Monty Pelerin's World

Economics, Finance and Politics Through The Prism of Classical Liberalism

Gaming the System

Gaming the System By Monty Pelerin, posted April 16th, 2010 Folks, understand what is happening here to cover up the condition of the banks and the economy. I just spent several days with my cousin, an MD from rural Missouri. His tales amazed me, and I am not used to being amazed as to how people are abusing the system. In his case, it was the medical health care system. Of course these grifters did not limit themselves to medical fraud, but also participated in welfare and other schemes to live at taxpayer expense. It seems we have bred an entire new class of people that are keen to living off the government teat whether they are entitled to or not. I will not try to repeat any of the stories or schemes. These tales could be told about any area of government programs. The graft, fraud and abuse are apparent to anyone with eyes open and willing to investigate. The fraud perpetuated in the banking system is not yet seen or understood by the public. Rage and disgust prevails over the bailouts, but the real fraud is yet to be revealed. Banks are in desperate shape, despite what you are being told. The sad part of this story is that the government knows their condition and has done everything it can to ignore and cover up the insolvency problem in the banking system. It is a desperate attempt (that will fail) to pretend that this is just another ordinary recession. Do not believe that we are recovering for a moment. Banks are not normally kindly sorts. They do business to make a buck. Often we hear stories about how they foreclose on widows, shut down businesses, etc. etc. One can either believe they have changed their stripes or that desperation is the norm when one looks at some anecdotes from Financial Armageddon: My 25 year old niece had $10,000 of outstanding credit card debt. Recently, she told the bank she couldn’t pay. She is not unemployed so the ‘hardship’ is all relative. Nevertheless, the bank offered her a concession which she refused. They offered another concession, she refused again. Finally, they told her if she paid $150/month for 2 years (total of only $3600 with no interest), they would call it paid in full! She accepted in a heartbeat. It is less than a month later, and she celebrated her good fortune by going on a cruise to Hawaii. A friend owns a small manufacturing co. He tells me of one of his female employees who was saddled with a $450,000 home she purchased almost five years ago with no down pmt. One year after her purchase she pulled $75,000 home equity and purchased ‘fun stuff’ including a boat. She recently walked away from the house (now saddled with $525K mortgage), purchased a new house for $200,000 (in her sister’s name) and kept all the goodies purchased from the home equity withdrawal. With the much lower mortgage payment she just bought a new car. Almost everyone in my “survey” is aware of, or knows someone living rent free in their home for an extended period of time, having stopped paying their mortgage. Many of these free boarders are spending lavishly on non-essentials. My hard-working part-time assistant knows two different 35+ yr olds who have enjoyed over 9 months (one is up to month eleven) of rent-free living in very nice homes they purchased in 2004/2005! Both are employed and both enjoy a non-frugal lifestyle. My assistant wonders if he should do the same or have me pay him more so that he too can enjoy the ‘good life’. My sister is a nurse with 25+ years on the job. She told me of a young couple that she is good friends with that both work at her hospital making a decent joint income. They didn’t like the fact that they grossly overpaid for their 3000 sq ft home in 2006. They stopped making hefty monthly payments six months ago and haven’t yet been contacted by the bank. They have decided to wait until contacted and then walk away. In the meantime, they just returned from NYC from a week vacation in the Big Apple. My brother-in-law wanted to know if he should stop making payments on everything. He lives in Virginia and his carpentry skills are not as marketable as they were in the height of the boom. He and his wife’s best friend have lived close-by for many years. For the past 13 months since they strategically decided to stop paying their mortgage, they had yet to be contacted by their bank. Not even one letter! My brother-in-law doesn’t understand how they get to pocket the mortgage and spend carefree, including a 10-day Caribbean vacation. It would appear that our entire society has been corrupted by government largess. It will not be pretty watching this entire facade collapse. You can believe that banks suddenly became altruistic (at your expense, I might add). I regard this behavior as desperation. The situation is so dire that they cannot take additional write-downs on loans. I believe the banking system is so tenuous that ignore and pretend is their only alternative. Share/Save Related posts: The Cash for Homes Boondoggle (5.081) Bank Failures On Rise (4.628) Jimmy Stewart Wouldn’t Run These Banks (4.282) Headlines vs Reality (4.254) Banking Mess (4.003)