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Idaho's Weekly Journal of Local & National Commentary  Week 4314

 

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by Free Market Duck

“Covered Bonds” new mortgage gimmick by “Banksta Gangsta” Treasury Sec Hank Paulson
(Aug 01, 2008)

 CEO corporate welfare recipients at Bank of America, Citigroup, J.P. Morgan Chase, and Wells Fargo kissed their Washington Godfather’s Fascist Business Model butt – Hank Paulson’s -- on national TV last week and said they would be glad to issue banksta gangsta Paulson’s “Covered Bonds” as a new mortgage scheme in their ongoing subprime slime mortgage crime.  “Covered Bonds” is a popular method of counterfeiting the money supply in socialist Europe to finance their currently crashing mortgage market.

Washington, DC – Just when you thought the monetary gangstas down at the Federal Reserve and U.S. Treasury couldn’t dream up another way to pump another coupla trillion dollars into the hyper-inflated mortgage market, pour yourself another hot cup of Rocket Java and listen up girl friends.

    Are you wondering why in hell it’s so important for the Administration, the U.S. Congress, the Fed Reserve central bankers, the U.S. Treasury, and all the major banking institutions and their affiliated mortgage companies to try and keep housing prices higher than the Moon?  I mean, think about that for a moment.  Nobody is screaming to keep oil prices high.  Nobody is trying to keep food prices high, or keep car prices high, or trying to jack up the price you pay for utilities, computers, furniture, and yo-yos, right?  In fact, in a free market economy, the goal is to bring prices down, not up.

    So why is the entire banking industry, the Federal Reserve, and the Treasury Dept bending over backwards to try and prevent America’s housing prices from going down?  One would think that the entire U.S. market is economically dependent upon one commodity:  homes.  Not computers, not cars, not steel, not nano-technology, not lollipops but only homes.  Why?

   The reasons are simple.

   First, the housing industry is the pipeline that the central bankers are using to inject their counterfeit paper money into the market to earn billions of dollars.  Let me restate that:  the central bankers, the Federal Reserve, and their member banking institutions have chosen the mortgage industry as the main route by which to implement their fiat monetary schemes.  “Fiat” means “forced” money not backed 100% by gold or silver or any other tangible asset, and not redeemable by the bearer upon demand.

   Therefore, the last thing the bankers want is for housing prices to go down because the bankers would be holding, for example, $500,000 mortgages whose market values are dropping to $250,000 with home owners walking away from their upside down, or negative, mortgages.  While on net – even after billion dollar write downs -- the entire banking institution has earned billions of dollars in their front-end subprime mortgage schemes and subsequent back-end “selling” of funds supposedly “backed by” those same mortgages to, for example, pension fund managers investing old folks’ pension savings into those mortgage funds to earn interest, the bankers cannot allow the housing market to collapse or their entire future house of cards – both the front-end interest and the back-end funds selling – will come crashing down around their ears.

   And that, mes amies, is why Treasury Secretary Paulson, Fed Reserve Chief Bennie Bernanke, and the entire banking industry will do anything to prop up the housing industry:  because, once again, the home mortgage industry is the major pipeline, the major vehicle, the main methodology by which the bankers are injecting their counterfeit Dollars printed up out of thin air.

   While the bankers have tried to claim that their mortgages are “collateralized debt obligations” (CDOs) because the mortgages they issued are backed by physical homes, two big questions are:  (1) from where did the bankers originally obtain their mortgage money if not by from the Fed Reserve who created it out of thin air, and (2) if the physical home really is backing for the paper mortgage, how can the bankers use the same physical home for “collateral” again for another piece of paper called a "hedge fund" for people to invest in?  How can the banks use a CDO backed by a physical house simultaneously as a Structured Investment Vehicle (SIV) backing pension funds that they sell to old folks and others?

