ArtfulDodger

11 Reasons Why It's Time to Invest in China and 5 Ways to Play It

Excellent article.

Taking Profits - Thanks, Obama

Ray001:

Yes, I surely hope you are right about Obama, but I don't think you are.

Birds of a feather flock together, and look at Obama's past friendships. You won't find anybody who believes in government restraint, that's for sure.

As far as the Democrats not having anything to do with the current economic mess we're in (caused by the Subprime Blowout), with all due respect, you are dead wrong.

Here’s what happened.

In 1977 the Carter Administration and the Democrat Congress passed the Community Reinvestment Act (CRA)—this bill outlawed what the Left called "redlining" and mandated lending institutions to "lend equitably to minorities." (As Buffett Jr. said, we need a more "equitable country"; but this was more to buy votes rather than create economic equality.)

The Democrats claimed banks were encircling sections within their working areas where mostly minorities lived and then were refusing to lend money to anyone living within those red lines. This they claimed violated the Equal Credit Opportunity Act passed by Lyndon Johnson (LBJ) and a Democrat Congress in 1967.

Over the next three years, in fear of steep fines and lawsuits, banks lent money to contractors—subsidized by the federal government—to build low-cost housing for minorities and a small percentage of the lower-income White majority. Cheap apartments and houses cropped up like weeds in an untended garden all over the nation in the late 1970s.

The federal subsidies in turn lured all types of companies, such as Duke Power (a power company supplying power to NC, SC, and parts of GA) into the homebuilding business. It was all a continuation of LBJ’s "War on Poverty" and his "Great Society"—a socialist concept invented to help the Democrats buy the minority vote permanently.

When Ronald Reagan got elected in 1980 this type of lending and building came to a halt over most of the nation—except in states that continued to subsidize contractors for such building.

Indeed, the subsidies provided builders with a no-lose situation, for whether the homes sold or not, either the state or Federal Government would pay for most of the expenses for building—or they would provide at least the down payment (and sometimes more) for minorities to buy the home.

When the Clintons got elected in 1992, the first thing they did was to try to get Congress to pass a "$30 billion stimulus package" for certain cities. It was such a blatant attempt to repay city governments that had promoted the Clintons’ campaign that even the Democrat Congress declined to go along with it. That, however, did not deter the Clintons.

The Clintons scurried to find other ways to repay their constituents and buy more votes for the 1996
election—remember, the Clintons lost heavily in rural areas but won a large majority of the votes in cities and carried as much as 98% of the vote in areas where minorities lived. The media didn’t tag Clinton as the "first Black President" for no good reason.

The first move the Clintons' HUD made was to strengthen the rules within the CRA and give Federal Housing bureaucrats the fangs to bite the financial institutions that did not comply—these new powers allowed federal bureaucrats to order financial institutions to create a new lending vehicle, which became known as the subprime loan. These are loans made almost exclusively to minorities whose repayment rating is far below normal government required lending regulations.

Whites—unless on welfare or disabled—still had to qualify according to the much stricter lending standards laid down by the Federal Depository Insurance Corporation (FDIC) after the Savings and Loan boondoggle of the late eighties and early nineties caused the government to have to pile approximately $1.8 trillion onto the National Debt to cover the cost of the bad loans the Savings and Loan Industry had made.

The changes to the CRA put into place new regulations that forced lenders to make high-risk loans to applicants that could not previously qualify. In areas where old-fashioned, conservative principles had governed lending standards, lenders now had no choice other than to lower their guidelines and make loans that—otherwise—they would never have approved. The alternative was to face fierce federal fines and burdensome lawsuits.

By the time the Republicans took over the Congress in 1994, the Clintons were well on their way to transferring hundreds of billions of dollars to their minority constituents through their new lending rules—and it was costing the government zero. But the hell to pay was on its way.

Thousands of banks, however, were still reluctant to dive into the subprime cesspool. For they knew that such lending practices portended terrible trouble.

Here are some of the rules qualifying the mandates banks received from the Clinton bureaucrats:

Regarding Credit History: Lack of credit history should not be seen as a negative factor in lending money to minorities. In reviewing past credit problems, lenders should be willing to consider extenuating circumstances.

Regarding Down Payment and Closing Costs: Accumulating enough savings to cover the various costs associated with a mortgage loan is often a significant barrier to home ownership for minority applicants. Lenders should begin to allow gifts, grants, or loans from relatives, nonprofit organizations, or municipal agencies to cover part of these costs.

