At Salon, David Dayen tells the astounding tale of American banks going feral and mass-forging legal documents to foreclose mortgages on houses they had zero claim on:
If you know about foreclosure fraud, the mass fabrication of mortgage documents in state courts by banks attempting to foreclose on homeowners, you may have one nagging question: Why did banks have to resort to this illegal scheme? Was it just cheaper to mock up the documents than to provide the real ones? Did banks figure they simply had enough power over regulators, politicians and the courts to get away with it? (They were probably right about that one.)
A newly unsealed lawsuit, which banks settled in 2012 for $95 million, actually offers a different reason, providing a key answer to one of the persistent riddles of the financial crisis and its aftermath. The lawsuit states that banks resorted to fake documents because they could not legally establish true ownership of the loans when trying to foreclose.
This reality, which banks did not contest but instead settled out of court, means that tens of millions of mortgages in America still lack a legitimate chain of ownership, with implications far into the future. And if Congress, supported by the Obama administration, goes back to the same housing finance system, with the same corrupt private entities who broke the nation’s private property system back in business packaging mortgages, then shame on all of us.
Richard Anderson explains why Ontario Premier Kathleen Wynne is upset with Prime Minister Stephen Harper:
It is a time honoured tradition that premiers look to Ottawa for one reason and one reason only: To beat the Prime Minister of the day over the head with their begging bowls. What Kathleen Wynne is looking for is not a “partnership” but a ceaseless no-strings-attached flow of federal money. Like a petulant teenager the sextuagenarian premier always wants more and offers little in return. Prime Minister Harper has wisely refused to play her game.
Now imagine that you’re Kathleen Wynne — please try to subdue the gag reflex — and billions of dollars now flow into the provincial coffers from this de facto payroll tax. Perhaps the money gets tossed into general revenues. Queen’s Park then turns arounds and issues IOUs to the “arm’s length board” in the form of increasingly worthless provincial bonds. The pension would for actuarial purposes be “fully funded” but as a practical matter one pocket of government is borrowing from the other.
But perhaps the Wynnesters are a tad more clever than all that. The revenues from this payroll tax go directly to the allegedly “arms length” investment board. Nothing goes into general revenues and the Liberals allow themselves a patina of fair dealing. The board, however, will almost certainly have its investment guidelines laid out by the government. Those guidelines, by the strangest coincidence, will likely have an “invest in Ontario” component.
Some of the money will get used to buy up provincial bonds, lowering the government’s cost of borrowing at a time when capital markets are getting skittish about Ontario debentures. Quite a lot of the rest will be used to fund infrastructure projects, private-public sector partnerships and other initiatives that will, mysteriously, favour Liberal allies. The Chretien era Adscam scandal will seem like chump change in comparison.
Justinian wanted to restore the glory of Rome, but many obstacles stood in his way. He brought on talented advisors to help him reform the tax system, the law code, and the military might of the empire. With them he made great strides, but these advisors had very human flaws. His tax collector, John the Cappadocian, centralized tax collection and crushed corruption in his agents, greatly increasing the revenue to the empire – but he also skimmed money off the top to feed his private corruption. Meanwhile, a lawyer named Tribonian took centuries of confusing and even conflicting legal precedents and resolved them into a single code, the Corpus Juris Civilis, which remains the foundation of modern law today. He even made a textbook for students to learn from. But he was also a practicing pagan during an era when Justinian was trying to crack down on pagan rituals. And last, Justinian’s chief military commander Belisarius helped the Empire recover its military glory. He defeated the Sassanid Persians in the Battle of Dara, crushing a force of 50,000 men with only 25,000 of his own through clever strategy: he dug a trench to halt their infantry’s advance, then baited the Persian cavalry into overextending and sprang a surprise attack on them with Hun mercenaries. Although Belisarius seems to have been an upstanding person, his personal historian Procopius tainted even his clean record. Procopius wrote glowing official histories of the reign of Justinian, but his long lost secret history depicted Justinian as a literal headless demon and Theodora as a debauched monster.
A few weeks back, Strategy Page looked at “practical sorcery” in the Middle East:
ISIL (Islamic State in Iraq and the Levant) recently got some media attention because they had beheaded two Moslem women accused of sorcery. For a Moslem the only thing unusual about this was how the women are killed. Public beheading is usually reserved for men. Sorcery, on the other hand, is quite common in the Islamic world, even though it is strongly condemned in the Koran. Many Islamic majority countries consider sorcery a capital (the guilty are executed) crime. But there’s a lot more to sorcery than that.
