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Taibbi on Fannie, Freddie, Mortgages, Bankers and Marla Singer
Zero Hedge readers will miss out if they fail to carefully study Matt Taibbi's piece on Fannie, Freddie, and the mortgage bubble (as well as a number of other tangential but critically important topics). Mr. Taibbi makes much of being delicate with me over what he sees as our disagreement on the issues, but I think he mistakes a few (and generally minor) differences in our conclusions for a real divide on the facts. We are, as near as I can tell, in pretty violent agreement on the substance of the argument: The present exploding bubble is the result of mis and malfeasance on all sides. While Mr. Taibbi and I may diverge after that on where we go from here, I cannot find a single position from which I would demur in passages like this:
For what we’ve learned in the last few years as one scandal after another spilled onto the front pages is that the bubble economies of the last two decades were not merely monstrous Ponzi schemes that destroyed trillions in wealth while making a small handful of people rich. They were also a profound expression of the fundamentally criminal nature of our political system, in which state power/largess and the private pursuit of (mostly short-term) profit were brilliantly fused in a kind of ongoing theft scheme that sought to instant-cannibalize all the wealth America had stored up during its postwar glory, in the process keeping politicians in office and bankers in beach homes while continually moving the increasingly inevitable disaster to the future.
A must read for Zero Hedgers.
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You're both right.
Obviously you are not a bankster.
As a vocal proto-anarchist-capitalist, it may appear strange that I endorse Taibbi's opinion.
Think about it from this perspective: you are a super-predator; your only motivation is to kill (win). In fact, you enjoy it so much you make sure your victim(s) understand what is going to happen to them, and ensure that every delicious moment of their horrific experience will be realized, up to and including, their imminent demise. In short, you're a homicidal maniac; a psychopath.
However, you have a small problem: there are other super-predators competing for the same prey, but due to some slight genetic disorder, they are willing to protect potential victims for the (relatively) small price of a nominal stipend & the allure of relative comfort. Even worse, there are more of these 'turn-coat' master-criminals than those who are following the true path.
Hmm, what to do? If you engage in a full frontal attack, you'll get killed. So why not set to luring the protectors with an alternative siren song of comfort? That is, you can more than match their current pay with a greatly enhanced stipend if they would just leave the door open at night. Even better, if all the protectors are part of a single union, then there is only one organization to penetrate & corrupt.
OK, end of the parable. Imagine you're a smart banker. You look at an incredibly wealthy & diverse place like the USA and realize that it wouldn't take much to direct all that wealth to yourself. What you would really need to do is set up and promote programs & influence legislation that appealed to certain national ideals eg fairness, equality aka "the ownership society".
When there were 50 separate, sovereign states, there were only so many resources a super-predator group like GS could devote. Perhaps California & NY could be captured, but after that the declining marginal utility of corruption would become highly diluted. So the key was to destroy individual sovereignty and consolidate power in one central entity: the US federal government.
Now, the same corrupting activities could be focused and streamlined. The erst-while protectors would be more than happy to sell out their constituents for the lure of an easy buck made on the back-end. Besides, some of them may have actually believed their own rhetoric; you know, fairness and all that. Others might think they are also killing type of super-predators, and that they can eventually eliminate the competition to have the field to themselves. Little did these groups know the forces of power they were playing with.
And that's where we are today. The Wall St-DC connection is nothing more than an alliance of two traditionally opposed master-criminal groups. The only solution is to replace the corrupted protector class with a new group that will perform their jobs. More importantly, it's imperative we restore the previous distributed system of governance so as to avoid repeating the same kind of mistakes made in concentrating power that got us into our current predicament in the first place.
+1
From my view it is exactly as you put it: the psychopaths want us to know how they control - the question is, what is their real endgame? They know the system is collapsing - and I have read how it is engineered that way. So, what do they really want. I can read about it on websites of questionable sanity, but just a view of all the symbolism incorporated is quite alarming - in plain view!
Maintaining the sovereignty and natural competition between states, as I believe you have mentioned before, is the key. You put it quite well; very lucid.
