I am a real estate and mortgage broker - 22 years. The solution to the economy is really simple. It all began with Sub-Prime mortgages. In particular, the MARGINS on these mortgages were and are gougingly outrageous. I've heard many, many so-called experts all over local, network and cable television report on our Global Economic Crisis. Some report it as news. Others report human interest stories and yet others instruct the general public to tighten their belts, weather the storm and be frugal. NOT ONE speaks that way to the financial institutions!
Get this... The self proclaimed reformer cough crook cough John McCain, yeah you know the guy who says he's not apart of the washington politics as usual scene has just been outted as a typical corrupt washington politician that pals around with sleazy, greedy, corrupt lobbyists. Go Figure! ;-)
Boy you can't get any more Mavericky than that now can you. lol
The more I google and read about John McCain the dirtier I feel. Any who... back to the Sleazo Lobbyist William E. Timmons, Sr. whom John McCain has named to head his presidential transition team, he is also registered to lobby in 2008 for a wide range of companies and trade groups, including the American Petroleum Institute, the American Medical Association, Chrysler, Freddie Mac, Visa USA, and Anheuser-Busch just to name a few.
His registrations include work on a number of issues that have become flashpoints in the presidential campaign. He has registered to work on bills that deal with the regulations of troubled mortgage lenders Freddie Mac and Fannie Mae; a bill to provide farm subsidies; and bills that regulate domestic oil drilling.
On top of that it has recently been reported that Timmons has been lobbying for Saddam Hussein for 5 years. This slime ball stood to make 45 million from just 1 of the deals. Timmons claims to be a naive angel but that doesn't wash... no one and I mean no one works with and for giants in the industry without knowing something is a stinking pile of doo doo when they step in it! Beside he had Tongsun Park working in lock step with him and this character is well known for his notorious background. Timmmons knew exactly what he was doing and tried to lie to the Feds about it.
To read all about Timmons lobbying for Saddam Hussein click the link below.
http://www.huffingtonpost.com/2008/10/14/mccain-transition-chief-a_n_134595.html
What does this say about John McCain?
It reflects his true colors, he can try to slap lipstick on that pig all he wants it's still a pig. He supposedly wants us to believe that he is honest, that he is a reformer, that he is mavericky and yet he keeps proving to us time and time again that he associates with sleazy crooks, out right criminals, unsavory and unethical characters.
His own actions have been unethical and corrupt... I'm citing the keating 5, the sweetheart land deals etc.
He has the morals of an alley cat in heat!
He protesteth too much whilst pointing fingers at others... I suspect it his unsuccessful attempt to cover up his own illegal activities.
His life is full of stupid blunders, extra marital affairs, lies, uncontrollable anger, corruption, greed and ties to the kind of sleazy, unsavory people you wouldn't bring home to momma or admit to knowing to all of America... and it is all well documented and all over the internet. The internet is rich with detestable filth on John McCain. He can run but he can't hide!
Don't take my word for it google McCain with various terms added such as mob ties, sweetheart land deals, traitor, racist, enemy to POW families, corrupt, terrorists, nazi, scandal, against veterans, against women and children, etc etc and you will find tons of information on John McCain that he don't want you to know.
His Father and Grandfathers Reputations have protected John McCain by preventing the truth from coming out about all of his illicit activities in his life. Cindy's money gives him even more of a cushion from facing the consequences of his actions. Karma's a bitch John... trust me one day your past will catch up with you.
The resurrection of racism and incorporating it into his campaign is totally unfathomable and unforgiveable. There is nothing that this man won't do to serve himself.
He is unfit to be a senator muchless a president!
Juli Norwood
Stephen Views the News 10/15/08
http://stephenviewsthenews.blogspot.com/
* Naked on the right - The demise of the most recent version of conservative economic and political policies has the populist talking heads of conservatism in a dither. Examples include Neil Cavuto and Rush Limbaugh from viral broadcasting and the right-sided writing of the Washington Post’s Charles Krauthammer. They currently are desperately grasping for a hold on respectability and relevance. In order to protect their message they have concocted faux targets to divert attention from misguided and wrong counsel. One of their disingenuous maneuvers is to place the blame for the current financial crisis on Fannie Mae and Freddie Mac.” Look out for those liberal-supported policies designed to assist lower income families to invest in homes.” “Those damn left-wingers.” Fortunately, there are still some in the Fourth Estate doing their job.
The McClatchy Newspapers Washington Bureau just removed the wheels from the canard that conservatives are riding. The article is titled “Private sector loans, not Fannie or Freddie, triggered crisis.” It was an unregulated private sector gone wild that brought our economy to its knees, not regulated government-assisted programs. I highly recommend a read of this article as an aide to understand what took place and, just as importantly, guidance for future policy. Republican conservatives bemoan the fact that the current financial crisis has altered the parameters of the upcoming election. I agree that it is unfortunate. We all had to suffer the effects before their failed policies were laid bare. The policies that they promoted should be evaluated and voted upon by the electorate, without spin and din.
To borrow an often used phrase of Barack Obama, “Let me be perfectly clear.” I do not advocate a national discourse devoid of conservative ideas any more than it would be appropriate to give voice exclusively to liberal thinking. It so happens that conservatives have dominated the national landscape while their views were implemented dishonestly and incompetently by President George W. Bush and the Republican Party. Liberal thinking and the Democratic Party are not without criticism. Going forward America’s best chance is a synthesis of views from all positions. It is likely that the first step will require that the political house be cleaned, with many more Republicans than Democrats being left for the trash pickup. A return to normalcy will be accompanied by a return to balance. At some point in the future this lesson will be forgotten and the process will cycle again. At best, we can hope for less dramatic swings of the political ideology pendulum and greater integrity in the people that we elect.
