The Mother of All Rip-offs: “Get ready for a real hosing”

February 11, 2008

MIKE WHITNEY

Low interest credit and “financial innovation” are a deadly-combo. They knocked the banking system for a loop, clogged the credit markets with billions of dollars of subprime sludge, and left the real estate market sprawling on the canvas. Still---even though $2 trillion of capitalization has been wiped-out from falling home prices; and even though the financial system is in a terminal state of paralysis---no one has been held accountable. In fact, not one trader, mortgage lender, rating's-agency official, fund manager, or investment banker has been indicted or even charged with criminal wrongdoing.

NOT ONE. The system operates without rules or guard rails. It's the Wild West!

The system is so thoroughly marinated in corruption, that every trace of regulatory-oversight has been removed. The SEC is little more than a public relations sham loaded with business-friendly sycophants who try to sustain the publics confidence while, at the same time, kow-towing to their corporate paymasters. It's a complete hoax.

Last week, the Chairman of the SEC, Christopher Cox, gave a speech at the Ronald Reagan Building. He said: "We’ve already launched an initiative in this area to investigate possible fraud or breaches of fiduciary duty involving collateralized debt obligations. Among the issues confronting us this year will be determining whether bank holding companies and securities firms made proper disclosure in their filings and public statements of what they knew about their CDO portfolios and their valuations. We’ll determine whether brokers carefully followed suitability requirements when they sold complex debt-related derivatives that shortly afterward went bad. And in this area, as elsewhere, we’ll be investigating whether unscrupulous insiders used non-public information to bail out of these securities or to sell them short, in violation of the securities laws.”

Huh? So, after 6 years of sitting on the sidelines watching the fat-cat investment banks and hedge funds sell dodgy securities, (comprised of mortgages from unemployed thrift-store workers with bad credit) Cox has finally decided to “to investigate possible fraud or breaches of fiduciary duty.”

What a joke. Trillions of dollars have been lost, the financial system is reeling, and the nation is headed into recession. We want scalps---not excuses!

Did Cox know that the CDOs, the MBSs, the ABCP and the rest of the alphabet soup of “structured investments” were unalloyed garbage?

Yes, of course, he did. Everyone knew. But they were making so much money selling snake oil to credulous investors they couldn't help themselves. They went ape. Two week's ago TV investment guru, Jim Cramer, even admitted that he and his business buddies used to call the investors who bought these sketchy “debt pools” “morons” and Bozos”. That says it all, doesn't it?

Does Cox still expect us to believe that he and his Keystone Cops at the SEC didn't know what was going on?

Bullshoes!

Here's a video clip from the Daily Show with Jon Stewart with CNN's personal finance editor, Gerri Willis. Willis explains in simple terms how the subprime fiasco evolved. She acknowledges that the loans were made to “people who really couldn't afford to pay them off” and that when “Wall Street saw how successful they were, they decided to sell them as investments all around the world”. Good thinking, eh? She even admits that the sellers knew that the investments were rotten but duped their customers by saying “Trust us” . Unfortunately, the naive investors found out later that “they were sold swampland in Texas”. Click here for the Jon Stewart video

This is a great summary of a how millions of investors were ripped off in broad daylight by crafty junk-bond salesmen while the SEC looked the other way. It may turn out to be the biggest heist of the century. Trillions of dollars were raked in on complex investments that everyone in the industry knew were worthless. This is fraud on an industrial-scale.

And that's just the beginning. The same gaggle of investment sharpies who cooked up the subprime swindle are putting the final touches on a plan to off-load hundreds of billions of dollars of mortgage-backed slop onto the American taxpayer. If they succeed, the country's biggest GSE's---Fannie Mae and Freddie Mac---will be crushed by their expanded debt-load and probably go belly-up within the year.

Don't believe me?

Bush's new “Stimulus Package will allow Fannie and Freddie to raise their loan limits from $417,000 to $729,750.The idea is to keep interest rates as low as possible on new mortgages in order to revive the moribund California and New York housing markets. Jumbo loans—mortgages that are over $417, 000—-are nearly impossible to get now that the market for mortgage-backed securities (MBS) has dried up and the banks have tightened up their lending standards. Sales in California have dropped 40% or more for the last 4 months. Price declines are in double digits. It is a housing Depression.

