There Really Is No Honor Among Thieves

The following graphic and quotes come from a recent Addison Wiggin’s article at The Daily Reckoning:

Looks like fun, doesn’t it?

The Federal Housing Finance Agency (FHFA) — the arm that oversees the  government-sponsored entities Fannie Mae and Freddie Mac — announced they plan  to sue a list of major Wall Street banks for… drumroll, please… lying about the  quality of the mortgages they packaged into securities and sold to Fannie and  Freddie.

“While I believe that FHFA is acting responsibly in its role as conservator,” one-time Fannie flunky Tim Rood (now a partner at the Collingwood Group) told The New York Times this morning, “I am afraid that we risk pushing  these guys off of a cliff and we’re going to have to bail out the banks  again.”

Hmmmnn… let’s see if we can get this: A bankrupt government is suing on  behalf of two bankrupt quasi-government firms… hoping to recover money from  bankrupt banks that were already bailed out once by the aforesaid bankrupt  government… and as a consequence may yet need to be bailed out again.

I can understand Addison’s quandary.  I have been trying to wrap my mind around this for days. I doesn’t compute.

Those of you who have followed this blog for any time know how much I despise the banking industry. So, you would expect that I would be delighted that the FHFA is finally going after the bankers who ripped off investors during the housing bubble fiasco and then were bailed out by our government in the name of all future and present taxpayers. I say finally because this action by the FHFA took place just two days before the statute of limitations expired. Does all of this seem just a little bit fishy to you?

Let’s do a simple review of events. Starting back in the Clinton Administration, our compassionate Democrats, like Barney Frank and Maxine Waters and others, pushed a program to allow poor people with less than stellar credit ratings to obtain mortgages to buy a home. The quasi-government agencies, Fanny Mae and Freddy Mac, were pressured to lower their loan standards so that people otherwise unqualified would now qualify for mortgages. The un-said premise being that there was little risk to the lender because houses always go up in value over time. (Mental midgets our compassionate Democrats.) Fannie and Freddy do what they are told and millions of unqualified people start buying homes. There is a boom in the housing industry. Meanwhile, Fannie and Freddy and their friends on Wall Street begin packaging these high risk mortgages with lower risk mortgages and they are sold to investors. The baksters bribe or coerce S&P and Moody’s to give these investment instruments AAA  ratings. Because these packaged instruments pay a higher return than the under laying mortgages, Fanny and Freddy decide to invest in them big time. okay, the bubble burst and Fannie and Freddy are in big trouble. Our government takes them over and we taxpayers assume their debt. Now, three years later, the FHFA is suing all the banks that were involved in selling these toxic mortgage packages, in the name of Fannie and Freddy , claiming that Fannie and Freddy weren’t made aware of the risk level of the investments they were making. Excuse me!!! Fannie and Freddy wrote most of the under-laying high risk mortgages. HOW COULD THEY NOT KNOW THE RISK?

Please go back and  reread the last quote of Addison’s. Do you see why i am scratching my head?

Well, that’s what I’m thinking. What are your thoughts?


Read more: Mind-Blowing News from the FHFA


28 thoughts on “There Really Is No Honor Among Thieves

  1. As Ronald Reagan said, “Get in bed with government, and don’t be surprised if you get more than a good night’s sleep.”

    Excellent post. You stole my thunder. I’ve got a post set up for tomorrow on the same bizarre topic.

    Obama is looking more like Chavez every day…

  2. Government needs to GET OUT OF HOUSING, GET OUT OF BACKING HOME LOANS (among 100’s of other things they have absolutely NO constitutional right to be involved in).

  3. I’m re-reading Laurence Kotlikoff’s “Jimmy Stewart is Dead” and I’m scratching my head constantly as he unpacks what happened. Particularly cringeworthy is his description of the “powerful” people who were running these companies. To think that our economy was entrusted to these dolts… The other thing that makes me go gray(er) is the ineptitude of the “regulators”. Anyone who wants more costly regulation first should have to show me a competent regulator, but I’ll bet all they could show me is a bureaucrat that’s in over his head, if not corrupted.

  4. In the manner of the day, they are mostly sons-of-bitches.

    The founders could have never contemplated the federal government being involved in loaning money to people to buy real estate. Or anything else for that matter.

    1. We who know better were asleep a the switch for a long time, Grant. Most of what makes-up government today is in fact unconstitutional. Unwinding this mess, if we win the chance to do it, is going to be a long and painful process.

  5. Get ready, I’m going to quote James Traficant, who makes a good point in this portion of a speech given in 1993. As I recall, he was one of the few dems to stand up to Clinton:

    “Prior to 1913, most Americans owned clear, allodial title to property, free and clear of any liens or mortgages until the Federal Reserve Act (1913)
    “Hypothecated” all property within the federal United States to the Board of Governors of the Federal Reserve, -in which the Trustees (stockholders) held legal title. The U.S. citizen (tenant, franchisee) was registered as a “beneficiary” of the trust via his/her birth certificate.

    In 1933, the federal United States hypothecated all of the present and future properties, assets and labor of their “subjects,” the 14th Amendment U.S. citizen, to the Federal Reserve System. In return, the Federal Reserve System agreed to extend the federal United States corporation all the credit “money substitute” it needed. Like any other debtor, the federal United States government had to assign collateral and security to their creditors as a condition of the loan. Since the federal United States didn’t have any assets, they assigned the private property of their “economic slaves”, the U.S. citizens as collateral against the unpayable federal debt. They also pledged the unincorporated federal territories, national parks forests, birth certificates, and nonprofit organizations, as collateral against the federal debt. All has already been transferred as payment to the international bankers.

    Unwittingly, America has returned to its pre-American Revolution, feudal roots whereby all land is held by a sovereign and the common people had no rights to hold allodial title to property. Once again, We the People are the tenants and sharecroppers renting our own property from a Sovereign in the guise of the Federal Reserve Bank. We the people have exchanged one master for another. ”


  6. Very little that western governments do these days will ‘compute’ with average people. Perhaps it’s because those leading them live in some sort of different parallel universe. Either that or we’re all too stupid to get it. I doubt very much that it’s the latter.

  7. You are right, Jim, this is a head scratcher. But it goes well with the coming job creation speech and main electoral platform of the President – to promise that jobs are coming soon! (Emphasis on the word “promise”), for it actually creates jobs………..for lawyers.

    Seriously, a lot of people feel like you feel, they hate banks. This does not escape the campaigning instincts of the President, and going after banks is one of these good campaign issues. It is all a flash in a pan because they were talking settlement even before the announcement was made. But there are unintended consequences that add to the despair of the banking industry and tends to prolong their skittishness about lending. Like them or not, the economy needs their lending.

  8. This going after the banks will end up in no good place (much as I despise the banking industry! As the excerpt from the article says:

    A bankrupt government is suing on behalf of two bankrupt quasi-government firms… hoping to recover money from bankrupt banks that were already bailed out once by the aforesaid bankrupt government… and as a consequence may yet need to be bailed out again.

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