And Justice for all? The subprime crisis as seen from inside the Cheshire Correctional Institution

Editor’s Note:  In addition to teaching media law and ethics at Quinnipiac University’s Graduate School of Communications, Mr. Cooper teaches writing to students at the Cheshire Correctional Institution. This article is based on discussions in his classes there.

Joseph H. Cooper: Indict bankers, parole home owners


01:00 AM EST on Thursday, December 4, 2008

 HAMDEN, Conn.

MY ECONOMIC advisers don’t trade bonds; rarely are they able to post bond. For bailouts, they call upon bail-bondsmen; defaulting on those conditions yields stiffer terms. My advisers’ balance sheets are rap sheets. Their deals are plea bargains. They pay for their miscalculations, over time, by serving time.

Their misconduct — criminal conduct — brought about the loss of their home lives; they foreclosed many opportunities for themselves and their families, and, in some instances, their victims. But in a public-speaking class (part of a community-college outreach program), they took on prosecutorial tones — in defense of public victims of those of the Wall Street stripe.

n my neighborhood, if I misled upright people and lost their home and savings for them, well, I wouldn’t be living high for long.

Advisedly, these inmates do not maintain a menacing tone. They “amortize” a righteous wrath — wondering how the criminal-justice system will deal with defrauders; wondering whether prosecutors will actually go after defrauders.

A number of the inmates serving time for “victimless crimes” wonder why those who actually wronged home owners and investors are apt to get away with it; why those who did real harm — ruined many lives — are likely to escape real punishment. While convicted felons have a hard time finding jobs in the best of times, today’s disgraced financial executives may suffer only a bit of embarrassment, as they are obliged to sell off a piece of art, a yacht, or even a ski lodge, to pay for hours of pricey lawyers’ time.

Some members of the class spoke of a hard line. One of the “rap sheets” went something like this:

Forget about using legal dictums/Have ’em juried by their victims.

A still harder line insisted on “paying the debt to society”:

Lenders got to do time for/ their sub-prime crime.

But most of the inmate-students called for restitution, if not confiscation:

Better than jail time,/ take every last dime.

Another recitation called “Billion! aires Be hind Bars: A Little Rap on Big Bankers” proceeded with this:

No golden parachutes/ For misleading lenders/ Who enlarged their backpacks/ Figuring legal benders./No golden parachute/ For a misleading lender/ The loot in his backpack/ He ought to surrender.

Still another call for confiscating bonuses and severance packages, with the money reverting to those truly harmed, was championed with this cadence: “Confess, divest and re-invest.”

Once divested of rhymes, earnest discussions about foreclosure plights took over. Not surprisingly, the verdict was unanimous: Those who profited extravagantly should have to help the people they hurt.

Somehow, they should be “sentenced” (obligated) to work to help people avoid losing their homes.

Several of the inmate-students took up the challenge to propose rescue legislation. With a grandmother or great aunt in mind, they rose from their molded plastic chairs and debated the terms of a Peoples’ Bailout.

“Brothers, brothers,” one intoned, as he put aside his 5×7 note cards and gestured to the low-end laminate tables that crowd the classroom where we were to imagine Mortgage Magistrates (my term) who would take applications from those in, or facing, foreclosure.

The first week’s hearings would be reserved for those who had been in their homes for no less than 25 years. These home owners, he explained (to much approval), might have refinanced in recent years to help out a son or daughter who had lost a job, or to pay medical bills, or because a grandchild needed money for college tuition.

If I understood this spokesman fully, only mortgages on sole residences would be eligible for these initial relief grants. Applicants would be required to show proof of what they owed. With proper documentation, part of what was owed on the mortgage would be paid directly to the bank or mortgage company that originated the loan.

There was some discussion as to the brackets or cut-offs, but what emerged was a “tiering” or “hierarchy” of relief, correlated to length of o! wnership of the family’s primary residence (and no funny stuff, only one relief package per family): For those who owned their primary residence for:

30 years or more, there would be a 90 percent payoff of up to 70 percent of the current value of their primary residence; 25 to 29 years, there’d be an 80-percent payoff of up to 60 percent of the current value; 20 to 24 years, there’d be a 70-percent payoff of up to 50 percent of the current value; 15 to 19 years, a 60-percent payoff of up to 40 percent of the current value; 10 to 14 years, a 50-percent payoff of up to 30 percent of the current value; 5 to 9 years, a 50-percent payoff of up to 10 percent of the current value.

A co-sponsor of this proposed legislation referenced the Gettysburg Address (“for the people”) in his advocacy for emancipating honest home owners from the threat of foreclosure.

Another co-sponsor (a fiftysomething former financial executive instrumental in “codifying” the above proposal) offered this chant:

“One, two, three, four. Re-negotiate for the housing poor.”

Still another warned of a scary prospect that may not be touched by the present bailout formula: “There’s gonna be a real nightmare on Elm Street — with a bunch of foreclosed homes. Ghost towns.”

Joseph H. Cooper was editorial counsel at The New Yorker magazine from 1976 to 1996. In addition to his work for community colleges, he teaches media law and ethics at Quinnipiac University’s Graduate School of Communications.