M. Collins: The Money Party (4)
Money Party to Citizens: Drop Dead!
Tens of millions are just a lost job away from homelessness.
Mission accomplished for The Money Party. (Nathan Rein CC)
"The FBI is investigating every level of the conspiracy that it believes perpetuated the housing boom..." TimesOnline Jan. 31, 2007
Michael Collins
"Scoop" Independent News
Washington, DC
Now they've done it. The Money Party road show just hit a speed bump at 90 mph and that speed bump was us. There are no more "booms" to hype. No more schemes to hook investors into the stock market. The high tech boom is dead and biotech turned into road kill thanks to a president who talks to God and believes that evolution is just "a theory."
All they had left was the housing bubble. Ram home prices up by flooding the market with buyers. Get them in that home anyway you can. The finance guys will figure it out. We saw "interest only" mortgages to sell people more home than they could afford. And the highly "recommended" adjustable rate mortgages that mature in record time plus other schemes were there to qualify those who should have bought less for more than they'd ever hoped.
What a great deal that was. The economy is now tanking. Only 18% of middle class families have three months worth of accumulated income, the amount needed to have a chance of surviving a financial crisis.
As foreclosures go through the roof, the know-it-alls in The Money Party public relations shop (the mainstream media) trot out their paid liars to blame the people.
This housing "boom" turned bubble had a crushing impact on the economy. One analyst noted, that "By 2005, this bubble had been creating fifty percent of all economic growth in the U.S." That growth is gone and now we're looking at people losing their homes just as massive layoffs are planned and implemented.
This is an important point to remember about the party. It's never their fault, never. Not once has any economic failure been their fault. It's our fault. We're supposed to be smart enough to see that these great "opportunities" are nothing more than the bad ponies you'd never bet. The Money Party can't help itself and we were supposed to know better.
This is a very big lie that we must believe. If we didn't, who knows what would happen?
But wait! Apparently the paid flacks forgot that the financial deity, former Federal Reserve Chairman Arthur Greenspan, endorsed the housing bubble in no uncertain terms. In 2004, Greenspan told a credit union association crowd that "the refinancing phenomenon" had been supportive for the economy and that the use of home equity "helped cushion" declining stock prices. Then Greenspan showed his supposed genius with this advice to home buyers and owners:
"American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home." Understanding household debt obligations, Federal Reserve Board, Feb. 23, 2004
The message was clear. Get an ARM!
Here's the back story. Greenspan got first rate analysis in 2001 from Ned Gramlich, a widely respected economist and Federal Reserve Governor. Gramlich warned, "that a fast-growing new breed of lenders was luring many people into risky mortgages they could not afford." Greenspan dismissed this advice and other warnings that followed. Predatory loan offerings; not to worry. It's all good.
The New York Times reported this epitaph of the Greenspan housing boom from a 2006 Gramlich speech to the Federal Reserve:
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