America is a fraud.

Having worked in financial instutitions with strict lending guidelines and a reasonable loan-failure rate, I see two groups at faults. The lenders who just wanted to get the money out the door and the commissions in their pockets and the borrowers, who with an ounce of common sense would realise that the rates would go up and so would their payments. However, that should have been spelled out by the lenders. Regulation would help. We reap what we sow.

Namvet67, you said a gaping mouthful. A nation of ostriches, surrounded by wolves governed by jackals.

But if I could breakdown just some of the shit that's been going on...more observations than that gestalt of a comment.

Half of the bankrupcies in this country are because of major health problems. So we have compounded misery. No universal health coverage, loss of homes and any semblence of security.

As much outright fraud was perpetrated by loans that should never have been given, our whole financial institution "systems" is permeated with fruad against lower income people. Greater Fees, higher interest charged because of how risk is determined. The well to do and corporations have a been able to leverage assets-theirs and others- far more and with more damage than people of modest means. After all a loan in the hundreds of thousands takes as much time to do as one of a few thousand or less.

The banking industry has consolidated so much that I doubt that more than 40% of the 100 largest banks in the US in 1980 exist now as opposed to the merged parts of an even larger bank.

These same banks dumped tens if not hundreds of thousands of employees. They try to weaken credit unions and oppose legislation that benefits rdinary people. Hell, they actively promote legislation that economically puts us further from democracy of any real meaning.

And how 'bout those check cashing places-where'd they get their financing?

The financial markets have seen larger and larger asset management corporations, including banks, investment firms, brokerage houses become less accountable and more powerful. Things like Community Reinvestment Act and accountability for anything other than $ bottom line have been gutted. Derivitives and Enron accounting- didn't the "Justice" Department squash a prosecution of massive fraud? I remember the quote, "There are 10 Enrons out there." Like the Titanic headed towards an iceberg, which is 1/10th out of the water, 9/10ths submerged.

Some gross national product...

Wasn't there a movie Americathon about it going bankrupt? The great American Pyramid Scheme.

Watch while the "Bailout" proposals "justify" giving Billions of dollars to various Banks and Wall Street financial firms to keep them from collapsing while they foreclose on millions of homes.

Essentially, they will have gotten every last dime the homeowners once had, plus title to their houses.

At the same time, the Bankruptcy Laws those same banks wrote for their wholly owned subsidiary, the US Congress, will obligate those former homeowners to become Debt Slaves to those banks for the rest of their lives. And their Children's lives, too!

Amazing how everything will end up rosy for the Billionaires while the rest of the country descends into serfdom and slavery.

A person could almost believe it was planned...

But, of course, we all know that Dubya's "Base" are all Compassionate Conservatives, and Compassionate people would never lie, cheat and steal from the entire nation in such a manner...

A very timely article.

Its a great opportunity here to investigate and find out exactly who the big players were who were responsible for this.
They need to be made a public example of. I think it needs to be through the international court somehow.

These Wall Street crooks need to know that there will be no place to hide.

From what I understand, they are guilty of:

1) deliberately sucking in poor people and young people to commit to home purchases they could not afford.

2) repackaging these debts a securities and bonds, then reaping in the profits then getting out - leaving pension funds, other institutional investors, private investors, and even large banks on the hook.

They have cause serious damage to the international finance system through their greed.

Is George W is up to the task??

The movie, Money as Debt is the best explanation of the system I have found!

Remember Silverado Savings and Loan? While Bush Sr. was prez Neal Bush made shady deals that cost the taxpayer 1 billion dollars and the whole thing was covered up as best they could.

When you create the situation where fast and loose deals can happen, they usually do.

The Savings and Loan meltdown came because Congress changed the laws allowing them to make loans in more risky areas.

The latest situation was bought on in part by the Fed rates being so low for many years after the last recession ended.

When it is easy for the banks to borrow money at such low rates, they lend more of it out and when they run out of prime borrows, they go for sub prime borrowers. They rent money.

Another take on what is happening is provided by

http://www.worldreports.org/news/77_predicted_global_cri

capitalism is, has always been and always will be a pyramid scheme. Money for nothing, I make money simply because I have money? The first sucker that agreed to give back more than he borrowed, from someone who already had more than they needed(otherwise why would they be lending in the first place?)doomed us all. The game of Monopoly wasn't invented by Milton Bradly, it was created by an economist who was trying to illustrate the downside of the capitalist free market system. It's fun to play while you have cash and there are assets to purchase, but once all the real estate is bought up and everything is developed it's a slow battle of attrition that ends with one person owning everything. The end game is never fun, it's just incessant rolling of the dice and luck, till someones luck runs out and one person is left playing with them self. People keep playing though because they buy into the delusion that they too can be that one in a 100,000 that gets to call the tune never realizing that actually they are already one of the other 999,999. Oh well heaven forbid that we actually look out for each other and actually make sure that people know what they are signing before they sign.

NMBill, I remember the silverado scandal well, it was covered up by the first Gulf War, remember? The rest of the world pretty much didn't care that the millennia old nation of Iraq had invaded the decades old port of Kuwait(a state created by the British right on the gulf in order to pump out the oil) it took bush #1 something like 3 months to drum up the coalition of the willing to invade. Before Saddam invaded Kuwait both Neil and Jeb were in the hot seat with the savings and loan scandal, front page news. Once the war started it all just disappeared and we never heard about it again. Saddam was our puppet, no one will ever be able to convince me that we didn't give him the green light to go in there in the first place. It's pretty hard to connect the dots if your attention span is all of 3 minutes though, so here we are. Look at this, look at this, look at this, what happened last week? wait look at this, look at this.

Amen

Yeah, they talked about Clinton playing "wag the dog" with his scandal. I guess it may have been played many times, but people failed to realize it.

