Trouble, trouble everywhere, not just with notorious big cases like Madoff.
Today’s wave of dubious deals is more pervasive and grass-roots in nature than the S&L debacle, which primarily involved thrift executives and their borrowers. Developers, mortgage brokers, appraisers, bankers and borrowers alike are under the microscope of state securities regulators and federal prosecutors.
“We’ve always had people fudging the numbers on their loan application to buy the home they wanted to live in,” said Joe Boyer, supervisory special agent for the FBI in Portland. “During the boom, we had people trying to do 50 homes. It was all about the real estate appreciation.”
Boyer is a key member of a mortgage fraud working group in Portland formed among local, state and federal investigators to combat real estate and mortgage fraud.
It’s good that law enforcement is finally taking action, I guess. The horses are out of the barn, down the road and on a plane to an offshore location, sipping tropical drinks and laughing, but hey, it’s something. Basically huge portions of American society became a kleptocracy, and with nobody enforcing existing laws or lending standards to any great extent, it seems like it became socially acceptable to do wrong.
Thus shall the disastrous neo-liberal epoch of 1980-2008 be remembered. Both parties shared in this, and to a certain extent many politicians seem not to have learned a great deal. This is TWICE in the last twenty years this has happened. It’s inexcusable, and more importantly, downright stupid and unnecessary.
While it’s true that proper regulation must be neither too burdensome nor too lax, we’ve lived through an age where the reflexive attitude of most bidness guys and gals, especially in the house building, buying and selling industry, is to oppose regulation just ’cause they wanna. It makes ’em mad and so they run lying third party expenditure ads and so on, kind of like a child holding its breath. And like a naughty child, they are now very, very sorry that they got caught and everything is all messed up.
Babbling about the invisible hand is all fine and dandy, but it’s neither realistic nor much of a policy. The automatic response to anyone still claiming markets will police themselves should be a belly laugh.
While it is obvious that we have been through a period of dreadful business morality, I am not sure that it is equally obvious that the answer lies in more regulation.
The difference between gambling and investment escapes me except that the risks of gambling are more apparent while investing is more respectable. Why is this?
The answer is in the myth that investment adds tom our economy. But how? If I buy your shares of GM, GM gets no more money. The incentive for the management is not to make GM more productive but to further raise the share price! The idea of the corporation that never makes a profit but does grow in value because of market share is a definition of a Ponzi scheme.
Rather than more regulation, it seems to me that we need more transparency and a more rational investment tax. Wall Street ought to be just as transparent as Las Vegas and capital gains should be taxed at the same level as other gambling wins.
One way to achieve this is by a wealth tax. Madoff’s gamblers lived on the air filling their balloon of wealth. If that same money had been invested in productive enterprises, the balloon would have grown more slowly and it would have been much less likely to burst while the government would be taxing the least productive aspect of the money supply.
AMEN!!!!
Jon, are you embarrassed about your previous post?
Sounds like regulation to me. And that is not a bad thing at all.
To create “transparency” requires regulation. Or do you have some other way in mind, SJ?
“The automatic response to anyone still claiming markets will police themselves should be a belly laugh.”
Can we say the same thing when it comes to lawyers and doctors policing themselves? Hope so.
Sludge puppy
Wrong wrong wrong on regulation.
AIG nearly got brought down by a total of 337 guys in the London office, selling CDOs. (They averaged well over a million a year apiece.) Please remember that the financial community bought/sold $62T (sixty two trillion U.S. dollars) worth of credit default swaps world wide.
Please find the story and read it. It was in the news about 6 or 8 weeks ago. 337 folks selling an unregulated, undercapitalized, under-reserved, little-understood financial instrument.
No oversight, no rules on reserves, no SEC requirements, etc. A fellow from Nebraska who wrote risk assessment software actually raised the red flag to the SEC repeatedly (article has the paper trail), but we know how this administration works, so one that whiffed.
s/
Jim, an true musician who has not, does not, and will not ever attempt to operate a bagpipe assembly.
http://www.bagpipeassembliesmakenicebonfires.org
Madoff, the Donkey gift that keeps giving.
@4 At this point I’d let the Japanese sub out
running our govt and fire the current bunch of
self serving cocksuckers. While their at it
they could fix our transportation system too.
re 9: If GM stocks are highly rated, their ability to borrow funds is greater. The big problem is with the way financial institutions rate companies.
One big problem is that companies that treat their workers like crap are more highly rated than companies that treat their workers well.
That’s the reason WalMart is rated higher than Costco.
re 9: “At this point I’d let the Japanese sub out running our govt and fire the current bunch ofself serving cocksuckers. While their at it, they could fix our transportation system too.”
Spoken like a true Republican.
“You can have your gold and your diamonds, too.
All I want is a ring-dang-doo.” Sam the Sham
I think SJ has a point that just adding more regulation isn’t necessarily the answer. It needs to be better. Part of the problem is indeed that the K street gang and the politicians who derelicted their duty and listened to them have peeled away half of the regulatory strictures that were supposed to keep businesses honest. The other half of the problem is that the remaining regulations have been turned on their head to give “special advantages” to those companies who had managed to get themselves declared “more equal than others”.
ArtFart, thanks for explaining what you think SJ meant.
I rarely know what he means by what he posts, and I usually want to give him the benefit of the doubt, but… Well.
But this is not going to be cleaned up without regulations. Better Regulations is obvious. But it is not gonna be fixed without regulations.
I’m just saying…
Maybe SJ should ask Big Gipper what he thinks?
@15 Real American
I think that regulations for its own sake happens too often and to no end. One obvious fact, from biology and economics, is that survival mechanisms are nearly infinite. No matter what regulations we create, someone will find a way around them.
I do not know enough to suggest the sort of regulations or changes in law that would be most robust but here are two suggestions:
a. Wealth Tax. This would diminish the incentive for leverage by taxing this sort of gain in wealth. A big part of the incentive of mumserem like Madoff is that their gains were hidden or not taxable even if visible.
It is also worth noting that Madoff could not have done his dirty if he had to provide dividends rather than capital gains!
b. The Madoff Rating. Establish a quasi government but for profit entity that assesses risks. We can call the product of this firm the Madoff Rating. MRs would be provided by the Madoff Rating Institute (MRI .. inside joke?).
MRI would have full access to the financial records of any firm seeking an MR, including confidential documents such as tax returns.
Because MR ratings would be very strict, there would be a huge incentive for investors to determine their investment based on these ratings. Obviously this preserves the freedom of investors to take risks by suing investments with low MR or no MR.
Is this sehsible?
I’m always amazed at the contradiction of our society. We claim we are so moral and so Christian, yet at the first chance we get, we adopt the “Greed is Good” mentality and each try to top the next to set up a kleptocracy. All segments of the society, liberal and conservatives have some element of blame, but I find the conservatives to be very hypocritical. They are the ones that claim to be so moral, yet so willing to cheat, lie and steal.
Nice theme, we don’t need just more regulations, we need better ones THAT we in enforce.
17 You have it exactly backwards. The democrats
are behind the mortgage crisis in an effort to make everyone equal. Keep trying though!
@17 Blue
How Christian of you!
Too True, and good suggestions for regulations.
Here is my suggestion for a new regulation:
If you get caught scamming for money under the collar of a “financial institution”, you get hung.
In public.
Now that is a regulation that might make all Republicans start earning an honest living!
@ 19
Yes, yes, and up is down, and war is peace.
Keep trying, asshole. I am sure there are some uninformed idiots who will believe your bullshit.
Hell, you could be the next Rush or Bill O’Liely!