Overpaid Criminals

When the only criterion for getting a home loan is having a pulse, no one should be surprised that the financial market is in chaos. Who would have guessed that lending money to non-credit worthy borrowers would result in delinquent loans?

The Equal Lending Opportunity legislation defied common sense. It broke the cardinal rule of banking by demanding lending institutions ignore the collateral, credit and employment history of the borrowers. Nor could the geographic location of the property be taken into consideration.

The financial community obliged these federal mandates with gusto. With quasi-government corporations like Freddie Mac and Fannie Mae buying up the new mortgages, the original lenders had no downside to approving loans. Better yet, selling the worthless paper freed their credit lines to issue more mortgages.

Sub-prime and interest only loans were introduced and promoted to broaden the field of potential home owners (read new mortgages). This fueled the construction industry’s surge. The demand for housing inflated property values, which in turn inflated the stock value of the companies buying the mortgages.

The merry-go-round stopped. Thousands and thousands of credit-worthy buyers are sitting on properties whose values have since plummeted. Their mortgages are greater than the property value. This depreciated the reserves of lenders which underpin their ability to lend, to survive. The depth of this problem has yet to unfold, but expect more bankruptcies.

To add insult to injury the homes of most Americans have been devalued by the number of anxious sellers. The market is flooded with inventory. Experts don’t see this problem solved in less than four years.

The executives at Fannie Mae, Freddie Mac, AIG, etc. knew it was a Ponzi scheme. The early stockholders were paid off with money put up by the later ones. The system collapsed when they ran out of people willing to plunge into the inflated market. They ran out of stupid buyers.

Now the public is told that there is no criminal liability. No one in government, in financial institutions or in the SEC can be held accountable. The taxpayers are expected to believe that this fiasco came as a surprise to the government and the financial community. In a pig’s eye!

Greed is criminal when the participants, with full knowledge of the harmful consequences, pursue deceptive strategies to entice investors. Does anyone with an IQ higher than a cup of mud believe the past and present executives of these companies aren’t bandits?

The US Attorney General should rip the covers off these companies. If they don’t find proof of criminal intent it means one thing. Some important people in government colluded and benefited personally. It’s a cover-up. And if there is no serious investigation, be assured that members of Congress and the Executive branch are in this up to their necks.

The failure of Lehman Brothers, AIG, Freddie Mac, Fannie Mae and many more to come substantiate that when stupid is given what stupid wants the nation always pays the price.

Equal Opportunity Lending is welfare masquerading as monetary fairness. It’s not equal because it penalizes every citizen who makes responsible decisions. These folks will face tighter credit, reduced home values and higher taxes for a decade to compensate for the trillion dollars the government squandered in the name of fairness.

The Democratic solution offered by Rep. Barney Frank: Use more tax dollars to bail out every investor and every home buyer whose poor decisions got them into trouble. The liberal definition of shared responsibility: Protect the criminally stupid and the criminals.