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The Housing and Economic Recovery Act of 2008

MoGal

Well-known member
http://news.goldseek.com/GoldSeek/1218694140.php

This is quite lengthy and tells in very similar terms as worldreports.org did, however since its written by Catherine Austin Fitts who served as Assistant Secretary of Housing and Federal Housing Commissioner in the first Bush Administration, maybe you all will believe..............

imo its time to vote all the incumbents in congress out as they who voted for this have committed treason against the people of the United States of America.............


By clearly signaling to the market that the U.S. government stands behind Fannie Mae and Freddie Mac, this new law increases the national debt from $9.5 trillion to $14.8 trillion overnight (that is a $5.3 trillion increase as opposed to the $800 billion increase provided for in the debt-limit increase accompanying the bill). Not surprisingly, a lot of pork needs to be added to pay a lot of people to go along.

A more appropriate bill title would be the Housing and Economic Takeover Act of 2008. Rather than declaring the New World Order, we are apparently going to legislate it sector by sector.

Here is the bill language:

Housing and Economic Recovery Act of 2008

Here is a rosy summary from the Senate Finance Committee:

Senate Finance Summary – Housing and Economic Recovery Act of 2008

The best overview so far is from Larry Lindsey. Lindsey was one of the more excellent governors of the Federal Reserve. Lindsay had to resign from the Bush Administration in 2002 as director of the National Economic Council when he had the good sense to warn that the Iraq War would be expensive.

Hank Paulson's Fannie Gamble

As Lindsay points out, the number of porky add-ons in this bill are stupefying. Bloomberg provides a review of one:

Fed Loans to Banks Made Easier By Fannie Mae Rescue
One recent market commentator pointed out that Fannie Mae and Freddie Mac executives were allowed to keep the big bonuses they made engineering the housing bubble and bankrupting the companies.

One of the examples given was Jamie Gorelick, (1, 2) who joined Fannie Mae as vice chairman from 1997 to 2003 after engineering the move to private for-profit prisons as deputy attorney general in the Clinton Administration. Gorelick's name received national attention as a member of the 9-11 Commission and close advisor to Hillary Clinton.

Gorelick got Fannie Mae compensation and bonus payments of $26 million, which she gets to keep.

However, the bill stipulates that Americans at risk of foreclosure who get a mortgage workout must share future equity capital gains with the government.

Any government official asked to come up with a workout plan for troubled financial institutions, large portfolios of financial assets and liabilities, and/or places that are financially challenged first must consider all the constituencies involved. No matter what his or her goals, an official must choose from among the options available. Before we judge these individuals harshly, we must consider what we would do if we stood in the same shoes.

The challenge that U.S. Treasury Secretary Hank Paulson faces when working out the problems with Fannie Mae or Freddie Mac is that a significant number of mortgages that serve as collateral for U.S. mortgage-backed securities markets are not real. They do not exist.

The problem is not that the people who bought the house and borrowed the money cannot afford to pay it back or that the house they bought has dropped in value. If these were the problems, we would not be watching the debt the U.S. government is responsible for increase by $5 trillion dollars. We would not be watching the National Bank of Australia announce a 50% loss rate on their mortgage-backed securities.

When my company served as lead financial adviser to the Federal Housing Administration (FHA), we surveyed industry loss rates to compare them to FHA's high rate of 35%. The highest we found in the industry was 25%, and this was at the end of the last housing bubble bust, when loss rates would be expected to be high. As we due diligenced the FHA nonperforming and foreclosed portfolios, trying to understand a 35% loss rate, we started to find symptoms of fraudulent collateral practices. Indeed, we found portfolios with 50% loss rates, and the losses had nothing to do with income levels or housing prices.

Here is a story that I have told many times before:

"In 1994, after the first FHA/HUD financial audit was published, a mortgage banker came to see me. He was a serious engineering type who clearly worked hard and had mastered the details of his business. He was distressed, he said. For decades he had been keeping a tally of total outstanding FHA/HUD mortgage insurance credit. He had brought printouts of his database for me. It turned out that the government’s published financial statements showed the amount outstanding was substantially less than the actual amount outstanding. He was sure. I assumed that the guy was crazy. If what he said were true, then the U.S. Treasury and the Federal Reserve would have to be complicit in significant fraud, including securities fraud."

