With millions of homeowners losing their homes to foreclosure during this recession, megabank JPMorgan Chase plans to argue against the Obama administration’s latest weapon in its fight to stem the problem — principal cuts for struggling borrowers — by citing the sanctity of contracts and the borrower’s “promise to repay.”
In testimony to be delivered Tuesday afternoon, David Lowman, chief executive officer for home lending at the “Too Big To Fail” behemoth, will fight back against the program which calls for lenders and investors to decrease the outstanding debt owed on a home mortgage. While his competitors at Bank of America, Wells Fargo and Citigroup plan to dance around the issue — judging from their prepared remarks — Lowman cut right to it: borrowers don’t deserve it.
Ok. Let’s go back two years and not do ANYTHING to help out the banks during the crisis and see if JPMorgan Chase sinks or swims under the load of their “sanctified contracts” without taxpayer largesse and huge government intervention at taxpayer expense. And let’s see how many homes JPMorgan Chase has foreclosed on the owners and then abandoned in areas like Cleveland, leaving the wrecked and unclaimed homes to be looted, vandalized, and serve as crack and crime dens up and until the taxpayers are forced to deal with it. Let’s make them live up to their sanctified god damned contracts and take responsibility for their mess. Let’s see how profitable they are without no-interest and extremely low interest loans from the Fed which they turn around and lend to consumers for a hefty profit.
I hate these assholes. And yet I can guarantee there will be someone in the comments defending these guys. You hippies are just being irrational and lashing out!
cleek
there’s a time and a place for a pitchfork-wielding mob.
now’s the time. the time is now.
EdTheRed
Remember: collective bargaining agreements with labor unions do not count as “sanctified contracts” when management decides that the best way to cut costs is to use those contracts to wipe the asses of their shareholders.
Omnes Omnibus
In their defense, they are being consistent-ish. They argued they should get their bonuses despite poor (to say the least) results because of sanctity of contracts. So they have that going for them.
Napoleon
This country now has an almost explicitly two tier legal and political system. One with draconian rules and enforcement that applies to the average person then those that apply to the political, business and media elite of Washington and NYC, which are basically no rules or accountability at all.
Zifnab
Go ahead. Do it. Too Big To Fail means never having to say you’re sorry.
Admittedly, SOME dirty hippies were suggesting the government shouldn’t be bailing out the banks at all. They should be buying the worthless mortgages and foreclosed properties at the bargain basement rates, then releasing them to homeowners under non-price gouge terms.
SOME dirty hippies insisted that if you just handed the richest assholes in the room another giant stack of cash, they’d spend it irresponsibly and tell their clients to suck a duck.
But what do those dirty hippies know about the sanctity of contracts and the almighty wisdom and power of free market capitalism?
Omnes Omnibus
@EdTheRed: Silly rabbit, there is a difference between collective bargaining agreements and contracts. I am a lawyer and I am not sure what that difference is, but there must be one, right?
Poopyman
I said at the time of the crash that I wouldn’t be surprised to see bankers hanging from lampposts. We didn’t, of course, and this is one of the results. These guys doing the taunting are really pushing their luck.
In any other society they’d either have been strung up immediately or they’d have wound up in court – either legit or kangaroo. Why are we as a society just sitting here taking it?
ETA – This comment applies to the previous thread too. Also.
Punchy
CR always has a bunch of commentors complaining about “moral hazard”, and there is something to that. Specifically, a cousin of NIMBY-thought that says “how dare my neighbors act like fucks and still get to pay less, while I pay my full share!”. While this is probably not always the case, since everyone knows someone who spent like a drunk and is now financially screwed, this would probably be the default assumption among neighbors in neighborhoods. Personal responsibility and all that….
A lot of ill will would brew between neighbors, and between citizens and their local and fed govt.
chowkster
Financial Reform is an even bigger winner than HCR. Obama and the Democratic congress should go full steam ahead with this. Besides, IT IS THE RIGHT THING TO DO.
Also, I have a sneaking suspecion that greedy big banks will help the financial reform along the same way greedy insurance companies helped HCR by increasing premiums by 40%.
Mike Kay
Free markets aren’t free, John.
