How We Got Here

I can't shut up any more. When I started this blog, the first two posts were all about Fannie Mae and Freddie Mac and how they were headed into the abyss and how their management were in WAY over their heads and how people on both the origination (of new mortgages) and sell side, the Street, were way smarter than they were and that they were dupes and that Congress let the whole thing happen because they were way too obtuse to comprehend the magnitude of the problem if this house of cards was to fall - as it did. Anyhow, I deleted those posts because I was afraid that if anyone read them, it may cause a run on the shares of the GSE's. Little did I know that, not only did nobody read the blog, nobody cared that these "foundations of the secondary mortgage" market were so undercapatalized that a one percent increase in mortgage defaults would bankrupt them both. Not only that, but that they were getting in to a sector of the market that NOBODY really understood - sub-prime. Not only that, but they were increasing single loan limits and decreasing underwriting and qualification standards during a period of rampant inflation in single-family housing.

So, how could something that was so blatantly obvious, be allowed to happen?

Everything is allowed to happen because of the context within which it happens.

Here are some things to think about:

When is a lie not a lie?
How many of the mainstays of our society are really based on fact?
Can our leaders really be trusted?
I could go on but does it really matter?
and, How much should we dwell on things that have happened versus looking forward?

The state that we find ourselves in DEMANDS that we examine some of the milestones of the last several years. I've shown, in past posts, that one could easily make a connection between the attitudes of the people in the financial services sector and the attitude towards the American people as expressed by Dick Cheney that relates to being truthful. That is, so long as the perpetrator of ANY act believes that they are superior in any intellectual, moral or moneyed sense, they have a rationale to make decisions that effect other people and for which they can not be held accountable.

I didn't really express that thought very well, but:

It's all about money ... especially in Washington. Number one on my list is what is referred to as "The K Street Project", because it set the tone for what has happened for the last several years and showed members of congress that they too can easily get on the gravy train.

When Tom DeLay appointed himself Majority Leader of the House, the first thing that he did was to set about getting the K Street lobby firms to pony up contributions if they (and their clients) wanted to be looked upon favorably in the legislative process. DeLay understood the power of money. As a good member of Congress though, he also understood how things got done, e.g., the connection between votes and money for projects in member's districts. He really understood though, corporations have money and most voters do not. When one is motivated by money, one can conclude therefore, that corporations matter more than voters, AKA taxpayers. So, the K Street project was born. Step number one, decrease committee staff - the dedicated people who put in 60 hour weeks writing new laws on behalf of we citizens. With no staff to draft legislation, that task was handed over to K Street and any draft legislation had to be accompanied by contributions specifically aimed at the districts that would benefit from the legislation.

Since DeLay started this process, the number of registered lobbyists has increased exponentially and we now find ourselves in a situation where corporate America is creating the rules by which it is regulated.

Ask yourself this, how much does each Senator and Representative spend during each election cycle and just where does that money come from? Have you ever made a campaign contribution?

The American Bankers Association is one of the biggest contributors in Washington - golly, I wonder if there is any connection between that and the "bailout"? or the speed with which Morgan Stanley and Glodman Sachs got their National Bank charters and their bailout checks?

Next, and at the risk of sounding a bit paranoid, the easy financing of the last several years had a side benefit for those in Washington. That is, if Americans are so busy working and so preoccupied with paying for stuff that they really could not afford, they won't pay any attention to what's going on in Washington. Things like a war and who really benefits from it - hint, not the people that actually fight it. Things like torture and the abolition of habeas corpus. Think about it, there is an awful lot that our legislators have gotten away with in the last several years.

The whole selling of the Iraq war has served as a paradigm for the folks in Wall Street as it relates to "full disclosure". I refuse to believe that the people in the Street, the rating agencies and the law firms did NOT know that they were dealing with fire. They had to have known that the whole thing was going to blow up. Read what follows down this page ... it's all there.