In the long history of evolution it has not been necessary for man to understand multi-loop nonlinear feedback systems until very recent historical times. Evolutionary processes have not given us the mental skill needed to properly interpret the dynamic behavior of the systems of which we have now become a part.
Excerpts: We may be the richest nation in the world, but poverty is higher and social mobility between generations lower than in other rich nations. In other respects, our model is bloated: we release far more carbon dioxide and use far more water on a per capita basis; and we spend far more on health care, while leaving tens of millions uninsured and achieving health outcomes that are mediocre at best. The spectacular profits of the energy industry, for example, rely heavily on the failure of regulation to incorporate fully the social and economic costs associated with environmental degradation, including climate change. Similarly, the increasingly aggressive activities of Wall Street—whether in the marketing of unsound mortgages, the use of excessive leverage, or the irresponsible use of derivatives—create huge risks for the economy as a whole. Yet these risks are largely not taken into account in the prices paid in financial markets. Without effective regulation, the costs are borne by all of us—most acutely by the struggling millions who have been pushed out of jobs. The economics is really easy. If we were to spend more money at the government level and ... rehire the schoolteachers, firefighters, police officers who have been laid off in the last several years because of cutbacks at the state and local level, we would be a long way back towards full employment. ... Right now, there just is not enough spending, and we need the government, which can do it, to step in and provide the demand we need. ... We’ve had austerity in the face of a recession, in a way that we have never had before since the 1930s. ... And the results are clear: it’s disastrous. What Krugman & Stiglitz Can Tell Us by Jacob Hacker and Paul Pierson | The New York Review of Books
Conservatives take issue with liberals when we argue for fairness in American economic, political, and social life. “Life isn’t fair,” they argue, with more vehemence than I think warranted, but conservatives can get pretty worked up over anything that sounds like socialism, and to them, everything we liberals say sounds like socialism. I think we liberals are partly at fault for this knee-jerk reaction on the part of our conservative friends, because we use the term “fair” too broadly.
So what is fairness? The Federal Communications Commission (FCC) introduced a law in 1949 that required the holders of broadcast licenses to present both sides of controversial issues of public importance. News was to be presented in a manner that was, “honest, equitable and balanced.” The FCC doctrine is no longer with us (that should be obvious), but the words honest, equitable, and balanced constitute a good definition of “fair.” But when we liberals discuss fairness with our conservatives we sometimes misuse the term, or use it imprecisely.
Consider the Occupy Wall Street (OWS) movement, for example. One of their rallying cries is, “We are the 99%.” The slogan refers to the income disparity in America, which has grown significantly since the late 1970s to the point today where the top 1% control 40% of wealth in the U.S. When liberals, who are largely sympathetic to the OWS activists, argue that this isn’t “fair,” conservatives are apt to call us socialists, or worse, communists, who want the state to dole out equal shares to all.
We liberals give conservatives the opportunity to construct this straw man by not being precise in what we’re saying. What we mean is that policy distortions that lead to inequality, such as unregulated or under-regulated financial institutions, the near monopoly power of too-big-to-fail, and preferential tax treatment for special interests, are bad for America. They’ve allowed unethical and even criminal enterprise, decimated the middle class, led to shrinking opportunities to realize the “American Dream,” resulted in a deteriorating infrastructure, and decreased overall economic efficiency. Clearly, this is a nuanced treatment of “fairness,” and in today’s political climate, nuance is rare.
"Corporations are people too, my friend"
On a related issue of fairness, voters, both liberals and even many conservatives I know, question the “fairness” of the unrestricted flow of cash to political parties, candidates, and their surrogates. This flood of money resulted from the 2010 Citizens United case in which the Supreme Court decided (5 to 4) that bans on corporate contributions were unconstitutional, or as Mitt Romney put it, “Corporations are people, too” (the ruling applies to unions and NGOs, as well). Justice John Paul Stevens wrote in his dissent, “The ruling threatens to undermine the integrity of elected institutions across the Nation.” In this sense, when we complain that campaign financing is no longer “fair,” what we mean is that they are not “balanced” -- they allow moneyed interests to wield disproportionate influence on both elections and the elected.
We depend on our elected officials to represent the people, all the people. And yet the median net worth of our congressional “representatives” is almost nine times the typical American household. Fully 250 members of congress are millionaires, and 57 have a net worth that puts them comfortably in the 1%.
The founding fathers, well-read in history, and well-versed in the literature of the French enlightenment and the philosophy of Descartes, Voltaire, Bacon, Locke and Hobbes concluded that successful republics required an equitable distribution of wealth. They knew that where wealth concentrates, political power can never be democratically shared. They knew such a situation to be inherently unfair. And they knew what unfair meant.
