Daily Archives: November 6, 2010

Foreclosure Fraud, What Does It Mean?

We write mostly about specific issues and ways to improve family finances, what might be called micro issues by the economists.

This post is a look at the macro picture, as it is referred to by the “dismal science” of economics.

Massive fraud in mortgage documentation is coming to light across America.

The Federal Reserve, which does have a monopoly on the printing of money in the United States, (if you don’t think so, try competing with them and see what happens) created a bubble in real estate.

They are the only ones who can print money; they are the only ones who can create the necessary pre-conditions for a bubble, despite Allan Greenspan’s protests.

It was done on his watch.

Greed fueled things from there, anyone who could fog a mirror got a mortgage, underwriting standards plummeted as there was money to be made and securities to be sold.

Make no mistake, this crisis could not happen without government support.

The regulators let the banks carry these investments off their books, so called SIVs. (Special Investment Vehicles)  Fannie and Freddie bought the crap, or there would not have been a market for all of it.

The ratings agencies played their part, rating this junk just under U. S. government debt.

And the sorry countries which bought in to this style of banking, the now bankrupt Iceland, the Norwegian pension system, and on and on, are sunk by our bad mortgage debt.

Then, as the manure hit the fan, our government panicked, buying the line that the crooked bankers were essential to the economy, and bailed them out.

TARP 1 and TARP 2 and the Fannie and Freddie bailouts, and on and on, instead of letting them fail, and home prices to bottom out, the government tried to keep the bubble inflated.

The U. S. dollar has been the World’s reserve currency, what other governments use to back up the paper that they print and call money.

Now, the Fed decides to follow through on its policy of backing the fiscal insanity of the Federal government, and devalue our currency, by printing more of it, calling this “quantitative easing,”

How do you think the Chinese feel about this, holding around a trillion dollars of U. S. denominated debt that is being systematically devalued by us?

OK, so, what does it all mean to Joe Six Pack?

Possible economic retalitation, trade wars, other countries devaluing their currencies, abandonment of the dollar as the reserve currency of the World, which will increase inflation at home, as demand for the money we print up declines.

Money is  good just like anything else.

OPEC sets its crude oil price in dollars, and that is what you have to pay them to get their oil.

So the Japanese, who import all their oil, have to turn yen into dollars to buy oil.

The Fed’s actions threaten to pull the rug out from this entire system.

Back to the bottom line, inflation, goods costing more money, e.g. sugar is at a 30 year high, maybe the old “stagflation” of the Carter years, as unemployment remains high.

Bad news all around, which means, we need to be even more vigilant about how we spend each buck.

Foreclosure Fraud, What Does It Mean?

2 Responses to Foreclosure Fraud, What Does It Mean?

  1. Wall Street was incompetent to allow this to happen, and it is handling the situation incompetently. Proposals from NACBA and others to reduce mortgage notes and interest rates would decrease the value of the funds, but the funds would be intact. Hypothetical: I invest $10,000 a year in a fund which promised a return of $1000 a year, but I end up with a share of a fund worth $8,000 which returns $400 a year. Not good, but better than my fund managers destroy the fund, and the only who benefit are the lawyers who billed for the lift stay motions and the foreclosures. The current style of management is to resist to the utmost any law mandating re-writing mortgages. This Is the Louis XVI style of management. You will recall early in the French Revolution, Louis was called upon to become a constitutional monarch, in return for which the Estates General would reform his financial system and “bail out” his royal butt. He wanted to be bailed out, but not reform. Two decades later, a revolutionay military dictator reformed the system. Wall Street is worse than criminal. It is incompetent. I hope history doesn’t repeat itself and there won’t be a Napolean to straighten out the mess.