Sound and fury signifying nothing
Rep. Dennis Cardoza is making a lot of noise lately about something (see links below). It has something to do with the foreclosure rate -- highest in the country -- in his congressional district. He's also denouncing the President Obama and Nancy Pelosi because they don't care about the Valley. Cardoza also doesn't like Obama because the White House wrote a paper about how to reform the mortgage credit system. Cardoza has his own solution to the foreclosure problem and has put into a bill. But you don't hear Obama and Pelosi denouncing Cardoza.
Our congressman is outraged that the president's plan involves the federal government backing out of the mortgage business. The White House paper mentions loss of trust in the mortgage credit system as a prime motive for its reform proposals. Cardoza is against getting the federal government out of the mortgage business. Cardoza, his family, friends, supporters and donors benefited very much from the untrustworthy mortgage credit system that created the bubble that burst. One of the crucial elements in the making of the bubble was the realistic expectation banks had that when their risk strategy crashed, the government would bail them out with public funds. That would be a necessary element in the next housing bubble, too, so it makes sense that Cardoza would want to keep it.
The whole flap is boring. Wall Street controls the government and the time has passed for the government to do anything constructive about the foreclosure crisis. Now, state and local governments are slashing the welfare net when the people have not needed it more at any time in the last 30 years. So much for the government. Wall Street is restructuring states the same way the World Bank and the International Monetary Fund restructures broke nations. California is adopting an austerity program and selling of state-owned assets. As the Badlands Journal editorial board has mentioned occasionally in the last decade, California is getting more like Argentina every year. The process continues and is now accelerating.
In 2005, a consortium of Wall Street banks created standard contracts for creditderivatives based on subprime mortgages, making it even easier to create synthetic subprime CDOs. These developments all confirmed the predictions of economist Hyman Minsky, who had warned that "speculative finance" would eventually turn into "Ponzi finance."
The end result was a gigantic housing bubble propped up by a mountain of debt -- debt that could not be repaid if housing prices started to fall, since many borrowers could not make their payments out of their ordinary income. Before the crisis hit, however, the mortgage lenders and Wall Street banks fed off a giant moneymaking machine in which mortgages were originated by mortgage brokers and passed along an assembly line through lenders, investment banks, and CDOs to investors, with each intermediate entity taking out fees along the way and no one thinking he bore any of the risk. -- Simon Johnson, James Kwak, 13 Bankers: the Wall Street Takeover and the Next Financial Meltdown (2010)p. 132.
Badlands Journal editorial board
Notes:
2-11-11
Financial Times (UK)
White House seeks wind down of Fannie and Freddie ...Tom Braithwaite in Washington and Suzanne Kapner in London
http://www.ft.com/cms/s/0/56b7cf88-35e1-11e0-b67c-00144feabdc0.html#axzz1DulUnfYl
2-12-11
Modesto Bee
Cardoza blasts Obama, Pelosi as do-nothings…Michael Doyle mdoyle@mcclatchydc.com
http://www.modbee.com/2011/02/11/v-print/1553506/obama-pelosi-blasted-as-do-nothings.html
2-12-11
Modesto Bee
Cardoza blasts Obama, Pelosi as do-nothings…Michael Doyle mdoyle@mcclatchydc.com
http://www.modbee.com/2011/02/11/v-print/1553506/obama-pelosi-blasted-as-do-nothings.html