Reinventing The Broken Wheel

What is it about the far left that they never learn from their mistakes (nor do they admit them, for that matter). And what is about the right that they are unable to point out any of this to the nation.

The biggest scandal of our lifetime is the subprime crisis that led to our economic meltdown - and from which we have yet to recover. I have maintained for years now that there should have been a miles long line of bankers, bond rating agency managers, Wall St. types, Fannie and Freddie managers and others who should have been prosecuted over our economic meltdown. When these people colluded to bundle and then rate subprime bonds with a AAA rating, that was pure fraud. Yet there has not been a single related criminal prosecution brought under the Obama administration. That itself is a scandal.

Worse, Fannie and Freddie, the two institutions at the heart of our meltdown, have not been privatized. To the contrary, under Obama, they are now not merely true government wards, but they are right back in the middle of the housing market - insuring 90% of all new mortgages. Worse yet, they are not merely back in the middle of the sub-prime market, they own it entirely - which is to say it is backed by the full faith and credit of every taxpayer in the nation.

Then to top it all off, over the past several days, both houses of Congress have released the results of ethics investigations holding no one in Congress liable for their acceptance of below market rate mortgages from Countrywide - a private mortgage company joined at the hip with Fannie and Freddie and that lobbied to keep the subprime lending going full speed ahead - at least until the company itself went bankrupt.

All aspects of this scandal are being swept under the rug, with no effort being made to diagnose the problems, nor to hold those liable where appropriate. As John Fund writes at NRO:

In Star Wars, Obi-Wan Kenobi used an old Jedi mind trick on Stormtroopers to deflect them from their real quarry: “These aren’t the droids you’re looking for.” It worked.

It looks as if another mind trick, well known in the Congress — delay and deflection — will now work to make Americans forget one of the biggest scandals of our time: the housing collapse that triggered the 2008 financial meltdown we are still suffering from. We shouldn’t just gaze over the fiscal cliff everyone else is scrutinizing; we should also examine the droids who helped set in motion our current economic mess.

To cure the problems, you first have to diagnose them - and that has yet to happen in America. Under Obama administration, it never will.

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BOHICA - Obama's Fannie/Freddie Dead Drop

Those who cannot learn from history are doomed to repeat it.

- - Edmund Burke

The Obama administration, on Christmas Eve, dropped an utterly insane bombshell. Team Obama has used the slowest news weekend of the year to announce that they are uncapping federal guarantees for Fannie Mae and Freddie Mac loans - writing these institutions a blank check with our tax dollars. This from the WSJ:

The Obama administration's decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie Mae and Freddie Mac over the next three years stirred controversy over the holiday.

The Treasury announced Thursday it was removing the caps that limited the amount of available capital to the companies to $200 billion each.

Unlimited access to bailout funds through 2012 was "necessary for preserving the continued strength and stability of the mortgage market," the Treasury said. Fannie and Freddie purchase or guarantee most U.S. home mortgages and have run up huge losses stemming from the worst wave of defaults since the 1930s.

"The timing of this executive order giving Fannie and Freddie a blank check is no coincidence," said Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee. He said the Christmas Eve announcement was designed "to prevent the general public from taking note."

Treasury officials couldn't be reached for comment Friday.

So far, Treasury has provided $60 billion of capital to Fannie and $51 billion to Freddie. Mahesh Swaminathan, a senior mortgage analyst at Credit Suisse in New York, said he didn't believe Fannie and Freddie would need more than $200 billion apiece from the Treasury. . . .