For example, back in 2013 Mehdi Taeb, a senior cleric in the Iranian government explained that the major reason so many nations went along with the increased economic sanctions against Iran was because Israel had been using magic to persuade the leaders of these nations to back more sanctions. Without the Israeli witchcraft, the sanctions would not exist. Taeb explained that the Israelis have used this magic before, as in 2009, against Mahmoud Ahmadinejad when he was running for president. Many Iranians openly opposed Ahmadinejad, who won anyway. This, to Taeb, was proof that devout Moslems could defeat the Jewish magic.
What’s interesting with this observation is that, in 2011 Taeb and his fellow clerics tried to get rid of Ahmadinejad and his zealous (against corrupt clerics) associates. One method used was to send the police (which the clergy control) to arrest key Ahmadinejad aides and accuse them of witchcraft and sorcery. This led to street brawls between fans of Ahmadinejad and Islamic hardliners. Clubs, knives, and other sharp instruments were used. There was blood in the streets. All because of a witch hunt.
Ahmadinejad was quite popular because he has gone after corrupt officials, especially the clerics and their families, who feel they are immune from prosecution and can take what they want. In theory, the clerics can get rid of Ahmadinejad by simply declaring that he is not religiously suitable to run for election. That’s the kind of power the clerics have. But Ahmadinejad was too popular for that sort of censorship and Ahmadinejad was not corrupt. His rants against Israel and the Jews, while a bit much for some clerics, is also not grounds for being declared “un-Islamic” and ineligible to run for election. Ahmadinejad is quite respectful of Islam and most Moslem clerics but willing to go after clerics who are dirty. This is also quite popular with most Iranians, and that scares the dirty clerics at the top.
So why had the clerics decided to accuse Ahmadinejad cronies of sorcery? That’s because in most countries where there is a dominant religion, especially a state approved one, there is usually still a fear that the previous religion (or religions) will try to make a comeback. The former faiths often involved some really old-school stuff, including what many would consider magic and sometimes animal, or even human, sacrifice. It is not uncommon for there to be laws covering those accused to be practicing such sorcery and severe punishments for those convicted. At the very least, the accused will be driven from any senior government jobs they might hold, and that’s what’s being done to dozens of Ahmadinejad associates. In Iran Ahmadinejad was eventually removed from power by going after his more vulnerable associates and sorcery was one of the false accusations used.
India spent a lot of time and money to develop an arms industry that could supply the Indian army with Indian-made weapons. One of these weapons is the INSAS rifle. Unfortunately. Strategy Page reports on the resurrection of the INSAS despite its many failings in combat conditions:
INSAS rifle (via Wikipedia)
In early 2015 India seemed to be finally responding to complaints from soldiers and other security personnel fed up with the poor performance of the locally made INSAS (Indian Small Arms System) 5.56mm assault rifle. The government recently reneged on that promise and announced that the despised INSAS would be replaced, in two years, by the MIR (Modified INSAS Rifle). On paper there are some improvements, like full auto-fire (INSAS can only do single shot or three round bursts), folding butt stock, Picatinny rail (for all manner of accessories), more reliable and effective magazines and more ergonomic design (making MIR easier to handle, clean and use). The government also revealed that recent firing tests have shown only two jams after 24,000 rounds fired by MIRs. There will also be a MIR 2 that is chambered to fire the AK-47 (7.62×39) round. Despite all that, to the current unhappy INSAS users the promise of the MIR comes as a huge disappointment. The government weapons design capability has a long and consistent history of failure and disappointing promises. Few INSAS users believe MIR will be much of an improvement over INSAS and will serve more as another source of cash for corrupt officials. While buying foreign weapons uses a lot of valuable foreign exchange it is more closely monitored and has proven to be less corrupt. In 2010 the government had agreed to allow the military to get a rifle that works and that meant a foreign rifle. The leading candidate was Israeli. But now that competition has been cancelled and many troops believe it is all about corruption, not getting the best weapons for the military.
This sad situation began in the 1980s when there was growing clamor for India to design and build its own weapons. This included something as basic as the standard infantry rifle. At that time soldiers and paramilitary-police units were equipped with a mixture of old British Lee-Enfield bolt action (but still quite effective) rifles and newer Belgian FALs (sort of a semi-automatic Lee-Enfield) plus a growing number of Russian AK-47s. The rugged, easy to use and reliable Russian assault rifle was most popular with its users.
