Saturday, February 25, 2012

The "robo-signing" settlement won’t help homeowners, and it doesn’t hurt the banks. - Slate Magazine

The "robo-signing" settlement won’t help homeowners, and it doesn’t hurt the banks. - Slate Magazine
The main motivation behind the administration’s indulgence of serious criminality evidently is fear of the consequences of taking tough action on individual bankers. And maybe officials are right to be afraid, given the massive size of the banks in question relative to the economy...The message to bank executives today is simple: build your bank to be as big as possible—and then keep growing. If you manage to become big enough, you and your employees are not just too big to fail, but also too big to jail.
This explanation makes sense to me. These big banking corporations are above the law.


Anonymous said...

"Too big to fail" is the same rationale used to support an HOA's right to foreclose.

Anonymous said...

from the story:

"First, there was no serious criminal prosecution, meaning that no one will be charged with a felony and no one will go to jail. In terms of affecting executives’ incentives, this is the only thing that matters….
Second, the civil penalties in this settlement—a form of fine—are minuscule relative to the size of the companies involved…
Third, such fines are, in any case, paid by the companies’ shareholders, not by their executives or board members (all of whom carry insurance). In the rare cases in which fines have been levied on individuals, either their insurance policies picked up most of the bill, or the penalties were trivial relative to the cash compensation that they received while committing their crimes—or both.

Which describes perfectly the perverse incentives and moral hazards that exist in H.O.A. corporations.

Why some people think that the survival of so-called "community associations" (aka H.O.A. corporations) should be a priority for our policy makers is beyond me.