Crime Does Pay -- For Government-Chartered Banks

Taxpayers beware! A bi-partisan plot to bail out the mortgage greedy banks is in the legal racketeering incubator. Remember the rescue of the Savings and Loans Bank swindles that has already cost the U.S. Treasury more than a trillion dollars. (Try to get an exact figure and you'll be strangled by a set of logarithms made on Mars.)

Headlines about the late Henry Hyde have stirred old memories. He was a grand old fellow known for his integrity on matters related to the protection of the fetuses from their mothers and for his obsession to impeach anyone who engaged in oral sex near the oval office. Few remember that because of his steadfast morality Congressman Hyde did a flip-flop on a position he took refusing to pay a hefty fine levied on him and all of the other board members who had oversight powers over a large failing Savings and Loans Bank in Illinois. As a result of annoying national publicity, Hyde reluctantly acquiesced and paid his fine of several hundred thousand dollars.

Few remember now that during that crisis paying fines to atone for fiscal crimes was the standard deal offered by the George H.W. Bush Justice Department. The formula required that taxpayers must rescue the banks "too big to fail" but the public should realize that the perpetrators were too powerful to go to jail. Many of the rich and prominent received similar nuisance fines or stains on their reputations: Senators Cranston; Domenici; Speaker Jim Wright; son of the president at that time and brother of the present president, Neil Bush. No one, however, was forced to make restitution or do community service.

But in the end the Federal Deposit Insurance Corporation (FDIC) used the taxpayer dollars to reimburse every depositor up to the guarantee of 100,000 dollars. In the coming mortgage pyramid scheme bailout will the ordinary Americans on the bottom be reimbursed? Or will only the predators high up on the food chain have their fortunes rescued?

The mortgage customers on the bottom are not thieves or swindlers. The borrowers are the victims who were not licensed by the state or federal government. But clearly the professionals in the greed chain who took the fees, commissions, point payments, etc. are to some degree regulated by the government and they have violated regulations and laws. These sharks from the bottom to the top of the feeding chain have enriched themselves but we hear no proposals that this new set of racketeers be mandated to pay restitution to the families they have caused to be evicted.

Taxpayers beware! Socialism for banks must be ended. Billions of your public dollars are being packaged now for shipments to relieve the hedge fund geniuses. Princes and sheiks from the Middle East are now arriving to monitor the coming bi-partisan bail out operation. Into whose pockets will our public dollars now flow? Whose profits are we about to stabilize? Will our government order a freeze on foreclosures to save victimized poor families from evictions?

Comments

[SisterAnn]

In our area the builders & developers have hundreds of houses half finished. Some that are finished will not sell.

I suspect that is who will be bailed out.

Some say it is cheaper to build than to buy one already built.

I am so tired of the instability of the leaders of this country. They always have to 'trick' the average person. They are not honest people.

[swift_goat_pet_for_truth]

White collar crime has ALWAYS paid.
Look at what Bush did. The SEC found him guilty of fraud, and did not prosecute. It rarely does.
And Congress is the cause.

[alohaboxer]

A few of your comments are important and should be addressed. Unfortunately, a surprising number of the foreclosures are, in fact, coming from thieves and swindlers in the form of mortgage loan fraud. Are you going to blame the banks for that?

Much more prevalent, is the individuals who stretched their own budgets for the nice car and the huge home, only to find their incomes did not support an increase in a loan payment. One they KNEW would increase one day. Are you going to blame the banks for an individual"s personal financial mistake?

And what about federal oversight and licensing for mortgage salespeople?

Who really is "licensed"? The banks yes, but certainly not the individual sitting with the client, coaxing the individual with the lower payments of option ARMs and Hybrids. Not to the extent they should be. Yes, I will say it. The mortgage loan officer needs to be licensed and regulated exactly like a stock broker and take on the same responsibility of being a "fiduciary". This individual also needs to have education requirements and regulated training.

Bottom line, let the country take the pain it now so richly deserves. Bank"s made billions via the "gain on sale crack pipe" that was, and is, securitization; and, Wall Street took on these risks with all the models they needed to predict a three-sigma event. Let Wall Street and the banks keep those risks and suffer the losses. Further, let the market weed out the lower tier poorly managed banks like WaMu and Countrywide, and let the ethically questionable ones fail as well. Finally, if an individual made the decision to live in a house she could not afford, don"t prop their bad decision with government intervention, let them adjust, in their own personal way, to the downsizing of their own dream into a livable reality. That is the medicine that know one ever wants to take, it tastes bad, but in the end, it prevents greater ills. Given our country"s current individual attitudes of entitlement, it is the best remedy.

[realitytrumpsbull]

I read that the drug dealers are already
shifting to euros...what does that mean for
grain futures?

