[Rhodes22-list] Brad, Economics/Politics - Significant Post about economic and politicalmess

[Herb Parsons]

I wish I were a well-financed man, I'd be buying up some rental houses 
right now. Folks that lose their homes will still need a place to live, 
and houses are going to be cheap to buy.

Brad Haslett wrote:
> Herb,
>
> It goes back further than that.  Between Fannie & Freddie, FHA, and VA
> housing loans, and the home mortgage interest deduction, the federal
> 'gubment' has been waaaay too involved in the housing market.  My home
> loan is with the credit union where I bank and they hold the paper.
> Trust me, they made damn sure I was able to pay the money back before
> they made the loan. Like a lot of Depression era programs, Fannie may
> have sounded good in the beginning but should have been eliminated
> decades ago.  President Johnson spun off Fannie to a quasi
> private/public company to make his budget numbers look better and
> created Freddie for competition. The seeds of destruction were planted
> a long time ago. Ed posted a list of proposals and warnings from the
> Bush Whitehouse earlier - 43 was aware of the problem as well as the
> Congress, it was just cross-purpose with the liberal agenda.  However,
> as amusing as it is to study the history of this issue, it does
> nothing to solve the problem. I don't think most folks realize how
> close to the brink we came.  Here's a newspaper article on the
> experience and a really good analysis from an astute blogger.
>
> http://www.nypost.com/seven/09212008/business/almost_armageddon_130110.htm
>
> http://meganmcardle.theatlantic.com/archives/2008/09/how_close_was_the_financial_sy.php
>
> There's only two solutions to this problem that I can see, either
> flush the "turd" loans out of the system or give banks a reprieve on
> FASB 157 and temporarily suspend "mark to market" accounting. Nancy
> and Harry are clueless demagogues. There's plenty of smart people on
> both sides of the isle.  Now would be a good time for some real
> leaders of both parties to take control and tell some of the bigger
> mouths (Barney Franks for example) to STFU.
>
> Whatever the solution, I think we've got some tough sledding ahead of us.
>
> Brad
>
> On Mon, Sep 22, 2008 at 9:41 PM, Herb Parsons <hparsons at parsonsys.com> wrote:
>   
>> Brad,
>>
>> Clinton Administration?
>>
>> Did that article say "under increasing pressure from the Clinton
>> Administration to expand mortgage loans among low and moderate income
>> people"
>>
>> That's got to be bogus. This mess was caused by the Republicans dammit,
>> all those kool-aid drinkers couldn't possibly be wrong...
>>
>> Since we're blowing away a little smoke from the "let's blame the
>> Republicans" kool-aid fans, fast-forward from 1999 to 2005, and take a
>> look at the Federal Housing Enterprise Regulatory Reform Act of 2005.
>>
>> In part, here's what Charles Hagel had to say about it: "Our legislation
>> would create a new independent world class regulator for Fannie Mae,
>> Freddie Mac and the Federal Home Loan Banks. Our bill provides the new
>> regulator with enhanced regulatory flexibility and enforcement tools
>> like those afforded to the Federal Deposit Insurance Corporation, the
>> Federal Reserve System, the Office of the Comptroller of the Currency
>> and the Office of Thrift Supervision. "
>>
>> Here's what McCain (a co-sponsor) had to say about it: "For years I have
>> been concerned about the regulatory structure that governs Fannie Mae
>> and Freddie Mac--known as Government-sponsored entities or GSEs--and the
>> sheer magnitude of these companies and the role they play in the housing
>> market. OFHEO's report this week does nothing to ease these concerns. In
>> fact, the report does quite the contrary. OFHEO's report solidifies my
>> view that the GSEs need to be reformed without delay."
>>
>> Would have been nice, huh?
>>
>> Unfortunately, the bill never made it out of committee. Chris Dodd was
>> on the committee at the time, and is now chairs it. He's the all time
>> highest receiver of money from the Fannie-Freddie lobbies. It's worth
>> noting that Obama is #2 in receiving those lobby monies.
>>
>> But, ignore all that. Pelosi says it's all the Republican's fault. Would
>> that be cherry, or grape kool-aid?
>>
>> Hey politics fans, see if you folks can guess who said this back in 2005
>> - "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 market, and the economy as a whole."
>>
>>
>>
>> Brad Haslett wrote:
>>     
>>> Mike,
>>>
>>> Here's a New York Time's article from 1999 that may shed some light on
>>> how this mess got started.
>>>
>>> Brad
>>>
>>> --------------------------
>>> http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&scp=1&sq=september%201999%20fannie%20mae&st=cse
>>>
>>> September 30, 1999
>>> Fannie Mae Eases Credit To Aid Mortgage Lending
>>> By STEVEN A. HOLMES
>>>
>>> In a move that could help increase home ownership rates among
>>> minorities and low-income consumers, the Fannie Mae Corporation is
>>> easing the credit requirements on loans that it will purchase from
>>> banks and other lenders.
>>>
>>> The action, which will begin as a pilot program involving 24 banks in
>>> 15 markets -- including the New York metropolitan region -- will
>>> encourage those banks to extend home mortgages to individuals whose
>>> credit is generally not good enough to qualify for conventional loans.
>>> Fannie Mae officials say they hope to make it a nationwide program by
>>> next spring.
>>>
>>> Fannie Mae, the nation's biggest underwriter of home mortgages, has
>>> been under increasing pressure from the Clinton Administration to
>>> expand mortgage loans among low and moderate income people and felt
>>> pressure from stock holders to maintain its phenomenal growth in
>>> profits.
>>>
>>> In addition, banks, thrift institutions and mortgage companies have
>>> been pressing Fannie Mae to help them make more loans to so-called
>>> subprime borrowers. These borrowers whose incomes, credit ratings and
>>> savings are not good enough to qualify for conventional loans, can
>>> only get loans from finance companies that charge much higher interest
>>> rates -- anywhere from three to four percentage points higher than
>>> conventional loans.
>>>
>>> ''Fannie Mae has expanded home ownership for millions of families in
>>> the 1990's by reducing down payment requirements,'' said Franklin D.
>>> Raines, Fannie Mae's chairman and chief executive officer. ''Yet there
>>> remain too many borrowers whose credit is just a notch below what our
>>> underwriting has required who have been relegated to paying
>>> significantly higher mortgage rates in the so-called subprime
>>> market.''
>>>
>>> Demographic information on these borrowers is sketchy. But at least
>>> one study indicates that 18 percent of the loans in the subprime
>>> market went to black borrowers, compared to 5 per cent of loans in the
>>> conventional loan market.
>>>
>>> In moving, even tentatively, into this new area of lending, Fannie Mae
>>> is taking on significantly more risk, which may not pose any
>>> difficulties during flush economic times. But the
>>> government-subsidized corporation may run into trouble in an economic
>>> downturn, prompting a government rescue similar to that of the savings
>>> and loan industry in the 1980's.
>>>
>>> ''From the perspective of many people, including me, this is another
>>> thrift industry growing up around us,'' said Peter Wallison a resident
>>> fellow at the American Enterprise Institute. ''If they fail, the
>>> government will have to step up and bail them out the way it stepped
>>> up and bailed out the thrift industry.''
>>>
>>> Under Fannie Mae's pilot program, consumers who qualify can secure a
>>> mortgage with an interest rate one percentage point above that of a
>>> conventional, 30-year fixed rate mortgage of less than $240,000 -- a
>>> rate that currently averages about 7.76 per cent. If the borrower
>>> makes his or her monthly payments on time for two years, the one
>>> percentage point premium is dropped.
>>>
>>> Fannie Mae, the nation's biggest underwriter of home mortgages, does
>>> not lend money directly to consumers. Instead, it purchases loans that
>>> banks make on what is called the secondary market. By expanding the
>>> type of loans that it will buy, Fannie Mae is hoping to spur banks to
>>> make more loans to people with less-than-stellar credit ratings.
>>>
>>> Fannie Mae officials stress that the new mortgages will be extended to
>>> all potential borrowers who can qualify for a mortgage. But they add
>>> that the move is intended in part to increase the number of minority
>>> and low income home owners who tend to have worse credit ratings than
>>> non-Hispanic whites.
>>>
>>> Home ownership has, in fact, exploded among minorities during the
>>> economic boom of the 1990's. The number of mortgages extended to
>>> Hispanic applicants jumped by 87.2 per cent from 1993 to 1998,
>>> according to Harvard University's Joint Center for Housing Studies.
>>> During that same period the number of African Americans who got
>>> mortgages to buy a home increased by 71.9 per cent and the number of
>>> Asian Americans by 46.3 per cent.
>>>
>>> In contrast, the number of non-Hispanic whites who received loans for
>>> homes increased by 31.2 per cent.
>>>
>>> Despite these gains, home ownership rates for minorities continue to
>>> lag behind non-Hispanic whites, in part because blacks and Hispanics
>>> in particular tend to have on average worse credit ratings.
>>>
>>> In July, the Department of Housing and Urban Development proposed that
>>> by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's
>>> portfolio be made up of loans to low and moderate-income borrowers.
>>> Last year, 44 percent of the loans Fannie Mae purchased were from
>>> these groups.
>>>
>>> The change in policy also comes at the same time that HUD is
>>> investigating allegations of racial discrimination in the automated
>>> underwriting systems used by Fannie Mae and Freddie Mac to determine
>>> the credit-worthiness of credit applicants.
>>>
>>>
>>>
>>>
>>> On Mon, Sep 22, 2008 at 9:05 AM, Michael D. Weisner <mweisner at ebsmed.com> wrote:
>>>
>>>       
>>>> Brad,
>>>>
>>>> Thanks for the story.  It was well written and very interesting.  Haslett on
>>>> Hassett.
>>>>
>>>> If you are interested in viewing the original S.190 bill, you may find it
>>>> at:
>>>> http://www.govtrack.us/congress/bill.xpd?bill=s109-190
>>>>
>>>> Sponsor:
>>>> Sen. Charles Hagel [R-NE]
>>>>
>>>> Cosponsors [as of 2007-01-08]
>>>> Sen. Elizabeth Dole [R-NC]
>>>> Sen. John McCain [R-AZ]
>>>> Sen. John Sununu [R-NH]
>>>>
>>>> If you're a purist and do not want the commentary and analysis, you may find
>>>> the text at the LoC:
>>>> http://thomas.loc.gov/cgi-bin/query/C?c109:./temp/~c109wHZu09
>>>>
>>>> Mike
>>>> s/v Shanghaid'd Summer ('81)
>>>>       Nissequogue River, NY
>>>>
>>>> From: "Brad Haslett" <flybrad at gmail.com>Sent: Monday, September 22, 2008
>>>> 9:09 AM
>>>>
>>>>         
>>>>> Ed,
>>>>>
>>>>> Thanks, I still don't have a good grip on all these debt swap and
>>>>> derivative contracts but then neither did Warren Buffet. Anyway you
>>>>> slice it, Fannie and Freddie were what brought this house of cards
>>>>> down (see attached).
>>>>>
>>>>> Brad
>>>>>
>>>>> -----------------------------
>>>>>
>>>>>
>>>>>
>>>>> Commentary by Kevin Hassett
>>>>> More Photos/Details
>>>>>
>>>>> Sept. 22 (Bloomberg) -- The financial crisis of the past year has
>>>>> provided a number of surprising twists and turns, and from Bear
>>>>> Stearns Cos. to American International Group Inc., ambiguity has been
>>>>> a big part of the story.
>>>>>
>>>>> Why did Bear Stearns fail, and how does that relate to AIG? It all
>>>>> seems so complex.
>>>>>
>>>>> But really, it isn't. Enough cards on this table have been turned over
>>>>> that the story is now clear. The economic history books will describe
>>>>> this episode in simple and understandable terms: Fannie Mae and
>>>>> Freddie Mac exploded, and many bystanders were injured in the blast,
>>>>> some fatally.
>>>>>
>>>>> Fannie and Freddie did this by becoming a key enabler of the mortgage
>>>>> crisis. They fueled Wall Street's efforts to securitize subprime loans
>>>>> by becoming the primary customer of all AAA-rated subprime-mortgage
>>>>> pools. In addition, they held an enormous portfolio of mortgages
>>>>> themselves.
>>>>>
>>>>> In the times that Fannie and Freddie couldn't make the market, they
>>>>> became the market. Over the years, it added up to an enormous
>>>>> obligation. As of last June, Fannie alone owned or guaranteed more
>>>>> than $388 billion in high-risk mortgage investments. Their large
>>>>> presence created an environment within which even mortgage-backed
>>>>> securities assembled by others could find a ready home.
>>>>>
>>>>> The problem was that the trillions of dollars in play were only
>>>>> low-risk investments if real estate prices continued to rise. Once
>>>>> they began to fall, the entire house of cards came down with them.
>>>>>
>>>>> Turning Point
>>>>>
>>>>> Take away Fannie and Freddie, or regulate them more wisely, and it's
>>>>> hard to imagine how these highly liquid markets would ever have
>>>>> emerged. This whole mess would never have happened.
>>>>>
>>>>> It is easy to identify the historical turning point that marked the
>>>>> beginning of the end.
>>>>>
>>>>> Back in 2005, Fannie and Freddie were, after years of dominating
>>>>> Washington, on the ropes. They were enmeshed in accounting scandals
>>>>> that led to turnover at the top. At one telling moment in late 2004,
>>>>> captured in an article by my American Enterprise Institute colleague
>>>>> Peter Wallison, the Securities and Exchange Comiission's chief
>>>>> accountant told disgraced Fannie Mae chief Franklin Raines that
>>>>> Fannie's position on the relevant accounting issue was not even ``on
>>>>> the page'' of allowable interpretations.
>>>>>
>>>>> Then legislative momentum emerged for an attempt to create a
>>>>> ``world-class regulator'' that would oversee the pair more like banks,
>>>>> imposing strict requirements on their ability to take excessive risks.
>>>>> Politicians who previously had associated themselves proudly with the
>>>>> two accounting miscreants were less eager to be associated with them.
>>>>> The time was ripe.
>>>>>
>>>>> Greenspan's Warning
>>>>>
>>>>> The clear gravity of the situation pushed the legislation forward.
>>>>> Some might say the current mess couldn't be foreseen, yet in 2005 Alan
>>>>> Greenspan told Congress how urgent it was for it to act in the
>>>>> clearest possible terms: If Fannie and Freddie ``continue to grow,
>>>>> continue to have the low capital that they have, continue to engage in
>>>>> the dynamic hedging of their portfolios, which they need to do for
>>>>> interest rate risk aversion, they potentially create ever-growing
>>>>> potential systemic risk down the road,'' he said. ``We are placing the
>>>>> total financial system of the future at a substantial risk.''
>>>>>
>>>>> What happened next was extraordinary. For the first time in history, a
>>>>> serious Fannie and Freddie reform bill was passed by the Senate
>>>>> Banking Committee. The bill gave a regulator power to crack down, and
>>>>> would have required the companies to eliminate their investments in
>>>>> risky assets.
>>>>>
>>>>> Different World
>>>>>
>>>>> If that bill had become law, then the world today would be different.
>>>>> In 2005, 2006 and 2007, a blizzard of terrible mortgage paper
>>>>> fluttered out of the Fannie and Freddie clouds, burying many of our
>>>>> oldest and most venerable institutions. Without their checkbooks
>>>>> keeping the market liquid and buying up excess supply, the market
>>>>> would likely have not existed.
>>>>>
>>>>> But the bill didn't become law, for a simple reason: Democrats opposed
>>>>> it on a party-line vote in the committee, signaling that this would be
>>>>> a partisan issue. Republicans, tied in knots by the tight Democratic
>>>>> opposition, couldn't even get the Senate to vote on the matter.
>>>>>
>>>>> That such a reckless political stand could have been taken by the
>>>>> Democrats was obscene even then. Wallison wrote at the time: ``It is a
>>>>> classic case of socializing the risk while privatizing the profit. The
>>>>> Democrats and the few Republicans who oppose portfolio limitations
>>>>> could not possibly do so if their constituents understood what they
>>>>> were doing.''
>>>>>
>>>>> Mounds of Materials
>>>>>
>>>>> Now that the collapse has occurred, the roadblock built by Senate
>>>>> Democrats in 2005 is unforgivable. Many who opposed the bill
>>>>> doubtlessly did so for honorable reasons. Fannie and Freddie provided
>>>>> mounds of materials defending their practices. Perhaps some found
>>>>> their propaganda convincing.
>>>>>
>>>>> But we now know that many of the senators who protected Fannie and
>>>>> Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd,
>>>>> have received mind-boggling levels of financial support from them over
>>>>> the years.
>>>>>
>>>>> Throughout his political career, Obama has gotten more than $125,000
>>>>> in campaign contributions from employees and political action
>>>>> committees of Fannie Mae and Freddie Mac, second only to Dodd, the
>>>>> Senate Banking Committee chairman, who received more than $165,000.
>>>>>
>>>>> Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and
>>>>> employee contributions, has received more than $75,000 from the two
>>>>> enterprises and their employees. The private profit found its way back
>>>>> to the senators who killed the fix.
>>>>>
>>>>> There has been a lot of talk about who is to blame for this crisis. A
>>>>> look back at the story of 2005 makes the answer pretty clear.
>>>>>
>>>>> Oh, and there is one little footnote to the story that's worth keeping
>>>>> in mind while Democrats point fingers between now and Nov. 4: Senator
>>>>> John McCain was one of the three cosponsors of S.190, the bill that
>>>>> would have averted this mess.
>>>>>
>>>>> (Kevin Hassett, director of economic-policy studies at the American
>>>>> Enterprise Institute, is a Bloomberg News columnist.
>>>>>
>>>>>
>>>>> Last Updated: September 22, 2008 00:04 EDT
>>>>>
>>>>>
>>>>>
>>>>> On Sun, Sep 21, 2008 at 6:53 PM, Tootle <ekroposki at charter.net> wrote:
>>>>>
>>>>>           
>>>>>> Brad,
>>>>>>
>>>>>> Have you seen this site?
>>>>>>
>>>>>> http://www.occ.treas.gov/ftp/deriv/dq403.pdf
>>>>>>
>>>>>> Ed K
>>>>>> Greenville, SC, USA
>>>>>> http://www.nabble.com/file/p19599807/stock%2Btip.gif stock+tip.gif
>>>>>>
>>>>>>
>>>>>>
>>>>>> Ed, Brad,
>>>>>>
>>>>>> First, thanks Brad for taking the time to post all this stuff.
>>>>>>
>>>>>> Next, Ed, while I agree with most of what you have said I gotta' take
>>>>>> this with a grain of salt
>>>>>>
>>>>>>
>>>>>>             
>>>>>>> and 2.
>>>>>>> the people who were reporters, editors or commentators did not have
>>>>>>> appropirate education to understand what they reported or chose not
>>>>>>> report
>>>>>>> the issues. [This goes back to my comments to Captain Rummy]
>>>>>>>
>>>>>>>               
>>>>>> Appropriate education is way over-rated. I have none to speak of and I
>>>>>> have been watching incredulously as this whole thing unfolded. I think
>>>>>> all this proves is that some of the most prestigious colleges in the
>>>>>> country graduate some of the least sensible people. It doesn't take a
>>>>>> rocket scientist to figure out that you can't loan money to people who
>>>>>> aren't going to pay it back and remain in business for long. You can't
>>>>>> continually make risky loans and expect to be able to pass the risk on
>>>>>> to some greater fool forever. Eventually even the dimmest bulb is going
>>>>>> to figure out he's being taken for a ride.
>>>>>>
>>>>>> So, lets not try to claim that more education would have helped these
>>>>>> fools. What was and is obvious to a high school graduate should have
>>>>>> been child's play for someone with "higher education" yet, they show us
>>>>>> a complete lack of common sense. It seems you can't get good sense
>>>>>> through education.
>>>>>>
>>>>>> Rik
>>>>>>
>>>>>> Ayn Rand was a prophet - - it isn't my fault
>>>>>>
>>>>>>
>>>>>>
>>>>>> Tootle wrote:
>>>>>>
>>>>>>             
>>>>>>> Brad,
>>>>>>>
>>>>>>> 1.  Thank you for your posts on this subject.  There are those who
>>>>>>> quibble
>>>>>>> that this series of posts is not sailing related.  Well it is.  Because
>>>>>>> it
>>>>>>> concerns our freedom to sail, buy a boat, keep a small sail boat maker
>>>>>>> in
>>>>>>> business.  It is important to understand the basics of business,
>>>>>>> economics
>>>>>>> and ethics.
>>>>>>>
>>>>>>> 2.  Warren Buffet was not the only one who understood the problems with
>>>>>>> the
>>>>>>> mortagages, loans and financial instuments involved.  The important
>>>>>>> thing
>>>>>>> to
>>>>>>> comprehend is 'The holy media' did not understand.  Why?  Two important
>>>>>>> reasons:  1.  It flies in the face of liberalism and their advocacy, and
>>>>>>> 2.
>>>>>>> the people who were reporters, editors or commentators did not have
>>>>>>> appropirate education to understand what they reported or chose not
>>>>>>> report
>>>>>>> the issues. [This goes back to my comments to Captain Rummy]
>>>>>>>
>>>>>>> I am sure the lady accountant who broke the Enron scandal understands
>>>>>>> what
>>>>>>> the financial and accounting issues are.
>>>>>>>
>>>>>>> I am sure that those who support 'Progressivism' do not care to
>>>>>>> understand
>>>>>>> the real results of their advocacy.  Thank you for pointing out Obama's
>>>>>>> financial advisors use of the problem causing techniques.
>>>>>>>
>>>>>>> Again, thank you for the information.
>>>>>>>
>>>>>>> Ed K
>>>>>>> Greenville, SC, USA
>>>>>>> Addenda:
>>>>>>>
>>>>>>> 1.  "Character isn't something you were born with and can't change, like
>>>>>>> your fingerprints. It's something you weren't born with and must take
>>>>>>> responsibility for forming."  Jim Rohn
>>>>>>>
>>>>>>> 2.  "Leaders are made, they are not born. They are made by hard effort,
>>>>>>> which is the price which all of us must pay to achieve any goal that is
>>>>>>> worthwhile."  Vince Lombardi
>>>>>>>
>>>>>>> 3.  "Most of the poverty and misery in the world is due to bad
>>>>>>> government,
>>>>>>> lack of democracy, weak states, internal strife, and so on."  George
>>>>>>> Soros
>>>>>>>
>>>>>>>
>>>>>>> Brad Haslett-2 wrote:
>>>>>>>
>>>>>>>
>>>>>>>               
>>>>>>>> Ed,
>>>>>>>>
>>>>>>>> It will take years to unravel this whole puzzle and no doubt a lot of
>>>>>>>> money will be made writing books about it, but here's what we know for
>>>>>>>> now.  The economy was about to grind to a stop like an engine running
>>>>>>>> without oil, ie, financial institutions were about to stop lending
>>>>>>>> money because no one trusted anyone.  The root cause was a lot of
>>>>>>>> really nasty mortgages made with horrendous lending practices. Add in
>>>>>>>> some new debt instruments that no one really understood (Mr. Buffet
>>>>>>>> excepted) and the problems accelerated. The "fix", if you want to call
>>>>>>>> it that, is for the federal government to allow financial institutions
>>>>>>>> to dump their toxic assets, clean up their books, and go back to "mark
>>>>>>>> to market" accounting with assets of determinable value.  What this
>>>>>>>> will cost the government is unknown because the value of the assets to
>>>>>>>> be dumped is unknown.  Just like the RFC during the Great Depression
>>>>>>>> and the Resolution Trust in the late 80's, some of these assets do
>>>>>>>> have value and the taxpayer will get some of their money back.  One of
>>>>>>>> ideas being floated now is a reverse auction where institution bids
>>>>>>>> down to a price that they are willing to sell the government the bad
>>>>>>>> assets. This is truly new territory. Lehman Brothers had a chance to
>>>>>>>> be acquired by Bank of Korea and CITIC bank of China months ago but
>>>>>>>> thought they could get a better price.  Now they'll settle for pennies
>>>>>>>> on the dollar.
>>>>>>>>
>>>>>>>> Ever heard of a NINJA loan?  Neither had I until a couple of years ago
>>>>>>>> and it didn't make sense then and it sure as hell doesn't now.  NINJA
>>>>>>>> - no income, no job or assets.  Who in their right mind would make
>>>>>>>> such a loan?  No one, unless they thought they could palm the risk off
>>>>>>>> on someone else.  Fanny and Freddie are the biggest culprits in this
>>>>>>>> mess.  Now here's where it gets interesting. They and most banks
>>>>>>>> operated using sound lending practices until the late 70's when the
>>>>>>>> Community Reinvestment Act was passed by Carter. (I'm going to use a
>>>>>>>> "cheap and easy" citation here instead of financial news articles to
>>>>>>>> save time)
>>>>>>>>
>>>>>>>> http://en.wikipedia.org/wiki/Community_Reinvestment_Act
>>>>>>>>
>>>>>>>> Clinton strengthened the act in 1995 and shoved more bad lending
>>>>>>>> practices down bankers throats. One of the "leaders" in subprime
>>>>>>>> mortgages was Superior Bank in Chicago.
>>>>>>>>
>>>>>>>> http://query.nytimes.com/gst/fullpage.html?res=9C05E4D71E3CF934A3575BC0A9679C8B63&sec=&spon=&pagewanted=1
>>>>>>>>
>>>>>>>> Superior went belly-up in 2001.  Who ran Superior?  Penny Pritzker, B
>>>>>>>> Hussein Obama's finance 2008 finance chairman, financial sponsor, and
>>>>>>>> also chairman of the successor to the Chicago Annenberg Challenge. The
>>>>>>>> point is, the demo model for subprimes was Superior and it failed.
>>>>>>>> Pritzker was to the sub prime mortgage what Michal Malkin was to junk
>>>>>>>> bonds.
>>>>>>>>
>>>>>>>> In 2003 the Bush administration tried to reform Freddie and Fannie and
>>>>>>>> was shot down, led by Barny Frank.
>>>>>>>>
>>>>>>>> http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63
>>>>>>>>
>>>>>>>> Some Senators saw the handwriting on the wall in 2005 and again tried
>>>>>>>> to reform Fan & Fred.
>>>>>>>>
>>>>>>>> http://www.govtrack.us/congress/record.xpd?id=109-s20060525-16&bill=s109-190#sMonofilemx003Ammx002Fmmx002Fmmx002Fmhomemx002Fmgovtrackmx002Fmdatamx002Fmusmx002Fm109mx002Fmcrmx002Fms20060525-16.xmlElementm0m0m0m
>>>>>>>>
>>>>>>>> By 2007, the problems were too big too ignore because so many
>>>>>>>> homeowners were defaulting.  The financial markets stayed intact
>>>>>>>> because these "toxic mortgages" were hidden behind some really clever
>>>>>>>> debt instruments.  Then everyone got scared.
>>>>>>>>
>>>>>>>> I'll post more as information trickles in.  Both political parties
>>>>>>>> have their fingerprints all over this mess and Wall Street threw some
>>>>>>>> good old fashioned GREED into mix for the final meltdown.  Follow the
>>>>>>>> money-
>>>>>>>>
>>>>>>>> http://www.opensecrets.org/industries/mems.php
>>>>>>>>
>>>>>>>> What interesting times we live in!
>>>>>>>>
>>>>>>>> Brad
>>>>>>>>
>>>>>>>>
>>>>>>>>
>>>>>>>> On Sun, Sep 21, 2008 at 6:16 AM, Tootle <ekroposki at charter.net> wrote:
>>>>>>>>
>>>>>>>>
>>>>>>>>                 
>>>>>>>>> Brad,
>>>>>>>>>
>>>>>>>>> You are the accountant on this forum.  If there are others, they do
>>>>>>>>> not
>>>>>>>>> have
>>>>>>>>> courage so speak up.
>>>>>>>>>
>>>>>>>>> This is also an ethical question, a legal ethical question.  And
>>>>>>>>> lawyers
>>>>>>>>> should be speaking up.  But alas, they claim Marxism is good.  Or they
>>>>>>>>> say
>>>>>>>>> their practice is limited to real estate transactions or business
>>>>>>>>> matters.
>>>>>>>>> What the hell caused this mess?
>>>>>>>>>
>>>>>>>>> In South Carolina when the state legislature is not in session, lawyer
>>>>>>>>> represenatives represent clients before judges they elect.  Right and
>>>>>>>>> Wrong,
>>>>>>>>> good and evil, when working in a gray areas, it is important that
>>>>>>>>> actions
>>>>>>>>> withstand the scrutiny of sunlight.
>>>>>>>>>
>>>>>>>>> Brad said, "Here's something you don't hear much about - I've read
>>>>>>>>> exactly
>>>>>>>>> two articles that discussed "mark to market" including one from Steve
>>>>>>>>> Forbes.  He didn't name it but he's referring to FASB 157 (Financial
>>>>>>>>> Accounting Standards Board) which went into effect November 15, 2008
>>>>>>>>> that
>>>>>>>>> requires all assets including level 3 assets which include
>>>>>>>>> collateralized
>>>>>>>>> debt obligations (what Warren Buffet described as "weapons of mass
>>>>>>>>> financial
>>>>>>>>> destruction" in 2002) to be shown on the books at market value.  There
>>>>>>>>> lies
>>>>>>>>> the problem, no one knows what these obligations are "worth" and when
>>>>>>>>> faith
>>>>>>>>> in these instruments failed, the system started grinding to a halt.
>>>>>>>>>
>>>>>>>>> If the people had been honest and ethical from the get go they would
>>>>>>>>> have
>>>>>>>>> held the actions and the paper they were written on to sunlight and a
>>>>>>>>> simple
>>>>>>>>> test of right and wrong.  These events remind me of the lady who
>>>>>>>>> spilled
>>>>>>>>> the
>>>>>>>>> beans in the Enron situation.  And the media said Enron was big?
>>>>>>>>>
>>>>>>>>> As you find time tell us where to find Steve's article and Warrens
>>>>>>>>> admonition.  And post any relevant sources.
>>>>>>>>>
>>>>>>>>> Yes, Marxism is at issue because of the Federal requirement of banks
>>>>>>>>> to
>>>>>>>>> loan
>>>>>>>>> in questionable situations instead of holding federally backed loans
>>>>>>>>> to
>>>>>>>>> a
>>>>>>>>> high standard.  The government compelled bankers to disregard risks.
>>>>>>>>> Dictatorship, Marxism, Socialism, Progressivism, call it what you
>>>>>>>>> want,
>>>>>>>>> it
>>>>>>>>> is wrong and leads to garbage.
>>>>>>>>>
>>>>>>>>> Ed K
>>>>>>>>> Greenville, SC, USA
>>>>>>>>> attachment:
>>>>>>>>> http://www.nabble.com/file/p19593492/401k.jpg 401k.jpg
>>>>>>>>>
>>>>>>>>>
>>>>>>>>> Ed,
>>>>>>>>> The subject line should probably be edited to include 'Politics' since
>>>>>>>>> that is always an aspect of economics, but let's stick primarily to
>>>>>>>>> economics for now.
>>>>>>>>>
>>>>>>>>> First, a quick personal note.  My union called me this week - the wife
>>>>>>>>> of one of our members is dying from cancer and he has burned through
>>>>>>>>> his sick leave to be by her side.  They asked me to cover one of his
>>>>>>>>> trips last night, which I did.  I contacted my superior in the
>>>>>>>>> training department and asked that he get the word out to fellow
>>>>>>>>> instructors to consider flying "back-side-of-the-clock" trips for
>>>>>>>>> landing currency instead of the usual afternoon "gentlemen" trips, and
>>>>>>>>> they have stepped-up to the plate.  This is a great country, and I am
>>>>>>>>> fortunate to work for a wonderful company and with a very professional
>>>>>>>>> union.
>>>>>>>>>
>>>>>>>>> Now about this little "financial problem" we face, it is bad. Just as
>>>>>>>>> in every major airline crash that leaves a smoking hole in the ground,
>>>>>>>>> the press immediately jumps to conclusions, focuses on the horror, and
>>>>>>>>> is usually wrong in their analysis. What we are witnessing here is not
>>>>>>>>> a crash (despite the MSM comparisons to 1929) but more like a GPWS
>>>>>>>>> (ground proximity warning system) encounter - if immediate action
>>>>>>>>> isn't taken, disaster will be the result. Like every aircraft
>>>>>>>>> accident, the usual suspects start their spin, "It was the pilots
>>>>>>>>> fault", "It was Boeings fault", "It was the company's fault", "It was
>>>>>>>>> the weather".  The reality takes years to discover and the root causes
>>>>>>>>> are often something completely different than the original pundits
>>>>>>>>> analysis. And most importantly, there is usually plenty of blame and
>>>>>>>>> responsibility to go around.
>>>>>>>>>
>>>>>>>>> Here's the quick and dirty on what we know.  The financial markets
>>>>>>>>> were about to shut down because the trust and faith in the underlying
>>>>>>>>> assets that props-up the entire system were suspect.
>>>>>>>>>
>>>>>>>>> I'll go into a more thorough analysis tomorrow after a good nights
>>>>>>>>> sleep.  Here's something you don't hear much about - I've read exactly
>>>>>>>>> two articles that discussed "mark to market" including one from Steve
>>>>>>>>> Forbes.  He didn't name it but he's referring to FASB 157 (Financial
>>>>>>>>> Accounting Standards Board) which went into effect November 15, 2008
>>>>>>>>> that requires all assets including level 3 assets which include
>>>>>>>>> collateralized debt obligations (what Warren Buffet described as
>>>>>>>>> "weapons of mass financial destruction" in 2002) to be shown on the
>>>>>>>>> books at market value.  There lies the problem, no one knows what
>>>>>>>>> these obligations are "worth" and when faith in these instruments
>>>>>>>>> failed, the system started grinding to a halt.
>>>>>>>>>
>>>>>>>>> I'm not very happy about the federal government nationalizing roughly
>>>>>>>>> 7% of the economy but let's hope this only a temporary jolt of
>>>>>>>>> medicine and the government will divest themselves of their new
>>>>>>>>> "ownership" position as quickly as they acquired it.
>>>>>>>>>
>>>>>>>>> We'll discuss the culprits tomorrow.
>>>>>>>>>
>>>>>>>>> Brad
>>>>>>>>>
>>>>>>>>> On Fri, Sep 19, 2008 at 6:26 PM, Tootle <ekroposki at charter.net> wrote:
>>>>>>>>>
>>>>>>>>>
>>>>>>>>>                   
>>>>>>>>>> Brad just posted a significant post to the list, but its significance
>>>>>>>>>> gets
>>>>>>>>>> lost in subject line.  All shoud read his last post:
>>>>>>>>>>
>>>>>>>>>> http://www.rhodes22.org/pipermail/rhodes22-list/2008-September/054616.html
>>>>>>>>>>
>>>>>>>>>> I am referring to the briefing to Congress.
>>>>>>>>>>
>>>>>>>>>> Ed K
>>>>>>>>>> Greenville, SC, USA
>>>>>>>>>>
>>>>>>>>>>                     
>>>>>> http://www.nabble.com/file/p19599807/stock%2Btip.gif stock+tip.gif
>>>>>> --
>>>>>> View this message in context:
>>>>>> http://www.nabble.com/Economics---Significant-Post-to-List-with-wrong-subject-line%21%21%21-tp19590875p19599807.html
>>>>>> Sent from the Rhodes 22 mailing list archive at Nabble.com.
>>>>>>
>>>>>> __________________________________________________
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>>>>>> __________________________________________________
>>>>>>
>>>>>>
>>>>>>             
>>>>> __________________________________________________
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>>>>> __________________________________________________
>>>>>
>>>>>
>>>>>
>>>>>           
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