Attorney Scott Pilutik wrestles with the news of the day, from a lawyerly perspective…
[Regarding this story: Whistleblower: Wall Street Has Engaged in Widespread Manipulation of Mortgage Funds]
Whistleblower describes the same pattern that led to the 2008 crash, only with commercial mortgages instead of residential mortgages: systemic overvaluing of properties, which garbage numbers are packaged and hidden inside “Commercial Mortgage Backed Securities” which are then traded by investors, while overvalued properties are leveraged by its owners to get new loans.
It all forms a kind of pyramid-ish shape and would be outright fraud if the elaborate manipulations weren’t, just as was the case in 2008, blessed by overwhelmed and outgunned ratings agencies.
As a wave of defaults from commercial-space renters (businesses) surely approaches, a genuine problem presents itself, and one not easily solved by a bailout, which will become increasingly harder to justify as “regular folks” can’t pay their rents. Yet, given how the commercial landlord lobby is so well-represented in the White House (Kushner more so than Trump even), they’re well situated to get hundred-cents-on-the-dollar packages even as the wave drowns everyone else.
That the securitization of mortgages was permitted to continue after 2008 is a crime in itself. Financial bubbles like this aren’t once-in-a-century freak events, they’re the inevitable result of a giant moral hazard whereby the desire for profits and bank fees meets to create these vehicles that benefit no one except the direct participants. Society takes a nominal value from these transactions even under the best conditions, but when they blow up taxpayers are called on to rescue without any assurances promised or given in the way of steps meant to prevent its recurrence.
It’s not capitalism if there’s no risk to losing, it’s plutocracy.
