LaRouche on Mortgage Bubble Collapse:
My `Firewall' Has To Protect the Economy
While We Reverse 37 Years of Policy Disasters
Sept. 3, 2007 (EIRNS)This statement was issued today by the Lyndon LaRouche Political Action Committee (LPAC).
Lyndon LaRouche commented today on the failure of Ohio, New York, and other state "mortgage bailout/refinance" attemptsincluding the one just proposed by President Bushby outlining what is really at stake in the necessary emergency action of freezing all mortgage foreclosures, which must come from the Congress during September.
"People, including elected officials, are acting as if the question was, 'How do you fix something that just got broken last year or so?' " LaRouche said. "Nothe question is how do you stop, and reverse, 37 years of economic policy disasters, and financial bubbles, each one bigger and worse than the last, which have destroyed our industry and economy? Since 1971, we've suffered under a worse and worse anti-capital formation, anti-industrial policy, now blowing out the entire global financial system. And we've got to reverse that, by going back to policy ideas FDR showed to worknot by little schemes and tricks.
"These failures [link to Ohio slug] how that you're in a falling market with an increasing margin of negative equity" among millions of homeowners," LaRouche said. There is nothing you can do trying to 'fix' these mortgages one by one. A blanket approach is needed. Freeze all of the problem mortgages immediately. Do not allow a single further foreclosure to take place in the country. Write them down to reasonable monthly rent changes for the time being. Later, much later, you can come back and use then-current home price values to set new mortgages. But now, the necessary policy is to freeze them all. And protect the Federally and state-chartered banks, so as to put a "firewall" between these huge financial losses, and the physical economy.
"Then," LaRouche joked, "it might be useful and enjoyable to give out free tickets, to the weekly spectacle of watching hedge funds disintegrate."
LaRouche stressed that the so-called "mortgage reforms" of the 1980s, pushing mortgage finance out of savings banks and into international money markets, was the real proximate cause of the current mortgage bubble meltdownand that too, was in the context of a deeper policy of economic destruction. "Three things were done that were fundamental:
- the destruction of Bretton Woods and its replacement by the floating-exchange-rate global casino, from August 1971 through 1974;
- the 'controlled disintegration of the economy' policy triggered by new Fed Chairman Paul Volcker's super-high interest rates policy from 1979; and
- the 'rescue' of the October 1987 Wall Street stock market collapse, by the bailouts of then-incoming Fed Chairman Alan 'Bubbles' Greenspan.
"People have been bankrupted, not by taking mortgages, but by a system that is bankrupt and does not worka system that is the product of 37 years of policy disasters and bubbles," LaRouche concluded. "You do not 'fix' that as if something just went wrong with some mortgages last year. You need a thorough bankruptcy reorganization, and a New Bretton Woods international agreement. First step to that, is the immediate policy step of my Sept. 1 presentation."