Forrest’s Take on Mortgage Backed Securities

I’m not a big fan of forwards, I get so many of them anymore that they usually get deleted. But this one cam from the mother-in-law, so it had to get read.

Mortgage Backed Securities are like boxes of chocolates. Criminals on Wall Street stole a few chocolates from the boxes and replaced them with turds. Their criminal buddies at Standard & Poor rated these boxes AAA Investment Grade chocolates. These boxes were then sold all over the world to investors. Eventually somebody bites into a turd and discovers the crime. Suddenly nobody trusts American chocolates anymore worldwide.

Hank Paulson now wants the American taxpayers to buy up and hold all these boxes of turd-infested chocolates for $700 billion until the market for turds returns to normal. Meanwhile, Hank’s buddies, the Wall Street criminals who stole all the good chocolates are not being investigated, arrested, or indicted.

Mama always said: “Sniff the chocolates first Forest.”

Sniff. Sniff.

This is a good “plain English” way of looking at the situation that Americans – and the rest of the World – is facing today.

Now I’m not saying that the concept of mortgage-backed securities is criminal. However, I do think that EVERYONE involved got greedy and wanted to see the highs continue, while ignoring the risk.

It became like a drug. The more that was made, the more that was expected. Remember the days when a company’s stock would FALL because they didn’t beat earning expectations by enough?

How can that be?

It isn’t a sound market principal. It creates a world where “expectations” become more important than what is “real”. And the result is Enron, Freddie Mac, Fannie Mae, and all the other bloated corporations that are stepping back and taking stock of what they are doing.

But isn’t just the “crooks” on Wall Street or the “Fat Cats” in Washington or the “Demons” in the cushy jobs at the big companies. It is on your street, it is on your block, hell it might even be in your house.

There was a story on one of the talking-head news shows about a woman that had lived in a house for going on 20-years and refinanced it in 2006. Stopped paying in 2007 and is now chaining herself to the house because she won’t leave. She refinanced her house and removed $300,000 in equity from it. Now she’s crying foul.

Serious, I couldn’t make this stuff up.Does this sound familiar to those all those we’ve been crying about stealing our money?

We – and I mean the majority of the people on Earth – got greedy and forgot the most simple economic rule of all. What goes up, must come down.

Now that the financial markets are reducing, we want the government to step in and protect us from those that allowed us to become this vulnerable. In walks Hank Paulson to save the day, but only there isn’t really a way to “save the day”.

This reminds me more of the scene from Forrest Gump where Jenny is dying after living the “high life” of sex, drugs and rock-and-roll. She leaves Forrest with a young son to raise on his own. Does Forrest sit and sulk? Nope. He steps-up to the plate and raises the boy.

Are you ready to be a Forrest Gump and accept the responsibilities that Jenny left us? When Americans are, then we’ll move forward.

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