* Agreeing to disagree – I almost never agree with neo-con, conservative and Bush war cheerleader Bill Kristol. His column in the NY Times on Monday October 13th was no exception. Kristol wrote, “It’s time for John McCain to fire his campaign.” This comment comes after previous Kristol comments suggesting the McCain campaign do what he now criticizes. I say leave well enough alone. This is a McCain-selected campaign team of lobbyists, neo-cons, deregulators and slime campaigners scraped like barnacles from the Karl Rove ship of ghouls. They represent the political and economic philosophy and foreign policy that has put this country and its citizens in peril. My friends, I say do not fire them. Allow them to go down in flames with the current icons of these failures, Senator John McCain and Governor Sarah Palin. I wish them GOP – Get Out of Politics - after the election.
* Clunk - That thud you heard this week was the approval rating of George W. Bush. Declining to 23% it surpassed Richard Nixon’s low of 24% and is a point away from the lowest in 70 years of polling, set by Harry Truman in early 1952. The ABC News/Washington Post poll also found that 90% of Americans believe that the country “is on the wrong track.” Contrary to Mr. Bush’s daydreams and prognostications, history will not absolve him of what will be one of the worst executive tenures in American history. I believe that as we learn more about a Bush administration that has been wrapped in secrets and deceptions the perception of the Bush years will worsen. The face of G.W. Bush will not displace the portraits of Washington, Lincoln, Jackson, Hamilton or Franklin on our folding money – even if there is any money left.
* Mea culpa – I recently criticized the Clintons for not campaigning more on behalf of Barack Obama. Perhaps their appearances were not showing up in my news sources. On Sunday I watched their speeches in Scranton, PA and both Clintons are active on the campaign trail promoting Obama, the jobs he will create and reinforcing the idea that we do not need a continuation of Bush-like policies. We each can ask ourselves what we are doing to bring about a change from the disastrous policies of the last eight years. The Obama campaign is urging people to volunteer at their local offices leading up the election on November 4th. With less than three weeks remaining before the most important presidential election in our lifetime there are opportunities to get out the vote, work at polls, help people to get to the polls. If you have been unhappy with the course our government has taken, the time to do something is now.
* Welcome to the 51st State of the United States ~ the police state - Talk about unfocused and misguided policy. Over the last couple of years we have seen evidence of federal, state and local police bodies targeting anti-war groups. Unlike the protests during the Viet Nam war evidence of violent intentions or behavior is lacking and yet the free speech of protesters is seen as terrorist activity. The latest example of such blurred vision and perhaps illegal action was committed by the Maryland State Police. Sisters Carol Gilbert and Ardeth Platte, each serving the Catholic Church for over 50 years, have been placed on a national watch list due to their participation in anti-war protest activities. “They were among 53 people added to a terrorist watch list in conjunction with an extensive Maryland surveillance effort of antiwar activists.” Many voices in our society are quick to criticize the efforts of the American Civil Liberties Union (ACLU) but it is actions like that of Maryland law enforcement that reinforces the need for civil liberty watchdog organizations. Note: This portion of SVN is being written anonymously since I will be driving through Maryland later this week. You can be sure I will not be wearing a nun’s habit.
* Unwelcome results of government spying on citizens – The National Security Agency (NSA) is the primary eavesdropper on our communications. Bush has tried at every opportunity to allow such spying without oversight or court order. Before Bush the courts had to issue a warrant for a U.S. citizen to be spied upon. Recent legislation removed restraints and that is troublesome in a free society. Power unregulated gets abused. It is a natural law. In an ABC report, “two former military intercept officers who worked at the NSA charge that the government spying agency listened in on calls to the United States made by soldiers, journalists and human rights workers working in the Middle East, even after it was clear that the calls were not in any way related to national security. The NSA officials regularly passed around salacious calls such as the private "phone sex" calls of military officers calling home, according to the report.”
In the next administration and congress oversight of spying should be revisited and protections from spying abuse legislated. One J. Edgar Hoover was enough for this country. Hoover was instrumental in founding the FBI in 1936 and led the organization until his death in 1972. Known for abusing his power and exceeding his jurisdiction U.S. leaders feared him because he compiled secret files on them, information often collected illegally. His dirty tricks program included “infiltration, burglaries, illegal wiretaps, planting forged documents and spreading false rumors about key members of target organizations.” Hoover was not bashful about using these files to achieve his end. This is not an America that I envision.
* “The fact is that censorship always defeats its own purpose, for it creates, in the end, the kind of society that is incapable of exercising real discretion.”
Henry Steele Commager (1902 – 1998) American historian
Sen. John McCain is on national television telling one lie after another to the American people, and trying to spin the massive rescue package, without which the American economy would currently be hurtling toward the abyss, and for which he voted, as a sinister attempt by Democrats to give billions to big banks. John McCain is a politician who once stood on principle and who has consciously chosen to put aside every shred of basic integrity or human dignity in order to poison the minds of voters, because basically, he doesn't understand enough about what's happening to be convincing.
