The Escalator of Life Is Going Down (Part 2) 85 comments
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Do We Need To Change The Rules of the Road?
Americans, from the country’s founding, have always cherished liberty over dependency. Personal responsibility and self reliance had forever been the hallmarks of the American population. Since 1913 when the Federal Reserve was created and the Federal income tax was implemented, Americans have been slowly and insidiously made dependent upon the government and criminal bankers running this country. Government has taxed and borrowed to implement policies and programs that make people more dependent on them and increased government’s control over our lives. Bankers have marketed debt as the way for Americans to live the good life. Americans have become serfs, ever indebted to the lords of the manor in Washington DC and on Wall Street. Until Americans decide to choose liberty and freedom over relying on government to solve all our problems, the country will continue on its path to socialism and bankruptcy.
Since the start of this financial crisis, government bureaucrats, Congressmen, Federal Reserve chairmen and have tried to hide the debris of our economic system in the woods. Nothing has worked. Bad mortgage loans, bad car loans, bad commercial loans, and bad credit card debt cannot be hidden. They must be written off. Letting banks pretend it isn’t bad debt has just led to more uncertainty in the markets. The smoke and mirrors that Treasury and the Federal Reserve have used to fool the public into trusting the banking system have not worked. Now they want to change the rules of the road.
All attempts to change the rules have backfired. The SEC outlawed short selling to stop the stock market from going down. The market accelerated downward, with no possibility for short covering to stop the fall. Hank Paulson forced banks to take billions of taxpayer dollars whether they wanted it or not. This was supposed to bring confidence in the system back. It didn’t. The government took over AIG, Fannie Mae (FNM), and Freddie Mac (FRE), deciding they could run them better than the existing horrible managements. These moves have already cost the American taxpayer a quarter trillion dollars. With many more billions to be poured down these rat holes.
The financial system is gridlocked. Four lanes have suddenly converged into two lanes and the drivers are angry. The AIGs of the world went from selling plain vanilla insurance to making bets with every major bank in the world along with guaranteeing risky bets by these same banks. Fannie Mae and Freddie Mac went from providing liquidity to the mortgage markets so that average Americans could buy a house to a Democratic Party tool used to provide mortgage loans to poor Democratic constituents so they could win more votes in the next election. Investment banks went from investing in productive business ventures to creating fake credit instruments designed solely to generate monstrous fees and bonuses for executives.
The rating agencies Moody’s and S&P went from the boring business of rating corporate bonds and generating 10 percent annual growth to giving AAA ratings to indecipherable derivative products that were then sold to pension plans and schools. Mortgage brokers went from helping match worthy borrowers with the best mortgage to criminals pushing no doc stated income adjustable rate mortgages on people who could never possibly afford a home. Consumers went from utilizing credit for just home purchases with 20% down to utilizing credit for multiple home purchases with nothing down, utilizing credit for car purchases with nothing down, and utilizing credit to buy every electronic gadget, kitchen appliance, and other toys flaunted by neighbors. The rules of the road were changed during rush hour causing chaos and confusion. Until honesty, integrity, and morality are again restored to our financial and governmental systems, gridlock and distrust will reign.
Where’s My Net Worth, Dude?
Americans are wondering where their net worth went. They can’t find it anywhere. It dissipated into thin air. It never really existed. Does that make you feel better? American households lost $11.2 trillion of net worth in 2008, and net worth is now below 2004 levels. The 17.9% drop in net worth during 2008 is mind boggling and will have a drastic impact on the future trajectory of household consumption and saving. Nearly 25% of the loss in net worth was from real estate, and equities and mutual fund shares made up 50% of the loss.
The dramatic rise in net worth coincided with the biggest debt bubble in history. Home ownership reached an all-time high of 68% in 2005. Stock ownership is still in the 50% range, so the downturn in housing values is affecting many more people than the 2000-2001 dot.com collapse. As you can see, home values fall but the debt remains the same. With at least another year of falling home prices, the number of people underwater on their home mortgages will reach 25 million, or one-third of all the houses in the United States. You won’t hear Mustard Seed Kudlow or Mad Money Cramer telling you this.
President Obama and Democrats in Congress passed a $787 billion pork filled calamity that will contribute to an explosion of our financial system. Very little of this socialist’s dream will help the U.S. economy in 2009. Vast sums will be allocated to unnecessary make work projects throughout the country. Picture thousands of Ralphs taking their time on construction projects while six guys stand around watching one guy using a jackhammer. Every construction project in the country will be a union job. This means 40% more expensive and a 40% longer timeline. When the majority of this stimulus hits in 2010 and 2011, along with Bernanke’s humongous printing of dollars we will hear a rumble before inflation erupts across the globe.
The American economy hit debris in the road years ago. Instead of pulling over and taking care of the problems before they became a crisis, our leaders ignored the problems. Government overspending, ignoring $56 trillion of unfunded liabilities, funding over-expenditures with money borrowed from foreigners, not addressing crumbling infrastructure, not creating a cohesive energy policy, and over-reaching in empire building were the fuel that led to our economy bursting into flames before our very eyes. President Obama and his minions in Congress scream, “Oh the humanity”, and take your hard earned money and redistribute it to the fools who created the tragedy.
It’s My Life
Tomorrow's getting harder make no mistake
Luck ain't even lucky
Got to make your own breaks
It's my life
And it's now or never
I ain't gonna live forever
I just want to live while I'm alive
(It's my life)
My heart is like an open highway
Like Frankie said
I did it my way
I just want to live while I'm alive
'Cause it's my life
Better stand tall when they're calling you out
Don't bend, don't break, baby, don't back down
--It’s My Life – Bon Jovi
The American people are at a crossroads. It’s our lives, not the governments. The country is headed on a path toward government running everything in our lives. Now is the time to stand tall. Barack Obama, Ben Bernanke, and Nancy Pelosi can not make us spend money we don’t have. We can force the painful restructuring of our economy on our politician leaders. They can stimulate, print, and urge you to spend, but we don’t have to listen. We can throw them out of office in 2012. If the new set of clueless morons doesn’t do what is right, we can throw them out too. We must heed the warning of Founding Father Thomas Jefferson.
A government big enough to give you everything you want, is strong enough to take everything you have.
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This article has 85 comments:
The writer's inciteful little Op Ed piece presents and embellishes with inaccuaracies some very real problems facing this generation of Americans. It's introduced with a very weak 'shoelaces caught in the escalator of life and ripped off your foot' analogy. Such drama. Picture of the Hindenburg? Is that supposed to support your thesis in some meaningful way? Are graphic words and pictures supposed to arouse our anger, as if we need more help with that? C'mon, give SeekingAlpha readers a little credit.
