Robert Stein 1924-2014

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Friday, October 15, 2010

Bank Night at the Movies

"The past is a foreign country--they do things differently there" is the opening line of a 1950s novel and movie evoked by the mortgage mess splattering the American landscape now with greed, misconduct and, worst of all, a breakdown of social trust built up over more than two centuries.

Bank stocks are plummeting as financial institutions, courts and endangered homeowners scramble to cope with the "near certainty that significant numbers of borrowers are being defrauded--charged fees they don’t actually owe, declared in default when, by the terms of their loan agreements, they aren’t."

Worse, as state attorneys general try to deal with the massive fraud, the legal system may be swamped. "If the basic principles of property law have been violated here," says an understandably anonymous Federal bank overseer, "it may be extremely difficult to fix. There is a chain of questions that no one seems to know the answer to."

Now here is a subject to bring together Tea Party adherents with those who oppose them in a nostalgia for the past that transcends immediate politics, involving as it does failure of Bush oversight then and an Obama crackdown now.

Perhaps they should attend screenings together of classics showing the "foreign" country we lived in more than half a century ago.

Start with "It's a Wonderful Life," in which small-town banker Jimmy Stewart ruins himself personally to protect his depositors and then go on to "The Best Years of Our Lives" to see Frederic March struggle to make loans to other returning World War II veterans over the opposition of older hidebound bankers.

During the Great Depression, there was a fad called "Bank Night" at movie houses, essentially a lottery in which patrons saw a double feature and had a chance to have their ticket stubs drawn for a cash prize. Banks were a symbol of hope as well as dread.

There were no mortgage brokers then, no Wall Street sharks to buy up and bundle obligations into opaque gambling chips, no "robo signers" of foreclosure notices.

As critics sneer at Tea Party longings for a simpler time in our national life, they might take a look at celluloid artifacts of the past, stop shouting at one another and try to figure which was the baby and which the bath water of earlier times.

Update: Look for a happy ending for bankers with a retroactive stealth bailout, as a CNBC editor predicts "the screwed up paperwork, lost notes, unassigned security interests will be forgiven by a legislative act...The lame duck session of Congress will pass a bill that essentially papers over the misdeeds of the banks that originated mortgage securities."

Those old movies were made before "too big to fail."

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