Well, if you are an amoral atheist, as opposed to a moral atheist as I am, you know that as vilified as Hilter, Stalin, Mao, and all the rest are, it matters not a whit in any real sense of the matter. There is no cosmic justice, and the only record of your crimes resides in our collective chemical wash called memories. In other words, history doesn't really exist - it's only an illusion concocted by our brains.
This being the case, the amoral atheist rationalizes that the only thing that really matters is the here & now: the rush, the experience of being. The particular outlet one chooses merely depends on one's specific interests: artists pursue art, surfers pursue surf, and psychopathic criminals pursue, well, crime.
The Framers had no misconceptions about this essential reality. They thought they had developed a fool-proof plan to thwart the inevitable flow of evil towards the source(s) of power. Thus the reason for such a highly distributed system: 3 branches of government (4 if you treat Congress as two parties) X a variable number of states.
Alas, the best laid plans of mice & men often go awry. Now it is the charge of our generation to clean up the mess.
You don't have any children, do you?
I want what you're smoking.
Randian protocapitalists running the banks? Give me a break. The bankster scum are still running the banks because of a Keynesian-based bailout mentality. If the Government is going to bail the bankers for their idiocy, of course they will take the bailouts and reward themselves bonuses -- who in their right mind would turn down free money?! ($8,000 home credit, anyone?).
These bankers were able to game the system and then get away with it. They got away because of our Government. As long as the economic system is some form of Keynesian-based fascist regime, then it automatically nullifies free market principals. Who cares if the bankers are self-proclaimed capitalists if it's up to the government to enforce (or in this case abandon) the rules governing a free market?
The free market, by its very nature, cannot function when it is being actively manipulated by the Government elites, and by the business that control government puppets from behind the scenes.
Blaming the 'free market' is akin to me taking your hand, slapping you with it, and then politely asking you why you're hitting yourself. The truth, of course, is that you are not really hitting yourself and that what we have/had is not really a free market.
Who bails out the government?
I didn't find anything in Taibbi's article blaming the irresponsible homeowners who took on the risky mortgage. That's so typical from people on the left. It's all bankers, realtors and someone else's fault. It's never themselves. Sure bankers, Fed and government were big culprits. No doubt. But shouldn't these homeowners be smart enough to see that there's no way for either the market to forever go up or them to afford the mortgage. The homeowners got greedy and acted stupidly, too. Now all of a sudden they point the finger at everyone else. That's pretty hypocritical.
No. The homeowners are repeatedly told that real estate is a good investment that will go up forever and they are idiots if they don't get in on the ladder (and as long as the market goes up this actually is true!). Apparently even when things do start going south the government will step in to "save" them. It's kind of like watching the road-runner cartoons expecting the road runner to fall while he is running off the cliff... he never falls! Therefore, it is somehow illogical to expect gravity to apply to him. This is because of the first law of cartoon physics. http://www.spsnational.org/wormhole/laws.htm. These laws blasting through the airwaves have also become "laws" in "reality". The markets won't go down (regardless of all the facts uncovered at this site and others). Housing prices will stay up, the bunny, roadrunner, pig, and the duck will never get slaughtered and eaten. It's a fact... Until it's not, but let's not even think about that nightmare, because the children will be crying and screaming wondering WTF happened to their world that they knew so well.
Most people do not understand financial products of any kind. They trust the supposed "experts" (bankers and realtors) to tell them what they can and cannot afford.
Perhaps some critical reasoning would have been useful on their part, but Americans are not trained to be critical thinkers; they're trained to follow order from people in suits who have "expertise".
And when that "professional" says it's ok to take on a 500k no-money-down loan on a shitbox in Bubbletown, Middle-of-nowhere, Joe Plumber listens because "real estate always appreciates".
Blaming the peasants for trying to get their piece of the American Dream is pretty disingenuous, especially when the bankers get bailed out and Joe is in foreclosure. You need a dose of perspective my friend.
