Jeff Nielson's  Instablog

Here is a news item which clearly falls into the “believe-it-or-not” category: two members of the U.S. Congress, including the chairman of the House Financial Services Committee have publicly urged Fannie Mae and Freddie Mac to begin to (once again) intentionally provide government guarantees for bad loans.

Naturally, this is not how this request was phrased by the two politicians. Instead, they urged Fannie and Freddie to “relax” their “recently tightened standards”, according to a Reuters article. To be precise, at a time when the U.S. economy is shedding jobs at a pace greater than at any time in (at least) 70 years, and with all categories of U.S. mortgages simultaneously experiencing record rates of defaults, they want Fannie and Freddie to revert to the same behavior which helped to create the U.S. housing “bubble” (the largest asset-bubble in human history).

As regular readers will recall, this comes at a time when Fannie and Freddie are likely to require $100's of billions in additional government hand-outs – next year alone (see “Fannie and Freddie to need $100's of BILLIONS in 2010”). The U.S. Office of Budget and Management has already estimated that Fannie and Freddie will require $92.2 BILLION in additional hand-outs in 2010.

However, their estimate was based upon fraudulent government “statistics” and the ridiculous premise that the U.S. economy is about to commence a “recovery”. Insert realistic data and projections into those parameters, and a much more probable estimate is that Fat Fannie and Fumbling Freddie will require three times that amount.

These two political “experts” have warned that by setting more responsible standards for their loan-guarantees, Fannie and Freddie are causing “a real chill” in the U.S. condominium market. In other words, to try to repair the damage caused by the implosion of the U.S.'s Ponzi-scheme economy, they want Fannie and Freddie to engage in more Ponzi-like behavior.

As further evidence that the politicians, “regulators” and banksters have learned absolutely nothing from their reckless greed and systemic fraud (see “U.S. bank-fraud SYSTEMIC and INTENTIONAL - William Black”), at the same time Reuters put out a 2^nd article reporting that Citigroup has temporarily “suspended” its mortgage securitization unit for continuing to package (and sell) fraudulent mortgages (i.e. “liars' loans”). These “mortgage products” were missing property appraisals and/or employment documentation, and this one unit “produced” half of Citigroup's $115 billion in mortgages last year.

The natural question to ask is: with the U.S. economy about to start a “recovery” in one week's time (according to that learned sage, “Helicopter” Ben Bernanke), why are U.S. politicians so adamant that Fannie and Freddie lower their lending standards?

Surely, in an “economic recovery” the creditworthiness of borrowers should be expected to rise up to the new lending standards set by Fannie and Freddie – rather than needing to lower standards in order to stimulate buying.

It's almost like these politicians secretly believe that Bernanke's 5^th prediction of a U.S. “economic recovery” will turn out to be no more valid than his first, four predictions.

And what are we to make of this latest scandal at Citigroup? Surely a company which only months ago bragged about its return to “profitability” should not need to engage in more mortgage-fraud to pad its bottom-line – unless the “profits” which Citigroup claims to be producing are the result of yet more, U.S. mortgage-fraud.

Unfortunately, Citigroup has refused to comment on this scandal, so questions about their latest example of scam-banking remain unanswered.

U.S. propaganda-outlets have been crowing for months about how “affordable” U.S. houses have become, and have been proclaiming for almost as long that “demand” is improving and the market is close to (or already at) a “bottom” (see “Bloomberg's Sunday propaganda: U.S. housing has bottomed”).

Again, this begs the question: why revert to extremely dubious lending standards to prop-up a market where demand is “improving” and homes are “extremely affordable”?

The reality is that there is no possibility of a U.S. “economic recovery”. The U.S. housing market is still plummeting downward, with no hope for a (real) bottom for at least another five years – and most likely much longer (see “Distressing news about Distressed U.S. properties”).

Meanwhile, with yet another example of the continuation of the same scam-banking which caused all these problems, the Obama regime is poised to produce a set of extremely diluted “reforms” for the U.S. financial sector – which essentially do nothing other than preserve the status quo (see “Obama's financial reforms: let the Fox guard the Hen-house”).

The overall message is clear from both the banksters and the politicians: it's “busines as usual” for the U.S. financial crime syndicate.

[Dislcosure: I hold no position in Citigroup, Fannie Mae or Freddie Mac]