Financial Mess: Naming Names

[Cuda]

It’s Not as Though Anyone Saw It Coming

by Vin Suprynowicz


Who’s to blame for the current meltdown of the financial sector, caused by the dependence of so many corporate balance sheets on defaulting home mortgages?

Since the White house has been occupied by a Republican – and one with low approval ratings, at that – for the past eight years, many may be inclined to agree with Democratic House Speaker Nancy Pelosi that the fault lies with “failed Republican do-nothing policies.” (She would have said “laissez-faire,” but she knows her constituents would assume she was referring to a kinky new sex club.)

In fact, the Community Reinvestment Act of 1977 was enacted by a Democratic Congress and signed by Democrat Jimmy Carter, and it was under Democrat Bill Clinton in 1995 that the real regulatory pressure began to build on America’s banks to meet regulatory quotas for loan-making to unqualified buyers in low-income communities – well-meaning social policy (home ownership is nice; it may even be a “right”) enforced by requiring bankers to take the very billion-dollar risks which have now come home to roost.

There were plenty of warnings that too much of this bad debt was piling up – especially at mortgage giants Fannie Mae and Freddie Mac.

But the Wall Street Journal reports that in the year 2000, when Rep. Richard Baker proposed Fannie Mae and Freddie Mac reform, powerful Democrat Barney Frank dismissed it as unnecessary. The New York Times reports that a Bush administration proposal in 2003 to reform Fannie Mae and Freddie Mac found Rep. Frank insisting “I do not believe that we’re facing any kind of crisis.”

Warned in April of 2004 that Fannie Mae and Freddie Mac could collapse, Rep. Barney Frank replied “I think Wall Street will get over it.”

Over in the Senate, the biggest recipients of financial largesse from employees and political action committees of Fannie Mae and Freddie Mac over their careers have been not George Bush and John McCain, but Democratic Senate Banking Committee Chairman Chris Dodd ($165,000) and Democratic presidential nominee Barack Obama ($125,000), followed by Hillary Clinton and John Kerry, Democrats.

WHO are the friends of the fat-cat bankers?

(Note last week’s original bailout plan included tens of billions of dollars for non-profit “affordable housing advocacy” outfits including Sen. Obama’s longtime patron, “Acorn.” And that Sen. Obama’s advisor on banking and mortgage matters is Franklin Raines, former head of Fannie Mae.)

Yet at the same time Sen. Obama was pocketing money from these institutions, some far-sighted Republicans including John McCain (yes, I was surprised, too) were fighting to reform them.

“One of the major government privileges granted to GSEs is a line of credit with the United States Treasury,” Republican Congressman Ron Paul of Texas warned the House Financial Services Committee in September of 2003. “According to some estimates, the line of credit may be worth over $2 billion. This explicit promise by the Treasury to bail out GSEs in times of economic difficulty helps the GSEs attract investors who are willing to settle for lower yields than they would demand in the absence of the subsidy.

“Thus, the line of credit distorts the allocation of capital,” Rep. Paul continued. “More importantly, the line of credit is a promise on behalf of the government to engage in a huge unconstitutional and immoral income transfer from working Americans to holders of GSE debt.”

Sen. McCain was another leading advocate of reform of the “Government-Sponsored Entities” (GSEs) – back when there was still time.

“For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac … and the sheer magnitude of these companies and the role they play in the housing market, …” Sen. McCain said on the Senate floor on May 25, 2006. “The GSEs need to be reformed without delay. …

“This week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were ‘illusions deliberately and systematically created’ by the company’s senior management, which resulted in a $10.6 billion accounting scandal,” Sen. McCain continued. “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.”

That was three years ago. But the well-paid Democrats refused to listen, back when there was still time. And so the Federal Housing Enterprise Regulatory Reform Act of 2005 – co-sponsored by Sen. McCain – went nowhere.

Yes, plenty of Sen. McCain’s fellow Republicans share the blame. Porker Team “B” has controlled either the White House or the Congress or both for much of the past eight years. Even faced with Democratic foot-dragging, why didn’t Republicans act to repeal the Democratic mandates that encouraged and even required these risky loans?

For that matter, even today – with near unanimity that the nation faces a “crisis” – why hasn’t Congress done the equivalent of plugging the leaks before starting to bail the boat? Why haven’t they repealed the poisonous Community Reinvestment Act of 1977, along with all the ancillary banking regulations piled on under Bill Clinton in the late 1990s, which not merely allowed but actually REQUIRED banks to demonstrate to government regulators that they’d extended credit to a “sufficient” number of minority borrowers, even if that meant allowing those borrowers to use their welfare and unemployment checks to “qualify” for a loan?

