Now that the banks and local governments are finding themselves in serious danger due to the housing crisis, they have been working together even more visibly than they always do. Mortgage companies experiencing defaults in record numbers are having a difficult time remaining solvent and have required injections of inflated capital from the central bank; politicians elected to cut spending and waste from government will not be able to finance their own overspending and waste if property tax revenue declines. Both government and banks, therefore, have an extremely vested interest in keeping as many people in their homes as possible.This explains the recent trend of government partnering with selected banks to teach homeowners about financial management and the foreclosure process. Numerous city or state governments have sponsored websites or local seminars featuring local mortgage brokers and representatives of large banks to educate homeowners on what they can do to stay out of foreclosure. But it is deeply ironic that government, after ignoring its “duty” to protect “citizens” from being taken advantage of by fraudulent loans or their own ignorance, are now taking up the cause when their own livelihood is threatened. It is impossible for government to provide the third-party, independent assistance that foreclosure victims require.
To begin with, the State (or city or county) is not there to protect anyone right now. For example, try suing the police department if they “fail” in their “duty” to “protect” your life, liberty and property, such as if your car is stolen or you are mugged. The lawsuit will be promptly thrown out of court because there is no “cause of action” against the government, because the bureaucrats have no duty to protect anyone or anything. So these same politicians are not going to suddenly, magically, start “protecting” homeowners from bad loans unless it serves the bureaucrats’ self-interest of keeping property taxes high enough to fleece homeowners enough to maintain their corruption.
Judges, although they may be able to help homeowners in some instances, are often just as corrupt and paid-for as any other bureaucrat. Most of the judges work with the same attorneys day in and day out to pursue foreclosure hearings, becoming friends and acquaintances with the lender’s attorneys. The lender, though its lawyers, pays all of the filing fees and court costs related to the foreclosure out of its pocket, which keeps these judges in business. The judges, then, have little other option than to keep the lenders happy by rubber-stamping the foreclosure judgments one after another, despite gross rule violations or outright criminality.
The banks are no different and benefit the same way. The managers of the local offices of these subprime loan sharks are sitting on election boards and donating to state and local campaigns to keep their preferred candidates in as much power as possible. The state and local governments are able to appoint judges to the trial courts which hear the foreclosure complaints and are more open to the arguments of the lenders, instead of “protecting” the life, liberty, and property of the average taxpaying homeowner.
Even at the federal level, the large banks and investment institutions are some of the top donors to many presidential campaigns, because they know that their preferred candidate will pursue legislation that will allow banks to keep making poor loans and receiving bailouts to avoid facing the consequences. And the banks in the past half-year have received hundreds of billions of dollars from central banks around the world in misguided efforts to steal money from productive people to hand to bankers who made poor lending and investing decisions. Of course, homeowners who make poor financial decisions are simply left out to dry.
Interest rates are also controlled at the federal level by the Federal Reserve System, which is owned primarily by the largest banks which are now suffering the most and need the Fed to bail them out repeatedly. The Fed lowered rates as far as possible for years to assist banks in seducing more buyers to get into adjustable rate mortgages that they could not afford. Then, when rates rose and defaults occurred in record numbers, the banks made out by taking over large sections of the country’s real estate, and getting tens of billions of dollars of free bailout money care of the private printing press that they own.
This is not to say that there should not be an option of using a third party independent of both government and banks to provide some help to stop foreclosure, if homeowners want it. But it would be a mistake to trust the mortgage companies or the government to provide any “independence” to the people. Lenders, unfortunately, must participate in the process of working out solutions with owners because they are one party to the contract. Involving a bought-and-paid-for government bureaucrat, who owes his job to the foreclosing banks, though, is only a sure-fire way to guarantee that foreclosure victims end up either homeless or in bad solutions that will serve as only temporary band-aids as politicians pressure them into stop-gap measures to keep property taxes high for another few months.