A Creditor’s Playland, or: Cato on Housing Crisis Policy | Rortybomb
Mike Konczal demolishes the right-wing think tank Cato Institute for their unique brand of free-market capitalism: "I like this form of libertarianism, where policy is simply the things that defend the power and hierarchy of creditors, the rich and the elite, much better than the normal 'gee whiz markets are cool' kind. There’s almost a Nietzschean zeal for the wonk world to first and foremost accept creditors as a master class to whom all policy bends."
In this piece, Konczal is taking apart Cato's bank-friendly, consumer-hostile prescriptions for the housing market. Predictably, Cato wants to rush all the foreclosures to conclusion, never mind the fraudulent or nonexistent proof, and the banks should get deficiency judgments against people who strategically default. Public policy needs to be concerned about moral hazard you see...unless it is the banks who have the moral problems.
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Back in 2005, the Cato Institute published "What Are Private Governments Worth?" (250 KB 4-page PDF), which, for some strange reason, overlooked the moral hazards that exist as a result of an HOA's existence (eg, perverse incentives, the ability to use a homeowner's own money against the homeowner's interests, no incentive among the corporate board to control legal expenses, opportunities for embezzlement, etc.)
From the article:
I love how the concept of “moral hazard” plays out here. Homeowners need to be disciplined at even the slightest hint that they aren’t paying up, but there’s no need for an investigation into the disaster of the biggest banks and their servicing and securitization divisions. As Matt Stoller pointed out, with no threat here there’s even less of a reason for the banks to follow the rules in the future.
Replace "banks" with "HOAs", and we get the current state of affairs:
I love how the concept of “moral hazard” plays out here. Homeowners need to be disciplined at even the slightest hint that they aren’t paying up, but there’s no need for an investigation into the disaster of HOAs and their property managers and collections attorneys. As Lucius Day pointed out, with no threat here there’s even less of a reason for HOAs to follow the rules in the future.
I hope the Tea Partiers enjoy getting paid in scrip, because they're going to need it to buy goods at the company store.
On May 16, 2012, you wrote that
(Arizona) Gov. Jan Brewer Signs New Law That Takes Deb Collectors' Word For How Much You Owe
...
So Governor Brewer is making it easy for collection agencies to "prove" the amount that is owed. Now they don't have to go to the trouble of finding and digging through all the records of the original creditor to find out how much is really owed. They just offer the last billing statement.
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