The State Department most definitely told their representative to go to Iraq and tell Saddam "what ever you are going to do, get it over with".

That led to Gulf I and the public forgetting all about the Savings and Loan problems. We are still paying for that with interest to the tune of over $500 billion dollars.

I believe that after we forgive World Debt, we should forgive American debt also. So many people, poor people, middle class people, young and old of all races get conned into going into debt. Let's give everyone a clean slate.

We also, as I said before, start renovating all the run down abandoned properties that blight our country, particularly urban areas. Start giving people decent places to live.

I AM CANADIAN, JUST CAN,T UNDERSTAND WHAT GOES ON IN US

$150 OOO OOO AS BAILOUT TO FINANCIAL SYSTEM AND NO BAILOUT FOR POOR PEOPLE WHO GOT FISHED FOR SUB PRIMES. TALK ABOOUT A FIXED DECK

WHERE ARE THE ETHICS AND THE MORALS? NO WHERE TO BE SEEN FROM UP HERE.

SAD SAD SAD

So, much for free market capitalism..
The fed injects billions into the sub prime lending market to prop it up! So, much for the prime directive, "thou shall not interfere, the market is self-adjusting".
But at the first real sign of trouble for their baby and they on to the rescue and the prime directive is out the
Window.

Do you think these MFs didn't know that this was going to create financial chaos down the line? Why do you think George Bush, and at the time, a Republican-led Congress rushed to get the Bankruptcy Reform Bill passed? By the way, 19 Democrats joined them and voted in favor of this bill which former SEC Commissioner, William Donaldson opposed. Donaldson, a Republican Bush appointee later resigned to "spend more time with his family".

sjc_1 August 11th, 2007 2:36 pm wrote:

"When you create the situation where fast and loose deals can happen, they usually do.
The Savings and Loan meltdown came because Congress changed the laws allowing them to make loans in more risky areas."

Yes, and let's not forget that the Savings and Loan Scandal took place under Ronald Reagan and Bush I and left taxpayers (after bailout) with a $500+ Billion tab while many involved in this scam walked away unscathed with millions and billions added to their financial portfolios.

"We should press the Congress to use its subpoena power investigate the corporate criminals and their government enablers."

Do you think "off-the-table" Pelosi or Harry Reid will do anything about this when so many on Capitol Hill are funded by the Banking Industry that just happens to run U.S. economic policy?

I really don't think they can claim ignorance on this debacle when many well respected economists like Kurt Richebacher were predicting this would turn into an economic disaster.

Please note date of when I wrote the article below. I've been living with the frustration of seeing it for 5+years, and now...well, here it is Part 1.

CREDIT WHERE CREDIT IS DUE
MMS, an American, 02/17/03.
(name withheld for blog posting)
Ahh, those inventive, risk-taking Americans! About six years ago they gave the world all those Sophisticated Debt Instruments. What were they again? Oh yes, derivatives; like, securities-backed-debt, secured and unsecured swap instruments, synthetic debt obligations, synthetic leases, collateralized debt obligations, and the list goes on. Also around six years ago, for some reason we Americans adopted a more cavalier and inventive form of book-keeping than the one used by "old" Europe and "Timid" U.K. accountants. At any rate, these SDI's (sophisticated debt instruments) did what they were intended to do. They thinned-down the risk of investing while spreading that risk over a wider base. The result stimulated investing to an almost exponential level. Plus they greatly stimulated business, and business to business, not only here in the states but around the globe. With these SDI's, businesses acquired much greater maneuverability, from getting loans, to acquiring other companies, to spinning off subsidiary start-ups. By spreading risk, businesses and individuals became flush with money. Profits seemed to be everywhere. The flush stock market made the little-guy investor dream of an early, cushy retirement to a second bungalow, on some tropical island-paradise. That is what these SDI's are credited with doing. It is for what they have NOT been credited with that deserves credit where credit is due.
The more people and businesses felt the warm glow of profits, the further out on the "risk-limb" they tip-toed in pursuit of more. By the peak of the market bubble, there were far too many people, and corporations, that had taken risk to maniacal extremes. The "mo-money" mania, had corporations and investors dancing on a hair-thin wire, between undreamed of wealth, or loss of job, house, car, family, friend, dog and reputation. Alas, Mr. Greenspan's warning about "reckless exuberance" was uttered about a year too late. SDI's had made the improbable look graphically, palpably possible. What surprised even the pundits is the speed with which these many SDI's were embraced and spread throughout the world economy. In no time, they were having their effect in Germany, France, Italy, South America, Japan, and Singapore etc, etc. The meteoric market rise, or bubble, was due to the effectiveness of these SDI's. They provided the very special ingredients needed for the world to become strangled in debt at practically an over-night pace.

