THREE QUESTIONS...
Question #1: Do events announced earlier this weekend concerning former Countrywide Financial CEO Angelo Mozilo's settlement with the Securities and Exchange Commission (SEC) personify the surreal, Orwellian nature of our "new normal" and the obfuscated realities of the true extent of Wall Street's institutionalized, ethically-bereft and fraud-riddled greed (along with a mortgage origination sector fully-engaged in a self-enriching effort to feed that terminally-unsated beast, which has now culminated in the current U.S. foreclosure fraud crisis)?
As I note, farther down, below...
Late in Friday's news dump, we were informed that counsel for Mr. Mozilo had cut a deal with the Securities and Exchange Commission (SEC), wherein he will pay -- actually, as incredible as this may appear, Bank of America and its Countrywide unit will pay much of it, not Mozilo -- a record civil penalty of $67.5 million for (among many other misdeeds) misleading "investors by over-rating the credit strength of borrowers of their subprime mortgages."
Question #2: And, isn't it now crystal clear to many of those that are following the Mozilo story, that it's just the tip of an iceberg of a lengthy list of memorialized events which all tell us that the entire mortgage mess is just a major chapter in a much bigger story of crony capitalism and corporate kleptocracy gone awry; a story which may soon record a second collapse of many major, too-big-to-fail (TBTF) Wall Street firms -- one which is not-so-quietly playing out over this weekend, but still unbeknownst to most.
One would have to be in deep denial to not admit that -- over the past five or six years, from the very first point of origination of a mortgage, onto the fraudulent conveyance by Wall Street of much of the supposedly investment-grade paper that was created to enable massive U.S. mortgage origination, in general, and then through to the egregious and unlawful circumstances by which these very same originators have been proceeding to foreclose upon these same mortgages which they originated during this time -- this country's investment community, and those institution's responsible for managing it, have been riddled with rampant fraud, every step of the way; both inside and outside of the mortgage vertical.
(Doubt this last statement? Google: "Dick Fuld," "Lehman Brothers," "Repo 105," "Bear Stearns," and/or specific events, such as: Robert Rubin's meetings with then-NY Federal Reserve Chair Tim Geithner while Rubin was the acting Board Chair of Citigroup; or, facts relating to Lloyd Blankfein's totally unethical presence aside then-Treasury Secretary Henry Paulson, during that notorious mid-September 2008 weekend when Paulson decided to save Goldman's ass by bailing out AIG; or, just checkout the over-the-top, downright-criminal [IMHO] behavior of former NY Federal Reserve Chair and Goldman-Sachs' board member Stephen Friedman's insider stock purchase. The list goes on, and on, and on...and I provide a "brief list" just for the first few months of 2010, later on in this post, too. Never mind 2009, 2008, and earlier!)
And if you're still doubting what's immediately ahead for the U.S. mortgage industry and the largest/TBTF Wall Street banks, and consequently much of our economy, you may want to checkout these three articles relating to the incredible pounding they're taking (quietly, behind the scenes, this weekend) as you read this...
...on Bank of America, which is, essentially, already insolvent, and the latest $70 billion-plus hit they're now realizing: "Here's That Devastating Report On Bank Of America That Everyone Is Talking About Today," Gregory White, Business Insider (with a h/t to fellow Kossack JimP), 10/14/10
...on Wells Fargo, who was late to the table when it came to admitting their participation in the "Robo-signing" fiasco, concerning a story relating to rampant investor fraud elsewhere in the mortgage business which is just hitting the blogosphere, this evening: "Wells Fargo Prepares For Tsunami Of Loan Repurchase Demands," Zero Hedge (with a h/t to Kossack JimP), 10/17/10
...on Wall Street's TBTF firms, in general, and "The Enormous Mortgage-Bond Scandal" currently underway, from Felix Salmon, over at Reuters, 10/13/10
Question #3: Last of all, numerous prominent (and not-so-prominent) voices in the blogosphere are all asking, essentially, the same question this weekend:
--Simon Johnson's blogging partner, James Kwak, over at Baseline Scenario:
Why, just weeks from an election in which Democrats are probably going to get clobbered, is the Obama administration sitting on its hands, writing this off as a bunch of technicalities, and opposing a foreclosure moratorium?
--Here's former Goldman-Sachs Managing Director Nomi Prins asking, more or less, the same thing over at Alternet.org: "Why Is the White House Against Freezing Foreclosures in the Face of Rampant Fraud?"