Still, there's no guarantee that the plan will work. After all, Fannie Mae requires a substantial down payment as well as documentation of earnings and a good credit record to secure a loan. The whole lending environment has changed dramatically in the last year. It's gotten a lot tougher and the pool of potential loan applicants has shrunk by more than half. Besides, how many people are going to plunk down $700,000 for a home in a falling market? That same MacMansion might dip to $625,000 by the end of the year. No one wants to lose that kind of money.

More importantly, why should taxpayers have to guarantee a $700,000 loan just so some brandy-swindling tycoon can get a better deal on his mortgage? That's nuts.

Here's how Sean Olender sums it up in an article in the SF Gate: "Thanks to Congress, junk bond investors will be able to pawn off their bad debt to Fannie and Freddie, instead of suing the big investment houses for ripping them off. This shift will certainly doom Fannie Mae and Freddie Mac, so don't be surprised if we, the taxpayers, have to bail out poor Fannie and Freddie - to the tune of more than $1 trillion....Why more than $1 trillion? If Goldman Sachs is correct in its recent projections that home prices in California are going to drop 35 to 40 percent, the state's losses alone would top $2 trillion, because California has a disproportionate number of jumbo loans.”(”Stimulus Plan a Scam to Benefit the Rich”, Sean Olender)

Olender's right. It'll cost at least a trillion bucks; and for what? To lend a hand to the bond-hucksters who misrepresented themselves so they could pay off their vineyard in Provence? No way. This is all backwards. It was the investment bankers who created this mess with their mortgage-laundering” operation. They're the one's who should be cleaning it up. They don't need a bail out; they need to go to jail.

Besides, as Olender points out, Fannie is already in financial trouble and doesn't need more debt.

"Contrary to popular myth,” says Olender, “Fannie holds a lot of subprime debt, option ARM debt and other dodgy securities. Fannie and Freddie owned or guaranteed almost 45% of all mortgages in America last year. BusinessWeek noted in 2007 that Fannie and Freddie have "moved more prominently into low-documentation loans, which require little or no proof of the borrower's income."

Presently, Fannie has nearly $3 trillion mortgages guaranteed, but only $34 billion in capital reserves. If housing prices slide even 10%; Fannie's is under-water and will probably have to file for bankruptcy. So, why take the chance?

This week, CNNMoney.com reported: "The increased share of housing debt taken on by Freddie Mac and Fannie Mae during the housing slump has put the two government sponsored enterprises at risk.” By “buying up mortages on the secondary market that the banks are walking away from” Fannie and Freddie “are reducing risks in the market, but concentrating mortgage risks on themselves. These risks are beginning to take their toll," said James Lockhart, director of the Office of Federal Housing Enterprise Oversight (OFHEO) He spoke Thursday at a Senate Banking committee on regulatory reform.

Get the picture? Wall Street won't buy a mortgage-backed security (MBS) if it doesn't have Fannie's seal of approval. But that just puts Fannie at greater risk of failure. If Fannie and Freddie take a swan dive the effects will be felt through the entire financial system for years to come.

Naturally, the National Association of Realtors (NAR) are jazzed about increasing the conforming loan limits to $729,000. They're even predicting that it will boost sales by 300,000 homes. But that's just more realator-hype. Look: the way we got into this mess was by "artificially stimulating" the market with low interest credit from the Fed. We're not going to get out of it by using the same strategy. The government needs to stop meddling in the markets and let home prices return to the mean. Then the buyers will reappear. The stimulus will only prolong an already-painful contraction.

Of course, Congress has already rubber-stamped the “stimulus travesty” and rushed off to the Senate where it will get a slight face-lift before it's plopped on Bush's desk. Next week, there'll be a signing ceremony in the Rose Garden, where Bush will be surrounded by a small army of smiling bankers, nodding approvingly and patting themselves on the back for sticking it to the American taxpayer one more time. What a triumph.

THE BANKER'S MASTERPLAN: "Dump the mortgage-backed junk on Uncle Sam"

Everyone should be aware of the massive fraud that is about to be perpetrated on the nation to save a few shifty bankers from default. The basic contours of the plan were laid out in an op-ed in the New York Times last week by Howard P. Milstein, chairman of New York Private Bank and Trust. Milstein made his pitch for a bailout in an article titled “Give The Banks Some Credit”.

