When a radical Muslim jihadist, trying to blow up a plane over U.S. territory on a recent Christmas Day, failed to properly detonate his bomb, Janet Napolitano told us that government efforts to provide homeland security had been successful at preventing this terrorist attack. In point of fact, a number of red flags were raised to the government’s attention, predicting that this young jihadist would commit a terrorist act, but were ignored and the urgency and importance of the information available was not communicated effectively with the various U.S. intelligence units. Government failed in every way in regard to this terrorist attack. It was dumb luck and the courage of a few passengers on board that particular Christmas Day flight that prevented the tragedy that al-Qaeda had planned for America on that day.
In regard to illegal immigration, Janet Napolitano informs us that, due to her Homeland Security efforts under the Obama Administration over the past two years, illegal border crossings are currently at the lowest levels since the 1970s, and seizures of illegal drugs from illegals crossing the border from Mexico to the U.S. and of cash and weapons from illegals crossing from the U.S. back into Mexico have increased. The Obama Administration would have the American people believe that all of their hard work on border security has paid off with favorable statistics confirming the government’s successes in this area. But as it has been said before: In order of magnitude, there are lies, damn lies, and statistics.
A slightly deeper look at these numbers reveals the spin that the Obama Administration is using to claim credit for what is being sold as improvement in border security. When the U.S. economy was growing and unemployment was at an all-time low, most illegal immigrants who crossed the southern border from Mexico into the U.S. came here to work; most found jobs that helped them earn money to provide for their families.
Because jobs for illegals were plentiful, there was a dramatic surge in the numbers of illegals entering the U.S. illegally during this period. During most of the G. W. Bush presidency, most illegals who found work in the U.S. had their families follow them to America, while those who were unable to find sustainable work returned home.
Towards the end of the Bush final term and during the past two years of the Obama presidency, our economy tanked due to the Federal Reserve, Wall Street, Fannie and Freddie and other Bankster (think mobster) failed fraudulent, high-risk ventures and abuses at the expense of the American people. These high-rollers made trillions of dollars over the last decade by creating and manipulating their extreme-risk investments (think casino gambling) and secured huge profits and bonuses and for their CEOs, staff and shareholders.
When the bubble burst and all the Ponzi schemes disintegrated, the housing market collapsed and all the financial institutions were found to be insolvent. Even after an infusion of trillions of dollars from the Federal Reserve and billions of dollars from the pockets of those who were abused in the process of the financial bubble creation, the American taxpayers, these financial institutions continue to distribute huge bonuses to their management and staff and continue to remain insolvent despite unprecedented and unwarranted public bailouts.
These corrupt financial institutions were permitted by our government to privatize (and pocket) profits from their extreme-risk ventures while socializing their losses (sticking the bill for their bad behavior to the American taxpayer). In previous times, Wall Street and the monster banks provided investment capital and loans to all types of businesses that led to increased economic productivity and significant economic growth and prosperity.
Currently, these banks are holding onto their cash or cautiously investing in Treasury Bills. Most loans are being made to Wall Street firms or being used for the banks’ own investing, once again, in the same risky, non-productive and dangerous financial instruments. Small businesses, the life-blood of the productive American economy, are being denied the credit they need to innovate, grow, expand and create jobs. These banks have also severely restricted and increased the costs to the American people of consumer credit, leading to a dramatic fall in consumer spending. With demand for consumer goods plummeting, businesses, large and small, across the country slowed or were closed leading to our current, persistent high unemployment.
Enormous infusions of cash from the Federal Reserve to Wall Street banks and excessive government spending on pork-barrel projects, Stimulus, TARP and similar spending bills have temporarily propped up the stock market. However, government spending and the Fed’s “quantitative easing” have only made matters worse for the rest of the U.S. economy and the American people, prolonged the Great Recession with our jobless “recovery”, left millions of homeowners, drowning, underwater in their mortgages or facing foreclosure (the new “homeless”), and produced marked inflation that is currently threatening to collapse the dollar. Our government’s skyrocketing deficits and the Fed’s consistent abuse of the dollar will not only lead to continued devaluation of the dollar, but are likely to precipitate a switch from the dollar to another currency as the international currency of exchange and trade.
