The Housing Bill: One Step Closer to the United States of Zimbabwe? 14 comments
-
Font Size:
-
Print
- TweetThis
You’re dangerous because you’re honest” ~ U2
Recently a bill to bailout Fannie Mae and Freddie Mac was overwhelming passed by both branches of the U.S. Congress, the House of Representatives and the Senate U.S. Congress. It is expected that President Bush will sign this bill into law almost immediately. Because U.S. Senator Ron Paul deftly explains the impact this bill will have on the already sick global financial world, here's his video:
I have outlined some of the important points of U.S. Senator Ron Paul’s speech along with my own commentary here:
(1) The housing bill, the “mother of all bailouts” has removed all U.S. Congressional oversight and handed the power to administer this unlimited line of credit to the U.S. Treasury as requested by former Goldman Sachs CEO and current U.S. Secretary of Treasury CEO Hank Paulson.
(2) Although the media has reported the bailout provision of Fannie Mae and Freddie Mac to be only $25 billion, this is wrong. As Senator Ron Paul has pointed out, the line of credit extended to the U.S. Treasury to buy Fannie Mae and Freddie Mac securities is unlimited. There is no way that $25 billion will be adequate to bailout Fannie Mae and Freddie Mac when both entities only have about $70 billion in capital supporting $1.7 trillion in assets and another additional $3.3 trillion + of guarantees.
(3) The national debt limit was increased in the United States by $800 billion. These translates into almost certain increased further massive debasement of the value of the U.S. dollar. Massive foreign currency exchange intervention and controls will now be necessary to not create further massive downward slides in the dollar as massive monetary expansion directives are most likely on the way.
(4) Ron Paul correctly pointed out that U.S. Federal Reserve has exchanged U.S. Treasuries on their balance sheet for Fannie Mae and Freddie Mac securities, temporarily downgrading their balance sheet. He has stated that U.S. Treasuries, a debt instrument that no one in the world wants, now support Fannie Mae and Freddie Mac. However, the Term Auction Facility [TAF] and Term Securities Lending Facilities [TSLF] have also created the same situation for America’s largest banks and Wall Street firms. So you can apply Ron Paul’s statements to most of America’s largest banks and Wall Street firms, not just America’s two largest mortgage companies.
Provisions that have nothing to do with the mortgage bailout were buried in the massive 600-page bill in the hopes that U.S. Congressmen would not care or would not read them. As the vast majority of U.S. Congressmen never actually bother reading any of the bills they vote on, Ron Paul kindly pointed out a couple of the more prohibitive provisions that were hidden in this bill:
(1) All U.S. mortgage employees will now be fingerprinted (this is actually not such a big deal as all U.S. bankers and investment firm employees have been fingerprinted for years. However, as Ron Paul points out, mortgage employees did not cause the housing crisis so it is an irrelevant provision that does nothing to address the root source of the housing crisis and is just an attempt to scape goat them); and
(2) All credit card transactions will be reported to the I.R.S.
Though the United States is far, far away from reaching the hyperinflation environment of Zimbabwe where fresh $Z100 billion notes were just minted last month, the U.S. regulatory agencies are doing everything in their power to give the U.S. a chance of mirroring Zimbabwe’s monetary crisis.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 14 comments:
To be sure, the blame doesn't rest on any one business or sector, but to even imply that mortgage employees didn't have anything to do with this crisis is not only laughable, but a downright lie. I would be surprised to find no evidence of mortgage companies padding Sen Paul's campaign warchest, but that's the skeptic in me. However, the alternative is that he is incredibly stupid and ill-informed. The fact of the matter is that mortgage companies like Countrywide served by their employees who sought commissions on as many new mortgages as they could throw together had aggressively pursued sub-prime and alt-a mortgages when it became apparent that both investment banks, Fannie Mae, Freddie Mac and credit rating agencies weren't minding the store. There is blame to go around but it was the mortgage company greed that initiated this crisis in the first place.
I like your article, especially since it brings up things that most MSM articles do not, like the credit card transactions and fingerprinting. My only issue with this article is that Ron Paul is a congressman, not a senator. Other than that, this is spot on.
