Okay, I have to ask…
How many more of these phony schemes do we allow before we finally get a clue and demand that the government re-regulate commerce, as they are required to as part of their constitutional duty? A bunch of would-be criminals keep trying to find ways to lend money to people who can’t afford to pay, take a cut of that money for themselves, and leave the rest of us holding the bag.
In the 80s, we had the junk bonds/ savings and loan scandals, in which our money was given to thieves, who "promised" to pay it back "someday." When it was discovered that most of these "loans" would never
be paid back, the federal government, through the Resolution Trust Company (you know, the taxpayers), bailed them out.
We recovered from that "smoke and mirrors" market by way of a couple of twin frauds in the 90s; the tech bubble, combined with fraudulent accounting practices on the part of huge corporations, as they attempted to find ways to make money appear out of thin air. During the tech bubble, anyone who put a dot-com after their name could count on all sorts of "venture capitalists" handing over gobs of cash, which they then pocketed, before putting the company out of business and starting another. My favorite had to be pets.com. Who could have ever imagined that people would actually prefer to buy pet food and pet toys at a store, rather than paying the same price online and being hit with a huge shipping and handling bill? From what I understand, gumandmints.com never got off the ground.
Of course, at the same time people were starting dot-coms that defied logic, other more traditional companies were screwing the market in another way, by lying about how much money they were actually
making, in a lame attempt to boost the value of their stock. We found out that auditing companies were helping them defraud, and even taking a cut themselves.
After government regulated those two markets, the crooks had to think of another, in order to save themselves from the other frauds. You see, without a fraudulent major component, unencumbered markets just don’t work. The Founding Fathers weren’t stupid; there was a reason why the Constitution mandated government regulation. Without it, crooks rule the day. And in their quest to dominate the economy, what better market for crooks and charlatans to screw with than the real estate and mortgage markets, right? I was writing stuff like the below five years ago, and I’m no genius:
As far back as 2001, advocates for low-income homeowners had argued that mortgage providers were making loans to borrowers without regard to their ability to repay. Many could not even scrape together the money for a down payment and were being approved with little or no documentation of their income or assets.
In December, the first subprime lenders started failing as more borrowers began falling behind on payments, often shortly after they received the loans. And in February, HSBC, the large British bank, set aside $1.76 billion because of problems in its American subprime lending business.
I predicted this a long time ago. Actually, such a prediction wasn’t exactly a revelation. Look at what we had; we had lenders advertising impossible monthly payments on loan amounts the people couldn’t afford. They infused the market with tons of buyers who couldn’t afford what they were buying, thus forcing the prices up. Therefore, the size of these impossible mortgages kept getting larger and larger.
For the last 5-6 years (or more), we have had an artificially inflated real estate market, a lot of money being put into it that was backed by little more than a promise to pay by people who couldn’t afford to pay it back (think back to junk bonds), and you had legitimate buyers suddenly finding themselves priced out of the market, because the money dried up, due not only to the number of mortgage holders who can’t afford the payments, but also the overblown price of real estate overall. Couple that with the fact that many people have been using their homes as ATMs to pay for things they really can’t afford, just because their home had suddenly doubled in value, due to the "smoke and mirrors" housing market.
Money isn’t really an unlimited resource, no matter what the wingnuts say; it has to run out at some point, especially when there is so much pressure on it. Right now, we are heading into a major crisis, folks, and the government will once again have to bail out a market that crooks have completely defrauded. To not bail it out could result in major disaster. if the housing bubble is allowed to burst completely, it will no longer just be a reduction in home values, which is expected every once in a while. No, the problem is the sheer number of now-unsecured loans out there, at below-market interest rates, and a correction that will be historic in its proportion. Not only that, but one of the few actual engines of the economy — credit — will largely have to dry up for a while, as the market plays catch-up with itself. And lest you think this phenomenon will be limited to the real estate market, think again. The cash crunch will be felt in corporate America, as well,
Now, a lot of right wingers will make light of this, and offer the bromide "the market always corrects itself." But the fact of the matter is, the market NEVER corrects itself. The government usually corrects the market. Unfortunately, we have a guy in office who makes Herbert Hoover look competent, and the Keystone Kops supporting him are all "true believers," whose actual religion isn’t "Christianity," but
"marketism," in which the almighty "market" fixes all things financial.
In short, unless we can manage to impeach these bozos in time, and the time is growing short, we have 17 more months of the Fed throwing fake money at a problem, which will only serve to make the solution more difficult, and a lame duck who doesn’t care what kind of mess he leaves for his successor.
This ride’s gonna be bumpy, folks.