Like everyone else I have watched some pretty amazing things unfold since September 7,  2008.

In the three weeks that followed the announcement that Fannie Mae and Freddie Mac were being taken over by the Feds, we were told that the United State's financial system was on the brink of a total meltdown. Our leaders said they needed a huge amount of money to save it from total disaster and prevent a total global economic catastrophe.  And we were told that our government was the only entity large enough to provide sufficient funds to pull off the rescue.  In just three weeks $700 billion dollars (that's  a seven followed by eleven zeros) was committed to saving the system.

My IRA dropped 20%, and that got my attention.  So I started listening to what the financial experts and politicians were saying about the situation.  Most of the talk centered around "the Sub-Prime Mortgage Crisis" and how it almost led to a global meltdown.  That didn't make sense to me, the math just didn't work.

Here's the math; There is about $11.1 trillion worth of outstanding debt in home mortgages in the US.  And that's counting the good AND the sub-prime mortgages.  Now, if 10% of the mortgages went bad, and the homes that were foreclosed on were worth nothing, 1.1  trillion dollars would pay off every one of them. 

In fact, fewer than 3% of the total mortgages in the country have defaulted.  And the foreclosed properties are probably worth 50% of the outstanding loan value.  So if the banks took the homes back and sold them for 1/2 of the loan value, less than 300 billion dollars would have taken care of the whole problem.  So there must be more to the crisis than the bad mortgages.

Since September 7, 2008 we've seen TARP, TALF, PPIP, TLGP, MMIFF, AMLF, Auto SSP, CAP, CPFF, HASP and HERA roll out.  Each one costing billions of dollars.  While a few of these programs are meant to address home mortgage issues, the majority are designed to "recapitalize" banks, "loosen credit" and "instill confidence" in the financial system.  Some estimates of the final cost of these programs exceed SIX TRILLION dollars. 
 
So, where is all the taxpayer's money going?  It's being used to pay off the debts and losses caused by the "toxic assets."  In the next article I'll explain just what the politicians and experts are talking about when they use the term "toxic asset."  You will be amazed at how simple they are to understand and how the Wall Street insiders convinced each other that such a dumb idea was a good thing.
COPYRIGHT 2009 BY RAY WOOD