November 26, 2007 (LPAC)--As reported on this website on Oct. 31, Lyndon LaRouche warned that while leading members of the U.S. Congress were espousing hyperinflationary proposals to bail out the unsalvageable $20 trillion U.S. housing bubble and refusing to back his Homeowners and Bank Protection Act, "the store has been stolen, the entire GSE store is being stolen by sub-prime lending predators" right under their noses. Specifically, LaRouche identified the fact that since August, $163 billion was lent by the Federal Home Loan Board, a U.S. government-sponsored enterprise (GSE) to predator lending institutions. LPAC reported that during August and September Countrywide Finanical Corp. in particular borrowed $25 billion from the Atlanta District of the FHLB, doubling its outstanding borrowings to $51 billion.

Now nearly one month after LaRouche's warning, Senator Charles Schumer (D-NY), who is among those who have promoted legislation to raise the portfolio caps on Fannie Mae and Freddie Mac as an alleged solution to the mortgage crisis, has been forced to face the reality that these two institutions are themselves collapsing. Under these circumstances, Schumer has finally taken some action to protest the raid on the Federal Home Loan Bank System by Countrywide Financial among others. In the case of Countrywide, the $51 billion in advances made by the FHLB, represents 37 percent of the Board's total outstanding advances as of September 30, 2007. Nowhere in the constitution of the FHLB is there a provision that it should be used to bail out failing and insolvent banks.

In a Nov. 26 letter to Ronald A. Rosenfeld, Chairman of the FHLB, Schumer writes: "I am concerned that the loans being pledged by Countrywide to secure these advances may pose a risk to the safety and soundness of the FHLB system as a whole." He accuses Countrywide Financial Corp. of using the Federal Home Loan Bank system as a "personal ATM" and calls for the FHLB regulator to scrutinize the practices of Countrywide. "At a time when Countrywide's mortgage portfolio is deteriorating drastically, FHLB's exposure to Countrywide poses an unreasonable risk."

Once again, Lyndon LaRouche was right in defending the well-being of the people and institutions of the nation. Action is now urgently required on his Homeowner and Bank Protection Act.