Volatility

October 22, 2010

Jubilate! Mortgages and Property

 

The Street Enters the House - Umberto Boccioni

The implications of the Land Scandal keep rippling out to ever more distant shores of political possibility. By now it has sunk into the public consciousness: Your alleged bank may not have the note on your mortgage. It may only be posing as the real owner of your house. It may have no legal right, even according to its own bank-friendly laws, to foreclose if you stop paying the mortgage. Show Me the Note!
 
People understand that the reason they’re losing their homes is not because of any moral failing on their own part, but because the banks have systematically destroyed America’s jobs through their program of forced globalization, outsourcing, offshoring, downsizing, and consolidation. The main goal of all of these, other than direct looting on the part of banksters, was to destroy all decent American jobs. At the same time the banks undermined the economy and all social protections to the point that losing one’s job or having a medical emergency is likely to trigger a personal mortgage crisis. (As is often pointed out, only in the banksters’ America does losing one’s job mean losing one’s health insurance. This system of a double-hit was intentionally set up by the corporatists as a form of socioeconomic terrorism. It’s meant to quash dissent among the work force.)
 
The people understand that the same banks who presided over the massive bubble propaganda then willfully burst that bubble, dumping overboard and underwater many of the housedebtors they induced into extravagant mortgages they can now no longer afford, on houses worth far less than they borrowed. These bloated loans were all predatory loans. The bubble was a fabrication, the bloated housing prices were a fabrication, the loans and municipal taxes and bonding based upon them were fabrications. Every lender and every government was guilty of massive, willful fraud. Now that the bubble has burst, prices are seeking their real economic level. So by definition anyone who’s underwater is the victim of lending fraud.
 
The fraud extended to the federal government. The only priorities of both kleptocratic parties are to reflate the bubble, prop up the zombie banks, and help them continue looting. This has forced the government into all sorts of policy contortions, trying to navigate the contradictions of a situation where everyone wants to keep prices up but also wants to foreclose, which would bring more housing stock onto the already grossly oversupplied market. (And we’re learning about the conflicts of interest between the servicers, who have an incentive to foreclose, and the MBS investors who do not, since the phony “value” of their toxic assets depends upon extending and pretending with everything including the mortgages.)
 
Facing these paradoxes, the administration launched its HAMP scam. The goal was to lie to distressed housedebtors, telling them if they keep paying for the time being they’ll get a permanent mod. In reality Obama never intended to give anyone mods, but only to string people along, forestalling any ideas they were having about walking away, inducing a few more payments out of them, before the servicer lowered the boom once and for all.
 
If there were ever any doubt about this, the fact that Obama, as per his normal corporatist procedure, put the servicers themselves in charge of the mod application process, in direct contradiction of their own interest, should dispel it. That proved right from the start what the real plan was.
 
The people are learning how the banks, in their rush to securitize these fraudulent loans, separated the note from the lien and didn’t convey title along the Rube Goldberg chain of sponsors and depositors and trustees, thereby rendering the trusts themselves illegal, the MBS as nothing but unsecured loans now of zero value (so the banks we already knew were insolvent are now known to be in far worse shape than previously thought), the liens as phony “liens” that are also fraudulently referring to unsecured loans, and the houses themselves in legal limbo.
 
We know how once people started to wise up the banks simply set up Taylorist conveyor belts to churn out fraudulent affidavits. When judges started getting suspicious of all these lost-note affidavits, the fraud progressed to actual fabrication of documents. One company presented a price list.
 
We know that the banks are worthless, useless, criminal, parasitic, insolvent, obnoxious, and stupid. We know they have no right to exist at all, that every cent they’ve stolen (including the “bonuses”) has to be taken back in restitution, and that what’s supposed to be our government is really an illegitimate rogue kleptocracy which has committed itself not only to refusing to put a stop to the crimes of the banksters, but to helping them continue these crimes. The core policy of Bailout America is to steal taxpayer money and hand it over to the banks, in order to prop up their insolvency and enable them to continue gambling and looting. This is the essence of what this government does, and all other policy is defined by it.
 
We the people know all this, and when it comes literally to our homes we’re confronted with it in the starkest, most questionable form, and it is indeed causing us to start to ask some hard questions.
 
The three questions of the relationship of the banks and the land are these:
 
1. Does your particular bank own your particular mortgage? Or is it just lying about that?
 
2. Should banks – parasitic, insolvent, criminal, and since the Bailout the property of the people – be allowed or considered to own land at all? Isn’t this illegitimate on its face?
 
3. Does the very concept of unproductive ownership of land make any sense? Shouldn’t that be done away with as a counterproductive, immoral practice which only breeds the kind of criminal parasitism which so afflicts us today? Weren’t the “American Dream” and the “ownership society” nothing but scams to cover up bank looting? (Let’s recall how “ownership society” was the Bush slogan for his big push to privatize Social Security.)
 
I know that I’m still an outlier in asking #3. But it seems that the banksters have gratuitously, out of sheer idiotic greed, caused #1 to become a question in the first place, perhaps the central political question of the day. And having voluntarily, in an unforced error put #1 in play, they’ve reinforced the still-small but existing trend toward people starting to ask #2. And if #2 comes widely into play, #3 logically follows.
 
Just as the pro-bank scum try to keep the debtor-bashing propaganda going, but with less and less success, so they also keep saying, “even if the bank can’t produce the note, you still owe the debt.”
 
Here’s a typical example I found funny:
 

Joseph R. Mason, a finance professor who holds the Louisiana Bankers Association chair at Louisiana State University, said that concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.

“You borrowed money,” he said. “You are obligated to repay it.”

 
(I think it’s funny that LSU has a “Louisiana Bankers Association chair”. Actually I appreciate the honesty of that. Most of corporate academia is more deceptive about its prostitution.)
 
I keep asking the same question in response to this and never get an answer. Assuming I granted that “you are obligated to repay” a debt like this, to whom would you owe it?
 
The banks are criminal organizations. Morally no one should feel the need to owe them anything. Legally there’s also no obligation to pay off a “contract”, written by a loanshark, based on fraud. Granted, the disposition of such a legal claim would depend on how bank-friendly the judge was, but we’ve already seen judges willing to follow the spirit and letter of the law here.
 
Similarly, if we think it’s the government, as owner of many of the mortgages through the GSEs, as well as the real owner of the banks themselves, who owns the debt, the answer has to be that this is not the people’s government but a rogue criminal organization serving really as the banks’ flunkey and thug even though it’s actually their owner. So paying the government would be similarly immoral.
 
No, I think that if the debt exists, its an orphan debt owed to no one in particular, and therefore payable to no one in particular, which is as good as saying it doesn’t exist.
 
To put it another way: While the debt is not owed to the government, it is owed to the people. And since there’s no direct way to pay it to the people, the right way to discharge it is to stop paying the banks, and stay in the house. That’s the way one practices citizenship under these bank-created conditions. The good citizen resists the banks in any way possible. This is the most direct way of striking at them. Refusal to pay the fraudulent debt not owed to the banks is the way to pay the true debt we owe to ourselves and to one another as citizens.
 
I’m not the only one thinking this way. Read these excellent pieces on “the coming middle class anarchy”. Here’s just one of the snowballing anecdotes establishing how the words, Show Me the Note, strike terror in the hearts of the banksters. This is something for which their goon government has no fix. Not if a critical mass of people find the will to do it.
 
And how fortuitous! We decry how Americans are unwilling to leave the comforts of their homes to get out in the streets to protest, but here the Street has entered the House, the arena of protest has literally come home, and it’s the home itself which is at stake, in a fight to the finish with the banksters.
 
Compare today to where we were a year ago, when Brent White’s excellent paper on “strategic defaults” said you have to credibly threaten to walk away in order to get a mod. Now the debtor is in a much stronger position, if he’s willing to take advantage of it. He can credibly threaten to stop paying completely and stay in the house.
 
