Stiglitz: Justice for Some
Joe Stiglitz on "corruption, American-style":
Justice for Some, by Joseph E. Stiglitz, Commentary, Project Syndicate: The mortgage debacle in the United States has raised deep questions about “the rule of law”... The rule of law is supposed to protect the weak against the strong...
Part of the rule of law is security of property rights... But in recent weeks and months, Americans have seen several instances in which individuals have been dispossessed of their houses even when they have no debts. To some banks, this is just collateral damage... Most people evicted from their homes have not been paying their mortgages... But Americans are not supposed to believe in justice on average. ... The US justice system demands more...
To some, all of this is reminiscent of what happened in Russia, where the rule of law – bankruptcy legislation in particular – was used as a legal mechanism to replace one group of owners with another. Courts were bought, documents forged, and the process went smoothly.
In America, the venality is at a higher level. It is not particular judges that are bought, but the laws themselves, through campaign contributions and lobbying, in what has come to be called “corruption, American-style.”
It was widely known that banks and mortgage companies were engaged in predatory lending practices, taking advantage of the least educated and most financially uninformed... But banks used all their political muscle to stop states from enacting laws to curtail predatory lending. When it became clear that people could not pay back what was owed, the rules of the game changed. Bankruptcy laws were amended...
With one out of four mortgages in the US under water ... there is a growing consensus that the only way to deal with the mess is to write down the value of the principal... America has a special procedure for corporate bankruptcy, called Chapter 11, which allows a speedy restructuring by writing down debt... It is important to keep enterprises alive ... in order to preserve jobs and growth. But it is also important to keep families and communities intact. So America needs a “homeowners’ Chapter 11.” ...
Growing inequality, combined with a flawed system of campaign finance, risks turning America’s legal system into a travesty of justice. Some may still call it the “rule of law,” but it would not be a rule of law that protects the weak against the powerful. Rather, it would enable the powerful to exploit the weak.
In today’s America, the proud claim of “justice for all” is being replaced by the more modest claim of “justice for those who can afford it.” And the number of people who can afford it is rapidly diminishing.
Posted by Mark Thoma on Thursday, November 4, 2010 at 01:18 PM in Economics, Housing |
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