Unfortunately, you present no solutions to the myriad problems our nation faces, except to conclude that throwing out Democrats so as to presumably elect more Republicans, will fix them. As if there's not plenty of blame to go around. Pretty shallow.
Answers are apparently very simple in your world; real world solutions are more complex, harder to implement, and don't rest on partisan politics as a cornerstone of success.
theburningplatform.com...
As for his belief that individuals should solve their own problems, I remember telling a gentleman in a Sydney pub that my father had lost his money in a bank failure in l929, and he replied by telling me that his father had also lost his money in a bank failure the same year. Accordingly, I find this business of individuals solving their own problems a crock.
Try using your 'market freedom' and 'individuals solving their own problems' to go find insurance against healthcare costs that will bankrupt you. See if an insurer will be impressed by your self-help approach.
We need govt to step up and help us with financial greed and with healthcare.
>>>Their models, created by overly confident MBAs, assured them that nothing could go wrong. <<<
Let's see we have George W Bush and Henry Paulson with Harvard MBA's. But, Warren Buffet was refused admission to Harvard business school in 1950.
There is the problem. The admission committee at HBS is essentially determining the future leaders of the US based on an applicant's connections and not their capability or potential.
FLOYD NORRIS
Published: March 19, 2009
The losses from the worldwide financial implosion are only now being tallied up. Adjusting to the reality is proving hard.
...
As a society, we are not as rich as we thought we were. The Federal Reserve now estimates that American households as a group are poorer than they were four years ago, even before adjusting for inflation. That had not happened in any four-year period since the Fed began making those estimates more than half a century ago.
It is not an easy reality to adjust to. But simply assuming that we deserve to live as if it had not happened will only make things worse."
www.nytimes.com/2009/0...
1. That Fox News talking point has been THOROUGHLY and factually disproven . . . seriously . . . If you honestly believe that, I challenge you to show some facts, from an unbiased source, to back it up
2. I found the rest of your article to be pretty accurate in painting the picture that Wall Street, Main Street, Republicans, Democrats, and most importantly typical American 'consumers' were all equally complicit in creating this gawdawful mess
and no, I'm not a Democrat . . . just someone who is trying to keep his eyes open and think for himself
On Mar 20 09:03 AM youngolf wrote:
> Quinn-You sound like a typical repub. We need middle of the road
> genious to get out of this situation. No repub, no demo. American
> people are tired of you labeler-extremists who just want one party
> to rule. Who cares? We want an economy not choked or controlled by
> greedy and powerful.
> Try using your 'market freedom' and 'individuals solving their own
> problems' to go find insurance against healthcare costs that will
> bankrupt you. See if an insurer will be impressed by your self-help
> approach.
> We need govt to step up and help us with financial greed and with
> healthcare.
seekingalpha.com/artic...
On Mar 20 09:15 AM johnnyd1000 wrote:
> You had me up until the "a Democratic Party tool used to provide
> mortgage loans to poor Democratic constituents so they could win
> more votes in the next election" part . . .
>
> 1. That Fox News talking point has been THOROUGHLY and factually
> disproven . . . seriously . . . If you honestly believe that, I challenge
> you to show some facts, from an unbiased source, to back it up<br/>
>
> 2. I found the rest of your article to be pretty accurate in painting
> the picture that Wall Street, Main Street, Republicans, Democrats,
> and most importantly typical American 'consumers' were all equally
> complicit in creating this gawdawful mess
>
> and no, I'm not a Democrat . . . just someone who is trying to keep
> his eyes open and think for himself
Lets put everything into free markets......like drinking water, police protection, fire, sewage......that should solve everything.
Some of us responsible people want balance betwn free market and govt.
Democratic Representative Barney Frank, Chairman of the House Financial Services Committee, chose to blame short-sellers for Fannie and Freddie’s problems when he made the following statement on April 25, 2008. Between 1989 and 2008, Fannie & Freddie contributed $42,350 to Mr. Frank’s re-election campaigns.
I believe Fannie and Freddie are better off than the market thinks. Over the long term the market is a very rational distributor of resources, but in the short term it can fall prey to hysteria. Sometimes you need to deal with that. Part of the problem is rumor mongering by short-sellers. Our hope is that just by making U.S. financial support available, we'll quiet the fears and eliminate any need for that support.
Democratic Senator Christopher Dodd, former candidate for President, revealed his grasp of the situation on July 11, 2008 when he strongly defended the financial condition of Fannie & Freddie. Between 1989 and 2008, Fannie & Freddie contributed $165,400 to Mr. Dodd’s re-election campaigns.
"This is not a time to be panicking about this. These are viable, strong institutions," Sen. Christopher Dodd, D-Conn., said at a Capitol Hill press conference. "The economics are fine in these institutions and people need to know that," Dodd said. There's no reason "to talk about failure," he added. "These two institutions are fundamentally, fundamentally strong," Dodd said. "There's no reason for the kind of reaction we're getting."
Mr. Dodd’s analysis proved to be somewhat deficient. President Bush signed the Housing Recovery bill on July 30, 2008. This bill gave the Treasury authority to put the U.S. taxpayer on the hook for all of Fannie Mae and Freddie Mac’s bad decisions.
It appears that our political leaders believe in capitalism when there are obscene profits that benefit their hand picked cronies, but prefer socialism when it comes to sharing the losses with taxpayers. The Congressional Budget Office estimated that the American taxpayer would end up paying $25 billion for their mistakes, with a 5% chance that it would reach $100 billion.
The major problem with the bill was that it gave the Treasury the ability to provide an open ended guarantee. In July, former Fed governor William Poole said that Fannie Mae was technically insolvent. Their shareholder equity was $35.8 billion at the end of 2007. It plunged by $23.6 billion to $12.2 billion as of March 31, 2008. If their balance sheet had been marked to market as of June 30, 2008, they would have been insolvent. Congress passed this plan but provided absolutely no mechanism to pay for these future commitments.
At the end of the day, two public companies that had lost a combined $13 billion in the last 9 months were given a blank check to lose billions more. The CEOs of these two institutions “earned” a tremendous amount of compensation while their companies have plummeted to worthlessness. Daniel Mudd, CEO of Fannie Mae, took home $46.7 million in compensation between 2003 and 2007. Richard Syron, CEO of Freddie Mac, took home $58.1 million over the same time frame. In the last year, stockholders of these “fine” institutions lost $98 billion. They should be appreciative of the tax loss carry forwards they can use for decades.
On Mar 20 09:15 AM johnnyd1000 wrote:
> You had me up until the "a Democratic Party tool used to provide
> mortgage loans to poor Democratic constituents so they could win
> more votes in the next election" part . . .