According to one suit, Bank of America allegedly passed on bad loans to the Federal Housing Authority. In another, the bank allegedly denied qualified homeowners access to HAMP, the government's loan modification program.
The suits were all settled as part of the overall $25 billion mortgage deal. They were filed under the False Claims Act, which provides incentives for whistleblowers to come forward in cases where someone has defrauded the government. Whistleblowers can net up to 25 percent of the total settlement from False Claims suits, and in some of these cases, the reward is in the millions.
Details are available for four of the cases; documents in a fifth, against JP Morgan Chase, have not yet been filed in Massachusetts. While the cases were settled as part of the overarching agreement, they still have to be accepted by the courts in which they were originally filed. In reaching the settlements, none of the banks admit or deny the lawsuits' allegations.
We've laid out the details of each case.
Countrywide Defrauded the FHA
Countrywide CEO Angelo Mozilo
Kyle Lagow worked at LandSafe, a contractor of Countrywide, which Bank of America bought in 2008. He brought a suit in 2009 alleging that the company systematically undermined the appraisals process for home loans in order to approve as many as possible.
The result was bad loans passed on to the FHA for insurance, while Countrywide was later able to file millions in claims from the FHA. (Read the complaint, which has plenty of juicy details.)
Lagow alleges that much of the appraisal staff were not properly trained, and that in many cases, the appraisal was being done by a developer, KB Homes, which had a stake in making sure the loans closed.
Countrywide pressured LandSafe to blacklist appraisers with whom KB Homes "had too many issues." (KB Homes did not respond to requests for comment.)
Lagow's complaints were ignored or challenged.
He also says that he was fired for bringing the issue to Countrywide executives. Lagow's suit was settled for $75 million, and was a component of the Federal Housing Authority's $1 billion settlement with Bank of America over FHA insurance. Documents detailing his cut of the $75 million haven't yet been filed. Bank of America did not respond to requests for comment.
Rampant Robosigning at Bank of America, Wells Fargo, JP Morgan and Citi
Lynn Szymoniak, a lawyer, was facing foreclosure in 2008 when she received what she believed were fake documents from her bank. She began an investigation and eventually filed another false claim suit against the country's four largest mortgage servicers.
Szymoniak's suit is still sealed, but she told 60 Minutes last year about a mystery woman, "Linda Green," who appeared to be the vice president of 20 different banks and whose signature varied on the thousands of mortgage documents she had supposedly signed. Szymoniak also discovered what she called a "sweatshop" company, Docx, which forged signatures on thousands of mortgage documents (The banks Szymoniak names told 60 Minutes that Docx was hired by subcontractors. The company has since been shut down).
Her suit settled for $95 million, and she will receive $18 million. JP Morgan Chase declined to comment, and Wells Fargo and Bank of America did not respond to our inquiries. A spokesman for Citi declined to respond to the specific allegations, but said that Citi "is making every effort to ensure that no foreclosure goes forward based on an inaccurate or defective affidavit."
Two employees at a Georgia mortgage broker alleged in a suit filed last summer that JP Morgan, along with Bank of America, Wells Fargo, and Citigroup, scammed a program that is supposed to make it easier for veterans to get loans. The banks hid fees that would have disqualified loans from the program, lumping them in with other items on the clients' bill, and then submitted fraudulent documents to the government for reimbursement under the veterans program: Read their full complaint.
JP Morgan settled for $45 million dollars. The two whistleblowers, Victor Bibby and Brian Donnelly, told Reuters that they would together receive $11 million. They also said they would continue their case against the other banks. JP Morgan declined to comment.
Bank of America Cut Qualified Homeowners Out of HAMP
Bank of America CEO Brian Moynihan
Gregory Mackler worked at Urban Lending, a company contracted by Bank of America to handle HAMP requests. His suit, filed last summer, alleges that Bank of America actively sought to reduce the number of people who qualified for the government's loan modification program, HAMP, pushing instead the bank's (often less affordable) proprietary loan modifications. This approach saved Bank of America money, but cost homeowners. (Read the complaint.)
Mackler's complaint describes many ways that Bank of America, through Urban Lending, allegedly disqualified homeowners for HAMP.
Payments were intentionally processed incorrectly so that they would be deemed late.
Houses that were owner-occupied were declared not so by "drive-by" inspections.
In some instances, Countrywide started foreclosure proceedings on homeowners who had been told they were "under review" for HAMP modifications. (ProPublica has also detailed many similar instances.) And the customer advocates assigned to HAMP customers didn't have access to the information that they needed.
When Mackler raised concerns with Bank of America executives, the suit alleges, he was ignored or told that Bank of America was "not of course interested."
According to the suit, Mackler was fired "in retaliation" in March 2011. Bank of America also did not respond to our requests for comment.
The suit settled for $6.5 million, and Mackler's cut is not yet finalized.
