Corruption in the Executive Branch?

Corruption is a strong word, but it appears warranted given the two stories of import this weekend. First, on the firing of inspectors general:

WASHINGTON - -- He was appointed with fanfare as the public watchdog over the government's multi-billion dollar bailout of the nation's financial system. But now Neil Barofsky is embroiled in a dispute with the Obama administration that delayed one recent inquiry and sparked questions about his ability to freely investigate.

Treasury, you see, is refusing to turn over documents - items that Barofsky believes he needs to do his job properly.

Mr. Barofsky's job is, for those of you who need a refresher, to investigate potential fraud and abuse in the TARP program. One would think that Treasury would be very interested in the integrity of that program, and submit without quarrel to any inquiry by the OIG's office, which was incidentally set up for the specific purpose of "watchdogging" the program itself.

It appears not.

Then there are two other IG firings:

The first dismissal occurred last week, when the White House terminated Gerald Walpin, inspector general of the service agency AmeriCorps. Walpin claims his dismissal was unjust, the result of political interference.

This one is particularly interesting because AmeriCorps is part and parcel of Obama's trademark "GIVE" bill - that is, the "youth service" corps that was put together for supposed "civic purposes."

The IG in question, Gerald Walpin, was a Bush appointee. The WSJ wrote this about the controversy:

A George W. Bush appointee, Mr. Walpin has since 2007 been the inspector general for the Corporation for National and Community Service, the federal agency that oversees such subsidized volunteer programs as AmeriCorps. In April 2008 the Corporation asked Mr. Walpin to investigate reports of irregularities at St. HOPE, a California nonprofit run by former NBA star and Obama supporter Kevin Johnson. St. HOPE had received an $850,000 AmeriCorps grant, which was supposed to go for three purposes: tutoring for Sacramento-area students; the redevelopment of several buildings; and theater and art programs.

Mr. Walpin's investigators discovered that the money had been used instead to pad staff salaries, meddle politically in a school-board election, and have AmeriCorps members perform personal services for Mr. Johnson, including washing his car.

At the end of May, Mr. Walpin's office recommended that Mr. Johnson, an assistant and St. HOPE itself be "suspended" from receiving federal funds. The Corporation's official charged with suspensions agreed, and in September the suspension letters went out. Mr. Walpin's office also sent a civil and/or criminal referral to the U.S. Attorney for the Eastern District of California.

Now remember, we were sold "an open administration" and "hope and change." What we appear to have received is just the change - about 2 cents, while the other 98 are siphoned off as political favors, and when an independent watchdog does their job and is uncovering what sure looks like a prima-facie case of looting of the public treasury, obtaining the approval of the corporation's own people and referring the matter for prosecution, The Obama Administration sacks him.

Second, there is what I consider outright lying by the Obama Administration with regards to his "notice" to critics of his "financial overhaul" proposal:

"These are the interests that have benefited from a system which allowed ordinary Americans to be exploited," Obama said. The president said he would stand up for his plans, saying: "While I'm not spoiling for a fight, I'm ready for one. The most important thing we can do to put this era of irresponsibility in the past is to take responsibility now."

Does that include Fannie (FNM), Freddie (FRE), and Lockhart? Remember this from just yesterday?

June 19 (Bloomberg) -- President Barack Obama’s program to help more homeowners refinance may be expanded to include borrowers who owe more than 105 percent of their homes’ values, Federal Housing Finance Agency Director James Lockhart said.

The Obama administration is considering allowing Fannie Mae and Freddie Mac to refinance loans with current loan-to-value ratios of 125 percent or higher, Lockhart said at a National Association of Real Estate Editors Association conference in Washington yesterday.

And my comment thereupon:

If you are underwater on your house and take a deal like this, you are as dumb as a box of rocks and have just consented to being bent over the table and violated repeatedly. That our government would propose "allowing" such a thing is fomenting financial rape upon The American Public. Period.

I will stake a case of scotch on the bet that there will be no "clear, plain" disclaimer on any such refinance "offer" containing the following language in 14-point block type:

CAUTION TO THE CONSUMER:

Refinancing of your mortgage under this program will turn your mortgage into a "recourse" loan in all 50 states. If your current mortgage is a purchase money first mortgage - that is, it was originally issued to purchase a property for you to live in as your principal residence, you may be immune under the law from collection of any amount exceeding the foreclosure recovery if you fail to pay. If you execute this refinance, you will permanently lose any such protection and may be subject to a suit for collection or even garnishment of your wages should you default. You are strongly advised to consult with both LEGAL and ACCOUNTING experts of your own choosing before signing this document to determine what, if any, rights you are WAIVING VOLUNTARILY by executing this document.

