Nonfeasance in Financial Oversight

“The system is completely broken. It’s amazing that the system ever worked at all.”
-Marc L. Weinberg, Acting Executive Director and General Counsel, Appraisal Subcommittee

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Last night, we discussed various kinds of real estate related fraud; Appraisal fraud was front and center.

This morning, I stumbled across an interesting Associated Press article on the governing rules on Appraisals: Weak rules cripple appraiser oversight. It is rather fascinating:

As soaring home prices set the stage for America’s great housing meltdown, a critical step in making sure those home sales were a fair deal  — the real estate appraisal  — was undermined from within. After the nation’s last major banking disaster, Congress set up a system to catch rogue appraisers. Their game: inflating the value of homes at the direction of equally unscrupulous real estate agents and mortgage brokers, whose commissions are determined by the size of the deals.

But a six-month Associated Press investigation found that the system is crippled by both the bumbling of its policemen and their inability to effectively punish those caught committing fraud. And despite ample evidence appraisers are pressured into inflating home values — sometimes to prices in support of loans that are more than buyers can afford — the federal regulators charged with protecting consumers have thus far made a conscious choice not to act. (emphasis mine)

This has been a very consistent element of the entire housing boom and collapse, as well as the very related credit crunch: An abdication of responsibility from the very entities assigned to supervise and regulate various aspects of our financial system.

Its as if the referees were on the field, but made the ideological decision against making any calls so as not to sully the purity of the game.

This wasn’t mere Incompetence (doing a job poorly) or Malfeasance (commission of an unlawful act) — this was Nonfeasance — the Failure to perform an act that is either an official duty or a legal requirement.

If I had to select a single word to describe the Greenspan era of the Federal Reserve (and to a lesser degree, the Bush White House) Nonfeasance is the word I would choose.

How bad was the Nonfeasance this last housing cycle? An Associated Press investigation, including  “dozens of interviews” and the review of “thousands of state and federal documents” found that:

• Since 2005, at the height of the housing boom, more than two dozen states and U.S. territories have violated federal rules by failing to investigate and resolve complaints about appraisers within a year. Some complaints sat uninvestigated for as long as four years. As a result, hundreds of appraisers accused of wrongdoing remained in business.

• The only tool federal regulators have to force states into compliance is so draconian — it would effectively halt all mortgage lending in a state — that it has never been used.

• Both state appraisal boards and the federal agency tasked with their oversight are chronically understaffed, many with only one full-time investigator to handle the hundreds of complaints that arrive each year. Some don’t even have an investigator.

Note that as far back in 2005, Appraiser organizations were testifying in Congress that appraisers were under increasing pressure from lenders, mortgage bankers and real estate agents to “hit their number” when appraising property (Appraisal fraud: your home at risk).  The pressure from mortgage brokers, lenders and RE agents had become so widespread that “more than 8,000 appraisers – roughly
10 percent of the industry – have signed a petition asking the federal
government to take action.”

The response was yet more Nonfeasance.

Why is this so significant? Consider what Appraisers are supposed to do: Come up with a true value of a home’s worth free of any outside pressure. As the AP article noted, more than three dozen appraisers nationwide interviewed “said they often felt pushed by a real estate agent or mortgage broker to fraudulently inflate a property’s value. They supplied the AP with documents from lenders asking them to “hit a number.”

Back when that petition in 2005 went to Congress, here is what CNN/Money wrote:

“A puffed up appraisal can have serious consequences for a homeowner down the road.


“There are a lot of people who have refinanced for more than their
homes are actually worth and they’re effectively already upside down
even without a real estate bubble bursting,” said Callahan. Down the
road if they have to sell or decide to refinance, a more accurate
appraisal might show that they owe more than the house is worth.

“The real issue is on the refinance side where people are cashing
out of their equity on the basis of higher and higher values,” said
Zielinski, who before accepting a job e-mails lenders and brokers to
remind them that he is obligated to appraise property based on market
conditions, not a predetermined value. “Conservatively, I’d say that 10
percent of the houses I appraise are worth less than the mortgage on
them.”

One overvalued appraisal can skew home prices throughout a
neighborhood, according to the Appraisal Institute’s Kelly. “If a house
is appraised for 10 percent or 15 percent more than it’s actually worth
and the sale closes, it may be used by another appraiser as a
comparable sale the very next day,” he said. “It has a ripple effect.”

