How the Fed's 0% Money is Creating Jobs, Profits

    ....at the big banks, hedge funds and Wall Street. Homeowners, non-profits, and religious institutions overdue taxes are being sold as tax liens by state and local governments, and bundled by big banks like Bank of America, and hedge funds like Fortress Investment Group. Fees and interest can be applied to give virtually guaranteed profits of 16% or more when the bill is paid, or the property is foreclosed and sold. The tax lien, which may have started out with as little as a $400 overdue bill, may have top priority in payment over all other loans on the property, virtually guaranteeing repayment.

    Local governments need money fast with today's economy, and Wall Street is only too willing to provide funds, for a price. Once bought with free money from the Fed, the tax liens can be profitably bundled into debt paper and sold off, and there is apparently no regulation of the tax lien bundling market. Of course, with the Fed's Discount Window open to big banks, at 0%, its a no brainer to use that money and put it into use by profiting on the economic collapse.  A recession largely created by the very same institutions that now make money off of property owners behind in their taxes, and governments operating in the red. Call it the magic of 'free market' capitalism. Desperate homeowners may pay 16% interest on overdue taxes, while fat cat bankers buy their debt and make a profit on it.

    Under the new Dodd-Frank Wall street regulations, which the Republicans are trying to kill, the Federal Reserve would be required for the first time, to reveal who is borrowing money from the Discount Window, and how much. Only problem is the law says that disclosure need only come TWO YEARS later. That means one election ago, forever in political terms.

    Of course, neither the Fed nor the Fannie Mae or anyone else is giving distressed homeowners 0% loans to pay their taxes or mortgages.

    In fact Fortress Investment Group which is in the tax lien game bigtime with Bank of America, is headed by Daniel Mudd, the former chief of Fannie Mae.

    Even NBA stars have had their overdue taxes (perhaps due to the county sending the bill to the wrong address) sold off to wealthy investment banks.

    Anyone interested in buying tax liens can Google for 'tax lien certificates' and get almost 1/2 million hits. I guess tax lien get rich quick scams may be nearly as big a business as schemes like bundling tax liens and selling them, practiced by our indispensable financial sector and leading financial institutions like B of A.

    One wonders how much more blood the financial sector can squeeze out of the turnip of the struggling main street economy. With 100,000 foreclosures estimated to be coming this month, what will be left when the vampires of the finance sector finish picking over the bones of the housing bubble?  Where will they turn next to keep profits rolling in? Where do the states and the counties think the fees and interest are going to wind up? A distressed property owner will have that much less money to spend on main street.

    Every dollar of profit from tax lien interest, fees and bundling that winds up fattening the wallets on Wall Street is a dollar that won't be spent in the local economy. The handling and lack of regulation of these overdue tax bills by local, state and federal governments is prolonging the recession and starving consumers of money they need to pay their bills, keep their property, support themselves, their busninesses and their families.

    Comments

    I suppose you don't have to worry about who holds the note.


    Excellent work, NCD.  This needs the attention of Obama's Consumer Protection Commission immediately.  I know Warren doesn't have it up and running yet but this seems like a natural place for abuse.


    Thanks, why can't the Fed buy the liens from the counties/states and forgo the fees and interest charges, and consider it another Discount Window transaction?

    That action may help property owners to get back on their feet, instead of enriching the millionaires of Wall Street. I guess that is too much to expect from Helicopter  Ben, who only dumps free cash on the big money economy, and not main street.


    The Fed could certainly do that, according to its charter.  But that would inject money into the economy without using the banks as an intermediary and the fed exists, first and foremost, to protect the power of the banks.


    "No revenue stream left untouched"; and now they're creating streams! 

    Good work is right, NCD.  When I'd read about the tax lien gimmicks last week, it was announced as a very small number that wouldn't pay off the liens, ergo, no problem, or at least a small one.  Doesn't sound like it now. You'll likely like reading Bill Black's new piece on accounting control fraud, and once again, why the poor aren't to blame for the Bubble.  I might write on the Republican version of the final report from the financial crisis inquiry commission, but in the meantime, you'll understand this better than I did  ;o)  :

    http://my.firedoglake.com/williamblack/2011/01/03/how-did-a-relatively-small-number-of-subprime-loans-cause-a-record-crisis/#recommend-11-12895


    Thanks, good link to William Black on loan fraud: .....'The lies in liar’s loans were so endemic and so egregious that the financial version of “don’t ask; don’t tell” was essential at every step of the process.'


    He'd said in a previous blog that the FBI agents doing the investigations were taking all the cues as to how and what to investigate from the Mortgage Bankers Association!  Fox, Henhouse, Fox, la la la...  It's all so out of control it's unbelievable. 


    Good piece. I've been reading MaxKeiser.Com and ZeroHedge.Com as well. Check this out-- "Here’s How Goldman Is Letting Its Wealthiest Clients Get A Crack At Pre-IPO Facebook Shares."

    As the insanely greedy banksters don't like a free press either, I thought I'd let folks know about Blackout for Hungary (also at Facebook):

    Will the upcoming Hungarian Presidency of the EU attack the Net?

    A new media law in Hungary creates a powerful censorship authority without oversight and excessive powers under control of the governing party, which endangers the freedom of speech, the Internet and journalism as a whole. Citizens are called to black-out the Internet from the 5th January - when Hungary is taking over the EU presidency on the 6th January 2011.


    I will never understand this. I have read articles on this subject for years.

    If I give you money for nothing with no interest, I should own you.

    As a matter of fact in Minnesota for years, it was coded in the tax laws that an interest free loan was taxable to the lender. It was just assumed that the lender was making money.

    Does not this mean that we, as Americans, own the banks?


    We don't own the banks, we just wash their money.


    LINE OF THE WEEK MOAT!!


    Rep Issa has been sending out memos to the business community asking what rules, regulations and legislation that occured under Obama they believe is stifling their abilities to create jobs. And I sure there are other GOPer's following suit. So I have serious doubt's the interest free money to the business community will be a serious issue the GOPer's will tackle in the next two years...it's not an achievement Obama can use to get re-elected in 2012. And it wil enamor the business sector to keep filling GOPer campaign coffers for 2012 and beyond. Of course, with interest free cash.


    The Fed has already given $3.3 trillion since 2008 in low or no interest loans to big businesses, ranging from MacDonalds, Caterpillar, GE and to foreign bank branches in the US.

    Why homeowners behind in their taxes must pay up to 16% interest or more, with fees, on late taxes while big businesses pay little or nothing, is my complaint. If the interest was capped at 2% perhaps there would be less foreclosures and a faster recovery on main street, and less buying and bundling of tax liens by Wall Street bloodsuckers.


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