Credit Where Credit is Due PART 2

provided the very special ingredients needed for the world to become strangled in debt at practically an over-night pace. Like children playing with matches, the combination of inept policy makers and unproven debt-instruments had created "The Perfect Storm". They also proved to be much too efficient at making fraud and unethical practices look enticingly do-able. The staggering number of business, and investor-related law suits today, tying up the courts in record breaking numbers, thus becomes yet another credit to SDI's. When the market bubble finally did break, there were two things retrieved from the rubble. One were the word's of P.T. Barnum, and the other was the grim revelation that an evil-triad-relationship has long existed between Wall Street, Corporate America, and Washington Politicians. It was promptly evident that the SEC was much too favorably inclined to look out for the vested interests of the corporate America-Wall Street connection rather than for the little-guy investor to whom it owed its very existence in the first place. Needless to say such an unethical alliance has created a magnitude of disgust, distrust, and disillusionment equal to the size of the bubble at its peak. So to the list of credits must go loss of investor confidence worldwide. More troubling still, is the mind boggling thought that any responsible agencies would sanction and unleash theoretical and untested SDI's onto the world financial stage; such an act would directly incriminate the U.S. establishment as being at the heart of responsibility for the crumbling world markets. Which begs the question: "Is not war the only subterfuge strong enough to divert attention away from the responsibility of having caused a global economic meltdown?" One cannot read the daily business news without seeing that, as much as possible, all negative information, from failed pensions, to laid-off stock analysts, shows Wall Street's desperate, and jaundiced attempt to tie the failing economy to the conflict with Iraq. Terrorism aside, in this case war (or conflict) is being pushed as a convenient scapegoat, rather than admitting to the travesty of a SDI-based economic policy. At any rate, the most important credit that needs to be revealed about these SDI's, is their ability to remain hidden for extended periods of time. You see, they usually function at the 2nd and 3rd tier down-within the economy, rather than at the easily monitored surface arenas seen during the stodgy-old-days of accountable book keeping. Similar to many of the more insidious diseases with prolonged incubation periods, the damage that is caused goes undetected for longer and evermore damaging time periods; and like those diseases, the treatment and cure range from limited to non-existent.
It is important to give credit to Myron Scholls and Robert Merton. You see, in 1997 these two Americans were presented the Nobel Prize in Economics for their development of ……derivatives ( the grandfather of all these SDI's)
Finally, it is essential to recognize any and all persons in positions of authority who signed off on releasing these experimental follies into the world economy as the arrogantly feckless gaggle of moronic wastrels that they are. Woe-be-unto-you, should the world ever awaken to exactly what you've done, because then they will want to know exactly who you are!
In a world crumbling under a mysterious plague of debt, it is appropriate to give credit where credit is due.

Paradox Revisited
By: 'Preston Digitator', an American, 3/19/03

Today's date is important for obvious reasons. Our attack on Iraq began and I noted a very interesting article offered on my AT&T home page. It is an article by Wayne Cole and posted by Reuters entitled "Treasuries in Disarray". To paraphrase the more cogent part, Mr. Cole reports that yesterday the Federal Reserve made the very unusual decision to "drop its Assessment of Economic Risks" which, up until yesterday, had always been an integral part of the policy meetings. He goes on to say: "The Fed, in essence argued that the economic data is so distorted by war uncertainties that they cannot take a stand on policy until the Iraq situation is resolved". I think it would not be a stretch to read "disturbing" in place of "distorted". Major red flags go up to mark events such as this, for the importance implied is not to be assumed "good".

So lets see if we can sum up the day's important events:

Today we level an attack on Iraq that is reputed to be of a force and magnitude sufficient enough to instill, in the enemy, "Shock and Awe". Simultaneously, our governmental economic specialists and policy makers are stricken agog by the fact that their economic governance has been a bomb of sufficient force and magnitude to instill, in the American people, "Shock and awe".

Thank you Mr. Prez, for creating a gigantic free-for-all in the United States, one where every single industry- YOU NAME IT- takes advantage of the lax standards and/or oversight since you were elected king.
Mean, hateful banks? Thanks, Mr. Bush. They of course sucked before, but today, its much much worse- oh, they way they treat the poor, very indicative that the American Dream is nothing but a myth, and the poor will stay poor- so why treat them well?
Out-of-control factories? Again, praise be to Bush, 'cause now, there's more pollution than before, and the factories are much less safe to work in and states don't bother enforcing the rules, if they can get away with it (and they do, seemingly with impunity)- why should they? It's a free-for-all!
*I agree: watch "Money as Debt".

Must add- it's a free-for-all UNLESS you are a small business owner, small farm, whatever- they are placing so many restrictions on the little guy, it's nearly impossible to compete.
It's a crime,how the government is trying to do erase the small, family farm, just restrict them right the hell out of existence (this is a very big deal and yet so invisible to mainstream America)- SMALL FARMS- WE NEED THEM! And the image of a farmer, pure Americana, right? These agri-monster replacements got no soul and they bring ruin in so many ways.

Here's how it'll go down: lots of squawking, investigations launched (at our expense,) three scapegoats perp walked, some pocket change returned, yacht sales continue to rise. Just like the S & L theft, the junk bond theft, etc. Meanwhile, a couple million Americans get tossed to the curb. It's no wonder we love watching reruns on TV so much...

No Sympathy. Sorry, but what ever happened to buyer beware? The people losing their homes are just as guilty as those who wrote the loans. The American people are to blame for this. You are getting what you wanted.

Here is the deal people! Every political party!

Lyndon LaRouche, pointed this out years ago what was going down, and that the American people were being scammed! Period! The banks lost their asses! The banks, lenders, AND, mortgage companies inflated the actual value of LAND and HOUSES in the BIGGEST scam ever to hit our shores. Yeah, they lost all your hard earned money in HEDGE funds, and otrher risky adventures.

I got the freakin news letters to prove it, so do not give me any crappola. IF per chance YOU work for a US Bank, Lender, or Mortgage company YOU are working for economic terrorists! Have a nice day,

WAKE the hell up!

Coffeelover,,,,,,,

I read common dreams often, and agree with a lot of the articles posted here, but some of the things in this article are just plain incorrect, in my opinion.

"And it will happen in the economic arena too, when we see the "subprime" credit crunch for what it is: a sub-crime ponzi scheme in which millions of people are losing their homes because of criminal and fraudulent tactics used by financial institutions that pose as respectable players in a highly rigged casino-like market system."

Nope, the mortgage market is not a ponzo scheme. In a ponzi scheme, the operator has to solicit new money to pay obligations to the previous investors. In the mortgage market, the investors, or the lenders, get paid by the people to whom they originally lent money to, or they do not. It's that simple.

"Suddenly, after years of denial and inattention, the press has discovered what they call "the credit crisis." Vague words like "woes" are still being used to mask a financial calamity that some analysts are already calling an apocalpyse as lenders go under and the Stock Market melts downs."

As the saying goes, capitalism without failure is like religio without sin. On the macro level it's not a big deal if some lenders go out of business andymore than it is if some shoes stores go out of bbusiness.

"A French bank froze BILLIONS Thursday saying, ""The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets." Translation from the French: We are all in deep shit."

I disagree. The people who are most in trouble are sophosticated investors who gambled on non-investment-grade tranche of mortgage backed securities, and CDO's. Yes, the effects trickle all the up the chain to home borrowers, but it's not that big a deal. Look at mortgage rates over the past 6 months? How much have they changed? Not much.

"On Thursday morning, President Bush was asked about this at a press conference. He blamed borrowers for not understanding the documents they signed."

This is actually one of the few bright comments he has made in quite a while. If you have a 600 FICO score, cannot provide a lender with any documentation to verify your income or assets, and have to borrow 100% of the value of the property, you should not be borrowing money for a mortgage, regardless of what anyone tells you. You probably shouldn't even have a credit card. Of course the mortgage lender is going to tell you that you can afford the house, because teh lender gets paid on commission. If I went to Best Buy, an employee would try and convince me that I should buy a 60 inch TV, even though I know I can't afford it.

"This crisis is an example of what goes around comes around as the companies that suspended their usual "standards" and "rules" and self-styled "due diligence" knowingly sucked money out of people with poor credit records and who now find their own companies imploding and collapsing worldwide. Many of the victims are people of color. They were targeted by predators."

This is irresponsible. If anyone can show me any data supporting that "predators" targeted people of color, please post it.

"Underscore that this was done deliberately, with forethought and malice, a well orchestrated plan to create armies of "suckers" and steal-yes, I said it-their monies to leverage even bigger deals. Their greed had no limits, until the scheme collapsed."

I disagree. It's funny how, 20 years ago, the complaint was that lenders were too stingy with their money, and they discriminated against minorities. They were criticized, and laws were changed. Now, lenders are criticized for being too easy with their money. Which is it? The job of a lender is not to hold someone's hand, it's to make loans that will be repaid.

"Lou Barnes, co-owner of a small Colorado mortgage bank called Boulder West Inc., has been in the mortgage business since the late 1970s. For most of that time, a borrower had to fully document his income. Lenders offered the first no-documentation loans in the mid-1990s, but for no more than 70% of the value of the house being purchased. A few years back, he says, that began to change as Wall Street investment banks and wholesalers demanded ever more mortgages from even the least creditworthy - or "subprime" -customers."

What is the problem here other than investment banks making unprofitable business decisions? Bears Stearns recently lost a billion dollars when 2 hedge funds composed of residuals of MBS collapsed. Who cares? I don't. There's nothing criminal here.

"You don't read many accounts like this of businessmen bashing Wall Street in the business press. Could it all have been stopped? Of course, if there were real regulators and rules protecting consumers and the public interest. And if there was a social movement that championed exonomic justice."

There a bazillion rules in place, and again, consumers are not the ones being hurt. Hedge funds are losing tons of money. From the tone of the article, my guess is that you don't have much sympathy for hedge funds. The only way consumers, or the little guy, or the borrower is being affected is that now, people who shouldn't be getting mortgage aren't getting them. This is called progress, This is responsible lending. The system is correcting itself.

They note that "credit problems once seen as isolated to a few subprime-mortgage lenders are beginning to propagate across markets and borders in unpredicted ways and degrees. A system designed to distribute and absorb risk might, instead, have bred it, by making it so easy for investors to buy complex securities they didn't fully understand. And the interconnectedness of markets could mean that a sudden change in sentiment by investors in all sorts of markets could destabilize the financial system and hurt economic growth."

Well, once again, just look at mortgage rates for the next 6 months. I doubt they will change very much. That's just my opinion. Subprime mortgages are about 10% of all US mortgages. If you beliEve that they will destabilize teh financial system, well, I guess time will tell. My guess is that they will not.

"This is very serious. folks, but far too many progressives, activists and politicians alike haven't spoken out about the crime behind this rolling scandal."

I don't know what law was broken. Really, I don't. There's no scandal either. Everyone in the industry knew what was happening. There's no secret here.

"We should be calling for major debt reform in America like Bono advocates for Africa"

Cmon, please tell me you are not trying to compare debt forgiveness in sub-saharan africa to lenders making risky loans to people buying over-valued houses in Las Vegas.

"We should demand criminal penalties for the profiteers who started out to enrich themselves and seem to have ended up destroying the very system they misused."

What is the crime? The same people who made money securitizing all the subprime loans are now losing money. It's a wash.

"We should press the Congress to use its subpoena power investigate the corporate criminals and their government enablers."

This problem will have corrected itself in 6 months. People on Wall Street don't like being embarrassed, and don't like losing money. They'll fix the problem way before the government gets around to it.

"When they propose a bailout, we should demand a "jailout." The Washington Post reports that the US has started a bail iout "pumping more than $150 billion into the financial system to keep it operating smoothly." Where is this money coming from? Not from the military budget you can be sure."

Actually, the money is coming from the Federal Reserve discount window. It's one of the functions they serve. They aren't taking money from medicare putting it towards this "bailout" (which it isn't). This isn't a zero sum game.

"What is most disturbing to me, "she writes, "about the book is what appears to be a total lack of perception regarding the role of fraud, theft, and malicious intent in the American and global financial train wreck which has been exacerbating over recent decades."

What? Global financial trainwreck that is exacerbating? Look at a chart of teh SP500 over the past 20 years. Look at a chart of US inflation over the past 20 years. Heck, look at mortgage rates over teh past 20 years. They're all doing great.

"Indeed! What are we going to do about this? How about starting with becoming more aware?"

Amen.