After I began researching HUD fraud in the late 1990s, I would be contacted by people with experience with HUD fraud. They insisted that the same home was being used to create ten or more mortgages that were placed into different pools. They alleged that Chase as the lead HUD servicer and the other big banks were implementing such systems. This was why we would see the same house default two, three, or four times in a year, they claimed. FHA mortgages had to be churned through multiple defaults to generate the cash to keep all these fraudulent pools afloat. This, they insisted, was all going to finance various secret government operations and private agendas.

This issue of collateral fraud was repeated in other markets. As I started to learn more about precious metals and the commodities markets, I would hear story after story about precious metals arrangements in which what investors really had was a bank credit—there was no bullion behind the arrangement.

I have come to believe that the allegations of mortgage collateral fraud are true—not just for FHA and Ginnie Mae at HUD but across the board throughout the mortgage markets as well.

What this means is that Freddie Mac's and Fannie Mae's obligations must be converted to what is essentially government debt. Such conversion means that investors simply don't care if the mortgages have a lien on anything real or not (at least for the time being). Otherwise, there would need to be a process by which all the defaulted mortgages can be sorted through to determine which of the mortgages are legitimate and which are not.

Creating and managing such a process would indeed crash the global financial system. It is hard for a multi-trillion-dollar financial system to maintain liquidity when contracts and laws are meaningless.

The challenge for Hank Paulson is that by increasing the national debt by $5 trillion—whether collateralized by real estate or by phony paper—he can delay the day of reckoning, but he cannot cancel it.

Only one thing can cancel the day of reckoning, and that is a return to productivity—a reengineering of resources in households and communities; a revitalization of culture, education, and markets; a rebuilding of infrastructure; an integration of new technology and new process; and a shift away from warfare, centralization, financial fraud, and organized crime and those who lead and promote it.

Hank Paulson's hands may be tied, but ours are not. Ultimately, you and I have the power to change this. So . . . who is your banker? Who is your farmer? Where is your money?

snip...........
So what has evolved is a corporate and banking model to run the planet that has no connection whatsoever to fundamental economics or business. It is not efficient, it is not transparent, it does not compete, and it is not productive. It has absolutely nothing to do with capitalism or free markets or free enterprise—although it claims these words for branding purposes. It has the economic benefit of fantastic increases in productivity from technology, all of which have been incorporated within its control without helping the model achieve basic productivity or overall sustainability. Technology has made the corporation a more powerful financial vacuum cleaner rather than a source of real wealth. For several years, I have referred to this model as an integral part of Tapeworm economics. So, for easy reference, let's refer to the model as a "Tapeworm corporation."

The Tapeworm corporation works like this: Working alone or with others in a trade group, the Tapeworm corporation arranges for its well-paid lobbyists to write and legislate new government regulations and laws that guarantee it a market or market share. The lobbyist and various beneficiaries of the corporations' largesse fund the campaign contributions that help make the system go. The corporation gets government contracts, often on a no-bid,"cost-plus" basis, which guarantees profits and encourages overspending. The corporation may also make government purchases or receive industry-wide subsidies that also generate revenues or tax exemptions and benefits that shelter income. It uses government credit to attract and command global capital at low cost. The astute participant in this system can even use government enforcement to wipe out its competitors. In the worst cases, honest and ethical people in their way are forced out, harassed, or killed.

Let's say our corporation loses money. If it is a financial institution, it simply has the government or the central bank arrange more borrowings that can be loaned back to the government at a built-in profit or, in the worst instances, bail it out using the "too big to fail" justification. If it is a defense contractor, more contracts and purchases can be arranged. In all cases, our corporation enjoys government intervention to prop up its stock prices and debt in the open market, ensuring it a significantly lower cost of capital. The resulting profits fund rich compensation to hire the best and brightest people, field lots of lobbyists to keep the gravy train going, and pour money into the coffers of foundations, universities, and not-for-profits that provide affirmation of the corporate credibility. Our corporation and its leaders are great philanthropists!

A simple, clear picture of the real workings of this Tapeworm model has been challenging to communicate. The model has been obscured by an enormous amount of legal and operational complexity and financial engineering. A great deal of time and effort, financed by those who most benefited, was spent spinning the illusion that the Tapeworm corporation was efficient and productive. And, in all fairness to those who have served as corporate apologists, some of what was going on was hidden behind the nontransparency of national security law and covert operations and money laundering. For those who want a detailed case study, see “Dillon, Read & Co. Inc. and the Aristocracy of Stock Profits.”

The average person could not believe that the largest, most prestigious Wall Street banks and investment houses were engaged with Washington in managing the largest capital market in the world—the U.S. mortgage markets—on a criminal basis.

