Why is the Govt. siding with Banks over Soldiers?

America's golden age was after World War II – when the federal government awarded the American soldiers who'd risked their lives with college loans and Veteran Benefits that inspired a decade of building and progress.

Ever since then, there's been a tacit understanding that if you risk your life for your country, the federal government's going to look out for you when you come home.

[Except if you served in Vietnam – Editorial Bear]

Which makes stories like this one really troubling: A sergeant in the National Guard who served valiantly in Iraq, only to have the bank foreclose on him while he was away.

It was at the height of the War in Iraq when Sgt. James Hurley was sent overseas. He left his wife and children in his small house in Michigan and bravely did his duty – expecting them all be waiting for him when he got back.

Because he would be serving on a reduced income while he was in Iraq, Hurley even expressed concerns that his family wouldn't be able to keep up with the mortgage payments, but the US army reassured him that the Servicemembers Civil Relief Act would protect his family while he was away. It's against the law to foreclose or evict an Active Duty Servicemember while they're on tour – and the law also ensures a VA refinance can never have an interest-rate higher than 6%.

But despite the law, agents of Deutsche Bank still foreclosed on his modest home while Hurley was in Iraq, and callously evicted his wife and kids. They then sold the property for about half of what it was worth to a developer who quickly scooped up the plots next door as well.

More than 20,000 active duty military had their homes put into foreclosure in the last year alone

When Hurley returned, it took him a four-year legal battle for Deutsche Bank to even acknowledge that what they'd done was wrong, and offer him 'fair market value' for his lost home. Considering their illegal action had cost him tens of thousands in legal fees, broken up his marriage and made certain that he'd never be able to reclaim the home he'd lovingly built over the course of decade, that seems like an absolute travesty of justice.

Currently, the courts are deciding whether or not Hurley deserves 'punitive damages' from Deutsche Bank. The fact that this is even up for debate astonishes and enrages me.

I have some serious questions about the whole situation that I am singularly failing to get answered:

• Why was Hurley's family evicted in the first place? If the Servicemembers Civil Relief Act protects against foreclosure, how did Deutsche Bank manage to push through foreclosure proceedings? Couldn't Hurley's family have just picked up the phone and explained the situation? Were the Deutsche Bank agents so ignorant or unscrupulous that they just didn't care?
• Why is Deutsche Bank not being charged for this disgusting violation of trust? They broke the law – almost certainly knowingly and with intent. Yet not only are they not being punished for it, they've been allowed to spend the last four years fighting from giving Sgt. Hurley even the most basic compensation for what they did. Why is there no accountability here?
• How can the question of punitive damages even be up for debate? Sgt. Hurley lost his home, his wife and tens of thousands of dollars in legal fees, and the bank won't be held responsible for that? If they're not punished for so flagrantly breaking the law, what's to stop them doing it again with another active servicemember?

In point of fact, more than 20,000 active duty military had their homes put into foreclosure in the last year alone; each case in violation of the Servicemembers Civil Relief Act. It just shows how vitally important it is that banks face real consequences when they ignore the law so blatantly.

Across the country, other servicemembers were thrown into financial turmoil when banks ignored the rules about how high interest rates could go, so a Virginian soldier whose Virginia VA Home Loan were never meant to go above 6% would up being expected to cover an interest rate comparable to the most sharkish of adjustable rate mortgages.

What makes it especially appalling is that it wasn't until this scandal hit the news that Holly Petraeus, who heads the Office of Service Members Affairs, warned 25 banks that they were breaking the law – and that warning came with little action or consequence.

How come in America banks can operate with such impunity? How come the government is willing to turn a blind eye to them churning the families of servicemembers onto the streets?

Given that over 80% of all home loans wind up going through one of the pseudo-socialistic mortgage agencies overseen by the government – Freddie Mac and Frannie Mae – how can a responsible government allow this to happen?

I fear the answer is that the government feels more duty and loyalty to the billion-dollar bankers than it does to the men and women dodging bullets overseas; and that's a situation responsible Americans should work very hard to change.