This ongoing collapse of the U.S. economy has severely limited the number of jobs available for illegal immigrants, most of who had previously come to the U.S. to work. With a scarcity of jobs in a bad economy, I can believe that many illegals that were here to work, if they had no job and no welfare support, would return to their home countries, and that fewer illegals would be motivated to immigrate to the U.S.
While I don’t believe Janet Napolitano has any idea how many illegal aliens cross the border from Mexico into the U.S. each day, I can accept that the number of illegal crossings may be decreased from the Bush years. If the absolute number of illegals crossing into the U.S. each day has really decreased, such a decrease is likely attributable to those seeking work deciding not to cross into the U.S. illegally, discouraged by the lack of jobs.
On the other hand, U.S. Border States report markedly increased illegal border crossings by criminals peddling illicit drugs, human trafficking, and violence. Such an increase in criminals crossing into the U.S. would naturally increase the odds that border patrol agents would intercept a larger number of these criminals.
Napolitano and Obama want to claim credit for decreased illegal border crossings. However, most of the decrease can be accounted for on the basis of policies put in place during the Bush Administration and the lack of jobs in the U.S. for illegals. When Napolitano boasts of increased border patrol seizures of illicit drugs and weapons from criminal illegals, she is unintentionally admitting to the current tidal wave invasion of illegal alien criminals bringing violence and lawlessness into the Border States with them.
The borders are really more porous than ever with a greater percentage of criminal illegal aliens entering the U.S., all because the Obama Administration is not really serious about border security. If the U.S. were truly serious about border security, we would have a fence the length of our southern border. If we really didn’t want illegals to climb the border fence, we would electrify it. If we really didn’t want illegals to cut electricity to or tear down the fence, we would build interval towers along the fence line with remotely operated sniper rifles to pick off any illegals climbing over, through or seeking to damage the fence.
Do we need to militarize our southern border like they have between North and South Korea with soldiers and artillery and drones? How serious are we about border security? Serious enough to do whatever it takes to stop illegal immigration?
If we ever did get truly serious and put into place such measures, it is doubtful that any would-be illegal alien would ever be harmed; once the word gets out that the border is defended by an electrified fence and sniper towers or soldiers, artillery and drones, few would be foolish enough to test these defenses.
Showing posts with label unemployment. Show all posts
Showing posts with label unemployment. Show all posts
Thursday, March 31, 2011
Sunday, November 14, 2010
The Great Recession: what is the root cause and is there a way out?
(Updated 12/05/2010)
Subprime Mortgage: a mortgage given to an individual who is likely to default on payments and the mortgage as a whole.
The narrative promoted by Obama and the Democrats and passed along to the public by the lame-stream media, is that eight years of Bush administration policies, cronyism with big corporations and Wall Street, and war-mongering with loss of U.S. treasure on contrived foreign wars led to the collapse of the housing sector and U.S. financial markets, which has caused our current Great Recession with volatility in financial markets affecting the retirement savings of millions of Americans, the loss of U.S. manufacturing industry, high unemployment and business stagnation.
The story goes on to claim that because of Obama policies, bailing-out and taking-over private companies, and the high level of government spending under the Obama administration working in concert with a Democrat majority in Congress, significantly deeper and more painful economic disaster has been averted by stimulating the economy and saving or creating millions of jobs.
Further Democrat narrative claims that the new Obama financial law brings much needed regulatory control of financial markets that prevents Wall Street from taking the kind of risks that they took with subprime mortgage derivatives that led to the financial collapse. The narrative also claims that the new financial law frees the taxpayer from ever having to pay for anymore bail-outs of companies “too-big-to-fail”.
While this grand Democrat myth seems plausible on the surface and has a certain appeal to a public that has been much abused by the excesses of Wall Street and the loss of gainful employment by businesses moving offshore and deserting everyday Americans, there is the minor annoyance that the facts just don’t support the story.
In fact, the collapse of housing and financial markets, the loss of U.S. industry and jobs, and our current Great Recession were brought about and then worsened by failed Democrat policies that persist in supporting unacceptably high-risk Wall Street ventures based on taxpayer-guaranteed, subprime mortgages that Democrats continue to encourage, and future government-mandated, tax-payer-funded bail-outs of failing “too-big-to-fail” companies that was written into the new financial law.
