President Obama once again demonstrated his utter lack of understanding of the basic principles of economics during a meeting with his economic advisors on Monday. He chooses to blindly follow the misguided and discredited theories of Lord Keynes, among others, given him by his advisors. It is also most unfortunate for this country that the entire cadre of the presidents economic advisory team seem incapable of objectively analyzing the Keynesian model that they are so attached to, for if they could only extricate themselves from this “third way” paradigm and experience a few moments of economic lucidity, it is highly possible that even they could begin to fully understand just how utterly disastrous Keynesianism has been for the global economy in general, and our economy in particular. Unfortunately, they ignore the continued warning signs that keep popping up and continue to dig the United States ever deeper into this economic black hole that threatens to suck the very life out of what remains of our economy, and will ultimately take what remains of our liberty with it.

Let me be clear: what we are presently witnessing in the ongoing economic crisis is the natural laws of economics giving their referendum on Keynes. The current national unemployment figure of 10.2% simply underscores the point. In short, Keynesian theory suggested what has been called a “third way,” not fully capitalism and not fully socialism. It sought a system where the government, both through the power of the central bank and intervention through regulation, legislation and manipulation would be able to bring about a condition of perpetual prosperity, an end to recessions and economic cycles of boom and bust, and end to the bubble economy. The problem with the theory is that the very controls and manipulations demanded by Keynesians to “grow” and “sustain” the economy are the very things responsible for the creation of the economic bubbles and the business cycle, precisely because these things violate the natural laws of economics. Mises, Rothbard, Hayek and others have proven this time and again. The natural laws of economics correlate with human thought and action, and these things are wholly incompatible with bureaucratized central planning boards and central banks fixing prices, wages and interests rates at values much different than those the free market would deem proper. Attempting to isolate these things from the reality of the marketplace in essence creates the bubbles that are bound to burst at some point because they are at odds with the market, with the decisions and choices producers and consumers make on a daily basis.

Keynesian theory has been the driving force behind the economic policies of the industrialized world since the early twentieth century. Keynes’ model economy was viewed as having evolved beyond capitalism, thus noted above as being a hybrid between capitalism and socialism. It advocates corporatism. It is therefore by its own admission decidedly not capitalism. Those who prefer to cast the blame for the current economic mess on unrestrained capitalism are flat out wrong and woefully uninformed, because there has been no unrestrained capitalism in the United States – ever. Sure, we came fairly close up until 1913; however, once the Federal Reserve Act and Income Tax Acts were passed and the Constitution amended through the ratification of the 16th Amendment, all hopes for true capitalism were indeed dashed.

Mr. Obama and his advisors like to remind us how they inherited this economic crisis from the previous administration. There is nothing untrue in that statement. However, for anyone, especially a well trained and educated economist, to lay the whole blame for this mess at the feet of the Bush Administration without taking into account the overwhelming number of far more important factors that are truly the root cause, is disingenuous, dishonest, and grossly insulting to those of us who have studied anything other than Keynes, as well as an affront to the common sense of anyone who takes the time to question the current scenario and really think it through. Those economists who regurgitate the official government talking points and try to put a positive spin on the current course of action undermine their own legitimacy in doing so. It is simply incredible that so many of these economic advisors are so quick to declare unrestrained laissez-faire capitalism the root cause of this crisis when they know full well that the prevailing Keynesian school of economic thought that has been driving economic policy for the better part of a century is itself specifically defined as being something that is not capitalism. There is far too much at stake to play semantics and talk out of both sides one’s mouth.  (Continued...)

Michael Moore the millionaire Marxist is at it again.  Everyone knew it was only a matter of time until he came out openly Marxist, and with his latest piece of pro-Marixst propaganda, Moore does not disappoint.   In the film, “Capitalism, a Love Story,” Moore seeks to illustrate how capitalism has failed and thus socialism is the only viable system by which a sensible and advanced people may prosper. Unfortunately for Moore it is clear from viewing many of his previous films that he doesn’t know what capitalism is. It is also clear that while Moore may well indeed have a true empathy for those financially less fortunate than himself, he has no intention of spreading his wealth around. Why? Because, in his own words, he is just like us. A recent interview with Larry King revealed the following exchange:

Moore: Who's got the money? And whoever has the money has the power. And right now, in America, tonight, Larry, the richest 1 percent have more financial wealth than the bottom 95 percent combined.

King: You're in that 1 percent, though?  (More...)

The favorite U.S. financial cocktail of fiat currency, inflationary monetary policy, and massive deficit spending that has been the staple of U.S. economic policy for decades could soon result in a hangover that the dollar might not survive. Already new concerns are being raised as to what might happen is China and Japan refuse to continue buying U.S. debt. Tiger Management founder and chairman Julian Robertson told CNBC: “It's almost Armageddon... (more here...)

On March 18 in an almost perfectly orchestrated sequence of events that make conspiracy theorists like myself froth at the mouth, while the vast majority of Americans were obsessed with the feigned “outrage” by Congress over $165 million in bonuses paid out to AIG executives that they (Congress) themselves knew of and apparently approved in their passing of the co-called “stimulus” bill that not one of them read prior to voting on, a far more important and potentially catastrophic event took place almost without notice. Only a few patriots bothered to report it, and among those who did even fewer either bothered or were able to adequately and accurately explain it's meaning for us and for the future of our country.

What it means to say that the Fed's balance sheet assets will increase from $1.9 trillion to $4.5 trillion must be understood in the proper context, that being, that the neither the Fed nor the government has anything close to $4.5 trillion with which to purchase any assets. The reader will recall that the Treasury has been conducting auctions on a regular basis whereby it auctions off U.S. debt to whoever will buy it. And, just recently, Secretary of State Clinton made a special trip to China to assure them that the U.S. will make good on it's debts held by foreign entities and encourage them, particularly the Chinese, to continue to purchase U.S. debt. Considering that the U.S. government is in fact bankrupt, in order to embark on this bold new policy endeavor, the Fed will print $1 trillion dollars now, and certainly more later, with which it intends to purchase said “toxic assets.”

Through means of vastly increasing the amount of currency in circulation by printing it literally out of thin air, the dollar must necessarily become grossly devalued, its purchasing power will be greatly reduced and the unfortunate result will be hyperinflation of the kind mentioned in the examples above.

If allowed to continue, this policy will ultimately result in the total collapse of our monetary system, likely followed by a collapse of government. What will follow next is any body's guess. It is most unfortunate that those who currently wield political power so stubbornly cling to the same failed theories of interventionism that they predecessors also clung to. Indeed, at present how many times have we been told by those in Washington that because the current financial situation has deteriorated so rapidly that it is necessary to “change” capitalism in order to “save” it.

