that finger off the trigger.”
Update: While you’re shedding tears for the “senior bondholders in securitization” keep this in mind:
While the US unemployment rate remains stuck at 9.6 percent, pay on Wall Street is likely to rise another 4 percent.
To what? $144 billion, according to an estimate by the (paid restricted) Wall Street Journal published Tuesday…
“Compensation was expected to rise at 26 of the 35 firms,” the paper’s reporters wrote, with the total payouts leaping to $144 billion, “a 4% increase from the $139 billion paid out in 2009.”
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