During strong economic times, government kept growing because it needed to provide more services to a rapidly changing world and rapidly growing communities. More police officers were hired to "protect" the community and collect revenue, and more social welfare programs were created to buy votes.

Now that the real estate boom has turned into a catastrophe of historic proportions, government needs to keep growing to meet the demands of a rapidly changing world and growing poverty. More police offers are hired to "protect" dangerous foreclosed neighborhoods, and more social welfare programs are created to buy votes.

The people in the middle who suffer the most are the working people in these communities who are still attempting to hold a job and pay their mortgages. These homeowners are seeing property taxes increase at a time when property values are falling by the day.

In fact, CNN is reporting today that home prices have fallen by 27% from their peak, but municipal tax collection has grown by 12% from 2006 to 2008. With fewer homeowners and rising civil unrest, governments across the nation have taken the exact wrong approach by preying on the men and women who are still working and paying their bills..

It seems that the culture of bailout has extended far beyond Wall Street and Washington, DC, as homeowners in all areas of the country are being stolen from in order to pay off anyone with a political connection. The billion dollar bailouts make the news, but many more companies and individuals have profited from government handouts.

The only jobs that have been created by the president's stimulus plan have been government jobs, all of which need to be funded through additional tax revenue or borrowing. These government jobs, furthermore, have done little else than take resources from the private sector and dump them into giant black holes of public works.

Driving through a large metropolitan area over the weekend, it seemed that there was highway or road construction every few miles, all of which had huge administration recovery plan signs littering the landscape. Some of these roads had been repaired and redone just a few years ago, but are now being repaired again. Some roads were not damaged in the first place.

Is everything the government does just for show? To provide an appearance that, without the central planners, we would all be crawling around in the dirt eating worms and working in caves digging rocks for $1 a day?

But this is not the case, and all of the money being taxed, borrowed, or printed into existence to allow the government to keep growing at the expense of communities will not solve the foreclosure crisis or the broader recession. All we are getting is a show of resources, a few more unnecessary government jobs, and higher property tax rates.

With the rise in the foreclosure rate over the past few years, it seems that many lawyers have gone into the foreclosure assistance business. Even in states like California, where loan mitigation companies are no longer allowed to charge an up-front fee from borrowers, attorneys can still charge a multiple-thousand dollar retainer fee before any work is done for a homeowner. This makes the foreclosure business very lucrative, and very attractive for the corrupt.

Also, what happened to all of the lawyers providing mortgage services during the boom for lenders, title companies, and home buyers? Many states require that borrowers and sellers both have an attorney at closing to represent them. With the falloff in new closings and refinances, these attorneys may have decided to enter the other side of the business -- helping homeowners escape the predatory loans the lawyers should have warned about in the first place.

Many homeowners were given loans that were either misrepresented to them or were simply not explained at all. Too many lawyers hired to make sure the borrowers understood the terms of the contracts did very little other than collect several hundred dollars at the closing table. The law requiring legal counsel before a real estate closing had more to do with injecting unnecessary legal fees into the housing market than creating educated borrowers.

Some of the complaints against these lawyers now providing loan modification services are the same ones homeowners routinely file against loss mitigation companies. Some of the complaints involve no service being provided, up-front fees that are collected but no work is done, no refunds even though no work is done, instructing homeowners to stop contacting their lenders, even attempting to transfer money directly out of a borrower's bank account.

This indicates that some lawyers have entered the loan modification business essentially just to steal money from desperate homeowners. Too many companies or law firms take payments from borrowers and then never provide any work -- it is one of the most common foreclosure scams around, and one that homeowners keep becoming victims of as they try to save their homes.

But none of this really explains the shocking rise in complaints against attorneys offering foreclosure help. From nine in 2008 to close to 400 in the first seven months of 2009, it seems that more factors than just legal industry corruption are involved. Or, have attorneys in large numbers made the move from other less lucrative practices into the foreclosure business, where they can prey off the huge numbers of people struggling to keep their properties?

The banks, during the real estate bubble, knew that money was just pouring into their vaults with artificially low interest rates and low or zero reserve requirements. So they handed out newly created money like it was going out of style. Once everyone who wanted a mortgage and was qualified got a loan, then it was time to start giving credit to people who wanted loans but were not qualified for them.

Once the bubble collapsed, the bank's moral bankruptcy was exposed in the subprime fiasco and the pumping of the real estate market. Prices came crashing down and are still declining, while more banks go out of business every week. But with the failure of the banking system and exposure of the corruption in financial markets, the government was "forced" to step in and start abusing the money themselves.

So far, over $23 trillion has been set aside or directly pumped into the system in order to stimulate the economy. The government has bailed out all of their friends and helped prevent any banker from having to go without his or her bonus last year or this year. Average Americans have had their tax dollars taken from them during a recession in order to "save the economy" by a simple transfer of wealth from poor to rich.

But instead of saving the economy, the government has only encouraged more moral hazard. Banks have been handed hundreds of billions of dollars and have done little or nothing to help stop the bleeding in the real estate markets. Of course, there is nothing they can do anyway, but they also should not have been given these enormous sums of money when it was always clear the money could not solve the problem.

Homeowners facing foreclosure have simply been walking away from their homes. Instead of taking advantage of the government's loan modification programs which would not save their homes anyway, many have decided just to cut their losses, abandon the property, and let the banks foreclose on them. The houses are not worth anywhere near what they were originally purchased for, so walking away makes more economic sense.

However, in a country where taking out debt was a serious matter, and paying it back even more important, this trend of walking away may be significant. The government, through its bailouts of its crony banksters, has encouraged a culture where people who make poor financial decisions are rewarded at best, and only ignored at worst. Can an economy ever recover while such activities are being rewarded by government?

The lenders, of course, will just ignore these laws as they have all of the other regulations on the books. If they do not just ignore them, they will rely on the incomprehensibility of the laws to confuse loan applicants and keep them in a perpetual state of confusion about the lending process. Instead of dealing with borrowers on a rational level, these new laws will make the lending process even more difficult.

For instance, one of the most common calls to fix the crisis is to have more disclosure, as if the book-length package of disclosures homeowners receive when buying or refinancing is not enough paperwork. But new amendments to the Real Estate Settlement Procedures Act will allow third-party payments not to be disclosed at their actual cost. Instead, they may be disclosed at an average price. So much for transparency.

However, some of the new regulations allow for more statutory and other damages to be awarded to homeowners if lenders violate certain acts, as well as broadens the range of certain regulations. The Truth in Lending Act now applies to private student loans over $25,000. Previously, there was a TILA exemption to private student loans over $25,000. Student loans guaranteed by the federal government, however, are still exempt.

In terms of statutory damage issues relating to mortgage transactions, the Mortgage Disclosure Improvement Act amends the law to require more timely disclosures to borrowers. As of July 30, 2009, lenders must give good faith estimates of certain costs to borrowers within three business days of receiving a loan application. If disclosures are not made, courts may find the new laws will make it easier to grant statutory damages.

New laws are also in place relating to the loan servicing industry, which has always been plagued by crooked profit incentives that make it worthwhile to push homeowners into foreclosure. After October 1, 2009, servicers are prohibited from engaging in the following abuse tactics against borrowers:

• Failing to respond to payoff requests within a reasonable amount of time
• Pyramiding of late fees
• Failing to credit payments as of the date they are received

There are simply so many new laws coming into effect in the next year and a half that it is almost impossible to keep up. Homeowners facing foreclosure or attempting to apply for new credit lines will find even more burdens and higher costs, if they are able to qualify at all. And lenders will be passing along their higher costs of compliance to borrowers. Will any of these new laws change how banks operate? Probably not.

There has never been a shortage of regulations to put the brakes on bad lending or abuse practices by creditors. But the main problem has been the implicit guarantees that the federal government has given to companies that get huge by preying on people. With companies being bailed out as a result of failure, it makes economic sense to violate or ignore laws, and the new regulations do not change this.

The result of this was that lending standards virtually disappeared during the real estate boom of the early twenty-first century. With the Federal Reserve pushing interest rates to artificially low levels through massive amounts of inflation, all that cheap money had to go somewhere. And it went into the housing market through the mechanisms of subprime loans, inflated property values, and unfair lending practices.

The decade of the 1970s witnessed the beginnings of the push towards mortgage securitization, as lenders moved away from the practice originating and holding loans. Instead, mortgage companies would originate and immediately turn around and sell the loans. In this way, they could quickly generate more money for additional loans, while investors had residential real estate loans to provide monthly income.

However, the main profit source for loan origination companies also shifted with the advent of securitization. Banks had been in the practice of deriving profits through taking in money and lending it out at higher rates of interest than what they paid to get deposits. With mortgages being securitized in higher numbers, though, interest income was replaced with fee income.

Origination companies received their profits from the creation of these loans and the packaging and selling of them to other companies and investors. The investors in the mortgage securities, on the other hand, now received the interest income from the loans. Thus, the banks making the loans had little incentive to ensure the loans were good for the long term once the loans were made and they received their fees.

The practice of securitizing mortgages, though, also created incentives for banks to make loans that could never be paid back. Once the pool of credit-worthy customers had been exhausted, there was left a large number of people without stable income or good credit. But with all of the cheap money flooding into the housing market from the Federal Reserve, the subprime market was vastly expanded.

Homeowners and banks both share part of the blame in fueling the housing market bubble, but all that money came straight from the inflation caused by artificially low interest rates. Securitization allowed banks to hide the risk of the bad loans for a number of years as real estate prices kept rising. For a few years, it worked, but the flood of money began to slow down and property values stopped rising.

Once property values stopped rising and actually began falling, the entire subprime mortgage market collapsed under its own weight. Hundreds of lenders went out of business, Wall Street transformed from predatory investment banks into bankrupt bailed out institutions preying on the economy at large, and the securities created during the boom all began to smell very toxic.

The government, though, quickly stepped in to make the investment banks as whole as possible, by forcing other companies to take them over, providing inflation-created incentives, or simply handing over tens of billions of dollars to banks and financial companies. This was just the latest and largest in a long line of federal bailouts of the financial industry, but all of the investment banks relied on the federal backstop against failure.

Without the transference of risk to the rest of the world and the reliance on the federal government for artificially low interest rates and a guarantee against failure, the subprime market and housing bubble could not have reached the heights they did. But all of these factors created huge non-market incentives for unfair lending and borrowing, with the economy in general now suffering the fallout.

The Obama administration is doing what it can with the problem it inherited in many ways. On top of the skyrocketing number of loans in or going into default, the credit markets are essentially broken, with credit becoming almost impossible to access, even for the most credit-worthy borrowers. No one knows who is to blame for the current state of the market, but it is clear that conditions are bad for both lender and borrower, and is especially difficult on the homeowner who sees that future mortgage payments will be too high to manage, but cannot refinance or sell their property in time for a price that will get them out of the situation.

As long as Americans dream of home ownership, foreclosures will be soon to follow. While credit was easy to access 5 and 10 years ago, that well has dried up, and the market is correcting in a very severe manner affecting even those with good credit that had little to do with the current housing crisis. Property values have ceased to increase, and many are lucky to sell for a price they paid as long as 5 years ago. The bottom line is that foreclosure and borrower default is a part of home buying. The luckiest people who can pay for a property still have to worry about defaulting on tax bills, association fees and construction liens. It is an issue that goes hand in hand with real estate investing, just as potential gains and losses are part of investing in stocks or commodities.

However, never before has our federal reserve and banking system been flooded with so many defaults at once. Many banks are desperately trying to sell off those toxic assets to clean up their balance sheets, but are finding that the market for these products is so low that the bank could risk going under if they were to realize these massive losses in home value. There are many investors and bottom-feeding real estate investors who are interested in purchasing the properties at 50 cents on the dollar or less, but most banks are being given quite a bit of lead-way by the federal government, and many think have not been forced to feel the pain of the market as others have. This reluctance to accept where the market will be for these assets is part of the problem, and as long as banks sit on the properties as REO’s the slower the nation’s housing recovery time will be.

If you are in foreclosure or feel that your upcoming payments are going to be too difficult to manage, consult with a loan modification company as soon as possible, or contact your lender and see what options are available. It is better to find out sooner rather than later so that you are prepared for what is to come. You can still find time to stay in your property, and if you have missed payments, your lender may be able to provide time with which to work with you to get back on track.

This situation causes an obvious public safety hazard, but the rising number of foreclosures has also meant that property tax revenue to local governments have been declining. So if there is a leaky roof, standing water in the pool, a gas leak, or vagabonds living in the house, it is up to the neighbors to take care of the problem. Local police and city street departments may will get to the house when they get to it, maybe.

As both private individuals and state governments get desperate for the funds they need to survive at their current living standards, they will turn more often to theft and violence. While private citizens may squat in a house or turn to dealing drugs or robbing homes, governments will raise income taxes, fees, fines, and increase the number of tickets that local cops hand out to drivers.

Because of the foreclosure crisis and the rising unemployment rate, cities and suburbs are becoming more dangerous by the day. And the rising crime and large number of empty homes will just drag property values down even further, causing more properties to be abandoned and tax revenues to fall even more. The situation seems to be going from bad to worse, despite all the overly optimistic talk of green shoots.

The core problem for the states and people, it seems, is a lack of money. And the news about the American dollar has been even stranger in recent weeks than anything I have ever read. Take, for example, the two Japanese men arrested in Italy carrying $134 billion of American Treasury bonds. The bonds have been declared to be "likely fake" and the two men have been released without being charged with a crime.

So it is clear that smuggling hundreds of billions of dollars of maybe fake American bonds into foreign countries is not a crime? Is this really how we treat our money and government debt in this country? People can not really counterfeit hundreds of billions of dollars and then deposit it in a bank account in Switzerland, can they? No wonder fewer people than ever trust the value of the dollar.

Governments and the people, though, are still scrambling around to try to obtain as many dollars as possible, because enough people still accept them to make them worth trading for. Yet, the fact that anyone counterfeited hundreds of billions of dollars, was caught, and then got away with the crime anyway just shows me how little even our government cares for the value of the money they print for us to use.

I have an idea. Maybe all of the states facing budget deficits can just print a few ten or hundred billion dollars out of thin air. And private citizens would be able to do the same. We can all print as much money as we need from our home computers without ever having to work again. But of course, this would be illegal most of the time, as the federal government claims a monopoly on printing phantom money out of nothing.

Trust in the institutions of this country are being eroded further every day. People are ending up homeless, jobless, and holding onto money that is losing value and being treated like toilet paper by our government and the rest of the world. Is it any wonder more are turning to black market housing, black market jobs, and moving their little remaining wealth out of the government and stock market that just finished impoverishing them?

Since the banking meltdown began in the summer of 2007, there have been dozens of attempts by the politicians and bureaucrats to discourage bad lending, encourage lending to the poor, provide incentives to investors, reduce CEO pay, making housing affordable, prop up housing prices, divert money from private employment to new government jobs, and so on. Have these dozens of regulations helped yet?

One of the first programs was the Hope Now Alliance, developed to help banks, the government, and homeowners work together to modify mortgages that were in danger of foreclosure. The program was voluntary for the banks to participate in and more borrowers ended up with expensive repayment plans than actual loan modifications. But even the modifications have a 60-75% redefault rate.

To help financial institutions that had created securities out of mortgages but had no buyers, regulators proposed a Super Conduit to funnel investor money into these worthless securities. At the time, the government thought the problem was frozen markets -- in reality, the freezing markets were only a symptom of the problem that no one trusted or wanted these bad loans any longer. There were no buyers for the super conduit.

In April of 2008, the government decided to provide insurance for $300 billion in new refinance loans, along with giving $15 billion in handouts to the state governments. The refinance insurance was designed to assist close to 500,000 borrowers, although it does not seem to have made much of a dent in the foreclosure rates for the country as a whole.

A few months after this, in July, the Federal Reserve came out with some of its most obviously unnecessary regulations. It finalized new rules requiring mortgage lenders to verify borrowers' incomes and their ability to pay back mortgages that were made. In all honesty, any bank not doing this deserved to go out of business, but apparently the Fed had to waste time and resources to tell the banking system not to kill itself.

In December of 2008, President Bush announced a the new FHA Secure program, another voluntary plan which encouraged banks to lose money and recognize losses on their balance sheets. The plan was to freeze interest rates on mortgages, although this was after many rates had already reset to higher monthly payments.

By now, everyone knows the fate of the Hope for Homeowners program, which was another brilliant idea to save homes from foreclosure. After being given over $300 billion, the end result has been one family facing foreclosure has received a new loan. The remaining applicants did not qualify for government help or their banks would not participate in the voluntary plan.

And months after President Obama's economic stimulus plan was passed, unemployment in almost every sector of the private economy is increasing. The only real job gains (besides the figures the government just makes up) have come from the government hiring people. Unfortunately, though, this is just another drag on the economy as the state produces nothing of value in the market.

The one regulation that props up all the bank failures and encourages mindless lending decisions is the FDIC insurance on bank deposits. The entire regulatory structure of banking encourages the financial institutions to take excessive risks with depositors' money, knowing that the government will step in and bail everyone out in case of disaster. This is the regulation fueling the fraud and it has been increased.

But now, the regulators in Washington who set the economy up to fail, did not recognize the severe problems in giving loans to the destitute, and denied the collapse as it was happening, are now going to give us a new regulatory structure. How these people were ever believed when they proclaimed themselves the experts and saviors of the economy is completely unbelievable.

During the housing boom, California was the heart of the mortgage industry and especially the subprime mortgage sector. Lenders in the state pumped housing markets all over the country full of cash, but the people of California themselves received the most money from the growing mortgage industry. With cheap money pouring in from Wall Street investment firms to these lenders, the only consequence could have been a bubble.

As real estate values increased by 10%, 20%, 50%, or more every year, everyone became a speculator. Instead of having a job and saving up for a house, Americans could buy a house so that they could avoid having a job. All they had to do was wait for the next greatest food to purchase their home for an even more ridiculous price. And for a number of years, this tactic worked and people made money hand over fist.

But, most important for government, higher real estate values also translated into higher property tax rates. As a result, local and state governments in California grew beyond all reasonable bounds. More services were offered, entitlement programs created, and bureaucrats hired and paid enormous salaries and pensions for living parasitically off of the citizens of the state. All this was funded through cheap Federal Reserve and Wall Street money.

But all bubbles must come to an end, and the real estate bubble in California and across the country was no different. The bubble burst in a mess of rising foreclosures, declining home prices, and continuing job losses. The state has reacted to this by trying to keep up its bloated size, and property taxes have fallen little, if any. This makes it more expensive to purchase a home in California, and has caused further declines in home values. But the state refuses to shrink, even in an economic collapse.

And due to the recession, which has hit Californians especially hard in terms of property value declines and job losses, no one wants higher taxes just to maintain expensive government salaries and entitlement programs. As more people apply for public aid, fewer people are available to fund these programs and do not have enough money themselves. As a result, the more government tries to save people, the more people it pushes out of employment and onto the streets.

So, as a result of a government grown enormous and a population unable to afford the price any longer, the state of California in danger of running out of money nearly every month. The budget shortfall (not the budget itself) is in the tens of billions of dollars. In addition, the state seems unwilling to balance its books and live more frugally, as millions of people across the nation are being forced to do by economic circumstances.

These guidelines, part of President Obama's plan to save the economy from the foreclosure crisis, reward mortgage servicing companies with thousands of dollars of taxpayer money for offering loan modifications that will almost certainly redefault. The following is from the Treasury Department's press release (PDF):

Servicers will receive an up-front Servicer Incentive Payment of $1,000 for each eligible modification meeting guidelines established under the initiative. Servicers will also receive Pay for Success payments -- as long as the borrower stays in the program -- of up to $1,000 each year for up to three years.

The up-front payment is the real issue here, as it allows mortgage servicers to offer loan modifications to almost any borrower, regardless of their long term ability to pay back the loan or not. As long as the modification meets the terms of the program reducing the mortgage payment to 38% of the borrowers' gross monthly income, the banks will get their $1,000 bonus for participating in the new program.

The payout deal is also being extended to the disastrous Hope for Homeowners refinance program. According to the press release, "Similar incentives will be paid for Hope for Homeowner refinances," despite the fact that the program should be shut down -- not extended with more taxpayer money being handed out to the banks by bureaucrats who have received over $300 billion and helped only one borrower.

Even more incentives are paid to mortgage holders and servicers that agree to modify a loan before it is in default:

One-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers will be provided for modifications made while a borrower is still current on mortgage payments. the servicer will be required to maintain records and documentation evidencing that the Trial Period payment arrangements were agreed to while the borrower was less than 30 days delinquent.

Thus, the servicing company and lender will receive up front payments from the taxpayers for modifying a mortgage that may be on the short road to default anyway. Looking at a borrowers' credit history or conversing with the owners soon after a default (but less than 30 days after a payment is missed), banks will have a fairly good idea of where the loan is going -- either paid back or foreclosed on.

People are losing their incomes in huge numbers and have little means or incentive to keep a house with negative equity. In response, the government has set up a program to give the lenders up front payments to modify mortgages in an attempt to keep people in these overvalued homes. But with a 75% redefault rate, it is clear that families are losing their homes anyway and the banks are being handed over even more money.

Many commentators, politicians, pseudo-economists, and other media proclaimed experts have pointed out only one (false) cause of the housing crisis – the lack of regulation on Wall Street, on subprime lenders, and others in the real estate industry. These same professionals who failed to foresee the collapse, though, can only recommend one solution – give more power to the government in the form of more regulations, more laws, and more bailout programs.

The following is a partial list of some of these laws and rules that were put into place specifically to regulate the financial or housing markets, as well as a large number enacted for other reasons but which have relevancy to the great housing market bubble:

• Community Reinvestment Act
• Department of Housing and Urban Development Act
• Equal Credit Opportunity Act
• Fair Credit Reporting Act
• Fair Debt Collection Practices Act
• Fair Housing Act
• Homeless Assistance Act
• Housing and Community Development Act
• Indian Housing Act
• National Housing Act
• Real Estate Settlement Procedures Act
• Truth In Lending Act
• Veterans' Disability Compensation and Housing Benefits Amendments

In fact, this is only a very small sampling of the Act of Congress that have been created to regulate the housing market, the financial industry, and mortgage lending in particular. And even banking acts and laws have been mostly kept out of the above short list, although they are designed to regulate the institutions that provide the most money for mortgages.

It is not lack of regulation of the housing market that caused the foreclosure rate to skyrocket and real estate prices around the country to plummet. The vast number of regulations on banks and lenders and mortgage brokers and appraisers and real estate agents and title companies were all supposed to prevent a crisis of the magnitude the country now faces from ever happening.

But it is not the regulations or laws or lack thereof that is the problem. The real problem is that banks and financial firms that want to take advantage of their clients face absolutely no consequences for fraudulent or predatory actions. This situation where banks own the government which rules over the rest of the people in the nation has come about through two main factors.

First, access to the courts for homeowners facing foreclosure has been severely restricted. In nonjudicial foreclosure states, homeowners do not even have the right to confront the bank and the charges against them – the lender is simply able to advertise a sheriff sale of a property, regardless of the borrowers' circumstances or if they have ever missed a payment. And it will cost them potentially thousands of dollars to file their own lawsuit against a bank to stop foreclosure, a price which many homeowners dealing with a financial hardship are unable to pay.

But even in states where homeowners must be sued in court by the lender, access is still severely restricted. Even discounting the prevalence of “rocket docket” jurisdictions holding 30 second foreclosure hearings and lawyers simply lying to judges in order to push through cases, all of the complicated procedural rules have been written to keep the average person from being able to comprehend how the court system works. And again, if the owners want a fair shot at defending their home, they most often have to hire an expensive lawyer of their own.

The banks, on the other hand, are easily able to afford high priced lawyers all over the country when pursuing foreclosure against customers. The banks and lawyers are the two groups which contribute the most to political campaigns, and it is no surprise that judges are often willing to overlook gross deficiencies in lawsuits against borrowers in order to proceed to auction and eviction more quickly.

Thus, the banks know that homeowners can not afford the protection of the thousands of pages of laws that are supposed to protect them. How will another few thousand pages of lending laws and regulations make sure a crisis in the housing market never happens again, if borrowers are still unable to understand the law on their own or afford to hire someone who does understand?

Second, the banks know that they will never face serious repercussions for their fraudulent lending auctions because they have been given bailout after bailout time after time for decades. Every time there is a slowdown in the economy, the Federal Reserve lowers interest rates and the politicians borrow or print more money out of thin air to “stimulate the economy.” In practice, this always means handing out more money to the banks to create even more debt out of thin air.

Thousands of laws have not discouraged predatory lenders from creating money out of nothing, pumping real estate markets full of cheap money, and then dumping the worthless investments made from these mortgages onto markets around the world. The most meaningful responses by government to these acts have been decreasing the time homeowners have to defend against foreclosure and stealing trillions of dollars from workers and consumers to hand over to banks.

At the federal, state, and local levels, banks and lawyers work together to create laws and enforce them upon the rest of the country, state, or community to enrich themselves, impoverish others, and keep their various frauds going as long as possible. Manipulating interest rates, engaging in fraudulent lending transactions, creating money out of thin air, and keeping borrowers from adequate legal representation are just a few of these deceptions.

Banks hire their lawyers and install them in legislatures at every level of government in order to control the "secret" language of contracts and property rights among the people. Local courts, which are made up of judges picked by lawyers who themselves were picked and funded by the banks, then typically interpret every law and contract in the banks' interests and avoid looking behind the curtain of fractional reserves and where banks actually get the money that they loan out.

As well, many lawyers, being so close to the other lawyers in state legislatures, pledge an oath to the state itself to become lawyers in the first place. By spending the requisite time taking state-approved university law courses and pledging loyalty to the state, they are then able to help private citizens defend their rights in state courts against bad laws written by more state lawyers.

In the end, laws are nothing more than opinions backed by guns, written by lawyers in confusing language specifically to keep the average person from understanding them. Typically, the government is seen as the chief lawmaker, issuing opinions, enforcing them by coercion, and imprisoning or killing people who do not comply with them. Government as an institution claims this monopoly over the use of force.

But with the current economic crisis, the real operators of the government's monopoly on obedience through force have been revealed as the banking industry. The banks bought their lawyers, installed them in legislatures, had laws and policies and regulations written in their favor, and then took full advantage of these opportunities to ruin the housing market.

As soon as the financial institutions began experiencing losses due to the bad loans they had made to homeowners, they essentially took the government hostage and demanded hundreds of billions of dollars as protection money for "systemic risk." Financial industry representatives at the Federal Reserve and Treasury Department were sent to Congress by the banks to blackmail them into various thefts of taxpayer money.

The lawyers in Congress, not wanting to let go of their second-largest campaign contributors, agreed to hand over hundreds of billions of dollars to the banks directly, and have allowed the Federal Reserve (not controlled by Congress at all) to fund several trillion dollars more of new programs designed to bail out the financial system. The American people have been sacrificed for the state lawyers and state bankers.

And the sacrifices continue. Every month that goes on with banks receiving more money and the government continuing to grow, unemployment will stay high and keep going up. Not having a job is the price people have to pay to keep the banks in charge of the government and the state lawyers retaining any legitimacy whatsoever. But the banks love the lawyers who they purchase to enforce their opinions and frauds through force, and the state lawyers love the ill-gotten gains the banks funnel back to them through campaign contributions.

This is the reason why homeowners facing foreclosure may either want to find someone with knowledge of the law but who is not owned by the banks, or simply do the work of saving their homes on their own. But simply hoping that the state courts will provide justice is a mistake. Too often, the "little guy" is forgotten about while the banks, state lawyers, and state judges determine how best to carve up the fraudulently stolen property.

A number of real estate and financial experts played a role in the pump and dump scheme that was perpetrated on the US housing market over the past decade. Homeowners should be aware of the role of these professionals in taking advantage of the artificial boom in real estate prices to impoverish borrowers.

Local real estate agents who arranged sales between buyers and sellers were usually the first contacts that families had with the housing market. Depending on the contacts the real estate agent may have recommended to home buyers, it could be very easy to inflate the value of a property or recommend a mortgage broker able to get fraudulent loans approved.

Mortgage brokers or loan originators for lending institutions were also able to take advantage of a willing buyer. Brokers would often encourage homeowners to take out a loan for as much money as they were approved for, instead of a reasonable amount they could pay back. With the loose lending standards during the boom, getting approved for a large loan was easy.

Appraisers played a role in the housing bubble by estimating values of properties on the high side and finding any excuse in the book to justify market appreciations of 20% per year or more. But even if they wanted to be honest, appraisers would often find themselves with very little business from local Realtors or mortgage brokers if they did not inflate values.

The mortgage lending institutions that funded these loans also helped inflate the housing bubble by looking for loans anywhere they could be found. Lending standards disappeared in the search for more mortgages to fund. Once the loans were made, they were packaged up and sold to the Wall Street firms that mortgage lenders borrowed the money from to fund the loans in the first place.

The Wall Street investment banks played an enormous role in the housing boom by providing the credit lines to subprime and other lenders to make mortgages. Once the mortgages were funded, Wall Street would buy the loans, package them, slice them up, and sell the various mortgage backed securities to investors around the world.

The investors played a role by purchasing these securities that everyone knew would go bad. Public, private, and international pension funds bought these securities believing they were safe. Hedge funds took on some of the greatest risk, using credit lines provided by Wall Street to purchase more mortgage securities on margin.