MattF
Ah, the sanctity of contracts. Quoted from Michael Lewis’ new book:
When a Wall Street firm helped him to get into a trade that seemed perfect in every way, he asked the salesman, “I appreciate this, but I just want to know one thing: How are you going to fuck me?”
Heh-heh-heh, c’mon, we’d never do that, the trader started to say, but Danny, though perfectly polite, was insistent.
“We both know,” said Danny, “that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to fuck me.” And the salesman explained how he was going to fuck him. And Danny did the trade.
kommrade reproductive vigor
Of course! Just like the sanctity of the Roman Catholic Church means no one should dare complain when priests rape kids.
Linda Featheringill
@Zifnab:
Capitalism was created out of respect for the contract over blood ties and associations. Okay, “sanctity of the contract.” And yes, contracts are interpreted and enforced with benefit to the rich and powerful. And the “free market” seems to work only for the benefit of the fat cats, too. ‘Twas ever thus.
Does that make it right? Oh, no. But these are the guys that set up the rules of the game and yes, they set it up so it benefits their own interests. Can the system be “fixed” so that it benefits all equally? I don’t know.
Sammy
Exhibit 1 is Gov Christie “amending” the teachers contracts in NJ. He had the excuse today that because they weren’t state contracts, but instead negotiated with each school board, he could do it. i had to laugh.
DanF
Worse than a commenter defending them will be the handful of “serious” Democratic Senators defending them. Insane.
soonergrunt
Yup. And the Today show has Kate Goselin on right now talking about being on Dancing with the Stars and being a single parent to 8 children.
Because that’s so important to the American Dialog.
Mike Kay
You know who else wanted to provide relief to the struggling lower middle class? — that’s right, HITLER!
Butch
EdTheRed beat me to it, because my first thought was the “sanctity” of the autoworkers contracts.
someguy
I dunno. The contracts I enter into are pretty fuckin’ sanctified. I pay all my bills on time, do my obligations under the contract (like painting the goddam trim on the house every other year even though it’s a complete PITA) and so forth. I treat the law the same way and try to follow it.
Why is it then, that I feel like an utter goddam stooge when I look at the lawless SOB’s in both parties and in high finance who are running this country? Evidently, it really is about how you play the game, and if you’re a lying cheating, lawbreaking scumbag, you prosper. I have no other explanation for our politics or our financial system.
Short Bus Bully
Privatize the profits and soshulize the losses, it’s the American Way!
Freeeedooom!
Wolverines. Also. Too.
Mike Kay
Cutting mortgage principle? Another corporatist trick by RAHM! and Obama.
What Obama and his jack-booted thugs should be doing now is providing aid to renewable hemp communes, not these materialistic homeowners.
cleek
Obama’s too busy right now instituting the jizya to do anything about banksters.
Julian
What’s really offensive about this is that these banks pursued risky borrowers to feed their hunger for securities and in the hopes of getting lots of expensive land cheaply once they defaulted (because apparently bankers are too stupid to realize that mass mortgage defaults would lead to the property bubble bursting, and thus, to a precipitous fall in real-estate prices). Of course, once their stupid bets, designed to beggar their counter-parties by selling them junk for real capital, collapsed and left them over-extended and under capitalized, the first people they blame are the mortgage holders they just made homeless. I wish there was a stronger word for infuriating in English.
db
John writes:
There already are such places and bound to be more. But I doubt that the top of the foodchain at JPMorgan and the like ever see any of this or really care.
It would be nice to see some judge administer a sentence where these folks are forced to live in those blighted neighborhoods they have created.
SpotWeld
Doesn’t the free market demand that to be sucessful any individual must be willing to exploit advantages for thier own profit.
The banks have shown themselves weakened… the free market demands that the weak banks be reduced by such measures.
It’s an idiot that assumes that the goverment can’t be an actor in the free market.
Brian J
Are they talking about principal cuts for anyone and everyone who wants one, or simply people who are struggling to make payments because the value of their home has decreased? I am not aware of anyone who is proposing the former.