Matt will be a lot more useful when he pulls his head out of the one-party system's ass.
+1
Marla,Marla,Marla. :(
I've read all his books (including the Exile one). I've probably read 90% of his columns too.
You're wrong. He votes Dem but is not delusional about the power structure. It is what it is.
You have 2 smokers. One is delusional about the deleterious effects of smoking, the other is not. Neither quit. So, I ask you, what's the difference? Pacifism is not something to hide behind.
Maybe some people who are against the people in power aren't pacifists at all.
The military and the military industrial complex are socialism and the redistribution of wealth at its finest.
It costs 1 million dollars to send one troop to the middle east for one year.
It costs 363 million for one F14, and 2 billion for each stealth bomber.
Imagine the economic impact of spending what the next ten highest defense spending countries spend on the military on something like infrastructure, employment, or education instead of wars that really do little but increase the likelyhood of future terrorism in the U.S.
In short, we've spent well over a trillion dollars (and will spend much more when the military gets their future entitlements because of this war) to attack two countries that people with BOXCUTTERS didn't come from.
Trillions of dollars to stop less than 20 guys with boxcutters.
Maybe some people that are against the war aren't pacifists, but realists.
I agree with your premise, but I don't understand your conclusion. Are you stating that in order to be against war you must be a Democrat?
If so, you fall victim to the notion that there's a fundamental difference between Republicans and Democrats, when the differences between the two parties are, at best, a wash. In fact, even after acknowledging that most American presidents were Republicans, it doesn't bode well for your conclusion when you realize that most 'war-mongering' was conducted when a Democratic was in power.
"It costs 363 million for one F14"
You need to refresh your Wikipedia page
Well said. Imagine the change in behavior of banks if Citi, MS, and GS were allowed to fail, as they were on their way to doing (among many others).
Now imagine what their behavior is going to be going forward given that they have an unlimited safety net.
Nothing free market or capitalist about that.
Not to mention there can be no such thing as a free market when an important consideration, the cost of money, is centrally planned.
And correct me if I am wrong - businesses have traditionally made loans according to established criteria (debt-to-income ratio < 36% etc.) which mathematically described the likelihood that someone could actually pay these loans off. These criteria were established by the simple fact that exceeding these criteria typically led to the lender going out of business (i.e., the free market).
Then government got involved with, for example, the Community Reinvestment Act (which Tiabbi dismisses offhand claiming it is just politics to mention CRA):
Right on, Tethys - I will not fail to flow chart this baby all the way back to CRA. It is how Cloward-Pivin works after all. Start out with something innocuous that sounds reasonable, and then lever it. Remember, leverage works both ways, and if you can game the big picture numbers you can build or destroy accordingly. Anyone who claims it is partisan politics to point this out fails to see the farthest point on their own face.
It was a very simple communist trap. Have the government and the FED create easy money loans to the "poor". Then when they can't pay and did nothing constructive with the easy money, have the government raid the wealth of the nation and more importantly the middle class.
So we had a classic quick redistribution of money.
This was all communistic and has zero to do with free-markets.
"and, not to bash Clinton..."
http://www.cato.org/pubs/regulation/regv17n4/vmck4-94.pdf
yes government housing policies are abusrd, BUT making CRA loans in distressed inner city neighborhoods had almost nothing to do with the credit bubble. i dont have the numbers at my fingertips, but i would bet totals are a relative pittance. the subprime crisis was in the suburbs, not the ghettos.
"CRA loans in distressed inner city neighborhoods had almost nothing to do with the credit bubble."
Bliss?
Residential HOUSING had very little to do with the credit bubble!
I mean, look at the total outstanding of all mortgages and then compare to synthetic instruments such as notional outstanding for CDS or other swap instruments.
Residential housing is only the visible tip of a gigantic credit iceberg.
Had I gotten down to reading your post before making mine, I would have realized that you said the exact same thing that I think.
Good show.
"Residential HOUSING had very little to do with the credit bubble!"