   If the old folks in the pension fund held the actual mortgages, that's one thing.  But they don't.  The bank holds two pieces of paper and is making money twice:  (1) the home mortgage paper on which the home owner pays the bank per month, and (2) the hedge fund paper for which the bank has already received the total money from the old folks who are investing and hoping to earn interest.  Wow, double duty as the bank collects twice the money on two pieces of commercial paper both backed by one chunk of tangible property (whose current market price, by the way, is crashing).  This could best be described as fractional reserve home mortgage banking and is not much different than fractional reserve bankers issuing more gold certificates than the amount of redeemable gold in a bank on the premise that not everybody will run on the bank to redeem their certificates all at once.  And that's exactly what modern mortgage bankers have done:  fractional reserve banking using houses instead of gold.

   But it gets worse.  By using the second piece of paper in this example, a hedge fund, as supposedly legitimate backing for another hedge fund backed by the original house, and then expanding more and more pieces of new hedge fund paper in the same manner, the bankers have expanded the concept of fractional reserve banking to the housing market and thereby greatly expanded the U.S. money supply -- i.e., hyper-inflated the U.S. Dollar.  All this snowballing debt is based upon the value of one house claimed as "collateral."  Multiply this scenario times several million home owners who are defaulting on their mortgages and another umpteen million pensioners who have invested in these same "mortgages masquerading as hedge funds" and you have our current mega-trillion dollar mortgage market mess created out of thin air by America's banking and investment community on Wall Street.  This mortgage mess could never have happened unless it was financially fueled by the central bankers at the Federal Reserve and the U.S. Treasury Department pumping trillions of new dollars into the U.S. economy via member banks and their investment buddies on Wall Street. 

   This Ponzi Scheme by America's bankers is like me selling my ’57 Chevy twice, with each buyer holding fake copies of a pink slip for one car.  The first buyer pays monthly payments to own the car and gets to drive it around town.  The second buyer gives me $50,000 to own the car and earn interest on his “investment” but never sees the car and never gets to drive it.  Wow, tricky me.  I'm using one car to make the same money twice.  If I want to get really tricky, like today’s bankers, I could “sell” the pink slip for my ’57 Chevy to a million people, mix that money with other debt paper instruments, feed the total into a computer and “slice and dice” the total into different non-traceable (non-traceable to my ’57 Chevy) SIVs, and re-sell those new SIVs to other banks and investment institutions (hello European banks).  If the value of my ’57 Chevy collapses, everybody holding the new SIVs have no traceability to the ’57 Chevy pink slip, and that, mes amies, is exactly what is happening to the bankers in the housing mortgage industry:  home prices are collapsing and thus endangering their future Ponzi Scheme for using the mortgage industry as the main pipeline to inject future Fake Dollars into the economy.  And nothing is traceable to a real tangible commodity, especially the houses that were touted as backing for the CDOs and SIVs.  That’s why banksta gangsta Hank Paulson and his partners in crime at the Federal Reserve and its member banks are so worried about the nation’s collapsing housing market.  They created the mess based upon faulty economic premises and don’t know how to get out of it.

   In fact, the real mess is not a mortgage collapse but rather a U.S. Dollar collapse.  We have a U.S. Dollar bubble that will soon implode like Enron on anabolic steroids.  There is no shortage of houses; there is a huge oversupply of Dollars.  It’s called hyper-inflation of the money supply and the newly enacted Mortgage Lending Act just signed off by President Bush will probably push America into another huge round of more hyper-inflation or instigate the final blow that will crash and burn the housing industry.

   How did we get here?

   We are not living in a free market economy.  As soon as the U.S. created the Federal Reserve in 1914, a private central banking cartel, and went off the gold standard in 1971, we moved into a “highly managed” socialist style economy with central bankstas driving the monetary truck with a policy called “targeted inflation.”  That’s right.  Inflation on purpose.  It’s part of modern economic theory today and you can see where it has gotten us.  Just take a trip to the grocery store or a gas station and eyeball the prices.  Remember, the bankstas did it on purpose:  inflation of your money.  And they did it, mostly, through the housing industry.

