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Tuesday, October 12, 2010

Killin the Goose

Hey Barry:

Y'all mebbe wonderin what is the big deal about this foreclosure mess anyway.

Some folks sayin that we jes gotta let the market take its lumps and move on.

But Barry, it aint that simple or easy. It aint about some poor shlub like yours truly who been sucker punched.

Nope, its about some big things.

An Barry, this here's a surprise - Im gonna agree with the billionaires on this. Normally they is jes wrong and bad for the country - this here's the exception.

When ya think about where does the money come from - all the money in the whole country - ya could do worse than readin THE MYSTERY OF CAPITAL, by Hernando De Soto.

His point is that Western countries like the good ol US of A create a lot of wealth - money - because they have created a system that lets a banker in New York be certain that Sammy Smith really does own the house in Kansas City that he wants a loan on. And with that system the banker can make Sammy a loan and sleep at night.

And because the banker can sleep, then he is willing to value Sammys house at the price that Sammy can afford to pay the loan on, lets say mebbe $200,000.

That mean that Sammy can borrow against his house and buy some stuff or buy another house.

That's the way it used to be, say five years ago. Different today. And Barry, the difference is your problem to solve.

Here's the difference:

But, jes suppose that the NY banker can NOT be sure Sammy owns his house. Then what will he lend Sammy. Answer = zip, nada, zero.

Then what is Sammy's house worth. The same - zip, nada, zero. Mebbe he can find sum fool that'll pay him $5,000 and gamble that he really owns the house. But, and this is the big point Barry, aint no banker gonna lend nuthin on Sammy's house without his being sure who owns it.

OK, then, so what is this wonnerful system that creates all this money. Its the title insurance system. This is the companies that track all the history of Sammy's house to be sure that Sammy really owns it. Then that company writes an insurance policy that says: Yes, Sammy really owns the house.

And thats what the banker needs to make a loan.

Thats all good, but here's what is happening now: The crooked bankers have made such a mess that some title insurance companies are refusin to write insurance on Sammys house. And that gonna mean that no banker will lend on Sammys house. And that gonna mean that Sammys house is worth exactly zero.

See, the bankers job is to provide clear documents to the title company so they can be sure of ownership.

Here's where the crooked bankers come in - today's banks have been so cheap/crooked/lazy [y'all can choose your own word here] that they have failed to provide title companies with clear documents.

That gonna mean that the entire wealth of the country is headin down the drain in a big hurry.

Talk bout killin the golden goose - these criminal banks have jes bout done it for all of us.

OK so whatta we gonna do.

Heres what ya gotta do Barry:

First: Ya gotta create an interim guarantee for the title companies so's they can keep insurin Sammy's house.

Most Important, second: Ya gotta force - I mean FORCE - them crooked mother banks to provide clear and legal docs on all the houses they think they own.

Its the only way out of this particular mess Barry.

Ya gotta be real hard and some of them boys gotta do time.

We with ya Barry.

Your pal,

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