Pilant's Business Ethics

Business Ethics Blog

Tag: banks

A Victory for Home Owners in Massachusetts!

The New Bottom Line reports that –
Members of SEIU and No One Leaves packed the Springfield City Hall to support the passage of a foreclosure ordinance that will raise the fee on banks from $100 to $10,000 for every foreclosure in the city and require banks to negotiate with owners through city-led mediation.
This could raise a million dollars for the city and prevent future foreclosures. The ordinances need a final enactment vote (expected in August), but got unanimous support last night — nothing like a packed gallery and the sweet taste of victory!
This is important. The banks are creatures of the law. They are only private business in a sense. Their accounts are protected by law and they have been given fast and favorable legal methods for foreclosure because in previous decades they had acted the role of responsible capitalism. Now that the banks have demonstrated they are unworthy of foreclosure favoritism, it is time to tighten the legal procedures and make them earn their money by legitimate means.
You may be tempted to argue that they have every right to foreclose on someone who has stopped payments on a home. That would be true if that is the only way they have been working it. But all over this nation, they have been using a somewhat different procedure. A home-buyer calls up and says he has trouble with paying this month’s mortgage. The bank kindly says, “Don’t pay it. Don’t make any payments for three months. That will qualify you for the HAMP program, and we can renegotiate the loan.”
The trusting home owner doesn’t pay for three months then resumes payments. He is stacked with penalty fees for late payments. Concerned, the home owner calls the bank. But the bank never seems to find the time to call him back. Eventually a letter is received saying that he has been denied admission to the government program and all payments including penalties are due now to avoid foreclosure. Then when the unfortunate client is unable to come up with the thousands of dollars in fees, they foreclose. I suspect the bank hands out a bonus and maybe a bottle of champagne per kill.
When the banks act in this manner, the legal procedures designed to protect their profits no longer make sense in a civilized society.
James Pilant

How the Bubble Destroyed the Middle Class (via Yahoo! Finance)

How the Bubble Destroyed the Middle Class (via Yahoo! Finance)

There is a new article on Yahoo. It’s written by  Rex Nutting.

These are key paragraphs –

There are a hundred different ways of looking at the economy, and a million different statistics. But if you wanted to focus on just one number that explains why the economy can’t really recover, this is the one: $7.38 trillion.

That’s the amount of wealth that’s been lost from the bursting of housing bubble, according to the Federal Reserve’s comprehensive Flow of Funds report. It’s how much homeowners lost when housing prices plunged 30% nationwide. The loss for these homeowners was much greater than 30%, however, because they were heavily leveraged.

In brief, the economy can’t turn around. There isn’t any money. The American Middle Class has been flattened. With stagnant wages for more than two generations, the great American Middle Class no longer has enough money to recover.

It was inevitable. From the time of the Reagan Administration when the financial industry supplanted manufacturing as the key economic engine of growth, the great majority of Americans have been losing their standard of living. Why? Because manufacturing is the actual making of value. It requires cooperation among many. It requires time, skill and large bodies of organized workers. This kind of process spread value around. Workers profit. Companies profit. The nation profits.

The Financial Industry, when it loans money for production goods, like housing, automobiles, business startups and business improvements is a powerful engine for growth, a great asset for any society. Many banks serve the interest of their community in this way.

But finance for the sake of finance is a different animal. Money made in community investment is low-interest, long-term money. That is small potatoes. So, they speculate. They take the money entrusted to them for investment and invest in foreign nations, risky new industries and most strange (and horrifying) they create never before seen instruments of finance that they themselves do always understand. These kinds of investments divert money from creative and useful endeavors and siphon that cash into more and more speculation creating enormous financial profits that give the illusion on paper of a prosperous society.

What happened during the 1980’s? The financial industry became predators, buying up companies and disassembling them like toys. It’s been like that ever since. Every few years the great masters of finance develop a new method of making huge profits. One these phases which continues today is out sourcing. Outsourcing is where you take stable, profitable, American companies and move them overseas to corrupt or totalitarian or, just plain, unstable nations to maximize profit. World communism has been one of the greatest benefactors of out sourcing as the Chinese regime (and now the Vietnamese) had previously lurched from one financial disaster to another. American “entrepreneurship” helped them become a stable nation whose industrial and military power will increasingly challenge our own.

It is obvious that an intelligent person acting morally, patriotically and with an eye toward the long-term would find the United States with its well-educated population, immensely dedicated, highly productive workforce, a fully developed infrastructure, and a stable, well-organized system of business law, an ideal place for manufacturing. In fact, large companies like Toyota have located here on that basis.

But the financial industry acting to maximize profit on the short-term, turns all these facts upside down. An uneducated population is easily manipulated, cheap workforces while less productive and efficient over the long-term are effective in the short-term, nations with educational systems and fully developed roads and highways are to be avoided because of higher taxes, and a legal system where a company can be held accountable for its crimes is to be avoided at all costs.

Patriotism, morality, even religion are intellectual burdens the financial industry shed a long time ago.

The process of looting the American people continues.