>
> 1. That Fox News talking point has been THOROUGHLY and factually
> disproven . . . seriously . . . If you honestly believe that, I challenge
> you to show some facts, from an unbiased source, to back it up<br/>
>
> 2. I found the rest of your article to be pretty accurate in painting
> the picture that Wall Street, Main Street, Republicans, Democrats,
> and most importantly typical American 'consumers' were all equally
> complicit in creating this gawdawful mess
>
> and no, I'm not a Democrat . . . just someone who is trying to keep
> his eyes open and think for himself
Like I said, this is an undeveloped thought at this point, but it seems to fit in this story along with the coincident trend in compensation and incentives which are much in the "news" these days.
The people do have the power to change the rules. i was suprised that not much media attention was placed on France this week when only 1 million people brought the country to a grinding halt in one day!. Ordinary normal workers shut down, Airlines, buses, transit etc..in protest to their President's inaction. You see the people REALLY DO have the true power! Wokers at a closed Chysler plant in Windsor Ontario Canada occipied that plant by welding the doors shut, until they were paid 1.2 million in severance, and they were!
France and Germany do not agree with the USA tact in solving the problem via selling the country's viable future to try and solve the polical present.
Bottom line THIS DEBT HAS ABSOLUTEY NO WAY TO GET REPAID! THE DOLLAR FIAT SYSTEM WILL BE "FORCE MAJEUR" IN TIME!
Your articles grate on partisans who are blinded by the light. Quoting Jefferson was a nice touch. Your views are extreme only in their centrist nature. I believe that most of us would like the government to act like a referee or an umpire at a great game of football or baseball. Nobody notices that they're there if they do their job the right way.
The government has grown too big, too corrupt, and too malevolent for honest, hard-working people. Instead of Lincoln's "Of, by, and for the People," it has become an oligarchy that serves a privileged few. We only want a chance to build a life to support our families and live with dignity. That's the core of the American Dream.
Nobody wants what is happening now. This rabid bunch, especially in the banks, insurance, brokerage, and hedge fund industries, have stolen our futures and the wealth of our children. Our ignorant leaders have played into the hands of these thieves, and now we are left with nothing but ashes.
Good writing, Jim. Continue speaking with a clear voice. Some will listen.
On Mar 20 10:03 AM youngolf wrote:
> Quinn-I am not your buddy, yet. As one sensible poster said, there
> is plenty blame to go round. Again, you like to label "dependent
> people like yourself'. I will not stoop to your child-like responses.
> You just shot yourself in the foot 'it was a govt agency that failed
> to enforce laws'...Gee, who broke the laws? The free-market power
> brokers???
>
> Lets put everything into free markets......like drinking water, police
> protection, fire, sewage......that should solve everything.
>
> Some of us responsible people want balance betwn free market and
> govt.
On Mar 20 10:24 AM raytayzmd wrote:
> ...the ancient problem of "20-20 hindsight"...when things are running
> smoothly and everybody's making money, very few want to be a party-pooper
> and very few want to attend to what they have to say...this makes
> since in light of human psychology...hence, the recurring cycle of
> booms and busts since some caveman first traded a fur for an arrowhead...and
> it's unlikely that this cycle will ever be broken or that anyone
> will ever find a way to successfully mange them...hence, perhaps
> the most reasonable thing to do is work within the cycle...get while
> the getting is good and prepare for the day when the going gets tough.
I hate to say this, but it's the result of interlinked currencies and trade and a credit bubble created in the dollar beginning in 2001. Since the US is the reserve currency everybody else inflating to keep par. Well, the bubble is deflating and here we are. The escalator is going down.
I don't know what to do. I write to my congressman and senators, but receive no responses other than political triteness. I’ve decided to take a different course of action to try and make my fellow citizens aware of how government is stealing our wealth and robbing us of our freedoms. I have created a micro-marketing initiative to spread propaganda about the inalienable rights we all have as American citizens.
I have purchased a large quantity of silver-dollar sized wooden buttons from a local business that makes consumer novelties. I had the buttons inscribed with various messages that I hope will get people to start thinking seriously about what government is doing to each and every American. Each of the tokens has the word, “THINK” printed in the middle with different slogans described around it.
For example:
“Government does not work for you. You work for the them”
“Government wants your money and your silence”
“Government will enslave your children, just like you are”
“Your taxes are payment to wealthy bankers”
“Politicians represent the elite class, not you”
“Campaign money is bribery”
“Free markets are no longer free”
“Government will kill you because you allow it”
“Government will steal your wealth because you allow it”
“Welfare creates poverty”
“Give up your gun, give up your liberty”
“George Orwell was a visionary”
I leave these buttons in bars (yeah, I like beer), on shelves of retail stores, on those small stands in banks (one of my favorite places), on book shelves in public libraries, on shelves in grocery stores, in government buildings and restrooms. I do it subtly (e.g., reach for product, leave a button). I don’t know if it will work, but I’m hoping it makes people think and take some action.
What else can we do short of outright rebellion?
I like the fact that his chart shows that all the increase in mortgage debt as a percentage of GDP occurred during Republican Administrations. The increase in mortgage debt was done by unregulated financial companies making poor loans, not Fannie and Freddie. They got in trouble because of the general decline in housing values, which they were not prepared for.
Look at the data, not the rant.
The rant is dead on. Do some research.
On Mar 20 11:41 AM One Eyed Guide wrote:
> "Fannie Mae and Freddie Mac went from providing liquidity to the
> mortgage markets so that average Americans could buy a house to a
> Democratic Party tool used to provide mortgage loans to poor Democratic
> constituents so they could win more votes in the next election"<br/>
>
> I like the fact that his chart shows that all the increase in mortgage
> debt as a percentage of GDP occurred during Republican Administrations.
> The increase in mortgage debt was done by unregulated financial companies
> making poor loans, not Fannie and Freddie. They got in trouble because
> of the general decline in housing values, which they were not prepared
> for.
>
> Look at the data, not the rant.
Well all situations are unprecedented when you have more than a few moving parts, and despite the deep wisdom of Bon Jovi I'm going to pass on this useless collection of misinformation.
Please grace us with the misinformation you are referring to. I love when people who don't agree, just dismiss the arguement backed by facts as useless. If you disagree, provide your "facts".
On Mar 20 11:51 AM joes wrote:
> Your perspective is so short that any analysis that you draw from
> it is useless. Ever since Reagan we have been going up? How about
> the growth since 1950, you are using charts to show a small period
> of time as being an unprecedented situation.