[nomoredead]

They are calling this a "Sub-prime " mess , but it is something much larger that the big boys got caught with their pants down. Why would H&R Block, AIG and E-Trade be in the sub-prime loan business? Last week when Hillary gave her speech about a bail-out plan on CNBCs financial show the men on the show were so excited and gigglely I knew something was wrong. The men were frothing at the mouth about government money coming to the rescue but all emphasized that they would be worried that some small homeowner would accidently take advantage of the system and get some of the money. Let the banks have billions but don't let Joe6pack dare get some.

[Novista]

Well said, Rep. Owens.

I would welcome a real free-market solution. But since my birth in 1936, the only one I can see is the illicit drug trade! Everything else has been government managed. Or should that be mangled?

Here's an interesting housing bubble link:

http://bigpicture.typepad.com/comments/2007/07/cool-residentia.html

and within, a convenient link to the graphic.

One has to wonder how GSEs, Fannie and Freddie could have been stung ... and as Money Market funds are supposed to be limited in their investments to low-risk, why is there much trouble there? Just ask Florida ... and others.

Oh, of course, they were misled by fraduluent ratings, right.

Personally, the only accountability I'd like to see is some jail time for lots of people who gamed the market.

As for the constant sub-prime misdirection, the percent of such mortgages was 8.3% in 2002, rising to 12% and peaking at 20% in August, 2006 -- at the same time the housing market peaked. But who noticed?

Now, of course, Bloomberg and others can dissect the cadaver but only a few pessimists saw the crash coming. It's Enron redux.

[Sundialsvc4]

At the bottom of it all...

... is "usury."

[bethinCary]

Excellent post.

I agree banks and lenders need to be reigned in. The amount of mergers taking place-supposedly to make banking cheaper-are just providing banks more opportunity to guge customers with more fees.
I was just talking to a friend who has a loan for $6000(school) and his interest rate jumped this month from 4% to 32%.
It's this kind of unfair practice that needs to be halted.

[localman]

Really important issue. Thanks for bringing it up. These bankers know the system and know that big government will be there to bail them out when they get too greedy, and compromise their entire industry. It's pitiful that more people are not pissed off about how the banks control our destiny.

The only presidential candidate I hear talking about this deeply deeply flawed system is Ron Paul. The issue needs to be addressed and promptly. First the banks inflate the money supply unnaturally resulting in a devaluation of the currency then they get bailed out to the tune of trillions of dollars which of course comes out of thin air and causes even more inflation. Bye bye dollar. Hello Amero. But of course that's just the way it's 'supposed' to happen.

[EtOH]

Thanks for the post Rep. Owens. When I heard Bush was going to do something about the mortgage crisis I natually assumed he was doing it for the benefit of the lenders, not the borrowers.

I think it will be revealed in the next few months just how much the US Treasury and Secretary Paulson's role in all this is. We may be hearing "Heck of a Job Pauly" here in the next few days.

[knosiswar]

EXCELLENT POST

Listen to Kucinich and Ron Paul when they talk about the WTO, NAFTA, The North American Union, The EU, New World Order, Globalization, One World BANK, Leading to One World Government, Central Control of the Central Money-Laundering Central Bank, with every person on the globe a dedicated tax-payer, to the SYSTEM, INCORPORATED, and owned by those FEW Share-holders. Now bush wants this South American Deal. Listen To Ron Paul when he says NAFTA Rules SUPERSEDE STATE RIGHTS. If we continue this road, the dollar, right along with our Constitution, and our Government, incorporated as it is, will go BANKRUPT, and our debts will be sold, and us as GUARANTORS of those debts, we will be slave to new masters with NEW RIGHTS AND LIMITED LIBERTIES.

[Stoyver]

Thanks Major. You nailed it again as usual. Unfortunately, the people will need to experience considerable pain before they pull their heads out and start voting intelligently. We allow our elected representatives to screw us over and over.

That pain is just around the corner. My father endured the pain of the late '20s and early '30s. His political views were based on that pain. I inherited most of his views. The approaching financial storm will end American's sense of superiority and entitlement. I only hope it doesn't lead to something worse, something soviet for instance. I hope there will be another FDR and not a Hitler. Its up to us!

[Boris]

I wish we could blame this disaster on the idiot president, Ronald Reagan, but this is the fault of the industry itself. Why is it that worshipers of Adam Smith say, 'let market forces determine the outcome' when the said forces are ready to screw the average citizen? Yet, when the same 'corrective market forces' actually come home to bite the Adam Smith-ers on the ass, they want help from the same people they have been screwing. This disaster is reverberating all over the world...the dollar is crashing, the stock market is in doubt. The rampant speculation of greedy middle class people, duped by greedy loan officers and the worst Realtors in the world has led to this. I think NOBODY deserves the bailout. You bet on the horse and he loses, you get no compensation. Hey, living under a bridge can be fun...just think of it as camping out.

[joebhed]

Have y'all read "The Legalized Crime of Banking"?
I guess its out of print.

[joja]

Uhhhhh, lemme guess. This is an intelligence test, right?

OK. I'll take a stab at the answer to Rep. Owens' question about who will get stuck with the bill for the mortgage bailout --

Taxpayers!

An alternative title for this blog: "Bend Over, Folks!"