The media also helped to create the illusion that housing prices never fell and that the boom was a great time to get into the real estate market. Of course, none of this was true, but the news media ran with it anyway and too few homeowners questioned the wild claims made by pundits or market analysts.

The credit rating agencies, which get most of their money from the financial firms whose products they are supposed to be rating, simply assumed that mortgage securities were safe and gave them the highest ratings possible. This made it much easier for Wall Street to sell the toxic assets around the world; after all, they were AAA rated.

This does not even take into account the government politicians and regulators who encouraged bad lending policies. As well, the Federal Reserve set the entire market up for malinvestment through artificially low interest rates during the years after the 2000 dot-com bust and the 2001 mini-recession.

The bubble in the housing market turned everyone into amateur speculators and allowed homeowners to believe in a fairy tale of perpetually rising real estate prices. Now that it has collapsed, the result has been rampant foreclosures, the erosion of trust in government and the financial industry, and the worst recession the country and world have seen in decades.

With home builders having constructed far more properties than could ever have been sold, real homelessness does not have to be an option for foreclosed homeowners or laid-off workers. Instead, they can often just move into an empty property and take further advantage of the boom in real estate building.

Rents and selling prices in many areas of the country will still need to come down to reflect a return to more reasonable real estate values. But banks, which were too willing to lend 100% of the value of an inflated property, are now reluctant to acknowledge their mistakes and allow homeowners to sell for less than the total amount owed on the mortgage.

Banks' unwillingness to allow short sales is forcing selling prices higher than the market value of properties, especially properties in distress. In some areas of the country, a large number of homes are selling for $300,000 to $1 million, but rentals are available for $600 to $1,200. Landlords must be losing significant amounts of money every month.

Lenders are also reluctant to help homeowners stay in their houses by modifying mortgages or offering other realistic solutions to help avoid foreclosure. This makes it almost inevitable that borrowers will have to sell, but then they run into the problem of getting a short sale approved by their mortgage company.

So real estate prices are still too high compared to the rents that properties are generating, and foreclosure rates are higher than they would otherwise be if banks voluntarily worked with homeowners. In a freer market than we have now, banks would have an incentive to work with homeowners to stop foreclosure if there was a realistic expectation of having the loan paid back in time.

For example, banks charging 6% interest on a mortgage may lower the rate temporarily to 4% or less to assist homeowners who demonstrate a long-term ability to keep their loan current. While this may be a temporary loss to the lender, it will not be a total loss, as is the case with many foreclosures. And this agreement could be worked out between the owners and bank voluntarily, which foreclosure as the last resort.

But right now, banks have every incentive not to dedicate extra resources to helping borrowers. Instead, they can let homes go into foreclosure and try to keep real estate prices artificially high. When this plan fails and they are forced to recognize total losses on loans, they simply blackmail or threaten legislators into handing over billions of dollars to paper over losses.

This keeps foreclosure rates high and pushes homeowners out of properties, all the while forcing them to contribute to the bailing out of the mortgage lenders. Obviously, the banks feel entitled to looting taxpayers for trillions of dollars and Congress and the Federal Reserve acquiesce to such demands time and time again.

Thus, who can blame foreclosure victims or the unemployed for feeling as if they are entitled to share in the bank's wealth (i.e., the taxpayers' wealth) and take over a bank-owned foreclosed properties? People are being forced to bail out financial institutions, so they force their own way into a piece of the bailouts by squatting and living rent free.

Either the bailouts need to stop for everyone, or everyone should get a free home. Over $10 trillion has been appropriated by Congress and the Fed for solving the financial crisis so far, which amounts to over $33,000 for every person in America. That should be enough to allow people to live mortgage and conscience free inside an empty house for a long time.

Squatting in an abandoned or foreclosed home is clearly wrong (at least morally, since legal determinations mean little these days), and not an activity anyone should engage in. But banks squatting in the American economy, threatening destruction of the entire financial system, and living parasitically off of the productive is wrong on an even bigger scale. Putting an end to the latter may put an end to the former.

It should be obvious by now to anyone paying attention that the markets are not in need of more liquidity. Through the initial $300 billion Troubled Assets Relief Program (TARP), the US Treasury invested in banks and bought special classes of preferred stock. In response, the banks receiving TARP money essentially stuffed it in the mattress.

The real problem is that the value of many of the assets that once backed up the debt securities held by these banks have fallen so dramatically. This was bound to happen when the banks started taking advantage of the Federal Reserve's artificially low interest rates to start giving loans to people who would never be able to pay them back.

Values were inflated by everyone involved in the real estate transaction and everyone went along with the myth. Borrowers wanted to get in on a bubble economy and were willing to finance 100% of the purchase price, knowing they could just sell in a year or two and make a huge profit.

Real estate agents knew that the value of the home and its sales price would determine their commission.

Mortgage brokers knew that their pay (through commissions, fees, yield spread interest) would be based on the loan amount.

Appraisers knew that if they failed to appraise a home for the maximum marginally-plausible amount, they would get no further business from banks or mortgage brokers.

Banks knew that the larger the mortgage, the more the debt security would be worth. And they also knew that, if the owners fell behind on their loan they could just refinance or sell and take their profits. And even if they did not sell, the bank could foreclose and sell it later on and take the profits of the inflating bubble for themselves.

When defaults began to rise and values started to fall, the dodgy debts became entirely worthless. People who can not pay a mortgage on a property with an inflated value can sell. People who can not pay a mortgage on a property that is underwater are forced into foreclosure unless they can work with their lender.

Values have fallen in real estate, but sellers can not list their properties for sale when the mortgage is 150% of the current market value of the home. If they want to try to sell to stop foreclosure at all, they need to sell for a high enough price to pay off the mortgage company. And no one is buying at those prices anymore.

They need a short sale to be approved by the bank in order to sell for a reasonable price. But the banks are notoriously difficult to work with negotiating for short sales. If they ever acknowledge receiving the offer at all, it is too often turned down.

Then, a few months later, the bank forecloses and lists the property on the market for even less than the original short sale offer. The homeowners were not allowed to sell for a higher price to avoid foreclosure than the banks sometimes list the properties for after they take them back!

Currently, the banks are shooting themselves, homeowners, and home buyers in the foot in not accepting that real estate values have fallen. But the banks also have very little incentive to acknowledge falling home prices.

First of all, if home values were accepted to be lower than they were in 2006, this would instantly discount the value of the mortgage securities. Many banks that invested heavily in CDOs, MBSs, ABSs, and the rest would have to face that they are already insolvent.

Second, banks are doing just fine in receiving money from the government to continue operations without having to acknowledge any of the mistakes of the past. Congressional tongue-lashings have been the worst most banks have had to deal with, and their reward for such public spectacles is usually billions, if not tens or hundreds of billions, of dollars.

Third, the government has stepped in to make it easier for banks to hide their losses on mortgage securities by pressuring the accounting world to relax mark-to-market rules. This makes it easier for the banks to keep inflated values of these assets on the books while their borrowers have to deal with actual falling home prices in the real world.

So a bank is able to keep a mortgage on its books valued higher than any rational buyer would ever pay for a particular home. The homeowners are facing foreclosure and would just like to sell for the market value and put the entire experience behind them.

But the banks and the government have facilitated a business environment where it is a better deal for the banks to avoid recognizing falling home values and simply decline short sales. Homeowners are forced to try to sell for what they know to be unreasonable prices.

Thus, the government allows housing prices to be propped up and gives banks incentives not to work with borrowers to sell properties. As a result, foreclosures increase, the banks declare the problem to be bad borrowers and "liquidity," and come hat in hand to the government. The government hands them more money and gives them more advantages to prop up housing prices.

Enron relied on the mark-to-market accounting rules to securitize its own debt, create the buyers for the debt, and then market the debt securities to a wholly Enron-created market. Since Enron was both the seller and buyer, it was able to unload its debt and count it as an asset at a price that the company negotiated with itself.

It sounds fraudulent and it is. Mark-to-market was also known as mark to myth at the time of the Enron dealings and collapse. The rule's few restrictions, which numbered a few created by the accounting professionals, were almost entirely ignored by the energy company. But even the deals which were mostly legal were still mostly fraudulent.

The politicians in 2009, however, have decided that Enron-style fraud is not such a bad thing after all. Just this past Friday, April 3, 2009, the Financial Accounting Standards Board, under heavy pressure from Congress and other banking interests relaxed mark to market rules to make it easier to hide the true value of toxic mortgage assets.

The banks were suffering under the rules because they were being forced to value their mortgage securities and other toxic assets at their current market values. Their excuse for relaxing the rules is that "markets are frozen," and that the assets are actually worth a lot more than the pennies on the dollar that investors are willing to pay for them right now.

But seriously, how much is a mortgage loan that is in default on an overvalued property really worth? It will be almost impossible for lenders to collect on some of these loans, and the banks are not even all that willing to work with homeowners to turn bad loans into performing ones again.

Instead of negotiating with borrowers to reduce mortgage balances and interest rates to a more reasonable level, people are just walking away from their homes and banks are just crying to the government for free money. But this is the reason these mortgage assets are currently worthless. And everyone wants to unload them.

The more the banks are bailed out with taxpayer money and the more they are allowed to hide their insolvencies, the longer the economic recovery will take.

All of this money is being taken away from viable businesses that could provide real jobs to homeowners and other consumers. But instead, it is taken from these businesses and given to failing corporations to keep the bubble-era party going, even if the executives and politicians have to party on the graves of American workers.

So money is taken away from people to give to banks. Businesses can not afford to hire or expand production to provide new jobs to these workers. The government sucks resources out of the private market. The private market can not recover.

Why shouldn't homeowners just walk away from their homes in such an economic climate? Most people who have a $400,000 mortgage on a $200,000 property will probably rightly assume that their lender has received a significant portion of the $400,000 from the federal government.

Is there any reason the homeowners, if they experience a financial hardship due to government manipulation of the economy, should keep paying the mortgage? Especially when their bank, which received money from those homeowners in their role as taxpayers, will not even return their phone calls to negotiate an alternative to foreclosure?

But now that market-to-market accounting rules have been relaxed, banks will be able to inflate the values of worthless mortgage and debt securities. So the crisis should be solved, right? Mark-to-market has been replaced with mark-to-trust-us, or mark-to-continued-fraud.

With the covering up of the low values of these assets, the bank's balance sheet problems are solved, right? No more capital injections, liquidity injections, or TARPs will be needed, right? Now that the banks can take the bad assets and say their worth more than they really are, they will need no more bailouts from the federal government, right? Right...?

In 1998, after the collapse of economies in Southeast Asia and the Long-Term Capital Management hedge fund, the first downturn came in the subprime mortgage market. Since there was no real estate bubble by then, however, the collapse was not nearly as destructive to the economy. Government policy at that point was not to encourage people who could not afford homes to buy them.

But in September of 1999, Fannie Mae began easing credit requirements for the mortgages it bought and guaranteed. As the Government Sponsored Enterprises (GSEs), as Fannie and Freddie are known as, began easing lending requirements, more buyers were able to purchase homes without positive credit histories. Fannie began this policy under pressure by the federal government.

Because the two mortgage giants guarantee nearly half of the American mortgage market, their easing of credit standards created huge new markets for lenders to expand into. And they wasted little time in beginning to lend to borrowers who were more risky.

With the government enterprises guaranteeing the mortgages, few lenders really cared all that much if many of the loans later went into default. And with home values increasing by 10 or 20% every year, the homeowners could just sell the property for a profit if they ever got into trouble actually making the monthly payments.

So it was no wonder that lenders made riskier and riskier loans. The Federal Reserve reduced interest rates to 1% after the 2001 recession, and investors were looking for assets that produced a better yield than Treasury bonds. Mortgage-backed securities were seen as just as safe as Treasury securities, but with higher interest rates.

Unfortunately, with so many borrowers who would not have qualified for loans under stricter guidelines now being given mortgages, the assets were far riskier than anyone wanted to acknowledge. The entire subprime mortgage market was based on the assumption of constantly rising home values.

Another assumption was that, even if home values began to decline, the government would step in and rescue Fannie Mae and Freddie Mac. Of course, even the GSEs prospectuses for investors stated the mortgage securities were specifically NOT guaranteed by the federal government. But it was always implicitly assumed that the government would step in if there was trouble.

The entire mortgage market was loaded so full of risk and based on so many false assumptions that, as soon as home prices stopped increasing, problems almost immediately arose. By September of 2008, the government had stepped in to take over Fannie Mae and Freddie Mac. The era of giant company bailouts had begun in Washington.

Now, with the GSEs being essentially run by the government, failure and loss only increases the amount of money that they are given by the American taxpayers. Fannie announced a third quarter of 2008 loss of $29 billion. The natural reaction would be to declare bankruptcy after so many disasters. But the government has recently given the companies an additional $200 billion.

The current financial crisis is being used as an opportunity by these corporations and the government to reward risk and enrich the people who created the disaster. As well, the crisis is being used to give more power to the very people who destroyed their firms, all in the name of helping to restore stability.

But how can the same people who created the environment in which a crisis would inevitably occur, did not see the crisis coming, and denied it was a crisis, ever be trusted to rescue the economy from that collapse?

The latest debacle has been the complete failure of the much-touted HOPE for Homeowners plan which has been given $300 billion to guarantee mortgages and has helped a grand total of one homeowner avoid foreclosure so far. This is money that could have been used in the private sector to fund new loans or just keep money in people's pockets to save or spend in the economy.

Now Secretary Treasury Timothy Geithner told the Council on Foreign Relations that the newest Obama mortgage modification plan "has a pretty good chance of gaining traction." This plan represents another $75 billion that the government is taking from people to assist homeowners in preventing from losing their properties.

And all the plan has is a "pretty good chance of gaining traction." This should strike fear into the heart of any homeowner who places all of their faith in the new program or any government plan to address the housing market. What does Secretary Geithner's statement even mean, when it comes right down to it?

It means that the government is entirely unsure of whether or not any of their programs will have any impact at all on the housing market or on a homeowner's ability to stop foreclosure. The economy is just like a car stuck in the mud and spending $75 billion and being optimistic about it might help it get a little bit closer to being able to drive out of the mud. What a metaphor!

Either this new loan modification program is expected to be a complete disaster or the Treasury Department is hedging its bets on this plan, having seen the failures of previous ones. In either case, borrowers should not rely just on these government guaranteed mortgage refinances and modifications to save their homes.

If the US Treasury Secretary is hedging his words on the ultimate success or failure of the plan and spending $75 billion to take a shot in the dark on helping homeowners, then these same homeowners also need to hedge their own bets. The more options they have to avoid losing a house, the better.

So far, the government has created numerous plans and appropriated hundreds of billions of dollars to end the foreclosure crisis, with no significant reduction in the foreclosure rate to show for it. The politicians would have been better off sending out checks to borrowers to pay their mortgages or just paying off everyone's mortgages directly.

But this policy of handing out money to the banks in order to get "credit flowing again" has been a disaster. Credit is not flowing again, and consumers are attempting to pay down their debts with the money that they have left, rather than borrowing more. Banks are sitting on the money while borrowers pay back loans or go into foreclosure if they experience a financial hardship.

Even if the government's programs have all had noble intentions behind them, the banks have taken advantage of these new plans to grab more money while avoiding assisting their clients in default. This has only made the recession more harmful to homeowners, taking their money from them, preventing prices from falling, and creating trillions of dollars of new money.

President Obama's new mortgage relief plan does not include a real property valuation for homeowners to qualify for it. Is this a sign that the plan was rushed, creating a massive oversight that should have been caught but was simply missed? Because this can not really be the Change that taxpayers were promised, right?

Unfortunately, it seems that the Obama definition of Change has more to do with creating even less stringent requirements than the recently-departed Bush administration did for banks and homeowners to receive help from the federal government to cover up losses from overvalued real estate and subprime mortgage loans.

Without adequate appraisal requirements to qualify for the Obama foreclosure relief plan, the current value of properties participating in the plan will not be officially determined. This means that the banks and investment firms that own the loans on these properties will not have to acknowledge declining real estate prices on their books.

Falling property values were the problem that had to be addressed for any correction in the housing market to occur. One solution would be simply to let properties go through foreclosure that could not be saved, and help homeowners who could stop foreclosure find ways to do so using the dozen or so methods already available.

Another solution would be simply to take money from workers and have the federal government create a new program that allows homeowners facing foreclosure to get free money and a modification of their loan without have to prove the value of the property they are receiving assistance for.

This latest plan, unfortunately, is little more than a way for the government to help prevent the banks and Wall Street firms from ever having to admit the huge losses they are carrying due to bad loans and declining real estate prices. Suddenly, the housing market crash is not the problem -- writedowns of worthless housing market assets are the problem.

All we can hope is that the government stops interfering in the stock market and the housing market and allows some of this bad debt to be cleared off the books. The government and the banks have created a mess of mortgage loans and covering up the damage or nationalizing failed institutions only creates more uncertainty.

Mortgage giants Fannie Mae and Freddie Mac, insurance giant AIG, banking giant Citigroup -- all have been essentially nationalized after sustaining huge losses from bad loans. Finance giants GE and GM may be next. And who will be next after that? Is any company safe from being nationalized? Should anyone invest in the stock market with the threat of nationalization?

Nationalization and this latest mortgage bailout plan have in common that they are designed only to help companies prevent from recognizing losses, thereby keeping them artificially alive at taxpayer expense. But none of us can afford this much longer. It is disheartening to see more people lose their homes day by day so that failed corporations can be kept alive.

The loss of a few companies or some overvalued homes may be tragic, but no healing will begin until they are liquidated. So far, President Obama only seems to be accelerating and increasing Bush-era failed policies, rather than fundamentally changing them. Until we get change, expect more nationalizations and attempts to prevent losses from being recognized.

Politicians, on the other hand, promise us entirely too much, but even as nearly every one has broken every promise they have ever made during the campaign upon coming into office, we still believe them. In fact, we judge other and competing candidates on what they are promising us, even though we have no reason to expect the promises to be kept.

Far too often, these promises are vague and vacuous -- creating jobs, putting people back to work, restoring the economy -- or they are cloaked in irrelevant metaphors -- kickstarting the flow of credit, backstops against failure. Just as often, though, we fall for this rhetoric and put our own meanings into the language, rather than accepting it at its empty face value.

Bureaucrats promise us things, and then, when they fail to deliver, they state that they had no real obligation to do what they promised, or the promises are scaled back almost immediately after the election. We are all disappointed, but at least we did not really expect the promises to be kept in the first place.

One promise we hear frequently is getting the economy going again, as if politicians created any wealth in the marketplace. Unfortunately, all government can do is send the wrong signals to the economy through interest rate manipulations or take money from all the people to give to a small number of special interests. Neither action helps in the long run.

Even a vague promise such as stimulating the economy is impossible for government to keep. All it can do is take wealth away from everyone to reward a small number of people or groups. If you are one of the small number, you may feel as if you won the lottery -- but the rest of the people will be poorer, and this will affect you anyway.

We see this now with the Wall Street and auto bailouts. These industries asked government to take money from all of us to give to them. As a result, we all got poorer and the corporations got richer for a little while. But the illusion did not last long, wealth was not created, and now the industries are looking for more handouts.

Government promises to keep us safe, but when we are in danger or hurt, the politicians claim they have no duty to protect any individual. Their only duty is to the public -- a complete abstraction if there is no duty to any one person or another. Every state in the country has determined that police have no duty to protect you or me -- just to protect the public.

This leads, of course, to the promise of government courts to provide justice, which has been another failure. The lawyers in and out of government have created a system so unnecessarily confusing that the average person is locked out of it. Cookie-cutter legal concepts are applied to complex cases through confusing language and termed "justice."

Thus, it is no surprise that both lawyers and bureaucrats are in high salary positions but both hate their jobs enormously. Both exist in a make-believe world with its own language (legalese) specifically designed to ostracize everyone else in their lives. Yet these people get nothing but our respect and awe, and some are even termed "our leaders."

We expect too much of the government. Although much of the blame rests with the politicians themselves, just as much rests with all of us who expect anything of substance from them. The failures keep coming, but so do the promises, and we accept both and declare them successes. Will we ever learn?

Up until now, it was only the most destitute and desperate individuals who felt forced to carry signs by the side of the road indicating “will work for food” or similar depressing slogans. But in the era of the housing collapse and trillions of dollars of new money being printed by the Federal Reserve, maybe a new type of message is called for. “Will take Congressional verbal abuse for $17 billion” seems to be a fitting one.

In all seriousness, though, it is deplorable that banks used government money and market interventions in order to enrich themselves at the expense of impoverishing the future, and when the future arrived, they were able to cry “Wolf!” and receive taxpayer money for bailouts. And not only have they received bailouts (which 90% of the country disagreed with), but they have been able to spend the money with zero accountability.

But in a severe recession with a frighteningly fast collapse, the storyline needs to be played out according to the script. Like a child, the bankers are sorry, they never saw it coming, they learned their lessons, and they will never do it again. Like a stern but forgiving parent, the politicians are outraged, anyone could do a better job than these clueless bankers, but will bail them out of their mistake; after all, they meant well.

All this feigned outrage and remorse is little more than a cover for the transfer of more money to the bankers through bailouts and Federal Reserve programs. It is designed to placate the public and focus the depression and rage Americans are feeling at the bankers onto the television screen instead of real life. But the banks have gotten away with very little in the way of real penalties for their actions – what if the fake outrage fails to deflect the public's real outrage?

Show trials of banking CEOs may be next, or a new huge crisis may be allowed to happen and inflated beyond all reasonable proportions. General Motors in considering filing for bankruptcy, for instance. While this may not have the apocalyptic effect on the economy pundits predict, the media may be able to inflate the failure into an epic catastrophe. A show trial where a couple bankers end up in jail may also be in the works.

Unfortunately, though, all of the strong negative feelings directed at the banking institutions (and there are a lot of such feelings) fails to address why people and the nation itself has become poorer. While the banks certainly took advantage of cheap and free money, so did vast numbers of people during the housing boom. Interest rates were artificially lowered and saving was replaced by borrowing and spending.

What we can expect from the government, banks, and media may be only show trials or more contrived economic disasters, followed by more crises and bailouts to address them. Unfortunately, these bureaucratic and corporate wranglings will only make the job of economic recovery more difficult, but what is needed now is for Americans to begin saving again, paying down their previous debts, and investing in productive capacity instead of borrowing ever more money.

An interesting post at the website PopularDelusions suggests that one way to fix the economy may be for the government to legalize currently prohibited drugs and begin taxing them. This would be in an effort to recapitalize the banking system through taxing a new market, rather than just borrowing or printing more money until the problems in the economy go away.

However, making illegal drugs legal and then taxing them would create even more problems for the US and world economies than simply allowing the black market to keep operating. The number of players and vested interests in supplying and fighting drugs is now so numerous that a change in the legality of the products would only contribute to the collapse of financial markets.

According to the United Nations Office on Drugs and Crime, the value of the global illicit drug sales in the North America was was as follows:
Cocaine $43.6bn
Opiates $8.9bn
Cannabis $64.0bn
Ecstasy $8.5bn
Amphetamines $42.3bn
Total $167.3bn

The world illegal drug market is estimated to be closer to $600 billion to a trillion dollars a year.

One of the striking features of the illicit drugs markets are the high retail prices. To put them in perspective consider that cocaine sells for around $100 per pure gram, or $2,800/oz while heroin sells for $1,100 per pure gram or $30,800/oz. Compare that to the $950/oz price of gold.

Why are prices so high? Caulkins and Renter (Journal of Drug Issues, Summer 98, Volume 28, Issue 3, "What price data tell us about drug markets") estimated that around 50% of the retail price could be accounted for by the high risk run by employees - of product confiscation, incarceration and rival violence. So let's say removal of this risk would give a pre-tax market of $85bn.

The premiums for simply growing the stuff, transporting it to refineries, refining it, transporting it to distribution, and selling it on the streets can increase the price of drugs by 10 to 100 times. If illegal drugs were legalized, the prices would be more likely to collapse by a very large amount.

How much tax is the US missing out on by prohibiting this market? In NY City, the tax take on a packet of cigarettes is 58% of the average retail price. If we gross up the pre-tax market by that amount we get $117bn in annual revenue.

The total drug trade at $600 billion a year mostly finds its way into the US financial markets. The money needs to be cleaned in order to be spent, and the American dollar is still the reserve currency of the world, as well as of the drug traders. How much money would the economy lose out on if drug prices suddenly collapsed and over $500 billion a year in highly liquid assets disappeared from the market?

To take that much laundered money out of the financial system now would be a huge disaster for company stock prices. Collapses in housing of 40-50% have escalated the foreclosure crisis and turned suburbs into developing ghost towns while bankrupting Wall Street investment firms and pushing the economy into a recession. An industry that accounts for $600 billion of annual investment in the US economy where prices collapses by 90-99%, on top of all the other disasters in the market, may quickly lead to a depression.

But there's more. The annual cost of drug enforcement - police, prosecutors, judges and prisons for drug related crime is has been estimated by Jeffrey Miron at Boston University to cost $33bn annually. Adding that saving to the tax take would mean $150bn per year for the US Treasury.

The nearly one trillion dollars the US has spent since the beginning of the drug war represents a huge group of enforcers, judges, lawyers, and politicians who have extremely vested interests in keeping drugs illegal. If the drug warriors had no drug war to wage, it is doubtful that they would simply give up their lucrative government positions and pensions. And the drug war itself is another reason that politicians give in order to take more money in taxes from businesses and citizens.

Local governments have also learned to take great advantage of forfeiture laws, which allow the police to retain property and cash seized in drug arrests, whether or not the person is ever found guilty. Forfeiture laws allow lawsuits to be brought directly against property itself, giving governments another source of revenue due to the non-crime of being suspected of having illegal substances.

Unfortunately, the right answer for the economy is not to decriminalize drugs. The government can tax the substances like it does with cigarettes and liquor and like it is contemplating doing with fast foods to discourage people from eating unhealthy. People should be free to do whatever they want with their bodies, and there are far more dangerous substances available now. The FDA approves substances that has been linked to cancer but is trying to classify vitamins as drugs and restrict them.

But the very illegality of drugs has created a hugely lucrative black market where prices for illicit substances are 10-100 times what the free market would support. Making these drugs legal and taxing them would cause the US economy and government at all levels to incur huge opportunity costs and any revenue taken from taxing drugs would be not make up for the collapse in prices and liquidity lost from money laundering. At this point in time, the economy could not sustain the legalizing of drugs, which is why they will remain illegal for the foreseeable future.

Further Reading:
Fitts, Catherine Austin. Dillon Read & the Aristocracy of Stock Profits.
Gray, Mike. Drug Crazy.
Russell, Dan. Drug War.
Scott, Peter Dale. Drugs, Oil, and War.

If you're poor and the bank is coming for your home, Congresswoman Marcy Kaptur has a plan for you.

Just squat, she says.

Yes, this Ohio Democrat is actually encouraging her financially distressed constituents whose homes have been foreclosed upon, to simply stay put.

In a Friday report, CNN's Drew Griffin explored the case of Ohioan Andrea Geiss, whose home was foreclosed upon in April.

"Behind in payments, out of work, a husband sick, she had nowhere to go," said Griffin. "So, she decided to follow the advice of her Congresswoman and go nowhere."

In Lucas County, Ohio, over 4,000 properties were foreclosed upon in 2008, reports CNN.

"So I say to the American people, you be squatters in your own homes," said Congresswoman Kaptur before the House of Representatives. "Don't you leave."

She's called on all of her foreclosed-upon constituents to stay in their homes and refuse to leave without "an attorney and a fight," said CNN.

"If they've had no legal representation of a high quality, I tell them stay in their homes," Kaptur told Griffin.

Kaptur is a high-profile advocate of an increasingly popular mode of fighting foreclosures best known for it's key phrase: "Produce the note."

By telling a bank to "produce the note," a homeowner can delay foreclosure by forcing the lender to prove the suing institution is actually the same which owns the debt.

"During the lending boom, most mortgages were flipped and sold to another lender or servicer or sliced up and sold to investors as securitized packages on Wall Street," explains the Consumer Warning Network. "In the rush to turn these over as fast as possible to make the most money, many of the new lenders did not get the proper paperwork to show they own the note and mortgage. This is the key to the produce the note strategy."

And Friday's segment on this growing foreclosure fighting "movement" was not the network's first. Earlier in January, CNN explored one person's strategy in demanding her bank "produce the note," only to find that the lender had "lost or destroyed" the evidence of debt ownership. Such a revelation can significantly strengthen a homeowner's position when asking to renegotiate a mortgage.

That these banks, many of which received billions of dollars in government bailout funds, continue to boot defaulted owners from their homes, makes them "vultures" says Kaptur.

"They prey on our property assets," she said. "I guess the reason I'm so adamant on this is because I know property law and its power to protect the individual homeowner. And I believe that 99.9 percent of our people have not had good legal representation in this."

The banking industry has now collapsed, with virtually all of the Wall Street investment firms that set up the subprime market to fail going out of business or converting to banks in order to be rewarded by the federal government for destroying the economy. The American auto industry has also imploded, with the minor three being given billions of dollars to continue force-feeding unwanted cars into the marketplace.

The government has stepped in to manipulate the economy in numerous ways, from simply handing billions of dollars over the banks to creating an FHA mortgage guarantee program that almost no one has applied for yet. Bureaucrats and politicians have addressed the foreclosure crisis with new programs being created by Congress or the Federal Reserve weekly in order to save the economy.