The fact of the matter is that we are in this current financial mess because they have already “changed” it. What was changed from the first half of the 20^th century was the almost universal adoption of a policy of active interventionism by western industrialized governments, based upon the misguided and now disproven theories of Keynes. Interventionism, it was posed, was to be neither true capitalism nor true totalitarianism, but rather, “as a third solution of the problem of society's economic organization, stands midway between the other two systems, and while retaining the advantages of both, avoids the disadvantages inherent in each.”³ In fact, all that interventionist theory has really accomplished is the mass deception free peoples, and the unsubstantiated and wholly unrealistic promises of “lasting prosperity” or “permanent” prosperity. An appeal to common sense would instantly reveal the impossibility of a permanently prosperous economy as the interventionists would define it.

In a very general sense, interventionism means government meddling or coercion upon the various aspects of the economy in order to effect specifically desired results. An example of a desired result is the buzz-word, “total employment,” sought by the governments of almost all industrialized nations whereby the government over-regulates and thereby influences various industries by a variety of means to “stimulate” the economy along a path of what it hopes to be a permanent state of growth, production and consumption. Yet what is missed by so many supposedly brilliant economic minds is the inescapable fact that wherever government intervenes, whether by passing mandatory “living wage” laws, price controls, or whatever, the immediate effect is to artificially raise the costs of production – and therefore raising the costs of the goods produced for consumption - above what the unhampered market (you and I) would wish to pay. If the price of the good becomes too high and consumers buy less of it, the costs of the producer increase further and ultimately end in higher unemployment. Thus, the means employed are entirely self-defeating relative to the intended goal. The law of unintended consequences thus manifests itself – what the interventionist policy sought was higher employment, but what resulted was higher unemployment.

Typically this result prompts even further interventionism on the part of the government as it seeks to correct the unintended consequence of the original policy. For example, in the case of price controls, the next move may be to decree that as the cost of the good to too high to attract consumers, then the price of the good will be fixed even lower. This still leaves high costs for the producer, who will be forced to either go out of business (because his revenues do not exceed his costs) or to seek redress from the government. Again, the typical response from government would likely be to fix the costs of those commodities employed in the production of the good to be produced. However, it becomes immediately apparent that the size and scope of the original policy has just been expanded instantly and exponentially, for in fixing the price of these commodities the government must continue fixing prices of others and mandating more and more controls over many aspects of the overall economy. Thus, interventionism, if not abandoned when the law of unintended consequences becomes apparent, must always lead to increased bureaucratic control incompatible with free market capitalism.

A worse form of interventionism, however, is the one that has been employed by the Federal Reserve since its creation in 1913: the policies of so-called “easy money.” The name is an irony in and of itself, for in the end there is nothing “easy” for those who suffer the results of massive credit expansion (creating money out of thin air), deficit spending, and inflationary monetary policy. Indeed, the fundamental underlying cause of the current fiscal crisis, and the thing that has enabled all of the other factors to come together to form this perfect economic storm that threatens to bring this nation and possibly the world to its knees is these misguided interventionist policies of massive credit expansion and inflation. And now, as the nation waits for results of an ill planned and mostly ineffective “stimulus” bill to be manifested, the Fed has been loaning money to banks, buying debt and printing money behind the scenes, almost unnoticed. What they do now, they do in relative obscurity, but the effects of their actions will certainly be felt in the years to come. With trillions upon trillions of dollars being newly created, printed, and injected into the financial system the short term effect may well be a temporary recovery. The effects of the massive inflation that will result have yet to be accurately estimated, as nothing on this scale has ever been attempted. The closest situation to ours was Weimar Germany, and the results, as we know, were not good. Inflation is bad policy to be sure. Just how bad it will ultimately be, and how devastating effects will be remain to be seen.

You may want to read Part I , Part II , and Part III prior to reading this, as this is a multipart series.

Part IV

A Government Sponsored Culture of Corruption

Freddie and Fannie took on increasing amounts of high-risk debt because they could do it with impunity: they are backed up with an implied guarantee from the government, so for them high-risk is really no risk at all – even if the loans go into default, Fred and Fan will be OK because they know the government will throw lots of money at them. Why? Because they own more than one half of the mortgage debt in the US. So they, and the government, encourage privately owned financial institutions to get on board the high-risk-high-profit gravy train and they also begin assuming high-risk debt. Banks and holding companies begin to consolidate and merge – money is flowing all around, the economy is humming right along and the Dow hits record highs. Unfortunately for the rest of us, many of those companies and individuals who were raking in the money were doing so because of what would otherwise have been considered unethical business practices had government not been promoting it.   An atmosphere of corruption facilitated and even encouraged by the government is only going to breed more corruption. 

Housing was more in demand than ever, so… the price of housing goes up, and up, and up. The demand is still there, so when the opportunity presents itself to make even more money, people and institutions will do it. Given the fact that the government was at least tacitly blessing these questionable activities, if not outright threatening regulatory enforcement if companies refused to participate, many people were taken advantage of by such relatively new inventions as so-called Ninja loans (No Income, No Job and no Assets) where said loans were made when there was really no probability that it would ever be paid back. Granted, one would think that when pursuing a loan for a home that one would have adequately assessed one’s financial standing and come up with a line in the sand that was an absolute limit, knowing they could afford nothing more. You can’t argue with ignorance or sheer stupidity. 

If people are too stupid to understand what they can or cannot afford, there’s not much one can do to help. A substantial part of the problem here, and certainly a part that only served to feed the beast and make matters even worse is the “credit culture” that practically puts having as many credit cards as you want in the Bill of Rights and very bad regulations that allow banks and financial institutions to give credit cards to an unemployed homeless guy with leprosy and dementia, and then encourage him to seek even more credit. 

Credit cards are great, right? You only have to make the minimum payment each month and you can spend as much as you want – and, the more you spend the bigger your credit line seems to get. Let the reader understand that I am not making excuses, but simply relating a contributing factor. When you go into a broker and sit down to get pre-approved to buy a home and you have determined that your absolute maximum price you can afford is $200,000 you have given this a fair amount of thought. Then the broker sifting through your paperwork tells you that your assets show that you can really afford a $285,000 home. And then you start thinking about the one you saw last week that you thought was out of your price range and reconsider – and buy it. Eventually you realize too late that the broker was wrong and you were right in the first place. You default, the bank takes the house and turns around and sells it and continues to make money – that is until people stop buying houses. Then the whole bubble bursts and the ugly truth rears its head. And that is what happened leading up to the collapse of Freddie Mac and Fannie Mae.