Nor is it just some radical bloggers saying this. These ideas are percolating closer to the mainstream. Chris Whalen is certainly no firebrand. Yet even he is saying that as the federal government continues to coddle the banks, state governors may end up calling upon people to “keep paying property taxes, stop paying the mortgage, and stay in your home”.
 
 
I don’t agree that Obama is unconscious in the sense Whalen means. I think he’s very intentionally dedicated to serving the banks and consciously doesn’t care if this dooms America to a Second Great Depression (although he probably thinks it won’t be that bad; but he certainly doesn’t care about impoverishment and suffering).
 
But I love the implication that this will have federalism ramifications, as state governments will have to take up some of the power the federal government has abdicated. Whalen thinks we’ll end up with mortgage moratoria in fifty states, but on a state-by-state basis, and implicitly in defiance of the federal government, at first.
 
So he sees power devolving in the right direction, downward, as a result of this “cancer” as he calls it. (Of course he thinks that’ll just be a temporary stopgap until “democracy does the right thing”. But we know he’s wrong about that part.)
 
Every housedebtor, distressed or not, underwater or not, should:
 
1. Stop paying the mortgage;
 
2. Stay in the house.
 
If America jubilated that way, it would be a good start toward our desperately needed Land Recourse. America needs two million small farmers. Feeding ourselves post-Peak Oil will require all land to be put into food production. The elites want to do this on the basis of feudal enslavement, but political freedom and moral integrity require that it be done on a democratic food stewardship basis. A bottom-up mortgager jubilee can be a great first step toward this.
 
And it can provide the base for a wider, greater debt jubilation. Other system debtors need to consider their positions. Here’s just one example: We have a growing legion of unemployable student debtors, burdened by massive indentures which cannot be discharged even in bankruptcy. These victims of a bank/government/university propaganda scam were swindled into taking out massive undischargeable loans for an “education” meant not to humanistically educate but to provide a credential (a Stamp) certifying that one jumped through a formal hoop and paid an exorbitant toll. This extortion payment, it was promised, would guarantee one a lucrative “career”.
 
But then those same banks intentionally crashed the economy, unilaterally reneging on the system’s side of the student debt deal. Now those college degrees are worthless. But the debt remains, for as long as the victims of this fraud choose to let it remain. Some are suing their universities for fraud, and that’s a good start.
 
But here as everywhere else where a debt to the big banks or government (where in a case like this the government simply socialized the exposure to the debt while privatizing the lender profit) exists, the real action is to strike at the senior criminal. That’s always the bankster. In the case of student debt, where the banksters’ rigged law has foreclosed even bankruptcy as an option, where the bank has placed its relationship with the debtor into the state of nature, the debtor has NO system recourse. The only option of student debtors is to form a default union and default as a bloc.
 
So there’s one example where the problem is harder to solve, but where the spirit of debt revolt can find a way. Ground zero for the spirit of jubilation, and for the general Revolt Against the Banksters, is the mortgage crisis.
 
Demand to see the note, and resolve not to pay one cent more until they show the note or give you a real modification. A real mod, meaning a principal writedown; the people in Lira’s example still look like they’re going to let Wells Fargo off too easy.
 
Better yet, demand to see the note, but resolve to stop paying period. If enough people did this, we’d break the banks over our knee. The government’s malice would sputter out in impotent fulminations. This one small step for an individual debtor would collectively be a giant leap toward taking back our country.

October 8, 2010

The Next Crash At Hand? (Mortgage System Collapse, MBS Disaster)

 

Just two years after the big crash, is this already the start of the second, terminal crash we’ve agreed is inevitable?
 
Leaving aside the obvious – looting – the whole Bailout has been predicated on propping up the balance sheets of the insolvent banks. This means artificially, by any and all means, propping up the prices of worthless toxic paper like MBS and the CDOs built on them.
 
I often explore how the mortgage conveyance scandal exposes how the banks have inadvertently abrogated their own property rights in the land, according to their own rigged law, most recently here. How this is systematic, endemic lawlessness, which must more and more suck in the courts themselves.
 
As the legitimacy crisis expands, we’re seeing how it’s metastasizing into a new, more virulent assault on those fraudulent balance sheets, on the government’s attempts to reflate the bubble on behalf of those balance sheets, and how it may strike a death blow to all the efforts of the Bailout itself.
 
Yves at Naked Capitalism explains:
 

Although the data points we have seen so far could be considered anecdotal, we have evidence that strongly suggests that major RMBS originators, the investment bank packagers, and the bank trustees failed to convey the notes (the borrower IOU, which is critical to having the legal standing to foreclose in 45 states) to the RMBS trusts starting in 2005, perhaps even earlier. And comments from industry insiders suggest this problem is pervasive.

That puts a cloud over the entire US RMBS market, the biggest asset class in the world. This paper was sold as secured; the ability to offset the cost of borrower defaults by seizing and selling his house is critical to the value of the instruments. And if no assets were conveyed to a particular trust by closing, an even uglier possibility exists: under New York law, which was elected by RMBS as governing law for the trust, it would be considered to be “unfunded”, which means it does not exist.

 
This is a double compromise of all those toxic assets at the core of the Bailout.
 
1. They were sold as loans secured by the house, but since in 45 states the lien cannot be separated from the note and still be secured by it, this may render all those mortgage loans simple unsecured loans.
 
So while I’ve emphasized how this places the land itself in legal limbo, we see how it also caves in the entire legal foundation of the financial stability of the loans and any system built upon that stability.
 
2. By violating the NY trust law, the industry standard, the MBS trusts may have nullified themselves. (Specifically, those administering them nullified them; never forget the criminal and/or negligent agency.) These MBS trusts may not exist at all.
 
Yves thinks that the GSEs will probably just make good on all the toxic crap they already bought. (What about the Fed’s holdings?) But it’s hard to see how they could politically and even legally get away with buying more of it, even though that would give mark-to-market succor to the bank balance sheets. (Banks haven’t had to use that since spring of 09, but they can still choose it, can’t they?)
 
Yves quotes MSM blogger Felix Salmon repeating some of the same rationalistic stuff we were hearing in 08 before the Bailout really got rolling in earnest. But perhaps it’ll prove true this time round. How much can the already-stretched thin Bailout do?
 

Argentina’s sovereign default has been called “the slowest trainwreck in history”, but this one might turn out to be slower, bigger, and much less fair. Millions of people have already lost their houses to lenders who didn’t have the proper paperwork, and it’s unlikely they will ever get any redress. For people who haven’t yet been foreclosed upon, however, it could now be a very long time before they lose their house.

The big-picture consequences here are by their nature unpredictable, as no one has a clue how this might all play out. But I can think of a few themes:

1. Bond investors, who have seen the value of their mortgage-backed debt rise impressively over the past 18 months, could find themselves unable to find any kind of bid at all. The paper will still be cashflowing, but those cashflows will be surrounded by enormous uncertainty, and no one’s going to want to buy them except at extremely deep discounts until the mess is cleared up.

 
So Salmon thinks the toxic garbage, which always did keep trading at some price, may literally go to zero.
 
He envisions some richer reverberations:
 

3. The time from default to foreclosure will become indefinite, and as a result there will be a significant uptick in strategic defaults, especially in states with judicial foreclosures.

4. The “shadow inventory” of houses which aren’t on the market but will eventually be sold once the bank gets around to foreclosing will grow substantially from its already-enormous level.

 
There’s no such thing as a strategic default among the non-rich. The beleaguered people should not only stop paying but wait before they physically walk away, if they’d like to stay in the house. Demand to see the note. Often this will be impossible, and it will take judicial lawlessness (or street thugs) to pry people loose.
 
The more people do this, the closer it will come to snowballing into an actual nonviolent rebellion. Land Reform from below.
 
Meanwhile that shadow inventory could prevent the kleptocracy from ever reflating the bubble.
 
