America's Mortgage Crisis: Bailout or "Nationalization" of the Mortgage Giants?
By Ellen Brown
Global Research, September 5, 2008
www.webofdebt.com
By Ellen Brown
Global Research, September 5, 2008
www.webofdebt.com
“Take a load off Fanny, take a load for free;
“Take a load off Fanny, and (and) (and)
“You put the load right on me.”
– The Band, “The Weight,” 1968
There are other aspects of Paulson’s bailout plan that could be giving policymakers Maalox moments. As noted in a July 17 Economist article:
The Endgame Nears
It sounds pretty grim, but let’s think about that. Would the end of the current financial system really be so bad? The international financial system is now controlled by a network of private central banks that print national currencies and trade them with sovereign governments for government bonds (or debt). The bonds then become the basis for creating many times their value in loans by commercial banks. At a 10% reserve requirement, banks are allowed to fan $1 worth of reserves into $10 in loans, effectively delivering the power to create money into private hands. The price exacted by this private money-creating machine is compound interest perpetually drawn off the top, in a Ponzi scheme that has now reached its mathematical limits. The chief role of Fannie and Freddie has been to keep the Ponzi scheme alive by adding “liquidity” to markets, something they do by buying mortgages and bundling them together as securities that are then sold to investors. Old loans are moved off the banks’ books, making room for new loans, further expanding the money supply and driving up home prices. As economist Michael Hudson noted in Counterpunch in July:
“Altruistic political talk aside, the reason why the finance, insurance and real estate (FIRE) sectors have lobbied so hard for Fannie and Freddie is that their financial function has been to make housing increasingly unaffordable. They have inflated asset prices with credit that has indebted homeowners to a degree unprecedented in history. This is why the real estate bubble has burst, after all. Yet Congress now acts as if the only way to resolve the debt problem is to create yet more debt, to inflate real estate prices all the more by arranging yet more credit to bid up the prices that homebuyers must pay.
“. . . The economy has reached its debt limit and is entering its insolvency phase. We are not in a cycle but the end of an era. The old world of debt pyramiding to a fraudulent degree cannot be restored . . . . The class war is back in business, with a vengeance. Instead of it being the familiar old class war between industrial employers and their work force, this one reverts to the old pre-industrial class war of creditors versus debtors. Its guiding principle is ‘Big Fish Eat Little Fish,’ mainly by the debt dynamic that crowds out the promised economy of free choice.
A Very Important Message From Your Sponser
This "downturn/ajustment" is what drives all political and military consideration globally this very minute, there simply are no other human endeavours right at this moment in time that rival them in importance or immeadiacy. This is a clear and present global crisis that marks the end of capitalism and of life as we in the western world have known it. If you doubt that, stay tuned, though you could hardly expect to miss it's impacts even if you did not believe. D B Eaver ha:lol:
It,s a very nicely written piece, makes it easy to see the plumbing of finance and why it's plugged with paper.:lol:
“Take a load off Fanny, and (and) (and)
“You put the load right on me.”
– The Band, “The Weight,” 1968
There are other aspects of Paulson’s bailout plan that could be giving policymakers Maalox moments. As noted in a July 17 Economist article:
“[N]ationalisation . . . would bring the whole of Fannie’s and Freddie’s debt onto the federal government’s balance sheet. In terms of book-keeping this would almost double the public debt, but that is rather misleading. It would hardly be like issuing $5.2 trillion of new Treasury bonds, because Fannie’s and Freddie’s debt is backed by real assets. Nevertheless, the fear [is] that the taxpayer may have to absorb the GSEs’ debt . . . . That suggests yet another irony; the debt of the GSEs has been trading as if it were guaranteed by the American government, but the debt of the government was not trading as if Uncle Sam had guaranteed that of the GSEs.”2
The U.S. federal debt is already up to nearly $10 trillion, putting its own triple-A credit rating in jeopardy. If the U.S. assumes the GSEs’ weighty liability as well, the country could lose its own triple-A rating, causing foreign lenders to withdraw their massive infusion of funds.3 But if the U.S. does not back the GSEs’ debt, the result could be the same. China’s $376 billion of long-term U.S. agency debt is mostly in Fannie and Freddie assets. Yu Yonding, a former adviser to China’s central bank, warned on August 21:
The Endgame Nears
It sounds pretty grim, but let’s think about that. Would the end of the current financial system really be so bad? The international financial system is now controlled by a network of private central banks that print national currencies and trade them with sovereign governments for government bonds (or debt). The bonds then become the basis for creating many times their value in loans by commercial banks. At a 10% reserve requirement, banks are allowed to fan $1 worth of reserves into $10 in loans, effectively delivering the power to create money into private hands. The price exacted by this private money-creating machine is compound interest perpetually drawn off the top, in a Ponzi scheme that has now reached its mathematical limits. The chief role of Fannie and Freddie has been to keep the Ponzi scheme alive by adding “liquidity” to markets, something they do by buying mortgages and bundling them together as securities that are then sold to investors. Old loans are moved off the banks’ books, making room for new loans, further expanding the money supply and driving up home prices. As economist Michael Hudson noted in Counterpunch in July:
“Altruistic political talk aside, the reason why the finance, insurance and real estate (FIRE) sectors have lobbied so hard for Fannie and Freddie is that their financial function has been to make housing increasingly unaffordable. They have inflated asset prices with credit that has indebted homeowners to a degree unprecedented in history. This is why the real estate bubble has burst, after all. Yet Congress now acts as if the only way to resolve the debt problem is to create yet more debt, to inflate real estate prices all the more by arranging yet more credit to bid up the prices that homebuyers must pay.
“. . . The economy has reached its debt limit and is entering its insolvency phase. We are not in a cycle but the end of an era. The old world of debt pyramiding to a fraudulent degree cannot be restored . . . . The class war is back in business, with a vengeance. Instead of it being the familiar old class war between industrial employers and their work force, this one reverts to the old pre-industrial class war of creditors versus debtors. Its guiding principle is ‘Big Fish Eat Little Fish,’ mainly by the debt dynamic that crowds out the promised economy of free choice.
A Very Important Message From Your Sponser
This "downturn/ajustment" is what drives all political and military consideration globally this very minute, there simply are no other human endeavours right at this moment in time that rival them in importance or immeadiacy. This is a clear and present global crisis that marks the end of capitalism and of life as we in the western world have known it. If you doubt that, stay tuned, though you could hardly expect to miss it's impacts even if you did not believe. D B Eaver ha:lol:
It,s a very nicely written piece, makes it easy to see the plumbing of finance and why it's plugged with paper.:lol:
