Congressman Says $20 Trillion Mortgage Bubble Could Blow Up the System; LaRouche Says the System Is Gone, Build a New One
Nov. 5, 2007 (EIRNS)Rep. Paul Kanjorski (D-Pa.) and New York Attorney General Andrew Cuomo, along with other legislators and organizations, held a press conference on Capitol Hill today on a regulatory crackdown against fraudulent home appraisals, and the mortgage lenders' demand for appraisal fraud in building up the now-collapsing mortgage bubble. Kanjorski has legislation to re-regulate appraisers, mortgage services, and escrow practices, H.R. 3837, which was being endorsed at the press conference by Cuomo, Rep. Gwen Moore (D-Wisc.), the Center for Responsible Lending, and Debbie Huber of the Appraisal Institute.
But it was clear that this was not the solution to the foreclosure of millions of households, and the huge losses now hitting the banks as the $20 trillion mortgage bubble melts down.
Kanjorski put the bubble at $20 trillion in his opening remarks, and said that its losses "are having an incredible impact on financial markets right now.... If left alone, they could be the germ that infects the entire [financial] system." He acknowledged that stopping foreclosures"keeping people in their homes"was the element not yet addressed by any of the Congressional proposals: "It's not an easily soluble problem. But we [Congress] have to take it up," he said.
Attorney General Cuomo, who has begun the first prosecution (of Washington Mutual mortgage bank) for pressuring house appraisers for fraudulently inflated appraisals, called appraisal fraud the "central, systematic element" in the pumping up of the huge mortgage bubble, "and it continues into the secondary [mortgage securities] markets. There is a crisis of confidence in valuations in the securities markets," Cuomo said. He later told an EIRNS journalist that "many other banks are involved, this is systematic."
In answer to a question from EIRNS on the "systemic banking crash and foreclosures on top bank CEOs" from the mortgage blowout, Kanjorski replied that his own estimate was that $150-300 billion in losses were already being suffered by U.S. financial institutions due to the mortgage collapse. "Is it systemic? That depends on us," he said, meaning the Congress. "We will have to act."
Lyndon LaRouche commented that in fact, the entire system is bankrupted now, no matter what they doonly a new financial system can survive. We need a replacement system now, LaRouche emphasized.