Mortgage Meltdown: JUNK SALE

In both cases — housing prices and CDO/CMO prices, there was no intervening factor that caused the decline. No meteor hit the earth, no world war broke out, no material event occurred to account for these changes. It is therefore impossible to come to any conclusion except that the fair market values of the houses and the CDO/CMO market were falsely represented in a systematic, intentional manner. 

 

Any remedy for this situation must first address that basic fact before moving on to anything else. Addressing the valuation issue allows all the other pieces to fall into place. In the interest of preserving U.S. sovereignty and the American lifestyle, we have proposed here amnesty for everyone, showing favoritism to nobody. Everyone must share in the loss. And everyone must participate in the recovery. But in all cases it starts with ending the foreclosures and ending the evictions.  

 

Anyone can go to www.wsj.com and see a multitude of articles on the effects and causes of the mortgage meltdown. You don’t have to be a subscriber to see the first page. It all boils down to finger pointing and a series of tricks that are being played out to stretch out the effects of the meltdown and avoid an economic collapse. Periodically G7 or its equivalent has met and historically come to some agreement to prop up or devalue the U.S. currency. This weekend they won’t prop it up yet, which pretty much means that the junk sale includes our beloved American dollar.

 

While the effort to stem the effect of the mortgage meltdown is a worthwhile endeavor, and spreading out the losses over a larger period of time is also a good idea to provide breathing room from a panic and collapse, the methods being employed are contrary to common sense, and are so out of balance that they are contributing to a collapse of larger proportions. It is a “NEXT BUBBLE” strategy. The overall effect will be to increase government and personal debt, increase the number of derivatives on the market, increase the effect of private companies on money supply, increase inflation, decrease employment in the U.S., decrease the financial resources of every household, decrease quality of life ands standard of living for the American Citizen, increase stress on the lower and middle class,  and thus continue the pattern of crating ever larger bubbles to cover up the last one. 

 

Our economic policies have been, continue to be and will apparently be maintained despite adherence to what is clearly a massive Ponzi scheme, illegally depriving the American Citizen of property, life, liberty and the pursuit of happiness all without any real notice to the public and obviously without the coveted due process of law required by our constitution. 

 

When you tally up the the various costs and expenses that have been socialized (including the bailouts of corporations and financial institutions for the benefit of a few at the expense of the many), the intentional devaluing of the dollar, and all of the other expenses that are charged “privately” (PRIVATE TAXATION) and add in the excise, sales and other taxes that people pay in addition to property, income and other standard revenue-producers for government, you can easily see that the effective tax rate on American Citizens is the highest in the world. It is masked by calling the taxes different things and spreading the imposition of taxes through channels of private companies. You need not be an economist to prove this. At the end of the month, citizens of much “poorer” countries have more money and less debt than we do. It’s basic arithmetic not advanced economic theory. 

 

Nowhere on top of the political agenda, is there any hope of widespread relief for everyone who fell victim to falsely inflated property values — including the homeowners who were tricked into signing papers based upon the apparent condition of the market, the appraisal of the property, the rating of the securities, the underwriting risk (none) of the lender. 

 

What home buyer would have closed the deal if they knew that the lender was not taking any risk, that the appraiser was validating a price based upon economic incentive rather than fundamentals, and that the mortgage broker and lender had no interest in protecting the buyer even though they were bound by law to do so? Nobody.

 

What investor would have purchased a collateralized mortgage obligation if he knew that the rating agency had issued ratings based upon negotiation and relationship with the issuer? Nobody.

 

Without tricking everyone who bought a home between 2001 and 2007 into believing the values were real, the scheme would not have worked. Now these people who bought those homes are seeing their largest investment, and in many cases, their only investment, pulled out from under them, while they are pulled out from having a roof over their heads, and remaining more deeply in debt than before the transactions started. 

 

Without addressing the needs of these people by stopping foreclosures and stopping evictions, the problem will not end, — it will simply grow larger. Yet in true form most legislators and many Americans take up the “conservative” position that these people should have known better. Exactly how would they have known better when the essential information was being withheld from them and the government was lying, along with the industry participants, about the key factor in the real estate market: fair market value. THIS IS NOT ABOUT PERSONAL RESPONSIBILITY, IT’S ABOUT FRAUD.