Regarding Sources of Income: In addition to primary employment income, Fannie Mae and Freddie Mac will accept the following as valid income sources: overtime and part–time work, second jobs (including seasonal work), retirement and Social Security income, alimony, child support, Veterans Administration (VA) benefits, welfare payments, and unemployment benefits. (Source: the Wall St. Journal)

Conservative animals that bankers normally are, they did not willingly accept these new criteria. The Clintons therefore sent out notices such as the following to threaten lending institutions:

"Did You Know? Failure to comply with the Equal Credit Opportunity Act or Regulation B can subject a financial institution to civil liability for actual and punitive damages in individual or class actions. Liability for punitive damages can be as much as $10,000 in individual actions and up to $500,000 or 1 percent of the creditor’s net worth in class actions." (Source: the Wall St. Journal)

Still not satisfied with how banks were complying with their plan to transfer billions of dollars to their minority constituents, the Clintons sicced their grisly bear running the Justice Department—one Ms. Janet Rhino—on about 1500 hundred banks with federal lawsuits aimed at forcing them to adhere to the Clintons’ new federal lending mandates. HUD under Andrew Cuomo also sued lending institutions around the nation to force them to lend money to minorities.

These banks, of course, got together and hired a group of lawyers who did what lawyers do: they settled with the Justice Department. According to their asset value, each bank had to set aside certain amounts of funds to be lent strictly to minority applicants.

The settlements came to the forefront sometime in 1998.

The result of these mandates was that "loan brokers" (go-between parasites that searched for loans for unqualified applicants) popped up like hot corn kernels.

To aid the banks in hiding the quality of loans they were making, the Clintons allowed them to make their loan portfolios more opaque. This kept investors in the dark as to what kind of shape banks were in regarding their loans. They also allowed lenders not to have to expose their writedowns every year, as they previously had to do—now they were able to hide billions in bad (or delinquent) loans from shareholders and potential investors. The problem is, however, that not every investor—by any means—knew this had taken place.

These lax regulations had forced me completely out of investing in banks by the late 1990s. In fact, when I learned that First Union had to set aside $5 billion strictly for minority lending, I sold my stock and haven’t owned a bank since. It's not that I was concerned about minorities; it was that the Democrats were forcing banks to lend to people whether they could pay or not.

After 9-11 most Americans still don’t realize it, but they almost lost their economy then: people stayed home, they didn’t travel or buy, and they didn’t borrow. The whole system was about to collapse when Bush managed to push through investing and business incentive tax cuts and the Fed cut interest rates to an all-time low of 1%.

Both helped to save the American economy, but the latter also exacerbated the subprime problem, because the parasitic loan brokers became more than go-betweens; they began advertising and soliciting loan applicants. In this respect, greed indeed controlled this business—but remember that banks had to make the loans because of the mandates.

With interest rates so low, money began to flood all over the nation, and that’s when greed entered the lending field. Although loan requirements had already been set far below normal standards, loan brokers began fudging the applications for not only minorities but other low-income people—who could now acquire a loan whose payment they had no possible way of paying.

The mandated lending rules, low interest rates, and lax lending standards caused a building boom and a lending boom that encouraged builders to build and build and build, until now the nation has such a glut of homes on the market that real estate industry analysts say it will take until sometime late in 2010 to sell off.

The Clintons, however, were still not satisfied. To the last day of their Administration, the Clintons were pushing the two Democrat-created institutions called Fannie Mae and her brother Freddie Mac to buy more subprime mortgages. They did—with Clinton-appointed flunkies at the helm of both entities.

Because of mismanagement, an accumulation of hundreds of billions in worthless minority loans, and enormous salaries along with scrumptious perks for the bureaucrats running them, the government recently had to nationalize both Freddie and Fannie. I believe this will cost taxpayers a minimum of $200 billion this year—and hundreds of billions more over the upcoming years.

Through the politicizing of Fannie and Freddie, the Clintons accomplished far more for themselves than buying votes, transferring wealth, and paying off constituents. Clinton cronies appointed to run the two monsters padded their pockets with millions of dollars, and Fannie and Freddie became major contributors to the Clintons and other Democrats. The top four recipients have been Democrat Senators Chris Dodd, Barack Obama, John Kerry, and Hillary Clinton—in that order.

Worse even is Franklin Raines—a Democrat crony—whom the media purposely never mention. The Clintons had him appointed head of Fannie Mae in 1999, and he proceeded to convert the entity into his personal piggy bank. By the time he had packed his billfold full and scampered off under a fuzzy fog of rigged balance sheets, overstated earnings and hidden loan losses, he carried with him a golden goblet overflowing with honey—worth $100 million.

