The last debate was the best in terms of format. McCain's performance was very strong. But in a year when the well has been poisoned against Republicans, in part by their actions, in large part by their inability to communicate, and in large part by an MSM thoroughly biased to the left, and with the economy tanking, was it enough?
Last night was McCain's best performance by far. His likening Obama's economic plans to Herbert Hoover, the man who led us into the Great Depression, and McCain's discussion of the Colombia free trade agreement were just a few of the high points of the evening for McCain. The low point of the evening for McCain, I thought, was in answer to the first question, when he began to expound on the economic crisis by citing to "Wall St. greed." The problem's we face are not founded on Wall St. They are founded on Clinton and the left's intervention into the mortgage market beginning two decades ago. They are founded on ACORN and other people - Obama included - who fought to degrade lending standards rather than seek color blind equality in lending. Wall St. is an important player in this collapse, but in the scheme of things, they are a bit player in what happened. McCain's failure to explain that last night was, perhaps, a fatal error.
Thankfully, it only got better then there for McCain. And on Obama's side, we were treated to falsehoods about abortion, Ayers and ACORN. Unfortunately, with a media in the tank , Obama could spin whatever fantasies he wanted up there, and by the time news of it breaks beyond the shield wall the MSM have created for Obama, the election will be long over.
At any rate, the long and short, I am feeling very pessimistic about this one. I think the chances of McCain winning the election are fading because popular perception is that Democrats are better for the economy. The problem is that, if that was ever, at any time true, that perception does not comport with today's reality. The people in charge on the left are not left of center democrats. Nancy Pelosi and Barack Obama are both on the far left end of the scale, a place where Adam Smith is not welcome. I think McCain made a last good effort, though I do not think it enough. I hope that I am wrong. If not, we will soon see America remade.
Thursday, October 16, 2008
The Final Debate
Rumors Of My Demise
. . . have been greatly exaggerated. A series of technology related mishaps a corporation that provides its own proprietary modem combined to keep me off the net for a week. My crisis was not the latter's. At any rate, its good to be connected again.
Tuesday, October 7, 2008
McCain-Obama Debate 2 - A Town Hall Travesty
The second McCain-Obama debate is in the books. The format, faux town hall, was horrid. The questions varied from reasonable to mindless - why do we need to know who either one of these two would appoint as Treasury Secretary? The time allotted for answers was ridiculously short with no follow-ups. This all worked in favor of Obama who is sitting on a lead in the polls and a commonly held belief among far too many Americans that the tanking economy is the fault of George Bush and Republicans.
This was by far the worst debate I can recall every watching. McCain needed to be aggressive and to attack on the economy. He did that within the limits of the debate format. Unfortunately, the debate format was so limiting, I doubt whether he was able to impact many people at all. My notes from the debate:
- Finally, McCain goes on the attack over Fannie and Freddie. That was good, but he needs to extend out that attack and repeat it every day between now and the election.
- Obama is referring to a letter written in 2006 when he supposedly warned of the subprime crisis and the need to take action against Fannie Mae. I want to see that letter. It doesn't appear on his website. Obama is a political coward who does not go against the grain of his party - all of whom were in strong support of Fannie Mae and their mission to purchase subprime mortgages at the time. Bottom line, I am not taking the One at his word on this one. Show me the letter. Release it to the public. McCain should have demanded this at the debate.
- McCain is going to buy up all distressed mortgages. My initial reaction is to recoil in horror. I will have to sleep on whether it actually makes some fiscal sense given that, one, it was government intervention in the market place that got us here in the first place, and two, McCain is selling it as a way to stabilize markets. I have more than a little doubt.
- McCain hit on a point I have been thinking about for a few days. How similar Obama's plans sound to Herbert Hoover's when he found himself facing a down economy.
- Conbama Law 101 - The right of the people to health care shall not be infringed. If we are staring disaster in the face in the long run from the growth of medicaid, what is going to happen when we extend health care to the nation as a whole as a fundamental right?
- Obama is going to add a trillion in spending while cutting the budget and reducing taxes. That will no doubt come after he walks on water and feeds the nation with a loaf and a few fish. I wish he would name one program he intends to cut with that scalpel of his. Fannie Mae would be a start.
- The foreign policy questions were mostly a repeat of the same ones asked at the last debate, bringing out repeat responses.
- Why does McCain allow Obama to get away with saying he will end the war in Iraq? We've won the damn thing - Obama cannot ideologically admit to it.
