The Arcane and Deadly Workings of Government

Note: Please be aware that certain key elements in the following brief explanation of the recent mortgage catastrophe and its causes may not make sense to you unless you're a seriously impaired career politician like the smiling man on the right.

Now that the fog of con-fusion has dissipated to a degree, we are learning that the origin of the mortgage debacle essentially comes down to one thing. Admittedly, there were other factors, but if you follow the problem upstream, this is what you find.

A number of years ago, in an effort to put lower-income families into homes they couldn’t actually afford, congress enacted a bill entitled the Community Reinvestment Act.

Whatever congress’ intentions may have been at the time, whether well meaning or not, this ill-conceived act induced a lot of banks, with the dubious assistance of co-culprits Fannie Mae and Freddie Mac, into making a great many subprime loans. A subprime loan is a loan made to someone who really didn’t qualify. The loans went through anyway, however, because Fannie Mae and Freddie Mac, at the behest of the federal government, were essentially guaranteeing them.

Then, as if this curious bill heavily laced with faulty economic theories was not dangerous enough in itself, something else happened that added to the problem and stoked the rising fever. Some of the banks swept up in this developing fiasco began doing innovative things on their own initiative. They began devising creative if not completely ethical ways of packaging and bundling these subprime loans and selling them off as investments to other unsuspecting banks. These shady shenanigans soon became standard operating procedure for several of the more unscrupulous banks and some of their employees began behaving almost as if they were on a mind-altering drug.

Yet surprisingly enough, even as the potential hazards inherent in all this risky wheeling and dealing were becoming more and more evident, congress did nothing, despite repeated and urgent warnings from within and from without.

So why did congress drag its feet? Perhaps members of congress simply decided that with so many of their constituents, from house flippers to bank presidents, believing they were getting rich in this unprecedented and astonishing housing boom, albeit an artificially created one, they ought not dispel the illusion but rather play things out a little longer. After all, when a party’s really rockin,’ why be a wet blanket? Right?

Now that the party’s over, however, and with the horrific results laid bare before us, we can see what congress REALLY did when it passed that poorly thought out and pestilent bill in the first place. In effect, that ill-advised act of congress injected into our nation’s economy what turned out to be a deadly virus, even though one of its intermediate manifestations was a delusional sense of euphoria in some of its eventual victims. Over the course of several years the harmful effects of that virus led to a massive accumulation of what we now are calling “toxic” debt, debt that ultimately proved to be so pernicious it poisoned the very heart of our nation’s economic system, killing some banks and lending institutions outright and leaving many others gravely ill.

And now to top off everything, we are being told that some of the banks that barely survived the ordeal, and were left crippled as a result, will be expertly and lovingly nursed back to health by the very government that poisoned them. And that, they say, will ultimately bring about a happy conclusion to this tragic tale.

I warned you this might not make sense.