He once said he isn't all that interested in the fine points of economics. That would appear to be true, because he seems to have no knowledge at all of what Fannie Mae and Freddie Mac do in our economy. He alleges they are somehow responsible for promoting predatory lending and for tricking people into buying homes they can't afford. The fact is, since the Great Depression, we have had policies designed to help most working Americans find shelter and ideally, own a home.
Mass homelessness is a scourge on all of society, and unsustainable rent-levels are a drain on working people, sometimes forcing families into poverty. Home equity is a key to many aspects of our economic landscape, without which tens of millions of people would be marginalized, locked out and ultimately a drag on our economic output. Fannie Mae and Freddie Mac exist to help facilitate the long-term viability of home-loans. They do not lend directly, but help support the viability of loans given out by commercial banks.
The predatory lending practices and the irresponsible credit derivatives and potentially fraudulent financially unsupported "credit default swaps" that have brought this massive crisis to our nation, were the province of commercial financial institutions which were unwilling to make viable loans to those less able to pay, and which sought to extract usury-level rates of interest from those least able to pay them, for their own profit and with no mind whatsoever to the long-term health of those accounts or of the market generally.
Fannie Mae and Freddie Mac, with tacit government support, accelerated the pace of their buying up of problem loans, not in order to stimulate irresponsible lending, but in order to prevent or buy planning time for the looming credit crisis. As early as the summer of 2005, The Economist magazine warned that a global real estate collapse was coming, that would affect all industrialized nations, except perhaps those like Japan which had been struggling with the problem for more than a decade already by that point.
When Sen. Obama wrote to Treasury Secretary Paulson, warning of the problem of subprime mortgages and the potential catastrophic fallout from predatory lending practices —a problem he was working to tackle as early as 2001, in the bipartisan Illinois effort to counter predatory lending—, his effort was aimed at the real problem: the viability of credit derivatives that were being misused to prop up institutions whose portfolios were being poisoned by toxic inviable mortage-backed securities.
When Sen. McCain joined with other Republicans in attacking Fannie Mae, the concern was strictly ideological, and the move itself demonstrated a total misunderstanding of financial markets. The Republicans who fought to reduce the size of Fannie Mae wanted to do two things: 1) to force the assets of government-chartered firms like Fannie and Freddie onto the open market, at bargain prices; 2) to make it more difficult for individuals to leverage their buying power against major financial institutions.
The reasons? The move to force Fannie and Freddie to reduce their mortgage holdings was not an effort to shore up the economy, it was an effort to ignore the problem and avoid regulation of the financial sector. They wanted to help prop up private investment banks and financial institutions by allowing them to get cheap buys on mortgage-backed financial instruments, then count these as assets at market value, essentially, a veiled public buyout of private debt. Cover the financial institutions' rotting portfolio foundations with what look like suddenly rosy numbers.
The problem? Fannie and Freddie were already playing that role. That's what they do. They intervene in home-loan markets to help maximize the viability of loans to consumers, who are not as stabilized against sudden hardship as major financial institutions are. Fannie Mae's website clearly explains:
Fannie Mae is a government-sponsored enterprise (GSE) chartered by Congress with a mission to provide liquidity and stability to the U.S. housing and mortgage markets. Fannie Mae operates in the U.S. secondary mortgage market. Rather than making home loans directly with consumers, we work with mortgage bankers, brokers, and other primary mortgage market partners to help ensure they have funds to lend to home buyers at affordable rates.
Fannie Mae is a government-sponsored enterprise (GSE) chartered by Congress with a mission to provide liquidity and stability to the U.S. housing and mortgage markets.
Fannie Mae operates in the U.S. secondary mortgage market. Rather than making home loans directly with consumers, we work with mortgage bankers, brokers, and other primary mortgage market partners to help ensure they have funds to lend to home buyers at affordable rates.
Originally chartered by the US government in 1938:
The impetus for creation of Fannie Mae was twofold: the national commitment to housing and the inability or unwillingness of private lenders to ensure a reliable supply of mortgage credit throughout the country.
So, the misuse of that economic lever is the fault of the financial sector itself. Real decisions were made that distorted the nature of affordable-rate home loans, attempting to bend them by force into some sort of massively profitable adjustable-rate mortgages, which were designed to be misleading and which were sold over and over again, real estate flipping-style, in a kind of pyramid scheme where the last entity to hold the loan would eventually lose out.
The move to make it more difficult for individuals to leverage their buying power against major financial institutions (which could force down commercial interest rates), was part of a concerted effort by Congressional Republicans to reform credit and bankruptcy laws to shift bargaining power to big banks. Why? Because they needed help with their decaying solvency. The 2005 bankruptcy bill made it more difficult for individuals to escape debt repayment by declaring bankruptcy, but easier for major firms or even banks to do so.
The only possible reason for doing this was to help banks cover up the fact that they had inviable loans on their books. By now allowing individuals to escape repayment, in some cases even after losing their homes, the banks were able to continue counting those future repayments of failed loans as "assets", which were increasingly bundled together and resold as credible "financial instruments", when in fact they were essentially junk bonds in sheeps' clothing.
Sen. McCain's attack on Fannie and Freddie misplaces blame for this crisis in order to craft an entirely alternate history, which he then intends to use to blame Sen. Obama for a crisis that Sen. McCain actively worked to worsen, either from disinterest, confusion or worse. At the very least, it is clear that Sen. McCain's ranting on the subject bears virtually no connection to reality, and this is what we need people to understand.
when you try to make an informed choice when electing a person to a Federal or State office.