- Did anyone else notice Obama's refusal to answer the question whether he would immediately rise to Israel's defense in the event of an attack by Iran. He spent two minutes trying to wind his way around the question without ever answering it. This guy really is dangerous.
- Overall, McCain needed a far more freewheeling debate format if he was to have any chance of turning things around. Tonight was just horrid. If the next debate is like this, say hello to Presidnt Obama.
If McCain Keeps Making These Points . . .
. . . he has a chance of winning this election.
Not surprisingly, Powerline reviews MSM treatment of the speach and finds that the MSM has put what amounted to a news blackout on it. The MSM won't be able to do that during the debate tonight. McCain needs to make precisely the above case.
Hurricane Subprime - Part I (1977 to 2000)
Gone were “outdated” debt limits, as obligation ratios were now deemed arbitrary and racist when applied to lower income households: “Obligation Ratios: . . . Many lower–income households are accustomed to allocating a large percentage of their income toward rent. While it is important to ensure that the borrower is not assuming an unreasonable level of debt, it should be noted that the secondary market is willing to consider ratios above the standard 28/36.” Gone were credit history and credit scores. And indeed, in what can be called the ACORN Full Employment Act, credit counseling and buyer education programs run by community organizations could ameliorate bad credit history. “Credit History: Policies regarding applicants with no credit history or problem credit history should be reviewed. Lack of credit history should not be seen as a negative factor. . . For lower–income applicants in particular, unforeseen expenses can have a disproportionate effect on an otherwise positive credit record. In these instances, paying off past bad debts or establishing a regular repayment schedule with creditors may demonstrate a willingness and ability to resolve debts. Gone was the requirement for a permanent income source. Now, even temporary sources of income, such as welfare and unemployment benefits, were to be considered without regard to the fact that, while the mortgage would take 30 years, the income streams now being counted were of very limited duration. “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.” And in perhaps what has turned out to be the biggest mistake, gone were requirements that the individual borrower personally produce a down payment. Long experience had shown that a significant downpayment made personally by the borrower was perhaps the most significant indicie of stability of mortgages: Down Payment and Closing Costs: Accumulating enough savings to cover the various costs associated with a mortgage loan is often a significant barrier to homeownership by lower–income applicants. Lenders may wish to allow gifts, grants, or loans from relatives, nonprofit organizations, or municipal agencies to cover part of these costs. Cash–on–hand could also be an acceptable means of payment if borrowers can document its source and demonstrate that they normally pay their bills in cash. Even appraisal standards were changed for lending in low-income areas - and accompanied by a clear warning that failure to follow these new standards could lead to liability for racism. Management should be aware that Fannie Mae and Freddie Mac have issued statements to the effect that they understand urban areas require different appraisal methods. Accordingly, it may be advantageous to use the services of appraisers with experience in conducting appraisals in minority and lower–income neighborhoods. Management should consider having all appraisal reports that would cause an application to be denied reviewed by another experienced appraiser. This can help protect the financial institution as well, as it may be held liable if an appraisal is found to be discriminatory. Lastly, if the financial institutions did not understand the downside of still using “outdated and arbitrary” lending procedures, then the Boston Fed provided a helpful reminder on the last page. The federal agencies that regulate financial institutions have authority to enforce Regulation B administratively. Civil suits for unlawful credit discrimination may be brought within two years of the date of the occurrence of the alleged violation. Damages include actual damages and punitive damages of up to $10,000 in individual actions. Punitive damages are limited to the lesser of $500,000 or 1 percent of the creditor’s net worth in class actions. The damage done by this massive bit of social engineering and protected by the left bled throughout the entire mortgage industry. It, more than anything else, is where responsibiity for the subprime crisis - a crisis that in reality goes far beyond subprime loans - actually lies. CLINTON PROPOSES TOUGH NEW RULES ON BIAS BY BANKS There were a few brave souls who unafraid of charges of racisim, spoke out against this change. One group was at the Fed. This from a NYT article in December, 1993: Members of the Federal Reserve Board today sharply criticized the Clinton Administration's new plan for insuring that banks open branches and make loans in poor and minority neighborhoods. . . . [M]ost of its members expressed reservations about the plan as drafted. . . . And ironically, one of the other vocal and staunch opponents of this new push into subprime lending were minority owned banks that served large urban areas. This from the NYT in September, 1993: The black bankers said they were concerned about heightened enforcement of the Community Reinvestment Act of 1977, which mandates lending in underserved areas, . . . If that does not tell you how devoid of substance charges of racism were against conservatives and Republicans who challenged Clinton's changes to the CRA, nothing will. Yet that did not stop the left from playing the race