Washington Runs as Normal

I've been very disappointed in the goings-on (or, rather, lack of them) in Washington D.C. recently.

The Republicans derailed Obama's push for a rapid reform of America's health care system - but this was clearly motivated more out of partisan politics than meeting the needs of America's health care consumers.

Delaying the vote until after the summer recess smacks of laziness and self interest. From the very beginning, postponing the vote was the Conservatives' sole objective. If the Republicans really had America's best interests at heart, they'd have put their nose to the grindstone and hammered out a bipartisan solution, instead of doing what Washington does best and procrastinating.

But likewise, it's business as normal in DC for the Democrats as well. Today, Democrats Chris Dodd and Kent Conrad got caught lying to America about their preferential treatment by Countrywide Financial Corp. - the organisation blamed for throwing America's mortgage industry down the toilet.

As I wrote in this post, it was corruption, greed and sleaze on behalf of the Democrats which brought down America's housing market - not President Bush's so-called 'unregulated' market. It was politicians like Dodd and Conrad who fought to maintain the grossly overinflated mortgage market - and today's findings prove that they did it entirely for their own selfish ends.

The fact that Chris Dodd heads the Banking Committee and is responsible for solving America's foreclosure crisis would be funny if it wasn't so terrifying. He helped create this debacle. Isn't he the least qualified man in America to fix it?

Funnily enough, the list of Countrywide's 'VIP members' is filled with those responsible for perpetuating the Frannie Mae and Freddie Mac farce. James Johnson, a former head of Fannie Mae, also received a 'sweetheart' deal on his mortgages, as did Franklin Raines, who also headed Fannie Mae. It's so blatantly transparent that corruption, sleaze and double dealings were going on that I'm frankly astonished that nobody's been carted off to jail yet.

Don't get me wrong - the Republicans have their share of corruption going on. Let's not forget that the war in Iraq proved hugely profitable for Halliburton, coincidentally [or rather, not - Editorial Bear] former employer of Vice President Dick Cheney.

But even that blood-soaked, foreign quagmire pales in comparison to the level of greed and corruption that hurled America into an economic pit unrivalled since the days of the Great Depression.

It's a chilling reminder that Barack Obama's 'change you can believe in' hasn't yet materialized - and whatever your political sensibilities, anybody with half a brain can see that Republicans and Democrats are, at the end of the day, pretty much as worthless and corrupt as each other.

Is Capitalism to blame for the economy?

Scrappy socialist Neil Clark is clapping his hands in glee at the economic woes befalling Wall Street - which is pretty typical, since Neil is one of Britain's leading champions of Schadenfreude.

But does his take on the economic situation stand up to examination?

"We are now back in 1989- but the system that is collapsing before our very eyes is not Soviet communism, but Anglo-Saxon turbo-capitalism™. In the end, this most rapacious of economic models was destroyed by its own greed. It's time for everyone... ...to pop the champagne corks."

Greed, dishonesty and a very short-sighted agenda certainly contributed to the crisis on Wall Street - but they aren't exclusively to blame. Capitalism isn't the problem - the government's meddling is.

One such example is the Government's involvement in mortgage giants Frannie Mae and Freddie Mac - entities Neil Clark incorrectly identified as private industries. In reality, they were anything but.

The Federal National Mortgage Association (FNMA, hence 'Frannie Mae') and the Federal Home Loan Mortgage Corporation (FHLMC, hence 'Freddie Mac') are both Government Sponsored Enterprises - corporations created by the government and intricately linked to activities on Capital Hill.

Frannie Mae was created as part of Franklin D. Roosevelt's 'New Deal' in 1938 and was an entirely nationalised industry right up until 1968, when it was turned into a allegedly private corporation (enjoying a virtual monopoly on America's secondary mortgage market.)

Freddie Mac was created in 1970 to expand that market and offer competition to the newly privatised Frannie Mae. (No, two government sponsored companies in competition with each other doesn't make much sense to me, either.)

Despite being hypothetically privatised, both Freddie Mac and Frannie Mae enjoyed many things other private corporations didn't - including an unwritten reassurance that the securities it issued would be guaranteed by the Federal Government. What The Economist called; "the implicit government guarantee."

