The wipeout of the American and then the global economy was set when George Bush (Dubya) took the oath of office in 2001. It took a couple of years to get rolling, but once in motion nobody made an effort to stop it. Vocal support was given for reining it in, but nobody did more than talk. After all, the economy was artificially booming because of the housing bubble and nobody wanted to ruin "such a good thing."
Some people might question the "boom" as millions of American Manufacturing jobs were going overseas and being replaced with Service Sector jobs all across the nation. Service providers like Shady Hills Rest Home and others with even more relaxing names had an abundance of grandmas in their eighties and about half as many grandpas who needed to be attended to. There were service jobs there, so the younger generations were trained to help take care of all of the elderly, knowing full well that a massive wave of old people were approaching rest home and retirement community age.
Job security for that service industry was guaranteed. Fast food restaurants were booming and there were always jobs in that service industry. “Ya want fries with that?” became a popular buzz word for service sector jobs. Still a great many of the middle aged people who had lost manufacturing jobs were unhappy that they were working in service sector while still looking for a “Real Job.”
There was still hope that “Real Jobs” would come back some day, but not one politician in Washington actually knew how to make it happen other than try to get government expenditures in their home district that would put a few people to work. Pork Barrel Politics was still in play in America and a few bridges were built that probably did not need to be built and other useless spending was realized, but as long as people had jobs in the service sector they could survive, even if unhappy. Besides, they made the unemployment numbers look good.
China would manufacture those products that they were selling on the world scene for less than half what it would cost to make them in the United States. American workers could no longer compete with China, so they ended up selling those Chinese products in a service sector job at Wal-Mart. They worked for salaries that were half of that they used to make.That was a sign of the times. The rich people with money to invest put their money into Wal-Mart stock.
The booming economy was not really that strong, but people had jobs, even if they hated them. Now into this mess came the housing boom that was fueled by the mortgage boom that was fueled by massive corruption. “Hey, what!” you say?
The stage was set for the 2008 wipeout of the national and global economy with the mortgage refinancing craze that began around the year 2003. Sadly, much of it was totally corrupt because it was inspired by greed that led to still further greed that got out of control. There was no mature adult supervision over the industry which was largely controlled by Republican Bankers. I know many of these people, and I have never met a rich banker who was a solid Democrat. “Republican” and “Big Money” go together.
Shortly before that 2003 kick off of the massive corruption program the U.S. Federal Reserve cut interest rates to help the economy recover from the Tech Stock Collapse on Wall Street as well as the aftermath of the 9/11 terrorist attacks. Home owners and home buyers jumped at the chance to get "cheap" mortgages and a financing feeding frenzy ensued. The “Points” charged on the mortgages went up, but were loaded into the loans. People did not care as house prices started to increase with the added points and the buying and refinancing boom.
As a result, mortgage refinancing hit record levels, climbing from well under half a trillion in 2000 -2001 to near a staggering $3 trillion in 2003. Refinancing was making the Big Bankers very rich, so they promoted abuses in the system to facilitate loan creation. This facilitation also allowed people to borrow against the equity of their homes and use these borrowed funds to buy televisions, cars, appliances, computers and whatever other large purchases they had been putting off. I know, because the wife wanted to spend more money than we had, so we took out a home equity loan so she and the family could spend and be happy. When home interest rates fell to 4% about two years ago, I refinanced the home equity loans into the first mortgage, so I was not hurt.
According to the FCIC report, the refinancing mania resulted in home owners taking out $2 trillion in equity from their houses in the years between 2001 and 2007. Starting rates on home equity loans were as little as one percent. The loans were variable, but with interest rates as low as they initially were nobody seemed to worry.Who was president then when this facilitated financing and increased debt frenzy was going on? When house prices came back down, many of these homes were underwater because their owners were profligate spenders and nobody in power was making an effort to stop the abuses.
All this would have been bad enough, but around the same time Wall Street Republican Bankers and Controllers figured out a way they could make money—a lot of money—with all of this new debt.
The Republican bankers realized that they could "bundle" debt (particularly mortgages) into fake investments. (Did they know it was illegal? Hell yes!) It was literally a license to create their own money. It allowed Wall Street banks to create credit (money) out of thin air, and the fees from this artificial money-creation simply boggled the imagination. Individual Bankers without conscience were making a million dollars a month with this scam.