FRM and FRE have an unlimited backstop on losses (after initially having guarantees of 100 billion each, and then subsequently 200 billion each).
AIG, meanwhile, even had less than 200 billion.
"compare to synthetic instruments such as notional outstanding for CDS or other swap instruments."
Gross notional, however not NET notional: http://www.dtcc.com/downloads/products/derivserv/tiw_data_explanation.pdf
It's the derivatives of the loans and the securitization of loans that tipped the scales. The loans themselves are a relatively small part of it all.
Of course, the banksters want us to believe that the mess was caused by our neighbors and not them.
While there were some irresponsible borrowers for sure, the way out of whack capital ratios that destroyed our system came from the failure of derivative instruments and from the lack of faith in the U.S. financial system and subsequent run on the banks that occured because of that lack of faith.
The defaulted loans are well within acceptable ratios without the derivative investment vehicles held by companies like JPM and the misrepresentation of investment securities across the world by the banks that led to a drawdown of capital in our system.
And the difference between the banksters and FRM & FRE is?
"The defaulted loans are well within acceptable ratios without the derivative investment vehicles held by companies like JPM and the misrepresentation of investment securities across the world by the banks that led to a drawdown of capital in our system."
Sounds like you are now defending the banksters.......
+1
Yo, Taibbi! Stop slappin' yourself.
Um, I think you're basically making Taibbi's point. Or were you just offended by the Rand reference?
I wasn't offended by the reference to Rand, but by its usage. I'm similarly offended when people call GW Bush a capitalist, and then use that incorrect definition to leverage their arguments against actual capitalists.
Taibbi's point is that it's pretty much everyone's fault. He refuses to look at the causality of the actions of market participants. My point is that the fault is with Government, because when Government perverts the free market, it encourages the type of behavior that the free market (without government's interference) would keep in check.
Note that currently the government is at war with Risk. They want to set up regulations to combat risk. Risk, as government sees it, must be removed, dealt with, if not outright abolished. The utlimate irony is that risk must be embraced, and the consequence of risk must be felt by those who bear it, in order for risk to have a meaningful purpose in markets and decision making.
You're right. Let them eat straw, the eaters of straw men.
"I'm similarly offended when people call GW Bush a capitalist,..."
http://www.hud.gov/offices/cpd/affordablehousing/programs/home/addi/
Simply put, "Those that make the rules run the game." It's Congress's job to make the rules thus, they ran the game.
+100, nicely put.
And what's up with:
Not sure if he is implying that the antigovernment view is racist and classist, or if he is being racist and classist in implying that irresponsible home-borrowers are typically low-income or minority.
Either way, -100 to Mr. Tiabbi.
it's news to me the "low-income" types even have political allies in washington.
I'm not sure whether you're claiming the poor have no influence or whether the people who claim to be trying to help the poor actually screw them over worse than everyone else.
actually, i was inferring that it's not the low-income types who have the politicians in their collective pocket. ironically, this would suggest that both scenarios you mentioned are accurate.
"antigovernment folks" is a typical label the sheeple give to proponents of individual liberty.
I "captcha" you a [ + -100].
Calling someone antigovernment is lazy. When a government oversteps defined limits someone must go to jail.
That's all.
But we are not seeing people going to jail anymore, so I am extremely opposed to this pack of jackals that are probably in total disbelief (if not already delusional) that We the People still think We are being represented. It's not a government anymore - the Constitution has been violated. It's null and void. It is now the duty of the People to 'alter or abolish'.
To me all of these people were equally guilty of making bad decisions to benefit themselves in the here and now at the expense of the whole in the future. When it comes to bubbles, It Takes a Village, and blaming the whole mess on the “socialist” aims of a pair of government agencies seems off base — particularly since the Randian protocapitalists running the banks benefited every bit as much from this socialism as actual homeowners, and perhaps even more, when one considers that homeowners get foreclosed upon, while bonuses are forever.
its sorta like blaming the catfish for eating whatevers on the bottom of the pond.