That could have even greater implications, said Martin. “The
cumulative effect of appraisal fraud is you may have investors holding
mortgage debt that’s backed by real estate worth less than they think
it is,” said Martin. “It’s a train wreck waiting to happen.”

Your train wreck has arrived on Track 1 . . .

Previously:
Fraud in Real Estate, Mortgages & Homebuilders (August 2008)
http://bigpicture.typepad.com/comments/2008/08/fraud-amongst-h.html

Sources:
Weak rules cripple appraiser oversight
Mitch Weiss
Associated Press  August 17, 2:12 pm ET
http://biz.yahoo.com/ap/080817/mortgage_mess_appraisers.html
http://news.yahoo.com/s/ap/20080817/ap_on_bi_ge/mortgage_mess_appraisers

Also, Washington Post
http://www.washingtonpost.com/wp-dyn/content/article/2008/08/17/AR2008081701229.html

Appraisal fraud: your home at risk
Appraisers say they’re being pressured by lenders to inflate their estimates of home values.
Sarah Max
CNN/Money June 2, 2005: 9:56 AM EDT
http://money.cnn.com/2005/05/23/real_estate/financing/appraisalfraud/index.htm

Related:
Arizona bans Zillow from offering real estate estimates
http://www.downloadsquad.com/2007/04/17/arizona-bans-zillow-from-offering-real-estate-estimates/

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What's been said:

Discussions found on the web:
  1. Jeff M. commented on Aug 18

    I saw this article last night as well. To me, this is at least some proof that lack of any oversight/enforcement of existing regs along with significant short-term incentives produces a distortion of behavior (e.g. gaming of the system). Those who advocate 100% unfettered free markets (the Friedman, Rand, Ron Paul disciples, etc.) should note that such “free” markets often produce this kind of behavior when the incentives for short term gains are large because people cash in and generally don’t care about the repercussions afterwards (they just move onto to something else). Ideally, unfettered free markets based on the idea of self interest (keeping one’s reputation intact for doing business) should work, but as we’ve seen, we don’t live in an “ideal” (utopian) world. When there’s a lot of money to be made in the short term, distortions of behavior follow. I know I’ll get slammed by the Libertarian/Friedman/Paul idealogues here, but so be it. I think I’m right here……

  2. Marcus Aurelius commented on Aug 18

    Nonfeasence extends into all aspects of our government. The most dangerous manifestation of this trend is the failure of law enforcement to investigate/prosecute blatant criminality.

    We need to be able to sue our officials for specific performance of their mandated duties.

  3. leftback commented on Aug 18

    Nonfeasance.. you do enjoy a neologism now and again don’t you?

    I see the word is out on Phony and Fraudy – imagine your surprise as investors second guess themselves…!!!

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aNJf30bLaWT4&refer=home

    OMG, I am shocked, shocked.. to find that fund managers have placed investors money into these lumbering and soon to be extinct dinosaurs…!!!

  4. Lawrence commented on Aug 18

    Except Nonfeasance is an existing word:

    NON FEASANCE – The non-performance of some act which ought to be performed.

    When a legislative act requires a person to do a thing, its non feasance will subject the party to punishment; as, if a statute require the supervisors of the highways to repair such highways, the neglect to repair them may be punished.

    Mere non-feasance does not imply malice; this is strongly exemplified in the case of a plaintiff, who, having issued a writ of capias against his debtor, afterwards received the debt, and neglected to countermand the writ, in consequence of which the defendant was afterwards arrested. On a suit brought by the former defendant against the former plaintiff, it was held that the law did not impose on the first plaintiff the duty of countermanding his writ. If he had refused to give the countermand when requested, it might have been evidence of malice, but in such case there would have been something beyond mere non-feasance, an actual refusal.

    There is a difference between nonfeasance and misfeasance, or malfeasance.

    http://www.lectlaw.com/def2/n066.htm

  5. Walker commented on Aug 18

    This has been a very consistent element of the entire housing boom and collapse, as well as the very related credit crunch this administration.

    There, fixed that for you.

  6. John Navin commented on Aug 18

    I don’t think train wrecks “arrive.” It’s more like a lot of waiting at the station and, at some point, no train, but the bad news “arrives.”

  7. Douglas Watts commented on Aug 18

    This wasn’t mere Incompetence (doing a job poorly) or Malfeasance (commission of an unlawful act) — this was Nonfeasance — the Failure to perform an act that is either an official duty or a legal requirement.

