Foreclosure “Settlement” (Update)(x2)

The Wall Street Journal breathlessly reports it here.

Naked Capitalism deconstructs it here and here.

Ladies and gentlemen.  Even if this settlement really afforded any relief to the victims in all this – and it doesn’t – $25 billion is a drop in the bucket compared to the trillions upon trillions that have been marshaled to prop up the putrid and moribund global financial system.  To no effect, I might add.

But the truth is this has nothing to do with “helping homeowners”; this is strictly another risible buy-off of government enforcement – on the cheap, no less – by the same mobsters who would be its targets if the government’s efforts in this regard weren’t a pathetic joke in the first place.

There are no public officials who are going to even seriously address, let alone solve, the enormous financial disaster that is closing in on us even as I write this.  Not even New York Attorney General Eric Schneiderman, who I think kind of has his heart in the right place.  It’s simply impossible, though, even for him, as honest and decent as he might imagine himself to be and perhaps even is.  The institutional inertia and/or momentum is unconquerable for anyone in the middle of it.

If the real problem is going to be addressed, we have to do it ourselves.  And time is running out.

Update:  Originally optimistic about the AG foreclosure deal, Matt Taibbi now agrees with me. And Yves Smith.

Update 1:  This post is an important appendix to this post.  It’s by an attorney who has represented and litigated on behalf of some of the bag-holders investors in Mortgaged Backed Securities (MBS’s).  These are some of the people and institutions on the other side of the bets that homeowners made:

And yet, we see the same strategy being implemented today to solve the housing crisis that was being attempted back in 2008 – yell at the banks about poor practices while bailing them out with a back-door loss shifting strategy, give the money to underwater homeowners in the form of loan mods, and ignore the fact that our pension funds, college endowments and life insurance investments are being looted in the process…there remains some hope that by aggressively pursuing remedial action against the banks for the way in which they created an sold mortgage backed securities in the first place, regulators (the Mortgage Fraud Task Force, for example) could create a resolution framework that would disincentivize future fraud and irresponsible lending while sending a clear message to bondholders, insurers and homeowners that contracts and the rule of law still mean something in this country.

He’s trying to keep the focus on lenders, not defaulting homeowners, because that is more socially and politically palatable villain casting.  But the reality is, this lawyer pressures and lobbies the banks to squeeze the homeowners, or the government, or whomever else is required, to pay his “…pension funds, college endowments and life insurance investments…” which in his mind are being “looted” because they are not receiving their promised income from the MBS investments.

It’s important to remember, in other words, that a debt has someone on the other side of it that feels entitled to be paid.  And that is why when you cancel debt you have to be mindful of the consequences.



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