>
> Well all situations are unprecedented when you have more than a few
> moving parts, and despite the deep wisdom of Bon Jovi I'm going to
> pass on this useless collection of misinformation.
In 2004, this is what Frank said regarding the BUSH administration's attempts to reform Fannie/Freddy:
“Fannie Mae and Freddie Mac would suffer financially under a Bush administration requirement that they channel more mortgage financing to people with low incomes, said the senior Democrat on a congressional panel that sets regulations for the companies.
“The new rule compels the companies to put 57 percent of their mortgage financing by 2008 toward homes for people with incomes no greater than area median income. Fannie Mae and Freddie, the two largest U.S. mortgage finance companies, must currently meet a 50 percent threshold.
this from a Bloomberg article, June 17, 2004: "Fannie, Freddie to Suffer Under New Rules, Frank Says” by Jim Tyson.
They spent $175 million between 1998 and 2008 on lobbyists to influence Congressmen and Senators so that their housing agenda was pushed forward and expanded. These two institutions have bred a culture of corruption, combined with awful internal and accounting controls. Both companies were unable to file legitimate financial statements with the SEC for two years.
When Raines assumed command in 1998, he set a goal to double Earnings Per Share in five years. Raines and his top executives reaped huge bonuses by meeting these goals. During his reign between 1998 and 2004, Mr. Raines raked in $90 million. His top lieutenant, Jamie Gorlick, took home $24 million in a four year period. The only problem with the EPS that were reported is that they were fraudulent. According to an investigative report by OFHEA, "Those achievements were illusions deliberately and systematically created by Fannie Mae's senior management with the aid of inappropriate accounting and improper earnings management". During the investigation Raines lobbied his cronies in Congress to open an investigation of OFHEA and cut off their funding. Ultimately, it was determined that Fannie Mae had overstated earnings by $10.6 billion. In a settlement with OFHEA and the SEC, Fannie Mae paid a civil fine of $400 million for these misdeeds. Raines somehow walked away with a slap on the wrist, sacrificing less than $5 million of his immense wealth.
In 2003, Freddie Mac revealed that it had understated earnings by almost $5 billion, one of the largest corporate restatements in U.S. history. As a result, in November, it was fined $125 million. A 200-page report issued by the Office of Federal Housing Enterprise Oversight indicated that the company's records were manipulated to meet Wall Street earnings expectations. The firm signed a consent order promising to improve internal controls and corporate governance. On April 18, 2006 Freddie Mac was fined $3.8 million, by far the largest amount ever assessed by the Federal Election Commission, as a result of illegal campaign contributions. Much of the illegal fund raising benefited members of the House Financial Services Committee, a panel whose decisions affect Freddie Mac.
www.nolanchart.com/art...
On Mar 20 01:42 PM Howard_T wrote:
> Why wait until 2012? We can start in 2010 with the congressional
> elections. Involve yourself in your party's selection of its candidate.
> Insist on a fiscal conservative who will bring the spending spree
> to a screeching halt, make sure that failing institutions really
> fail and are not artificially propped up, remove the influence of
> politics from business, promote effective regulation, and in general
> restore some sanity to government. If the incumbent does not pass
> this test, THROW HIM (or her) OUT!!! Do not let the sideshows distract
> you from the events in the center ring. Never mind about abortion,
> gay rights, global warming (except where it affects the economy),
> and all of the other issues that politicians put forth to keep you
> from looking too closely at the real problems. Stay focused, stay
> intense, and take back our country. Do it legally now before some
> feel they have to do it with viloence.
1) The real problem is a broken monetary model
2) The underlying problem is political and yes, Washington is now a Cerebus, one ugly, mutated dog with two big foolish looking heads and one smaller one (Libertarians). This party has good ideas of restoration and reform but don't realize restoration must come in stages on there all or nothing agenda. So takeaway 2 is a political problem.
3) A solution we in the investment class must be working on is putting educational materials online to the PUBLIC that is a populist message, allowing Internet users to create some of the content, we just nudge a discussion into view. Notice Washington DEMONIZING populists? Since when is a majority rule and sentiment a bad thing?!?!
In any event, many of us in the entrepenuar class are working on the technical mechanisms of citizenship problem solving and collaboration online, because what was promised by this new Administration in this regard is proving to be yet another lie. And don't tell me I didn't give Obama a chance either. I didn't vote for the man but his fiscal policies and view of monetary policy are beyond insane. He is a puppet and happy to lead America down the path of socialism. It's his ideology that government has a right to force productive people to 'shaaaaare'. His actions speak a million words, nice rhetoric doesn't fix the financial system.
On Mar 20 02:16 PM James Quinn wrote:
> Out of context quotes? You mean Congressional Hearings are out of
> context? Here are some more facts and a link to the history of Fannie
> Mae. Open your eyes and see the truth:
>
> They spent $175 million between 1998 and 2008 on lobbyists to influence
> Congressmen and Senators so that their housing agenda was pushed
> forward and expanded. These two institutions have bred a culture
> of corruption, combined with awful internal and accounting controls.
> Both companies were unable to file legitimate financial statements
> with the SEC for two years.
>
> When Raines assumed command in 1998, he set a goal to double Earnings
> Per Share in five years. Raines and his top executives reaped huge
> bonuses by meeting these goals. During his reign between 1998 and
> 2004, Mr. Raines raked in $90 million. His top lieutenant, Jamie
> Gorlick, took home $24 million in a four year period. The only problem
> with the EPS that were reported is that they were fraudulent. According
> to an investigative report by OFHEA, "Those achievements were illusions
> deliberately and systematically created by Fannie Mae's senior management
> with the aid of inappropriate accounting and improper earnings management".
> During the investigation Raines lobbied his cronies in Congress to
> open an investigation of OFHEA and cut off their funding. Ultimately,
> it was determined that Fannie Mae had overstated earnings by $10.6
> billion. In a settlement with OFHEA and the SEC, Fannie Mae paid
> a civil fine of $400 million for these misdeeds. Raines somehow walked
> away with a slap on the wrist, sacrificing less than $5 million of
> his immense wealth.
>
> In 2003, Freddie Mac revealed that it had understated earnings by
> almost $5 billion, one of the largest corporate restatements in U.S.
> history. As a result, in November, it was fined $125 million. A 200-page
> report issued by the Office of Federal Housing Enterprise Oversight
> indicated that the company's records were manipulated to meet Wall
> Street earnings expectations. The firm signed a consent order promising
> to improve internal controls and corporate governance. On April 18,
> 2006 Freddie Mac was fined $3.8 million, by far the largest amount
> ever assessed by the Federal Election Commission, as a result of
> illegal campaign contributions. Much of the illegal fund raising
> benefited members of the House Financial Services Committee, a panel
> whose decisions affect Freddie Mac.
