Leave it to AG Roy Cooper — not to mention North Carolina’s financially illiterate press corps — to fall for the foreclosure non-issue. Foreclose this week, next week, with more docs, with fewer, with all of them — does not matter. The loans are bad, people. This amounts to little more than a faux populist October surprise as pols — and media outlets desperate for eyeballs — play the evil, dirty bad banker card one more time.
Guess what? There are no documents to justify the foreclosures — because there were never any to justify the loans. Hello.
Meanwhile, the real story is the on the performing side, loans that are actually making money for banks. Or will make money so long as the Fed gives money to the banks at 0% and the banks turn around and loan it for 4-5-6%. Which means stalling foreclosures is chump change compared to stalling refis.
As ever, we turn to Chris Whalen to explain it all:
House Speaker Nancy “Red” Pelosi (D-CA) and all of the other politicians clamouring for inquiries of bad home foreclosures are simply playing to their ill-informed audience. Neither Pelosi, most members of Congress nor the vast majority of Americans understand that the real crime by the Big Five banks is not the failure to perfect the loan documents on a mortgage a decade ago, but the active steps being taken today to prevent millions of American households from exercising their contractual right to refinance their mortgages when interest rates fall.
The focus by Washington on the very real mortgage foreclosure mishaps committed by many lenders is the functional equivalent of putting Al Capone away for tax evasion. The real, continuing act of racketeering and criminality being committed by the Big Five banks is the cartel behavior which prevents home refinancing for performing borrowers and also renders Fed monetary policy largely ineffective. Instead of suing American Express (AXP), the Department of Justice should be suing the Big Five for anti-trust violations, price fixing and criminal RICO.
Understand that? The Fed is throwing money at the banks with the expectation they will go back to lending it out, willy-nilly like it was 2006 all over again, which consumers will love, which means more consumption (cue HELOC JetSkis, cherry cabinets, hot tubs), which will boost asset prices across the board, arrest falling property values, gin up taxable transactions, (saving states and localities from End Times via revenue squeeze), and generally make it seem like October 2008 never happened.
Except that the banks won’t do that — because the can’t. They cannot wipe out existing bad loans by making new bad loans, all they can do is pocket the interest rate welfare the Fed supplies and hope for the best while clamping down on costs.
You have a better chance of explaining all that to house plant than you do to Roy Cooper.