...Foreclosure fraud is not new. Many sane people and organizations have been talking about fraud for years -- you don't manufacture $14 trillion worth of mortgage-backed securities and all their permutations and mega leverage out of $1.4 trillion worth of subprime loans in five years without cutting a lot of corners. Banks knew that. But when the value of their assets plummeted, unlike individual borrowers, they got to dump them on the Fed and the Treasury department, while receiving cash injections and guarantees, and cheap money subsidies in return.
--SNIP--
The Bank of America didn't quiver in its federally subsidized boots because Harry Reid asked (not even demanded, because really, he can't), for a moratorium on foreclosures last week. It capitulated because it owns a bunch of REO properties it wants to dump (and lawsuits are generally time-consuming and messy). It's not alone. JPM Chase's REO portfolio last quarter was double in size vs. its earlier quarter and nearly 30 times what it was last year. Wells Fargo's REO portfolio also nearly doubled, and Citigroup's REO pool last quarter was up 81 percent over the prior year. The GSEs, Fannie Mae and Freddie Mac are sitting on a record number of REOs on their books they haven't been able to sell.
Selling REOs to hedge, private equity and asset management funds in bulk is the hot new business. (Small now, but so were CDOs when I first warned about them in my 2004 book, Other People's Money.) Banks aren't being nice to those deadbeat borrowers who were too dumb to foresee a housing and financial market collapse due to the overzealous fee-seeking attitudes of securitizing and trading banks. No, having gotten a multi-trillion dollar federal life raft, the big banks are prudently trying to salvage a growing business...
And, there have been many others, including yours truly, wondering much the same.
Summing it all up, it would certainly appear that the latest travesty du jour--the foreclosure fraud crisis--is merely just another iteration of the same story we've been hearing for the past 36 months. It's all about a still-insolvent financial sector gone-wild that continues to do whatever it can, whenever and wherever it can, to squeeze as much cash as possible out of Main Street. And, now--with the passage of the Dodd-Frank FinReg bill, resplendent with official, taxpayer - supported backstops for the too-big-to-fail firms--the status quo's officially enabled to do this with the full faith and formal support of the U.S. government behind their actions, as well.
As Yves Smith noted, from my post on Friday (see two graphs up), the chances of the FinReg-created Resolution Authority actually springing into action and dissolving a TBTF firm are roughly...zero.
Yes, IMHO, the foreclosure "Robo-signer" scam is just an extension of this same mentality: Damn the law, full speed ahead to enriching our oligarchs' bottom lines! (Even if it means committing rampant fraud relating not just to foreclosure documents, but to virtually every aspect of the mortgage process, and ignoring the basic rules of law within our society?)
# # #
OUR MORTGAGE MESS: ROTTEN TO THE CORE, FROM POINT-OF-
ORIGINATION TO FORECLOSURE, AND EVERYTHING IN-BETWEEN.
I.) ORIGINATION...
So, let's talk about where it all begins: truth in mortgage advertising and the processing of a consumer's mortgage application. There's a well-known mortgage origination source which maintains a high profile in the typical U.S. consumer's mindset that has extensively used the following tagline in their ad campaigns for many years: "When banks compete, you win."
Technically, the tagline is true. Practically speaking, IMHO, it's quite deceptive.
The false meme here being that what the consumer thinks the banks are competing for--based upon the implied premise put forth by this ad campaign--is your business; when, in fact, what they're really competing for is the right to buy your lead from the mortgage originator. This is a fact which I know to be true, firsthand.
A simple question should make this charade (reality) more obvious to the naive consumer: If 200-plus mortgage firms are competing for leads (mortgage applications) from one source of origination, and no more than four offers are being presented to the consumer at the time they apply for the loan, what happened to the other 196 potential offers?
The reality-based answer is either one or all of the options, below:
a.) many weren't interested in the mortgage applicant's loan application (for a variety of reasons--too many to go into in this brief post); and/or,
b.) at least some of the other 196 mortgage lenders never knew your application was presented to the originator, in the first place; and/or,
c.) at least some of the other 196 mortgage lenders that were interested in the applicant's business didn't pay the originator enough money to compete (in the final group of four offers actually presented to the consumer) for the opportunity to present an offer to the consumer for the mortgage loan lead/application.
