The mechanics of Life often seem such that decisions of the past never quite seem to remove them selves from ones consciousness. As if they linger simply as a reminder of things to come or, if your really Spartan, to avoid.
I enjoy anecdotal metaphors that mirror life! They seem to say what we can not read or, for the spoken words, we can not see. For instance, Shakespeare’s “What’s past is prologue.” Santayana’s “Those who cannot remember the past are doomed to repeat it.” And , for the record, my own “Lessons unlearned will resurface at the most inopportune moments and often when you’re least prepared to be reminded of your oversight!”
I find, in my own observations of life, that there is a great deal of predictability. We just simply don’t like predictability that runs contrary to our expectations. In other words, I’ve never heard anyone suggest that life is easy, simply, effortless etc. The obverse of this fairytale is thus, and then, what is true! An that, my dear friends, is why life is so predictable! God, or whatever you choose to identify as the source of All That Is, presents His Creation (you and me) with all it needs to accomplish the task of perfecting creation (that is to say, “perfecting” meaning, to take it to a specific intent or intention or outcome) and then sets us loose to do just that. What we end up with is a world that mirrors the vision (or our view/intention) that we hold in our mind/soul. In other words: “…what we sow, so shall we reap….” Again, a predictable outcome!
Years ago, during the Savings & Loan fiasco I had an extraordinary opportunity to witness the actions (legislative) that lead up to the crisis, the convergence of interests that produced the crisis and the actions the were employed to resolve the crisis.
I admit, in advance, that what follows is a complete and unadulterated over simplification of the events however, I illustrate key points which will serve to illustrate an interesting point that is keenly relevant to our current financial pendulum. One that is swinging straight for us. Consider the following points:
- S&L’s were originally intended as a medium for residential lending funded directly by deposits. Intended as a self-funding entity, rates charged for loans were controlled by the S&L administrative function that was tied to public demand for and supply of funds from depositors. It worked well for decades however, pressure to expand funding capability and opposition forces from Banks (non-S&L and Credit Unions) provided the impetus for,…
- Legislation (authored by and heavily backed by Democrats) that produced 1980 & 1982 passage, in sequence, of the Depository Institutions Deregulation and Monetary Control Act and the Garn-St. Germain Depository Institutions Act.
- The consequent affect of this was to flood these Institutions with sources of funds that, in essence, allowed for greatly expanded lending practices that the S&L model was never intended nor designed to administrate. The end result was opportunistic borrowing practices by Investors, Developers etc. the profit/wealth from which made its way in to many pockets.
- As with any practice of excess we know there is ultimately the resetting of the scales and the S&L circus was no exception to the reverse swing of the pendulum. Contraction in the various markets due to overheating and overextension of credit caused the collapse of the real estate market and the inevitable financial implosion that follows.
This should sound very familiar, we’ve seen it before, we see it now and sadly, we have the makings of seeing it again in another 10-15 years. However, in concert with our current state of affairs one could be Looking Over Your Shoulder for the source of the sounds of weeping, wailing and gnashing of teethe! Are you wondering why?
As a brief sidebar I note with much displeasure B. Obama’s comments about “deregulation” as he assails J. McCain for culpability! What a train wreck of an argument. He is deliberate in his use of the terms as most of his adoring audience is ignorant to the facts and McCain is simply to benign an individual to retrieve this rhetoric and toss it right back at him,…in flames! IDIOTS! AROGANT IDIOTS!
Not to wax crystal ball like however, looking at the foreclosure rates one doesn’t need to be particularly clairvoyant to know that we’re headed straight for chaos, big time chaos. The makings of the same style of implosion were set in motion in 1977 (Carter Administration) with the passage of the CRA (Community Reinvestment Act). By the way, made progressively more unmanageable and unwieldy by five/six subsequent legislative and/or regulatory actions. All, including the original act, authored/sponsored and heavily supported by Democratic power brokers. A summary of the CRA, its initial intent and subsequent misadventures follows:
- CRA had its origins in a noble idea which was to find a way to deal with the growing problem of deteriorating inner-city housing.
- Using existing Lending facilities, Banks and S&L’s, incentives were provided to Lenders to fund developments designated for inner-city/blight prone areas.
- As time would go by and opportunities arose to further expand the applicable terrain and scope of the CRA, various modifications were instituted to do just this. Expand the scope and terrain of the CRA. More money was made available by, in affect, force Lending which was accomplished by dramatically reducing qualifying criteria, penalizing non-participator Lending Institutions, creating “credits” for Lenders who participated and permitting the establishment of non-Governmental Entities, such as “ACORN”, to develop and expand or otherwise mandate Housing Facilities that would target “Low”/”Moderate” Income candidates.
- The end result was an explosion not only in unsavory Lending Practices but also construction, by way of Mandate, of Housing specifically targeted at/to these prospective Low / Moderate Income Candidates. Which, I might add, is a focal source of the explosion in Market Rate Housing Costs/Prices, however, more on this at another time.
- In essence, forced Lending, in the Billions (possibly Trillions) of Dollars to not only what amounts to Government Mandated Housing but worse, to parties who can neither qualify (under normal lending practices) nor pay for it. Isn’t Government GRAND!
In my opinion, the time is not to far off were the net affect of all of this is going to come crashing down. The weight of the dead or dying Loans, on the financial markets, is of such massive proportions that market liquidity will simply not be able to handle it. It is worth noting that the contemporary equivalent of a Ponzi Scheme, known as the Collateralized Debt Instrument(s) and/or the Derivative(s) markets, is the great unknown! Which is to say, there is really no easy way of knowing just how deep the debt-equivalent burden is contained within these unregulated segments of the financial markets.
Make no mistake, it IS going to collapse. Just how deeply the pendulum will cut, frankly, is anyone guess! If you are a “One Worlder” wanabee then you couldn’t ask for a better opportunity to open the pearly gates to Global Monetary Policy! My greatest fears, I fear, however, will come true. What are these? Well, I’ll tell you: the Government will become the great financier of financial ruin. If, as I’m laying down money that he will, Obama wins, watch for another Federal Reserve hack as U.S. Treasury Secretary. Even more to the point, look at who the present Secretary of the Treasury is. The great solution to the great “financial crisis” will be to flood the failing markets with Taxpayer Debt. Well, it works for the Economy, must work for the Government too! I’m getting angry,…I’d best move on…!
Another interesting thought too! This could be a fabulous opportunity to incinerate massive quantities of U.S. Dollars in circulation around the world! Hmmm,…very interesting! Strangely, it could shore up the Dollar vs. the Euro and cause Crude to drop in to the sub $100/bl territory!
In closing. I reference Democratic crafting of the legislations mentioned above not as a way of impaling the Party but more to illustrate the hypocrisy of the notion that deregulation is an effect and the cause is Republican. Clearly not the case, AT ALL!!!
Government, our Government, was given specific tasks, each enumerated by/in the Constitution. Why? Because the Founding Fathers understood human tendencies in positions of power and influence and went to great lengths to keep these tendencies from masquerading themselves in the from of Policy, Government Policy! Whether Government, as the “few”, or the “few” imposing themselves by/through the Government, we can safely say that this has and will forever be, the source of our individual hardship! So long as we engage in the permissive use of Government, either willfully or by oversight abstinence, of this type of meddling in the affairs of the People, we will never, NEVER, gain our full potential as a People, as a Nation, as a benchmark from which we can exceed!
Keep Looking Over Your Shoulder for signs of the future! In the mean time, remember, don’t hold your breath, just breathe and wear a smile! It will make people wonder about you!
Curtis C. Greco, Founder