Comments with regard to the Congressional Oversight Panel hearing Dec. 16, 2010, with Treasury Secretary Timothy Geithner:
Mr. Geithner disingenuously blamed the American public for borrowing too much credit without acknowledging that homeowners relied upon (albeit inflated) appraisals and lenders telling them they could continue to refinance and pull out their investment gains. Originating lenders treated homeowners like stock market investors. Lenders lied about the value of the homes, the fact that refinancing would be available, and that investing in a home was better than renting. Lenders received enough documentation to determine the borrower’s ability to maintain the investment — they just didn’t pass it along to Wall Street investors… because Wall Street didn’t want it. The defective financial product that Wall Street designed was not made, intended or conducive to long-term lending.
There was a complete disconnect between the borrower (who was the original customer) and Wall Street who took the borrower’s collateral and used it to bait investors. This is what makes MBS a Ponzi scheme — there was no fiduciary duty to the borrower beyond the originator. If you can figure how and when these mortgages got loose from the trusts in order to foreclose; if you follow the paperwork — you’ll see that the scheme is magnified. Spinning off the loans from the trusts and foreclosing is actually denying the investors the opportunity to recover their investment — and it is depleting the assets within the Trusts without authorization. Just ask the IndyMac Class Action lawsuit Investors if they know that loans from the trusts in which they had invested were being, disposed of, foreclosed and/or sold off to Fannie & Freddie?? The investors may never see a dime — if they do it will be substantially less than if they negotiated the loans directly with the homeowners.
Overall, Mr. Geithner suggested the homeowners were irresponsible — when in fact the homeowners were seduced and duped — much like tobacco did to smokers. To be that ignorant of the facts of fraud upon the public by Wall Street is a disastrous thought process for an individual in such position of financial control as Geithner.