Wasn’t there some big article a month or so ago about how, when the banks are appearing to help people out, they are simply tacking on the difference to the principal, so in the end, they are simply bilking mortgage owners out of more money? Also, what about this:
Besides that, as the article says, the banks are making a claim that doesn’t hold up, because contracts are rewritten all of the time. It doesn’t just happen. It needs to be for a specific reason, like bankruptcy, but acting like it’s some sort of unheard of practice isn’t realistic, to say the least.
aimai
It seems to me that we are always going at this the wrong way: we are always asking the banks and bankers to do the right thing, instead of making it financially untenable for them to do the wrong thing? I realize that we are fighting, right now, for stronger regulation and we won’t get it but I’d like to see things like this:
1) If banks are essentially taking taxpayer money and lending it out for mortgages and reaping the profit why doesn’t the government set up a ratings agency that reviews the bank’s history of bad loans and foreclosures and make it more difficult for banks to access money if they have a bad credit history?
1a) I’d like to see a law that makes actual bankers be named in each mortgage sold such that the actual banker (kind of like the lead investigator on a grant or the lead doctor on a surgical team) signs off on each mortgage and is held partially liable for its failure. No mass marketing of mortgages, selling off of CDO’s and selling forward the liability. If a preponderance of mortgages you signed off on go bad you can’t be hired on in any high level capacity in the banking or financial industry again.
2) at the local level cities and states should review bank history and demand up front payment for all use of state and city resources to enforce bank and mortgage contracts in civil courts. No using local bailiffs for evictions if the banks aren’t taking care of other foreclosed houses. Abandoned foreclosed houses should be seized by the state and put back on the market, or turned into public housing.
aimai
Legalize
OT, but also priceless: Who could have guessed that Andrew Breitbart is still a lying sack of shit?
The Moar You Know
@Napoleon: Remove the word “almost” and you’ll have it right.
The horrible realization I’ve come to over the last several months is that we have a political apparatus that, from bottom to top, not only supports this two-tiered system but has worked tirelessly to put it in place.
I say this hopefully without conveying the false equivalency bullshit of saying “both parties are just the same.” They are not, not by a longshot. But the sad reality of the situation is that when it comes to policing the crimes of the banksters, “captains of industry” and lords of finance, both parties have not only turned a blind eye to their crimes, but have aided and abetted them in their fleecing and destruction of the middle class.
I have a feeling that come 2012 or 2016, that this may become the deciding issue in elections. Given a choice of either voting Democratic or Republican, well, that’s not much of a choice, is it? I’ll vote Democratic. But I’d like an option that would allow me to vote for someone who, for once, would look after my own personal financial interests.
Those interests boil down to “not turning the United States of America into a third-world country”.
Neither party seems too interested in doing that.
rootless-e
@someguy: you can’t be implying that the powerful and rich play by different rules than the poor and weak. That would be unprecedented in human society.
artem1s
I am outraged that these firms are still pushing this bullshit meme that poor people who were able to get home loans caused this. Greenspan was on the hill last week doing it again. NO ONE WHO BOUGHT A $50K HOME HAD ANYTHING TO DO WITH THIS. If you live in a place like Cleveland where the housing market has been chronically depressed for 4 decades, there is almost no reason NOT to lend to someone who has demonstrated that he/she can afford RENT for 5 or more years. Seriously, are you willing to believe that someone paying $650-$1,000 in rent every month CAN’T afford a $40K home? Responsible banks in Cleveland put many, many first time buyers into homes in the 90’s by offering low down payment products.
These firms got into trouble when they started to revalue $1M investment properties at $2-3M. Tripling their value for no damn good reason at all except that the investors wanted to double and triple their investments overnight. That’s why AZ, FL, and CO are the leaders in default. Massive investments in 2nd, 3rd and 4th vacations homes and investments in HIGH END development complexes. That was the Ponzi scheme.
If any of the mid range buyers (lenders) had the sense god gave a goat they would be buying up defaults in Cleveland and other rust belt cities and rehabbing them. It’s pretty easy to get a return on a double that you can buy for $5K-$40K. All you have to do is be willing to move out of the burbs and live next to some brown people. But you also have to be willing to live in the home, rent out the second unit, and wait for 10 years to flip it. My house has paid for itself once already and most of my neighbors have gotten the same benefit out of their homes. I have a friend who has eliminated both her rent payment and a mortgage by buying a $7K double in the city. All she has to do now is continue rehabbing and get the second unit in shape to make money.