And the result so far? The foreclosure rate nearly doubled from 2007 to 2008, and could double again in 2009. Nearly 2.4 million homeowners have lost their properties to foreclosure, and hundreds of thousands of workers are losing their jobs each month. Trillions of dollars of new money has been created by the Federal Reserve, inflating the currency by many times. The government has saved us all!

Clearly, stealing money from homeowners and other people in America and handing it over to banks to cover up their losses has not served any good for anyone who is not a corporate executive or power-hungry bureaucrat. Inflating the currency until gas is so expensive that no one can afford to drive and businesses have to shut down, resulting in demand destruction is another evil manipulation of government.

Unfortunately, our warning of two million families being evicted needs to be revised upwards to nearly 5 million families. Because of the government's manipulations of the economy, the money supply, bank lending, and the micromanagement of our lives, there is already reason to believe the depression will be at least twice as bad as originally expected.

And possibly the worst part about the situation: the more the media speaks, the more it tries to sell us all on government as savior of the economy. Nearly ever show and every interview puts all of the blame for the recession on the private sector and all hope for the future in the government, while ignoring the pivotal role of government in setting up the economy to collapse.

First of all, the government only gets money in a limited number of ways: through taxing, borrowing, or monetizing debt (also known as the printing press). The government produces nothing, so it can not create any value for the marketplace -- all it can do is steal money from the productive sectors of the economy or destroy the measure of value.

So far, the federal government has not seriously considered raising taxes and the Obama administration has even proposed some tax cuts. These may not go very far, though, as state and local governments across the country are increasing taxes and fees, which will only depress local real estate markets even further.

For bureaucrats who are crying for government intervention to solve the housing market collapse, very few are actually attempting to stimulate local markets themselves. Lowering property taxes would be one way to make housing costs more affordable, especially when values have fallen by 40-50% in some areas of the country.

But property valuations are only important when they can be used as an excuse to raise taxes on homeowners. When home prices fall, even by large amounts, taxes are kept at the previous levels. It is easier to ask the federal government to steal from homeowners in order to finance the larger level of bureaucratic parasitism than to lower taxes as the entire ad valorum tax concept would seem to demand.

With all of the bailouts and stimulus packages that have been passed and proposed, the government has borrowed money in the financial markets. In effect, the country has borrowed from foreigners for years to finance consumption, and now that it is unable to pay the bills, the government is asking these same foreign nations to lend more money to bail the country out of the mess caused by too much borrowing.

As surprising as it sounds, other governments have so far kept purchasing US government debt and allowed the country to borrow even more money. Of course, if the stimulus packages do not work to end the recession (which they will not), it is disturbing to see how much money America owes other countries. But if foreign nations did stop lending us money, the entire facade would collapse, and the dollar would lose much, if not all, of its value.

The government has also been relying on the printing press to bail out failing banks and the entire financial system. The Federal Reserve has been creating trillions of dollars out of nothing to help banks hide bad assets, as it allows mortgage securities, car loans, and credit card loans to be exchanged for US Treasury debt. Trillions of dollars have been fed into the financial system this way, allowing the banks to remain in business while still being insolvent.

Can the government really get it right and spend us all back into prosperity? The fact that the government instituted one policy after another to create a spendthrift state and prolonged the Great Depression for over a decade is quite worrying. The fact that it is doing the exact same thing now to spend us out of the current crisis, but on a much larger scale, is even more disturbing.

Well, it turns out that most of it was a hoax, and credit was available in large supply throughout all of 2008. Granted, it did not grow as fast as it had been, and did not grow at all for about six months during the year. But lending broke out of that plateau and continued growing -- bank credit actually stood higher at the end of 2008 than ever before!

But the government and the banks took this opportunity of slower growth than usual to proclaim a crisis in the credit markets that could only be addressed by vast thefts of money from people all over the country. The $700 billion TARP bailout plan was one brilliant idea, and the Fed's various new lending programs were more of the same.

The media, the financial interests, the corporate state, and politicians all used temporary slowing down of the credit market to steal huge sums of money through inflation and give enormous powers to bureaucrats and preferred companies. Everyone was told to be afraid that the complete lack of credit would bring the world economy to a halt and our only savior was government intervention in the market on a scale never before proposed.

Now, though, we are all on the hook for trillions of dollars of private debt, as one failing company after another has been partially or totally nationalized: Fannie Mae and Freddie Mac, insurance giant AIG, Bear Stearns, Citigroup, the entire financial industry, the irrelevant three automakers. And this is only the beginning, of course, with hundreds of billions of dollars still left in the TARP program and many more companies and industries lining up for handouts.

The Federal Reserve has allowed large financial corporations to become bank holding companies just to get a piece of the TARP bailout, from Goldman Sachs to GMAC, the lending arm of General Motors. It may not be a bad idea of homeowners trying to stop foreclosure to group together and apply for bank holding company status in order to have their mortgages paid off by the government. Seemingly everything else is quickly becoming banks.

The credit crisis was a hoax perpetrated on all of us in order to transfer huge sums of wealth to the banks and largest corporations in America and vastly increase the size and powers of the government. The fact is that it was an entirely manufactured fraud designed only to transfer wealth from the very people who had been taken advantage of (homeowners in the housing market) to the banks and bureaucrats who helped pump and dump the market in the first place.

The bailouts were sold to us all as a method of addressing these crises and providing assistance to borrowers and foreclosure victims, but nothing has been done to help homeowners. What we have ended up with is a few voluntary government programs for homeowners, a hopeless Hope for Homeowners FHA lending scheme, and untold, uncountable, unaccountable billions for the banks and politicians who work for the banks.

First, the federal government has been inflating or borrowing money like it is going out of style in order to nationalize corporations and transfer wealth from the people to banks. None of the money that is being provided from the various Federal Reserve programs or the bailout has been adequately accounted for, with banks even refusing to supply information regarding what they have done with the money they have stolen from taxpayers.

The complete collapse of Wall Street and the financial industry has also contributed enormously to the depression. These financial firms created instruments designed to hide money and confuse buyers, a fraudulent scheme perpetrated on the entire world through CDOs, ABSs, MBSs, and more. Once it became clear what kinds of debt were contained in all of those SIVs and other acronyms, the entire facade collapsed, taking much of Wall Street with it.

But this vast handout of money to bail out Wall Street and the banks has not even helped stabilize the financial markets. While credit is growing again, the impoverishing of America to bail out the lenders has meant that credit markets remain tighter than they were years ago. Of course, this is a good thing for most consumers who were taken in by the free money and borrowed more than they would ever be able to pay back.

Fourth, consumers have been tapped out for years now and have been borrowing money on credit cards and Home Equity Lines of Credit in order to replace old debt with new. But now that consumer lending has dried up, these market segments can no longer continue to pay their previous debt bills with more borrowed money. Defaults, foreclosures, and bankruptcies will continue to be the result.

The housing market is not helping the situation, either. Home values were pumped up beyond belief by easy money from the Federal Reserve flowing through Wall Street banks into subprime mortgage towns. Now prices have collapsed and are falling by the day, in some areas by as much as 40% or more. Huge tracts of land are left undeveloped in Florida, Detroit is an abandoned wasteland in some area, and California is seeing real estate prices fall by the hour. Values are almost impossible to accurately determine.

This has caused a near complete collapse of lending in the housing market, and the tapped out aspect of most borrowers has caused a further collapse in other consumer lending. This is one reason why GMAC, the lending arm of General Motors, needed a bailout from the federal government in order to lower its lending standards again to be able to sell more cars to people who can not pay for them. All such schemes to stimulate borrowing and spending will only lead to more failures and bailouts.

Extraordinary numbers of foreclosures are also contributing to the problem. Why would anyone want to buy a new house when foreclosed homes of every variety are sitting vacant in large numbers? Until this inventory is further liquidated, home builders will have to wait on the sidelines. But of course, the inventory can not be liquidated at today's high prices and with banks no longer providing home loans for people who can not afford to make mortgage payments. Thousands of houses were permanently constructed for families who could only afford to take a temporary break from renting. Now these homes remain foreclosed and abandoned.

A deep recession will keep the economy down for some years, as the government tinkers with one bailout or regulation after another that prevents the market from liquidating bad debt and insolvent companies. As the depression deepens, politicians, the banks, and failing corporations will kick the can a little further down the road. The end result will be a steeper, longer decline that if the economy just took the bad medicine right away and got on with supporting good companies, instead of being forced to prop up failed institutions.

To be sure, minorities like African Americans and Latin Americans were given subprime mortgages in higher proportions than the rest of America, for a number of legitimate and discriminatory reasons. It was in the subrpime mortgage segment of the housing market that the foreclosure crisis started in.

But the largest ethnic group of Americans are white, so the largest number of foreclosures are happening in white neighborhoods across the country. No large housing market was spared from the glut of cheap money and loans for people who could never pay them back. Upper middle class areas of California are not usually considered predominantly African American communities. Foreclosure is happening everywhere.

The news media, though, often represent the foreclosure crisis with footage of lower class blacks losing their homes and being evicted from obviously run-down properties. The subtle message for other ethnic groups is that this helps them feel better about their own situation, since only black homeowners are mostly in foreclosure and that it is not a problem affecting most Americans.

Really, though, these types of representations of the foreclosure crisis do nothing but set up a false perception that it is "other people" in "low-status neighborhoods" who lose homes. As the media seems to see the crisis, if it is mostly blacks in street clothes being evicted, there is little incentive to propose any real solutions to help these homeowners.

Contrast these images with those of predominantly white Wall Street and auto executives dressed in fancy suits begging for bailouts in front of a predominantly white Congress. The representations of each group in crisis (black homeowners vs. white executives) sets up the perception the news media are trying to convey to all the rest of us. "Look how important these old, rich white guys are -- they obviously need our help and support more than the poor black folks," is the nonverbal message.

But foreclosure and economic calamity is spread out throughout all ethnic groups because of the actions of these corporations working with government. It is true that minorities are suffering just a little bit more from foreclosure, but not out of all proportion. The main difference is how the news media portray and contrast the problems of homeowners and corporate executives by using false low-status and high-status images.

If members of Congress are watching the news, or taking campaign contributions from news organizations, or in charge of regulating the national air waves, it should be no wonder why the rich guys get to steal $700 billion from the poor folks.

In fact, the entire foreclosure crisis was not caused because stupid people got stupid loans from stupid mortgage brokers with money provided by stupid Wall Street investment firms (although a lot of that did happen). Nearly everyone who had any role in a housing transaction, from the buyers to the sellers to the mortgage broker to the title company to the real estate agent to the appraiser to the Wall Street firms to the government to the Federal Reserve, did whatever they could to pump up values just a little bit further.

So blaming the bubble and the collapse just on borrowers whose eyes for property were bigger than their pockets is a mistake. Without the roles played by every other individual and private or public organization, the housing market could not have been pumped up to such dizzying heights. Unfortunately, though, homeowners are the ones suffering most directly from the meltdown.

Some homeowners were told they were getting a fixed rate loan and did not know the payment would go higher. It seemed like everyone was approved for a low, fixed rate mortgage when they applied for the loan, only to find out at the closing that it was adjustable. And these were the lucky ones who realized it at the closing of the loan, rather than three years later when the payment adjusted automatically and it was suddenly impossible to afford.

Some families bought a new home at the top of the market and just do not want to pay tens of thousands more on the loan than their house is worth now that prices have crashed. In some areas, they may owe more than $100,000 on the loan than the property is currently valued, which gives them very little incentive to keep paying the mortgage. In such cases, a hit to the credit report due to foreclosure is inexpensive compared to paying the principal and interest of a loan on the house that is underwater.

Some borrowers have lost jobs over the past year, with even more losing them every day as the economy slows further and further. With a huge drop in their monthly income, these homeowners could not afford any payment, no matter how low. Factor in that they have to finance their share of the Wall Street and auto industry bailouts, and keeping out of or stopping foreclosure will be the last thing they can afford.

In reality, people routinely just have life happen to them. They get sick, or get divorced, or lose a job, or go out of business, and this will always cause foreclosures. The mortgage industry has always expected a certain percentage of loans that are made to default. The big difference during the boom was how much money poured into the housing market and how far lending standards fell to accommodate the new borrowers who were attempting to enter the market, despite the fact that they had poor credit and no assets or stable income.

Although it may make people feel better to blame the foreclosure crisis on its victims, the situation is more complex than that. It has been a combination of a lot of factors that have driven the foreclosure rates so high in the country and kept them at record levels for years now. The people who took out loans they could not afford just to get a big house are part of the problem, but many more issues contributed even more to the problem and set up the market for this failure.

The big questions being: are things going to turn around, when is the economy going to improve and are there laws being put in place to help homeowners. These are all valid yet difficult questions to answer. Right now a combination of strict lending standards, decrease in home values and the poor economy are hindering any improvements for homeowners.

Last month you may remember hearing on the news, the downward spiral of the financial market, forced the government to pass a $700 billion rescue package. The plan was to buy bad assets from the lenders; experts predicted them to have acquired more than a third of all U.S. properties for sale. Last Wednesday it was announced by Treasury Secretary Henry Paulson that the “plan” would not purchase those troubled assets. He said it would take too much time; instead the Treasury will be buying stakes in banks and encouraging them to resume more normal lending.

Housing and Urban Development Secretary Steve Preston also announced on Wednesday that the government could possible let borrowers qualify for a $300 billion program designed to let troubled homeowners swap there risky loans for more affordable ones. The only down fall in this though, is if lenders decide not to participate because of having to reduce the value of a loan and therefore taking a loss. Hopefully this does not happen and the help will decrease foreclosures.

Putting it into prospective- Number of homes that received a foreclosure filing for the month of October 2008:

Nevada- 1 in every 74
Arizona- 1 in every 149
Florida- 1 in every 157

These three states main metro cities hold many of the top ten spots for highest foreclosures filings the month of October 2008:

1. Las Vegas, NV
2. Fort Myers, FL
3. Miami, FL
4. Stockton, CA
5. Merced, CA
6. Phoenix, AZ
7. Riverside/ San Bernardino, CA
8. Ft Lauderdale, FL
9. Modesto, CA
10. Orlando, FL

Now for some good news! Overall, California was down by 18 percent from the previous months. This could be due to some of the new laws delaying the foreclosure process. For example in California lenders have to contact borrowers 30 days before filing a default notices. Other states are now trying to incorporate this law; North Carolina has decided to give borrowers an extra 45 days. Only time will tell if this, along with if the government “bail out plan” will help people avoid foreclosure or just delay the process.

If you are a homeowner and facing foreclosure what is your opinion; can the governments bailout plan succeed? If you were given extra pre foreclosure time, will it help you avoid foreclosure? As a homeowner, what do you think would help your situation the most?

The mortgage industry also knew that the boom in real estate prices could not last forever, which only fueled the drive to create more loans and gain more market share in the least amount of time. Almost every Wall Street investment firm handed out piles of money to subprime lenders in order to purchase, securitize, and sell the loans that were originated. The long term viability of these loans were not taken into consideration in the scramble to loan out more money and dump the resulting mortgage securities into the secondary market.

The fastest and easiest way to expand the market for mortgages was to give home loans with a low introductory rate to people who could not qualify for a normal payment. The terms of these loans were often not disclosed to understanding home buyers, who were essentially promised a complete financial program instead of an adjustable rate mortgage. Borrowers who had to overstate their income just to afford the teaser rate were assured they would be able to refinance before the rate adjusted because their property would appreciate -- because real estate always goes up in value.

It is really quite amazing how wrong the mortgage brokers, real estate agents, and Wall Street investment firms got it. But even more unfortunate is that these poor homeowners are the ones that are paying with homelessness and loss of quality of life because they believed in someone else to help them navigate the increasingly complex world of consumer credit and home loan programs. Once mortgages began adjusting, homeowners defaulted and tried to sell; but with so many new homes being constructed already, dumping more properties onto the market depressed prices rapidly in some areas, resulting in waves of foreclosures.

And now, it is all of us, homeowners, renters, and everyone else, who must pay the price for the large scale mortgage scam that was perpetrated on the American people. While subprime lenders have gone out of business by the hundreds, they were merely conduits for Wall Street money. Wall Street, after losing the mortgage cash cow, has been clamoring for bailout after bailout, which has been given to them by the Congress and the Federal Reserve. All of these bailouts have been granted to the financial industry, and now even the insurance and automotive sectors are counting on taxpayer money from taxpayers who can not afford even their own mortgages or credit cards.

Hundreds of local, regional, and national subprime mortgage lenders borrowed money from Wall Street investment firms to make loans to people buying or refinancing a house. When there were no borrowers left with good credit and stable income histories, these lenders gave mortgages to people with extremely poor credit, no credit, no income, and no assets. It was the easiest way to keep generating origination fees and the subprime industry did not have a stake in the eventual success or failure of the loans, as they were sold to Wall Street upon origination.

Wall Street investment firms like Bear Stearns, Lehman Brothers, and Merrill Lynch acted as middlemen in the process by providing subprime lenders with easy access to cash to make loans, then buying these loans from the lenders in order to securitize them for future sale as bonds. Investment companies charged investors to make these mortgage-backed securities, which investors thought were high-quality investments. Wall Street did not have a large stake in the eventual failure or success of the loans, except that the more loans they could securitize, the more they could sell to investors.

Bond insurers played a part by providing insurance on mortgage-backed securities, based on Wall Street firms' assurances that the mortgages were high quality when packaged together. A few might default, but not a large part of the entire group of loans. And anyway, with rising home values, the houses where families were unable to stop foreclosure by refinancing could be sold on the open market for more than the mortgage had been worth. So insurance companies charged a little bit to guarantee the securities, thereby making them look even safer. Insurers had a stake in the performance of the loans, but were convinced into believing that the bonds were of high enough quality to provide insurance on.

Rating agencies played their part by giving these bonds very high ratings, making them look to be very low risk, even though the bonds were promising to pay high interest rates. Typically, low risk means low return, but in the case of the subprime securities, low risk supposedly meant high returns. But the favorable ratings meant investors were willing to keep buying the securities. These agencies also had no stake in the success or failure of the loans, as they just provided their stamp of approval on them without ever having to own or invest in subprime mortgage securities.

The Federal Reserve lowered interest rates dramatically during the early 2000s, thereby making it much easier for banks to borrow and lend money. The greatest real estate bubble in history then formed, as anyone could get a loan at a low interest rate and no one had a stake in the eventual success or failure of the mortgages. They could just be securitized and sold to investors around the world or dumped on Fannie Mae and Freddie Mac and the toxic risk would be spread around the world. If the system collapsed, all of the players knew that the Fed and the government would step in to provide bailouts to prevent the recognition of the failure of the industry.

There is no doubt that ACORN, the Community Reinvestment Act, and other factors played a role in inflating the bubble and keeping housing prices rising far beyond sustainable levels, just as corrupt real estate brokers, mortgage brokers, and appraisers helped to overvalue properties in local areas. But all of these played merely supporting roles to the subprime lenders, Wall Street firms, bond insurers, ratings agencies, and the central bank that helped create and sustain the illusion that the housing market was in a phase of perpetual growth.

Upon passage of the bill deregulating the S&L industry, criminals moved in immediately to take advantage of the one regulation left: federal deposit insurance of up to $100,000 per account. Money began to flow from New York investment firms into local thrifts that could pay high interest rates.

With hundreds of millions of dollars in deposits being poured into Savings & Loan institutions, thrifts padded their balance sheets with reserves that could be loaned out. No loan was too big, no real estate project too overvalued, no excuse for personal profit at the expense of the business too egregious.

But just as with the subprime mortgage industry, no one had an interest in the success or failure of a particular loan. Banks gave mortgages, personal loans, and lines of credit to cronies who would never be able to pay them back, and the amount of money stolen from thrifts threatened the whole industry.

Relatively little was ever recovered from the gangsters and criminals who looted the thrifts for over half a decade, as most presidents and recipients of loans had moved the money offshore. Even when government agencies attempted to go after stolen assets, the thieves usually just declared bankruptcy and made off with their fraudulent gains.

Upon the inauguration of President George H. W. Bush in 1989, the S&L crisis had to be addressed. Hundreds of thrifts had failed with thousands more at risk of failure, and politicians, businessmen, and regulators were implicated in the covering up of the scandal.

The bill that was passed and signed into law was the Financial Institutions Reform, Recovery, and Enforcement Act, which re-regulated much of the S&L industry. But most importantly, and most relevant to the subprime mortgage meltdown, the Act created a huge new bureaucracy to sell the assets of insolvent thrifts.

Part of this bureaucracy was the Resolution Trust Corporation (RTC), similar in many aspects to the Troubled Assets Relief Program (TARP), designed to invest taxpayer money in insolvent mortgage securities. The RTC was expected to handle nearly 300,000 properties (many of which had been overvalued to begin with) and $400 billion in failed S&L assets (including loans which were taken out never intending to be paid back).

While the RTC took over nearly half a trillion dollars in toxic loans, bad mortgages, junk bonds, unfinished condo and development projects, and undeveloped land, the program became another excuse for the same people who had looted the industry to begin with to launder their money back into these same devalued assets.

Criminals who had received huge loans from S&Ls on overvalued properties pocketed the difference, usually with offshore bank accounts that were never confiscated by the government. When the RTC took over the assets of these failed S&Ls, the government wanted to liquidate the assets for whatever it could get.

The looters of the thrifts, then, were able to use the dirty money they had obtained by defaulting on S&L loans to purchase insolvent S&L assets. In fact, the Resolution Trust Corporation did not even ask questions about buyers if cash was offered.

Thus, as Stephen Pizzo, Mary Fricker, and Paul Muolo conclude in their 1991 book Inside Job: The Looting of America's Saving & Loans, "Clearly, the RTC was offering a way not only to repatriate their offshore money but to parlay it into further gain as they bought government-owned assets at bargain basement prices."

The RTC used taxpayer money to clean up failed thrifts and then, instead of prosecuting the people responsible for bankrupting the industry, rewarded them by allowing the criminals to use their stolen money to buy back assets they had helped inflate at depressed prices. Also with the RTC throwing hundreds of thousands of properties on the market at once, real estate prices could not help but drop, making the deals even better.

And now, with the TARP beginning to ramp up its activities, the government will be doing essentially the same thing: using taxpayer money to buy inflated securities at higher prices and then sell them later on. Officials state that the government may actually make money from the program, but it is difficult to see how currently troubled assets will be more valuable than future worthless assets as the economy continues to deteriorate.

The parallels between the current housing market bust and the Savings & Loan crisis of the late 1980s are almost too numerous to count: small lending institutions flooded with federally-insured Wall Street money, rampant overvaluations and looting, a Bush in the White House, and the government finally taking over the failed assets of a bankrupted industry.

Under the Garn-St. Germain Act of 1982, interest rate and investment aspects of the Savings & Loan industry were largely deregulated, but federal insurance regulations on deposits held at S&Ls were increased. The limit was raised from $40,000 per account to $100,000. Also, the Federal Savings and Loan Insurance Corporation (FSLIC) was granted "the full faith and credit of the US government," meaning that the federal government would guarantee deposits held in institutions with FSLIC insurance.

Immediately, money began flooding into regional thrifts from Wall Street investment firms through deposit brokers, who located S&Ls paying the highest interest rates and poured $100,000 deposits into those banks. These were all accounts of no greater value than $100,000, making them completely insured in the event an S&L failed.

The large amount of money flowing into the regional thrifts from Wall Street firms like Merrill Lynch allowed the smaller banks to boost their reserves and make increasingly larger loans. Loans were made on bad real estate deals using inflated appraisals, directly to friends, family, and cronys, condominium development projects, commercial real estate developments, casinos, jets, and so on. Huge bonuses and salaries were paid out to bank presidents and everyone else involved in the scams.

There was even a forerunner to the securitization process that took hold throughout the subprime mess. Participation deals allowed thrifts to spread their loan default risk to other banks by selling a portion of their loan portfolios to other S&Ls. This also allowed thrifts to remove delinquent loans from their balance sheets for just long enough for the regulators to miss them, at which point they bought back the toxic loans.

The bubble and inevitable collapse of the industry was set up by the Reagan-Bush administration and the Congress removing lending and interest rate restrictions on the S&L industry and increasing regulations on federal deposit insurance in the event of a failure. So it is a mistake to blame the crisis on deregulation when the most important regulation was actually increased.

The government removed some regulations while it simultaneously increased regulations to protect depositors against failure. But this was just an invitation for criminals to take advantage of the insurance limits, not a problem with deregulation or the free market. Greed and corruption certainly existed, but they would not have had such fertile ground to grow in the absence of federal protection against failure.

In the early 1990s, the government established the Resolution Trust Company (RTC) to buy up the inflated assets of failed S&Ls and sell them for whatever they were worth. This resembles the current Treasury Department Troubled Assets Relief Program (TARP) that will be used to buy up inflated credit securities and sell them for whatever they are worth. Again, another regulation against failure will allow banks, after pumping an industry to create a bubble, to confiscate any remaining assets for cheap.

The 1990s was also the decade where the banking system learned that, no matter how poorly their domestic or foreign lending decisions were, the US federal government would bail them out. All they had to do was pump a market or country full of cheap money, then remove the easy profits at the top of the bubble, then get back in during the collapse when prices fell.

Of course, the "collapse" of a manipulated market bubble was summarily declared a "crisis" in the "free market," and a taxpayer-funded bailout was required to prevent a credit crunch. This happened during the Mexican peso crisis, South East Asia crisis, and collapse of hedge fund LTCM, to name a few. Every time there was a problem, the Federal Reserve turned on the money spigots, lowered interest rates and kept them low, and investment firms were bought or bailed out to avoid actual failure.

The internet stock and 9/11 recession were classic examples of this, as the Fed lowered interest rates beyond all reasonable levels and kept them low while the housing market was pumped full of easy money. The artificially low rates turned a housing boom into an unsustainable bubble, while no one had a stake in the failure or success of any particular borrower. Lending standards disappeared.

Mortgage originators were only too happy to make loans to people who had no money or income that could be used to pay back the loan. Wall Street financial institutions enjoyed the profits they made from funding these types of loans. Investors around the world were only too happy to buy the AAA-rated securities that were created from these subprime mortgages. It was another participation scheme, but on a global level.

When rates began to rise, and people began taking a look at who actually received subprime mortgages, the industry collapsed virtually overnight. But subprime lenders were simply conduits for money from Wall Street. Once the large investment firms started to feel the pain of the collapse, an emergency was declared in the markets. The Fed and Congress reacted immediately and allowed the firms to loot the economy with bailout after bailout, new Fed auction window after new Fed auction window, and federally guaranteed loan after federally guaranteed loan.

The only hope that legislators still have is for another bubble to form or the complete looting of the American economy. With no boom in any market sector right now, it is difficult for the manipulators to create stability and upward momentum for the stock market. Thus, it should be no surprise that Congress went back to the S&L toolbox and has been attempting to prime the pump for another financial bubble to form.

Just a few weeks ago, with the passage of the $700 billion bailout plan that resembles the old S&L Resolution Trust Company, the limits on federal deposit insurance were raised from $100,000 per account to $250,000. Is Congress desperately trying to inflate a new bubble fueled by corruption, greed, and a federal backstop against failure?

The new legislation significantly reduces the possibility of foreclosure (let alone sheriff sales or eviction) for those homeowners whose mortgage is taken over by the federal government. Because the perception in political spheres is that foreclosures are bad when they are being reported on the news, the government has indicated it will work with borrowers on mortgage modifications.

Especially now that greedy corporate CEOs of financial investment firms and insurance companies have been bailed out, with banks next in line for direct capital injections, politicians can not go back to their constituents proclaiming the virtues of the free market and that foreclosures will be tolerated as a necessary mechanism to liquidate bad debts. Foreclosure, like impeachment, is now off the table.

Homeowners who leveraged a home close to or more than 100% of its value during the bubble will be rewarded the most, since banks will not want to keep loans on properties that are underwater. These will be the first defaulted mortgages dumped into the new government TARP, and borrowers have little incentive to make the monthly payments.

Especially if there is a possibility the government will renegotiate the loan balance, the incentive is actually to stop paying and just keep living in the property until the bank sells the loan to the government. Then owners can negotiate with the bureaucrats to lower monthly payments and the loan balance to a more reasonable level, and the government will sell the mortgage back into the private market, leaving taxpayers to eat the loss.

Prudent home buyers who had saved money for a down payment will find that the bank will keep their loans, however. It is more profitable for them to foreclose on homes with equity and resell the properties on the market. Thus, savers and the financial responsible who face foreclosure due to economic hardships, as opposed to not wanting to make the payment on a house underwater, will get no help from the government program.

In fact, if homeowners know a greedy corporate CEO, it may be wise to partner with him in order to create more fake money out of thin air in a cash-out refinance on a hugely over-valued property, split the proceeds from the loan, and immediately default. The bank can sell the loan to the government and the balance will be negotiated down. Loan fraud has never been so easy when the government rewards it!

Car loans and credit cards are next, of course, with defaults rising in each of these and the TARP authorized to take on securities backed by such categories of debt. The more defaulted credit cards one has, and the larger the balances on each, the more likely homeowners will be to convince the government that all of their debt should be negotiated down due to poverty.

The president's advice after the attacks of 9/11/01, "go shopping," holds true more than ever now, since the government will pay for all of your purchases. The more cash you can take out of your home, ideally with a fraudulent appraisal, and the more you can put on your credit cards before your limit is restricted, ideally on cards you obtained through misrepresentation, the better your chances are for receiving some of the $700 billion bailout. And it is better to receive a part of it than to have to pay for it, right?