cards with abandon in response to any and all efforts to legislatively reign in the CRA. In 1995, House Republicans made a major push to fundamentally change the CRA from the world’s largest affirmative action program into one that assured a level playing field for all. . . . Banking legislation working its way through the House would also cause damage, both socially and economically. It would remove the Justice Department's authority to sue bankers and realtors who systematically block blacks and other minorities from renting apartments or getting mortgages. Apparently Justice has been too vigilant fighting discrimination for the G.O.P.'s taste. . . . Again in 1999, Republicans, this time led by Senator Phil Gramm, tried to push through a bill that, as part of a major restructuring of our financial laws, would also have changed the nature of CRA similar to the earlier House plan. As the NYT reported in Oct, 1999: . . . . Mr. Gramm has repeatedly criticized the way regulators have interpreted the [CRA], saying that the Government should not be in the business of ''reallocating capital'' and that the law imposes unnecessary and burdensome requirements on small banks and savings associations. President Clinton’s promise "to veto the legislation unless major changes were made on the provisions in the Community Reinvestment Act" won the day. One side note that came out of this is worthy of mention. In order to buttress support for the CRA, the Clinton White House, in 1999, "instructed bank examiners . . . to seek testimonials from bankers about the Community Reinvestment Act." It ultimately came out in a report on this incident that the regulators asking banks for CRA testimonials while conducting CRA compliance inspections – all of which certainly seems a tremendous abuse of power. But even with that "the examiners ultimately did not find any executives to speak on behalf of the Community Reinvestment Act." Critics led by Phil Gramm, . . . argu[e] that [the CRA] imposes unfair regulatory burdens on banks and allows advocacy groups to ''extort'' money from institutions that do not want bad publicity over their lending records.
The left claims that the subprime crisis is a failure of capitalism and a consequence of "deregulation" pushed by Republicans. How accurate are those claims?
____________________________________________________
The short answer to the above question - ridiculous. Yes, other things have combined with the subprime crisis to worsen the mess we are in financially. But to point to those things while claiming that the subprime crisis itself is anything other than the alpha and omega of this fiscal catastrophe is pure prevarication.
One way to analogize the financial crisis is to a hurricane, with the left's push of subprime lending as a tool of social engineering being the hurricane gaining strength over the ocean. The deregulation of which the left complains did nothing to cause or strengthen the hurricane. What it did was effect some the levees on land designed to protect the markets.
During the period 1977-2000, most of the elements of our current fiscal crisis were put in place. President Clinton turned a little known law from the Carter-era, the Community Reinvestment Act, into a tool of massive socialist engineering. Color-blind lending standards were eviscerated and new standards were enforced by the police powers of the government and through the enlistment of community organizers and their ilk. Fannie Mae and Freddie Mac were made the engines of the new social engineering, creating an ever-expanding market for mortgages founded upon the new "innovative" lending standards. All attempts by Republicans to attack this cancer failed. The left deliegitimized and beat back every attempt to reform the CRA by recasting such efforts as racist.
As to the levees designed to protect our economy against such hurricane, some were important, others were meaningless. Possibly the most important but as of yet underreported aspect of the crisis, is how rating agencies of the era vastly underrated the risk of the toxic mortgage backed securities coming out of Fannie Mae. The repeal of Glass-Steagall actually strengthened some of the levees. Credit Default Swaps, which developed unregulated during the Clinton era, have proven to be a failed levee unable to withstand the widescale failure of the underlying mortgages.
As a side note before beginning this, understand that the goal of "affordable housing" was laudable. Looking at this in retrospect, there were and are two ways to approach this issue - one from a capitalist and market based approach and one from a socialist and redistributionist approach. The former would have been a series of programs to repair credit and to assist individuals with amassing savings for a downpayment. The latter, well, that was what the left was able to enact.
1977 – A Tropical Depression Forms Under President Jimmy Carter:
The Community Reinvestment Act (CRA) of 1977 was a well intentioned law pushed by then President Jimmy Carter. In defense of President Carter (and those words pass my lips for the first, and I suspect, last time) this law did nothing more than make "red-lining" illegal. Red-lining was a practice whereby banks would simply refuse to extend credit into the poorer sections in their communities. This grossly unfair practice hit minorities the hardest and it did so without reference to credit history or an individualized assessment of likelihood of repayment. The CRA of 1977 did not mandate any lessening of race and gender neutral lending standards. To the contrary, as the NYT summed up the original intent of the CRA, "the Community Reinvestment Act [was] supposed to be about geography, not race or gender." Looking back in 1994, one Fed boardmember described the law as, up to then, having done "little harm and some good." It waited for the left to turn this law into a cancer by stamping it with identity politics.
