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An interesting article in last Friday’s Seattle Post Intelligencer newspaper detailed the history of the subprime loan mess and the greed that consumed the banking and mortgage industry. It also detailed how congressional members worked to ensure banks and mortgage lenders were granted immunity from lawsuits should anyone ever want to sue. The “tort reform laws” gave the industry virtual immunity from civil suits. Lenders made very risky loans in a frenzy to collect more and more transaction fees. When the loans went into foreclosure, the value of the properties couldn’t cover the debt. At the same time these banks were telling the public their money was safe and the institutions financially strong, since they were propped up by mortgage backed securities. Well, we all know what happened. The housing market crashed, the credit market dried up and stocks in all of our retirement plans plummeted. All because of the greed of an industry. Now not only do we see our retirement mutual funds shrink, we see ourselves as taxpayers having to bail out the institutions because of their greed and mismanagement. There is an interesting quote in the article from University of Connecticut law professor Patricia McCoy regarding what would have been different if the industry had not been given immunity from lawsuits by way of tort reform passed by a republican congress, “I have no doubt the industry would not have made those (risky) loans. They would have put controls in place”. Professor McCoy is a former banking and securities attorney and recognized expert on this type of liability. The article contained another interesting quote from Kathleen Keest, a former Iowa assistant attorney general who now studies lending activity for the Center for Responsible Lending, “There was a lot of legal talent hired by the industry to try to figure out ways to make sure that nobody along the chain (including Wall Street) had to suffer legal accountability”. They take your money, they make you pay for the bailout and then they write tort reform laws so you have no legal recourse. What a great country.

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