Posts filed under “Foreclosures”
Adam Smith, Leading Austrian Economists and Other Free Market Advocates Are For the Prosecution of Fraud
There is a widespread myth that free market supporters are against regulation or prosecuting fraud.
In fact, Adam Smith – the father of free market capitalism – was for regulation of banks, and believed that trust is vital for a healthy economy. Because strong enforcement of laws against fraud is a basic prerequisite for trust, Smith would be disgusted by the lack of prosecution of Wall Street fraudsters today.
Smith railed against monopolies and their corrupting influence. And Smith was pro-regulation, so long as the regulation benefited the little guy, as opposed to the wealthiest:
When the regulation, therefore, is in support of the workman, it is always just and equitable; but it is sometimes otherwise when in favour of the masters.
Richard Posner – one of the leading proponents over the course of many decades for removing the reach of the law from the economy – has now changed his mind.
So has another leading proponent of deregulation and turning a blind eye towards fraud: Alan Greenspan.
While some promoters of a fake version of Austrian economics are anti-regulation and against prosecuting fraud, the main Austrian economists were unambiguously for them.
William K. Black – professor of economics and law, and the senior regulator during the S&L crisis – notes that leading Austrian free market economists said that fraud must be prosecuted:
Real Austrian economists … hate elite frauds and want them prosecuted vigorously. Ludwig von Mises and Friederich Hayek are the two most famous Austrian economists.
Hayek, F.A. The Road to Serfdom
To create conditions in which competition will be as effective as possible, to prevent fraud and deception, to break up monopolies— these tasks provide a wide and unquestioned field for state activity.
The Constitution of Liberty
There remains, however, one other kind of harmful action that is generally thought desirable to prevent and which at first might seem distinct. This is fraud and deception. Yet, though it would be straining the meaning of words to call them ‘coercion,’ on examination it appears that the reasons why we want to prevent them are the same as those applying to coercion. Deception, like coercion, is a form of manipulating the data on which a person counts, in order to make him do what deceiver wants him to do. Where it is successful, the deceived becomes in the same manner the unwilling tool, serving another man’s ends without advancing his own. Though we have no single word to cover both, all we have said of coercion applies equally to fraud and deception.
With this correction, it seems that freedom demands no more than that coercion and violence, fraud and deception, be prevented, except for the use of coercion by government for the sole purpose of enforcing known rules intended to ensure the best conditions under which the individual may give his activities a coherent, rational pattern…..
Liberty not only means that the individual has both the opportunity and the burden of choice; it also means that he must bear the consequences of his actions…. Liberty and responsibility are inseparable.
Government ought to protect the individuals within the country against the violent and fraudulent attacks of gangsters, and it should defend the country against foreign enemies.
Black also notes that fraud is a leading cause of financial bubbles and malinvestment – two of the greatest sins which Austrian economists rightly fight against.
Unless financial fraud is prosecuted, bubbles will be blown … and when they burst, the economy will tank. Fraud – along with bad Federal Reserve policy – is what causes bubbles in the first place.
The Proof Is In the Pudding: Fewer Prosecutions Equals a Worse Economy
The economy is worse than it has been since the Great Depression, if not before.
Everyone Supports Laws Protecting Contract and Private Property Rights
Even the most radical free market advocates support laws protecting contract and private property rights. In other words, they support the judicial branch of government and the basic laws Congress passes to support such rights.
There are obviously good, pro-competitive laws and bad, anti-competitive laws.
Paul Craig Roberts – a true conservative, who was a Wall Street Journal editor and Assistant Secretary of the Treasury under Ronald Reagan, and is widely credited with being the “father of supply-side economics” – points out:
Regulation can increase economic efficiency and … without regulation external costs can offset the value of production.
Thirty-three years ago in an article in the Journal of Monetary Economics (August 1978), “Idealism in Public Choice Theory,” I developed a model to assess the benefits and costs of regulation. I argued that well-thought-out regulation could be a factor of production that increases GNP. For example, regulation that contributed to the quality and safety of food and medicines contributed to specialization in production and lower costs, and regulations enforcing contracts and private property rights add to economic efficiency.
On the other hand, bureaucracies build their empires and extend their regulations into the realm of negative returns. Moreover, as regulations increase, economic managers spend more time in red tape and less in productive activity. As rules proliferate, they become contradictory and result in paralysis.
I had hopes that my analysis would result in a more thoughtful approach to regulation, but to no avail. Liberals continued to argue that more regulation was better, and libertarians maintained than none was best.
Do Anti-Law Advocates Really Want Anarchy?
All sports need a referee. Some players will be bigger or more talented than others, which is great. They have a better chance of outcompeting the other guy and winning.
But without basic rules and referees, ruthless players might use a knife or kick the other guy in the knee. Perhaps we could suspend all rules, and maybe everyone would whip out a knife break the other guy’s kneecap. That’s fine … but that’s not the game of football.
Radicals who believe that we should not have any laws against fraud are implicitly arguing for anarchy. They might not use that word, but that is what they’re arguing for.
But the same Founding Father who argued for periodic revolutions to keep the government honest also argued against tearing down something unless you have something better in mind to replace it? Thomas Jefferson, the most vocal advocate of the citizens’ right to revolt to ensure honest government also cautioned against tearing something down unless it was for the express purpose of replacing it with something better.