So, you see, the banks did "compete." But, as common sense and basic math also tell us, when it came to the "you win" part, not so much. A simple fact tells us this is the case: Throughout much of the U.S. (circa 2002-2008) mortgage and refinance boom, one well-known, subprime mortgage lender, Countrywide (now a part of Bank of America--more about them, down below), spent a lot of their marketing budget buying leads (the right to provide a bid--usually one of four or fewer bids--directly to the consumer) from this particular originator, discussed above.
(DIARIST'S NOTE: I could also convey many stories of rampant fraud and deceit in the consumer mortgage origination process which were undertaken by the large Wall Street investment houses, wherein the TBTF's partnered with other originators who were being provided with piles of cash via heavily-sheltered, supposedly-legal scams, which showered massive amounts of dollars--questionably, and I'm being very kind, in accordance with the Real Estate Settlement and Procedures Act ("RESPA")--on the "front-end" of the mortgage-selling process, too. And, anyone who was significantly involved in the mortgage industry was aware of these truths, contrary to anything you might hear otherwise, now.)
But, the deception at the point-of-origination didn't stop there. Through simple manipulation of mortgage leads, at their point-of-origination, and prior to their delivery and subsequent "processing" by a respective mortgage originator, many other "convenient" realities--all designed to optimize the TBTF's bottom line throughout this process--occurred.
The fact of the matter is that mortgage leads, in general and throughout the industry, were frequently not treated equally. Via a variety of seemingly "harmless" processes, lead follow-up could be (and was) easily manipulated. If a mortgage app was promoted as being presented to multiple sources, the fact remained that certain sources could be treated as higher priority than others. A mortgage applicant could, indeed, receive "x" amount of conditional offers, but on the back-end of the process, it was simple enough to process the more-profitable offers more rapidly than the less-profitable ones. This would manifest itself in the consumer receiving a more prompt response to follow-up from the source that was most profitable to the originator--without respect to the higher or lower cost of a given mortgage to the applicant--with less-profitable sources taking longer for a reply to be provided, if at all, to the mortgage applicant.
Even more simplistically, a mortgage application processor might be given "routing instructions," complete with zip code lists, signalling to the processor that certain applications from that list of zip codes should be handled/routed one way, while providing different instructions to the processor indicating that applications not on the list be handled in an entirely different manner.
For many mortgage providers, this was their standard operating procedure for many years.
# # #
II.) IN-BETWEEN ORIGINATION AND FORECLOSURE...
Over the past few days, we are now (also) learning of an escalation with regard to the level of fraud litigation inherent in Wall Street's issuance of mortgage-backed securities which is currently underway as I write this. As I've noted as recently as Friday, this is the story that's really hammering the TBTF's now. See my links, up above, to what's happening over at Bank of America and Wells Fargo, right now. Then checkout Reuters' Felix Salmon, from Wednesday: "The enormous mortgage-bond scandal."
The enormous mortgage-bond scandal
Felix Salmon
Reuters
Oct 13, 2010 11:21 EDT
You thought the foreclosure mess was bad? You're right about that. But it gets so much worse once you start adding in a whole bunch of parallel messes in the world of mortgage bonds. For instance, as Tracy Alloway says, mortgage-bond documentation generally says that if more than a minuscule proportion of notes in a mortgage pool weren't properly transferred, then the trustee for the bondholders can force the investment bank who put the deal together to repurchase the mortgages. And it's looking very much as though none of the notes were properly transferred.
But that's not even the biggest potential problem facing the investment banks who put these deals together. It also turns out that there's a pretty strong case that they lied to the investors in many if not most of these deals...
(NOTE: I strongly suggest reading Felix Salmon's entire piece, especially if you haven't been following this matter closely. It points out that the foreclosure fraud crisis is nowhere near the biggest problem currently on the plates of the TBTF firms, at the moment. They've got bigger fish to fry; and, it all points to at least a few hundred billion, IMHO, in additional losses that these firms are going to take in coming months, too.)
But, even here, that's not the half of it. The level of fraud that's pervasive on Wall Street affects virtually every area of the investment business. And, for those reading this whose memories are short, if you click on this link, to my post from September 13th, you'll find a partial list of over 40 additional Wall Street fraud stories, just from the past ten months: "2010 : The Year (To Date) In Wall Street Fraud."