>
> www.nolanchart.com/art...
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
Published: Thursday, September 30, 1999
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 Mar 20 01:31 PM sether wrote:
> I take issue with the claim that Fannie+Freddie helped cause this
> global crisis through democratic mandated lending to unqualified
> borrowers. That is not what happened. The Bush admin wanted to increase
> Fannie/Freddie exposure to "low income" loans. Management at these
> companies and congressional oversight / regulation related to that
> may have been horrible to criminal, but that's a different issue,
> and a bipartisan one. Who was controlling these committees, congress,
> and white house at the time? Anyway, here's some other out of context
> quotes:
> In 2004, this is what Frank said regarding the BUSH administration's
> attempts to reform Fannie/Freddy:
> “Fannie Mae and Freddie Mac would suffer financially under a Bush
> administration requirement that they channel more mortgage financing
> to people with low incomes, said the senior Democrat on a congressional
> panel that sets regulations for the companies.
>
> “The new rule compels the companies to put 57 percent of their mortgage
> financing by 2008 toward homes for people with incomes no greater
> than area median income. Fannie Mae and Freddie, the two largest
> U.S. mortgage finance companies, must currently meet a 50 percent
> threshold.
>
> this from a Bloomberg article, June 17, 2004: "Fannie, Freddie to
> Suffer Under New Rules, Frank Says” by Jim Tyson.
I just thought I would repeat the most important line of the article:
"A government big enough to give you everything you want, is strong enough to take everything you have."
This is a self-perpetuating cycle and while we should jail some of these criminals we should also understand our own place in the bubble.
I liked your tips on the blog put together with Rob Mulligan, I think they should have been left in the article (but I have to admit, I skimmed over the Seinfeld bits)
You do come across as a bit anti-Democratic, but while I'm not a Republican, I can see the harm that could come at this time from the nation becoming even more socialist. If only we could just retrench the entire govt and money-men and start from scratch.
Thanks!
Sometimes you come off as very angry on this post. But most of your readers know its not really you.
If readers would visit your website and look at your list of practical ways to improve oneself, with the help of famed financial blogger Rob Mulligan, people would understand that we may not be riding an escalator downhill, as SA has titled this piece, and that there are ways of improving our mindsets.
I enjoyed your thoughts and share many of them. Both political parties seem to think it is their elected right to spend heavily. They seem to think that anyone who donates a dollar to their campaign has the right to receive thousand fold returns on that investment.
I enjoyed your passion and willingness to state what you really mean.
"Dr. Franklin, what kind of government did you give us? A monarchy or a republic?"
Franklin's keen response was: "A republic, if you can keep it!"
I like this author - when he authors - not when he gets into hissey fits with a bunch of message board junkies.
Your incisive, detailed data, and apparent political view miss
the point! There is non longer a republican or democratic party,
they have been replaced by the 'republicrat' political system herdishly supported by a brainwashed and and uninformed american public. When those bailout packages were approved by congress, I watched in disgust as the tallies counted showed republican and democratic votes and not one single independent! You know, this issue of the central bank creation and the 1913 bill that created the Federal reserve Bank here has been a point of contention since its inception! If you care to trouble yourself with a litte historical invesitgation in your local Google search you will find that Representative Luis McFadden once, chairman of the house committee on banking and finance during the late twenties denounced the Federal Reserve Board and President Herbert Hoover as the cause of the Great Depression then underway. Response to his protests were several attempts to assassinate him (one when he was on his way to lunch in a New York City hotel restaurant) and one attempt to poison him (in the same restuarant that day!). It appears to me that the more things appear to change the more they remain unchanged. From what I'm seeing in these election and re-election of crony politicians, the statement made by Adolph Hitler just before the Second World War II comes to mind: "it is such a wonderfulf thing for governments that the people don't think!"
That to me sums up this whole historical-economic american slop
jar of a problem!
EDT
Chicago, Illiinois
On Mar 20 11:38 PM wpdragon wrote:
> gee, i like it when an author publishes his comments and leaves the
> comments to others... kinda smells like he has some insecurity issues
> otherwise.
>
> I like this author - when he authors - not when he gets into hissey
> fits with a bunch of message board junkies.
But I call it paranoia if you can't let your words stand on their own merit without feeling compelled to get into "shouting matches" with everyone who disagrees with your "principles".
We read it. We got it. We ain't gonna change our minds no matter how many times you invite yourself back to the war.
I don't know which side of the political spectrum you sleep on, nor do I really give a schitt, but I do know that the former party in power seems to have a penchant for getting into noisy shouting matches and creating and maintaining controversy. It attracts the sheeple and the emotions and the underlying fears. Comes right out of Rove and the RNC's playbook. So wherever you sleep, you seem to have adopted that mindset... at least in your comments about comments about comments.
Quite frankly, it demeans YOU and causes me to have less respect for you.
I no doubt expect this comment will cause an angry retort and an invitation for me to not read your stuff anymore - that's fine. I already made that decision on my own.
I lose, my friends lose, but most importantly YOU lose.
On Mar 21 09:12 AM James Quinn wrote:
> When people make inane comments without facts to back them up, I
> choose to call them out. You can call it insecurity. I call it standing
> up for my principles.
Two things I'd like to see expanded on:
1.) You write about the underlying causes for the current crisis, but I believe that a key component is missing. When banks and investment houses got involved in credit swaps, their investors were only committed up to what each had individually invested (stock, bond, whatever). An investor is not personally responsible for the debts of the company, and only stands to lose the amount invested. The debts incurred by the banks/investment houses thru leverage far exceeded the investor capital investment. But if the investors don't own it, who owns that debt (i.e. - who is the Fed interested in making whole for these bad investments)? Certainly NOT the equity and bond holders, who seem to be the only ones ever talked about on the cable news shows. And not the individual mortgage holder or the credit card user (agreed there are major problems with both of those, but it's not the problem). I have read very little on the behind the scenes owners of these trillions of dollars worth of debt, and I assume that's because of information blackouts such as the Fed not releasing where bailout funds are going to. Recently with the AIG debacle some information on AIG payment to foreign banks has come out, and this leads me to believe that the credit swaps were a "you-scratch-my-back-I... yours" arrangement between all of the major public and private members of the world's financial system. Any thoughts you might have on who owns this debt (and who therefore is the driver of this crisis and crisis-response) would be appreciated.
