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Obama Inc. Unveils Brilliant Plan to Cause Second Economic Crisis with Bad Loans
Posted By Daniel Greenfield On April 3, 2013 @ 1:27 pm In The Point | 10 Comments
Since we’re on an imaginary recovery from a real recession, it’s time to upgrade that recession to a real depression for twice the recovery.
This speech was made in Vegas, because when you want to trash the economy with a politically correct gamble, the place to roll the loaded dice is in Sin City.
The Washington Post reports that the administration is pushing a plan designed to encourage banks to lend money to riskier borrowers, in order to boost the housing market. The plan is designed to help young people (who have little to no credit history) and folks whose credit may have been damaged by the great recession.
Raise your hand if you see the flaw. The reason some of those people got ruined by the recession is because they were given loans they probably shouldn’t have been given. A surge in shaky home loans over the last 10 years is often the first thing people think of when they think about the collapse of the economy in 2008.
Yes, but surely that can’t happen a second time. I mean what are the odds that the government will pressure banks to make bad loans and that liberal billionaires will monetize those bad loans a second time to fund the election campaign of Hillary Clinton, whose husband set up this whole mess?
But at this point, the government essentially is the mortgage market; the overwhelming majority of loans now go through an entity controlled by the US government. So the government is going to set the underwriting standards. The question is, will they set them too high or too low?
Obama Inc. is playing with someone else’s money and it needs to get some action going to claim a recovery, even if it has to go on faking it.
So it will set the standards to too low. What does it have to lose?
And it’s all the more egregious because it repeats so many of the mistakes we’ve been lamenting — and paying for — the past five or six years. Not to mention that existing FHA-backed loans are already believed to be under-capitalized and run the risk of a taxpayer bailout that could rival those of GM and Chrysler.
Taxpayers have lots and lots of money? Right?
And who could possibly have an interest in all this?
Wells Fargo has become the dominant U.S. mortgage lender, grabbing an unprecedented 28.8% share of all home loans issued nationwide last year, up from 11.2% in 2007, the year before it bought Wachovia. Its home-loan production hit $524 billion last year, the largest annual total ever for one lender and greater than the output of the next five largest lenders combined, according to the publication Inside Mortgage Finance…
The big question now looming for Wells and other mortgage lenders is what will happen when the refinancing boom wanes. Loans to purchase homes accounted for only about 25% of the mortgage industry’s production last year. Mortgage refinancing accounted for 75%—business that is likely to decline precipitously when interest rates start rising again. Timothy Sloan, Wells’s chief financial officer, told investors last month that he expected mortgage revenues to decline in the first quarter—a sign that a refinancing slowdown may have begun.
Wells Fargo. Sounds familiar. Who is cashing in on that?
Warren Buffett’s voracious appetite for shares of Wells Fargo in recent years has made the San Francisco bank his biggest investment in a public company.
Wells pushed aside long-standing top holding Coca-Cola, a stake Buffett purchased from late 1987 to 1995 as he decided the value of the company’s powerful global brand wasn’t reflected in its share price. The fact that the beverage giant remained Berkshire’s top holding for years shows how well it has performed for Buffett.
Crony capitalism rides again.
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