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How Much Are Fannie and Freddie to Blame?

Ay, ya, yai!

Just look at all the swinging gates in this post. How can I be right when everybody's wrong?

To pin this mess on any one party or any one thing is foolish. But we can look at one key event that facilitated the whore mongers. The Mess in fact did start with the 1999 repeal of a depression-era law (Glass-Steagall) that served to keep a check on commercial lending and re-packaging financial products into incomprehnsible paper that was constantly re-sold. Sound familiar? If we want to pin the blame, McCain chief financial advisor, Phil Gramm, literally inserted in the middle of the night the key provision that allowed the financial industry waters to be muddied with no distinctions between insurance, banking and investing.

Do you really believe the lie that Fannie and Freddie CAUSED this crisis? If you really want to look at who was repackaging the clean mortgage paper into CSE's look no further than the same investment company that was the key reason for the passage of Glass-Steagall -- JP Morgan and the rest of the Investment Banking community. They were doing exactly the same thing they did in 1932 -- re-packaging debt into complex instruments and re-selling.

Though I agree with the premise of this article, there's enough blame to go around. This FIX does not solve the problem until we look at how the accounting rules, lax regulation and religious devotion to unfettered capitalism got us into this mess.

My one regret about the structure of the fix, as far as I can tell, is that the taxpayer still has no skin in the game. Let's just look at this logically: If Warren Buffet offered to invest his entire wealth to help solve this problem by purchasing paper of unknown real value, do you thin that he would exact majority control over the business operations of these companies in which he is literally investing?

We are simply left with the hope that someday about twenty years down the road, most of the honest borrowers will adhere to their debt obligations.

For now, the bankers get their money up front, and it's business as usual.