The $26 Billion Looting of Banks by States' Attorneys General

Fritz Pfister
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Posted: Feb 15, 2012 12:01 AM

Now comes the main stream media editorializing that the Attorneys General settlement against mortgage banks, is a good first step to fix the home crisis. This should be expected from overtly Obama-supporting, big -government, progressive editors and publishers. Of course government and lawsuits are the solution to the housing crisis. To liberals the government is the solution to all that ails mankind. 

Short and sweet, here is what Ronald Reagan said; the more the plans fail the more the planners plan. This is a textbook example. Federal bureaucrats and politicians caused the housing crisis resulting in the financial meltdown.

What crime did these banks commit? They followed government orders to lower lending standards to make loans to low income families. A great example of liberal and progressive good intentions. The Great Society? Destroyed many of our societies, see Detroit or any other liberal big city. Making home ownership affordable with loans for those who were not qualified? Destroyed the housing market.

From Investors Business Daily an article regarding the housing meltdown. Quoting from the article; “Audacity of dishonesty hijacks the truth in lending.”

According to Peter Ferrara, senior fellow at the Carleson Center for Public Policy:

“This over regulation reached the point of forcing lenders to discount bad credit history, no credit history, no savings, lack of steady employment, a high ratio of mortgage obligations to income, undocumented income, and inability to finance down payment and closing costs, while counting unemployment benefits and even welfare as income in qualifying for a mortgage.”

“This” he said, “turned into government-sanctioned looting of the banks.” [end quote]

The crime according to Attorney General Lisa Madigan is that the process is infuriating regarding the loan modification program HAMP. Seems hundreds of thousands got bogged down for months in red tape. Who wrote the procedures for HAMP? Government.

Certainly many banks were overwhelmed by applications and in many cases the left hand didn’t know what the right hand was doing. But they were following a hopeless plethora of government dictates that bogged the system down. The planners plans fail again.

This does not relieve home buyers from the fact they knowingly entered into a legally binding contract, at least until now. Seems Obama just threw contract law out the window with bankruptcy law (see GM). Were there some cases of lenders taking advantage of borrowers? Sure, however they amount to a teaspoon full in an ocean full of loans. What signal is this sending to current homeowners making their payments? It doesn’t matter if you make the payments or not, because government will order your contract terms void. Sweet.

Let there be no mistake, there would never have been a housing meltdown and a financial collapse had government not ordered banks how to conduct their business. The Clinton administration’s revision of the Community Reinvestment Act, putting it on steroids, is the genesis of the meltdown. All that followed would not have been possible without this first step Clinton ordered.

Part of a successful class warfare campaign hinges upon Obama ability to paint the banks as evil, for which the sycophant media is an accomplice. This lawsuit, and now this streamlined refinancing of troubled, and underwater homeowners is to make Obama appear to be saviour. None of which is true.

Here’s your streamlined plan, it’s deja vu all over again; lower credit score to 580, waive the appraisal provision, and forgive any amount owed above 140% of current value (tricky without an appraisal). Seems to me to be exacerbating the problem, not helping.

Why take a risk on a family with a 580 credit score? Haven’t they proven either they don’t have the will or ability to pay bills as agreed? Why are these folks behind on payments? Perhaps no job or working part time wanting full time work? Giving them a new loan won’t solve their income problem. Will they be able to make the new lower payment? Maybe, maybe not. This program just kicks the foreclosure problem down the road. This is like giving an amputee an aspirin and telling them to come back later. They will.

The solution to the housing crisis is not making more bad loans. The solution is not forgiving underwater mortgages when millions are paying as agreed. The solution is not undermining centuries of contract law.

This will come as a shock to the bureaucratic machine, to the Obama economists, to the progressive State Journal Register editorial board, to Democrats, and liberals, but here is the solution: a growing economy that puts people back to work. A few million jobs would do wonders for these folks who are in trouble, the unemployed, for struggling businesses, and for government revenues.

You want to fix the housing crisis? A good first step would be to reverse Obama economic policy freeing the private sector to grow and create jobs. It is fiscally impossible for a meaningful recovery with Obama policy in place. So says the laws of economics. A foreign concept to the left, Obama, progressives, and the planners who’s plans will fail again.

For following government orders, banks are looted for billions by the government. A good gig if you can get it. One Chicago community organizer did. Don Corleone would be envious.