Wednesday, March 26, 2014

Mike Whitney — The Economic Scam of the Century

This is such an outrageous, in-your-face ripoff, it shouldn’t even require a response. These jokers should be laughed out of the senate. All the same, the bill is moving forward, and President Twoface has thrown his weigh behind it. Is there sort of illicit, under-the-table, villainous activity this man won’t support?
Not when it comes to his big bank buddies, there isn’t.
Read the fine print. 

Incredible coming from the people that promised no more bailouts. Well, not really incredible at all considering who they are working for.

Counterpunch
The Economic Scam of the Century
Mike Whitney

8 comments:

Unknown said...

The level of corruption is beyond ridiculous and I don't see any practical way to put a halt to it, let alone a reversal?
It doesn't make a difference who is voted out or who is voted in.

The crazies in the TP who decry big government and rail on about the unfettered free market, crony capitalism etc. -- what the hell are they doing about this?


The political class simply do not care an iota about democracy or the citizens at large.

It's bad enough that the financial class never have to fear being accountable under the law for anything, now they can steal with the lights on while enjoying the official US Federal government seal of approval.

Dan Kervick said...

These guys don't know whether they are coming or going. On the one hand they beef up capital requirements to put bank shareholders at more risk so as to tighten up lending standards. But then they pull something like this that goes in exactly the opposite direction.

If the government is the securitizer of last resort on mortgages, then the government should just take over the mortgage industry. Time for public banking.

David said...

the government should just take over the mortgage industry

Why not just nationalize the land? It's the "Joseph in Egypt" solution. During the 7 years of famine Joseph bought up all the land in Egypt "for Pharaoh." Then he came up with a fair way to administer its use. Obama could have done something like that after the crash. It seems like a better way to go than to subsidize bandits to buy it up. On the other hand, I see no reason why the government should support, subsidize or manage a market in land as private property such as we have now.

Unknown said...

the financial sector corrupts government therefore we should completely deregulate the financial sector.



Matt Franko said...

The way it is working now the banks can just flip the loans right over to Fannie and Freddie with NO risk whatsoever (other than fraud in the application process) so they are not responsible for the first 10% loss... and dont have to reserve capital for this I'd assume...

They can achieve more leverage the way things are right now...

So I dont know if they are killing the golden goose here with this...

as until they can securitize the loans they themselves are on the hook for the 10% sounds like and if there is a missed/late payment they probably cant put that one in and they are stuck with it, etc...

right now as long as the paperwork is complete the whole thing goes immediately right over to Freddie and Fannie wham bam... no capital at risk ... a bank can take the profits from this origination and either use them to do another loan or just buy the govt guaranteed loan back via the GSE paper when the GSEs securitize the loan the bank just flipped to them... good work if you can get it!

This may be one of those situations of 'be careful what you wish for'...

I also read that these bills have no chance of passing in the current form.... I think what we'll see is that the GSEs stay, (Treasury may do an IPO eventually) and the GSEs will do the low down payment (perceived "riskier") loans...

But not any time soon as the GSEs are taking current P&I payments on their loans, NOT securitizing them, (the few they are securitizing the Fed is buying so same thing) and paying them to Treasury in the form of "dividends" of 100s of $B and is resulting in what the Dems see as politically helpful "deficit reduction" this FY going into the fall mid-term elections... so dont look for any upsetting of this current set-up any time soon imo...

this current Treasury/GSE/Fed policy is creating a significant fiscal drag under the radar.

rsp,

Peter Pan said...

From an MMT perspective, is this a problem?

Matt Franko said...

Bob,

I think it could become a problem from the MMT perspective if the policy acts to reduce the availablity of credit to those the banks would deem less "creditworthy" which are the lower income households, first time buyers, etc...

But it is not clear (to me) based on this limited info if that would be the result...

Right now, as I understand it low down payment loans are still being done pretty well via the GSEs... not enough of them though due to insufficient incomes at the entry levels...

rsp,

Tom Hickey said...

From an MMT perspective, is this a problem?

Government guarantees involves moral hazard.

Not sure that Mike Whitney understands this subject deeply, but from what he says it looks like an uptick in already high moral hazard.

I think we'll have to wait for Bill Black to weigh in to get the in-depth analysis.