 

Without tricking investors to buy these derivative securities through again falsely creating the illusion of fair market value and quality, the scheme would not have worked because the risk would have fallen on the perpetrators on Wall Street instead of the governments, pension funds, and other investors who bought them. 

 

Without addressing the needs of the investors who were duped, and the reducing the impact of various investment decisions and flows of money that ran down stream from those investments, no solution can stem the tide of inflation, dollar devaluation, and economic collapse in the the U.S. And yes this means preserving the channels of market liquidity that precipitated this crisis. We need them even if right now we don’t like them. Wall Street should get a pass on consequences but not on future regulation.

 

Again common sense proves it without being a lawyer, economist or accountant. How could the housing prices have dropped so suddenly if they were really worth the values that were published? In some cases, the effect was seen within days or weeks of the closing. This is not the commodities market. It is the real estate market where the volatility index has always been low. 

 

And again, without being an expert, how could the same “investment” instruments be rated at AAA one minute and unrated the next?

 

In both cases — housing prices and CDO/CMO prices, there was no intervening factor that caused the decline. No meteor hit the earth, no world war broke out, no material event occurred to account for these changes. It is therefore impossible to come to any conclusion except that the fair market values of the houses and the CDO/CMO market were falsely represented in a systematic, intentional manner. 

 

Any remedy for this situation must first address that basic fact before moving on to anything else. Addressing the valuation issue allows all the other pieces to fall into place. In the interest of preserving U.S. sovereignty and the American lifestyle, we have proposed here amnesty for everyone, showing favoritism to nobody. Everyone must share in the loss. And everyone must participate in the recovery. But in all cases it starts with ending the foreclosures and ending the evictions.  

 

From the new “Freedom” aggregation of Lehman Brothers, to the other new derivative securities created for the purpose of hiding the blow-out, the Federal Reserve is converting itself from the lender of last resort to the investor of last resort. Buried on page 14 of the WSJ, — The Senate has created a bill that rewards buyers of distressed homes with a tax credit. Bear Stearns was bailed out by the Fed with a windfall profit potential to the people who helped create this mess. The bad paper that has been circulated is being repackaged and recirculated with the complicity of the Federal Reserve, the U.S. Treasury and all of the major players in the world of financial institutions. 

 

It’s a junk sale, where non-investment grade securities are being rated as investment grade by Moody’s and other rating agencies. These agencies are competing for “market share” and have succumbed to the pressures of the marketplace — thus abdicating their responsibility for independent analysis and entering into negotiations and friendly deals with the “clients” whose securities they are rating. 

 

The fact that these people go fishing together and are building “relationships, we are told, has not compromised the independence of these “auditors” of investment quality. If accountants did these things they would lose their licenses and maybe go to jail. But when rating agencies do it — and do far more damage than any bad report issued by an accounting firm — it’s the “marketplace.” And the free marketing ideologues continue to push the agenda of controlled markets through the utility of calling it “free markets.”  

 

What we have here is an invisible hand, but not the invisible hand of free market balancing that Adam Smith was talking about. We have instead the invisible hand and the free hands of government and private enterprise conspiring to defraud the world around them. 

3 Responses

  1. Can anybody out there help with this qustion?

    Of ALL mortgages (around $12B grand total) how much of it is “Junky” Subprime, Alt-A, high LTV and etc that is held by Fannie and Freddie? I know that Fannie and Freddie guarantee $5B in mortgages, but how much of Fannie and Freddie is considered to be high risk?

  2. […] Mortgage Meltdown: JUNK SALE What we have here is an invisible hand, but not the invisible hand of free market balancing that Adam Smith was talking about. We have instead the invisible hand and the free hands of government and private enterprise conspiring to … […]

  3. […] Mortgage Meltdown: JUNK SALE What we have here is an invisible hand, but not the invisible hand of free market balancing that Adam Smith was talking about. We have instead the invisible hand and the free hands of government and private enterprise conspiring to … […]

Leave a Reply

%d bloggers like this: