BS: The Bailout

Subject: RE: BS: The Bailout
From: Bobert
Date: 04 Dec 08 - 07:53 PM

The define wrong-headedness, T-Bird...

You apparently are either clueless as to what I proposed or have even less understanding about economics than you did about gettin' into Iraq...

What I proposed was for the US government, if it was going to write some bigass checks, switch from the 30 year failed trickle down (supply side) economics which has gotten US here to trickle up (demand side) economics... Right now we have given the banks about $300B and don't have a clue where it went... I guess that's fine with you??? It was also fine for another guy who thinks like you... His name is Herbert Hoover... He was the guy who almost sunk the US for good with his stubborness (strange adjective...sound familair???) in supply side economics...

What I proposed is somethimg akin to what FDR did... Rememeber him???... He established the Home Mortage Corp which stepped in and took over bad morgages... Given the massive distrust that Hoover created with the banks and folks not wanting their money in the banks he also established the Federail Depositors Insurance Program which still survives to this very day...

But it was FDR's stepping in to assit folks who were about to be forclosed on that really made a huge difference... This is what I have proposed... And here's is why it works... When this money is used to help the working man who is about to be put outta his home where do you think that money goes, T???

Cat got yer tongue???

Well, to goes to the lender, that is where it goes...

(So what, Boberdz???)

Well, if the US were to buy all these mortages from the bottom up (demand side) alot of good things happen:

1. One less family is on the street creating even more burdens of Socail Services...

2. One less property is now vacant which means that property values around it aren't adversely effected...

3. One less property is on the market which means that if we take all the forclosed prioperties and refinance them thru a federal home mortage corp. then it dries up the excess inventory of houses and restores the housing market...

and...

4. The money does make it back up to Wall Street as the feds, in essence, buy back these mortgaes one at a time... That koney will go into banks who will then feel a lot better lending...

But there is more, T...

If all these loans are refinaced thru a federal mortgage corp at 5 ot 6% as payments come in a portion of each will be amortized as either interst or pronciple... I think that part of the interest could be used to shore up Social Security while the rest going to pasy back the initial investment... Of course, all of the principle will go back to pay for the program leaving that portion to cover losses...

Now, T, have at yer hole pokin'... There were lots of hole pokers in 1933, too...

B~

Subject: RE: BS: The Bailout
From: Teribus
Date: 04 Dec 08 - 07:15 PM

Oddly enough Bobert, in one way, for some completely perverse reason I do wish the US Government had followed your advice on this from day one, right across the board.

The results would have been as follows:

1. The USA as you know it would be completely screwed. No money at all, nobody prepared to lend and a seige mentality benefiting very, very few - In other words Bobert you would create exactly what you have been saying has existed for years but which in actual fact hasn't.

2. A number of "catters" such as yourself and Little Hawk would be taught the object lesson that there is no such thing as "big, evil, multi-national mega corporations" who just happen to be responsible for all the ills on this planet. Because when all these banks, insurance companies and mass employers go to the wall as you suggest you will discover that the major shareholders in those "big, bad, evil, multi-national corporations" were ordinary Joes and their pension funds - You have no idea whatsoever of the spread of shot and exactly how wide the effect of following your plan would go.

Some questions for you Bobert:

1. Who do people borrow from if all the Banks have been allowed to go under??

2. If the Stock Market has gone down the tubes and companies have been wiped out. Who invests in what to generate capitial, wealth and jobs??

3. You are not prepared to help companies that employ 1 in 10 of every person in the USA - You and the rest of the chattering left often talk of decimation, yet here you are actually advocating it. Fine let them go to the wall, 10% unemployment - how's Obama going to pay for that?? And that's only those directly employed the spread of those affected goes much wider than that.

In this as with with many other topics Bobert you are a complete and utter chump, completely lacking in imagination and logic, who cannot see further than the nose on his own face.

Subject: RE: BS: The Bailout
From: Bobert
Date: 04 Dec 08 - 06:47 PM

Yes, Rigs, Hoover did bail out the banks... That is all he bailed out... He told the folks who were being forclosed on to "eat cake"...

As for the advantages that ther Japanese car companies have over Detroit, a great part of the problem is that by setting up assmebly plants in 14(b) states they are taking advantage of our labor force... Kinda like sening jobs off-shore 'cept it's in Alabama or Mississippi where folks will work fir very little... If 14(b) were to go then things woukld be alot fairer... This isn't free trade within the US... It is manipulated trade... Nothin' free about it...

B~

Subject: RE: BS: The Bailout
From: Riginslinger
Date: 04 Dec 08 - 06:41 PM

All of the above having been said, I think this thread was started when the banks originally went to Washington begging for money, and that, as it turns out, really was a bailout.

Subject: RE: BS: The Bailout
From: Riginslinger
Date: 04 Dec 08 - 06:40 PM

Did Hoover bail out banks? I don't know, I'm just asking.

                   The biggest problem with the car companies, as the media continues to point out, are their legacy costs. The foreign companies locating in the south don't have those expenses.
                   If every auto coming out of Detroit has to generate %1,500.00 just to pay for past pensions and health care, there is no way they can build an inexpensive car and sell it at a profit. If they can't sell $40,000.00 SUV's they are facing a losing proposition.
                   It isn't that they can't compete in the "little car" market, it's that they can't compete and continue to shoulder the legacy costs.
                   If things continue to go the way they are, the foreign manufacurers in the south will probably have legacy costs like the Big Three have today, but they don't have them now, so the playing field is not level.

Subject: RE: BS: The Bailout
From: Bobert
Date: 04 Dec 08 - 06:21 PM

Here's my beef...

The banks come to D.C. in corporate jets and nothin' is said about it... The car companies do the same and it is the bihhest scandal since, ahhhh, Watergate???

Here's my beef, Part B...

The banks come to DC with their hats in hand and the governemnt fills the hat so full of big checks that the bank have to hire big strong guys just to carry the checks back to New York... Conditions??? None

The car guys come to DC with their hats in hand and the governemnt takes a big steamy dump in their hats, hands 'um back to 'um and istructs the car guys to pull the hats down over their ears....

Here's my beef, Part C...

The above scenerio is exactly what Herbert Hoover did, too...

B~

Subject: RE: BS: The Bailout
From: Big Mick
Date: 04 Dec 08 - 06:08 PM

I haven't read the entire thread, but based on the title and the last few posts, I think I will toss in.

First, what is being sought by the automakers is a loan, not a bailout. It comes with conditions. This is necessary for the obvious reasons of knowing where the money is going and whether we have a chance of having it paid back. It is also necessary based on watching the dismal failure of the current administration to successfully manage the money given to assist the financial industry. Paulson hands money out with no conditions, and in one case the financial institution took the money and invested it in starting a construction company in China. It boggles the mind the arrogance of these bastards.

It is a loan, It should be referred to as such. The perception of "bailout" is "handout". This is not the same thing

Big Mick .............. from Michigan.

Subject: RE: BS: The Bailout
From: Amos
Date: 04 Dec 08 - 05:48 PM

From Bloomberg:

Dec. 4 (Bloomberg) -- American International Group Inc., whose bonuses
and perks drew fire from lawmakers after the insurer accepted a
federal bailout, will make special retention payments that more than
double the salaries of some senior managers, according to a person
familiar with the matter.

Subject: RE: BS: The Bailout
From: Riginslinger
Date: 02 Dec 08 - 10:34 PM

Yes, I can't argue with that. I have an account at the Bank of America. I've heard rumors that they're expecting to be the next big bank to go to Washington with a tin cup.

Subject: RE: BS: The Bailout
From: Bobert
Date: 02 Dec 08 - 09:39 PM

Well, they certainly wouldn't have chosen the guy who proudly preclaimed that he didn't know jack about the economy... An' you can take that to the bank... That is, if yers ain't been closed down...

Subject: RE: BS: The Bailout
From: Riginslinger
Date: 02 Dec 08 - 10:29 AM

The whole thing is amazing to me. I wonder if the announcement had been earlier, if the Republicans would have fielded different candidates?

Subject: RE: BS: The Bailout
From: Bobert
Date: 01 Dec 08 - 07:26 PM

Yeah, Rigs... The funny thing is that the folks who now say it's official say the recession began a year ago??? What took them so long??? I guess the funnier thing is that those folks who own stock must have been on Mars for the last year or so because they obviously were clueless if it took an "officail announcement" to get that kinda market reaction???

B~

Subject: RE: BS: The Bailout
From: Riginslinger
Date: 01 Dec 08 - 07:17 PM

It's official - We're in a recession, and the Dow/Jones dropped 600 points to announce its arrival.

Subject: RE: BS: The Bailout
From: Riginslinger
Date: 01 Dec 08 - 08:19 AM

I wasn't actually referencing capital gains. It's the tax code. I think it was in that 1986 legislation where they made it so the only interest you could deduct of taxes--at least for an individual--was the interest on a home mortgage. Before that, you could deduct credit card interest, auto loans, and etc.
             The tax structure created a situation where if you weren't making house payments, you got killed in taxes. I think this created a system where older people who had paid their house off felt the need to trade up, and professional people who might otherwise rent, simply couldn't afford to.

             All I'm saying is, this added to the problem, but it took a long time to materialize.

Subject: RE: BS: The Bailout
From: Bobert
Date: 27 Nov 08 - 08:42 AM

Well, deferred caspital gains has been around a long time, Rigs... I mean, going back to at least the 70's... And this isn't a bad idea either because it allows people to have that flexibility to move up the ladder in terms of housing... The concept of a "starter home" is woven into that system... Ir's not a bad thing... It's when folks see their homes as a final payout that the problem come in... I'd like to see the "deferred capital gains" modified only so that if someone has gotten too old to maintain their home and wants to move into an assisted care that the capital gains can be put into something similar to a escrow account to be used to pay the monthly charges of that facility... Other than that, that part of the tax code actually makes sense...

Okay, Amos, I fully understand yer situation but you are speaking as someone who is over 50 and has been successfull in life in terms of making good financial decisions... I would expect you, like me, to not be interested in new credit cards or loans that weren't absolutely necessary... But folks like us were the targeted market for these loans... Yeah, you might have gotten a dew phone calls and some junk mail but that's only because the lenders did blanket marketing to find the right kinds of people who they could lure into the trap... Kinda like bass fishing... That old and wise large mouth bass ain't all that easy to catch but that guy with the rod and reel in his hand is casting anyway... That's the way advertsing is...

B~

Subject: RE: BS: The Bailout
From: Riginslinger
Date: 26 Nov 08 - 03:53 PM

It looks to me like a bigger game than that. The tax code was changed so that the only thing you can deduct anymore is interest on a mortgage. I took a job out of the country a number of years ago, and sold my house before I left. I got raped in taxes. I had to buy another house in order to stay afloat. It wasn't always that way.

Subject: RE: BS: The Bailout
From: Amos
Date: 26 Nov 08 - 03:51 PM

Well, I hear ya Bobez, and I am not denying that the promoters were crim to the max.

However, I got all the credit-card pitches, low-cost loan pitches, junk phone calls, junk mailings, popups and email spam that these creeps put out, and I always knew enough to cut them short and toss them out.

Not just because I'm jaded, but because I am used to calk'latin' where the bottom line goes, jes' like you are.

You didn't get sucked into this shit either.

All I am saying is, the guy who took the deal has to face the fact that he took it, in addition to everything else that was responsible. Without him signing, it would not have gone down.

Ya gotta own what you do, or you will never be free.


A

Subject: RE: BS: The Bailout
From: Bobert
Date: 26 Nov 08 - 03:30 PM

Yeah, beneath all the "Truth in Lending" laws and "Reg Zs" is the reality that the Fat Cats used some of the most bogus sales pitches in the world to get folks on the hook... Legality, when the deck is stacked with crooked law makers, isn't the issue... What is the issue is that the lenders knew that they were putting folks in houses that would be forclosed on down the road... But, like CEOs who raked in big dough for failures, these brokers werer paid upfront as if every payment was going to be made on time and the notes would go full term???

These assumptions were just that... Yeah, the CEO's company would either be bought up by a competitor or eventually make money... And all these mortgages would go full term... This is failed business logic... These folks knew it at the time but they looked around and everyone elese was being rewarded for failure so they just thought to themselves, "What the hey???" and frabbed as much dough as they saw others grabbin'...

Regulators became business partners and helped these crooks craft better strategies to confirm to the "laws"... And if ya' found a regulator who was doing his job you had the option of changing regulators??? The Office of Thrift Supervision (OTS) is once of the worst examples of what goes wrong when the inmates and the guards conspire against the warden...

So, I for one, will not buy into their story that it was the borrowers who created this nmess or even had any part in creating it... It was a trap the borrowers were lured into not only by the lenders but with the support of the federal governemnt... Shame on the Bush administration and shame on Wall Street...

Gitmo for them all!!!

B~

Subject: RE: BS: The Bailout
From: Barry Finn
Date: 26 Nov 08 - 01:35 PM

Wrong Amos. That strawberry picker from Mexico, he was seduced into his home by a government that claimed "more homeowners" as it's banner. So the guy went for a 3/4 million dollar home, it was great while he was living in it & now that it's being foreclosed on he'll go back to Mexico after living & riding high. We opened the door & asked him to walk right in. If I could go to England & move into a 3/4 million dollar home on the seaside I'd be there in a New York second, so what if they foreclose on me 7 yrs later. I'd pack my bags & come home. Half of the loans make were very creative & made only so the broker could get fast cash & the home owner didn't even realize that with all he lawyer speak that they were getting raked. What me care? Fair practice, regulation, industry norms all went out the window & a good bit of it was criminal too. The little guy is the last one to blame if he should be blamed at all. They/we were all sold the great American dream, they shouldn't have been sold a nightmare.

Barry

Subject: RE: BS: The Bailout
From: Amos
Date: 26 Nov 08 - 11:31 AM

I agree to a degree with your sentiments, Bobez; but part of being an adult in the economy is understanding value, pay, costs, and such things. You don't listen to slick salesmen when you understand those things, and if you don't know how things work, you should at least know enough to ask for independent expert advice on how these things work.

Anyone who signs a legal document is, by the nature of law, responsible for it legally, and he needs to be responsible for it personally as well. A child-like faithin advertisements and salespeople is not going to cut it any more than a blind trust in Gummint is. I am sure your WV SLide Rule has reached that conclusion manmy times.


A

Subject: RE: BS: The Bailout
From: Bobert
Date: 26 Nov 08 - 11:10 AM

Well, the one shmo who shouldn't get the blame is the poor guy who was being told at every turn that in order to be part of the "in crowd" he had to own his home... Bush made "Ownership society" a cneterpiece of administartion and there were his buddies ready put together mortgage products which would get folks into houses... These "products" were bogus from the get-go...

My thinking is that we don't close Gitmo but get those folks released to various countries, including the US, and start trials immediately for the Wall Street crooks and ship 'um all doen there for a few years... No torture, mind you... But serious jail time...

B~

Subject: RE: BS: The Bailout
From: Amos
Date: 26 Nov 08 - 09:23 AM

"This financial meltdown involved a broad national breakdown in personal responsibility, government regulation and financial ethics.

So many people were in on it: People who had no business buying a home, with nothing down and nothing to pay for two years; people who had no business pushing such mortgages, but made fortunes doing so; people who had no business bundling those loans into securities and selling them to third parties, as if they were AAA bonds, but made fortunes doing so; people who had no business rating those loans as AAA, but made a fortunes doing so; and people who had no business buying those bonds and putting them on their balance sheets so they could earn a little better yield, but made fortunes doing so.

Citigroup was involved in, and made money from, almost every link in that chain. And the bank's executives, including, sad to see, the former Treasury Secretary Robert Rubin, were clueless about the reckless financial instruments they were creating, or were so ensnared by the cronyism between the bank's risk managers and risk takers (and so bought off by their bonuses) that they had no interest in stopping it.

These are the people whom taxpayers bailed out on Monday to the tune of what could be more than $300 billion. We probably had no choice. Just letting Citigroup melt down could have been catastrophic. But when the government throws together a bailout that could end up being hundreds of billions of dollars in 48 hours, you can bet there will be unintended consequences — many, many, many.

Also check out Michael Lewis's superb essay, "The End of Wall Street's Boom," on Portfolio.com. Lewis, who first chronicled Wall Street's excesses in "Liar's Poker," profiles some of the decent people on Wall Street who tried to expose the credit binge — including Meredith Whitney, a little known banking analyst who declared, over a year ago, that "Citigroup had so mismanaged its affairs that it would need to slash its dividend or go bust," wrote Lewis.

"This woman wasn't saying that Wall Street bankers were corrupt," he added. "She was saying they were stupid. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of borrowed money, and imagine what they'd fetch in a fire sale... For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You're wrong. You're still not facing up to how badly you have mismanaged your business."

Lewis also tracked down Steve Eisman, the hedge fund investor who early on saw through the subprime mortgages and shorted the companies engaged in them, like Long Beach Financial, owned by Washington Mutual.

"Long Beach Financial," wrote Lewis, "was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking homeowners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, Calif., a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000."

Lewis continued: Eisman knew that subprime lenders could be disreputable. "What he underestimated was the total unabashed complicity of the upper class of American capitalism... 'We always asked the same question,' says Eisman. 'Where are the rating agencies in all of this? And I'd always get the same reaction. It was a smirk.' He called Standard & Poor's and asked what would happen to default rates if real estate prices fell. The man at S.& P. couldn't say; its model for home prices had no ability to accept a negative number. 'They were just assuming home prices would keep going up,' Eisman says."

That's how we got here — a near total breakdown of responsibility at every link in our financial chain, and now we either bail out the people who brought us here or risk a total systemic crash. These are the wages of our sins. I used to say our kids will pay dearly for this. But actually, it's our problem. For the next few years we're all going to be working harder for less money and fewer government services — if we're lucky. " (NYT)

Subject: RE: BS: The Bailout
From: CarolC
Date: 21 Oct 08 - 12:20 AM

'On the other side were consumer advocates, who said that bankruptcy abuse was minimal, and that people who file are generally forced into bankruptcy by financial problems stemming from job loss, medical conditions, or divorce...

...according to a March report by Credit Suisse, rising default and foreclosure rates are directly tied to the new bankruptcy rules.

The Credit Suisse report is unequivocal that the law has driven mortgage-foreclosure rates higher. "The stringent means test ... means more delinquent loans have to go into foreclosure directly rather than into bankruptcy," it reads. "Therefore, it is directly responsible for the rising foreclosure rate since the end of 2005."'

http://www.rcreader.com/index.php?option=com_content&task=view&id=12225&Itemid=42

Subject: RE: BS: The Bailout
From: Sawzaw
Date: 20 Oct 08 - 11:47 PM

Amos:

Got any facts and figures to back up your assertions or will you run away and hide from questions as usual?

Subject: RE: BS: The Bailout
From: Amos
Date: 20 Oct 08 - 11:27 PM

Sawz:

Your assertion that it was mortgages to poor people that caused the financial collapse is naive, gullible, shortsighted and inaccurate. The problem of credit default swaps, leveraged assets and the kind of rollup packaging of subprime loans between banks that are the real elements in play are far weightier by orders of magnitude than the individual mortgages that were defaulted on.

A

Subject: RE: BS: The Bailout
From: Q (Frank Staplin)
Date: 20 Oct 08 - 10:13 PM

More cash needed, Bernanke said today. Come on, boys and girls, sweeten the pot!

Subject: RE: BS: The Bailout
From: Donuel
Date: 20 Oct 08 - 04:31 PM

AIG got another multi billion dollar [13b] taste of free money today on top of the prior two bailouts that took nearly a third of the Congressionally approved bail out funds.

Subject: RE: BS: The Bailout
From: heric
Date: 20 Oct 08 - 04:28 PM

Financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn (£40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.

Subject: RE: BS: The Bailout
From: Sawzaw
Date: 20 Oct 08 - 02:36 PM

ACORN in 1991, by taking over the House Banking Committee room for two days to protest efforts to scale back the CRA. Obama represented ACORN in the Buycks-Roberson v. Citibank Fed. Sav. Bank, 1994 suit against redlining. Most significant of all, ACORN was the driving force behind a 1995 regulatory revision pushed through by the Clinton Administration that greatly expanded the CRA and laid the groundwork for the Fannie Mae, Freddie Mac borne financial crisis we now confront. Barack Obama was the attorney representing ACORN in this effort. With this new authority, ACORN used its subsidiary, ACORN Housing, to promote subprime loans more aggressively.

As a New York Post article describes it:

    A 1995 strengthening of the Community Reinvestment Act required banks to find ways to provide mortgages to their poorer communities. It also let community activists intervene at yearly bank reviews, shaking the banks down for large pots of money.


    Banks that got poor reviews were punished; some saw their merger plans frustrated; others faced direct legal challenges by the Justice Department.

Flexible lending programs expanded even though they had higher default rates than loans with traditional standards. On the Web, you can still find CRA loans available via ACORN with "100 percent financing . . . no credit scores . . . undocumented income . . . even if you don't report it on your tax returns." Credit counseling is required, of course.

Ironically, an enthusiastic Fannie Mae Foundation report singled out one paragon of nondiscriminatory lending, which worked with community activists and followed "the most flexible underwriting criteria permitted." That lender's $1 billion commitment to low-income loans in 1992 had grown to $80 billion by 1999 and $600 billion by early 2003.

The lender they were speaking of was Countrywide, which specialized in subprime lending and had a working relationship with ACORN.

Investor's Business Daily:

    The revisions also allowed for the first time the securitization of CRA-regulated loans containing subprime mortgages. The changes came as radical "housing rights" groups led by ACORN lobbied for such loans. ACORN at the time was represented by a young public-interest lawyer in Chicago by the name of Barack Obama.

Subject: RE: BS: The Bailout
From: Amos
Date: 20 Oct 08 - 07:37 AM

Woah!! Sharp tongues !! :D


A

Subject: RE: BS: The Bailout
From: CarolC
Date: 20 Oct 08 - 06:06 AM

'Every day (or close to it) until November 4, a series of writers and thinkers will discuss the election over instant messenger for nymag.com. Today, Rolling Stone's Matt Taibbi and National Review's Byron York argue over the headwinds facing McCain, what Phil Gramm had to do with the financial crisis, and the importance of credit default swaps.

M.T.: So how are you feeling about McCain's chances today?

B.Y.: I've just finished an article for National Review — the actual magazine — about the headwinds McCain faces. I was going to look at three, and then I started to list them. I stopped at ten. New Gallup numbers out today show that George W. Bush's job approval rating remains at 25 percent, while his disapproval rating has ticked up to 71 percent. How hard is it to succeed a two-term president of your own party who is at 25-71? We don't know because it's never been done.

M.T.: Yeah, that's a damned shame, too. I feel really badly for the guy. I suppose you think the media coverage is also a headwind?

B.Y.: Actually, I did not list media coverage among the headwinds. I listed the succeed-a-two-term-president problem, the right-track/wrong-track problem, the Republican-Democrat-enthusiasm gap problem, the Republican-Democrat-I.D.-gap problem, the financial meltdown, Iraq, Republican gloom on Capitol Hill, Obama's fund-raising advantage, and McCain's historical problems with the GOP base.

M.T.: But all of those "headwinds," or almost all of them, are the direct result of McCain having supported policies that are now unpopular. There is absolute justice in his facing a "headwind" from the financial meltdown, from the unpopularity of the Iraq war, and so on. How is that a "headwind"? That's just self-created unpopularity.

I mean, his onetime campaign co-chair and top economic adviser, Phil Gramm, basically created the credit-default-swap market back in 2000. Why shouldn't he get hammered on the financial crisis?

B.Y.: Did I suggest that headwinds are unfair? But on the financial meltdown in particular, if you're suggesting that that is a Republican creation, or even more specifically a McCain creation, I think you're on pretty shaky ground.

M.T.: You don't think the unregulated CDS market was a major factor in the current crisis? Were you watching when AIG almost went under? Were you watching the Lehman collapse?

B.Y.: I think that Fannie Mae and Freddie Mac were also major factors. And I believe that many of the problems in the mortgage area can be attributed to the confluence of Democratic and Republican priorities: the Democrats' desire to give mortgages to people, particularly minorities, who could not afford them, and the Republicans' desire to achieve an "ownership society," in part by giving mortgages to people who could not afford them. Again, I believe that if you are suggesting that the financial crisis is a Republican creation, or even more specifically a McCain creation, I think you're on pretty shaky ground.

M.T.: Oh, come on. Tell me you're not ashamed to put this gigantic international financial Krakatoa at the feet of a bunch of poor black people who missed their mortgage payments. The CDS market, this market for credit default swaps that was created in 2000 by Phil Gramm's Commodities Future Modernization Act, this is now a $62 trillion market, up from $900 billion in 2000. That's like five times the size of the holdings in the NYSE. And it's all speculation by Wall Street traders. It's a classic bubble/Ponzi scheme. The effort of people like you to pin this whole thing on minorities, when in fact this whole thing has been caused by greedy traders dealing in unregulated markets, is despicable.

B.Y.: I was struck by the recent Senate testimony of James Lockhart, who is head of the Federal Housing Finance Agency, about the sheer recklessness of Fannie in recent years. Despite "repeated warnings about credit risk," Lockhart testified, Fannie became more reckless in 2006 and 2007 than they had been in the scandal-ridden tenure of Franklin Raines (who departed in 2004). In 2005, Lockhart said, 14 percent of Fannie's new business was in risky loans. In the first half of 2007, it was 33 percent. So something terribly wrong was going on there, and it became a significant part of the present problem.

M.T.: What a surprise that you mention Franklin Raines. Do you even know how a CDS works? Can you explain your conception of how these derivatives work? Because I get the feeling you don't understand. Or do you actually think that it was a few tiny homeowner defaults that sank gigantic companies like AIG and Lehman and Bear Stearns? Explain to me how these default swaps work, I'm interested to hear.

Because what we're talking about here is the difference between one homeowner defaulting and forty, four hundred, four thousand traders betting back and forth on the viability of his loan. Which do you think has a bigger effect on the economy?

B.Y.: Are you suggesting that critics of Fannie and Freddie are talking about the default of a single homeowner?

M.T.: No. That is what you call a figure of speech. I'm saying that you're talking about individual homeowners defaulting. But these massive companies aren't going under because of individual homeowner defaults. They're going under because of the myriad derivatives trades that go on in connection with each piece of debt, whether it be a homeowner loan or a corporate bond. I'm still waiting to hear what your idea is of how these trades work. I'm guessing you've never even heard of them.

I mean really. You honestly think a company like AIG tanks because a bunch of minorities couldn't pay off their mortgages?

B.Y.: When you refer to "Phil Gramm's Commodities Future Modernization Act," are you referring to S.3283, co-sponsored by Gramm, along with Senators Tom Harkin and Tim Johnson?

M.T.: In point of fact I'm talking about the 262-page amendment Gramm tacked on to that bill that deregulated the trade of credit default swaps.

Tick tick tick. Hilarious sitting here while you frantically search the Internet to learn about the cause of the financial crisis — in the middle of a live chat interview.

B.Y.: Look, you can keep trying to make this a specifically partisan and specifically Gramm-McCain thing, but it simply isn't. We've gone on for fifteen minutes longer than scheduled, and that's enough. Thanks.

M.T.: Thanks. Note, folks, that the esteemed representative of the New Republic has no idea what the hell a credit default swap is. But he sure knows what a minority homeowner looks like.

B.Y.: It's National Review.'

http://nymag.com/daily/intel/2008/10/matt_taibbi_and_byron_york_but.html

Subject: RE: BS: The Bailout
From: CarolC
Date: 19 Oct 08 - 01:19 PM

ACORN actually has a program for helping low income people get home loans. And their program includes providing financial counseling to those they help. And for this reason, ACORN's clients have a much lower rate of default than the rest of the mortgage buying public, percentage wise. The figures were given in one of the videos I posted earlier in the thread.

So any suggestion that ACORN is responsible for the mortgage crisis is simply a lie.

Subject: RE: BS: The Bailout
From: Stringsinger
Date: 19 Oct 08 - 12:47 PM

The idea that ACORN was encouraging poor people to buy homes is ridiculous. ACORN's only concern is that it's seeking representation from disenfranchised voters who represent the less well-heeled citizens in the voting booth.

It's simple. Republicans don't want poor people to vote. Democrats do.

Republicans want to suppress the vote. Democrats want everyone to vote.

If you don't believe me, just check out what Paul Weyrich has to say derisively about
"goo-goo government. He doesn't want everyone to vote.

In short, Republicans don't want democracy. Democrats do.

Subject: RE: BS: The Bailout
From: Sawzaw
Date: 19 Oct 08 - 12:37 PM

Obama > ACORN > CRA > Pressure on banks > Fannie&Freddie > Bailout

    CRA was meant to encourage banks to make loans to high-risk borrowers, often minorities living in unstable neighborhoods. That has provided an opening to radical groups like ACORN (the Association of Community Organizations for Reform Now) to abuse the law by forcing banks to make hundreds of millions of dollars in "subprime" loans to often uncreditworthy poor and minority customers.

    Any bank that wants to expand or merge with another has to show it has complied with CRA - and approval can be held up by complaints filed by groups like ACORN.

    In fact, intimidation tactics, public charges of racism and threats to use CRA to block business expansion have enabled ACORN to extract hundreds of millions of dollars in loans and contributions from America’s financial institutions.

    Banks already overexposed by these shaky loans were pushed still further in the wrong direction when government-sponsored Fannie Mae and Freddie Mac began buying up their bad loans and offering them for sale on world markets.

    Fannie and Freddie acted in response to Clinton administration pressure to boost homeownership rates among minorities and the poor. However compassionate the motive, the result of this systematic disregard for normal credit standards has been financial disaster.

Subject: RE: BS: The Bailout
From: Sawzaw
Date: 19 Oct 08 - 12:32 PM

Multi screen cut and paste violator CC: "They must be terrorists, so I guess we can't trust them." When they support Obama.

2001
April: The Administration's FY02 budget declares that the size of Fannie Mae and Freddie Mac is "a potential problem," because "financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity."
2002
May: The President calls for the disclosure and corporate governance principles contained in his 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac.
2003
September: Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend that Congress enact "legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises" and set prudent and appropriate minimum capital adequacy requirements.
November: Council of the Economic Advisers (CEA) Chairman Greg Mankiw explains that any "legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk." To reduce the potential for systemic instability, the regulator would have "broad authority to set both risk-based and minimum capital standards" and "receivership powers necessary to wind down the affairs of a troubled GSE."
2004
February: The President's FY05 Budget again highlights the risk posed by the explosive growth of the GSEs and their low levels of required capital, and called for creation of a new, world-class regulator: "The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore�should be replaced with a new strengthened regulator."
February: CEA Chairman Mankiw cautions Congress to "not take [the financial market's] strength for granted." Again, the call from the Administration was to reduce this risk by "ensuring that the housing GSEs are overseen by an effective regulator."
June: Deputy Secretary of Treasury Samuel Bodman spotlights the risk posed by the GSEs and called for reform, saying "We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System."
2005
April: Treasury Secretary John Snow repeats his call for GSE reform, saying "Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America� Half-measures will only exacerbate the risks to our financial system."
2007
August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying "first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options."
December: President Bush again warns Congress of the need to pass legislation reforming GSEs, saying "These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I've called on Congress to pass legislation that strengthens independent regulation of the GSEs � and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon."

Subject: RE: BS: The Bailout
From: CarolC
Date: 19 Oct 08 - 09:48 AM

http://news.yahoo.com/s/nm/20081018/ts_nm/us_fbi_resources_1

NEW YORK (Reuters) – The FBI, after years spent focusing on national security, is struggling to find agents and resources to investigate wrongdoing tied to the country's economic crisis, The New York Times reported in Sunday editions.

Citing current and former FBI officials, the Times said cutbacks in its criminal investigative workforce following the September 11 attacks left the FBI weaker in areas like white collar crime.

The cutbacks were the result of a shift in focus to terrorism and intelligence matters. More than 1,800 agents, or nearly one-third of all those in criminal programs, moved into those areas, the Times said.

"Clearly, we have felt the effects of moving resources from criminal investigations to national security," the newspaper quoted FBI Assistant Director John Miller as saying. "In white collar crime, while we initiated fewer cases over all, we targeted the areas where we could have the biggest impact. We focused on multimillion-dollar corporate fraud, where we could make arrests but also recover money for the fraud victims."

While the FBI plans to double the number of agents working on financial crimes, people within and outside the Justice Department question where the agents will come from and whether that will suffice, the Times said.

Records and interviews show that FBI officials have warned of a looming mortgage threat since 2004, and asked the Bush administration to fund such nonterrorism investigations, but the requests were denied and no new agents were approved for financial criminal investigation work, the newspaper said.

Internal FBI data shows the cutbacks were especially sharp in areas of white collar crime like mortgage fraud, with more than 600 agents lost, or more than one-third of 2001 levels.

According to Justice Department data, fraud prosecutions directed at financial institutions dropped by nearly one-half from 2000 to 2007, insurance fraud cases fell 75 percent and securities fraud decreased by 17 percent, the Times said.

"The administration's top priority since the 9/11 attacks has been counterterrorism," Justice Department spokesman Peter Carr told the paper. "In part, that's reflected by a significant investment of resources at the FBI to answer the call from Congress and the American public to become a domestic intelligence agency, in addition to a law enforcement agency."

According to the Times, several former law enforcement officials said that senior administration officials, notably those at the White House and the Treasury Department, made clear that they were concerned the Justice Department and the FBI were taking an anti-business attitude that could inhibit corporate risk-taking.

One former official said some in the administration characterized aggressive corporate prosecutions as "over-deterrence."

Subject: RE: BS: The Bailout
From: CarolC
Date: 18 Oct 08 - 11:40 AM

On the subject of Chuck Hagel's bill (that McCain co-sponsored) - from the American Enterprise Institute...


H.R. 1461: A GSE "Reform" That Is Worse than Current Law

'HR 1461--a bill that was supposed to create a "world class regulator"--is in fact a world class failure. Not only does it fail to improve significantly upon the regulatory authority of the Office of Federal Housing Enterprise Oversight (OFHEO), but it actually increases the opportunities for Fannie and Freddie to exploit their subsidies in order to expand into other areas of residential finance. While the bill makes some modest improvements to the weak regulatory structure of OFHEO today, these improvements do not bring the authority of the new regulator of Fannie Mae and Freddie Mac to the level currently exercised by federal bank regulators. Moreover, the deficiencies of the bill so far outweigh its modest regulatory improvements that the taxpayers and the economy generally would be better off with current law. Under these circumstances, unless there is a reasonable chance that the bill can be strengthened on the House floor, in the Senate, or in conference, it does not deserve to proceed further in the legislative process.'

http://www.aei.org/publications/pubID.22705/pub_detail.asp


So had this bill become law, John McCain would have actually been responsible for weakening regulation of Fannie Mae and Freddie Mac, overall, rather than strengthening it.

Subject: RE: BS: The Bailout
From: CarolC
Date: 18 Oct 08 - 11:26 AM

'Let's be honest. Fannie and Freddie, which didn't make subprime loans but did buy subprime loans made by others, were part of the problem. Poor Congressional oversight was part of the problem. Banks that sought to meet CRA requirements by indiscriminately doling out loans to minorities may have been part of the problem. But none of these issues is the cause of the problem. Not by a long shot. From the beginning, subprime has been a symptom, not a cause. And the notion that the Community Reinvestment Act is somehow responsible for poor lending decisions is absurd.

Here's why.

The Community Reinvestment Act applies to depository banks. But many of the institutions that spurred the massive growth of the subprime market weren't regulated banks. They were outfits such as Argent and American Home Mortgage, which were generally not regulated by the Federal Reserve or other entities that monitored compliance with CRA. These institutions worked hand in glove with Bear Stearns and Lehman Brothers, entities to which the CRA likewise didn't apply. There's much more. As Barry Ritholtz notes in this fine rant, the CRA didn't force mortgage companies to offer loans for no money down, or to throw underwriting standards out the window, or to encourage mortgage brokers to aggressively seek out new markets. Nor did the CRA force the credit-rating agencies to slap high-grade ratings on packages of subprime debt.

Second, many of the biggest flameouts in real estate have had nothing to do with subprime lending. WCI Communities, builder of highly amenitized condos in Florida (no subprime purchasers welcome there), filed for bankruptcy in August. Very few of the tens of thousands of now-surplus condominiums in Miami were conceived to be marketed to subprime borrowers, or minorities—unless you count rich Venezuelans and Colombians as minorities. The multiyear plague that has been documented in brilliant detail at IrvineHousingBlog is playing out in one of the least-subprime housing markets in the nation.

Third, lending money to poor people and minorities isn't inherently risky. There's plenty of evidence that in fact it's not that risky at all. That's what we've learned from several decades of microlending programs, at home and abroad, with their very high repayment rates. And as the New York Times recently reported, Nehemiah Homes, a long-running initiative to build homes and sell them to the working poor in subprime areas of New York's outer boroughs, has a repayment rate that lenders in Greenwich, Conn., would envy. In 27 years, there have been fewer than 10 defaults on the project's 3,900 homes. That's a rate of 0.25 percent.

On the other hand, lending money recklessly to obscenely rich white guys, such as Richard Fuld of Lehman Bros. or Jimmy Cayne of Bear Stearns, can be really risky. In fact, it's even more risky, since they have a lot more borrowing capacity. And here, again, it's difficult to imagine how Jimmy Carter could be responsible for the supremely poor decision-making seen in the financial system. I await the Krauthammer column in which he points out the specific provision of the Community Reinvestment Act that forced Bear Stearns to run with an absurd leverage ratio of 33 to 1, which instructed Bear Stearns hedge-fund managers to blow up hundreds of millions of their clients' money, and that required its septuagenarian CEO to play bridge while his company ran into trouble. Perhaps Neil Cavuto knows which CRA clause required Lehman Bros. to borrow hundreds of billions of dollars in short-term debt in the capital markets and then buy tens of billions of dollars of commercial real estate at the top of the market. I can't find it. Did AIG plunge into the credit-default-swaps business with abandon because Association of Community Organizations for Reform Now members picketed its offices? Please. How about the hundreds of billions of dollars of leveraged loans—loans banks committed to private-equity firms that wanted to conduct leveraged buyouts of retailers, restaurant companies, and industrial firms? Many of those are going bad now, too. Is that Bill Clinton's fault?

Look: There was a culture of stupid, reckless lending, of which Fannie Mae and Freddie Mac and the subprime lenders were an integral part. But the dumb-lending virus originated in Greenwich, Conn., midtown Manhattan, and Southern California, not Eastchester, Brownsville, and Washington, D.C. Investment banks created a demand for subprime loans because they saw it as a new asset class that they could dominate. They made subprime loans for the same reason they made other loans: They could get paid for making the loans, for turning them into securities, and for trading them—frequently using borrowed capital.

At Monday's hearing, Rep. John Mica, R-Fla., gamely tried to pin Lehman's demise on Fannie and Freddie. After comparing Lehman's small political contributions with Fannie and Freddie's much larger ones, Mica asked Fuld what role Fannie and Freddie's failure played in Lehman's demise. Fuld's response: "De minimis."