Why aren’t we talking about a program that would encourage this kind of behavior? We have a golden opportunity to rebuild and reinvest in our rust belt cities. Why not offer a Peace Corp-like student loan forgiveness to graduates who invest in inner city defaults for 5-10 years? Because JPMorgan and Greenspan, et al, want to continue to blame poor, inner city people for the housing collapse.
kay
Or, they can walk away, allow the foreclosure to proceed, the lender can sell the property at fire sale prices, and the debtor can discharge the unsecured portion of the mortgage loan in bankruptcy.
Along with all their other unsecured debt.
Is that what he wants?
Okey-doke.
Deal.
I don’t see that he’s left them a whole lot of wriggle room. Maybe he shouldn’t have lent money based on trumped-up appraisals? Just a suggestion. Going forward.
EvolutionaryDesign
@Mike Kay: I believe you mean “FEE markets aren’t free”
cmorenc
The GOP would never have accumulated anywhere near as much traction toward obstructing and tearing Obama down had Obama started his administration by publicly hanging a few of the most greedily overreaching bankers and financial manipulators from the lampposts, and quite visibly pressed the advantage of the desperate need for bailout cash by teetering-on-bankruptcy situation of banks and financial institutions in order to drive a hard bargain on things like foregoing/waiving bonuses, supporting financial and consumer protection reform, and perhaps modification of some oppressive loans. Instead, we got new Treasury Secretary Geithner practically giving these masters of the universe financial blowjobs in public. That’s the spectacle that forfeited for Obama the chance to be seen as a 2nd FDR as the champion out to save the populace from the feckless greed and dire circumstance caused by the preceding gilded-era administration who represented the robber-barons, and incredibly has allowed the GOP to make headway repositioning themselves as the party of financial responsibility.
EvolutionaryDesign
Does anyone know who we should be calling/talking to, and what we should be pushing them for in terms of financial regulation? I wouldn’t mind seeing another Tim F. style HCR campaign. I’ve seen this community do wonders before.
Anton Sirius
@cleek:
A riot is an ugly ting. Und I tink that it is just about time ve had vun!
Rosalita (Formerly GReynoldsCT00)
@soonergrunt:
and she’s such the ‘average’ mother. barf.
IronyAbounds
WaMu literally packaged up loans it knew were going to go bad and foisted them on unsuspecting buyers. If there is on criticism of Obama that really holds water it is the lack of aggressive action against the criminals on Wall Street. Of course, the minute anything is proposed to do anything they cry class warfare and socialism. It is hard to maintain love of country with the shit that goes on every day.
The Moar You Know
@kay: There’s a simpler reason that lending institutions prefer to do this rather than write down principal; it allows them to pretend that their worthless mortgage-backed securities are worth their face value. Rewriting the loan means that the securities take a hit on their book value, which means the institutions take a hit on their shareholder value, which means that the CEO will get a smaller bonus and will have to forgo buying a gold-plated Gulfstream jet this Christmas for his kids to play with.
How could you want to wreck a child’s Christmas like that? You are a heartless monster.
The Moar You Know
@cmorenc: Even smart people with an understanding of history can do stupid things. I will assume that Obama has read at least as much about the history of FDR and the Depression as I have, and he must have known that failing to take it to the banksters, as FDR did repeatedly and often, would lead to undesirable results.
I don’t know. But your point stands. Obama will not go down in history as the next FDR. He may well go down as the next Hoover unless he figures out that you can’t mess with an American’s standard of living without paying dearly for it.
LanceThruster
The “sanctity of contracts” sounds just like the “sanctity of marriage” in that those using these terms tend to ignore them at will.
Linda Featheringill
@EvolutionaryDesign: I don’t know what the others are doing but this is what I did:
I contacted the usual suspects – senators and representative – and and basically said this:
You can also contact the senators on the Finance Committee. The House has a similar committee but it is difficult to get through to a representative because you have to go through zip code filters. Apparently, they don’t want to hear from you if you don’t live in their districts. I have succeeded in getting through to Nancy Pelosi’s office, though – as Speaker of the House.
Welcome aboard. Let’s go get ’em.
