If you doubt this outcome, look at consumer sentiment - that is a documented leading indicator of behavior over the next six to twelve months, which just happens to coincide at this point with the period leading to the elections. The sentiment numbers have never been wrong in predicting consumer behavior over the next six to twelve months.
80% of Americans did not participate in or benefit from the fraud and yet ALL AMERICANS are paying for it right now and will in the future.
The ONLY winning position for The Republicans is to force ALL of the fraud out into the open RIGHT NOW and thus force The Democrats into a corner - do they "pile in" or do they try to obfuscate and stall in which case you can pin the tail on THEM as the ones that are ripping off The American Public.
The answer for the Democrats to such a challenge will be to obfuscate, as they are the ones in power in Congress. Chris Dodd and Barney Frank are insanely vulnerable on this point right now, as housing is front-and-center in this crisis but The Republicans control the executive and thus can bring the hammer down on the fraudsters whether Dodd and Frank like it or not.
This means that The Republicans must do all of the following right here and now if they want to win in November:
- The Executive must indict all of the fraudsters they can find. Look back through those tickers at http://market-ticker.denninger.net/ and count 'em up. All the investment bank CEOs who put together toxic mortgages into securities knowing they were going to blow up would be a good start. Angelo Mozillo is, of course, the poster boy for this and indicting him (while largely symbolic in terms of real impact) would really get the ball rolling. Homeowners, brokers, appraisers and Realtors who participated in the fraud must be indicted and prosecuted, both civilly and criminally, with the intent of both restitution when possible and punishment for all involved.
- The Republicans in Congress must refuse any bail-out package that helps anyone, directly or indirectly, that participated in this fraud or benefited from it. The solidarity behind this position must be absolute. If it is not, you will be picked off one at a time. This means that you must be prepared to filibuster in the Senate, and actually do so.
- Any housing-related bill or amendment that goes through Congress must include forcing Fannie and Freddie to only underwrite sound mortgages and must force all their bad paper off their books. If that doesn't happen these two institutions will blow up.