Marla,
I was taken slightly aback when it seemed like you were letting the bankers off-the-hook regarding GSE.
great highlight, Marla. thank you for it.
Taibbi, like 'everyone else', is simply unaware of or sleeping on Socionomics, which would unify his extremely insightful thoughts within a methodological framework; outside of that, profound & prescient.
That's not destruction, that's transfer. Wealth is being transfered. The banksters are sucking the wealth out of this country. Hopefully, enough people will realize this and rise up to stop it.
Nice post, Cursive.
A while back, I was wearing my tin hat and wondering aloud to myself, and questioned whether what we're seeing is the purging of "old wealth" (the one thing we actually have a lot of around my parts) to the next generation of sharks and looters. Therefore, it would seem that those who are damaged the most are those who play the game the worst (those who go chasing market peaks- both paper and property).
Anyone else care to weigh in?
There are two wars which are constantly being fought. One is the war between men and women; the other is the war between old money and new money. Old money has the distinct advantage here; as a minor piece of evidence, I give you estate taxes. And, old money has experience, and has had time to buy favors and put resources in place (MSM, university endowments, politicians, etc); new money doesn't usually know how to handle money and is easily crushed, and perhaps needs to be crushed from time to time when it gets too uppity.
Regards the hat: what style do you wear? Mine's a Centurion.
http://people.csail.mit.edu/rahimi/helmet/
I think that your assessment of old money is pretty accurate. The bottom line comes down to how well the lessons of yesterday are passed on to the trust fund babies of tomorrow. In my experience, the peak of the upper crust does this the absolute best, while those around the "upper-upper middle class" (probably considered "newer" money) tend to fall a bit short.
As for the war between men and women, you may have missed one, SWR. It is said that men have one common enemy: women. Women have two common enemies: men, and other women.
RE: Hat- I prefer the contemporary styling of the New Era 59Fifty. Very popular at Indians games.
Taibbi makes much of being delicate with me over what he sees as our disagreement on the issues,
Marla;
I don't think it's you per say that Matt disagrees with but women in general. After the Goldman article, I started reading his blog. I had to stop. He spent all his spare time bashing Sara Palin a la Perez Hilton. She is just a woman out selling a book that couldn't hurt him if she wanted too.
It's not the banksters or the fed rsrv fault. They're just taking what they can get their hands on. They're actually very powerless. If the entire nation minus the top 2% stood up one day and said give it back, they would. They would have no choice.
There should be something in the manual about rapidly increasing levels of debt. Never in history has this not led to massive loan losses, massive fraud and on a widespread basis, depression. Someone in the Fed should have strangled Greenspan. I am not sure if it is Michael Hudson or Steve Keen who says that once a debt bubble and speculation gets going, the regulators start cheering rather than regulating and don't want to end the party. Clearly once history is forgot, it repeats. Bernanke and Greenspan read the same books and neither has a clue what started the Great Depression. Some how do you do having a couple of morons as the head of the central bank.
Taibbi's biggest Achilles heel is that he continues to try to appeal to the burned-out, way-past-their-prime hippies and hungover, clueless college students that make up Rolling Stone's primary audience these days. When one keeps that in mind, his style of writing makes a lot more sense.
He's good for a chest-pounding rant or two and that's led to occasional nuggets of real insight, but he's still far too wedded to the contradictory notion that a government which promises to take care of everybody will somehow not take care of big business, while promoting the idea that if government was just run by The Right People, things would be perfect and utopia would rein. The problem is that as an actual instrument of policy, this idea passed its due date 20 years ago.
The sooner he accepts that Super-Big Government is just as bad as Super-Big Business and that the two will inevitably join forces, the sooner his writing will have actual populist appeal.
ding.
Hey, he gave us "Vampire Squid," didn't he?
I'm a college student, far from being hungover, but I don't see any of my peers reading Rolling Stone at all. I thought that magazine was for wannabe hipsters in their 40s.
It isn't so complicated: Government allowed itself to be bought and that compromised its ability to regulate.
Noteworthy in that various parts of the axis line continue to meet in agreement on the facts.