# # #
Late in Friday's news dump, we were informed that counsel for Mr. Mozilo had cut a deal with the Securities and Exchange Commission (SEC), wherein he will pay -- actually, Bank of America and its Countrywide unit will pay much of it, not Mozilo -- a record civil penalty of $67.5 million for (among many other misdeeds) misleading "investors by over-rating the credit strength of borrowers of their subprime mortgages."
So, just hours after I posted a diary, entitled: "Is Wall St. Imploding, Again? Krugman: It's "very, very bad," on Friday, had I known that the news on Mozilo would occur later that day, I would have retitled that post not as a question but as a statement of FACT: "Wall Street Is Imploding, Again." I'm stating this now because of one very basic reality, which I mentioned at the top of that post...
...it sure is beginning to look like this was the week when the ongoing U.S. foreclosure fraud crisis pivoted from bad to worse. In fact, while the "retail" side of this matter is what's capturing all the headlines; and, that chapter of the foreclosure mess will certainly cost the banks many billions, the real, "big money" story, IMHO, is about what's slowly (and much more quietly) unfolding in the Wall Street investment community.
Bold type is diarist's emphasis.
How this latest development impacts upon our nation's foreclosure fraud crisis--at least up until now--is, IMHO, the real fraud story of the year, if not our generation. To tacitly, if not "legally," acknowledge that your mortgage firm--one of the largest in the country and now an integral part of the largest mortgage originator in the country--misled "investors by over-rating the credit strength of borrowers of their subprime mortgages," basically morphs the entire matter into virtually clearcut investor fraud, with the foreclosure fraud crisis merely being the latest (episode of a series of fraudulent acts) chapter in that book.
Furthermore, as history has shown us, what happened at Countrywide (where the firm's senior management realized, long before the public got wind of it, that their mortgage portfolio was heading south) was pervasive throughout Wall Street. (Many others, including yours truly, have posted numerous pieces about Bear Stearns, Lehman Brothers, Citigroup, AIG, Goldman Sachs, Morgan Stanley, and others, where it was a matter of public record that, by 2007, senior managers at virtually all of these firms were fully aware there were major problems in the mortgage marketplace, in general, and in their respective entities' mortgage portfolios, specifically.)
Sincerely, if I was an investor in a mortgage-backed securitization contemplating legal action against Wall Street due to the foreclosure fraud mess, and I just read this story on Mozilo, which indicates that there is now all but a formal acknowledgement that the senior officers of the mortgage company knew that the paper was rotten to the core, I'd have my legal counsel on speed-dial for the next couple of years seeking treble damages, too! (More about that in a moment.)
Additionally Mozilo will pay $45 million in disgorgement of ill-gotten gains to settle the SEC's disclosure violation and insider trading charges against him.
The money will go to said investors who lost out in Mozilo-led investments.
Again, just to add emphasis ot this travesty: What we were not told, early Friday evening, is that Countrywide and its parent, Bank of America, the TBTF entity that took over Countrywide in January 2008, is actually paying much of this bill.
But, luckily, the NY Times' Gretchen Morgenson isn't letting this "fun-fact" slip by, today...
Here's the business lead in Sunday's NY Times: "How Countrywide Covered the Cracks."
How Countrywide Covered the Cracks
By GRETCHEN MORGENSON
New York Times (Page B1)
October 17, 2010
...What Mr. Mozilo, now 71, knew about Countrywide's problems, and precisely when he knew it, was what eventually led the Securities and Exchange Commission to file civil securities fraud charges against him last year. And on Friday, in the Los Angeles courtroom of John F. Walter, a federal District Court judge, representatives for Mr. Mozilo and for two of his top lieutenants -- David Sambol, Countrywide's former president, and Eric Sieracki, the company's former chief financial officer -- settled those charges.
As part of the settlement, Mr. Mozilo and his co-defendants didn't admit to any wrongdoing. But Mr. Mozilo agreed to pay $67.5 million in a penalty and reparations to investors and is permanently banned from serving as an officer or a director of a public company. Mr. Sambol is paying $5.52 million in a penalty and reparations and agreed to a three-year ban from serving as an officer or director of a public company. Mr. Sieracki agreed to pay a $130,000 penalty.
The settlement is a signal event in the credit crisis and its aftermath, including the foreclosure debacle that is now rattling the mortgage market and upending the lives of average homeowners...
Bold type is diarist's emphasis.