Let me reiterate once more: I am not advocating excuses for any people who knowingly overextended themselves and ended up in foreclosure sitting under mounds of debt that they could not pay off. Fiscal responsibility is an individual responsibility, and most of us understand and adhere to it. Unfortunately there has been a general attitude of entitlement in this country for a long enough period of time that many people simply think that having credit so they can get stuff they know they cannot afford is a Constitutional right. And, it doesn’t help matters when the government steps in and acts as if this were so, creating a regulatory structure that not only encourages but forces banks and financial institutions to make loans to people it otherwise wouldn’t because of quotas and threats of enforcement of anti-discrimination statues, etc.

The people on Wall Street and those who administer the financial markets of this country are not stupid. If someone with no job, no assets, no income, and no way of ever paying off a loan can to them and asked for a loan to buy a nice house in the suburbs, under normal circumstances the banks would have turned them down flat. But the government stepped in and said, in effect, “you have to give them a loan because they deserve a home and a line of credit, and if you refuse we will have to audit your business practices.” In the beginning, the banks weren’t given a choice. In the end, they succumbed to greed as they apparently could no longer resist the temptation to get themselves in deeper and deeper, issuing more bogus loans and justifying it by the “collateral” supposedly backing up those loans. But, the wealth of the companies was measured in terms of the “pledged collateral” and assets backing up those loans, so on paper they were rolling in money. In reality they were being bled dry.

To say that the bursting of the mortgage bubble caught some off-guard is completely and utterly moronic, because common sense ought to dictate that when you make a loan to someone with no assets, job, or income, you will not be getting that money back anytime soon. The people who were making the decisions at these institutions are not by any means stupid: they knew full well what they were dealing with and what they were doing. They knew exactly the risks they were taking, and believed the potential for profit was worth the risk. And they were wrong. And they were warned many, many times.

Some people, however, apparently did see the eventual bursting of the bubble. In fact, the Bush Administration proposed some sweeping overhauls back in 2003. In a New York Times article dated Sept. 11, 2003 the Times reported that, “Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.” This was seen as “is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken.”

Furthermore, then Treasury Secretary Snow said that “Congress should eliminate the power of the president to appoint directors to the companies, a sign that the administration is less concerned about the perks of patronage than it is about the potential political problems associated with any new difficulties arising at the companies.”

However, “The administration's proposal, which was endorsed in large part today by Fannie Mae and Freddie Mac, would not repeal the significant government subsidies granted to the two companies. And it does not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enables them to issue debt at significantly lower rates than their competitors. Nor would it remove the companies' exemptions from taxes and antifraud provisions of federal securities laws.”

So, even though people in the know were openly acknowledging a very major problem and preparing somewhat for the inevitable downturn that they had to know would lead to a financial collapse, there was still little incentive to alter the prevailing practice of the day when both companies were exempted from antifraud provisions of federal securities laws. The result? No changes, just more debt. Freddie and Fannie continued to accrue debt and sell it to other firms, all of which were now totally on board the high-risk mortgage gravy train.

Not everyone saw a problem with this, however: “’These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,’ said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ‘The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.’'' You see, to some politicians, most of them progressive Democrats, pandering to a voting bloc is more important than the financial stability of the nation.

So for the far-left progressives who are in denial that their precious pandering policies are about to ruin the nation financially, and continue to blast the current President and any conservative thinker who would dare to question the validity of the standard progressive, or for that matter Congressional, solution of throwing as much money as possible at problems, might I inquire as to who you think will be paying for this? The progressive left blames the free market, but the real problem is that the market is not free and hasn’t been for decades due to government meddling in things it has no business meddling in. And now it owns businesses – and a ton of debt. That means YOU own a ton of debt, and you and your posterity will be responsible for paying it off because, despite its assertions to the contrary amidst the clatter printing presses running overtime in the basement of the Fed, you know and understand if you have read some of my previous articles on the subject of the government and its debt, that the Federal Government is flat broke. It has no money, and only keeps running because the Treasury auctions off that debt to the entity – or country – bidding to charge us the lowest interest rate.

This brings me to a final point. Remember that $2.3 trillion dollar figure we were discussing a while back?   Well, that seems to have changed too. Recently the Fed printed out another $180 billion to pool with other central banks from around the world and pump into the global economy. Congress will likely will approve the recommendations of Fed chief Bernanke and Treasury Secretary Paulson and authorize close to $1 trillion for a new government agency and program to by up all the bad debt in the country. It’s amazing how fast things can happen in Washington when those responsible for it realize that the proverbial you-know-what has hit the fan and splatter all over their vile and corrupt faces. You may also factor in the very real possibility of Congress approving even more that the $1 trillion figure requested so it can bail out homeowners. There will also be more industry bailouts, because now that the government kitty has been tapped, there will be no end to the number of industries holding out their hands for money.

Finally, as if the news could not get any worse, consider that a certain far-left progressive who would be President will tack on an additional 800 billion to 1 trillion dollars to these figures with new government programs. 

It is time to act sensibly here and do something about this mess before we totally implode. 

What can we do about it? For starters bombard your representatives with angry email. Flood their accounts. Flood their phone banks. If you scare them they will react, because for the most part, they are cowards. Then in early November ask yourself this question before you go to the polls: “If two quasi-government agencies and a bunch of corrupt, rotten and unaccountable politicians got us into this mess, how will the same people and more government get us out?” Then vote.

You may want to read Part I and Part II prior to reading this, as this is a multipart series.

Part III

An Economic Bermuda Triangle

Those who are to blame for this crisis are the ones who engaged in predatory lending practices and those who enabled them to do so. Who would that be? Let’s start at Freddie Mac and Fannie Mae and then skip on over the Capitol Hill and the White House.

Who’s been working over at Freddie and Fannie? Funny you should ask that. According to the Investors Business Daily, when “Franklin Delano Raines took the helm in 1999 at Fannie Mae, for example, he used it as his personal piggy bank, looting it for a total of almost $100 million in compensation by the time he left in early 2005 under an ethical cloud. Other Clinton cronies, including Janet Reno aide Jamie Gorelick, padded their pockets to the tune of another $75 million. Raines was accused of overstating earnings and shifting losses so he and other senior executives could earn big bonuses. In the end, Fannie had to pay a record $400 million civil fine for SEC and other violations, while also agreeing as part of a settlement to make changes in its accounting procedures and ways of managing risk.” Hey – isn’t that the same Jaime Gorelick who was on the 9/11 Commission? And isn’t that Franklin Raines the same guy who was Director of the U.S. Office of Management and Budget under Clinton? Coincidence, or...?