People who disagree with me are hippies.
What? No pictures? (heh heh)
Much of what people say, and most of what people write, is completely scripted, edited, and revised to align with their given objective regardless of objectivity. Rare is the occasion that the individual lets their guard down enough to which they (usually unknowingly) reveal insight to both their thought process and their character.
Several months back, I commented on an interview I heard with Taibbi where he was knocked off balance by the radio host and completely recanted the extreme language he used in his article that was the purpose the interview.
Credibility and consistency are paramount as a reporter/journalist. Given the often extreme and controversial nature of Taibbi's writing, I find this inconsistency to be unfortunate. That is not to say: (1) he is not a very bright person; (2) his views are always less than completely accurate; and (3) recanting his statements in one story yields irresponsible reporting elsewhere. However, he openly admitted that his writing has the ability to reach the level of sensationalism, and in my opinion, his statements should always be taken with a grain of salt.
The entire machine was the GSI's. The CDO market was a late comer. I believe the subprime market got going in the late 1990's. But, I recall reading Doug Noland of Prudent Bear fame in 2001 and he was pointing and never stopped pointing toward the GSE's. Doug wrote something in 2000 chiding Franklin Raines and how he was pusing paper through FNMA. Armando Falcon of OFHEO came out with a report warning of undercapitalization of FNM and FRE in early 2002 from what I recall and immediately resigned his position pending replacement. I recall they had a hell of a time finding a guy to replace him, but his charges held water. In the meantime, Raines was stuffing plenty of money into his pockets and into the pockets of the Congressional Black Caucus.
Did making loans to poor people cause this? No, I don't think so. I think Tabbai is kind of right. The mortgage business has evolved to being more and more about loan fees and less about interest rates. I knew some guys working for Countrywide back in the gogo years 2002-2005. I recall one saying they were making about 6% fees on what they were doing. That meant there was money being stuffed down plenty of pants. I knew the mortgage business and I also knew it was going to blow up and that people associated with lending that blew up quite often went to jail. It wasn't for me.
The point here is that the guys at AIG had to know it was going to blow, but they knew they would be gone when it did. The rating agencies couldn't have looked at the loans and if they did, they couldn't have had a clue what they were looking at and might as well have recruited some kids from the local kindergarten to give their opinions. The Wall streeters knew everything about them and were committing fraud to the max. I suspect FNMA and FHLMC were as well, as they knew the story about mortgages. You can pretty much get a statement from Pinto that a novice from their risk department knew this stuff was bad.
Congress? They are merely bought off. How many of those guys would you hire for something that required more brains than being a dog catcher?
All I know is that I got fucking ganked and now I'm pissed the fuck off. My government takes my earnings but does not work for me. Greedy, lying sacks of shit born with silver spoons in their mouths can't get enough for their money addictions. Who the fuck goes back to work the next year after making 10 million the year earlier? Retention bonus? Puhleeeeze. Give me a few million in one year and you can retain the fucking turd I leave in my office right before you never see or hear of me again. Washington has their head so far up these fucks arses. God damn I'd love to go knock some of these old fart's jaws across the room.
Who's to blame? Holy shit. Talk about shooting fish in a barrel.
For me it boils down to the basic problem of the lack of affordable housing to begin with. It's insane when hard working people need to carry a lifetime of debt in order to own a home. Inflation caused by an infinitely growing money supply is to blame. All else flows from that. Those who can keep ahead of inflation win and those who fall behind lose. Greedy behaviour (stepping on others to further one's gains) surely accelerated the wealth transfer from the comfortable middle class to the rich but we were marching toward the same destination without the blatant corruption.
Have to agree, it would be tough to miss with the blame gun. However, hard working people don't need a lifetime of debt to afford a home, unless it's a three car garaged, granite countertopped, 3br/3.5bth + bonus in the suburbs, which turns out to be what everyone (greedy bastards that they are) wanted. If people could look past the MSM-sponsored My Crib McMansion BS, and realize they can make do in a 1200 sf fix-up, that can be afforded.
