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How To Prevent A Housing Recovery: Accept A 46-State Mortgage Fraud Settlement


How To Prevent A Housing Recovery: Accept A 46-State Mortgage Fraud Settlement


The settlement will do nothing to help fix the bruised housing market and may in fact have damaging consequences.

There are two fundamental values that are essential to any working capitalist economy: accountability and the rule of law. The reported outlines of the proposed settlement of the robo-mortgage scandal (no official details have been released) by 46 state attorneys general working together shows how far we have diverged from the basic principles of egalitarian capitalism.

This proposed settlement has no place in a capitalist economy. First, a successful housing recovery is essential to the ultimate recovery of the economy. So the implications of any settlement that potentially hurts the housing market are extraordinarily significant for the health of the nation. Second, it is based on principles that are unrecognizable in a nation built on capitalism and hence accountability and the rule of law.

Bank officials have testified in investigations of the robo-mortgage scandal that they submitted up to 10,000 false affidavits per month. Such testimony is effectively an admission of criminal guilt. These people admitted that, on behalf of their firms, they broke numerous criminal laws, most likely including conspiracy, fraud, and misleading the court.

The banks have attempted to deflect their misdeeds by suggesting that these illegal acts did not harm anyone. The laws were related to process only. The answer to such claims is that they are irrelevant. The banks are acknowledging that they perpetrated victimless crimes on a massive scale. And, each year, I suspect thousands of American citizens go to jail for perpetrating victimless crimes on a far lesser scale.

Moreover, these illegal acts demonstrate disrespect for the mortgage process. This same disrespect for appropriate processes, although not proven to be similarly criminal, is a large part of how our current mortgage mess was created in the first place. The banks ignored many basic underwriting rules in a rush to profit from extending as many mortgages as possible.

Bruce Judson

Bruce Judson is a bestselling and award winning author, a successful entrepreneur and one of the nation’s leading experts on the implications of rising inequality in America. Most recently, he has been developing, and writing about, a practical theory of sustainable capitalism in America, and how this often differs from current federal and state policies. He writes a regular column titled “Restoring Capitalism” for the Next New Deal Blog, a project of the Roosevelt Institute, and recently served as an Entrepreneur-in-Residence at the Yale Entrepreneurial Institute. Judson’s most recent book, published in 2009, It Could Happen Here: America on The Brink , forecast the rising levels of economic inequality in America, if unchecked, would lead to extreme political polarization, absolute political paralysis, anger and mistrust throughout the society, the collapse of the middle class, followed by protests and reform or political instability.

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  1. JamesMcLain November 9, 2011

    Jail time is what is called for if one purjures themselves like this, not a penalty that amounts to one tenth (or so) of your ill-gotten gain. I am a renter, like almost 99 million of my fellow Americans. I would love to own a home, and with 99 million potential buyers out there you would think that someone could build one for me for a price that I could afford. A 30 year mortgage to me sounds like 30 years of indentured servatude, Except that America was founded by indentured servants who only had to work for 7 years for free. The only reason homes are so expensive, the only reason that I have to give up half of my LIFE to afford one, is because of this easy money trickory. Lets throw these bums in jail and invent a new banking system, one where you can’t lend money unless you actually have it. People are way more careful lending out their own money than lending out someone else’s money.

    BTW my statistics are from here:

  2. Bernard Forand November 9, 2011

    Typical ploy of the financial institutes. If they are not held responsible this will occur again and again and again. Promising a trickle down benefit for the lower tiers of our populace. Has not happened and never will.
    With 84% 0f the nations wealth distributed to 20% of our populace. Remaining 16% for the 80% of our populace is not acceptable.
    Wall Street protest is inspiring, as it increases to spread. Fragrance throughout the world is a perfume of liberty. Seeking to hold the tyranny of the suppressors accountable.
    Protesters may be subdued but the injustice will not continue to be acceptable. Justice for all is mandatory.
    Rattle their windows and shake their Walls, for the times, they are a changing.
    ….The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.

  3. j_berry50 November 9, 2011

    No problem. If costs get too high ,I just get rid of employees!

  4. GaryDuell November 9, 2011

    The best sentence in your entire article: The idea of entitlement is anathema to a capitalist system. Those currently in power aren’t really interested in capitalism and the “survival of the fittest” ethic it implies, an ethic that is widely and often thoroughly bastardized. The word is “fittest” not “biggest” or “strongest”. Fittest. The more our corrupted system stifles bottom-up creativity, intelligence and hard work, the further we will sink in the global competitive market. Would the Koch brothers survive a minute without their inherited wealth? Not a chance.

  5. darhmann November 9, 2011

    The key word is FREE, the idea that capitalism alone can cure our ills is nonsense. The biggest problem that faces America is GREED! Once you factor in greed all economic models are off, Supply-side cannot create jobs due to greed, true free trade will be side-tracked by tariffs and protected markets fueled by GREED. Alan Greenspan (retired) said it best.. you can regulate all you want but you cannot regulate greed…

  6. dpaano November 9, 2011

    IMO, I think that banks should be forced to refinance everyone’s mortgage, using the current balance owed (or, if that’s higher than what the house is worth, use the amount the house is actually worth) and the current low interest rate. If all the banks were forced to do this, more people would be able to stay in their homes. And, if you have lost your job….the bank can give you a “forbearance” and allow you to pay the interest only until you get a job and are again able to pay your regular mortgage payment, tacking the unpaid amount to the end of the mortgage period or adding small amounts of it to the current mortgage payment. It all makes sense to me…..probably waaay too easy to implement, however.

  7. Mother Outlaw November 9, 2011

    Thank you for this article. The thing that has been worrying me is the lack of smart, thoughtful comment on the issue of holding the banks accountable. If enough people of substance speak out on this issue, something may get done. So here is a huge thank you!

  8. robyndi17 December 12, 2011

    You made some decent points there. I appeared on the internet for the issue and located most individuals will go along with together with your website.
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