The new Obama Financial Law canonizes for select, large financial companies that profits are privatized while losses are socialized (i.e. if these big firms undertake high-risk ventures and make huge profits, they will pocket the gains; however, if in taking on high-risk ventures they lose big, their losses will be absorbed by the government with taxpayer funds). Some call this close relationship between government and large corporations State Capitalism, but a more appropriate term would be National Socialism (from which the German National Socialist or Nazi Party name was taken and whose precepts Hitler and the Nazi Party embraced).
It is also the inconvenient truth that Democrat policies have produced the loss of U.S. industry and jobs, and Obamacare, the new financial law, the promise of higher taxes and Democrat anti-business rhetoric has dramatically increased the costs of doing business and created such uncertainty that American businesses are virtually paralyzed. While large, government-favored financial institutions have been showered in taxpayer funds to keep them strong, small banks and businesses on Main Street have been abandoned by the federal government and hung out to dry.
Beginning with the Clinton administration, Fannie, Freddie and other mortgage banks were coerced by the Democrats to give mortgages to low-income families so these families could participate in home ownership and enjoy some of the economic benefits of the middle-class, a seemingly noble humanitarian goal.
While it's a worthy goal to want to help as many low-income citizens as possible join middle-class America through home ownership, what may have seemed initially like a blessing has now become a curse. In the medical profession's Hippocratic Oath it encourages physicians to do all they can in the interests of the patient, with this final caveat: But above all, DO NO HARM.
Since the mid-1990's almost all lenders have been making subprime and creative mortgages. These loans are called subprime because the homebuyer is at significant risk of not making payments and of defaulting on the mortgage at some time in the near future. In the originating lenders' rush to collect the inflated fees and points that were producing huge profits for themselves, lenders often overlooked or failed to verify creditworthiness, employment status, citizenship, or ability to repay the loan.
Since originating lenders quickly bundle and sell the mortgages they write to Fannie, Freddie, other large financial institutions, and Wall Street firms like Goldman-Sachs, what should they care if the homebuyer should default some time in the future? The originating lender has made its profits by charging low-income homebuyers more to make a subprime loan than it charges for other homebuyers.
While the low-income homebuyer gets hit with a huge bill from the lender for advancing the loan, these loan costs are usually hidden in the loan amount to be advanced and taken off the top by the lender, so the homebuyer doesn't feel it until later on in the loan repayment schedule. After signing loan documents, and before the ink is dry, the originating lender immediately sells the mortgage. The subprime hot potato has been passed to someone else, who will pass it along to again another or multiple other investors (i.e. Fannie, Freddie, Bank of America, Citibank, JPMorganChase, and Wall Street firms such as Goldman Sachs).
Subprime homebuyers take another hit when the loan terms are written. Typically, an Adjustable Rate Mortgage (ARM) is set up providing for an initial low monthly, low interest, interest-only house payment. Then over the subsequent 3-5 years, the homeowner sees his interest rate increase and also begins paying back principle along with the interest payments which often doubles or triples the initial monthly payment to a level that the homeowner had not anticipated, a level of payment that the homeowner cannot sustain for long without exhausting all resources. Many of these subprime loans have a large balloon payment due at 3-5 years. Also, virtually all subprime borrowers are required to purchase mortgage insurance which adds a significant sum to the monthly payment.
The lender predicts while making subprime loans that the homebuyers are likely to default within the first 3-5 years. Even if the originating bank holds the subprime mortgage it makes, the bank makes money from making the loan, collects monthly payments for the duration of home ownership, and forecloses on and takes possession of the home for resale when homeowners default. As long as home values continued to rise, if the bank had to foreclose on the home, the bank stands to make a profit on this too. In addition, since all subprime mortages require mortgage insurance, if the homeowner defaults, the bank can turn to the mortgage insurance company (AIG ring any bells?) to pay off the defaulted mortgage.
