The banking industry continues to cover itself in glory.
Last year I pointed out that efforts to modify unaffordable mortgages were failing because lenders refused to hire enough people to deal with all of their reckless loans.
Now it appears they also didn’t hire enough people to legally process all of the foreclosures created by their refusal to modify those mortgages.
Depositions suggest that the few employees who were hired to push foreclosures through the system were hair stylists, retail clerks and factory workers who were woefully unprepared to do their jobs.
They were derisively known as “Burger King kids” at JPMorgan Chase & Co., according to the New York Times.
Now we’re told that these “robo-signers” were putting their names on as many as 10,000 affidavits a month that claimed — fraudulently claimed — they had verified all of the critical information needed to meet the legal obligations for repossessing a home.
The banking industry’s latest foul-up has thrown the foreclosure process into chaos and caused many of the major mortgaging servicers to suspend foreclosures until the legal morass they’ve created can be sorted out.
Although that’s the right thing to do, it will further slow the recovery.
The housing market is still acting like a huge anchor on the economy.
How can we possibly have a vibrant, growing economy when 11% of all mortgages are in default or foreclosure, and millions of repossessed homes are wreaking havoc on the housing market and property values?
Yet the new scandal over the accuracy and legitimacy of the documents lenders need to clean up their old scandal could add years to the whole sorry process.
So with no real recovery in sight, the Federal Reserve seems determined to keep driving interest rates down in an increasingly desperate attempt to stimulate spending.
Indeed, the government-controlled bank is widely expected to resume buying billions of dollars worth of federal bonds after its next policy meeting on Nov. 2-3.
That will undoubtedly push the pathetic returns on bonds and bank deposits even lower, while having very little impact on the GDP.