Like any Ponzi or Madoff scheme, everything worked fine as long as there was a steady stream of new investors. Eventually, the financial house of cards received a nasty jolt, around 2007, when some of the underlying subprime mortgages and variable interest home equity loans began to default because the poorer people who were eagerly refinanced simply did not have the income to continue making the payments, especially if their variable interest rate loans reset to a higher interest rate.
Sadly, now the Republicans are saying that the Clinton Administration set up these abuses by trying to get minorities into more home ownership with a new government monetary policy. Monetary policy has never been responsible for the massive wave of corruption this country experienced during the last six years of the Bush presidency. At no time, in any way, did the Federal Government authorize bankers to make mortgage loans that were not credit worthy.
It is true that one Federal Reserve Bank (The Federal Reserve Bank of Boston) did point out that actual viable sources of income for Blacks or Hispanics or American Indians should be considered, simply because so many minorities were being denied the right to purchase homes (even small inexpensive homes) when they had the same or greater income as Whites who were almost always allowed to purchase homes. Discrimination based upon types of income had to stop as that was just a ruse for denying minorities an opportunity to buy their own place to live that they could be proud of. We are not talking mansions here, just homes that are adequate for the poorer people of our country.
If the lenders were to treat all income fairly, if one family member on the mortgage contract was on unemployment disability payments, that should be considered as income. The same thing applied to welfare payments if people on welfare were co borrowers (This was with the understanding that if four people tried to finance the loan and one of them was on welfare that should not be used to disqualify the loan. By being a co-owner of the house the welfare recipient could effectively rent a room at less cost than if they were in an apartment. In other words it could be cheaper to buy than it was to rent. When I bought my house in 1975 the monthly mortgage was less than I was paying for rent at the time. What a deal!).
As long as it was income, it could be counted, especially for refinances of mortgages. Shoot, the equivalent value of food stamps would help qualify as it is a source of income. There are presently millions of Americans on Food Stamps even though they have full or part time jobs. They can still go in as a part owner of a house and co-qualify for the mortgage based upon the value of the Food Stamps and the income from the part time job as long as they showed a history of steady employment. Remember, a house does not have to be a sprawling structure. I can build a simple house for under $9000 in parts and lumber. I could sell it for considerable profit and it would still be a good house for people with low incomes who had always been denied the right of home ownership before. A used mobile-home set out in the country on a small lot could qualify for a few thousand dollar home mortgage for poor people, too.
The corrupt Bankers finally complied with that instruction and minorities who would have been denied mortgages because of their skin color were finally allowed to be homeowners of houses that they actually could afford.
Finally, if their income was adequate they would qualify just like Whites always could. If their income was inadequate they still did not qualify and were denied loans.
THEN the Bankers decided to royally fleece the system regardless of the ethnicity of the borrowers.
1. They started writing mortgages for people who did not have reliable incomes.
2. They were not bothering to check all other sources of income if one job was at least fairly steady in the past year or so.
3. They started writing mortgages for people who did not have any reliable proof of employment other than just their word.
4. They started writing mortgages for houses worth hundreds of thousands of dollars with non fixed rates, knowing full well that when the loan reset the new homeowners could not afford the higher payments.
5. They did not care as long as they could write the mortgages, take their points (Charged up front. Thousands of Dollars of instant profit for cheating), and then sell the mortgages to Fannie Mae or Freddie Mac under the ruse that incomes had been confirmed. Either that or bundle the mortgages as “high grade investments” and sell them to foolish foreign banks, which our Republiscam bankers did in fantastic fashion.
Anything to spread the liability around so that when the reality of the corruption became known, the loss was equally distributed around the globe. Still, some banks were caught holding too much bad paper in 2009 and we saw a bunch of them go bankrupt.
Those corrupt bankers almost brought the entire world economic system down while they ran to the French Riviera with millions of grafted dollars.
At all times during this six year wave of Bush Era crime there was no mandate from the Federal Government to dispense with the old rational requirement that people had to prove that they had adequate income to be able to pay the mortgage, feed and clothe themselves and pay utilities.
Why did the Bankers act that way during the Bush administration and not during the Clinton administration? Simple, they knew that from a Republican administration they would be bailed out. It was that reality that allowed the massive wave of corruption to get into high gear. With a Republican President you could do anything that you wanted with the bank, including giving yourself fantastic multimillion dollar bonuses, which the corrupt Republican bankers did.
