So now is the time to write concerning the mortgage broker sales of dud securities as a spinoff of the homebuyers who now hold an upsidedown mortgage and the people who hang on to actual cash now getting little or nothing for giving the bank the privilege of holding money. Another downside of this squabble for bubble profits are the tax rates raised by governments as the ‘value’ of the properties increased due to all the quick cash scams perpetuated by lenders now being rewarded with bailouts, cheap loans and smelly deals designed to buy $26,000,000 residences and high payoffs for CEOs. Amply rewarded CEOs of failing businesses preying on loopholes and gullibility did not accept any social responsibility. Just collect those profits, no matter how they were generated. The average person still has to pay higher taxes because of the real estate price hike.
The scam works like this:
The politicians decide that more people need to own houses so policy is suggested that loosens up credit guidelines for well researched clients who will most probably pay the loan. Not researching borrowers at all led to quicker deals and more profits, so why not?
Lending companies find that these loose guidelines allow for more and more people to qualify to buy homes, including speculators. The loose credit allows developers and builders to raise prices, because the credit will be OKed anyway. ARMs or interest only payments become the norm, in order to qualify more people for more and higher amounts of credit. These loans were structured to fail, which would give foreclosures a nice equity in a property or would allow the borrowers to refinance, as long as prices kept rising. Profits were to be had either way. If prices dropped, then people would be left owing more than the property is now worth, plus they would have the ARM factor or the interest only loans that hugely balloon in payment size. No surprise that foreclosures are on the rise.
Back to the scam. So first we have non-researched loans structured to fail that are ‘bundled’ and called securities and sold like they are a viable investment sure to balloon as soon as the ARMs or interest only payments did. It was all planned out. Everybody would pay up and the profits would flow, but it is really better if I cash out now when I sell these bogus securities to investors rounded up by big name brokers. I guess to pay the appraisers of these ‘securities’ a little would be enough if they kept their jobs.
Criminal activity? Loans structured to fail should be a criminal offense. Loaning money to people who cannot pay it back is reprehensible and rips off somebody. Who gets paid? The developer, builder, construction workers, loan personnel, real estate, appraisers, all get cash out. The bond bundlers and bond brokers cash out. The investors who put up the money to be loaned are expecting starry eyed profits based on recent paybacks based on more investment. A Ponzi scheme. The foreclosure rate woke everybody up and the profits disappeared in a wash of red ink.
Lo and behold our government takes steps to prevent this red ink from getting on anybody important. Cut the interest rates and the ARMs don’t adjust upward. It does not matter that the interest rate cuts also cut the rates paid to those unfortunate holders of cash in banks. The cut in interest rates also cut foreign investment, a little side effect of saving your buddies from taking a loss. The falling dollar makes oil cheaper for everybody but us, so the low interest rate is doing a number on the little guy in more ways than one.
So now the latest link in the scam is that a huge brokerage firm will get a bailout in order to avert a financial meltdown. What is going on? Why the bailout? Why not just let it go broke?
Retirement funds invested in low or negative yield bundled mortgage securities? Is this true? Would these retirement funds then be lost while at least three of the perpetrators lounge in millionaire luxury? Exactly who bought these worthless securities? I want to see a list of investors, how much they invested, and why is it necessary to bail them out.
It is my opinion that all this money never existed. It cannot be found because it was only a figment of the imagination fueled by cheap credit. Printing money is not the answer. Inflation is horrid as it is. The inflated housing prices were a scheme to get money via the easy credit avenue. This ‘value’ does not exist. Allow the real estate to deflate and allow people to renegotiate their loans. They did not steal the value. Somebody else did and they are living in luxury at investors and now taxpayers expense.
So the Fed bails out these same charlatans and expects to continue to do business with them, rather than bypassing them and working with the investors and homeowners. They deserve to live in a homeless camp in California where so many former homeowners now live, some in tents and some in camp trailers. I say give them a pup tent until they go to jail.
What is normal? Fair interest rates when cashholders can make a little. Fair rates for loans to people who can and will repay the money. Interest rates that attract investment. Stable currency. Raise the interest rates.