I am a progressive but I don't think it's in anyone's interests to investigate this problem. I think it would undermine business and threaten jobs which is what Bin Laden wants as it is one of the steps towards the Caliphate he seeks. I hope that there are sentences or paragraphs in the Patriot Act that can prevent protest about what has happened.

Soeharto you are a weird sort of progressive

But don't worry. Diversity is our biggest asset.

The Japanese people borrow money at 0% interest all the time.

Soeharto August 12th, 2007 3:41 am

"I am a progressive but I don't think it's in anyone's interests to investigate this problem. I think it would undermine business and threaten jobs which is what Bin Laden wants as it is one of the steps towards the Caliphate he seeks. I hope that there are sentences or paragraphs in the Patriot Act that can prevent protest about what has happened."

Soeharto or Suharto, the Indonesian ruler, who according to John Perkins (The Secret History of the American Empire) didn't care about World Bank loans placing his countrymen in deep debt while he invested his fortune overseas?

You hope something in the Patriot Act can prevent protest about this? Are you a dictator, a moron, or do you simply live your life in fear?

Are we just waking up to the fact that most Capitalist's wealth has been acumulated either illegally, immorally, or unethically?

vernonhowell, you are mostly full of crap. 10% of homeowners is millions of people, and yes, most of them are minorities. even the MSM biz press is talking about this crisis spilling over to other categories of mortgages. so are we now talking about 20% or 30%? consumer spending, 50% of our economy, has largely been fueled by easy credit from mortgages. w/credit drying up, what are the implications for the total economy? certainly not good. millions of people stand to lose their homes and become debt slaves for life, but...

"no laws were broken." when thieves write the laws, thievery is legal. b/c it's "legal" doesn't mean it's just or fair.

The corporate media has framed this issue, desperately trying to shove it into as small a box as posssible, as a subprime -- mainly persons of color -- problem.

The fact of the matter is that anyone who bought a home, especially from perhaps 2000-2007, may now be sitting on a property which has seen double-digit hikes in assessed value, higher property taxes, higher homeowner insurance premiums, etc. Even if they did not take out a home equity loan, etc. they may be at a state of "negative equity". And since the criminal lending practices flooded the market with new borrowers (demand) price shot up for everyone. No, this was never merely a subprime problem. That's just the smallest box they hope to frame it in.

The crux of the problem may be that in our whored out materialistic culture everything is a commodity, a potential investment instrument. I'd probably draw the line at food and housing. Most people don't primarily purchase homes because they are investments so much as the fact that we need a roof over our heads to survive.

I found it interesting last week that the French bank BNP, froze 2+ billion in funds due to the "subprime" issue, and the US market tumbled. The crux of the problem is the ponzi nature of real estate. Ideally, there should be no interest at all, or perhaps just 0.5% just to cover some administrative overhead. But usury has many middle-men at various levels all demanding a piece of our hard-earned cash. The fact of the matter is that I'll be paying usurers much more in interest on my 40 year-old modest suburban ranch home than what I actually purchased the home for. All the "luxury" of being able to borrow. It's a steaming pile of horseshit.

So what, I'm supposed to now be informed because of this "I told you so" article?

Here is a thought... For years I have been viewed as something of a pariah for daring to speak openly about what I make. Throughout my entire adult life discussing finances and salaries has been viewed as inappropriate and in bad taste socially. Yet as I have learned many financial lessons the hard way, I have made it a point to share that information with friends and anyone who ever seeks financial advice or counsel from me.

No one ever seems to ask the question why in America anymore. After 2 decades of public education, the average citizen can no longer think for themselves. So they won't ask why, and more importantly to the financial institutions of the world, they will never understand why. How can you know the answer to the question why when you never have bothered to ask it?

We did not get far as a species operating alone. Why is it then that we think in America we can do so in the complex world of modern finances? So bad that farmers during the 80's when they were getting run down by banks and lenders were turning to suicide because they held fast to the belief that they themslevews had failed their families when in fact they had been swindled.

My initial lesson with credit and lending was that what is written almost NEVER matches what the sales person in froint of you is telling you verbally. this is in large part because legally a verbal agreement is worthless in court when facing a written agreement. The more people begin to share their financial information with each other instead of acting like it was a Sate secret, the more people will begin to learn about how these financiall institutions work.

For starters financial institutions are all in business to make money. Guess who is going to make that for them? You and I, right. Understanding the types of loans offered and the effects of your credit rating on what is available to you is crucial. when people do not discuss these things they work to keep themselves and their friends uneducated about the world of finance. People who have wealth constantly help each other out with jobs to family members and tips on hot stock pix or investment opportunities. Also they keep each other abreast of laws impacting their wealth. The working poor and middle class need to lose this idea that to remain silent on personal financial issues is a sign of pride. We need to remember that silence is most likely akin to financial problems and that discussion of said probnlems may eventually lead to a solution other than foreclosure and bankruptcy.

Sure money can't buy you love, but it sure makes everything else in life much easier. It is not the be all end all of the world but it is one of the primary tools required for navigating life in our society. Society is a collection of people and ideas, so then why do we continue to remain mute with each other on these issues? This also works with the concept of salaries. Discussing salaries puts the EMPLOYER at a disadvantage, refusing to do so puts the employee at a disadvantage. Remember the people next to you are not your competitors, but rather your collaborators.

Here is what I'm talking about; my own lender preapproved me for a loan amount about $25,000 more than I knew I could afford. I bought lower than what I calculated I could afford. Why? Because I knew that if I put ALL I could afford into a mortgage note I would have nothing available for any maintenance issues that may have come up. The house was 20 years old and sure to have a few problems that would show up after I bought it. Most people also have no idea what they spend each month and where. A good practice to engage in for a t least 3 months prior top buying a house is to track (write down) your living expenses - EVERYTHING. then look and see how you are really operating financially. After educating ourselves my wife and I are now buying a second property and we are working on 1 salary of $54.000/yr. When we both got laid off from the same company after 14 & 13 years each it did not make any sense to replace my wife '91 Camry and spend $2000 on new clothes for her so she could now go work in an office 40 hours a week.