As we headed into the brave new world of the 1990’s, mortgage lending standards were well established based on decades of experience. These standards included a credit history with a qualifying score, a verifiable and long-term income stream, and based on that income stream, a 28/36 ratio to gross or net as the cap on the share of monthly income that could be devoted to mortgage payments. Further, a down payment in the range of 20% was the industry standard. Years of experience had shown that individuals with that sizeable a stake in their home were far less likely to go into default.
1992 - The Tropical Depression Becomes A Category I Hurricane
William Jefferson Clinton was elected President in 1992, the same year the Boston Fed published an atrocious study alleging wide-spread racism in mortgage lending. According to the report, "Blacks and Hispanics remained trapped in a lending gap when they tried to buy homes last year in Greater Boston, denied mortgages more than twice as often as whites regardless of income."
The report did not accurately adjust data for credit scores, income steams, etc., which, when later done, showed no racism in lending practices. Nonetheless, this single report was embraced by the left as proof positive of wide spread racism in lending. No further – and surely to be conflicting reports – were deemed necessary before taking action on a national scale. The left used the report as justification not to level what was in reality an already level playing field, nor to justify market based government programs to help raise lower-income minority borrowers to the point that they could meet the lending standards and save for a down payment. Rather, they used the report to entirely gut lending standards on a nationwide scale, forcing lending institutions to take part in a massive redistribution of wealth as part of the most costly bit of social engineering ever undertaken.
The Boston Fed led the way, publishing "Closing the Gap: A Guide to Equal Opportunity Lending" in 1992. The central thesis of this guide was that "[u]nintentional discrimination may be observed when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower–income minority applicants" (emphasis added).
The "arbitrary and outdated criteria" the Boston Fed had in mind amounted to an attack across the panoply of lending standards. Racially neutral fiscal standards and reality fell to the politics of race (quotes from the Fed publication appear in italics):
Successful participation in credit counseling or buyer education programs is another way that applicants can demonstrate an ability to manage their debts responsibly.
1993 – 2000: The Hurricane Gains Strength To Category II
There were five parts to the Clinton Administration’s single-minded push to drive America’s into the subprime swamp. The first three were directed at forcing financial institutions to dispense with the “outdated and arbitrary” lending criteria. The fourth leg was to create a huge market for these loans. The fifth and last leg was the meme used to forward and defend these “innovations” by Clinton and Democrats. Any challenge to this new plan was invariably recast as racism and race cards were played with wild abandon.
To force these new lending standards on America. Clinton promulgated new regulations under the CRA, turning it from a purely geographical law aimed at red-lining into the nation’s largest affirmative action program. These regulations were enforced by the Justice Dept. and bank regulators on one end, while provisions in the CRA allowed “community groups” on the other end to bring private law suits – something out of which ACORN and other progressive organizations have made a highly profitable cottage industry.
By 1993, Clinton proposed a vast expansion of regulation under the CRA. He did this not through Congress, but through regulators. Once Congress has voted on enabling legislation for regulators, they are empowered, within limits, to craft regulation that passes into law without vote by Congress. This from the NYT in December, 1993:
The Clinton Administration proposed tough new tests today that are intended to insure that banks end discrimination in their lending to members of minority groups and to people with low and moderate incomes.
The changes are the latest effort by the Administration to broaden access to credit, financial services and investments. Officials predicted that people and businesses in these groups would gain access that they might not otherwise get to billions of dollars in credit once the proposals take effect in 1995.
The regulations, which set higher standards for banks, for the first time apply objective measurements on three levels. Banks would be tested in several ways to determine if their overall pattern of lending in specific neighborhoods was biased, when compared to their overall lending and those of competitors. They would also be judged on whether they were making investments in a community's growth, like grants for economic redevelopment, and whether they were providing a full array of customer services.
. . . [B]anks could for the first time face sanctions like binding orders or fines to change their practices.
That would give regulators additional power. Now, a bank's poor record in this area can affect whether the Government will permit bank acquisitions or mergers, and institutions that fall short have been sued by community groups or regulators. Lately, Federal regulators have blocked bank acquisitions when they regarded a lending pattern unfavorably.