Because of all of the above, home prices have crashed, causing millions of new homeowners to be sitting in homes that are worth far less than they paid for them. And subprime borrowers—perhaps 2.0 million of them—are sitting in homes they’ve not made a payment on in months (and sometimes years) and others have never made even the first payment on.

More proof that the Democrats caused the subprime debacle:
See this 1999 article in the NY Times that documents the Clintons were behind pushing Fannie Mae into making more subprime loans to minorities who could not qualify for conventional loans.

Here is a quotation from that article:
"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. . ."

Here is the site for the entire article, which goes on to explain how risky subprime loans were: query.nytimes.com/gst/...

In 2003 Treasury Secretary John Snow testified before Congress that if something weren't done, the subprimes were going to cause terrible problems for the nation. The Senate Republicans sponsored a bill, led by none other than John McCain (who seemed not to remember this during the presidential campaign) to reregulate subprime loans, but the Democrats blocked the bill.

Barney Frank and Dick Schumer told John Snow that there was no problem with the subprimes and that the nation actually needed more lending in that area.

Taking Profits - Thanks, Obama

BS, you're going to have to stretch out a little further to find a Founder or a Paine-type Revolutionary who believed in the type of social-engineering that governments around the world have taken up since Karl Marx wrote the Communist Manifesto in the mid-19th Century and the type that Buffett Jr. wants.

Thomas Paine never ever believed or wrote that a government, such as the Republic his peers created, should go about trying to quell inequality among the economic levels. There is a difference between equality under the government and equality of wealth.

David Taffel can posit whatever belief he wants to put in Paine's mouth, but Paine in the "Rights of Man" was interested in men having equal rights under their government --- for God sakes by no means was he advocating the type of "equitable country" that Buffett Jr. was railing about.

Neither Paine nor anyone else of the 18th Century or early 19th Century would have endorsed curbing what the head of a business made --- much less taking part of those profits and giving them to the day laborers for the purpose of having an "equitable country."

Before you twist what I'm saying, let me point out that no one during that period wanted to keep the poor poor; what they wanted to do was to break them away from a tyrannical monarchy, give them freedom, and that freedom would provide them with the opportunity to gain status, wealth, or happiness in the world in pretty much any way they chose.

And I myself do not want to keep the poor poor, but neither do I want a government run by an Obama Executive Branch; a Nancy Pelosi, Barney Frank, Charlie Rangle, John Conyers, John Lewis, John Murtha, Rahm Emmanuel Congress; and a Christopher Dodd, John Kerry, Chuck Schumer, Diane Feinstein, Barbara Boxer, Harry Reid, Ted Kennedy Senate telling CEOs or otherwise what they can make. Do you?

BS, you are out of context on the subject and the time. In your obvious fanatical fervor to correct, you have entirely changed the face of the subject I was addressing.

Moreover, economic inequality is bred into our type of system, or at least the one we used to have, and it's in there for a purpose.

Our system tells folks on the lowest economic level that if they are capable of putting their noses to the grindstone, if they are willing to sacrifice, if they are willing to put out when others refuse to, then they can climb out of poverty and into a better life. Freedom is what gives them that opportunity --- not the government. Being poor ought to give people incentive to work their way out of that povery --- not sit around and envy what others have and try to figure out who to put in office that will take away from those they deem should not have and give to those they deem should have.

For you and particularly for Buffett Jr., this: "Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy. The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries." (Winston Churchill)

Taking Profits - Thanks, Obama

Buffett Jr. speaks of it being a good thing if America could become a more "equitable country."

You surely won't find anybody who had anything to do with founding this nation speaking of an "equitable country." You surely won't find anyone who laid the foundations of the freedoms we've had in this nation spewing such crap.

It's surely not in the Constitution. The only people who've ever come with this tripe are Karl Marx and his followers, and their views have enslaved hundreds of millions over the last 150 years and killed hundreds of millions more. Their claim to creating a more "equitable countries" has brought about one terrible world war and numerous death-filled conflicts around the world.

Why would any sane leader seek to bring about a more "equitable country" after the bane such doings have brought upon the world?

Where can you show the empirical evidence that will prove that trying to creat a more "equitable country" is truly a worthwhile endeavor?

Leftist rhetoric sells suckers, but the evidence shows the reality of what leftists claim they want is a bane full of damnation.

Freedom should be the first cry of every American, and they should all damn leftist social engineering, such as the type that brought about the recent Subprime Bustout that has nearly busted the nation, the banking system, and other sectors.