STOCK MARKET WATCH -- Tuesday, 5 June 2012

[Demeter]

15. Matt Stoller: On Foreclosure Fraud, One of the Good Guys Gets a Win for a Change

http://www.nakedcapitalism.com/2012/03/matt-stoller-on-foreclosure-fraud-one-of-the-good-guys-gets-a-win-for-a-change.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

...Most people don’t know Lynn Symoniak, but the banks certainly do. And so should you. If you want to know how the foreclosure fraud scandal was uncovered, she is a key figure. I first encountered her work in 2009, when I was a naive bewildered staffer working on policy issues I didn’t quite understand with enthusiasm and adrenaline that could partially make up for the ignorance.

In 2009, I was a Congressional staffer focused on the complex awkward mash note to regulators that eventually became known as Dodd-Frank. The financial crisis was in full effect, with hearings that for all intents and purposes were held with caps locks enabled. Every week was a new scandal or systemic risk, from AIG bonuses to multi-trillion dollar Fed balance sheet expansions. I didn’t know a lot about how banking regulations interacted with the real economy at the time, but then, it didn’t seem like that was the main criteria for working on the Financial Services Committee. The committee was not set up to do good policy, it was designed explicitly as a fundraising mechanism for new members of Congress. The ignorance of those on the committee was remarkable, to which anyone watching hearings at the time could attest. Rep. Brad Miller, who is a real legislator and a geek on mortgage issues, has said that he had to look up the meaning of credit default swap on Wikipedia in 2008. That’s the level of information we’re talking about. To be fair, the world at large didn’t know much about the true nature of the financial system, and frankly, neither did many people inside the big banks.

But still, this was a committee in Congress charged with oversight of the capital markets, so it was confusing that there seemed to be a lack of basic knowledge of how the system worked. Actually, that’s not quite right – many staffers and members on the committee had a wide and deep well of financial expertise, but it was built on faulty assumptions about credit. The cocoon of lobbyists had created an environment inevitably built on groupthink, on the idea that the big banks were somehow good for society. Staffers had to increasingly ignore the suffering of homeowners and mounds of data on income inequality in order to believe this. This is not so hard to do in DC, there is a lot of money and infrastructure invested in ignorance. Applied ignorance, however, has a psychological side affect. In order to believe that your bad harmful decisions do not invalidate you as a human being, a wonderful sense of aggressive ignorance had to be paired with an almost artistic level of privileged self-pity.

One story should suffice to describe this attitude. A staffer once turned to me after a hearing that ran late and actually said, in typical Capitol Hill asshole fashion, ”our job is so hard”. I looked at his plushy chair and the enormously fun and interesting subject matter before us, and momentarily enjoyed the hatred I felt for him. That was the attitude. Self-pity mixed with ignorance and privilege. My guess is that he’s now working for some trade association for predatory lenders talking about the need for creative credit products to serve under-banked communities, and making an enormous amount in the process. Now, this does not apply to everyone – there are spectacularly brilliant morally upstanding people there, and they are the reason that policy success happens, when it does. But that was/is the general vibe...