Obviously, most people will not go to such lengths and take advantage of their credit lines, and the very idea surely sounds absurd and predatory. Most people live within their means until inflation (caused by government printing money out of thin air to finance such programs as Wall Street bailouts) causes them to fall further and further behind. Few consumers voluntarily chain themselves to so much debt they will never be able to pay it back or commit fraud on banks in order to get free money.

But that is the point -- the government encouraged this kind of moral hazard behavior in banks for decades with one bailout after another, and now it is rewarding the same behavior in the average citizen. We are all greedy corporate CEOs now, living off borrowed money until the government bails us out of our inevitable failure. Federal backstops against failure mean that everyone can take on high levels of risk and then expect to be bailed out anyway.

No failure left behind.

But then again, the economy did not need the $700 $850 billion bailout passed by Congress. The government, working with the banks, used an apparent crisis of confidence in the stock market to take more power for itself, this time to be able to interfere even more with the financial markets. Government always uses such manufactured crises to give itself more power, responding even to problems it caused with former responses to previous government-created crises.

Most of the top bankers knew how the money system worked in the United States and that they would prosper no matter how well or poorly the economy and even their own companies performed. Although much of the profits of the financial investment firms came from the securitization of subprime mortgages, CEOs could not have cared less about the real estate market overall -- they were making good money in an up economy and would make good money if the housing market crashed.

The banks were aware they would win any way the market went. If housing had stayed strong, banks could keep lending money to people who would never pay it back. By then purchasing those loans, slicing them up into bonds, and insuring the mortgage-backed bonds, they could profit by selling toxic loans to unsuspecting foreign pension funds in Norway and hedge funds in New York. As long as the housing market kept rising, high default rates were not a problem even if owners could not stop foreclosure -- banks could always just sell the houses for even more profit.

On the other hand, if the real estate market fell, the banks' stock would fall and a "crisis" would develop naturally. When that point came in late 2007 and early 2008 with the failure of the subprime mortgage industry, Bear Stearns hedge funds, and Bear Stearns itself, the banks partnered once again with government to increase the power of politicians to reward banks for bad behavior, poor lending guidelines, and moral hazard.

With the largest corporate banks partnering with the largest government in history, plans have been proposed to give government more power and the ability to invest in and take over any private company for any reason. The Treasury has plans to use its new authority to inject liquidity into worthless mortgage securities for face value. Such bailouts ensure that corporate CEOs will be able to keep the hundreds of millions of dollars they made during the boom, even as their clients, borrowers, and investors foot the bill for the bailout. Again, the banks and government win.

In a complete financial collapse, foreclosures may be halted for a while as banks holding mortgages fail, especially if the government does not step in quickly enough to take over the assets or arrange sales of the failed institutions (as it did with the sale of Washington Mutual to JPMorgan Chase). Even in the best case, though, this may only mean a temporary halt in the wave of foreclosures sweeping over the nation.

A complete meltdown of the economy and financial system will most assuredly be precipitated by a severe loss of confidence in the dollar and the banking system. Depositors will make runs on banks, taking out their money in the form of cash in order to prevent the institution from declaring bankruptcy and refusing access to currency.

Because banks do not hold very many reserves in their vaults, they will be unable to pay back everyone who demands money and will then be taken over by the Federal Deposit Insurance Corporation (FDIC). There is a limit to how many failures the FDIC can handle, however, and there is already discussion among bureaucrats and politicians that it may have to borrow money from the Federal Reserve in order to meet its deposit insurance obligations.

Even more worrisome is the fact that foreign investors may dump their dollar holdings (in the form of US Treasury securities) onto the world market, driving down the value of the dollar very quickly and flooding the market with a very large supply of devalued dollar-denominated securities. This would ensure that the government can no longer borrow money from these nations, thus restricting its ability to deal with an ongoing financial crisis by borrowing or monetizing debt through the issuance of more securities.

So the financial system may grind to a temporary halt as banks realize their insolvency and the government can not allocate resources to bail out financial firms or arrange sales of assets between a healthy bank and a failed one. This may leave a lot of foreclosure victims seemingly hanging for months or even years as no one is there to collect payments, negotiate mortgages, or even pursue foreclosure lawsuits in the local courts.

But debt collectors are like cockroaches. Although it may seem as if they have disappeared during the financial crisis, they are simply watching out for their own and plotting a profitable return. Collection agencies will survive almost any disaster and will be looking to purchase defaulted mortgage debts as soon as the economic situation has stabilized. This means that homeowners now facing foreclosure need to keep track of how many payments they have missed and be ready to make those payments when a legitimate owner of the debt comes asking.

So homeowners facing foreclosure should do everything they can to keep saving money even if their bank fails or the government can no longer meet its obligations. Lenders will go bankrupt and the FDIC may join them in not having the resources to guarantee deposits in a currency that holds any value. Families facing foreclosure may get a much-appreciated break from the stresses caused by losing a home, but debt collectors will be waiting on the other side of the collapse to begin buying up defaulted accounts and going after homeowners.

Thus, it is always in the interests of everyone who owns a home, is facing foreclosure, rents a property, or simply has any investment in the US dollar to oppose all government assistance to failing financial firms. Many of them are failing because the products they offered (mortgage securities based on subprime loans) have become worthless. Forcing families to purchase these so-called assets with no value for arbitrarily defined prices is government at its most economically violent. But there are numerous other reasons, as well, not to save Wall Street from its predatory actions against the American people.

Rewarding predatory lending and fraudulent mortgage servicing will only encourage more of these same acts. This is the most important reason why the companies that engaged in money laundering, securities fraud, deceptive sales practices, and inflating the housing bubble should be allowed to fail, declare bankruptcy, and have their business practices disclosed. Rewarding them by nationalizing certain companies or federally guaranteeing percentages of takeovers hides the truth from the people and will result in more fraudulent bubbles and more companies relying on the ignorance of people too poor to know the difference between sound financial practices and predatory loans.

Any bailout of Wall Street fails to address the underlying factor driving the downturn in the economy; namely, declining home values. Government can not step in and mandate higher real estate prices, and taking money from families to hand over the banks who made speculative bets on rising home values only papers over the problem. The bubble was inflated by the Federal Reserve and the banking system; home prices have to fall now or the market for real estate will effectively be frozen for the foreseeable future.

Government is also using violence and coercion in its bailouts against the people, while only giving banks "encouragement" to help families in foreclosure. Despite 90% of the country being against the $700 billion bailout, Congress just stole thousands of dollars from every family in America in order to force them to purchase worthless mortgage securities that no one in the world is currently stupid enough to invest in.

But when it comes to reducing mortgage balances, negotiating interest rates, or declaring a moratorium on foreclosures, the government either puts together voluntary programs that banks fail to participate in fully, or politicians claim that they can not interfere in private contracts or the free market. The government's monopoly on the use of force is obviously reserved for forcing homeowners to buy back their own worthless mortgages and then lose their homes anyway.

Finally, the government is not even overtly stealing extra money from families by raising taxes or other fees in order to come up with the $700 billion. Instead, they will borrow the money and issue more US Treasury securities, which will be pledged as security for dollars borrowed from the Federal Reserve. The Fed simply credits the government's bank account and dollars come into existence from nothing, thereby inflating the currency and debasing the value of the dollar. The only result will be higher inflation, and the more the government bails out Wall Street, the higher prices will rise for goods and services in the economy.

All that the government can do when rescuing one sector of the economy over another is redistribute wealth from one group to another. With the current financial crisis, Wall Street has demanded that families and individuals pay for the decades-long corruptions of financial firms, aided by government guarantees and federal backstops against failure. Now that banks are failing and the debt and derivatives markets are unwinding, wealth is decreasing for the average person saddled with tens of thousands of dollars of debt even as government is stealing what little wealth people have left in order to facilitate Wall Street being able to offer more debt to Americans.

Instead, all that is being offered is an ambiguous bailout package whereby the Treasury would borrow $700 billion from the Federal Reserve in order to provide welfare to any corporation that may be in trouble. Financial firms, automotive companies, and any other business would be eligible for a taxpayer funded rescue. In return, American homeowners are still expected to pay their mortgages and other bills at the predatory interest rates at which they were offered to begin with, while the banks dump the losses from these predatory loans onto the very people unable to pay them back.

All of these subprime, Option ARM, and other creative mortgages were packaged and sliced up and rearranged into bonds. The bonds were valued based on the income that they would generate over time through interest rates set at 3% for 2 years then 14% for 28 years as the rates reset based on market conditions. With the banks and the Federal Reserve controlling interest rates in the economy, it was a simple matter to offer low teaser rates and then spring the trap later on.

But the banks counted the value of these bonds based on this estimated income and with low default rates. The MBSs, ABSs, CDOs, and other confusing mortgage securities were valued under mark-to-market accounting rules, which ensured that they would look good for at least few years. House prices kept increasing and even if the underlying loans went bad, the properties could be sold and any losses on the bonds more than made up for. A mortgage servicing fraud industry based in out of the way states ensured that hedge funds based in the Cayman Islands could raid local communities in Detroit and manufactured suburbs in California from their offices in New York.

Now with the loans defaulting, these same giant investment firms and banks are being forced to take huge writedowns on the garbage bonds they had overvalued to begin with. Mark-to-market when the market has disappeared means they have to take the bonds and mark-to-zero. Now there is a lack of confidence in the entire financial system, with banks unwilling even to make loans to each other because of the uncertain exposure to such toxic mortgage securities.

Thus, if a freeze was enacted by the federal government and mortgage rates were set to a lower level, the bonds would have to be written down even further by the banks to mark them to their new market price. And this is still assuming that lower interest rates would help borrowers save their homes from foreclosure. At the least, banks would have to write down the value of the loans partially to show the lower interest rate; at worst, the loans would still default and have to be marked to trash.

So obviously, the banks do not like the idea of an interest rate at all. They would much rather dump all these worthless bonds on the American people instead of admit they hugely overvalued the housing market and have to write down the paper losses on securitized mortgages. This is why Fed Chairman Bernanke is asking Congress (and you and I) to buy these bonds from the banks at 100% of their face value, even though estimates of their true value range between 0-35% of face value at this point.

The Big Business and Banking Bailout for Billions Act of 2008 is just more socializing losses and privatizing gains. Nothing more, except that this time, it is on such a massive scale that no one -- the people, their representatives in Congress, even the docile media -- believes their deceptions anymore. Opposition against the bailout could not grow any more fervent, with over 90% of the population against it; in fact, the few people in favor of the rescue are most likely the ones employed by the financial firms and mortgage lenders likely to face bankruptcy without stealing billions of dollars from Americans.

In Chicago, Cook County Board President Todd Stroger is leading the efforts to impose a year long moratorium on foreclosures. Stroger is gathering signatures, speaking at public engagements, and sponsoring workshops throughout Illinois to help foreclosure victims. Entering 2008, Chicagoland foreclosure rates were at an all time high, but home sales are beginning to turn around and foreclosure rates are beginning to flatten out. Home sales are up 25% which will help the overall economy, but home values are still decreasing in many areas, indicating the market still has a way to go before supply and demand corrects. Overall home appraisals within the city of Chicago are down over 5% from last year.

Michigan activists and public officials are joining together this week in Lansing to march in a parade to halt foreclosures for up to two years. Michigan is one of the hardest hit states when it comes to foreclosure and decreased property values. The state senate bill protects homeowners for a period of 6-24 months, while giving would-be foreclosure victims a chance to get back on their feet. Michigan foreclosure rates were up 27% from last year, which is actually an improvement from previous periods. Foreclosure rates throughout Michigan were up over 100% in previous months! Michigan is still easily one of the top 10 states for foreclosure filings, but rates are finally significantly decreasing, although this market was also artificially pumped full of easy money, driving up prices to unsustainable levels.

Last weekend, Sept 7th to be exact, the government officially took over the mortgage giants Fannie Mae and Freddie Mac. Both of these organizations were created by the government and Fannie Mae was previously run by the government, so their takeover comes as not really much of a surprise. By taking back these organizations, the government hopes to provide stabilization throughout the financial system and the economy as a whole by showing that the US government will stand behind troubled private lenders and mortgage guarantors and continue to focus on providing low cost mortgages to home buyers throughout the US.

The end result of this “conservatorship” will probably be the American tax payers bearing the brunt of the foreclosure crisis, to the tune of at least $200 billion, although Fannie and Freddie guarantee about half of the $9 trillion American mortgage market. Senators nationwide are asking the newly appointed Chief Executives of Fannie Mae and Freddie Mac to temporarily put foreclosure proceedings on hold across the country to allow local governments and homeowners to find other options to stop foreclosure. Finding solutions will mean that taxpayers are not on the hook to make up losses due to foreclosures.

While foreclosures in many states such as Nevada, California, and Arizona still seem to be increasing, other states like Tennessee and Idaho are leveling off. Based on 2007 foreclosure rates, Tennessee rates are nearly identical this year. This may represent an improvement, but the state still has 13th highest rates, with over 1 in 600 homes in some stage of foreclosure. Nationwide, about 1 in 400 homes have received some type of notice indicating they are in default of their mortgages. The top ten states in foreclosure rates were Nevada, California, Arizona, Florida, Michigan, Georgia, Ohio, Colorado, Illinois and Indiana, in that order, although Michigan, Georgia, Ohio and Colorado all reported rate decreases and may soon find themselves dropping from the dreaded top 10 list.

Despite the help offered by most government plans, foreclosure rates across the nation have increased at their own pace and may now be finally starting to level out in some areas. The fact that this is happening just as the financial system goes into crisis and the Federal Reserve and US Treasury are stepping in to take over private companies indicates a lag time between when the crisis hit Main Street and when the consequence are felt on Wall Street. It also indicates how misguided it is to trust in government programs which are proposed to fix problems now, but do not take effect for months, thereby always attacking problems inefficiently and after the fact.

The history of Merrill Lynch in the US housing market goes back decades further than the subprime mortgage crisis, though. During the 1980s, as Savings and Loans (S&Ls) were deregulated, Wall Street firms financed some of the frauds that resulted in the collapse of the S&L industry. Deregulation allowed S&Ls to accept brokered deposits where a large investment banking firm would package together accounts of $100,000. They then send these funds to regional Savings and Loans that were searching for funding for commercial real estate projects. Merrill was one of the largest deposit brokers on Wall Street.

In the midst of the post 9/11 American housing market recovery, Wall Street firms were buying billions of dollars of subprime loans from nonbank lenders. By the end of the bubble in housing and subprime lending, Merrill Lynch was one of the two largest firms (along with Citigroup) issuing Collateralized Debt Obligations (CDOs). After purchasing loans from mortgage originators, they would be packaged into Asset Backed Securities (ABSs) and sliced up according to risk. The riskiest parts of several packages would then be grouped together and further securitized into CDOs, and then sold to end investors around the world.

Merrill Lynch and the other Wall Street firms would, of course, generate commissions on every step of the process. Warehouse lines of credit were offered to subprime mortgage lenders in order to make loans to the public. Once the mortgages had been originated, the investment firms would purchase packages of the loans from the originators and securitize them.

However, Merrill took the process another step and actually provided loans to investors to buy their CDOs once they had been securitized. Most of the money on both ends of the transaction came from the Wall Street firm, increasing their exposure to the subprime industry by orders of magnitude. The firm would buy subprime loans from nonbank institutions it offered lines of credit to, securitize them into ABSs, create CDOs out of the riskier portions of the ABSs, then provide more loans to investors to purchase the bonds.

As one of the largest and most prestigious investment firms on Wall Street, Merrill Lynch could also aggressively target the subprime market. The banking giant paid more for loans than any other Wall Street firm, paying higher premiums for subprime than any other investor. As well, it would offer cheap warehouse lines of credit to nonbanks to make loans as long as they then sold the mortgages to Merrill for securitization.

The only piece of the total subprime puzzle that Merrill was lacking by the end of the housing bubble was owning its own origination company. Although it had been interested in purchasing New Century, the mortgage company balked at the deal and ended up in bankruptcy. Even by February of 2007, Merrill did not own a subprime lender, so it purchased First Franklin from National City Bank. Since delinquencies were already rising in subprime generally and at First Franklin specifically and concerns were being raised about the long term value of home prices, this was probably not the best business decision the Wall Street firm had made.

Just a year after buying the company, Merrill closed First Franklin in March 2008. From operating a trading desk where it would compete with Fannie Mae and Freddie Mac in the secondary market as buyers of unsecuritized whole mortgages to only funding subprime loans through First Franklin that could be sold to Fannie/Freddie, Merrill's origination and securitization business had made a 180 degree turn.

Soon after its ill-fated purchase of First Franklin, it was clear that Merrill had begun to see the writing on the subprime wall. The Bear Stearns hedge funds that collapsed in August 2007 had borrowed $850 million from Merrill Lynch in order to purchase more subprime mortgage bonds. Before the collapse, in Spring 2007, the firm issued a margin call to Bear Stearns and then took control of $850 million in bonds as the hedge funds could not meet the calls. A few months later, the hedge funds collapsed and the credit crisis began in the American and then the world financial markets.

Flash forward to this past weekend, and, amidst the attempts to keep Lehman Brothers solvent, Bank of America purchased Merrill Lynch. Now the largest commercial Savings and Loan in the United States, BofA, which just purchased the largest mortgage originator, Countrywide, is consolidating further by purchasing its very own Wall Street investment firm, Merrill Lynch. In effect, the entire subprime scam can be operated from within one corporation, from Merrill lending money to Countrywide to give loans to unsuspecting homeowners, to Countrywide selling the loans back to Merrill, to Merrill offering CDOs to BofA investment funds and depositors.

Lehman Brothers had been one of the most prestigious names on Wall Street, playing in the world financial flows among such other firms as Bear Stearns, Citigroup, Merrill Lynch, Credit Suisse, and others. Lehman, along with Bear Stearns, though, led the way in subprime mortgage lending and securitizations of these loans into bonds salable to other end investors.

After the terrorist attacks of September 11, 2001, the largest Wall Street firms began reacting to the Federal Reserve policy of low interest rates and cheap fiat money by purchasing billions of dollars of subprime loans. These were most likely bought from nonbank mortgage companies, which borrowed money from companies like Lehman in order to make loans and quickly resell them to Wall Street.

In fact, Lehman very nearly owned this market, as other players like Merrill Lynch were late arriving to the subprime lending and securitizing game. Lehman Brothers and Bear Stearns were the major players in subprime, extending money in the form of warehouse lines of credit to nonbank lenders, buying the mortgage products, turning them into asset backed securities (ABS), and then selling these bonds to end investors like insurance companies, pension funds, local governments, and foreign banks.

Although the media portrays the credit crisis as if the largest Wall Street firms are simply unwitting victims of the subprime lenders and greedy homeowners who have decided to do nothing to stop foreclosure on speculation houses, the banking giants are counting on the ignorance of the public on at least two major points. Lehman participated in both of these games, drastically increasing their own exposure to the risks.

First, the Wall Street firms provided vast amounts of assistance to mortgage companies (subprime and otherwise) in going public. From managing their initial public offerings (IPOs) to giving the corporations loans in order to make subprime mortgages, Lehman could be involved with a lender from beginning to end, all the while hiding its role from actual home buyers. After helping companies go public and extending them lines of credit to make mortgages, Lehman would often buy the mortgages in order to securitize them and generate even more fees from the sale of the new bonds.

Second, as the hysteria for subprime loans grew during the early part of the 2000s, Wall Street firms would often become the owners of residential mortgage lending or loan servicing companies. Bear Stearns owned the notorious EMC Mortgage, while Lehman owned Aurora Loan Services. Conveniently, anyone who had a loan through these companies would not be able to connect the name of the lender to the Wall Street firm it was backed by, insulating the investment companies from negative publicity on the part of the subprime lenders they owned.

Hedge funds that invested heavily in subprime mortgage bonds were also often managed by the largest Wall Street firms. After all, unless the banking giants could control at least some of the money going into these securities, it would be difficult to increase demand artificially and convince municipalities and public pension funds to become investors. The credit crisis itself is popularly believed to have begun in August 2007 when two Bear Stearns hedge funds collapses due to a lack of confidence in its subprime mortgage holdings.

With the government takeover of mortgage giants Fannie Mae and Freddie Mac due to insolvency, it should come as no surprise that the investment firms most involved with the Government Sponsored Enterprises (GSEs) would also face collapse. When the GSEs experienced a wave of investigations and regulatory constrictions in the aftermath of the discovery of accounting regularities in 2003, Wall Street stepped into the void to provide securitization and purchase of mortgages.

With Fannie and Freddie's hands temporarily tied and unable to buy as many loans in the secondary market as were being originated, Lehman and others searched for or created new buyers. From selling mortgage backed securities (MBSs) to the GSEs to opening trading desks dedicated to purchasing unsecuritized whole loans from Savings & Loans and nonbank lenders, Wall Street could create mortgage bonds and sell them without the help of Fannie and Freddie. These loans would be packaged into MBSs and sold to investors with Structured Investment Vehicles (SIVs) taking the place of the government enterprises, with Lehman generating fees at every level of the process.

So, this is the company that all of Wall Street and Washington will be spending this weekend deciding the ultimate fate of. Whether it ends up in bankruptcy, is absorbed by another investment giant, bailed out by the Federal Reserve or the Treasury, or allowed to move forward with its "restructuring" plan, the firm has left an indelible mark on the US housing market. The smart money has left Lehman by now, just as it had left the subprime industry before its collapse; now the sharks must decide how best to dispose of the carcass and leave shareholders and the public with the responsibility of cleaning up the mess left behind.

After the high inflation rates of the 1970s had been defeated by the Federal Reserve's monetary manipulations, the home foreclosure rate began to rise precipitously. In fact, this rate tripled during the 1980s, despite stronger economic growth in other sectors of the market and the fact that unemployment rates began to fall during the decade.

One main factor that drove the rising foreclosure rates seems to have been the stagnating or declining of real estate values in housing markets throughout the country. High inflation was no longer driving up prices for goods, while collapses in the oil, gold, and other commodities decreased the amount of financial protection a home could offer in the absence of rising prices every year. The lack of appreciation in the housing market generally began to contribute to rising foreclosure rates

Although unemployment actually fell during the 1980s, one important trend had emerged since the previous decade. More workers began to go into business for themselves, which meant that they were much more exposed to the direct working of the market. With the shift in the 1980s from production economy to a service-based one, as well, homeowners could face severe financial disturbances but still count themselves as employed, albeit in a failing business they owned. Moreover, business failure rates did increase during the 1980s.

Thus, more homeowners became business owners, tying their personal financial fortune directly to the sector of the economy they had entered into. A failure of the small business could quickly push the household into foreclosure, and changing market conditions throughout the deregulation period and beyond guaranteed that many companies would not be able to react to the new paradigm.

Two other trends that bear mentioning is the growing dependency on consumer credit and the declining savings rate that occurred during the 1980s. Americans began their love affair with credit cards, and had learned from the previous decade that saving money in a bank could result in the value of that account being wiped out due to inflation or bank failure. So consumers began borrowing money and spending their own incomes on paying off these loans instead of saving for any kind of emergency. When a business failed or property values decreased, foreclosure became more likely.

The mortgage industry had also begun to change in the 1980s compared to decades before. Savings and Loan institutions had been freed from most regulatory burdens and began to use the remaining laws to engage in fraudulent loan schemes, mostly on commercial property, while Wall Street's securitization of mortgages kicked into higher gear. The use of mortgage servicing companies by mortgage holders also grew during the decade.

These three trends virtually set up the economy for a deceptive end run around American homeowners, although the final piece of the puzzle had not been inserted yet. But it was waiting at the Federal Reserve as of 1987, with the appointment of Alan Greenspan as chairman of the Fed.

From opening the flood gates at every sign of economic slowdown and injecting liquidity into the market to lowering interest rates too far for too long, Wall Street banking firms had found a friend in Greenspan. Moral hazard was routinely rewarded in the subsequent decade, from the Mexican peso crisis, to the Asian crisis, to the LTCM crisis, to the Russian debt default.

But during the 1980s, the housing market was increasingly set up for failure, with a tripling of foreclosure rates in the decade. Deregulation meant that large corporations were freed from laws designed to protect consumers, although it also meant that the government would step back into the picture to protect these businesses from failure or accusations of fraud or corruption. For all intents and purposes, deregulation meant giving politically connected businesses free rein to prey upon Americans with no potential for public backlash against such practices.

It was not until the 1990s, though, that the housing market boom began, and not until the 2000s that it turned into the largest speculative bubble the world had ever seen. The 1980s, though, began the necessary trends in the economy, in government policies, and in the personal habits of Americans. Once a few other bubbles had burst, there was seemingly no other option left to obtain massive profits than to blow up the real estate market.

The Roots of the Mortgage Crisis - The 1970s

Maybe there is no financial disaster meter any longer in the public mind because nearly all of this type of economic collapse news is filtered through our television culture. Nine percent of homeowners in foreclosure¹ is so out of context that it is entirely meaningless for most of the news-watching population. They are unable to appreciate what this number means, because they have nothing similar to compare it to; only further irrelevant information and more sound bites.

Foreclosure rates way up. McCain picks woman as VP. A few words from our sponsors. Local murder. Obama says something about faith. A few more words from more of our sponsors. Cubs lose. Olympics ended. A few more words from our favorite corporations. Weather will be nice tomorrow after rain tonight. Fannie Mae and Freddie Mac bailed out. CSI coming up next. Enjoy our Thursday night entertainment lineup.

What is the connection between any of that information? And why should people care about the foreclosure rates anymore than they care about the latest Pepsi advertisement or the fact that the Olympics have ended? Most people are simply watching the news to ensure they have repeatable sound bites for work the next morning if a semi-informed discussion accidentally takes place.

In fact, the way that our news media reports information, nothing is connected to anything else. All of the stories reported on television turn into nothing more than sound bites from a continuous stream of too much data presented as news entertainment.

And no one should care about the foreclosure rates when they are being sold cars with 0% financing every few minutes. Financial Armageddon is bad, but if it is presented as entertainment and punctuated with psychologically rewarding commercials, then it is meaningless at best and actually encouraging at worst.

In fact, the very medium of television is so insulting to the intelligence of the average human being that people simply lower themselves down to the level of the medium and discount any attempts at critical thinking or analysis. If every few sentences, I inserted a few kind words about Gateway Computers or Amazon.com, most people would stop reading, believing me to be hopelessly distracted or even schizophrenic. But this is exactly how television makes all news irrelevant.

People's ability to detect the collapse of our economy and financial system has been so deadened by years of having their intelligence lowered to the level of television that they probably will not care even if the system does collapse. As long as the Machine that delivers their ideas and entertainment does not stop, they will keep trusting in their unconnected distractions.

Source:
¹ mrmortgage.ml-implode.com/2008/09/05/9-of-all-mortgages-in-defaultforeclosure

Housing prices are going to continue falling for quite a while, which is a negative for many homeowners, but will bring values down to the level of real affordability. The real estate bubble was pumped full of artificially low interest rates and cheap money; along with declining lending standards among large banks and small lenders alike, the crash was inevitable after a historic run-up in home prices. In fact, prices are falling to levels not seen since the early 1980's, which may soon open up the markets again as consumers are finally able to afford to purchase properties without resorting to unnecessarily complex mortgages.

The low interest rates that prevailed years ago is having a direct impact on rising prices in the economy right now. Interest rates can affect the cost of short term borrowing as soon as they are changed, but the long term effects are not seen until years later. So rising commodity, food, and energy prices may simply be a result of the extremely low interest rates the Fed used to combat a perceived (but entirely incorrect) threat of deflation after the 2001 slowdown.

Because of these too-low interest rates, the dollar has been getting steadily weaker, and the Fed's policies of exchanging subprime mortgages for Treasury securities has not helped. But now the rest of the world is following the American example and devaluing their own currencies just as the Federal Reserve has been either rising or holding steady interest rates. This is having the effect of strengthening the dollar and actually reducing prices slightly in the commodity and energy markets.

Oil also bears mentioning as a potential positive; namely, a stronger dollar will decrease the price of energy. As well, at around $140 per barrel, oil sells for about twice what it costs to produce it, which should be a clear sign of either its relative scarcity or that there is a bubble in the market. Foreign countries, which had historically subsidized oil and gasoline prices for consumers, are ending these subsidies, which will instantly drive up prices at the pump. For many people, this will necessitate a decrease in demand, driving prices in America down further.

Although these are just a few, relatively small, positive signs for the economy, they may provide some relief to homeowners and open up the housing market again, or at least take off some of the financial burden. And the best part of each of the examples listed here is that they involve either no government interference or less government interference in the markets, which may lead to prices actually declining for once. Granted, there are still serious threats to consumers that will need to be overcome, but the bottom of the market may finally be on the horizon.

The New York Post is reporting that an undisclosed sovereign wealth fund (SWF) is interested in making purchases throughout foreclosure ravaged areas. SWFs are large investment funds owned and administered by foreign governments. One of the more publicized SWFs of the recent past is the Abu Dhabi fund which, in late 2007, invested $7.5 billion to prop up the banking corporations Citigroup.

After the real estate markets were pumped full of easy money that created massive malinvestment and drove prices to unsustainable levels, the market was crashed by the predictable, inevitable fallout from the subprime crisis and the subsequent drying up of credit. In communities throughout the country, wealth was created out of thin air, then pushed towards the local giant corporations, which were the only businesses to move into the mass produced suburbs.