Below is a list obtained from OpenSecrets.org: 

Top 12 Recipients of Fannie Mae and Freddie Mac Campaign Contributions, 1989-2008

Name                             Office State Party     Grand Total    Total  PACs   Total Individuals 

1. Dodd, Christopher J     S         CT        D          $165,400      $48,500           $116,900

2. Obama, Barack            S          IL         D          $126,349      $6,000            $120,349

3. Kerry, John                  S          MA      D          $111,000      $2,000             $109,000

4. Bennett, Robert F         S         UT       R           $107,999      $71,499            $36,500

5. Bachus, Spencer           H         AL       R            $103,300      $70,500          $32,800

6. Blunt, Roy                   H         MO      R            $96,950       $78,500             $18,450

7. Kanjorski, Paul E        H          PA      D            $96,000        $57,500            $38,500

8. Bond, Christopher S    S          MO     R            $95,400        $64,000            $31,400

9. Shelby, Richard C       S          AL       R           $80,000        $23,000             $57,000

10. Reed, Jack                  S          RI        D           $78,250        $43,500           $34,750

11. Reid, Harry                S          NV       D           $77,000        $60,500           $16,500

12. Clinton, Hillary          S          NY       D           $76,050        $8,000              $68,050

Nancy Pelosi is number 17 on the list. The full list names just about everybody in both houses of Congress. Get the picture? 

At the very least since the Clinton Administration took power, and likely long before – like circa 1970 – there has been a financial Bermuda triangle between the White House, Congress and Freddie and Fannie. Money and power and influence and corruption swirl round and round, yet the data, evidence and memories of those involved in government sanctioned corruption seems to just disappear into thin air – especially when the good times go bad and someone else has to be blamed. It seems that it is always the same people involved in making your money disappear – and right into their own bank accounts in one way or another. Ah, the revolving doors of Washington DC!

When you look at this list of politicians who took Freddie Mac and Fannie Mae contributions over the last twelve years and read their names and party affiliations, one quickly realizes that the spirit of bipartisanship is indeed alive and well, at least when it comes to taking campaign contributions from quasi-government agencies chartered by Congress, certainly with that potentiality in mind.  

The whole list it is very incriminating to politicians of both parties. It is interesting to note, however, that most of the high dollar recipients were Democrats. This by no means absolves the Republicans - in fact it damns them. Not the number one recipient of these contributions, Senator Chris Dodd, Chairman of the Senate Banking Committee. This Senator also received a sweetheart deal on a loan, as it turns out. Surprised? You needn’t be, because he is not alone. 

According to Portfolio.com, “Kent Conrad, Democrat from North Dakota, chairman of the Budget Committee and a member of the Finance Committee, refinanced properties through Countrywide’s “V.I.P.” program in 2003 and 2004, according to company documents.”

Here’s something else that won’t surprise you, because the MSM and the Democrat Party don’t want you to know about it, lest your feathers get a bit ruffled. “Other participants in the V.I.P. program included former Secretary of Housing and Urban Development Alphonso Jackson, former Secretary of Health and Human Services Donna Shalala, and former U.N. ambassador and assistant Secretary of State Richard Holbrooke. Jackson was deputy H.U.D. secretary in the Bush administration when he received the loans in 2003. Shalala, who received two loans in 2002, had by then left the Clinton administration for her current position as president of the University of Miami. She is scheduled to receive a Presidential Medal of Freedom on June 19.”

Have you noticed anything that these folks, I mean crooks, have in common. They all worked… for a certain guy… at a particular address on Pennsylvania Avenue… Have you figured out the connection yet? Here’s one more clue just to help you out: “James Johnson, who had been advising presidential candidate Barack Obama on the selection of a running mate, resigned from the Obama campaign after the Wall Street Journal reported that he received Countrywide loans at below-market rates.”

There are many, many more. All of these former high ranking government officials who worked for a particular Democrat who served two terms between 1992 and 2000, and who received VIP treatment were referred to in Countrywide company emails and documents as “FOA”s, or Friends of Angelo – Countrywide CEO Angelo Mozilo. 

It appears, again according to Portfolio, that Angelo had many, many friends in very high places. “Henry Cisneros, who served as secretary of Housing and Urban Development in the Clinton administration; former White House staffer Paul Begala, now a commentator on CNN; and Postmaster General John Potter. Countrywide also offered special discounts to Congressional staffers involved in housing issues.”

Angelo’s tentacles were far reaching: Countrywide spent over $1.5 lobbying Capitol Hill in 2005. Here’s an interesting anecdote. “Jimmie Williams, a Countrywide lobbyist in Washington, was remarkably candid in emails about the purpose of V.I.P. loans. In November 2002, for instance, Williams urged Feinberg’s boss, Doug Perry, to give “specialized handling” to an application from a staff lawyer for the House subcommittee that monitors the Department of Housing and Urban Development. HUD regulates real estate settlements and closing costs and runs the Federal Housing Administration, the agency that guarantees mortgages. Williams pointed out that Clinton Jones III, senior counsel of the House Financial Services Subcommittee on Housing and Community Opportunity, was “also an adviser to ranking Republican members of Congress responsible for legislation of interest to the financial services industry and of importance to Countrywide.” Jones borrowed $101,800. So what. Who is this Clinton Jones, anyway?

Clinton Jones III is now vice president for industry relations at Fannie Mae. The lobbyist, Williams, is currently state director for federal residential-mortgage bundler Freddie Mac – you know, the guys who bundles up all this bad debt and sells it to firms on Wall Street. Also worthy of note is the fact that depending on the year, Fannie Mae bought anywhere from 10 to 30 percent of its loans from Countrywide, which they would bundle with other bad loans and then sell again. Are you holding your nose yet? Wait – there’s still more! 

Many current and former Freddie Mac and Fannie Mae executives received VIP loans from Countrywide. Former Fannie Mae C.E.O. James Johnson was given home loans at relatively low interest rates, and Countrywide waived points for him. In fact, company documents show that after leaving Fannie Mae, Johnson received more than $7 million in VIP loans. Just in case you forgot, that’s the same James Johnson who Senator Barack Obama appointed to vet his potential VP candidates. I think you get the point.

These were the just some of the players involved in the high-risk mortgage game. Granted, many of these people just named would have no problems paying back the loans, but when one is given such VIP treatments and so many of these types of VIP loans are made that may preclude a company such as Countrywide from adequately covering its costs, who do you think that cost gets passed on to. Did your Countrywide mortgage rate increase over the last couple of years? Mine did. Gee, I wonder why?

