Did Bank Of America / CFC Write The Housing Bill?

I’m not even sure where to start with this.

National Review Online has broken a story in which they state:

“National Review Online has obtained an internal Bank of America “discussion document” (pdf here) on the subject of the FHA Housing Stabilization and Homeownership Retention Act of 2008, a.k.a. the Dodd-Shelby mortgage-lender bailout bill.

Yesterday, Tim Carney reported that the prevailing sentiment on Capitol Hill is that the Dodd-Shelby bill “is exactly what Bank of America and Countrywide wanted.” BofA is in the process of acquiring Countrywide. Countrywide is currently embroiled in a scandal over its V.I.P. program, under which several powerful politicians, including Sen. Chris Dodd, got preferential loan rates.

This discussion document (dated March 11, 2008) would appear to support the contention that BofA essentially wrote the bailout section of the bill. Almost all of BofA’s preferences are mirrored in the Dodd-Shelby legislation. The BofA document even offers PR tips, such as “We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bail-out of the bond market.”

This is an outrage. Senator Dodd was discovered to have gotten a “special” mortgage from Countrywide Financial (they are being “acquired” by BofA) as I wrote about in “Where’s the FBI”. Senators and Reps have since declined to do anything more than allow an “ethics investigation” to take place.

Now we find out that it appear that Bank Of America wrote the damn bill that he and Shelby introduced!

Now why is this important? Because it stinks to high hell, that’s why. And more importantly, if you read that linked document closely you will find that GNMA, otherwise known as “Ginnie Mae”, should be the issuer of the bailed out loans.

This is an absolute ticking nuclear weapon folks.

You are about to get robbed to the tune of $300 billion dollars. Ginnie Mae is the ONLY issuer that has an EXPLICIT government backstop. That is, if this plan fails you will be be on the hook for every penny of defaulted loan as a taxpayer.

Now I do not know if the actual final bill that will come out and be sent to the President (who has said he’ll veto it, by the way) will contain the GNMA underwriting or not.

But for Bank of America to “propose” that the government step in and rewrite, then guarantee hundreds of billions of dollars of retained mortgages that Countrywide Financial (and others) have on its books, while they are supposedly “buying” Countrywide Financial, is an absolute outrage.

This is corporate welfare at its worst – Countrywide is being investigated by virtually every 3-letter agency of the government that exists for the possibility of violating both civil and criminal law, and now Bank Of America, who agreed to buy them around the turn of the year, three months later essentially writes a bill that would remove some of the risk that they are buying something that has more liabilities than assets by shifting a good part of those liabilities to the taxpayer?!

If we the people allow this bill to pass, even if it is vetoed, it appears that there is a veto-proof majority in Congress and the veto will get overridden. That is, we must stop this in Congress and we must stop it NOW.

Mark my words folks. If you do not pass this Ticker around to everyone you know on Monday, and manage to get the Capitol Hill switchboard flooded with calls and faxes demanding that this bill be killed, you will get billed for the entirety of the housing bailout. All of it.

Lenders will receive a windfall in that their potential losses in the bad paper on their books will be transferred to you.

This will be only the first. Using this bill as a template Fannie and Freddie will be next. The mortgage insurers are drowning, with one of them being forced into runoff this last week. The others will likely follow. If and when they fail, Fannie and Freddie’s credit book will be forced to trade on its underlying credit quality – that is, it will be exposed as toilet paper and full of fraudulently-sold loans (to them) that contain material misrepresentations as to the credit quality of the property and/or borrower.

This bill will then be extended to cover those losses.

How much loss will you, the taxpayer, eat?

As I have said, my total estimated loss in this party is going to be between $2.5 and $3 trillion dollars, which is roughly equal to one third of the entire public debt of the United States.

That’s right folks, Bank Of America’s “proposal”, which will become law unless you stand up and stop it right now, will ultimately end up costing you, the taxpayer, $3 trillion dollars, and $300 billion of that cost is contained in the bill “as written.”

To fund that treasury bonds and bills will have to be issued, and that will drive borrowing costs much higher.