It's hard to imagine the present American economy getting healthy without the housing market being fixed. Even a Dow at 36,000 would have limited impact with housing prices down another 10-20%, as very few in America have any wealth in the stock market, if they have any savings at all. Much of it is in their homes, and that continues to get eaten away. So Chris Whalen's Reuters piece accompanying his downgrading of Wells Fargo due to the continuing mortgage fiasco -- Yves Smith continues with best coverage on this issue -- is well worth the read.
Whalen makes an excellent point about the courts and mortgage crisis. He writes:
The US banking industry would have been far better off if they had allowed sane bankruptcy reform to be enacted with respect to restructuring of first mortgages. Over-burdened home owners could discharge unsecured debt and modify mortgage loans under the watchful eye of bankruptcy judges, who understand how to balance debtor and creditor rights.
Instead banks seeking foreclosure now face state court judges, who are elected by the people in their communities and not used to the intricacies of Wall Street finance. State courts are taking a much harsher line with banks than would federal bankruptcy judges. Banks seeking to conduct foreclosures are being met by a phalanx of judges that now say "show me the mortgage note and prove you are the one with the right to foreclose or I will not act on your pleadings."
This is a lesson in American democracy 101 -- the separation of powers. The genius of the American system was not to centralize power in DC, but to separate it -- with three branches of government, but also balancing DC with the states, localities, and finally the ultimate power in the citizen, we the people. The agrarian era architecture of our government set up by America's founders always had a hard time dealing with the new industrial era and its most powerful and insidious creation, the corporation. In the 1930s, in response to the crisis of the national/global economy created by the industrial corporation, the New Deal was born, and liberals en masse headed to DC to rule briefly for a few decades. This lasted until the modern corporation and its entrenched interests could gain control, making present DC both eminently corrupt and dysfunctional, a fact our remaining liberals continue to either ignore or discount.
Matt Taibbi has an excellent piece documenting the most open and not even the most egregious of crimes committed by banking and finance, which the complicit powers of DC ignore. No one goes to jail. It reminds me of the California Energy scam 10 years ago, where again no one went to jail and the Clinton FERC sat on its hands as the people of California were fleeced by multiple energy companies and Wall Street. The fact is the American system is broken, but paradoxically its redemption lies in restoring and evolving the system. At this point, what is missing most is courage.
It is time to think much larger than worrying every day about what happens in DC and to liberals. I can only point to a piece in the LA Times yesterday regarding Egypt:
Not wanting to be left out of the future government, two competing groups of young activists are meeting with the military and distancing themselves from longtime opposition figures they regard as inept and weakened from years of oppression by Egyptian security forces.
Joe Costello was communications director for Jerry Brown’s 1992 presidential campaign and was a senior adviser for Howard Dean’s effort in 2004.