In addition to that, other private financial institutions had to maintain a capital/asset ratio of at least 3% to the mortgage backed securities they sold. Freddie and Frannie were exempt from that requirement, only having half as much cash to back those securities up.

The final icing on the cake? Both Freddie Mac and Frannie Mae were exempt from local and state taxes, giving them another massive advantage over 'real' private industry.

So Neil's suggestion that Freddie and Frannie were private corporations is pretty short sighted. They weren't - and that makes their collapse even more inexcusable.

Where did Freddie and Franny go wrong?

Neil Clark blames the entire collapse of Wall Street on the 'turbo capitalist' model (no, I have no idea what that means, either.)

With Freddie Mac and Frannie Mae, the blame can actually be directed towards politicians.

The management and accounting practices of Frannie Mae and Freddie Mac were known to be pretty shifty for at least a decade before their collapse.

The House Banking Subcommittee On Capital Markets, Securities And Government Sponsored Enterprises were holding hearings on Frannie Mae as early as 2000, to question how the companies were being run.

In 2001, the Bush administration called for more accountability because Frannie Mae and Freddie Mac posed 'a potential problem' because 'financial trouble of the large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity.'

In 2004, the Office of Federal Housing Enterprise Oversight published a report highlighting accounting 'errors' that shifted losses around the balance books so the senior executives could award themselves millions of dollars in bonuses.

The Bush government again called for more regulation: "The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore…should be replaced with a new strengthened regulator.”

John McCain himself highlighted the crooked management back in 2006, telling George Bush: "Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created" by the company's senior management" to justify those enormous bonuses.

In 2003 and again in 2005, Bush's government tried to bring about legislation that would make the management of Freddie Mac and Frannie Mae more accountable and transparent - and both times, this legislation was shot down by Democrats in congress.

Why?

Because the Democrats received enormous campaign contributions from Freddie Mac and Frannie Mae to help make sure no legislation like that ever came into being - legislation which could have put an end to the Government sponsored cash-cow that allowed them to cook the books and rake in millions of undeserved bonuses.

The evidence is pretty clear: Did you know that Barack Obama raked in over $126,000 in campaign contributions from Freddie and Frannie? In just two years?

Or that Hillary Clinton collected over $75,000 herself?

Even House Speaker Nancy Pelosi - one of the most vocal opponents of Bush's legislation - took over $56,000 in campaign contributions from Freddie Mac and Fannie Mae.

What does this mean?

The disastrous collapse of Freddie Mac and Frannie Mae had very little do to with the capitalist system and a lot to do with two government backed organisations being driven into the ground by crony management.

The left-wing politicians who were meant to be rallying against such forces of 'unregulated capitalism' sat idly by and let all this all happen (counting the money they'd accepted to turn a blind eye.)

Neil Clark might blame 'turbo capitalism' for the Freddie and Frannie disaster - I think the opposite is true. These two mortgage giants illustrated the flaws in the socialist system he advocates. When a government monopoly is backed by taxpayer's money, the inevitable result is corruption and profiteering by the minority in charge.

Right now, the collapse of Freddie Mac and Frannie Mae has resulted in the American taxpayer being saddled with up to a trillion dollars in 'bailout' money - and the crooks who'd 'cooked the books' and walked off with millions in crooked bonuses?

Well, former Chairman and CEO of Frannie Mae, Franklin Delano Raines, is an advisor to Barack Obama's presidential campaign on economic matters.

In the capitalist system, a scandal like this would have resulted in criminal investigations that would have made those of Enron pale into insignificance.

But thanks to the pseudo-socialist system that supported Frannie Mae and Freddie Mac, the crooks who collected millions in bonuses (more than $20 for Franklin Raines) didn't get busted and imprisoned - they got recruited by the Democratic party to help with their election campaign.

["Turbo-capitalism" trademarked Neil Clark, 1996, all rights reserved. Quotes butchered and taken out of context to maximise effectiveness - Kitty Copy Editor]