    Excellent point. I am now in involved in a lawsuit at the Maine Supreme Court over this very question: ie. whether a state agency is legally required to correct a defective license or the agency has the authority to not correct it — at their sole discretion. The State of Maine is taking the position that an agency can refuse to fix legal defects in a license even if the defects create a public health hazard. Pretty weird.

  8. me commented on Aug 18

    ty Walker

  9. jim commented on Aug 18

    Not sure why everyone is so shocked that this was happening, appraisers are part of the real estate triangle that was just as guilty as brokers & agents.

    In the US, when the choice is between greed and ethics, greed usually wins out.

  10. Steve Barry commented on Aug 18

    My friend was a subprime mortgage broker in Connecticut for a big name bank. He would call existing bank customers, armed with their credit report. He knew who had other forms of debts. He offered to roll all their debt into one lower monthly payment and he could do it. Unfortunately, it was an ARM based on a pumped up appraisal with 100% LTV. It would reset to 12% in a few years, but not to worry…you’ll re-fi before that happens.

    What’s happening now is they can’t re-fi, as subprime lending is gone, the home is not worth the appraised value, prices are falling and you can’t do 100% LTV anymore…foreclosure city.

    In this case, I have to blame, in this order:

    1) Greenspan
    2) Bank
    3) Appraiser
    4) Subprime broker
    5) Borrower

    The ranking is according to who should have known better and extent of damage by their action or inaction.

  11. bdg123 commented on Aug 18

    The nonfeasance is a Wall Street problem. Of course, I realize you can’t say this because your employment is at least partially contingent on placating the machine. I don’t begrudge that fact. I actually appreciate your position – many of us have been there in some form.

    But, the reality is none of this could have happened without Wall Street’s loose money, packaging and selling of toxic trash and other unsavory antics. Additional proof points within the system are coming to light that also point directly to Wall Street. That includes people going to bed hungry because of rampant speculation in food markets. Most of what is becoming apparent have nothing to do with real estate. The bigger issue is Wall Street nonfeasance with the complicity or naivety or both of government.

  12. Bruce commented on Aug 18

    Barry,

    On a longer term basis, I have been disappointed most of my adult life after our elections…by that I mean, when you listen to the pre-election promises, you think that this time the (fill in the blank) you voted for will actually behave the way you would if you were in office.

    You expect him or her not to spend more money than they take in, not to send us to unnecessary wars, to act prudently, to realize that they have a position of trust…

    But nonfeasance in office for many decades has produced this mess, true of elected officials, bureaucrats, those who are supposed to look after us…

    Oh, well……

    Bruce in Tennessee

  13. Dr. Kenneth Noisewater commented on Aug 18

    I don’t think train wrecks “arrive.” It’s more like a lot of waiting at the station and, at some point, no train, but the bad news “arrives.”

    It depends on the distance from the station and the energy of the wreck, I would think… I can imagine a smoking ruin sliding into a train station and halting only when it hits the endstop..

  14. GB commented on Aug 18

    BR

    Just thought of some more fraud in the industry. 1) Local governments rezoning for a small bribe I mean donation.

    http://www.latimes.com/news/nationworld/nation/la-na-chicago7-2008aug07,0,1244199.story

    2)Maybe not fraud but local municipalities can reject new housing permits if they feel the area is overbuilt. This town in MN below had 430 permits during the strong growth. This year 55. Don’t you think the number of permits should be controlled? Or at least watched?

    http://www.startribune.com/local/west/17989859.html?page=2&c=y

  15. Donkei commented on Aug 18

    If the appraisers were guilty of Nonfeasance, the fed was guilty of Malfeasance.

    This is a tale of self-interested (i.e., normal) people, behaving predictably in the circumstances in which they found themselves. The Nonfeasance, the looking the other way, would not have happened had money not been so readily and cheaply available.

    For that, it’s the Fed’s fault, and what the Fed did was deliberate. It was malfeasance.

    You can’t expect an appraiser, or anyone for that matter, to have behaved like a saint in the face of the temptations offered by easy, easy money such as prevailed after 9-11, particularly considering the perceived lack of risk (houses alway go up in value, no?).

  16. Dan Duncan commented on Aug 18

    Just like modern medicine has difficulty treating chronic ailments, the law has diffculty framing the issues with respect to chronic, yet passive fraud.