But, But, But you say, why would the bankers run their banks into bankruptcy? Hell, if they were prudent they did not own any shares of the bank so what would they care? A bank was just a job location that allowed them to get filthy stinking rich by violating all common sense lending rules.
The bank goes under and FDIC comes in and sells it to another bank to continue running the banking system. If there is an overall deficit, the FDIC makes up the difference and guarantees the individual accounts so that Americans don't lose their savings. The Bankers involved in the mortgage rip offs usually kept their jobs, because they knew that there would be no investigation of their corrupt practices under the Bush administration.
Good mortgage writers (I.e. The crooks who wrote all of those bad mortgages) could always find instant employment at another corrupt bank or a mortgage mill if a bank was allowed to totally fail. Only a few banks were actually locked up and closed.In addition to all of this Republiscam nonsense:
Rating agencies like Standard & Poors and Moody's participated in a global fraud on the investing public. They had the power to rate what they wanted, any way they wanted. They still do, and can trash whole countries in the process. This is like the might of an army that does not have to fire one bullet to win the war. Just the strength of the army alone can win the war without a shot being fired.
Federal officials in the Bush administration actually stymied investigations into bank fraud by the states’ attorneys general. Their reasoning was that “If there is no investigation, no crime can be said to have been committed.” This was so corrupt that it falls into the category of treason against the American people and leads me to believe that the Republican Party should change its name to Republiscam.
The Comptroller of the Currency (OCC) blocked investigations of Wachovia, Citibank and other big banks. It helps to have corrupt friends in high places as well as politicians who help you bend the rules for personal tremendous wealth gain. Make 10 Million and retire to the south coast of France or the Spanish Riviera or Mallorca!
The rich conservative majority on the U.S. Supreme Court protected Wall Street bank hustlers from regulators. This evil wave of total corruption went to the very top. That action leaves me convinced that the Bush administration era will go down in the history books as the most corrupt in American history. Worse than Harding and worse than Grant. Total corruption beyond imagination. And then we wonder why the kids are protesting in the streets? They know it is all corrupt even if they do not understand how all that corruption works. I do and am putting it in black and white right here for people to read.
Continuing this wave of corruption, Republiscam run banks offered consumers "interest only" loans—and they grew to be 25 percent of the mortgage market in 2005. Unbelievable evil corruption! And those sons of female dogs were all slapping each other on the back while they were waiting for the coming collapse. To buy my house in 1975 I had to have four times my mortgage payment in income. When the interest only loans came out the bankers were not even checking to see if the homebuyers had any income at all. That (4X) requirement was waved long before Bush took office in 2001. All you had to do in 2005 was have close to the income to be able to make the minimum interest payments. Nobody checked actual income. Why should they, when they all knew that it would all collapse eventually?
It was a standing joke in the industry. They all knew that this excessive refinancing wave was going to collapse. The question was, “Who would take the blame and who would go to prison?” As long as Bush was President they figured that they would all get a pass. Bush (Dubya) understood banking and just smiled while his best friends were raping the whole country.
Republiscam banks hired "highly educated but totally out of contact with reality" geeks and nerds out of our honored colleges. They labeled their new hires as "mathematical geniuses." They, in turn, convinced naïve investors that bundled debt was safe and secure. “Hell, I come from Yale. You can trust me.” Triple "A" Rated Folks and we are selling them at a discount just for you!
Once the Repucliscam Bankers showed the world how it could be done and all the bankers could get filthy stinking rich, the U.S. loose lending policies quickly spread all over the industrialized world and threatened the global economy. They copied us! We showed the world how to be corrupt in lavish style and globally bankers started doing the same thing.
On Wall Street they had an insider code that people greeted each other with, "In a few years, I'll Be Gone, You'll Be Gone!" It was very prophetic. Many took their money and ran to the exits in late 2007 and early 2008. If they had any investments at all, they were short the stock market, because they knew what their corrupt efforts had caused and would cause for years to come.
Why haven't a flood of Wall Street CEO's been charged with high crimes despite evidence of massive, systematic, and unbelievable fraud???? Simple, the Republicans are still running the show in the background. They find no fault with themselves and will reassure you that the reason why the economy is not improving is because Obama is messing everything up.
