Sunday, March 08, 2009

PART 2 of 2

By Jon Christian Ryter
March 5, 2009

The second part of TARP was the "whole loan buyback program." This program—which was never implemented because it would have ended the crisis before it became one—would have unclogged the credit crunch and reopened the credit pipeline to consumers. The question is, when money was allocated for this project TWICE, why were the foreclosed subprime mortgages that clogged the credit pipeline never sold to the Resolution Trust Corporation? Two reasons.

First, several very large banks—Citibank, Bank of America, Wells Fargo and JP Morgan Chase among them—didn't want the crisis to end before the profit-taking was done. Like Rahm Emanuel, none of them wanted to let a good crisis go to waste. Eight of the nation's leading banks received $176 billion to jumpstart the economy by feeding the money into the credit stream. Instead, they used the money to buy banks declared insolvent by the Fed. Let's understand how that works since none of the insolvent banks were actually insolvent. When the subprime crisis happened, the housing market died overnight. As hundreds of thousands of defaulted mortgages became 2.25 million foreclosures, mortgage money virtually dried up and the value of homes across the country plummeted, making it virtually impossible for troubled home owners to sell out from under teetering mortgages they could no longer afford. Homes that cost a half million dollars or more were suddenly only worth their pre-housing boom values which many times, was only 25% to 40% of the balance owed on those existing mortgages.

On paper, banks like WaMu and IndyMac and mortgage companies like Countrywide, which invested heavily in subprime mortgages, were in trouble. The collateral guaranteeing the mortgages was suddenly diminished by anywhere from 40% to 75% or more, destroying the banks' asset to debt ratios. Under the model known as fractional reserve banking, banks are allowed to keep only a fraction of their deposits (assets) on hand to meet depositor demand while they loan out the balance. This is done with the tacit understanding that the banks are required to keep enough liquidity on hand to meet all depositor demands. When Fed officials feel a bank is in jeopardy of being unable to meet those demands by borrowing on its own collateral from the Fed (even if a demand for payment by depositors has not been made), the Fed has the authority to declare those banks to be insolvent. Those banks are deemed to be "underwater"—just like the asset-to-debt ratios of the homeowners when the values of their homes plummeted as the housing boom imploded. The value of millions of homes across the country—not just those in default—were suddenly worth only a fraction of the balances still owed on them. Tidying up after themselves, the Fed declared those banks to be underwater. They were officially insolvent. And rather than risk the possibility of those banks actually closing and the collapse cascading like falling dominos across the land, the Fed quickly found buyers for the troubled banks and before the boards of those banks could say, "We don't want to be sold," the Fed seized their assets and sold them.

Second, using Roosevelt's 1932 playbook, Obama knew that before the socialist far left could get away with re-engineering democracy in America by erasing even more of the Bill of Rights, there would have to be a crisis of such monumental proportions that he could disguise the redistribution of wealth as a necessary stimulus to jumpstart our failed economy in order to stave off what doomsayers believed might be another job-crushing decade-long depression. And, like FDR, Obama knows the crisis has to be severe enough that society fears the catastrophe more than the "cure." Between Woodrow Wilson and Roosevelt, the one-worlders stole the American dream and tried hard to replace it with the Orwellian one-world nightmare that today's New World Order, steered by the USS Obama, is close to implementing.

In 1993 the Democratic trifecta (House, Senate and Oval Office), at the urging of Treasury Secretary Lloyd Bentson and then Assistant to the President for Economic Policy Robert Rubin, amended the Community Reinvestment Act of 1977 (Public Law 95-128, Title VIII, 91 Stat 1147, 12 USC § 2901) to "solve" the problems of the inner cities and distressed rural communities by eliminating what they called the "redlining" of minority applicants for home mortgages. Under the new law, banks that denied loans to minority credit applicants because they were low-income minorities in blighted areas, face civil and possibly criminal penalties. Bentson argued in the media that "...the only thing that ought to matter on a loan application is whether nor not you can pay it back, not where you live." That's true. It was also smoke and mirrors since the home buyers Bentson was speaking of were people with poor payment histories.

These were the specific type of concessions that Southside Chicago community activists Barack Hussein Obama and Rahm Emanuel fought for in 1992-94—and won. Subprime mortgages for low income minorities who may not be quite as credit-worthy as the bill-paying middle class applicants for home loans. Between 1993 and 1997 (just before the subprime housing boom that began that year) $497 billion in mortgage loans that should have been redlined were granted based on demands in 1993 by the Clinton Administration to "...reform the Community Reinvestment Act based on the demands of community activists for the White House to solve the problems of racial inequality in the nation's inner cities." Banks would no longer be allowed to redline minority applicants buying homes in distressed areas. The underlying message was, redlining minorities by the nation's banks and mortgage companies—for any reason—would not be tolerated by that White House. Beginning in 1992, community activist Obama (and then, in 1994, Illinois State Senator Obama) worked very closely with Fannie Mae's vice chairman Franklin D. Raines to guarantee the mortgage loans of not-quite credit worthy minority home buyers, jumpstarting the subprime mortgage industry.