    Yes, the fraud is riddled with non-disclosure and intent to deceive. Only, the one being “deceived” is actually encouraging the deceit. Self-Induced Fraud? More like a murder by suicide in this industry.

    Only, the perpetrator/victim/Lender gets to collect insurance payouts from the title insurance companies and E&O carriers when things go sour.

    Perhaps these insurance companies should take a page from the playbook of Life Insurance Companies and be more rigorous in their detection of self-induced, self-inflicted wounds.

  17. Bryce Baril commented on Aug 18

    This reminds me of an appraisal done on my last house. The extent of the appraisal was the appraiser taking a single digital photo of the house from across the street. He never even set foot in the yard. Go figure that the appraisal came in at exactly the number that the loan officer wanted– no more, no less.

  18. Seriously. Go On. commented on Aug 18

    West Michigan appraisers say they are asked to ‘hit the number’

    “A lot of it started when all the loan originators went on commission,” said John Meyer, immediate past chairman of the Michigan Council of Real Estate Appraisers, a subcommittee of the Michigan Association of Realtors.

    He was hopeful recent legislation regulating loan originators might help stem the tide.

    Meanwhile, the state does not have enough funding to investigate all complaints, he said.

    “It could be a couple of years from the time a complaint is filed until something comes of it,” he said. “In the mean time, the guy can literally be appraising thousands of other properties.”

  19. johnnyvee commented on Aug 18

    Don’t be suprised if they get rid of appriasers altogther. How? Just put 50% down.

  20. wally commented on Aug 18

    I really have to disagree to some extent with the premise of this story. Even if there was no malfeasance or nonfeasance, it is not possible for a system of appraisals based on comps to “Come up with a true value of a home’s worth free of any outside pressure.”
    If prices start rising, as in a bubble, appraisals will rise up with them. The error here was people’s lack of judgment. In most cases they weren’t driven to that by a few ‘bad’ appraisals, they went there of their own choice. They were motivated by herd instinct, by greed, by a desire to be not left out – whatever. What is happening to so many Americans now goes on them, not on a scapegoat.

  21. John commented on Aug 18

    My wife was a SRA residential RE appraiser from the late 1980s through about 2000 . She quit this profession because of the increasing pressure from loan officers and even underwriters to “get the value up” to make the deal work .

  22. advsys commented on Aug 18

    I hate to say it but there has to be more to this. In every system there is generally a loser when the the game is rigged. That person then gets mad and fights back. Thus creating a sort of checks and balances.

    This has been lacking through out this entire process. It is still true even as we are seeing things fall apart. I don’t know how this came to be nor when and if that will change but it seems to me that we have to look at ourselves and our lack of something before we can put all the blame on some regulator.

    Is this a cultural thing? What part of human nature has changed or failed us?

    Now don’t get me wrong. I understand that greed and power were at play here and in a very big and powerful way. All I am saying is that we should try and understand what role we all played that allowed this to happen.

  23. Agoracom commented on Aug 18

    CFO’s were “pressured” into cooking the books of public companies.

    Appraisers were “pressured” into pricing homes higher.

    WTF? Are the markets being run by the mob? Just how much “pressure” could some real estate agent put on an appraiser? Are the Century21 gold jackets actually a cover of nation wide bad-ass real estate agents?

    “Pressure” actually means:

    “The good times were rolling, the real estate agent was paying me some dough under the table and I was a greedy bastard who doesn’t want the tail to be pinned on my ass now that the pyramid scheme collapsed.”

    The American financial system is BROKEN. White collar crime over the last 10 years has done more damage than MS-13, Bloods and Crips.

    Something needs to be done and it has to be done soon. I am tired of hearing “pressure” as an excuse for failing to fulfill a duty.

    People = the biggest wall street players to the smallest administrator in a local office.

    People need to go to jail for a very long time.

    People need to be humiliated and have their careers ruined.

    People need to stop thinking the system is their own piggy bank.

    People = more than just a couple of high-profile examples. We need mass incarceration.

    People need to get back to their jobs and stop cutting corners to fulfill their material needs.

    People need to realize there is more to life than money. If you can make a boat load legit, great. If not, don’t use fine print to steal from others.

    The American financial system is broken.

    Regards,
    George

  24. Andrew Mackenzie commented on Aug 18

    Forgive me if I’m missing something. I’m a student. But, if someone chooses to take out a mortgage, aren’t they consciously determining that they are capable of paying that mortgage?

