The How & Why of America Now Being a Banana Republic

People used to joke about how the US might become a banana republic. But the joke is over. It is reality. The rule of law has completely broken down in the US.

Here is a post by Barry Ritholtz in his The Big Picture blog:

Fraudclosure Errors Destroying Americans’ Property Rights

by Barry Ritholtz

Over the past 2 years, I have warned repeatedly about the dangers to American property rights caused by massive bank fraud, A deadly combination of MERS, robo-signing, and illegal shortcuts have created a horrific situation. A bedrock of our society — the ability for the owner of a piece of real estate to confidently convey that property, along with all associated property rights — is now in danger.

It was the inevitable result of the frauds that too many state Attorneys General seem unwilling to prosecute.

The end results of that massive fraud, and the State’s refusal to hold the wrongdoers accountable, are simply this:

“The highest court in Massachusetts ruled that a homeowner who bought a foreclosure that hadn’t been properly conducted by the foreclosing bank in 2006 didn’t have legal ownership of the property.

The decision by the Supreme Judicial Court casts a cloud over the legal ownership of any properties in Massachusetts where banks didn’t properly convey title when foreclosing. The problem has gained attention nationwide because of banks’ use of “robo-signing” and other dubious practices that may have broken chains of title on foreclosures.

The case follows a previous state court decision that voided a foreclosure when banks couldn’t prove that they owned mortgages when they initiated foreclosure proceedings.”

(WSJ, State Rules on Foreclosure)

The Rule of Law is yet another bedrock foundation of this nation. It seems to get ignored when the criminals involved received billions in bipartisan bailout monies.

The line of bullshit being used on State AGs is that we risk an economic crisis if we prosecute these folks.

The people who claim that fail to realize that the opposite is true — the protest at Occupy Wall Street, the negative sentiment, the general economic angst — traces itself to the belief that there is no justice, that senior bankers have gotten away with economic murder, and that we have a two-tiered criminal system, one for the rich and one for the poor.

Today’s NYT notes the gloom that has descended over consumers, and they suggest it may be home prices. I think they are wrong — in my experience, the sort of generalized rage and frustration comes about when people realize the institutions they have trusted have betrayed them. Humans deal with financial losses in a very specific way — and its not fury. This is about a fundamental breakdown of the role of government, courts, and leadership in the nation. And it all traces back to the bailouts of reckless bankers, and the refusal to hold then in any way accountable.

There will not be a fundamental economic recovery until that is recognized.

Obama is part of the problem and not part of the solution. I could go along when he claimed he didn't want to press charges against Bush administration officials for war crimes. I could understand that was disruptive and would bring out the worst of partisan politics. But when Obama refused to prosecute the fraud and crime among the financial industry, he lost my respect. He is part of the problem. As Ritholtz points out: the economy will not revive until the rule of law is restored in the US. Sadly, there is not one presidential candidate in either party who has indicated a willingness to restore the rule of law.