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TechnoratiCatching Predators Is Good; Economic Justice Is Better
Is The FBI’s Crackdown on Mortgage Crime Wave Too Little Too Late?
Stephen Colbert has a popular feature in his Comedy Channel rants of the day. He calls it "The Wørd." (Rappers used to just say "word.") and it explains how language has different meanings. Consider the word "predator."
My online dictionary offers two meanings, one for the animal world and one for ours.
predator |ˈpredətər|
noun
an animal that naturally preys on others : Wolves are major predators of rodents.
• figurative: a rapacious, exploitative person or group : Her wealth made her vulnerable to predators. (Note: Poverty also can make one vulnerable.)
In popular usage there are two others. One references companies and scammers who engage in predatory lending. They are behind the subprime loans that took advantage of so many people resulting in the collapse of our markets and a threat to the global economy. Despite its pervasive presence, this type of predatory behavior does not find its way into the news much because of its connotation of criminality.
The other use is associated with men who use the Internet to lure young people into sex. No one really knows how pervasive the practice is -- most of the figures have been hyped and exaggerated. Yet, because of its salaciousness, it has been the subject of a popular prime time TV segment, NBC's "To Catch A Predator," which has made parents fearful that legions of perverts are lurking online to solicit their kids. Yet, when the Columbia Journalism Review analyzed the show, they found it exploitative, factually inaccurate and a disservice. They showed how it inflated a problem for the sake of entertainment, as opposed to reporting one as news.
This is an example of how TV news organizations sensationalize to generate ratings while ignoring a far uglier and more pervasive reality by the same name confronting many more people who are losing their homes and their hope.
Now that the Justice Department and FBI are indicting and rounding up this type of predator, the criminal nature of this problem has finally been validated. Last week, two former hedge fund managers at Bear Sterns were busted for defrauding investors to the tune of a billion dollars. Another 400 scammers were arrested in "Operation Malicious Mortgage," an FBI-run investigation staffed by 180 agents serving 40 task forces working more than 1200 cases.
So far, no TV network has announced a special series on these corporate predators, but the New York Times business section has become a subcrime scene with pictures of the perps. There have been reports about an executive for a Swiss Bank that encouraged Americans to violate the law by moving money illicitly into off shore accounts, as well as a profile of another hedge fund crook, now on the run, chased by US marshals as he tries to escape a jail sentence. The Times even published a Wanted poster.
The investigation of this white collar crime wave is a bit late since trillions have already been lost. Legal experts say that the top dogs may walk because of the difficulties of proving that what they did was a crime.
Historian Carolyn Baker, who follows the economic crisis for her Truth to Power site, believes: "History will prove that the number of people busted for this is only a drop in the bucket compared to the number involved in nationwide blatant fraud and theft which created the largest mortgage meltdown in the history of the world. A few bad apples? Get a clue! The scam was rampant and epidemic."
Aaron Krowne, who edits the indispensable insider Ml-implode.com mortgage site, concurs: "It's not like the current execs would have done anything different; this is all just plausible deniability and saving face, so that angry investors (the general public -- including Aunt Millie's pension fund) who are being diluted to oblivion won't be able to say 'nothing is being done.'"
What's worse, while these arrests capture the headlines, the industry is busy lobbying Congress to back off on regulations of its latest bubble-blowing exercise. Reported the Washington Post: "Wall Street banks and other large financial institutions have begun putting intense pressure on Congress to hold off on legislation that would curtail their highly profitable trading in oil contracts -- an activity increasingly blamed by lawmakers for driving up prices to record levels."
Yes, there are criminal practices underway, but they are far more insidious and invisible than most people realize. For example, Treasury Secretary Paulson is using the crisis as a cover to call for more power to the Federal Reserve Bank, which is actually an entity run by private banks in their own interest. (The Bank itself was created in response to a manufactured banking crisis in 1907.) Committee chairman in Congress are not rushing to discuss his proposals reportedly, in part, because Paulson has done so little about he worsening foreclosure problem
Read some history, like lawyer Ellen Brown's well-documented book The Web of Debt, and you will see that a battle between financial capital and the public interest over who controls our money supply, has been a constant over the decades. The book reminds us that Former Fed Chairman Alan Greenspan, who many now blame for allowing the housing bubble to burst, was on the board of JP Morgan before joining the Fed. It was the Fed, of course, which recently bailed out Bear Stearns by giving Morgan $30 billion to buy the company. Morgan boasted last week in an unseemly way about what a bargain it got.
Americans have been fighting for economic justice from before there was an America. The colonists opposed taxation without representation. They rose up against the kind of debt that is enslaving so many of now and seems to be leading to a total economic breakdown.
If President Dwight David Eisenhower was alive today, he might have warned us of another complex, as well as the military-industrial behemoth, that is threatening our economic well-being as a nation. Imagine if his famous farewell address was updated to sound like this:
"In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the financialization of America and its CREDIT AND DEBT complex. The potential for the disastrous rise of misplaced power exists and will persist.
We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of our FINANCIAL SYSTEM and ECONOMIC JUSTICE so that security and liberty may prosper together."
Mediachannel Org's News Dissector Danny Schechter directed the film IN DEBT WE TRUST (InDebtWeTrust.org). He has now written PLUNDER, an investigation of our economic calamity, out soon from Cosimo. Comments to Dissector@mediachannel.org
4 Comments so far
Show All"Only an alert and knowledgeable citizenry can compel the proper meshing of our FINANCIAL SYSTEM and ECONOMIC JUSTICE so that security and liberty may prosper together."
Er... duh.