That was too much to swallow.

Until now.

The real model has come out of the closet. Whereas the last year of Wall Street bailouts were making things clearer, the Housing and Economic Recovery Act of 2008 now leaves no room for doubt. The Act could not be more blunt about infinite government subsidy funded with infinite debt benefiting the private few. The Tapeworm corporation is in full bloom.

The American taxpayers are, in essence, guaranteeing $5 trillion of Fannie Mae and Freddie Mac debt. The Federal Reserve stands by to subsidize Fannie's and Freddie's stock in the stock market. Fannie and Freddie continue to pay dividends to their shareholders. All the profit goes to the shareholders and management. The taxpayers get no compensation or payback for saving all of Fannie and Freddie’s equity and essentially guaranteeing their income. The management of Fannie and Freddie get to keep all their compensation and bonuses. They get to spend as much as they want on more lobbyists and law firms. They and their foundations can continue to hand out money to universities and not-for-profits.

This all ensures that Fannie Mae and Freddie Mac can continue to use the federal credit to centralize and control the U.S. mortgage market.

What Fannie Mae and Freddie Mac do get is a new regulator. After reading the scope of work for the new regulator outlined in the Act, it is not clear to me what authority and scope is left for their board of directors. The boards essentially have all liability and no power. The management must do whatever the regulator says, and the regulator has the ability to micromanage no end, checked only by a Congress that can also micromanage no end. We can reasonably expect Fannie Mae's and Freddie Mac's payrolls and partnerships to continue to expand with their market share. A lot of constituencies are likely to get fed from this new back-door spigot.

The out-of-the-closet Tapeworm corporation is a more powerful, sophisticated version of the old Tapeworm corporations that were common in Washington housing circles—the HUD property management companies that were sometimes referred to as CIA or Department of Justice (DOJ) “proprietaries.” The management would talk as if they were in charge. The investors would talk as if they were in charge. And the folks from the CIA would talk as if they were really in charge. At the mercy of this invisible matrix structure, the old-style HUD property management company lacked clarity on missions or decisions, and the resulting culture was confused and unproductive at best. It all left you scratching your head wondering who “they” really were.

The housing bill has put forward the most explicit description yet of the true corporate model prevailing in America—congressionally legislated businesses with central-bank-determined stock prices.

It is a fascinating combination of friendly fascism and multiple personality disorder. Now that the fundamental nature of the Tapeworm corporation is out of the closet and clear, keeping it afloat will require a mind-numbing combination of global force to maintain financial liquidity, plus global propaganda and payola to preserve its brand.

In 1994, I was deep in conversation with a technologist who managed our server's security and firewalls for my investment bank. We started to talk about what would happen as the explosion in information and communications technology increased the learning metabolism within the economy. At one point, he got up to call a physicist he knew at Lawrence Livermore Laboratory to ask him what happened when the learning metabolism rose in a system. After conversing with the physicist, he returned with this warning. "He said, 'When the metabolism rises, the rate of entropy increases.'”

It is not easy to engineer the bankrupting of the American middle class and the U.S. government.

Alan Greenspan and the Federal Reserve banks and their members can push all they want, but a destructive housing bubble could not have happened without the federal housing infrastructure at the Department of Housing and Urban Development (HUD) dismantling or ignoring countless laws, financial controls, and administrative rules created to prevent disasters, particularly disasters of this magnitude.

Creating a housing bubble and bust that is this harmful required reorganization of FHA and Ginnie Mae. It required new rules and changes in the oversight of the mortgage markets, including of Freddie Mac and Fannie Mae. It required cooking the accounting systems, budgets, and books, even refusing to produce financial statements for HUD and FHA as required by law. It also required pushing hundreds of responsible people out of way. It meant manipulating the press and throwing money around in the right places. It was a big, big job. Someone had to do it.

Thanks to a handful of courageous people and reporters, you can understand why it took 232 years for America to accumulate almost $10 trillion in national debt but only one new bill bailing out Freddie Mac and Fannie Mae to clean up more housing bubble mess to add another $5 trillion overnight.

There are two great financial mysteries in America:

* Where is all the missing money and how do we get it back?
* How big is the missing collateral black hole and how will it be resolved?

These two mysteries are essentially part of one mystery at the heart of the matter: Who is in charge of—and what are—the real financial flows and assets of the central banking/warfare complex that increasingly governs the resources on our planet?