    To take from a comment by “Jay Walker”:
    “‘Intrinsic’ value is meaningless in the context of market sales – properties are worth what they can be sold for, just like stocks”

    Who cares how inflated these houses were if people were still willing to take out mortgages on them? It seems to me that the issue here is the shoddy mortgages, not that people were willing to pay for over-appraised houses.

    If I buy a Milky Way for $2 but it would normally only be worth $1, who do I have to blame but myself? And furthermore, who determines its value? Maybe I was very hungry. Maybe I’ve got a lot of cash and I have no problem spending it. To me it was worth $2. And if the cashier tells me it is surely worth $2, and I choose to listen to them and purchase it for that price, how have I been defrauded?

    As I have elaborated on before, I don’t place all the blame on the buyer for the crisis. But I have no sympathy for someone who makes the decision to buy something they can’t afford in the first place.

    And as for nonfeasance, are you REALLY that surprised that government fails to carry out even its simplest obligations? We’re talking about government, here…

    ~~~
    BR: Andrew, don’t get sucked into that line of thinking.

    Police, Schools, Defense, Internet, Space Exploration, Interstate Highways, Coast Guard, etc.

    There are lots of things the government does well — this wasn’t an example of doing a job poorly — this was PURPOSEFULLY REFUSING TO DO ANY REGULATION because of an ideological bend (less regulation is better).

    Your are getting sucked into what is an effective line of propaganda …

  25. Paul commented on Aug 18

    Wally has a good point. The appraisal industry does not have the tools to come up with an exact value of a property, yet that’s what they do. I’m in FL and a few years ago I took the course to become a licensed appraiser. After succesfully competing it I reviewed the appraisals on all the properties I had bought and sold in the previous couple of years. Not one of the appraisals conformed with standards, and in most cases it was not possible to generat an appraisal within the standards. (Usually no suitable comps within a mile and within six months.)
    The appraisal process is simply not up to the job and really never will be up to predicting exact property values. Plus or minus 10% is as good as it will ever get, which makes zero down loans simply stupid.

  26. Jeff M. commented on Aug 18

    @Andrew MacKenzie: There WAS a time when PARTS (not all parts, but many parts) of the government did it’s job very well. This is what happens when our governement gets hijacked by those free market cures all idealogues who DON’T BELIEVE IN GOVERNMENT doing anything well, other than for filling the pockets if its corporate cronies. This is the diabolical genius of the GOP – they claim to not believe in gov’t doing anything competently, but take over the very gov’t functions they claim to not believe them, and then run things so poorly and virtually into the ground to prove their point so that people don’t believe that gov’t can do anything competently anymore. Follow the logic? Too many people don’t these days, which is one reason why we are where we are…..

  27. VennData commented on Aug 18

    What is the difference between the appraisers and the credit rating agencies? Zero.

    You can add FDIC insurance. All those free market purists out there wouldn’t make any money if they had to inspect the books of any bank they put money into. Can you imagine Granny doing it? The government/FDIC uses the law of large numbers to make a bet that “valuations” of the banks is OK. What’s the difference between that and the appraisers? Zero.

    You can add stock hockers, asset accumulators who do the same with with equities. Zero difference. The whole system relies on someone telling you the truth. Ha.

    The time it would take a human – with the skills – being to analyze everything relevant to every transaction they undertake makes a hash of the “let people make their own decisions” philosophy. It’s another Friedmanite theoretical construct that’s impractical in the real world.

    …until you can change the financial system so that providers of valuation are at risk like you – until the regulators are at risk with you too! – but the fast money Wall Street firms always get their pudding at the regulation-writing trough, so we never get anywhere but set for the next “financial crisis.”

  28. Troy commented on Aug 18

    Your train wreck has arrived on Track 1 . . .

    . . . and 2, 3, 4, 5!

  29. RK commented on Aug 18

    Let me here express my appreciation for the link to the story on the INDYMAC chief appraiser (commercial), a must read as it relates to the systemic fraud on which the residential and commercial bubbles were enabled.

