Are you ready for Sub-Prime Mortgage Bubble _ The Sequel? You’re probably thinking you still haven’t recovered from the 2008 original. Well, if Mel Watt gets his way, the sequel will be coming to a neighborhood near you soon. Who is Mel Watt? He was named by President Obama last year to be Director of the Federal Housing Finance Agency (FHFA). If you recall, that is the agency that took the bankrupt Fannie Mae and Freddy Mac into receivership after the collapse of the original sub-prime mortgage bubble popped.
Prior to his appointment, Mr. Watt was a long time Congressman from North Carolina and before that he was a practicing attorney. According to Wekipedia, as a lawyer, Mr. Watt specialized in minority business and economic development law. It sounds like Mr. Watt’s has his roots in”community organizing”. Imagine that!
So, what is Obama’s clone proposing? As reported by the Wall Street Journal back in May and by Fox News just the other day, he wants banks to loosen their lending standards, so that those with poor credit ratings can buy a house and he wants the banks reduce their down payment requirements to just 3%. Does that sound familiar? Well, of course it does. It’s a sequel, after all.
Of course, Mr. Watt has all the politically correct rational for his proposal. It will spur the housing construction sector and create jobs! More importantly, it will help all those dead beat victims in America buy a house they can’t afford. But. Mr. Watt is a clever little rascal. He is working hard to get the bank regulators on board with his plan. That way, when the SHTF, he will have plenty of places to point all ten of his fingers. Not surprisingly he is working closely withe bankers, who don’t like that the regulations after 2008 are hurting their profits. The bankers, as you all know, just want to help the less fortunate among us. That’s is why they will package those mortgages into security back derivatives and sell them before the buyer’s signature has had a chance to dry. By the way, Zero Hedge had a guest post on Mr. Watt’s plan a couple of days ago. The author, Mike Krieger, found this interesting tid bit:
While some observers consider Watt’s appointment a significant lurch to the left compared to DeMarco, (he was among those named by the Democratic Socialists of America as a member of their caucus in 2009), Watt himself has raised a tremendous amount of money from banking and real estate-related corporations and trade associations. One report from the Sunlight Foundation found that for 2009, Watt had received some 45 percent of his total campaign funds from donors in the finance and real estate sector.
Some things never change, do they?
Your humble observer of the asylum we all have to live in has some advice for you, dear readers: do whatever you can to make sure your pension funds do not invest in mortgage-backed-securities. Period!
Well, that’s what I’m thinking. What are your thoughts?