Handing over the keys

Does anyone ever say noto the banks?

Here’s yet another form of hidden bailout the federal government doles out to our big banks, without the public having much of a clue.

This is from the WSJ this morning:

Some of the biggest names on Wall Street are lining up to become landlords to cash-strapped Americans by bidding on pools of foreclosed properties being sold by Fannie Mae…

While the current approach of selling homes one-by-one has its own high costs and is sometimes inefficient, selling properties in bulk to large investors could require Fannie Mae to sell at a big discount, leading to larger initial costs.

In con artistry parlance, they call this the “reload.” That’s when you hit the same mark twice – typically with a second scam designed to “fix” the damage caused by the first scam. Someone robs your house, then comes by the next day and sells you a fancy alarm system, that’s the reload.

In this case, banks pumped up the real estate market by creating huge volumes of subprime loans, then dumped a lot of them on, among others, Fannie and Freddie, the ever-ready enthusiastic state customer. Now the loans have crashed in value, yet the GSEs (Government Sponsored Enterprises) are still out there feeding the banks money through two continuous bailouts.

One, they continue to buy mortgages from the big banks (until recently, even from Bank of America, whom the GSEs were already suing for sales of toxic MBS), giving the banks a permanent market for home loans.

And secondly, they conduct these quiet bulk sales of mortgages, in which huge packets of home loans are sold to banks at a “big discount.”

2 thoughts on “Handing over the keys

  1. We really should have a discussion revolving around the biggest lie that the Capitlists and their Republican shills tell us everyday. Free markets. Free markets do not exist today nor have they ever existed in the history of mankind. This mortgage post is just another glearing example of that fact.

  2. Its land grab by the oligarchs to dispossess the common people. Its is parallel to the enclosure movement of the 17th and 18th century in England and Ireland. In that case the peasants were forced into the industrial cities as laborers or to emigrate to the US. Where will the people go this time?

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