A Summer Break Question: Who Should We Kill First – Frank, Fannie or Whitey?

I hope you’re having a fun-filled and relaxing summer.

Have you, like me, been taking time to chill on the beach with your dog named Skipper and read exciting non-fiction books about the U.S. fiat money system and failed economic policies?  I knew it!

I hadn’t planned on blogging until summer was over, but when I read an interesting research study, I sent ol’ Skip out to fetch a stick and started writing.

The Pew Research Center, which analyses Census Bureau data, has reported that as of 2009, white households held a median wealth of $113,149, roughly 20 times that of blacks and 18 times that of Hispanics.  Pew also reported that from 2005 to 2009, median wealth dropped 66% among Hispanics and 53% among blacks, compared to only 16% for whites.

Citing plummeting house values as the principal cause of the decrease in household wealth, Pew comments that this is the largest wealth gap between minorities and whites since the government began tracking the data more than 25 years ago.

Below is a link to the study:

http://pewresearch.org/pubs/2069/housing-bubble-subprime-mortgages-hispanics-blacks-household-wealth-disparity

I found myself baffled by this report.  It made me question how this was even possible.  How could the gap be so unequal in this Country?

It’s easy to claim racism.  And, yes, nobody can deny that disparity still exists due to long-standing prejudice and racism toward minorities, as well as a lack of equal opportunity.  But, if we dig deeper, we can reveal another disturbing truth behind these numbers:

In order to promote home ownership among lower-income America, a “perfect union” was formed in the 1990’s between certain government officials (such as Barney Frank and Chris Dodd), James Johnson & Franklin Raines (the then CEO’s of Fannie Mae), and Wall Street executives.

By the late 90’s, the “Barney Frank group” had turned Fannie Mae into a private piggy bank.  Through political pressure, favoritism, and thumb screws, Fannie and Freddie were forced to implement sloppy lending standards to meet some whacked-out vision that each American “deserves” to own a home, regardless of that person’s credit worthiness.  This meant the requirement that a borrower put down a substantial amount of cash, verify his income, and demonstrate an ability repay debt was basically thrown away, making it possible for Fannie and Freddie to buy exotic, reckless mortgages from originating banks.

Meanwhile, on the Fannie front, James Johnson amassed a personal fortune estimated at $100 million during his nine years as CEO of Fannie Mae, and both he and Raines encouraged loose lending practices to grow this toxic GSE (Fake Definition:  Government-Sponsored-Enterprise. Real Definition: taxpayers are on the hook for its shitty lending practices).

It is now reported that Fannie Mae, among other things, lied about profits, intimidated its adversaries, bought off Congressmen, stacked congressional hearings with friendly bankers and activists, and even hired friends of key members of Congress (including Barney Frank’s partner).

And any time rational observers objected to these increasingly dangerous lending standards, Frank and the rest of the cabal would silence their alarms by accusing them of opposing housing for the poor.

But certainly the brilliant minds on Wall Street would step in to bring sound business judgment to this nonsense and stop it, yes?  — NO!

Instead, Wall Street became a willing participant.  It’s rich, white executives acted as drug peddlers for reckless mortgages.  They created complex computer models which “concluded” that housing prices would never go down, engineered exotic mortgage-backed security products that not even the smartest people could fully comprehend, and entered the black box world of credit default swaps to the tune of trillions of dollars.  All in a concerted effort to dump toxic mortgage garbage on unsuspecting investors when they knew default was inevitable.

We all know the end result.  Home ownership rose to an all-time high of 69.2% in 2004 but, when the inevitable crash came, $1 trillion in loans became $1 trillion in bad debt.  And, as we can see from the Pew Report, minorities were hit the hardest.  The people Frank and the rest of the cabal intended (or pretended?) to help are now losing their homes, their credit ratings, their life savings, and the American dream.

If you’d like to spend this summer learning how Frank, Fannie, or Whitey (your choice) destroyed the U.S. economy and helped create the largest wealth gap in modern times, I would suggest reading “Reckless Endangerment,” a new book by Gretchen Morgenson and Joshua Rosner.  Gretchen Morgenson is a business reporter and columnist at The New York Times.  She was awarded the Pulitzer Prize in 2002.  Joshua Rosner was among the first analysts to identify accounting problems at the GSE’s and to warn of the coming credit crisis.  These authors have taken a detailed and fascinating look at how greed and government distortion of markets led to the housing meltdown.

Read a WSJ review here:

http://online.wsj.com/article/SB10001424052702303745304576361531730887312.html

If you want to buy it, you can order it here:

Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon

Of course, since I seem to be the only person left in America without an iPad, I’m going to buy the real book with my Border’s gift card before the shelves are cleared out and take it to my next vacation spot.  Have a great summer!

Til’ next time, Jeff