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.