As happens in the life of a pastor, I’ve been doing a number of funerals lately. I’ve been dealing with people who are terminally ill, grieving families, funeral homes, church musicians, neighbors, friends, and the folks who prepare the meals for the mourners after the funeral. To take a break from all of this, I’ll check out the news. You know, something absolutely different, like what’s happening with the banks around the mortgage meltdown. Something to get my mind off of all this death and dying.
And I realized that what’s going on with the MOTUs isn’t at all different.
It is exactly the same thing I see with these people in my parish who are dying and with their grieving families. Back in 1969, Elisabeth Kübler-Ross described a pattern of behavior that many people exhibit around death and dying:
- Denial — we’ve got no problem here . . .
- Anger — it’s not my fault; someone else is to blame.
- Bargaining — maybe we can work out a deal . . .
- Depression — nevermind, it’s all hopeless.
- Acceptance — OK, I’m dying.
The death of major failed institutions like Enron, Bear Stearns, Lehman Brothers, WorldCom, and AIG was greeted by their compatriots in the MOTU universe with denial: “This could never happen to us. We’ve got better judgment. We’ve got better people. We’ve got more smarts. We’ve got better technology. We’ve got . . .” To the MOTUs on Wall Street, the death of IndyMac, Washington Mutual and hundreds of other banks in the last three years is proof of the inadequacy of those other, lesser bankers.
The MOTU refrain of “We survived, because we’re better than they are” is actually true, in a way. Bill Black would say that what they’re better at is not getting caught:
My research specialty is “control fraud.” These are frauds led by those that control seemingly legitimate entities and use them as a “weapon” to defraud. Financial control frauds’ “weapon of choice” is accounting. Lenders optimize accounting fraud by following a four-part recipe:
- Extreme growth
- Making bad loans at high interest rates
- Extreme leverage
- Trivial loss reserves
The [Senate Banking] Committee’s findings show that WaMu’s business operations followed this recipe. The result was what Akerlof & Romer described in their classic 1993 article – “Looting: Bankruptcy for Profit.” This is also why I titled my book: The Best Way To Rob A Bank Is to Own One.
To anyone but a MOTU, charts like this (h/t Calculated Risk) would seem to indicate that there’s something terribly wrong with the industry as a whole. But try telling that to a MOTU. Denial is a powerful thing.
Lately we’ve been starting to see more fingerpointing, suggesting that they’re moving from denial to anger:
- It’s those lazy homeowners. (Never mind that we misrepresented our loans to many of them, and screwed around with them again using HAMP.)
- It’s the onerous banking regulations and government interference. (Never mind that we gutted any of those that would have prevented this mess.)
- It’s the shiftless loan originators and servicers. (Never mind that we knew what they were doing and turned a blind eye in order to bring in the profits to make up for our losses elsewhere.)
- It’s the evil pushers of the mortgage backed securities. (Never mind that we created these securitized instruments of mass financial destruction and the credit default swaps that went along with them.)
- It’s the robosigners. (Never mind that we hired and trained them.)
- It’s all the fault of MERS. (Oh, wait a minute, that’s us. Uh, never mind that one, too.)
- It’s everyone else’s fault. Really. Cross my heart and hope to die. Trust me on this.
And now people are beginning to talk about deals — but it’s other people, mostly, and not yet the bankers:
- Homeowners to the MOTUs who set up the foreclosure mills: “You modify my mortgage instead of foreclosing on me, and I won’t demand in court that you produce the note that you obviously don’t have (and swore under oath that you did).”
- MBS investors to the MOTUs who sold them crap and called it caviar: “You buy back the crap you put in these investment vehicles and make us whole for our losses, and we won’t go to the SEC and file charges of misrepresentation and fraud.”
- Attorneys general to low- and mid-level financial industry people: “You spill your guts, provide documentation backing up your story, and implicate those higher up the ladder, and we’ll ask for lenience when it comes to your own wrongdoing.”
Depression is on its way, if it hasn’t already come to a couple of individual MOTUs, but I wouldn’t count on seeing much acceptance any time soon. After all, Jeff Skilling is still crying fraud on his conviction.
(photo h/t tkksummers)