Getting The Incentives Wrong
by digby
Atrios, in his inimitable pithy style, gets to the heart of the foreclosure fraud scandal:
We’re really at the point where no sane person should get a mortgage given the kind of fraud and theft that’s out there... Once we came to a point where servicers could make more money by foreclosing than not foreclosing, the game was over.
Seriously, while the powers that be may consider the number of people who’ve lost their homes and credit rating due to fraudulent foreclosures is nothing more than collateral damage, it’s actually a massive and horrible injustice. Anyone who trusts the system at this point is taking a much bigger risk with their financial well being than the purchase of the house itself.
*Sigh* — just read this by Mike at Rortybomb. Oy:
Finally the administration is talking about the foreclosure fraud crisis. And their approach is that only BP knows how to foreclosure on people with improper documents 5,000 feet below the sea only Bank of America, GMAC and the other largest servicers and banks can figure out how to solve this problem internally, that “This is a problem for the banks and servicers to fix. They can fix it as fast as they feel like it.” Here are Shahien Nasiripour and Arthur Delaney on Obama Team On Furor Over Foreclosures: ‘Problem For The Banks and Servicers To Fix.’ What if the adminstration came out with something half as strong as this ruling by Judge Christopher A. Boyko of Federal District Court in Cleveland (my bold, though seriously read it all)
So read it all. This Judge evidently believes in some archaic concept called “the rule of law.” It’s quite unusual.
The administration’s view that “only the banks” can unravel the criminal enterprise they’ve created is eerily reminiscent of their position on the AIG scandal. Recall that we were all told that if the executives were fired (or even denied their full bonuses) then there would be no one with the requisite “skills” available to make sure the whole economy didn’t come crashing down. (Remember, these banksters are “superstars” and can’t be held to the same prosaic notions of law and order that apply to the rubes because they are so special.)
Feinberg’s push for long-term accountability was met with what Feinberg calls “intense pressure” from officials at the Treasury Department and from the Federal Reserve Bank of New York, which had provided most of the A.I.G. bailout, to make accommodations for the firms whose perceived extravagance had created his job in the first place. First, there were those cash retention bonuses, which 8 of the 12 A.I.G. executives now under Feinberg’s purview received in 2009. Feinberg pushed to have the executives return the money and replace it with salarized stock. They all refused, even those who had pledged to give the bonuses back altogether. Among those who insisted on keeping the cash was David Herzog, A.I.G.’s chief financial officer, whose bonus was $1.5 million. He and the others told Feinberg, through A.I.G.’s vice chairman Anastasia Kelly, that if they didn’t get to keep that bonus, plus get additional bonuses for work in 2009, they would leave, which would grievously imperil the company. No one at A.I.G. seemed to be embarrassed to argue that the chief financial officer of Wall Street’s Titanic was irreplaceable.
My experience in corporate life over the years had led me to believe that these people are extremely overvalued in general. But regardless of that, it’s always a bad idea to deal with terrorists (which they are) by coming right out of the box bowing and scraping. It rarely works out well.
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