Subprime deja vu all over again
My thoughts on an article by Tara Servatius of Creative Loafing titled 'Mops away!: Meet your new subprime lender.'
I really thought we had all paid our dues on this subprime mortgage fiasco by the big hit we all took in our investments in banks, securities firms, CMOs and mortgage-backed bonds. Just when I thought it was all over, I read an article by Tara Servatius in Creative Loafing titled "Mops Away! : Meet your subprime lender." Her article frightens the heck out of me.
In the article, she shares how, now that the banks and mortgage origination scum aren't taking advantage of the poor folks, FHA, Fannie Mae and Freddie Mac have taken up the slack.
Most of the home sales in Charlotte recenlt have been under $130,00, with buyers taking advantage of the $8,000 first- time home buyer tax credit.
Our federal government is subsidizing these home buyers with over a billion dollars a month in tax incentives. FHA is $40 billion in the hole and taking on new mortgages from people with FICO credit scores as low as 560. Freddie Mac published in September its default rate has hit 7.3%. And still they keep doing the same insane lending.
Isn't the definition of insanity doing the same mistake over and over but expecting a different result?
Now comes the bad part of this news. If these mortgages default, and many will, it's not the banks that take it on the chin, it's the federal government.
Guess where the government gets its money? From you and I. Remember those powers to tax and spend? Somewhere along the line our representatives reversed that to spend and tax.
Before you remember Obama's promise to make sure the rich pay for any new spending and deficits, and not the middle class, and let the vow make you complacent, remember that his promised salary and bonus controls ensure won't be rich people to be taxed much longer. He has made sure we are all middle class now.
Since the poor people don't pay taxes (they just receive tax credits) that just leaves you, me and all our middle class neighbors and friends.
Robin Hood has left Sherwood Forest and is now robbing the middle class from Washington and giving it to the poor in the forms of housing, food stamps, free lunches, health care and even cash for clunkers.
For you next year's tax return will be easy - how much money do you have left - attach a check for that amount and send it on in to the IRS.
Jim Van Meerten is an investor who write on financial matters here and on Financial Tides. Please leave a comment below or email FinancialTides@gmail.com.
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