Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
UK House Prices Momentum Forecast 2019 - 18th Dec 18
Will US Government Shutdown Cause The Stock Market To Crash? - 18th Dec 18
The Coming Financial Storm - 18th Dec 18
Jeff Gundlach thinks that a Stocks Bear Market has started. Is he Right? - 18th Dec 18
Gold’s Not An Investment – You Won’t Get Rich - 17th Dec 18
Stock Market At Medium-Term Lows, Which Direction is Next? - 17th Dec 18
This Stock Will Drive America’s 5G Buildout - 17th Dec 18
Stock Market Turn In The Tide - Have a Happy Bear Market! - 17th Dec 18
How A NASA Scientist Could Trigger The Next Cannabis Boom - 17th Dec 18
iShares Russell 2000 IWM Leading Stock Market Decline - 17th Dec 18
Where is the Dow Stock Market Santa Rally? - 17th Dec 18
With Weaker Climate Consensus, Expect Elevated Climate Change - 16th Dec 18
SMIGGLE Advent Calendar 2018 UK Contents - What You Get Look Inside Review - 16th Dec 18
Is there a Lump of Coal in Santa's Stock Market Bag? - 16th Dec 18
This Market Will Drive Gold in 2019… - 16th Dec 18
Gerald Celente:Central Banks Can’t Stop a 2019 Debt Disaster - 16th Dec 18
Gold Stocks Triple Breakout - 15th Dec 18
The stock market fails to rally each day. What’s next for stocks - 14th Dec 18
How Low Could the S&P 500 Go? - 14th Dec 18
An Industrial to Stock Trade: Is Boeing a BUY Here? - 14th Dec 18
Will the Arrest of Huawei Executive Derail Trade War Truce? - 14th Dec 18
Trump vs the Fed: Who Wins? - 13th Dec 18
Expect Gold & Silver to Pullback Before the Next Move Higher - 13th Dec 18
Dollar Index Trends, USDJPY Setting Up - 13th Dec 18
While The Stocks Bulls Fiddle With The 'Fundamentals,' Rome Burns - 13th Dec 18
The Historic Role of Silver - 13th Dec 18
Natural Gas Price Setup for a Big Move Lower - 13th Dec 18
How to Get 20% Off Morrisons Weekly Supermarket Shopping - 13th Dec 18
Gold Price Analysis: Closer To A Significant Monetary Event - 13th Dec 18
Where is the Stock Market Santa Claus Rally? - 12th Dec 18
Politics and Economics in Times of Crisis - 12th Dec 18
Owning Precious Metals in an IRA - 12th Dec 18
Ways to Improve the Value of Your Home - 12th Dec 18
Theresa May No Confidence Vote, Next Tory Leader Betting Market Analysis and Forecasts - 12th Dec 18
Gold & Global Financial Crisis Redux - 12th Dec 18
Wow Your Neighbours With the Best Christmas Projector Lights for Holidays 2018! - 12th Dec 18
Stock Market Topping Formation as Risks Rise Around the World - 11th Dec 18
The Amazing Story of Gold to Gold Stocks Ratios - 11th Dec 18
Stock Market Medium term Bullish, But Long Term Risk:Reward is Bearish - 11th Dec 18
Is a Deleveraging Event about to Unfold in the Stock Market? - 11th Dec 18
Making Money through Property Investment - 11th Dec 18
Brexit: What Will it Mean for Exchange Rates? - 11th Dec 18
United States Facing Climate Change Severe Water Stress - 10th Dec 18
Waiting for Gold Price to Erupt - 10th Dec 18
Stock Market Key Support Being Re-Tested - 10th Dec 18
May BrExit Deal Tory MP Votes Forecast, Betting Market Analysis - 10th Dec 18
Listen to What Gold is Telling You - 10th Dec 18
The Stock Market’s Long Term Outlook is Changing - 10th Dec 18
Palladium Shortages Expose Broken Futures Markets for Precious Metals - 9th Dec 18
Is an Inverted Yield Curve Bullish for Gold? - 9th Dec 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

Bernanke's Bankster's Skimming Operation Exposed

Politics / Credit Crisis 2010 Feb 04, 2010 - 06:11 AM GMT

By: Mike_Whitney

Politics

Best Financial Markets Analysis ArticleThe reappointment of Fed chairman Ben Bernanke means that the opportunity for change has passed and the reform movement is dead. It means that and that derivatives trading, off-balance sheet operations, securitization, dark pools and high frequency trading will go on much as they have before. It means that the public will continue to be gouged so that a handful of Wall Street sharpies can rake in obscene profits using complex "financial innovations" and over-leveraged debt instruments. It means that the entire system will continue to be put at risk to protect the interests of investment banks and hedge funds. It means that the subsidies, the preferential treatment, and the bailouts will continue to fuel populist rage and exacerbate deepening divisions in society. It means that the status quo has been preserved and that it's "business as usual".


No reform movement will succeed as long as Bernanke is at the Fed.  He's an agent of the big banks and a Wall Street loyalist. He's also the author of "Too Big To Fail", the controversial theory which provides unlimited state support for financial institutions that are deemed too large or interconnected to fail. TBTF means that capitalism's vital market-clearing function can avoided if one is rich or powerful enough. Bernanke repealed capitalism to save his friends.  

The Fed's role in the housing fiasco, goes way beyond Alan Greenspan's low interest rates which helped to ignite a frenzy of speculation. It's clear now, that both Greenspan and Bernanke knew that the multi-trillion dollar credit expansion, was based on  mortgages to applicants who had no way of repaying the money they had borrowed. It was a complete scam. Recent testimony by FDIC chairman Sheila Bair before the Financial Crisis Inquiry Commission (Jan 14, 2010) provides many of the details. Naturally, Bair's testimony has been ignored by the media.

