Lew paced thoughtfully for a moment, his right arm folded across his body, his left elbow resting on it, his index and middle finger across his lips. He stopped, lowered his arms, and looked at the camera.
“I’ve wondered about that, Dr. Redbridge. Why have they not enforced the banking regulations on the books? Were they unenforceable? Have financial services products, like derivatives, outpaced regulations and made them unenforceable? What happened?”
Arthur explained that the best way for political hacks to gain new power was to implement new regulations. It was also the way they covered up misbehavior or even fraud. “They create the need to rewrite regulations by ignoring existing ones. When logical problems result, they sell the public on how ineffective existing regulations are. ‘We need new regulatory controls!’ they shout and the guys already in power – the guys who caused the problems in the first place – gain more of it. They are put in the position to hide their complicity in causing the problem. No. We don’t need new regulations in the financial services industry. We need existing regulations enforced!
“The regulations that haven’t been enforced were passed as recently as 1998,” Arthur said thoughtfully. “In the 1980s and 1990s, regulations from the Great Depression era were changed – to allow the taking rather than the management of risk. The legislation from the 1980s – the Bank Depository Bill – helped the savings and loan industry fail. That paved the way for two giant, government sponsored entities like George Mae and Georgia Mac to emerge. That, in turn, enabled all of those garbage mortgages from which mortgage-backed derivatives were created by Silvergal and Heyer and other Wall Street brokerage firms. They turned into worthless investments, and were sold around the world.”
Lew interrupted him.
“Are you suggesting that the failure of the savings and loans was planned?”
“I am,” Arthur replied quietly. Had those attending Arthur’s testimony been able to see the faces of members of the 50 grand juries, they would have seen the same stunned expressions on their own faces.
“What evidence do you have for this conclusion, Dr. Redbridge?”
“I have analyzed the reality of where the current crisis began and what caused it – I consider reality the best possible evidence. There is no doubt that the loss of the savings and loan industry made the emergence of George and Georgia possible and there is no doubt that George and Georgia made the current crisis possible. There is no doubt that enemies of this Great Nation have tried to use these two entities to bring America to her knees,” Arthur responded, his voice sounding a bit brittle.
It was time for a break, Lew decided.
After the break, Lew’s next line of questioning started by asking for an explanation of the authority the Federal Central Bank had over George Mae and Georgia Mac – how these two entities emerged as key players in the current worldwide economic crisis being so keenly felt?
Arthur explained that at one time the savings and loan industry had provided mortgages for “the American Dream.” He said the words softly. His tone of voice changed as he described the legislation that had been passed in 1982. It had been signed by President Rory McCoy. Arthur quickly explained that was part of what he meant when he said proper advisory services from commercial banks and savings and loan institutions were not available to the Executive Office to explain the damage such legislation would cause.
“We economists didn’t see it coming, either. As I said, we know little about commercial banking or mortgage lending. When legislation made it possible for investment banks to accept deposits – something they’d been unable to do until that time – it caused the failure of the savings and loan industry. It also made it possible for savings and loans to make business purpose – or, commercial – loans.”
Lew allowed a long pause and poured a glass of water for Arthur who had emptied the first one.
“So why do you believe the savings and loan industry was purposely caused to fail? What does the failure of that industry have to do with George and Georgia? The S&Ls began failing in the 1980s – thirty years ago.”
“It is impossible to control the mortgage lending policies of thousands of savings and loans. It is easy to control the mortgage lending policies of two government-sponsored enterprises like George and Georgia,” Arthur replied calmly. “And, with no competition from savings and loans, small mortgage companies that are not audited by any government authority began to pop up everywhere. It is from that source most liar loans contained in mortgage-backed derivatives originated.”
“We haven’t heard much about George and Georgia lately. Why is that?”
Arthur smiled. “Bill Leonard agreed to use several trillion of his own money to buy George and Georgia. He and his staff have been working around the clock to analyze each mortgage contained in those portfolios. Then they package the good loans and sell them to reputable financial institutions with an FDIC kind of guarantee given by Mr. Leonard against loan losses. Mr. Leonard has put together a program that lets people who can afford to pay minimum rent stay in the homes they would likely otherwise lose. It’s a very good program and is probably responsible for delaying the economic fall we might otherwise have suffered in this country. We’ve been able to gather a lot of evidence from the liar loan files that have been analyzed to date. We’ve turned cases of blatant disregard over to the FBI,” Arthur told his audience. “You may have heard about the numerous court decisions rejecting bank claims of home ownership when the bank tries to foreclose on a property and homeowners go through the legal process of Discovery to force the mortgage lender to produce a true and accurate copy of the property deed. This program has helped identify some of the properties with improper documentation. Without proper documentation, banks cannot foreclose on the homes held as collateral because they have not perfected the lien against the property. People do not lose their homes. They are still liable for the loan amount for which they agreed in writing to pay, but their home can no longer be held as collateral against that loan.”
