Two distinct and mutually exclusive narratives are taking shape around the latest round of the housing meltdown, this time involving slipshod, get-rich-quick record-keeping, leading to the now notorious affidavit mills and strong rumors of fraud. With one major bank or mortgage server after another announcing moratoria on foreclosures including the bombshell Friday from Bank of America covering all 50 states, the problem is no longer addressed as one of ‘mere’ technicalities.
However, a strong back-up thread is developing that attempts to convince us that the whole problem is overblown because, after all, the vast majority of these foreclosure procedures deal with mortgages that are seriously delinquent. Calculated Risk, for example, said last Thursday:
‘This will probably just be a delay. And the delays will mostly be in the judicial foreclosure states, . . .
Note, however, that a mere 24 hours later his comment about only the ‘judicial states’ being affected was belied by events.
An alternative view comes from Naked Capitalism whose author, Yves Smith, has been way out front on the topic for two weeks. She refuses to countenance any tut-tutting and says instead that:
‘. . . what is really at stake here. . . is the rule of law. Banks that were quick to defend unjustifiable pay deals by invoking “sanctity of contract” have no inhibition about ignoring their own contracts to pad their bottom line, and ultimately, the wallets of top executives. Rather than deal with the considerable consequences of these abuses, the banks are prepared to bulldoze well settled state laws to give them an easy way out. . . . The result is that we institutionalize kleptocracy while keeping largely gutted forms of due process as theater. The powers that be hope that the broad public will remain unaware of what is really at work’.
Paul Krugman at the NY Times compares this fast-and-loose operation by bankers with the sanctimonious reaction to other countries’ financial collapses.
‘After the Asian financial crisis of 1997-1998, it was often said that a key barrier to recovery was the uncertain state of property rights: so much debt had been run up during the boom, and there had been so many defaults in the bust, that it was no longer clear who owned anything. Plus, these countries lacked clear legal procedures, and in general suffered from insufficient rule of law. All this was said, of course, in a tone of superiority: we Americans had solved such problems’.
Does anyone else hear the faint echoes of a parallel breakdown that occurred under Bush and has been faithfully continued under Obama to the present day? I refer, of course, to the cavalier dismissal of the rule of criminal law and procedures in dealing with accused terrorists, including people who may spend the rest of their lives in cages at Guantámano because our society is too chicken-shit to give them a fair trial in a court of law.
Why should it surprise us that convenience and expediency, once allowed to trump our core democratic principles in the ‘War on Terror’, are dumped in precisely the same way when dealing with the property rights of defenseless, working Americans? After all, delinquent mortgage holders are all a bunch of deadbeats and scammers (‘the worst of the worst’, in the Bush-ite phrase), so they should get shoehorned out of the houses they can’t afford ASAP, right? Why let courtroom technicalities drummed up by their liberal lawyers stop the process?
And so the whirlygig of time brings its revenge. I hope to live long enough to see a Tea Party-er get thrown out of his suburban three-bedroom by a bank using phony documents so he can rail on Fox News against the unfairness of depriving him of his rights without a valid court proceeding and due process.