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Theft by commission costs us far more than ordinary robbery

Posted by John Reed on

Copyright 2010 by John T. Reed

When a mugger points a gun at you and demands the $174.83 in your pocket, he gets $174.83 and you are out $174.83.

When burglar steals $3,600 worth of stuff from your house, you are out $3,600 and he gets that amount less his fence’s margin.

But when theft is committed by getting an illicit commission, the cost to you is far, far greater.

Why has no one ever written about this?

Take the so-called savings and loan debacle of the 1980s and 1990s. It cost U.S. taxpayers around $160 billion. Did the criminals who perpetrated that get $160 billion?

Nope. There is no calculation of how much the perps got, so I’ll guess it was around 5% of that amount or $8 billion. Where did the rest go? To construction workers who built unneeded apartment buildings and land owners who sold the land under the new buildings and various clerks and jerks who handled the paperwork.

Who were the perps? The decision makers who said building those buildings was a good idea and who got commissions for saying so and deciding so: appraisers, real estate agents, construction loan officers, executives of the savings and loans who made the mortgages.

Subprime crisis

The subprime crisis is another example. People are worked up over the huge amounts the Wall Street guys pocketed. Pretty outrageous. But the big picture is they were on commission. The losses were $8 trillion or so—although it’s probably hard to pinpoint. To see where the money went in the subprime crisis, get a settlement statement from a subprime loan that was closed in, say, 2006.

It will show that most of the loan proceeds went to the seller of the house. Second most went to the real estate agents. A bunch of clerks and jerks got some. The perps: appraisers, mortgage brokers, Wall Street securities packagers, execs at FNA and FHLMC and banks and investment banks got lots per person, but there are not very many such people. All told they probably only got about 1% of the $8 trillion loss to the nation and the world. Like I said, look at the settlement statement. All the perp money is listed under financing and appraiser which is a financing expense. The Wall Street crowd only got a tiny bit per mortgage when they bought it from the mortgage broker and marked up a bit to resell it to Wall Street investors.

Federal government runaway train

The biggest commissioned theft of them all involves commissioned salesmen known as federal elected officials: Congress and presidents. They get some money, Like Obama’s Tony Rezko house deal or Hillary’s $100,000 commodities trade “profit.”

Mostly what they seek and get is power. They are big shots. They appear on TV regularly. Those are tiny commissions on their giving away taxpayer’s money in the form of political spending on massive entitlements, military spending on discretionary wars, harassment of business desired by environmentalists and unions, etc.

Take one example. Once there was a House Ways and Means Committee chairman named Wilbur Mills. (He did not look like the painted portrait of him at his Wikipedia bio. Here is an accurate photo of him—with Fanne Fox, the Argentinean stripper who caused his resignation.)

Mills suffered from a delusion that he had a snowball’s change in La Jolla of being elected president. Pursuant to that campaign, he greatly increased the generosity of Social Security benefits figuring a grateful public would reward him with the White House. They did not. Wills died. The generous increase in Social Security benefits—your money—that he spent to buy votes, however, lives on.

In that case, you pay enormous amounts for a speculative commission that Wills actually never received. But those Social Security recipients are still receiving your hard-earned tax dollars.

The impending bankruptcy of the U.S. federal government is the cumulative result of thousands of Congresspersons, Senators, and presidents like Wilbur Mills spending your money to get power for themselves. As with the other examples in this article, they had to take monstrous amounts of your money to get a commission—in the form of money or power—in the 1% or less range.

If all these bad guys had simply held us up at gunpoint, we would be infinitely richer, and they would still have the exact same ill-gotten gains in their mansions and yachts.

It seems like if we are going to be dumb enough to let these people steal from us, we should at least make sure we are not impoverished any more than the thieves are enriched. As it stands, they have to take $99 from us for ever $1 they get to keep. Couldn’t we at least make this process more efficient so we are only out the $1 instead of the $100. Perhaps by tying the punishment to the amount lost overall, not just the amount received by the perp? 

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