Perhaps for the same reason we should not believe Mr. Obama (in the Sept. 26 debate) or any other Washington politician who currently promises the taxpayers can expect to get a “return” on their bailout “investment.”

The way you get a “return” after buying a non-performing loan is to repossess the collateral property and re-sell it. But imagine the hue and cry of “racism” from the race hustlers if it turns out close to 50 percent of the defaulting properties to be repossessed belong to blacks and other minorities – thanks to 30 years of Democratic policies that implied (wrongly) that minority Americans couldn’t work hard enough and save enough to actually afford home ownership.

Black home ownership rates increased nicely from the 1920s through the 1950s – up until the birth of the current welfare state, in the 1960s. It was only at that point that liberals decided the only way blacks would ever afford homes was if their oh-so-well-intentioned patrons arm-twisted the banks into give them loans they couldn’t really afford.

How has that worked out?

[Cuda]

Rack mCloon, btw

ALBUQUERQUE, N.M. (AP) - Republican John McCain is calling Democratic rival Barack Obama a liar.
The GOP presidential candidate told a campaign rally: "Sen. Obama has accused me of opposing regulation to avert this crisis. I guess he believes if a lie is big enough and repeated often enough it will be believed."

In some of the harshest language yet, McCain said the campaign comes down to a simple question: Who is the real Barack Obama?

McCain drew the loudest cheers when he said the Democrat has written two memoirs but "he's not exactly an open book."

Trailing in the polls, McCain and his advisers say they will hammer that theme as the campaign heads toward the Nov. 4 election.

[Kierland]

the Community Reinvestment Act of 1977 {is to blame}

I guess he believes if a lie is big enough and repeated often enough it will be believed."

Pot met kettle

[Tom In VA]

But it didn't dare call it black. Fallacious cries of racism would ensue.

http://www.breitbart.com/article.php?id ... _article=1

BOSTON (AP) - Rep. Barney Frank said Monday that Republican criticism of Democrats over the nation's housing crisis is a veiled attack on the poor that's racially motivated.
The Massachusetts Democrat, chairman of the House Financial Services Committee, said the GOP is appealing to its base by blaming the country's mortgage foreclosure problem on efforts to expand affordable housing through the Community Reinvestment Act.

He said that blame is misplaced, because those loans are issued by regulated institutions, while far more foreclosures were triggered by high-cost loans made by unregulated entities.

"They get to take things out on poor people," Frank said at a mortgage foreclosure symposium in Boston. "Let's be honest: The fact that some of the poor people are black doesn't hurt them either, from their standpoint. This is an effort, I believe, to appeal to a kind of anger in people."

What a true sniveling coward this guy Frank is.

Ultimately people not paying their fucking bills is the root cause of this problem. That's it. Now if we want to engage in a discussion as to why people can't pay their bills ... that's fine. Jobs being moved overseas, overtaxed businesses, gross irresponsibility, or what have you.

But no, let's go ahead and turn this into a racial issue. Then we can continue to mistrust, hate, and delve further into balkanizing our society. It's so much easier to control us when we're focused on throwing shit at each other rather than looking at whose hands are in the cookie jar.

And there were a lot of hands in this cookie jar - Democrat and Republican.

Of course their answer is to bake more cookies. Using our flour, sugar, milk and eggs of course.

But that's okay. We don't mind. We can continue to fight amongst ourselves while they come after our milk.


Keep your eye on the ball.

[Goober McTuber]

After Bailout, AIG Executives Head to Resort
UPDATED: 11:31 a.m.

Less than a week after the federal government offered an $85 billion bailout to insurance giant AIG, the company held a week-long retreat for its executives at the luxury St. Regis Resort in Monarch Beach, Calif., running up a tab of $440,000, Rep. Henry Waxman (D-Calif.) said today at the the opening of a House committee hearing about the near-failure of the insurance giant.

Showing a photograph of the resort, Waxman said the executives spent $200,000 for rooms, $150,000 for meals and $23,000 for the spa.

"Less than a week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation," Waxman said. "We will ask whether any of this makes sense. "

The committee will ask the company's executives about their multimillion-dollar pay packages -- some of which they continue to receive -- as well as who bears responsibility for the company's high-risk investment portfolio, which led to its near collapse just weeks ago.

"They were getting their manicures, their pedicures, massages, their facials while the American people were paying their bills," thundered Rep. Elijah E. Cummings (D-Md.), of the executive retreat at the Monarch Resort.

The House committee, which took on executive compensation at bankrupt Wall Street firm Lehman Brothers yesterday, has received "tens of thousands" of pages of documents from AIG, Waxman said.

