CURMUDGEON’S CORNER The Revenge of the Dementors
No wonder theAmerican people are unhappy and angry.
An indispensable book, if you want to read how we got here and who led us into this quagmire is Reckless Endangerment Endangerment by New York Times reporter Gretchen Morgenson and analyst Joshua Rosner, sub titled “ how outsized ambition, greed, and corruption led to economicArmageddon.”
One of the most frightening thing how the same names of the same characters keep going from chapter to chapter. Many who manufactured the disaster are presenting themselves as part of the cure.
Perhaps the most illuminating example of the thinking of those involved in the three card monte mortgage game that still threatens to bankrupt the world is this explanation of the the increased value to investors of lower quality loans.
“Investors would benefit twice, therefore. First the income streams were larger because riskier borrowers were forced to pay higher interest rates on their obligations. Second because the borrowers were locked in, prepayment risk was diminished.” They were locked in because being bad risks would make it harder for them to refinance.
Part of the great con in this whole operation was the fiction that these loans were designed to help more people own their own homes. But the real purpose was to create a mechanism for fast money freaks to help themselves to the money of more people with less money, ever inventive skim artists coming up with the reverse Robin Hood, robbing the poor to help the rich.
Due diligence also took on a whole new meaning, Morgenson and Rosner note that Countrywide brokers told wild tales about how “if a loan looked questionable” meaning unlikely to be approved “company officials thought nothing of changing the applicants information to secure the loan.”
Later Reckless Endangerment reports that “ Of all the partners in the homeownership push no industry contributed more to the corruption of the lending process thanWall Street. The authors compare mortgage originators like Countywide and NovaStat to drug pushers and brokerage firms providing capitol to the anything goes lenders to overseers of drug cartels, drug lords who know their product is hazardous. Turning these loans into investment packages like CDOs turned out to be toxic.
This detail rich book provides chapter and verse on howWashington andWall Street bought into the deadly strategy of slicing and dicing and repackaging and reselling bad loans while skimming fees and commissions off the top at every step of the way. It seemed like a brilliant way to print money at other people’s expense. They got called predatory loans for good reason.
Never have so many given so much to so few for so little.
Regularly and repeatedly those who drove us off the cliff blame what they clearly imply are sub-prime people with sub prime mortgages who were guilty of over spending and over mortgaging over sized homes.
Because this was such a key stone of the mantra for the mortgage machines that created fuel for the even more deadly CDO and Credit-swap virtual Ponzi machines even Morgenson and Rosner occasionally seem to buy into this argument. But that is kind of like blaming those consumers who bought thoseAmerican cars that blew up because the gas tank was unprotected in the rear of the car. They bought a car and a sales pitch.Was it their fault the car was fatally flawed. The mortgage machines had even better sales pitches. But it is not those home buyers or even those mortgages that cut us all off at the knees. It is the over leveraging too big to fail banks and brokerages. They got the bail out and we got the shaft. Now this same tribe of Dementors wants slash spending on schools, highways, medicare and Medicaid, social services, social security so they can keep their tax cuts and ill-gotten gains and leave the pain for the rest of us to share.
The ranting business first mob, who believe corporations are people with more rights than flesh and blood people, keep repeating that capitalism makes the world go round and creates jobs..Well, maybe so, when they are investing in industry, literally adding value to create products, or investing in infrastructure. But when hedge funds, investment banks and speculators are playing a testosterone laced version of Monopoly onWall Street the only thing they are creating is more Monopoly money at our expense. The only jobs they create are for landscapers at their multiple residences. Remember these vampires created the perfect storm when they wiped trillions of dollars of the world’s wealth off the books in the giant credit crunch that led to the Dementor disaster that is now the world economy.
Immediately after the great debt ceiling debate debacle disaster stock markets of the world again burned off $2 trillion of wealth. Then the stock market yo-yoed up and down by 400 and 500 points a day, a positive wet dream for flash traders but a heart attack for 401k’s. None of this is doing anything for the economy or for growth or for jobs.
Ask yourself how many jobs you create by closing Post Offices, laying off hundreds of thousands of people to “ preserve shareholder value” laying off thousands of school teachers, police offices and firemen? Firing people doesn’t create jobs. It simply increases the wealth of CEO’s.
What we have created inAmerica is crony capitalism as blatant and corrupt as anything in such Third world countries as the Philippines, Afghanistan and Pakistan.
The stampede to decline and fall is led by sound bite sirens and shouters going off half cocked who find all their own pre-conceived ideas etched in stone like the ten commandments but ignore all facts with the same disdain they use to dismiss evolution or global warming. They don’t like it so they don’t believe it so it is not true for them or for you.
The howl you hear is the victory cry of the Dementors who herded us all into this economic slaughter house.