Copyright ©2010 |The Unique Green Boutique
Whenever we now read opinions from the Chairman of the Federal Reserve or the former Chairman of the Fed, or the former Treasury Secretary we roll our eyes and sigh, “what now.”
We’ve heard them state that they did not see the collapse coming. Yet, they prepared for something when they allowed the trillion dollar gambling in short positions affecting sub-prime mortgages. Is the SEC indictment of Goldman Sachs related to this Greenspan/Paulson/Bernanke/Geithner complicity in changing the "value" definition for real estate appraisals?
In a word, YES.
When Greenspan ordered the change in the real estate appraisal Scope of Work Rule back in 2005-06, he was aware of something that would impact banks more severely than any single calamity heretofore known to the banking system.
Why else would he order the change in how real estate was valued. Prior to the effective date of this change…January, 2009...appraisers could not include foreclosure values as comparables in determining resale value. Greenspan had to know that the sub-prime orgy of the five previous years...2001-2006 would result in foreclosures on a gigantic scale when interest rates went up on adjusted rate mortgages. He knew there would be an avalanche of non-performing loans, he knew they would destroy the capital base of banks throughout the nation.
To alleviate a cascade of bank failures, the redefinition of how value would be determined was Greenspans way of both providing access to real estate assets for pennies on the dollar and giving banks a means through which to clean up their balance sheets. These changes in the Scope of Work would allow banks to create subjective values for these properties and off load them to cash buyers. There was no longer the expectation that an “arm's length” sale had taken place and reflected market value.
Greenspan knew, and Paulson knew, and Geithner knew and the Senate Finance Committee staffers knew. Brooksley Borne, was the sole voice to warn the Fed and the Treasury about the orgy of derivative bets coincident with the sub-prime fraud and impact on small banks.
The Old Boy's Network did all they could to muzzle and marginalize her. However, there were hosts of officials at the FDIC, Fannie Mae and Freddie Mac also sounding alarm bells. Importantly, after being apprised of a Florida scam, the FBI began investigations but the Bush Administration had these minions shifted to the “War on Terrorism.”
How could Greenspan and company not know once the Scope of Work Rule was changed that mark-to-market values would be distorted to assure the quick and final elimination of much of a bank’s toxic assets represented in part by non-performing mortgages? He knew!
The others in the government and quasi-government entities had two years to review the regulation. They saw, in 2007, the tip of the foreclosure tsunami. Yet they did nothing. Except lead their fellow colluders to trillions in profits.
It wasn’t until late 2008 that the Fed began to voice its concern because housing industry data pointed to an horrific increase in foreclosures of sub-prime loans and a significant decline in new construction and resales. The macroeconomic effect had not been planned for according to the Fed Chairman. "Foreclosures could be handled," he said, "but no one anticipated the extraordinary spillover effects on new home purchases and resales." Within three months that concern would be overshadowed by the erosion of CITI, Goldman-Sachs, Merrill, Lehman Brothers, A.I.G. and other mega gamblers who had unrestrained opportunities to do what they wished with derivative, and swaps and the other exotica of Wall Street gambling.
They fully expected that, like twice before, taxpayers would bail them out.
They will continue to be bailed out precisely because they are too big to fail.
Pending Congressional legislation does nothing to reign in the absolute control of these 6 banks in their control of this society. With assets equal to 63% of our GDP who stands in their way to creating a fascist plutachracy.