It seems the smarminess of Countrywide Financial’s CEO, Angelo Mozilo, is now so far reaching as to smear the reputation of Democratic nominee, Barack Obama. According to the Wall Street Journal, many politicos got special treatment with loan approvals done by Mozilo himself. This group came to be known inside the company as “Friends of Mozilo”.

I’ve reported for about 18 months now the two GSEs, Fannie Mae and Freddie Mac are both severely over leveraged. Now I have a former Federal Reserve bank president agreeing with me calling both companies “insolvent”.

William Poole, said in a Bloomberg report,

The Washington Post reported the HUD Secretary, Steve Preston is worried the mortgage bill could sink the FHA mortgage program. The bill as passed by the House allows subprime and other borrowers to convert their exploding mortgages into FHA mortgages.

Today Ben Bernanke, the Federal Reserve Chairman, spoke addressing many issues the foreclosure and mortgage crisis are causing. Mr. Bernanke seems worried, at least ostensibly, the current or a possible future crisis could cause entire “financial markets” to grind to a halt.

Paul Tharp writes in the New York Post yesterday on the plight of Countrywide Home Loan stock price taking a beating while the CEO, Mr. Angelo Mozilo, cashes in stock options worth more than $118 million! Anytime the executives start cashing out, you know there’s trouble.

Finally I am getting some support for my long standing prediction the GSE’s, Fannie Mae and Freddie Mac, are on the verge of collapse. Tuesday the New York Time publish an article which I believe is the first from a major news outlet to even raise the question of the GSE’s long term viability.

The article stated the worries by saying,

Larry Kudlow earlier this month stated during an interview with David Walker that the Community Reinvestment Act “created subprime loans”. Larry Kudlow in this interview is really pushing the agenda attempting to help minority groups get their piece of the American Dream “caused” the subprime meltdown.

The housing crash currently in it’s infancy will soon grow up into an economy killing monster that the Federal Reserve has no weapon strong enough to defeat. A housing crash is unlike a stock market crash in that there is no easy way out.

Let’s take a walk back in time to the tech stock crash just 8 years ago and compare it to a housing crash.

Freddie Mac, a company responsible (along with the other GSE, Fannie Mae) for the sound underwriting standards of conventional, prime mortgages, decided last week to tighten it’s underwriting. This Freddie Mac tightening of underwriting standards is probably too little, too late.

When President Bush signed the Economic Stimulus Act into law making jumbo mortgages GSE insurable, he may have unwittingly pushed our GSEs, Fannie Mae and Freddie Mac, already on tilt, over the edge. If you think we have a housing crisis now, wait until you see what the demise of the GSEs and subsequent secondary mortgage market would do!