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Elizabeth Warren’s World, and Mine

Federal Reserve Hearing

Some time ago in these pages I’ve expressed my grudging admiration for my native country’s Weberian, bureaucratic legalism.  The years I spent under that system should give me an advantage in a bureaucratizing America that’s still trying to domesticate latter-day cowboys. Nope.  American-style bureaucracy is way more suffocating, stupid, and sinister.

Recently, my wife and I applied for a very modest mortgage (refinancing) loan. Bank of America, where we’ve been customers for two-plus decades, desperately wants to make that loan. But can it? No. Or rather, maybe—but only if we supply, after reams and reams of documents verifying our income, assets, etc., the following information:

Provide a detailed and satisfactory signed letter of explanation regarding the following checks listed on the bank statements: 12/23, 1/5, 1/20 – $100.00; 1/12 – $5,000.00; ….

It goes on like that, for many more items. The full and satisfactory explanation of these particular items is that we pay the cleaning crew every two weeks. The 5K was our quarterly cocaine delivery. No, wait: it was an estimated tax payment to the IRS. It said that on the check. (We also explained it in a e-mail to the IRS but that got lost.) In any event it went from our BofA account through their system to the IRS. In other words, it stayed totally in house. Still, they want us to explain it. Plus, more information is needed on the income side:

Provide a detailed, signed letter of explanation regarding the source of the deposit of $ 1)$1,000.00; 2)$2367.18; 3)$400.00; 4)$165.00; 5)$150.00; 6)$45.00; []. Include documentation to support the source of the deposit.

They do have a point here. I have no idea who on earth would send me a check for $45: I’d never miss it if it hadn’t been sent. Before I accept the loan I demand a detailed, signed letter of explanation from BofA, including documentation to support the source of the deposit.

My saintly wife knows better than to let me anywhere near transactions of this sort; she handles them, with her infinite patience. But even she eventually threw in the towel. Why, she inquired in an I-give-up e-mail, do you want us to explain stuff that is in your computers? Lo, here comes the loan officer’s answer:

We completely appreciate your business and we know you qualify for this loan but we have federal guidelines to follow so we can re sell this mortgage to the government after we close. We know most of the answers but we need the answer to be written by our client for the reasons and explanations.

At one level, this is completely wrong. BofA appreciates our business only to the extent that the loan helps it to satisfy some federally invented metric. Its only customer is the government; the nominal customers are cannon fodder. Still, I feel for the guy and appreciate his candor: but for the government, this loan is a no-brainer. But for the government, they wouldn’t be asking us to affirm what they already know. At that level, he is totally right.

This is what life is like in a country with a socialized mortgage market and government-run banks: the most routine transactions become a bureaucratic nightmare (if, indeed, they come about). That can’t be good by way of getting the country going. But I’ve come away from the experience thinking that this m.o. isn’t just inefficient; there’s something creepy about it.

Personally, I don’t need a loan officer to tell me about the government-driven nature of bureaucratic idiocies that he, and his bank, and we would rather do without. However, you never meet an actual government agent in these transactions. Thus, most loan applicants will blame comparable experiences on the “big banks” (or, more erroneously yet, the poor wretches on the front lines). They may send letters to Senator Warren, who will deliver yet another stemwinder about capitalism’s betrayal of the middle class (or whatever). The system produces no gain for anybody except the political class and its hangers-on. You get the sinking feeling that it’s set up that way.

Likewise, only really nasty political regimes ask their citizens to affirm information that you’d think they already have. (Their gambit is that if you think they have it you’ll volunteer it: if they do and you refuse, they do bad things to you. But they don’t always have it; so everyone blabbers and the regime learns.) No private enterprise would ever do a thing like that on its own volition. The fact that American banks now do this on a routine basis—we know the answers but we need them in writing—ought to give one pause.

Whatever can be said about bureaucratic legalism, you never want to entrust it to Americans: they’ll turn it into a racket. They already have.