So, you had at least one major mortgage company giving away sweetheart deals to those who wield political power and leaving the rest of us to make up the difference coupled with pressure from the Clinton Administration to approve loans to millions of people who couldn’t afford them and shouldn’t have been given loans and lines of credit in the first place. What, then, do you have? According to the left you have a conspiracy theory, for it is understood in official circles that there were no Democrats involved. That means the MSM doesn’t tell you about it – so you have to hunt around to find the information, even though everyone in Washington knows who did what.

According to Politico, Nancy Pelosi had this to say “Eight years of weakened regulation of our nation’s financial system — including a failure to regulate risky, and often predatory, lending practices — by the Bush administration and Republicans in Congress have led us to this point, and could further erode our nation’s economic health.”

Doesn’t seem to jive, now does it? Remember too that Pelosi has a vested interest in NOT being found complicit I this scandal – she’s Speaker of the House and number 17 on the recipients list for Freddie and Fannie. Funny how these things always seem to triangulate in Washington, isn’t it? 

Obviously, if you’re thinking that there might be some hearings on this little matter of our entire financial sector imploding, you can forget it. The left will blame Bush and McCain and the MSM will ignore the inconvenient fact that Obama is up to his ears in this mess – if for nothing else than really, really bad judgment in appointing or having anything whatsoever to do with a miscreant like Johnson. If everyone is making some money, then all is well among the corrupted elite; no harm, no foul, right? That is at least if you’re the DC insiders making the money, cutting the deals, brokering power and influence, and covering your tracks – or at least trying to.

So, as the financial feeding frenzy really ramped up, Freddie, Fannie and the bulk of the remaining major lenders began delving into the high-risk loan market and issuing lines of credit and approving loans for more and more people who shouldn’t have had them while jumping in bed with Congress and the apparently the whole former Clinton White House. They just couldn’t control themselves, I guess, with the potential sitting there for such huge, monetary gains and political favors waiting to be granted. 

The problem was that eventually the odds against making the money back have to become overwhelming because economies and markets, be they housing markets, credit markets, securities markets or what have you, are also cyclical: where there is boom there will eventually be bust, because the thing cannot continue to grow to infinity. As these high-risk loans were being blessed - if not pushed - by the government the conditions became more and more friendly for predators and for corruption system-wide across all strata of the financial industry. And where those in government and in management are overtly corrupt or sanctioning corrupt business practices, one must understand that corruption begets more corruption and this is a cycle that will continue until it is either too late to stop or it crashes. Why? Because when people are buying homes out the wazoo, spending on all sorts of stuff, taking out lines of credit and the economy is humming along nicely with barely a noticeable hiccup, no one cares about corruption. And even when red flags are raised, no one is going to listen – except those kooky conspiracy theorists like us (and Ron Paul).

You may want to read Part I prior to reading this, as this is a multipart series.

Part II

Here’s the Deal-eo

Before I get into the down-and-dirty politically-incorrect reality of what is presently transpiring in the national cesspool known to most people as Washington DC, let me first provide the reader with a breakdown of where we are so far. The government has thus far exceeded its Constitutional authority in bailing out the following companies and financial institutions: Bear Stearns $29 billion; Freddie Mac and Fannie Mae $200 billion initially (with a potential ceiling of $1.5 trillion, yes, trillion, due to the debt they carry); AIG 85 billion; the “officially” acknowledged version of the federal deficit $400 billion; loans floated to various other smaller banks and institutions, plus FDIC replenishment $109.6 billion. Put this all together and as of today we’ve just tacked another $1.2 trillion onto the taxpayer’s bill. 

But it gets better, as we may as well just factor in the actual debt that Fannie and Freddie have accrued, $1.5 trillion, because you and I both know the bottom line is that when the government steps in to pay for something, they pay the full asking price. So the real number up to $2.3 trillion. But we’re not done yet. Far from it. You know that “official” deficit figure of $400 billion? Well, that does not include the obligatory welfare/nanny-state social and financial programs such as Social Security, Medicare and Medicaid, federal education loans, grants and the like. Oh, and don’t forget the trade deficit where we lose big to foreign tariffs and, of course, the interest we will ultimately have to pay to all those other corporations and foreign central banks who are buying up US debt auctioned off by the Treasury like candy. So just keep that little $2.3 trillion kiss-in-the-mail in the back of your mind and understand that the actual figure is far, far higher. 

On September 15 the Investors Business Daily published an Op-Ed piece called, “The Real Culprits In This Meltdown.” This piece sums up the current financial crisis nicely and places the proper blame exactly where it ought to be placed – on those people who were responsible and complicit in the criminal activity that resulted in the unprecedented action of the US Government nationalizing industry. 

First off, let us understand exactly what was the catalyst of this mess. Subprime lending is a high-stakes financial game played by massive financial institutions, most notably Freddie and Fannie, where loans are made with the higher expectation of risk and are therefore made with a higher interest rate than normal. This means loans are made to people or entities that the lender understands may not be able to pay back, and so a higher interest rate is the price of the loans. If the loan is paid back the lender wins big. But if the loan is defaulted upon, the lender loses all.

The notion of subprime lending generally refers to those types of loans in categories apart from those specified in loan guidelines established by Freddie Mac and Fannie Mae, which is a bit of irony seeing as the whole problem snowballed from these two institutions. Loans would be considered subprime due to several factors including, but not limited to, income, income and job history, and the credit status of the borrower. “Subprime” also denotes bank loans taken on property that cannot be sold on the primary market and such lending encompasses a variety of credit instruments, including mortgages, car loans, and, of course, the all-American staple that those with no money just can’t do without, credit cards.

Now that we understand what we are talking about, let us move on.

Let’s jump back in time to the late 1970s for a moment. You remember it, don’t you? The booming economy, massive economic development, national pride abounding, and all under the leadership of the best President that the United States that has ever had: Jimmy Carter! You remember that little gem he got Congress to pass called the Community Redevelopment Act that was meant to promote minority home ownership? Well, that particular piece of legislation was employee by the Clinton Administration fro the first days he was in office to ensure that he could declare how he was the champion of the poor and of minorities and how it was he who was able to provide them with “affordable housing.” Do you know what “affordable housing” is? “Affordable housing” is when people who can’t afford it buy a house and you and I pay for it. 

So, Clinton used this legislation to pander to minorities and the poor. In doing so, he also put the full weight of the Federal Government behind it so as to “encourage” lenders to “help” the “less fortunate” to obtain “affordable housing.”   What that really means is that Clinton resurrected the Community Redevelopment Act and to make good on his campaign promise to provide said “affordable housing,” it quickly became well understood that every lender had to make “affordable loans” “available” to basically anyone who was not of white Anglo decent who wanted one. Of you were a lender, you did not want to turn anyone down, because then you were subjecting yourself to bearing the full brunt of the US Government penal code as enforced by the relevant agencies. You could be investigated for anything from “unfair” loan practices to racism and discrimination, and as we all remember after Waco and Elian Gonzales, Janet Reno was more that anxious to wield her power.

