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How Come Right-Wingers Aren't Up in Arms About Wall St's Assault on Private Property?

The Right will continue to defend the bankers, even if they undermine one of conservatism's most cherished principles.

Ever since the financial crisis hit, conservatives -- at places like the American Enterprise Institute and the Heritage Foundation, joined by some prominent Tea Party groups -- have fought tooth-and-nail to deflect new regulation of Wall Street’s wheeler-dealers. (In my new book, The Fifteen Biggest Lies About the Economy, I note that the Right, following the advice of conservative message-maker Frank Luntz, derided new regulations that Wall Street was fighting hard to kill as a “second bailout” of the big banks. It was a lie so bold that one couldn’t help but be impressed with their chutzpah.)

So there’s a certain amount of irony in new revelations that the banks, in their quest for easy profits, appear to have undermined one of the Right’s most important principles: the sanctity of property ownership.

“If you own something,” George W. Bush explained in a 2004 speech, “you have a vital stake in the future of our country. The more ownership there is in America, the more vitality there is in America, and the more people have a vital stake in the future of this country.”

Yet today, thanks to the “innovative” financial instruments cooked up by the Wall Street Casino, doubt may be cast on the ownership of American homes across the country. Brady Dennis and Ariana Eunjung Cha, writing in the Washington Post , laid out the contors of the story last week:

Millions of U.S. mortgages have been shuttled around the global financial system -- sold and resold by firms -- without the documents that traditionally prove who legally owns the loans.

Now, as many of these loans have fallen into default and banks have sought to seize homes, judges around the country have increasingly ruled that lenders had no right to foreclose, because they lacked clear title.

These fundamental concerns over ownership extend beyond those that surfaced over the past two weeks amid reports of fraudulent loan documents and corporate "robo-signers."

The court decisions, should they continue to spread, could call into doubt the ownership of mortgages throughout the country, raising urgent challenges for both the real estate market and the wider financial system.

Having pushed for deregulation that broke down the wall between commercial lending and investment banking, Wall Streeters came up with a way to slice and dice risky mortgages into investment vehicles, which they peddled for fat fees. Essentially, they laundered the risk out of shaky mortgages, at least in theory, transforming some slices into AAA-rated securities (which allowed pension funds and other institutional players to invest in them). In doing so, they broke the relationship between lenders and homeowners, and shielded themselves from the fallout. (Again, only in theory -- when the house of cards eventually came down it brought about the most painful economic downturn since the Great Depression, and they came running to the taxpayers for a bailout.)

Those investments -- the hottest thing around at the time -- created an enormous demand for new loans. They were the raw material from which all those securities that were later referred to as “toxic” were created. Lenders, drinking deeply of their own stream of fees, were happy to accommodate the bankers. They relaxed loan standards to ridiculous levels, and families trying to live the American Dream went on a home buying (and refinancing) binge.

In order to do their supposed magic, Wall Street needed a way to trade mortgages back and forth quickly, without waiting for all the paperwork to be processed in the time-consuming way mortgages had traditionally been transferred. So, in 2000, the mortgage industry --- led by GMAC, Fannie Mae, Freddie Mac and the Mortgage Bankers Association -- created the Mortgage Electronic Registration Systems (MERS), a Virginia-based firm that would serve as an electronic clearing house to track the mortgages being sliced and diced and swapped by the big trading houses.

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