MattR
@The Moar You Know: IIRC (and God knows if anyone actually does with this entire mess), but the other reason the banks are against this is because they have hedged themselves with credit default swaps which would only pay out if the underlying mortgages are forcelosed on (and not if they have the principal crammed down). So right now they get paid if you make your payments and they get paid if you can’t make your payments which means there is absolutely no incentive for them to accept a lower payment while keeping you in the house
kay
@The Moar You Know:
He’s full of shit. He’s exposed out the wazoo on the unsecured portion of that debt, due to his irresponsible lending decisions. Maybe he should have valued the collateral properly, huh? He’s the finance wiz. We’re just the dummies he fleeces.
He should be begging the underwater mortgage borrowers to keep making payments, or they walk away, and all of his property is going to tank, and then he’s just digging a bigger hole.
How do all the other unsecured lenders behind him feel about him demanding homeowners choose between bankruptcy and making his bonus payments?
He’s basically daring them to file bankruptcy.
EvolutionaryDesign
@Linda Featheringill: Thanks! I think this is a good start. I think if we can start being vocal now, we will have a better bill in the end.
The Moar You Know
@kay: All of this only makes sense if you think of life in segments of a financial quarter at a time. It doesn’t matter to the CEO if the whole thing collapses and the value of all the assets falls to zero so long as up until then he’s gotten his full bonus and shareholder value has been “preserved”.
There are some other issues. One biggie is what MattR says above. Another is that shareholders have already filed lawsuits against banks who have decided to do principal modification for breach of contract. Remember, the law states that the first duty of a publicly held corporation is to its shareholders – in fact, the law pretty much doesn’t give a shit about anything else but that.
Jennifer
I dunno.
Sounds like to me these guys are doing a really good job of laying the groundwork on an argument for raising their taxes a good bit. Said argument being that it was primarily those in upper-income circles who were invested in and profited (greatly) from the bubble; though there are perhaps as many or more individual investors with some holdings in the market with more middle-class incomes, their stake both individually and collectively was miniscule compared to that of the uber-wealthy. When the bottom fell out, the government stepped in and helped the people (banks) who caused the crash, because to do otherwise would have been catastrophic for the economy as a whole. But it still fucked up the economy but good, leading the government to have to spend hundreds of billions to stop the meltdown and leading to a lot of pain and suffering on the part of people who weren’t involved in any way, shape, or form, profitably or otherwise, with investing in the housing market or even in a home of their own. Those people got hurt by stuff other people did – not just the banks but the investors who fueled the boom; now the government is having to help those innocent bystanders out. And you, rich guys, made money off causing the problem that now is forcing the government to help them out and run up these deficits that have all these Teabaggers foaming at the mouth. You guys – banks, investors – were irresponsible, and we pulled your tails out of the fire. But there’s no such thing as a free lunch, and now that bill has come due.
Instead of complaining about how you’re going to have to pay back some of what you made off of widespread fraud in the markets that we’re having to pay to clean up, you should be thankful that we haven’t decided to comb through the mess and figure out exactly how much of what you have resulted from fraudelent activity in the markets, either on your part or anyone else’s, and take all of it. You wouldn’t have any of it anyway if we hadn’t stepped in to bail you out and clean up the mess. We’re doing you a huge favor by ONLY raising the top marginal rate to 45%.
See, a political party that cared about winning the messaging would be saying something like this. Which is why we won’t hear the Democrats saying it.
burnspbesq
@MattF:
Interesting choice of quotes. Thanks to the sanctity of contracts, not only did Danny not get fucked, he and his partners became unimaginably rich when their bet against the subprime mortgage market paid off.
brendancalling
don’t look at me. i’ve been saying we need a repeat of 9/16/1920 ever since this outrage began. the Greeks get it; for whatever reason, we don’t.
FlipYrWhig
Everyone hates these fuckers. The question is, what can be done about it _without making things worse_? And it seems like that’s extremely tricky to figure out, because way too much of Teh Ekonamy is based on this nebulous incomprehensible banker bullshit, and if we pull it down–even righteously!–maybe we’d just be pulling a Samson and crushing ourselves in the process. That’s the fear, anyway. It’s above my pay grade to know if it’s valid.
J. Michael Neal
@The Moar You Know: There’s a serious problem with your analysis. Obama didn’t have the legal authority to do much to the banksters. The FDIC process of taking a bank into receivership only applies to commercial banks. All of the big corporations have a lot of other things.
