Signal Attack on Obama's Foreclosures Mess

The New York Times notably devoted its front-page lead story Jan. 2 to the charge that President Obama's disastrous, year-old "foreclosure mitigation" plan has not only failed, but is worsening the housing price collapse and could "cause another recession." While the Times' descriptive language for this financial breakdown collapse is inappropriate, their taking aim at Obama—perhaps on behalf of those economists who know he has to be put under adult supervision and his policies reversed—is clear.

The article's new home-loss figures, from Moody'sEconomy.com, are shocking. The sum of repossessions in foreclosure, plus abandonment of homes in lieu of foreclosure, plus loss of homes by "short sale," amounted to a total of 1.7 million American homes lost in 2008; 2 million in 2009; and a projected 2.4 million in 2010. This means 6.1 million, or one-eighth of all mortgaged homes in the country, 6,000 homes lost every day for three years.

Economists Mark Zandi of Economy.com and Kevin Katari of Watershed Asset Management are quoted: "From its inception, the Obama plan has drawn criticism for failing to compel banks to write down the size of outstanding mortgage balances." "Banks have been using temporary loan modifications under the Obama plan as justification to avoid an honest accounting of the mortgage losses on their books." True, for a change.

On the bank bailout flip-side of Obama's policy, economist Dean Baker catches on to what LPAC's "Tantamount To Treason" pamphlet laid out 18 months ago: Obama has expanded the size of the government bailout of Fannie Mae and Freddie Mac, from its original $400 billion limit, to no limit. "Now, its very hard to understand how they [Fannie and Freddie] could incur losses of more than $400 billion," says Baker. "And this raises the question, what exactly are [nationalized] Fannie and Freddie doing? And what I suggest in that piece is that this might be a backdoor TARP. In effect, what Fannie and Freddie could be doing is buying the bad assets—that's what TARP was supposed to do—of banks, and paying too much money for them, in which case you will incur lots of losses. So this could be yet another big gift to the banks."

Meanwhile the Federal Reserve bought $1.111 trillion in such mortgage-backed securities (MBS) during 2009. Since Fannie and Freddie issued only about $250 billion in MBS in 2009, and this was 90% of all MBS issued, the Fed was overwhelmingly ($850 billion worth) buying MBS from banks, which had been on those banks' books since 2006-2007, and buying this toxic crap at 100% of the banks' claimed value.

Restore the Glass-Steagall principle—which, as Lyndon LaRouche has described, was simply an implementation in 1933 of the Hamiltonian national banking principle embedded in the United States' Constitution. And, all these corrupt bailouts must be immediately cancelled; all these banks are ready for reorganization in bankruptcy.