Yves discusses four scenarios for how this will proceed. They boil down to:
 
1. Try to expand and intensify the Bailout tyranny, trampling the Constitution and the law even further. The unconstitutional law Congress rushed through (but Obama is apparently pocketing for now) is an example of this. As would be an expanded version of Florida’s  kangaroo courts.
 
2. Bailout-lite: Try to reduce foreclosures and prop up the system by really doing what the HAMP fraudulently pretended it was going to do. The taxpayers would of course pay for propping up the prices of principal. (This is where we get a lot of pro-bankster attitudes even from non-rich bank-haters. Many people seem to find a bailout which would also incidentally help some non-rich people more offensive than one which helps only the rich. It’s a moot point in my case since I oppose all bank bailouts. But I’d love for people who have a little but are getting screwed to recognize that the banks and the government are the enemy, not their fellow debtors.) 
 
3. Write down the principal. Do real cramdowns. This is the real reformist solution. Capitulate on the bubble (temporarily, they’d hope) in order to save rest of the structure. If I know my kleptocracy, they’ll never do this. A “real” HAMP will be just barely what they can take, if they absolutely have to.
 
4. Continue to pretend there’s no problem, for as long as possible.
 
I’ve always said that once doing nothing no longer works, I expect mostly attempts at (1), although some banks like Citi have toyed with (2).
 
Sure enough, we have this bizarre Congressional escapade. Commentators have immediately converged on the analysis that the pocket veto is kabuki for November, after which Obama will sign either the bill as is or a modified version. This will trash many provisions of the Constitution and wipe out a vast array of venerable state laws governing real estate. It’s precisely the kind of might makes right lawlessness we predicted.
 
So as with everything else, in the end this is going to be up to the people. Maybe we didn’t want this responsibility (certainly all the crises and suffering have been inflicted upon us as a criminal assault from above), but we have it nevertheless. Now we have to rise to it, to save ourselves, our families, and our human future.

September 15, 2010

Some Ideas – What We Need To Do

 

How to get the message out there? We’ve discussed the refinement of online activity – a new website, web TV. (There are already sites out there which seem to some extent aligned with the basic goal, and people have suggested that we try to systematically post to those.)
 
Then there’s also the offline front – getting out into the community. Forming sustainability groups, community gardens, local economy intitatives, other community volunteering and activism, becoming involved in local politics on a sustainability and anti-system basis. Again, there are templates out there. I’ll compile and post a list when I get the time.
 
Little by little this process has been organizing itself from the bottom up, from people everywhere taking the initiative on their own. Then recognizable organizations like Transition Towns and Slow Food start to form, which provide some of those templates and perhaps an organizational umbrella. I don’t think people need to start seeking umbrellas yet (if ever), since the vitality of this movement is grounded in its indigenous spontaneity. When I talk about unified campaigns, I’m presupposing a critical mass of existing groups who can then coordinate according to ideas which have meanwhile been promulgated. I suppose I see myself as trying to help with the task of formulating and propagating the ideas.
 
Here’s one possibility for idea coordination, which could also have many other benefits. Are readers familiar with Toastmasters? It’s an organization for the practice of public speaking. I’ve never been to a meeting myself (the times I checked there was no chapter within a convenient distance), but I’ve read about it. I guess the members are mostly careerists looking to hone their business and backslapping skills. But we could use these skills as well.
 
So my idea was that people who share a dedication to a political cause could form their own such groups. Nominally it would be a public speaking/book discussion group. But it could also serve as the vehicle for coordination of ideas and messaging, including people taking on particular tasks.
 
The way I just described that involves meeting in real life, wherever there were enough people within driving distance of one another. But something similar (of course without the public speaking component) could be done online as well. FireDogLake has its regular book salons, to give one example.
 
So that’s one idea.
 
The overall strategy: Affirmatively, relocalization and direct democracy. Negatively, in terms of resistance, passive resistance, coordinated toward mass civil disobedience. For example, we should start to come up with a game plan for how to resist paying the health racket extortion mandate. (I operate taking for granted that the “regulations” and “subsidies” in the bill will never manifest, and wouldn’t suffice even if they did, so the paper we’re forced to buy will be worthless. This should be obvious from the entire trend of bogus regulation and the fact that the same criminals who are trying to gut Social Security as we speak are not telling the truth when they promise to add a new public expenditure. There are more specific proofs as well. But I should prove it just for the record, so I’ll soon dedicate a few posts to that.)
 
We should look at how an idea like MMT is spreading in the blogosphere, how eager and thirsty people are for new ideas, new ways of looking at things, new prescriptions for how to break out of the trap. (Unfortunately the first wave MMTers are implicitly or explicitly reformist and not radical. So the second wave will have to adapt this tool for use as part of a radical prescription. I haven’t yet written posts on MMT, but that’s upcoming as well. Anyone looking for a good historical treatment of the idea’s potential should consult Lawrence Goodwyn’s The Populist Moment for its discussion of greenbacker advocacy among the radical farmers. I also recommend it as a great book on movement-building, period.)  
 
We also need to encourage the debt jubilee. Since the prevailing idea can be summed up as:
 
1. The banks rightfully own the land;
 
2. The housedebtor has an obligation to pay the mortgage;
 
we need to start by counteracting these. I have many posts on this, under the category Land Recourse and the tags Strategic default (a bogus term I’ve since retired; I should change the name to “walking away”) and Fannie and Freddie.
 
Here’s a few:
 
 
 
 
 
 
 
 
The truth is:
 
1. The banks never legitimately owned the land, we the people own it.
 
2. Even if they had, and however we look at it, since the Bailout we the people own the banks. So all their “property” including the land reverts to us anyway.
 
3. Even according to their own rigged “legality”, with the MERS system having dissolved unified ownership and in many cases lost the physical note, the banks have abdicated this ownership, inadvertently dissolved it.
 
4. As for the mortgage contract, if it’s non-recourse then walking away is a perfectly sound, by-the-book provision of the contract.
 
5. Since the banks stole everything they have to begin with, since they intentionally plunged the economy into this incipient Depression and used the crash they intentionally caused to loot even more trillions, we also have the moral right to stop paying but stay in the house as long as we want. This is an example of bottom-up direct restitution.
 
6. Such squatting is actually positive for the community. In many regions the banks simply let the foreclosed or abandoned property rot, to everyone’s detriment.
 
So there’s a basic outline of the argument for debt jubilation.
 
Those are a few ideas I have, pieces of the overall picture. I’ll try to get it all out there as best I can. So do people reading this agree with some or all of it? Reject any of it? I think it’s all on the same wavelength, headed in one direction on one trajectory. I’ve tried to weed out ideological inconsistencies and principle-tactic mismatches. It’s not complete yet, but I think it’s getting usably close.

September 9, 2010

Housing Divided

 

There’s been considerable buzz lately on the doomed attempt to sustain and reflate the housing bubble. Should policy capitulate to the real free market and let prices deflate? Which is another way of saying, should we let prices move closer to reality? Housing became absurdly expensive, way beyond any historical measure, as a result of the bubble. Reality now wants to deflate.
 
This would contradict the government’s commitment to propping up the zombie banks, as their fraudulent balance sheets are dependent upon reflating the bubble. This has been the basic contradiction from the start of the Bailout: Corruption vs. increasingly insistent reality. It defines how the Bailout, even leaving aside its criminality, is a policy of fantasy and insanity.
 
That’s why every phony mortgage mod plan was intended only to continue to extract payments while preventing prices from continuing to decline. That’s why cramdowns are anathema. That’s why the nightmare scenario would be large numbers of people making the rationally and morally correct decision to walk away* from underwater mortgages. That’s why the desperation position, including that floated a month ago as a rumor about upcoming GSE policy, would be to really renegotiate payment schedules but not write down the principal (the HAMP was a lie which promised to do this).
 
