Private investigators, lawyers and whores (sorry for the redundancy) will all tell you, “When in doubt, follow the money.”

Let’s give that a shot with regard to the current banking mess, shall we?

We’ll walk through the whole process step-by-step — but, hold on, you might get a little dizzy…

Step One: The Federal government decided everyone was entitled to a house regardless of whether they could afford it and drafted a bunch of laws and regulations, such as the Community Reinvestment Act, that forced banks to lend to less-than-creditworthy customers.

Step Two: The banks, knowing that this was a recipe for failure, agreed to lend to anyone and everyone who showed up on their doorstep. However, the banks wanted the Government to guarantee that the banks wouldn’t lose money (either their own or that of their depositors whose savings were going to finance these dubious loans) and requested that the Government guarantee any housing loans they made.

Step Three: “As it turns out,” said the Government, “we have these two friends, Fannie Mae and Freddie Mac, who will guarantee any crazy-ass loan you can come up with.”

“How do we know they’ll be good for the money when the time comes?” asked the bankers.

“Because,” said the government, “they’re reeeallly good friends of ours. Why it’s almost like you’d be lending to the Government, if you know what I mean.” **wink, wink; nudge, nudge**

Step Four: Thereupon, bankers being bankers, figured out if there was no downside and only upside to making loans, the only sensible thing to do was to make as many loans as possible.

It was like the circus — it was someone else’s job to clean up after the elephants.

Step Five: At some point, some of the citizens who had attended the circus wondered if, oh.. just theoretically, there wasn’t more crap than anyone — even the government — could clean up.

At which point the government responded, “Hey! Where’d all this crap come from?”

Step Six: “See, this is the problem with the free market,” said the Government — all the while standing on top of over 36,000 pages of regulations so they might better survey the carnage they had wrought.

Step Seven: Banks, sensing a disturbance in the Force, decided to rein in lending until they could figure out what the Government was up to. And until they could get their balance sheets repaired to the point where they could lend.

Step Eight: Meanwhile, depositors who had their life savings in the banks were starting to get nervous. No problem, everyone said, the FDIC is there to insure your savings.

Step Nine: “Um, excuse me…” said the FDIC clearing its throat, “There’s just one little problem … we have enough money to cover, oh … about half a bank.”

“But now, since things are so bad, we have to raise fees to the bank and institute an emergency charge. Of course, we realize that this will hurt the financial status of banks making them more likely to fail and less likely to lend — but, at that point, we’ll probably just look at raising our fees again and dunning you for more money you don’t have.”

Step Ten: Somewhere in this process, the politicians stirred and said, “Is there a problem here?”

“Yes!” shouted the banks, stock analysts, companies, employees, and anyone who hadn’t taken a recent traumatic blow to the head, all in unison.

“We just need to get everyone’s confidence bucked up a bit,” said the politicians. “But we really can’t afford to have companies and banks going out of business. People without jobs and savings tend, according to everything we’ve read, be less confident than people who are solvent and still employed.”

“Hmmm,” the Congress and the Executive Branch wondered, “What can we do about this whole situation?”

And then it hit them like the fist of an avenging god …

“Let’s start back at Step One!”

And that, children, is how we’re going to grow our way out of the current burgeoning depression …

Epilogue:
It should be noted that some of the children questioned the wisdom of doing more of what got everyone in trouble in the first place, but the wise men in Washington merely laughed and said, “You’re so young, you just don’t understand.”

And went back to feeding at what they truly believed was a bottomless trough.

– THE END —

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Rap on, brother, rap on…

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Post from: EveryJoe

Ball Of Confusion