To thku4grace:
You are right. Dr. Paul never said that the lenders are 100% guilt free, merely that the Federal Reserve's policies gave the lenders incentive to act the way they did. When the Federal Reserve is setting the Fed Funds Rate at such a low level, basically there is no risk to the lender. Citi can charge a 7% interest rate to just about anyone when they are borrowing at a rate of 2% from the Federal Reserve. Now that they know they will be bailed out if they are too risky, what's their incentive to not risk even more. As for Paul's warchest, I doubt many lenders and bankers are on his side, considering his staunch opposition to the Federal Reserve and fiat currency. So yes, greed did consume the industry, but it was allowed to fester by the Federal Reserve who did nothing to counter this bubble.
I have a hard time not calling you stupid. I won't argue with you who's fault it is. Who cares? When your house is burning you do not stop to see who started the fire.
What Ron Paul and the article itself is pointing out is the fact that Wall Street is bailing itself out with our money and government is using this to get more power and information over us.
And printing money they way they are doing will devalue your assets even though you were supposedly smart enough not to live beyong your means.
I agree that a log of people were greedy. And now if they were the only ones getting burnt I would not care at all. But as they've been saying: Wall Street got drunk and we are getting the hangover.
For a further read about the hangover see the article about covered bonds at tradinggoddess.blogspo.../.
It is amazing to me how little outrage has been shown about what is going on. And probably because of people like you that stop to yell at the people that set the fire.
I am a foreigner originally. I can always go back to my country. What will you guys do if this becomes United States of Zimbabwe?
P.S. And if you feel tempted to ask me the standard narrow minded question: why did you come here if you do not like it? The truth is when I came here it I liked it very much and admired America. But lately people are f#$%^! around with my "american dream"!!!!!
Maybe its time to storm the castle...
FYI: Ron Paul is a member of the House of Representatives, not the Senate. :-)
The Internet has indeed revealed much truth to the American public. Note the 9% approval rating for Congress which represents the Legislative Branch of the American government. Democratic polls show only a 13% approval rating for there own party! Itr is not just a lame Congress, I wish it were only that, it has become fascist.
23% approval for President Bush which of course represents the Executive Branch. I haven't done any Judicial polling but it was at 58%. So basically half the people in the nation feel the Judicial system is providing what it should - Justice.
It all starts in Washington my friends. 545 people, count them - in Washington D.C. work with 100 major people in Central Banking. The old fools on the Hill haven't figured out that amoungst the propoganda, the truth will be revealed and nobody on earth can now stop it. The unfortunate part is that the Legislative Branch and the party associated with it, now has power and will likely consider to do so. Rasmussen shows double digit leads in polls on Congress. So a portion of America knows the truth but we are not alone friend. There are those of us with money and talents we will use to educate the American public.
Then we can get on to a peaceful voter revolution in the next election cycle (2012). It's not likely at all to me this is going to happen this election to stop the rampant corruption destroying the nation.
97% of American's have gotten dumbed down with false comfort derived from credit. That is now vaporizing. The hangover is waking them up to the fact that they are suffering while 645 people I mentioned are still partying and extending the hangover indefinately. But remember, after the darkest night comes a new dawn. We bailed out the Russians, the strength of the American people will bail out ourselves, but first we must get the high value thieves out of the twin city empire of America, D.C. and NYC. I am not making many friends these days in my educating process. But so be it. Christ would not run and neither shall I, even if they have a nice big cross waiting for me at the end. But I prefer Costa Rica personally :)
In regards to conspiracy, I doubt it. Think of any business. The board tells it's management that shareholders expect 10% increase year in, year out. Well, if your in money business like the Rockefellers, Rothchild's you can quickly reach saturation points where growth of 10% is no longer possible. So you repackage portions of the business and focus on untapped market share. That the end result of an impovershed America was probably considered.
It was and is short-sightedness and selfishness occurring in the world right now. Some call that greed and perhaps that term fits, but to me it is the customer segment focus that is the issue. Here's the best way I can describe what I am talking about in the assault on the little guy:
For example, I sell media. I can call 100 companies and tell them my email product is the best thing ever. Who doesn't need to move products? But it is there lack of technical knowledge where there is a danger of my abuse. I lose deals because I tell them how they should leverage the media to get the return. I could just as easily lie to them all and get tremendous short business but cause disruptions to there ability to move more products because they have spent there budgets and wasted them. Now after I was done raping them and acting disonorably, would I then turn around and blame them for there lack of knowledge and bring them to court when they can't pay there media tab? I hope this analogy helps because it sure seems to fit.
