Column #2 Sub-Prime Mortgage Scam

I received an email about my last column, asking me to explain why the 2008 financial crisis was based on a scam.  What was the scam?  One hundred million sub-prime mortgages were written after the repeal of the Glass Steagall Act, were all ajustable mortgages.  The home buyers needed no down payment, the rate of the mortgage would be 2%, and there were no income requirments.  What these buyers were not told was that after two years, the interest rate for the mortgage woul dgo up to 13% or more.  This change would triple the monthly payments, and cause 95 home owners into foreclosure.  The “scam” was selling buyers mortages that they would never be able to pay.

This was key mechanism to accomplish the goals of the Scam.  The goals of the scam were many, and all of them were accomplished.  

 Repeal Glass-Steagall, so that the trillions of dollars in savings deposits could be used for investments which would ultimately become worthless.  

Use those trillions of dollars to create 100 million mortgages.  These sub-prime mortgages require no down payment, have a 2% interest, and are hated by main stream Americas as a hand out to the poor.   After two years, the mortgage rate on these mortgages will rise fo 13% or more, and 95% of them will go into forecloseure.

Gather together those mortgages into large “packages” which are used to back stocks, and make sure that these stocks are sold to people an institutions all over the world.  Everyone is told that “mortagages” are the safest long-term investment that money can buy.  The insiders know that the stock ail be worthless in two years, for. as adjustable mortgages, the interest rates rise to over 13% after two years.  

Create an un-regulated financial vehicle called “Credit Default Swaps”, so that very wealthy people can “insure” any losses from stock purchases which lose the assets backing them.  For a 1% fee, a Credit Default Swaps holder will received a $30 payment for every dollar in the foreclosed home.   

As the neighborhoods become depopulated, have hedge funds, which made fortunes with CDS, buy up and demolish all these homes.  During 2015. hedge funds were buying a thousand houses a week for cash. 

The red-lined neighborhoods will now be used to create new neighborhoods with spacious streets, the finest schools, and the best property bases in the history of the United States.  Mansions will be built n these neighborhoods, so that foreigners can use EB-5 Visas

to provide their whole families full freedom to enter and leave the US.

I hope this explains the Sub-Prime Mortgage scam.  If you do not know what “red-lined neoghborhoods” are, I will be covering that in my next column.

Column #1 for new political column

Here is my fist Column for a new summer series.  If you know of a newspaper that needs this kind of liberal work, please have them contact me.

Over the years, I have written quite a few Letters and columns about the real cause of our fianacial crisis of ten years ago, but the editor with whom I was working insisted that his readers would not understand my points.  I think he underestimated his readers, and I think it is information that should be known by all Americans.  The polirtical leaders of America created a fiscal siuation which was doomed to gigantic failure, could be blamed on poor people, and would reap trilions of dollars for about 2,500 investors and money managrs. 

There is certainly a real problem with the fact that this information has been withheld from us, but we should not be surprised.  How was this scheme created?  It started with Alan Greenspan, and attachemtn to Ayn Rand.  Here is what Greensan wrote about her“…Ayn Rand became a stabilizing force in my life. It hadn't taken long for us to have a meeting of the minds -- mostly my mind meeting hers -- and in the fifties and early sixties I became a regular at the weekly gatherings at her apartment. She was a wholly original thinker, sharply analytical, strong-willed, highly principled, and very insistent on rationality as the highest value…”  Greenspan would beomce the advocate for lives based of greed and selfishness, an dhis only caveat was that rational humans would not hurt themselves or their societies.  To a large degree, this is the point upon which Greespan’s name as the founder of the 2008 Financial meltdown.

Greenspan did everything he could to advocate and create a “regulation free” world for America financial corporations.

The climax came in 1998-1999, when the Glass Steagal Act was repealed.  Savings funds could now be combined with investment funds, and used for whatever the financiers wanted.  The major vehicle in these plans was the creation of Credit Default Swaps or Swap Bonds.  They were insurance but no really, so they had no regulation and have none today.  The CDS were designed to reward Swap buyers a prize if the assets backing their “swaps” lost value.  Does this sound difficult.  It is, and I might be explaining it badly.

The bottom line is that CDS holders would and still are being paid $30 for every dollar in a sub-prime mortage that go into foreclosure.  At the height of this scheme, 62 trillion dollars was invested in these Swaps.   When a $200,000 sub-primed mortage home gos into foreclosure. the CDS inversters receive six million dollars.  This is why there were offices thoroughout America who were creatuing fraudulant mortgages.  This is why one hundred mortages were written, and the hedge funds knew that most would go into foreclosure—amd 95 million of then did.  It is difficjult to get a real eastimate of the triallions of dollars that AIG paid out on these “Swaps”, and i veleive that the amount was 35-55 Trillion dollars. 

Further, eveyone who had bought the stocks backed by these mortgages lost every dollar that they invested.  I have read that the Hewlit Packard Foundation dropped from 12 billion dollars to 8 billion dollars.  Universities, colleges, pension funds, and all the other instituions that were not told that the whole scheme was the largest theft in the history of the world.