Members of Congress, the President, and anyone else with an opinion is still blaming the recession on greedy corporations. This article isn’t about rehashing the debate, but… what about the greedy government elitists? What about us?
The government needs us to borrow more to feed the partial-reserve economy system we have. To get us to borrow more, they need us buying cars and houses, and not the cheap ones. ACORN was out rioting against banks and threatening bankers to force them to give loans to people that could not afford them… ever. Barney Franks fought against controls in Fannie Mae and Freddie Mac that would have prevented many of the bad loans that greedy wall street corporations then had no choice but to repackage, resell and pray. God never answered.
The government has done everything it could to keep home values at ridiculous prices and had failed. Bubble: Part Two, has been setup by the Obama administration and Franks. Once all the liquidity they are creating has its effect, inflation will follow. Next will be interest rates that will make the 80’s look like a picnic.
Inflation is hard enough, but what about all those homeowners that have adjustable loans, on property that is now mortgaged at 125% of actual house value, and they’ve been making minimum payments. Once the interest rates skyrocket and those ARMs reset… their payments could increase by up to 75% – they will have to simply walk away and leave the bank holding the bag.
According to the most-recent “Negative Equity Data Report” from First American Core Logic, California had 43,000 home owners recently slide into negative equity positions (the house is worth less than the mortgage). Overall, California has 723,000 properties in a “severe negative equity position” (a.k.a. in real trouble). Nearly one-third of all mortgages in California are under-water.
18% of interest-only loans are currently 60-days and Californian banks will be stretched to cover loses of that magnitude. There are those that argue that the ARM catastrophe isn’t that bad and that it will only affect high-end states like California and Florida. Unfortunately, when those golden and sunshine state banks fail in record numbers…wait for it… the FDIC is already running out of money [link].
The FDIC will be awarded larger and larger lines of credit to cover the bank failures. That credit comes from the treasury which gets its money from – the Fed. Of course the Fed gets money from thin air – aka “printing it”. Interest rates will go ever higher and now middle-value loans start getting affected.
The recession is not over, and it wasn’t caused by some CEO’s greed. It was caused by the greed of the average citizen doing what their government wanted them to do – borrow more than they could afford to pay back. That way, we could look just like them.Rich Mitchell is the Sr. Managing Editor of Conservative Daily News. His posts may contain opinions that are his own and are not necessarily shared by Anomalous Media, CDN, staff or .. much of anyone else. Find him on twitter, facebook and google+