How the Mortgage Crisis Got to be a Crisis….(1)

There’s a certain irony in the mortgaghe crisis, and a certain justice, though that justice is about to become, as always, injustice in order to protect the Usual Suspects. The ironic justice of it was put succinctly today by one Edmund Andrews in one of the Grey Lady’s patented business stories. Whether he meant to or not is another question.

Over the last two decades, few industries have lobbied more ferociously or effectively than banks to get the government out of its business and to obtain freer rein for “financial innovation.”

But as losses from bad mortgages and mortgage-backed securities climb past $200 billion, talk among banking executives for an epic government rescue plan is suddenly coming into fashion.

A confidential proposal that Bank of America circulated to members of Congress this month provides a stunning glimpse of how quickly the industry has reversed its laissez-faire disdain for second-guessing by the government — now that it is in trouble.

I guess he did.

Yes, it’s that old Round Robin of Yesteryear:

Deregulation -> Speculation -> Collapse -> Govt Bail Out

I know. You said that would happen when the Dereg Boys came around selling their snake oil with high-falutin’ promises and their fingers hovering bare inches from the pocket you keep your money in. And you were right. So was I. Who could have predicted that business would use deregulation as an excuse to bring back all the old scams (along with a few new ones) that created the last economic collapse?

You could. So could I. In fact, WE DID.

Who could have predicted that when the shit hit the fan and the greed, the wild speculating, the lying, false annual reports, phony accounting tricks, and outright scamming of both customers and their own investors threatened to bring down the whole House O’ Cards, the very same con artists who’d created the mess would be banging on the Treasury’s doors with both fists and demanding our tax money, screaming, “Save us! Save us!”

Well, you could have. So could I. In fact, WE BOTH DID.

Despite our predictions (pretty easy, not-too-hard-to-figure-out kind of predictions, sort of like, you know, predicting that the sun will rise in the east), y’all just went ahead and listened to the Siren Song of Greed thinking they (The Great They) was gonna make y’all rich. Despite many warnings, signs, and signals that what they wuz gonna do wuz make theirselfs rich by skimming your money, y’all went ahead and decided that De-regulation wuz a Good Thang. And now they’re gonna make you – all of us – pay through the goddamn nose to save their sorry asses.

See, E Andrews misses something kind of key.

Bank of America suggested creating a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates.

“We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bailout of the bond market,” the financial institution noted.

In practice, taxpayers would almost certainly view such a move as a bailout. If lawmakers and the Bush administration agreed to this step, it could be on a scale similar to the government’s $200 billion bailout of the savings and loan industry in the 1990s.

(emphasis added)

Not really. Unfortunately, more than $$$200BIL$$$ has been thrown at the banks to solve this problem already, more than half from the govt and it ain’t done shit except buy the investor class and the financial class a li’l more time before it all caves in, like propping up a sagging, rotten roof with toothpicks – A LOT of toothpicks. Another $200BIL$$$ wouldn’t fix it, either, but if such a package does get aimed at aiding the borrowers (the victims) rather than the lenders (or “perps”), it would actually do more to limit the damage than the so-far followed policy of having banks and govts “lend” $$$BILLIONS$$$ to, you know, each other.

It would mostly benefit banks and Wall Street firms that earned huge fees by packaging trillions of dollars in risky mortgages, often without documenting the incomes of borrowers and often turning a blind eye to clear fraud by borrowers or mortgage brokers.

A rescue would also create a “moral hazard,” many experts contend, by encouraging banks…to take outsize risks in the future, in the expectation of another government bailout if things go wrong again.

If the government pays too much for the mortgages or the market declines even more than it has already, Washington — read, taxpayers — could be stuck with hundreds of billions of dollars in defaulted loans.

Uh, yeah. And where have we heard that before?

Oh yeah: every time deregulation goes smash, here come the perps and the con men and the bankers and their lobbyists with their hands out.

Will we EVER, you know, learn? These people haven’t changed since Cato was a Roman slumlord. Enough is never enough and they don’t care who pays for their folly and greed as long as it isn’t them. (Which means it’s always, you know, us.) Can we just stop believing their lies now, please? Pretty please?

Oy.

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