Globalization is considered by many to be an inevitable process. This is nonsense. There have been previous periods notably in the 1920’s when free trade was in vogue. But that ended with the financial crisis of 1929. These historical movements are not mindless changes like continental drift, they are the result of decisions made by governments, opinion leaders, philosophers, industrialists, financiers and speculators. People can make choices. People can do things differently.

That Fascism would triumph in all Europe was considered a straightforward inevitability by many in the 1930’s. Yet even today the war criminals of that defunct idea are still being chased down like the pitiful rats they are.

What will history think of the American financiers who bankrolled the Communist resurgence? In 1989, it seemed that all the remaining Communist dominoes would fall. That will not happen as long as the cash flows, American cash.

What will future generations think when they look over these days and see a nation looted by speculators with scarcely a complaint from a compliant judiciary, legislature and presidency?

I believe that people should make money and a good amount of it from making and doing useful things. I don’t think that’s radical. But in many circles it is.

James Pilant

Please read the attached article from Yahoo Finance.

Welcome To Pottersville, USA (via Crowhavenscriptsfarm’s Blog)

A few stories of the banking industry and how it plays the public for every last extractable fraction of a cent!

I’ll let the stories speak for themselves of the constant danger of being a consumer in America.

James Pilant

Welcome To Pottersville, USA Yes, that is a reference to that classic film, “It’s A Wonderful Life”. Oh where, oh where is George Bailey when you need him?! Because most banks, MOST not all, are run by Mr. Potter type thinkers. Get ’em while they ain’t lookin’. And get ’em good! We have debt, who doesn’t these days? I own up to it, or “own it” as the financial gurus tell you you must. I do, we have debt. And with two teens, more is coming. My hours at work have been cut in h … Read More

via Crowhavenscriptsfarm’s Blog

BOA: BAD BANK, BAD BANK, WORSE BANK (via Livinglies’s Weblog) Part of The Foreclosure Crisis

Right!

This is how I feel as well. It’s a good read. Be warned, he’s really upset. But so am I when I’m dealing with this issue.

Here is my writing on the same subject. You can see that I get passionate about foreclosures too.

Robo-Signing Foreclosure Freeze Update (via Foreclosureblues)

Lots of Links on the Foreclosure Fraud Crisis (via Rortybomb)

“We Can Either Have a Rational Resolution to the Foreclosure Crisis or We Can Preserve the Capital Structure of the Banks. We Can’t Do Both” (via Foreclosureblues)

Sheldon Whitehouse Weighs In On The Foreclosure Crisis

Third Way Comments on Foreclosure Fraud Policy in the Post-Ibanez Landscape (via Rortybomb)

Foreclosure Speed Made Loan Modifications Impossible

The Vast Majority Of Foreclosures Were Done Correctly?

In total, I have 46 posts about the mortgage crisis.

James Pilant

BOA: BAD BANK, BAD BANK, WORSE BANK COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary Bank of America to Create Troubled Loans Unit BANK STILL ATTEMPTING TO KEEP FORECLOSURES A POLITICAL ISSUE AS LEGAL OPTIONS RUN OUT EDITOR’S NOTE: As for what this means for homeowners, it is obvious that BOA is trying to come up with some formula that will be politically acceptable the final result of which will still be that they will get hundreds of thousands o … Read More

via Livinglies’s Weblog

Enhanced by Zemanta

BOA: BAD BANK, BAD BANK, WORSE BANK (via Livinglies’s Weblog)

Right!

This is how I feel as well. It’s a good read. Be warned, he’s really upset. But so am I when I’m dealing with this issue.

Here is my writing on the same subject. You can see that I get passionate about foreclosures too.

Robo-Signing Foreclosure Freeze Update (via Foreclosureblues)

Lots of Links on the Foreclosure Fraud Crisis (via Rortybomb)

“We Can Either Have a Rational Resolution to the Foreclosure Crisis or We Can Preserve the Capital Structure of the Banks. We Can’t Do Both” (via Foreclosureblues)

Sheldon Whitehouse Weighs In On The Foreclosure Crisis

Third Way Comments on Foreclosure Fraud Policy in the Post-Ibanez Landscape (via Rortybomb)

Foreclosure Speed Made Loan Modifications Impossible

The Vast Majority Of Foreclosures Were Done Correctly?

In total, I have 46 posts about the mortgage crisis.

James Pilant

BOA: BAD BANK, BAD BANK, WORSE BANK COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary Bank of America to Create Troubled Loans Unit BANK STILL ATTEMPTING TO KEEP FORECLOSURES A POLITICAL ISSUE AS LEGAL OPTIONS RUN OUT EDITOR’S NOTE: As for what this means for homeowners, it is obvious that BOA is trying to come up with some formula that will be politically acceptable the final result of which will still be that they will get hundreds of thousands o … Read More

via Livinglies’s Weblog

Bailed Out Banks In Trouble Again?

From the Huffington Post

Nearly 100 banks previously rescued by the federal government are again poised to fail, despite billions of dollars of support from the American Treasury.

