March 24, 2010



Housing sales are again slumping after last year’s uptick, even as more units are being put on the market, according to the NYT. “Again” is a tendentious term, since only last year’s homebuyer tax credit artificially propped up sales in what’s otherwise now a three year decline. That’s the reality-based process which is being hindered by the temporary tax credit extension, now set to expire on April 30. If they want to keep this zombie propped up, they’ll have to extend this again and pretend again.
As with everything else, this tax credit may help a few random buyers (but is probably setting up most of them for underwater status), but is really yet another looting of taxpayer money for the benefit of Wall Street, to help prop up the toxic crap on the banks’ balance sheets. It’s another part of the Bailout.
The NYT piece refers to the “triple-whammy of bad news”, slumping sales, increasing inventory, and its likely depressing effect on prices. “If that proves to be the case, it could slow the broader recovery.” It’s hard to see how ideological capture gets worse than this. There is no “recovery” at all, let alone a broad one. The price effects they talk about are the natural, inexorable result of an insane bubble now deflating. There’s no way to recover from that until the deflation is complete and reality has reinstated itself.
Meanwhile all government policy has zero purpose and zero goal other than to try to reflate the bubble for as long as possible, while in the process conveying as much public wealth as possible to Wall Street. In a comment thread at Baseline Scenario I just read how someone says his Wall Street acquaintances are crowing about how 2009 was their “best year ever”. This is the year after they had intentionally crashed the economy for their own profit. And now their brazen looting of the country has no bounds of even political tact. They know they’re protected by simple government force. As Obama said a year ago, “I’m the only thing between you and the pitchforks.” Indeed, surely by now the people would deal with these bandits as they deserve.
Nothing could be more clear. We live under foreign occupation. The Wall Street banks and the filth who staff them are simply alien. They’re not American citizens and they’re not human. They’re foreign predators with their claws clutching our hides and their snouts stabbed into our veins, sucking our life blood.
Meanwhile this is a rogue, traitor government, dedicated only to enabling the tyrannical occupying power. Shall the name “Obama” supplant that of “Quisling” as the eternal personification of contemptible, shameful treason? It will if there’s any justice in the world.
So what was this government up to yesterday? The criminal cretin Geithner crept before Congress again to discuss this housing price and bank balance sheet issue. Namely, the government using Fannie and Freddie as its Bailout bagmen of last and permanent resort.
The NYT obliquely acknowledges how a theoretically infinite Bailout has been instituted off the government books and utterly beyond accountability to the law, the constitution, or the people.

The government has so far spent $126 billion bailing out Fannie and Freddie. Republican criticism over the absence of a plan for the institutions escalated when the White House released a budget in January that said only that the administration “continues to monitor the situation.”

They learned accounting control fraud from the best, since the whole GSE MBS buy-and-convey scam has been set up for one reason only, to let the banks carry worthless garbage on their balance sheets at sufficiently fraudulent values that they can report fraudulent “profits” and their officers can directly steal in the form of fraudulent “bonuses”.
The administration is pretending to want to find a new way to loot.

On April 15, the Treasury Department and the Department of Housing and Urban Development will publish a list of questions seeking comment on the appropriate role of the government in housing finance, as well as the design of mortgage products and protections for consumers who use them.

Yet under Congressional questioning Geithner had nothing new to say, just the same old boilerplate lies.

The lack of specifics frustrated several lawmakers, one of whom, Representative Bill Posey, Republican of Florida, lashed out at Mr. Geithner, saying, “We can’t wait forever to find out.”

Mr. Geithner replied: “You won’t have to wait forever. We’re starting today the necessary process of figuring out what Congress and the executive branch would like to do to reform the housing finance system.”

So after one year you’re “starting the process”. Well, I guess the process mentality, if it’s going to do anything at all, has to at least “start”. But in your case I think there’s a more significant reason you haven’t “started”.

Mr. Geithner suggested that the administration was waiting for the economy to stabilize before deciding on a plan. Fannie and Freddie back most of the nation’s home loans and are managing the administration’s $75 billion loan-modification program.

Next week, the Federal Reserve plans to complete a $1.25 trillion program to buy mortgage-backed securities, a major test of the recovery’s staying power. If mortgage rates were to quickly rise afterward, the Fed might have to step back in.

“If” mortgage rates rise afterward? Everyone thinks they will, since we know that in spite of all your lies from day one of the Bailout, these banks will not lend. Only Fed and Treasury MBS buys, as well as the contrivance of the tax credit, have kept this market functioning at all.
And we know the part about “waiting for the economy to stabilize” is the same old heads-I-win, tails-you-lose trick. You can’t reform anything during the crisis. On the contrary that’s when you need to gut all existing reforms. Disaster Capitalism 101. Meanwhile if things ever actually do stabilize, they’ll turn around and say there’s no need to change, “don’t rock the boat”.
Waiting for the economy to stabilize? Whatever happened to “not letting a crisis go to waste”? We know what happened. We know how they used the crisis. They better pray there’s no justice in the universe.

