I had missed this excellent story in the NYT by Peter Goodman about the dubious loan modification companies that have emerged out of the mortgage industry. They ask people to cough up money and promise to negotiate for lower rates with lenders. Once they get the money, they vanish.
It makes for harrowing reading to see how voracious businesses can be and how people who are desperate will go for anything, even bankrupting themselves in hopes of financial salvation. It reminds me of Michael Covel’s movie and its explanation of why people keep going for the lottery despite their near-zero chance of winning.
Stories like this are alarming but do they make a case for restricting business? No. For as terrible as all of this sounds, it is a pale imitation of federal rackets like Social Security or the bailout itself, and, moreover, the underlying cause here is the cheap money made available via the central banking system that is sustained by government grants of privilege. It is the Fed itself which is the font of this kind of corruption. Fiat money spreads a financial virus throughout the social system.
