Sunday, October 6, 2013

Self-deception, rationalization and moral compass

Self-deception, rationalization and moral compass

by Neil Garfield
The "parsha" this week from the Torah involves the story of the second creation, when G-d wiped out all life on the earth except for Noah and the inhabitants of his ark. The reason why this happened was thievery amongst other reasons (beastiality included). But the part about thievery was not just that people stole from one another, but because it had become a way of life.
"Yiddish humor defines "chutzpa" as the case of a child who murders his parents and then asks for leniency from the court because he is an orphan!
"While such exaggerated self-deception is hard to imagine in real life, the capacity for human beings to lose touch with their actions can be truly remarkable. A true story which illustrates this took place in a suburb of Warsaw about 70 years ago:
"A woman had come from out of town, bringing her family's meager savings with her, searching for profitable business transactions. As it happened, while she was staying at the local Jewish inn, thieves stole her money. When the local rabbis saw how distraught the woman was, they hit upon an unusual plan - to talk with the "leading" thieves in the area, whom these rabbis knew, and see if the money could be retrieved.
"Surprised at being summoned by the rabbis, the thieves agreed to a meeting. One of the rabbis explained to them the difficult straits the victimized woman was in, and, though he was not at all certain what their response would be, suggested that the thieves keep 30 percent of the loot and give the rest back to the poor woman. Upon hearing this, one thief fell into a rage, shouting, "We worked hard for the money! It belongs to us! We're not going to keep less than 60 percent!" (Quotes from
The problem here was the thinking process of the Rabbis, the thieves and the victim. The victim did not ask for justice and return of her money. The Rabbis failed to demand justice, making sure that the thieves did not enjoy their loot and punishing them as an example to others, and the thieves who had rationalized what they were doing as work and therefore earning a place at the table of compensation. With everything so upside down, and all humanity having entered into a dark period of self deception, G-d makes the decision to flood the world and dispose of all mankind and all other loving things, with a view toward restarting a world that is not based in fiction and self delusion, rationalization and acceptance of consistent immorality.
From that era come reports that "often many thieves would descend on their victim together, but each of them would take only a very small quantity of goods to insure their individual exemption from prosecution. The thieves would repeat this over and over again. The end result was that though they had become enriched, the thieves could rationalize they hadn't really done anything wrong, for, after all, no court was demanding they stand trial."
"With this understanding, the error of the flood generation was more than simply a case of people constantly stealing. It was a situation in which people had so lost their moral compass that they'd become embroiled in self-deception and could no longer recognize that they'd done wrong. It was because their self-deception had become so extreme that they were beyond repair and the Almighty had no choice but to start His creation all over again."
I don't have the pay grade of someone who can say whether our current situation is of biblical significance, but from my personal vantage point it certainly appears that we have reached the point of total loss of moral compass and the acceptance of thievery on a world-wide basis with both the thieves and the victims rationalizing the system and the government both allowing promoting violation of any moral standards and the government's own laws. I speak of bankers and brokers, merchants and politicians.
Before we expect another flood it should be pointed out that the courts and government are in conflict on this very point. In the mortgage mess the decisions range from appropriate moral outrage at bank behavior to intentionally turning a blind eye toward the bankers' behavior and actually enforcing the deceptions and rewarding the bankers with approval. The victims have largely accepted their fate in part because of acceptance of an era of injustice. And even the lawyers who are there to intervene on behalf of those who cannot fight for justice themselves are in a state of denial and self deception. It is nearly universally accepted that foreclosure is just and proper and that borrowers should pay their debts.
I accept the notion that borrowers should pay their debts and I even accept the extreme remedy of throwing a family out on the street if they agreed to use their home as collateral for a loan. But I ask the question: if in 1996 it was announced that over the next 6 months tens of millions of families were going to be enticed into taking loans based upon false promises of property values, false promises that because of unique innovations on Wall Street they would be able meet the payments and even make money, and false representations that their lender was at risk and could therefore would obviously not put itself in the position of going out of business because these loans could not work, what would you say to that?
If borrowers should pay their debts, then are we not saying that they should pay for the risk they knew they were taking? Would we not say that the bankers themselves assumed the rest of the risk caused by inflated appraisals, false underwriting, and false representations about the sharing of risk? And what would we say to the investors who, like the borrowers, assumed that the risk on the loans they were funding was no greater than the risk on mortgage loans before this plan was put into place? Wouldn't we say the investors should be paid 100% for the principal they advanced the interest income they need to pay their pensioners?
