Sep112015

Bankers were the terrorists of the housing bust

The 9/11 terrorists killed several thousand people, but banking terrorists destroyed the lives of millions, and they are still in power.

Millions of families lost homes during the housing bust, and most of those families hate the bankers who threw them out of their family homes; however, that wasn’t an act of terrorism as much as it was a mercy killing. Most of those borrowers were hopelessly indebted, and the foreclosure ended the pain. The real acts of terrorism perpetrated by bankers were not these mercy killings.

Foreclosure roulette or terrorism?

During the housing bust, well over 10 million borrowers quit paying their mortgages. Lenders foreclosed on millions of these borrowers, including more than a million in California alone, but with so many delinquent borrowers and so few creditworthy buyers, lenders couldn’t foreclose on every bad loan and resell the property, so they allowed many delinquent borrowers to squat.

In order to avoid a flood of strategic defaults from people hoping to obtain free housing, lenders embarked on a campaign of terrorism that PropertyRadar called “foreclosure roulette.”

it is a problem that is easily solved by the diabolical game of Russian roulette. So long as lenders continue to foreclose on at least a handful of homeowners each month, in what from all appearances is a completely random game of chance, they’ll keep those willing and able to pay their mortgage doing so. Those who decide not to pay their mortgage will find themselves playing today’s update on the Russian game, Foreclosure Roulette, wondering each month whether they’ll get another free month in their prison of debt, or finally be shot and forced to move.

American-Foreclosure-Roulette

Roulette is a nice analogy, but this tactic should be called out for what it is: terrorism. Random violence to keep the herd spooked is a terrorist tactic designed to force compliance with a terrorist’s demands. When bankers started foreclosing on random borrowers to instill fear in the general population of borrowers who might strategically default, they resorted to terrorist tactics.

From terrorism to execution

This terrorist tactic is the only real option bankers had short of widespread foreclosure processing; however, with house prices rising they have a new option: they can foreclose on underwater squatters as they hit the surface.distressed_borrowers

When a borrower is deeply underwater, it doesn’t do the bank any good to foreclose on them because the loss severities are very large. Once the value of a property rises back to breakeven, the bank has no reason to allow the delinquent mortgage holder to stay in the property because they can foreclose and recover all they are owed.

Now that prices are rising, it’s likely that banks will abandon their random terrorist approach to foreclosures and instead target those reaching the surface. This action will be quite a shock to the long-term squatters who thought they were about to obtain equity again in a house they weren’t paying for.

Other terrorist threats

Lenders also resorted to terrorist tactics back in 2008 when they demanded and obtained huge bailouts under threat of an economic collapse — a collapse caused by their bad behavior. While many today justify these bailouts as necessary to avoid an economic calamity, I believe that justification is bullshit because Bankster Bailouts Did NOT Save Us from the Second Great Depression.

In 2011 lenders embarked on their most successful terrorist threat: they forced new buyers to pay the bank’s price for property or do without. Since they controlled a huge portion of the market between the properties they owned and those they controlled through underwater borrowers, they were able to remove for-sale inventory from the market and “corner” the real estate market like a 19th century monopolist.

Americas_housing_market_2012

In a more organized and orchestrated act of financial terrorism, the federal reserve, a group of bankers, decided they needed to steal the retirement income of senior citizens and divert this income to the banks to help them “earn” their way back to health. These “earnings” came on the back of the elderly, some of whom were forced to eat dog food to survive the loss of interest income in their senior years.

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Terrorism of societal decay

Another pernicious act of terrorism perpetrated by the banks is the slow erosion of moral standards of ordinary Americans. The long-term impact of the bank’s bad behavior is yet to be felt.

When I grew up, my parents worked hard and sacrificed in order to pay their bills, particularly their mortgage. They made this sacrifice to pay down their mortgage so they could live without house payments in their retirement, a condition they enjoy today. This path to a stress-free retirement was the experience of most Americans, a collective lesson we learned about responsibility and deferred gratification. Lenders destroyed that and replaced it with a culture of Ponzi borrowing and a series of poisonous beliefs that turned responsible homeowners into reckless and irresponsible loanowners.

How sweet it is…

It wasn’t enough to merely give millions of Ponzis billions in free-money loans. That act alone would have irreparably harmed out culture.

No, lenders didn’t stop there.

When the ATM benefits ran out, they allowed the Ponzis to remain in the houses they could not afford for years without making any payments. Do you think the culture of mindless consumerism and profligacy is a step forward for American culture? I don’t.

Over the last fifteen years while most of us where working and paying our housing costs through rent or steady mortgage payments, a large cohort was converting the appreciation of their properties to spending income. For a big portion of the adult lives of these Ponzi squatters, housing has not been an expense, it’s been a source of income. banking_terrorists_2

To these “sophisticated” financial managers, owning a house became a source of income rather than the biggest expense of daily life. Like a drug addict, these people depended on these regular infusions of cash, and when the housing bust cut off the flow, lenders allowed these Ponzi money addicts to live in their homes without making any payments.

After the inevitable foreclosure and eviction, these Ponzis will endure the shock and horror of paying for housing as their entitlement is eliminated. After fifteen years of HELOC dependency and squatting, such a change will be quite disturbing as they learn to live like the rest of us.

This problem was created entirely by lenders. They created a generation of Ponzis who view free housing money as an entitlement. And now with assistance of the government and federal reserve, they are forcing the rest of us to pay for their mistakes with bailouts and reduced interest income on our savings. As the final insult, we must watch as banks allow these people to squat in what should be our homes so they can prop prices up and make us pay more for what should be our houses.

Banker Ambush

The terrorist activities of bankers doesn’t end after the foreclosure and resale. Bankers get one more pound of flesh. Many people who lost their homes and moved on with their lives will be attacked by bankers one last time once they have assets again. Bankers don’t forget about the old debts, and once the bubble-era borrowers become solvent again, the banks will  clobber them financially: the final act of random violence and terrorism from the enablers of the housing bubble.

banker_ambush


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