Lending money to poor people doesn't make you poor. Lending money poorly to rich people does.'

http://www.slate.com/id/2201641

Subject: RE: BS: The Bailout
From: CarolC
Date: 18 Oct 08 - 11:15 AM

CRA May Deter Risky Mortgage Lending

On January 7, 2008, Traiger and Hinkley, LLP, a law firm that specializes in fair lending counsel and Community Reinvestment Act (CRA) compliance, released a report titled The Community Reinvestment Act: A Welcome Anomaly in the Foreclosure Crisis. The study concludes that CRA regulations have meant that banks that must comply with th eregulations and originate loans in their local communities, or more formally their CRA assessment areas, are substantially less likely than other lenders to make the types of loans that have contributed to the foreclosure crisis.


http://blog.seattlepi.nwsource.com/northwestlaw/archives/149530.asp?from=blog_last3

'S. 190; McCain "Supported" it After it was Dead

People vehemently say that McCain was a champion of regulation despite his voting record and point to S. 109, a bill introduced in 2005. The bill was introduced by Charles Hagel on the Senate floor and several months later, after it had gone to the Senate Committee on Banking, Housing Urban Affairs, McCain announced a in brief speech in the Senate that he was a co-sponsor of the bill.

People argue that it was over the valiant efforts of Republicans, particularly McCain, that the bill was defeated by the Democrats. The first thing that struck me as odd about this is that McCain stood up for the bill only after it had been in committee for several months and no action had been taken. He then said absolutely nothing about the bill.

Could the Democrats have blocked the bill in committee? This seems like an odd thing to say of the minority party. The Committee on Banking, Housing and Urban Affairs was chaired by a Republican and Republicans held a clear majority of the seats on the committee.

I found the committee's rules of procedure for the year 2005 and the Republican chairman alone, without any vote could have launched an investigation into the financial trouble of the day that the bill was supposed to address. There was no investigation.

According to the rules the Democrats were powerless to block anything coming out of the committee to be voted on by the Senate but there was no such vote. All it took for the bill to get out of committee was a majority, which was held by Republicans. The bill was amended somehow and reported out of the committee but was never voted on.'


http://mpandgs.blogspot.com/2008/09/on-john-mccains-warning-about-fannie.html

John McCain's 2005 "Warning" About Fannie, Freddie & Dems "Blocking" Regulation
A bit late passing this along, but John McCain's claim that he issued a warning against the excesses of Fannie Mae and Freddie Mac during the 2005-06 legislative year was given a "barely true" by Politifact. On 25 May, 2006, Senator McCain signed on as a co-sponsor to Chuck Hagel's effort to overhaul Fannie Mae and Freddie Mac (which Senator Hagel intoduced in January, 2005) following the publication of "a 340-page report from the Office of Federal Housing Enterprise Oversight."* However, as Politifact points out, his attempts to depict those efforts as some sort of early warning that could have lessened the current credit crisis just don't wash. All McCain was talking about then was the potential fallout of accounting troubles in Fannie Mae and Freddie Mac. He didn't say anything about a freewheeling climate among creditors that had major financial institutions becoming badly leveraged on bad loans.

Additionally, those rumors that Democrats alone blocked GOP proposal, S.190, to regulate Fannie Mae and Freddie Mac? Questionable claims, for the bill never got out of committee:

    Last Action [July 28, 2005]: Committee on Banking, Housing, and Urban Affairs. Ordered to be reported with an amendment in the nature of a substitute favorably.
    Status: Dead

So the bill was never brought to a full Senate vote. Recall that the Republicans were the majority in 2005-06, and the Committee on Banking, Housing, and Urban Affairs consisted of 11 Republicans and 9 Democrats (for a full listing of the members of the 2005-06 Committee on Banking, Housing, and Urban Affairs, see this entry at Sourcewatch). In other words, the proposal could have been voted out of committee and brought to the Senate floor had the GOP members had supported it.

* Notably, Senator Hagel reintroduced S.190 in 2007 as S.1110: Senator McCain has not publicly supported the "Federal Housing Enterprise Regulatory Reform Act of 2007," which remains pending.'


http://www.salon.com/tech/htww/2008/10/07/a_fannie_freddie_debate_primer/print.html

'In 2005, bills designed to increase regulation on Fannie and Freddie were introduced in both the House and the Senate -- both controlled at the time by Republican majorities. The House actually managed to pass its version of the bill with a large 330-90 majority. The Senate? Its bill, although similar to the House's version, died in committee.

The New York Times reported on Oct. 6 that Democrats vigorously opposed the Senate bill, calling it "fundamentally flawed," but I haven't found, so far, any specific Obama reference to Fannie and Freddie at the time. Still, let the record show that the Republican Party, which controlled the White House, the Senate and the House of Representatives in 2005, was unable to pass legislation reforming how Fannie and Freddie were regulated.

Mike Oxley, the House Republican who chaired the House Financial Services Committee in 2005, blamed the White House for sabotaging his bill.

The Financial Times:

    The House bill, the 2005 Federal Housing Finance Reform Act, would have created a stronger regulator with new powers to increase capital at Fannie and Freddie, to limit their portfolios and to deal with the possibility of receivership.

    Mr Oxley reached out to Barney Frank, then the ranking Democrat on the committee and now its chairman, to secure support on the other side of the aisle. But after winning bipartisan support in the House, where the bill passed by 331 to 90 votes, the legislation lacked a champion in the Senate and faced hostility from the Bush administration.

    Adamant that the only solution to the problems posed by Fannie and Freddie was their privatization, the White House attacked the bill. Mr Greenspan also weighed in, saying that the House legislation was worse than no bill at all.'

Subject: RE: BS: The Bailout
From: CarolC
Date: 18 Oct 08 - 10:19 AM

Study Finds CRA Banks Less Likely to Issue Subprime Loans

A recent study by Traiger and Hinkley LLP of 2006 mortgage loans in the nation's 15 most populous metropolitan statistical areas has found that banks that are subject to the Community Reinvestment Act were two-thirds less likely to originate high cost mortgage loans for the purchase of an owner-occupied home than other types of lenders and were 58% less likely to make high cost loans to low and moderate income borrowers.

In the Boston MSA the difference was even greater: only 4% of loans originated by CRA lenders to low and moderate income buyers were high cost, compared to 18.8% of loans originated by other lenders. The study noted that in addition to offering better terms on average (including lower average interest rates on high cost loans), CRA lenders denied a lower percentage of loan applications overall than other lenders. It noted that these differences may be due to the fact that CRA lenders are more than twice as likely to retain loans they originate in their own portfolio. For example, CRA lenders retained 42% of their loans to low and moderate income blrrowers, while other lenders retained less than 19%.

The study also found that the presence of CRA bank branches is strongly negatively correlated with foreclosure rates (the more branches in an area, the lower the foreclosure rate). The authors theorize that the presence of branches makes it easier for borrowers to apply for conventional loans and that the CRA mandate also encourages outreach and good underwriting.

http://www.traigerlaw.com/news/study_finds_cra_banks_less_likely_to_issue_subprime_loans_chpa_02-07-08.pdf

Subject: RE: BS: The Bailout
From: CarolC
Date: 18 Oct 08 - 10:08 AM

LOL

That factcheck.org site is run by the Annenburg foundation. Those are the same people who pal around with Bill Ayers and put him on that education board. They must be terrorists, so I guess we can't trust them.

Subject: RE: BS: The Bailout
From: The Fooles Troupe
Date: 18 Oct 08 - 09:28 AM

4 Corners

Look at Video on Demand - Recent Programs - "Mortgage Meltdown"

Mortgage Meltdown

Reporter: Paul Barry

Broadcast: 13/10/2008

"The crisis is just beginning" ... "We're nowhere near the end."... "I don't think anybody anywhere in the world is going to be immune." – from 'Mortgage Meltdown', Four Corners September 17, 2007.

At the time, the words from this Four Corners program may have seemed like another all-too-gloomy, glass-half-empty prediction – but just over a year later they've turned out to be on the money.

With stocks in a tailspin, credit crunched, currencies ricocheting, and confidence ebbing in the face of a looming international recession, no one knows when or how this crisis will end. Where did it start? That's another matter.

