Empirical economic analysis is a powerful tool. It can elucidate correlations and sometimes even get us to causual explanations. But it has a serious weak-spot:  its value is entirely dependent upon the integrity of the data analyzed. To put the problem succinctly: sh*t in, sh*t out.

This brings us to analyses of the housing bubble. There’s a sizeable academic literature on the housing bubble (and relatedly also expert witness reports on loss causation in MBS litigation) that rely on loan-level data. The problem is that a lot of that loan-level data is suspect. That should hardly be a surprise: the industry even referred to some products as “liar loans”. And there were also FBI Mortgage Fraud reports indicating an uptick in mortgage fraud. But it was easy for economists to ignore the data integrity problem as long as the problems were merely anecdotal (e.g., the mariachi musician with the six-figure…

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see Robot Can Write Your Letter and Signature

In a typical day in Court, the “borrower” is asked by the lawyer for the “lender” whether THAT is his or her signature on the note and the mortgage. The initial response is yes. By admitting that signature you have validated the note and mortgage and that you signed it and that the foreclosing party has it. That is a lot of admitting based upon a single “yes” answer.

My question to you is whether you have answered truthfully. Do you really remember what you signed, what was written on the documents and exactly how you signed each document? In most cases it is years before. The homeowner answers “yes’ because he or she knows they went to a closing and signed a bunch of papers.

It frequently does not occur to either…

Since approximately 2008, consumers in the United States have seen the majority of their wealth disappear.  David Dayen, in his new post, “A Needless Default“, states that according to economists Emmanuel Saez and Gabriel Zucman, the bottom 90% of Americans have seen at least one-third of their wealth disappear.  That is a staggering number. It means that the middle class is disappearing.  That is one of the reasons why the economy is growing so slowly.  According to John Maynard Keynes, a stable middle class consumption is needed in order to grow investment.  The middle class has always been the backbone of the economy.  Knowing this, why would an Administration favor bailing out the financial industry and not the middle class?

So what happened in the past several years.  For one thing, the financial industry drove the world’s economy to the edge of a very high precipice.  Spurred by the temptation…