Idaho's Weekly Journal of Local & National Commentary Week 2815


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by Free Market Duck

Central banks create $4.7 trillion mortgage foreclosure debacle with fractional reserve monetary concepts

Oct 10, 2010

New York, NY – Whoa, girl friends, jump off your side saddles, pull up the floor and pour yourselves another hot cup of Rocket Java.  Four major U.S. banks, B of A, Wells Fargo, JP Morgan Chase, and Citigroup, handle-service-screw-around-with $4.7 trillion, or 70%, of the home mortgage market money that was used as collateral to create investment derivatives such as CDs with fancy sounding names like Super Duper You Bet Safe As Hell Pension Fund 1001 for people to invest their life savings into to earn interest so they can have a retirement pension to live on when they hit age 65.

   Unfortunately, it looks like those Super Duper Pension Funds won’t be there.


   Because the basis for the Super Duper Pension Funds, the collapsing value of homes and, thus, the collapsing value of the home mortgages that home owners are supposed to pay to their banks each month, are not being paid.

   Home owners are defaulting on their house payments and either walking away or simply living in their home without making any payments whatsoever.  Home prices are continuing to collapse with no end in sight and Mr. Average Home Buyer ain’t forking over house payments to the banks because (1) he lost his job, and (2) the value of his house is a lot lower than the mortgage balance of his loan.  He is underwater and drowning in debt, debt originally created by our central bank, the Federal Reserve, in a maze of fallacious Economic Wizardry concocted at places like Harvard and Wall Street.

   Time for the banks to foreclose, right?  Wrong.  Why not?  Because if all the banks in the U.S. foreclosed on all the homes that aren’t being paid for and brought those foreclosures onto their accounting books, all the banks in the U.S. would have to declare bankruptcy.  That’s why the Obama Administration and Government Sponsored Entities (GSEs) Fannie Mae, Freddie Mac, the FHA, and Donald Duck and Mickey Mouse are doing nothing to push foreclosures on the American public, besides the fact they can’t physically process that much paperwork in our life time.  Mainly, it would show us how bad off we really are… and, by the way, you know, as an aside, it would cause the entire frickin economy to crash and burn like the economic snow ball from hell that it really is.

   So, what did the above four major Banksta Gangstas do yesterday?  That’s right, they stopped all foreclosures on their $4.7 trillion of home mortgages until they could rearrange the deck chairs and try to tap dance their way off the deck of the sinking Titanic.

   The Bigger question is:  how in hell did we arrive at this point?

   That’s easy.  Easy peezy, lemon squeezy.  We got to here by adopting the same concepts and absurd economic principles as the central bankers adopted for creating paper money and credit out of thin air with no real collateral.  It’s called:  fractional reserve banking, in which the banks issue more debt, more paper I.O.U.s, more non-backed promissory notes, more pulp fiction U.S. Dollars than the hard commodity collateral for which the legal tender notes are supposed to represent.  In short, the central banking bastards have been legally counterfeiting our money with the full knowledge and consent of Congress so they can spend tons of money they don’t have like drunken sailors on shore leave.  It’s called a “stimulus.”  It used to be called “counterfeiting.”

   Let’s get down and dirty and put it in "street talk."  The Federal Reserve prints paper money out of thin air or issues credit from nowhere.  They loan it to Congress as a National Debt and/or to member banks who then loan the new fake money to home buyers.  The home mortgage market created by the central bank and the government is part of a larger picture of monetary inflation to “stimulate” the economy to purposely create boom-bust business cycles so the bankers can rake in billions of dollars annually in a giant Pulp Fiction Dollar Ponzi Scheme.  It’s no different than counterfeiting by a bunch of crooks except that it is “legal.”

   As this creation of fake money drives up all prices in the market, especially houses, people grab the cheap money at no down payment and buy million dollar McMansions.  Then, the new MBAs from Harvard who gravitate to the biggest Gangsta Bankstas on Wall Street pop up with brilliant idea # 1001:  Hey, you know how it’s OK for us to do fractional reserve banking with the U.S. Dollar, issuing lots more paper money than there really is for the gold and silver that is supposed to back the dollar?  OK, -- they reason from their brilliant Econ Class Robbery 101A – so why not do fractional reserve banking for homes, too?  Oooh, how do dat work?  Easy Peezy, lemon squeezy:  we issue more paper than the actual value of the home, you know, just like we did for gold and silver dollars.  In fact, let’s take it one step further, just like we did with the dollar.  Let’s make it non-redeemable.  In the same way that nobody can take a paper gold or silver certificate down to the U.S. Treasury and redeem it for the real gold or silver, let’s make it so nobody can take their mortgages to the bank or anywhere else and redeem the house.

