It’s not a Bubble, It’s a Pyramid Scheme

  • Bailing out financial institutions, homebuilders, and homeowners with taxpayer guarantees
  • Exchanging liquid treasury paper for unmarketable mortgage debt
  • Witholding information about the unmarketable debt from taxpayers
  • Forcing taxpayers to pay for losses on the unmarketable debt
  • Failing to hold accountable those who committed fraud

While most taxpayers lived within their means, a small minority managed to put the US financial system into a perpetual state of near meltdown. Just about everyone knew years ago that the real estate market was in its biggest bubble in history and that anyone with a pulse could purchase a home. Unfortunately, a minority took advantage of the lax credit standards to such an extent that it forced the Federal Reserve to recently bail out the creditors of private investment bank Bear Stearns (BSC). This minority included borrowers who applied for loans they knew they could not afford, lenders who approved loans to borrowers they knew could not afford, credit rating agencies who conferred AAA ratings based upon incomplete or nonexistent information about borrowers and investment banks that sold pools of mortgages as securities assigned the bogus AAA ratings.

They were all milking the system through ignorance, greed and fraud, and without consideration to the US credit standing in the world. Unfortunately for this self-serving minority, the bankruptcies of two leveraged BSC hedge funds last August ruined their party. These bankruptcies signaled that this modern day Ponzi scheme, known euphemistically to the main stream media as a credit bubble, was over and as home values collapsed the de-leveraging was about to begin in earnest.

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