  30. Greg0658 commented on Aug 18

    GB writes – “Don’t you think the number of permits should be controlled? Or at least watched?”

    thats part of the problem & #8 from prior thread
    its more tax base for government, hell offer up a TIF to boot-it into happening and capture those construction jobs

    the next curve on this track is the old dilapidated housing and commercial space that only the strugglers would consider remodeling

  31. Andrew Mackenzie commented on Aug 18

    “@Andrew MacKenzie: There WAS a time when PARTS (not all parts, but many parts) of the government did it’s job very well. This is what happens when our governement gets hijacked by those free market cures all idealogues who DON’T BELIEVE IN GOVERNMENT doing anything well, other than for filling the pockets if its corporate cronies. This is the diabolical genius of the GOP – they claim to not believe in gov’t doing anything competently, but take over the very gov’t functions they claim to not believe them, and then run things so poorly and virtually into the ground to prove their point so that people don’t believe that gov’t can do anything competently anymore. Follow the logic? Too many people don’t these days, which is one reason why we are where we are…..”

    Agreed. The hypocrisy of the GOP is terrible, not that I have much faith in the democrats, either. I don’t really affiliate with either party, and can’t see voting for either of them this year. I’m really bothered by the economics of both parties. The republicans say they’ll bring free markets but never, ever do. The democrats use the failures of regulated markets to make inferences about the free market. In the end, American’s lose faith in the market, and I don’t like the direction that heads us in.

    The GOP’s perverted concept of the free market DOES involve padding the pockets of their corporate cronies. But thats corporatism, caused by government, not the free market.

  32. emailcraigs commented on Aug 18

    You know, I always hear people talking about “the system”. America doesn’t have a system in my opinion. Any financial structure that can’t survive one of its supposed major institutions crumbling from Nonfeasance is not a system. It’s a giant scam that nobody has called out yet. If anything “the system” should be called Nonfeasance instead of “the system”. That way everybody will finally be on the same page.

  33. Andrew Mackenzie commented on Aug 18

    “Your are getting sucked into what is an effective line of propaganda …”

    I’ll give you the points about government, but I don’t believe what I believe because either party has told me so. I don’t think its a propaganda thing (for me, at least). If I eventually come to believe that less regulation is better, its because I’ve considered the facts, not because GWB said so.

    But if it puts lines on your forehead, Barry, my latest read is Murray Rothbard.

  34. leftback commented on Aug 18

    Realtors + mortgage brokers + appraisers = mainly jackasses with HS diploma. A few career criminals sprinkled in, interestingly.

    I rest my case.

  35. Francois commented on Aug 18

    VennData wrote

    “The whole system relies on someone telling you the truth.”

    Amen to that!

    Business need confidence and trust in order to thrive, as opposed to survive. To make sure trust is kept more intact than less, an enforcer is needed to ahem, shall we say, keep the actors with latent (or patent) elastic moral standards to behave properly.

    Take the former out of the equation by action or omission, and the later will run the show. Then, predictably, you going to end up with some serious problems…which is exactly where we are now.

    The real mystery is this: Why are there so many people seemingly unable to grasp this simple concept?

  36. Bruce commented on Aug 18

    Speaking of realtors, Southern California numbers for July…

    http://biz.yahoo.com/ap/080818/california_homes.html

    Sales were up…13 per cent from July 2007, but 44% of the sales were foreclosures…

    In July 2007 the average price was 505,000 now 348,000 down from 355,000 in June…

    Anybody besides me see a trend and a very simple reason sales were up??

    (In July 2007 only 7.9% of sales were foreclosures..)

    Bruce in Tennessee

  37. bumble commented on Aug 18

    But if it puts lines on your forehead, Barry, my latest read is Murray Rothbard.

    Oh, yes. The guy who tells the lambs there is no need for the fence, because the lions will behave nicely. You think you have no control now? Try figuring out how you will fare in a system in which you get crushed at the slightest whim of the rich thugs. Far good your rights will do you, when you try to get them acknowledged and enforced.

    You have only as much rights as what others grant you – whether willingly or out of fear. Whatever rights you get on paper is just that – paper.

    The GOP’s perverted concept of the free market DOES involve padding the pockets of their corporate cronies. But thats corporatism, caused by government, not the free market.

    If you elect people, who think that the govt doesn’t work, then the govt will not work. Govt is not some abstract coconut. Govt is the people you elected to run it.

    You elect people who promise not to govern, and then you turn around and say govt doesn’t work. Circular logic at it’s finest.

    Disagreements about policy does not equate to ‘policy is not required’. Absence of policy is not a policy. You could always choose to see a second doctor who disagrees on the treatment with the first one. But will you ever go see a doctor who says treatment doesn’t work?