The commercial bank parts of them weren’t the ones with the serious problems. Those parts were solvent. It was the investment bank, or insurance, or hedge fund parts that were bankrupt. The government does not have the power to take them over.
The only options were to let them go into bankruptcy or to bail them out. Bankruptcy might have been morally satisfying, but it also would have been an economic disaster beyond anything we’ve seen. If you’re worried that the state of the economy will drag Obama down, then you sure as hell wanted him to bail out the banks.
I would love to have seen the government nationalize all of them and tell those in charge to get lost, but Congress would have had to pass a law that let him do so. They never did.
J. Michael Neal
@Zifnab:
This wouldn’t have done anything to keep the financial system from collapsing. People would have cheap homes, but unemployment would be double what it is now. Throw in the fact that it would have also been a foreign policy crisis, given the way the Europeans were leaning on the State Department, and you have a recipe for disaster.
Maude
Hang ’em high.
Some of the mortages are broken up and securitized. It’s hard to find the investors that own the house. Isn’t that nice?
Thank you Bill Clinton for repealing Glass/Steagal and for signing into law the Commodities Moderization Act of 2000.
PGE
I’ve always thought Shakespear had it wrong… first we kill all the bankers. The lawyers can wait.
Cap'n Phealy
” Deserve’s got nothin’ to do with it.”
Clint EastwoodWilliam Munny for Treasury Secretary!Fergus Wooster
@John Cole:
No defense here, and I’m a banker by trade. The big boys have the best scam in the world – borrow at zero, and either lend at exhorbitant rates or invest in treasuries at 2%. Then brag about how savvy you are and threaten to go Galt if we don’t let you extract your bonuses.
I’m pretty sure anyone on this thread to could turn a profit with 0% financing.
Fuck ’em. Obama needs to remind them of the pitchforks again, maybe letting a few pokes get through to drive the point home.
kay
@The Moar You Know:
I’ve changed my approach to lenders. It’s Lender v Consumer. It’s adversarial. I’m not interested in the myriad problems of lenders. I just don’t care!
Consumers have a powerful tool, and this charming banker has chosen not to recognize that.
So, I’ll ask him.
Does he want the consumer to remain in the home and continue making payments, or should the consumer use the tool they have at their disposal, walk away from the property, let the bank sell the collateral, and then discharge all of his unsecured debt in bankruptcy?
Because the individual consumer doesn’t give a rat’s ass about the larger housing market, or the value of real estate. He’s walking away. He’s hurt, but his losses are limited.
Mr. Bad-Ass Banker here has lots and lots of bad debt out there that’s tied to the housing market. He’s pretending he’s in control, but, really, he’s very exposed.
I’m open to suggestions! I’m reasonable! Maybe he has a idea on how we resolve this? One? He’s the finance wiz! My guy is walking away.
cyntax
Well, if we give the principal a haircut (and that should be for every home that’s lost some standard % of value), then we may actually be able to get the economy going again. This would be possible because Residential Investment usually leads us out of a recession, but due to the overhang of housing inventory, RI isn’t able to do that right now. Trimming the principal and getting to price disclosure in the housing market could be a really good thing.
That is for everyone but the banks who created and profited from this asset bubble.
Egilsson
Corporations always weigh the benefits of a contracts against the cost of the contract – and that includes the cost of breaking the contract. If the costs exceed the benefits, they break it, without breaking a sweat. That’s how it works, and the people who do the best job of figuring out the costs get rewarded.
It’s normal business stuff.
It blows my mind someone from a large bank says what that guy said, but I guess I shouldn’t be surprised. If he can convince people to be suckers and behave differently from his own bank, so much the better for him.
daverave
I’ve finally gotten around to reading Howard Zinn’s masterwork and it really is mind-blowing how this has been the case since the earliest days of this country. The story just never changes, although there certainly were a lot more fruitless, class driven, workers-against-capital riots back in the good ole days. But like Rush preaches, we just cannot go there. The populace has been voluntarily and psychologically de-fanged.
WereBear
The financial elite are more than capable of melting down the whole of North America and fleeing to Dubai.
What would they lose? We don’t make anything anymore. They can buy the maid uniforms in Viet Nam and potato peelers in China.
