Major New Direction for US Economy: Sub-Prime Mortgage Mortgages are back/C

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Major Economic News:
Major New Direction for US Economy: Sub-Prime Mortgages are back/Capital Write-offs of Housing Debt

Today saw one of the biggest pieces of economic news in many months: The powers- that-be will bring back Sub Prime Mortgage Loans and allow underwater homeowners to write off their capital losses.

Hooray for me (bad for the country)!

Here is the gameplan:

-The banks (and the little people) will be allowed to ‘write off’ their bad debt

-Broke folks will again be given sub-prime loans

-The housing market will finally ‘recover’ due to the influx of even worse loans

-The banking sector will prop up the equity markets to new highs

-The Whitehouse will ‘save’ the middle class with a ‘booming’ paper economy for 3-5 years

Then the bottom all falls out….

Here is the substantiation:

Off With His Head

Currently, Edward DeMarco is the (acting) head regulator of Federal Housing Finance Agency. The FHHA oversees Fannie Mae and Freddy Mac, the two largest backers of home mortgages in the US.

The administration will NOT make DeMarco permanent because he won’t let the banks allow underwater homeowners to write off their capital losses. That is, if you own a home currently worth 200k but the mortgage is 300k, you still need to make payment on 300k or short sale the house.

However, DeMarco would NOT allow the banks to write off their bad loans because he knew it would simply be a transfer of debt FROM Big Banking to the US Citizenry.

DeMarco rebuffs Democrats:
Dems raise pressure on Fannie, Freddie regulator to write-down mortgages - The Hill - covering Congress, Politics, Political Campaigns and Capitol Hill | TheHill.com

The White House desperately needs some economic wins, given the very poor state of the overall economy (look at today’s abysmal job numbers). Hence, they wanted to sack DeMarco and instead install puppet Mark Zandi.

Y! SPORTS

Back Scratching Gone Wrong

Of course, you may recognize the name Mark Zandi as the Chief of Moodys’s Analytics. That is the organization which gives out credit ratings and guaranteed the last decade of subprime loans as AAA while they knew the loans were actually garbage. Naturally, Zandi is an operative of the criminal front known as Warren Buffet. Buffet and his firm Berkshire has been the largest single investor of Moody’s for years; at one point he owned over 20% of the company (when Moody’s was perpetuating the subprime ratings fraud).

Neither Moody’s nor Buffet apologized for their role in the housing scam. Far from it, they have been rewarded handsomely:

FCIC Testimony: Moody's CEO Won't Say He's Sorry, Buffett Testifies (VIDEO)

Appointing Zandi was going to be the Whitehouse quid pro quo for Buffet’s ‘service’ to the Whitehouse.

However, something went wrong. Namely, even Zandi told the democratic wing that there was no way he would allow the banks to write off capital losses since that would prop up the housing market and stock market in the short run (3-5 years) but create extremely stressful fundamental shocks to the financial system.

Here’s why:

• The banks would ‘write off’ the capital losses
• Banking stocks would now be ‘worth’ much more and the financial sector would raise the stock markets to new highs
• The Federal Reserve would ‘absorb’ the capital losses
• The Federal Reserve will then transfer bad debt to US Treasury (same at TARP)
• US Treasury would continue to sell debt (US Bonds) to finance these capital losses
• Long Term, the debt is unsustainable and brings down the system

The Powers-in-Charge aren’t concerned about long term, they care about the next two election cycles – and feathering their own nests – that is all.

So, Zandi is no longer in play.

Enter the New King

Hence the President TODAY named Mel Watt (D - NC, 12th District) as the new nominee for head regulator of Federal Housing Finance Agency.

Obama Taps Rep. Mel Watt to Head Fannie, Freddie Regulator - US News and World Report

Obama taps Representative Watt as housing regulator | Reuters

Why?

Because Mel Watt will allow capital write-offs to ‘help the suffering middle class’ and also allow the banks to again write subprime mortgages to ‘help the suffering middle class’.

Naturally, you and I know that Mel is bought and paid for by BIG BANKS. Look at his list of donors if you want further substantiation. Though, all you really need to know is that Charlotte, NC is a Major banking center of the US. Guess which district Charlotte, NC is in? Yep, NC 13[SUP]th[/SUP] District = Mel Watts.

The republicans in congress will put on a great kabuki theater opposing Mel Watts, but Mel will get the nod. (Or, in an alternate ending of the play, Watts gets shelved and parties settle in favor of the ‘reasonable’ Zandi who probably already gave his consent over the weekend).

The Sun Rises and the Sun Sets

• The banks (and the little people) will be allowed to ‘write off’ their bad debt
• Broke folks will again be given sub-prime loans
• The housing market will finally ‘recover’ due to the influx of even worse loans
• The banking sector will prop up the equity markets to new highs
• The Whitehouse will ‘save’ the middle class with a ‘booming’ paper economy for 3-5 years

Then the bottom all falls out….hard.

 

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