The whole scenario was developed on the credit card model.
By Daniel at 7 December, 2009, 12:03 am
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
It was why credit scores became the most important credential for a mortgage. The loans were asset backed and most importantly risk was transferred via securitization. Wall Street has a junk bond dream left over from the asset stripping 80’s.
Greenspan put the gas pedal down with low interest rates to promote growth to pay for a war. He had is eye on inflation, which never happened. Unnoticed were the dollars and jobs moving overseas. We did not experience inflation because the supply of goods coming into the States was infinite and cheap. It was Asia that experienced the growth.
No bank has ever sent someone knocking on your door begging you to re-finance or obtain a home equity loan to pay off your credit card debt. Remember the credit card come-ons, 0% for 6 months, the same come-on as toxic ARMS. Like credit cards, asset backed lending generated fees with no risk, risk was securitized in bundles and off-loaded. Servicing the loans was immensely profitable, with a penalty fee structure like credit cards, which stayed with the servicer.
Greenspan continued to have low rates and money went looking for other AAA securities. Once the fee fever hit, they could not turn off the machine. Greenspan tried to raise rates but money, offshore “savings”, was buying the bundled securities keeping long term rates low, the “conundrum”. The savings were the profits from us buying all the imported stuff. The growth Greenspan was waiting for was taking place in Asia and coming back as “savings”. Inflation was localized to real estate as supply dwindled and investment banks swindled. Increasingly lax lending to unqualified borrowers allowed commission fueled sales reps wallets to bulge stuffing more lending down people’s throats. The inflating housing prices created it’s own wind.
Local banks were out of the picture around 2004 unless they did commercial lending for new construction or exceedingly overpriced rental units that were destined to become condos for snow birds. Idiots in town government were floating gimmick securities to build local infrastructure for new construction. People were lining up in the streets to put down payments on condos yet to be built and that were sold three times over before the ground was broken. Any idiot could become a real estate broker, and they did. The old hands were complaining about all the competition. Ultimately, very few were making money because of the insane competition, so they lied as much as they could to make a sale.
It was the best example of out of control capitalism because everyone was making money. No one wanted it to stop, so it didn’t. Builders could not build houses fast enough. Rates and terms had never before been seen this favorable (but low rates did not force anyone to buy. Rates are low now, and people are not acting foolishly.) Real estate brokers were touting low rates, gimmick loans and the “better buy now or you will never afford a house in your life time. If terms seem unaffordable, you can sell the house at a profit. If you have bad credit, make payments on an exploding mortgage and re-finance before it blows up.”
Fannie and Freddie were out of the picture by 2005, there were no more qualified borrowers. Raines was out for accounting fraud. Mudd had his arm gently twisted by Frank and investors wanting better returns. Frank wanted the poor not to miss out on the housing appreciation “miracle” (but he didn’t say make bad loans). Bush wanted everyone in a house so they would buy stuff and keep the economy afloat. Fannie and Freddie bought AAA ABS of loans they would never be allowed to make, even before Mudd. Every bank in the US did likewise. Mozilo offered Mudd conventional loans but he had to take ALT-A and twisted ARMS as well. Mudd was in competition with the investment banks with the exception that he would hold on to the loans or guarantee them.
Then the defaults came, first slowly as HELOCs were used to make payments. Investment banks lost buyers so they turned attention to oil and made that market, drawing in dumb money from pensions and retirement accounts. Remember? Gas at $5 a gallon by the end of the year?. Bear Sterns lost some funds and then Lehman went down and a big freeze settled in.
- Ransome
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Nobody wants to talk about the real beginning of America’s Economic Problems
I still find it hard to believe that none of the talk radio shows or TV shows have connected the dots. ISO 9000 and NAFTA the beginning of the NWO.
ISO 9000 and NAFTA brought to us by the Clinton administration, is where the real problems with the economy began. Many people have no clue what either of these programs are so I will explain them in simple terms.
ISO 9000, is a vehicle for moving American industries out of America and into less developed countries where wages and regulation are much less.
NAFTA, North American Free Trade Agreement is a means for those companies exported to Mexico or Canada for example to sell their goods in America without having to pay an import tariff.
So with just these two tools alone the progressives have managed to dismantle most of the manufacturing industries of America and along with it the real jobs that Main Street relies on to survive.
Now unemployment is climbing and mortgages are defaulting at an alarming rate. Don’t blame it on the greed of those business that moved out of country. In a free market the consumer drives the prices. For many of the companies that moved out of country to lower production cost if they hadn’t then their competitors who did would undercut their prices and drive them out of business. The consumer doesn’t care where stuff is made anymore. The consumers of today are themselves greedy and only want the lowest price.
Welcome to the New World Order, where the businesses brains and wealth of America are redistributed around the world and regulated by the New Order through treaties. If you think things are looking bad now, just wait till the new Emperor of the NWO starts to flex his or her muscle after the Copenhagen Treaty is signed.