Bush was right is a sense, many people do not knwo what thye have signed - but this is by design of the financial world. They are the original creators of making wealth with other peoples money; namely yours. You need to change your mindset from "going to work for money" to "making your money work for you".

What no one is mentioning is what is going to happen to local governments that rely on property taxes.

No one has mentioned the other Ponzi Scheme,
"THE KEATING FIVE" where no one is asking the Presidential candidate, from Arizona, what he did with
all that money that was never accounted for..
He does not get a free pass from me, I was in the
service also, and I never mentioned it before, or used
it to promote myself, as have millions of other
veterans who were very patriotic in the two World Wars, Korea, and Vietnam..

Soeharto - progressive? I suppose then you believe the neoconns who tout a society of accountability? Accountability of the poor and middle class with exemptions for the rich and wealthy? If you think this scandal is something that would help Al-Qeada in the war on terror then either you work for a bank or other lending institution and just may be one of the guilty or you work for RoveBushCo LLC and are simply trolling progressive websites to post your verbal ghonnorhea. I'd like some data or real information backed up with source references for your claim that to investigate this is bad for the economy? This is trash simly trash you have posted. Explain yourself.

From my own observation, too many people reaching for far too much than they could afford. Back in 2001 before things really shot up in the Central Calif, banks back then were saying I could get approved for $500,000! Yes, I'm gonna live in a half-million dollar house on my basic salary, then how to furnish, maintain, and still provide transportation. I could've charged forward, oops, charge it. Not me, but way too many others did. It's unfortunate. Take a look at the Running House developement, Trump came, Trump saw, Trump offered, Trump left. He'll scrape up the remmants via a bank note. What's sad is that too many people know how to operate cell phones and Ipods but lack basic financial knowledge - stay out or MINIMIZE personal debt. But hey, it worked to finance the war/occupation of Iraq, so if good enough for the President, then let's do the same mentality was and still is far too pervasive. And I'm lefty with as basic BS in Business Admin. But the false this false economy boomed on borrowed funds "kept the economy going" while no one paid attention. Well, the bills are due. I'm sure the smart bloggers can explain it much better than my banter!!!

I see that vernonhowell has stirred up the keyboard hornets with his insightful deconstruction of Schechter's article. I, too, thought it odd that the article was determined to find villains to prosecute, while those miscreants are a little too busy right now losing money to respond in kind.

Now when the Federal Reserve steps in with tens of billions of dollars given to favorite bankers in order to stop those losses, then is the time to call the police. Which, according to my newspaper, has already happened (the Fed's bailout, that is.)

This whole issue stinks, of course, because on the street this means the foreclosure of possibly millions of houses, containing millions of families, no telling what percentage of which were foolishly agreeing to impossibly good mortgage terms in a market that everyone around them was swearing would only go up bigtime (after all, a house is inherently worth double its initial price in only ten years, right?). These fools now get to sleep in the streets. The fools that sold them those mortgages all keep their houses, but their capital gains will be a trifle smaller this year.

All this because those variable-rate mortgages just had to vary upwards, in some iron law of economics that I have been inquiring about for the past two days in assorted threads. Had those giant securities bankers seen fit to keep the rates flatter, I gather that many more borrowers could have met the payments. So like vernonhowell, I invite those hedge funds and lender consortiums to lose their shirts on this. Much like another site the other day decided, I'd sooner see the government help out the borrowers at risk of losing their homes than the lenders losing their quarterly bonuses.

There's a quote often attributed to Martin Luther King that goes something like this:

"In this country, there is capitalism for the poor and socialism for the rich."

I think whoever said it, whether MLK or someone else, is right. Capitalism requires being allowed to fail. If my business tanks, nobody will do anything to keep me from failing. The Fed won't convene a meeting, there won't be a taxpayer bailout, and it will be nobody's problem but my own. That sort of thing - Fed meetings, taxpayer bailouts - that's only for the big dogs. And most of them come out of the process reasonably well.

A poor person who declares bankruptcy is screwed.

But Donald Trump, apparently, uses bankruptcy as a financial instrument.
---------------------------------------
In March of 1968, Robert Kennedy challenged the dearly held concept that pure economic activity (usually measured by the GNP) is an honest way to measure the impact of corporations on the human community. In 1968, he said:

"Our gross national product is now over 800 billion dollars. But that GNP, if we judge the country by that, counts air pollution, cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwoods and the loss of our natural wonders. It counts napalm, nuclear weapons, and armored cars for police to fight riots in cities. It counts rifles and knives and television programs which glorify violence in order to sell toys to children."

"Yet, the GNP does not allow for the health of our children, the quality of their education, or the joy of their play. It does not count the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither wit nor courage, neither wisdom or learning, neither compassion or devotion to country. It measures everything except that which makes life worthwhile."

I saw an article a while back that said the Carlyle Group was calling (internally) the impending financial crisis a wonderful opportunity to snap up distressed properties.

bartleby a scrivener writes:

"vernonhowell, you are mostly full of crap. 10% of homeowners is millions of people, and yes, most of them are minorities."

#1, I am not full of crap. I work in this industry, and know more about it than most of the other contemprary issues I follow. I don't claim to be an expert, but I'm not full of crap.

Again, if you have any evidence to support the idea that most of these borrowers are minorities, please post it. I have not seen any, but I'm willing to change my mind if you can produce evidence.

