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Guest Post: Tim Geithner Is A Sniveling Scamster

05 Apr

Via Mike Whitney of Market Oracle

Timothy Geithner is a Sniveling Scamster

Whew. That was fast. It didn’t take long for Wall Street to figure out
how to game Obama’s new mortgage modification program, did it? The plan
was hyped as help for “struggling homeowners”, but it turns out, it’s
just another stealth bailout for pudgy bank-execs. It’s funny, the
program hasn’t even kicked in yet and, already, bigtime speculators are
riffling through their filing cabinets looking any garbage paper they
can find to dump on Uncle Sam. Take a look at this on today’s Bloomberg
report:

"Subprime-mortgage securities are rising at an accelerating pace as the
U.S. begins to encourage reductions to homeowners’ balances, which may
lead to fewer foreclosures and a quicker end to the housing
slump….Senior-ranked bonds tied to borrowers with poor credit will
mostly benefit after the Treasury Department said for the first time it
would seek to cut the size of mortgages, reducing the likelihood that
loan modifications will fail, according to JPMorgan Chase & Co.,
Morgan Stanley and Barclays Plc. (Bloomberg)

What does it
mean? It means that Obama’s mortgage modification extravaganza has
touched-off a gold rush in toxic paper. Subprime securitizations, which
had been worth next to nothing, are now the hottest trade on Wall
Street. It’s a subprime bonanza! The investment sharpies are scarfing
up all the crummy MBS they can get their hands on, because they know
they can trade it in for Triple A FHA-backed loans when the program
get’s going. It’s another swindle cooked up by Treasury Secretary
Timothy Geithner to keep the brokerage clan in the clover. Here’s how a
Wall Street veteran explained it to me:

“It looks like the investors in securitizations will be swapping
underwater real estate for govt-insured paper… I think the scam here
is just to provide some cover so the hedge funds and other high net
worth individuals can trade their low grade paper for Triple AAA
mortgages insured by the FHA at the taxpayer expense.”

That’s it, in a nutshell. The faux-foreclosure prevention program has
nothing to do with helping homeowners. That’s just diversionary
gibberish to confuse the public. The real objective is to create a
government landfill (aka–FHA) where the banks and other financial
institutions can dump their toxic MBS-sludge and walk away with
gov-backed loans. Get a load of this:

(Bloomberg) — The Federal Reserve’s completion this week of its
program to buy $1.25 trillion in mortgage bonds probably won’t mean
significantly higher U.S. home loan rates as investors return to the
market, replacing the Fed…

What we are seeing is an effective handoff occurring between the Fed
and industry buyers such as banks and pension funds,” said Christopher
Sebald, chief investment officer for Advantus Capital Management in St.
Paul, Minnesota…

Advantus is purchasing mortgage bonds after the Fed’s program drained supply in the $5.4 trillion market." (Bloomberg)

Of course, they’re “purchasing mortgage bonds”, because the government
is going to insure them. It’s a “no brainer”. And don’t you love that
expression, “a handoff”, because that’s exactly what it is. The
government hasn’t stopped pumping liquidity into the system; they’ve
just found another entry-point where they can push it in. Here’s how it
works: The new program offers incentives to banks and other
deep-pocketed investors (in mortgage-backed securities) to slash the
principal on underwater mortgages which keeps people from strategic
default or foreclosure. Sounds good, right? But here’s the catch: When
the mortgage is refinanced, it’s converted into a FHA-backed loan which
provides an explicit gov-guarantee. So, for a slight loss on the
face-value of the MBS, the investors (ie–investment banks, hedgies,
etc) are able to resuscitate their moribund securitizations (MBS) and
reap hefty gains. It’s like taking Fido’s steaming pile on the front
lawn and turning it into the Hope Diamond. Abracadabra!

Geithner has figured out how to put together a bailout that will cost
taxpayers hundreds of billions of dollars without any money actually
exchanging hands. The value of the putrid mortgage-paper will soar
because of the gov-underwriting, and the ginormous losses won’t be
realized until the mortgages start blowing up sometime in the future.
That’s when FHA will be put-to-pasture along with fellow-homicide
victims, Fannie and Freddie. Pretty clever, eh?

So, the cutthroat speculators and bunko artists who fleeced us all with
their dogshit subprimes, have returned for another dip at the public
trough. That means taxpayers will get scalped on the same investments a
second time. Hey, it’s a double-whammy!

This really takes the cake. You gotta hand it to that sniveling
scamster Geithner. He had his back to the wall and, presto, he extracts
another rabbit from his hat. What a guy. He knew he couldn’t go begging
to congress for more money, or they’d kick him to the curb. So he
worked out a scam that picks up where the Fed’s $1.25 trillion
quantitative easing bailout leaves off. It’s a seamless transition from
one massive corporate giveaway to the next. Now the Fed has nearly $2
trillion worth of structured garbage on its balance sheet, (which it
will undoubtedly dump on Fannie or Freddie) the banks are loaded with
fresh reserves, and another trillion or so is earmarked for the shadow
bankers who provide funding to the regulated banking system. AND IT’S
ALL 100% FREE. Such a deal.

This bank/credit cabal is robbing us blind in broad daylight and no one
seems to give a hoot. Maybe Barack Obama will save us from all ruin?

Fat chance!

By Mike Whitney

 
 

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