Why uncap federal (our tax dollar) guarantees for Freddie and Fannie, particularly when they have the vast majority of funds remaining available to them. At Politico, one analyst speculates that "It's possible we may see some horrendous numbers for the fourth quarter and, thus 2009, and Treasury wants to calm the markets." The other possiblity is more insidious. Hot Air reasons:

It looks as though Obama wants to use Fannie and Freddie as proxies for more social engineering and wants to prepare for them to take more losses as a result. That would be the only reason to completely uncap the commitment to cover its losses. After all, the bailout was supposed to help put the two GSAs back into the black, and at the rate they have used that bailout (assuming no improvement), we wouldn’t have to worry about exceeding caps until 2012. I’d bet that the Obama administration retools its foreclosure prevention programs to have Fannie and Freddie buy up the paper and forgive parts of the principal on the loans, and have taxpayers eat the losses on a massive basis.

Perhaps the biggest travesty of putting Democrats in charge of both houses of Congress is that there has been no investigation into the causes of our economic meltdown. That meltdown, which began with the sub-prime crisis, was proximately caused by massive market distortion resulting from Democrat's social engineering. Bill Clinton, Chris Dodd and Barney Frank were the engines of that social engineering, and the tools they used were Community Reinvestment Act (CRA) regulations to force the lowering of lending standards and the use of Fannie Mae and Freddie Mac to underwrite these risky loans.

The CRA regulations allowed groups like ACORN to sue banks who did not make a proportionate amount of loans to African Americans. It mattered not that the banks could show, in virtually all cases, that loans denied to people of whatever race were denied on legitimate, non-discriminatory grounds. It didn't matter that ACORN could not show that a minority was treated to different standards than a white. All that mattered were the statistics. As an aside, this precise theory has been held, standing alone, as unconstitutional in terms of hiring and fining.

With no official investigation into this disaster, Obama has been free to not merely continue with the poison at its heart, but to further it. A few months ago, proposed financial regulations that would not merely keep the CRA in force, but would double down, expanding its enfocement. And now if Obama is planning to again use Fannie and Freddie as tools of this disaterous piece of social engineering, it will condemn us to repeat history. BOHICA - bend over, here it comes again.

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Obama's Explosion of Regulation

Obama began his war on private enterprise in America. His first target was to rein in pay across the private sector. Then came credit card companies. Now its a massive attack on the entire financial industry of our nation. Two days ago, “A New Foundation: Rebuilding Financial Supervision and Regulation,” running 89 pages in length and instituting the most far reaching regulation of our financial industry since at least the New Deal. Washington Wire condensed the report to the following:

For the regulation of financial firms, the proposal:

- Creates Financial Services Oversight Council, which would coordinate activities among regulators, replacing the President’s Working Group.

- Ensures that any financial firm big enough to pose a risk to the financial system would be heavily regulated by the Federal Reserve, including regular stress tests.

- Says the Fed will have to “fundamentally adjust” its current supervision to more closely watch for systemic risks.

- Allows the Fed to collect reports from all U.S. financial firms that meet “certain minimum size thresholds.”

- Gives the Fed oversight over parent companies and all subsidiaries, including unregulated units and those based overseas.

- Says the Treasury will re-examine capital standards for banks and bank-holding companies.

- Tells regulators to issue guidelines on executive compensation, with the goal of aligning pay with long-term shareholder value, including a re-examination of the utility of golden parachutes.

- Creates a new bank agency, the National Bank Supervisor, and kills the Office of Thrift Supervision. The new agency will look over national banks, including federal branches and agencies of foreign banks.

- Forces industrial banks, non-bank financial firms and credit-card banks to become more traditional bank holding companies subject to federal oversight.

- Kills the SEC program that supervised Wall Street investment banks.

- Requires hedge funds, private-equity funds and venture-capital funds to register with the SEC, allowing the agency to collect data from the firms.

- Subjects hedge funds to new requirements in areas such as record keeping, disclosure and reporting. The oversight would include assets under management, borrowings, off-balance sheet exposures.

- Urges the SEC to give directors of money-market mutual funds the power to suspend redemptions, and take other action to strengthen regulation of money-market mutual funds to prevent runs.

- Beefs up oversight of insurance by creating an office within the Treasury to coordinate information and policy.