Milstein says: "The health of the American — and indeed the global — economy depends on having a financial system that is able to extend credit to businesses and consumers. The losses that have been incurred as a result of the excesses in subprime mortgage lending will take years to work their way through the worldwide financial system, as dozens of banks act to replenish their lost capital... Until the banks rebuild their capital, they will not have the wherewithal to lend money and support economic growth. If banks of all sizes could regain their capital immediately and easily, it would be a tremendous benefit to the American economy."

Milstein continues: "The federal government could make this happen by entering into an arrangement with American banks that hold subprime mortgages, in which homeowners typically pay a low interest rate for two or three years then face much higher payments. Here’s how it would work: The government would guarantee the principal of the mortgages for 15 years. And in exchange the banks would agree to leave their “teaser” interest rates on those loans in effect for the entire 15 years. This would instantly give the lending banks new capital.”

Wait a minute. If “the government guarantees the principal of the mortgages” then there's no risk for the banks. If that's the case then why should they be paid anything, even the “teaser rates”. Investment is risk and risk is investment---Get used to it. What Comrade Milstein is requesting is “nationalizing” the banking system to protect his indolent friends from loss or default. This could have been written by Chairman Mao.

Milstein continues: “As these mortgages would be guaranteed by the Treasury, they would suddenly be assessed, on bank balance sheets, at their original value — and a significant amount of the banks’ lost capital would be restored. Plus, the banks would receive, from most of the homeowners with subprime mortgages, up to 15 years of teaser-rate payments.”

Unbelievable! So the bank takes NO risk on the investment but---at the same time---is allowed to add the full value of the mortgage to its capital reserves? And, Milstein doesn't even want to reduce the value of the mortgage to current housing prices. He thinks it should be recorded at its "original value" so it can beef up the bank's dwindling capital.

What kind of mumbo-jumbo is that? Real estate prices have plummeted in the last year and so have subprime "structured investments". The banks assets should reflect those losses. Tough luck, Milstein. Your buddies cooked up this scam. Now take your lumps like a man.

Milstein continues: “By solving the bank capital crisis immediately, this strategy would ensure that fewer families would lose their homes”...blah, blah, blah. It would “be good for our economy.” Blah, blah, blah.

Then Milstein adds this tidbit: "Under this arrangement, American banks would have an incentive to buy back the subprime debt now being held by foreign banks and other financial institutions. American banks could buy the securities at a discount to face value (reflecting the continued low teaser rates) and then, thanks to the government guarantee, hold them as capital assessed at their full value. That, in turn, would allow the other financial institutions to reinvest in other sectors of our economy.”

Ah-ha! So the foreign banks and investors are finally waking up to the fact that they were ripped-off and they want their money back. It's about time. They were defrauded and they deserve restitution. The first article about the impending tidal wave of subprime litigation appeared earlier in the week on FOX Business.com Lawsuits Begin to Spill Out of Subprime Mess. The subprime boondoggle will play out in courts for years to come.

But, back to Milstein. What does he want? He wants to buy back the subprime debt that was sold to gullible foreign banks "at a discount" and then record it on the banks' balance sheets at full value.

Whoa. Now, there's a neat trick. In other words, he wants to pay a nickel for the "debt", but then record it as a dollar to meet his capital requirements.

Is this really how bankers think?

Oh---and by the way---he also wants the American taxpayer to guarantee the debt in case the nickel loses some of its value. Nice touch, eh? Milstein adheres to the old adage, "Privatize the profits, socialize the losses."

Finally, Milstein adds that his only interest is his “concern for the health of the global financial system.” How sweet. Can you feel the love?

The tragedy of the stimulus charade is that some variation of Milstein's proposal is sure to be enacted. Otherwise it wouldn't have shown up in the NY Times. The Times frequently uses the op-ed page to put up trial balloons for changes in policy. It's the same here. The banking establishment and the administration have finally settled on a 'bail out plan' and "We the People" are going to have to foot the bill. Congress is already on board and Bush is just a swipe-of-the-pen away from another trillion dollar giveaway to big business. The banks and money-lenders always get their pound of flesh while the rest of us get screwed. Some things never change.

Expect Fannie and Freddie to collapse within the year.

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Comments

[Carlos]

”Privatizing Profits and Socializing Losses” - Nouriel Roubini referring to the stealth bailout of Countrywide but it applies to the whole Alan Greenscum inspired exuberant banking model and his tenure at the Fed from 1996 on.

