Karl Denninger calls the current foreclosure fraud mess "Foreclosuregate."
Personally, I think labeling the foreclosure fraud mess with the obligatory "-gate" suffix makes Watergate appear to be a far bigger deal than it was. Watergate just involved some petty crimes by lackeys of the POTUS to secure fodder for political dirty tricks. By contrast, the foreclosure scandal is systemic and appears to include, at some level, the complicity of pretty much everybody in the elite power appartus (POTUS, Congress, courts, banks, lawyers, other corporations), all to the detriment of average American citizens.
The foreclosure fraud scandal is several orders of magnitude worse than Watergate and could well result in an existential political crisis on the order of the Revolutionary and Civil Wars. Because the foreclosure scandal does not lend itself to the typical "A versus B" frame of conventional politics, it cannot devolve into the factionalism or regionalism that marked prior existential crises. Indeed, because the foreclosure fraud scandal strikes at the heart of our conception of America as being a country premised on the "rule of law" and the sanctity of property, even many economic elites will feel compelled to join the cause of reigning in the predatory FIRE sector, just as they did in response to the Great Depression.
I view Obama's veto of HR 3808 as confirmation that the White House understands just how volatile this situation could become. Why? Because HR 3808 is really no big deal. Contrary to a lot of the breathless headlines out there, HR 3808 would have had no real effect on foreclosure fraud because nothing in the bill requires judges to accept fraudulent documents as either evidence or true. The authentication of documents, which is all that notarization provides, is but the first step in getting a document in front of the finder of fact (in judicial foreclosures, this is the judge), and the mere fact that a document is authenticated as genuine does not mean that its contents are true. It is up to the finder of fact to weigh all of the evidence presented and determine what the truth is. Obama knows this. His choice to veto the bill in view of the completely unfounded concerns of lay people** was a purely political one meant to mollify the masses and get them back to being angry at each other instead of the banks. The bill will ultimately become law.
I don't think the political whirlwind caused by the foreclosure fraud scandal can be so easily contained. The number of states imposing moratoria on foreclosures is growing, as is the number of major banks being subject to them. This makes Chris Whalen's prediction of a new banking crisis within the next 3-6 months that much more likely, and I'm betting on the under.
The timing could not be worse for the major political parties, who are only a month away from the mid-term elections. Expect a major shift in campaign rhetoric as candidates realize that the foreclosure fraud scandal transcends politics-as-usual. Another bank bailout is politically impossible after the banks paid themselves billions of dollars in taxpayer money for being so "successful" after the last bank bailout just 18 months ago.
We'll see how this all plays out. We're definitely living in interesting times.
** I practiced law for fifteen years, most of them as a litigator and trial lawyer. While I no longer practice law, I remain interested in the discipline.
UPDATE 1: Via Mish, 40 state attorney generals are now investigating mortgage/foreclosure fraud.
FYI -- In the linked post, Mish links to a previous post in which he blames the SEC's lack of regulation for the fraud we're seeing. While there's no doubt that things might not have turned out so poorly if the SEC had been doing its job, the reason why the NEC was not doing its job is because neoliberal ideologues like Mish were in charge of the SEC and Federal Reserve. The only people who can properly be blamed for the fraud are the banksters who engaged in it. If you want to blame captured regulators as accomplices of the banksters, fine, but to blame only the regulators is to absolve the real criminals, i.e., the banksters. Austrian neoliberals like Mish cannot have it both ways.
UPDATE 2: Here's an interview with the Ohio Secretary of State regarding foreclosuregate and HR3808 (h/t Karl Denninger). My take on what she had to say is that HR 3808 would have made it cheaper and easier for the banks to engage in forging missing mortgage documents by setting up shop in states with loose notary laws. This concern does not translate directly into the assertion that the law would have made it easier for the banks to obtain judicial foreclosure, although arguably being able to pump out forged documents more quickly could sharply increase the number of foreclosure cases in the system and encourage other states to create a Florida-like "rocket docket" for handling foreclosures.
