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Spank the Banks

It’s a common problem that bad news travels faster than good news, and gets treated as more important by us media types. So, having devoted a number of columns to the mind- bending ways in which the bankers who trashed the country have been rescued more quickly and more dramatically than anyone else suffering the consequences of our collective delusions about the benefits of unfettered predatory capitalism (yes, that’s right), I figure it’s only fair to share some small news of just deserts in the same vein.

To wit: Increasingly, courts are canceling foreclosures because the banks can’t prove that they own the loans. Bless the gutsy Legal Aid lawyers who have been spearheading this technique. The Kansas Supreme Court even upheld a case like this recently. Sounds like the kind of hellish Kafkaesque thing that usually happens to individuals up against an implacable bureaucracy, but in this case the tables are turned.

It can work in a few ways, mostly related to the madcap environment of slicing and dicing loans into various securities and operating them through other entities. Sometimes lenders initiate foreclosure on something they haven’t bought yet. Or just can’t figure out their own byzantine paper trail.

Also, it appears that to increase profits in the housing bubble’s sky’s-the-limit frenzy, lenders created an electronic registry for tracking property transfers.

Now that’s all well and good—I’m for using the power of technology for better, faster, more transparent record keeping. In fact, if the philanthropic arms of these companies, back when they were flush, had embarked on a campaign to help local governments upgrade and digitize their record- keeping, that would’ve helped everyone: the lenders who would’ve saved a ton of money in recording liens and the governments themselves, not to mention all the communities served by advocates and neighborhood leaders who could have more accurate information about where foreclosures were rising and which mortgages might be in trouble in time to act faster and in a more targeted fashion with prevention and recovery work.

But of course that’s not what happened. The too-big-to-care financial institutions merely decided that as long as they could keep track they didn’t have to, oh, register property sales at the local level at all. They decided they could supersede local law because it was annoying.

Given the attitude behind this, I suppose it’s not surprising that I find it satisfying that some of these lenders are getting told, “Nope. You didn’t file the paperwork. We have no record that you own that loan/lien. Get lost.”

Now, I recognize that this satisfaction is only marginally productive. I recognize that this legal strategy does not distinguish between helping homeowners who were hoodwinked and speculators who lied on their paperwork (though hopefully the latter could be prosecuted for that, along with the brokers who set them up to do so and the appraisers who collaborated, etc.).

And it’s true that I have, in this very space, cautioned against letting vengeance drive policymaking. I wouldn’t advocate for every mortgage in the country to just vaporize. But I am human, and if leveling the legal playing field comes with a garnish of barbecued chicken-come-home-to-roost, I admit to finding it tasty.

There is a larger takeaway lesson though to this legal turn of events. As a former Ayn Rand supporter I know and love once said: The arguments made against utopian forms of communism are that they rely on people to be selfless and not game the system, which is an unreasonable expectation. However, unregulated capitalism relies on businesspeople/corporate organizations to do the same thing—an even less likely proposition, given the larger profits involved and the way large organizations can distance individuals from the consequences of their actions.

Since I view one of the most difficult fights before us (amazingly, given the events of the past few years) to be establishing the principle that unfettered corporate-welfare capitalism doesn’t actually make for a good, or even efficient and advanced, society, symbolic acts might actually be fairly useful. Anything that reminds not only those “businesspeople” who prefer to pilfer the government rather than conduct their business in a competitive, customer-driven fashion, but the rest of us, that businesses of all sizes can and should be subject to the same kinds of laws and for-the-common-good restrictions as the rest of us, is a good thing in my book.

Scramble to register those deeds folks. Hey—that even ought to create a few jobs.

—Miriam Axel-Lute

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