2.) I also agree with your call for personal responsibility as part of the way forward (I did read your full article that was linked to above). But it's going to take more than personal responsibility to get thru what may be coming. Over the past 5 years I've had to make so many course corrections and changes that I feel like a dodge-ball player with 4 or 5 opponents throwing at me. I don't make my living in the investment sector, but I've had to become knowledgeable about stocks, commodities, real estate, currency and options just to keep from losing ground. If I'd chosen to stay still and hold in any of those vehicles I'd have lost most of the investment gains made over the past 10 years. My point is I am personally responsible, I do all of the things mentioned as solutions in your post not to save money but because I consider them the right thing to do. But if all I did was related to personal responsibility I'd be a lot poorer than I am. I know it is more likely the topic for a book rather than a SA article, but more insight into what a person needs to look for and act on in the future would be helpful.
Thanks again.
George
this is a link to a 24 minute interview by Ken rogoff to the TV show now. He was an Imf economist and says it like it is. I'd advise everyone to listen to this
The Industrial Revolution occured. We gave up some freedoms, andiIn return we enjoyed material abundance. We joined The System. Governers are required to keep systems (human and mechanical) from flying apart. Any system requires responsible maintenance to keep it working. Pushed beyond it's limits by "tooth fairies" (promoters) promissing magical benefits, a system can be driven into a bubble. Today we face multiple bubbles: population, financial, energy, and weapons of mass destruction. And what is your solution? Less government. That's like the Pope telling the Africans "you need less birth control!" I wish our problems today were simple enough that the wisdom of Jefferson would apply. It no longer does. We bought into the System. We live in a highly interdependent society. We need to deal with that.
On Mar 21 09:56 AM wpdragon wrote:
> Sorry to hear that Mr Quinn. I have been an admirer of your work
> heretofore and have linked it to a number of friends to benefit from.
>
>
> But I call it paranoia if you can't let your words stand on their
> own merit without feeling compelled to get into "shouting matches"
> with everyone who disagrees with your "principles".
>
> We read it. We got it. We ain't gonna change our minds no matter
> how many times you invite yourself back to the war.
>
> I don't know which side of the political spectrum you sleep on, nor
> do I really give a schitt, but I do know that the former party in
> power seems to have a penchant for getting into noisy shouting matches
> and creating and maintaining controversy. It attracts the sheeple
> and the emotions and the underlying fears. Comes right out of Rove
> and the RNC's playbook. So wherever you sleep, you seem to have adopted
> that mindset... at least in your comments about comments about comments.
>
>
> Quite frankly, it demeans YOU and causes me to have less respect
> for you.
>
> I no doubt expect this comment will cause an angry retort and an
> invitation for me to not read your stuff anymore - that's fine. I
> already made that decision on my own.
>
> I lose, my friends lose, but most importantly YOU lose.
The fact of the matter is America is the "ultimate gated global community" in terms of people trying to get in. These individuals are talented, skilled, innovators and risk takes. These affluent "global citizens" would be repatriating dollars that are being funneled out of the country either through oil transfers to the middle east or through the Wal-mart effect on industry offshoing jobs. Trillions are sitting in the sidelines in Asia (China & India) or the Middle East and even in Russia (the recent oil boom and gas shipments to EU).
The problem is finding the dollars to fund the spending, and it can be more debt (Federal) or more printing (Fed Reserve) or "citizenship vouchers" as part of immigration. Fill the empty homes, refund the banks and financial institutions, and get the economy back on track through high income, high talented, risk taking, willing supporters of American values who want to the US. Give the 1,000,000 Squared plan a chance to work.
Four top foreign born MBAs from my University had contracts to work for Bank of America after their graduation. Bank of America withdrew their offers. We told 4 of the best and brightest after they paid $100,000 for a 2 year education to get out of our country. We don't want you to pay taxes or use your education to help an American company. Go back to China or India and help a company there kick our asses.
On Mar 21 05:06 PM 1,000,000 Squared wrote:
> While I agree with most of the conclusions in the article, part of
> the issue is not just printing away the problem but the lack of money
> (read Federal funding without taxes) or enough buyers (with money
> to fill the homes and pay taxes due to declining consumer spending).
> There is money "out there" (read our WalMart Dollars in China or
> Oil Dollars in the Middle East) so as a modest proposal, Offer a
> special route to US Citizenship (via visa's that vest after 10 years
> for American Citizenship). Imagine if a million individuals already
> in line to contribute to the American Experience are allowed to "buy
> in" to the US? With a 1,000,000 providing a check for a $1,000,000
> each generating a trillion injection (not increase taxes, not rolling
> printing presses since it is our money overseas) of would provide
> not just an immediate injection that would dwarf the trillions in
> debt and the Fed's recent 300Billion programt, but would provide
> real cash and real people to go filling up the empty homes and condo's
> across the country. It would sweep substantially away many of the
> empty or under forclosure home too and generate further spending
> by those families.
>
> The fact of the matter is America is the "ultimate gated global community"
> in terms of people trying to get in. These individuals are talented,
> skilled, innovators and risk takes. These affluent "global citizens"
> would be repatriating dollars that are being funneled out of the
> country either through oil transfers to the middle east or through
> the Wal-mart effect on industry offshoing jobs. Trillions are sitting
> in the sidelines in Asia (China & India) or the Middle East and
> even in Russia (the recent oil boom and gas shipments to EU). <br/>
>
> The problem is finding the dollars to fund the spending, and it can
> be more debt (Federal) or more printing (Fed Reserve) or "citizenship
> vouchers" as part of immigration. Fill the empty homes, refund the
> banks and financial institutions, and get the economy back on track
> through high income, high talented, risk taking, willing supporters
> of American values who want to the US. Give the 1,000,000 Squared
> plan a chance to work.
your solutions are unfortunately just another manifestation of populist personal finance tips which are common sense maxims for those of us who actually aspire to live sustainable lives. they fail to address the systemic problems embedded in the capitalist system, which is what jefferson (and a number of others whom on this site would be unmentionable) truly warned against.
in the spirit of fairness, your article seems to be on the right track. you appear to recognize the conflicts of interest that more and more seem to define the infrastructure our policy makers work within (lobbyists, donations, fundraising, etc), and you rail against the tyranny of this system. yet you critique obama as a socialist, while at the same time while using distinctly socialist rhetoric throughout your article. obama is far from a socialist, in spite of whatever the fringe libertarians may espouse. that fact is that dissenters have not been able to make up their minds as to whether he is a socialist, a puppet of his capitalist masters, or just your average bumbling politician, despite the fact that these all would appear to be mutually exclusive. likewise, you appear to be posing as a socialist, an investor class free-market fetishist, and blue collar everyman all at once. i guess both you and mr. obama need to figure out which hat to wear.