Also, I wrote that subprime loans make up about 10% of the market. I should hav been clearer. Subprime mortages have only been around in their current form for maybe 5 years, and the 10% statistic I have mentioned is the high water mark, which occurred around late 2006. To be clear, this 10% refers to new mortgages. I think it would be accurate to say that subprime mortgages account for maybe 10% of mortgages originated in the past 3-5 years. 10 years ago, if a person with lousy credit who couldn't prove their income and had no money for aq downpayment asked for a mortgage, then would have been declined in 10 seconds. Nowadays they are not. That's a business decision, not an ethical decision. So first, you have to calculate the propertion of total mortgages outstanding that were originated within the past 3-5 years. I am guessing that this is approximately 20%. This is a guess based on the idea that most mortgages are about 30 years, but more mortgages are being written each year. Feel free to correct me. Then take 10% of this 20%, which is 2%. Then note that a certain percentage of homeowners own their homes outright. I don't know what percentage that is. Regardless, let's say 2% of current homeowners are paying subprime mortgages. this is a good idea of the scope of the problem.

"even the MSM biz press is talking about this crisis spilling over to other categories of mortgages."

Yes, this is true, and it is happening. Underwriting standards are tightening on all loans. What I belive is meant, however, when news reports state that this is spilling over, is this: At the beginning of the year, the bonds that were collateralized by subprime mortgages were taking big losses, investors in these bonds (hedge funds) were losing money, and they stopped buying them. Basically, the demand for these bonds dried up, which caused the price to go down. The investors in hedge funds read the news reports that we all read, and they got nervous as well, so they started pulling theri money out of these hedge funds. the problem the hedge funds had was that they didn't have enough cash to give to thier investors, because it was fully in vested in the market. So, in order to get cash, they had to sell assets (bonds backed by subprime loans) which put further downward pressure on prices.

So, now everyone sees prices of bonds backed by subprime loans falling, and they starts to wonder whether bonds backed by less risky borrowers are safe, (Alt-A loans, which are in between subprime and prime). The ratings agencies, like Moody's, S&P, Fitch see that they have been asleep at the wheel by rating some of these bond AA when they are actually more like BBB bonds. So they start to downgrade the bonds that are backed by Alt-A mortgages. Today, the prices of Alt-A bonds are lower than they were 3 months ago. So in terms of spillover, it is harder to get a subprime mortgage today, and it is a little bit harder to get an Alt-A mortgage.

"so are we now talking about 20% or 30%? consumer spending, 50% of our economy, has largely been fueled by easy credit from mortgages. w/credit drying up, what are the implications for the total economy? certainly not good."

I agree that it is not good. When press reports state that there is a credit crunch, they mean at the institutional level, not the personal level. Eventually, they become one in the same, but I do not beleive they are, currently. I also agree with you that a portion of recent growth has been propelled by the housing market. Borrowers with poor credit have, for the past few years, been able to borrow money against the equity in their house and spend it as they wished, even though it was imprudent. From a lender's perspective, that wasn't a problem, as long as housing prices continued to rise. As long as housing prices went up, the lenders could at least break even by foreclosing. Now, lenders are losing their shirts when they foreclose on a house.

"millions of people stand to lose their homes and become debt slaves for life, but… "no laws were broken." when thieves write the laws, thievery is legal. b/c it's "legal" doesn't mean it's just or fair."

http://www.iht.com/articles/ap/2007/07/30/business/NA-FIN-ECO-US-Foreclosure-Rates.php

Yes, according to this article, there could be 2m foreclosure filings. Keep in mind, though, that not all of these houses go to foreclosure. But yes, I agree with your point. As to your point about no laws being broken, I am not sure what you are suggesting. Do you think that people should not have to pay back their mortgages? Because of that idea gains even the slightest bit of traction, THEN, you will see a credit crunch at the personal level, and only rich people will own homes.

What type of law do you think should be enacted? What current law should change? Who do you think is at fault here?

Here is what I suggest:

I don't think regulation is the best way to fix this problem. Howeverm maybe FNMA or the other similar GSE's might commit to securitizing lower quality mortagages. That could provide some stability to the mortgage market.

At the personal level, and perhaps most importantly, individuals should not buy homes they cannot afford. Just because you qualify for a mortgage does not mean you can afford the house.

At the structural level, bond ratings agencies need to be more carefully scrutinized. They have lost some credibility. A+ bonds aren't supposed to take losses, but they will.

Also, the ultimate investors in subprime mortgages (hedge funds buy the junk bonds, large institutions buy the AAA bonds), need to be more critical of the underwriting standards of loan originators. They need to look much more carefully at the incentives currently in place, that have caused to many bad loans to be written. There are several conflicts of interst build into the system.

Nevermind "Soeharto", his email address is some dipshit named 'Georgie' in Crawford, Texas...

Okay, first of all, I'd like to tell 'NamVet67' that NEVER have I seen a truth more succinctly told. The third commenter's line about "gestalt of a comment" was great too!

That said, I've been doing tons of reading my whole life for information and a great deal of it has been political and financially based since 9-11. Here's my Reader's Digest take on everything. Amazing how the senseless can start adding up to making sense when you get enough puzzle pieces put together...

The Neocons have had all the good but not too bright God-fearing people of middle 'Merka worried about 'gays in the military' and 'bringing back prayer in schools' and such, while they've collectively been:

1. Murdering every progressive that knew the score or was going to run strongly against them. Wellstone and JFK Jr. were murdered. This also serves to bring a lot of people into line that otherwise would challenge the status quo. What else explains, 'off the table' and endless hearings and nothing ever getting changed or accomplished and NO ONE GOING TO JAIL???

