I have used an analogy regarding bankers that some may see as being unfair. I have used the analogy of a fireman starting a fire and then putting it out. Clearly, the fireman starting a fire is engaged in criminal activity.
With regard to bankers in the housing bubble it is not illegal to offer easy money, toxic loans to mainstreet victims. It is a scam, a form of class warfare from the top, but it is not an act of breaking the law.
However, offering easy money loans in such quantities to actually infect the value of housing with speculation should be against the law. The great New York Times columnist Will Rogers actually called for a law against speculation of all kinds. In 1930 Rogers said this:
“We never will have any prosperity that is free from speculation till we pass a law that every time a broker or person sells something, he has got to have it sitting there in a bucket, or a bag, or a jug, or a cage, or a rat trap, or something, depending on what it is he is selling. We are continually buying something that we never get from a man that never had it.” DT #1301, Sept. 24, 1930 (Willrogerstoday.com)
We know that it is not illegal for oil to be at 100 dollars a barrel. But we know demand is less than when it was 70 dollars a barrel. We know that speculation in housing was a churn entered into by a public largly unfamiliar with anything like that happening to that market. Yet the churn was set up by Wall Street. The churn was no different than churning stocks or oil contracts. There is no law, but Rogers wanted a law.
So, then you can steal legally in this country if you control the money and the credit. There is no law, except for laws that should have protected investors that are on the books. But even those are not being enforced or are not clear enough for prosecutors to act. I happen to think the former.
When using the fireman analogy, the concept still sticks. If you create a mess you are not a hero for fixing the mess. I like the analogy of the used car salesman as well. The used car salesman has a reputation for selling cars that are duds. We know that not all salesmen do this. But enough did in the past to give the business a bad name.
Well, now bankers, who are not breaking the law with their easy money speculation, have a reputation. It is not a good one. Many people I talk to are not willing to give them business. My dad listened to Will Rogers and never bought a car on credit. Rogers was against doing so. I hope people listen and avoid buying a house on credit with the possible exception of purchasing at the beginning of a bubble created by government guarantees of all loans. That is likely coming as a means for investors to have risk free mortgage investments. That is what Dimon, Wells, the IMF and many others want.
But other than a little gambling based on knowledge, it would be better for America if people just quit buying on easy credit. I said that the German banks protect their own citizens by requiring 20 per cent down. Those same German banks offered easy money, toxic loans to the PIIGS and to Americans. Americans are considered no better than weak sisters. We are disdained like the PIIGS citizens!
The Germans protect their own with regard to credit and with regard to jobs, yet their banks are the most irresponsibly leveraged in the world. Germany is a predator. While articles are placed all over the internet praising Germany, the country is really just a bully. And German banks are a worry of our private Fed, which does nothing to help mainstreet, as QE goes on and on. And don’t think our TBTF banks don’t mind piling on with our own easy money, that caused US banks to be levered over 30 per cent. That is child’s play compared to German banks. That is why those banks catch cold when Greece sneezes. When you are that leveraged you are very vulnerable.
So, Will Rogers was right, speculation that allows banks to leverage up is a bad thing for America. As soon as Americans realise it, the sooner there will be laws against this predatory behaviour. No the easy money is not now against the law, but as in Germany, it should be. Germany is a predatory nation with regard to credit beyond her borders. It is not against the law. But it is an attack upon those with fewer means. You can attack legally if you control the rules. You can sell a loan “as is”, if you have the backing of the central banks, who are heavily involved in this predatory behaviour.
Oh, and I long for the day when NY Times columnists speak out like Will Rogers, calling for an end to speculation. Wouldn’t that be great?
Update: The back end securitization fraud is illegal and should be prosecuted. This article focuses on the front end ponzi, toxic lending, that is not now illegal.
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