More on the Federal Bailout Scam

Wednesday, October 15th, 2008

I spent far to much time watching the Senate Agriculture hearings one the Fannie Mae Freddie Mac debacle. Why The Ag committee? I asked that myself at first but someone brought up futures and the commodities markets do play in this somewhat. Plus the USDA also runs a housing program the Rural Housing Administration I think it’s called. It used to be FMHA.

I think the FMHA program is a good one and that’s not just because my wife and I got a home through them. We did. They were not easy and they took a lot of care to make sure we could pay the loan back! Think about that.

The Feds already had a housing loan (more than one actually) for poor folks who couldn’t qualify for a loan via normal channels. As a matter of fact this is one of the requirements of qualifying for a FMHA loan: you had to be unable to qualify for a regular bank loan.

Now fast forward to yesterday with the Ag Committee looking at the credit meltdown.

Please note: I saw four Senators on this committee - Dems Tom Harkin (Chairman D-IA) and Blanche Lincoln (D-AR) Along with Dick Lugar (R-IN) and Mike Crapo (R-ID). I think they all did a good job and really want to get a handle on this. Tom Harkin especially impressed me as being fair and reasonable.

So what did I learn? There were 3 panalists - Mr. Eric R. Dinallo
Superintendent, State of New York, Insurance Department
New York, NY
Dinallo Testimony

Dr. William K. Black
Associate Professor of Economics and Law
University of Missouri
Kansas City, MO 64110
Black Testimony

 

Dr. Richard Lindsey
President and CEO
Callcott Group, LLC
New York, NY
Lindsey Testimony

 

 

Of the three Dr. Black impressed me the most. He seemed less anxious to beat around the bush. The NYS Insurance guy also seemed fairly straightforward. The CEO? Not so much. Why?

Mr. Black stated there was strong evidence of outright fraud (scam, bunko, con) going on with (I think) loan originaors i.e. banks. What kind of fraud?

Properties with inflated (read fraudulent) assessments so qualify for loans well above the value of the property.

And here’s the one that gets me:

Loans granted to borrowers for a primary residence for properties that were NOT a primary residence.

That means an “investor”.

Furthermore, Mr. Black was saying this evidence was apparent to anyone who did nothing more than simply open and review the loan file! And he indicated this fraud was rampant.

In other words, we’re not talking about a few isolated cases here folks but wholesale fraud!

Now Dr Lindsey claimed he saw no evidence of fraud at all. Interesting. If I was sitting on the committee I’d be wanting to open up Bear Stearns books. From what I can gather he was with Bear Stearns in 2000, but this whole thing didn’t just pop up yesterday either.

The question this committee was exploring was how to deal with derivitives. Derivitives are basically loans on loans on loans… as far as I can figure out. I remember reading a story in a major financial magazine about them over 7 years ago. Basically some were saying few people, even those whose business is to trade in derivitives, really understand them. The article went on to say, the derivitives market was a house of cards that could blow over at any time.

So now congress is looking for some oversight on derivitives. That may not be a bad thing, but what this hearing revealed is there was almost NO oversight on the activities on the banks, investment firms and Freddie Mac/Fannie Mae - where some of the participants may easily be convicted of fraud. And, despite Obama’s continual whine - this was not a result of deregulation!

It was a result of several factors, including many in Congess pushing sub-prime loans.

And now it looks like this is going a lot further than just “loans for underpriviliged citizens” like many would have you believe.

I’ve got more to say one my “stuff” blog.

God bless,

Andy

P.S. If you are registered in Marylands 1st Congressional District - please write me in for Congress. At this point I’m chomping at the bit to get into this fray - even if someone takes me out within the first week.

To make it easy for vote counters write me is as “Andrew Havens”

Thanks. Maybe now I’ll get TWO votes (My wife is still undecided. Hoy.)

 

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