- Kicks off a process by which the Treasury and the Department of Housing and Urban Development will figure out the future of mortgage giants Fannie Mae, Freddie Mac and the federal home-loan banks, which could include winding them down, returning them to the private sector or refashioning them as public utilities.

For the regulation of financial markets, the proposal:

- Brings the markets for over-the-counter derivatives and asset-backed securities into a regulatory framework, strengthens regulation of derivatives dealers and forces trades to be executed through public counterparties, such as exchanges

- Toughens the regulatory regime, including more conservative capital requirements and tougher rules on counterparty credit exposure.

- Strengthens laws designed to protect “unsophisticated parties” from trading derivatives “inappropriately.”

- Gives the Fed more power over the infrastructure that governs these markets, such as payment and settlement systems.

- Harmonizes the powers and authority of the SEC and CFTC to avoid conflicting rules relating to the same products or time-wasting turf battles over who should regulate what.

- Tells the SEC and the CFTC to deliver a progress report by September.

- Requires that originators, for example, mortgage brokers, should retain some economic interest in securitized products.

- Directs regulators to “align” participants’ compensation with the long-term performance of underlying loans.

- Urges the SEC to continue its efforts to improve the transparency and standardization of securitization markets and recommends the SEC have clear authority to require reporting from issuers of asset-back securities.

- Urges the SEC to strengthen its regulation of credit-rating firms, including disclosing conflicts of interest, better differentiating between structured and unstructured debt and more clearly stating the risks of financial products.

- Tells regulators to reduce their reliance on credit-rating firms.

For regulations protecting consumers and investors, the proposal:

- Creates a new agency, the Consumer Financial Protection Agency, with broad authority over consumer-oriented financial products, such as mortgages and credit cards. The new agency would work with state regulators.

- Gives the new agency power to write rules and levy fines based on a wide range of existing statutes.

- Proposes new authority for the Federal Trade Commission over the banking sector, in areas such as data security.

- Creates an outside advisory panel to keep an eye on emerging industry practices.
Says the new agency should play “a leading role” in educating consumers about finance.

- Gives the new agency authority to ban or restrict mandatory arbitration clauses.

- Improves transparency of consumer products and services disclosures.

- Says the new regulator should have authority to define standards for simple “plain vanilla” products, such as mortgages, which would have to be offered “prominently” by companies.

- Proposes the government “do more” to promote these simple products.

- Beefs up the agency’s power to regulate unfair, deceptive or abusive practices.

- Imposes “duties of care” that will have to be followed by financial intermediaries, such as stock brokers and financial advisers.

- Regulates overdraft protection plans, treating them more like credit credit-card cash advances.
- Promotes access to credit in line with community investment objectives.

- Strengthens SEC’s framework for investor protection by expanding the agency’s powers to beef up disclosures to investors, establish a fiduciary duty for broker-dealers who offer advice and expand protection for whistleblowers, including a fund that would pay for certain information.

- Requires non-binding shareholder votes on executive compensation packages.

- Requires certain employers to offer an “automatic IRA plan” for employee retirement, with investment choices prescribed by regulation or statute.

- Urges exploration of ways to improve participation in 401(k) retirement plans

To give the government more tools to manage crises, the proposal:

- Creates a mechanism that allows the government to take over and unwind large, failing financial institutions.

- Creates a formal process for deciding when to invoke this power, which could be initiated by the Treasury, Fed, FDIC or SEC.

- Gives authority to make the final decision to the Treasury, with the backing of other regulators.

- Gives the Treasury the authority to decide how to fix such a failing firm, whether through a conservatorship, receivership or some other method.

- Taps the FDIC to act as conservator or receiver, except in the case of broker dealers or securities firms, in which case the SEC would take over.

- Amends the Fed’s emergency lending powers to require prior written approval by the Treasury Secretary.

In the international sphere, the proposal:

- Recommends international regulators strengthen their definition of regulatory capital to improve the quality, quantity, and international consistency of capital.

- Recommends that various international bodies implement the Group of 20 recommendations, including requiring banks to hold more capital in good times to protect against downturns.

