Another attempt

I am going to make another attempt at making clear the "whats and whys" of this mess out there, and as a start, I am going to take as given that "greed" was what induced people to take out mortgages that they could not afford. Without that, there would be no credit mess.

I have stated previously, "greed IS good." It is what drives the economy ... without greed, there would be no urge or impetus to advance (we'd be happy supping a beer from a mug in whatever passed for a primitive Barcalounger, beating our wives over the head, huntin' and shootin,' wives doing most of the work, men being men -- sounds kind of Red State). But greed is not necessarily good when it is for power -- for power's sake. As in the greed for political office.

And in this respect greed did play another role in creating the credit crisis (hereinafter simply "Mess"). You see, politicians are always on the look out for ways of currying favor with their electorate in order to ensure that they will continue to remain in office. That is the goal of most every politician in Washington -- I totally refute the notion that they have any desire to help people in their Districts. In the end analysis, the politicians like being in Washington, like being "powerful," like the perks, the pensions, the medical care, the fawning adulation of their supporters -- it is egomania writ large. If they were better looking, they'd be actors.

So, around 1992 (that would be when Bill Clinton ascended the throne, in case you forget), Congress started pushing Fannie and Freddie ("F&F") to increase their purchases of mortgages going to low and moderate income households. In 1996, at the behest of the Clinton administration, HUD gave F&F targets: 42% of their purchases HAD to go to low and moderate borrowers. This rose to 50% in 2000 and through Congress, 52% in 2005. Sounds bad already, doesn't it?

In 1996, HUD required F&F to allot 12% of their purchases to "Special Affordable" loans. Egads, what are those? Those are borrowers with less than 60% of the median income in a given area. This "special" allotment rose to 20% in 2000 and 22% in 2005. The 2008 goal was 28%. F&F, true to their puppet masters, met their goals: remember which Party has been in control of F&F since 1992 -- and it ain't the GOP. In meeting their goals, F&F bought hundreds of billions of subprime and adjustable rate loans. As the Journal reports, these loans were often made to persons buying property with deposits of less than 10% down.

F&F also sought to make a few pennies (and bonuses for their own Fat Cats) by buying lots of those subprime CDOs for a little extra yield. Wall Street was happy to sell them to F&F, and Congress saw that its will and intent was being met. Everyone was happy -- except, perhaps, for certain politicians who saw that long-term financial stability of the system was required in order for them to benefit from their position over the long term: John McCain being one of them. But in the meantime, F&F was getting "poor people" into houses, thereby meeting a political goal. The White House liked it because it was "off balance sheet." After all, F&F was not an instrument of the Government. Democrats loved it because "their people" were being enfranchised, moving into houses that ultimately the taxpayers at large will have to pay for, because in many cases the loans were made to persons who could not rationally be expected to pay for them. The F&F guarantee was a taxpayer guarantee: and if you know ANYTHING about who pays the taxes in this country, you know it is not the people receiving L&M preferrential mortgages. If the Ponzi scheme fails, it turns into income redistribution!! Perfect for Barney Frank and Nancy Pelosi.

As the WSJ points out, the Community Reinvestment Act of 1977 was revisited in 1995 with the goal of encouraging local banks to increase the number of loans to L&M income households. Bear Stearns (remember them?) floated these bastards, guaranteed by F&F. Interestingly, even F&F objected to doing this until they discovered that these loans kept their own non-performing assets artificially low. Beautiful: more bonuses for us!

Then the Tech Wreck induced the Fed to lower rates for everyone -- to delay the inevitable pain that should follow such a fool-hardy bout of excess. So the money moved to the next best Ponzi scheme: property. And at this point, with Congressional and White House backing, the mania took off. Everybody wins, as long as the market continues to rise.

But there is no such thing as a one-way street in global markets. Never has been. Likely never will be. So in pointing fingers, the largest finger really should be pointed at the same group of blood-sucking leeches that propose that we, the tax payers, should bail ourselves out of a mess that is really of their self-serving creation.

Regardless of your socio-political stripe, lending to bad credit bets has always been bad business. And Congress does not have the best interests of the taxpayer at heart. Never has. And likely never will.

And just to remind you who pays the taxes:

Income Category	1977	1979	1981	1983	1985	1987	1989	1991	1993	1995	1999 (Projected)
Highest 20%	68	67	66	68	68	72	72	72	75	77	79
Fourth 20%	20	20	20	20	19	18	17	18	17	16	16
Middle 20%	10	10	10	10	9	8	9	9	8	8	7
Second 20%	3	4	4	3	3	3	3	2	2	1	1
Lowest 20%	0	0	0	0	0	0	-1	-1	-1	-2	-2
All Families	100	100	100	100	100	100	100	100	100	100	100
Top 1%	20	19	17	20	21	24	24	23	27	29	29
Top 5%	38	37	36	38	39	43	44	42	46	49	50
Top 10%	50	50	49	51	52	56	56	55	59	61	63