Ms. Morgenson reminds us that while "Goldman Sachs settled securities fraud charges earlier this year," (in a $550 million settlement) Mozilo is the "first prominent chief executive" to be held personally liable "for questionable business practices" that brought our nation's economy to its knees in 2008.
Morgenson tells us that Mozilo and a couple of his colleagues were "accused of misrepresenting the company's declining lending standards during 2006 and 2007 and portraying themselves publicly as underwriters of high-quality mortgages even as they learned that the company's loans were becoming increasingly risky."
She points out that the SEC's case also focused upon the improper, personal profits Mozilo ($260 million) and his colleagues (another $40 million-plus) received, due to their insider status, when they sold Countrywide shares between May 2005 and the end of 2007.
Lawyers for Mr. Mozilo declined to comment. Mr. Sambol's lawyer said his client had "put the matter behind him for the benefit of his family and loved ones." Mr. Sieracki's lawyer noted that the S.E.C. had decided not to pursue fraud charges against his client and that his client had not been barred from serving at a public company. Bank of America is paying Mr. Mozilo's legal bills. Countrywide is paying $5 million toward Mr. Sambol's repayment to investors and $20 million of Mr. Mozilo's reparations...
Bold type is diarist's emphasis.
# # #
FORECLOSURE: THE U.S. FORECLOSURE FRAUD CRISIS AND THE SOLUTION TO IT...
I pretty much agree with everything Marshall Auerback's saying, from his post at Naked Capitalism (which I'm authorized to reproduce for the benefit of the Daily Kos community, in it's entirety), from early Saturday...
Foreclosure Fraud: We Need to Fix the Banks Again
Naked Capitalism
Saturday, October 16, 2010 1:00AM
By Marshall Auerback, a Senior Fellow at the Roosevelt Institute, and a market analyst and commentator. Crossposted from New Deal 2.0.
It's time to put the perps of this scandal in jail.
Yves Smith, Bill Black, and Mike Konczal have already done yeoman's work in seeking to explain the lender fraud scandal in the securitized mortgage market and its possible legal ramifications. Here, I'd like to restrict my discussion to the optimal government response.
President Obama recently used a pocket veto on a bill that would allow foreclosure and other documents to be accepted among multiple states (and therefore make it difficult for homeowners to challenge foreclosure documents prepared in other states). But I worried that this action was not sincere. My concern was that, following the midterm elections, the Administration would eventually come up with some grand "compromise" solution, which would in effect give the banks everything they wanted.
In retrospect, it appears that even that was too favorable an assessment. Per the Washington Post:
The Obama administration does not support a nationwide moratorium on foreclosures at this time, Federal Housing Administration Commissioner David Stevens said Sunday in an e-mail response to questions.
"We believe freezing foreclosures for all banks in all states, whether we have reason to believe them to be in error or not, is simply not the prudent step to take in this fragile housing market," he said. (Our emphasis)
Banks 1, rule of law 0. In effect, the President is making the argument, "If we penalize people for not following the laws as they existed at the time, it will have really bad repercussions. So everybody gets a mulligan."
Additionally, the Administration seems to be buying the prevailing spin that the foreclosure problems are merely the product of "sloppy paperwork", rather than recognizing this disaster as a case of rampant, systemic fraud. That deserves punishment: fines and jail time, not additional government support.
Most of the current administration proposals are misguided because they continue to be based on the twin presumptions that big banks only face a liquidity problem, and that if this problem can somehow be resolved, the economy will recover. This is a fundamentally flawed view. Using any honest measure of accounting, the big banks are insolvent. The latest debacle illustrates that big banks cannot and should not be saved. They do not hold the key to recovery; if anything, their rampant criminality demonstrates that they are a barrier to a sustainable recovery. Since they were given their handouts, they have been working assiduously to resurrect the bubble conditions that led to this crisis. (Not to mention paying out huge bonuses in the process--this year $144 billion, a record high for a second consecutive year, according to a study conducted by The Wall Street Journal.) Your tax dollars at work!