The real estate catastrophic wipeout that began in 2007 will be remembered as one of the greatest financial disasters in World History—one that continues to threaten the financial survival of millions of hard-working American families to this day.
It's estimated that since the peak of the housing market, U.S. home values have fallen by a staggering Eight Trillion Dollars! Business properties have probably lost even more value. The irresponsible refinancing bubble created house and business building price inflation. Easy money does that and that easy money was created by the corrupt banking industry.
According to the Mortgage Bankers Association, at least 8 million Americans are at least one month behind on their mortgage payments. How is that for home security in hard times? The banking industry raped America and so far the Fat Cats have smiled all the way to their lavish retirements.
Approximately 10 percent of all homes in the United States are currently standing vacant, unoccupied while adult children have moved in with their parents and grandparents. I know. I have children and grandchildren living with me.
An all-time record of 2.87 million U.S. households received a foreclosure filing in 2010. We will get the final numbers for 2011 in a few weeks.
New home sales in the United States are now down 80 percent from the peak in July 2005. You can't put homebuilders back to work until there is a market for more new homes. That is one cause of the slow return to a stronger economy.
If you want to understand how America's banks could have been left holding trillions of dollars of bad real estate debts you need look no further than Florida's artificially overheated housing market in the 2000s. (Rich Bankers playing games in cahoots with crooks.)
According to an investigation by the Herald-Tribune in Sarasota, Fla., in the last 10 years more than 50,000 houses and properties in Florida were "flipped" under "suspicious circumstances."
In these cases, houses, commercial properties and even vacant lots were bought and resold in less than 90 days at a new price that was at least 30 percent higher than the original price.
The crazy housing market made it easy for Republiscam crooks with good credit to buy a house, get a no-questions-asked mortgage and then immediately sell the house for more money to a co-conspirator who could default on the loan or sell at an even higher price to another co-conspirator who could then default. The corruption just goes around and around and on and on with the local banks taking the hit. Any wonder why so many banks have failed.
In the process, the crooks would use the new, fake price to get another mortgage for more than the house was really worth and split the extra proceeds as quick profit with their fellow crooks.
The results of all this fraud were toxic investments that were also marketed to investors around the globe. Hell, if you are afraid to hold the paper, package it and sell it to foolish banks and investors all around the globe. And since the rating agencies “with all those geniuses” working for them, who were supposed to understand what were in these investments, rated them AAA, naïve investment groups sunk billions of dollars into them.
The consequences of this systematic real estate fraud have been catastrophic. Yet, we are not seeing these crooks put into prison where they belong.
As the FDIC accurately reports, "In Colorado fraudulent losses of $11 billion... could cause the Public Employees Retirement Association plan—which covers 450,000 public workers and teachers—to go bust in two decades." As a result the State had to cut retiree benefits to account for the losses. Most State Civil Service Employees do not make that much in the first place. To have their retirements cut is very painful. Many will have to work a job in retirement just to get by. (Retirement, what retirement? Screw the middle class!)
Other states were equally hurt.
Republiscam bankers and brokers got away with fraudulently borrowing millions of dollars from inflated mortgages without investing a single dime. Those scammers used these government-backed mortgages to make millions of dollars from fake transactions, destroying the U.S. economy in the process.
So why was the economic collapse so great?
I started this missive by talking about how solid old fashioned Manufacturing Jobs had given way to Service Sector jobs. Now, about 70 percent of jobs in America are service sector jobs. In a booming economy those jobs are there, but in a contracting economy service sector jobs go away because people who have lost their jobs do not buy as many services. Grandma and Grandpa come home from Shady Hills Rest Home to live in the kids’ bedroom and the kids get to camp out in the front room and have been doing so for three years now. People don’t eat out as much and restaurants cut back on their employees. People don’t buy as much in the stores or in the car dealerships and sales force are cut. As these service sector jobs are cut there is less income to spend in the stores and the restaurants. It is like a never ending cycle. To rebuild the economy we need some more of those oldfashioned jobs that all of those middle aged people were looking for while they worked their low paying jobs at Wal-Mart. Unfortunately those old jobs are in China and India and even Viet Nam. Short of the American Dollar going down in value (it keep going up and up regardless of what Ron Paul says) we will not and cannot be competitive with the Chinese. Thus the jobs stay overseas while we slowly wait for a service sector recovery.
It is happening, but very slowly.