The number of banks on the brink of collapse rose from 86 to 98 during the summer months, according to analysis of federal data from the Wall Street Journal. The banks in question have received $4.2 billion dollars in aid through the Troubled Asset Relief Program (TARP). Most of the troubled institutions are relatively small.

The latest sign of distress in the financial system suggests the bailout may have simply been a stopgap solution for a sector still contending with the aftershocks of the greatest banking crisis in 80 years.

If you own a business in the United States and you lose money instead of making it you go out of business. If you are a bank, the government runs to you with large bags of money and gets you back on your feet.

But twice? It’s only been two years. Is the government going to save these banks and, if so, do it again in two years.

What’s the ethics here?

Those who have committed crimes should be punished? Okay, have the banks been investigated for fraud?

The incompetent should not be rewarded for botched work or destroying their business. Has the government in the previous bailout or in the one likely to happen now, asking about competence and cleaning house in these institutions? Shouldn’t those who have ruined the banks by poor management find jobs elsewhere?

Ethically, is it wise to encourage the kind of behavior you get when you bail out failing institutions? Doesn’t that encourage immoral activity like risk taking? Doesn’t that give bank officials the impression that risky behavior is to be encouraged? If you win, you win big. If you lose, your dear Uncle Sam will find money for you?

What do you as a citizen want to happen? Maybe the government should’ve asked that question, “What results are we looking for in this bailout?” two years ago?

James Pilant

The Human Touch

The word, home, has powerful meanings for Americans. Who can forget, Dorothy in the Wizard of Oz, saying over and over, “There’s no place like home.” How many of us “want to go home?” How many of us when overseas, look back at the U.S. and think about going “home.”

Home is a human concept life love, caring, kindness,.. those kinds of things.

It’s hard to quantify.

For most of American history, homes were very simple, often one room, generally little more than shacks. But as time went by and with urbanization, homes became larger and more complex … and more expensive.

For most Americans, purchasing a home all at once became impossible. A market for mortgages developed and people bought their homes over time.

Banks were small and deeply embedded into the fabric of the community. Social fabric is a fancy word for multiple relationships. A local bank with small resources depended heavily on the success of its loans, even the smallest, for its continued success. So, the bank exploited its connections, it knew a great deal about a creditor, may have known him personally, probably his family as well. They knew what he did for a living, not in the sense of the job title on the application, they knew what he did.

The bank was also well known. It’s officials were church goers, customers, friends, etc. The locals knew the bank by its continuously developing reputation.

Thus, there was social pressure both ways. For the homeowner, it was a disgrace to fall behind on payments. For the bank, it was dangerous to its moral authority to foreclose without consideration of many factors. Generally, speaking there was a great deal of pressure, rightfully so, to work out the problem rather than seize the home.

That’s gone. Beginning roughly in 1999, banks began selling their loans as assignments to investment banks to be bundled into “securities” to be sold to the foolish and the more foolish.

There is no knowledge of the community or the borrower beyond the thinnest veneer of computer data. The bank might as well be orbiting Pluto for all the effect of public opinion.

Human and business are both relegated to key strokes.

This limited knowledge is probably entirely adequate for “World for Warcraft.”

Taking a process developed from a community developed series of relationships has been disastrous. Banks were given the benefit of the doubt because as community citizens they could be trusted. This made the process of mortgage foreclosure easier for the banks, streamlining a difficult problem in the community to be as painless as possible.

Maintaining that level of trust in bank integrity has been disastrous in an age where banking has become more a world of bonus obsessed, financial buccaneers than respectable community bankers.

The human recipients of the mortgages have suffered terribly. They have very often expected that their loans could be modified as since they were making what in the past were reasonable offers only to be tossed from “the gates of the temple.” What was reasonable no longer mattered. What was the best decision no longer mattered.

The only thing that mattered was the process. Humans need not apply.

We can no longer pretend that banks are reasonable, that they will act intelligently, or that they have the interest of the community or their nation in mind, when they make decisions.

James Pilant

Should We Be Sending Bankers To Jail?

Alain Sherter has an article discussing this issue.

There are several comments I’d like to make. First, this is the first use of “big swinging dick” in any financial article I have ever read. Mr. Sherter probably believes this issue deserves the Matt Taibbi treatment. Certainly I do.
My feeling in regard to sending Wall Street bankers to jail runs like this. There is certainly elements of fraud in their behavior and probably conspiracy is a possible charge.
When you consider the damage that a large financial institution can do, it becomes critical to criminalize some behavior. A murderer can kill several people. A bank robber can steal some money. (I believe the average is about $6,000.) But one of America’s large investment companies can destroy billions of dollars in retirement fund, foundation money for colleges and universities, individual investments and destroy much of the value of people’s home.
Society deserves protection from murderers and thieves. Doesn’t it also deserve protection from financial predators who endanger the financial structure of the entire world?

James Pilant

Alain now has a video up on You Tube. Watch it. This guy knows his stuff.

Powered by WordPress & Theme by Anders Norén