Bush Housing Crisis Policy 3 — Fashioning Solutions

 Continued from Intimations of Insolvency

Late 2007 – early 2008. The Bush administration encourages creative measures to instill confidence in the market and give the impression that the mortgage debt problem and financial market do not indicate that the U.S. economy is a teetering house of cards.

The National Association Of Realtors reacts to the growing number of home foreclosures by proclaiming “There Has Never Been a Better Time to Buy a House!”

Wall Street begins to notice that the securitized home mortgage debt it has been selling — and buying — is based on the illusion of ever-rising housing prices. As a result, it sells more of it and ramps up sales of more unregulated financial devices, Debt Swaps or Credit Default Swaps. These are supposed to be insurance but they are not, since insurance is regulated, and insurers need to be able to pay off claims. The new instruments are not technically securities, since securities are regulated, and brokers need to be able to pay for them. Swaps are private agreements between rich, greedy liars (pardon the technical terminology).

Given the lack of transparency at mortgage insurers Fannie Mae, Freddie Mac, Jimmy Mack, and Chili Mac, and the absolute invisibility of Swaps, it is still possible to deny the true extent of the crisis, which can still be blamed on imprudent home buyers, the whiners.

Next: Inventive Interventions

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