I guess that fell apart when the 1200 sf fix-up appreciated 250% from 1999-2003. Wall St. wasn't the only place greed reared its head. Anyone using a HELOC for anything other than property improvements, education, or investment was a greedy fool.
As directed I studied MT's article carefully.
Left wing apologetics with the conclusion everyone is to blame so no one is to blame.
oh, and that MS has been "really nice" to MT "personally"
The "system" is working as designed. Only sacrificial goats are ever held responsible. Unconnected dots or unreported - in the MSM? Who's the "well dressed Indian" of the financial meltdown?
Who are we all kidding here? No one but ourselves, of course. Here is the root problem..
It takes more than bacon to make a pig and similarly, it took a confluence of the CRA, the GSAs, mis, mal, and non-feasance on the parts of politicians and bankers, speculators, and a large swath of the general populous to create the debaucle we now witness. Even assuming malice on the part of all these players, the bubble could not have been created without the root cause of too much cheap money and guess who owns that end of the puzzle? I refer to the institution rather than the particular ass-hat who sat in the chairman's chair at the time. This is how Spain could have a similar disaster without the CRA.
The way to put a stop to this madness is to eliminate central bank(ers/ing).
Eliminate central banking. Yes. The economy will be more stable without their constant meddling.
get a room.
The GSEs have been turned into a dumping ground. This is a story that is not getting enough attention. If you concentrate on debating the origins of the crisis ("At Dawn We Slept") you'll miss the next chapter in the on-going crisis ("At Noon We Slept").
The Biggest Losers Behind the Christmas Eve taxpayer massacre at Fannie and Freddie.-WSJ
Even better for the political class, much of this is being done off the government books. The White House budget office still doesn't fully account for Fannie and Freddie's spending as federal outlays, though Washington controls the companies. Nor does it include as part of the national debt the $5 trillion in mortgages—half the market—that the companies either own or guarantee. The companies have become Washington's ultimate off-balance-sheet vehicles, the political equivalent of Citigroup's SIVs, that are being used to subsidize and nationalize mortgage finance.
http://online.wsj.com/article/SB1000142405274870415280457462835098004308...
I agree with you. This story has not gotten sufficient attention.
F/F have jointly become the long awaited " Bad Bank ". The dumping grounds that allow Ben to slip out of the junk business. And unlike the modeling of RTC in the 80s, this baby is designed for a triple dose of bad shit......like a steroid, crack and meth house constructed under the shaky roof of these two GSE Bad Banks.
RTC was a recovery from a bad hangover compared to the deadly overdose situation of today.
My impression after reading this article is that Mr. Taibbi would not know "free markets" or "capitalism" if they smacked him in the face. Just another liberal twit who thinks that if only the right people with pure hearts and correct motivations were in charge, Big Government would make everything just swell. Haven't we heard that a million times before?
Taibbi isn't smart enough to understand the problem.
THE problem is debt-based money. It requires exponential growth.
At some point, finite, real physical systems place a ceiling on growth.
This is just the nature of things. At that point, the system has to begin generating credit growth by ponzi means. Synthetic debt was far larger than housing and residential mortgages. By any means necessary, they grew the credit base. The housing price trend was merely a symptom of a deeper problem.
Everyone is running around pointing at the tip of the iceberg as if that is the entire problem. Then when they think they've solved that, they wonder why jfc the thing is still here. There is so much more below the waterline, real foundational problems that are simply not contemplated by economists. Consequently, they can do no more than run around making asinine proclamations.
Who cares how or why when the SYSTEM we operate in our actual money in the absolute, REQUIRES growth as a nature of its existence? All the things we've seen WILL occur and MUST occur as a side effect of the inability of a real economy to produce the growth needed to pay the coupon on the money lent into it.
Look at the credit curve or the inflation curve since we hit our oil peak in 1970. Look at all that happened since. Every dollar in existence, whether physical or electronic, has an interest demand that it lays by its very existence upon the real economy.