Reader Discussion

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.

on March 22, 2015 at 13:31:28 pm

Huh?

1. I refinanced my mortgage about 14 months ago without any of this. And my partner is an entrepreneur with varied and irregular sources of income. Has something changed in that period?

2. What bars Greve from borrowing from someone other than BoA? I’m not aware of any prohibition on lending by entities other than banks. Or even credit unions. Why not borrow from a private individual?

To be sure, some of these parties might charge more because their loans might not qualify for resale to Fannie Mae or Freddie Mac. So what? Does Greves feel entitled to loans subsidized by Fannie Mae/Freddie Mac without meeting the requirements for such a subsidy?

3. The value of my house has fluctuated wildly due to no action on my part, but rather to irresponsible lending practices by others. Why are policies designed to limit this kind of externality so terrible? Does Greve feel the same way about securities regulations – that we were better off in the rough-and-tumble pre-SEC days?

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nobody.really
on March 22, 2015 at 15:22:46 pm

Uh oh!!!

You really screwed the pooch this time, nobody:

" my partner is an entrepreneur with varied and irregular sources of income."

Expect a visit from the IRS, DEA and maybe even the EPA; after all your partner could be illegally trading in carbon swap credits. Of course, if your partner were a six year selling lemonade on the street corner, the Feds may be coming after your partner anyway.

So I wish you and your partner well in this matter; but as a good citizen, I fell obligated to forward the "irregular sources of income" information to my government. I would not want this *irregular* income enter the stream of interstate commerce and corrupting it!

" that we were better off in the rough-and-tumble pre-SEC days?" - No, but the fellow who is charged with reviewing all these forms, buried deep within some guvmnt agency is certainly better off - after all, he can rest assured that he will continue to be employed over the next several decades doing precisely the same thing.

On a more serious note, credit unions are somewhat easier to work with and I, too, would recommend them. BofA is a pain in the ass. I once tried to get an amortization schedule for MY loan hoping to figure some way to pay it off sooner and keep track of the progress, and had to go through similar hoops. Insane!!

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gabe
on March 22, 2015 at 16:51:14 pm

This experience is in stark contrast to the behavior of the Bank of America (whoops) the Bank of Italy immediately following the earthquake and fire destruction of San Fransisco back in 1906. Then, according to history, they moved their loan officers out on the sidewalks of the city and made handshake loans to a populace desperately in need. The current problems across this nation can be traced to a single source: A stifling, arrogant, overbearing group of jackasses called the federal government.

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Harry Taft
on March 23, 2015 at 10:44:52 am

[…] Elizabeth Warren’s World, and Mine […]

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Image of The Wealth of Cities - Freedom's Floodgates
The Wealth of Cities - Freedom's Floodgates
on March 24, 2015 at 15:49:49 pm

Hence we have the logic of so-called progressivism.

Something, supposedly bad, happens to someone (regardless whether the undertaking is of their own volition - such as signing on to a mortgage they couldn't really afford, by the way, because government regulations permitted it), therefore it's my business to make sure it doesn't happen to other, quoting Obama, "folks." And if the newer, profoundly grotesque, bureaucratic regulations negatively impact someone else BUT not me, it's still a good thing.

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EJW
on March 24, 2015 at 17:14:22 pm

Hence we have the logic of so-called progressivism.

Something, supposedly bad, happens to someone (regardless whether the undertaking is of their own volition – such as signing on to a mortgage they couldn’t really afford, by the way, because government regulations permitted it), therefore it’s my business to make sure it doesn’t happen to other, quoting Obama, “folks.”

Hence we have the logic of so-called libertarianism.

People create externalities that hurt themselves and others around them. Government could restrict this behavior. But because restricting this behavior would tend to protect people from their own conduct, and because libertarians are obsessed with morality plays rather that promoting the general welfare, libertarians oppose limits on externalities. The very people who claim to honor property rights in fact want to facilitate the power of third parties to impair the value of my property. Go figure.

Yes, policies that restrict externalities are not costless. Policies that permit externalities are not costless, either. There are not costless options. If you want to chide progressives because they’re content with policies that are less expensive than the economic collapse of 2008 – instead of engaging in a utopian quest for costless policies -- I’ll not gainsay you.

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nobody.really
on March 24, 2015 at 18:48:38 pm

C,mon nobody! You know better than that.

Your implication, no make that assertion, that the crash of 2008 was due to adherence to some libertarian policy of non-intervention is groundless. In point of fact, the blame for this crash may be lain at the feet of *progressive" interventions to *offset* the externalities of alleged discrimination in the housing market.

The real estate / lending / mortgage nexus was anything but non-interventionist; rather, it is a prime (pardon the pun, here) example of progressive social objectives running roughshod over an otherwise well functioning market in housing and mortgage lending. How is it that impelling lenders to discard their previous risk assessment standards is not an attempt to restrict market externalities?

Blame some greedy lenders, yes; but let us not forget the assistance rendered by the guvmnt!

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gabe
on March 25, 2015 at 08:11:47 am

[…] Read full article here […]

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Image of Who’s hoops are these please | Abolish Government Now
Who’s hoops are these please | Abolish Government Now
on March 25, 2015 at 09:08:40 am

Were I "libertarian" I might feel gainsaid by the commentary. I'm not libertarian nor, regardless, would think myself gainsaid anyway.

I believe in freedom versus progressivism's license, and in true liberty grounded by moral, religious based self-discipline (not that I'm a perfect example). Therefore, I do not accept nor believe in a, shall I say "earthly", Utopia of any sort. It is the relativist progressive who's always on the march discovering and exploring new utopias. Who in the process makes fledgling attempts to create a false order through a never ending labyrinth of rules, regulations, and manipulation of markets and lives - think Obamacare. And in general like to think, unfortunate for them and everyone else within reach, in a self-delusional way they can micromanage enormously complex systems - the economy, ecology, and education to name a few, that they possibly cannot. This in of itself imperialism as the only apparent alternative to a sane republican way of thinking for them is an ever becoming more densely concentrated, centralized government; the primary leverage tool a progressive uses to create "change" and, ultimately, to dominate peoples' lives and a country as a whole.

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EJW
on March 25, 2015 at 09:57:21 am

Excellent. And it’s been a pleasure speaking with you before your departure to whatever land you imagine will bring you what you’re looking for.

Presumably a land without an evil CENTERALIZED system of property records. Much luck to you in resolving disputes with your neighbors, given the lack of an evil CENTRALIZED police force.

Presumably a land without an evil CENTRALIZED system of water allocation. Again, much luck in resolving disputes over aquafer depletion.

Presumably a land without an evil CENTRALIZED system of pollution control. If your neighbor uses his land to block discharge smoke, or release toxins, or block your access to your land, or excavates in a manner that causes your land to subside and collapse – hey, those are the joys of freedom!

Presumably a land without an evil CENTRALIZED system of utilities or roads, or weights and measures, or currency. Lots of people have lived this way; why not you?

Presumably a land without an evil CENTERALIZED control of infectious diseases. Lots of people have died this way; why not you?

You say you’re not seeking utopia, so I have every confidence you won’t be disappointed. Bon voyage!

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nobody.really
on March 25, 2015 at 12:10:08 pm

Again, nobody!
Stop the nonsense and hyperbole.
Nothing in EJW's response indicates that he / she does not support some measure of centralized effort in pursuit of civic necessity (health, safety, etc).

You continue to use this technique of arguing in extremis - if one says he does not like being compelled to provide information, not previously deemed necessary to good public order, you automatically assert that the individual therefore does not wish to support standard record keeping practices (say for real property); or that he wishes to see the air and waters polluted, etc. etc.

Kindly stop this. You are quite capable of employing a better line of argument dealing with particulars rather than some hyperbolic diatribe applauding the latest intervention of the state.
I am disappointed, really! (oops, I used your last name again.

