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Economy
Related: About this forumThe Economic Scam of the Century by Mike Whitney
March 26, 2014Government Backing for Toxic Mortgage Securities?
The Economic Scam of the Century
by Mike Whitney
The leaders of the U.S. Senate Banking Committee, Sen. Tim Johnson (D., S.D.) and Sen. Mike Crapo (R., Idaho), released a draft bill on Sunday that would provide explicit government guarantees on mortgage-backed securities (MBS) generated by privately-owned banks and financial institutions. The gigantic giveaway to Wall Street would put US taxpayers on the hook for 90 percent of the losses on toxic MBS the likes of which crashed the financial system in 2008 plunging the economy into the deepest slump since the Great Depression. Proponents of the bill say that new rules by the Consumer Financial Protection Bureau (CFPB) which set standards for a qualified mortgage (QM) assure that borrowers will be able to repay their loans thus reducing the chances of a similar meltdown in the future. However, those QE rules were largely shaped by lobbyists and attorneys from the banking industry who eviscerated strict underwriting requirements like high FICO scores and 20 percent down payments in order to lend freely to borrowers who may be less able to repay their loans. Additionally, a particularly lethal clause has been inserted into the bill that would provide blanket coverage for all MBS (whether they met the CFPBs QE standard or not) in the event of another financial crisis. Heres the paragraph:
Sec.305. Authority to protect taxpayers in unusual and exigent market conditions .
If the Corporation, the Chairman of the Federal Reserve Board of Governors and the Secretary of the Treasury, in consultation with the Secretary of Housing and Urban Development, determine that unusual and exigent circumstances threaten mortgage credit availability within the U.S. housing market, FMIC may provide insurance on covered securities that do not meet the requirements under section 302 including those for first loss position of private market holders. (Freddie And Fannie Reform The Monster Has Arrived, Zero Hedge)
In other words, if the bill passes, US taxpayers will be responsible for any and all bailouts deemed necessary by the regulators mentioned above. And, since all of those regulators are in Wall Streets hip-pocket, theres no question what theyll do when the time comes. Theyll bailout theyre fatcat buddies and dump the losses on John Q. Public.
If you cant believe what you are reading or if you think that the system is so thoroughly corrupt it cant be fixed; youre not alone. This latest outrage just confirms that the Congress, the executive and all the chief regulators are mere marionettes performing whatever task is asked of them by their Wall Street paymasters.
http://www.counterpunch.org/2014/03/26/the-economic-scam-of-the-century/
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The Economic Scam of the Century by Mike Whitney (Original Post)
Crewleader
Mar 2014
OP
The Oligarchs, Corporations And Banks Own And Control The Politicians That Own And Control Us
cantbeserious
Mar 2014
#2
Demeter
(85,373 posts)1. Yeah, I saw that
The government is corrupt, and you know what they say: A fish rots from the head down.
cantbeserious
(13,039 posts)2. The Oligarchs, Corporations And Banks Own And Control The Politicians That Own And Control Us
eom
GeorgeGist
(25,319 posts)3. I'm looking forward to ThirdWay Manny ...
'splain why this is good for MainSt.
n2doc
(47,953 posts)4. Since they can't make their huge bonuses running legitimate banking
They resort to rigged profits. Of course, sine they got away with it before, no reason for them not to try again.
Will Warren or Sanders have the power to stop this? Will they try? What about Obama?
Doctor_J
(36,392 posts)5. Well, the century's pretty young
I am sure it will get much worse
SamKnause
(13,091 posts)6. ALL branches of the United States government
are corrupt !!!!
Wall Street and global corporations own and control everything that happens in this country.
Doctor_J
(36,392 posts)7. Time for President Hope & Change to pronounce this DOA
running out of time & gimmicks to get his 2008 juggernaut re-engaged to save his presidency, party, and nation.
Hotler
(11,416 posts)14. I have no hope. n/t
CrispyQ
(36,457 posts)8. ~kick.
The crooked banksters run the world.
KoKo
(84,711 posts)9. Recommend...
sigh......
jtuck004
(15,882 posts)10. k&r n/t
Fuddnik
(8,846 posts)11. Only 3 letters can describe my reaction.
DemReadingDU
(16,000 posts)12. WTF!