Unlike the Creator, Who rested from his labors on the seventh day, the architects of our kleptocratic State do their most important work over the weekend.
The arrival of each week’s two-day market sabbath is heralded by the announcement of yet another bank failure tied to the collapse of the real estate/mortgage/debt refinancing bubble, with the bad tidings disclosed after the final bell sounds on Wall Street.
The most recent episode involved Nevada’s Silver State Bank, which appropriately enough has ties to high-ranking personalities in both branches of the Ruling Party. (Washington Mutual is presently the leading candidate for this week’s high-profile failure.)
At irregular intervals, the weekend also brings news of the latest installment of the incremental nationalization of the investment markets. This began several months ago with the federally backed and brokered buy-out of Bear Stearns. Over the most recent weekend this process reached an important milestone when Fannie Mae and Freddie Mac were transformed from fascist entities — that is, “public-private” partnerships — into fully realized, federally owned socialist organs.
Legendary investor Jim Rogers, as usual, speaks the unalloyed truth when he observes that the Fannie/Freddie bailout demonstrates that “America is more socialist than China right now,” with government redistributing wealth for the benefit of the politically connected super-rich. (That’s how socialism always works in practice, of course.)
Once again, to the surprise of nobody who has been paying attention, this development was praised by the presidential candidates from both wings of the Ruling Party. And as with all such socialist undertakings, the very first priority of the officials who seized Fannie and Freddie was to assure the apparatchiks that their jobs were secure.
“Clearly, this [seizure of Fannie Mae by the feds] is a very significant regulatory action, and I know many of you will be concerned about how it will affect you and your work at Fannie Mae,” wrote James B. Lockhart III, the agency’s new conservator in a memo to its “officers, employees, and other personnel.”
“I hope the following information will allay those concerns. First, your jobs are secure. There will be no change in your employment status with Fannie Mae as a result of the conservatorship. Your jobs, compensation, and benefits will continue without interruption.” (Emphasis added.)
Fannie CEO Daniel H. Mudd, and Freddie CEO Richard Syron engaged in fraudulent bookkeeping right up to the eve of the federal takeover by deliberately overstating their capital holdings and financial health. However, neither of them faces criminal or civil prosecution. In fact, strictly speaking they’re not even being fired: They will both eventually “step down” from their current posts, but will be given sinecures of some kind.
Solicitude of this kind is routinely displayed toward those who had helped generate hundreds of billions of dollars in perfectly rotten mortgage loans as part of a corrupt scheme to boost executive compensation through dishonest accounting methods. Fannie and Freddie practiced Enron-onomics and Arthur Andersen-style accounting on steroids, in the serene confidence that the taxpayers would eventually have to absorb the costs and that nobody of any consequence in those agencies would suffer significant repercussions.
That confidence, as we can see, was entirely justified.
The announcement of the takeover was timed to assure foreign bondholders in Asia, Russia, and elsewhere that they wouldn’t have to eat hundreds of billions’ worth of bad paper issued by Fannie and Freddie. That foul feast will be served to the taxpayers who had no stake in that nasty business, but whose earnings will be plundered in order to keep foreign domestic political criminals comfortable, and foreign central bankers happy.
This process isn’t finished, of course. We’re being ordered to believe that the $200 billion line of credit being used to “backstop” Fannie and Freddie will be adequate to cover the rotting mortgage loans.
Those two Government-Sponsored Entities account for roughly half — $5 trillion — in outstanding U.S. mortgages.
Believing that $200 billion will cover the damage at Fannie and Freddie is even sillier than thinking that I could still fit into the uniform I wore more than a quarter-century ago as the starting fullback on our state championship football team.
Just as there is no logical stopping point between “backstopping” Fannie and Freddie and nationalizing them outright, there’s no reason to assume that the cost of nationalizing those corrupt enterprises will fall far short of the full $5 trillion, an amount equivalent to roughly half the existing National Debt.
Monetizing this bailout will wipe out the savings and earnings of tens of millions of American households — but no sacrifice extracted from the productive citizenry is too great, given that the objective is to protect the interests of the Power Elite.
Here’s how justice operates under the kleptocratic state that rules us:
If you’re a politically protected corporate leader who helps perpetrate a $5 trillion fraud through a federally chartered “private” entity, your crimes will be forgiven and the costs will be passed along to the taxpayers.
However, if you’re a young woman living in a small midwestern community who neglects to pay a $180 library fine (perhaps because you’re too busy working two jobs to pay your other bills), you can expect to feel the unyielding steel of handcuffs around your wrists, as was the case with Heidi Dalibor of Grafton, Wisconsin.
If, like Peter Tubic of Milwaukee, Wisconsin, you’re a severely disabled man who neglected — amid the turmoil of tending to a dying elderly father and cancer-stricken mother — to pay a $50 ticket for storing an unregistered vehicle on your own property, you can expect to lose your $245,000 home to a tax lien and foreclosure imposed by the city government. (The citation, incidentally, was the result of a telephone tip from Tubic’s estranged brother, who obviously has more than a little bit of Pavlik Morozov in what passes for his soul.)
In Brooksville, Florida, failure to pay a $5 parking ticket can result in foreclosure on one’s home, or seizure of his car.
A similar fate awaits those who reside in Sarasota County, Florida. Under an ordinance recently enacted by the County Board of Commissioners, any motorist who is merely accused of failing to pay a traffic ticket issued by a for-profit red light camera system would suffer foreclosure on their home or seizure of other personal assets.
This sentence would be imposed by a “special master,” rather than a judge. A lien against the property would be filed against motorists who “ignore” a ticket issued in any amount. And this would be done in defiance of Florida state law, which expressly forbids the use of red light cameras. But the law offers no effective impediment to an esurient county government expecting to collect $2.25 million in annual revenue harvested through a projected 18,000 illegal citations.
The proliferation of predatory, extortionate measures of this kind at the local level reflects a trend I described nearly a year and a half ago: A dramatic escalation of enforcement efforts (involving traffic, parking, code enforcement, and “quality of life” measures) by revenue-starved municipal and county governments.
This is how such governments act when inflated home values collapse, taking property and sales tax revenues with them. And it’s a tidy illustration of the way our current system is rigged to wring every penny from the productive class before expropriating them entirely.
Some might object that it’s unfair to treat local and county governments as part of the same system of institutionalized plunder that gave us Fannie and Freddie. But we really should dispense with the illusion that anything resembling a federal system still exists in the United States.
Every government agency at every level is merely an administrative unit of the monolithic, fiat currency-fueled, Warfare/Welfare/Homeland Security Leviathan that must collapse — and the sooner, the better — if civilization is to recover.
Yes, the collapse is coming, and neither Ben Bernanke nor Henry Paulson can prevent it. What they can and will do, of course, is draw out and magnify the agony in order to provide platinum parachutes for their cronies, both here and abroad.