Mnemosyne
Sad as it is to say, I think people are vastly overestimating the financial knowledge of the American people if they think that taking over the banks would have made people happy. I’ve seen way too many comments about how any regulation at all by the government is horrible and socialistic to think that the average person would have seen a government takeover of the banks as anything but another step towards One World Government. I don’t understand why ordinary people will defend to the death the right of corporations to rip them off, but they will.
Mnemosyne
D’oh! The S word has me trapped in moderation.
Gatsby
Contracts of all kinds are being reviewed and amended every day. So, the JP Morgan’s argument does not hold water. For instance, pre-nups are only good until divorce looms on the horizon. Then, lawyers figure out all sorts of ways to go around those. Allowing personal bankruptcy is the perfect example of a broken contract… Etc… Etc…
Gatsby
John,
Can you post a pic of Tunch and Lily? Today’s a particular bad day for me, and seeing those two cuties would lighten up my mood! Nothing like cat & dog therapy!
Thanks!
ericblair
@Egilsson:
Happens everywhere. I’ve been in meetings where this has been discussed, and the only issues that come up are how much we’ll piss off the other company and whether we care. Nobody starts wringing their hands about the “sanctity of contracts” or other crap: we’ll pay the penalties if there are any, and if the other party wants to sue they know where to send the papers.
This is just more sanctimonious crap to guilt the rubes. You never sit in business meetings and talk this way.
Max Peck
Honor a contract that is nothing more than a fraud perpetrated against me? I don’t think so. If there is a single piece of data on that contract that is untrue and was put there by the banker so that my app passed the risk model then I will break that contract and dare them to take me to court. I’d love to hear them defend what they did.
mai naem
You gotta hit these people where it hurts them which is targeted taxes/fees but I don’t think Obama and the Dems have the balls to do it and/or have been bought by the bankstas. I also think a few of them going to a a not such a nice prison for a long long time would help. A maximum security prison which is far from their homes so it makes it inconvenient for their families to visit them. Their actions have indirectly have led to people committing suicide/deaths to loss of healthcare etc. so the results of their actions are similar to a serial killer.
Gus
@The Moar You Know: Class warfare!
Mr Furious
Isn’t it convenient that Congress (with the help of plenty of Dems, btw) passed the execrable Bankruptcy Bill in 2005, setting the stage for this horseshit argument.
Had normal people been able to declare bankruptcy like businesses still can, these fucks would have been left holding the bag on the whole thing instead of settling for a reduced rate or principal.
ally
Chase is one of the Worst. They fraudulently approved mortgages – even directed their employees to “simply inflate the income” – and not one of their CEOs or employees is in Jail????
JPMorgan Chase memo titled “Zippy Cheats & Tricks”
The document recommends three “handy steps” to loan approval:
– Do not break out a borrower’s compensation by income, commissions, bonus and tips, as is typically done in a loan application. Instead, lump all compensation as the applicant’s base income.
– If your borrower is getting some or all of a down payment from someone else, don’t disclose anything about it. “Remove any mention of gift funds,” the document states, even though most mortgage applications specifically require borrowers to disclose such gifts.
– If all else fails, the document states, simply inflate the applicant’s income. “Inch it up $500 to see if you can get the findings you want,” the document says. “Do the same for assets.”
http://www.calculatedriskblog.com/2008/03/zippy-cheats-tricks.html
When will we see these Fraudsters in Jail???
J. Michael Neal
@Maude:
Neither of which played much of a role in this instance. Securitizations were perfectly legal before either of those things; John Meriwether created them for mortgages back in the 1970s. What happened is that an enormous new pile of money, namely the current account surplus the Chinese (as well as, to a lesser extent, Korea and Japan) started building up in the wake of the 1997 Asian financial crisis, at around the same time that the stock market collapsed. For a variety of reasons, housing was the obvious place to take it. The leverage used to build up the banks’ balance sheets wasn’t regulated prior to the reforms, either.
Glass-Steagal prevented commercial banks from merging with investment banks. So, in a sense, it is true that the commercial banks wouldn’t have ended up in as much trouble, but the overall financial system would have. All of that money was still there. It still had to go somewhere. Worst, even if the commercial banks are fine, the collapse of the rest of the industry would still have been catastrophic. Remember, the three key moments of the ignition of the crisis all involved companies that had no commercial bank arm. Bear Stearns and Lehman Brothers were pure investment banks with no commercial arm. AIG was an insurance company, not a bank at all.