Many subprime lenders utilize predatory loan practices that benefit the lender at the expense of the homebuyer. Such as lending to low-income, would-be homebuyers, where the lender knows in advance there is high risk of default, higher loan costs are charged the homebuyer but hidden in the loan amount, ARMs are set up as described above where over several years a reasonable payment becomes two to three times it's original amount, there may be an unrealistic balloon payment required, and the cost of mortgage insurance is added to the monthly payment.
If not too many homeowners default on their mortgages at once, this is not an unmanageable or unprofitable situation for banks. So, while lenders making subprime mortgages clearly reap huge profits from these predatory practices, the low-income homebuyer takes another hit with foreclosure, eviction, and financial and psychosocial-emotional loss. Rather than being a benefit to low-income families, hundreds of thousands of subprime mortgages have defaulted and are in foreclosure; many more such loans are due to default over the next several years. Massive subprime mortgage defaults resulting in collapse of the housing, financial and insurance markets, and the ensuing Great Recession has brought about untold misery for these families and for most Americans.
The fact that most mortgages are federally guaranteed (using taxpayer money), explicitly or implicitly, encourages the financial sector to consider these high-risk, subprime mortgage bundles and the Wall Street securities and derivatives based on them as low-risk investments.
The government mortgage guarantee converted a known high-risk investment into a low-risk one, being secured by mortgage insurance companies and also by the good faith and credit of the United States. These mortgages were securitized and sold by Wall Street as prime investments, not based on the usual anticipated high homeowner debt repayment level, but based solely on the insured value and the government mortgage guarantee.
When millions of these homeowners began to default on their subprime mortgages as predicted, a glut of troubled or foreclosed upon homes on the market produced a fall in home values, making most American homeowners upside-down in their mortgages (the mortgage balance owed is greater than the current appraised home value). Securitized subprime mortgages were leveraged as derivatives at 100:1 and greater, and when the housing market collapsed and mortgages were defaulted, the value of the derivatives evaporated as well leaving the Wall Street investment banks owing 100:1 on their products which now no one was buying.
In 2006, the Bush administration tried to rein in Fannie, Freddie and the other mortgage banks and halt any new subprime mortgages with government guarantees to people who could not afford them. Democrats in Congress resisted all efforts to provide judicious oversight or regulation of this high-risk activity. As late as 2008, Democrat leadership in Congress assured the American public that Fannie, Freddie, and the U.S. housing and financial markets were in good shape and as strong as ever.
When the subprime mortgage housing crisis began to grow and spread, Wall Street firms and other large financial institutions filed insurance claims based on the defaulted subprime mortgages, that led to the failure and federal bailout of large insurance companies like AIG, that were insolvent and unable to satisfy claims. The financial sector next went to the federal government for the guarantee and the government gave the financial and insurance companies taxpayer money to bail them out.
The bubble of subprime mortgages was contrived and executed and Wall Street and other financial company excesses were subsidized by Democrat policies that led directly to the current Recession. While the Bush administration was admittedly far from perfect, Bush is not responsible for the current recession—this blame is more appropriately laid at the feet of the Democrats.
While the Bush administration did little to hold down government spending and deficits, Obama has raised spending and deficits more than twice as high as levels under Bush. Most of the Bush deficit expenditures were for a prescription drug program for seniors, and providing justifiable action for national security defense against Islamic Jihadist terrorists.
On the other hand, most of the Obama expenditures have been political payback to Democrat cronies, like Wall Street, the unions, environmentalists, ACORN and other subversive groups, and increasing the size of government and the number of government employees, along with ensuring that federal employee salaries and benefits were more than twice those of comparable workers in the private sector.
The fact that Bush did a limited amount of damage to America through deficit spending on widely desired and other essential, constitutional government functions, does not justify Obama’s multiplying Bush’s deficit many times over with frivolous and wasteful, pork-barrel, political payback while aggressively acting to destroy American free market capitalism, abridge American freedoms, stifle the voice of opposition and critical analysis, weaken American and allied national security defenses, increase American subservience to international interests and secure long-term power to himself and the Democrat Party.
Big Labor, and high corporate taxes, both strongly supported by Democrats, have forced companies to leave the United States and take their businesses elsewhere to remain competitive. If we could have stopped the unions in the 1980’s, and maintained a more reasonable business and investment tax policy we might still have a private auto industry, other manufacturing, and a stronger business sector with higher employment in our economy. Even now, we have the opportunity to dramatically reduce corporate and investment taxes and see business and industry return and boom in the U.S.
