Evil Is The New Good

Charles Hugh Smith posted one of his excellent "deeper game" (my label, not his) essays today entitled "The Banality of (Financial) Evil."  The entire piece is well worth reading, but I want to focus on a few selections from it because they deftly describe the dynamics behind two other recent stories :

Hannah Arendt coined the phrase the banality of evil to capture the essence of the Nazi regime in Germany: doing evil wasn't abnormal, it was normal. Doing evil wasn't an outlier of sociopaths, it was the everyday "job" of millions of people, Nazi Party members or not.

Not naming evil is the key to normalizing evil. Evil must first and foremost be derealized (a key concept in the Survival+ critique), detached from our realization and awareness by naming it something innocuous.

. . .

Can any of the tens of thousands of people working on Wall Street or in the bowels of the Federal Reserve, Treasury, Pentagon, etc. truthfully claim they "didn't know it was wrong" to mislead the citizenry, the soldiers, the investors and the buyers of their fraud? On the contrary, every one of those tens of thousands of worker bees and managers knows full well the institution they toil for is doing evil simply by hiding the truth of its operations.

Now, let's turn to Bill Black's latest piece, "Lenders Put the Lies in Liar's Loans," which lays bare the cognitive dissonance of Andrew Kahr, who Black describes as "one of the architects of subprime lending."  Essentially, Kahr details the "liar's loan" industry (without realizing he is describing a criminal enterprise built on on accounting control fraud) and then blames the borrowers for the fraud.

At the end, Black summarizes precisely how Kahr has "normalized evil" to the point of identifying the victims of his criminal industry as the criminals and the criminal industry itself as the victim:

To sum up situation to this point:

• Mr. Kahr says that "the banks" created liar's loans, knowing they would produce endemic mortgage fraud. They even redrafted their loan documents to encourage fraud.
• The nonprime lenders did not create liar's loans due to competitive pressures because such loans cause severe losses.
• The banks identified widespread fraud - and deliberately violated the law by failing to file criminal referrals.
• The nonprime lenders and brokers encouraged the mortgage fraud because they profited from it. The fraud produced more loans that they could sell at a profit to Fannie and Freddie. The officers controlling the nonprime lenders and brokers knew that a strategy of endemic fraud would make them wealthy and transfer the losses to the taxpayers.
• The strategy that Mr. Kahr describes is fraudulent. Indeed, it is a classic accounting control fraud.
• The controlling officers of the fraudulent nonprime lenders and their brokers created the "echo" epidemic of appraisal fraud in order to maximize the firms' accounting income and their personal compensation.
• Yet, Mr. Kahr, assumes that the nonprime lenders are the victims of an epidemic of fraud committed primarily by financially less sophisticated working class borrowers. He offers no proof -- it is self-evident to him. He has no idea that the strategy he ascribes to the nonprime lenders is fraudulent. He has no apparent sympathy for the working class borrowers induced by fraudulent lenders and brokers to borrow money to buy homes (at the peak of the bubble) that they could never afford to repay -- and the inevitable destruction of working class wealth.

Meanwhile, we have Duncan Smith, a government official in the UK, threatening long-term jobless with "compulsory manual labor" (i.e., slavery), if they don't "play ball," even as his government props up the criminal financial system that caused these people to lose their jobs.

Apparently, Evil is the new Good.