Tuesday, September 16, 2008

IT'S About jobs, stupid!


By l.t. Dravis

NEW YORK – Tuesday, September 16, 2008 – The people we trusted to govern, lead, and protect our economy – the Bush administration, Congress, the Federal Reserve Board (FED), and the CEOs and boards of major financial institutions - the bunch who brought us the mortgage meltdown, bank failures, and Wall Street’s current collapse, are now busily making things worse.

Because federal regulators sat on their thumbs for decades and did nothing to protect individual and institutional investors and because the FED cut interest rates to make money dirt cheap, CEOs and boards of major financial institutions got greedy and pushed trillions of dollars in mortgage loans on anyone and everyone, whether or not they were creditworthy.

Trillions of dollars in mortgage-backed securities then became worthless because too many homeowners weren’t and aren’t able to make their mortgage payments.

The reasons are simple and predictable.

First and foremost, millions of homeowners have adjustable rate mortgages that ‘adjust’ their monthly payments beyond their ability to pay. This problem has been compounded by the fact that housing values have dropped precipitously, wiping out trillions of dollars in equity, which prevents people in trouble from refinancing to lower monthly payments. Secondly, hundreds of thousands of homeowners lost the ability to pay their mortgages along with their jobs . . . a fate that faces hundreds of thousands more homeowners as the economy continues to tank.

Financial institutions that sell, trade, and use mortgage-backed securities as collateral for operating loans have been particularly hard hit. So, it should have come as no surprise that venerable institutions like Bear Stearns, founded in 1923, would fail or that 158 year-old Lehman Brothers, the 4th largest investment bank in the country, would file for Chapter 11 bankruptcy, or that Merrill Lynch, one of the most trusted names in the financial world, would be forced to literally give itself away to Bank of America to avoid liquidation.

The Bush administration, Congress, and the FED should have anticipated at least a year ago that Fannie Mae and Freddie Mac, quasi-governmental institutions, guarantors of trillions of dollars in mortgages, would run out of cash and would ultimately have to be taken over by the Federal Government.

Now, to make matters worse, American International Group (AIG), a major insurer of billions of dollars in corporate loans and mortgages held by banks all around the world is running out of cash. If AIG failed, all those loans would be uninsured and umpteen dozen banks would see their balance sheets tip the wrong way . . . many into insolvency . . . so the Federal Reserve will likely loan $85 billion taxpayer dollars to bail AIG out of its current crisis.

And that’s how the experts are making things worse.

They’re throwing billions and billions of taxpayer dollars at the wrong end of the problem.

Just this morning, the Federal Reserve dropped $70 billion in taxpayer cash on banks to encourage them to ease tight credit conditions with no guarantee that any of that money will ever be lent to businesses or consumers.

Dramatic?

Yes.

Effective?

No.

Throwing taxpayer money at the wrong end of the economy does nothing to change the fact that trillions of dollars in worthless mortgage-backed securities are destroying our financial institutions and threatening the future of the economy we’ve known and trusted for the past sixty plus years.

If the Bush administration, Congress, and the FED were serious about solving this crisis and preventing a reoccurrence next month, next year or the year after, they’d invest taxpayer money to bring back value to mortgage-backed securities.

Until that happens, financial institutions will continue to fail, taxpayers will continue to pay, and the economy will continue to fall apart.

How do you bring back value to mortgage-backed securities?

You give people the ability to make their mortgage payments.

For homeowners fortunate enough to still have jobs, you make Fannie Mae and Freddie Mac pay back a portion of their taxpayer bailouts by sending financial counselors out to renegotiate adjustable rate mortgages so homeowners can make mortgage payments within their current budgets.

For those who’ve lost their jobs, you create jobs across the country, in a variety of disciplines – from blue collar to professional - rebuilding our infrastructure, building wind farms, refurbishing schools, and cleaning up inner cities so homeowners can make their mortgage payments, support their families, stimulate the economy by consuming other products and services, and generate local, state, and federal tax revenues.

For those who’ll argue against government investment in creating new jobs, keep in mind that because of the unprecedented ineptness of the Bush/Cheney administration’s eight years in power, because of the hundreds of billions of dollars lost by the Bush/Cheney preoccupation with the Iraq war, and because of Congress’ inability to regulate the financial services industry to prevent the current economic crisis, the free market economy is no longer free to correct itself.

Why?

Because business and consumer credit is likely to remain tight for the foreseeable future, because hundreds of billions of dollars in investment capital has been lost through greed and mismanagement, because the national debt costs the American taxpayer nearly $2 billion a day in interest alone, and because historically high deficit spending for the past eight years puts the Federal Government in the position of competing with businesses and consumers for loans.

For these reasons, the economy is no longer free to raise the capital it needs to create, design, produce, and deliver products and services essential to grow and drive the its way out of this mess.

So, while the Bush administration, Congress, and the FED waste billions of taxpayer dollars on the wrong end of this economic crisis, while more and more people lose their homes and their jobs, remember that we actually elected these people . . . freely . . . to lead us to this place.

Makes you wonder why, doesn’t it?


Copyright © 2008 by LTD Associates West, Ltd. All rights reserved.

If you have questions, comments, or concerns, Email me at LTDAssociates@msn.com (goes right to my desk) and since I personally answer every Email, I look forward to hearing from you soon.

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