    The govt today is a hospital staffed with GOP doctors who say treatment does not work.

    The GOP is a bunch of doctors, who grovel to serve the quacks. The quacks who profit from the failure of the hospital.

    And the people who appointed these hospital doctors – based on the advice of the quacks- want to get rid of the hospital. Instead of owning up to their past delusion about quackery.

  38. Andrew Mackenzie commented on Aug 18

    “But if it puts lines on your forehead, Barry, my latest read is Murray Rothbard.

    Oh, yes. The guy who tells the lambs there is no need for the fence, because the lions will behave nicely. You think you have no control now? Try figuring out how you will fare in a system in which you get crushed at the slightest whim of the rich thugs. Far good your rights will do you, when you try to get them acknowledged and enforced.

    You have only as much rights as what others grant you – whether willingly or out of fear. Whatever rights you get on paper is just that – paper.”

    Nice straw man.

  39. JBL commented on Aug 18

    This is why most of the calls for regulatory reform are nonsense.

    There’s a lot that went wrong, but it’s mostly in two categories:

    1.Fraud, negligence, or mal- or nonfeasance. For the most part we already had the necessary regulations, they just weren’t enforced.
    2. There were also a lot of cases where no regulations were broken but people who had sufficient information to make better decisions didn’t.

    Politicians putting out new regulations won’t fix either category.

    There are certainly regulatory changes that need to be made, but that’s always been true and most of the needed changes wouldn’t have prevented the bubble (at least not singly or directly). The financial industry spends a huge amount of time and money filling out relatively ineffective paperwork, and their resources would be better spent on things like underwriting and real education.

    For those who like to blame the Fed, I would point out that one regulation that should be changed is the Fed’s dual mandate – it’s not realistic to boost the economy in a sustainable fashion by tweaking the money supply. Greenspan is hardly innocent but maintaining stable money wasn’t necessarily what we asked him to do.

  40. Justin Morton commented on Aug 18

    Does anyone find it interesting that Ben Henson publicly admitted he would never begin non-recognition proceedings? Without that enforcement mechanism, what power does the subcommittee actually have?

  41. Jojo commented on Aug 18

    Skeptical CPA
    Saturday, August 16, 2008
    The SARBOX Scam

    “A fired bank executive who became the first person to win protection under a federal law that shields whistle-blowers, only to see his victory overturned, suffered another setback in a federal appeals court Tuesday. A three-judge panel of the 4th U.S. Circuit Court of Appeals, did not reinstate David Welch to his job, ruling that he failed to explain how his employer’s shoddy accounting practices could be considered a violation of federal law. … Since Sarbanes-Oxley was signed into law, more that 1,000 self-professed whistle-blowers have come forward, and most have seen their cases rejected. Welch was the first to win his case before an administrative law judge, but that decision was reversed in June 2007 by the Department of Labor’s [DOL] Administrative Review Board, Houston Chronicle, 6 August 2008.

    More Nonfeasance!

  42. john commented on Aug 18

    Seems to me all the people on here acting “surprised” and “calling for action” are being a bit delusional.

    * Companies exist to enrich the management.
    * Equity holders “hire” THE most scamming management they can stomach hoping that the management screws the customers more than themselves (the stockholders).
    * Management runs the company for their own – and their buddies – benefit.
    * Government policy is set by politicians owned by corporate and wealthy “donors”.
    * The peasant voters are convinced that government is screwing them and giving all their tax money to “those people”.
    * The politicians tell these peasants that only deregulation can “free” the “hard workin’ honest `merican bidness man” from the “evil clutches of those leftist regulators”, regulators that actually LIKE giving “those people” welfare.

    Sounds to me like things are working exactly as planned.

    Look out, behind ya, the fornicating harlots are gonna corrupt your mind, run… run!!!

  43. Vincenzo commented on Aug 18

    During 2005 and 2006, I was working for a large county government client in one of the states being hit hard right now. I can assure you that they knew this was going on. Why was nothing done about it? Real Estate taxes! Increased real estate values create increased tax revenues, and real estate taxes generate the largest portion of tax revenues for these entities – by far. Some of these government entities had unbelieveable increases in real estate tax revenue. Let’s face it. Everyone looked the other way because they all benefited by doing so.

  44. DownSouth-ie commented on Aug 18

    Where is DownSouth?? His Sepulveda quote belongs here, I think. Something about how the laws of Spain were on the books but no one followed them.

Read this next.

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