The U S by stepping in to the Fannie May and Freddie debacle has , or seems will prevent that happening , and has foiled what I see as a free for all feeding frenzy on the less fortunates and their homes and lifes savings , which In my Opinion looking at it from a distance , seems to have been years in the planning ,
So what if the $ and stuff does devalue , ? It it were not for that nothing much would change in price and Those too lazy to produce anything would be poor instead of the working families .who spend their time working for what these people would like to see ... NOTHING
Good on ya for seeing what these eveils doers have tried to do .
You can write Volumes on what should or not be done , but in the end one page can sun up most of it , "strip the people of their money and transfer it to the people who are scheeming to get it "
Wise Move USA with Fannie and Freddie Foiled the evil does and their years of planning for its downfall , and camoflaging it by all the bad publisity .
But here's the rub and where you are a little off Aussie. This time, it is the U.S. government AND banking in collusion. This was specifically warned against by the Founding Fathers of this nation, notably Alexander Hamilton and Thomas Jefferson.
1870, 1908, 1929, 1966, 1970, 1987, 2000, 2008 were years overvalued assets were sold to the masses in this nation using banking and government regulations (or lack thereof) to fleece the general population of wealth in this nation. The differences this time is that people have easier access to get the facts because of the Internet and other communication advances. It means after the real economic tsunami hits in 3 or so years we can rebuild much faster and begin innovating again (America's once proud claim to fame).
The other difference then say, the 1930's was that in the 2008 dual market crashes of March and June, that there was NO technology innovation associated to later fuel productivity. You can argue money itself fueled some productivity and that is partially true. But the capital was not redeployed in the host nation (USA) and the gains were crushed by monetary policy creating inflation. No different then say the Weirmark government of 1919.
The 1930's had the radio to fuel longer term productivity returns. 1870 had the railroad. 2000 was the Internet. Housing and financial repackaging is the lousiest of investment returns to a population, it returning yachts to a handful and poverty for 200+ million. And how it was conducted with government collusion with banking is no different then the Nazis manipulating free markets drastically with the outcome of any deal done behind the scenes at the expense of the wider investment community.
Just awaiting the scapegoat amoungst our population when the visible taxpayers can no longer foot the tab... And CHL, you are very bright but simply read my comments for the last 14 months if you think we are wrong but hope are or some other rubbish. Invest where your money is safest, wealth preservation is my game right now.
Jefferson had it so right. A people cannot remain free and uneducated. If you let George do it, he's quite likely going to do it - as he has.
for Reviving the Economy
Stan Muse
smuse@us.ibm.com
The Federal Reserve is out of Federal Funds rate options and now the Congress is about to pass legislation which will be the largest bailout bill in the history of the world. Fannie Mae and Freddie Mac are now penny stocks with perhaps over 1000 bank failures yet to come. The American taxpayer will be told that they and their children will be writing big checks to rescue the Wall Street crooks and congressmen that caused all the problems, while receiving nothing in return.
Anyone who has been following recent congressional hearings knows by now that this is unacceptable to Main Street, the voters who will be firing their congressmen for turning the USA into a socialist country. It is also widely believed that this bailout bill may not be embraced by Wall Street because of its onerous terms even if passed. Finally, it will not provide sufficient liquidity for improving the rest of the economy.
A much more effective and fairer way to end our economic crisis is easily attainable. To state it simply, all Congress has to do is to pass a Mortgage Investment bill which allows individuals a one-time option to use some of the funds in their IRAs to pay off their mortgage balance in full, without any penalty, interest, or taxes for doing so. In return, individuals choosing to exercise this option give up their mortgage interest tax deduction for life. This bill could be passed quickly and independently of any other economy-related legislation currently being debated, or included in the current bill. Individuals choosing this option would need sufficient IRA funds to pay mortgage balance in full. The actual payment to the individual’s mortgage company would be done by the IRA managing institution to avoid fraud.
