Let's take a refresher course before we get into what the hell is the going on now.
2008: Subprime mortgage industry begins to erode due to bad loans. Bad loans failing means Collateralized Debt Obligations(CDO's--those AAA rated securities) begin to fail, potentially paralyzing the entire global economy by bringing lending to a complete halt. Banks beg for bailout, Congress refuses, stocks drop dramatically, and Congress passes the bailout package, TARP, to the tune of $700 billion. Despite the fact that said "bailout" would save the economy, it tanks anyway, and two years later there is still no recovery.
2010: Despite the MERS situation being evident for at least the past two years (that is, judges questioning whether MERS has the right to stand in as the lending party in foreclosure hearings), all of a sudden Bank of America and a few other big guns are freezing foreclosures either across the country or only in those states where foreclosures require a court-hearing. MERS(Mortgage Electronic Registration Systems) was set up by the banks in 2000 for the sole purpose of stream-lining mortgages into CDO's and getting them sold worldwide to duped investors. Several judges in several states have denied MERS the right to foreclose because the documents necessary to prove that MERS actually holds the deed are not able to be presented. Likewise, the Attorney General in California is demanding banks put a wholesale freeze on foreclosures and Senator Dodd has announced that he will begin holding meetings on the situation next month in the Senate, and there is speculation that a resolution trust corporation could be set up to review the mortgages and foreclosures and make sure everything is up to par.
What does this all mean?
Well, it depends on who you talk to, but it means that the millions of MERS handled loans dating from 2007 were almost entirely stream-lined, that is, lacking a good few critical paperwork back-ups and other technicalities like signatures or originations. This is what happens when you dice up a mortgage and sell it pieces that are scattered all over the universe. The trail virtually disappears. On top of that, the widespread fraud in the foreclosure racket is getting uglier, with the MERS connection coming in a close second to forgery and coercian as the basest charges against the industry.
Many are alarmed at this and saying that this could mean an epic collapse of the global economy because now the banks are threatened with NOT being able to foreclose on the millions of homes that are currently delinquent. This means that not only is there a severe loss of income for the banks and mortgage companies, but it also freezes the housing market for the foreseeable future. This means gigantic losses have to faced yet again by the banks for the same basic reason they had to be faced back in 2008--rampant, unchecked fraud. It also means that we are once again facing the possibility of a dramatic financial collapse, this in the face of new bailout money being proposed to the tune of $2 trillion.
Of course, Bank of America is confident that there is no issue with their foreclosures and they are just being careful. Since the Federal Government and the SEC--as well as the Treasury Department--are showing no interest in what could amount to a significant level of fraud on the part of the lenders and mortgage companies, what can one expect of the potential for a real disaster? Really, the banks are cooling things off and stalling so as to keep the lid on what's happening. The lid is to hide the corruption from the general population, NOT the government. If the federal government didn't blink an eye as the obvious criminality of the CDO-derivative scandals that nearly destroyed Western Civilization, why should they care now? Instead, it is the mission of the banks to have enough time to debrief the Federal Reserve, make sure they know what they need to keep the ball rolling, and move on. That means that even with the RTC involved, it will slow-going for any attempt to expose and correct the clearly criminal and fraudulent foreclosure processes taking place right now. If anything, Obama, Geitner, and Bernanke are going to move towards having all of the MERS handled mortgages rubber-stamped as valid and circumvent--illegally--any court ruling to the contrary. Likewise, this "crisis" on the eve of a Quantative Easing proposal that Bernanke has already stated will be inadequate, the banks can throw a few more zeros behind the ultimate number and keep the game going.
It is critical to remember two things as this unfolds--and you will see it unfold and it will seem dramatic and daunting and scary-as-all-hell (just like in the Fall of 2008):
1. The Federal Government is the maidservant of the Federal Reserve and corporations in general--NOT the other way around(thank you all you folks shouting "Socialist!" Get your facts straight!). This means that whatever it takes to keep the facade intact is what the government will do. The FACT is that the banks are, and have been effectively INSOLVENT. The government is effectively INSOLVENT. In both cases, the amount of debt owed is beyond a level that could ever be paid, so instead of default, the idea is keep just enough blood running to make us think that those corpses are really alive.
2. Austerity measure ALWAYS strip-mine the wealth of the lower class, NOT the other way around. If you really think that Obama is in the business of taking from the rich to give to poor, you are still gullible enough to swallow the idea of a two-party system. He serves the wealthy, HAS served the wealthy, and will CONTINUE to serve the wealthy like EVERY PRESIDENT SINCE GEORGE WASHINGTON. Are we all on the same page here? Your enemy is not the Democratic or Republican party, but the ELITIST CORPORATISTS WHO RUN THE GOVERNMENT!
Thus, if I say it is the LOWER classes who get strip-mined, I don't mean those who make less than $45k. I mean those who make less than $500k. We are a two-tiered society right now, and if you aren't in good with the movers and shakers, you are dog meat and will be treated as such.
Austerity means higher taxes, higher utility fees, higher interest rates, and NO "entitlements".
So how does this play out?
As I said, the bankers are buying time to let the Fed work it's bailout package, and in the meanwhile, before some outrageous number is conjured up, the MERS fraud will be glossed over with a rubber stamp, the foreclosure indiscretions will be partially remedied but largely forgiven, and the economy will teeter on the brink of ruin. Just when Congress or the media, or anyone else balks at the prospect of a $5-10 trillion dollar reinforcing of the bankers balance sheets, the stock market will tank, the fright will bring the dissenters to their senses, and the bailout will go through as planned.
In the end, just like last time, it will be the common people who suffer--the little people. It will be lay-offs, inflation, and rampant hunger and joblessness will abound. This will, of course, only serve to convince the naysayers how much we need the government, how lost we are without them, and we'll hang on begging for some kind of stimulus that will feed our children and pay our electric bill.
They have us by the balls, these bankers. They always have. They screwed the economy, hijacked the government, and bled us dry in 2008. Now, in 2010, they need to push the point home again, this time raking in enough of a windfall to cripple any opposition and to enact the kind of measures that have destroyed economies and human beings across the third world.