Those documents show that as the company's risky investments began to implode, the company altered its generous executive pay plan to pay out regardless of such losses.
AIG lost over $5 billion in the last quarter of 2007 due its risky financial products division, Waxman said. Yet in March 2008, when the company's compensation committee met to award bonuses, Chief Executive Martin Sullivan urged the committee to ignore those losses, which should have slashed bonuses.

But the board agreed to ignore the losses from the financial products division and gave Sullivan a cash bonus of over $5 million. The board also approved a new compensation contract for Sullivan that gave him a golden parachute of $15 million, Waxman said.

Joseph Cassano, the executive in charge of the company's troubled financial products division, received more than $280 million over the last eight years, Waxman said. Even after he was terminated in February as his investments turned sour, the company allowed him to keep up to $34 million in unvested bonuses and put him on a $1 million-a-month retainer. He continues to receive $1 million a month, Waxman said.

Waxman also looked skeptically at the executives' defense that the troubles in the business had to do with larger economic forces and not their own bad decisions.
When a former AIG auditor, Joseph St. Denis, expressed concerns, Cassano told him "I have deliberately excluded you from the valuation ... because I was concerned that you would pollute the process," according to Waxman.

St. Denis resigned in protest.

PricewaterhouseCoopers, AIG's auditor, told the company in March 2008 that the "root cause" of AIG's problems was that people assessing risk did not have enough access to the financial products division, where the risky investments originated.

Waxman further suggested that Sullivan had deliberately misled investors.

On Dec. 5, 2007, Sullivan expressed confidence to investors. But a week before, PricewaterhouseCoopers warned Sullivan that the company "could have a material weakness relating to these area," committee members said.

[Cuda]

what's your point, goober42?

as far as I'm concerned, if the taxpayers bailed out AIG, the bonuses the execs walked out the door with should be fair game for the government to go after for recovery. Same for any company the latest bailout bill rescues

[Goober McTuber]

Hey, just doing my bit to name names and point fingers. While I'm at it, you're a fucking idiot.

[The Seer]

Massive amounts of semen ingestion has obviously affected Frank's ability to reason....hey, maybe some posters in here.....

[Cuda]

he means you, goobs

[Felix]

If you're under the impression that loans to low-income home buyers is the cause of the home mortgage crisis, you need your fucking head examined (either that or tune into a different screeching radio harpy).....

Speculative home-buying (affectionately referred to as "house flipping") and the buyers of these properties that levereged them to the hilt using idiotic financing deals such as "interest only loans" or "125% of the home value" loans that were anticipating cashing in on astronomical (and unsustainable) price increases, coupled with speculative developers building speculative residential properties on the same desire to cash in on 20-30%/annum increases are the primary perpetrators of the mortgage crisis we're in today....not low-income buyers....

[Cuda]

flippers are an insignificant percentage of both total number of homes sold and total dollar volume.

felix, you don't know what the fuck you're talking about

[Felix]

flippers are an insignificant percentage of both total number of homes sold and total dollar volume.

and I'm sure you can provide the data that supports that assertion?

you're a fucking idiot.....plain and simple

real estate is my business....

[Derron]

flippers are an insignificant percentage of both total number of homes sold and total dollar volume.

and I'm sure you can provide the data that supports that assertion?

you're a fucking idiot.....plain and simple

real estate WAS my business.... I am unemployed now since I have not sold a house in over a year.

FTFY.

[Felix]

Where's the data that supports your assertion?

drive through some of the newer neighborhoods where you live and see exactly how many of the houses have ever actually been occupied....you'll probably be surprised to see how many haven't been lived in.....supply and demand must remain in equilibrium in order for the housing market to sustain itself....

when there is an overabundance of supply (speculative development) the market is in disequilibrium and prices fall.....there was simply too much construction and not enough buyers....it's the basic concept of supply and demand.....

my knowledge of the market comes from talking with real estate loan officers, title companies, mortgage brokers, real estate agents, buyers, sellers, etc.-that's what I do every day

it's simple human nature to want to lay the blame for shit like this on somebody, and I'm not saying the people who couldn't afford a particular house don't carry some of the blame in this, but by and large most real estate professionals I deal with indicate that the majority of the money that is tied up in mortgage lending is largely attributable to speculative real estate investors.....

real estate WAS my business.... I am unemployed now since I have not sold a house in over a year.

