Tuesday, August 11, 2009

There You Go Again, Mr President!

The editors of Wall Street Journal wonder if Ginnie Mae is "The Next Fannie Mae?" Specifically they worry, "Ginnie Mae or the Government National Mortgage Association, which will soon join them as a trillion-dollar packager of subprime mortgages." They explain, "Ginnie’s mission is to bundle, guarantee and then sell mortgages insured by the Federal Housing Administration [the FHA], which is Uncle Sam’s home mortgage shop. Ginnie’s growth is a by-product of the FHA’s spectacular growth. The FHA now insures $560 billion of mortgages—quadruple the amount in 2006. Among the FHA, Ginnie, Fannie and Freddie, nearly nine of every 10 new mortgages in America now carry a federal taxpayer guarantee."

In August, 2008, I deplored the Financial Industrial Complex, the lobbyists and investment bankers that have Congress wrapped around their fingers, in "Fannie Mae and Freddie Mac: Look Past the Jargon, and You Find a $5 Billion Scandal." The federal government's takeover of Fannie and Freddie effectively transferred private sector and foreign government losses to the American taxpayer. Now the Administration is continuing that practice on what promises to be a grand scale using Ginnie Mae. The lobbyists, their congressional clients, and the administration are happily portraying this fiscal folly as "feeling the homeowners' pain" and "dealing with the foreclosure problem."

No doubt the administration's complicity in the renewed supply of dodgy debt will keep the Chinese happy (they have a huge exposure to American mortgage backed securities) and it indirectly bails out the Fed (have you looked at the Federal Reserve Bank of New York's balance sheet lately?) The Financial Industrial Complex, which you think would be hiding in disgrace, is riding high. I past a car yesterday, and it was not a Mercedes or an SUV, which had written on its window in soup: "Honk, if I am paying your mortgage."

Mark Twain once boasted, "We have the best Congress money can buy."

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