- Urges that national authorities standardize oversight of credit derivatives and markets.

- Recommends national authorities improve cooperation on supervision of globally interconnected financial firms.

- Recommends regulators improve the way firms are unwound when they straddle borders.

- Recommends strengthening the Financial Stability Board.

- Urges other countries to follow the U.S. lead and: subject systemically significant companies to stricter oversight; expand regulation of hedge funds; review compensation practices; tighten rules governing credit-rating firms.

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The Subprime Crisis In Cartoons

Michael Ramirez has several cartoons that pretty much sum up the subprime crisis:

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Pelosi's Coverup

If Nancy Pelosi has her way, their will be no investigation and no justice for the Fannie Mae / Freddie Mac subprime crisis. This from the American Spectator:

. . . According to House Oversight Committee staff, [Congressman Rham] Emanuel has received assurances from Pelosi that she will not allow what he termed a "witch hunt" to take place during the next Congressional session over the role Fannie Mae and Freddie Mac played in the economic crisis.

Emanuel apparently is concerned the roles former Clinton Administration members may have played in the mortgage industry collapse could be politically -- or worse, if the Department of Justice had its way, legally -- treacherous for many.

The "many" includes vitrually everyone in the picture above.

Whether McCain wins the election - and how well Republicans do in the election - will be determined by how well they publicize responsibility for the fiscal crisis between now and November. Given Pelosi's plans, it is that or this seminal issue gets buried, allowing Democrats room to work ever more of their well intentioned, highly destructive policies on our nation.

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The History Of The Left's Subprime Crisis

Roger Kimball, writing at PJM, gives a very good thumbnail history of the subprime crisis and how it is a creation of Democratic identity politics and interference in the market. This story cannot be repeated often enough, particularly when Nancy Pelosi and company, aided and abetted by the MSM, are baldly lying, loudly and repetetively in an effort to hide their responsiblity for the subprime swamp.
__________________________________________________

This from Roger Kimball:

. . . ”The Community Reinvestment Act” (see here for more).

* The original Community Reinvestment Act was signed into law in 1977 by Jimmy Carter. Its purpose, in a nutshell, was to require banks to provide credit to “under-served populations,” i.e., those with poor credit. The buzz word was “affordable mortgages,” e.g., mortgages with low teaser-rates, which required the borrower to put no money down, which required the borrower to pay only the interest for a set number of years, etc.

* In 1995, Bill Clinton’s administration made various changes to the CRA, increasing “access to mortgage credit for inner city and distressed rural communities,” i.e., it provided for the securitization, i.e. public underwriting, of what everyone now calls “sub-prime mortgages.”

Bottom line? It forced banks to issue $1 trillion in sub-prime mortgages.
$1 trillion, i.e., a thousand billion dollars in sub-prime,i.e., risky, mortgages, in order to push this latest example of social engineering.

But wait: how did it force banks to do this? Easy. Introduce a federal requirement that banks make the loans or face penalties. As Howard Husock, writing in City Journal way back in 2000 observed: “Bank examiners would use federal home-loan data, broken down by neighborhood, income group, and race, to rate banks on performance. There would be no more A’s for effort. Only results—specific loans, specific levels of service—would count.” Way back in 1994, for example, Barack Obama sued Citibank on behalf of a client who charged that the bank “systematically denied mortgages to African-American applicants and others from minority neighborhoods.”

* In 1997, Bear Stearns–O firm of blessed memory–was the first to get onto the sub-prime gravy train.

* Fannie Mae & Freddy Mac–were there near the beginning, too.

Anatomy of a bubble

Step 1. The intoxication: “My house is worth millions!” From 1995 - 2005, the number of sub-prime mortgages skyrocket. So did the house prices.

Step 2. The hangover: “Oh my God, my house isn’t selling. What went wrong?”
Why didn’t someone try to stop it?

Someone did: “The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago,” The New York Times, September 11, 2003.