2. 9-11 was an inside job, carried out by factions of the Israeli Mossad, the CIA, and the world banking community. Building 7 was destroyed, conveniently enough, along with thousands of documents relating to banking fraud court cases... The missle (not plane, sorry) that hit the Pentagon ran right into the part of the Pentagon where the financial analysts worked. You know, the people where were supposed to be 'investigating' the missing billions that Rumsfeld announced on 09-10-01...? The planes were remote controlled and the 'hijackers', if there were any and the passenger lists say not, were patsies. That whole 'osamabinladenhijackerswithboxcutters' story was just too quick in the telling. It was a STORY, written as COVER in ADVANCE. As was the Orwellian-named Patriot Act...

3. For those of you who think the US government wouldn't feel free to kill it's own people, take a look at the current body count in Iraq. Duh. They like blood. They make money on it.

4. For those of you who think the government is too stupid to pull it off, or somebody woulda talked, please keep in mind that GWB is not the government, he's a stooge and a puppet (easily controlled, looks like he's on Haldol now), and the Bilderbergs are pretty smart. And see #1, above. Talk, and your kids are dead meat.

5. Bush's signing statements have put in place the framework for martial law. He's gonna take advantage of the first hurricane of the season and they're either planning no election in 2008 (since we're wising up about the election machines) or there's gonna be another 9-11. Word has it that NYC, Phoenix and Portland, Oregon are having 'War Games' with a nuclear bomb dropping scenario being played out soon. These 'games' have a nasty habit of going real right in the middle..

And if you bought a big 4 bedroom, 3.5 bathroom house on a half acre in the suburbs for far more than you can afford, you bought into the biggest myth of all... How the hell you gonna get to work when oil goes to 100 bucks a gallon, then 200, then 300, then unavailable? Peak oil, global warming (otherwise known as the "War on Terra", economic collapse, Afghan heroin being the economic engine for the money laundering schemes on Wall Street are all real.

And meanwhile, Delores In Des Moines has been told to worry about gays getting married... ?

It's all kinda comical in a Roman Coliseum sort of way. Let's face it, most adults are stupid children got bigger. How else could you get them to believe in some God up in the clouds being in control of everything? And signing off their higher powers of reasoning to 'prayer'.

I for one can't wait until all these morons are 'raptured' so we can start cleaning up the mess they've left. And the Neocons and their minions need to be sent to hell where they belong. Preferably publicly, and with guillotines.

Hats off to namvet67 and signalfire for telling it like it is. USA = One Nation Under Fraud.

Another point which needs to be reiterated here is the phrase "homeowner". Unless you're independently wealthy or probably over 65, you "own" more of a mortgage liability than real equity in a home.

So in a nutshell one is a serf of the manor, paying a tithe to the bank lord, indentured servitude, etc. until that last payment is tendered.

I'm sure the Democrats will bail out the banks...er... I mean us. Instead of jailing people, they'll throw good money after bad. Hard to say which is worse: unbridled exploitation or the bailout which vindicates -- instead of jails -- the exploiters. Liberalism isn't politically or ideologically capable of doing the right thing here.

I am not a financial analyst but, I saw this coming. Fascinating that our financial giants (Bears Stearns) didn't. Makes me wonder about our fractional reserve banking system (the common banking practice of issuing more money than the bank holds as reserves) and the federal reserve (a private bank, not a part of the government).

Ron Paul asked some pointed questions of the fed chairman and the chairman was unable to respond with a solution to the problems concerning our debt based economic system.

I would venture to say that the dollar will fail and be replaced with a Euro equivalent (disabling the ability of our government to print its own currency). Chomsky stated that those in power create the problem and provide a solution that benefits themselves and not the people as a whole.

Listen to what Ron Paul has to say. He seems to be the only candidate to ask these questions. He may even be putting his life on the line.

http://www.youtube.com/watch?v=A4kxTkhwR_Q

When I was a kid Wisconsin had a usury law that limited interest to 12% (as I recall). We had no check cashing places and few pawn shops.

Bad credit risks were denied credit if the bank felt that the borrower couldn't pay. Credit cards were not easy to get if you were poor or irresponsible.

The law was changed to allow the absurd situation that now exists where the stupid, irresponsible, or desperate to get lots of credit cards and lots of loans they can't afford. Now we have laws that make declaring bankruptcy very difficult.

Debtor's prison without the actual prison. The new slavery or a new sharecropping system for all occupations - you decide.

I hate to say it folks but the American Dream is a giant pyramid scam legislated and propagated by none other than the United States Congress. Thom Hartman of Air America Radio said this week that 90% of first draft Congressional legislation is written by corporate lobbyists. You must be kidding me.

One problem that this pyramid scam causes is higher home costs for everyone. To be able to buy a house , invest a small to medium amount of remodel money and then turn quickly around and 'HOSE' the next buyer is part of the scam. Something like 40% of the homes bought in the last 5 years were people who already own at least one home, buying additional investment homes so they can overcharge YOU when you try to buy your first house. Oh yea, I know, everybody is doing it. Well if you got in at the top of the pyramid you are part of the problem, hosing others so you can have more. That is the reality of the NEW American dream. And you can bet your sweet you know what that Americas lending institutions will lead the way skimming the cream right off of the top.
Everything is so me, me and don't forget ME right now(and don't forget, half of THAT is MINE too) that we don't seem to mind the crushing weight imposed on the pyramids base.

I'm seriously in agreement with Bob Dylans statement that refers back to the beginning of the pyramid scam that goes something like, "America will never be right until we get right with the Indians." They were here for tens of thousands of years before the pyramid builders arrived and pillaged their land, their culture and their respect for Mother Earth. Our country is built on no morality whatsoever. What a shame.

So the free market capitalists will use our tax dollars to bail out their own. How convienent and arrogant of them. Just suck all of America's hard labor dollars. Kill the union, their pensions and finally make healthcare out of reach for these retired devoted people. Pump the gravey into easy money fraud and then bail them out.
Alberto justice will turn a blind eye to us all. And these theives will skate again.
America is apparently for the rich and the slave.