In the late 1980s India began developing a family of 5.56mm infantry weapons (rifle, light machine-gun and carbine). Called the INSAS, the state owned factories were unable to produce the quantities required (and agreed to). Worse, the rifles proved fragile and unreliable. The design was poorly thought out and it was believed corruption played a part because the INSAS had more parts than it needed and cost over twice as much to produce as the AK-47.
Earlier this month, David Pryce-Jones wrote about one of the 20th century’s greatest con-men and his unbelievable role in the East German economy:
Alexander Schalck-Golodkowski was a most ingenious conman. The world at large never knew about him because he stayed in a little circle of corrupt political and financial insiders with whom he was doing his dirty businesses. In a mind-blowing interview that I had with Günter Mittag, the East German minister of finance, I first heard something about Golodkowski. The collapse of Communism allowed Mittag to speak more freely. Communist East Germany, he said, had always been an economic disaster, so much so that he had never dared tell Erich Honnecker, the Party first secretary, the truth that the state had no money. Mittag made up the numbers. For cash to keep up the pretenses, he turned to Golodkowski, giving him permission to do whatever he thought might be profitable. The measure of Golodkowski’s success was the CIA’s preposterous judgement that East Germany had the tenth-largest economy in the world.
Golodkowski operated through KoKo, a company set up for him freed from the laws and restrictions of both Communism and capitalism. A colonel in the Stasi secret police, he had protection the Mafia would have envied. Through bankers in West Germany and Switzerland he set up false accounts and shell companies. He was an arms trader, a speculator in commodities, and a specialist in bogus insurance claims. One of his scams was to “liberate” 600 old master pictures from the Dresden Museum and sell them. In 22 years of illegal operations, Golodkowski himself estimated (with understatement no doubt) that KoKo had amassed 27.8 billion East German marks.
Good government is a constable — it keeps the peace and protects property. Parasitic government — which is, sad to say, practically the only form known in the modern world — is at its best a middleman that takes a cut of every transaction by positioning itself as a nuisance separating you from your goals. At its worst, it is functionally identical to a goon running a protection racket.
The desire to be left alone is a powerful one, and an American one. It is not, contrary to the rhetoric proffered by the off-brand Cherokee princess currently representing the masochistic masses of Massachusetts in the Senate, an anti-social sentiment. It is not that we necessarily desire to be left alone full stop — it is that we desire to be left alone by people who intend to forcibly seize our assets for their own use. You need not be a radical to desire to live in your own home, to drive your own car, and to perform your own work without having to beg the permission of a politician — and pay them 40 percent for the privilege.
Principles are dangerous things — whiskey is for drinking, water and principles are for fighting over. The anti-ideological current in conservative thinking appreciates this: If we all seek complete and comprehensive satisfaction of our principles, then there will never be peace. This is why scale matters and why priorities matter. In a world in which the public sector consumes 5 percent of my income and uses it for such legitimate public goods as law enforcement and border security, I do not much care whether the tax system is fair or just on a theoretical level; and while I may resent it as a matter of principle, the cost of my consent is relatively low, and I have other things to think about. But in a world in which the parasites take half, and use it mainly to buy political support from an increasingly ovine and dependent electorate, then I care intensely.
Quick question for you: What’s the optimal amount of corruption in politics?
If you said “zero,” then I’m sorry. You do not win the prize. (It was a year’s supply of Mr. Clean Magic Erasers, just so you know.) The optimal amount of corruption in any system is almost never zero, and that goes double for politics.
We shouldn’t try to get corruption to zero because fighting corruption is costly. Think, for example, of government contracting, which mindlessly awards contracts to the low bidder, as if quality and reliability were irrelevant considerations. This sloppiness inevitably adds time and costs. Or the various requirements we impose on civil service workers to make sure that not one of them enjoys so much as a stray sandwich on the taxpayer dime … and thereby ensure that normal business practices, like sitting down for an inexpensive group meal to discuss something, are almost comically difficult to arrange. All these procedural rules make government less effective and more costly. My father, who was the head of a trade association for contractors on heavy infrastructure projects, estimates that adding federal money to a project adds about five years to its completion date.
