Webster G. Tarpley, Ph.D.
October 11, 2010
The fact that so many foreclosures have been illegal as well as immoral and antisocial has now brought the foreclosure reissue to critical mass. The deeply flawed paperwork used by many bankers in their attack on working people’s homes is now a scandal which is bringing out the populist pitchforks everywhere. Even title insurance companies are now declining to be a part of this swindle. This past Friday, Bank of America, the largest US bank, stopped foreclosures in all 50 states because of the threat of counter-suits and public backlash. Previously, JP Morgan Chase & Co., Ally Bank’s GMAC Mortgage unit, and PNC Financial had halted foreclosures in the 23 states where the consent of the judge is required in order to seize a home.
The current chaos in home foreclosures is once again the direct responsibility of the zombie bankers themselves, who have neglected all traditional legal and accounting standards concerning the necessary paper trails in their frenzied desire to securitize mortgage loans and make them into toxic derivatives in the form of asset-backed securities and mortgage backed securities. The zombie bankers, already the recipients of $24 trillion of public largess in the form of the various bailouts, have turned out to be incompetent even in the technical aspects of their own thieving racket.
But the chaos in the bankers’ filing systems is nothing compared to the chaos created by the millions of foreclosures they have engineered, based on adjustable-rate mortgages and similar misleading contracts which never should have been legal in the first place. For some time, it has been evident that the defense of the American middle class requires a blanket, orderly, federal freeze (or moratorium) on all foreclosures on primary residences, similar to the New Deal protections offered to family farms by the landmark Frazier-Lemke Act of 1935-1949 during the previous depression.
Desperate to avoid defeat at the hands of crazed Tea Party fanatics, top Dems are starting to grasp the explosive potential of this issue and calling for stopping foreclosures: “Senate Majority Leader Harry Reid (D-Nev) …. urged five large mortgage lenders to suspend foreclosures in his state until they establish ways to make sure homeowners don’t lose their homes improperly. Attorney General Eric Holder said that the government is looking into the matter, and Democratic lawmakers urged bank regulators and the Justice Department to probe whether mortgage companies violated laws in handling foreclosures,” according to AP.
Speaking on Fox News Sunday earlier today, “Rep. Debbie Wasserman Schultz (D-FL), a top House Democrat, said she backed a foreclosure moratorium and government talks with the banking industry to concoct ways to let lenders reshape troubled mortgages. She said the foreclosure problem has been ‘extremely vexing’ in her state” of Florida, AP reported.
In a response of great clinical significance, the number two reactionary Republican in the House and would-be majority leader, Rep. Eric Cantor of Virginia, immediately rushed to defend the Wall Street parasites and their right to feast on the flesh of the American people. Cantor said that ‘”a national moratorium would remove the protections that lenders need.” “You’re going to shut down the housing industry” with a national stoppage, Cantor added, pontificating that “People have to take responsibility for themselves.”‘1
There it was: the eternal reactionary refrain of the New Deal-hating GOP: in a conflict between a citizen and a bank, the citizen will be on his or her own. Canter’s response demonstrates that any time the Democrats attack Wall Street, the Republicans are immediately obliged to throw off their protective camouflage of “tea party” populism, and line up to defend the bankers who own them. This is the dirty secret of the “libertarian” GOP.
Unfortunately, but characteristically, an additional defense of the Wall Street hyenas came from the Obama White House. Financier stooge David Axelrod undercut both Reid and Wasserman-Shultz in his eagerness to shield the zombie banks, telling CBS’ Face the Nation: “I’m not sure about a national moratorium because there are in fact valid foreclosures that probably should go forward,” if their documents are accurate, and the public be damned. “Our hope is this moves rapidly and that this gets unwound very, very quickly,” he added. (AP) In other words, Axelrod and Obama see the solution as speeding up foreclosures so that the crisis can “bottom out” in an orgy of liquidations and homelessness — precisely as prescribed by the anti-human reactionaries of the Austrian school of economics touted by the GOP. If a new object lesson in Obama’s status as an abject Wall Street puppet were needed, here it was.
Congressional Democrats, if they wish to survive, must realize that Obama is nothing more than an anchor tied around their necks. They need to ignore him as party leader now, as a prelude to dumping him as their presidential candidate for 2012.