[*Among the non-rich there’s no such thing as a “strategic default”. Even those who could at the moment afford to pay have to take into account the precariousness of their situation. No one who isn’t rich can say with confidence that he’ll be able to keep paying indefinitely, or that his payments now won’t end up having been an irrational mistake in retrospect. If there’s any doubt at all about one’s negative equity, we have to assume we can’t afford to maintain it. So if the definition of a strategic default is to “walk away while you can still afford to make payments”, then for the non-rich there’s no such thing as a strategic default.]
 
This week two NYT articles expressed the elite ambivalence. They struggle in the contradiction. The reality of asset deflation stares them in the face, but given that the Bailout cannot coexist with this reality, and given that they’re nevertheless committed to the Bailout…..
 

Caught in the middle is an administration that gambled on a recovery that is not happening.

“The administration made a bet that a rising economy would solve the housing problem and now they are out of chips,” said Howard Glaser, a former Clinton administration housing official with close ties to policy makers in the administration. “They are deeply worried and don’t really know what to do.”

 
Streitfeld describes the policy follies, talk of another destructive housedebtor tax credit, administration cadres contradicting one another, empty proclamations, “stakeholders” like Bill Gross still pimping the rumor about really doing rate reductions (but not principal cramdowns), the administration still resisting….it’s all very stupid.
 
I won’t bother documenting all the lies and editorializing in the piece. There’s as much as you’d expect from an NYT piece on this subject, because it too is committed to the Bailout and the permanent zombification of those fraudulent balance sheets.
 
But I must emphasize the falsehood of this line of propaganda:
 

The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.

 
Nobody “chose” current housedebtors. The corrupt politicians chose to prop up prices as part of the bank bailout. The housedebtors are just an occasion for that.
 
Here’s the editorial core:
 

A small decline in home prices might not make too much of a difference to a slack economy. But an unchecked drop of 10 percent or more might prove entirely discouraging to the millions of owners just hanging on, especially those who bought in the last few years under the impression that a turnaround had already begun.

 
So according to the NYT the current propensity of housing prices to fall is a minor glitch in the big scheme of things, and not at all a major symptom of the core insanity and unsustainability of the exponential debt/growth economy itself.
 
So letting prices fall in compliance with reality would really be just “choosing to do nothing” in the face of an annoying but fixable SNAFU, and this capitulation would have nothing to do with restoring reality-based economic balance. Meanwhile, it would badly hurt those still clinging to the American Dream.
 
The desired implication is obvious – the reader should demand forceful action to prop up housing prices. In this way the NYT hopes to astroturf unwitting “bottom up” support for the Bailout.
 
Streitfeld’s colleague Leonhardt takes a different tack, discussing whether housing was and is actually overpriced at all, and what that ought to mean. Of course, this is simply inventing a false debate by taking those who state the obvious, pairing them with mercenary hacks, and pretending there’s a real question being asked and answer being sought.
 

No one doubts that prices rose roughly with incomes from 1970 to 2000. The issue is whether that period was an exception. Housing bears like Barry Ritholtz, an investment researcher and popular blogger, say it was. The government was adding new tax breaks for homeownership, and interest rates were falling. These trends won’t repeat themselves, the bears say.

As evidence, they can point to a historical data series collected by Mr. Case’s longtime collaborator, Robert Shiller. It suggests that house prices rose no faster than inflation for much of the last century…..

The second, less bearish group of economists doesn’t buy this. This group includes Mr. Case, Mark Zandi of Moody’s Analytics and Tom Lawler, a Virginia economist who forecast the end of the housing boom before many others did. They say they believe that house prices rise nearly as fast, if not quite as fast, as incomes, and that real estate is no longer in a bubble.

 
The inclusion of Zandi says it all for where the “less bearish” are coming from.
 
Leonhardt does ask a question which goes to the core, far deeper than he intends.
 

I can’t claim to clear up all the uncertainty. But I do want to suggest a framework for figuring out whether you lean bearish or less bearish: do you believe that housing is a luxury good and that societies spend more on it as they get richer? Or do you think it’s more like food, clothing and other staples that account for an ever smaller share of consumer spending over time?

 
He means of course that given the neoliberal rigged-market and Social Darwinist parameters, “is this the way things behave?”
 
But the real answer is always the prescriptive, not the descriptive. So the answer to the question is that in a healthy society housing “prices” would act in the latter way, and that’s the society we must rebuild. Since we all need housing, if we have to “pay for” it then no one has the right to treat it and pay for it as a luxury. That’s coercion and assault against those who can’t afford to pay luxury prices for a necessity.
 
That brings us back to the core issue here. These articles represent the housing quagmire as an isolated policy mess. They emphasize how painful asset deflation may be for housedebtors. But this is doubly false.
 
Housing policy has nothing to do with the good of the householder and everything to do with propping up insolvent banks and enabling them to continue their rent extractions. And reality’s compulsion toward asset deflation isn’t some accidental thing floating around which policy is free to choose to deal with or not. It’s the result of structural gravity, of the physical (Peak Oil) and economic unsustainability of infinite growth, which has reached its limit.
 
Underwater housedebtors can’t be removed from their predicament by any top-down policy short of cramming down the principal, which would directly contradict the reflation imperative of policy. They can remove themselves by walking away from the self-destructive debt. Or if they surrender to their plight and wait for policy to help them, that’s simply committing fiscal suicide, since sooner or later policy will be overwhelmed by reality. But in the meantime their passivity just enables the Bailout, just enables their own debt enslavement, and portends the enslavement of us all. In that sense underwater debtors who don’t jubilate are a kind of scab.
 
So however painful in the short term jubilation and capitulation to deflation may be, it’s the only way. You can’t appease fascists, and to genuflect before the neoliberal version by continuing to play its debt game by remaining the good little sharecropper is just another pre-doomed attempt at appeasement.
 
Housing divided by the banks can never be united through compromise with the banks. A house divided by class war can’t be united except by fighting hard and following through to the bitter end, for only there can we break through and beyond to freedom.

August 18, 2010

Fannie and Freddie to Stay the Course (As if the Bailout allows any other)

Filed under: Bailouts Only Propped Up Zombies — Tags: — Russ @ 2:55 am

 

Yesterday’s GSE hearing came and went with nothing special happening. There was no confirmation of earlier rumors that the system would order a mortgage rate reduction.
 
Instead it was status quo all the way. Geithner affirmed the government’s commitment to reflating the mortgage bubble and keeping housing prices artificially high.
 

Rather, Mr. Geithner — and the conference after his remarks — focused largely on drafting a new and improved version of the current system, in which the government subsidizes mortgage loans made by private companies.

Mr. Geithner said continued government support was important “to make sure that Americans can borrow at reasonable interest rates to buy a house even in a downturn.” The absence of such support, Mr. Geithner said, would deepen future recessions because unsubsidized private companies would curtail lending.

 
There were the same old lies about how inflating a bubble and then using the mechanism of the GSEs to provide lower-cost mortgages represents some “progressive” outcome.
 

The administration is still considering these and other options. The choice will reflect in large part a judgment about how hard the government should try to increase homeownership. Broader guarantees create greater risks for taxpayers, but also lower interest rates, bringing ownership within reach for more families.

Shaun Donovan, the housing secretary and a host of the conference with Mr. Geithner, said that the administration remained committed to “broad access to homeownership, including options for those families who have historically been shut out of these markets.”

 
Think about the double artificiality and manipulation here: first the banks use government to inflate a bubble, and then they use it to provide market access at prices which are artificially low over the short run. (Of course, as with any heroin dealer giving away a free sample, they intend to make you pay in the end.) So it’s a double affront to reality.
 
Reality, of course, wants to and will deflate. Housing prices remain far above their historical level, far above any relation to the real economy. But the bubble is a primary rent mechanism for the banksters, and MBS generation and price support through the GSEs is a primary vector of the Bailout. So conscripted public support for the bubble (and for the zombie banks’ balance sheets) will continue via the GSEs. Geithner simply reaffirmed this. (Meanwhile, the posturing of Republicans and other alleged fiscal responsiblists is just posturing; they’re all lying when they imply they want to let housing markets discover reality-based prices. To say “let the private sector take it over”, while implying that asset prices could still be sustained this way, is imbecility. There is no private market for housing, not at anything near these bubble prices.)
 
