Technology creates new problems that require new solutions. New technology then creates additions to the original problems that require more solutions. No one voted on being able to sign up for credit cards online, but it happened and identity theft took off. Consumers should be able to vote on this with their pocketbook, but there is one problem. Our government stopped caring about antitrust law, and we never really put in protections against oligopoly. Corporate consolidation meant fewer options, and a bad choice by a company for efficiency cannot be avoided. We are victims of scale.
An interesting symptom of our scale problem is the entire housing casino that our elites created. Scale is not just the size issue, but the acronym of size, complexity, atomization, liberalization, and elitism. Looking at our housing debacle, scale fits perfectly. Make more loans, securitize the asset, offload it onto someone else for a few points above Treasury bonds, collect a fee for processing and servicing, and leverage up. Only credentialed experts can allocate capital and make the proper loans.
Reduce costs through efficiency. Automate as much as possible to just read the data and not verify. Efficiency means streamlined approval processes. Approval processes means the loans must meet a base minimum underwriting standard to have the loan packaged and sold off. Keep growing the pot bigger while shrinking who collects the winnings to concentrate more wealth.
Hustle and lies created borrowers, but the size of the problem now creates new scams. Some slick mortgage firm created NINJA borrowers (no income, no job, or assets), but someone on the other end allowed for underwriting standards to accept that risk and market it to asset buyers. Off-loading the risk and separating borrowers from lending institutions created more holes for others to fill. Who files complaints? Who defends the little guy when the process is automated? Brookstone Law fills a need and hole with a great pitch. Sue the bank keep your home.
It is a great pitch and one that works well for any American angry at the legal system and desperate to stay in their box. These guys are also fraudsters. Forget the Bloomberg article, even amateur sites were onto the spotlighted scam law firm. Is it technically a scam? That is the problem with our financial and legal system. We encourage such twisting of the law and legal loophole-finding that the line between law-abiding and law-breaking behavior is blurry. The size of our system and scope of our housing problem allows weasels like these men to wiggle into a spot and collect millions.
Bloomberg scolds this law firm, but the system allows it. This law firm benefits from honest laws that give individuals the right to challenge the foreclosure process. Just filing the proper forms and asking for extensions gives homeowners time to plan a next step and not have to pay their mortgage. This specific law firm is manned by former crooks, but our American legal system looks softer at what we call white collar crime. Due diligence is the homeowner’s responsibility, but we are already discussing a stressed and frazzled homeowner behind on mortgage payments. A snazzy website with a solid sounding name can trick just enough of the people to reap millions for sharps with questionable ethics. Law firms like this firm are also helping the banks.
These delaying actions give the banks a breather as the home retains an occupant to prevent the banks from having to perform upkeep. Not foreclosing means they do not have to realize the loss on the property, as now their collateral is worth far less than the loan they secured it with. The banks dragging their feet on foreclosing some high-end California homes was not about helping the wealthy out as much as it was delaying the recognition of a loss on the loan. To recognize such losses would have brought calamity to the banks.
For our current political-economic system, that cannot be allowed to happen. The five biggest U.S. banks control half of the industry’s total assets. These banks fund our political elites and need government sanction and blessing to continue their control over the allocation of capital not just in America, but within the American empire. These same banks have the majority of total derivatives, as the government’s lack of regulation of derivatives acts as an economic moat for those same banks. If the banks go down, the danegeld holding together the Left is threatened and large corporations suddenly have to adjust long-term planning.
Our government went along with this because it sold out the productive elements of our economy for a FIRE economy. A FIRE economy is the one based on the marginal borrower. How low can underwriting standards go to extend the margins? It boosted aggregate GDP. Asset holders and information gatherers over natural resource extraction and product manufacturing. Capital over labor. GDP über alles. We had to grow the economy to soothe the Left to pay for those social welfare programs through taxation and a large economy to perform a nation-sized leverage buyout. It soothed the Right, as economic interests were pacified and the pitch to the voters that the Right would make them materially better off worked. No one questioned the continual centralization and consolidation of decision-making, since it made things more efficient.
Because of the size of dollars and institutions involved and the limited number of credentialed geniuses at work, wealth and income concentrate and million-dollar scams pop up like the Brookstone Law firm. The system’s scale and scope changed home mortgages from a relationship between two locals (lender and borrower) forging a relationship in their community into a transactional relationship for lowest cost and efficiency. Brookstones’ pop up because they fit a transactional need, just like the newly-minted mortgage originator did. Brookstone is an unintended consequence of the financialization of our economy. Brookstone is a side effect of the cure that easy money will fix the economy–like the fine print side effects of Big Pharma’s supposed cure-alls: take the pill, the experts said so, and just keep quiet about the negative side effects a few of you little people face. There is too much money at stake for the big boys to slow down for you.