As Randy Wray and Eric Tymoigne presciently wrote over a year ago:
The best approach is something like a banking holiday for the largest 19 banks and shadow banks in which institutions are closed for a relatively brief period. Supervisors move in to assess problems. It is essential that all big banks be examined during the "holiday" to uncover claims on one another. It is highly likely that supervisors will find that several trillions of dollars of bad assets will turn out to be claims big financial institutions have on one another (that is exactly what was found when AIG was examined--which is why the government bail-out of AIG led to side payments to the big banks and shadow banks). There probably are not `seven degrees of separation'--by taking over and resolving the biggest 19 banks and netting claims, the collateral damage in the form of losses for other banks and shadow banks will be relatively small. Government lending, guarantees, and purchases of bad assets will be much smaller if we first consolidate the balance sheets of the biggest players, net the assets, and shut down the institutions. This will help to downsize the financial sector and reduce monopoly power. Moving forward, policy should favor small, independent, financial institutions.
In addition, it will be necessary to increase supervision and regulation of the financial sector. This can start with 3 simple measures, which were suggested to me by Bill Black (who was a long-time S&L investigator):
A. Replace every top banking regulator other than Sheila Bair and the head of the SEC. The regulators have to serve as the "sherpas" for any successful effort to prosecute and prevent frauds--they do the heavy lifting and serve as the essential guides for the FBI. Two of the major banking agencies did zero criminal referrals. None has made putting the crooks in prison even a weak priority. Put new leaders in place who believe in regulating and jailing. End the instructions to regulators to view bankers as their "customers." The only client is the American people.
B. End the FBI's "partnership" with the Mortgage Bankers Association (MBA), the perps' trade association. The MBA has convinced the FBI that the lender was always the victim, never the perpetrator. That's why, along with regulatory failure, we have no top executives convicted, as opposed to over 1000 in the S&L debacle.
C. The Department of Justice needs new leadership. Do what we did in the S&L crisis. Create a
"Top 100" priority list to ensure that we go after the elite criminals who caused the greatest wave of white-collar crime in world history--and the Great Recession.
And we must get back to a fiscal policy that genuinely helps to sustain job growth and rising incomes--this, in turn, will stabilize the economy. The costs of increased fiscal stimulus are dwarfed by the costs associated with an irrational reliance on monetary policy gimmicks such as "QE2". Fiscal austerity drains aggregate demand and induces reliance on PRIVATE debt. Today, a large number of Americans still suffer from high private debt levels and correspondingly sluggish income growth. Their ongoing reliance on the banks is becoming the 21st century equivalent of indentured servitude. With higher levels of debt comes higher levels of financial fragility and instability and then economic busts. With recessions we don't just experience extended losses of income. The accompanying costs manifest in the criminal justice system (rising crime), the health system (rising mental and physical illness), the family court systems (rising marriage and family breakdown), etc. The sum of these costs dwarf all other economic costs. And we should not forget that human lives are destroyed by prolonged recessions -- dignity is lost, self-esteem disappears and the children who grow up in jobless households inherit their parents' disadvantage.
If borrowers can meet their payments, lenders will receive their funds and will return to profitability; there will be less need for future bailouts. A full employment policy is also a financial stability policy. With a fully-employed population, you have consumers able to purchase goods with rising income. If they decide to expand those purchases or increase investment in a business via debt, they are better able to service it because a fully-employed person or a businessman with booming sales is far more able to service his debts, which means less write-offs for the banks and therefore less need for bailouts.
Amazingly, this is not only sensible economics, but also good politics. Yes, there is no question that some borrowers were overextended and probably took on mortgages they couldn't afford. But to use this as a reason to avoid the issue of fraudulent foreclosures strikes me as a colossal red herring. To be sure, one should not generally support the principle of abrogating loan agreements via strategic defaults, for example. But when the other contracting party is exposed as a rampant predator/fraudster, it changes the moral calculus considerably. If one ignores fraud, or downplays its significance here, it undermines the rule of law, the very basis for modern democracies. What's the "cost" associated with that? The fiscal austerians and defenders of bailout packages such as TARP (yes, I'm talking to you, Tim Geithner) ought to factor this into their calculations the next time they drone on about what a great "success" these programs have been, based on a bogus measure on how "little" it ended up costing the US taxpayer.
Wall Street bankers turned homeownership into an "investment", so owners ought to treat it like one -- walk away from bad investments. Business people do it every day and no one admonishes them about morality. But if we are going to sanction borrowers for strategic defaults, then it seems wildly inconsistent to avoid the issue of fraud, as well as recognizing that eliminating it (or significantly mitigating it) is the only basis on which we can construct a sound financial system going forward.
# # #
Diarist's Disclosure: HERE and HERE.