Friday, September 2, 2011
Round and Round We Go
Today's post by Richard Eskow makes a great point about how to deal with the current foreclosure crisis but I want to look at another aspect of the problem which is preventing the same kind of thing from happening again. Efforts to re-regulate the banking industry have had limited success in the face of congressional gridlock and Obama's seemingly tepid backing for major reform. Now comes word that the Federal Housing Finance Agency is planning to sue many of the big banks for basically putting crappy mortgages into big, bright, shiny AAA packages and selling them as if they were not crap.
So is this good news? I'm not so sure. Let's say the suit is successful. The banks pay out a bunch of money which would probably bring down the share price but won't really hurt the people who did all the bad stuff and have already become rich as a result of selling the aforementioned crap. Worst case the banks are hurt badly enough that they might fail and then we will doubtless bail them out again. Round and round we go in an endless cycle of money for the rich and doom for everyone else.
One hope for getting off this nightmare ride is that this new lawsuit will be settled in a way that would put limits on the banks, but given the Obama administration efforts to pressure New York Attorney General Eric Schneiderman to go easy on the banks that does not seem all that likely.
So what is the solution to keeping this from happening in the future? I'm still where I was back in March--The only way the bankers are going to stop this kind of thing is if a bunch of them go to jail. Its seems unlikely that Obama is going to do it but maybe someone like Schneiderman will. These civil cases just don't act to deter people who are clearly more than happy to destroy the companies they work for and the U.S. economy as long as they get rich in the process.