The system merely found a way to temporarily satisfy those exponentially growing needs with synthetic inputs. That is all.
I mean, shit, we HAD to grow lending, right? Ever wonder why credit MUST be grown? If you place that axiom upon a system, who could be surprised at what happened? Credit done got grown, didn't it?
All this talk of "socialism" and "capitalism" and government and the rest is just obfuscation. I say this over and over again - UNDERSTAND the parable of the indian king, the chessboard, and the rice. Until/unless you come to a fundamental understanding of what demands an exponential growth problem levies upon the real world, you will not get what has occurred and will continually scramble around with no more than a superficial grasp of the underlying issues.
Thank you. I am reminded of a quote.
"Make no mistake about it: in this credit collapse we are witnessing the death throes of irredeemable currency. In vain have governments and their client banks tried, for hundreds of years, to graft this repulsive and degenerate bastard on the living organism of society. The result was always the same: the healthy organism rejected the unnatural implant in its own good time. The present episode is no different from earlier ones except, perhaps, in the degree of the conceitedness of the perpetrators, and in their contempt for the native intelligence of man."
Dr. Fekete
Hey Trav777,
Agreed... mostly.
Very much agree with points you make on peak oil on other threads...
However, while I do agree that the fractional reserve basis of our monetary system is the problem, I doubt they will change that. Even should we go back to some form of a hard money/commodity system. Even in prior times of gold standard the actual on hand gold was fractionated and about a 2.5x leverage to actual on hand. Still less than the 10 times banks do and 30 times investment banks do. And I do believe that many of the politicians do understand the problem, but its easier to keep larding up your home district/state/program than to actually address the problem that is created by leverage. Should they actually adress the problem they will be out of a job as the washout occurs and the pain hits hard. Not saying that it can be avoided, but pols will do whatever they can to spread it out and alleviate it even at further problems down the road because all they care about it the current gravy train they ride...
When everyone is guilty, do you send everyone to jail? Impossible. Mass amnesty is the only plausible outcome.
But pinning blame is not going to solve anything. There will still a criminal system in power, and that system cannot be saved or overthrown. It can only collapse and die. Exit is the only solution. Renewal the only salvation. ZH is the beginning of this, the death of the dollar will be the middle, the end of the USA the finale.
There is no organism in the world that survives more than two centuries without breaking down. The USA is the oldest state in the world. As such it is the most obsolete, as well as the most corrupt. Time to put it out of its misery.
http://jessescrossroadscafe.blogspot.com/2010/01/why-was-there-no-canadian-housing-bust.html
The bailouts you guys are referring to are backing the loans of the guys you work with, work for etc. Fannie/Freddie/FHA loan book is composed of the loans backing middle class households. We are backing our currency. Our work, future income, blood, sweat etc.
Stop thinking us vs them etc. It's just US. It's not Congress, Wall St, the Chinese etc. American's bought too much, borrowed too much and we will pay the price for at least a decade. The "home debtors" with 100-125% loan to value mortgages working their asses off for their past spending and mistakes. You know all the government loan programs allow for 125% mortgage "reflief refinances" right? Because the mortgage balance is so far above the current value. 30-35% of current homeowners with mortgages owe more than their place is worth. About 20% of homes don't even have a mortgage. Do the math. A whole swath of American's bought too much and screwed themselves. Bestbuy, Harleys, motorhomes, powerboats, restaurants, VEGAS baby!, etc. The money didn't disappear that was borrowered and spent... it just went to the smart guys around the world. Money doesn't disappear it just circulates around the table.
Why should the wealthy/elite who own all the assets suffer b/c some jackass wanted a 4000 sq ft 800k home in Vegas in 2006? That is now worth 400k that he defaulted on 1.5 years ago and was finally kicked out by the Clark County Sherriff.
The bonds/savings that back the banks were never wiped out. That is what the pension funds, mutual funds and the elite own. Your retirement account basically. The losses of 4-5T will be spread out over time with QE and borne by the masses.
thegreatloanblog.com