[Elaine Supkis]

Yes, he is correct and he put it in words anyone can understand. Britain is doing the exact same thing, by the way.

[HARRY SUBPRIME]

THESE BANKS SHOULD BE PUNISHED LIKE ALL COMMON THIEVES. THEY PROMULGATED THIS OVERWHELMING, UNJUSTIFIABLE, SUB PRIME LOAD OF LOANS FOR THEIR OWN GREED & SELF INTEREST. WHY SHOULD THEY RECEIVE ANY SPECIAL HELP FROM THE RISK THEY TOOK TO FILL THEIR POCKETS, SHOULD IT BACKFIRE?

NO ONE DOES THAT FOR MY BUSINESS. IF I LOAN OR LEASE MORE THAN CAN BE PAID, I GET STUCK WITH THE LOSS AND HAVE TO EAT IT RAW!!

WHY SHOULD THESE GREEDY, SLIMY, SNAKES CALLED BANKS OR LENDERS GET SPECIAL ASSISTANCE TO HELP THEM OUT WITH A PROBLEM THEY KNEW ALL ABOUT AND WERE WILLING TO TAKE ALL RISKS? THEY WERE BIG KNOWLEDGEABLE
WELL INFORMED TRAINED BANKERS THAT WANTED TO MAKE A KILLING ABUSING ALL THE POOR CUSTOMERS AS BAIT, WELL AWARE THAT THEY HAD A GREAT CHANCE TO HAVE TO FORECLOSE ON THESE SUB PRIME LOANS.

WHY DOES THE REST OF OUR COUNTRY, UNRELATED TO THESE SLIMY SNAKES, HAVE TO GIVE UP OUR HARD EARNED MONEY TO BAIL THESE PIGS OUT OF THE PROBLEM THEY CREATED WITH FULL 100% FORESIGHT?

THEY WILL NEVER LEARN AND CONTINUE DOING THIS AS LONG AS THEY CAN, SINCE THE FED. WILL ALWAYS BE THERE TO ASSIST THEIR GREEDY, parsimonious, SOCIOPATHIC, UNLIMITED, GREED.

OUR ECONOMY MUST SUFFER FOR THOSE WHO PURPOSELY PROMULGATED THIS FRAUD ON THE PUBLIC AT LARGE!!
why?
WHY SHOULD THEY ALL NOT BE SENTENCED, JAILED, FILE CHAPTER 7, ETC. AND LOSE ALL THEIR ASSETS FIRST, THEY PROBABLY HAVE ENOUGH MONEY THEY CRIMINALLY TOOK FROM THESE OBLIVIOUS BORROWERS.

OUR GOVERNMENT SHOULD GIVE THEM NOTHING BUT A SINGLE JAIL CELL!!!!

R. D. SIRO, M.D.

[hans blink]

Whose article is this, I read something very similiar here http://www.informationclearinghouse.info/article19324.htm

[Elaine Supkis]

Hans, I put Mike's name in huge letters at the top. Mike Whitney and I are friends. I publish him because of this. Unlike the others, I publish my own cartoons and we both put in graphics. This is why he wants me to publish him too.

Also, if anyone wishes to support his work, do feel free to donate money and make certain you mention his name and I pass this on to him.

None of the other sites online pay him a PENNY. This fine writer gets nothing at all. Thanks in advance.

[Elaine Supkis]

Also, Mike isn't a professor. He should be one but isn't. His intelligence, ability to write, analyze things and entertain all should be honored and I am glad he is being published around the web.

There are so many good writers coming out of the woodwork! In my own case, I used to have 'writer's block' all the time until the web came along and I wrote every day. Now, I nearly never get it.

The same is true with Mike. And many commentators at web sites and certainly, many here, are also good writers. Thank goodness for the web.

[Grandma pkk]

Many alive now will not realize the implications of our having conned the world.
If we bring down the economies of those with whom we already have so-so relationships, tinged with some measure of distrust both ways or resentment towards our hubris, we could find ourselves on the receiving end of another Pearl Harbor. Wars have been started on the basis of economic malfeasance, and I think we have hoodwinked the banks and financial institutions of the world. I think it's too late; the best we can hope for is modification of the disaster sliding our way like an ugly coal heap, and the operational word there is hope, which is of no use when reality is on a real tear.

