Wednesday, December 12, 2007

Greed slips and falls

Eventually, not quite as sure as death and taxes but certainly a front runner, karma settles up. It has currently called in the books of the mortgage industry for a review and people are less than happy.

Much like the bubble, the mortgage bubble seems to have popped. Or rather exploded, and rather messily leaving a number of people with a great deal of mess on their hands. Again, we're not all going to be rich! It has been blamed in the past few days on 1)Alan Greenspan, 2) speculators, 3) the government 4) and in the next few days the Illuminati in some form or fashion. What's really happening is a basic law of common sense - what goes up must come down. And since it rose so high so swiftly, the expectations of the fall had to be great. Or should have been.

Now comes the clean up, and the fun begins. Much like the bust, a lot of folks need to go to jail.

You see there is an interesting caveat in the mortgage securities sales, one that is about to drive up shredder sales. If it can be determined there was fraud in the origination of the loan, the seller has to buy back the security at the value it which it was sold. And if you got a home loan in the past five years, you KNOW there was fraud. Which means the banks which packaged it up and sold it the market might have to buy it back, by now at 60% or less what it was priced at when they were the seller.

This would cause a complete collapse of several major banks, investment firms and mortgage lenders. This is because the amount needed bring the loans back in house is more than they have in funds...combined. Essentially anyone who is not the Credit Union up the street would be in a mess of trouble. Let's not even get started with the lawyers. And since Fannie Mae and Freddie Mac also are heavy into this item, guess who would have to raise taxes on somebody. White House, we're looking in your direction.

Which is the idea behind our current "best fix" - freezing rates for five years. It puts of the next wave of foreclosures in the next administration, which the Republicans have just about conceded to the Democrats. It should all blow up right around the 2012 elections, forcing higher taxes, a meltdown of financial institutions and putting economic fear back in the populace, just in time for the Republicans to save us. It also gives those responsible time to retire quietly to some warm with lots of rum drinks and women in bikinis.

Now that's what you call a long term strategy. Karl Rove must have dropped in for lunch.

As papers decry the death of personal responsibility on the part of the homeowner, the lenders are slowly backing out of the room before they get noticed. Because nobody told the lenders to give Mary who already had two houses foreclosed on the money to buy a third (with those marble floors she loves) because the fees were outrageous. The people who signed the loans are responsible, but the lender who played with the numbers, the appraisal that said it worth 40% more than it was last month, the manager who let it all ride and the senior management who knew a continuous 35% increase business and fees over 4 years was crazy were all a little bit at fault as well. And since they all got the economy stagnated, these educated folks of finance had to figure it would give at some point.

And that point for argument's sake would be now.

We're just now getting to where it's gonna get interesting. I'm going to suggest everybody get what they can now and get ready for a long dry spell. In addition to the Georgia drought.

Barkeep. Everclear. No ice.

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