Caught up in the hysteria of the typical liberal obsessions of enforcing multiculturalism and pandering to the poor, the Administration was more than willing to levy hefty fines and other penalties on those who did not share the Administration’s enthusiasm for such high risk lending. Any anyone who does not think that such conditions not only enable but strongly encourage predatory lending practices – that is lending to people that you know will never be able to pay it back – needs to pull their head out of their hind-side and get with the reality of the actual situation as it was and as it presently is.

“Now wait a minute,” you might say to yourself. “Is he saying what I think he’s saying?” Well, yes and no. Let me be unequivocally clear here: the poor and minorities are not the ones to blame here – they are as much victims as you and I, and probably even more so, as far too many of them are being or have been foreclosed upon. They are victims because the environment in which they purchased homes was artificial if it was the case, as it was with so many, that lenders knowingly convinced them that they could take out a loan worth far more than they could pay in reality.

Part I

Here We Go Again…

OK. By now you’ve probably heard that the US government has seized control of yet another failing company, AIG and the Federal Reserve is going float them a sustenance loan to the tune of $85 billion. The government will have 79.9% control of the company and the loan must be will be repaid in 24 months, at an interest rate of 11.56%.

When the Fed and the Treasury and the President’s “economic working-group” decided on this course of action, they did not call Congress for approval. This is a big deal, and just in case you don’t know, Congress and Congress alone holds the purse strings of this nation’s government. Per the Constitution, no monies in the Federal treasury can be appropriated without the approval of the Congress. Not only did the Fed in it’s infinite wisdom opt not to contact the Congress and even inform it that they had decided upon another multi-billion dollar bailout for AIG, they also talked with a bunch of central banks from around the world and decided to inject $180 billion into the global monetary system.

But don’t worry, because according to the government they didn’t really need to get approval from Congress to do this because they were not going to spend money we already had, they just printed more! Get the picture?

Did You Know…

Let me put this as clearly and succinctly as I can: there is nothing Federal about the Federal Reserve. It is not a branch of the US Government. It is a bank. It is a central bank of the exact type that our Founding Fathers warned not to create. It is an entity that operates entirely outside of the constraints and limitations of the Constitution because it is entirely unconstitutional. It is completely and utterly unconstitutional, yet is the de facto controlling agency of the US Government. Congress is supposed to hold the purse strings, yet it is the fed that routinely dictates to the Congress what it intends to do, and then summarily receives a blessing to do so. It operates with impunity, and you and I pay the price it’s activity incurs.

An article entitled U.S. to Take Over AIG notes that: “It puts the government in control of a private insurer - a historic development, particularly considering that AIG isn't directly regulated by the federal government. The Fed took the highly unusual step using legal authority granted in the Federal Reserve Act, which allows it to lend to nonbanks under ‘unusual and exigent’ circumstances, something it invoked when Bear Stearns Cos. was rescued in March.”

Some economic analysts and talking heads are speculating that this could be a good thing – that when the loan is repaid, the government will actually make money on the deal because of the steep interest rate. They must be assuming that the loan will actually be repaid. And you know what happens when you assume, right? They think this is a good thing because they have totally lost sight of the fact that the US Government has absolutely no Constitutional authority whatsoever to seize control of a privately owned business and bail it out with taxpayer money.  

What is going on here is sheer, unadulterated, unconstitutional, government-run-amok madness, and its high time we took the gloves off and stopped dancing around the issue of why we are here in the first place, and start naming it for what it is. And naming names. We may as well do that here in the blogosphere, because you sure as hell know that these subjects and names of the people responsible for this mess will never, ever, come before Congress. I don’t think I need to tell you why.

Bad things happen. It screws up everything – even the correct understanding of what, exactly, government is supposed to do and, more importantly, what it ought not to do. For those within the government, especially you “progressive” and faux-conservative politicians out there, here’s a little clue: the government has no business messing with the economy. Our government has become so monstrous that the confused masses of America now overwhelmingly look to this Leviathan to cure all that ails our nation. Why? Because they’ve been taught to. They don’t know that government has no such Constitutional authority as helping citizens and funding businesses and fixing the economy. Perhaps they (especially politicians) ought to actually read the document some time – it is very enlightening indeed.

Here’s how bad it is: when most people are asked who is to blame for the economy being screwed up, they tend to answer that the government is responsible. This answer is not at all incorrect. But, here’s the problem: when asked how the woes of the economy ought to be healed, most believe that the government needs to “do something about it.” Then they demand that Congress and the President act now! Seriously – isn’t the government the entity that is responsible for screwing things up in the first place? Now we are demanding that this screwed up government “fix” things? We want to entrust an impotent and self-serving Congress with a 9% approval rating and an Administration with little understanding of Constitutional restraint to “fix” things? The government has no business messing with the economy in the first place because in doing so it just messes things up even more and ends up costing the taxpayers (don’t even get me started).

On Sunday Treasury Secretary Henry Paulson announced that Freddie Mac and Fannie Mae were being placed in a “government conservatorship.” The plan to take control over the companies was approved by Fed Chairman Ben Bernanke. Paulson also affirmed that the Treasury would do “whatever it takes” to keep these two bastions of government excess from failing. Initially the Treasury would receive $1 billion in preferred shares, and then is initially prepared to provide up to $200 billion to help the companies heal from their financial hemorrhaging over excessive risky home loans. Remember that word: initially… you’ll see why in a minute.

The CEOs of both companies were fired – sort of. Freddie Mac’s Richard Syron and Fannie Mae's, Daniel Mudd, were respectively replaced by David Moffett, a former top official at US Bancorp and Herb Allison, formerly with Merrill Lynch. But, Syron and Mudd won’t be leaving immediately – they’ll be sticking around for the transition. If that weren’t enough, The Treasury's plan puts the two companies under a conservatorship, giving management control to their regulator, the Federal Housing Finance Agency.   FHFA was created recently by Congress specifically to oversee Freddie and Fannie. Are you beginning to see the pattern here?   Try Googling FHFA.gov to find its website and you’ll see that there is none. Either the agency is too new, or the government has become so big there’s no more room left in cyberspace for any more.gov websites. I am inclined to believe the latter.

According to the Wall Street Journal, with the government seizure of Freddie and Fanny, “the U.S. mortgage crisis entered a new and uncharted phase, potentially saddling American taxpayers with billions of dollars in losses from home loans made by the private sector. Bush administration officials argued that the cost of doing nothing would be far greater because of the toll on the economy of falling home prices and defaults in the $11 trillion U.S. mortgage market.” Potentially? Are they kidding? The bill is already in the mail.

