The Federal Reserve has decided to put their thumbs on the scales of justice, explicitly attempting to overturn state-based anti-foreclosure laws on the spurious grounds that they hurt the economy.

This story by Tim Reid in Reuters cites the Fed arguing against the kind of laws in states like Nevada – and soon, California – that have saved hundreds of thousands of homes from foreclosure.

State and federal laws enacted to protect homeowners from eviction in the wake of the 2008 housing crash may be extending the slump, according to a growing number of economists and industry experts.

Foreclosures have all but ground to a halt in Nevada, which passed one of the stiffest borrower-protection laws in the country last year. Yet the housing market is further than ever from recovery, local real estate agents say, with a lack of inventory feeding a “mini-bubble” in prices that few believe is sustainable.

A recent U.S. Federal Reserve study found that in states requiring a judicial review for foreclosure, delays associated with the process had no measurable long-term benefits and often prolonged the problems with the housing market.

There’s been a concerted effort to overturn due process in these judicial foreclosure states, on the theory that foreclosures must be quickly flushed through the system so the market can “clear.” Incredibly, house organs like the Fed still express this opinion even after years of documented evidence of illegal foreclosures using false and forged documents in court. The explicit recommendation from the Federal Reserve is to react to systematic foreclosure fraud by closing the courthouse doors to troubled borrowers.

The entire premise that judicial foreclosure states are prolonging the housing slump is completely spurious. Nothing furthers the housing slump more than a spate of foreclosures flooding the market, increasing the supply of distressed homes that sell cheaply and bringing down property values in a particular area. That’s what the Fed is arguing for.

It’s not only the Fed. Alfred Pollard, general counsel to the Federal Housing Finance Agency, has said this openly in Congressional hearings, and wrote an unusual letter to California, basically arguing against their proposed “homeowner’s bill of rights,” which confers a private right of action to homeowners to allow them due process in foreclosure. Pollard argued along the same lines as the Fed, that there’s no long-term benefit to foreclosure delays. This didn’t work in California, incidentally: the Homeowner’s Bill of Rights passed out of a conference committee today, and is nearing final passage.

I love how state laws are being blamed here. No state law in this country disallows legal foreclosures. If the banks cannot substantiate ownership of the property, why is the finger pointed at the state laws that force that substantiation, and not the banks themselves? Nobody told them to lose ownership of mortgages, prompting them to falsify documents in an attempt to foreclose.

And why the focus on “long-term benefits,” rather than the short-term benefits of a family staying in their homes? Or the short-term benefits to the rule of law that occurs when a bank cannot run roughshod over the legal system with false documents simply because some of their regulator buddies say that the market must “clear”?

So when these officials argue against laws like those in Nevada, which merely criminalize a criminal practice, or California, which provides due process for people having their homes taken from them, they’re arguing in favor of what amounts to a dissolution of justice.