If anybody is to blame, it's those politicians who removed regulations that kept things stable for decades. I think they are mostly GOP, but doesn't that really matter. Let's not use labels, as not all GOP or Democrats are the same.
One thing to keep in mind: if you voted for Bush or Reagan, you can blame partly yourself for this, as they pushed for the big spending easy-credit system that created the bubble in the first place.
Doesn't matter if they are GOP or Democrats, they were just both very horrible Presidents in terms of the debt they created for future generations.
On Mar 21 07:04 PM bookman4 wrote:
> is the author sure he wants to be quoting jefferson? jefferson was
> about the closest thing to an anarchist socialist our country has
> ever put into public office, and the tendency of pseudo-intellectuals
> who find fault with a semi-planned economy to coopt his views is
> woefully (likely willfully) ignorant.
>
> your solutions are unfortunately just another manifestation of populist
> personal finance tips which are common sense maxims for those of
> us who actually aspire to live sustainable lives. they fail to address
> the systemic problems embedded in the capitalist system, which is
> what jefferson (and a number of others whom on this site would be
> unmentionable) truly warned against.
>
> in the spirit of fairness, your article seems to be on the right
> track. you appear to recognize the conflicts of interest that more
> and more seem to define the infrastructure our policy makers work
> within (lobbyists, donations, fundraising, etc), and you rail against
> the tyranny of this system. yet you critique obama as a socialist,
> while at the same time while using distinctly socialist rhetoric
> throughout your article. obama is far from a socialist, in spite
> of whatever the fringe libertarians may espouse. that fact is that
> dissenters have not been able to make up their minds as to whether
> he is a socialist, a puppet of his capitalist masters, or just your
> average bumbling politician, despite the fact that these all would
> appear to be mutually exclusive. likewise, you appear to be posing
> as a socialist, an investor class free-market fetishist, and blue
> collar everyman all at once. i guess both you and mr. obama need
> to figure out which hat to wear.
"Pretending that a true difference exists between the two major candidates is a charade of great proportion. Many who help to perpetuate this myth are frequently unaware of what they are doing and believe that significant differences actually do exist. Indeed, on small points there is the appearance of a difference. The real issues, however, are buried in a barrage of miscellaneous nonsense and endless pontifications by robotic pundits hired to perpetuate the myth of a campaign of substance. Influential forces, the media, the government, the privileged corporations and moneyed interests see to it that both party’s candidates are acceptable, regardless of the outcome, since they will still be in charge. It’s been that way for a long time. The two parties and their candidates have no real disagreements on foreign policy, monetary policy, privacy issues, or the welfare state. They both are willing to abuse the Rule of Law and ignore constitutional restraint on Executive Powers. Neither major party champions free markets and private-property ownership. Those candidates who represent actual change or disagreement with the status quo are held in check by the two major parties in power, making it very difficult to compete in the pretend democratic process. This is done by making it difficult for third-party candidates to get on the ballots, enter into the debates, raise money, avoid being marginalized, or get fair or actual coverage."
On Mar 21 09:02 PM Paul H. M. wrote:
> If you left out the partition BS, this was a decent article.
>
> If anybody is to blame, it's those politicians who removed regulations
> that kept things stable for decades. I think they are mostly GOP,
> but doesn't that really matter. Let's not use labels, as not all
> GOP or Democrats are the same.
>
> One thing to keep in mind: if you voted for Bush or Reagan, you can
> blame partly yourself for this, as they pushed for the big spending
> easy-credit system that created the bubble in the first place.<br/>
>
> Doesn't matter if they are GOP or Democrats, they were just both
> very horrible Presidents in terms of the debt they created for future
> generations.
www.wealthalchemist.co.../
MarvinMBA
I don't know about you guys,but I'm tired of looking in the rearview mirror.Right now,I'm busy with trying to conserve the little wealth I have and maybe make a dollar or two....and that ain't easy..
Falling incomes had to be made up by easier credit in the hope that that credit will tide us over until the dislocations caused by the shift offshore are worked through. If the financial industry hadn't stepped in the breach, business leaders across the board would have raised hell. And so we get to where we are today.
As you can deduce, government and Wall Street are the lesser evil in this scenario; the bigger evil is the short-sighted ,greedy executive leadership of your average U.S. Corp. who are getting none of the blame for this mess.
I hate to tell you this, but 2006 data is so old right now in regards to loan resets its rediculous you even included it. Care to bet how many of those loans are gone already, wanna guess?
Please do a better job retreading what other blog writers are writing on other sites. It will save some of us the time we read your articles that we could be doing something far more productive
Regards
I have to disagree with you on your position on finance and debt, and by extension, modern financial instruments. Finance is like modern transportation - used correctly, it makes the world a better more productive place. However, occasionally you get a white bronco out on the freeway, or a drunken driver behind the wheel, out of control.
The litmus test for comparison has to be economies based on sharia law; those economies are just as subject to ups and downs, but have traditionally been less dynamic, and have simpler, if different, drivers. I'd prefer to keep what we have.
What occurred in financial markets was bad - for you, for me, and for world economics. However, the far more tragic outcome was that the companies (and Congresspeople) that took the risks are not only getting bailed out, but actually are making money in the process, and don't seem particularly beholden to the vox populi (GS being the most egregious). Mark my words, losses will be booked, taxes will be evaded, but huge bonuses will be paid...thanks to the USG.
It would have far better to let AIG, GS, Merrill, etc fall...., and then to have backstopped the economy. Bankruptcy would have wrung out the speculators in the CDS market, and the concept of PERSONAL RESPONSIBILITY would have been upheld. This then is the failing, not the concept of indebtedness itself.
We could have then re-booted with re-organized companies, a managed CDS market, and still be able to look at ourselves in the mirror in the morning, albeit with a terrible hangover.
On Mar 22 03:24 PM levin70 wrote:
> If there is one thing I hate its retread without checking what your
> retreading. I will give one example because thats all the time I
> have - that nice subprime graph showing the resets coming coming
> from neg am and other loans. That graph is from a Nov 2007 Deutch
> Bank presentation. The data is from 2006.
>
> I hate to tell you this, but 2006 data is so old right now in regards
> to loan resets its rediculous you even included it. Care to bet how
> many of those loans are gone already, wanna guess?
>
> Please do a better job retreading what other blog writers are writing
> on other sites. It will save some of us the time we read your articles
> that we could be doing something far more productive
>
> Regards
On Mar 22 03:36 PM Henry Buttal wrote:
> Thanks for taking time to reply to the posters.