As one senator recently stated, ‘for most people their home is their IRA’. For many others, their 401-K plans hold many trillions of dollars, much of which by now is parked in money market funds or T-bills as mine is. If these IRA funds could be released to pay off mortgages, we could possibly avert, or at least significantly shorten, the economic recession we now find ourselves in. In fact, no other bailout legislation may even be necessary, although more regulatory legislation is certainly needed.
I asked Allan Meltzer, Arthur Segel, and Ellen Zentner to review this proposal and received some positive responses. Ellen said it seemed to be fool-proof and better than a reverse mortgage. In fact, it is a no-brainer for the homeowner with a large 401-K balance, and for the government. The only people who might object, as Ellen stated, are the bankers who want to keep homeowners dependant on them, especially those in the upper-income group. But even the bankers can not want the government to own a large stake in their business for a multitude of reasons.
It makes sense to allow people to use their IRA money, which they earned, to invest in the best and safest investment they could ever make, their home. Presumably they will need a place to live in retirement on a fixed income. It makes no sense for someone with more than enough IRA funds to cover their mortgage balance to loose their home because they lost their job and can not pay their mortgage. It also makes sense because it is not some form of government bailout which rewards the bad behavior of mortgage companies and unqualified borrowers. Instead, it rewards the good behavior of those who have saved and invested in the economy
If only 5 million people chose this option, for an average of only $200,000 each, the result would be $1 Trillion in paid-off mortgages, providing liquidity to the mortgage industry. By executing the option, an individual’s annual mortgage payment would become disposable income to put back into the economy or back into IRA accounts. To the individual, the effect is the same as lowering taxes. If only 5 Million people were able to put back $20,000 per year into the economy, the result would be a $100 Billion per year stimulus package for many years to come.
In my case, with $800K in IRAs and a secure pension, I would increase disposable income by $1600 per month while reducing the IRA balance by only $160K, but saving over $120K in future interest payments. I could retire, which I can not afford to now, and leave my six figure job to someone else. I could also quickly replenish the IRA money used to pay off my mortgage with the extra income.
Adding a further provision to delay receiving Social Security payments for a year in order to exercise the option would be a baby step towards privatization of Social Security. Anyone financially able to exercise the option should be able to delay the payments. For every 5 million people choosing the option, approximately $100 Billion would remain in the Social Security fund. This could fix our problems with Social Security for good.
Some of the benefits of this plan would be to:
• Immediately increase an individual’s or married couple’s disposable income by tens of thousands of dollars each year while enabling them to become debt free
• Save homeowners hundreds of thousands of dollars in mortgage interest payments
• Encourage individual IRA savings by many who have never saved
• Allow many people to retire earlier than they otherwise could
• Create demand for housing, reducing inventory, and stopping the decline in home prices
• Stimulate the overall economy, creating and saving jobs
• Not cost the government anything, and actually Increase federal, state, and local tax revenues by eliminating individual mortgage interest tax deductions, without raising tax rates
• Force the banks to sell their good loan assets to cover their bad loan losses, instead of forcing the taxpayer to buy their worst loans, and increase liquidity for new loans to those who need them
• Allow the free market economy to work through the crisis rather than resorting to socialism
• Not increase the national debt nor the money supply as a bailout would do and contribute to inflation
• Allow the individual home owner to the freedom to become their own banker with the money they earn, reducing America’s dependence on bankers, and changing America from renters and borrowers to homeowners and savers
The merits of this simple plan, the Mortgage Investment bill, for saving the economy, instead of trillions of dollars for a Wall Street bailout which will socialize the finance industry, are obvious and would benefit everyone involved. The individual gets more disposable income and a chance to live debt free, the capital markets get needed liquidity, the government collects more taxes and collects them sooner at the expense of the bankers, the housing market gets more demand, and the general economy gets a much needed boost for the next few years.
Democrats should like this plan because they can claim that it lets the wealthy pay for this mess. Republicans should like it because it increases disposable income, which has the same effect the same lowering taxes. The average voter should like it because it addresses all segments of the economy with a huge economic stimulus package, not just Wall Street, and costs nothing while helping to pay off the national debt and potentially fixing Social Security.