The Ignorant Investor

Paul Krugman writes today about banks jerking around borrowers in a loan modification program. A complaint filed by Nevada's attorney general...

...charges the bank with luring families into its loan-modification program — supposedly to help them keep their homes — under false pretenses; with giving false information about the program’s requirements (for example, telling them that they had to default on their mortgages before receiving a modification); with stringing families along with promises of action, then “sending foreclosure notices, scheduling auction dates, and even selling consumers’ homes while they waited for decisions”; and, in general, with exploiting the program to enrich itself at those families’ expense.

The end result, the complaint charges, was that “many Nevada consumers continued to make mortgage payments they could not afford, running through their savings, their retirement funds, or their children’s education funds. Additionally, due to Bank of America’s misleading assurances, consumers deferred short-sales and passed on other attempts to mitigate their losses. And they waited anxiously, month after month, calling Bank of America and submitting their paperwork again and again, not knowing whether or when they would lose their homes.”

I believe that the public still believes that big banks like Bank of America can't be staffed by scumbags. There's just something too horrible in the idea that a large business could be operated with the same predatory dishonesty that you'd find in the local low-rent check cashing operation across the tracks. They want to distrust the government and believe that big business can't be operated in a way that screws the little guy. Our ancestors who lived at the turn of the last century would be bewildered by this attitude.