But, the best is yet to come. Secretary Paulson noted that more than $5 trillion of debt and mortgage-backed securities issued by Fannie and Freddie is owned by central banks and other investors world-wide.

Do you know what that means? Think back to where the Treasury pledged to initially provide up to $200 billion and how Secretary Paulson stressed that the Treasury will do “whatever it takes” to save Freddie and Fanny. Factor that in with the $5 trillion of debt that is owned by foreign central banks and investors and then put Congress into the mix, and guess what you have? A Congressional authorization for our comrades at the Federal Reserve to do “whatever it takes” even to the tune of, oh, say, $5 trillion. After all, it won’t really be “debt,” because said “debt” will just go back to the Treasury to be auctioned off to more foreign central banks and investors. And eventually, our taxes will go up and we’ll pay for foreign bankers to get filthy rich. 

Keep in mind that the whole reason Freddie and Fanny were created by Congress is summed up in the following signature mission statement: “Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac raises capital on Wall Street and throughout the world's capital markets to finance mortgages for families across America.” Translated from Congress-speak this means: all investments through Freddie and Fanny are safe because Uncle Sam guarantees them. 

There is no risk at all to the investor. And that is exactly the problem. That is exactly why government should never, ever be involved in messing around with the economy.

From the Wall Street Journal: “The intervention also marks the failure of the public-private experiment that was created to boost home ownership among Americans. Fannie and Freddie were created by Congress to help prop up the housing market, and investors have long believed the government would bail the companies out in a crisis. But the companies have long been owned by private shareholders seeking to maximize profits.”   And they will. And the people will be angry, but Congress won’t care. You can bet on a new-and-improved “public-private scam that will certainly fleece the taxpayers of even more money. 

One economist from the University of Pennsylvania's Wharton School said, “Without government support for the mortgage market, home prices would fall much further, exposing the country as a whole to greater economic strain.” Any reasonable person who has ever read the Constitution with even a modicum of understanding and who gets the basic principles of supply and demand as the basis of a free market capitalist system of economics would argue the exact opposite. Why? Because of the difference between a supply system vis-à-vis a command system: once the government enters into the business of supporting various sectors of the economy the entire economy becomes de facto an artificial bubble, ever more removed from the reality of the market and prompting more and more government intervention until the government has to take control of or nationalize most of the economy in order to regulate prosperity and production and keep the whole thing from imploding. The problem here is obvious: Freddie and Fanny are the most startling examples of who our Founding Fathers never intended the government to be involved in such things.

Today President Bush had this to say: “Putting these companies on sound financial footing, and reforming their business practices, is critical to the health of our financial system and to making further progress with the housing correction that today is weighing heavily on our economy. Allowing the companies to fail or further deteriorate would damage our home mortgage market, and could weaken other credit markets that are unrelated directly to housing." He went on to stress that this is not a government bailout. 

Well, if a pledge of $200 billion for starters with a real possibility of running into the trillions is not a government bailout, I don’t know what it is. Wait a minute - maybe I do. It’s called nationalization. It’s called command economics. It is a deadly endeavor for a free republic. It is the inevitable result in a series of mortal errors that began with the creation of a central bank, the Federal Reserve System, by the Federal Reserve Act enacted December 23, 1913. That Act alone was a treasonous violation of the Constitution that has effectively sealed the ultimate fate of this republic – unless it can someday be repealed. It was shortly followed by another treasonous abomination, the 16^th Amendment ratified 03 February 1913 resulting in the Federal Income Tax Act of 03 October 1913. All must be repealed because all are deadly to a free republic because they by their nature usurp Liberty and encroach upon the rights of the individual. Not surprisingly a progressive income tax and a strong central bank are number 2 and 5, respectively, of Karl Marx’s list of 10 essential measures that must be enacted in order “to centralize all instruments of production in the hands of the State, i.e., of the proletariat organized as the ruling class; and to increase the total productive forces as rapidly as possible.” For those who are interested, this list is located toward the end of Chapter II of the Communist Manifesto. 

Every American should read the Communist Manifesto. They should read it so that they all understand what happens when government gets too big. They should read it all be frightened and angered. They should read it so that they can better understand why our Founding Fathers gave us the Constitution of the United States of America, and why that document was crafted so as to never to be tampered with or reinterpreted, lest we lose our Liberty to government hegemony, for such hegemony against individual Liberty is the only possible result when government grows too big to be stopped. It feeds on Liberty and snuffs out freedom. And this is only the beginning – unless it can be stopped.

With the economy in a shambles, the government rescuing banks from liquidation and the housing market all but collapsed, it might be a good thing that Pelosi and the rest of her minions are on vacation. Seriously. They are the ones responsible for getting us into this mortgage mess in the first place – can you imagine how completely screwed up it will be when they go back to “work” and try to “solve” the problem? I mean, we all know how great the Federal Government is at fixing things and getting stuff done in a timely manner and on-budget. Yeah, right. Budget –a word that nowadays seems even more elusive to our increasingly incompetent representatives in Washington. The sad thing is that when they come back from vacation they will try to fix the mortgage problem. Guess how? Yup! You guessed right! – They’ll just do what they always do and what never works: they’ll more money that the Treasury doesn’t have at a couple of the primary culprits, Freddie Mac and Fannie Mae. 

The more I learn about these two institutions, the more upset I become. I’ll only deal with Freddie Mac in this post, because the two are, for all intents and purposes, identical. The following comes from the Freddie Mac website:

Freddie Mac “is a stockholder-owned corporation established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac raises capital on Wall Street and throughout the world's capital markets to finance mortgages for families across America. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.” [Emphasis mine]

“As a government-sponsored enterprise with an important public mission to make housing finance more accessible and affordable, Freddie Mac is unique. We have special responsibilities to the American people. It's incumbent upon us to carry out these responsibilities to the best of our abilities.” [Emphasis mine]

This part of a letter from Richard F. Syron, Freddie Mac's Chairman and CEO is almost comical, in a very dark way, in light of what is going on in the housing market:

“Freddie Mac plays a critical role in financing homes for America's families and providing strength and resiliency to America's economy. I aspire to no greater legacy than to build public trust in an institution chartered by Congress to ensure the stability, liquidity and accessibility of the nation's mortgage markets.” [Emphasis mine]

All of this leads to several concerns.   First and foremost, since when does the Congress actually have the Constitutional authority to charter an institution to ensure the stability, liquidity and accessibility of anything? This is not the function of Congress, it is the function of the market – you remember, the FREE market, where people set prices they think people will pay for stuff they think people will want to buy, all without government rushing in to “fix” things that would balance themselves anyway? As a student of government I was blissfully unaware that the government had any obligation or authority to “raise capital on Wall Street and throughout the world's capital markets to finance mortgages for families across America.” Aha! So, this is how Freddie Mac is simultaneously a stockholder-owned corporation established by Congress as well as a government-sponsored enterprise. Wait a minute – I think I get it! 