Out here in the political Wild East of Florida, you hear just about every nifty Republican rumor. There was the last summer there was the choice "Obama gets his money from a secret slush fund of Arab countries," myth that was popular amongst our elder Jewish neighbors. My current fave, though, is our Halloween special: Fannie Mae & Freddie Mac as the financial bogeymen.
A family member emailed me a link to the YouTube video below:http://www.youtube.com/watch?v=NU6fuFrdCJY
Here's my response:
What we're all about to witness over the next 31 days is a systematic dismantling of a campaign through rumor, slander, and gross exaggeration.I have to respect the central premise of this video of "bad social engineering." Though the video even states that it wasn't a bad idea...just that it created the conditions in which banks and speculators ran amok. So, then, if we were to try again at affordable mortgages, would a new effort be more regulated so that predatory lenders (who Obama spoke out EARLY and often against) would not be legitimized?It is a stretch of logic to blame the whole crisis on the idea that mortgages should be available to more people. In reality, it wasn't the idea, but the execution, abuse and speculation that created the bubble. Yes Barney Frank and Chris Dodd had a role in that, but those two also stepped up and provided solid leadership during the crisis the last couple of weeks. Good politicians. Bad politics. It is an even further stretch to try and pin this all on Obama. What a ridiculous screed. I sat through all ten minutes of that video. Here's Obama on the Fannie/Freddie smear:http://fightthesmears.com/articles/21/fannierumor What we'll see in the next 31 days is the McCain campaign releasing a series of attacks trying to discredit Obama through his associations. We'll learn all about Ayers, Rezko, Wright and others. What we won't hear about in this flurry of venom, is that McCain has JUST as many if not more associations that Obama could leverage for similar purposes. Here's one: McCain's chief advisor, Charlie Black. Do as the video says, but this time Google Charlie Black. Holy cow, there's hardly a dictator that Black hasn't represented as a lobbyist! If Obama needed to, he could really press that point home. But instead, over the last couple of weeks, his advertisements have become increasingly positive, while McCain's advertisements this week are coming in 100% negative. 100% attack ads by John McCain. The truth is, McCain has lost the battle of ideas and policies with Obama. The American people have increasingly been coming over to Obama's camp on most of the major issues affecting us. Health care, the economy, climate change, even the war in Iraq...McCain has lost the battle of ideas. The only thing McCain has left is to go negative and hope that it turns the tide in battleground states. http://www.washingtonpost.com/wp-dyn/content/article/2008/10/03/AR2008100303738.html?hpid%3Dtopnews&sub=AR Here's what role McCain's senior advisor had with Fannie/Freddie:http://www.freddiemac.com/news/features/stories/20051114_homeownership.html That's a press release from...you guessed it...2005!And the trail of collusion goes WAY back in BOTH PARTIES.What's the truth? A good idea (giving more people the ability to own their own home), combined with a greedy corporate culture (duh), combined with regulation and oversight that was not applied evenly (thank congress) due to the influence of lobbyists and corruption (both parties, but the GOP has redefined corruption after controlling all aspects of government) led to people like me (and many in worse standing) stretching to get loans in an unaffordable market. There are many, many reasons for the bubble itself collapsing that go far beyond Fannie and Freddie not being able to back up their mortgage assets. How about the falling dollar - which led to the huge spike in oil prices? How about the Bush tax-cuts...the first time a president as ever pushed tax cuts in a time of war? How about the Iraq war sucking our resources dry and crippling our ability to respond or have a credible seat at the negotiating table with our allies? How about the fact that all our bad debt has been sold to China, the Saudis, and the Emirates? Really...if all the money was changing hands inside the US, we could regain control through oversight and regulation. But, sadly...when debt crept all the way up the ladder to the US Treasury, they sold more bonds to China. THAT is the Bush legacy. He has accrued more national debt than the 42 presidents before him, combined. We are running budget deficits of close to half a trillion dollars a year. I'd rather have a "tax and spend" democrat than a "don't tax and spend more than anyone ever has" Neoconservative. By the way, have you reviewed the candidates' tax proposals? 80% of Americans and 95% of American families would not see ANY tax increase with Obama, and anyone making less than $200K a year will have a lower tax bill with Obama than McCain. P.S....all those donations from "Fannie and Freddie" that have gone to Obama....those were from individual employees, NOT corporate donations.Here are some other categories where Obama FAR outraises McCain:
I'm worried...how can we spin this in a positive way? Here's what's coming out of the woodwork...
"I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole."
The big deal? That was from John McCain! I know the recent add trying to pin a relationship between the former corrupt CEO of Fannie Mae (Franklin Raines) and Obama has been thoroughly denied by both Raines and Obama and his campaign. But there's a finger wagging and I just think Obama should make sure that everyone knows where he stood in 2005 too! He has recently made the necessary criticisms about crony capitalism and bad policies due to lack of regulation. He has acknowledged the travesty of mismanagement that has led to the ruin of the federally funded mortgage and loan programs. But he needs to say something about 2005. How can McCain have had the insight then and not one Democrat share the sentiment? If Obama can show that his platform on economic reform was shaped back in 2005, it could show that he too saw something coming. Obama can be a leader who can work across the aisle, he can afford to acknowledge that he agreed with McCain in 2005 and that with his youth and energy may be able to get the job done where McCain had to struggle. Especially if all the democrats work together this time to make reform happen! That can only help Obama.
