Losing Financial War on Enterprising American Households

Dr. Sankarshan Acharya
Founder, Pro-Prosperity.Com and Citizens for Development

September 7, 2015

To:        Honorable President Barack Obama
Cc:        Everyone affected (please feel free to circulate)

Sub:      Losing Financial War on Enterprising American Households 

Date:     October 7, 2015

Dear President Obama,

The financial war on enterprising American households is no longer subtle.  It has been a long-running financial war waged by American emperors - elected political leaders and their anointed pundits - through gendarmes (robber barons) shielded by an unconstitutional system (rules) of robbery surreptitiously foisted on enterprising American households.[1]  

The emperors now appear cognizant of their imminent defeat.  For example, this morning Senator Corker said that a majority of elected leaders support winding down of Fannie Mae and Freddie Mac with their mortgage loans (owed by the enterprising households) given away to private banks because the huge $5T liability of Fannie and Freddie is a gigantic risk to taxpayers.  He seemed frustrated that Fannie and Freddie are not being wound down.  He even advised investors to short-sell Fannie and Freddie stocks.  His brief interview on CNBC makes obvious that the emperors and their gendarmes see losing a financial war although they want to continue it against enterprising American households.  The emperors are losing because the enterprising households are no longer buying the pack of lies designed to suppress unconstitutional acts of robbery:

  • Liabilities of Fannie and Freddie have remained steady at about $5T since 2008 while the enterprising households' homes backing these liabilities have increased their equity to 32% and are raising the equity further by repaying mortgage debt.  During the same period, the emperors have laden (i) the public exchequer (taxpayer) with $9 trillion of new debt - backed by 'I Owe You' Ponzi Scheme - and (ii) the public's central bank (Federal Reserve) with new liabilities of $4.5 trillion backed by private bank profits generated from an unconstitutional system of robbery which is economically inefficient and unstable.  The emperors with their established system of robbery (not enterprising households nor their mortgage lenders) have been, thus, imposing the unseemly quantum of risk on taxpayers.
  • Fannie and Freddie were confiscated by the emperors in 2008 to bailout private banks choked then with toxic assets, which were created by the latter through short-selling of mortgage-backed securities backed by fictitious home mortgage loans as proved by the hefty penalties the banks had to pay later for committing mortgage fraud.  The emperors forced Fannie and Freddie to buy $400 billion of toxic assets from private banks, as per New York Times, about which I had written to the US government at that time (in 2008).
  • The 2008 confiscation of Fannie and Freddie and the 2012 net-worth sweep imposed on them just when they were slated to earn huge profits were designed to wangle away the private equity of Fannie and Freddie stockholders and to extinguish the wherewithal for existence of the enterprising households' lenders. 
  • The emperors unleashed full-throttled punditry from an embedded academy to brainwash enterprising American households that the 2008 financial crisis was an act of invisible hands (god)[2] and more mundanely due to a failure of Fannie and Freddie.  Why is the academy of economics and finance not publishing general equilibrium outcomes in a model comprising both coalitions of lenders and borrowers while it has published many articles based on only coalitions of lenders?[3]  It is obvious that the academy is unfairly serving the lenders and is reluctant to admit the very idea of fundamental fairness for both lenders and borrowers. 
  • But, alas, the Financial Crisis Inquiry Commission (FCIC) appointed by the emperors found that neither god nor Fannie-Freddie were the cause of the 2008 crisis. 
  • The FCIC found that the emperors' gendarmes (robber barons) and embedded academic pundits caused a manmade (avoidable) crisis by (what the commission should have stated openly) suppressing first-best efficient, constitutional and stable rules of governance available on time to avert the crisis preemptively.  Incidentally, if Oxford University publishes a book authored by Bertrand Russell claiming that science has triumphed over religion and god (without defining god scientifically) and trumpets economics as a field of science, how could it publish a book authored by a Yale professor  claiming that the economic crisis starting in 2008 was an act of god?  Oxford University can be rational and be consistent with the findings of the FCIC only if it and its allies like Cambridge, Harvard, Yale and Chicago think of themselves as the modern gods controlling humanity through their children operating as Masters of the Universe.[4]  

So, honorable emperors, decorated gendarmes and acclaimed academic pundits, accept your failure:  you could not shut down Fannie and Freddie; shutting down of Fannie and Freddie would have destroyed the hands that feed everyone.  You could not paint that Fannie and Freddie caused the financial crisis, i.e., the current on-going Great Depression.  Neither could you suppress the circulation of first-best system (rules) of governance because it is the only unanimously agreeable truth (absolute knowledge) on governance.  It is bound to spread like a juggernaut to create new leaders (it is a relay race) to hammer the final nails on the coffins of an unacceptable system of unconstitutional robbery.[5]

To succeed, the new leaders ought to recognize, though, that collecting taxes on robbed wealth - even at the same rate as applicable for legitimately earned wealth - simply legitimizes the robbery by white-washing unconstitutional acts (rules).  Such white-washing were tried and had failed.  Taxes were raised to as high as 90% in USA.  It could not trigger prosperity. Only after the world recognized that USA followed a rational system - as demonstrated by joining WW-II and defeating forces of irrationality - did talents worldwide flock to American shores to establish their homes with long-term Fannie-Freddie loans to garner the security needed for perseverance, creativity and innovation.  The financial crisis of 2008 has, however, bared USA as an irrational-unconstitutional system with troubling inefficiency and worrisome instability. There is no alternative path left for USA other than a complete adoption of the unanimously agreeable, first-best, constitutional, efficient and stable system of governance and termination of all unconstitutional acts.     

With profound regards, 
Founder, Citizens for Development & Pro-Prosperity.Com
Director, Research Center on Finance and Governance

Acharya, S. (2013), "Constitutional System of Money and Finance," http://pro-prosperity.com/Research/Constitutional-Monetary-Finance-System.pdf and Acharya, S. (2015), "Unconstitutional Robbing by Government and Citizenship Rights," http://pro-prosperity.com/Research/Constitutional-Monetary-Finance-System.pdf

As per a book authored by a Yale professor published by the Oxford University Press.  For complete citation see Acharya, S. (2013), "Arbitrage Pricing of Total Risk of Assets and First-best Governance of Financial Markets," http://pro-prosperity.com/Research/moralhazardliberty.pdf  For a rational definition of god, see Acharya, S. (2012), "A Unifying Philosophy of Governance [Universal Religion and God]," Journal of Governance and Regulation, http://pro-prosperity.com/A-Unifying-Philosophy-of-Governance.html

Acharya, S. (2015), "Coalitions of Borrowers and Lenders, Government-Regulated Lender, Interest Rate and Safe Central Bank in Equilibrium," http://pro-prosperity.com/Research/Coalition%20of%20Borrowers.pdf

Acharya, S. (2015), "Diktat of Unanimously Agreeable Governance and Unified Philosophy Necessary for Individual Freedom," http://pro-prosperity.com/Diktat%20of%20Unanimously%20Agreeable%20Governance%20and%20Philosophy%20for%20Freedom.html

Acharya, S. (2015), "Absolute Knowledge on Governance," http://pro-prosperity.com/Absolute%20Knowledge%20on%20Governance.html