If you currently owe more on your loan than your home is worth IT MAY BE TO YOUR ULTIMATE BENEFIT TO INTENTIONALLY DEFAULT INSTEAD OF REFINANCE AND GIVE UP YOUR HOME. This is particularly true if the offered refinance extends the term of your loan or includes closing costs and fees into the new principal balance. ONLY QUALIFIED LEGAL AND ACCOUNTING ADVISERS CAN ANALYZE YOUR PERSONAL CREDIT, INCOME AND HOUSING SITUATION AND DETERMINE IF THIS REFINANCE IS IN YOUR BEST INTEREST AND YOU ARE STRONGLY ADVISED TO SEEK SUCH REPRESENTATION BEFORE EXECUTING THIS DOCUMENT. NO LOAN OFFICER OR GOVERNMENT EMPLOYEE CAN DO SO, AND ANY SUCH REPRESENTATION TO THE CONTRARY IS BOTH FALSE AND CRIMINAL FRAUD.

If President Obama's "consumer protection" was real along with his intentions in that regard, he would not have trotted out Lockhart with his "HOPE Plan changes" without making such a strong statement.

Of course he didn't, because the political cronies over at Fannie and Freddie - yes, even now - are more important to him than YOU, the citizen who was originally screwed through fraudulent appraisals, artificially inflated "values" and complex loan products that were inadequately explained to you yet sold as a means for you to "afford" to "own" a home that you in fact could never actually obtain clear title to given your personal circumstances of credit, assets and income.

Yes, some of you (perhaps even most) were willing participants in this scam, but that belies the point: your culpability wasn't singular and yet now you're being asked to stick your neck on the chopping block while those who profited from your naiveté (or worse) keep their fancy houses, cars, yachts and political patronage.

Funny how the facts interfere with the "Hope and Change" fantasy Olympics.

Comments

[Moon Kil Woong:]

Karl: Fannie Mae and Freddie Mac have been delinquent for the the last two decades (ergo the massive losses). Although people link it to CRA they seem to have gone beyond the call of duty securitizing home loans they ended up taking a huge hit on about every asset class of home loans with forclosures even though they are only suppose to buy low risk ones.

Sadly, they are more than willing to engage in such a program to the adversity of the borrower insofar that it gives them bigger marketshare. After all, that's what insures its survival as the biggest hidden entitlement system, can't go broke government institution that can practice any in your face economics it wants.

Don't bother complaining, there is nothing you can do about it since it's a private company like the Federal Reserve (funny how that works). They learned the Washington system oh so very very well.

Jun 22 07:40 AM

[john s. gordon:]

doesn't look too good here. watch for further developments, if any.
> jack

Jun 22 09:17 AM

[gon4beer:]

Fannie and Freddie have recently paid out over 200 million in retention bonuses to top execs, but it's had barely made a dent in mainstream media coverage. I would love to see Frank Raines come back before a Senate investigation-now THERE'S a crook.

Jun 22 09:42 AM

[retiredengi...:]

You're only hitting the tip of the iceburg as far as corruption in DC and it's only getting worse with the payback to unions and others like Obama who only live off other peoples labor, our tax dollars.
I hit the sweet spot working from the 60's, but don't see the same for my kids over the next 40 years in the US.

Jun 22 09:45 AM

[EMS News:]

The true corruption is campaign contributions. These should be terminated. Both political parties are totally corrupted which is why we run our trade in the red. Anyone supporting free trade is betraying the US.

Jun 22 10:01 AM

[fireball:]

chicago politics, actually chicago has just been caught more often. a man that can look you in the eye and lie without flinching is destined for high political office.
a phrase the media coined which caught on comes to mind. "character isn't an issue?" it has always been the number one issue for me. without good character there is no "hope" for honesty, duty, honor or integrity.
as i watched obama stand and lie so smooth and with such an altruistic demeanor it was chilling. at least mccain was a stumbling bumbling lier. these two were the best our nation could offer? i guess they were the best at the slime of politics.

Jun 22 10:33 AM

[joes:]

Gee thanks Karl, people with the opportunity to siphon money and power will often do it, regardless of their previously stated moral position.

This idea is ancient of course, the first stock market opened in 1607 and by 1617 people were complaining about corruption. Every bubble has been caused by cheaters, misrepresenting everything from Tulips, Tech Stocks, even the value of an education or a visit to the doctor. We all pay more through these misrepresentations and we always will.

Those that complain the most regret not being on the cheating side, and would jump over in a second given the chance. For now people will just continue to be taken, it has nothing to do with who is in the white house or capital hill, nor the latest celeb CEO.

All of all problems are caused by our greed and fear cycles that go back to the risks needed to win a meal and the power to share only with those that help your cause.