Waiting to exhale...
The financial crisis of today is directly traceable to the Bush policy called "The Ownership Society" as outlined in a speech given in October, 2002. The OS policy granted permission to Fannie and Freddie along with cohorts in the real estate and financial markets to unleash the steamroller that's crushing our economy today by granting loans to people with unnworthy credit. About 60% of creditworthy people were also caught in the net and given the same rates as those with bad credit.
"He (Bush) called on Fannie Mae and the private sector "to unlock millions of dollars, to make it available for the purchase of a home"--an important reminder that subprime lenders were taking their cue straight from the top." Naomi Klein 2/18/2008 in an article in The Nation copy and paste www.thenation.com/doc/20080218/klein to view it entirely.
The story on MSM is one of shock and awe created using "psychological gunpoint" tactics hustling and hastening the legislative branch to agree on providing bail out welfare to Bush's "have more" base under the guise of "the sky is falling" tomorrow.
Oh no, there's no time to think, there's no time to look at any interim solution that would tide the crisis over until the new president is in office. There's no time to have consultations on alternative plans to Paulson's four page undetailed plan (ransom note) demanding $700,000,000,000 within five days. There isn't time to consider informing "we the people" why two weeks ago the economy was fundamentally sound and now it's hurry up before we sink! We can't even get the candidates together for debate on TV so Democratic processes have been canceled too in what seems like marshall law on Capital Hill!
I have written letters to my Senators, Congresspersons, Obama, McCain with my concerns as have hundreds of thousands of other citizens who're on the borderline of experiencing the depth of outrage that drives revolutions and uprisings.
Please tell me the Obama campaign is all over this. Milk it, folks, milk it
Loan Titans Paid McCain Adviser Nearly $2 Million - NYTimes.comSenator John McCain’s campaign manager was paid more than $30,000 a month for five years as president of an advocacy group set up by the mortgage giants Fannie Mae and Freddie Mac to defend them against stricter regulations, current and former officials say.
http://www.nytimes.com/2008/09/22/us/politics/22mccain.html
The recent fusion of state and financial interests that culminated in the federal bailout of Freddie Mac, Fannie Mae and AIG will eventually cost taxpayers over a trillion dollars. While some may see the financial slowdown as evidence of the decline of the American Empire, others view recent developments in the giant government bailout as steps toward fascism.
Continue reading at: http://locationofcontestation.wordpress.com/
As an economic historian, I have been trying to figure out what it means to spend a trillion dollars on bailing out AIG, Fannie Mae, and Freddie Mac.
It seems to me this is happening too fast - that we need to back up and look at what is going on.
This much I know, however. If we are going to save these institutions - and there are very good reasons why we have to - if the next owners are going to be the taxpayers - and that I'm not so sure of - then we must not stop there.
There is too much that is lost when a homeowner is evicted, and there are too many evictions going on. If we have to save the financial industry from the "sub-prime" mortgage mess, we need to save everyday working people as well.
The following is the best I can make of this mess - if you can correct facts, or have another interpretation, or can say it clearer, pleae speak up. But we need to think about what the AIG bailout means.
“I am a conservative. I could never vote for the most liberal Democrat in Congress.” I’ve heard this said over and again. Let me show you why it is precisely the liberal Democrat you need to vote for if you truly espouse conservative principles.
Let’s take the idea of small government, with little interference in and self-regulation of markets. We can all agree this is a truly conservative value. Free markets consistently outperform centrally planned economies, and everybody ends up better off. The problem is that the “conservatives” running Washington for the last 8 years mistook “little intervention” for “no intervention.” So they successfully pushed for deregulation and less government oversight of our financial markets, leaving the markets to their own free-wheeling and increasingly non-transparent devices. Where has that gotten us? To a world in which the federal government now essentially owns four of our largest financial institutions.
Should the federal government be in the business of running Wall Street? Is that a conservative value? The answer is no. Overnight, we dramatically jumped from no regulation to government control. We now have the very government intervention that would have Milton Friedman turn in his grave. And what is free about a market in which companies and their executives reap enormous profits when times are good and get bailed out when times are bad? Does that teach prudent investment and good decision making, also conservative values?
The thing is, with prudent foresight and well-managed regulation, the current crisis could have been avoided. With a little well-placed oversight, our markets would have run pretty smoothly, largely unassisted, and with the public’s trust. Easy to say now, but we needed that a year ago.
So let’s take a look at what happened over the last few years. In February 2006, the so-called liberal candidate introduced the STOP FRAUD act in the Senate to address “deteriorating mortgage lending practices and rising foreclosures.” In March 2008, the same “liberal” candidate outlined 6 detailed principles to “correct failures in financial market oversight and move forwards to restore accountability, transparency, and trust,” warning of precisely the kind of problems we now face. Meanwhile, the so-called conservative candidate, who throughout his career consistently embraced his party’s mantra of deregulation, repeatedly failed to recognize the growing housing crisis as a problem and continued to call for less regulation in March, May, and July of 2008. And the economic adviser of this “conservative” candidate authored the Financial Services Modernization Act of 1999 to “protect financial institution from overregulation,” paving the way for the explosion of complex financial instruments that are at the root of our current credit crisis.