Fraudulent bank loans were fed into the housing market, and the borrowers put the money right back into the corporations that get their financing from the largest banks and then privatize government services and outsource local industry and commerce. The result is a lessening of local government power at a strengthening of the corporate model. In suburbs with little or no community involvement to begin with, the conditions were ripe for the draining of the entire area's wealth.

Now, the same SWFs, financial investment firms, and large banks that financed homebuilders, home buyers, and corporations to build up and move into communities to piratize the incomes and assets of the residents need a method of dumping their dollar investments before the currency is further debased. They no longer need dollars to lend to homeowners who will never pay back loans, and are now focusing on simply buying up the actual real estate assets, currently selling at 60-80 cents on the dollar in some areas.

Investment banks made billions of dollars made from fees generated by selling mortgages to poor people and then made even more billions securitizing these loans and dumping them off on local government pension funds and other unsuspecting end investors. Now, flush with cash just after preying on the housing market, they are ready to trade in their worthless dollars for the land and properties of the American middle class, which has been hit hardest by the bubble's collapse.

For anyone who was wondering what would happen to all of those abandoned foreclosure properties without people to live in them, the answer is starting to become clear. Banks and wealthy investors will be the new feudal masters of the suburbs, using cash from the profits from the housing bubble, plus a few free handouts from the federal government in the form of banking and Fannie/Freddie bailouts, plus the destruction of any competition from actual people who might live in these homes due to the credit crisis.

Now with a recession almost inevitable, foreclosures, personal bankruptcies, and corporate bankruptcies are on the rise, some of which are already at or near historic levels. Restaurant chains and retail stores have been hurt the most by reduced spending so far, while holding money in a bank has become much more uncertain by the growing number of failed financial institutions taken over by the government.

Because of all this, homeowners who are already facing a financial hardship will find it much more difficult to recover or supplement their incomes until the crisis is over. Taking on even a low paying part-time job, one of the most effective ways to avoid falling behind on bills for a few extra months, may no longer be an option for many homeowners. Seasonal jobs in retail or shift work in restaurants that have filed bankruptcy is certainly not an option, and many local businesses have been pushed out by the large chains.

Even for jobs that seemed steady, hours are being cut throughout the economy and even government workers may have to accept far less in wages. Although unemployment figures seem to indicate health in the job market, the numbers do not reflect such trends as more people working fewer hours or at jobs that they had to take simply to pay half of their bills every other month and avoid falling much further behind.

And even worse, homeowners' paychecks are getting lighter just as home prices are crashing and food and oil prices are skyrocketing. Getting any relief seems almost impossible, as all of the money is being taken out of the economy as lenders try to protect against rising defaults. But tight money means that more people will end up defaulting on car, personal, and home loans, which will cause the banks to tighten lending even further but also end up with the assets of people who could not pay their loans.

Despite a few recent pullbacks in the price of oil and other commodities, the short-term future looks exceedingly grim for the American economy with higher inflation and lower housing prices. Even homeowners who are able to stop foreclosure may find themselves holding a piece of severely price-depressed real estate in a neighborhood targeted by crime and full of empty houses with an incompetent government starved for public funds.

Unfortunately, the trend in the economy seems to point towards more insolvency and fewer loans, and it might be best for homeowners to join with their favorite stores in filing bankruptcy to escape huge debt burdens. Although the banks will line up to receive more inflated Federal Reserve bailout money, the less people support such a system of financial slavery, the more power communities will have to generate real wealth for their neighborhoods that can not be stolen by unelected federal bureaucrats.

Renters and conservative homeowners who were unwilling or unable to gamble on the real estate market over the past decade will now have to work even harder to make sure they pay their fair share of the government bailout of the banks. After hundreds of billions of dollars of inflated money already injected into the banking system by the Fed, taxpayers will now be expected to keep the Government Sponsored Enterprises afloat for a few more months as prices are manipulated upwards and private capital flees.

But after pumping the markets so full of cheap money that an artificial, unsustainable bubble was inevitable, how responsible is it for the government to keep attempting to reinflate the markets? Billions of dollars in credit lines to Fannie Mae and Freddie Mac to keep up appearances of solvency actually only hurts the average person struggling with a loan that has doubled in monthly payments on a property worth half of what it was two years ago.

Even worse, though, is the fact that rescuing these companies actually rewards the risks that the banks took during the boom years in making loans to people who had no income or ability to pay the mortgage. Instead of both homeowners and banks suffering for their poor borrowing and lending decisions, government bailouts are ensuring that banks feel less financial pain and the people experience a higher degree of economic devastation.

Inevitably, what such bailouts will lead to is more foreclosures as prices keep rising in all sectors of the economy due to the creation of hundreds of billions of dollars out of nothing. Every time the Fed injects liquidity or Congress approves more spending for one agency or another, the money is simply created out of nothing and put into an account at the Federal Reserve Bank -- money which came from nothing but was created as a loan to the government by the Fed and which will need to be paid back by future revenue.

Homeowners already worried about their monthly bills will have to work even harder to pay their share of the inflation tax and keep the banking system from having to recognize its total bankruptcy. Ironically, though, it is often the individual borrowers who feel the most remorse at falling into financial difficulties; the banks, on the other hand, simply wield their political power to make sure their insolvency is paid for by the very people whose assets and communities they are financially raiding.

Catherine Austin Fitts has often talked about the "piratization" of the American economy, and the term seems to fit better with every new liquidity injection, interest rate manipulation, and federal legislation designed to protect the banks and corporations at the expense of communities. The newest legislation is just another step along the process of treating the entire American economy as the most lucrative criminal leveraged buyout in history -- people financing their own homelessness.

When the internet and telecommunications bubbles were on their way up in the late 1990s, and in the middle of a decade of strong dollar policies coming from the Federal Reserve, US financial companies had great power over the investment flows between nations. With a little plotting, it was quite easy for speculators to remove capital from the Southeast Asian nations and collapse their currencies.

The next step was for the International Monetary Fund and World Bank to offer these nations in deep economic shock some handy therapy, in the form of loans. In return, the nations had to agree to privatize many of their public services, closing down state-run plants and utilities and selling the assets on the open market. Multinational corporations then moved in to take over these assets and run them for profit at the expense of the people living in them.

With the strong dollar policy and the collapse of the foreign nations' currencies, the corporations could move in and buy the formerly state-owned assets for relatively cheaply. They took dollars near their peak value and invested them in the assets in other countries that were near their low value in terms of the value of the foreign currencies.

Then, while these foreign nations were starved for capital and could offer manufacturing and labor for cheap, most of the American manufacturing base was outsourced to these same countries. While trillions of dollars have been leaving the United States to these countries, the housing bubble is created to entice people into purchasing real estate they can not afford for long.

Creative new loans are designed and accepted by banks and investment companies to ensure that the bubble will collapse. The foreclosure crisis is engineered in two ways. First, the largest banks are financing the movement of assets overseas, thereby removing jobs from the economy and pushing workers into bankruptcy or foreclosure. The same banks that homeowners send their mortgage payments to every month are the ones giving loans to manufacturers to ship jobs overseas and downsize homeowners.

Second, even if some homeowners can keep hold of their current jobs, resetting interest rates will double their payments in a few short years. With the Federal Reserve in control of manipulating interest rates, it is quite easy to drive millions into foreclosure. The Fed began raising interest rates, which decreased home values and put the first cracks into the entire housing industry facade. People could not afford the mortgage payment, and negative equity positions ensured they could not sell.

Once rates were increased and the crisis became self-sustaining, they were taken down again, collapsing the value of the American currency, the dollar. Now, with the dollar at a low, the investments the corporations made in the Asian currencies are worth much more, even as the value of assets, real estate prices, and the stock market in the US are falling. Now, these corporations that made trillions of dollars investing in the assets of countries with collapsed currencies can take their profits and drive values down even further in America and buy assets for cheap.

With the collapse of the Government Sponsored Enterprises like Fannie Mae and Freddie Mac and a steadily declining stock market, the entire country is ripe for the privatizing. As the federal government decides how much to reward the moral risk of making poor loans, corporations flush with appreciating foreign currencies are just waiting for the right moment to invest in such assets. They will be buying the country with the money they control, and using positions of power which allow them to collude into engineering these bubbles for their own profits and to increase their control.

In fact, many banks, if customers stopped making debt payments, would face collapse and bankruptcy in a matter of days as cash flow would dry up surprisingly fast. Smaller lenders that relied on only one specific type of credit, usually subprime mortgage loans, have already gone out of business, and the FDIC is preparing for the possibility of large numbers of bank failures. And this is just the beginning, and reflects only more defaults than expected primarily in the mortgage market.

It is the banks that have impoverished the nation, manipulated interest rates and the housing market, tricked the people into taking out more loans than could ever be paid back, and attempted to make it more difficult to escape this predatory credit trap through bankruptcy. But by enslaving the people and chaining them to their corporate jobs under threat of foreclosure or public humiliation, the lenders have also given Americans the one most important tool that can bring them all down.

When one group or organization takes out a large loan from a bank, that group then owns the bank and can dictate the terms of the agreement from that point forward. After all, if the group that took out the credit decides not to pay it back, the bank will be in serious trouble as they will have to write off that loan and they will not be collecting the principal or interest payments any longer. Thus, the borrowers have a large influence on the banks simply through the act of borrowing.

Over the past decade, banks had spent all of their time handing out money to everyone who could sign their name on a piece of paper, thereby creating massive amounts of new credit. But they have also given away all of their power to control money by relying on the financial health of the lower and middle classes of America, who are now being squeezed out of the economy by the banks' larger economic manipulations.

But it is these same borrowers, the group comprising the lower and middle classes who are now losing their homes en masse, that own all of the loans and, by extension, the banks. If enough of them simply stop paying the debt they have taken out, the banking system may not even be able to survive long enough to initiate foreclosure lawsuits and attempt to repossess assets. Politicians, in turn, may have to start listening to their constituents instead of the banks.

Such a simple refusal to pay (if it is not possible to pay off a bill entirely and retire the debt completely, thereby also destroying the money) may be a most effective social movement and act of civil disobedience. Without causing a single act of violence or breaking a law, the people could show the banks, bill collectors, and their lapdogs the politicians who is really in charge and that the health of the people is intrinsically intertwined with the actions of Wall Street. The lenders would no longer be able to treat the people as a feeding trough for easy money and a garbage dump for predatory lending scams and bad financial investments.

Of course, this is not an act that could be taken without large-scale participation by homeowners and borrowers, and there may be negative consequences for some families who end up losing their home or assets anyway. But it would not take long for a skyrocketing default rate to catch the notice of politicians, who may then realize that it is in their own best interests to serve the will of the people instead of looking for excuses to protect banks and corporations from the manipulations of the government, banks, and corporations.

The banks would notice the lack of payments coming in the door immediately, and may decide it is finally time to come to the negotiating table with homeowners who are struggling financially. Some borrowers may even get their phone calls returned by mortgage companies, or end up with an approved loan modification or other foreclosure solution, instead of being ignored until the day before their home is auctioned off out from under them.

However, the longer the foreclosure crisis rages along at a pace that allows the banks to go to the government every few months begging for more bailouts, tax breaks, and free money, the more homeowners will end up homeless without any action being taken to hold the predators accountable. Unfortunately, if the situation persists as it has for the previous year, more people will be unable to stop foreclosure, the banks will cover up their own bankruptcy through Federal Reserve bailouts, and prices will keep rising as a result of the continuing manipulation of the markets for the benefit of banks.

In the end, though, it may finally be time for the average person, so preyed upon by the banking industry for nearly a century in this country, to start reasserting ownership of the money of the nation. Although there may be a shock to the banking system if large groups stop paying their bills, it may be preferable to the slow burn of just enough people losing their homes in small numbers at any given moment, which engenders enough apathy for the current system of lender misconduct, deception, and corruption to continue.

This means that the high foreclosure rates have not yet begun to reflect what is happening in the real estate markets right now, as the numbers only represent how many homeowners defaulted on their mortgages nearly half a year ago or more. In some states with redemption periods after a foreclosure auction, homeowners who are currently falling behind may not be counted in the economic numbers for more than a year or two, depending on how far behind courts and banks are in pursuing foreclosure lawsuits against defaulting homeowners.

All of the current and coming economic collapse may very well indicate the end of the concept of "growth" as a measurement of the health of a nation or its people. Even as it has become more and more difficult to grow out of one problem or another, banks, investment firms, and government have all worked together to keep up an illusion of constant growth. But in order to keep up the illusion, corruption and deception have been relied upon to cook the books and manipulate the numbers.

Various tricks have been used for years to create an illusion of economic growth, when the reality of the situation is simply that more people are working longer hours for more of their lives and never getting ahead. Elderly couples who receive too little from Social Security and retirement accounts to pay their bills have to work, which means economic growth. People who eat out everyday contribute more to economic growth than families who make their own meals. Computers get faster, so the higher processing numbers count as economic growth even though the difference may be negligible. Such delusions of progress at the expense of personal satisfaction can be found in nearly all of the official accounting of growth.

Both political parties have benefited from the subprime mortgage fiasco and both presidential candidates have ties to the mortgage companies that have ensured the impoverishment and homelessness of many of their victims. And no matter who wins the White House, this corruption can be expected to continue as long as the propaganda of infinite economic growth remains firmly entrenched in the public mind. As the economy grows, so too will government regulations and control, which usually restricts the freedom of individuals while rewarding the corruption of politically-connected lobbying groups.

As the country goes into a deeper recession than has been experienced in decades, with June 2008 being the worst June month for the stock market since 1930, homeowners may wish to look to their own families and communities for foreclosure assistance. Even if local banks are able to remain open and avoid falling victim to the financial manipulations of the large money center banks, there may be little credit available for borrowers in the coming years. Local solutions will keep some communities together and in good health, while the subprime crisis turns less well-connected areas of the country into ghost towns.

Many homeowners who took out these lines of credit against the equity in their houses used them for large purchases or as a backup credit card to pay the necessary monthly expenses in case of a financial hardship. Now that lenders have locked some of these accounts and the entire economy is in full-blown hardship mode, it was only logical that homeowners would begin missing their payments in droves. For some, it is a matter of paying debt down on credit accounts they still have access to, while others will not be able to keep up on any of their bill payments.

The entitlement factor also plays a part in the decision of which debt payments to fall behind on. After all, homeowners had a contract with the bank to have access to a certain amount of money in case they needed it, and now the bank has cut them off from that. Although most consumers are aware of the fact that banks can and will change contracts and alter terms at will and it will all be legal, homeowners who can only make one debt payment this month will choose an open credit line to pay, rather than one that has already effectively been involuntarily closed.

The only somewhat good news about this situation is that, with such a rise in HELOC defaults to the highest numbers ever recorded, maybe more banks will be willing to come to the negotiating table with borrowers. Lenders with a HELOC lien on a property may hold the third mortgage on a property that has declined severely in value, and can expect to get absolutely nothing if the house is sold at a county sheriff sale. Therefore, it is in the best interest of these banks to help their clients stop foreclosure for as long as possible, in the hopes that markets will recover.

One of the few ways that mortgage lenders may be able to provide some tangible assistance during this economic recession will be to help homeowners stay in their properties. Although banks may have to settle for less in the short term, offering a mortgage modification or other workout agreement may result in a far better chance of recovering more of the value of a loan over time than simply foreclosing and attempting to sell a property at auction. The rise in HELOC delinquencies is just another indication that borrowers can use all the help they can get, and banks will be suffering almost as much as homeowners if they are unwilling to provide some measure of assistance.

The list of groups and institutions feeling the pain of the foreclosure crisis encompasses nearly every aspect of American life. County governments are faced with budget crises as property tax revenue falls. Mortgage companies are so far behind on selling homes that have been foreclosed on that they are holding off on beginning more foreclosure proceedings. Local court systems could not handle more foreclosure lawsuits anyway, as they are also far behind.

And the group most affected by the foreclosure rates is the homeowners and neighbors who have large numbers of abandoned properties sitting in the community. Ripe for vandalism and squatting, these empty properties are magnets for crime. With fewer homeowners in an area even to report the disturbances, and police departments reeling from lower budgets and higher fuel costs, the suburbs may quickly turn into the new slums.

It should also come as no surprise that homes that have been abandoned or are not sold are falling into disrepair as no upkeep is done on them by the owners (usually the foreclosing bank). Broken windows are not fixed, leaky roofs lead to severe water damage, and a broken sump pump may cause a basement flood to remain undiscovered for months. These are far worse than just an overgrown lawn and will contribute to a longer-term decline in house prices.

One good idea that local governments have had in some ares has been to take over these abandoned properties and make sure they are maintained or simply tear them down to improve the neighborhood. Although governments owning large portions of a community may not be a good idea, it can only be better than multinational banks owning these properties and leaving them to disrepair and crime.

But even governments that take over foreclosed homes must put the cost burden onto current homeowners through higher property taxes on fewer homeowners. In turn, the higher tax rates means that housing costs will be higher in particular areas, so home values must come down even further to induce buyers to move into an area. Falling property values, however, make it more difficult for homeowners to stop foreclosure by selling, and contribute to higher foreclosure rates.

Homeowners have also been forced into the mortgage trap as the housing market cools considerably. Even if they have never missed a payment, many home loans of the past decade were made up to 100% of the value of a property that may now have fallen 40% or more. Homeowners who wish to sell and upgrade or take a new job opportunity in another area of the country are unable to sell for enough to pay off their mortgage, whether they are in foreclosure or not.

Unfortunately, even as homeowners in foreclosure are forced to deal with the loss of their home and the negative consequences of this, the people institutions that are left behind often fare no better. The foreclosure crisis is contributing to a cycle of lower property values, more crime, and more desperate actions by local governments. Nothing yet, however, has been able to slow down the crisis in some areas of the country, and it may be that the mistakes of the subprime criminals and suburban sprawl will have to be paid for by mostly innocent homeowners and communities.

A good question that should be investigated is whether or not the credit scoring guidelines changed at all during the period when large numbers of subprime loans were originated. However, even a study of this sort may not shine much light on the situation. As we know from the bond rating agencies' failure to acknowledge the risk in the subprime loans, it is clear that manipulating credit ratings or scores is surprisingly easy.

But one thing that is known for sure is that the savings rate of Americans has been dropping over the past decade and even longer. Without substantial savings, people are unable to react to a short-term downturn in their financial situations, and can not begin to improve their lives in any significant way. In times of hardship, they turn to credit cards to finance their lives or are forced to cut down drastically in their standard of living to avoid falling into bankruptcy.

This type of cycle is incredibly difficult to break for many people, who fall further into debt at every little hardship and spend the rest of their lives trying to climb out of the hole. The prevalence of subprime mortgage loans requiring little or no money down allowed people who may have had little or no assets throughout their lives to purchase homes with no financial investment. They were not required to save up 10 or 20% as a down payment, so they had far less emotional attachment to the property, and did not have to alter their financial habits.

If a borrower had a history of late credit card or car loan payments, and was then offered a house loan with no money down regardless of their credit score, why should they care if the mortgage payment doubles in a few years and they can no longer afford it? The banks should have recognized that these borrower have a history of paying late and not saving for an emergency fund, but they were offered a seemingly great mortgage loan anyway.

For these homeowners who had nothing, were offered it all, and then had it all taken away again, there is always the good chance that they will get away from the foreclosure house with no negative consequences, besides more damage to their already meaningless credit score. And a bad credit history did not stop banks from lending hundreds of thousands of dollars in the past with little more than a signature, so the former homeowners can probably just wait a few years until credit conditions ease and apply for a new mortgage.

It is clear that not every homeowner to obtained a subprime loan was a poor credit risk or taking advantage of the loose lending. However, these types of borrowers, who had previously been turned down for loans due to poor credit and no savings, were given the subprimes. Whether they were just somewhat ignorant of the entire system or were trying to get in on the boom by buying a dozen houses and flipping them, the banks obviously overlooked past poor payment histories, to their own detriment.

Lenders did not have to lower their lending standards in response to this demand from borrowers with no credit or assets for creative financing vehicles requiring no financial investment on their parts, but for some reason, the banks did lower standards dramatically. If they did this in an attempt to stay in business a little longer, it was an extremely shortsighted goal with severely negative consequences for the majority of American homeowners, whether they are facing foreclosure or not.

If the recession turns into a particularly bad one and the credit crisis continues to squeeze consumers and businesses alike, all bets may be off for the economy. Oil prices and food costs have soared in the past year and have only accelerated in the first five months of 2008, while homeowners are being cut out of the lending industry by tightening loan policies and a cutoff of access to some lines of credit.

Many homeowners, no matter what their current financial condition, have saved far too little in the recent past to weather a personal or widespread financial storm. Living paycheck to paycheck just to make the increased mortgage payment can only end badly, and homeowners who invested their resources in larger mortgages and personal assets may find themselves wishing they had saved far more of their income.

In such an economic environment, cutting expenses and saving as much as possible become mandatory. During the boom years when credit was freely available to anyone who could operate a pen successfully enough to sign their name, consumption was the name of the game. Now that money is disappearing from the hands of consumers, the government has been printing more of it by the hundreds of billions of dollars.

The problem with this approach is that those who get to use the money first, like the banks and financial institutions, will get the money when it is at its most valuable. As this newly printed money expands throughout the economy, the people at the bottom will get a smaller share of it, but will experience higher costs anyway due to the inflation of the money supply.

So, for most of us, money will be increasingly scarce, but everything will cost more anyway. This makes cutting expenses and saving for a rainy day better than any other financial insurance policy. When a job loss or personal emergency results in a loss of income, any amount of savings can help get you through the initial months of a hardship.

However, this is not to say that you should cut out every little expense, never go out to eat, and live like a pauper. For most people, that is simply impossible to do, as they have been steeped in the consumer culture for far too long to break the habit of overspending. But any little step to cut an expense, go without a luxury more often, or cancel inessential services can ease up the strain on the monthly budget.

While every homeowner should try and save at least a few hundred dollars a month, depending on their income level, it is also important to eliminate potentially the largest drain on your monthly budget: paying off your debt. Even though it may seem like it will take forever to pay off the car loan and those high interest credit cards, just sending an extra $20 a month on one bill can decrease the principal balance significantly over time.

High debt and credit card balances will be one of the main reasons people are unable to recover from financial hardships, so it is in your best interest to pay down these balances as much as possible before running into a crisis. With the coming recession, it is likely that all of us will face some sort of economic breakdown in the coming months, whether an employer goes belly-up or the car breaks down. Making sure to get even a few extra dollars out of the credit trap may help facilitate a recovery.

The government and the banks seem to be pursuing policies that will cause nothing but severe financial harm to the vast majority of Americans. A credit crisis at the consumer level combined with massive levels of inflation to bail out the banks may lead the country far past a recession and into a panic or inflationary depression. It is in all of our best interests to reduce our exposure to the slow collapse of the financial system any way we can.

Well, after months of these programs being in place, foreclosure rates have continued to increase. It seems few people are taking advantage of the government's guidance through these programs and use them to lower their monthly payments. Even on a month-to-month basis, foreclosures are increasing, with April 2008 numbers four percent higher than March, according to a recent report by Bloomberg.

For a little bit of perspective on how big the housing crisis is becoming, compare 2007 foreclosure rates to this year. Foreclosure rates have risen 65% from a year ago and are still increasing by the month. California has seen the worst increase at 327% year over year. More than three times as many homeowners are facing the possibility of eviction this year than they were last year, and no relief is in sight yet.

What is not surprising, though, is the failure of the government's highly touted loan modification programs. The same problems that homeowners have always had in such situations have not even been addressed, let alone solved. Homeowners sit on hold for hours, the lenders take months to make a decision on the workout program, and no voicemail is ever returned. This chain of events simply continues until the day before the county sheriff sale, when the owners are sadly turned down by the mortgage company.

The same excuse is given to the owners time after time: "We're sorry, but you do not make enough income to qualify for a modification at this time." This ignores the fact that it is the mortgage companies themselves who are often responsible for homeowners not being able to qualify for a loan workout. They wait so long that several more payment due dates are missed, which increases interest, adds late fees, penalties, and attorney fees and court costs.

Thus, because the banks wait so long to make a decision on whether or not their clients qualify for a mortgage modification, a several hundred or thousand dollar deficiency turns into tens of thousands of dollars of accrued interest and various junk fees. And the banks call this a "proactive" effort to offer homeowners a second chance to get back on top of their mortgages!

Again, the banks and government have been proven to be working together to spew out more propaganda at the people. Rising foreclosure rates and continuing problems with qualifying for a mortgage modification give lie to these voluntary programs that were set up to help homeowners stop foreclosure and work with their lenders through the medium of government assistance programs.

What is this results in, though, is a consolidation of assets and financial power in the hands of the banks. Homeowner will lose their homes in large numbers and local governments will face insolvency and budget crises as property tax revenues fall. Small and medium size banks will also face collapse due to the mortgage fallout, while large banks gobble up the smaller ones or government takes them over through the FDIC. The machine of the corporatocracy continues to roll over the American people.

Also, partly as a result of the collapse of the Savings & Loan industry, and the resulting wave of foreclosures from the fallout, real estate was a steadily-appreciating, but not inflated, market. Investments were going elsewhere and returns were better in other market sectors than could be had on real estate or mortgages, two seemingly somewhat boring markets.

But then, around 1997, the markets in Southeast Asia and other developing nations became super-inflated, with many of them pegging their currencies to the US dollar. Speculators could then inflate the markets, driving capital into them and inflating stock values, and then create a flight out of the currency, taking their profits. Many of these countries saw their currencies collapse relative to the dollar as capital fled. As a result, they were forced to impoverish themselves and take loans from the International Monetary Fund.

The same currency destruction happened most notably in Russia in 1998, where the government actually defaulted on its debt, which was quite unexpected. The most powerful nation in the USSR that competed with the United States for decades during the Cold War defaulting on its bond payments was a surprise for many investors. A large hedge fund at the time, Long-Term Capital Management, had bet heavily in favor of the Russian bond market, and was in danger of collapse. The Fed and other large banks stepped in to make sure this did not happen, thereby setting the precedent of bailing out hedge funds.

In 2000-2001, the dotcom bubble burst, as investors realized internet companies could not make money without business plans. Many of them folded, and the market began to sink. It sank even further as a result of the 9/11 attacks on the Pentagon and New York City. As a result, the large energy-trading company Enron faced collapse as a result of its aggressive accounting fraud. But Enron had engaged in the somewhat novel idea of selling off its debt to other investors, a plot the largest banks in the country had helped the company put together.

After the collapse of the dotcoms and the disclosure of Enron's accounting shenanigans, two things happened to work together to create the housing bubble. Without both, the bubble would not have inflated so much, most likely.

First of all, the banks and mortgage companies realized what a great idea Enron had in selling off its debt. The banks could originate mortgages and package them up and sell off the rights to collect the payments. The profits they got from selling mortgages would help them originate new mortgages, and the scam would continue forever, or at least as long as the real estate market was increasing in value. Because they did not have to worry about collecting the payments themselves, these origination companies did not have to worry about borrowers being financially able to pay their debts.

Second, because the Federal Reserve lowered interest rates to below 1%, huge amounts of capital flowed into the US market, and anyone who could successful operate a pen could sign for a mortgage. Interest rates were so low that lending guidelines became nonexistent. If the homeowners defaulted, it did not matter in the least, since the bank could just re-sell the house on the open market and make a profit.

This was the environment until early 2007 or so, when investors started to sober up and realize that maybe giving loans to deadbeats was not such a great idea, because if the market declined, there would be a lot of foreclosures. Banks started tightening up lending guidelines and the Fed was busy raising interest rates to "cool off" the artificially "heated up" housing market.

Then, the inevitable happened: with money becoming more expensive, the real estate bubble burst, taking a few Bear Stearns hedge funds with it. But it was alright for them, since they were bailed out anyway. Homeowners who were actually facing foreclosure, though, were still dealing with higher interest rates and were unable to sell their homes for as much as they paid for them. They either failed to stop foreclosure and lost their properties or the banks had to help them take a loss on the houses through a short sale.

Either way, when the loans went into foreclosure or were paid off for less, the money lost just disappeared. Even worse, no bank wanted to own these bad mortgages anymore, but no bank was quite sure who owned them at all. They were not even absolutely sure they did not own a lot of bad debt themselves, because these loans had been sliced up, packaged, and sold off to dozens of different investors.

So because banks did not want to do business with each other, credit dried up. The Fed started providing loans to banks and dropped interest rates in efforts to stimulate the economy. When that failed to work, the Fed decided to trade bad mortgage debt for US Treasury Securities, which means that the US dollar is now backed by foreclosed loans that no one is quite sure who owns.

Since the rest of the world uses the dollar as its reserve currency, it was none too happy to see that their money was paying less interest and was backed by defaulting mortgage loans. Currencies not backed by foreclosures were assumed to be safer, and nations moved to invest in European Union Euros or Japanese Yen.

Nations still accepted dollars, but wanted more of them for what they were selling. Stuff like gas (refined from oil), food (fertilizer made from natural gas), precious metals, and consumer goods (made in China) went up in price as the value of the dollar went down.