The NYT does what it can to help with the fraud. In the very first sentence it gives a particularly deceptive version of the two-extremes-truth-in-the-middle lie:
 

The Obama administration has been barraged with ideas for reworking the government’s role in housing finance, spanning the spectrum from guaranteeing all mortgage loans to eliminating all federal subsidies for homeownership.
Treasury Secretary Timothy F. Geithner, speaking Tuesday at a conference to discuss the possibilities, made clear that the administration was not pondering such radical kinds of surgery as it develops a proposal it hopes to unveil in January.

 
Of course, “guaranteeing all mortgage loans”, what the piece calls a “radical” extreme, is in fact exactly what we have and what the NYT wants to help perpetuate. (All loans are either explicitly guaranteed or receive the implicit Too Big To Fail guarantee.) So now they’re reaching the realm of de jure lies of fact itself, and not just of truth.

August 10, 2010

Bailout War: All QE on the Western Front

Filed under: Bailouts Only Propped Up Zombies — Tags: , — Russ @ 2:54 pm

 

So after a brief stint on the wagon the Fed’s off on the binge again. The FOMC announced Tuesday that they’re going to recycle $250 billion worth of MBS cash flow into a heroic new push on that darn string.
 
I don’t think many people doubted this day would come sooner rather than later, since the Bailout is the core policy of the government and the core feature of what is now a command economy. Since the two imperatives of policy are to prop up the zombie banks’ balance sheets and try to reflate asset bubbles (or in the case of stocks keep the rally bubble reflated), and since the “private sector” is unable and unwilling to do this on its own, the only mechanisms available are the Fed’s festering balance sheet and the laundering of MBS through the GSEs.
 
(On that GSE front, no new word on last weeks rumors of a general rate reduction, though we’re waiting on the next GSE policy huddle on the 17th for definite news on what’s happening if anything. Meanwhile yesterday Freddie Mac outdid its sister Fannie in their latest disgrace, announcing a $4.7 billion loss for the quarter and opening up its mooching sack for another $1.8 billion mugging of the taxpayer. This comes a week after Fannie’s $1.2 billion loss and $1.5 billion suck.
 
These losses are all incurred on MBS they bought from the banks at intentionally bloated prices. That’s yet more Bailout robbery.)
 
So the Fed will dole out another quarter trillion in free money to the banksters, who will lend it back to the government at a higher rate. I still can’t get over that scam. I feel like if I read it in a satire I’d think it skirts the bounds of heavy-handedness. Yet this really happened on our Earth…
 
They say this signifies that most within the Fed have finally accepted (at least privately and in action, if not in public rhetoric) that inflation is about as much of a threat as the Hottentots as America sinks into the Second Great Depression and deflation tugs ever more insistently at the bubbles and the balance sheets.
 
I used to joke that the creationists would reject gravity as well if there was a monetary or religious angle. Well, the inflationistas have been propagating a figurative denial of gravity for a long time now with these bubbles, and since the crash they’ve striven with great mysticism to regain the faith. These hippies didn’t join hands to chant and levitate the Pentagon, but the towers and mints of Wall Street and Washington.
 
What’s really going on here is a struggle for control. The system wants a basic, consistent, low inflation rate for assets and the economy in general. (Spikes and volatility for necessities like food are OK.) So staying that course constitutes maintaining control, while capitulating to deflation, or sprawling into hyperinflation, are the forms of losing control.
 
Reality wants to deflate, and these bubbles will all go flat. Asset prices are still bloated way beyond any physically anchored economic value. But at the same time there’s far too much funny money in circulation even at this level of oil production, let alone once descent sets in over the next five years. And now the Fed will bloat even further? While there’s little possibility of conventional inflation, there’s an excellent chance of a bout of hyperinflation before the final deflation sets in.
 
(That deflation is where we’re inevitably headed in the end is a key reason we need the bottom-up debt jubilee.)
 
At least at first it won’t be these criminals, this vile combination of robber, psychopath, and concentration camp doctor, who feel the pain. We the liquidated will get pummeled and ravaged. That’s what the elites of finance and government impose upon us. What happens after that, though, is 100% up to us.

August 8, 2010

Freddie Mac: “Rumors” (A New and Improved HAMP Scam?)

 

With the HAMP scam reaching the most becalmed horse latitudes of incredibility, dubious rumors have it that Obama’s ready to try again with a new mortgage mod scam, this one centering on the GSEs. This rumor may be just hype, but the issue’s likely to keep coming up, if only because the kleptocrats will feel the need for a fake carrot to accompany whatever sticks they try to use to beat the strategic defaulters. So I figure a short post on the subject is worthwhile. 
 
Whenever you see the system say anything about mortgages, the basic facts to immediately summon to mind are:
 
1. The system is committed to propping up housing prices and if possible reflating the bubble. This is to prop up the balance sheets of the bankrupt banks, and in their wildest dreams get securitization going again, blowing the same bubble all over again.
 
2. The system’s worst nightmare is bottom-up debt jubilation. The growing wave of strategic defaults is beginning to comprise a mini-jubilee. So in anything, if we assume they’re trying to stave off strategic defaults we’ll never be wrong.
 
The only things which could possibly help distressed borrowers are principal writedowns and bankruptcy court cramdowns. But these would constitute the system’s capitulation to reality-based deflation. Therefore, unless they decide to completely overthrow their existing policy, any alleged relief they offer will have to be a scam. The way we can measure this scam is simple: Does the proposal acknowledge lower asset prices of not? If not, it’s a scam meant to string underwater borrowers along, trying to dissuade them from strategically defaulting and to extract more payments out of their doomed position before the inevitable foreclosure.
 
Thus the HAMP offered temporary mods to those current on the mortgage, dangling the fictitious carrot of a permanent mod while the real goal was simply to get someone who might walk away to instead throw a few more full payments down the rathole.
 
So what are we hearing about this alleged new policy?
 

Ongoing rumors of a streamlined GSE induced refi wave began last week with notes from Morgan Stanley and Bank of America. Folks at these firms proposed that borrowers could benefit, resulting in increased consumer spending, if only the GSE’s initiated a streamlined and broad program to allow those of their mortgagees who are current on their mortgages to instantly refinance from their higher rate mortgages to current market rates.

The argument is, since the GSEs own the credit risk anyway, they should change the refinancing requirements and lower or eliminate appraisal requirements and LTV requirements for refinancing. Doing so would, it is suggested, lower the burden on borrower cash flows, as they would benefit by lowering their rates by about 150bp. The pitch was ‘it would be a costless plan with real benefits’. Nice theory, too bad it doesn’t work and isn’t possible.

 
So the principal remains the same. The borrower’s payment is refinanced, while the taxpayer covers the rest via last December’s GSE Bailout extension. The banksters win, they keep being bailed out and keep having their fraudulent balance sheets propped up. The underwater debtor keeps drowning, but at a slower pace. Over the long run more could perhaps be extracted from him this way than under the HAMP scam. The limp bubble gets some hot air pumped into it. The taxpayer is robbed all the way down the line. 
 
That sure sounds like Obama. If the rumor ends up being false, it’s not because it was implausible.

June 26, 2010

Bailout World, 2nd Stage of Kleptocracy (New Feudal War 2 of 4)

 

The fictive “growth” which was really nothing but the result of asset bubbles peaked and started to be rolled back in 2007. The rout temporarily climaxed in 2008, as trillions in phony wealth disappeared when the hologram machine went dead. This laid bare the true extremism of the “Great Moderation”, really a crazed raging of booms and busts, bubbles and crashes, all this throbbing over the backbeat of an inexorable debt curve trending terrifyingly, impossibly upward since the 1980s. It was impossible to sustain, and nobody meant for it to be sustained. It was just supposed to carry the middle class along while this doomed cohort’s political and economic strongholds were destroyed. The steady degradation of wages and job security, the assault on the unions, the co-opting of pension systems into stock market thralldom, Walmartization and offshoring, and the “ownership society” propaganda offensive including the systematic demonization of all values other than Social Darwinism; all this combined to reduce the people to a mass of totally dependent and antisocial atoms. It was a comprehensive top-down strategy.
 