I dare say, if years ago we had listened to those “liberal” proposals instead of enacting the “conservative” ones, we would now live in a world where the markets were regulated AND working. If you are in favor of free markets and little government intervention, you need to wake up to the fact that “liberal” and “conservative” are misleading labels created as smokescreens by the political parties. Nowadays “conservatives” are not pro-market. They are pro-business and have allowed special interests to lobby them for measures that imperil the very foundation of our free markets. Look at what the candidates stand for, and whether it is smart policy or simply blind repetition of party dogma. If the liberal candidate’s plan states, “Free markets are the engine of American progress; but the government’s role as umpire and steward is critical to the function of the free market,” you should give that plan a serious look.
Too bad it had to come this far. No matter who ends up in the White House, he will have to deal with this financial mess for a long time. But why put a person there just because he calls himself a “conservative”? Because that happens to be what you think you are? If you’re voting for free markets, you need to vote for the man who has plans for their survival, no matter what label anyone tries to stick on him.
This was emailed to me via a listserve I belong to and to me it looks like everyone is involved in washington one way or the other. One thing is clear however, that Mccains Obama 400MM claim is as we all know a lie.
http://dyn.politico.com/printstory.cfm?uuid=28F13661-3048-5C12-000140B077704AAA
If you want to know how Fannie Mae and Freddie Mac have survived scandal and crisis, consider this: Over the past decade, they have spent nearly $200 million on lobbying and campaign contributions.But the political tentacles of the mortgage giants extend far beyond their checkbooks. The two government-chartered companies run a highly sophisticated lobbying operation, with deep-pocketed lobbyists in Washington and scores of local Fannie- and Freddie-sponsored homeowner groups ready to pressure lawmakers back home.They’ve stacked their payrolls with top Washington power brokers of all political stripes, including Republican John McCain’s presidential campaign manager, Rick Davis; Democrat Barack Obama’s original vice presidential vetter, Jim Johnson; and scores of others now working for the two rivals for the White House.Fannie and Freddie’s aggressive political maneuvering has helped stave off increased regulation and preserve special benefits such as exemption from state and local income taxes and the ability to borrow at low rates. When their stock prices took a dive last week, their government allies extended another helping hand with a plan for the Treasury Department, the Federal Reserve and, possibly, Congress to shore up the companies.
The housing crisis is sure to linger into the next administration, when the mortgage companies will inevitably be well-represented �€" no matter who’s in the White House. Fannie and Freddie’s political contacts exist deep in the two presidential campaigns.
At least 20 McCain fundraisers have lobbied on behalf of Fannie Mae and Freddie Mac, netting at least $12.3 million in fees over the past nine years. Political insiders Arthur B. Culvahouse Jr., picked by McCain to vet his vice presidential nominees, and Jim Johnson, picked by Obama to perform the same function, once worked for the mortgage giants. And for years, Rick Davis served as president of an advocacy group led by Fannie Mae and Freddie Mac that defended the two companies against increased regulation.So far this election cycle, Freddie Mac’s political action committee and employees have contributed $555,567 to Senate and House candidates, and Fannie Mae’s PAC and employees have given more than $1.1 million, according to the Center for Responsive Politics. In total, the two companies have spent $170 million on lobbying over the past decade, according to the Center, although they have scaled back in recent years. Last year, they paid $14.1 million in lobbying fees, a significant decrease from a high of more than $26 million in 2004. The connections of both campaigns to the well-entrenched mortgage companies highlight the difficulties the candidates face in selling voters on an outsider message. McCain’s campaign denied that its political connections have affected his view on the issue. “I have written every word that has to do with Fannie and Freddie in this campaign, and I don’t know who the people are that are linked to the companies,” said McCain’s economic adviser, Douglas Holtz-Eakin. “Sen. McCain has favored GSE reform in the past and continues to favor GSE reform,” Holtz-Eakin said. “That’s unchanged.”McCain has called the government’s weekend intervention in the struggling companies “correct,” saying he hoped that the action would “preserve the ability of Americans to obtain loans in order to buy a home and be able to afford mortgage payments they’re having to make.”