And here we are today, with the US economy facing a recession and politicians providing foreclosure relief which rewards the banks and homebuilding companies with tax breaks. No one is yet sure who owns all of the foreclosed loans, but with the Federal Reserve taking them in return for Treasury Securities, it is becoming clear that all Americans will own these bad debts. The banks will be able to lend money to each other again, while they foreclose on houses, raise interest rate fees, and collapse the economy.

But one thing is certain: everyone will definitely not get a bailout from the central government. The politicians will delay for as long as possible to prevent this; that is, they will spend so long talking about who to bail out and how much to give them and what kind of bailout to provide, that they will never get around to actually doing anything. Already, nearly 20,000 new homes go into foreclosure every day and nothing will be done to help any of their owners.

Homeowners who own more than one property and have fallen behind on their second vacation home will probably be completely out of luck, as well. These are usually individuals or families, and they are only a constituency, not a special interest, so they will receive no help to stop foreclosure before losing these properties. Constituencies are on the receiving end of propaganda to convince them to vote one way or another, while special interests are on the receiving end of beneficial legislation, tax breaks, and government welfare.

Investment flippers who were small businesses or individuals will lose everything, while being demonized as one of the real causes of the housing market crash. Investment flippers who originated mortgages, sliced them up and packaged them, and sold them to hedge funds while betting on the continuing appreciation of the real estate in order to pay off any defaults are called "banks." They will receive as many bailouts as it necessary to keep any of the largest of them from failing completely.

Low wage McMansion buyers, also known as the suburban middle class, will pay for the bailing out of the banks, which will push many more of them into facing foreclosure on their own homes. As the US currency's backing of nothing is quickly replaced by backing of bad mortgage debt, the dollar's value will fall, pushing up energy and food prices even higher. This will be difficult to keep up with when the middle class will also be responsible for bailing out large banks to the tune of hundreds of billions of dollars.

"No Money Down" ARM buyers will probably be the ones who walk away, caring nothing for bailouts. They thought they were sophisticated enough to buy a home with nothing down and leverage it up to 100% or more and they would just sell when the market went up another 20%. Now that the market is down, they are not going to be able to make that profit, and they are not going to pay $400,000 on a house that's worth $215,000. These homeowners will not get a bailout, but they could not care less since they will not be in the house to receive any federal money, and any bailout would not be enough to convince them to stay and keep making the inflated payments.

Genetically stupid, delusional people, also known as mortgage brokers and real estate agents, will have to suffer the consequences of the housing market crash. They most certainly will not get a bailout; on the contrary, they are the ones who will be scapegoated as having caused the mortgage mess by inflating home values and assisting greedy homeowners in lying on credit applications. This transfer of blame will ensure that real estate brokers and mortgage originators will take the blame when it was the politicians and the big banks who created the environment of the easy credit and loose lending guidelines.

Honest people who are getting screwed by all of the corruption and market manipulation will also not receive a bailout. However, these people will be used by politicians as the motivation for providing a bailout package that is said to "help homeowners," but will instead provide tax breaks and assistance to corporations. People are losing their homes, so the government will reward GM, Ford, the airlines, and home building companies and call it "foreclosure prevention."

The FHA plan involves the government securing new mortgages for nearly nine million homeowners having trouble making payments on loans that are larger than the values of their properties. Homeowners would be able to refinance into a mortgage backed by the FHA, and lenders be required to forgive part of the current loan. This plan would effectively force banks to offer short payoffs to homeowners in return for the opportunity to get these bad loans off of the bank's books.

What may be most disturbing about this proposal is that it would require the newly refinanced homeowners to live in the house for a period of time after obtaining the new loan. Whether this is some kind of prepayment penalty or a prohibition against selling the house, it is debatable if the government should be restricting the movement of homeowners and limiting their ability to sell or refinance their homes.

Even worse, the FHA is already on the brink of insolvency, and the Department of Housing and Urban Development (HUD) is considering having to ask Congress for direct subsidies to meet a $1.4 billion budget shortfall in 2009. For the first time in its 74-year history, the FHA will face a deficit due to its own exposure to the housing bubble and high rates of foreclosure and mortgage payment delinquency.

So, it seems that the FHA will be encouraged to take on more bad loans and allow struggling homeowners to refinance, but the agency itself is facing its own financial crisis. Thus, homeowners and the general public will have to subsidize the FHA so that the FHA will be able to subsidize mortgage companies and help them remove bad loans from their balance sheets.

These bad loans will be made slightly better, but an FHA that is already suffering from high foreclosure rates will be taking on underwater loans from homeowners who may end up walking away anyway if property values keep declining. But the FHA will come up with some part of the program that uses government force to require homeowners to remain in these homes for an unspecified period of time.

Now it is being reported by John Olagues at OptionsForEmployees.com that the entire buyout was fraudulent from top to bottom and an exercise in enriching insider traders betting on the collapse of the company. The entire article makes for very interesting reading as a case study of how investors are able to manipulate markets and use even larger financial institutions to arrange fire-sale buyouts and leave the losses at the feet of taxpayers.

These inside traders were even able to keep up the propaganda war in the days before the surprise collapse and merger, with the media and investment advisers in print and on television denying any problems with Bear Stearn's liquidity and recommending investors hold onto the stock. The rumors of a liquidity crisis seem to have been used as justification for the bank's collapse, while the recommendations to keep money in the firm allowed inside traders to profit from the stock price's collapse.

Of course, without the Federal Reserve, none of this would have been nearly as easy. JPMorgan was allowed to finance its purchase of Bear Stearns with capital from $55 billion in loans guaranteed by the Fed. Collapse the company, let the inside traders take enormous profits, then let the American people pay for the rescue of the company; that seems to have been the plan from the beginning.

"The bail-out is a great deal for J.P. Morgan, the illegal insider short sellers got a great deal. Bear Stearns stock holders and employees got a very bad deal and the sellers of puts sustained large losses."

The benefits to JPMorgan Chase are especially noteworthy, as it is one of the corporations with the largest exposure to the derivatives market, as well, which has been inflated to nearly $700 trillion. With the credit crisis and subprime meltdown contributing to capital markets at risk of systemic collapse, $55 billion stolen from the people would be a welcome gift to any bank.

So, Bear Stearns will become a part of JPMorgan Chase and be allowed to continue their fleecing of American homeowners through mortgage servicing fraud, hedge fund manipulations, and moral hazards rewarded with free money. This widespread fraud, though, is only a natural outgrowth of the complete control of the money supply by private banks and the creation of money through debt loaned to the people and paid back to the banks.

More and more people are calling for an end to this system of deception and theft by proposing the Federal Reserve be shut down. If this were to be done and the control of money given back to the people in forms of local currencies or contracts denominated by gold or silver, a better monetary system may develop, in time.

Unfortunately, though, shutting down the Fed and keeping all of the power centralized will only result in a shuffling of papers and a name change; a new department controlled by the banks will be established and the current system of money creation and inflation will continue. The Bear Stearns deal, along with similar insider trading schemes used to collapse currencies, countries, and companies over the decades of the Fed's existence, is only one more sign of far too much power in the hands of central government.

Unfortunately, the problem of foreclosures is actually quite a bit more serious than even the media is making it out to be. They are just focusing on the foreclosure crisis and how homeowners and lenders are being affected during the credit crunch, while ignoring many other, related problems.

The housing market was pumped full of inflated money and easy credit for at least the decade from 1997 until 2007, and it started accelerating after the 2001-2002 "mini-recession." A bubble was inflated in residential real estate to keep the party going after the tech stock collapse, and now there are no markets left to inflate.

The Federal Reserve has been lowering interest rates over the past six months, but this has not helped homeowners save money on their resetting Adjustable Rate Mortgages. Any money they "save" by having lower-than expected mortgage payments, but higher than they originally paid with the teaser rate, is not reflecting actual savings of money, but simply an opportunity cost. If rates had been kept higher, they would have to pay more, but the expiration of the teaser rate is causing them to pay more anyway, just "less more."

Furthermore, lower interest rates mean that the dollar is being devalued, and costs of imported goods (and anything made with imported goods as an input) will increase. Anything made with oil has been going up, such as plastic goods and items that need to be transported around the world and throughout the country. Trucking companies are feeling this pain especially acutely, as the price of diesel has been over $4.00 a gallon for a while now, with gasoline following closely.

Homeowners are also seeing food prices increasing in America and worldwide, with riots and general shortages in some Third World countries already happening, and rice shortages being reported in the US. The dollar is becoming worth less, so producers of real goods like food increase their prices or produce crops that are worth more as ethanol to feed SUVs than as food to feed families.

In this inflationary economic environment, homeowners with a mortgage payment that has increased by 50%, with the cost to feel their car up 30% in a year, and the cost to feed their family increasing at 20% in a year, may be running into some real problems. A total personal financial collapse is probably one job loss or medical emergency away for families already living on the edge.

But even if homeowners fall behind on all of their bills in large numbers, the banks and the government will not do anything to help the people -- in fact, quite the opposite has been happening. The Fed is bailing out banks with billions of newly printed dollars every week now, and this inflates the money even more, driving up costs even higher, pushing more homeowners into foreclosure as they struggle with rising food, energy, and healthcare costs.

But with the free money the banks are receiving, they have no incentive to work with homeowners to put together repayment plans, mortgage modifications, or other programs that will stop foreclosure on houses. The largest banks know they can sit back, do nothing, let the foreclosure process take over, and make up their loss with help from the Federal Reserve, paid for courtesy of the people they have stolen a house from.

It is bad out there in the housing market, and will continue to be bad at least through the summer of 2009, if not far longer, when the resetting mortgages will mostly have adjusted by then. But by that time, how much will gas cost? Seven dollars a gallon? How much will food cost? Will there be enough of it to feed everyone? And how will people be able to afford either transportation or food, when their mortgage payment has nearly doubled?

Although unfortunate, it should surprise no one that the government will do absolutely nothing to provide help directly to homeowners in trouble with their mortgages. They do not have the authority to do so under our system of government, but that has never stopped them in the past. No, this is due to the problem of spending public money on public projects, instead of corporate welfare schemes. So there will be no answers from Washington on how to use tax money to keep people in their homes. Foreclosures will keep increasing.

Congress will pass a few token pieces of legislation that are said to help homeowners while actually helping banks enrich themselves while impoverishing homeowners. Hope Now and Project Lifeline are completely voluntary for the banks to participate in. The new proposed $7,000 tax credit for buying foreclosed homes will go to banks who purchase properties at sheriff sales and get $7,000 for stealing millions of homes from people. All of these plans were sold to the people as helping them stop foreclosure and combating the foreclosure crisis.

In the meantime, while Congress debates what to do with homeowners and what bill will "go far enough," they will quietly be giving bailouts to the banks, paid for by the people in foreclosure and the rest of us. The Fed has already provided hundreds of billions of dollars to mortgage lenders and other banks exposed to the mortgage crisis so that they do not go out of business. This stealing from the people, though, goes largely unmentioned in the media, and people do not put together rising prices at the grocery store and gas pump with purchasing power being stolen from them by the elected officials.

But it really should not amaze anyone with a small amount of common sense that creating hundreds of billions of dollars out of nothing will debase the currency and prices will begin to rise. Well, prices are already rising and have been for years, but they will continue to rise and do so even quicker. Food and energy will become more expensive as the dollar sacrifices its value in order to keep banks healthier for a short while longer.

By bailing out banks, two more things will happen with long-term effects in the economy. First, the debasement of the currency will mean it takes more dollars to provide for one's family and oneself. More money being spent on groceries and gas to get to work means less money available for the mortgage payment. One small hardship and even more people will be in foreclosure, which will be used as another excuse for the Fed to steal more money and Congress to debate more about what not to do.

Second, if the banks know they will be bailed out by the Federal Reserve (and they have been bailed out of every financial crisis like Mexico in the 1990's, the Asian crisis in 1997, etc.), there will be less incentive for them to work with homeowners to stop foreclosure on a voluntary basis. Why bother spending money on programs, when you can sit back and complain about defaults and get free money stolen straight from the people you are stealing homes from? Working with homeowners is hard -- stealing their purchasing power turns out to be quite easy.

Inflation, currency debasement, moral hazard for the banks, ineptness in Congress, and national bankruptcy will all contribute to more foreclosures in the short-term and the long-run. People who have mortgages much higher than the values of their homes may decide to give up on them, rather than trying to pay them off. The artificially manufactured and preserved suburbs may turn out to be the new ghost towns of the mid and late twenty-first century, unless communities come up with better plans. So maybe the current foreclosure crisis will only result in a long-term financial collapse in the real estate market.

This may make it slightly easier for homeowners to sell, but does nothing to help those who are simply trying to save their homes. In fact, providing tax credits and other incentives for banks to buy foreclosures properties actually encourages mortgage companies to keep foreclosing on these properties instead of working with their clients to find solutions.

Although the bill has not yet passed both chambers of Congress and has not been signed into law by the president, some of these offensive provisions will most likely find their way into the final version of the act. The tax credits going to the banks and builders will most likely stay, as they are purported to help homeowners get out of foreclosure, when in fact they only promote more foreclosures.

Banks and builders will be able to report losses on properties back four years instead of two, as is the case now. In addition, these parties will be able to take a $7,000 tax break when they buy foreclosure properties. Since it is usually foreclosing banks that purchase homes at county sheriff sales, they may be able to take literally thousands of tax breaks just by foreclosing even faster on homeowners.

The builders, on the other hand, will be able to keep putting up homes no one can afford in areas no one wants to live in. Providing subsidies to builders to keep constructing or repairing properties only puts more houses on the market for sale, driving down home prices even further but allowing the homebuilding companies to stay in business at the expense of other members of the general public.

Not surprisingly, the $7,000 tax credit for purchasing foreclosed properties lasts only for the next 12 months, at which time it will expire if not extended. The largest purchasers of foreclosure homes in the next year will be the largest lenders, who are experiencing the fallout of lending to people who could not afford their mortgage payments.

Twelve months of foreclosures could potentially create hundreds of billions of dollars in tax credits for buyers, most of which will help banks offset losses on these loans. With the banks now writing down their valueless mortgages by tens of billions of dollars, it will be a welcome relief to offset those losses with hundreds of tax breaks they receive by stealing homes from property owners.

It should be little wonder why the Foreclosure Prevention Act has met with so much criticism. The market will find ways to help homeowners save their homes or leave them, but giving more tax breaks to the banks and builders that profited most from the real estate bubble, just to make sure they do not feel the same level of pain as the homeowners, will only lead to more unintended consequences.

Homeowners who know their banks are receiving hundreds of billions of dollars in direct subsidies and hundreds more in tax credits may be far less willing to give up their home peacefully. It is repeated government interventions on the side of big business at the expense of the public that helps foster the animosity that leads to properties being stripped of copper pipes, appliances, and other valuable fixtures.

It can be very hard to blame the homeowners for taking some psychological and physical revenge against the banks who not only steal their homes, but also benefit most from the foreclosure crisis. And all of this is paid for by the people who are losing their homes in record numbers throughout the country.

In fact, the bill actually provides tax credits to soften the blow of proceeding with a foreclosure. The lenders are now encouraged to keep foreclosing on houses, while Congress allows them tax cuts to make this more attractive. All the while, the banks claim they need more bailouts and the Fed needs more power to offer bailouts.

This line of thinking, rewarding those with money with the houses of the poor and middle class, reflects the popular thinking among the rich, which they have tricked the general public into believing that these policies are for the common good. To see through the deception, though, look no further than how Congress has done absolutely nothing to help any single homeowner in foreclosure.

But the banks get hundreds of billions of dollars from the Fed in below-market interest rate loans, and they can exchange defaulting mortgage debt for not-yet-defaulted US Treasury Securities. This is then defended as necessary to prevent the banking system, which has preyed upon the public for decades, from collapsing.

And banks and homebuilders now get tax credits to lessen the cost of foreclosing on homeowners. The new owners of America are the very same corporations that created the unsustainable suburbs and locked people into homes with large mortgages they can no longer afford.

The general public is getting stuck with these defaulting mortgage loans so banks can ignore the toxic debt and continue operating without having to work with homeowners to stop foreclosure. They have taken the policy of just ignoring the problem and hiding their bad loans at the Fed until the issue is no longer interesting to the media.

And of course, the media is proclaiming that the recession, which was not coming, and was not strong enough to be considered a recession, is now over. The Fed and the government stepped in to correct the problem, and rising food and energy costs and increasing foreclosure rates are not symptoms of problems in the economy.

Did people really elect their government officials to make it easier for banks to steal their homes? Probably not, but that is exactly what is happening now in the gifts given to the banking system.

Americans are being forced to pay through inflation for bailouts to the very same mortgage companies that are pushing them into foreclosure. And all Congress can come up with is voluntary plans for banks to maybe participate in to maybe offer solutions to homeowners behind on their housing payments. We have to keep the banking system afloat, but banks do not have to help anyone suffering from their policies of inflation and credit creation.

With the political power and the power of money in the hands of the banks, politicians, and even the homebuilders right now, why wouldn't the news and mainstream media encourage even more predators to get into the foreclosure business? It sure seems to be much more lucrative than helping anyone actually save a home from foreclosure, what with foreclosure victims and others paying hundreds of billions of dollars to help out the banks.

"Poor unfortunate credit victims" are the best consumers for the banks to prey on, and they have extended their tentacles into every aspect of the lending system. Subprime mortgages, adjustable rate mortgages, high These same banks and corporations have also financed the impoverishment and wage slavery of the average American. People are locked into their low-paying jobs with threats of outsourcing to a developing country if the cost of labor goes too high, while their health benefits are tied to their employment. The fact that they probably would not receive adequate healthcare from their insurer does not make the threat of losing insurance any less disturbing.

Few homeowners or consumers ever realize that their jobs and their consumption go to finance their own enslavement, however. The large banks they have their checking account and mortgage with are the same ones that finance the large corporations to outsource production while replacing local businesses with big-box stores and franchise-heavy strip malls.

The general public works for the large corporations, which keep them as impoverished as they can without inciting riots. The low pay that the people receive that is not taken directly by the government is then spent or deposited back into the economy and ends up in the large banks. These institutions then lend the money back to businesses to finance more wage-slavery, while impossible-to-pay-back mortgages are sold to homeowners for the banks to rake up the last little bits of whatever money the public has left.

The housing crisis is, unfortunately, one of the last steps in the leveraged buyout of the country by the banking system, which controls and creates the money used by every person. The banks will either own the real estate, or they will have helped to inflate and crash the markets so that homeowners owe far more on their properties than they are worth or could ever pay back.

The main point is that the Federal Reserve is not contained within any branch of the United States Government. It is a consortium of private banks that was given a monopoly of creating the money supply of the country. Its accountability to Congress is nonexistent, although the Fed does grant periodic hearings to the banking commissions. Congress, though, has ignored its responsibility to regulate the Fed, and no independent complete audit has been performed.

Thus, giving the Federal Reserve even more power is giving up the power of the government to regulate the markets to a private central bank that is completely unaccountable. It is debatable whether or not the government should be regulating the free market, as this helps create malinvestment and thousands of pages of regulations often turn into thousands of pages of loopholes. But the Congress should not allow a private bank to regulate the market and shield this bank from any oversight or scrutiny.

The Federal Reserve, along with other agencies of the government such as the Office of the Comptroller of the Currency (OCC) and Department of Housing and Urban Development (HUD), was integral in creating the real estate bubble. They were also involved in the profit-taking that the bubble created, and are now involved in bailing out the nation's largest banks from the fallout of the crash. Colluding government agencies working together to create the foreclosure crisis deserve to be abolished, and their functions returned to the market -- not given even more power to inflate themselves into a new bubble.

Whether the Paulson plan goes far enough to address the inadequacies of regulation of the banking and mortgage markets is nearly an irrelevant debate. The question of the effects of the"Federal Reservation" of the markets is not being asked. Do we really want the government to give up even more of its oversight and regulatory responsibilities to a private system of banks owned by the very banks that assisted, along with other too-powerful government agencies, in creating the conditions that have led to so many homeowners facing foreclosure?

From Ohio judges throwing foreclosure lawsuits out of court to this latest suspension of sheriff sales, local governments have been able to act much more forcefully to combat the rising foreclosures than the federal government. Anyway, no one can really tell which companies, hedge funds, investors, or banks own the paperwork and have the legal right to collect on the loan. The marketing of subprime loans was just a scheme to generate as much money as possible in loan origination fees and sell toxic loans to investors. This has been accomplished and now the fallout must be dealt with.

But banks are getting their bailout courtesy of the American public, through generous loans and packages provided by the Federal Reserve. It seems that it is only just for people, through their community leaders, to come up with their own solutions. In fact, maybe the entire foreclosure crisis will reach some sort of perverse equilibrium with the Fed stealing money from the public to bail out the banks, creating massive inflation and taking the banking industry completely away from all government regulation, while homeowners find ways to void out their mortgage contracts completely and suspend the auctioning of their properties and the financial destruction of their communities.

Another question that should be raised is if the banks are suffering any actual damages from the foreclosing mortgages. They are receiving hundreds of billions of dollars from the Federal Reserve, which essentially pays off many of these mortgages. So where is their standing to sue? The people who pay taxes have already paid off the defaulted mortgages through the Fed's granting of US Treasury securities to the banks. If the banks no longer own the mortgages, and have had them paid off nonetheless, it would seem they have little reason to keep going after homeowners to steal properties.

Ending the incessant whining about subprime mortgages going bad and the danger of the survival of the banking industry, though, would mean the banks would not be able to ask for more bailouts. The banks already made a killing on the way up by packaging what they knew were bad loans and selling them to unsuspecting investors, who were fooled by the bond-rating agencies into purchasing what they believed were prime-rated securities. Now that the loans are going bad, the banks' reserves are drying up (on paper), so they need generous loans and free money from the Fed to ensure that they can make more money on the resulting crash of the market.

The people of Philadelphia, by suspending foreclosure auctions, may be on to something important. Hopefully, the suspension will last longer than just one month and the banks will have no choice but to deal with homeowners as negotiating partners, rather than as hosts for their parasitic lending practices. The banks have put themselves into a situation where the only logical reaction for local governments is to realize the invalidity of the mortgage loans. With the decrease in property taxes to local governments, the banks' ability to manipulate local communities into allowing invalid foreclosure lawsuits to go forward may also be evaporating.

The key question is where does the government get the money to give away to people or businesses? It gets it through one of three methods, taxes, borrowing, or inflation. None of these options, though, involve the government actually producing anything of value or creating more wealth that can be spread around the economy.

The first option government has is to tax people, which takes money from homeowners struggling to make their mortgage payments. Second, it can borrow money from investors or foreign economies, increasing the amount of tax money that is spent on interest payments and pushing the problem of paying back the debt onto future generations. The third option is for government to print the money out of thin air, which causes inflation by diluting the money supply and will lead to increased prices for goods and services.

Government does not produce anything tangible, so it can not create wealth out of nothing for people who need more money to meet their own obligations. Government can only provide money to one group by stealing from another group, borrowing money and stealing from future generations, or stealing from all of the people by inflating the supply of money. Any of these actions may hurt more people than help homeowners facing foreclosure.

But the government also should not supply money to the banks that are in trouble from the foreclosures, either. That is what the government has been doing for over half a year now, while it has been "debating" what to do with homeowners in foreclosure. From tens of billions of dollars in direct "liquidity injections" to hundreds of billions of dollars available to trade in bad mortgage debt for US Treasury securities, the banks have been given generous donations care of the American people to get them through the credit crisis.

But all the government and its rulers at the Federal Reserve have done is give the banks inflated money and talk about giving inflated money to homeowners. Neither is a long-term solution and may lead to dangers like bank failures, a collapse in confidence in the dollar, or increasing inflation. Providing corporate welfare is all the government has done so far to address the foreclosure crisis, and it has not helped any homeowners keep on top of their mortgages.

The banks may be able to get rid of this bad debt by giving it to the Fed, but that just hides it away. The bad debt becomes the backing for the American currency through a not-so-clever trick. The people in foreclosure are still suffering -- but now the government has hidden away their loans so that the banks don't have to report the bad debt and they do not look like they are in such trouble anymore. Of course, the banks are still in trouble, and homeowners are still suffering, but there is a perception that it is not quite as bad anymore as it was a few months ago.

Possibly the worst aspect of subsidies to the banking industry will be that this gives the banks the incentive to do absolutely nothing to help homeowners stop foreclosure, since they can count on future bailouts when property values decline further and more mortgages go into default. But the lenders end up with free money from the Fed, they keep up the appearance of solvency, and they steal properties away from people.

But when the inevitable collapse came, the banks cried out that they were just as much victims of the market as the homeowners whose properties they were taking. In fact, the banks cried out that they were even larger victims than the homeowners, as the banks faced a drying up of credit and potential collapse. The Federal Reserve, in response, provided generous bailouts to the banking system in the form of direct injections of liquidity and low-interest loans.

But how did the lenders and financial institutions miss the bubble? Or were they planning on the foreclosures for some other end? Did the foreclosure crisis really catch any of the highest executives of the largest banks by surprise? Or did they want the foreclosure crisis rather than continuing to collect mortgage payments from homeowners?

The banks certainly wanted their loans to be paid back, but foreclosures did not bother them at all. The wave of foreclosures sweeping across the country is not materially affecting the business models of the largest financial institutions very much right now, except they have stopped lending money to people who can not afford mortgages (and are cutting off access to credit to homeowners who are not behind yet). But this action was taken only because the real estate markets are in a condition where the banks can not make money from the poor lending and foreclosure scam at this point.

As long as property values kept increasing (which they did for nearly a decade due to the bubble created by the Fed), foreclosures were not a problem. If the banks gave a loan to someone who eventually fell behind, it did not much affect the bottom line. The homeowners got kicked out of the house and the loan was a loss, but the bank ended up with the property through the county sheriff sale, and resold it right away for a higher, quicker profit. Real estate agents, banks, mortgage brokers, appraisers, and the local governments all made out very well during the period of increasing home values.

The main danger the possibility of property values stagnating or beginning to fall. In that scenario, the banks would not be able to regain a loss on the mortgage loan right away through a sale to another gullible home buyer, and the property might sit on the market for months, costing money in property taxes and insurance. But that is the environment the real estate market is in now, where property values are falling and banks have all of these foreclosed properties that are not moving.

But even now with so many foreclosures, the banks have already made their money from originating the loans and packaging dodgy debts to sell to hedge fund managers and investors. So the lenders have not really "lost" much -- they just are not "gaining" as much as they were a few years ago when they were taking advantage of the real estate bubble to pump and dump homeowners out of their homes and resell properties for ever-higher amounts.

When bank profits go down, though, they are very good at crying "Wolf!" to the government and receiving bailout packages, as is happening now. The banks have received hundreds of billions of devaluing dollars in bailouts and below-market-rate loans from the Federal Reserve in order to keep them looking profitable and solvent. With the collapse of Bear Stearns, though, it should be clear to everyone that the financial institutions and Federal Reserve will do whatever it takes to keep the banking system afloat at the expense of the average American.

In the end, the banks have been able to take their profits from making bad loans, take homes from people unable to stop foreclosure, and steal even more money from Americans by giving the government the bad mortgage debts in return for Treasury securities. Our currency, the rapidly-devaluing dollar, is now backed by these bad loans that are not being paid back. This is a far cry from the gold standard or pseudo-gold standard, but probably not that far from the backing of most other fiat currencies.

Foreclosures may not have been part of any sort of centrally-managed "master plan" of the banks for the economy, put forth by wicked idiots or conspirators to rob people of their homes. But foreclosures have definitely not been a great loss of money to the banks, who are receiving more in "assistance" than the people who have been victims of the banks. In fact, the banks are getting their free bailouts paid for by you, me, and even all of the people that they are foreclosing on.

JPMorgan Chase taking over Bear Stearns was a show of just how weak that company had become, despite all of the help offered to the banks so far. Even after receiving financial aid to prop up hedge funds and their failing subprime mortgage investments, the financial firm took a buyout offer $2.00 per share, less than 2% of its high value near $172 per share. An enormous drop in value, however, did not persuade the Federal Reserve or the other large banks that a failed institution should be allowed to fail.

The Fed can made their aid contingent on pretty much anything, but why would they want to do something to promote accountability and free markets within the banking system? In fact, many of the largest banks in the country have hired ex-employees of the Federal Reserve system and its network of regional banks. Bear Stearns even did this, although it did not seem to do them much good in the end. This provides the banks with insights into how the Fed will manipulate the markets, but also allows them the false security that the central bank can efficiently manage the economy.

Probably the best way to find out what the Fed is doing is to hire people who used to work there. Companies in other industries hire former employees of competitors to better gauge their strengths and weaknesses. And of course it works the other way, too. What better way for the Federal Reserve to find out how the banks are doing than to ask former Fed employees who now work at the largest banks in high-level positions for their opinions?

Thus, it is surprising that any individual would seriously consider asking the Federal Reserve to make their former employees, now working at the banks most exposed to the subprime mess, put their own assets and investments at risk in order to receive aid. At risk of losing assets to a bubble created and inflated by the Fed? That seems to be going a little far in terms of accountability for banking and government institutions working together. Corporatism is not such an open system as to privatize losses.

On the contrary, what we will probably see is more free bailouts handed to the banks at the cost of a dollar destruction and further losses in the stock market. Homeowners, even if their mortgage rates stay the same, will experience higher gas and food prices, which will just keep pushing more of them into situations where they have to find methods to stop foreclosure before the bank ends up with their house and inflated money. This will put the banks in even greater trouble as they will be forced to foreclose on ever-depreciating assets, and they will end up back at the Federal Reserve requesting more "help" at the expense of and funded by the people whose homes they are taking.