[Grandma pkk]

Many alive now will not realize the implications of our having conned the world.
If we bring down the economies of those with whom we already have so-so relationships, tinged with some measure of distrust both ways or resentment towards our hubris, we could find ourselves on the receiving end of another Pearl Harbor. Wars have been started on the basis of economic malfeasance, and I think we have hoodwinked the banks and financial institutions of the world. I think it's too late; the best we can hope for is modification of the disaster sliding our way like an ugly coal heap, and the operational word there is hope, which is of no use when reality is on a real tear.

[Elaine Supkis]

I agree, Grandma. And this is why I talk about this. Ignoring that slag heap heading our way is stupid.

[mike]

we? as a bank shareholder. my ten year holds on a "quality" bank have pitiful returns, but you should see the twenty year hold returns starting just before i bought in.,,,,,,,,,,,,,,perhaps another disgruntled sheeple

[CK Younng]

A Red-Capitalism monetary system is distinguished from that of classic capitalism by the substitution of an arbitrarily created fiat currency which exclusively supplants an actual gold or silver currency, or a gold or silver backed, and redeemable, currency.

● Red-Capitalism is a political-economic system enabling clandestine taxation that most citizens are unaware is caused by their own government. Ask people you meet, “What causes inflation?”
● Politicians and dictators who embark on this perilous economic adventure inevitably bring ruin to their nation’s monetary system through hyperinflation, and not infrequently, precipitate a collapse of their nation’s government.
● As the red-capitalist regime grows desperate to maintain order, the citizens within are increasingly subjected to further erosions of their rights and liberties. Slowly, the nation is suffocated caused by the pollution of its life-blood—its monetary circulatory system.

MONETARY & FISCAL POLICIES IN A RED-CAPITALIST ECONOMY

MONETARY POLICY
Monetary management within a Red-Capitalist system is effected by the arbitrary manipulation of a nation’s fiat currency, i.e., ‘money,’ by the central ministry’s bankers. In the U.S., this conspiracy of bankers does business as the Federal Reserve Board.

PROPAGANDA ALERT: The use of the word ‘reserve’ is a misnomer. It is a calculated propaganda term used to assuage public concerns concerning the reliability of the paper money in circulation. Reason?—there is no reserve of substance, since neither the paper money, actual fiat currency, nor the ‘money’ that materializes on the ledgers of the ministry-affiliated banks, is backed by, or redeemable in, gold or silver. Our fiat currency is simply created at the direction of bankers operating within the conspiracy of the so-called Federal Reserve Board. In true-speak, the Federal Reserve Board, is the Ministry of Taxation by Inflation (MTI). ‘Reserve,’ as used by the MTI, is the amount of fiat currency that the Board requires member banks to have at hand in order to create—out-of-thin-air—and lend—large multiples of their ‘reserve.’ The bankers, of course, charge interest on this out-of-thin-air money.

The MTI is a tax-confiscating system that is perpetrated in stealth. This insidious form of taxation—a surreptitious confiscation of a portion of our money—is accomplished by creating and distributing vast sums of fiat currency. In the U.S., our fiat currency, the dollar, is comprised of Federal ‘Reserve’ Notes (FRN).

INFLATION TAX TRAP 1: The printing of an excess amount of paper dollars taxes us by diluting the value of the dollars we hold. Prices go up when there are new dollars competing against old dollars. Thus, when a government increases the paper money, we are taxed as prices go up. That’s why they do it. This out-of-thin-air paper money becomes debt as bank loans. We citizens must repay this debt with interest—billions of hours of work. Many economists—outside of government—refer to this fraudulent scheme as legalized counterfeiting.

The basic operations of the Ministry of Taxation by Inflation include Open Market Committee meetings, where behind closed doors:
1. The ‘reserve’ requirements of banks, is arbitrarily changed.
2. The discount rate is arbitrarily changed—with enforced compliance. This is the interest rate that the MTI charges for newly created ‘money’—FRN loans—to ministry-controlled banks.
3. The federal funds rate is arbitrarily changed, also with enforced compliance. This is the interest rate that the MTI requires ministry-controlled banks to lend and borrow among themselves.

