From the New York Times:

Feckless as it was for Bush to ask Americans to go shopping after 9/11, we all too enthusiastically followed his lead, whether we were wealthy, working-class or in between. We spent a decade feasting on easy money, don't-pay-as-you-go consumerism and a metastasizing celebrity culture.

I did not. I did the right things, saved, made sure my credit card debt did not get above $1000 and if it did I would freak out and pay it down immediately. I saved heavily, putting money in both low interest accounts and stocks. The only thing I used the HLOC for was car loans as the interest was cheaper. I was down right conservative in how I managed my money and affairs and for good reason.

What laid me low and put me back to square one was a divorce - a personal Black Swan to use the current fashionable vernacular for the unexpected and unwished for. Even now, despite my changed circumstances, I am fiscally conservative.

What chaps my ass isn't that I did things the right way and after ten years of hard work am back to square one - it is those that did not are getting bailout after bailout. Looting is not an improper term in this context. I am not scared of capitalism, and I am not scared of competing in the labor or entrepreneurial markets - those that failed, should fail, and have to compete in the same manner that I am.

Once you accept public money your actions come under political, and ultimately public scrutiny. Citibank is being told by the US Treasury to cancel an order for a 50 million dollar private jet. It is obscene for a company on public support to be doing that - they obviously have no understanding of politics and a massive sense of entitlement. I remain convinced these banks should have been allowed to fail. Unrepetant actions such as this and the bonuses given out show that only complete failure at the hands of capitalism and free markets will reform such behavior.

I am a bit late to all this on how the Banks have messed up the basics of loan ownership with the 'financial innovation' of sub prime bundling of mortgages. Barry Ritholtz has a guest post which explains the issue in decent detail, enough for me to catch on to what the ultimate issues are.

If for whatever reason any of these signatures is skipped [on a mortgage note], then the chain of title is said to be broken. Therefore, legally, the mortgage note is no longer valid. That is, the person who took out the mortgage loan to pay for the house no longer owes the loan, because he no longer knows whom to pay.

Apparently this was known to be an issue and companies that were foreclosure mills actually offered services the banks could pay for to clean up the chain of title issue, which was probably forgery.

In the US a title company backs that the house you are about to buy is ok and clear, there are no outstanding debts you will be on the hook for and that the owner you are buying from is the real owner. Apparently they stopped approving sales to broken chain of title houses.

Why do you think that happened? Because the banks are in trouble--again. Over the same thing as last time--the damned mortgage-backed securities!

The reason the banks are in the tank again is, if they've been foreclosing on people they didn't have the legal right to foreclose on, then those people have the right to get their houses back. And the people who bought those foreclosed houses from the bank might not actually own the houses they paid for.

What a bunch of bastards. And we bailed them out? They are relying on the moral definition of transfer of property rather than a legal definition which should protect against fraud. This suggests regulators and legislators dropped the ball badly in allowing the sub-prime mortgages to be created in the financial world. Paul Krugman notes;

After the Asian financial crisis of 1997-1998, it was often said that a key barrier to recovery was the uncertain state of property rights: so much debt had been run up during the boom, and there had been so many defaults in the bust, that it was no longer clear who owned anything. Plus, these countries lacked clear legal procedures, and in general suffered from insufficient rule of law. All this was said, of course, in a tone of superiority: we Americans had solved such problems.

Or maybe not.

I suspect we will bail them out again, behind the scenes in such a way that it doesn't become a mainstream political issue.