Jamie Dimon has finally managed the difficult feat of making Lloyd Blankfein look good.
When Blankfein said Goldman was “doing God’s work,” as offensive and laughable as that sounds, it’s an arguable position. If you look at the God of the Old Testament, he’s a really cranky and often capricious character. Indeed (and I am NOT making this up), one of my friends, who got a PhD in theology after writing for one too many business publications, is working on a book that will argue, in effect, that the Bible is not pro-environment. Why? God is regularly smiting people, causing floods and tearing up the landscape and has a certain fondness for the use of fire and brimstone. He’s never (per her) nice to fallen birdies. So Goldman may see itself as the God-appointed deliverer of various forms of temptations of and pestilence upon the greedy (you know, investors and the public at large). And the Bible seems to be silent on the rewards for this particular duty, so there seems nothing prohibited in Goldman profiting from this role.
On another level, by not getting specific about what exactly Goldman does (the firm is engaged in a lot of activities), so this could be an effort to sanctify trickle-down: “We generate a lot of employment and pay taxes (whoops, well our staff does), so that’s good for everyone, right?”
Even though these efforts at deconstruction are a bit of a stretch, it’s even harder to paint lipstick on this pig from Jamie Dimon. As Adam Levitin writes:
I missed this howler from a few months ago, but it’s so outrageous that I’ve got to comment on it, even thought it’s stale. I’m amazed that this didn’t get much more press. In the course of a CNBC interview (full show here, foreclosure discussion runs from 4:07 to 5:23), JPMChase CEO Jamie Dimon stated that:
“Giving debt relief to people that really need it, that’s what foreclosure is.”
As he explained:
“[Homeowners] are probably better off going somewhere else, because they get relieved almost 100% of the debt through foreclosure.”
For real? It’s debt relief? Why not just go old school with “let them eat cake”?
“Debt relief” requires a forgiveness of debt. It’s a gift, not an exchange. There’s no quid pro quo. In foreclosure, however, the homeowner gives up the house, and doesn’t necessarily get any debt relief. If the mortgage is recourse, there could still be a deficiency judgment. Does Dimon mean that JPMChase is forgoing all deficiency judgments? I doubt it. And even if so, there’s an exchange of debt for house. That’s hardly debt relief. That’s debt collection.
There are, without question, some homeowners who feel quite relieved when the foreclosure is complete–the uncertainty of their living situation is finally resolved, and they aren’t saddled with a mortgage any more. But they might now have a mountain of unsecured debt.
Note that as we’ve noted, servicers seldom do pursue the portion of the mortgage over and above whatever they get back from selling the house (the “deficiency judgment”) but with the bank-generated media hype about strategic defaults, there is far more saber-rattling about going after borrowers who default, so it’s hard to imagine they now rest easy after the bank does them the big favor of relieving them of their house. Similarly if banks were so keen to be considerate to borrowers’ need to move on, they’d be far more receptive to short sales, yet both commentors on this site and media reports indicate that many servicers make it well nigh impossible to enter into a short sale when it is almost always a better outcome for the homeowner and investors (less credit report damage, lower losses on the sale of the house than selling it when vacant).
We’ve hit the point where people in positions of power make no bones about the fact that corporate persons get a better deal than the flesh and blood kind. Dimon would never dream of saying, “Yes, it’s good when weak companies fail and we sell factories for scrap value.” It’s taken as a given that it’s always better for both the borrower and lender to restructure the loan, ideally out of court. And if servicers were willing and able to do mortgage mods, they could be handled quietly, in a way that did not incite jealousy (how would you possibly know your neighbor got a mod unless he blabbed to you?). Credit card debt gets renegotiated all the time, yet we don’t see moralizing on the Web and in newspapers about it. It’s the banks’ intransigence and the fact that the government has had to intervene to force action that has led to public consternation.
Nevertheless, the Dimon moral calculus is fascinating. If foreclosures are kind, is it even kinder to restore debtors’ prisons? After all, those people who lose their homes would be assured of getting shelter.