Saturday, October 29, 2011

Heartlessness on parade

The New York law firm of Steven J. Baum, P.C. specializes in foreclosures. Joe Nocera of the New York Times has obtained photographs from the firm’s 2010 Halloween party: What the Costumes Reveal. What a riot. What a rotten lot.

November 22: The firm is shutting down. Thanks for the update, Gunther.

comments: 8

Adair said...

I think I'm going to get sick...

normann said...

Have they no sense of decency? At long last? The entire American financial "industry" is a cynical lot of rent-seeking parasites, and the only reason they have not all been ridden out of town on a rail is that they have used its adjacent role as operator of the payment system to blackmail the government into making good on their foolish gambles. Outsource the entire US banking system to Germany, but put a Czech banker in charge of it (from the EU member state with the lowest household debt to GDP ratio).

Anonymous said...

For all who take one side of the argument, here is the other.

On a Greek bond, you lose fifty percent of your principal balance as an investor. How many bonds will you buy in the future?

The game is one of building by saving and investing, not by harvesting free money in an imaginary market which is going bust for many.

If your 401(K) fund in invested in a mortgage which must be foreclosed to return your investment value lent out, will you be so easily moved to accept your haircut? I think not.

It is a difficult problem, but those who save and build on that saving are in much better shape than those which took out more debt than they could pay back.

For every loser there is a winner, but the only way the middle ground is reached is when the mortgage -- based on the Latin for death -- dies by being paid off.

We paid off our mortgage, and have a home free and clear. It took hard work and discipline.

As to "rent-seeking parasites," any who seek someone else's productivity can be such a parasite. This includes the usurious loan maker as well as the unscrupulous loan taker. Things either work both ways, or not at all.

normann said...


I agree wholeheartedly. I was raised by my third-generation Czech mother to treat debt like fire: something to be very careful with, and never take out more than you absolutely need. My parent borrowed just enough to build the shell of the extension of our house (with unfinished floors) and paid for the rest out of cash flow. My partner and I also own our condominium free and clear, so I know how it feels to have that burden lifted (because like you, I was raised to treat it like a burden).

When I use the term "rent-seeking parasites", I am not referring to the socially beneficial role of persons with surplus capital to lend. They are entitled to interest as payment for the use of that capital. I am using "rent-seeking" in its strict meaning in economics, namely using political connections rather than adding value to obtain financial advantages ( Market makers, middlemen, futures markets, etc, help to mitigate risk; I am not talking about them. But what useful purpose is served by cost-free electronic arbitrage? In yesterday's Financial Times I read that Wolfgang Schäuble is pushing for the EU to introduce a Tobin tax on financial transactions. This won't end arbitrage in general, but may put a dent in arbitraging minuscule exchange-rate or interest-rate spreads by moving vast amounts of "liquidity" around the planet, for a very thin slice. Meanwhile, we can all hope for prudence to return to the banking sector. I'll admit, it would be a novelty.

Anonymous said...

Dear Mr. Normann, dear Mr. Leddy,

Herr Schäuble and the others cheering on the Tobin tax pretend it will not be passed down to the little folks. I can tell you that it will, without fail. "Moving liquidity around the planet" is also seeing capital flight when a government -- think Argentina in the moment -- seeks to bring out the shears for the next haircut.

If you want an interesting read, I suggest looking at the IMF Working Paper, WP/08/238 entitled "The Costs of Sovereign Debt" by Eduardo Borensztein and Ugo Panizza. In it you will read of the many defaults by governments around the world, each a "haircut" for private investors, large and small alike. You will find it in PDF format via a search.

I am a very small saver with minimal investments, but I can tell you that if the Tobin tax is enacted here in Germany, when I wish to send my investment assets to another country for my retirement will be elsewhere, my Tobin "haircut" will be very real to me.

You write about "prudence" returning to the banking sector. I agree with you, but also hope for prudence to return to governments around the world. Read the IMF Working Paper, and I think you will find its contents informative and alarming. Government debt and a subsequent default equals -- pardon the vernacular -- someone getting screwed.

This does not just mean big investors. Check out your own retirement account, or ask after some of your fellows. Between insolvency coming to governments from the municipal to the largest, the new pressure is to force retirees to accept their haircuts. When it becomes your turn, I think you will find liquidity will be far more useful than discounted promises from government.

As one reads, many pension funds are now in deep, deep trouble. Ergo someone will get the next haircut. I am trying in my own small ways to avoid this like a plague, for that is what debt ultimately becomes.

Best wishes.

Michael Leddy said...

Anon., I’m in no position to debate the Tobin tax with you. My post was meant to record my response to what I would characterize as utter heartlessness — the mockery of people who have ended up, for whatever combination of reasons, losing their homes. I’m for compassion; that’s all.

Gunther said... "Baum to shut down foreclosure law firm"

Michael Leddy said...

Thanks for the update, Gunther.