The Great Money Experiment

The reason why corporate CEO's make so much money is because they hold the most power and with that comes great responsibility, and with that responsibility comes the automatic absorption of any blame when something goes wrong. Consider this, and look at the current financial dilemma, and how much it seems to be blunder in the media that no one knows who is to blame.

It's really not a matter of who to blame, but rather blaming those who had there hands on the money most of the time. Those who managed, manipulated or exchanged money, in order to move loans into the housing market had their hands on the cash at all times, not to mention the commission that came as reward for successfully locking in a loan for a lender. Steve Heideman, a mortgage broker said back in April 2007 that the brokers are to blame, because there are "problems and abuses [that] are happening because brokers see it as their right to make as much money as they can on a loan" (Subprime crisis shines light on mortgage brokers). The higher dollar value of the loan, the higher the commission on it's signing. This could have been a main contributor to bloating the value of the loans, to the point that the values of the homes would plummet below the debt of the loan. As of August 2008, "one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth" (Debt outpaces home value for one-third of new owners!).

So how do you blame homeowners, or those individuals who had inherited debt at a point far beyond the signing of their loan. The homeowners were losing cash. They lost cash simply because financial firms closely tied to investments of mortgage packages were absorbing all the cash through their sale. Cash is gone. The average consumer does not have the buying power or the financial sway to grab more money from a larger financial institution. What the consumer has is what they deposit in the bank, and what the banks will lend directly. But it has not been that simple over the past decade, because loans for the most part were and are ghost cash. It simply never existed.

To further the point, the financial sector has been playing a dirty game of where's the cash. Homeowners simply cannot make good on their debt because the monetary values are hidden behind an imaginary wall of infinite lending. Credit has become money, and seems to mask any true measure of cash value. Mike Shedlock, an investment advisor, has a great and informative blog, that discusses the question, "Where's the cash?". At one point he looks further into Alan Greenspan's implementation of the Sweep Account Program (Federal Reserve Board Data on OCD Sweep Account Programs). Shedlock explains here that, due to advances in financial analysis software, banks have the ability to monitor customer's usage of their checking accounts, and based on that information, can "sweep" or "relabeling transaction deposits as savings deposits." This is done for the purpose of the bank not having to hold a larger reserve requirement, basically a statute put in place by the lending Federal Reserve, that makes it mandatory for banks to hold a percentage of their deposits in reserve to secure the value of what's been lent to them. Now with less money actually in the bank required to be on hand, having been moved from checking (on demand deposits) to savings accounts, the bank is free to lend out more and more of its money, with no limitation. One hundred percent of your money has been lent out, and money you think is sitting in your comfy-cozy checking account is simply, not there (Where's the Cash?).

So, the financial fog is beginning to clear a bit, but who do these banks give money to? Well more times than none they are lending to people via mortgage brokers, and the mortgage brokers not only take the commission, but also bundle up all their loans, and sell them off to investors. So the cash is being dumped into the mortgage broker's laps en mass. Brokers were stealing twice from the consumer, and the banks were enabling this practice, by eliminating value in the consumer's cash, and turning the value back on when it was put back into the financial system.