I don't often agree with John Carney. I believe that the
community reinvestment act had less to do with the housing bubble than
the repeal of Glass-Steagall, for example. A few subprime borrowers were
nothing compared to banks being able to write swaps "insurance" on bad
loans, then hide them with the blessing of Basel 2 off balance.
But Carney has hit the nail on the head in a recent article
published on the CNBC webpage. Carney is warning us of the perpetual
requirement that Basel 3 plans to impose upon the US taxpayer. I have tried to explain the article on my blog, but I wanted to explore it for the benefit of Seeking Alpha as well.
Carney would likely say that we never needed government loan guarantees
for the GSEs. He would likely say that we don't ever need the GSEs. I
personally think that the government should hold the choice about the
matter. In other words, the government should determine when to allow a
loan guarantee and when not to. There are times when these loan
guarantees are needed. But to prevent against moral hazard, the
government has to have the power to at least threaten to pull the
guarantees.
However, I am in agreement with Carney that Basel 3
wants to bake in the loan guarantees and make them permanent. The way
that they would do this would be to allow the big TBTF banks to buy
massive amounts of GSE securities, and place them as part of the
mandatory tier 2 capital. Once the banks were in this position, congress
and the taxpayer would no longer have the choice to overturn the
guarantees. Once the mortgage bonds were a part of tier two capital, any
effort to overturn the guarantees would result in an immediate bank
crisis.
So this brings us to the Tea Party. The Tea Party was formed in Chicago and St Louis on February 22, 2010 in tandem with the February 18 rant by Rick Santelli on CNBC. Santelli ranted, as most of you know, against the borrowers and made it clear that he believed they were losers. The Tea Party picked up on that and sought to continue the "return to values" of responsible borrowing and responsible payback of loans. I have argued that the international bankers both devised and carried out the ponzi housing bubble and crash.
But one wonders if the Tea Party has been duped. We know that the Tea Party supported the banks, rather than the borrowers. The leadership of the movement wanted no regulation for the banks. Rather, the Tea Party blamed government socialism. But with the proof that I have laid out here, clearly, the banks are wanting to be in charge. While the Tea Party divides Main Street, the bankers laugh and proceed with their plans to create foolproof ways to control sovereign nations through Basel 3.
The Tea Party is playing into the hands of these international bankers. They are, unless something changes, supporting Taxation without Representation, which is at the root of this Basel 3 push. The Tea Party wants to cut Main Street spending which plays into the hands of the IMF and the international bankers. And one wonders if they realize that taxpayers will be on the hook for bailouts that they cannot ever reject, as Basel 3 intends to make the international financial system, as a whole, too big to ever fail.
Disclosure: no positions
- Company: Foreclosuregate Resources
- Blog: Political Economics Blog By Gary A