Capitalism is in a crisis—but—I see a light at the end of this journey. Believe it or not, a similar occurrence happened in the banking industry and not during the depression but in the late 1960’s when the stock market hit such a bull market that brokerages could not keep up and, instead of hiring, or training, more processors, they simply misplaced, delayed or never processed many of their loans, or—even as bad—processed them so slowly that they ended up cancelled. The Stock Market, in 1968, actually closed once a week so that these delinquent brokerages could catch up with their back-office work—even though hundreds of them never did and went belly up.

This is very similar to what is happening today only—instead of concerning investors—it concerns homeowners. Servicing loans is a fairly low margin business and banks have always notoriously done things as cheaply as they could and so—true to their form—they hired as few people as they could and it will probably end up costing them billions, if not trillions of dollars. Why? Obviously, there is probably a year or more in home inventory sitting on the market right now and banks are not stupid? Uh-huh! Greedy—but not stupid—and they are going to have to either get serious about modifying homeowners’ loans or they are going to meet some very knowledgeable lawyers in courts where if they can’t produce the original note, and accompanying documentation, and a lot of them can’t even produce a photocopy, they will lose—or at the very least cause a huge delay in the process—and will and up losing more money by trying to foreclosure these loans than if they would just modify them. Times are changing and if these banks refuse to change with them they will, believe me, go under and as I said before banks are greedy but not stupid. I am looking forward to seeing these modifications really begin because I see it as the only way for the banks—and America—to survive and maybe even a miracle will happen—just like in the Wizard of Oz—you remember—when Oz gave the Tinman his heart, well, he actually just showed him that he already had one and so do these bankers—now—if they can only find them.

Peace,