However, in order to hire employees, expand the business and increase production, business needs capital. Despite a massive infusion of taxpayer dollars, money is still tight. The banks still are not lending to the economy what the economy needs to grow. When the banks get back into the business of providing the needed capital to the economy instead of just investing overcautiously in Treasury Bills, the economy will have a chance to start growing again.
In the United States we don’t have a typical parliamentary system, but we do have a fairly strong two party system. Many times in the past, third parties have been formed, and while they may temporarily sway American thought and the direction of the two major parties, none have been successful in being any real, long-term influence on American politics. The plan of the Tea Party from the start was to take over, from the inside, the Republican Party, taking it from the establishment which had lost its way and return the party to its roots in fiscal responsibility, smaller government, lower taxes and free markets within the framework and freedoms of a Constitutional Republic. The Tea Party did not want and refused to go down that pointless, third-party road.
Large numbers of individual, average Americans, most for the first time in their lives, moved beyond their comfort level, took a stand against the fiscally irresponsible policies of both major political parties, and worked long and hard hours to get good people with Tea Party views to win in the Republican primaries. Many progressive incumbent Republicans were replaced in these primaries with a Tea Party-supported Republican candidate. In the general elections, many progressive Democrats and earmark and spend establishment Republicans were roundly defeated and replaced with Tea Party Republicans committed to sound fiscal policies.
Over time, the goal is to replace progressives of all party affiliations with Tea Party Republicans such that the Republican Party will be the party of Tea Party principles and values, and the majority party in federal, state and local government. The “Tea Party” is not an actual political party, but a loose organization of Republicans, Independents, Constitutionalists, Libertarians, Unaffiliated and even some Democrats fed up with politics as usual forming thousands of small patriot groups that together make up a rather disjointed but broad-based and committed, grass-roots political movement.
There is nothing illegal, immoral or unethical in being a Tea Party Republican. Rather than serve to prop up the corrupt Republican or Democrat establishment in Washington, Tea Party Republicans have been charged with the special mission of restoring the Republican Party and the nation to correct, constitutional principles of government that promote freedom and prosperity.
There is less than zero basis for any type of legal or ethical challenge to these newly elected lawmakers for not being “real” Republicans. The Tea Party movement believes that real Republicans ascribe to Tea Party principles and values, and that establishment Republicans have strayed far too long from their true conservative roots. The Tea Party movement may, in fact, be a part of another “Great Awakening” spreading across America and even well beyond her shores, presenting the possibly of a second chance for other great nations as well.
With an influx of Tea Party Republicans into governments across the land and a Republican majority in the House, slowing down if not actually stopping altogether and reversing the relentless and destructive Obama socialist/anti-colonialist juggernaut is a real possibility. If the average American continues to stand against what is wrong with America, and fights for what is right for America, in the next several election cycles there will be Tea Party Republicans in power across the country, in the House, the Senate and in the Oval Office.
If the millions of Americans who relate to the Tea Party movement continue to stand up for the God-given, inalienable rights guaranteed by the Constitution, corruption and destruction will fail, freedom will prevail, and America will be back on the road to honest industry and real, non-bubble prosperity, building a better life for our children and grandchildren, instead of selling them into future slavery to foreign powers.
Subprime Mortgage: a mortgage given to an individual who is likely to default on payments and the mortgage as a whole.
The narrative promoted by Obama and the Democrats and passed along to the public by the lame-stream media, is that eight years of Bush administration policies, cronyism with big corporations and Wall Street, and war-mongering with loss of U.S. treasure on contrived foreign wars led to the collapse of the housing sector and U.S. financial markets, which has caused our current Great Recession with volatility in financial markets affecting the retirement savings of millions of Americans, the loss of U.S. manufacturing industry, high unemployment and business stagnation.
The story goes on to claim that because of Obama policies, bailing-out and taking-over private companies, and the high level of government spending under the Obama administration working in concert with a Democrat majority in Congress, significantly deeper and more painful economic disaster has been averted by stimulating the economy and saving or creating millions of jobs.
