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Uncertainty is creating and driving fear

By Keith Kennelly - posted Tuesday, 21 October 2008


Previous to this Fanny Mae had, on occasion, experienced severe liquidity problems. To overcome this Fanny Mae used Clinton’s law changes to parcel and on sell the now defaulting and predicted future toxic loans. This enabled Fanny Mae to liquefy the loans and continue in business lending more and more and of course on selling more and more.

Therein lay the original hive, drones and Queen Bees of the current crises.

The Carter Administration and the Clinton Administration planted the seeds. The Republican controlled Congress proposed the legislation enacted by Clinton. It was passed in Congress with bi-partisan support. The Democrats support was conditional upon reinforcement of Carter’s folly. As an aside Fanny Mae was and still is widely recognised as an arm of the Democrat party.

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Wikipedia gives a comprehensive synopsis of the legislation and processes here.

John Montgomery in The Australian recently gave a very good, albeit a bit partisan, explanation of this part of the mess.

An article “They Warned Us About the Mortgage Crisis” in Business Week published last week gives a grand account of the details of what was occurring across the US and is easily read.

It gives a detailed account of the extent of the problem and how it spread to the “Main Street” and “Wall Street” banks.

The Bush Administration and Republican Congress oversaw this spread from the original corruption in Fanny Mae. What happened from there was plain stupidity and raw greed.

These institutions, watched by the well aware Federal Reserve and Federal Government Overseers, jumped aboard the out-of-control sub-prime express. They were well aware of the “profits” earned by Fanny May and its management, well aware of the loans toxicity risks, but fearful of missing the massive profits available, and hoping to have “passed the parcel” before the current inevitable wreck occurred. They were enthusiastic participants and made the corruption a fine art.

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They were somewhat successful at “parcel passing” and that’s why many banks across the world are failing.

The most recent Democrat controlled Congress prevented re-regulation and curtailment of the abominable lending practices as little as three years ago. The cheer leader in this monstrosity is Barney Franks, Chairman of the House Financial Services Committee. Up until March of this year he was spruiking the great financial standing of Fanny Mae and encouraging continued investment in this lender. Again Wikipedia is good for background.

The irresponsible actions and inactions Franks, along with all the major shareholders of the banks of the Federal Reserve - especially those of the New York Regional Fed Res, as well as Greenspan, Benanke, Bush, Clinton, Carter, Paulson and Raines have wrecked a finance and banking system that had served us well for nearly 80 years through times of war, social dislocation and massive social and economic growth and change.

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About the Author

Keith Kennelly is a 53-year-old small business operator, resident in Brisbane who raised two childern as a single dad. His hobbies now include swiming, reading, sailing and Texas Hold 'Em poker.

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