Political Cortex: Brain Food for the Body Politic

"This is all too similar to the authority granted to fight the war on terror and to invade Iraq, based on the pressing urgency of the situation.

"Congress must not settle for token compromises about executive compensation and homeowner mortgage relief, while allowing the clause to stand."

Fortunately, Congress refused to allow this total dictatorial power grab to remain.  Cooler heads prevailed.  Despite Bush's defense of rewarding failed bank officials with golden parachutes as they left the banks they have been brought to the brink of bankruptcy.

If ever there was a bankrupt administration this nearly eight year run of mostly robot Republican rule, this is it!

Stacey Duke of San Francisco in her New York Times Letter to the Editors September 24 expressed her response to the $700 billion bailout by succinctly stating the following:

"As early as 2005, Paul Krugman warned us of a housing collapse on the economy.  That my tax dollars will inevitably help pay for inexcusable excesses in which I played no discernible part is infuriating.  When I add the billions wasted by an inert president on unnecessary war, tax cuts for the richest, and on and on, I feel completely defeated."

Michael Abolafia, associate professor at Rockefeller College of Public Affairs, Albany, New York, lends perspective in his New York Times letter:

"In the 1930's during the Roosevelt administration, corporate America recognized its interest in a government that invested in the economic infrastructure of America.  Once again, it took a financial meltdown to remind it that government provides the capital for health, science, education, transportation, and yes, regulation that unfettered markets fail to provide on their own.  Once again, the pendulum swings from profits to prudence."

Well stated!  When I lived in the Tampa Bay area of Florida, I vividly recall an incident on a Saturday night when a man at a neighborhood convenience store stole a $2 rose for his girlfriend.  The police were called when the sales person caught this thief.

Quickly the local police arrived, placing handcuffs on the rose thief, hustling him down to the police station for booking.

What a sharp contrast for punishing big time bankers, whose sub-prime home loans to individuals with rotten credit histories.

The Seattle Times business reporter Drew DeSilver in the September 21 edition explained the Washington Mutual collapse:

"From 2004 to the end of 2007, WAMU made $452.5 billion in some of the riskiest types of loans and short term adjustable rate mortgages, especially so-called `option ARMS,' which allowed people to choose how much they wanted to pay each month.  Many borrowers, unsurprisingly, chose to pay as little as possible.  Like credit card users making only the minimum monthly payments, they ended up owing more than they'd originally borrowed.

"But as mortgage defaults and foreclosures rose sharply in 2007, the resale market for home loans and the securities based on them abruptly evaporated because no one could readily assess how much default risk those loans carried, and no one wanted them.  

"As a result, as of the end of June nearly 54 percent of WAMU's $239.6 billion loan portfolio consisted of option ARMs home equity loans and sub prime."

But before this, until mid-2007, Drew DeSilver explains:

"Lenders like WAMU were able to package pretty much any mortgage they made and sell them off to hedge funds, pension funds, insurance funds, companies and other financial firms."

These almost worthless package mortgages were packaged with the lying label "mortgage securities".  They were in reality anything but secure.  

Before the inevitable of Washington Mutual, a banker was rushed in to save the collapsing thrift, and given a $7 plus million bonus to begin.

Out of this billion dollar banking mismanagement spectacle, to date nobody has been jailed as far as I know.  

But a word to the wise:

Don't ever steal a $2 rose from a Tampa, Florida convenience store!

There is a good chance you'll get caught, be handcuffed, and given a free ride to a jail cell, courtesy local police.

Finally, Friday September 26 the Seattle Times headline read:

END OF WAMU

FEDS SEIZE THRIFT IN NATION'S LARGEST BANK FAILURE

May I add, "About time"!

In the future, when an accurate analysis of what Washington Mutual Bank had become, will Washington Mutual Bank not be considered a split banking operation, part legitimate while the other arm had degenerated into the world's biggest Ponzi scheme?