There’s even more reason not to strive for zero corruption: Politics is the art of getting widely disparate factions to come to some sort of policy agreement, and “clean graft” greases those wheels. Now, calm down — I’m not advocating that we move to a full-on kleptocracy like Russia. What I’m suggesting is in attempting to root every last vestige of pork and patronage out of the system, we have inadvertently produced the partisan gridlock that we now decry. Anyone who thinks that this is a crazy statement should read Jonathan Rauch’s terrific new e-book, Political Realism: How Hacks, Machines, Big Money, and Back-Room Deals Can Strengthen American Democracy. At a trim 55 pages, it is a fast read, and at $0, it is the bargain of the century.
For another example, consider trade barriers such as tariffs. There are good economic arguments to show that we would be better off if we went to complete free trade. That seems puzzling — if we would be, why don’t we?
The answer is provided by public choice theory, the branch of economics that deals with the workings of the political market. A tariff makes the inhabitants of the country that imposes it worse off but the politicians who pass the tariff better off, since it benefits a concentrated interest group at the cost of dispersed interest groups. More concentrated interest groups are better able to pay politicians to do things for them. Trade policy is optimized, but for the wrong objective.
America’s biggest welfare queen is someone you’ve probably never heard of. She’s Hispanic. She’s been living off other people’s hard-earned tax money for years. And she’s gotten rich doing it.
Her name is Iberdrola. She’s a Spanish energy company that has invested in U.S. power facilities. And according to the advocacy group Good Jobs First, she’s raked in more than $2 billion from Uncle Sam in just the past few years.
Good Jobs First maintains a subsidy tracker where you can look up which companies are getting rich from public funds. It recently issued a report on “Uncle Sam’s Favorite Corporations — the companies that have gained the most from federal grants, special tax preferences, loans, and loan guarantees.
The biggest beneficiaries (“by an order of magnitude”) are Bank of America, Citigroup, and other major financial institutions that were bailed out during the 2008 financial crisis. The Federal Reserve, the Troubled Asset Relief Program, and so on threw trillions of dollars at U.S. and foreign banks in a desperate effort to stabilize the financial system. It worked. In many cases (though not all), the institutions repaid the money. In some cases the federal government actually earned a profit.
But hundreds of other companies have raked in billions of dollars in direct grants. Along with Iberdrola, NextEra Energy, NRG Energy, Southern Company, Summit Power, and SCS Energy all have reaped more than $1 billion in federal largess, often receiving payments through programs meant to boost renewable energy. At the same time, many coal companies have taken huge sums from Washington through grants and coal production tax credits. So, as with farm programs—some of which subsidize farmers to farm more and some of which pay farmers to not farm at all—Washington thwarts its own objectives by subsidizing both renewable fuel sources and the fossil fuels they’re supposed to replace.
I am shocked, shocked to find corruption in Quebec politics. I’m also shocked that it’s cold in Winnipeg in February. Politics has never been a game for choir boys. However by international political standards Canadian politics is incredibly tame. M. Lortie may have walked around with hundreds of thousands of dollars in his briefcase, try getting past airport security with that today, but he didn’t make a habit of killing political opponents. In most countries Joe Clark wouldn’t have been deposed, he would have been assassinated.
Even by global standards of graft, bribery and influence peddling this is kid’s stuff. Anyone with a passing familiarity of politics in Latin America knows that M. Lortie is a rank amateur compared to the real professionals beyond our humble dominion. Nor is his temporary alignment with the PQ all that surprising. Allegiance in Quebec politics is that most fluid of things. There are very few real federalists and real sovereignists in La Belle Province. There’s a long running petty feud between cousins about how best to fleece the Canadian taxpayer. The rest is theatre.
These stories are important, they help teach Canadians that politics is rarely public service, but quite often self-service with a taxpayer’s expense account. Beneath the noble rhetoric there’s some guy with silly hair shuffling money around.
Tim Worstall looks at a recent book on an Indian experiment that investigated how to improve poverty relief programs:
In terms of the Indian experience one of the reasons that these trials worked well was because they were trials. Effort was put into making certain that those who were supposed to be receiving the cash were in fact receiving it. Such care and attention to people getting what they’re supposed to get is not an outstanding feature of the various welfare systems currently in use in India, as the book makes clear. So, just making sure that people were getting those modest amounts that they were supposed to get is going to be an advance. And it wouldn’t be possible to simply roll out such a scheme across the country, however beneficial, without a lot of preparatory work to make sure that the right people really would be getting the money.
