More Fun With Fraud

As Badtux points out, the real impact for normal people is going to be in the validity of land titles. If you want to buy a house, how do you know for certain there isn’t an existing mortgage on the property?

It isn’t just homeowners who are being screwed over in this mess, bond holders are filing law suits over the mortgage-backed securities that weren’t exactly as advertised by those issuing them.

And Banks are suing over double- and triple-pledging mortgages, i.e. the same mortgage was sold to more than one bank by mortgage companies.

Now, we have been told that we can’t be too hard on the financial sector, because they have been expanding the US economy with “innovative products”. That is pure, unadulterated bovine excrement. Charles Ponzi was operating the scheme named for him in the early 20^th century. Charles Dickens wrote about a similar scheme in Little Dorrit which was serialized beginning in 1855. All of these schemes are “innovations” that magically produce huge profits until the bubble bursts.

As noted in the Wikipedia entry on Ponzi schemes: “Knowingly entering a Ponzi scheme, even at the last round of the scheme, can be rational economically if there is a reasonable expectation that government or other deep pockets will bail out those participating in the Ponzi scheme.” Can you say “TARP”? How about “Too big to fail”?

CNN had a Spitzer Q&A: ‘Too big to fail’ survives on Wall Street

CNN: As more books and films are released about the financial crisis, what are we learning about what really happened?

Eliot Spitzer: We are realizing that there was a massive failure on the part of our business leaders, our regulatory leadership, and the academics who were supposed to provide an intellectual framework for economic thinking. All fell into the thrall of a self-justifying ideology that put faith in the myth of “self-regulation” and permitted a libertarian approach that led to skyrocketing pay on Wall Street with limited real growth. The scheme collapsed when the leverage that led to sky-high bonuses simply couldn’t be supported any more.
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CNN: How do you think the Obama administration has handled the financial crisis and its aftermath?

Spitzer: The Obama administration and Treasury Secretary Tim Geithner in particular have failed to stand up to Wall Street. Wall Street got bailed out and yet has been asked to give virtually nothing back. The opportunity to negotiate passed with hardly a meaningful murmur from Geithner and [National Economic Council director Lawrence] Summers.

As Attorney General of New York Eliot Spitzer made his reputation going after the Wall Street criminal class because the Federal government refused to do anything about it under the Hedgemony. I don’t think it would be a stretch to believe that the Federal investigation that caused him to resign as Governor of New York was a reaction to that.