Ron Paul not only predicted mortgage crisis in 2002, he tried to stop the implosion
They don't know it, but taxpayers stand to lose billions as the housing bubble bursts. And in a bipartisan effort to "do something" to save the housing market, President Bush and the Democratic Congress appear set to put taxpayers on the hook for billions more.
Until now, losses in the housing world have been confined to homeowners, mortgage lenders, banks and investors in toxic mortgage securities. But by virtue of the implicit federal guarantee backing mortgage giants Fannie Mae and Freddie Mac, U.S. taxpayers may be one of the largest mortgage lenders in the world - set to lose billions, like all the others.
Between them, Fannie Mae and Freddie Mac back more than $4 trillion in mortgages. If they fail, it could force an unprecedented taxpayer-funded bailout. And they are much closer to failure than most people realize.
Some saw this coming, including presidential candidate Ron Paul. As far back as 2002, Mr. Paul - whose candidacy I'm not actively supporting - predicted the Federal Reserve would blow up the housing bubble.
Mr. Paul was dead-on with his prediction that the Fed was blowing a new bubble and that it would burst violently.
Another Paul prediction, that Fannie and Freddie will go bust, forcing a taxpayer bailout, remains controversial because few think the housing crash could be that bad.
In a recent Securities and Exchange Commission filing, Fannie noted that it backs $2.6 trillion worth of single-family home loans. Underneath this pile of debt, the company has only $42 billion of capital. If the value of mortgages backing Fannie's debt falls a few percentage points, the company's capital could be wiped out. And because of the implicit government guarantee backing Fannie's debt, American taxpayers would be on the hook for whatever debt Fannie couldn't cover.
In 2005, Mr. Paul introduced an amendment in Congress to end the implicit taxpayer guarantee backing Fannie's and Freddie's debt. He said at the time: "I hope my colleagues join me in protecting taxpayers from having to bail out Fannie Mae and Freddie Mac when the housing bubble bursts."
Source: Option ARMageddon
2.6 TRILLION dollars in loans secured by an anemic 42 billion dollars. That works out to having only 1.6% of collateral on hand to back up the loans.
Try this: Try borrowing a measly $100,000 dollars from your bank. When they ask for collateral, tell them you're wiling to put up $1,600 in cash to secure the loan, then see how many seconds it takes before the bank security officer bounces your ass out the front door.
Good one, Greg. Here's another...
Ron Paul on Bill Moyers before the 2002 Iraq Authorization vote
AIPAC = Apartheid Israel Placing America in the Crosshairs
–or–
American-Israeli Pimping-America Committee
I’m also concerned that falling property values will wipe out the property tax revenues in many areas, forcing state, county, and municipal governments to cut staff, cut services, and increase taxes in other ways.
Following up on AZ's comments about the drain on local and state treasuries that will lose income due to the falling housing market:
When a property is repossessed by the bank, does the bank then pay property taxes on that property?
Or has the banking industry, with the more than willing help of its slavish servants in the US Congress, managed to get a law(s) passed that exempt banks from paying those taxes?
It's pretty amazing though considering how much credit card debt people have in this country when they were presented with a loan to good to be true yet it was they took it. I'm not saying all those people are at fault they aren't but it's like all the junk mail offering them everything under the sun and to just sign here. Totally messed up the amount of people who lost homes and in debt now.