The entire banking industry is certainly the most effective at privatizing all of their profits for corporate executives but passing off all of their losses onto the American people. For example, see the Fed's $200 billion lending program where banks can trade in garbage subprime loans for US Treasury securities, in effect giving the nonperforming subprimes to the people to deal with while the banks keep up an appearance of solvency. However, the banks will not be returning any of the massive profits they made from these loans to the people -- just the losses now that the loans have gone bad.

There will be more large banks to fail in the coming months, and many more smaller and mid-size banks. The next multinational financial institutions to crash might be Lehman or Citigroup, which are both in big trouble in terms of running out of money very quickly. For average homeowners and people, it may be a good idea to consider getting out of the dollar while it holds any remaining value and find some real store of value that is more stable. Gold, silver, or even seeds that can be grown into food hold more value than processed and died green paper right now.

But it is quite ironic that Bear Stearns has been hit so hard by a mortgage crisis that they have actively participated in for years. Bear Stearns owns EMC Mortgage Servicing, a notorious servicer alleged to have been involved in hundreds of cases of mortgage servicing fraud. Through some very shady practices, they were instrumental in pushing people out of their homes. Whether through outright fraud or forced institutional incompetence, the servicing company is no stranger to foreclosures.

Through some years of experience with the servicer, it seems their main tactics were to force homeowners and potential mortgage brokers or real estate agents to give up due to absolute confusion and frustration. "Mistakes" made were never corrected, faxes sent were never received, payoffs could take a week to arrive and were frequently out of date. And these results were the best one could hope for after spending nearly half a day on hold or fighting through the voicemail system.

EMC has always been one of the more difficult banks to work with in terms of everything. It is doubtful to me whether the entire company had a single working fax machine, as it was a common occurrence for them to request information from a client and then claim never to have received it. This could go on for weeks, using numerous fax machines to send them the requested information, which they stated they never saw.

And even if they could be kept on the line to confirm receipt of a fax, the customer service representative on the phone was not the person who was "handling the file." Calling back a few days later, it turned out that the person "handling the file" had not received the fax and there was not record of it "in the system." With such poor customer service and communication, it is not surprising that homeowners had such trouble finding a way to stop foreclosure with EMC.

One of the great ironies that can be read in stories about the collapse of Bear Stearns is that it had a so-called "ownership culture" of its employees, who owned about one-third of the stock of the company's stock. Although not every employee of the company was involved in the alleged mortgage servicing fraud, it seems that karma has finally caught up to the bank. EMC, through willful fraud or gross incompetence equating to negligence with the same end result as fraud, stripped the equity and took the homes of their mostly-unwitting foreclosure victims, but it is EMC's parent company that has the "ownership culture," which deserves the pity of the media.

Whether JPMorgan can fix the problems at Bear Stearns remains to be seen, but the question has not been asked whether these are problems worth solving through any means other than a full collapse of the company and the dismantling of the the mortgage servicing division. EMC has been able to operate as it has due to the high profitability of its scam, and the fact that any other bank would be willing to rescue it from destruction is disturbing. When there are so many communities facing the possibility of local refugee conditions (tent cities, abandoned suburbs), do we really need our largest banks in the country rescuing a greedy "ownership culture" that has contributed greatly to so many more people losing ownership of their properties and giving up everything they own? Some culture that is.

The bailout, like others before it, is an attempt by the Fed to remove enough of the toxic mortgage debt from the balance sheets of the most exposed banks to keep the system appearing financially sound, although weak at the moment. Complete collapses of the largest banks in the country may correctly induce runs on the remaining banks. If people realize that they are not the only ones facing financial ruin and foreclosure and pull their money out of the banking system, the largest financial institutions could not survive without even great bailouts.

These banks have already burned through much of their reserves to cover losses resulting from exposure to the mortgage crisis and have borrowed as much as possible from each other and foreign investors. The fire sale of American companies to foreigners may be just beginning, but they will not buy if our institutions are facing bankruptcy. While credit from other banks has been drying up, the Fed has been turned to as the garbage dump of last resort for these banks and their nonperforming, highly inflated mortgages.

For now, these debts still retain a small semblance of officially-recognized legitimacy through the bond rating agencies, so the Fed is more than willing to keep up the charade by trading Treasury Securities for them. Slightly better money (dollars, Euros, Swiss Francs, and other currencies) will be used to chase after very bad money at the expense of those who hold the better money.

So the banks will be able to move $200 billion worth of bad debt off of their balance sheets in exchange for new loans from the Federal Reserve in the form of Treasury Securities, which will prop up their dwindling reserves and make them appear solvent. But it is very doubtful that this action will really fool anyone who owns a home, lives in a neighborhood, or invests with banks, hedge funds, or other institutions that are exposed to the mortgage meltdown.

The mortgage crisis has now spread far beyond just a few regional markets and has infected over 200 markets across the nation. Florida and California now have at least 33 soft markets each in various counties and cities as the values in certain areas rose faster and higher than in other communities. These are the markets where much of the bad debt will come from to be traded in at the Fed. (Otherwise, if these banks held mostly good debt, they would not need a Federal Reserve bailout in the first place; therefore, the debt must be coming from these distressed and severely distressed markets.)

The Federal Reserve, though, will be giving the banks loans even as their previous loans fail spectacularly. The inflation will continue pushing up costs for consumer goods, including food, energy, and everything derived from energy (everything else in the economy, mostly). But at least homeowners having trouble making their mortgage payments or keeping the heat on or feeding their families will be able to rest assured that their bank will not feel any financial pain from kicking them out of their homes.

And as the values of these inflated properties continues to fall, and more houses remain empty on the market for longer periods of time, the restrictive bankruptcy laws may just push even more homeowners towards giving up on their increasingly worthless homes. This is the financial and legal environment that the banks set up for themselves. And just as designed, it will be the public who will lose their homes and bear the costs of bailing out the banks.

However, just the opposite seems to be true of the government, which has also overspent, raising its own debt limit and inflating the currency to finance war and welfare programs. But now that a systemic financial collapse is leading to recession, the government is considered to be just another victim of the economic crisis.

Obviously, this perception is due to the fact that the government controls the message through its collusion with the largest media companies. For example, General Electric, one of the top defense contractors in the nation, receives corporate welfare to build the equipment used in war. GE also owns NBC, one of the largest media companies that are able to control what people hear about issues. Government can control the money that goes to GE for defense contracts, and NBC can control the message heard by consumers about certain politicians.

Both government and media companies have an interest in remaining on good terms with each other, even at the expense of the average homeowners. It is not that homeowners actually are more responsible than the government for their own personal economic catastrophes. It simply influences how people feel about the government and their own finances.

It is also said that only government bailouts will help the situation now that there is danger of a widespread financial collapse of the banking system. Thus, people should expect to have to give up more in taxes and purchasing power in order to give government the resources it needs to grow and create new help programs.

However, it is never said that government policies created the problems in the first place. No media company will allow coverage of the reasons why the Federal Reserve lowering interest rates inflated the housing bubble, and why further interest rate manipulation and liquidity injections will only lead to more problems.

But this should not come as any surprise. When the government can influence the message in the media, then no economic recession will be blamed on any institution of government. It is much easier to shift the blame away from the government and politically-connected interest groups and corporations onto the politically weak people. This results in blame for the problems being given to people while credit for economic success is given to the government's wise policies handed down by the benevolent philosopher-kings.

More of what is not being said is that the government is run by evil idiots who are now see themselves as victims of their own poor economic policies. Of course, the issue of government centrally planning the economy will not challenged, despite the fact that it has led to hundreds of thousands of homeowners facing foreclosure with potentially millions more to come. Only people can act in the economy; no one group can direct it without unintended consequences.

But government is more responsible for the foreclosure crisis than are most homeowners who are losing jobs or facing medical emergencies. That is a message that will not be widely spread, though, because of the myth of government benevolence. But hopefully the economic devastation in the housing market will help more homeowners realize that government creates the problems and then offers solutions that make the problems worse. Instead of blaming just greedy homeowners, banks, mortgage brokers, and real estate agents, maybe it is time to reconsider the government's manipulation of the economy and hold it directly accountable for the fallout of its unnecessary economic manipulations.

Today, in another effort to prop up the banking system at the expense of the homeowners whose defaulting loans are harming that system, the Federal Reserve and other central banks worldwide have announced another $200 billion expansion of their lending program. None of the previous injections of money into the system have solved the liquidity and credit crunches, but central banks do not have very many alternative tools. Manipulating interest rates and destroying currency values through inflation have worked in the past to steal money from the public and give it to the banks.

The lending program allows banks to trade in their failing mortgage-backed securities for loans from the Federal Reserve. Since the Fed actually holds no reserves of dollars, though, the money is created out of thin air. This has the predictable result of diluting the money supply and giving the banks the opportunity to use the new money first, when it is at its most valuable. Banks give their worthless mortgage securities, the values of which were always highly inflated and are now in complete doubt (with many of them being worth nothing at all anymore), and receive brand new cash in return.

This gives the banks the incentive to continue making poor loans and removes any real desire to work with homeowners to stop foreclosure from taking these homes. If they can count on periodic bailouts from the Federal Reserve, not under the control of Congress, the courts, or the Executive Branch, there is little reason for them to play along with the government programs to help homeowners. After all, they can simply keep trying to collect money from homeowners, foreclose on houses, and allow the Fed to keep them afloat until they can sell the properties in a better market.

So the Fed will be holding all of the toxic mortgage securities while providing new money to banks at preferentially-low interest rates. This will, at best, only postpone the collapse of the banking system and will more likely prolong it. A central bank loaded down with nonperforming debts should lose all legitimacy in printing the currency of the nation. The dollar has already lost much of its value compared to other currencies, due to the out of control spending of government and doubts about the American economy.

Combine overspending and an economy that no longer produces much with loads of bad debt, inflation, and artificially low interest rates, and the outlook appears very bad for the banking system this year. The Federal Deposit Insurance Corporation and a regional branch of the Federal Reserve are already warning and preparing for bank failures. The government will be unable to prevent or reverse the coming failures without further selling out the public to the banking system, which may lead to even higher inflation in food and energy prices for homeowners already struggling to keep on top of their mortgages and feed their families.

Take, for example, a couple of the stories posted by MSN Finance recently. One is titled "The Credit Card Party is Officially Over," which discusses credit card companies jacking up interest rates and the overall drying up of consumer credit. Even for consumers who have a perfect credit history, banks are cutting down on the limits offered to them on new lines of credit and are trying to discourage people from opening new credit cards in order to transfer balances from old credit cards. Overall, the article is somewhat cautious about consumers using credit and advocates them taking care of their own personal financial situations without borrowing more.

However, just a few stories down is another article published on MSN Finance, although it is taken from Bankrate.com. This one is titled "Why You Need Multiple Credit Cards" and deconstructs the arguments against having multiple open credit lines. The wonders of using consumer credit are boundless if used correctly, according to this article, such as the feeling of financial safety and the lure of rewards for using the card. People who use their numerous credit cards wisely will also boost their credit scores, which means that they will pay overall lower rates of interest on other debt, such as housing or auto loans.

So, the message is... what, exactly? Maybe the message is that credit may be used wisely to rack up rewards and feel safe, until the bank jacks up the interest rate and lowers the credit limit. That does not seem very reassuring, and the average person will have to decide between heeding the warnings of the dangers of credit or continuing to do their best to keep on top of a mounting pile of debt. The fact that the second article aims to reinforce spending through credit cards is not surprising: consumers should use more credit, so that they can qualify for lower interest rates on more credit. The circle only ends when the homeowners are in foreclosure or the consumers are in bankruptcy.

But of course, finding oneself in bankruptcy or foreclosure can not be blamed on the poor decisions of the consumer or the misguided advice of the financial gurus. People who do not save for a rainy day have a brain disorder is all; or at least that is what CNNMoney.com has to say about it. An article titled "Can't Save? Blame Your Brain" discusses the psychological differences that humans feel when given a choice of instant gratification compared to waiting for a larger reward later in time. So all those home buyers who are now trying to stop foreclosure before they lose their overpriced homes that were bought at the top of the market can put the responsibility for their situation on the physiological makeup of their brains, not on their lack of ability to control the thoughts and feelings that go on in that brain.

The only solution offered in a recent article, of course, is to trick oneself into saving money now. CNNMoney.com has an article about this, as well, titled "Fool Yourself Into Saving Smarter." Saving up a few thousand dollars and then spending it on more consumer goods like iPods or big-screen TVs, though, is little better than just applying for another credit card to use "wisely" and rack up "points." Much more effective would be a change in attitude about the role of money in one's life; whether or not it is to be used just as a blunt object to score points and more stuff to keep up with the neighbors. Money represents energy and the ability to do work, and it is doubtful to me that anyone should just expend energy to keep up an appearance of having more money.

The large mainstream media corporations are not there to provide consumers with the most important information about the nature of money and law, though. It should not be surprising that they encourage people to continue consuming far beyond their means through credit cards, while quietly warning them of the dangers of this activity. But even those who end up in foreclosure or bankruptcy can not be blamed for ignoring these warnings -- they are just responding to the chemicals in their brains that tell them to consume until they lose it all. Of course, the media and banks also can not be blamed for the propaganda; after all, they issued a few perfunctory, half-hearted warnings, right?

But will these numerous federal bailouts of the hedge funds and large banks "trickle down" to help the average American facing the loss of a home? Unfortunately, the answer is that bailouts of the banks will not help homeowners, and will even contribute to even more hardships. The government has nothing and produces nothing, so any bailout money it hands out to the nation's banks must be taken from some other source; namely, the taxpayers and homeowners themselves.

So, by stealing money (through borrowing or inflation) to pay off the banks and keep them in business, the government will just be rewarding the poor lending decisions these banks made for so long. Of course, this creates moral hazard for the lenders to keep making bad loans, trusting in the government to bail them out next time. This has happened over and over again, the Asian Crisis to the collapse of the Argentine economy being just two more recent examples. Furthermore, it was the easy credit and federal bailouts that created the housing bubble and led it to become as massive as it did. Just pouring more inflation and credit into the system to bail out the banks will not solve the problems. A trickle down? More like a mass concentration of wealth upwards.

Also, inflating the money supply will just drive up prices for other goods in the economy that are vital to the average person. Homeowners already struggling to feed their children, heat their homes, and keep their cars full of gas will not be able to keep up if food and energy prices keep increasing, as they certainly will if the money supply keeps increasing to keep the economy going. Stealing money from these people through federal government bailouts of the banking system will only push them closer to their own foreclosures, which will necessitate more government intervention, which will lead to more financial collapse.

A bailout of the banks might, in the best case scenario, keep them in business for a little longer, but the bailout will create the conditions that lead to the next waves of foreclosures. Even with a bailout, many of the large banks most exposed to the subprime lending mess are nearly insolvent. Pumping liquidity into the system can solve short-term problems, but the banks simply have no reserves left. In fact, they have already lost much more than they ever held, making many of them essentially bankrupt. But the only solution offered by government is just to keep stealing the purchasing power away from average people and expect them to be able to keep their heads above water and continue consuming.

The only other solution presented, the voluntary government programs, offers nothing new that homeowners and banks could not work out on their own. Essentially, with all of the voluntary programs that the government has already come up with to "solve" the foreclosure crisis, they have told homeowners "tough luck." Banks get direct injections of billions of dollars taken out of the pockets of average Americans, and the Fed offers to take the lenders' defaulted subprime mortgage securities as collateral for new loans, the money of which was stolen from the very homeowners struggling to keep their payments current. Homeowners get voluntary programs that are offered by only a handful lenders who are not required to do anything to help.

The bailouts that have been and are being provided to the insolvent banks and hedge funds are doing exactly what they were meant to do: allow the banks and financial centers of power to keep up appearances while they cash out of the system, leaving the average American out in the cold but (hopefully) unaware of it all. The government programs are a part of the ruse, of course, to show how much politicians care about homeowners in foreclosure, while quietly pushing them even further toward the brink of losing their homes.

Just a few of the mortgage companies who have restricted access to established home equity lines of credit include Countrywide, Bank of America, and USAA Federal Savings Bank. Countrywide has cut off 122,000 of its customers, while USAA has begun with 15,000. Bank of America has recently also begun contacting homeowners to inform them that they will not be able to use the credit lines.

These types of loans usually do allow for the lender to cut them off for period of time or suspend access if the home value drops, but few of the debtors ever read these complicated mortgage contracts. Few enough of them read the documents for their first mortgages, and most believed that the home equity line of credit could act like a credit card. Cutting off the owners' access to the accounts will contribute to more foreclosures, though.

Most importantly, some homeowners are currently using these credit lines to get them through a temporary financial hardship. With recession looming in the economy, jobs and wealth may begin to disappear at increasing rates. Homeowners who lose a job or face a similar financial crisis will not be able to borrow from their home equity in order to get them through the rough patch. This, in turn, will make it that much more likely that they will end up in foreclosure sooner rather than later.

But the lenders are also in a losing situation. If they keep the credit lines open, homeowners may be able to get through a temporary setback and keep on top of their housing and other bill payments. But if the situation involves a permanent decrease in income, the homeowners may just use the credit line to prolong the inevitable, borrowing as much as possible before they eventually lose the home anyway. In this case, the mortgage company holding the home equity line of credit will most likely not be able to recoup any of their losses from the sheriff sale.

So banks are stuck with the choice of leaving the lines open in the hopes that homeowners will use them to overcome a financial hardship, or closing them in order to prevent even greater losses through foreclosure. By keeping the lines open, they risk even greater losses as homeowners use the money to get ahead of the foreclosure and never intend to pay it back. By closing them, the banks are almost guaranteeing that some owners will quickly fall into foreclosure. Neither of these choices are easy, and it seems that the lenders have decided to reduce their exposure as much as possible by restricting access.

This indicates that the banks believe that there is worse to come in the economy and that home values may not recover for some time. These borrowers may never be able to get access to their equity lines, and ones who have used up much of the credit will not be able to sell their homes because they owe more than the home is worth. Thus, in order to limit their own exposure, banks are locking homeowners out of their credit lines while locking them into mortgage payments that they will never be able to make for the long term on houses that will not be worth nearly as much as they were during the bubble.

But the contagion in the mortgage and housing markets has not even been contained. Both mortgage lenders and homeowners are facing financial failure in record numbers, and bankruptcies are expected to increase. Over 220 lenders have now gone out of business, reduced their lending, or severely tightened up loan guidelines.

Homeowners, as well, are facing the consequences of a nearly decade-long bubble in the housing market, as property values have already fallen by 30-40% in some areas of the country. With increasing foreclosure rates, property values will have to fall even further to entice purchase offers and loan qualifications. But homeowners in trouble will be unable to sell their properties, as they received mortgages during higher points in the bubble.

Thus, even more homeowners are having to file bankruptcy to get out from under these crushing debt burdens on properties worth far less than the loans on them. Disturbing, although not surprising, is the fact that few homeowners seem to care much about these overpriced homes any longer. It is a good question why they should care about them, as they represent an era of excess spending and living beyond one's means that has now ended.

The local governments that benefited so much from the run-up in home values are also the facing financial consequences of trusting in a financially unsustainable system. Cities and counties, unable to collect as much through property taxes as they were used to during the boom, are facing possible bankruptcy. Contributing to the problem is the fact that some public servants are taking retirement early so that they can be assured of a pension paycheck as the local governments are coming closer to the point of insolvency and being unable to fund their payrolls.

Reducing spending and shrinking government is not an action that most governments could conceive of, so that option will not be considered. More likely, taxes will be raised, or the governments will beg for a federal bailout in the form of low-interest rate loans of new money from the Federal Reserve. Again, government will rely on its tool to steal money from the people through inflation in order to keep itself out of bankruptcy, while their theft directly contributes to the problem of people not having enough money.

Inflation caused the problem, and more inflation is, logically enough, causing more problems. Oil is over $3.00 per gallon and a barrel is now just over $100.00. Not even counting resource depletion and a shrinking supply of oil, these numbers reflect a dollar that is quickly falling in value. Homeowners, rather than pointing to Arab countries, should look to their own excesses and their government when seeking to place the blame for the faltering economy.

But the issue remains to be resolved if this is just another recession, or if it is the begin of the end stages of the decline of the American empire. Built on a dollar as the reserve currency of the world and oil being priced in dollars, a movement away from either of these conditions could cause a much quicker collapse. Many OPEC countries have publicly considered pricing oil in Euros and Iran has already begun this. As well, other countries have quietly begun dumping their dollars and diversifying their currency holdings.

These two trends leave the country with only its military superiority to encourage a strong economy, a military bogged down in its own unwinnable wars in foreign nations, stretched thin across nearly 140 countries in over 700 bases. Faced with a loss of confidence in the dollar and a loss of confidence of the general benevolence of the country throughout the world, there may be little reason to expect that this current recession does not signal the final days of an empire of debt.

I personally help 100’s of people save their home each year and I know for a fact that 90% wait until the absolute last minute before they seriously try to stop the foreclosure. Most just do research on the internet and talk to companies who might be able to help, but they don’t take action until they are weeks, or days away from losing their home. Of course, the servicing companies do not help much, because they do not even offer support until someone is 3 payments behind. They were not prepared for this either; they are so overwhelmed with people in foreclosure, that they do not have time for those who are still months away. It is too bad, too, because for many of these people, a simple refinance into a fixed rate loan would solve the problem.

Lenders and servicing companies need to be more proactive and offer solutions before it is too late. If a homeowner can not make payments at 10%, but they can at 8%, then why would the lender not want to offer a fixed rate refinance or modification into a more affordable rate? Instead, they are opting to lose 20-30% on a mortgage that could have easily been profitable. Lenders can make a simple change in their system and eliminate many of these foreclosures before they happen. Homeowners need to make changes as well. Obviously it is easy to blame lenders for these problems, but most homeowners knew what they were getting into and just made poor spending decisions. Consumers need to be educated on the mortgages and they need to be made aware of how easily a hardship or depreciation can cause a foreclosure. Spending habits need to be adjusted and homeowners need to be more aware of what is happening with their credit.

By continuing to foreclose on properties, rather than offering solutions, lenders are forcing lower credit scores and taking more and more borrowers out of the market for new homes and mortgages. This not only affects our real estate market, it affects our overall economy by removing millions of consumers from the retail market. Many mortgage brokers or real estate agents need new jobs and others are just barely scraping by. Not to mention all the foreclosure victims who are no longer creditworthy. Certainly this does open up new revenue streams for other business that profit from these hardships, but overall, I think we can all agree that society is much better off without foreclosure.

I have seen many clients who use their life savings trying to pay the mortgage on a home they can no longer afford, because of an adjustable rate mortgage. In the past these homes could just be sold and the owners could walk away, but now they are upside down from a 100% mortgage and a market that seems to be getting worse every day. Our company is generally successful helping victims refinance or sell, but we also work with lenders to help them establish a loan modification or workout program to keep them in the existing loan. Once we get involved, lenders are very cooperative, but only a small portion of foreclosure victims actually find us before it is too late. Lenders and servicing companies need to work with their clients without the need for professionals to get involved. Unfortunately, these lenders are suffering, too, so they are forced to hire low cost customer service reps that are overworked and underpaid.

This creates a whole new problem; the customer service rep does not care if the loan is profitable or not. They only want to make it through the day and eliminate as many cases as possible, with the least amount of work. They seem to love it when we contact them on behalf of a client, because they know we are going to do most of their work for them. Maybe this is why we are so successful, but still, homeowners should not be forced to hire someone to speak with their lender on their behalf.

If you are a homeowner facing foreclosure, then I recommend contacting your lender first and finding out what options they have available. If they are not helpful, or do not offer any viable solutions, then you need to immediately contact a professional who can help you either find a new lender or make arrangements with your existing lender to begin a loan modification. Companies like mine, who offer all of these services from one source are your best options, because you will not be “sold” on one solution, you will be evaluated and provided with all possible options to stop foreclosure. Ultimately, you need to find a company or person that has experience and is someone you can trust, so feel free to interview companies until you find someone who fits your exact needs. Just be careful, because many of the companies offering foreclosure help do not have experience and should not be trusted.

Eventually, lenders and servicers will figure out that it is more profitable to offer viable solutions, but for now, if you are a homeowner, you better plan on helping yourself out of foreclosure or finding someone to do it for you.

In 2007, more than 1% of all homes were in some stage of foreclosure. In 2006, only 0.58% faced foreclosure. This is an enormous increase in the foreclosure rate, and areas hit hardest by the crisis must seem to be turning into ghost towns. If not, at least the values of many properties have completely disappeared, if the residents have not yet moved out. Even worse than the nationwide number, Florida had more than 2% of households entering some stage of the foreclosure process in 2007, with 165,291 total properties entering foreclosure.

Some of the states with the highest foreclosure rates in the nation include California, Florida, Michigan, Colorado, Ohio, Georgia, Arizona, Illinois, and Indiana. This reflects much of our experience working with homeowners in danger of losing their homes, with nearly 25% of the visitors to this site coming from California and Florida, with the other states listed here contributing a significant portion of the total traffic. Ohio is also a notable state, in that one in every 56 households in Ohio entered some stage of foreclosure in 2007, an unbelievable rate.

Since late 2006, over 220 mortgage lenders have gone out of business, filed bankruptcy, or significantly reduced their lending policies due to fallout from the subprime mortgage crisis. Every day, new lenders are also shutting down lending divisions or significantly scaling back their exposure to the mortgage mess. A number of the largest banks in the country are doing whatever they can to minimize the risk, while other large banks are simply trying to keep afloat, after experiencing huge losses in the past year.

In December of 2007, foreclosure filings had jumped 97% from one year ago, indicating that the troubles for many of these banks may be just beginning. Not to mention the fact that many more homeowners are losing their homes now than even a year ago when there were serious worries about the foreclosure rates, homeowners are still experiencing their own personal financial collapse at an astonishing rate.

Clearly, unfortunately, this trend of homeowners in serious financial trouble to the point of losing their homes to foreclosure will continue unabated this year. An $800 check in six months courtesy of government borrowing from China will do little to affect the weakening economy due to the weakening of the average person's ability to buy products or services. The housing market boom was a result of the inflation pumped into the economy by the Federal Reserve in an attempt to avoid a recession in 2000-2001 after the tech bubble burst and the aftermath of the 9/11 terrorist attacks. But postponing a recession and transferring the bubble to the average homeowner has only made the situation much, much worse. How much worse will remain to be seen.

Actually, spending too much money is exactly what caused some of these problems in the economy. During the real estate boom of the early 2000's, when interest rates were manipulated downwards to provide economic stimulus after the tech bubble and 9/11, home buyers went out and spent as much as they could getting a home. With the artificially low interest rates, lenders gave every loan applicant as much as possible, believing the rising prices in the real estate market would take care of any potential foreclosure problems. Then the homeowners kept right on spending with their credit cards and HELOCs until they had all the cars, computers, and other consumer goods that they wanted.

But spending on credit means that, eventually, the bills will come due, and homeowners found that out the hard way when their subprime ARM mortgage rates increased. Then, in order to keep the mortgage on time, they had to miss a payment on this credit card or that personal loan, which drove up the interest rates on these loans. When a payment is missed, credit cards often drastically raise the interest rate, doubling or tripling the original, in some cases. Interest rates of less than 10% skyrocketed to 29.99% after a missed payment, and then the homeowners had to decide between paying the mortgage at all or paying the credit cards. In the meantime, collectors from all companies were calling several times every day looking for their money.

Factor in inflation due to government overspending and devaluation of the currency, and prices for transportation, home heating, and food were going up 10% or more per year. For homeowners who did not have to drive to work, heat their home, use electricity, or buy food to feed their families, the financial situation remained stable. For the rest, higher expenses translated into a decrease in the amount of income the homeowners could use for savings, paying down debt, or maintaining their current standard of living.

Thus, homeowners spent their way from a 6% mortgage rate to an 11% rate, and from a 10% credit card rate to a 29.99% rate. And in turn, the government also spent the homeowners' way from the dollar being the reserve currency of the world to a tripling of oil prices and inflation rates of 30% in some commodities. After all, the government really does not have anything, except what they take from consumers in the form of taxation or inflation, or borrow from other sources.

And what about the savings that homeowners should have been putting away to meet any emergency? Well, that was nonexistent, as the savings rate in America has been negative for years now. Consumers spent so much, that they had to borrow even more money just to make ends meet and continue their spending. Of course, now, instead of borrowing for unnecessary items, they are spending borrowed money just to make their increasing payments on the mortgage and credit cards, while borrowing even more to spend for basic items like food and gas.

Government interest rate manipulation and inflation are the two main reasons for the crisis being experienced now. And the solutions that have been offered so far are simply more rate manipulations and inflation! This is like a doctor giving a patient a medication he is violently allergic to, and then prescribing more of the same medication to combat the additional illnesses caused by the medication in the first place. At some point, either the treatment will need to be changed, or the patient will die. For now, though, if we could get spending under control, and consumers saved even a little bit to get through financial hardships, the fear of recession would probably be much less, and the economic downturn itself would be less dramatic.

