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Paul Kiesel
Paul Kiesel
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What Does Larry Kudlow Know?

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Larry Kudlow, of the CNBC talk show Kudlow & Company and Economics Editor for National Review, has been making some very bold claims in regards to the housing and subprime mortgage crisis, over the last few weeks. Mr. Kudlow is an intelligent man and I think that some of his economic insights are valid and erudite, but he seems to be omitting key information from his writings on the aforementioned subjects that leaves his readers at a great disadvantage when trying to form their own conclusions regarding the mortgage meltdown. For instance, Mr. Kudlow believes that, “The bottom line in all this [subprime mortgage mess] is that Bear Stearns should have been given the opportunity to access the discount window [federal aid] earlier in the game,” (National Review, 4/4/08). He also makes the claim that had the Federal Reserve opened their “discount window” to the broker-dealers last summer, when the first pangs of this credit fallout was being felt; the economic and financial landscape would look different today. That is not only false, but he makes a giant assumption that the reason we’re in this mess, currently, is because of a few poor investments on behalf of companies like Bear Stearns. When in fact, we are largely in this mess because of fraudulent, misleading, and other insidious tactics executed by companies like Bear Stearns as they hoodwinked potential borrowers and sold them subprime mortgages with illusory teaser rate payment options; such dubious business practices that the Department of Justice is currently investigating over 30 mortgage lenders for breaking federal laws.

           

Bear Stearns is one of many companies that went out into the mortgage marketplace and sold Option ARM loans to borrowers, billions of dollars worth of loans, leading them to believe that they were making payments on their interest and principal amount borrowed each month, that their “teaser” interest rate of 1 or 1.25 percent may change (it most definitely did after 30 days, if not before that time), and that they just so happened to forget to mention to the borrowers that they were putting them into a negative amortization loan, which the lender is required to disclose to the borrower in order to comply with the Truth in Lending Agreement Act.

         

Mr. Kudlow either needs to get his facts straight on Bear Stearns, or he needs to disclose the facts that he knows. Just because Bear Stears was able to get away with shady business practices, like omitting vital information from TILA forms, thereby leaving the borrower at a tremendous disadvantage in being able to make a knowledgeable decision as to whether they were entering an appropriate loan, doesn’t mean Mr. Kudlow or the National Review should practice the same unethical behavior when writing or publishing articles on the subject matter.