"Now We Have A Foreclosure-Based Economy"

That's the line Jon Stewart used to describe the situation we now find ourselves in, as the proud owners of hundreds of billions of dollars worth of worthless mortgages:

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Foreclosure Crisis
www.thedailyshow.com
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I can't dispute this. Based on the crappy employment numbers, one could be excused for thinking that the only jobs available these days entail foreclosing on each other's properties.

As Suzan points out today, the banks knew what they were doing. At least, the smart ones did. They just bribed the government and outspent it in court to escape real justice. And now, as David Dayen points out, foreclosure frauds are just the logical next step in that process:

if you want the nickel summary, read this interview between Ezra Klein and Janet Takavoli:

Ezra Klein: What’s happening here? Why are we suddenly faced with a crisis that wasn’t apparent two weeks ago?
Janet Tavakoli: This is the biggest fraud in the history of the capital markets. And it’s not something that happened last week. It happened when these loans were originated, in some cases years ago. Loans have representations and warranties that have to be met. In the past, you had a certain period of time, 60 to 90 days, where you sort through these loans and, if they’re bad, you kick them back. If the documentation wasn’t correct, you’d kick it back. If you found the incomes of the buyers had been overstated, or the houses had been appraised at twice their worth, you’d kick it back. But that didn’t happen here. And it turned out there were loan files that were missing required documentation. Part of putting the deal together is that the securitization professional, and in this case that’s banks like Goldman Sachs and JP Morgan, has to watch for this stuff. It’s called perfecting the security, and it’s not optional.

If you want to boil it down to its essence, that’s what we’re dealing with. The foreclosure fraud right now is covering up the fraud at the point of origination which Takavoli explains here. And contra Klein, this is something that the economy had to deal with at one point or another, since there’s so much money tied up in this[.]

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The sad fact is that Stewart's line sounds more like a reasoned conclusion based on the facts, rather than a gag line.