This rendered them incapable of resisting the kleptocracy’s next step. Since the ponzi debt bubble was unsustainable both in itself as well as on account of the physical limits of Peak Oil, the bank rackets and their prostitute government knew the system must crash. I don’t know if they intentionally crashed it at that time it did, but it doesn’t matter. They knew global financialization was (and is) nothing but a monumental ponzi scheme; they knew it would crash, just as they know it will crash again. So all their actions were and are full of intent with regard to the coming, premeditated crash. They intentionally crashed the economy and they’ll intentionally crash it again.
 
What came next was the ultimate disaster capitalist operation: the Bailout.
 
It started out gradually with the Fed “facilities” and the creeping oozes of “forbearance” and QE. It had to be stepped up with high-profile bailouts like those of Fannie and Freddie and AIG. Then with considerable fanfare and a propaganda campaign, the TARP was launched. Since then the plan has been to equate the fraudulent TARP with the Bailout itself, although the Bailout has since moved on to other avenues. The system tries to pretend the TARP is just about paid back, at minimal taxpayer cost (though even this is a lie). Meanwhile the main conduits of looting the taxpayer have been free money from the Fed (much of it directly lent back to the government at a higher rate); laundering Bailout loot through the MBS purchases and guarantees of Fannie and Freddie (whose official exposure limits were raised literally to infinity at the end of 2009, rendering quaint TARP inspector Barofsky’s previous exposure estimate of $23.7 trillion), the Fed, and Treasury; and the Too Big to Fail premium.
 
What has the Bailout cost so far? Including amount of at-risk exposure, TARP inspector Neil Barofsky put it at $23.7 trillion, while Nomi Prins estimated $14.4 trillion. These were both prior to the exposure limits on the GSEs being raised to infinity at the end of 2009. A more recent tally is that of SourceWatch (updated monthly). They didn’t know how to tally the new infinity so seem to have assimilated it to the status quo ante, coming up with a number close to that of Prins, $13.89 trillion.
 
Those are nominal numbere but don’t represent the real value to the banks. How do we measure how much each dollar stolen is really worth? I’m not sure. One metric that occurred to me is to take the interest Goldman Sachs had to pay Warren Buffett in fall 2008, add to that the Too Big to Fail premium, and prorate all the Bailout trillions according to it. Another possible measure might be how much MBS should really cost according to the market, “the terms private uninsured investors would require” as Yves Smith put it. Or perhaps a combination of metrics, depending on which is most accurate for a particular part of the Bailout.
 
And today? The government’s political ability to pass TARPs is probably exhausted, while Obama failed in last autumn’s attempt to get dictator power for the Treasury secretary to enact them on his own. But no matter. Today the main Bailout conveyances are free money from the Fed (QE), and MBS purchases at inflated prices by the Fed and Fannie and Freddie. These are intended to both directly convey loot to the banks and to prop up the prices of all the worthless toxic garbage on their truly bankrupt balance sheets. This in turn enables the insolvent banks to engage in accounting fraud (allowed both directly, as when Congress bullies the FASB or when the “supreme” court soon overturns Sarbanes-Oxley, and also indirectly under the rubric of “forbearance”, which is a fancy way of saying the government turns its head while the bank perpetrate fraud) which enables management to massively embezzle on a personal level in the form of “bonuses”.
 
The other day, after all the fanfare about the (also insolvent) Fed ending its QE and purchase programs, “Heckuva job Bennie” Bernanke announced that he might expand the Fed’s balance sheet (currently at $2 trillion, an already fearful number) to $5 trillion! That’s the level of support he’s thinking would be necessary to sustain the Bailout. There followed articles wondering if he’s suffering from nervous exhaustion. It wouldn’t be surprising if Bennie’s nerves are cracking. He’s got one huge zombie to keep propped up and ambulating. 
 
The Bailout is now the permanent socioeconomic paradigm in the US and Europe. The new regime is Bailout America. Globalization was the final frontier for one last massive colonial plunder expedition at the summit of the oil age. Now there’s no longer a new plunder frontier over the horizon. All sectors are in decay, and we’re at Peak Oil. There won’t and can’t be any more shifting costs to the outside. Now the gangsters can only terminally cannibalize the inside. Western domestic corporatism was the first level of this assault, and the Bailout is the accelerated and intensified version.
 
Proximately, the bailouts were supposed to solve an alleged “liquidity crisis” and “get the banks lending again”, which would trickle down to “Main Street”. It was the prospect of this failing to happen which was alleged to make these bank rackets “too big to fail.”
 
But every word of it was a lie. There was never a liquidity crisis; the banks are just bankrupt. They cannot lend and never intended to lend, and there’s no one to lend to anyway. The massive amounts of taxpayer money being conveyed to them was simply to be hoarded, gambled, and used for monopoly consolidation (M&As).
 
This is the new order, for as long as the system can be zombified this way. The government simply hands the banks free money through various conveyances. It allows systemic accounting fraud to represent the rackets’ balance sheets as solvent. It even actively abets the fraud with phony “stress tests”. The banks do whatever they want with the handouts. The government even covers some of their gambling “losses” via loan guarantees and other scams. It lets them fraudulently report the returns as “profit”. This in turn allows the banksters themselves to completely loot their own banks on a personal level, in the form of “bonuses”. It doesn’t matter because there’s more government-stolen public money being conveyed in tomorrow.
 
This is it. Obama, Treasury, the Fed, Congress, and their European counterparts, are fully committed to Bailout America and Bailout Europe. They have no ideas left and no alternative policy which could either keep the financialization tower propped up, or which would be ideologically/kleptocratically acceptable now that they’re fully committed to gangster psychopathy.
 
This is not and was never intended to be some temporary crisis measure. Just as the Global War on Terror is intended to be the permanent basis of foreign policy and domestic intimidation, so the Bailout is meant to be the permanent basis of US government and economic policy as such. The two combine as the twin vehicles of radical corporatism.
 
(The so-called domestic economy has become completely intermingled with the Pentagon budget by now. Any large “civilian” corporation you can think of, e.g. in the food or entertainment sectors, is likely to have fat Pentagon contracts.
 
So the Permanent War itself is a key part of the general corporatist Bailout.)
 
Wall Street spins from the center of a web of corporate welfare. The government exists only as the threads, along which all the people’s wealth and freedom slide away. Every other racket ramifies out along the lines directed by the finance sector. It’s a command economy which maintains private rent extractions. That’s the economic definition of fascism. So this is in fact “Bailout America” in the same way you might call another fascist regime “fascist Italy” or “Nazi Germany.”
 
Meanwhile unemployment goes up with grim implications of permanency, while public spending and programs everywhere are decimated. For good measure we’re insulted and laughed at with taunts like “green shoots” and “recovery”. The truly demented can even spew the atrocious oxymoron, “jobless recovery.”
 
So we see how every cent of the Bailout was not just a total loss to us, but how that money is being used as a weapon against us, as the feudalists further entrench their position. The big banks have never added social value, only destroyed. From the social point of view, they were not only never Too Big to Fail, they were always too predatory and destructive to be allowed to exist.
 
The worst delusion of all is that anything could possibly have been better for America than to let the whole parasite sector go down in 2008 while the government (if we the people actually had a government) did whatever was necessary to bolster Main Street through whatever level of hardship we had to endure.
 
That pain would’ve been far less than that to which we’ve now been doomed since the US was transformed into Bailout America. Now the only possible outcome remains the collapse of the sector, which is just as terminally insolvent as ever. But this inevitable eventual collapse is now bound to be far more painful, far more total, than ever would have been the case if the bubble had been allowed to burst and reality to resume in 2008.
 