The Obama White House did respond to the public outrage against Wall Street’s foreclosures by refusing to sign the infamous Leahy-Sessions bill, which would legalize a broad range of foreclosures which are currently illegal, thus catapulting more millions into homelessness. This veto should have been carried out with great fanfare and with extreme prejudice as a direct and defiant challenge to Wall Street and its Republican minions, but Obama, always true to form, did it surreptitiously and almost apologetically, using a form of pocket veto to send the bill back to Congress. so that it can be “improved.”
One person who could do a great deal for the faltering fortunes of the congressional Democrats is Elizabeth Warren, recently named as White House overseer of the new consumer financial protection agency. With the help of some aggressive lawyers, it ought to be possible for Warren to find something in the new FinReg law to use as the basis for a freeze on mass foreclosures, given the current public scandal of faked records. This could also be done under the authority given by existing states of emergency dating back to the aftermath of 9/11. During the last depression, the Frazier-Lemke Moratorium Act of 1935 halted foreclosures on family farms for a three-year period, provided that a local court of law would give its approval both as to the propriety of the delay and the adequacy of the rental to be paid in the interim. Frazier-Lemke was challenged in the courts, “but the Supreme Court upheld the law in Wright v. Vinton Branch of Mountain Trust Bank of Roanoke. After expiring in 1938, the act was renewed four times until 1949, when it expired.”2
The measure most urgently required today is a freeze on foreclosures on one and only one primary residence per family, to continue for five years or for the duration of the current world economic and financial depression, which ever lasts longer. The alternative is social chaos, with Hoovervilles and Obamavilles on a mass scale, and a tragic deterioration in the present and future productivity of the working adults and children being sacrificed on the altar of Wall Street’s insatiable greed.
Combined with state laws requiring mandatory mediation before foreclosure could be carried out, plus the creation of the Home Owners’ Loan Corporation, New Deal measures were able to stop about 90% of the foreclosure plague, and also offered meaningful assistance to the 10% who were still victimized. This was in an age when the money center Wall Street banks had not received massive public bailouts to save them from insolvency, as occurred in 2008-2009. A halt in foreclosures could be considered a belated expression of gratitude by the Wall Street tycoons to the American people, without whose tax dollars not one major Wall Street institution would have survived the world derivatives panic of September-October 2008.
While she is at it, Elizabeth Warren should also use her new position to provide desperately needed relief to the American middle class against outrageous Wall Street abuses in the following areas:
1. She should declare a ban on Adjustable Rate Mortgages, which are always fatally flawed because they never allow the homeowner to know in advance just what level of interest is going to be charged, no matter how clear their language and no matter how big the print in which they are set down. ARMs are thus the consumer financial equivalent of ticking time bombs, and there is no place for them in the modern US economy.
2. Warren should also set up a de facto 10% maximum ceiling on interest rates on consumer financial products all over the United States. This would merely restore the pre-1979 usury laws which generally established a 10% upper limit on interest rates until the coming of Paul Adolf Volcker and his lunatic 22% prime rate during his tenure as boss of the Federal Reserve under Carter and Reagan.
3. Predatory payday loans and car title loans would be largely ruled out by a 10% upper limit on yearly interest rates, but Warren should institute additional safeguards as needed to ban these two kinds of wildly abusive financial marketing practices.
Elizabeth Warren should take these actions immediately and on her own authority, and not wait for the inevitable waffling that will come from the feckless Obama. The current election season provides her with a golden opportunity to determine whether her new job carries any real power with it, or whether it was simply a sop to certain strata of left-liberal opinion. She should act now against foreclosures and exorbitant interest rates, and see if Obama fires her. The best guess here is that he won’t dare. She should do this right now, when Obama knows that the penalty for firing Warren would be massive disaffection and bitterness among left liberals who believes in her mission and who forced him to appoint her over the objections of Tiny Tim Geithner and other Wall Street operatives.
As for the Republicans, they will start howling bloody murder as soon as any Wall Street privilege is touched or any Wall Street abuse challenged. To get them to drop their posturing and do this in the midst of their populist-demagogical election campaign would be of the greatest benefit to congressional Democrats. With a perfect opportunity offered by the departure of enforcers like Rahm Emanuel and Axelrod, Ms. Warren should dare to struggle and dare to win — now.