I don't sell real estate

[Tom In VA]

Well the "New World" will make everything okay soon.

http://www.bloomsberg.com/apps/news?pid ... refer=home

French President Nicolas Sarkozy, who convened the Oct. 4 meeting, called for a global summit ``as soon as possible'' to implement ``a real and complete reform of the international financial system.'' He said ``all actors'' must be supervised, including credit-rating firms and hedge funds. Executive-pay systems must also be reviewed, he said.

``We want a new world to come out of this,'' Sarkozy said. ``We want to set up the basis for a capitalism of entrepreneurs, not speculators.''

Finance ministers from the Group of Seven industrialized nations meet in Washington later this week.

[.m2]

If you're under the impression that loans to low-income home buyers is the cause of the home mortgage crisis, you need your fucking head examined (either that or tune into a different screeching radio harpy).....

Those people are the same "twits" that want to blame people on welfare for the economic problems in the country.

It's not surprising really... most of those "twits" have never had to balance the books for a living.... and are so feeble when it comes to taking care of themselves, they always have to find someone else to blame for their own ineptitude's .

[Goober McTuber]

their own ineptitude's

Unbelievable.

[Kierland]

flippers are an insignificant percentage of both total number of homes sold and total dollar volume.

felix, you don't know what the fuck you're talking about

Nice dodge.

Where's the data that supports your assertion?

You've pushed this Community Reinvestment Act causing the crash BS. Where is you data to support that assertion you stupid asshat.

[Kierland]

You did no such thing you lying sack of crap.

[Derron]

Where's the data that supports your assertion?

drive through some of the newer neighborhoods where you live and see exactly how many of the houses have ever actually been occupied....you'll probably be surprised to see how many haven't been lived in.....supply and demand must remain in equilibrium in order for the housing market to sustain itself....

when there is an overabundance of supply (speculative development) the market is in disequilibrium and prices fall.....there was simply too much construction and not enough buyers....it's the basic concept of supply and demand.....

my knowledge of the market comes from talking with real estate loan officers, title companies, mortgage brokers, real estate agents, buyers, sellers, etc.-that's what I do every day

it's simple human nature to want to lay the blame for shit like this on somebody, and I'm not saying the people who couldn't afford a particular house don't carry some of the blame in this, but by and large most real estate professionals I deal with indicate that the majority of the money that is tied up in mortgage lending is largely attributable to speculative real estate investors.....

real estate WAS my business.... I am unemployed now since I have not sold a house in over a year.

I don't sell real estate, I just pretend to know what is going on in the market, while I wait for my next mark

FTFYA

[Derron]

Where's the data that supports your assertion?

drive through some of the newer neighborhoods where you live and see exactly how many of the houses have ever actually been occupied....you'll probably be surprised to see how many haven't been lived in.....supply and demand must remain in equilibrium in order for the housing market to sustain itself....

when there is an overabundance of supply (speculative development) the market is in disequilibrium and prices fall.....there was simply too much construction and not enough buyers....it's the basic concept of supply and demand.....

my knowledge of the market comes from talking with real estate loan officers, title companies, mortgage brokers, real estate agents, buyers, sellers, etc.-that's what I do every day

it's simple human nature to want to lay the blame for shit like this on somebody, and I'm not saying the people who couldn't afford a particular house don't carry some of the blame in this, but by and large most real estate professionals I deal with indicate that the majority of the money that is tied up in mortgage lending is largely attributable to speculative real estate investors.....

The over abundance of development was done by a bunch of builders who could get theses loans and build these spec houses and then not be able to sell them after the bridge or construciton loan ran out, had to get a mortgage on them and then fucking welched on the mortgage.

The fucking mortgage brokers around here were doing any thing to sell homes to people with the "ninja" or liar loans, and sell them they did.

The fucking builders kept building them, they set up multiple LLC's, moved the moneys around from LLC to LLC, got them into a project or holdings that was unencumbered and fucking rolled on the others. There are several homebuilders s up here in this area all managed to stiff a lot of subs and suppliers.

Fucking serves the suppliers and subs right since most of them let these lying sons of whores get into them wayyyy to far and when the builder didn't pay, the subs and suppliers went down, way before the builder did, whom most of them are secure in paid for homes, offices, shops, etcs..sitting on unencumbered real estate waiting for the next turn around.

So who do we blame ??

The builders ?
The real estate agents ?
The mortgage brokers?
The buyers ?
The banks for drinking the kool aid ?

Fucking all of them....there is enough blame to go around... fraud and deception at every level, multiplied again each level up until the whole fucking thing goes down....(i.e. See Wall Street last 7 days)

[dotdotdot]

I blame global warming...and manbearpig.

[Louis Cyphre]

Rack the South Park reset!

New episodes starting tomorrow.