ATTEMPTING TO UNDERSTAND THIS INSANITY...

Okay, the crops aren't ready to go, the neighbors are starting to run and I'm like a hunting dog watching his master load the truck with all the hunting gear. This post may be interpreted as my 'whining' and 'squirming' like said dog in his kennel as he awaits the gate to open and his coming trip to the fields.

Spent some of my time over the past day or so trying to figure out how the US economy got into this mess and what logic involves the American taxpayer bailing out a whole bunch of east and west coast banks for a whole bunch of bad loans on mortgages, car loans, and student loans. I'm having a hard time putting it all together, but after reading as much as I can stomach I think the timeline and sequence of events goes something like this:

1. Peanut farmer/President Carter signed into law the "Community Re-investment Act", hereafter known as "CRA" which stipulated that banks had to loan money in those areas inhabited by low income minorities that otherwise would not qualify for home loans.

2. Every President AFTER Carter supported the CRA because it was politically popular, but no one got real excited about making a big deal out of it until Bill Clinton came along. He more or less held a gun to the banking industries head and forced them to make a whole bunch of these loans. His threat was they were "red-lining' or discriminating against these same minorities and if they were his administration was threatening severe sanctions against these financial institutions. They were not empty words. Clinton had the clout to hurt them.

3. To his credit George W. Bush on multiple occasions asked Congress to re-examine the Fanny May and Freddie Mac arrangement and financial structure because it was obviously precarious and seen so as long as five years ago, but because it was so popular with certain voting blocs Congress, to no one's surprise, did nothing.

4. To his shame, George W. Bush made it worse when he sponsored the "No Down Payment" provisions to the CRA and allowed people to purchase homes with nothing down. This may have proven politically popular, but it lacked any shred of common sense and exacerbated the present situation.

5. Throughout all this time, the banking industry was doing land office business handing out volumes upon volumes of mortgages and other loans tied to this scheme and the people handling the most paper were getting record financial pay packages and bonuses. That part is understandable, regrettable, but understandable. A number of executives within the financial community got really rich off this government sponsored effort for the 'poor' to purchase housing. From their standpoint it was a "No-Lose" deal because the government through Fanny May and Freddie Mac was guaranteeing these loans, so they felt they were bullet-proof. Several times in my research you read the statement these transactions were "...too big to go under..."

What is troubling is the practice where various community organizations were given a cut of the action to facilitate these home loans to people within their low income community who would not otherwise qualify for a home loan. In other words, there are/were a lot of people who helped this situation along by taking advantage of the law and found people to sign up for the money. In the process their 'organization' and their personal bank accounts got a pretty good financial 'bonus'.

I think the technical word for this kind of action is called a "scam".

6. Michelle Malkin alleges that a good percentage of these bad home loans were given to people who are not US taxpayers and are NOT even US citizens. They are/were illegal immigrants. Again, various community groups help facilitate these transactions and took advantage of the situation.

SUMMARY: The threat now is the situation is SO BAD that unless the US taxpayer signs up to purchase these bad debts from the banks the whole system will collapse. It will cost each of us,personally, approximately $2,600! If we don't, credit will disappear. In a relatively short period of time no one will be able to get business loans and most financial institutions will start calling in their good loans to pay for these bad loans. A big side effect will be the downturn in the stock market and that will mean that all those 401K plans that everyone banks on for retirement income will diminish if not disappear entirely.

That means a whole bunch of retired folks and about-to-be retired people are going to run out of money pretty damn quick and fairly soon.

Where do you start to get a correction on this situation?

Well, offhand I think the first thing someone should consider is lining up the entire Congress against a wall and shooting them, followed by the community activists who used this scheme for undue enrichment. Talk about the Road To Hell Being Paved With Good Intentions, this makes any pyramid confidence swindle pale by comparison.

I, honestly, don't know what the answer is, but I do know that this is the kind of thing that sparks violent revolutions and bloody show trials. If you study the history of this thing at any length, you can see that the Republicans aren't blameless, but more than a fair share of the blame can be placed at the feet of the Democrats either through their zeal to help the economically 'dis-advantaged' or a deliberate attempt to raid the public treasury.

In any event, it is obvious the system is broke; both physically and financially. We have to do what's necessary to fix it for our own survival, but I say then we search for the culprits responsible and literally hold their feet to the fire (I don't mean that to sound like a metaphor, I mean it in a physical sense) to find all who participated in this disaster.

The old saying about republics and democracies only lasting 200 years because the citizenry figures how they can vote themselves an income from the public treasury has finally come home to roost in a very real way.

All The Best,
Frank W. James