Mortgage Meltdown: Get Out of Jail Free Card from Paulson

Mortgage Meltdown: Get Out of Jail Free Card from Paulson

In the usual way of floating trial balloons before committing to anything, and without the whole hearted support from any of the many entities and people who have a dog in this fight, Paulson is “outlining” the proposal for “subprime relief.”

All information points to another intentional diversion from dealing with and getting disgorgement of money from hundreds, perhaps thousands of investment bankers, mortgage brokers, lenders, “retailers” and institutional sellers who converted assets to fees in a very simple scheme — churning, covered over by the complexity of “creative” derivative securities. 

Anyone can sell something if the cost is zero and the buyer actually thinks he is getting value. In fact, the sky is the limit because at no time is the market saturated with such a product. That is precisely why the “subprime mess” got so out of hand. And as Krugman points out today in the New York Times, we don’t know where or how how much toxic waste is buried. 

Paulson’s outline presents a plan that does little for the borrowers. It creates the illusion of a bailout when the investment world will not accept our word for anything (and so the illusion is doomed to failure). And the new wrinkle is that it puts the burden on the states and cities to do something about it, which in classical Washington political terms meaning that they are creating someone else to blame. 

Cities and states, already struggling are going to see significant declines in tax revenues and investment income, the value of investment funds and their assets specifically as a result of this mess. And it isn’t just a “subprime mess.” It is about the whole credit market. “Innovation” is just a code word for saying that we are going to create the illusion of money, everyone is going to buy into it because it looks free, and we will collect real fees while everyone else goes into the toilet.

And while we are all sleeping, CDOs and similar securities have been sold for 20 years based upon mortgages, credit card debt and dozens of other exotic theories of risk, none of which have any Triple-A merit but all of which have mysteriously been given the extremely high ratings as risk instruments. They have converted junk bonds to Triple A bonds with a stroke of the ratings pen. 

Meanwhile the co-conspirators, the U.S. Government and Wall Street innovators together with lenders with plausible deniability, and retailers of derivative securities that were sold not just deceptively but with outright lies and fraudulent ratings — they all get a free pass.

The sad truth is that investors are beginning to suspect that most of our market indexes are a hoax. They are probably mostly right. Vapor has been sold with the clothing of kings and queens. Unsuspecting people, government finance officers, financial institutions, fund managers, have been misled into destroying the value of what were real assets until they were invested into these exotic derivative securities, with the fraudulent ratings. 

The economy has been driven by consumer spending. Without liquidity offered by these exotic plans to lend money on credit cards and other consumer debt, whether securitized or not, the economy can’t run. Liquidity is drying up. Pumping more “money” into the system is not a long-term solution, it is a suicide pact for the dollar and for inflation. 

If we REALLY want to save our economy and its place in the world, we need to do something real, own up to the mistakes, hold the people who did it accountable, and make amends to the world as best we can. 

3 Responses

  1. Yes, the cartel has been very hard at work for some years and has worked overtime for at least the past 20 years having a firm footed commitment to do away with our civil liberties, our judicial system as it was intended to be by our founding fathers and their daunting thirst and desire to force our country into a police state governed by corporate America who unleashes their rabid dogs on us, i.e., the zealous government, prosecutors and police who contort fact and law to lock up innocent people or people who, if given the resources, education and economic tools essential to success, would not need to resort to petty crimes to feed their families; this system is now successfully in place with much thanks and gratitude to the current and past, Clinton’s, and the Washington cartel and their cronies.

    One only has to follow the slimiest green brick road to our beloved investment banker, Mr. Lehman, and his cartel family, to realize just maybe…..all of this was, and is….part of the big economic picture and plan, or at least a quick look at macro economics will surely lead one to conclude these facts, i.e., x # or rich, x # of poor, x # of prisons needed in order to get$$$$$$$ and so on, or, the equation essential to keeping the money coffers greased and flowing back to Mr. L and his cartel!

    I am not crazy, one must only understand the profound financial incentives associated with such genocide to realize, Lehman lead the way and forced prison privatization, a fact. One unsophisticated left wing person might think, hey, what is the harm in this anyway? Well think again, and ponder hard and long at what is happening right now…. muse, for a moment asking, what would privatization of prisons do in the current economic environment, supposedly, as it was sold to our idiot senate and congress, but, provide relief to states and free up more money to invest in health care, education, schools and other essential infra structures etc., well; one then needs to examine our current economic environment and the final days leading up to this very sad state of affairs, at least…. looking at the last 20 years to make the obvious correlation here.

    Once you have correctly connected the dots, does it not now make sense as to what this very same….investment banker has done in the past and, again to our country all for his insatiable lust, love and passion for money at any cost…To understand the greed and the tones of money to be made by furor Lehman’s long term financial plan; it becomes painfully obvious and apparent at some point, the plan is to rid our society of the classes, particularly, we lower to mid class people are the first to go hence needing to be controlled and locked up for profit! This is accomplished by furor Lehman throwing money to the other top 10 banks/cartels so to ensure they can seal the deal or provide us with so….much credit that eventually forces us to be unwitting game in the churn game that then, sets us up for the theft of every dime we have and our homes noting further upon a detailed examination of history, just as he did along with Wells Fargo at the turn of last century and a tactical and preemptive move that set the stage for the Great Depression but, since furor Lehman did not get to cash in on the aftermath of the financial demise caused by his cartel the first go round, he has ensured that this second go of it, his current plan, is just a wee more sinister, as he has calculated and planned again that these displaced people would become homeless and destitute again… is happening today before our very eyes all across this country causing and aiding in the increase of crime that is ravaging our cities one by one and that is otherwise typical in an economic downturn, crime goes up when there are no jobs… hope…..and mouths to feed.

    Tragically, just as big daddy L planed, employing his HP 12-C calculator, his plan this time has created and ensured the onslaught of crime needed to fill those good old Lehman prisons and thus ensuring this time, big daddy is in the position to profit with plenty of “Private/Corporation Owned Prisons”!

    This plan has been aided by our poor economic and trade policies, the Clintons NAFTA policies and the continued assault against the American peoples lively hoods by corporate tycoons such as uncle Billy, i.e., Bill Gates who has lobbied congress to ensure engineering jobs and tech jobs are imported at slave like wages from countries such as India of which, is the why…..Americans wealth, jobs and incomes have eroded and dwindled to near nothing over the past 10 years hence, causing us to depend more and more on credit and the use thereof. Nay-Sayers, please do your research first, but, fact is, the Lehman cartel has poised itself again, just as it did during the days leading up to and during the onslaught of the great depression. This is the second time we have allowed this greedy ruthless cartel to profit and manipulate government, presidents, and markets to ensure they profit at the expense of honest hard working Americans. I must note that the Lehman cartel does not discriminate, as they have done this on a global scale this time!

    Thanks Neil again for revealing the lies we are all living right here on your web site, GB!

  2. To James B Dunne: You are right. But it isn’t just a perception. Organized crime is our politics.

  3. This country seems to be run by organized crime.

    Ethical Method to Eliminate ALL Political Corruption:

    ANSWER: James has some pretty good ideas. While I don’t encourage posting URLs on my site I would encourage everyone to visit his site.

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