Sheila Bair: "Federal consumer protections from predatory and abusive mortgage-lending practices are established principally under the Home Ownership and Equity Protection Act (HOEPA), which is part of the Truth in Lending Act (TILA). TILA and HOEPA regulations are the responsibility of the Board of Governors of the Federal Reserve System (FRB) and apply to both bank and non-bank lenders.

HOEPA, which was enacted in 1994, contains specific statutory protections for a narrow category of high cost loans used for mortgage refinancings. These protections include restrictions on prepayment penalties, balloon payments, and extensions of credit without consideration of a borrower's ability to repay. HOEPA defines these high cost loans in terms of threshold levels for either interest rates or points and fees. Many of the toxic mortgage products that were originated to fund the housing boom did not fall within the high cost loan definition under HOEPA. However, many of these toxic products could have been regulated and restricted under another provision of HOEPA that requires the Federal Reserve to prohibit acts or practices in connection with any mortgage loan that it finds to be unfair or deceptive, or acts and practices associated with refinancing of mortgage loans that it finds abusive or not otherwise in the interest of the borrower.

PROBLEMS IN THE SUBPRIME MORTGAGE MARKET WERE IDENTIFIED WELL BEFORE MANY OF THE ABUSIVE MORTGAGE LOANS WERE MADE. A joint report issued in 2000 by HUD and the Department of the Treasury entitled Curbing Predatory Home Mortgage Lending noted that a very limited number of borrowers benefit from HOEPA's protections because of the high thresholds that a loan must exceed in order for the protections to apply. THE REPORT ALSO FOUND THAT CERTAIN TYPES OF SUBPRIME LOANS APPEAR TO BE HARMFUL OR ABUSIVE IN PRACTICALLY ALL CASES. To address these issues, THE REPORT MADE A NUMBER OF RECOMMENDATIONS  INCLUDING THAT THE FEDERAL RESERVE USE ITS HOEPA AUTHORITY TO PROHIBIT CERTAIN UNFAIR DECEPTIVE AND ABUSIVE PRACTICES BY LENDERS AND THIRD PARTIES.  During hearings held in 2000, consumer groups urged the Federal Reserve to use its HOEPA rulemaking authority to address concerns about predatory lending. Both the House and Senate held hearings on predatory abuses in the subprime market in May 2000 and July 2001, respectively...."

Bernanke--who followed developments in housing in great detail--didn't lift a finger to stop the predatory lending until 2008 when he finally used his authority to restrict activities in just one small area of the market,  closed-end mortgage loans.

Shiela Bair again: "For this new category of higher priced mortgage loans, these changes address many of the abuses which led to the current housing crisis and help assure that mortgage borrowers have stronger, more consistent consumer protections, regardless of the lender they are using or the state where they reside. The rule imposes an "ability to repay" standard in connection with higher-priced mortgage loans. For these loans, the rule underscores a fundamental rule of underwriting: that all lenders, banks and nonbanks, should only make loans where they have documented a reasonable ability on the part of the borrower to repay. The rule also restricts abusive prepayment penalties."

So, you see, that even after the media had started exposing the hijinx that were rampant in the mortgage market, Bernanke still refused to act, or rather, only used his regulatory powers on one narrow part of the market. At the very least, Bernanke's failure to respond makes him criminally negligent in the biggest ripoff in US history.

Sheila Bair again: "We believe that an 'ability to repay' standard should be required for all mortgages, including interest-only and negative-amortization mortgages and home equity lines of credit (HELOCs). Interest-only and negative-amortization mortgages must be underwritten to qualify the borrower to pay a fully amortizing payment. Otherwise, the consequences we have seen during this crisis will recur."

Bernanke even refused to enforce the most basic "common sense" regulation, that loan applicants be able to prove that they have the ability to repay their mortgages. No wonder Bair's testimony appears nowhere in the mainstream media; it provides concrete evidence of the Fed's culpability.

But, why? Why would Bernanke refuse to act even though he could see that markets would plummet and millions would lose their homes in foreclosure?

William Seidman, the former head of the FDIC, figured it out back in 1993 when he was cleaning up after the S&L crisis. He said:

“Instruct regulators to look for the newest fad in the industry and examine it with great care. The next mistake will be a new way to make a loan that will not be repaid.”

That's it in a nutshell. The banks didn't care if the loans were repaid because they got their money "up front" on volume originations. That's why they were so eager to issue mortgages to people with no income, no collateral, no job, and a bad credit history. It was all a gigantic skimming operation, where banks and brokers got their cut and then bailed out before the whole thing blew up. Bair's testimony shows that the Fed knew what was going on; knew that the loans were garbage, knew that people were being victimized, knew that eventually the bubble would burst and the economy would go into a long-term nosedive.

Bernanke's job was simple; just look the other way while fatcat banksters steal as much as possible.  

Don't believe me? Read Bair's testimony. http://www.fdic.gov/news/news/speeches/chairman/spjan1410.html 

By Mike Whitney

Email: fergiewhitney@msn.com

Mike is a well respected freelance writer living in Washington state, interested in politics and economics from a libertarian perspective.

© 2010 Copyright Mike Whitney - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Mike Whitney Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

peter
04 Feb 10, 13:45
bernanke

I know this is probably an unoriginal comment, but,

Bernanke makes me want to puke;

someone who uses his intelligence to mask his corruption.

tbh, i think their (banksters) game is up.

Mr Bernanke, the world is watching


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules