Are You Also Perplexed By The Mortgage Disaster Today?

Are you confused about mortgages? Good

Are you confused about mortgages? Good. At least you know you are confused. The collapse of the world economy can, in broad strokes, be laid at the feet of three parties; the Federal Reserve, mortgage lenders, and American home buyers. Of these, the most dangerous and most responsible party, the Federal Reserve Bank, is also the malefactor fingered the least.

The Federal Reserve increased the amount a bank could loan relative to the amount the bank holds in deposits. It is hard to argue that the increase to a 30-1 ratio was simple idiocy. Jon Stewart repeatedly hammered this point home when demolishing Mad Money host Jim Cramer on March 12th. Why is Republican Congressman Ron Paul the only politician in Washington pointing at the Federal Reserve Bank? Why are heads not rolling and careers ending at Treasury?. President Barack Obama's failure to replace Ben Bernake at Treasury and the failure of Congress to set about replacing the Federal Reserve Banking System are unconscionable.

Mortgage brokers concocted obtuse mortgage contracts and then began shilling subprime loans to unqualified buyers. With interest rates at historic lows (until now, and God help us), mortgages were made to people that mortgage brokers knew could not afford the payments if interest rates were to return to their historic averages.

When the FRB raised the ratio it flooded the market with more money, which went out in loans to unqualified buyers which were then bundled as the infamous 'asset backed paper.'. Toxic assets don't exist in the real world. In the real world they have a different name: liabilities. Your tax money is being used to the American government.

What will happen going forward? People who can't afford things will not buy them. And people who can afford something will save to buy it instead of putting it on the credit card. If not, things that are bad now are going to get worse and they may not ever get better again. Does that sound pessimistic? Good, because if you are not pessimistic now, you are a fool.

by: Dorsey Ince

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