But in the meantime we’ve added the horrors of whatever level of robbery and tyranny the kleptocracy will be able to resort to once the Bailout itself becomes insufficient to keep everything propped up. As the Bailout becomes fiscally and politically impossible to sustain, the system moves on to the next step, direct liquidation of pensions, public amenities, all public property, civil society itself. This is Austerity. (Again, never for the rich and powerful themselves; just for humanity.) I’ll deal with that in Part 3.
 
This is the infinite crime of all the Bailout leaders, and it remains the insanity and depravity of anyone who still thinks the Bailout was/is “necessary” or “helpful.”
 
This is the Bailout: A fully rationalized command economy dedicated to maximizing loot extraction from the country by the big banks, under conditions of Peak Oil and debt’s attempt to deflate.
 
It’s a disaster capitalist adaptation of prior “normal” financialization, which was in turn the form of neoliberal kleptocracy, which was the system’s adaptation to the terminal stagnation of capitalism commencing in the late 1960s.
.
.
 
 

May 12, 2010

The Ongoing Follies of Fannie and Freddie

 

One of the most active fronts of the Bailout continues to be the looting of taxpayer money through the government-supported entities (GSEs), Fannie Mae and Freddie Mac and a few others. Since August 2008 alone the government has thrown nearly $140 billion down the GSE rathole, and the hemorrhaging continues. Fannie and Freddie both recently announced further losses and made new requests for government handouts.
 
Fannie just declared a first quarter loss of $11.5 billion and asked for another $8.4 billion. This followed on Freddie’s begging for $10.6 billion after reporting an $8 billion loss. These “losses” are nothing but money laundering to banks who refuse to hold loans or take risks themselves but will “lend” when the GSEs promise to guarantee the risks or just directly buy up the mortgages.
 
The Republicans are trying to seize upon the requests to force the GSEs onto the finance reform agenda. John McCain proposed a joke amendment to force the government to cut all ties to the companies within five years. The Democrats meanwhile are scared of the whole issue and want to pretend it doesn’t exist. They claim to want to put off clarification of the GSEs’ role until after the election (I suppose their rationale is the same old delaying tactic of falsely claiming the thing needs more deliberation or whatever), but they really don’t want to do it at all. We can bet if the Dems can get a sham finance reform bill this year and can still control the agenda post-November, they’ll never take up Fannie and Freddie at all.
 
The fact that the Dems refuse to engage GSE reform now proves their bad faith and bad conscience. Of course the Reps don’t really care either. They’re the ones who nationalized Fannie and Freddie in the first place. They started laundering the Bailout through the GSEs in the first place. Bush was especially ardent to use Fannie and Freddie to keep the subprime bubble inflating once it looked to be stalling. But as usual the Democrats have turned a big political advantage into a disadvantage. (As always, all the Dems had to do to guarantee themselves a permanent majority was to do the right thing. Smash Wall Street. But as always they remain stupid, cowardly, and wicked.)
 
As usual, the sticking point is the fundamental corruption and unsustainability of the system itself.
 

Fannie Mae and Freddie Mac were created by Congress to reduce the cost of home ownership. The companies buy mortgage loans from banks and other lenders, freeing up money for another round of loans. By providing a guaranteed return, the companies also allow lenders to charge lower interest rates.

 
If home ownership is so important, and if it would be impossible to accomplish through a free market, then why have the private middleman at all? Why doesn’t the government just directly lend? Even if it were true that as a result of the existence of the GSEs the banks did charge lower rates than what a true free market would charge, they still extract a rent and therefore cost more than what it would cost if the government directly lent. So it’s the worst of both worlds, an assault on the free market from both ends, government social engineering and private gangsterism.
 
(The standard retort that government is too “inefficient” to do it on its own has long since been proven to be a lie. No level of government waste and corruption ever equals the level of inefficiency, waste, and corruption of corporatism, where we combine all the worst aspects of government with private rent extraction. We’re seeing a spectacular example of that in the Gulf of Mexico today. No sane country places its energy production in the hands of private corporations. The oil belongs to the people, so if it’s worth developing at all it’s worth developing only on that basis.
 
And the reply is supposed to be that government would be too “wasteful” to drill on its own, maybe just hiring contractors? That handing the works to BP was going to be more “efficient”? Heckuva job.)
 
Fundamentally, turning the suburban model of “home ownership” into a fetish was always a bad policy goal. This campaign in social engineering was primarily undertaken for the sake of propping up the corporate economy (which must always rely on “engineering” new markets since the natural bounds of its growth didn’t allow for the infinite extraction of monopoly rents; that’s the point of enforced consumerism as a top-down economic policy) and for social control (keeping people socially embarrassed not to be rat racers, and deeply in debt once they do comply; that’s the top-down socio-political goal).
 
To this day “home ownership” is still an essential part of the “American Dream” propaganda, to keep the zombie ex-middle class lurching along, still politically astroturfed, like a dying workhorse still being lured by the mirage of a carrot dangling before it. So the loans have to still be made available, at something remotely like an affordable level. But the banks would never lend a cent on their own, since they know the market isn’t sustainable. Housing prices are still inflated way beyond reality.
 
At the same time, the loans must continue at the right level to continue to prop up all the worthless paper on the banks’ balance sheets, and to enable the banks to continue looting and extracting bonuses. The system is in an increasing state of difficulty trying to square this circle of keeping the Bailout going while keeping the American Dream ideology viable. The mission is hopeless in the long run, and probably the longer short run as well. Fannie and Freddie are the only game in town to even try to accomplish it for the shorter short run.
 
So when the Republicans claim to want to get rid of these things it’s the same scam as when they say “We don’t need to break up the banks, let’s just promise not to bail them out in the future.” In both cases they know damn well the big banks will always be bailed out for as long as they exist at all. But for as long as the Dems play the Rep game, for the Reps talk is cheap.
 

At the same time, the companies have become more important to the health of the housing market as private sources of mortgage funding evaporated almost completely during the financial crisis. Those sources have yet to make a significant comeback.

 
“Health” – sic. That’s like saying if you’re exhausted and need sleep, the way to restore health isn’t to, um, get some sleep, but to shoot up crystal meth.
 
The only patient here whose health is a glimmer in the government’s eye is the toxic paper held by the bank rackets. The Bailout’s goals are to prop up the balance sheets while the looting continues as fast and furiously as possible. Time is short.
 
1. The banks make bad loans to prop up the zombie housing prices.
 
2. Fannie and Freddie buy the bad loans at even more inflated prices.
 
3. The government keeps handing F and F taxpayer money to cover the losses from the bad loans.
 
4. F and F use the money to keep buying from the banks at the banks’ inflated prices.
 
5. The balance sheets and the “market” are thus propped up as zombies.
 
6. The taxpayer is the sucker being fleeced.
 
(The government, specifically Barney Frank, claims the ongoing F and F losses are from pre-8/08 loans, not from loans bought since then. Dean Baker keeps questioning whether this is really true, and clearly believes it isn’t. Common sense tells us we have to assume it’s a lie, since the government refuses to hand over the evidence.) 
 
Since something like the TARP seems to be not politically replicable (Congress won’t vote for it again directly, and has so far resisted Geithner’s attempt to get TARP-like disbursement authority, as a blank check, written into the “reform” bill), the Bailout now has to be laundered in various ways. The GSEs are a favorite loot conveyor.
 
So far $140 billion has been conveyed since 8/08. But a good indication of Obama’s expectation for how big a role the GSEs may play in the future is how at the end of 2009 the administration lifted the existing $400 billion cap on GSE laundering to infinity (at least through 2012). Doing this as quietly as possible over the holidays at the end of the year was a recursively vaster example of putting out bad news on a Friday. The furtiveness of such a blockbuster move is a testament to its unaccountability and flouting of democracy itself.
 
Meanwhile the losses flow freely like oil erupting from an unsealable blowout. As the NYT piece says, “the quarterly requests [for the continued loot conveyance] are a formality.”

