Naked Capitalism's Yves Smith picked up a post from Adam Levitin and added a fair dose of her own leavening to the Levitin treatment of Jamie Dimon's Lloyd Blankfein moment, in Jamie Dimon Says Banks Are Being Nice to You When They Take Your House, Naked Capitalism, May 5, 2011. It's worth excerpting, and you can follow the links to see Dimon's Blankfein moment in full.
(Yves Smith) Jamie Dimon has finally managed the difficult feat of making Lloyd Blankfein look good. When Blankfein said Goldman was “doing God’s work,” as offensive and laughable as that sounds, it’s an arguable position. If you look at the God of the Old Testament, he’s a really cranky and often capricious character. * * *
(Quoting Adam Levitin) In the course of a CNBC interview (full show here, foreclosure discussion runs from 4:07 to 5:23), JPMChase CEO Jamie Dimon stated that: “Giving debt relief to people that really need it, that’s what foreclosure is.” As he explained: “[Homeowners] are probably better off going somewhere else, because they get relieved almost 100% of the debt through foreclosure.” For real? It’s debt relief? Why not just go old school with “let them eat cake”? “Debt relief” requires a forgiveness of debt. It’s a gift, not an echange. There’s no quid pro quo. In foreclosure, however, the homeowner gives up the house, and doesn’t necessarily get any debt relief. If the mortgage is recourse, there could still be a deficiency judgment. Does Dimon mean that JPMChase is forgoing all deficiency judgments? I doubt it. And even if so, there’s an exchange of debt for house. That’s hardly debt relief. That’s debt collection. * * *
(Yves Smith) * * * [I]f banks were so keen to be considerate to borrowers’ need to move on, they’d be far more receptive to short sales, yet both commentors on this site and media reports indicate that many servicers make it well nigh impossible to enter into a short sale when it is almost always a better outcome for the homeowner and investors. * * * Nevertheless, the Dimon moral calculus is fascinating. If foreclosures are kind, is it even kinder to restore debtors’ prisons? After all, those people who lose their homes would be assured of getting shelter.
(ATaxingMatter) The continued intransigence of banks and servicers and the continuing problems caused to foreclosed families and foreclosed neighborhoods is striking. Just look at the situation underlying Los Angeles' suit against Deutsche Bank for failing to properly maintain foreclosed properties, resulting in neighborhood deterioration from the double whammy of residents moving out of foreclosed properties and foreclosed properties attracting graffiti and worse. See, e.g., Los Angeles Sues Deutsche Bank Over Foreclosure Blight, Reuters, May 4, 2011; Los Angeles Sues Deutsche Bank as Slumlord, Bellingham Herald, May 4, 2011.
It's past time for Congress to permit mortgage loan modification in bankruptcy. If it can't bring itself to do that, then maybe it could use the tax Code to disincentivize foreclosures generally and bad foreclosure behavior specifically--a kind of "sin tax". Perhaps a new "excessive fees" tax targeted to recoup a considerable percentage of the add-on fees and other charges that servicers and banks tack onto foreclosures. Or a tax of 50% of the sale price when a foreclosed home is eventually sold for less than a verifiable short sale proposal that was rejected by the servicer or bank.
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