Further Democrat narrative claims that the new Obama financial law brings much needed regulatory control of financial markets that prevents Wall Street from taking the kind of risks that they took with subprime mortgage derivatives that led to the financial collapse. The narrative also claims that the new financial law frees the taxpayer from ever having to pay for anymore bail-outs of companies “too-big-to-fail”.
While this grand Democrat myth seems plausible on the surface and has a certain appeal to a public that has been much abused by the excesses of Wall Street and the loss of gainful employment by businesses moving offshore and deserting everyday Americans, there is the minor annoyance that the facts just don’t support the story.
In fact, the collapse of housing and financial markets, the loss of U.S. industry and jobs, and our current Great Recession were brought about and then worsened by failed Democrat policies that persist in supporting unacceptably high-risk Wall Street ventures based on taxpayer-guaranteed, subprime mortgages that Democrats continue to encourage, and future government-mandated, tax-payer-funded bail-outs of failing “too-big-to-fail” companies that was written into the new financial law.
The new Obama Financial Law canonizes for select, large financial companies that profits are privatized while losses are socialized (i.e. if these big firms undertake high-risk ventures and make huge profits, they will pocket the gains; however, if in taking on high-risk ventures they lose big, their losses will be absorbed by the government with taxpayer funds). Some call this close relationship between government and large corporations State Capitalism, but a more appropriate term would be National Socialism (from which the German National Socialist or Nazi Party name was taken and whose precepts Hitler and the Nazi Party embraced).
It is also the inconvenient truth that Democrat policies have produced the loss of U.S. industry and jobs, and Obamacare, the new financial law, the promise of higher taxes and Democrat anti-business rhetoric has dramatically increased the costs of doing business and created such uncertainty that American businesses are virtually paralyzed. While large, government-favored financial institutions have been showered in taxpayer funds to keep them strong, small banks and businesses on Main Street have been abandoned by the federal government and hung out to dry.
Beginning with the Clinton administration, Fannie, Freddie and other mortgage banks were coerced by the Democrats to give mortgages to low-income families so these families could participate in home ownership and enjoy some of the economic benefits of the middle-class, a seemingly noble humanitarian goal.
While it's a worthy goal to want to help as many low-income citizens as possible join middle-class America through home ownership, what may have seemed initially like a blessing has now become a curse. In the medical profession's Hippocratic Oath it encourages physicians to do all they can in the interests of the patient, with this final caveat: But above all, DO NO HARM.
Since the mid-1990's almost all lenders have been making subprime and creative mortgages. These loans are called subprime because the homebuyer is at significant risk of not making payments and of defaulting on the mortgage at some time in the near future. In the originating lenders' rush to collect the inflated fees and points that were producing huge profits for themselves, lenders often overlooked or failed to verify creditworthiness, employment status, citizenship, or ability to repay the loan.
Since originating lenders quickly bundle and sell the mortgages they write to Fannie, Freddie, other large financial institutions, and Wall Street firms like Goldman-Sachs, what should they care if the homebuyer should default some time in the future? The originating lender has made its profits by charging low-income homebuyers more to make a subprime loan than it charges for other homebuyers.
While the low-income homebuyer gets hit with a huge bill from the lender for advancing the loan, these loan costs are usually hidden in the loan amount to be advanced and taken off the top by the lender, so the homebuyer doesn't feel it until later on in the loan repayment schedule. After signing loan documents, and before the ink is dry, the originating lender immediately sells the mortgage. The subprime hot potato has been passed to someone else, who will pass it along to again another or multiple other investors (i.e. Fannie, Freddie, Bank of America, Citibank, JPMorganChase, and Wall Street firms such as Goldman Sachs).
Subprime homebuyers take another hit when the loan terms are written. Typically, an Adjustable Rate Mortgage (ARM) is set up providing for an initial low monthly, low interest, interest-only house payment. Then over the subsequent 3-5 years, the homeowner sees his interest rate increase and also begins paying back principle along with the interest payments which often doubles or triples the initial monthly payment to a level that the homeowner had not anticipated, a level of payment that the homeowner cannot sustain for long without exhausting all resources. Many of these subprime loans have a large balloon payment due at 3-5 years. Also, virtually all subprime borrowers are required to purchase mortgage insurance which adds a significant sum to the monthly payment.
