We can’t say we weren’t warned.
On October 1st, 2008, Senator Jim DeMint hypothesized that one of the principal causes of the federal government’s plan to purchase toxic mortgage-backed securities as part of the $700 billion Troubled Asset Relief Program (TARP) was to bail out foreign entities.
On “The Mark Levin Show,” he said, “I think China and Saudi Arabia are holding a lot of these securitized mortgages. And I think they’ve basically said they’re not going to loan us any more money until we buy them back. And if they don’t give us loans every day, we default on our loans [because] we have so much debt as a nation. So, we’re going to borrow more money to try to make this situation right. There’s nothing else for me, Mark, that explains the urgency in using a sledgehammer to fix something that most of us know a few screwdrivers could fix.”
He may have been right, after all. Although, since TARP was instantly transformed into a bank recapitalization fund by then-Treasury Secretary Hank Paulson, it was invariably the Federal Reserve that stepped in to buy the troubled assets — some $1.25 trillion worth.
All of the securities the Fed purchased were those underwritten by Fannie Mae, Freddie Mac, and Ginnie Mae (Federal Housing Administration) — the government entities that helped cause the housing bubble with their loose underwriting standards and “affordable housing goals”.
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