A hypocritical Congress has passed a bill it calls necessary to help homeowners keep their houses. This is what they in congress claim even though over 90% of homeowners who live in their houses are making their mortgage payments on time. While claiming to help the middle class keep their homes, they loot the Federal Treasury by using taxpayer money for the bailout. To whose benefit is all this Federal generosity directed? Why the same people who skimmed off Billions for themselves by setting up complex lending programs. While Congress is bailing out their buddies, they have decided to give a few Billion for organizations like Acorn that openly support the election of Liberal Democrats in elections. Your tax dollars are used to support people who want to take more money and power from you, while helping to elect people that will continue this effort. I guess that’s what the Democratic leadership means by Paygo? We pay, and they go on redistributing our middles class money to the wealthy and special interests who support them.

On July 23, Paul Gigot of the Wall Street Journal wrote a piece called “The Fannie Mae Gang.” He mentioned that Fannie Mae “…helped to make Countrywide as profitable as it once was by buying its mortgages in bulk. Mr. Raines -- following predecessor Jim Johnson -- and Mr. Mozilo made each other rich.” He then wrote about the incestuous relation between the powerful mortgage monopoly and Congress, “…explains why Mr. Johnson could feel so comfortable asking Sen. Kent Conrad (D., N.D.) to discuss a sweetheart mortgage with Mr. Mozilo.,” Of course another sweetheart deal was provided to the Chairman of the Senate Banking Committee, Sen. Dodd.  He finally concluded; “Fannie has been able to purchase political immunity for decades by disguising its vast profit-making machine in the cloak of ‘affordable housing.’ To be more precise, Fan and Fred have been protected by an alliance of Capitol Hill and Wall Street, of Barney Frank and Angelo Mozilo.”

The real danger is also exposed in that same article. Mr. Gigot further wrote, “I know this because for more than six years I've been one of their antagonists. Any editor worth his expense account makes enemies, and complaints from CEOs, politicians and World Bank presidents are common. But Fannie Mae and Freddie Mac are unique in their thuggery, and their response to critics may help readers appreciate why taxpayers are now explicitly on the hook to rescue companies that some of us have spent years warning about.” Imagine the extent of their boldness when these same people who now want us the taxpayer to pay for their wealth accumulation actually threaten the Editor of the Wall Street Journal. I guess this is a preview of what will happen when the Leftist Leadership attempt to get their bill passed in the next Congress to suppress dissenting opinions in print, or any other media?

Investors should always be wary of complex investment instruments. Large financial institutions have learned from Congress that by making that which should be easily understood complex you can discriminate against those who can’t afford expert advice. If you make the investment complex, like the tax code, you can fool most of the average investors while manipulating the use the investment product to get rich.  Like a new improved laundry detergent, whose brand has been around for a hundred years, are the new products really better, or just hype? Traditional mortgage backed securities have been manipulated to get better credit ratings and hiding their risks in layer upon layer of the same investment, simply being repackaged every time. Of course every transaction generates obscene fees for the packagers and the risk is further increased. The mortgages are sold to homeowners and those purveyors of risk to the homeowners are further rewarded by substantial fees. I wonder whether the people involved in this Ponzi scheme will ever be indicted for their fraudulent acts. But wait, why indict, let’s just hide the whole sordid mess with a bailout and move on to the next scam?

Alan Greenspan was quoted as saying the Bailout was necessary, but not handled properly.  At the Fed, Mr. Greenspan warned for years that the two mortgage giants' business model threatened the nation's financial stability.  He now says they both should be dismantled over time. All right, now we have a strong voice for restoring stability in the financial markets, how about restoring “fairness” in financial markets. While head of the Federal Reserve he engineered low interest rates for financial institutions and businesses large enough to finance by selling Commercial Paper. What about Small Business, the real engine of job growth, and what about the poor consumer? If there was one late payment on a credit card, the financing method by necessity for many small businesses, the result is 30% interest. Their was no money for small business loans at banks, because they were busy funding and selling mortgage packages with all the fees those products generated. Financial Institutions no longer make a modest income working on the spread between interest earned and paid. They charge regular customers with high interest and excessive fees.  

Congress seems determined to gain power beyond that prescribed by Article I, the article that describes the Powers of the Legislative Branch. And yet one power, that to regulate the value of money, has been around since the ratification of the U.S. Constitution. Section 7 states; “To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.” Originally, it was left to States to determine what interest rates were usurious. But the mismanagement of government finances after the imposition of the Great Society programs led to an interest rate crisis, created Stagflation. This made it necessary that by 1980; national banks, federally chartered savings banks, installment plan sellers and chartered loan companies were exempted from state usury limits by the federal government through a special law. This effectively overrode all state and local usury laws. So the Fed sets the interest rates for Large Companies and today it is around 4-8% or so. Yes, risk is a factor and some large organizations pay higher rates because they are riskier. But how about a Bailout for Middle Class America, and re-establish usury rates for the consumer and small business? There will always be those who will be risk rated, but perhaps a Federal Usuty law will curb the appetite of Large Financial Instituiton to overcharge the smaller accounts to make up for their bad management of the Larger Risks they took? It may also curb their appetite for taxpayer bailouts.