Jun 22 10:53 AM

[jksisco:]

Obama and his team were 'hoping' you didn't notice how corrupt and scandal ridden they are, because the 'change' we will get is from a republican democracy to a socialist autocracy.

Jun 22 11:16 AM

[jackooo:]

Obama promised change! You go it.

Jun 22 12:10 PM

[User 283977:]

I wondered about the "recourse" loan issue. Good Information for those that are upside down on their homes.

Jun 22 12:18 PM

[oldtimertoo:]

Good points. One clarification on the recourse issue. In California, whether your loan is recourse or non-recourse, nearly all foreclosures in the state are non-judicial trustee's sales. The deck is so stacked against judicial foreclosures that they are as rare as California grizzlies.

Once a lender holds a non-judicial trustee's sale, the lender is barred from pursuing collection from the borrower whether the loan was recourse or not (the so-called one form of action rule). Not sure about other states, but in CA, recourse is a mute issue.

Jun 22 02:15 PM

[simplesimon:]

Re: Chicago politics. "stumbling bumbling liars"...or" look you in the eye and lie with a serious and sincere look of -ahem-compassion for your best interest". I was one of the complainers early on asking, "Why is it we all think lawyers have cornered the market on gifted leadership, and genuine trustworthiness?" I think everyone has forgotten all the shocking lawyer jokes I used to hear almost constantly. I still urge any and all, if they would, please...to plea for a dramatic turn from lawlessness ( Brian Ross' comment that over 100 Ponzi schemes are under investigation ), and a dramatic turn from immorality ( refresh yourself...watch the Maury Povich show a few weeks, until that sinks in, people. ). Any theologue worthy of the name knows there are grave consequences to an entire society for losing its moral compass. Theologians are detested enough as it is, but honestly friends, there are grave consequences. Anyone noticed fires ravaging homes? Floods, Hurricanes? Tornadoes? Earthquakes?...how about a volcano on U.S. soil anyone? One blogger I mentioned this to back during the campaign, said "This is the 2oth century; morality is not important anymore"...to which I replied, "Isn't it sad when cousins marry?"


On Jun 22 10:33 AM fireball wrote:

> chicago politics, actually chicago has just been caught more often.
> a man that can look you in the eye and lie without flinching is destined
> for high political office.
> a phrase the media coined which caught on comes to mind. "character
> isn't an issue?" it has always been the number one issue for me.
> without good character there is no "hope" for honesty, duty, honor
> or integrity.
> as i watched obama stand and lie so smooth and with such an altruistic
> demeanor it was chilling. at least mccain was a stumbling bumbling
> lier. these two were the best our nation could offer? i guess they
> were the best at the slime of politics.

Jun 22 03:28 PM

[Glen L.:]

I'm just finishing reading Hans Hermann Hoppe's "Democracy: The God that Failed". A fascinating read. HHH is correct; democracy is mob rule and inevitably leads to the lowest common denominator, which translates to the lowest scum in society becoming politicians, where they rip off the productive in order to buy votes (from willing sellers) and stay in power. Moral decay sets in and rots the foundations of civilization. At some point the parasites kill the host, and we're fast approaching that point now.

The Founders envisioned a Constitutional republic, not a democracy, but the democrats (who are often Republicans) slowly and steadily eroded away the protections put in to prevent a democracy, either by amendment or by just ignoring the Constitution. Now we have the spectacle of millions of moonstruck Obamites worshiping him, along with the vast majority of the mainstream press, as he steadily tightens his grip. Freedom is just a fond memory. Farewell, America.

Jun 22 06:09 PM

[Northstar10000:]

Any idiot could have seen right thru Obama. Ran across a few college kids who just graduated in late May. Can't find a job at Mickey D's. Laughing my --- off, guess who they voted for?

Jun 23 05:34 PM

[Perry B:]

Fannie and freddie went up today apparantly according ot one article I read it is due in part to a no friction rule in stock market trading ? What is that about any clues? Supposedly, the new administration has figured out the market makers were rigging the days results. Thus leaving us long traders raped and the market continuing to get sucked to the bottom. Rather than to flow freely upward. By our long positions. Supposedly this will help the market move up more freeely. Does anyone know about this friction rule . Why not just bring back the uptick rule. Or everyone continue to short when the stock hits the ceiling and buy in with the institutions when it is bottoming . Throw fundementals of strong companies you are willing to invest in out the window. Instead buy into a debt ridden FNM, FRE, or any stock in market maker favor, and have less friction. I am confused. This rule seems to play heavy for the insitutions and the market makers to further manipulate the market. Any help on clarifying this rule would be appreciated.

Jun 29 06:09 PM