Most of the abuses of the mortgage industry and bank foreclosures result because the originator of the mortgage sold their interest in it to another investor who is almost never local. Because they are not local, they have little risk if they abuse the customer. There is no mechanism to minimize and correct abuses. To regain a self-correcting mortgage system, I believe we need to prohibit the originators of mortgages from selling them.
It’s not just mortgages where our systems lack self-correcting mechanisms. Throughout our economic and political systems the self-correcting mechanisms have been lost. Commodity futures are a prime example. Commodity futures are supposed to provide producers with predictability and stability of prices and demand so that they can make better decisions – think farmers deciding what crops and how large a crop to plant. Unfortunately, that is a smoke screen for the reality which is that commodity futures are just another form of casino…one that leads to wild price fluctuations and misleading indications of demand. When product is owned and traded by actors in the market who have no actual involvement in the “real” market for the product – who never take physical possession or deal with someone who does – the actual participants in the market for that product have very little influence to provide a correcting mechanism for speculation and abuse. The commodity future investors are not dependent in any way on that market – the can withdraw from that market at any time. To regain a self-correcting real goods market system, I believe we need require, if you purchase real goods, you cannot resell them unless you take possession of them.