Much of the current panic stems from by America's so-called sub-prime lending crisis that began surfacing in the USA in the middle of last year. It was the gluttonous climax to a big credit binge. Banks and brokers gave risky, often high interest, loans to unready borrowers who began defaulting on a massive scale. In August last year, Paul Barry went to America's mortgage belt to report on the emerging sub-prime issue for Four Corners. He found streets lined with empty houses, dying gardens and demolition notices. One real estate agent described to him the criteria for getting a loan: "Ha, breathe - fog on a mirror!"

Barry explained how, in the 21st century's interconnected capital markets, the sub-prime risk might turn into a game of Russian roulette, with no one really knowing who's holding the bad debt. His report warned of a possible US recession, pointing out that $900 billion of sub-prime loans would soon re-set to higher interest rates with inevitably more defaults.

A year on, the USA and many other countries are reeling. As Australians worry about how deeply they will be affected and ponder the lessons that might be drawn, Four Corners replays Paul Barry's "Mortgage Meltdown", with a new introduction, as a timely reflection on the makings of this unfolding crisis. Four Corners – at 8.30 pm Monday 13 October and about 11.35 pm Tuesday 14 October on ABC1; also at 8 am Tuesday on ABC2.

Original Mortgage Meltdown program page

View the original Mortgage Meltdown program page which includes extended interviews and additional resources.
Video on Demand

You can now watch Paul Barry's report "Mortgage Meltdown", plus his 1994 report "Money Madness", online.
Program Transcript

Read the program transcript from Paul Barry's "Mortgage Meltdown", broadcast 13 October 2008.

Further Resources

View an updated list of articles, reports and multimedia, related to Paul Barry's Mortgage Meltdown. First Broadcast 17 September 2007.

Subject: RE: BS: The Bailout
From: The Fooles Troupe
Date: 18 Oct 08 - 09:20 AM

"the bad mortgages are on houses that will eventually appreciate in value and be sold at a profit"

Ah - what everyone forgets is that most of those houses are vacant - and as soon as they are vacant, they get stripped of copper, hot water heaters, air conditioners, siding, trashed, then eventually a demolition order - most of them are in fact totally worthless. Indeed, they will cost money to demolish and rebuild... :-)

I'm not making this up, you know... we just had a repeat the other night of an Aussie ABC program that dealt with this...

Subject: RE: BS: The Bailout
From: Sawzaw
Date: 18 Oct 08 - 01:40 AM

Fannie Mae's Patron Saint

Taxpayers are now on the hook for as much as $200 billion to rescue Fannie Mae and Freddie Mac, and if you want to know why, look no further than the rapid response to this bailout from House baron Barney Frank. Asked about Treasury's modest bailout condition that the companies reduce the size of their high-risk mortgage-backed securities (MBS) portfolios starting in 2010, Mr. Frank was quoted on Monday as saying, "Good luck on that," and that it would never happen.
    There you have the Fannie Mae problem in profile. Mr. Frank wants you to pick up the tab for its failures, while he still vows to block a reform that might prevent the same disaster from happening again.
    At least the Massachusetts Democrat is consistent. His record is close to perfect as a stalwart opponent of reforming the two companies, going back more than a decade. The first concerted push to rein in Fan and Fred in Congress came as far back as 1992, and Mr. Frank was right there, standing athwart. But things really picked up this decade, and Barney was there at every turn.
    In 2000, then-Rep. Richard Baker proposed a bill to reform Fannie and Freddie's oversight. Mr. Frank dismissed the idea, saying concerns about the two were "overblown" and that there was "no federal liability there whatsoever."
    Two years later, Mr. Frank was at it again. "I do not regard Fannie Mae and Freddie Mac as problems," he said in response to another reform push. And then: "I regard them as great assets." Great or not, we'll give Mr. Frank this: Their assets are now Uncle Sam's assets, even if those come along with $5.4 trillion in debt and other liabilities.
    Again in June 2003, the favorite of the Beltway press corps assured the public that "there is no federal guarantee" of Fan and Fred obligations.
    A month later, Freddie Mac's multibillion-dollar accounting scandal broke into the open. But Mr. Frank was sanguine. "I do not think we are facing any kind of a crisis," he said at the time.
    Three months later he repeated the claim that Fannie and Freddie posed no "threat to the Treasury." Even suggesting that heresy, he added, could become "a self-fulfilling prophecy."
    In April 2004, Fannie announced a multibillion-dollar financial "misstatement" of its own. Mr. Frank was back for the defense. Fannie and Freddie posed no risk to taxpayers, he said, adding that "I think Wall Street will get over it" if the two collapsed. Yes, they're certainly "over it" on the Street now that Uncle Sam is guaranteeing their Fannie paper, and even Fannie's subordinated debt.
    By early 2007, Mr. Frank was in charge of the House Financial Services Committee, arguing that he had long favored some kind of reform. "What blocked it [reform] last year," Mr. Frank said then, "was the insistence of some economic conservative fundamentalists in the Bush Administration who, to be honest, don't think there should be a Fannie Mae or a Freddie Mac." What really blocked it was Mr. Frank's insistence that any reform be watered down and not include any reduction in their MBS holdings.
    In January of last year, Mr. Frank also noted one reason he liked Fannie and Freddie so much: They were subject to his political direction. Contrasting Fan and Fred with private-sector mortgage financers, he noted, "I can ask Fannie Mae and Freddie Mac to show forbearance" in a housing crisis. That is to say, because Fannie and Freddie are political creatures, Mr. Frank believed they would do his bidding.
    And this is exactly what Mr. Frank attempted to prove when the housing market started to go south. He encouraged the companies to guarantee more "affordable" mortgages, thus abetting their disastrous plunge into subprime and Alt-A loans. He also pushed for, and got, an increase in the conforming-loan limits to allow Fan and Fred to securitize and guarantee larger mortgages. And he pressured regulators to ease up on their capital requirements -- which now means taxpayers will have to make up that capital shortfall.
    But the biggest payoff for Mr. Frank is the "affordable housing" trust fund he managed to push through as one political price for the recent Fannie reform bill. This fund siphons off a portion of Fannie and Freddie profits -- as much as $500 million a year each -- to a fund that politicians can then disburse to their favorite special interests.
    This is also why Mr. Frank won't tolerate cutting the companies' MBS portfolios. He knows those portfolios (bought with debt borrowed at taxpayer-subsidized rates) were a main source of Fannie's profits before the housing crash, and he figures that once this crisis passes they can do it again. And this time, his fund will get part of the loot.
    Mr. Frank has had many accomplices from both parties in his protection of Fan and Fred. But he was and is among the most vociferous and powerful. In any other area of American life, this track record would get a man run out of town. In Washington, he's hailed as a sage whose history of willful error will be forgotten faster than taxpayers can write a check for $200 billion.

http://online.wsj.com/article/SB122091796187012529.html?mod=googlenews_wsj

Subject: RE: BS: The Bailout
From: Sawzaw
Date: 18 Oct 08 - 01:30 AM

Blame the Republicans!

The MoveOn.org Political Action ad blames a banking deregulation bill sponsored by former Sen. Phil Gramm, a friend and one-time adviser to McCain's campaign. It claims the bill "stripped safeguards that would have protected us."
 
That claim is bunk. When we contacted MoveOn.org spokesman Trevor Fitzgibbons to ask just what "safeguards" the ad was talking about, he came up with not one single example. The only support offered for the ad's claim is one line in one newspaper article that reported the bill "is now being blamed" for the crisis, without saying who is doing the blaming or on what grounds.

Bill Clinton (Sept. 24): Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch by Bank of America, which was much smoother than it would have been if I hadn't signed that bill. ...You know, Phil Gramm and I disagreed on a lot of things, but he can't possibly be wrong about everything. On the Glass-Steagall thing, like I said, if you could demonstrate to me that it was a mistake, I'd be glad to look at the evidence. But I can't blame [the Republicans]. This wasn't something they forced me into.

No, Blame the Democrats!