It’s also true that the current systems fail badly in other ways. Purchasing grain to ship it around to special shops where it will be sold hugely under the market price is always going to be a leaky system. Some number of the middlemen will be sorely tempted to divert produce to sell onto the market and there’s considerable evidence that some succumb to that temptation. If people simply have money to buy on the standard market in the normal manner then it’s a lot easier to keep a control on that sort of thing.
However, the most important thing for the design of the American welfare system is the points they make about how the poor value being given goods as against being given money. $100 (far in excess of the amounts being discussed here) is worth more than $100 of food for example. Or $100 worth of medical care. There’s two reasons for this. One is simply that everyone values agency. The ability to decide things for oneself. And money does that. It’s possible to decide whether you want to purchase food, or to save a bit and buy a goat next week, or more fertiliser for the fields and so on. What the peasant on the ground would like to do with any increase in resources is most unlikely to accord with what some far away bureaucrat thinks said peasant ought to be doing. So, the choice itself increases value.
So, we could actually make poor people richer by abolishing food stamps. Assuming, of course, that we just gave them the same amount of money instead. The same would be true of Medicaid and housing vouchers of course. Yes, I’m aware that there are arguments against doing this. But it is still true: converting goods and services in kind into cash would make the poor richer at the same cost to the rest of us. So it is at least something we should consider, no?
And the main reason switching to cash from the current system is … paternalism. Governments really do think that they are better equipped than the recipients of aid in how to spend that money. And it’s quite true that some welfare recipients would blow the payments on booze or drugs or what-have-you, but the majority of peoples’ lives would improve if they got cash rather than food stamps or other in-kind assistance.
Earlier this month, I linked to an article about the low reputation enjoyed by India’s first domestically designed and manufactured assault rifle. According to Strategy Page, there’s a potential change of heart by the Indian military on the INSAS rifle:
In response to the growing combat losses because of flaws in the locally made INSAS (Indian Small Arms System) 5.56mm assault rifle, the Indian government seems likely to capitulate and allow the military to get a rifle that works. Unfortunately for nationalist politicians, this will probably be a foreign rifle, and the leading candidate is Israeli.
This all began in the 1980s when there was growing clamor for India to design and build its own weapons. This included something as basic as the standard infantry rifle. At that time soldiers and paramilitary-police units were equipped with a mixture of old British Lee-Enfield bolt action (but still quite effective) rifles and newer Belgian FALs (sort of a semi-automatic Lee-Enfield) plus a growing number of Russian AK-47s. The rugged and reliable Russian assault rifle was most popular with its users.
In the late 1980s India began developing a family of 5.56mm infantry weapons (rifle, light machine-gun and carbine). Called the INSAS, the state owned factories were unable to produce the quantities required (and agreed to). Worse, the rifles proved fragile and unreliable. The design was poorly thought out and it is believed corruption played a part because the INSAS had more parts than it needed and cost over twice as much to produce as the AK-47.
The original plan was to equip all troops with INSAS weapons by 1998. Never happened, although troops began to receive the rifle in 1998. By 2000 half the required weapons ordered were still not manufactured. Moreover in 1999 the INSAS weapons got their first real combat workout in the Kargil campaign against Pakistan. While not a complete failure, the nasty weather that characterized that battle zone high in the frigid mountains saw many failures as metal parts sometimes cracked from the extreme cold. Troops complained that they were at a disadvantage because their Pakistani foes could fire on full automatic with their AK-47s while the INSAS rifles had only three bullet burst mode (which, fortunately, sometimes failed and fired more than three bullets for each trigger pull.) What was most irksome about this was that the INSAS rifles were the same weight, size and shape as the AK-47 but cost about $300 each, while AK-47s could be had for less than half that. The INSAS looked like the AK-47 because its design was based on that weapon.
Individually, the cases are all bad news. The good news is that authorities often catch and punish government cheats, thieves and frauds. Penalties for ripping off the American taxpayer range from huge fines to hard time in prison.
And when the trial ends and punishment begins, many military ethics cases wind up in the Pentagon’s Encyclopedia of Ethical Failure.
That’s right, the military maintains a database of the federal government’s worst ethics violators. Unlike many government documents, the encyclopedia is clear, easy to read … and actually quite funny. Many of the stories are as amusing as they are aggravating.
It might be the most light-hearted official report anyone’s ever written about criminals.