Since all financial frauds—the manipulation of the precious metals markets, the engineering of the mortgage and housing bubble, ongoing naked short selling, Enron, and the pump and dump of the Internet and telecom stocks—come back to the same cast of characters, our ability to protect our families and assets necessitates an integrated understanding of “the real deal”—who is really in charge and how the economy is really managed. Hence, it is useful to have a basic understanding of the missing money and missing collateral mysteries.

Let's start with the first mystery, the missing money.

In fiscal 1999, the Department of Housing and Urban Development (HUD), under the leadership of Secretary Andrew Cuomo, reported $17 billion missing from its opening balance and $59 billion of undocumentable adjustments to close its books and refused to produce audited financial statements as required by law. In fiscal 2000, HUD refused to disclose the amount of its undocumentable transactions.To get a sense of the magnitude of even the reported discrepancies, this means that the amount of undocumentable transactions occurring at HUD in 1999 was $1.13 billion a week, $227 million each work day and $28 million an hour.

The contractors that ran HUD’s auditing and payment systems also were large contractors at the Department of Defense (DOD), which reported $2.3 trillion of undocumentable transactions in fiscal 1999 and $1.1 trillion in fiscal 2000. DOD declined to report the number for fiscal 2001, and in all years susequent to the requirement to do so, declined to produce audited financial statements as required by law, ensuring that the U.S. Treasury could also not do so.
 

MoGal

Well-known member
It goes on to say:
Collateral fraud occurs when the stuff that you use to secure a loan is just not there. So, as an example, ten mortgages are created on one house and put into ten different mortgage-backed security pools.

I am sometimes asked how HUD could have had more in undocumentable transactions in fiscal 1999 than the size of its entire budget for the year. My answer, in a nutshell, is securities fraud.

As an example, let me hypothesize one of many different ways that this could be achieved. The government could issue mortgage-backed securities without recording them on the official books. Here is how it might work.

As depository and government contractor, you shift $100MM out of a government account, such as the FHA Mutual Mortgage Insurance Fund reserves, using a debit entry. You use that money to purchase Ginnie Mae securities that are not recorded on the Ginnie Mae books. The cash received through the sale of the Ginnie Mae securities replenishes the reserves. You sell these Ginnie Mae securities offshore—in China, Japan, Dubai, or the Cayman Islands.

Now you have $100MM. You do it again. And again. And again.

By the end of the year, Ginnie Mae has issued $59 billion of securities backed by the full faith and credit of the U.S. government that are not reported on the official HUD books. You pay the debt service by defaulting fraudulent mortgages in the Ginnie Mae pools and putting them back into the FHA fund as a claim on FHA’s insurance.

Because FHA mortgage insurance originations are growing thanks to the mortgage bubble, FHA is taking in lots of premiums, so you can skim from these reserves. This is—in essence—stealing from the premium holders. However, they have no way of knowing. Accomplishing this requires manipulating the actuarial studies. Given what your accountants and auditors are already going along with, cooking the actuarial studies is certainly not a problem.

Again, this is only a hypothetical methodology. In theory, there are hundreds of ways of doing it, including with the full range of Treasury and agencies securities.

By the summer of 2001, to finance trillions of undocumentable transactions, the U.S. government would have built up quite a discrepancy between outstanding securities and those reported on the U.S. government books, and another discrepancy between agency securities collateralized with things such as mortgages and actual valid liens on real things in the material world.

Which leads us back to the interesting fact that the first plane that headed into the World Trade Center North Tower on September 11, 2008 took out Cantor Fitzgerald, the leading government bond dealer. All 658 employees present that day died, along with the system Cantor Fitzgerald used for settling transactions. This was not the only financial data destroyed that day. DOD has claimed that the attack on the Pentagon that day destroyed financial records. In addition, the destruction of WTC 7 resulted in loss of SEC and other federal agency enforcement records.

Rob Kirby’s recent piece “Dead and Buried but Not Forgotten” connects the dots between the possibility of securities and collateral fraud and 9-11.

The increase in defense appropriations after 9-11, ongoing missing money since that time, and the excusing of DOD from many mandated financial reporting requirements could all have helped the system dig out of or simply maintain a collateral black hole.

My reason for describing the missing money and missing collateral mysteries is to explain why I have such a bad feeling about this housing bill.

Whatever discrepancies existed between the official U.S. government financial statements and real debt outstanding before the housing bill, my guess is that such discrepancies are now suddenly much bigger after the housing bill. In other words, we are in the process of merging all outstanding mortgage fraud with existing U.S. government securities and collateral fraud. Add to that the assumption of the back-door liabilities protecting all of JP Morgan Chase and the New York Fed member banks’ positions on cleaning up Bear Stearns and maintaining large derivative positions, including in the mortgage and precious metals market. Now add to that whatever collateral fraud is embedded in the Fannie Mae and Freddie Mac portfolio plus significant increases in liabilities at FHA.

I used to have a deputy when I was the Federal Housing Commissioner who said that FHA was where mortgages went to die. This time around, this describes a very, very big number, given that many of the mortgages that need to be buried are fraudulent—the only valid “lien” they have is the criminal liability associated with them.

In short, as we centralize power and control of the financial system into the U.S. Treasury and Federal Reserve banks, we also consolidate outstanding collateral and securities fraud.

Typically, when many toxic liabilities consolidate into one central point at the same time assets (such as the $10 trillion) are privatizing or leaving, one of two things is going on.

The toxic waste is being consolidated for disposal and long-term containment.

Or, everything is being moved into one place so it can more easily be put into bankruptcy, reorganized, or destroyed.

Whatever the outcome, if you hold a position in which you manage large databases covering the U.S. mortgage or government bond markets, or any other markets with symptoms of significant collateral or securities fraud, you might want to consider finding a new job.

Nicholas Negroponte once said, “Data about money is worth more than money.” In this instance, the right data could give the right team of people the power to get $10 trillion back. That is real power—the kind that has a tendency to attract hostility from all sides of the political spectrum, not to mention accidents and terrorist attacks.
Let’s set the record straight:

* If energy technology had not been suppressed for the past 100 years, our energy costs would be a pittance compared to what they are now, and our savings would be much higher.
* If countless medical discoveries had not been suppressed, we would not be looking at such ridiculous costs for health insurance, Medicare and Medicaid.
* If government had produced proper financial statements as required by law and had also produced such disclosure contiguous to Congressional districts, the housing bubble and a lot of other bubbles could never have happened.
* If the currency and monetary systems had been run in the manner envisioned by the founding fathers rather than by private bankers, we would not have any debt.
* If the American media and government had communicated honestly about our problems for the past few decades, we would not be in this pickle.
* If wasteful defense spending and disappearing money had not defined the Pentagon for quite some time, things would look very different.

I once had a wonderful employee when I was the Assistant Secretary of Housing. He told me that the way to clean up a big mortgage mess was to view the problem as the solution. He said, “In the destruction of the old, let there be the creation of the new.”

America does not have a debt problem. We have a political problem. We have created a system where secret governments can steal and have Congress, the U.S. Treasury, and the Federal Reserve replace whatever they stole. The theory is that the end of the world will come unless we bail them out. That is not true, for all the reasons you learned in kindergarten about letting bullies have their way.

The implication of the trailer for I.O.U.S.A. is that we must turn to these great financial leaders to lead us out of our mess. But if they were truly leading, how did we get in this mess in the first place? How did billions of fraudulent securities get sold around the world? Why were several generations of Americans fraudulently induced to take on student debt and mortgage debt they could not afford?

In the destruction of the old, let there be the creation of the new. This begins with seeing the housing bill as it is.

When I finished reading the housing bill, I realized that it was more economic—on a risk-adjusted basis—for a young person to learn how to build a home than to manage dealing with the current homebuilding and mortgage finance industry. Mind you, I say this as a former Assistant Secretary of Housing. Shortly thereafter, I recently spoke to an attorney whose son was leaving for boarding school. She indicated that she was having similar thoughts. Why shouldn’t his education include learning to build and repair his own home?

I also realized that the rich resources that the passage of this housing bill makes available would now be available for currency and market manipulation. Sure enough: dollar up, gold down.



(See Silicon Investor Dollar Intervention Chart.) For some temporary period of time, the price of everything that has no inherent value is rising and the price of anything that has tangible value is falling. This, however, is temporary. As someone wrote recently about the additional write-offs that one of the large banks was taking,whatever money you put into these things, it just disappears. They will be back for more. They can’t create wealth, they just consume it.

If there is to be any blessing in this housing bill, perhaps it will be to so offend, so disgust those of us who are awake that the process of withdrawing from the old and reinvesting in the new models will accelerate. And maybe the smartest and most creative among us will be willing to invest the time and energy it takes to reinvent a model that incorporates what we like to think are traditional American values. These are the values that are enduring and make us proud to be Americans still. There is no hint of these values in the housing bill. There is, however, an abundance of them in the hearts and minds of the people.

In the destruction of the old, let there be the creation of the new.
 
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