Correct me if I am wrong, but my understanding of this example of a “public/private partnership” goes something like this: A bunch of Congressmen and Senators get together with some representatives of banking and mortgage lending special interests [yes, really] and figure out that they can: 1. violate the limitations on governmental authority and scope set forth in the Constitution; 2. Set up a “corporation” with private money and private investors to engage in high risk loans and activities that could potentially turn a tremendous profit, but that no one would be foolish enough to undertake unless, of course, the investment was guaranteed by the Federal Government; 3. Use this new “corporation” as a place to reward their political hack buddies with nice, high paying jobs. Wow! That really takes the risk out of “high-risk” now, doesn’t it?

Of major concern ought to be this: Freddie and Fannie are both a stockholder-owned corporations established by Congress as well as a government-sponsored enterprise. That means they are “run” essentially by the government – worse, the Congress, - and are accountable to no one – just like the Congress. It also means that those investors have no risk, for given the fact that these “corporations” were created by Congress, it stands to reason that they would be the largest monstrosity in the mortgage industry. And, given that fact, if either one collapsed then the entire housing market, and then other segments of the economy, would likely be dragged to the bottom. Get the picture? If you have the capital to invest, theoretically you can’t lose – the Government will not let Freddie or Fannie collapse because they can’t. 

Now, given the fact that the housing market has been in an abysmal state for months, if not years, and seems only to be getting worse, there has been speculation over the last several months about what is to be done to correct the situation. Oh, the Fed, you know – our Soviet-style central bank that all the Founding Fathers except Hamilton warned against - tweaked the interest rates again and then didn’t tweak them again, and we all got some of our money back from our dear friends at the IRS, and guess what? It didn’t work! 

Worse yet, there has been much speculation about the possibility of a Government bailout for these two pillars of socialism. In fact, there was an article in the International Herald Tribune [the international edition of the New York Times]:

“Financial conditions are continuing to worsen at Fannie Mae and Freddie Mac, leading some investors to prepare for a government bailout of the U.S. housing giants even as the Treasury Department and the companies say such government intervention will not be necessary.

"The markets are acting like a bailout is inevitable," said Sean Egan, managing director of Egan-Jones Ratings, an independent credit ratings firm.

Egan said he believed the federal government would need to help pump about $20 billion into each company, possibly through a government guarantee rather than through a direct injection of capital.

"We believe Treasury is going to be forced to act within the next couple of weeks," he added. "Probably some time after Labor Day, when investors are back from vacations so that the bailout has the biggest possible positive impact."”

Calls for a bailout by Uncle Sam! Imagine! For those of you who are not yet sufficiently cynical about this kind of stuff, let me assist you on your way to my happy place: This is a classic example of cronyism. It is special interests making deals with our elected officials who, incidentally know they don’t have to be accountable for their actions because even if they get voted out by an angry electorate, there’s always work at Freddie and Fannie. These two bastions of Government waste and excess cannot be allowed to collapse because there are too many politicians and hacks dependent upon them for their living. Now, here’s the best part – at least if you’re a politician who may be in need of a job come November: “With an implicit promise of federal backing, Fannie and Freddie have borrowed money at low rates and used these funds to purchase and hold large portfolios of mortgages and mortgage-backed securities, now totaling $1.4 trillion.” Did you get that number? In case you didn’t, that was $1.4 trillion, as in $1.4 trillion in addition to the massive deficit we are already carrying that is going to bring about the economic collapse of an economy that was once the most vibrant in the world.

Just to make sure you get the idea, here are some excerpts from a piece called Crony Capitalism Meltdown published 18 July:

“Fannie Mae and Freddie Mac are called government-sponsored enterprises. At times, Congress has seemed a Fannie Mae- and Freddie Mac-sponsored enterprise. The companies spent $200 million on lobbying and campaign contributions during the past decade. They lavished dollars on members of Congress, hired key Washington players for lucrative executive positions and extended the largesse to nonprofits through a charitable foundation and to congressional districts around the country through so-called partnership offices.

For a senator or congressman to get on the Senate Banking or House Financial Services committees was a guaranteed ride on the Fannie and Freddie gravy train. With their sharp lobbying elbows, sometimes it was unclear who was doing oversight on whom.

Whatever the question, the answer in Congress was always forestalling significant tightening of Fannie and Freddie’s operations. After the savings and loan debacle in the early 1990s, the institutions fought off meaningful new regulations. After Fannie was caught cooking its books to the tune of $6.3 billion a few years ago, the institutions still escaped reform. With the subprime mortgage market in meltdown lately, Congress has wanted Fannie and Freddie to assume even more risk.

Fannie and Freddie exist to bolster mortgage lenders — and therefore homeownership — by buying mortgages, guaranteeing them and selling them on the secondary market. With an implicit promise of federal backing, Fannie and Freddie have borrowed money at low rates and used these funds to purchase and hold large portfolios of mortgages and mortgage-backed securities, now totaling $1.4 trillion. In short, the government gets the risk, the executives and shareholders get the profits.

“Unlike many well-capitalized savings and loans and commercial banks,” Alan Greenspan warned in 2004, “Fannie and Freddie have chosen not to manage that risk by holding greater capital.” Why would they, if Uncle Sam is underwriting them? Fannie and Freddie kept Congress from limiting their expansion and from tightening their capital requirements. Instead, Fannie and Freddie have been recklessly undercapitalized at debt-to-equity ratios of 20-1 or more, when Bank of America and J. P. Morgan are at roughly 4-1.”

Good stuff, eh? Are you mad yet? You should be, because when Congress comes back into session after their break you can bet that Pelosi will rally her minions – with little opposition from Republicans, I should think – and have the issue of a massive trillion-dollar bailout on the floor for a vote in record time. Then you and I will be charged with yet another couple of trillion dollars we’ll have to pay off – that is, unless the Chi-Coms lend it to us. You know, this could easily surpass the monumental achievements of this Congress in their previous session – even the whole thing about apologizing for slavery. Big stuff.

And so it is. But why? It just doesn’t make sense to me. A Congress with a %14 approval rating, and Madame Speaker with a 9% approval rating. And the people will re-elect them all. And if they do, the people will get exactly what they deserve. Empty promises, flowery rhetoric, and screwed.