And how do "we" create a more alert and knowledgeable citizenry when Big Corp Media controls 90% of the pipelines, and nearly half of the population still does not have regular access to alternative info sources, like the Internetssss?
Pamphleteering? Isn't that how it was done back then? Is that all we have left?
Yes, and the current state of affairs is no surprise to experts in consumer law, fair housing, community reinvestment, and poor peoples' advocates in general who have been fighting these types of practices for 20 plus years, which escalated after Reagan's IRS tax code changes of 1986. The tax code changes created the incentive for equity-based lending, since they removed the ability to deduct consumer loan interest among other 'revenue neutral' changes. There are other factors too.
To protect their residents from what was first called 'equity rip-off scams' and then 'predatory lending', states and cities throughout the US, pushed and led by the types of advocates listed above, have tried to enact limits to 'stated income' and other high cost loans likely to default, extend liability to investors for fradulent loans in their portfolio, require independent counseling for potential borrowers of 'high cost loans' so they would be told clearly and loudly that in three years they would not be able to afford the monthly payment when the 'teaser rate' ended, etc.
All such proposed limits to the subprime lending industry would be heavily lobbied against by the national 'household name' prime banking industry, then challenged in court, and usually the mild, watered-down regulations were found to be pre-empted by federal law, or weaker state law, and completely killed. The 'dirty little secret' is that many well-known financial institutions have been relying heavily on the huge profits of their subprime subsidiaries for years.
here's one example of a court battle:
IN THE SUPREME COURT OF CALIFORNIA
AMERICAN FINANCIAL SERVICES ASSOCIATION, Plaintiff and Appellant, S119869 v. Ct.App. 1/1 CITY OF OAKLAND et al., A100258 & A097784
Alameda County, Defendants and Appellants. Super. Ct. No. 2001-027338
Filed 1/31/05 Quoting from the first two paragraphs:
"Predatory lending" is a term generally used to characterize a range of abusive and aggressive lending practices, including deception or fraud, charging excessive fees and interest rates, making loans without regard to a borrower's ability to repay, or refinancing loans repeatedly over a short period of time to incur additional fees without any economic gain to the borrower. Predatory lending is most likely to occur in the rapidly growing "subprime" mortgage market, which is a market generally providing access to borrowers with impaired credit, limited income, or high debt relative to their income. Mortgages in this market tend to be in smaller amounts, and with faster prepayments and significantly higher interest rates and fees, than "prime" mortgages.
In 2001, California enacted legislation to combat predatory lending practices that typically occur in the subprime home mortgage market. (Fin. Code,1 §§ 4970- 4979.8 (Division 1.6).)2 Eight days before Division 1.6 was signed into law by the Governor, the City of Oakland adopted an ordinance regulating predatory lending practices in the Oakland home mortgage market.3 We consider whether the Ordinance is preempted by Division 1.6, and if not, whether the Ordinance is nevertheless preempted by Civil Code section 1916.12. We conclude that the Ordinance is preempted by Division 1.6, and therefore reverse the judgment of the Court of Appeal."
This defeat in the CA supreme court also killed an ordinance passed by the City of Los Angeles in 2002 which had been challenged and linked to this lawsuit. The judges ignored the legislative records of the state law that showed that the new law was to be considered 'the floor' not 'the ceiling' of regulation of these types of loans, never meant to preempt local ordinances such as Oakland and LA. Other cities in California were following the court case, ready to enact protections for their residents too, if these weren't killed.
Thus, it is no surprise that securities backed by sub-prime mortgages have resulted in an international financial crisis. Many of these loans are not based in reality. misrepresentation, high pressure sales tactics, overstated income, overvalued properties, continually refinanced loans adding fees and penalties from prior loans resulting in huge balances that exceed the value of the property, prepayment penalties to prevent borrowers from refinancing into better loans, desperate over-optimistic borrowers in denial and not empowered to question authority or read the fine print, borrowers with expectations of dramatic income increases or ability to refinance out of this loan, continuing decline of middle-class wages and jobs, and flat-out fraud.
Combine that with no consequences to the lenders, the mortgage brokers, the securities traders, the investors, the secondary market, the real estate agents, the title cos, etc They all got their fees and points. someone else has to clean up the mess.
so here we are again. didn't we just have a big corporate meltdown? enron, broadcom, the S&L debacle of the 1980s? how to prevent? campaign finance reform, so the donations from industry are not essential to get elected? there are so many people who make so much money from the mortgage industry - until they don't when it falls apart...
what would a '7th generation environmental approach' look like when applied to our financial system? anyone thinking about that? There is no right to shelter, or housing, in this nation. what if there was?
Thanks for mentioning Ellen Brown, Danny. You could have mentioned that the "battle between financial capital and the public interest over who controls our money supply" is a primal Constitutional issue, based on Article 1, Sect 8, in which the power to "coin money, regulate the value thereof" is a power specifically assigned to Congress, not to private banks.
The Constitution did not intend the new nation should be dominated by a privatized financial system. The founders' intention was for the money power to be in the hands of the people by way of their elected representatives. This means, in terms we understand today that the banks would be nationalized as opposed to merely being "national banks".
The fight between the Hamiltonians and Jeffersonians began when Hamilton collaborated with British and other foreign financiers to impose the burden and obligation of debt on the new government. Hamilton, the original financial privatizer.
We are slaves of the financiers today. The problem is not fraudulent activity by a few of these predators, but the financial system itself, which is owned and operated by the predators, in the interest of the predators. Moreover, the system is contrary to the intent of the Constitution. It is highly unfortunate that Alexander Hamilton was involved in the drafting of our seminal document
"Pamphleteering? Isn't that how it was done back then? Is that all we have left?"
If uncle bushie has his way....