A spokesman for the Obama campaign declined to comment, noting only that former Fannie Mae CEO Jim Johnson stepped down from his campaign post in June. His resignation came in the wake of charges that he collected more then $7 million in home loans at special, below-average rates.On Sunday, Obama shied away from commenting on the specific proposals, but cautioned regulators to give top priority to the interests of homeowners.“That should be our No. 1 priority, not just shareholders, investors or CEOs of companies,” he said.Fannie and Freddie own or guarantee almost half of the country’s $12 trillion in mortgage debt. Over the past few months, their shares of the housing market have grown as private companies curtailed their mortgage lending in the wake of massive subprime-related losses.Critics have long argued that both Fannie and Freddie operated with too small a capital cushion to adequately offset financial risk. But the mortgage giants have consistently beaten back congressional efforts to increase oversight, even after a major accounting scandal in 2003 resulted in a $400 million fine for Fannie.Fannie’s government relations operations dramatically expanded in the mid-1990s, when then-CEO Johnson recruited Washington A-listers Robert Zoellick, who served in the Reagan and Bush administrations; Lawrence M. Small, former secretary of the Smithsonian Institution; and William M. Daley, commerce secretary in the Clinton administration. Johnson spearheaded an aggressive campaign to create a local grass-roots network of company advocates. Under his leadership, Fannie opened more than 50 partnership offices in cities and rural communities. At the same time, the Fannie Mae Foundation, a private nonprofit financed by the mortgage giant, contributed generously to local charities, arts institutions and housing organizations, giving Fannie influence in lawmakers’ home districts.Both Fannie and Freddie made large and visible commitments to low and moderate-income housing, quieting criticism from advocacy groups. With the companies in trouble, their political ties are under new scrutiny.Johnson headed Fannie Mae from 1991 to 1998, leaving with a $21 million payout. Even after he left, Fannie continued to pay him an annual fee of at least $300,000 a year for consulting services and a $71,000 monthly pension, according to filings with the Securities and Exchange Commission.From 2001 to 2005, Fannie also paid for Johnson’s support staff, communications services and provided him a car and driver.McCain tapped Culvahouse, the former Reagan administration official, to head his search for a running mate.Currently a partner at O’Melveny & Myers, Culvahouse lobbied on behalf of Fannie Mae in 1999, 2003 and 2004, according to Senate records.The campaign connections to the two mortgage companies go far beyond vice presidential vetters.McCain campaign manager Davis headed the Homeownership Alliance, a lobbying association that included Fannie, Freddie, nonprofit groups, real estate agents, homebuilders and consumer advocates. The group’s stated goal was to increase affordable housing. But it also worked to oppose congressional efforts to tighten controls on Fannie and Freddie.In July 2003, Davis wrote to the American Banker, taking issue with an opinion piece by Leslie Paige of Citizens Against Government Waste, arguing that Fannie and Freddie should operate with greater transparency. “Several of Ms. Paige’s assertions bear correction,” Davis wrote, defending Fannie and Freddie on behalf of the group. “The GSEs are subject to an innovative and stringent risk-based capital stress test �€" the toughest in the financial services industry.”Other McCain aides with ties to the two companies include economic adviser Aquiles Suarez, who worked as Fannie’s director of government and industry relations; congressional liaison John Green, who lobbied for Fannie from 2004 to 2007; and finance co-chairman Frederic V. Malek, a former Freddie board member.Jamie S. Gorelick, deputy attorney general in the Clinton administration and a chief policy adviser to Hillary Rodham Clinton, is rumored to be a possible attorney general in an Obama administration. She was vice chairman of Fannie Mae an
Robert Creamer
Link: http://www.huffingtonpost.com/robert-creamer/why-the-financial-meltdow_b_126802.html?view=print
Posted September 16, 2008
The financial meltdown on Wall Street is more than a cyclic correction brought on by a mismanaged business cycle. It is emblematic of a problem at the very foundation of the right wing economic philosophy that became conventional wisdom during the Bush years -- and would be continued in a McCain presidency.
The zealots of unfettered "free markets" cast aside the critical lesson that the world learned during the Great Depression: left to their own devices, unregulated financial markets do not necessarily function to benefit the society as a whole -- or, in the end, even many individual market participants.
The fundamental premise of right-wing economics is the incorrect view that if every market actor pursues his own economic interest, the "invisible hand" of the market place will assure that the "common good" results. But of course, common sense tells us that is not always true. Two quick examples: The first is referred to as the "tragedy of the commons." Suppose an island nation depends on the fishing harvests from the surrounding sea for its livelihood. It would obviously be in the interest of the community never to take more fish from the sea than can be replenished through the reproduction of fish. That way, everyone on the island will continue to have fish for the long haul.
But it is in the interest of each individual fisherman to catch as many fish as he can. This is especially true if the fish stocks grow scarcer. To continue to have enough fish for himself and his family, each fisherman competes more and more vigorously for the remaining fish. In the end, this behavior will assure that the fish supply is depleted, and that no one has any fish.
In this situation, if everyone pursues his own individual interest, the common good is not served. But if everyone looks out for each other, and recognizes that all have a common group interest, they will manage the fish resource to assure a self-sustaining fish supply that can feed everyone for years to come.
The other example is the classic case of economic recession. In a recession, it is in each economic actor's self-interest to increase his savings and cut spending, since the recession threatens his income. But by each pursuing his own individual interest, all of the actors together reduce the economy's overall spending. And that deepens the recession. If, on the other hand, the entire group of economic actors works through its government to increase national spending and reduce overall savings, it will stimulate the economy and the recession will end -- benefiting everyone.
The American mortgage market now provides us with another clear example of how this fundamental premise of right-wing economic thought is dead wrong.
For many years after the Great Depression, most mortgages were provided by banks and savings and loans. Traditionally these institutions would originate their own loans, evaluate the risk, and maintain a relationship with the borrower. It was in the self-interest of the institution to make loans -- that's how it made money. But it was also in the institution's interest to assure that the borrower could pay the loan back, because it was lending its own money.
Over the last thirty years, the mortgage market has fundamentally changed. Now most loans are originated by brokers or other mortgage companies who make their money through "origination fees" and often payments from big, unregulated lenders. Once these loans are made, they are then packaged and sold as securities through the secondary mortgage market.
Mortgage originators had every incentive to make all the loans they could, but absolutely no incentive to assure that the borrowers could pay the loans back. Credit standards were relaxed, new "sub prime" products were introduced, "no-document" loans were issued.
This system provided a great deal of liquidity to the mortgage industry. But it also removed the risk of making the loan from the loan originator and handed it to a huge, diffuse "market." No longer did any individual or institution have any individual incentive to prevent bad loans.
The problem was simultaneously hidden and exaggerated by the creation of complex derivatives -- securities that sliced and diced the risk and allowed it to be sold and resold.
