Spring segued into Summer with Hillary Clinton’s white wedding. The hot wack was on as Milady Hill rolled in Joe Sixpack’s arms moaning how Joe wouldn’t go for O. The real wild thing? Mrs. Joe wasn’t jealous. She didn’t dis Hill like Hill’s pals did Bill’s gals. Trailer trash no sirree. Hillary, who served copious globaloney during her years as co-president, is a stand up rep for blue collar interests.

Ain’t nothing madder than mad love. Unless it’s mad mortgage fraud.

Back in April (it seems like an eon of Clinton ago!) FBI Director Robert Mueller gave a speech to the American Bar Association titled “Corporate Fraud and Public Corruption: Are We Becoming More Crooked?” The question was left open. Mueller wrapped up with a Teddy Roosevelt quote: “Character, in the long run, is the decisive factor in the life of an individual, and of nations alike.”

A few weeks later the FBI released their 2007 Mortgage Fraud Report. Illustrated with pics of slums featuring wall-to-wall rubble, bare slats, and torn out toilets. The dumps were dubbed “recently renovated condos” by appraisers who ascribed fantastic values. “Granite countertops” and “Brazilian hardwood” were cited. You know the bigger picture. They call it the housing  bubble. Folks making chicken feed qualified for half-a-mil mortgages sans down payment. No-doc loans made lying easy. Teaser interest rates and deferred mortgage principle payments did the same for flipping. Realtors, brokers, and lenders embraced inflated appraisals and encouraged big eye buyers. Wall Street securitized the paper. Lap dog agencies rated it. The debt underlying gazillion derivatives grew ever crappier. Finally Ponzi popped.

Not all is doomster. According to the FBI mortgage fraud is going strong and adapting to the current market. Since more lenders now check credit records, mortgage fraudsters are increasingly relying on identity theft. Foreclosure rescue scams are also big. Perhaps both trends will end if the Housing Rescue bill passed in May by the Senate Banking Committee goes into effect and credit standards sink ‘neath a wave of underwater mortgages. The rescue goes this way: failing mortgages would be refinanced at better terms by lenders holding the paper. Among other things, they’d knock at least 15% off the original amount. Lender participation would be voluntary. Having their dud loans covered by government would be the incentive. Billions of dollars worth of refi would be insured by the Federal Housing Administration (FHA) using $500 million in funds channeled from Fannie Mae and Freddie Mac.

Since FHA money wouldn’t be at risk the Housing Rescue plan is being touted as taxpayer friendly. Quel shell game. Establishing a major new HUD mission (the FHA is a HUD sub) will cost taxpayers plenty. HUD never sez mission accomplished so operating costs will be forever. Particularly since a third of the rescue fund will eventually flow into a HUD-directed affordable housing initiative. Then there’s the Fannie Mae and Freddie Mac connection.

Fannie and Freddie are Government Sponsored Enterprises (GSEs). Though publicly owned they’re government poodles. The GSEs buy and securitize mortgages. The assumption is that taxpayers will bail them out should disaster strike. Fannie and Freddie have an extensive history of book juggling and in the last 3 quarters lost $11.1 billion combined. Yet they’re being cast as the financiers of assorted housing bailout schemes and as the prop for sagging high-end markets. The cap on the price Fannie and Freddie can pay for mortgages was recently lifted and Congress has relaxed requirements for their capital cushion. (Aka safety net.) The Housing Rescue plan passed by the Senate Banking Committee has to be reconciled with an even zanier plan hatched in the House of Representatives. A bill could be on Dubya’s desk by July 4th. Bring it on. If a load of steaming defaults hit the fan (and fred) taxpayers will know …

What Happened

In May, former White House press secretary Scott McClellan brought forth his tell-all book. Alt title: Why Are We in Iraq. Oh no! We were sold a bill of goods by a president for whom lies become truth when told with conviction. His vision of mushroom clouds clouded our vision. The real reason for Iraq? The neocon notion that democratization by force would bring reform to the entire MidEast. When the plan didn’t pan we got stuck twixt a rock and a hard place. Five years and counting. Bodies and billions.

On June 4th the Washington Post ran an article by Dana Milbank about Hillary Clinton’s non-concession speech after Barack Obama clinched the Democratic presidential nomination. Titled “In Defeat, Clinton Graciously Pretends to Win”.

In election years responsibility for the national condition gets laid squarely on the sitting or outgoing president. Candidates embrace or reject the admin’s record depending on political circumstances and depict the public as needing more of a good thing or succor from a bad. It’s as if the public were a bump on a log and the prez was a ruler rather than representative leader. The public doesn’t do enough to disabuse pols. Take the housing rescue thing. When candidates inveigh against predatory lenders and choke up over hardworking-Americans-facing-foreclosure nobody ever raises a hand and says, “Pardon me, but I resent being painted as a hapless Gumby. I actively lied about my income on my mortgage app in order to buy more house than I could afford and hid the fact that my downpayment was supplied by the seller. A whole lot of people in my nabe did the same. So there. Put that in your pipe and smoke it.”

Then there’s the Iraq war.

One night in early 2003, Dick Cheney and Karl Rove stole into homes across America and sprinkled zombie powder over the residents. President Bush was in DC watching on Homeland Security TV. Next day when folks awoke, newsmedia war drums were beating. (It’s important to remember that members of the fifth estate feared for their careers in the face of patriotic fervor and Bush’s poll numbers.) Still, questions about the wisdom of invading Iraq and the reality of Saddam as nuclear threat or 9/11 co-conspirator were being raised on the Internet by credible members of the military, intelligence, and foreign policy communities. The ideological reason for the Iraq war was also being discussed by neocon pundits and their critics. Though all this info was readably available to the enormous number of Americans who were online by 2003, the zombie powder made them forget how to use their computers.

After the powder wore off and people saw the Iraq mission wasn’t accomplished they put Bush’s numbers in the toilet and echoed Hillary Clinton re her vote in the Senate to give him war power. Saying “if I knew then what I know now. ” More hindsight: Hillary shouldn’t have bought more presidential campaign than she could afford. Barack may have to help retire her debt. No mention of tapping taxpayers. Yet.

Carola Von Hoffmannstahl-Solomonoff

Sources include but are not limited to:

Haggling on the Hill, The Economist, 05/22/08

Housing Rescue Plan Passed, John E. Mulligan, Washington Bureau, Providence Journal, 05/21/08

Senators say have deal on housing rescue bill, Patrick Rucker, Reuters, 05/19/08

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