Try Predatory Lenders - It Fits Better 02-21-09 mpg Predatory Legislators A quote...."Peter Schiff -- Although both lenders and borrowers were acting in their own perceived self-interest, what can we say of our economic policymakers who are expected to protect the good of all? Their actions encouraged the whole sad circus. Were it not for the excessively low interest rates provided by the Fed, the lax lending standards and moral hazards supplied by Congress courtesy of Freddie, Fannie, and the FHA, and the many real estate subsidies built into the tax code, none of these predatory loans would have been possible." Some of what Peter Schiff says is true, but he misses two major points here. One) -- Is that it was the Lenders that controlled Congress, not the other way around. It was the regulatory restraints established under the Roosevelt administration that the Lenders PAID congress to tear down. It was the Lenders that PAID to have the Neocons selected and placed into office. It was the Lenders that provided political and financial support for the Bush administration's "laissez-faire", "no regulation", "free market" approach (which turned out not to be so free after all). And it was the Lenders and the Bush administration that encouraged Greenspan to pump-prime the economy for the "up" part of this nation's decadal economic-war cycle so they could finance their attempts to seize control over the Middle East's oil supplies. Two) -- Very importantly, and curiously something no-one appears to have mentioned so far is, just how - exactly - is anyone, who is financially conservative and practices a sound fiscal policy, supposed to compete in a market place against someone else who is backed by a policy of "unlimited credit". It's all very well and good to tell an entrepreneur that he'll have to forgo the purchase of that piece of land, or those new machine tools, or that additional factory because the prices he would have to pay would be "unsustainable" So what good is that to him? Just how long is he supposed to wait? Even worse, with all that easy money floating around, what if a corporate raider comes along, tells this entrepreneur that he's not efficient enough precisely because he didn't avail himself of all that "unlimited credit". Something the corporate raider has no qualms about doing whatsoever and having taken advantage of all that “unlimited credit” the raider promptly buys up the company's stock in a hostile takeover, fires the entrepreneur from his own company along with all of his employees, breaks the company apart, and sells all of its assets making a tidy profit due to the high prices he received because.....you guessed it, all that "unlimited credit”. Similarly situated is the prospective homeowner. What - exactly - is he, or she, supposed to do? Wait five years, or would it be ten, or how about twenty years, before they could buy their first home? All because the current market price is, to quote, "unsustainable"? Or should someone who already owns a home wait and suffer before they refinance to make needed repairs, repairs they can't currently afford to make because they're being priced out of a market place being driven higher by, you guessed it, unlimited credit? Or do they take the financial gamble of their lives? Again just how long are they supposed to wait while they watch other people obtain their dreams, their necessities, or more importantly increase their financial net worth, wealth and long term security with easy credit. Sure, "in the long run" everyone knew those prices were unsustainable, but as one famous economist once stated -- "In the long run we'll all be dead." So just how is any person, group, entity, or country supposed to "play" in this rigged economic game. How are they supposed to compete against the "insiders" who after sixty years of tireless, unceasing, and unrelenting efforts, have managed to make the market less transparent, totally unregulated, with expanded “credit” available because they've developed new fangled financial instruments called SIMSs, CDSs, CDOs and many other types of derivatives to the tune of 1.3 to 1.5 Quadrillion dollars in notational value? Sure Mr. Schiff "guessed" right about the markets downturn this time. But what about the next? What if the "Lenders", instead of floating this current bubble with 1.3 Quadrillion in derivatives had managed to float it with 10.3 Quadrillion? Who knows what would have happened? It may very well have lasted another ten years, perhaps all the way to the next decadal downturn in 2020. But of course Mr. Schiff with his insight, along with his inside connections, would probably have been able to spot the trend and avoid doing anything rash to negatively affect his portfolio. That's very comforting for Mr. Schiff, but what about the rest of the "little people" out there? "Free" markets are "free" because they have discernible, easily understood, transparent and enforceable rules where both the buyer and the seller can negotiate the price of a given transaction at a given time. NONE of which has existed in this country for many years! If the underlying means to effectuate transactions such as the currency, along with the entire market itself, is massively distorted by the creation of valueless artificial financial instruments...it is not "free" in any meaningful sense of the word. It was the wealthy elites and the banksters, many of whom Mr. Schiff counts as his friends, or at least his colleagues, who caused all of this. They were the ones who FORCED people to go into the market place and pay prices that were unsustainable -- or -- be locked out of the market for an indeterminate amount of time. A time frame which could have been much lengthier than the one that actually occurred, a timeframe that many people had neither the ability, nor the resources to calculate, but which Mr. Schiff’s friends did. - mpg |