Monday, March 14, 2011

Krugman on Big Bank Greed

Here is a bit from a stunning op-ed by Paul Krugman in the NY Times:
Count me among those who were glad to see the documentary “Inside Job” win an Oscar. The film reminded us that the financial crisis of 2008, whose aftereffects are still blighting the lives of millions of Americans, didn’t just happen — it was made possible by bad behavior on the part of bankers, regulators and, yes, economists.

What the film didn’t point out, however, is that the crisis has spawned a whole new set of abuses, many of them illegal as well as immoral. And leading political figures are, at long last, showing some outrage. Unfortunately, this outrage is directed, not at banking abuses, but at those trying to hold banks accountable for these abuses.

The immediate flashpoint is a proposed settlement between state attorneys general and the mortgage servicing industry. That settlement is a “shakedown,” says Senator Richard Shelby of Alabama. The money banks would be required to allot to mortgage modification would be “extorted,” declares The Wall Street Journal. And the bankers themselves warn that any action against them would place economic recovery at risk.

All of which goes to confirm that the rich are different from you and me: when they break the law, it’s the prosecutors who find themselves on trial.

To get an idea of what we’re talking about here, look at the complaint filed by Nevada’s attorney general against Bank of America. The complaint charges the bank with luring families into its loan-modification program — supposedly to help them keep their homes — under false pretenses; with giving false information about the program’s requirements (for example, telling them that they had to default on their mortgages before receiving a modification); with stringing families along with promises of action, then “sending foreclosure notices, scheduling auction dates, and even selling consumers’ homes while they waited for decisions”; and, in general, with exploiting the program to enrich itself at those families’ expense.


In the days and weeks ahead, we’ll see pro-banker politicians denounce the proposed settlement, asserting that it’s all about defending the rule of law. But what they’re actually defending is the exact opposite — a system in which only the little people have to obey the law, while the rich, and bankers especially, can cheat and defraud without consequences.
Go read the whole article. It will stun you to see how the banks are refusing to collaborate in cleaning up the mess. Why? They are happier extorting payments from families with mortgage problems than in trying to resolve things to everybody's benefit. It is greed pure and simple.

What outrages me is that the Obama administration has "been on the beat" for well over two years and they let this kind of crime go on. I understood why the Bush administration let big corporations rape and pillage the little people. But Obama was supposed to bring "change we can believe in". But instead, he has been bought & sold by the big Wall Street banks and is happy to let these banks continue to pillage the economy and rob ordinary people of their money and their homes. Shame!


Lichanos said...

Obama is very much tied to the financial elite of Wall Street. Look at his cabinet and advisors. The psychological/intellectual reasons for this elude me, but the facts are clear.

Lichanos said...

P.S. A bichon, no? We have one too.

RYviewpoint said...


Yep, a bichon frise. I don't have one, but my brother does. Sweet tempered dog but not very bright.

Obama not only kept all the Clinton-era captive Wall Street crowd (think Larry Summers, Timothy Geithner), he even kept some Bush Wall Street types (Ben Bernanke). The only appointment that was a break with complete subservience to Wall Street was Paul Volcker. But Volcker has now quit in disgust because he was ignored by Obama.

This co-opting of politics by Wall Street means that the financialization of the US economy is growing. But history shows that is a short term "gain" at the cost of a long term decline. It is tragic that the US has chosen this path.

When I think of how Spain threw away its advantages in the 16th century, I am reminded that great counties can wither and die. The US is on a path of long term decline.

Lichanos said...

Sweet tempered dog but not very bright.

Tsk, tsk: I notice that the one on your blog has learned to read!

...financialization of the US economy...

This is true, but I think it's more accurate to say that a small part of the US population -very small!!- has chosen this path.

RYviewpoint said...


You caught me out. Yes, I like dogs but not enough to take on the responsibility. The bichon frise in the masthead has an uncanny resemblance to myself: a very handsome profile, a sweet air, but an aggressively intellectual view of things. The only problem is that my nose isn't as cold, as wet, nor as black.

As for financialization, you are right. This has become the passion of a tiny minority. But like the admirers of Gaddafi in Libya, this tiny number has power well beyond their numbers. But instead of carrying big guns, they use their great wealth to buy and sell politicians and dictate much of the policy in the US.

Just as Gaddafi and his minions are winning their war but taking their country over a cliff, I fear the Wall Street types in the US have created a very lucrative environment for themselves in the US but are running their country fast toward a Wiley E. Coyote moment.