Unlike most parts of America, manufacturing in Washington, D.C., is still booming. Guided by the expert hands of Frank, Pelosi, Waxman, Schumer and Reid, a handful of “underwater” homeowners with delinquent mortgages have morphed into an international crisis, with banks failing and stock markets headed down the toilet.
Along with the stock markets go the pension funds and retirements – in case you think this doesn’t affect you.
Here is the “crisis” in a nutshell. Ten years ago, Congress – ever on the alert for acts of compassion that will buy votes – demanded that mortgage giants Freddie and Fannie make more loans to poor people. How? The financial version of “don’t ask, don’t tell”: No-documentation loans.
Poof! Instant housing boom! Prices rise – more people rush to buy – banks lend money on increasing house values, then sell the loan to Freddie or Fannie, keeping a rake-off for themselves.
Speculators enter the market. House “flipping” begins, as investors buy with no intention of occupying. Prices rise more. Ordinary people take notice of the sudden jump in the “value” of their home. They refinance – and spend, spend, spend the proceeds.
Yeah, baby! It’s the new economy!
Really?
House prices become astronomical. People can’t afford to buy, even at low interest rates – not even by lying about their income and out-go on a “no documentation” loan. House prices fall. Quickly.
Oh, no, baby! It’s the same old economy!
So tell me this: If banks had been loaning out their depositor’s money, instead of selling the loans to faceless “investors” through Freddie and Fannie – would these banks have made the same loans?
And how about those regulators? You know, the guys and gals in the green eyeshades; the ones who most reporters and editors think should run the world?
Well, first they allowed merger after merger, creating banks that were “too big to fail.” Then they decided, “Bank A, you were bad, bad, bad! You did what Congress told you to do and made loans that have gone bad! Shame on you!
“Banks B-Z, Bank A was bad, bad, bad! They made loans that aren’t being repaid. We don’t know what those loans are worth (hint, they are secured by homes, try 50 percent).
“Banks B-Z, we have a rule we made called ‘mark to market.’ You made similar loans to Bad Bank A. Now you must mark those same kinds of loans down to the market, even if they are being paid. Since we don’t know what the market is, the value of those loans is zero.
“Poof! You’re insolvent!”
This is what happens when you put morons in government. Bank investors sold stock – and other investors panicked. The stock market declined. Pension funds recorded losses. The government responded with a bailout. Then another. And another.
Business saw demand slow. Employees were let go. People stopped spending. All of this happened so that Pelosi, Reid, Schumer, Frank and Waxman could “feel good about themselves.”
Did I tell you, this is what happens when your put morons in government?
Guess what? Now we have a real crisis. And there is not enough money to bail out all the “bad” mark-to-market loans identified by the bureaucrats and marked with their phony zero valuations.
How did a majority of Americans respond to this manufactured home crisis? Why, they elected more of the same people who caused the crisis, through poor judgment and historical incompetence (the textbook definition of stupidity).
Even in the midst of the financial crisis, however, there is one thing you can take to the bank. America’s financial education is just beginning. Enjoy the $2 trillion the Federal Reserve has already pumped into the economy. And enjoy the economic stimulus porker the Democrats have slaughtered on the capitol dome, after it was blessed by the Anointed One. Just remember: When the money is gone, the party is over.
Network ‘news judgment’ depends on who benefits
Tim Graham