I still think that repeal of Glass-Steagal was a good idea. I’m with Kevin Drum. The key is to regulate the amount of leverage people can have *anywhere* in the financial system. Breaking commercial banks away from investment banks won’t do a damned thing to solve this.
In a lot of ways, I do agree with you about the Commodities Act. There was a lot of stuff I don’t like in there. Some of them, notably how credit default swaps are (or aren’t) regulated probably triggered the crisis. However, they were not the cause of the underlying problems, which would have had to be dealt with at some point regardless.
There are a lot of things we could do to regulate derivatives trading that are really good ideas. Most of them have never been regulations at all, rather than something that was eliminated in the late 1990s.
J. Michael Neal
@cyntax:
Wrong. This would do absolutely nothing to reduce the overhang. You have cause and effect backwards. The overhang doesn’t exist because prices are low; prices are low because there’s a huge overhang. The only way we can have investment in residential housing lead anything is if we somehow need more houses. The only way to do that is to either increase the population or bulldoze a bunch of existing houses.
brendancalling
@ally:
never. is that soon enough for you?
I hope so, because that’s when it will happen. NEVER.
Egilsson
@ #73
Well, that’s overstating things. I don’t think you understood what he said. Banks are still sitting on bad loans and don’t feel enough pressure to move to more workable loan scenarios.
Cyntax’s point seems valid if simplistic.
NevDem
Nationalize the Bastards. Let them earn government salary or starve like the rest of us.
Jim Earp
Time for a Million (or Two) Victim March on Wall Street. Shut the damn thing down for a few days, say, the week after next Labor Day?
Only way to get their attention.
I’d take a rubber bullet for a march like that.
MSB
I think the best one could do to defend their efforts to fuse their mouths with Satan’s crank would be to argue that fiduciary duties to shareholders require them to be giant assholes.
That said, it’s well past time to smack the shit out of these guys. I think the Fin. Reg. bill is the proper avenue, but it would also be helpful to dual track some pitch-fork-wielding, angry mobs marching up and down Wall Street for the next few months. If a couple bankers happen to get strung up on some lightposts, well, the tree of free market liberty has to be watered with the blood of some lying, cheating assholes every now and then.
Gunga Dean
These assholes recently laid me off while offshoring mine and thousands of other jobs. My new dream job is at the FDIC breaking these bastards up. And they are bastards, Illegtimate and immoral to the core.
J. Michael Neal
@Egilsson: Please explain to me how getting residential investment going has to do with the prices rather than the quantity. We will only start building more houses when we need more houses.
Unless cyntax meant something other than what he wrote, it’s just wrong. There are a lot of reasons to want prices to clear in the housing market, but restarting residential investment isn’t one of them. It might restart buying and selling of existing houses, but that doesn’t add anything to residential investment.
Connecticut Man1
Lazy, good for nothing Dirty Fuckin’ Bankers. Sitting around on government welfare trying to tell everybody what is wrong with this country when they are the biggest problem.
Tell the DFBs to get off their butts and get real jobs.
zoe kentucky
We have a home loan with JPMorganChase and they drive us absolutely nuts. They regularly “lose” our mortgage check (paid directly through our bank), one month we even put a stop-payment on a check that they claim they didn’t have, reissued a 2nd check via our bank, and then the Chase tried to cash BOTH checks in the same day. Then when the funds for the 1st check were rescinded they sent us a flurry of ugly bills saying we were 1 and 2 months behind in our payment– meanwhile they were sitting on 2 checks that both came in before the late payment deadline. It was a MESS that took days to unravel, lots of wasted hours and frustration. They were awful about it, not the least bit apologetic, acted like we did something wrong. UGH.
We’d change companies and refinance except that we don’t have the money to do so. So we’re stuck with them for the time being, dammit.
Nancy Irving
You wonder what the banks are thinking of, as an alternative? Debtors’ prisons?
Oh, and I notice that Donald Trump’s company has just filed for its third bankruptcy reorganization. And the banks are still lending HIM money. Sanctity of contracts my #$%!