>
> I have to disagree with you on your position on finance and debt,
> and by extension, modern financial instruments. Finance is like modern
> transportation - used correctly, it makes the world a better more
> productive place. However, occasionally you get a white bronco out
> on the freeway, or a drunken driver behind the wheel, out of control.
>
>
> The litmus test for comparison has to be economies based on sharia
> law; those economies are just as subject to ups and downs, but have
> traditionally been less dynamic, and have simpler, if different,
> drivers. I'd prefer to keep what we have.
>
> What occurred in financial markets was bad - for you, for me, and
> for world economics. However, the far more tragic outcome was that
> the companies (and Congresspeople) that took the risks are not only
> getting bailed out, but actually are making money in the process,
> and don't seem particularly beholden to the vox populi (GS being
> the most egregious). Mark my words, losses will be booked, taxes
> will be evaded, but huge bonuses will be paid...thanks to the USG.
>
>
> It would have far better to let AIG, GS, Merrill, etc fall...., and
> then to have backstopped the economy. Bankruptcy would have wrung
> out the speculators in the CDS market, and the concept of PERSONAL
> RESPONSIBILITY would have been upheld. This then is the failing,
> not the concept of indebtedness itself.
>
> We could have then re-booted with re-organized companies, a managed
> CDS market, and still be able to look at ourselves in the mirror
> in the morning, albeit with a terrible hangover.
I went to your website and read your "solutions". What a crock.
A few of the highlights:
"Stop buying things"
"Contribute into your 401k until it hurts. Picture yourself handing out yellow smiley stickers at the age of 80 in a Wal-Mart as motivation. "
Why don't you describe why anyone would contribute to a 401k if they aren't going to buy things, in turn those not having jobs to make money to have a 401k. What is everyone going to do for a living? Please tell me they will all be "making things of value". Yes, the economy will improve when everyone stops buying things and starts producing things. Brilliant.
Why is "not spending" now some higher calling. If you make a lot or money or spend it you're evil. That is BS.
How about you call it how it is, spend what you can afford. Spending more than you can afford is the problem, not spending.
Can't wait until we have a society like Japan where people are afraid to spend money.
Keep on promoting your self-loathing, pay for our misdeeds agenda.
On Mar 22 10:51 PM CJJ wrote:
> Can't wait until the blogosphere saves the world. And I thought the
> Government was full of self loving, never wrong attitudes.
>
> I went to your website and read your "solutions". What a crock.<br/>A
> few of the highlights:
> "Stop buying things"
> "Contribute into your 401k until it hurts. Picture yourself handing
> out yellow smiley stickers at the age of 80 in a Wal-Mart as motivation.
> "
>
> Why don't you describe why anyone would contribute to a 401k if they
> aren't going to buy things, in turn those not having jobs to make
> money to have a 401k. What is everyone going to do for a living?
> Please tell me they will all be "making things of value". Yes, the
> economy will improve when everyone stops buying things and starts
> producing things. Brilliant.
>
> Why is "not spending" now some higher calling. If you make a lot
> or money or spend it you're evil. That is BS.
>
> How about you call it how it is, spend what you can afford. Spending
> more than you can afford is the problem, not spending.
>
> Can't wait until we have a society like Japan where people are afraid
> to spend money.
>
> Keep on promoting your self-loathing, pay for our misdeeds agenda.
Can we get your thoughts on global warming, religion, terrorism, peak oil, peak water and all the other BS the pundits of the world are cramming down our throats?
I just want to know how I should feel about the issues since Mr. James Quinn in the Blogosphere has it all figured out.
On Mar 20 01:42 PM Howard_T wrote:
> Why wait until 2012? We can start in 2010 with the congressional
> elections. Involve yourself in your party's selection of its candidate.
> Insist on a fiscal conservative who will bring the spending spree
> to a screeching halt, make sure that failing institutions really
> fail and are not artificially propped up, remove the influence of
> politics from business, promote effective regulation, and in general
> restore some sanity to government. If the incumbent does not pass
> this test, THROW HIM (or her) OUT!!! Do not let the sideshows distract
> you from the events in the center ring. Never mind about abortion,
> gay rights, global warming (except where it affects the economy),
> and all of the other issues that politicians put forth to keep you
> from looking too closely at the real problems. Stay focused, stay
> intense, and take back our country. Do it legally now before some
> feel they have to do it with viloence.
Good day sir!!
On Mar 23 09:50 AM CJJ wrote:
> You're out to shout and whine your opinion as loud as possible. Please
> compare the times to the fall of Rome and impress us with your populist
> crap.
> Can we get your thoughts on global warming, religion, terrorism,
> peak oil, peak water and all the other BS the pundits of the world
> are cramming down our throats?
> I just want to know how I should feel about the issues since Mr.
> James Quinn in the Blogosphere has it all figured out.
>
>
Blame it on the Constitution.
The founding fathers of the nation would be appalled at the bitching and moaning everyone is engaged in. Its hard to tell if anyone actually gives a damn or would rather just complain endlessly until the end of time.
Seems to me the solutions of today would not have led to people coming to the US and fighting the US Revolutionary War. Instead the bloggers would have just whined about the situation and worked with the Brits they opposed to destroy religion instead of fighting for it.
Do some research or perhaps just read comments a little more carefully before you rant back.
>Fannie Mae and Freddie Mac couldn't generate audited financial
>statements for 5 years before the housing boom. They were >criminally incompetent and run for the benefit of their Democratic >benefactors in Congress. You honestly believe they could lose >HUNDREDS of BILLIONS due to a general decline in housing >prices that ROBERT SHILLER clearly pointed out was a huge >bubble to anyone who would listen.
>The rant is dead on. Do some research."
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
Published: Thursday, September 30, 1999
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 Mar 23 12:41 PM One Eyed Guide wrote:
> I agreed that Fannie and Freddie were incompetent, but your rant
> blamed the Democrats. The data does not support that. Most of the
> bad stuff happened when Republicans were in charge, though I'm sure
> that the Democrats helped. Blaming it all on the Democrats is likely
> to give you a future outcome that you won't like.
>
> Do some research or perhaps just read comments a little more carefully
> before you rant back.
This article is great as is the fact that you illicited so much response to which you responded so directly and harshly. This is the best exchange that I have seen yet of SA and I virtually live here.
"All that is necessary for the triumph of evil is that good men do nothing." (Edmund Burke)
You are one of the good men and I hope that you can call others to arms (figuratively at the moment).
Take an hour out of your week and read the constitution. It really is a brilliant piece of thinking. Most of the problems that we face today could be fixed if we would stick with the original plan.
The Treasury should coin money from gold and silver. It's in the constitution for a reason. Abolish the Federal Reserve.