by John Lawrence
The big bank muckety mucks, having screwed the country once and then been rewarded handsomely for it are on the verge of screwing it again. There's only one problem. The law isn't on their side this time. It seems that the law states that in order to foreclose on someone's house, you must have legal documentation that you actually own that house. Now it comes out that the banks (for they are the ones trying to foreclose) can't produce the documents. So LEGALLY they do not have the right to foreclose. Legally speaking the homeowners have a right not only to stay in their houses without fear of eviction, but they also have the right to stop making any more mortagage payments until such time that the banks can produce the proper documents, and chances are, they can't produce them. If they could, they would have done so by now instead of having robo signers sign fake and fraudulent documents. Jeez, if these guys were on the level you would think that they could do better than to hire Wal-Mart employees and other minimum wage earners with no formal training in the field to robo sign thousands of these fraudulent documents. This is what the foreclosure moratorium is all about.
But the deeper issue is that the banks don't possess the correct documents, and they were never recorded with local counties. Therefore, for all their fancy schmancy CDOs, credit default swaps, tranches, derivatives and every other form of high blown finance, the banks don't actually and legally own the houses they are trying to foreclose on. Now if you accept that this is true, what it means is that these large banks will again fail and expect the taxpayers to bail them out. This is a bridge the Obama administration does not want to cross. 
Nor does it want to cross the bridge of the spectacle of having all these large denizens of Wall Street actually fail after they have been bailed out once. It is a huge embarassment not only to capitalism but to the US version of it. To put it mildly the US is up a creek without a paddle. On the one hand it can subvert the law and say, what the hell, we don't care if the banks have the proper legal documentation, let the banks screw the homeowners anyway. Because how else to maintain order and sanity in the banking system? We just can't have another meltdown, can we. On the other hand, if the Obama administration and the legal system is consistent with itself and maintains the law in the interests of justice and the property rights of the aggrieved homeowners, the whole damn edifice of the banking system goes kerplop. Talk about moral hazard and the ultimate Greek tragedy.
The only ethical way out of this morass is for the government to honor the Kanjorsky amendment to the financial reform bill that slipped past the lobbyists' notice and allows the government to step in. The Kanjorski amendment allows federal regulators to preemptively break up large financial institutions that pose a threat to US financial or economic stability. And this situation poses a definite risk to US financial and economic stability. Homeowners are not going to allow themselves to be screwed (again) just to maintain the big banks in their current positions, massive bonuses and all. They're going to sue the bastards and they're already doing it. Why do you think there's a foreclosure moratorium?
The Obama administration has sided with the big banks every step of the way so far, bailing them out without cracking down and then letting them go on feathering their own nests in a gargantuan display of financial gluttony. Now the banks are caught with their pants down (again), and this time the law is clearly on the side not of the banks but of the homeowners. They have even foreclosed on people who were paid up on their mortgage and at least in one case foreclosed on a person who didn't even have a mortgage! How would you like to be evicted from your home even when you owned it free and clear. It happened!
The Obama administration's plan for mortgage modification either by reducing principal or interest rate never went anywhere and was never actually put into effect by the banks. The banks thought it to be more profitable for them to go ahead and foreclose on everything they could get their hands on. Homeowners be damned! The banks got themselves into this mess because they wanted to bypass paying local recording fees. So they are totally culpable of wallowing in their own greed. Now let them wallow in their own puke. They deserve it. The homeowners, finally, and not the banks deserve a break. It's almost unimaginable that after the mess they created, the banks are at it again creating another mess. Although the first mess was created legally after the Glass-Steagall Act was nullified in 1999 by the Financial Modernization Act, the present mess does not have any legal backing whatsoever. Legally, the banking greed gluttons are clearly on the hook, but how much do you want to bet that they will try to weasle out of this one. Let us hope that the Obama administration comes to its senses and says to the banks: Enough! No more! We've been screwed once. We're not letting it happen again. It's the only morally right thing to do!
