Busted: Bankers and The Global Economy

March 25, 2008

Mortgage-Lovin’ Enron MLM Blues

Filed under: banking, investment, money — Tags: , , , , , , , , , , , , — digitaleconomy @ 12:00 am

securities2.jpgFederal regulators and government policies have clearly overcome any chance of market discipline or natural market correction in the mortgage market. A long-overdue correction in the United States mortgage sector began to rear its’ head last summer. If you’ve been listening, you know this well by now. What is happening with mortgage financing could be compared to Bush’s last financial crisis, the dot.com bust. America survived that financial bubble, although that bubble affected business and investors only. Like todays’ crisis, the production of income was secondary to complicated financial constructs which obfuscated the real mortgage business. The securities invented by the mortgage banking industry aren’t in reality a legitimate investment. Remember when Enron invented entire energy-investment markets that ultimately dealt in nothing but hype?

Turning mortgages into securities has been a great deal for early lenders, much like a wonderful multi-level marketing scheme. The directives market went gangbusters. The desire for non-stop heady profits has put the world where it is. The guys that joined the game later on are the ones that are beginning to lose along with the entire economy of the United States: even the world. Isn’t that the way a MLM operates?

The U.S. banking industry, out of greed rather than self-preservation managed to spread the MLM banking plague globally. The value of the subprime market didn’t matter as long as the risk could be spread thinly across the world. Never mind the ability to correct or change the loans, now dominated by securities investors. It was all about the money then and it still is. Unfortunately, the borrowing customer is no longer able to pay outrageous terms to sustain the overvalued global marketplace of MLM banking. Securities investors are still trying to move these mortgage banking securities to avoid getting caught with a red hot potato that isn’t worth a MLM Hallelujah. In no time, these securities won’t be worth pennies on the dollar and the market, once propelled to great heights, will fall into oblivion. More creative income streams won’t save the worthless paper of MLM mortgage banking.

The bankers have been caught red-handed, but the over-educated morons won’t get a pink slip, much less a slap on the hand. Instead, they are rewarded with salvation in a market that normally has no concept of right. In the meantime, the borrowers that signed the loans face the same fate as the securities that were based on their subprime loans, unless Mr. Bush steps in. Their fate is homelessness. This is an election year in politics. Millions of voters losing their homes this year won’t do before an election. Mr. McCain’s and Mr. Bush’s politics won’t allow for the same laissez-faire approach that brought this debacle to a head. If Republicans don’t stand for their constituents, they cannot win the election. Therefore, a temporary bailout for ailing borrowers is clearly in the cards. Temporary, because the complexities of the situation require that the changes be made in degrees. How many people will lose their homes, depends in part on whether they are willing to champion their own causes. The government and the industry is not up to the task. The government and the shaky finance industry doesn’t have enough time for a highly formalized bailout while millions lose their homes. “Washington. We have a problem.” Time is not in our favor.

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