The proposal is the most important modification of equal-lending enforcement since 1977, when Congress passed the Community Reinvestment Act. That law was intended to force banks to make loans to individuals, businesses and groups in neighborhoods that many large financial institutions had shunned. . . .
. . . Its reservations about the fair lending plan, which is part of a broad effort by the Administration to spur lending in poorer communities, had been expected. But some members strongly denounced the plan, revealing the depth of the board's opposition for the first time.
. . . The Administration's plan would toughen the tests used to insure that banks comply with the Community Reinvestment Act. For the first time, banks would be tested based on data about their loans and other operations.
Indeed, many black-owned banks have tended to aim at the wealthiest and most creditworthy black customers while turning away poorer applicants for fear of losing money on risky loans.
As reported in the NYT, the proposed legislation would have barred "the Justice Department from relying on statistical patterns of discrimination, forcing it to rely instead on cases of demonstrable bias against specific individuals." In other words, if a minority and a non-minority were on equal footing in terms of lending criteria and both were denied a loan, then there could be no charges of racism. The ratio of loans given to minorities versus non-minorities would be immaterial in the absence of a finding of at least some actual racism. Further, the challenge would have stopped "community activists" – and community organizers - from blocking "banks with bad community-lending records from obtaining regulatory approval for mergers, acquisitions and other transactions." These changes were "strongly opposed" by "House Democrats, community activists and the Clinton Administration." " . . . Democrats as well as consumer and community groups accused Republicans of . . . undermining affirmative action."
The effect of these changes would have created a level playing field with no impetus to adopt fiscally unsound lending policies. The changes would have done nothing to weaken the sound prohibition against red-lining. Nonetheless, the NYT grossly mischaracterized the effect of these provisions as to "eliminate most enforcement of the Federal law that requires banks to lend in poor neighborhoods as well as rich ones." And then, a few days later, the NYT editorial board in June of 1995 played the race card:
The bill . . . would . . . gut the Community Reinvestment Act, which requires banks to lend money in the neighborhoods where they take deposits or else possibly relinquish the right to merge or open and close branch offices.
His critics say that the Financial Services Act of 1999, as his bill is called, would roll back the Community Reinvestment Act. Those critics include the Congressional Black Caucus, a group that helped save Mr. Clinton's Presidency during the Senate trial proceedings early this year.
There were fresh signs today that Democrats and Republicans were hardening their views. Nine Republicans sent a letter to Mr. Gramm urging him to hold the line and not make any significant concessions on the issue. At the same time, the Rev. Jesse Jackson said in an interview that he was urging the White House to hold firm and that a compromise on the Community Reinvestment Act would undermine the President's commitment to raising capital in poor areas.
The changes worked by the Clinton administration not only provided for stiff civil penalties that could be imposed by the Justice Dept., but also allowed individuals and community groups to bring private law suits claiming discrimination in lending. This served a dual purpose for far left organizations. Against some, they actually filed law suits to force greater lending to minorities, seemingly irrespective of credit worthiness. The second purpose was – and is – as a shakedown vehicle, getting promises of funding in order to refrain from lawsuits or creating bad publicity. Both have been effective. As the NYT described it in 1999:
. . . Consider Bank of America, which estimates that its community lending and investment business . . . Created when Nationsbank acquired BankAmerica last year, the bank . . . pledged a 10-year, $350 billion package of community-development lending and investment to assuage regulators and activists . . .
. . . After Congress passed the law in 1977, many banks ignored it until the early 1990's, when regulators and the Clinton Administration stepped up examinations while community advocates intensified protests of mergers involving banks with spotty records. The law requires periodic reviews of banks to insure that they meet the credit needs of the communities they serve, particularly lower-income neighborhoods. Poor compliance can hurt efforts to expand or acquire other banks, though such setbacks rarely happen.
Nevertheless, figures supplied by both community groups and banking industry officials suggest that the law has been effective over the last decade. Today, 29 percent of home mortgage loans are made to low- and middle-income borrowers, compared with 18 percent nine years ago, according to the National Community Reinvestment Coalition, a nonprofit group made up of 700 community lending organizations.
Some places have experienced far greater changes. In Texas, for instance, the proportion of Nationsbank's home loans to low-income borrowers leapt from 1 percent in 1989 to more than 20 percent over the last decade, Ms. Bessant said.
And lenders have promised more than $1 trillion to future community lending and investment in low-income areas. Nearly all of that has been pledged in the last few years, after regulators changed the compliance rules to focus more on actual dollar amounts, while community groups sought assurances that a spat