April 1, 2010

The Joke’s On…..

 

So I took a break for a few days, and came back today, on April Fools’, to check out a joke newspaper’s headlines for the day. They actually didn’t look all that different from the normal headlines.
 
“Uncle Sam’s Citi exit partly vindicates Bailout” 
 
“Hedge Fund Managers’ Pay Roared Back Last Year”
 
“Risk Is Clear In Drilling; Payoff Isn’t”
 
“Pfizer Chief Says Growth Is Imminent” (I don’t doubt “growth” in extortion is expected; but that’s not what the NYT wants you to read from that.)
 
“Deadlock Is Ending On Labor Board” (Here the blurb contains the punchline: “The National Labor Relations Board will soon have three Democrats and one Republican, and businesses are bracing for a wave of pro-union rulings.”) 
 
But here’s my favorite joke piece, though the headline’s flatly descriptive enough: “Fed Ends Its Purchasing of Mortgage Securities”.
 

The Federal Reserve’s single largest intervention to prop up the American economy, its $1.25 trillion program to buy mortgage-backed securities, came to a long-anticipated end on Wednesday.
The program has been credited with holding mortgage interest rates at near-record lows and slowing the nationwide decline in home prices that threatened to send the economy into an extended slump.

 
In other words, as a key part of history’s greatest robbery, it helped prevent to restoration of economic reality, so that when reality inevitably does impose itself, the result will be experienced by most people as far more disastrous.
 
The government sentenced the people to this fate in order that the banks could steal yet further trillions. It’s part of the official establishment of Bailout Nation, Bailout America.
 
The academic prostitutes are out shilling:
 

Demand for mortgage bonds had been frozen since the federal takeover of Fannie Mae and Freddie Mac, the giant mortgage-finance companies, in September 2008. “We were in a deflationary spiral, causing mortgages to go underwater, more foreclosures and a further decline in housing prices,” said Susan M. Wachter, professor of real estate and finance at the Wharton School of the University of Pennsylvania. “The potential maelstrom of destruction was out there, bringing down not only the housing market but the overall economy. That’s what was stopped.”

She called the Fed’s mortgage purchases “the single most important move to stabilize the economy and to prevent a debacle.”

 
(That’s a joke in itself, that we now have such a thing as a “FIRE sector professor”.  Of course all such quotes have to be read in Orwellian code. “The maelstrom of destruction, currently decimating the jobs of the real economy and sending it into the Second Great Depression, had to be segregated from the housing market in order to enable further FIRE sector looting. That’s what we accomplished. It was the single most important move to temporarily stabilize the financial (as opposed to real) indicators and prevent a debacle for Wall Street. Thus we’ve been trying and so far succeeding in shifting the entire bankster-created debacle from Wall Street onto the people. We’ll now attempt to make the people of America sustain the entire maelstrom of destruction, while the banksters and government criminals abscond with the loot. Hopefully they’ll still need a few whores and take me along.”)
 
The Fed is leading this propaganda offensive:
 

“Financial markets have improved considerably over the last year, and I am hopeful that mortgages will remain highly affordable even after our purchases cease,” Janet L. Yellen, the president of the Federal Reserve Bank of San Francisco, said in a speech on March 23. “Any significant run-up in mortgage rates would create risks for a housing recovery.”

Ms. Yellen is President Obama’s choice to be the next vice chairwoman of the Fed, after Donald L. Kohn retires in June, but she has not been formally nominated.

 
What’s left out of this quote from “Obama’s choice”, i.e. from Obama himself? As with everything else these criminals say, it has zero to do with the real economy, with economic, energy, or resource fundamentals, with anything which has anything at all to do with the lives of actual Americans or of actual people anywhere.
 
That’s because to a sociopath like Obama, and to a gangster like anyone at the fed, real people simply don’t exist other than as a cash cow to be milked and then bloodlet and then skinned and then roasted.
 
The whole MBS conveyor is simply the ongoing main vehicle of the Bailout:
 

A major factor in that recovery was the government’s announcement last December that it would guarantee debts owed by and securities issued by Fannie and Freddie, according to David Crowe, chief economist at the National Association of Home Builders.

While the future of the two mortgage-finance entities remains uncertain, the government backing has been particularly reassuring for foreign investors, including the Chinese and Japanese central banks, that hold securities based on mortgages originated in the United States, Mr. Crowe said.

 
It’s been particularly reassuring for the attempt to prop up the insolvent debt zombie of America as a whole, as well as its insolvent zombie banks.
 
These are the same Fannie and Freddie who keep hemorrhaging taxpayer money, intentionally buying MBS from sleazy lenders at far-above-market rates. This is simple embezzlement, simple theft, and simple money-laundering, being committed by what is simply a criminal government, orchestrator of a criminal system.
 
Bailout America is a de jure kleptocracy. Neither the government, nor the political nor media nor academic class, nor the top-down economy in general, any longer even pretend to have any rationale other than to loot the productive activity of society. Since people still work in order to eat and shelter themselves and raise their children, as well as because they labor under the brainwashing of consumerism, once a gangster parasite has successfully planted itself on the people’s backs, it can suck their blood for as long as the sucking’s good. Only two things can put an end to it: When and if the people fight back to kill the parasite; or once the blood has all been sucked.
 
Meanwhile the parasite may reach the point where it becomes so drunk on the blood of its host, and so incapable of even pretending to generate any value whatsoever, that it goes insane in its psychopathy. No longer content to just extract at a constant rate, it must rend and flay, beat the people, burn the crops, salt the land. We’ve been seeing this saturnalia set in with the rush to resume bankster bonuses, the more brazen and obscene the better (that it’s as open and obnoxious as possible is clearly a value to them), and the health racketeering bill. And right in the middle of it, the massive escalation of the already unsustainable, losing imperial war.
 
Between these there can no longer be any doubt whatsoever about this government and the so-called “two” party system which is really as calcified a one-party system as the decrepit stage of the Soviet Union was. There can be no doubt that this is not just a criminal finance sector and a criminal government but that it has gone insane in its orgy of looting. This is a whole globalized finance economy now dancing its Dance of Death.
 
Nor can there be any doubt about the unspeakable vile MSM, the corruption of the universities, the prostitution of “culture”, or the treason of almost all existing political activist leadership. The end result on the extension of the Bailout to the insurance rackets is the final, irrevocable divide. Kucinich’s treason made it literally unanimous among existing politicians. The same treason was almost unanimous among existing “progressive” groups of almost every stripe and alleged focus. We now know they’re all sellouts, all Astroturfs, all corporatized traitors.
 
The defining abyss which slashes its bloody gouge across every arena of our lives is corporate tyranny vs. freedom and humanity itself. The great virtue of the Bailout and its health racket microcosm is the cosmic lucidity with which it has cleared the air and defined the positions. The clarity through which it has rendered the great fault line.
 
The definition of economic Fascism is a command economy based upon private profits and socialized costs. While there can be debate on when exactly America became this fascist country, there can be no debate whatsoever on the fact that the Bailout enshrined it once and for all. That the Fed has today temporarily ended its trillions in MBS buys (though it ostentatiously reserves the right to resume at any time, and with infinite boundaries), even as Fannie and Freddie continue with their infinite guarantees of this worthless paper, doesn’t change anything at all. On the contrary it simply highlights how, as with every other totalitarian system, the tactics are flexible even as the nefarious goal is always one and the same.
 
So we know what America has become, and we know that all existing leadership has declared for crime, for tyranny, for the great enemies of the people, for treason.
 
Meanwhile, the people…this bent-backed peasant with the bloodsucker on its back….all this peasant need do is shrug to rid itself of this parasite. Is the people’s refusal to do so our own Dance of Death? Are we really no longer citizens, no longer human, but just the husks of “consumers”, and soon no longer even able to pretend any longer at being that?
 
Only we can answer that for ourselves. Our actions shall be our testimony before history, before the universe itself……
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