   As stated above, the bankstas earn their money at both ends of their loans:  (1) interest on the mortgage loans to home buyers and (2) brokerage fees from selling the same home-backed homes (now collapsing) as hedge funds to investors.  In other words, the genius of the central bankers is that they have contrived an extremely clever method by which to counterfeit the U.S. Dollar, loan the counterfeit money to the U.S. Government as a “National Debt” or loan the counterfeit money directly to the Federal Reserve’s major member banks as a “Treasury” or other type of loan, then restructure the counterfeit money into subprime and other mortgage loans, use the mortgage loans (the homes) as so-called “backing” for fancy-sounding hedge funds, which are then sold to investors so the bankers can make more money.

   The Central Banking Merry-Go-Round continues until this artificially-created boom-bust cycle bursts its hyper-inflated bubble and all hell breaks loose in the inflated housing market when home prices start falling and home owners default on their mortgage payments.  Then, as predicted by free market economists, it spills over into the general market such as gas and food and -- in a faux attempt to "save" everybody from this mystery madness -- all the deficit spending whores in Congress run around like chickens with their heads cut off blaming everybody except themselves and the bankers for inflated prices.  The deficit prostitutes in Congress immediately start babbling about, and then implementing, stupid “recovery” programs that do nothing but exacerbate the original problem, which can be summed up as:  going off the gold standard and allowing fractional reserve banking by a central bank.

   So, gangsta banksta Hank Paulson and his banking buddies are working overtime in dreaming up new methods to keep their hyper-inflated housing market not only from collapsing but also to reach new pricing heights of absurdity.  Fannie Mae and Freddie Mac have just been granted unlimited access to counterfeited Dollars from the Treasury Department and Jumbo Loans have been increased from $417,000 to $729,000 to keep this counterfeit monetary fiasco going.  At this rate, billion dollar houses are just around the corner.  (By the way, Zimbabwe just erased ten zeroes off its hyper-inflated currency and devalued its money by 10 billion to one.  The cost for a loaf of bread had reached over 100 billion Zimbabwe Dollars.  The U.S. would never go in that direction, would it?  Nooooo.)

   Now that we know why Treasury Secretary Paulson and his banksta gangstas need to continue propping up their hyper-inflated mortgage industry, the question is:  what’s next on their agenda regarding how to continue their fiasco?

   Camouflaged as an “aid for mortgage lending,” Paulson and his Monetary gangstas have devised another subprime mortgage method – imported from European central bankers -- called “Covered Bonds” to inject even more counterfeited U.S. Dollars into the market to keep home prices sky high and urge the banks to keep on injecting those Funny Money Dollars into the economy.  The big diff, says Paulson, is that the banks will hold a pool of counterfeited Dollars on the bank’s books instead of the bank’s off-book accounting subsidiaries.  Wow.  Like how is that supposed to stop the current housing crash?  Or even solve the problem of “bundled” SIVs and no mark to market prices?

   The truth is, “Covered Bonds” are no different from the previous hyper-inflated subprime slime and the Structured Investment Vehicles (SIVs) that the bankers ridiculously issued the last time around to create the current mortgage mess.  In fact, by expanding the mortgage market to “Covered Bonds” instead of letting the housing market collapse and clear its prices through a free market process, Paulson is simply pouring more fuel on the housing fire.  Then again, we know why the bankers are attempting to keep their monetary Ponzi Scheme going:  the mortgage market is their major pipeline for injecting their counterfeit Dollars into the economy.

   Note that if America dumped the Federal Reserve central bankers and used real commodity money such as gold and silver, and no fractional reserve paper – as mandated by the U.S. Constitution -- we would not have gotten into our current economic mess.  The simple solution:  time to get back to the U.S. Constitution and real commodity money. – FM Duck   

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