And oh, BTW, here is the guvmnt stepping up its efforts to have citizens (corporations) inform on fellow citizens:

http://www.breitbart.com/big-government/2015/03/24/obama-justice-dept-floats-new-plan-to-push-banks-to-inform-on-customers/

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gabe
on March 26, 2015 at 01:11:58 am

Gabe,

While I do not wish to intrude on your exchange with nobody.really, or anyone.really or no_one.else or virtually.anybody, I would like to make just a couple of points.

I consider myself a libertarian, yet I recognize the necessity of and desirability of the government performing certain functions. I agree with P.J. ORourke that a little government and a little luck are both necessary in life, but only a fool relies on either of them. I do not mind supporting the county clerk's office or the Department of Defense, or the Federal Aviation Administration.

There are two points to be made about "essential" government services. The first is that the government should undertake such duties as killing enemies, enforcing laws, collecting taxes, conducting espionage, and stewarding limited resources. In short government does best those things for which someone needs to be a bastard; those unavoidable, unpleasant realities of human existence that require no small measure of cold-bloodedness. When government undertakes tasks (really for no other reasons than the perception of a large checkbook and the ability resort to force whenever competence and foresight is lacking) that require the opposite, its limitations become apparent. To paraphrase Chesterton, in order for charity to be a virtue, it must be nearly the opposite of justice; charity being beneficence to the undeserving, justice providing only that which the recipient deserves. I am happy to have my government confine itself to justice and leave charity and compassion to people who are in fact charitable and compassionate. Charity and compassion are not collective virtues. They are treasures in individual persons but are poor counselors for the governance of a free people. As per C.S. Lewis: "Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive."

The second point about essential government services is that they tend to corrode when they are set to purposes other than those for which they are intended (which usually means pandering to a desirable constituency.) The military should focus on military things, NASA on aeronautics and space, the FDA on ensuring the safety of food, drugs and medical devices. It is the unavoidable vulnerability of all government services, even those most necessary, admirable and well intended, that they are subject to corrupting and destructive political influences.

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z9z99
on March 26, 2015 at 09:08:33 am

When it comes to the nobodies of the world, I'm reminded of the old adage - "People who live in glass houses shouldn't throw stones." However, that is, if not the only, the primary recourse for a regression progressive, as progressivism itself is a form of stone throwing. It is always in search of imagined Goliaths, and progressives thinking themselves a new world David.

Consequently, progressives elevate their ideology, things and animals above the human species, irrespective of the fact they themselves are, of course, of human nature. To be a progressive one must think themselves better, more brilliant, more sophisticated than their neighbor. Likewise, belief in God the Supreme Being who is greater than the State, cannot be tolerated. So that, in order to protect the "State", the reflex reaction is to (attempt to) humiliate or demoralize disbelievers in the State - the progressive Utopia, and in their eyes mankind's supreme force.

"In extremis" is the very nature of progressivism. It is always on the periphery of something, and generally means returning full circle to a supposedly more idyllic time. In other words, "If only the State would do this or that, my (everybody's) life would be so much more better than it was before this (fill in the blank) ever existed." And never you mind the State placing a heavier burden on the backs of the people than the one it claims to replace.

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EJW
on March 26, 2015 at 09:31:35 am

Z:

Could not agree more! and I am not a libertarian; nor do I think libertarianism, properly understood and expressed, does or should deny that limited role of government that you described.
It is quite true that for some actions, we do indeed need a bastard to do the deed. It tends towards greater harmony, or at least less disharmony, among the populace.

In any event, I think we are in agreement that there is value to be had in examining the particulars rather than criticizing other particulars by resort to some general claims of government beneficience.

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gabe
on March 28, 2015 at 18:21:48 pm

"The system produces no gain for anybody except the political class and its hangers-on. You get the sinking feeling that it’s set up that way."

Of course it's set up that way, who do you think set it up?

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iowaan

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.