Mortgage fraud, another Enron?
The StarTribune reported today on another criminal investigation of mortgage fraud. While it is a good thing that someone is going after these people for the fraud they have committed, it would have been much better if someone had been guarding the hen house in the first place. The eggs are now gone and a lot of people won’t be eating eggs for breakfast in the comfort of their own home. Trapping a fox or two won’t change that.
We saw what enormous damage the Enron debacle did to our economy, not to mention all the individuals whose savings were wiped out. The entirety of the mortgage mess, while not quite as dramatic a fall, ultimate may impact more lives and do greater harm to the economy.
So will we learn that regulation is needed? Probably not. There maybe a few band-aids put on until the wounds heal, but band-aids either fall off or are taken off. There is a large segment of society that believes that government regulation is evil, that it stifles the free market, so they do everything they can to de-regulate the market and inhibit the regulators. Those same people also are the leaders of the Tort deform movement. They wish us to forget that lawsuits and the resultant jury awards are part of the marketplace. Lawsuits are the marketplace, in the form of a jury, punishing reprehensible conduct. One must not forget that especially in the consumer marketplace many of the laws against deceptive trade practices are meant to be used by one business against another to prevent conduct that deceptively externalizes a cost, thereby under cutting competition.
Tags: de-regulation, deceptive practices, fraud, free market, loans, mortgage fraud, regulation, tort deform, Tort reform
Filed under: Uncategorized
Awesome post. What do you think about H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007?
I can’t speak for Nick, but I briefly touched on the bill recently. I called it an
I am in general agreement with Sam and many others about the bill. While it does attempt to remedy a number of problems and is actually based on recently passed Minnesota Laws, the good is outweighed by the Federal preemption, which is always bad and especially in the consumer realm. The market quickly learns the loopholes, some of which are expressly built into the bill, and then it is nigh impossible to get meaningful change until the problems overwhelm us. States are much more nimble at addressing problems, though even they are slow. The courts are often the fastest and most nimble, which is why Tort Deform is such a big issue. As I alluded to in the post, I am a strong believer in the legal system as a form of check and balance on the market in the form of injunctive relief to prohibit conduct and jury awards to punish wrongful conduct. But that requires strong general consumer fraud and deceptive practices laws. It also is important to have statutory damages and attorney fees. HR 3915 does increase these but no where near enough.
Overall, I would give it thumbs down. If they got rid of the preemption though…