One of the most important reasons so many Americans are in financially difficult situations is the lack of economic knowledge and leadership by the politicians. This leads to massive overspending by Washington, which spends more money than it brings in through taxation. So, to make up a portion of the shortfall, the bureaucrats resort to borrowing money from China and other countries, but this still is not enough. At this point, Washington asks the Federal Reserve to print money, which inflates the currency and devalues the dollar. This causes prices to rise for everything else in the economy, like food and transportation. Homeowners whose income is stagnant or falling can not keep up with 10% inflation rates or more, and when their mortgage payment goes up 15% due to an adjustable rate, financial disaster is one paycheck away.

An ill-conceived foreign policy that is beyond wasteful also contributes to this problem. The nation borrows $2 billion a day from the communists China, politicians give $12 billion in foreign aid to a military dictatorship in Pakistan, then wage a $1 trillion war in Iraq "promoting democracy." Again, Washington can not afford to do all of that just with the money that actually exists, so the Fed again prints the money to fund the shortfall. It should not be any wonder that oil-producing nations want more dollars due to the devaluation, which drives up oil prices through inflation, which were already being driven up through the instability caused by our military adventurism.

Finally, another problem relating to the foreclosure crisis is the public school system. For over one hundred years, there has been a systematic dumbing down of Americans through government-run public schools, which teach students how to respond to things like bells and orders to be quiet, but do not teach them how to think critically or analyze situations in a broader context. Therefore, it is little surprise that many people read less than one book per year, but refinance their homes with extremely complex mortgage instruments every year. They not only do not understand the paperwork, they do not even attempt to read it or have it explained to them by an attorney that is often mandatory for them to hire in order to close the loan.

And this lack of basic financial education contributes significantly to the problem of homeowners' failure to understand what they have gotten themselves into. Thus, people do not know how to balance their own checkbooks or realize the importance of planning for the future beyond the next 10 minutes of their lives. If they could analyze their finances in a little more depth, they might set up an emergency fund to get them through a financial hardship or downturn in the market. But people who can not save even an extra 2% of their income towards an emergency fund are not going to be able to realize that even more of their money is being stolen through inflation and the contradictions of borrowing money from communists to give it to dictators and then going to war to spread democracy.

Furthermore, this lack of an ability to think critically is one reason why many of them will dutifully go and vote for the presidential candidate this year who will promise them the most "free" stuff, not understanding that they will be the ones to pay for it, through higher taxes, more of the economy sold off to foreigners, or a further devalued dollar. Everyone likes free programs and free handouts, but they simply do not exist in the world of politics and economics. Someone has to pay for all of that, and bureaucrats enjoy making the people who enjoy the benefits least the ones who pay for it most, as long as they can get a piece of the action.

The foreclosure crisis is not an isolated event caused by the failures of the market and greedy buyers and lenders taking advantage of each other. Although this certainly happened, there are much broader forces at work. Unfortunately, though, few of the homeowners facing foreclosure will be unable to realize the context of their hardship, and even fewer will be able to do anything about it. For homeowners who are in danger of losing their homes, the most important action they can take is to find some way to stop foreclosure, and worry about the macroeconomic issues after they are financially sound once again. Hopefully, though, this experience will teach many of them that the solutions to the problems that caused the foreclosures in the first place do not lie with those same institutions.

But then the bottom fell out of the market as investors realized that people could not afford their homes, and property values started falling dramatically in some areas. Hedge funds at Bear Stearns were bailed out by the Federal Reserve's printing press, investors from Abu Dhabi bailed out Citigroup to the tune of billions of dollars, Bank of America entered the process of bailing out Countrywide Financial Corporation after its subprime portfolio went into meltdown mode. Who is responsible for all of this mess?

To have some inkling as to why so many Americans are facing foreclosure all at once, it is necessary for one just to drive around to the closest shopping center in the neighborhood. Take a look at all the pointless, expensive garbage that people keep buying, because they can just whip out a credit card and never have to think about actually paying for their items. And they have no reason not to keep buying, as getting approved for a new credit card is as easy as ordering from McDonald's.

And when interest rates were lowered close to 0%, to combat the bursting of bubbles in 2000 and 2001, banks started giving out mortgages like they were credit cards. Homeowners, trained from birth to be greedy impulse-buyers, started purchasing houses and refinancing their homes as if they were ATMs. Banks would approve a family for a maximum loan amount, and appraisers would give the house a value of that amount, in order to increase fees and commissions for the mortgage broker and real estate agent. The item of the day was greed and everyone had a place at at the table.

Homeowners, in order to get as much money as possible, just lied on their loan applications, overstating their income by 50% or more. After all, decades of public schools encouraged cheating, and now the teacher-lender was not even attempting to grade the worksheets. Banks, eager to hand out money, approved the loans no questions asked.

It did not take too long for the first homeowners who could never afford their homes to begin with to find out that they could not afford their homes. This had little to do with interest rate increases, as people who make only $2,000 a month, and have $1,000 a month in credit card bills, are unable to afford a $3,000 principal payment, regardless of how much interest they pay every month. But several foreclosures in an area will start to drag down home values. And homeowners with good credit who financed 110% of the purchase price could not sell quickly if they ran into a job loss or medical problem. The fallout from the greed of the subprime buyers and lenders started seeping into the rest of the market, which should have been entirely predictable knowing how many poor loans were being made by banks, securitized, and sold off to hedge fund investors.

Property values declined, making it even more difficult for homeowners to sell to avoid foreclosure. And more foreclosures could not be avoided, pushing property values down even further. A market decline turned into a panic which, despite the best inflationary efforts of the Federal Reserve, turned into a recession which, despite the best interest rate manipulations by the Federal Reserve, turned into the depression now being experienced by homeowners who are now effectively trapped in their homes, with loans amounts much greater than the current value of the property. For years, they will paying for their greed of the past years, instead of building equity in their homes.

So, the real estate market experienced a number of big banks handing out money and homeowners lying to receive money. That imbalance paved the way for the housing market to enter a depression at the first sign of defaults and property value declines. The problem in the first place was created by inflation and interest rate manipulation by the Federal Reserve, in an ill-advised attempt to combat one bubble. Manipulated bubbles, though, can not be effectively dealt with by transferring the problem from one segment of the market to another. And in transferring a massive bubble to homeowners and consumers, the road to hell foreclosure victims are walking now was paved by the Fed.

Why is this? It seems to me that all this focus on irrelevant sports and entertainment is simply part of the public relations plan put on by the government, which spins its wheels investigating worthless events that harm no one but involve celebrities and professional sports players. And from the perspective of the media, consumers and homeowners worried about foreclosure are much less likely to spend their increasingly unstable incomes on the products of advertisers running commercials on the stations. It really is just easier for everyone involved to pretend that problems do not exist.

But the governmental focus on investigating sports and entertainment also helps politicians build themselves up and increase their own celebrity status. By appearing to be investigating important issues like one person taking a substance or not taking a substance, it helps create an aura of higher celebrity around government officials, who are never lacking in ego. It also gives these professional lawyers another forum in which to spout off their opinions of "universal truths" about "The Law," "fairness," "justice," and all the rest.

The pointless inquiries also takes time away that could be used to investigate real potential issues, such as war crimes, financial crimes, economic incompetence, and so on. But all of those, of course, are depressing to most Americans, whereas a daily dose of two-minutes hate against an "overpaid," "arrogant" baseball player instills a healthy amount of fear of and trust in government violence.

The real objective, so far as I can tell, is not even to prevent athletes from shooting up. I think it is a safe bet that many of them are still doing it and will continue to do so. The lesson to be learned here is that, if an athlete is planning on taking steroids, they better do a good job of not getting caught. And if they are unlucky enough to make a name for themselves and get caught, they better not lie to their surrogate parents (the State), or else they can expect a televised dog and pony show to illustrate their humiliation every day by lawyers in Congress who have never played a sport in their lives and have absolutely no idea what they are even talking about (but who are only too happy to take contributions from drug companies and medical interests).

Not to mention the fact that almost no one in Congress (with a few notable exceptions ) has any idea what they are talking about in terms of economics, foreclosures, or foreign policy, either. I think it would be safe to bet that they wouldn't do a better job of investigating those topics than they happen to be doing with steroids, and the results will be just as worthless and irrelevant to the vast majority of homeowners wondering how they will make their mortgage payment next month.

So maybe the best we can hope for from the government is just to keep on investing topics that are wholly irrelevant to most people. Leave the people and the market to work out its own instabilities and get over the current recession with as little interference as possible. But would it be reasonable for the media to focus slightly more on providing homeowners with more important information that they can use to keep ahold of their finances and navigate through the housing depression, rather than bombarding the viewer with irrelevant celebrity trials for victimless crimes?

The most important difference between these other scandals and the ongoing foreclosure crisis, though, is how deeply personal this crisis is to homeowners losing their homes. A drop in the value of their 401(k) or other investments is certainly disturbing, but finding out that one has been a victim of the most incompetent lending practices of recent memory and that has led to an inability to stop foreclosure is another matter entirely.

When other markets were heavily leveraged or securitized, the inevitable bursting of the speculative bubble was largely isolated to a specific market or industry. When internet and tech stocks collapsed in 2000 and 2001, the average homeowner in, say Ohio, was not as affected as the state of California. When the Russian currency collapsed in the late 1990's, there was no widespread concern about the American dollar.

Even other hedge funds that collapsed in the past did not engender the same amount of financial concern as the foreclosure problem. Long-Term Capital Management, a hedge fund that was bailed out by the Federal Reserve in the 1990's, was interested mainly in the Asian and Russian markets, and the collapse of the fund was a reflection of the weakness of those markets, rather than the American economy.

But the lessons of these other collapses have apparently not been learned by lenders or investors. Or, maybe, they have been learned all too well, and it is the average consumer and homeowner who has not learned enough.

When interest rates were lowered as a result of the recession of 2000 and the attacks of 9/11/2001, banks had a decision to make. And they actively, voluntarily, with no compulsion, decided to pull the trigger. What was that decision?

They decided that they would offer mortgages to nearly anyone who wanted one, whether they could qualify for it or not. In fact, they offered mortgages even to people who could not or simply did not want to prove to the bank that they made any income, let alone enough income. And the banks made billions of dollars from this quite illogical decision.

Once they originated the subprime, ticking time bomb loans, the banks would simply package them together and sell them as securities in the market. Hedge funds, who invest in the riskiest markets possible, ate up these mortgage-backed securities and could not get enough. Because of the rising real estate market, they believed there was no chance of loss.

In the first place, the loan payments were guaranteed to rise, with adjustable rate mortgages. Hedge funds could buy loans with low interest rates and sit on them for a few years until the rates automatically adjusted. And, if the homeowners could not afford the payment, there were no worries at all. They could simply sell the foreclosure properties for even larger returns, after eating up as much of the equity as possible. It was a no-lose situation for banks and investors.

The large banks, of course, knew that real estate prices would keep rising, since they control the money supply through their control of the Federal Reserve System. Lower the rates, give everyone a loan, and let the market spread the newly-created inflationary wealth around.

Then, raise the rates, watch as homeowners were unable to stop foreclosure because their home values dropped, and simply take back all the of the real estate. In this way, banks now own vast amounts of real estate throughout the country that was purchased at severe discounts through county foreclosure auctions.

The hedge funds who were willingly complicit in the scheme? Well, they got a free bailout of their toxic collateralized debt obligations. A few people lost jobs, homeowners and consumers lost wealth in their pensions and retirement accounts, but the offending companies were able to use that inflated money to keep operating with no real consequences. A free market would have punished such awful lending and investing decisions, but the semi-government intervention saved the funds from having to make good decisions in the future.

So, maybe I was wrong: the banks learned the lessons of these other market collapses all too well. Instead of wiping away the wealth of investors in the internet industry, or certain energy companies, or foreign bond markets, the lenders decided that the newest target would be more massive than any before. The homeowners of America who purchased or refinanced within the last seven years are now all caught in the trap of getting a loan on an extremely over-valued property, and many owe more than the house is worth.

The real estate value is gone. For many foreclosure victims, the house is gone. And even rents are increasing in many parts of the country, at a time when job quality is deteriorating and food and transportation costs are rising.

So now, we should ask ourselves, what will be the next bubble to burst? And who will be the unfortunate victims?

Banks are not even lending to each other very much right now. Many of the large banks, such as Chase, GMAC, and Washington Mutual, although they were not large players in directly lending to loan applicants in the subprime market, were voracious buyers of these loans. They would buy large numbers of bad loans, package them, and sell them to investors or hedge funds managers, who believed the returns would justify the enormous risks involved.

However, the mistake was in believing that real estate prices would just keep rising; if the homeowners with the bad loan defaulted, the banks would simply sell the property for a huge gain. Whether the owners made the payments or not, the investors would make money in a steeply rising real estate market. Of course, these geniuses failed to realize that large numbers of foreclosures would inevitably lower the home values in areas hit hard by defaulted loans. Once this happened, the charade could not last much longer and everyone realized just how toxic are loans made to people who could not afford to pay them back.

Now, with trillions of dollars of bad mortgage debt floating through the economy, banks are desperately attempting to reduce their exposure to the risks. If another bank requests to borrow money from a large lender, what is the reason? Because they are experiencing a short-term liquidity problem, or because the only way to stay in business for another few days is borrowing money that they will eventually default on once their mortgage clients default in even large numbers?

No one even really knows who owns these subprime mortgages, so every lending decision by a bank to another bank is now consumed by a fog of suspicion and distrust, which explains why credit is still scarce despite the Federal Reserve's repeated lowering of the interest rate and direct injections of newly-printed money into the economy.

Of course, all of this reduction of risk, refusal to lend money to homeowners in trouble, and direct involvement in the economy by the central bank just leads to more problems for homeowners. They are unable to figure out who owns their mortgage, because the loan has been sold numerous times and is now in the hands of some hedge fund who sells the servicing rights to another company which then sells those rights to various other companies. Even courts now are throwing out some of these foreclosure because the plaintiffs can not prove their own the loan; while this is a positive development for homeowners, it does not allow the mortgage contract to be performed as written and leads to more confusion as to just what is going on with these subprime loans.

The homeowners are unable qualify for a loan to fix their problems temporarily, because banks are no longer lending money to people in their financial situations. And they can not even afford to keep up with rising prices any longer, as the Federal Reserve inflates the money supply, decreases the purchasing power of the dollar, and bails out banks directly. While no one party should get a direct bailout, the fact that the banks are getting it just to prop up their bottom lines for the short term will not do a single thing to provide help to homeowners falling behind. They still do not qualify for a new loan, whether the lenders have been given free money or not.

And the new money given to the lenders just increases the possibility of more foreclosures, which increases the chances that the banks will request more bailouts in the future, leading to more inflation and more foreclosures, and so on. This cycle of stealing purchasing power from the average consumer to give to the big banks because they may not make as high of profits as they once expected is no excuse for the act of stealing money from the homeowners to begin with. When the Federal Reserve, owned by the large banks to begin with, prints money to give to the large banks, this is nothing but outright theft from homeowners. As the money supply increases, money becomes worth less, but those who have access to the newly-created money can continue to prosper at the expense of those who do not.

With bad lending practices, absolutely confusing loan paperwork and unclear chains of ownership, and continually relying on inflation to bail them out of these poor decisions, the banks have been shooting themselves and their clients in the foot at every opportunity. Extracting as much profit as possible from the people through lies and manipulations is one thing; believing their own lies is entirely another. Of course, it always helps when the banks do not have to worry about things like accountability or being punished in the market. After all, they exercise inordinate control over the market through interest rates and money supply, and will begin the next bubble after the currently bursting one's fallout has been cleaned up.

Of course, the inability to see the forest for the trees, so to speak, is trained into all Americans through a public school system that leads students to believe that various subjects have nothing to do with one another. History is taught for one hour, followed by Spanish, followed by Geometry, followed by Current Events, and so on, with no interdisciplinary focus at all. The same tendency towards compartmentalization is seen in TV news programs, which function more like court stenographers simply recording who says what, rather than journalism, which would attempt to connect some of the dots between stories and their wider influences and implications. So, it is not primarily the fault of homeowners that they may be missing out on a broader exposure to issues affecting the housing market and foreclosure.

Just a few of these other issues to think about are presented below, and they are considered as starting points to begin thinking about ways in which to prevent such a meltdown in the market from happening again. No one article or book or program can ever adequately explain all of the causes for and influences on a historical event, of course, and more research can always be done on any of the topics mentioned here. With the widespread use of the internet, it is easy to research nearly anything, from ways to stop foreclosure to the implications of the drought in the American Southeast. But, some very brief examinations of the larger picture of the foreclosure crisis are listed below, all or none of which may be entirely accurate.

If the Iraq War was ended sooner rather than later, less money would be spent overseas on destroying parts of and then rebuilding those parts of Iraq. That money would not have to be borrowed from foreign investors or created out of thin air by the Federal Reserve, which means that the value of the dollar would not be in such decline. If this were the case, homeowners would not see inflation rates over 10% per year on food (has anyone seen the price of bread or milk recently? ) or oil, since the value of the dollar would remain more stable. They would be able to afford their mortgages easier, decreasing the chance of becoming a victim to foreclosure.

Oil prices are also being affected by the Iraq War right now, especially due to a fear of the war spreading into Iran. Iran controls the immensely important Straits of Hormuz, through with passes 20% of the world's oil supplies. If the war spreads into Iran, and they close off the straits, then there may well be a worldwide economic collapse, leading to much higher prices for goods and leading to even higher foreclosure rates. In fact, many of the goods we rely on daily may no longer be available, due to much higher production, manufacturing, and transportation costs. Furthermore, if there is a worldwide collapse, the United States' undefended southern border may turn into a huge refugee crisis with people fleeing Mexico, hoping that the US is more stable during the crisis.

Also, retired people living on Social Security would have a more stable income with less deficit spending, borrowing, and creation of money which results in their cost of living rising. It is likely that the people dependent on it will always get their Social Security checks, but they may be worth nothing if prices keep increasing. People living on Social Security and fixed incomes will experience inflation rates higher than their income can keep up with, which may result in their eventual foreclosures. Money that does not exist can not be spent, but the government can simply inflate the money supply, taking purchasing power from these retirees to spend on various programs and bureaucracies.

Illegal immigration is a problem mainly due to the state of the economy now, and we should always welcome guest workers and people who wish to make a better life for their families and see the opportunities America presents as a vehicle for that. But due to inflation and borrowing and the devaluation of the dollar, businesses want to keep as much of their income as possible, which leads them to hire employees for as little as possible. Because there are no wage controls or minimum wage laws on undocumented workers, besides the fact that they are not to be hired in the first place, they can be paid very little, businesses can keep prices lower and increase their profits. But this may keep jobs from others who would demand higher wages; this might force prices to increase for some goods while other businesses fail due to disappearing profits.

None of these issues have an easy answer, even though many will present simplistic sound bites or illogical justifications for one position or another. But, without addressing all of the issues at once, it is hard to focus on just one as the single most important. If we solve one, it won't have a substantial impact on solving every other problem and truly ending the foreclosure crisis. And these few concerns listed above are insufficient to address problems such as inner city crime and the war on drugs and the widespread use of stimulants, anti-depressants, and other mind-altering drugs. Another issue that should be addressed the corruption of the banking system that led to a manic lending of hundreds of thousands of dollars to homeowners who could not afford the loans, and the fact these loans were designed to be so confusing that now even the banks, investors, and courts are unable to determine who owns the loans.

Although most of these issues are discussed frequently in the news, few conclusions are ever reached and no connections are made from one topic to another. It always seems to be "Turning now to..." or "And now, for something completely different...," rather than anything more than a superficial glance at one issue. Of course, with so many issues to discuss, this can not be entirely the fault of media, who merely present what happens (stenography again). This is why it is the responsibility of Americans to become well-informed and dig deeper into various topics on their own; no one else can help them understand their place in the world unless they are willing to begin finding out themselves.

The most commonly cited cause among armchair analysts is simply greed and corruption on the part of nearly everyone in the mortgage and real estate industries. And, of course, there were massive levels of greed among the lower level workers and participants in the market. Appraisers over-valued homes, Realtors listed them for these unwarranted prices, and loan officers provided loans at higher values in order to reap higher commissions. Homeowners were also not innocent, as many of them lied on mortgage applications to increase their incomes and qualify for homes they knew they could not afford for the long term. Banks provided incomprehensible mortgages with low teaser interest rates, basing the qualifications on the applicant's ability to pay the artificially low rate, not the reset payment even based on current market conditions. These circumstances all combined to create a highly over-valued real estate market and vast numbers of homes sold families who simply could not afford them.

Geopolitical concerns relating to oil and gas prices also began to contribute to homeowners' financial problems. Finite (and falling) energy supplies and growing populations in foreign countries pushed up demand for various forms of energy, causing an increase in costs. Prices have risen for food (grown on farms using oil-powered machines and oil-based pesticides and processed in industrial plants), gasoline (rising demand, falling quality of oil from imports), and home energy (natural gas-fired power plants), to name a few concerns. These rising prices are naturally passed along to the end user of the products, and consumers often spend more time complaining about high prices instead of reducing their dependence on such items or going without. Of course, every budget has its own break point, and many homeowners facing foreclosure who had negative savings rates for months or years before missing a payment inevitably reached theirs.

A third cause is the falling value of the dollar, decreasing the purchasing power of ordinary Americans. Devaluation of the dollar causes imported goods to increase in price, contributing to higher energy prices, food prices, and expenses for nearly every good sold by the largest retailers. Homeowners are also robbed of their money in the form of inflation caused by the federal government borrowing money and printing money to wage war and provide social programs, thereby devaluing the dollar further. Once Congress passes a budget and realizes it will not bring in enough money to pay for every program, they rely on borrowing money. When this does not make up the shortfall, they simply print the money and have the first use of it. This inflation takes away the wealth of citizens, as their once precious dollars become as common as confetti and worth about as much.

The complicated world of collateralized debt obligations, hedge funds, and packaged mortgage investments have also contributed greatly to instability in the market. Convoluted investment instruments have been used to package subprime loans and sell them on the market to hedge fund investors and pension funds. Now, with so many foreclosures, it is doubtful who even owns these loans in default, as they have been bought and sold so often by institutional investors. In some cases, the courts have been unable to verify who actually owns the debt and is legally allowed to collect the payments or foreclose on the homes that have defaulted.

A final cause discussed here is the prevalence of credit as a means of financing one's life. With credit applications available in nearly every college classroom, during commercials on every television show, and sponsoring sports and community events, an incredible percentage of people have faced financial issues at one time or another due to their use of credit. This overuse of credit through cashing out equity, using home equity lines of credit, or frequent credit card use, often combined with an unexpected financial hardship, such as a loss of job or medical expense to push homeowners into foreclosure. If credit is relied on to prop up the family's budget, and then a payment is missed, one of those shaky supports falls away, interest rates increase, and it gets more difficult to keep on top of that bill and others. Miss a few payments, multiply the same experience by numerous homeowners, and it is easy to see how that can affect markets.

Again, no discussion of the causes leading up to the declines in the real estate market can conclusively explain the effects. But, homeowners, whether they are in danger of losing their homes or not, would do well by researching some of the reasons their family and neighbors may be facing foreclosure. Only by learning from the mistakes of others, and the traps designed to facilitate the loss of their homes, can any homeowner realistically expect to keep his or her property out of the foreclosure process.

Months ago, the Fed pumped several billion dollars of newly printed money into the market to revive the economy from the collapse of the subprime mortgage industry. This is pure counterfeiting of money and steals the purchasing power out of the pockets of citizens, while investors and large banks and hedge funds get to use the money first. That is why investors on Wall Street see increases in stock values and think this is a good sign for the economy, whereas common people see increases in the cost of everything they buy and realize they can not keep up with the increases for much longer. Many of them may be forced to consider bankruptcy or other options to prevent foreclosure.

Stock prices can rise 6 or 8 or 10% annually with newly printed money continually injected into the economy. The Fed fudges the actual inflation numbers, declares the inflation rate to be at 2% or nonexistent, and every investor believes he has made 4-8% profit over the rate of inflation. Of course, the Fed's core inflation rate does not take into consideration energy or food prices, which take up huge amounts of consumers' budgets, and which have risen much faster than 2%. Homeowners in Michigan are experiencing their own economic recession, while more affluent communities are not hit as hard.

Possibly the best thing for common people (like almost all of us) is to have some extra backups in case things get tough for a few months. That might mean investing in silver/gold, or having an extra month's food supply on hand, or having 3-6 months of income in an emergency fund. This is especially important as the US moves into the winter months, which brings along higher energy costs in the form of home heating bills. Even if nothing happens system-wide to shock the economy, this planning can really help every consumer get through a temporary hardship. Just as no one can accurately predict the future course of the economy, it is no easier for families to predict a financial crisis, such as a sudden medical expense.

Another good reason to have this kind of backup plan is if there is some sort of natural disaster (Katrina style hurricane, San Diego style wildfires, etc.). Does any homeowner really want to have to make his way to the nearest large stadium for FEMA-administered starvation and disease, with all of the loss of civil liberties and freedom this entails? Or would the family rather be able to survive on their own even for just a few weeks until the crisis has passed and they can start working on rebuilding and recovering? Especially with all of the foreclosures that happened in the region after Katrina and the hurricane season, it would be a good idea to have some sort of plan in case things go very wrong.

But becoming more and more self-reliant will help every homeowner to ignore what the Fed and the markets say and do. We can not control them, and it would be a mistake to try to do so. All homeowners can work on is their own family's financial situation and what their plan will be if something happens. Simply planning for the possibility of foreclosure can mean that it never becomes an issue to begin with. Likewise, not planning for such a financial crisis almost guarantees that any setback can push the homeowners straight into missing bill payments, considering filing bankruptcy, or facing the danger of losing their homes due to an entirely avoidable foreclosure.

The markets have been bailed out repeatedly with freshly inflated, newly printed money, which artificially raises stock prices, as the worthless subprime mortgage bonds have been bought by central banks. However, the bank can only create this new money by stealing purchasing power from the homeowners and consumers who are having trouble paying their bills to begin with. Wall Street is doing pretty well and claiming no inflation, while the average person is seeing prices increase for transportation, food, and energy, due to their lost purchasing power as the value of their money decreases. The "benevolent hand" of central bank regulation takes away the freedom of markets and manually steals money from consumers to hand over to banks and investors.

There have been a number of bank runs and bank failures in the previous few months, as well, in America and other countries. Thus, panic is still a big factor in influencing the markets, and it is important not to generate any large amount of personal panic in the American consumer. To maintain a perpetual war segment of the economy, however, everyone needs to be on alert of terrorists and a nuclear armed Iran, but they can not be afraid of losing their life savings when their bank fails due to poor lending policies. If this were to happen, consumers might stop spending money and actually begin saving, which is the worst possible scenario for investors and banks relying on the interest generated by debt financing. Not that many consumers can afford to save money anyway.

The Old Media is certainly not going to report the weaknesses of the market, though, as they are financed by the same big banks that need positive press to keep up their destructive policies. Some large media outlets are even owned by companies that benefit from government largesse in the military-industrial sector, giving them a vested interest in maintaining war for the sake of profit. That is why bad things happen to markets in other countries, while good things happen in the economy here, while we are always under the threat of more attacks at home and abroad by shadowy terrorist organizations. Consumers will not hear any different on the Old Media sources.

Also, a good percentage of the population is now taking some sort of anti-depressant or other prescription medication. People who can no longer feel any emotion do not get that worked up over anything. They are simply trying to control their high anxiety by taking pills to suppress normal human feelings that would help them get through tough times and begin thinking about real solutions. But unnecessarily drugged parents and children can not critically think their way through the misrepresentations of their trusted news sources, let alone think critically to saving their homes from foreclosure, or establishing a plan for their future economic stability.

The only real silver lining is that, even with the collapse of the dollar, there is nothing real for it to collapse in relation to. All other currencies are backed by the same thing as the dollar: nothing at all. So we are all just playing with Monopoly money, essentially. The rest of the world has an incentive to keep taking our dollars to make sure their markets and currencies do not also collapse.

In most foreclosure situations, the bank does not want to become the owner of the property, because lenders are not in the business of managing houses. It is usually more profitable for the bank and the homeowners to reach some agreement where the house is saved and payments are made on time every month. Homeowners, when they first become aware of a financial hardship, though, can do much to offset any ill effects, such as saving money on other bills, reducing expenses, or cutting unnecessary costs. Especially with the winter months quickly approaching, homeowners will face increasingly high energy bills to heat their homes, and gas prices for transportation have also been rising. Turning down the heat, layering clothes, and avoiding unnecessary trips or car pooling can have significant positive affects on a family's monthly expense budget. Likewise, cutting back on luxury items, like cable TV or extra cell phones, may improve the financial situation in the short term.

Seeking out an additional source of income is another way to avoid going into foreclosure, and getting a second job may be worth considering. Even a few hundred extra dollars every month can mean the difference between having to choose between "heat or eat," and being able to put that money towards savings or getting out of debt. A second job does not have to last forever, but can instead provide a bridge for families from a financial hardship to a more secure position. Even selling items on eBay or through a garage sale can generate extra income for homeowners to make an extra mortgage payment. This may only be a one-shot deal, of course, and once the items are gone, they can not be sold again, but every moment counts in foreclosure situations, and most of us already have too much "stuff" that is really not needed, or even wanted anymore.

Lenders foreclosing on a home would generally prefer that homeowners find some way to stop foreclosure before the situation gets out of hand. They know that, the more payments that are missed, the more expensive it will be for all parties involved to take care of the problem. Foreclosure is expensive for banks to pursue through the court system, and homeowners know that the amount necessary to get back on track will increase every day, as late charges and interest