   Wow, said the brilliant geniuses from Harvard.  Sorta like creating fractional reserve home mortgages, huh?  Yeah, Throckmorton, fractional reserve home mortgages because now we can use the phony baloney home mortgage debt as the basis for creating Collateralized Investment Vehicles that are not really collateralized – especially if the value of houses happen to collapse in the economy.  Yippee, they all cried in unison at JP Morgan, Wells Fargo, Bank of America, and Citigroup.

   What a brilliant economic idea:  fractional reserve home mortgages just like fractional reserve U.S. dollars.  How easy was that, using the same robbery concept of fractional reserve banking for fractional reserve home mortgages?  Now we can add up a glob of thousands of home mortgages, slice ‘em and dice ‘em, and use the sliced and diced globs of debt supposedly backed by houses whose values may, yes indeed, in fact they did, crash and burn – hey, I know, let’s call them DERIVATIVES – and use these collapsed home values as a basis for investors to invest in.  Hi, we the bank will pay you 10% per year if you invest your money in our Super Duper Safe as Hell Pension Fund-a-Roono… and, thus, many people did.  Many people, such as retired teachers and Mom and Pop Senior Citizens.

   But oops, when housing prices collapsed lower than whale shit, or at least lower than Mr. Average Home Owner owed as a mortgage on his house, Mr. Average Home Owner stopped making his monthly payments.  The banks started foreclosing until a zillion home owners began defaulting and the banks could not keep up with the foreclosures, nor did the banks want to show these bankruptcies on their books so they did nothing.

  So much nothing, in fact, that as of this weekend, B of A has suspended all foreclosures on all homes in all 50 states to the tune of $1.7 trillion.  The other Gangsta Bankstas in the Gang of Four – Wells, Citi, and JP Morgan – have stopped all foreclosures in 23 states on the rest of the $4.7 trillion total.

  Back to the banks attempting to tap dance their way out of this home mortgage mess on the sinking Titanic.

   When the dummies from Harvard who modeled their derivative investment jokes on the concept of fractional reserve monetary banking created fractional reserve home mortgage investment vehicles, and mixed thousands of home mortgages as part of their derivative Investment Frankensteins, they muddied the standard old-fashioned paper ownership trail – the home title -- between the home owner and the bank and thus the investment derivative itself.  The Harvard MBA dummies simply added the mathematical values of different home mortgages to create sum totals for their investment vehicles without regard to what fraction of which home belonged to which investor.  Then they sliced up the mixed mortgages and sold them as investments.  So now, the banks have no legal paper trail by which to foreclose on somebody’s house because the mortgages were sold as fractional portions to other investment note holders and the courts cannot trace discreet ownership to a home title.  Thus, the courts can’t rule, banks can’t foreclose, and home owners don’t know what to do.  Can they even sell their home?  How would you like to try qualifying as a buyer for one of these homes?  Talk about a frickin nightmare title search in a real estate deal.

   So here sits – or is that “shits” – 70%, or $4.7 trillion, in home mortgage foreclosure problems in the courts, at the banks, as pension investments going belly up, and in the housing markets that are collapsing because:  the stupid bastards from Harvard who jammed over to work for four major Gangsta Bankstas – B of A, Wells Fargo, Citigroup, and JP Morgan – transformed the concept of fractional reserve banking to fractional reserve home mortgages.  What a bunch of dolts.

   Who do we blame for this gargantuan foreclosure mess that may well bring down the entire economy?  The altruistic state collectivists and their soppy socialist sophisms that are being taught in Quantitative Economics 101A at all of our major universities.  Hey, welcome to going off that old-fashioned, archaic gold standard in which the U.S. Dollar was backed 100% -- no fractional reserve robbery – by gold or silver and was directly redeemable at any U.S. Treasury.

   Now, home mortgages are not redeemable, either, and for the same basic reasons.

   At the axiomatic philosophical level, welcome to going off the reasoned, logical, thinking level.  And that is the real problem in our economy:  our students are not learning HOW to think logically at the conceptual level, much less WHAT to think, or WHY it’s important to even think at all. – FM Duck

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