The Federal Reserve allowed off balance banking, carrying out the Basel 2 plan in 1998. That plan was applied as Fannie and Freddie lost steam in mid 2003. The bulk of the bad mortgages written from then on were shadow bank mortgages, not CRA/ACORN mortgages. We know that Fannie and Freddie kick started the bubble, but really they were never the main event.
So I am not fan of the Fed. I think it no longer deserves status as a private bank. In fact, it should be a public bank with massive penalties for failure to regulate. We can’t have the Geithner/Greenspan mistake happening again. Easy money from the private MBS came after Fannie and Freddie guarantees wained due to, as House of Cards says, fraud and corruption.
So we know that the bubble would have fizzled without this private banking, private mbs attack from the Fed. And we know that many non libertarians, like Bernie Sanders and Dennis Kucinich, hate what the Fed is doing to the American people.
If we want a solid 30 year mortgage, going forward, with a solid down payment, it is unlikely that we would have any trouble with underwriting at all. The problem comes when the banks want to offer easy money, in a desperate means to rekindle the fervor of the housing bubble. The litmus test of politicians ought to be whether they are for easy money loans or not. We should vote out any politician, regardless of party, that wants easy money lending and securitization of same.
It is starting to look like the libertarians want the easy money loans, and the liberals want to control the casino, create jobs, and keep a safety net for Americans. This seems counterintuitive, given the efforts by the libertarians to expose speculation. But the libertarian/Murray Rothbard/Ron Paul/Paul Ryan con is that in the name of freedom and restoration that comes from their massive cuts private banks, banks will be able to lend recklessly. With massive tax breaks, the money will be with the hedge funds to carry out the future bubbles in real estate. If the banks fail they fail. But they are free to give it a shot and hurt Americans under this upside down reasoning. Ryan even budgeted for a bubble in his 6 trillion dollar budget cuts. This is not the predatory behaviour that we want from our banks moving forward.
And get this! Bachus of Alabama said it was government’s role to serve the banks. Hear that Ron Paul? Your buddy, in your own party, says government’s role is to serve the banks. How new world order sleazy is that?
Wouldn’t it be better to focus on major physical projects with jobs for Americans than the continual churn of speculation on Wall Street or the ponzi housing bubble that some very conservative Republicans, like Bachus, want? Wouldn’t it be better to make reasoned across the board cuts including military, with tax increases on the rich and get down to a serious jobs program for our nation?
If we aren’t wanting to serve the banks, as the Republican from Alabama says government is for, then perhaps we could actually serve ourselves. It is in the national interest to create needed infrastructure jobs. It is in the national interest to ban securitization of any loans that are not 30 year fixed. I don’t see Ron Paul wanting to ban those toxic mortgages.
America is at a crossroads. We can listen to the arrogant late Murray Rothbard, who said we should shame welfare recipients while he was paid by taxpayer money, having taught at a public university (UNLV), or we can seek to help all Americans and promote the general welfare. Social unrest that could result from government always serving the banks is not exactly the function of a responsible government.
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