The NINJNA Effect

 

 

"Barney Frank and Chris Dodd may not be totally responsible for the financial fire of 2008, but they are the ones who lit the first match"

Do you ever get the feeling while sitting through a movie, you have seen it before? Is it that déjà vu thing? It is really tough when the movie is bad and has a terrible ending. You really don't want to sit through it one more time. Only this time it is not a movie, but our economy.

Well today, two of the worst actors in recent political history are gone, but not forgotten. However, the memories of what they did to our economy seems to be either fading or changing. Allow me to help refresh some memories with facts, not fiction. For the purpose of this narrative, I will focus mostly on Barney Frank.

The flamboyant former representative of MA, who was the Chair of the House Banking Committee, loved to wield (and abuse) his power with the banks. One of his "pet rocks" was expanding the Democratic voting base by getting more poor people into houses. A noble venture - however, a fool hardy one to boot if the poor people had no prayer of making the payments. To get poor people into houses, three critical things needed to be waived - a job, a qualifying income, some tangible assets. These are items the rest of us need on our life's "balance sheet" in order to buy a house.

Barney was able to convince (really strong arm) banks they should offer mortgage loans to poor people who do not have the qualifying criteria to buy a house. These loans became known as NINJNA (No Income, No Job, No Asset) loans. The banks, knowing these loans were highly risky, bundled them, sold them and traded them. Fannie and Freddie became involved. Soon they became known as toxic assets, as nobody wanted them. They were a part of a game of financial "hot potato" that large financial institutions became involved in. Many hands were dirty on this one - Frank, Dodd, Clinton, Bush, Fannie, Freddie, the large banks, and yes, us for not paying attention.

As shameful as this was, and how very close we all came to going over the cliff in 2008, the frosting on the cake came in the aftermath. The guys who lit the match that started the fire, managed to convince many not paying attention it was all the banks fault. Then under the first two years of the Obama Administration, when the Democrats owned the town, Dodd Frank was signed into law. The arsonists who started the fire where now masquerading as fire fighters.

Now we are set for a repeat of this mess all over again. The Obama Administration wants to relax lending criteria on poor folks so more can own a home. The problem is now as it was before 2008 - we are setting people up to fail if they can't make the payments. If the loans go "bust" someone will need to "own the paper". Bottom line - another round of toxic assets will be in the pipeline, and the game of "hot potato" will begin again. Dodd Frank, which was suppose to keep this from happening, will do nothing except over regulate the innocent.

My advice folks, is read between the lines this time. That advice is as much for me as anyone else. I too, got caught napping in 2008. This time I won't be such a push over. When I see the landscape start to look like it did prior to the crash, I will sound the trumpet. Please consider this the first toot on the horn...