As long as housing prices went up, the problem of bad loans were hidden by the rising equity of the collateral -- the homes that were being financed. But once prices stopped rising and began to drop, the bottom fell out.
Left to its own devices, the mortgage market itself could not solve this problem. It was in the loan originator's interest to issue more and more risky loans and it wasn't in the interest of any individual market player to control for risk, since the securities representing that risk could be sold a minute after they were purchased.
The only solution to this problem would have been the kind of regulation that was put into place for banks during the New Deal. With banks and with savings and loans, regulators guarantee a substantial portion of the depositor's money, but they also ensure that the mix of loans and the bank's overall financial structure is sound. Today the major source of mortgage capital is not banks or savings and loans, but from financial institutions that are almost free of regulation.
The same went for the two institutions that were set up to create this "secondary mortgage market," Fanny Mae and Freddie Mac, before they were taken over by the government last week.
The kind of regulation that was necessary was opposed by the Bush administration -- and the entire right wing business and economic establishment -- that is trying desperately to hold onto power by electing John McCain to continue the Bush presidency.
So now the chickens are coming home to roost. The taxpayers are helping to bail out some of the players, the stock market is tanking, mortgages are harder to get -- further reducing home values and making the problem worse.
And unbelievably, John McCain told his audience that he would "clean up Wall Street."
John McCain's chief economic adviser is Phil Gramm -- a former economics professor -- who is now Vice Chair of UBS, a huge international financial company. He's the guy who said that the problems of the American economy were "in the minds" of the American people -- that we are "a nation of whiners." Gramm is an ardent advocate of precisely the right wing economic philosophy that caused this problem in the first place.
Gramm and McCain believe in letting the guys with all the money do pretty much what they want because, they say, it will ultimately benefit us all. They are the ultimate crusaders for "trickle down economics."
The problem is that the foundational principles of this economic view have been proven wrong by history. And after a while, the victims are no longer limited to the vast majority of Americans that has suffered for the last eight years -- the pain even spreads to the wealthiest denizens of Wall Street. As Barack Obama said yesterday, we hear a lot about the benefits of the economy "trickling down;" now we're beginning to see the pain of the economy "trickle up."
The central lesson of this saga is clear. If you like the Bush economy, hire McCain. Over the next seven weeks, however, Americans who care about our economic future have to join Barack Obama in saying: enough.
Robert Creamer is a long-time organizer and political strategist, and the author of the recent book "Stand Up Straight: How Progressives Can Win," available at amazon.com
The banner headline in today's The Wall Street Journal reads "Crisis on Wall Street As Lehman Totters, Merrill Seeks Buyer, AIG Hunts for Cash." Since that morning headline, Lehman Brothers Holdings, Inc., an investment bank for more than 150 years, has filed Chapter 11 bankruptcy. Merrill Lynch has sold itself to Bank of America. AIG has won a temporary reprieve after Gov. David Patterson agreed to relax insurance regulations to allow it to access up to $20 billion in assets held by its own subsidiaries. The Dow opened and immediately fell 300 points.
Sadly these days, many of our financial journalists and analysts have the depth of introspection of a Miss America Pageant. Degrees aside, they respond to the surface of news events and drool like Pavlov's dogs when the appropriate bell is sounded. It would appear, beneath the surface that two events suggest that the actual power structure behind the Republican Party, in spite of the Sarah Palin love fest following the Republican convention, does not see John McCain winning the White House. Here is why.
For those of you who aren’t clear on the details, heres a "dumb down" explanation of the fannie mae and freddie mac takeover explanation. Its pretty straightforward, and before reading you should read up on what a bond is if you don’t already know.
Bond Definition: (read the first paragraph alone and you’ll understand.)
In a nutshell, the “real estate bubble" burst and the value of homes plummeted. This caused interest rates for loans from banks to soar, and those families that barely made payments were now facing mortgage defaults. Millions of people couldn’t afford the new mortgage payments, which *had* the cost of essential commodities not soared along with the cost of gasoline AND healthcare, millions of people would have had a few more dollars to pull out of their pockets for their homes. This rule is applied across the board to millions of homeowners. Well we all know that when you buy a home it’s a mutual risk between you and the bank. However all the risks the bank takes with millions of people is indirectly propagated to financial institutions like Freddie Mac and Fannie Mae. They in turn will go out and sell bonds to raise the money for those loans to overseas and domestic investors.
Problem is that banks took in way too much risk, which indirectly eroded fannie and freddie with concerns over its financial integrity. Can a single company take in 5 trillion dollars of debt? This makes foreign and domestic investors alike think twice about buying bonds from fannie and Freddie. These concerns together with the 5 trillion dollars in debt started to slowly affect the influx of investors buying bonds from fannie and Freddie. This in turn forced fannie and Freddie to raise interest rates on the banks loans to still be able to raise money for future loans, which then in turn forced banks to raise interest rates on homeowner’s loans to still make a profit. That means they began pinching the people whom were already suffering from financial instability caused by the rising cost of living (gas, food, healthcare to name a few). End result, fannie and Freddie would have gone down the drain and the cost of living would have soared over night even further because banks would not have had a stream of cash flow to pay for the crucial roles they fill in our economy. Could this have been avoided? Sure, if we had someone who knows how to run the economy leading us.
Heres a great CNN money article that explains how we got to where we are regarding Freddie Mac and Fannie Mae.
