Attorney Ellen Brown has an article about the real risks that banks face with the mortgage crisis (which the banks created by hiding loans).  In her article she quotes a BBC report that states:

After previous financial disasters caused by excessive bank lending, regulators developed rules to limit how many loans a bank could have on its balance sheet.

The rules are complex, but as a rough rule of thumb, they say that for every $1 (50 pence) of shareholder capital a bank has on its balance sheet, it can also have about $10 of loans.

But, as is clear from the torrent of home loans in Stockton and across America, banks were lending far more than that 10 to 1 ratio.

Attorney Brown points out that Secretary of the Treasury Hank Paulson, is a banker and will probably go back into the banking industry after he leaves his current position, a clear case of the fox guarding the hen house.  Rather than put people into position who will enforce regulations, we have been putting into place people who are out to rob the rest of us blind.

Of course I am sure that they don’t look at it that way.  There are a thousand rationalizations for practices like California Attorney General Jerry Brown lays out in his complaint against Countrywide, for instance:

The company routinely made exceptions for loans that didn’t meet its guidelines, the suit says, and “turned a blind eye” to deceptive practices by brokers and its own loan agents despite “numerous complaints from borrowers claiming that they did not understand their loan terms.”

The problem is that it seems that Paulson and company seem willing to suck the bad debt into the Federal Reserve where they intend to hide it for at least another year or so (until the IMF releases it’s audit report of the Federal Reserve, which has never been audited before).

In short, if you think the economy is bad now, wait until after the election.

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