Economic Scam of the Century: Bipartisan Senate Bill Would Make Taxpayers Pay for 90% of Same Kind of Banker Ripoffs that Crashed the Economy in 2008

CodePink protests against banker ripoffs Manhattan, New York - Sept 17, 2012.
(Photo by Paul Stein)

By Mike Whitney
The leaders of the U.S. Senate Banking Committee, Sen. Tim Johnson (D., S.D.) and Sen. Mike Crapo (R., Idaho), released a draft bill on Sunday that would provide explicit government guarantees on mortgage-backed securities (MBS) generated by privately-owned banks and financial institutions.

The gigantic giveaway to Wall Street would put US taxpayers on the hook for 90 percent of the losses on toxic MBS the likes of which crashed the financial system in 2008 plunging the economy into the deepest slump since the Great Depression.

Proponents of the bill say that new rules by the Consumer Financial Protection Bureau (CFPB) –which set standards for a “qualified mortgage” (QM)– assure that borrowers will be able to repay their loans thus reducing the chances of a similar meltdown in the future. However, those QE rules were largely shaped by lobbyists and attorneys from the banking industry who eviscerated strict underwriting requirements– like high FICO scores and 20 percent down payments– in order to lend freely to borrowers who may be less able to repay their loans. Additionally, a particularly lethal clause has been inserted into the bill that would provide blanket coverage for all MBS (whether they met the CFPB’s QE standard or not) in the event of another financial crisis...

In other words, if the bill passes, US taxpayers will be responsible for any and all bailouts deemed necessary by the regulators mentioned above. And, since all of those regulators are in Wall Street’s hip-pocket, there’s no question what they’ll do when the time comes. They’ll bailout they’re fatcat buddies and dump the losses on John Q. Public.

If you can’t believe what you are reading or if you think that the system is so thoroughly corrupt it can’t be fixed; you’re not alone. This latest outrage just confirms that the Congress, the executive and all the chief regulators are mere marionettes performing whatever task is asked of them by their Wall Street paymasters.

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