“I don’t think there is a credible argument that we can abolish, put out of existence, these institutions today,” Mr. Geithner said. “That would not be responsible.”

This little worm is the last one to lecture anyone as an authority on responsibility. We can assume as a law of reality that anything he or his masters say is the epitome of irresponsibility, criminal cover-up, and incitement to further crime.
The gist is that the administration is claiming it wants to get beyond the Bailout and government subsidy of the big banks via the housing market:

Mr. Geithner vowed in his written remarks that whatever form the overhaul takes, Fannie and Freddie would change. “Private gains will no longer be subsidized by public losses, capital and underwriting standards will be appropriate, consumer protection will be strengthened and excessive risk-taking will be restrained,” he said.

But in the same breath he directly contradicts himself and admits they have no idea and no intention to change anything:

He added: “There is a quite strong economic case, a quite strong public policy case, for preserving and designing, some form of guarantee by the government to help facilitate a stable housing finance market. But it can’t be the one we have today.”

There are no such cases. Reason, morality, and common sense would indicate, and history proves, that Obama, Geithner, and all corporatists, are idiots and liars. Government intervention in housing markets has been purely malign. It was always undertaken with malignant motives – proximately, to favor interest groups like the banks, Big Auto, and the Big Builders; more broadly, to co-opt the potemkin middle class, place it on the treadmill of debt and therefore into a state of intense socioeconomic dependence and vulnerability, and in that way enforce social conformism. Its effect has been to enshrine the evil model of suburban sprawl and the personal car as the perverted form of our “civilization” and generate this debt-indentured pseudo-“middle class” as the socioeconomic base. Thus our physical resources have been uselessly destroyed, our environment has been trashed, our real economy and real social stability have been gutted, and in particular our rich heritage of small farming has been wiped out while the rich farmland itself has been physically destroyed for the sake of highways, strip malls, and subdivisions.
By coincidence the NYT (really the Reuters Breakingviews blog) on the same page has one of its infrequent skeptical pieces on the mortgage deduction, the main tool of this government market distortion.
This deduction is simply the current tax credit writ large. Its goal is to drive people to buy bigger houses than they need or could, according to any reality-based market, afford. This artificially drives up housing prices, as well as the costs of borrowing in general, including for those who might actually want to borrow money for some constructive purpose. It’s a version of Gresham’s rule – bad money drives out good. In general, in a kleptocracy bad policy everywhere drives out good, bad people drive out good, everywhere everything that is bad drives out what is good.
Of course, even a “skeptical” MSM piece has to know its limitations.

Economists have been pointing out these distortions for years, but for politicians, advocating the elimination of this deduction is seen as suicidal. One problem is that an immediate elimination would probably pull down house prices, the last thing the already weak housing market needs.

If you’re here to tell hard truths, then why are you waffling on this one? Housing prices are still bloated and have a great distance to go to get down to reality.
The piece recognizes the impasse:

The danger comes from the lower purchasing power that higher taxes would bring. For the couple who used to be able to afford a $400,000 home, the maximum purchase price would fall by 11 percent. The $900,000 home would have to drop about 21 percent in value to offset its owners’ higher tax payments. That sounds like an invitation to open another chapter of the financial crisis.

You mean it contradicts the insane, hysterical attempts to reflate the bubble. It contradicts the way they try to permanently interrupt the crisis, to keep it from doing what it has to do, and from what it must and will do in the end. (And thanks to this government, when the final dam break comes, it will be far more explosive than it needed to have been, since all they’re doing is forcing that much more pressure to build up.)
We should have let the fever run its course, let the breached dam drain, let the bubble deflate, write off all the worthless toxic garbage, let all the Wall Street rackets go down as they deserve to and will have to in the end.
Sure, it might have been rough. But by now we’d have that part overwith. We’d be restoring morality, justice, sanity, and health to the system.


  1. The January 2010 SIGTARP report documents pretty clearly how inadequate Treasury efforts are.

    Comment by tfitzaz — March 24, 2010 @ 11:08 am

  2. Treasury – inadequate? Now that’s understatement!

    Comment by Russ — March 24, 2010 @ 3:37 pm

  3. Your talk of Wall Street being aliens reminds me of a classic B movie from the 80s by the name of THEY LIVE.

    If you haven’t seen it, stick it on your netflix queue. It’s much better than you’d think, given that it stars “Rowdy” Roddy Piper.

    Comment by jimmy james — March 24, 2010 @ 11:00 pm

  4. This is a tad OT, but I think you will find it of interest.


    Comment by Edwardo — March 25, 2010 @ 12:40 am

  5. Yeah, I saw They Live a long time ago. That and a coffin on the lawn are suitably macabre signifiers for these days.

    Comment by Russ — March 25, 2010 @ 2:58 am

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