Poor “Homeowners” II
October 18, 2011 8 Comments
Matt Taibbi in Rolling Stone complains,
These gigantic institutions [too-big-to-fail banks] have put millions of ordinary people out of their homes thanks to a massive fraud scheme for which they were not punished, owing to their enormous influence with government and their capture of the regulators.
Now let’s take this slowly. Suppose I ask the following innocent question:
How on earth could a bank ‘put’ a person out of his home? How, exactly, could that happen?
Not every institution in every situation can ‘put’ a person out of his home, after all. Wal-Mart can’t ‘put’ you out of your home. Major League Baseball can’t ‘put’ you out of your home. These things are just not possible. When you think about it, an institution ‘putting’ someone out of his home is a rare thing, only possible under a certain very well-defined and specific set of conditions.
But Taibbi is, of course, correct that banks have put people out of their homes. So how then? How were they able to do that?
Could it be…because the bank was the one who paid for the damn home in the first place?
Why yes it could. In fact, that’s pretty much the only circumstance under which a bank, or anyone else, can put you out of your home as Taibbi describes.
So why does Taibbi skip that part and start the story in the middle? Why not, instead, relate the following chain of events:
- The banks gave millions of individuals half a million dollars each (give or take) to use to move into nice big comfy houses.
- The individuals lived in those houses for a while.
- Later, for one reason or another they stopped making the payments they had promised to pay.
- The banks tried to take the house back as collateral to sell and recoup some of their losses, and in some cases (say 12+ months later), succeeded.
Well, blown away by Taibbi’s impeccable logic and critique of banks’ behavior, once again I’m forced to agree that banks should not have done any of this. Most of these people should have been renting apartments in the first place.