Economic Disaster of 2008

Economic Disaster of 2008

I believe the whole truth cannot be kept hidden, but it is usually not told all at one time, especially when those who could tell the whole truth would be hurt by the whole truth.

It is only that by piecing together information from various sources and reading between the lines on information that is make available is it possible to construct the what I believe to be the whole truth.

I welcome any information that confirms or refutes the following discussion. Many web links already exist that show how the democrats defended Fannie Mae and Freedie Mac when questions were raised by Republicans. One of the best is

http://www.youtube.com/watch?v=_MGT_cSi7Rs

It will be necessary for private individuals to piece together the whole truth because the Atheistic Liberal News Media and democrats both support socialism and aid each other in a Cultural War that has been taking place since the Roosevelt Administration.

I believe the Economic Disaster of 2008 was mostly the fault of the democrats when they passed the Community Reinvestment Act.

Red Lining

The failure of our financial system was caused by the democrats creating the socialistic programs, Community Reinvestment Act, Fannie Mae and Freedie Mac. In order to simplify home loan processing, banks had identified (Red Lined) areas where they would probably not make a loan. The concept of Red Lining by Banks could have been considered either good economics or bad racism. The democrats treated Red Lining as bad racism and forced the banks to make sub prime loans to people by passing the socialist Community Reinvestment Act. The banks refused until the democrats created Fannie Mae and Freedie Mac to guarantee the sub prime loans. With the loans being guaranteed by the government, it did not make any difference about the home buyers ability to pay, since the loan was with the government. All kinds of financial thieves jumped in the sub prime loan business and the drove up the price of housing for everyone, creating a housing bubble. When the sub prime loans defaulted the housing bubble burst, and the value of every home in America dropped.

Some will say wall street should not have taken advantage of the sub prime loan guarantees, but there was a saying by W. C Fields, "It is a mortal sin not to take advantage of a fool". It is best that you do not tempt people by spending money foolishly.

This affected the whole world because the sub prime loans were bundled together with good loans because even a sub prime loan is a good loan when guaranteed by the American government.

I did not realize how bad this situation is till I saw a statement that said that the problem in Europe was a 40 trillion dollar problem. It is hard to believe numbers that big, but 200 hundred million people in America with an average family size of 3 yields about 70 million homes. Assuming the average house has dropped at least 20,000 dollars, that means the housing bubble represents a 20,000 dollars times 70 million homes or 1.4 zillion dollar problem. Even if Fannie Mae and Freedie Mac are on the hook for only one third of the problem, that is still 40 trillion dollars.

When the banks started seeing the sub prime failures, they turned to Fannie Mae and Freedie Mac to pay up on the guarantees. Fannie Mae and Freedie Mac instantly knew the worst case scenario had just occurred because they only had a 3% reserve and housing prices had dropped by at least 20%.

That is when TARP was offered to the banks to prevent the banks from taking Fannie Mae and Freedie Mac to court. Unfortunately the democrats who caused the problem by creating the CRA, got control of the government and instead of working with the banks they made the banks the scapegoat.

When the banks told the democrats that they were not beggars, but victims, the banks were told to shut up or the banks would be nationalized. Nationalization would mean Fannie Mae and Feedie Mac would not owe any bank in America anything. This means every homeowner in America faces a $20,000 loss. For self sufficient people the $20,000 is a real loss, but for the people who had the sub prime loans, it only means their bad credit rating gets worse.

Now the democrats that created the mess are asking banks to make more bad loans to solve the economic mess, but this time the democrats are not going to provide loan guarantees.

The banks should look Barney Frank right in the face and tell him the TARP money already received will be applied to the Fannie Mae and Freedie Mac debt. I don't thing Barney Frank will nationalize the banks, because it would wipe out the stock market and stop all international trade. Some might think that would be good, but America is not self sufficient either. If the flow of oil stops, millions die.

Lessons Learned

The most obvious lesson to be learned is that Socialism is a horrible concept. America started on the path of Socialism in the Roosevelt Administration. It grew into Civil Rights and there is now a concept that the government has a responsibility to provide health care /welfare for anyone that says they have a problem even if the problem is self inflicted due to too much wine, women and song (also known as the Atheistic Lifestyle).

Too much of what the democrats do is based on hope and not reality. Capitalism is lending money to people you expect will pay it back. Socialism is lending money to people you hope will pay it back.

The concept that government has a responsibility to provide anything to anyone is unconstitutional. The Constitution talks about the government providing protection but not services.

It may be reasonable for government to undertake large projects that could not be funded by private companies, but the government should contract for those projects and the projects should benefit at least 66% of the people instead of minorities.

Socialistic programs are very onerous to Christians because they are anti religious. Socialism is a dependence on the government instead of a dependance on God. A dependence on God leads to the Christian Lifestyle that is the most environmentally friendly socially responsible lifestyle that is possible.

Remedies

The government should eliminate any and all health care/welfare/socialistic programs because they favor the needy at the expense of the self sufficient. This would be a major problem for the self inflicted needy, but I believe the truly needy can be taken care of by Christian charity.

The government should be very careful about loan guarantees. In order to get banks to make risky student loans, the government allowed the banks to charge 9% interest on student loans which is almost impossible to pay off.

Capitalism is making loans to people you expect will pay back the loan.

Socialism is making loans to people you hope will pay back the loan.

The government should never accept the obligation of cleaning up a mess that a person has inflicted on themselves. Illegitimate children are a mess for the woman and all of society. It is horrible to think of the suffering of a child, but the child is the product of sin. It should be a criminal offence punishable by death for the parents to fail to financially support a child. The parents should be executed and the child put up for adoption or raised in an Christian orphanage that is contracted with the government.

The is a law whereby a business can just refuse to pay debts called "Commercially Impossibility" I believe we are in a situation where it going to have to be assumed that Fannie Mae and Freedie Mac are never going to pay anything back and figure out how to absorb the lost money. Maybe debt swaps and very long tax credits.

I have a feeling the mortgage backed securities are never going to be repaid (I am not even sure the interest on the securities is being paid). Probable best to send the title of property to the securities owners and let them decide to live in, rent or sell the property.