Arnold Kling  

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E. J. Dionne hearts Rep. Tom Perriello. Perriello was one of the participants in the panel on the future of the middle class where I felt out of place. He was not the Congressman who threw down his pen. But his beliefs seemed impervious to facts. What I most remember him saying is that we will never have good government until we have publicly financed campaigns. You see, it's not that his economic ideas are backward and uninformed. They are merely opposed by special interests.

Legal Controversy over Foreclosures. The general mood these days is that banks are to blame for everything. And you get the sense that the paperwork got "lost" in the securitization process.

But my reading of the story is that the villains here are lawyers. The ownership and mortgage records are in a central electronic storage facility, known to the industry as MERS. The lawyers are using arbitrary technicalities as an excuse to refuse to acknowledge the validity of those records. (Obviously, I have not examined any of these cases specifically. To the extent that there are instances in which there is evidence that bank X is not the servicer of the mortgage as recorded in MERS, I would have to back down from that statement.)

I suspect that the right public policy is to shut down the legal challenges to MERS unless real errors (as opposed to technicalities) are found. But in a country where lawyers dominate the making of public policy, that is not going to happen.

Ambulance fees would hurt the poor. Another lawyer making a public policy argument.

Brad DeLong should apologize?. We will see lawyers take a modest approach to public policy first.


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COMMENTS (10 to date)
GU writes:

I'm a lawyer, and I recently worked in a federal judge's chambers where we received a whole bunch of these b.s. MERS cases. I certainly thought they were ridiculous, and so did the other lawyers and the judge. (I guess we missed the evil lawyers meeting where it was agreed that we would all somehow cash in on MERS).

For the most part, the lawyers bringing these cases are the bottom-feeders of the legal world. They prey on poor, ignorant people, charge no fees (except contingency fees), flood the courts with (literally identical, copy & pasted) class-action complaints, and hope one "sticks." Most of the lawyers I know are not at all amused by this behavior.

Bad public policy in the U.S. is due to public choice problems, interest-group/rent-seeking problems, and the personality typical of persons who seek high office. In other words, a Congress full of economists would be just as bad (assuming they had to be elected the same way our current Congresspersons are elected).

Sorry to interrupt this libertarian fantasy rant against lawyers, but I'd like to remind you that lawyers a necessary evil, even in a (realistic) classically liberal future world. Bargaining and contracts don't always work as planned, and written laws are inherently vague—even super smart economists can't write laws that have one meaning in all possible applications! For better or worse, lawyers are here to stay. Moreover, there are lots of classically liberal and libertarian lawyers, so casually damning the whole class isn't justified.

Perhaps I'm being too sensitive, but the casual "f#ck all lawyers" talk that is common in libertarian circles is unnecessary.

JP98 writes:
I suspect that the right public policy is to shut down the legal challenges to MERS unless real errors (as opposed to technicalities) are found. But in a country where lawyers dominate the making of public policy, that is not going to happen.

What about lawyers who represent banks? Don't they have an impact on the making of public policy?

Joe in Morgantown writes:

I'm not sure these cases are nonsense.

Granted, to the extent they just delay foreclosures that need to take place, they are a bad thing. But I'm very reluctant to waive the rules for the powerful.

Aside from that, why do the assignments need to be back-dated? Why didn't the trusts get the notes at trust creation? Was that really about saving a few pennies? Maybe this is all just technicalities--- in which case it should come to little. But there is a stench of fraud here; air and sunlight are called for.

GU writes:

@Joe in Morgantown

It's not that there are no potentially legitimate cases. But a lot of the complaints in these cases are literally copy & pasted inane garbage, filed in every district court in the U.S., with a token class representative (the rest of the class to be named later). Dealing with these cases takes away precious judicial resources that could be spent on legitimate cases.*

*There is an absurdly large number of seats on the federal bench that are currently vacant (many have been vacant for years) because our wonderful Congress is engaged in a perpetual pissing contest over judicial appointments. Perhaps Mr. Kling can tell us why the the "lawyers that dominate the making of our public policy" don't want to appoint their lawyer friends to the bench?

Jeff writes:

There's a moral hazard problem here. If you throw out all the cases claiming insufficient documentation for attempted foreclosures, you'll get even more sloppy paperwork in the future. These cases will serve as a deterrent to future mortgage servicers trying to take shortcuts on the paperwork. If they think the paperwork burden is too high, perhaps they should spend some of their political capital on getting state legislatures to reform the system, rather than ignoring the legal requirements.

Charlie Deist writes:

I sympathize with Professor Henderson, and I wish that Professor DeLong would afford his intellectual opponents the same respect on his blog that I imagine he would give them to their faces, but Logan Penza's demand for an apology is off-base as well.

For one, he asks, "Is there any doubt that DeLong doesn’t exactly place a priority on ensuring that Berkeley economics students hear dissenting views?"

Professor DeLong has assigned the following for his Econ 1 students to read this semester:
--Free to Choose, by Milton Friedman
--I, Pencil, by Leonard Read
--In Praise of Price Gouging, by John Stossel

Impressive.

Rebecca Burlingame writes:

@GU,
Yes, we need lawyers. And I cheer lawyers whenever they can actually help someone. But someone in this system has allowed laws of all kinds to become so convoluted, that a lot of us can no longer live normal lives. Because of laws that are so bad, lawyers are actually embarrassed to level with their clients about the fact that they can't really help them. Because of some stupid outdated land laws, my possessions, and my husband's possessions, are not even really our own.

GU writes:

@Rebecca Burlingame,

I wholeheartedly agree that there are many "bad" laws on the books. As I said above "[b]ad public policy in the U.S. is due to public choice problems, interest-group/rent-seeking problems, and the personality typical of persons who seek high office." If you were trying to say that it is lawyers' fault that we have, overall, bad public policy in the U.S., well, I don't think that is plausible. If you were just lamenting the fact that we have many bad policies, I hear you.

Rebecca Burlingame writes:

@ GU,
Certainly it is not the lawyer's fault. But senators and representatives tell you to write a letter to the governor and then the governor's secretary rips up your polite letter and gets mad because you sent it. All I'm saying is that lawyers around the nation could form a group to put a serious dent in this economic and social gridlock, that wears down economies in many ways.

Disempowered Paper Pusher writes:
The ownership and mortgage records are in a central electronic storage facility, known to the industry as MERS.

No, the valid ownership records are at the country recorder's office. The recording process is well established and is very cheap, unless you're flipping houses on a weekly basis or passing tranches of MBS around.

The banks may, possibly, created cloudy title issues like Brazil, Egypt and all the various other countries that de Soto wrote about.

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