Democrats opposed the Federal Housing Enterprise Regulatory Reform Act of 2005, which would have established a single, independent regulatory body with jurisdiction over Fannie and Freddie – a move that the Government Accountability Office had recommended in a 2004 report. Current House Banking Committee chairman Rep. Barney Frank of Massachusetts opposed legislation to reorganize oversight in 2000 (when Clinton was still president), 2003 and 2004, saying of the 2000 legislation that concern about Fannie and Freddie was "overblown." Just last summer, Senate Banking Committee chairman Chris Dodd called a Bush proposal for an independent agency to regulate the two entities "ill-advised."

The Real Deal

So who is to blame? There's plenty of blame to go around, and it doesn't fasten only on one party or even mainly on what Washington did or didn't do. As The Economist magazine noted recently, the problem is one of "layered irresponsibility ... with hard-working homeowners and billionaire villains each playing a role." Here's a partial list of those alleged to be at fault:

    * The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.
    * Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.
    * Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.
    * Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.
    * The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.
    * Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.
    * Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.
    * Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.
    * The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.
    * An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.
    * Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.

http://www.factcheck.org/elections-2008/who_caused_the_economic_crisis.html

Subject: RE: BS: The Bailout
From: Bobert
Date: 15 Oct 08 - 06:59 PM

Good song, Reggie... Yeah, from lookin' at the reaction of the folks you was playin' to seems that lotta folks ain't got it yet and...

...what pisses me off is that after $700B seems that the Fat Cat whining crybabies don't either as another 700 point drop at Wall Street just today??? Like what's that all about??? Hey, I'd tell the sumabiches, "April Fools, a little early", an' take that dough and buy every friggin' mortgage out where someone is gonna get foreclosed and redo it 6%/30 year fixed and put the interest, afetr paying back the $700B into Social Security...

Screw Wall Street... It represents only 18% of Americans... Oh yeah, screw the horse they rode in on, too...

Bobert (bluesman, alias Sidewalk Bob)

Subject: RE: BS: The Bailout
From: Stringsinger
Date: 15 Oct 08 - 06:59 PM

One of the notions that has been proposed is that the bad mortgages are on houses that
will eventually appreciate in value and be sold at a profit for the benefit of the taxpayers.

That's an assumption however. It could be that this could take many years of suffering by
those being evicted and the houses do depreciate whereas the land value might appreciate in years. That's still a crap shoot.

The Bailout should have been exclusively to capitalize the banks and re-negotiate the bad loans to keep people in their homes. It should have had a provision to force CEO's to give back the money they stole to the taxpayers.

The interesting development will be when the stock market tanks and Wall Street is de-horned, the credit freezes up and people will have to restyle a workable form of
business to suit the new financial environment that the next Depression will bring.

Subject: RE: BS: The Bailout
From: Sawzaw
Date: 15 Oct 08 - 06:27 PM

Andrew Cuomo, then Bill Clinton's HUD Secretary, held
a press conference on April 6, 1998, explaining a settlement reached
with a major bank on a lending discrimination case based on
the CRA. Cuomo brags about how "this administration will enforce the
law", but he also makes a very telling admission about the $2.1
billion in subprime loans that the bank would offer as a result of the
settlement.
He then admits that there would be "higher risk", and a higher default
rate, on the loans the Clinton administration forced this bank to
make. He also admits that the action forced this bank to lower its
standards on loan qualification as a remedy to supposed discriminatory
action in the past by relying on income and equity requirements. Cuomo
describes everything wrong with subprime lending and reveals the
government's efforts to distort private lending markets to force
"fairness" in outcomes.

Watch The Video

Subject: RE: BS: The Bailout
From: Sawzaw
Date: 15 Oct 08 - 01:02 AM

A bill barring derivatives from being regulated as futures contracts passed the House in October 19 2000, by a vote of 377-4.

Did those mean old Republicans held a gun to the Democrats head again or did they just dangle some pork?

Subject: RE: BS: The Bailout
From: Sawzaw
Date: 15 Oct 08 - 12:44 AM

"if anyone is trying to suggest (and it appears that some are) that Fannie and Freddie are the cause of the economic meltdown we are currently experiencing, they are being dishonest."

In 2005, Congress rejected a Republican-sponsored bill aimed at curbing risky investments by mortgage giants Fannie Mae and Freddie Mac, thanks to resistance from mostly Democrats. It was the latest in a string of unsuccessful attempts to rein in the two agencies. In this case, Congress ignored Greenspan's warning about the financial risks Fannie and Freddie were taking on.
    The agencies were designed to expand homeownership by injecting money into the home mortgage market and encouraging banks to lend more. They buy loans from banks and guarantee them, holding some in their portfolios and selling others as mortgage-backed securities.
    With implicit government backing, Fannie and Freddie have been able to borrow money at below-market rates. In recent years, the companies borrowed to buy billions' worth of complex mortgage-backed securities. The investments earned big returns. Fannie and Freddie's stock soared. Their executives were paid tens of millions of dollars.
    Republicans sought to reduce the size of the companies' portfolios, arguing they were too risky.

Then the housing bubble burst. Fannie and Freddie didn't cause the financial meltdown, but they fueled it by becoming one of the biggest purchasers of toxic mortgage products, says Harvard economist Kenneth Rogoff.
    "There was tremendous coddling of Fannie and Freddie in the face of a lot of evidence that they really weren't helping homeowners all that much," Rogoff says. "I think it was very, very clear what was coming, and that they were a huge, huge risk to the American financial system. … It really was criminal neglect."
    Fannie and Freddie spent $175 million on lobbying in the last decade, according to the Center for Responsive Politics. The companies' employees and PACs gave nearly $5 million in contributions since 1989, by the center's count.
    Until they were taken over, Fannie had 13 lobbying firms on its payroll this year; Freddie had 33. Both packed their boards with politically connected people such as Democrat Rahm Emanuel, a former Clinton aide who joined Freddie's board in 2000 before he became a congressman. Both hired well-connected lobbyists such as Rick Davis, now McCain's campaign manager.
    In seeking to crack down on Fannie and Freddie, Republicans were encouraged by banks that didn't want government-subsidized competition. But there also was a chorus of warnings that the highly leveraged corporations could pose a risk to the economy.
    In 2003 and 2004, both companies were wracked by accounting scandals that led to the ouster of top managers.

In 2005, Sen. Chuck Hagel, R-Neb., sponsored legislation to shrink the agencies' portfolios. McCain later added his name as a co-sponsor. The bill passed the Senate Banking Committee, but every panel Democrat voted against it. That signaled that the bill wouldn't get the 60 votes needed to pass in the Senate. Obama was not on the banking panel; there is no record of him doing anything on the bill.
    Sen. Chris Dodd, D-Conn., a senior member of the banking committee, is the largest recipient of political contributions from Fannie and Freddie employees and PACs, having received $165,400 since 1989, according to the center.
    Dodd said he backed Fannie and Freddie because they encouraged homeownership. "I've never ever in my life been affected by a campaign contribution," he said in an interview. He noted that when he became banking committee chairman, he helped pass a bill restricting mortgage agencies' investment practices in 2007. By then, it was too late to stop the financial disaster.
    In the House, Republicans and Democrats agreed on a different bill that passed easily. But the Bush administration opposed it, calling it weak. The effort failed.
    The next year, Freddie Mac paid the largest election fine ever, $3.8 million, after regulators found it used corporate funds illegally to pay for fundraisers. From 2000 to 2003, Freddie Mac held 85 events that raised $1.7 million, mostly for Republicans on the House Financial Services Committee, regulators found.
    Rep. Barney Frank, then the ranking Democrat on financial services and now the chairman, says he and his colleagues were not soft on Fannie and Freddie. "Yes, they lobbied strongly, but I was one of the most successful ones in challenging them."
    Frank had no apologies. Rep. Artur Davis, D-Ala., by contrast, offered a rare Washington mea culpa: "Like a lot of my Democratic colleagues, I was too slow to appreciate the recklessness of Fannie and Freddie," he said in a statement. "Frankly, I wish my Democratic colleagues would admit, when it comes to Fannie and Freddie, we were wrong."