If it was known in 1996 that more than $17 trillion would be taken from investors under false pretenses and that the bankers would create a "shadow banking system" tens times the size of the world's money supply, the answer would have been "no, you can't do that." But because it happened over 15 years instead of 6 months and happened one "loan" at a time, it gradually eroded our outrage and acceptance of corrupt behavior became the norm. If you look at the results, you can easily see that the bankers retained all of their ill-gotten gains and were rewarded with more!
If it was known that 10,000,000 families would be displaced by the conduct of bankers who were playing with other people's money and who moved money under false pretenses claiming part of the movement were conventional real estate mortgage loans, we would have said that would have a devastating impact on our country driving it into a depression worse than the 1930's. So we would have said no, you can't do that.
And if the bankers attempted to do it all anyway, we would have stopped them, seizing the money they were taking in and returning it to investors and correcting the false mortgage liens and loans so that the borrower was paying for the risk they agreed to assume not the risk imposed on them by the corrupt bankers in a surprise "gotcha" that clearly violated federal state deceptive lending laws. So at least 25,000,000 people get thrown out of their homes based on 2.5 persons per household.
And millions of people who think they can live off their pensions are going to be learning that their vested pensions are now underfunded and that they will be paid less because of losses from mortgage bonds that were bogus from start to finish. And those victims mostly fail to express outrage and claims for justice as the banks continue to make false reports of proprietary transaction profits that are mere book entries changing the apparent ownership of the money from investors to the investment bankers.
Instead, like the victim in the story above, most homeowners are accepting their fate because they agree that borrowers should pay their debts. They don't understand the concept of assumption of risk. Despite laws requiring disclosure of the parties and terms of the loan our society has adopted the view that the guiding principle should be borrowers should pay the debts, as claimed by anyone who asserts the claim --- even if they never loaned any money and have no money in the deal. The laws and rules regarding disclosure were created to protect consumers from banks who were clearly in a far superior position to understand the transaction, the payment terms, the viability of the loan, the real value of the collateral, and the likelihood that the transaction would work. Today the Truth in lending Act, while still law, is ignored in favor of expediting Foreclosures on loans that everyone agrees were based upon false pretenses to both lender and borrower.
With the victims out- gunned and lacking in the information that would fully explain the way they got into this mess, the regulators, law enforcement and lawmakers are supposed to do something for all these people --- the borrowers and the investors. The government should have made it known that this scheme involved taking people's pension money and loaning their own money in a "loan" that was merely a transfer of money from the persons pension account to the pockets of the investment banker. The mortgage loan was merely window dressing and the bankers, regulators and law enforcers and law makers are ignoring the reality, self-deluding themselves and lazily helping the bankers. They propose settlements like the Rabbis who offered a percentage to the thieves. They bargain as though the thieves had legitimately earned some portion of the theft from the poor women. They were accepting and ratifying moral and legal corruption.
If we start with the premise that borrowers should pay their debts, we are already committing error. Long ago misbehavior of lenders caused both common law and statutory rules and laws concerning the "just debt." If the loan was usurious many states made it a crime, wiped out the interest due and in some cases wiped out the principal as well to dissuade others would might be tempted to prey upon people who don't have advanced degrees in business and mathematics, people who don't have years of experience squeezing transactions for profits not visible to the laymen's eye.
Our self delusion, rationalization and hypocrisy has reached epic proportions. We apply moral and legal standards to borrowers, use that to strip pension funds of any right to repayment and any protection of collateral that was pledged to the bankers instead of the lenders. The horrid hypocrisy of holding borrowers to a false moral and legal standard while not starting, as the law as always done before, with the premise that lenders should obey the law, disclose the true nature of the transaction and behave in a moral and legal manner has supplanted our system of justice that dates back to Judaic rules for reaching justice as a result and not just finality.
Across the country, using the false premise that the borrowers are responsible for this mess, many courts, the media, government and law enforcement are creating false settlements, admitting that the bankers have been and still are misbehaving but allowing the bankers to retain their ill-gotten gains. They have now assumed that despite the requirements of due process and the rules of civil procedure that the borrowers should be assumed wrong and the strangers bringing Foreclosures are right and that any defense by the borrower should be dispatched as creating delay. Expediency has now replaced justice. Expediency for the sake of bankers and governments colluding with them.
If Christianity stands for the proposition that people matter more than business and money, if Judaism stands for the proposition that the Jews are chosen to lead the way for a righteous life, if Muslims stand for the proposition that followers of Islam are messengers of actual true justice, then the state of the world, not just our own national economy, is fast approaching the point where G-d hits the reset button again.

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