The lender predicts while making subprime loans that the homebuyers are likely to default within the first 3-5 years. Even if the originating bank holds the subprime mortgage it makes, the bank makes money from making the loan, collects monthly payments for the duration of home ownership, and forecloses on and takes possession of the home for resale when homeowners default. As long as home values continued to rise, if the bank had to foreclose on the home, the bank stands to make a profit on this too. In addition, since all subprime mortages require mortgage insurance, if the homeowner defaults, the bank can turn to the mortgage insurance company (AIG ring any bells?) to pay off the defaulted mortgage.
Many subprime lenders utilize predatory loan practices that benefit the lender at the expense of the homebuyer. Such as lending to low-income, would-be homebuyers, where the lender knows in advance there is high risk of default, higher loan costs are charged the homebuyer but hidden in the loan amount, ARMs are set up as described above where over several years a reasonable payment becomes two to three times it's original amount, there may be an unrealistic balloon payment required, and the cost of mortgage insurance is added to the monthly payment.
If not too many homeowners default on their mortgages at once, this is not an unmanageable or unprofitable situation for banks. So, while lenders making subprime mortgages clearly reap huge profits from these predatory practices, the low-income homebuyer takes another hit with foreclosure, eviction, and financial and psychosocial-emotional loss. Rather than being a benefit to low-income families, hundreds of thousands of subprime mortgages have defaulted and are in foreclosure; many more such loans are due to default over the next several years. Massive subprime mortgage defaults resulting in collapse of the housing, financial and insurance markets, and the ensuing Great Recession has brought about untold misery for these families and for most Americans.
The fact that most mortgages are federally guaranteed (using taxpayer money), explicitly or implicitly, encourages the financial sector to consider these high-risk, subprime mortgage bundles and the Wall Street securities and derivatives based on them as low-risk investments.
The government mortgage guarantee converted a known high-risk investment into a low-risk one, being secured by mortgage insurance companies and also by the good faith and credit of the United States. These mortgages were securitized and sold by Wall Street as prime investments, not based on the usual anticipated high homeowner debt repayment level, but based solely on the insured value and the government mortgage guarantee.
When millions of these homeowners began to default on their subprime mortgages as predicted, a glut of troubled or foreclosed upon homes on the market produced a fall in home values, making most American homeowners upside-down in their mortgages (the mortgage balance owed is greater than the current appraised home value). Securitized subprime mortgages were leveraged as derivatives at 100:1 and greater, and when the housing market collapsed and mortgages were defaulted, the value of the derivatives evaporated as well leaving the Wall Street investment banks owing 100:1 on their products which now no one was buying.
In 2006, the Bush administration tried to rein in Fannie, Freddie and the other mortgage banks and halt any new subprime mortgages with government guarantees to people who could not afford them. Democrats in Congress resisted all efforts to provide judicious oversight or regulation of this high-risk activity. As late as 2008, Democrat leadership in Congress assured the American public that Fannie, Freddie, and the U.S. housing and financial markets were in good shape and as strong as ever.
When the subprime mortgage housing crisis began to grow and spread, Wall Street firms and other large financial institutions filed insurance claims based on the defaulted subprime mortgages, that led to the failure and federal bailout of large insurance companies like AIG, that were insolvent and unable to satisfy claims. The financial sector next went to the federal government for the guarantee and the government gave the financial and insurance companies taxpayer money to bail them out.
The bubble of subprime mortgages was contrived and executed and Wall Street and other financial company excesses were subsidized by Democrat policies that led directly to the current Recession. While the Bush administration was admittedly far from perfect, Bush is not responsible for the current recession—this blame is more appropriately laid at the feet of the Democrats.
While the Bush administration did little to hold down government spending and deficits, Obama has raised spending and deficits more than twice as high as levels under Bush. Most of the Bush deficit expenditures were for a prescription drug program for seniors, and providing justifiable action for national security defense against Islamic Jihadist terrorists.
On the other hand, most of the Obama expenditures have been political payback to Democrat cronies, like Wall Street, the unions, environmentalists, ACORN and other subversive groups, and increasing the size of government and the number of government employees, along with ensuring that federal employee salaries and benefits were more than twice those of comparable workers in the private sector.