Real, deep-thinking anarchists (as opposed to those using fake anarchy philosophy in order to promote lawlessness by the super-elite) are not for destroying all organization. Instead, they argue for self-organization and self-regulation. See this, this and this.
JP Morgan and Goldman Sachs aren’t reining in one another’s fraud. Bank of America and MF Global didn’t police each other’s fraud. Tepco and BP didn’t make sure the companies made accurate reports about their safety measures. Solyndra and Koch Industries didn’t guard against abuse by the other company.
So if one wants to argue that the Federal government should not regulate financial players, fine (perhaps our country is too big and complex to manage, and the federal government has become too corrupt) … but who should?
The states? Cities? Communities? Neighbors?
Human beings have the ability to form social contracts. Our D.C. government has largely breached it social contract with the people.
But we shouldn’t tear down the federal government unless we replace it with something better.
No one wants to tear down the state of organization so completely that we go back to monkeys (without the ability to talk), or one-celled critters . . . so the question is how do we want to organize?
Do you want to live as a “savage”? In reality, the natives had survival skills, cultural traditions, and knowledge developed over many hundreds or thousands of years (including knowledge gained before the migration from Asia to America), stored in the database of oral traditions. The settlers had traditions and knowledge as well. If we tear away all of that organization, life is going to be pretty challenging.
It is easy for a teenager to criticize his parents, but a lot harder to actually create a better adult life for himself. A teenager looks silly and immature when he criticizes everything his parents do without understanding the challenges he’ll face as an adult. But a young person who rebels against his parents and then creates a better adult life is doing important and heroic work.
In other words, anarchy as an economic model could work if economic players organized in such a way as to police against fraud and criminal behavior (the equivalent of pulling out a knife or taking out someone’s kneecap in the middle of a football game).
This is a long-winded way of saying that we should not stop the government from enforcing fraud laws unless we come up with a more effective way to stop fraud.
Below are the first criminal charges brought in the foreclosure fraud scandal. Every state Attorney General will take note of what Nevada AG Catherine Cortez Masto just did. We’ve read the indictment, and those 606 charges are no joke. Just open it up to any page and you’ll see what was going on. A likely…Read More
OFFICE OF THE ATTORNEY GENERAL ANNOUNCES INDICTMENT IN MASSIVE CLARK COUNTY ROBO-SIGNING SCHEME To: Office of the Attorney general ANNOUNCES indictment in massive clark county robo-signing scheme Defendants to be Held Criminally Accountable for Filing Tens of Thousands of Fraudulent Foreclosure Documents Carson City, NV – The Office of the Nevada Attorney General announced today…Read More
MSNBC – Nearly 29% of mortgaged homes underwater A whopping 28.6 percent of homeowners with mortgages owe more on their loans than their homes could sell for, according to quarterly data released Tuesday by Zillow, a real estate website. That’s up from 26.8 percent in the second quarter. Home values declined only 0.2 percent from…Read More
HARBINGER ANALYTICS GROUP REAL ESTATE FRAUD EXPERTS:
David E. Woolley is the author of the attached white paper. Mr. Woolley is a California Licensed
Land Surveyor and Certified Fraud Examiner with over 24 years of experience and is the
principal in Harbinger Analytics Group:
“Thanks to the Mortgage Electronic Registry System’s (“MERS”) failure to accurately complete and/or publically record property conveyances in the frenzy of banks securitizing home loans and in subsequent foreclosure actions,1 neighbors to a foreclosed property (with a sequential conveyance) as well as the foreclosed property itself will have unclear boundaries and clouded/unmarketable titles making it difficult, if not impossible, for these homeowners to sell their properties and for subsequent purchasers to obtain title insurance on that property. MERS now keeps electronic records on about half of the home mortgages in the United States.
Many problems with MERS and the home loan securitization process have been reported in print media (countless articles), in movies (the Inside Job) and on television (most recently on the April 3, 2011 edition of 60 Minutes). Academic professors such as Christopher L. Peterson of the University of Utah, S.J. Quincy College of Law, have written extensively on what is wrong with MERS.
Courts have ruled against MERS’ standing to foreclose and have criticized the MERS model as being flawed, wholly inaccurate and not allowing homeowners to fight foreclosures because it shields the true owner of a mortgage in public records.5 States Attorneys’ General and federal bank regulators are investigating MERS practices including fraudulently robo-signing and back dating missing documents. A few County Registrars of Deeds are claiming that they are owed millions of dollars in lost revenue from mortgage assignment transfers that were not recorded because MERS was listed as the mortgagee in public land records.
Full PDF after the jump . . .
Richard Vetstein is a nationally recognized real estate attorney, frequently quoted in the media. He was recently named one of Inman News’ 100 Most Influential in Real Estate. Mr. Vetstein is the founder of the Vetstein Law Group and TitleHub Closing Services LLC. The former outside claims counsel for a national title company, he has…Read More
Over the past 2 years, I have warned repeatedly about the dangers to American property rights caused by massive bank fraud, A deadly combination of MERS, robo-signing, and illegal shortcuts have created a horrific situation. A bedrock of our society — the ability for the owner of a piece of real estate to confidently convey…Read More
Last year, we noted the fantastic report issued at of the Florida Attorney General’s office that detailed the rampant fraud in the foreclosure operations of major loan servicers and banks (Florida Attorney General Report on Fraudclosure). It was put together by June Clarkson and Theresa Edwards. That was before the AG’s office was sold to…Read More