INFLATION TAX TRAP 2: When we hapless citizens deposit our hard-earned fiat money within the ministry controlled banks, we are again victimized; the rate of interest that the banks pay us is inadequate to compensate for the loss in value of our savings caused by the inflation tax. When our savings accounts accrue interest, the Central Ministry of Taxation (the IRS, in the U.S.), working in conspiracy with the MTI, ruthlessly subjects our interest to an income tax—in spite of the fact that the purchasing value of our deposited funds has deteriorated with respect to the paltry interest awarded to our bank accounts. Further, if we don’t ‘volunteer’ to pay ‘income’ tax, we just might go to jail.

INFLATION TAX TRAP 3: In the U.S., the nation’s ‘law’-makers, operating in collusion with the MTI, and the Central Ministry of Taxation, have created yet another mechanism to swindle us citizens. The perpetually increasing quantities of fiat money steadily moves us into higher and higher tax brackets. Thus, the MTI’s excessive creation of bogus money allows the central ministry to usurp a continually increasing proportion of our wealth.

INFLATION TRAP 4, DISPOSSESSION & AGGLOMERATION: If the MTI bankers keep the rate of interest too low for too long (Alan Greenspan), a ‘bubble’ economy (excessive economic expansion), develops. Altho this increases the taxes that the central ministry can levy, eventually it causes an overheated run-away economy, and hyperinflates the fiat currency. Then, in a belated effort to control spiraling out-of-control cost increases, the MTI bankers will hike the rate of interest. If executed too rapidly (Ben Bernanke), economic activity is choked and a recession or depression is induced. This orchestrated circumstance sets up the central bankers, along with any elitist insiders who hold vast sums of hyperinflated dollars, the opportunity to increase their holdings by buying everything of value that the financially strapped citizens mired in a stagnating economy are forced to sell. Thus, periodically, the middle-class citizens are dispossessed of their real-estate, their businesses, and their gold, as these assets are agglomerated by the super-rich.

FISCAL POLICY
Fiscal management within a Red-Capitalist system is implemented directly by a nation’s central ministry, in the U.S., (and now the former U.S.S.R.) the ‘Federal’ Government. Fiscal management entails either the arbitrary alteration in the rates of direct taxation, and—for a more rapid effect—government spending, in such areas as infrastructure, or socialistic largess, in an attempt to either stimulate (nourish), or depress (starve) the economy.

In an economic upturn, but only when the rate of expansion becomes excessive, aka, a ‘bubble,’ the central ministry bankers, in an attempt to forestall the danger of an imminent monetary collapse due to hyperinflation, may initiate a fiscal policy that curtails the fiat money supply. In this scenario, our taxes are increased, and government spending is reduced.

In an economic downturn, aka, a recession, an expansionary policy is implemented. This involves lowering our taxes and increasing government spending—including deficit spending—in an attempt to stimulate the economy. Occasionally the central ministry will dole various sums of money to its needy citizens to stimulate the economy.

PROPAGANDA ALERT: The dole, in new-speak, is rebate. This soft propaganda term is sometimes used to spare embarrassing those who receive a dole, but who have never paid taxes towards the so-called rebate. Use of this term encourages profligate spending, rather than responsible saving.

NOTE A: When quoting government statistics on the rates of inflation, the word ‘official’ ought ALWAYS be placed before the statistic, and ALWAYS contained within accent marks, as the govern-ment’s statistics are egregiously falsified. Falsification distorts all of the ‘official’ economic data.

NOTE B: There is ongoing debate among economists as to whether the so-called fractional reserve system, or, merely printing fiat money by the central ministry—in manner similar to the ‘Banana Republics’ is to be preferred. On the one hand, having a reserve requirement tempers the potential for reckless and extravagant excesses of fiat currency. On the other hand, negative consequences can arise: the Ponzi-like debt-pyramid can collapse uncontrollably, wreaking havoc and destabilizing the entire political system. Of course the MTI can secretly lower the interest rates and the reserve requirements (of the U.S. Toys-Я-Us ‘money’) to zero nullifying the possibility of a debt-pyramid collapse. NOTE C: Because the value of artificial ‘money’ deteriorates, it violates, Article 1, Section 10, Clause 1: (No state shall…impair the obligation of contracts….).

[Johnny Pierce]

While we're on the topic of excoriating everyone in sight, shouldn't we also blame the morons who took the mortgages knowing full well they couldn't afford a new house?