The fact that Bush did a limited amount of damage to America through deficit spending on widely desired and other essential, constitutional government functions, does not justify Obama’s multiplying Bush’s deficit many times over with frivolous and wasteful, pork-barrel, political payback while aggressively acting to destroy American free market capitalism, abridge American freedoms, stifle the voice of opposition and critical analysis, weaken American and allied national security defenses, increase American subservience to international interests and secure long-term power to himself and the Democrat Party.
Big Labor, and high corporate taxes, both strongly supported by Democrats, have forced companies to leave the United States and take their businesses elsewhere to remain competitive. If we could have stopped the unions in the 1980’s, and maintained a more reasonable business and investment tax policy we might still have a private auto industry, other manufacturing, and a stronger business sector with higher employment in our economy. Even now, we have the opportunity to dramatically reduce corporate and investment taxes and see business and industry return and boom in the U.S.
However, in order to hire employees, expand the business and increase production, business needs capital. Despite a massive infusion of taxpayer dollars, money is still tight. The banks still are not lending to the economy what the economy needs to grow. When the banks get back into the business of providing the needed capital to the economy instead of just investing overcautiously in Treasury Bills, the economy will have a chance to start growing again.
In the United States we don’t have a typical parliamentary system, but we do have a fairly strong two party system. Many times in the past, third parties have been formed, and while they may temporarily sway American thought and the direction of the two major parties, none have been successful in being any real, long-term influence on American politics. The plan of the Tea Party from the start was to take over, from the inside, the Republican Party, taking it from the establishment which had lost its way and return the party to its roots in fiscal responsibility, smaller government, lower taxes and free markets within the framework and freedoms of a Constitutional Republic. The Tea Party did not want and refused to go down that pointless, third-party road.
Large numbers of individual, average Americans, most for the first time in their lives, moved beyond their comfort level, took a stand against the fiscally irresponsible policies of both major political parties, and worked long and hard hours to get good people with Tea Party views to win in the Republican primaries. Many progressive incumbent Republicans were replaced in these primaries with a Tea Party-supported Republican candidate. In the general elections, many progressive Democrats and earmark and spend establishment Republicans were roundly defeated and replaced with Tea Party Republicans committed to sound fiscal policies.
Over time, the goal is to replace progressives of all party affiliations with Tea Party Republicans such that the Republican Party will be the party of Tea Party principles and values, and the majority party in federal, state and local government. The “Tea Party” is not an actual political party, but a loose organization of Republicans, Independents, Constitutionalists, Libertarians, Unaffiliated and even some Democrats fed up with politics as usual forming thousands of small patriot groups that together make up a rather disjointed but broad-based and committed, grass-roots political movement.
There is nothing illegal, immoral or unethical in being a Tea Party Republican. Rather than serve to prop up the corrupt Republican or Democrat establishment in Washington, Tea Party Republicans have been charged with the special mission of restoring the Republican Party and the nation to correct, constitutional principles of government that promote freedom and prosperity.
There is less than zero basis for any type of legal or ethical challenge to these newly elected lawmakers for not being “real” Republicans. The Tea Party movement believes that real Republicans ascribe to Tea Party principles and values, and that establishment Republicans have strayed far too long from their true conservative roots. The Tea Party movement may, in fact, be a part of another “Great Awakening” spreading across America and even well beyond her shores, presenting the possibly of a second chance for other great nations as well.
With an influx of Tea Party Republicans into governments across the land and a Republican majority in the House, slowing down if not actually stopping altogether and reversing the relentless and destructive Obama socialist/anti-colonialist juggernaut is a real possibility. If the average American continues to stand against what is wrong with America, and fights for what is right for America, in the next several election cycles there will be Tea Party Republicans in power across the country, in the House, the Senate and in the Oval Office.
If the millions of Americans who relate to the Tea Party movement continue to stand up for the God-given, inalienable rights guaranteed by the Constitution, corruption and destruction will fail, freedom will prevail, and America will be back on the road to honest industry and real, non-bubble prosperity, building a better life for our children and grandchildren, instead of selling them into future slavery to foreign powers.
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