Future home of? (photo by tomsaint11)
"Come gather round friends and I'll tell you a tale, of when the red iron outfits run empty." A time of prosperity when the options were ours and the moon was a destination rather than a reminder. A time when the boxes of war returned from jungles green only to be replaced by the boxes of war returned from lands of sandy brown.
Who gains from this? A wise man might ask, who gains from loss? Who gains from the cessation of prosperity? I asked a new acquaintance if she was aware that the Federal Reserve was lending money to member banks for 0.10 percent. "No," she answered, "what does that mean?"
I remain astounded that this story isn't well known by now. That member banks can borrow at the Fed Funds target rate of one tenth of one percent. One million dollars can be borrowed for the cost of $1,000. The Treasury then offers up one million dollars in treasury bills which will pay the bearer 3.10 percent interest or that one million dollars so casually handed over to the banker for $1,000 will cost you the taxpayer $31,000 . The banks if they like can buy those treasury notes and make three percent without even getting out of bed.
When you live in a country that runs a huge trade deficit each month such as the United States the money actually disappears. The wealth of a nation addicted to Japanese cars and Chinese running shoes soon finds that like old Mother Hubbard that the cupboard is soon bare. The cash for these outsourced products leaves our shores and so on the first of every month we find ourselves fifty or sixty billion dollars in the red. If you are selling these products you are making a handsome profit and don't care where the bulk of cash winds up, you've already gotten yours.
Ten million homes foreclosed, with no property taxes paid or owed on properties in foreclosure. A hundred or two hundred dollars in property tax revenue per month time's from ten million foreclosed homes leaves gigantic revenue hole in local government budgets. Officially 13.9 million unemployed yet the numbers of those no longer counted in the workforce adds two million more to that number. This months official U-6 unemployment rate of 15.8 percent is probably closer to 17.5 or even 20 percent. These millions pay no taxes into state or local coffers but instead draw out money in social services.
State governments billions of dollars in debt were offered a slice of the President's puny stimulus the first year. Then additional money was added to the phony jobs bill in the second year and in the third year the White House told the states to phuck off and die. Almost instantly, Republican controlled state governments simultaneously came up with the idea of breaking public employee unions and defunding pension plans.
Suddenly this crisis and fiasco becomes Christmas for conservatives and the wealthy. A President in the White House who is always willing to meet the Republicans half way even before negotiations begin. A President who sold us out on health care, sided with the Republican's on the GM bankruptcy, caved on the Bush tax cuts, showed no leadership what so ever on financial reform. So now ask yourself, why would the Republicans ever want to replace this guy? The Republicans get everything that they have ever dreamed of served up on a silver platter.
Barack Obama's leadership style has been compared to"Ronald Reagan. Barack Obama's agenda has been the most conservative since"Ronald Reagan. Barack Obama's domestic agenda has been the most counter productive since" Herbert Hoover.
Now look at the field of Republican Presidential front runners, Sarah Palin? That speaks for itself, nuff said. Michele Bachmann? A two term local school board member turned three term backwater Congresswoman. She has no legislative accomplishments and no following other than the lunatic fringe evangelicals. Tim Pawlenty, a two term, do nothing, Minnesota governor. Pawlenty rode in on the coat tails of good times and a successful Democratic predecessor. It was Pawlenty's administration which in an effort to get big government off of your back discontinued regular bridge inspections in Minnesota. The inspection program was suddenly revived after the collapse of the I-35 Bridge across the Mississippi River.
Mitt Romney? The man who couldn't beat John McCain in the Republican primaries? It soon becomes obvious that even when combined the Republican field of candidates doesn't contain enough Presidential timber to fill a box of Ohio blue tip kitchen matches. But then, it also becomes obvious, they don't need too, because failure is success. The conservatives get everything that they've ever wanted including the dissolution of civil rights delivered up on a silver platter and they get to blame the Democrats in the process.
Now these Real Estate properties do create a problem. The Obama administration dealt with it exactly the same way the Bush administration dealt with it. They created a program which leaves the banks in charge of who gets rescued and who sleeps with the fishes. That's because under the TARP agreement the banks can take your defaulting mortgage loan and present it to the Federal Reserve and the kindly Fed bankers will write the bank a credit for the full amount of your loan. Crisis? What crisis?
Say that you bought your home in 2006 for $200,000 but the homes in your neighborhood are now selling for $140,000. At auction your house might only bring in $110,000 but that's for the other guys, that's for suckers. The bank presents its deed to the Federal Reserve and says my customer defaulted owing $185,000 and the Fed writes them a check for $185,000.