By 1998, when Raines, who served from 1996-98 as Clinton's Office of Budget Management director, returned to the GSE (Government-Sponsored Enterprise) Fannie Mae, he worked directly with newly-elected Illinois State Senator as the guarantor of subprime loans to minorities. Obama was clearly instrumental in creating that industry through his Jesse Jackson-type strongarm Chicago street advocacy. The simple truth is, while the Obama Administration blames the subprime mortgage crisis on the Bush-43 Administration, the American people need to place the blame where it belongs—on Presidents Jimmy Carter and America's first black president, Bill Clinton and, most of all, America's second black president, Barack Hussein Obama whose strongarm advocacy in Chicago forced the banks to underwrite bad loans that would be guaranteed by Fannie Mae.

Today, Obama has been President of the United States for about 40 days and his strongarm advocacy has already cost the taxpayers of this country, with generational interest, some $71 trillion in new debt that stemmed directly from his actions from 1992-98 that he successfully blamed on the occupant of the White House whose misfortune it was to be President when the subprime dyke broke and a tsunami of bad debt swamped the American economy.

Obama is already well on his way of keeping his campaign pledge to lead the United States into socialism as he redistributes the wealth of the American middle class to compensate the minority underclass for not prospering in the greatest nation on Earth while claiming he is making an equitable redistribution of the excess wealth of the rich (who allow only their disposable income to be taxed).

Buried in the Omnibus Appropriations Act of 2009 which the Democrats (who never could count that well) claim contains only $642 billion in new taxes are $1,634,902,000,000.00 in new taxes. Since some of the new taxes are sleight-of-hand maneuvers that reinstate old taxes or rolled back existing tax cuts, the left doesn't really count them as "new taxes." Obama and the Reid-Pelosi congressional cartel rolled back the tax cuts of the Bush-43 era by raising the income tax rates of single filers earning $200 thousand or more and married filers earning $250 thousand from 36% to 39%. This will raise $338 billion. Phasing out personal exemptions and limiting itemized deductions for the same group of "rich people" will add another $180 billion. And, finally, imposing a 20% capital gains tax on the same group for $115 billion more, will net the Treasury $633 billion to redistribute to those who prefer not to work for a living. The Obama Administration estimates that by eliminating the mortgage-interest deduction from this same group, Obama will raise another $318 billion in redistribution money, or a total of just under $1 trillion per year.

But the icing on the cake for the ecoalarmists is that the socialist Democrats finally succeeded in taxing the air we breathe. The Obama appropriations bill includes a "global warming" tax that will assess a levy on carbon dioxide emissions. Anyone with a rudimentary understanding of biology and chemistry knows that without carbon dioxide there would be no oxygen to breathe. Curtail carbon dioxide and you curtail fresh air. Plain and simple, 100% of the time, carbon dioxide is the food that is consumed by oxygen-producing plantlife. Photosynthesis. A metabolic process that converts carbon dioxide into glucose. The byproduct of the process is oxygen and water. Without oxygen and water, we die. The cycle continues as long as there is carbon dioxide. Eliminate carbon dioxide all all oxygen-breathing life is in trouble.

Which, of course, is precisely what the Democrats are stupidly trying to do. In their initial assault on human life, they've decided to tax the air we breathe by taxing carbon dioxide emissions as a means of capping those emissions. Over the next decade, companies in the United States (if there are any left) will have to buy permits before they can exceed established pollution emissions caps. That money will be used to provide tax credits for low-wage citizens. Companies that can't afford the permits will have to curb carbon dioxide proliferation, thus curbing the natural production of both oxygen and rain. The eco-wackos are not concerned about how their agenda impacts human life because the socialists who pretend they are concerned about the environment are actually concerned only about exerting control over everyone and everything in order to achieve their objective: a socialist world government.

Using the proverbial congressional shell game to make the American people think they are getting one thing when the communist far left that controls the Democratic Party is giving them something else—phase one of the Obama redistribution of wealth which is camouflaged as a rescue plan that will theoretically save the US economy from being overwhelmed by a tsunami of bad debt.

But like the subprime mortgage crisis in which toxic mortgages were used to provide first time home buyers with a new life and a promised share of the great American dream, the dream will eventually become a nightmare. Like all liberal myths of easy prosperity, when the toxic adjustable rate interest payments owed to the transnational bankers overwhelms the debtors, and the American people can no longer pay the bill, the great American dream will become the socialist nightmare as the US economy sinks into the briny depths.

And the anchor that will permanently sink the economy to the depths is the Omnibus Appropriations Act of 2009 on top of the American Recovery and Reinvestment Act of 2009 on back of the Emergency Economic Stabilization Act of 2008 on top of the Housing and Economic Recovery Act of 2008 that promises to cripple the ability of the free enterprise system to grow the economy as Obama taxes the middle class job growers out of business, growing government with the sweat equity of the American taxpayers who, like the poor, will soon be shackled to the totalitarian feeding trough of the State. When that happens, true equality will have been achieved. Everyone will have nothing.


Blogger Michael J. Bernard said...

The wheels are going to be coming off of this bus soon!


Monday, March 9, 2009 at 7:27:00 AM GMT-4  

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