But someone intervened to stymie the Bush administration. Who? The New York Times reports:

Supporters of the companies said efforts to regulate the lenders tightly under those agencies might diminish their ability to finance loans for lower-income families. . . . “These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Why didn’t someone else ring the alarm?

Someone else did. In 2005, John McCain co-sponsored the “Federal Housing Enterprise Regulatory Reform Act,” which among other things provided for more oversight of Freddie & Fannie. The bill didn’t pass. Guess who blocked it?
The bill was reintroduced in 2007. But again, no luck. Fannie Mae and Freddie Mac had friends in the Senate:

* Chris Dodd, a recipient of “sweetheart” loans from a Freddie and Fannie backed company.

* The junior senator from Illinois, i.e., Barack Obama, who turned to Jim Johnson, former head (1991-1998) of Fannie Mae, to help advise him on whom to pick for the vice-presidential slot on his ticket. From 1985 to 1990, incidentally, Johnson was managing director of Lehman Brothers. Remember them?

* You might also want to check out one of Barack Obama’s other advisors: Franklin Raines, former CEO of Freddie Mac: see here , for example, or here , or here.

Towards the end of the video, we read this salutary observation: “Everyone deserves a home, not a house of cards.”

Who gave us the house of cards? Watch the whole thing here (original link was here). And then pass it along to everyone you know.

There are at least two other actions at work here. Of course if someone smells a dollar on Wall St., they'll try and latch onto it. That is what they get paid to do. But they don't get paid to purchase assets worth $1 for $10. The risk assessment associated with subprime lending got completely skewed. No one yet has even attempted to explain why that I can find, let alone do so with clarity. The other action are the recently introduced Mark to Market accounting rules that require accounting for assets at fair market value today. This accounting rule has the advantage of exposing bad assets. But subprime loans are secured. They are not valueless, though in today's market, under the Mark to Market rule, securities relating to these loans have to be counted as $0 because no one will offer any value for them. That, according to many in the know, seems to be a large part of the current implosion.

Other posts related to Subprime Crisis (from oldest to newest):

1. McCain, The Fannie and Freddie Crisis, and Obamafuscation - Obama and the entire Democratic Party are trying to blame Republicans for the subprime crisis. But this crisis was created by Bill Clinton and protected against Republican efforts to reign it in over a decade – until it failed, nearly pulling out entire economic system into a depression.

2. Dodging a Depression - The NYT and WSJ document just how serious is the subprime crisis. Quite literally it brought us to the point of a complete and catastrophic stoppage of our financial systems. This was not a stock market crash, it was a lending and credit crash. The WSJ describes the events of the week leading up to the crisis point.

3. Obama & The "Family" Of Fannie Mae - Documenting Obama’s relationship to Fannie Mae.

4. The Origins – And Foreseeability – Of the Subprime Crisis - A 1999 article in the NYT describes the Clinton Administration forcing subprime loans onto America and also forecasts that this will create a house of cards that will fall apart in a down market.

5. The Left’s Subprime Meltdown - A post by the Anchoress discusses this subprime crisis as a creation of the left and a system that was protected to the end by the left. She adds additional sites, quotes and links to explain the mosaic.

6. Fannie & Freddie, McCain & Obama, Subprime & Wall St.The WSJ discusses both how the subprime loan market came about and how Democrats, including Obama, were both the cause of the problem and the roadblock to a solution that would have averted this catastrophe. Dafydd at Big Lizard's explains how Mortgage Backed Securities worked on Wall Street.

7. A Doddering Fool & Charlatan - Chris Dodd is up to his ears in the subprime crisis. With our economy teetering on an actual depression due to the Fannie/Freddie/subprime loan crisis, it was not merely surreal to watch Senator Chris Dodd chair an emergency hearing of the Senate Banking Committee to evaluate the Treasury's proposed rescue plan, it was obscene.

8. Finally – Oversight - The FBI has finally announced criminal investigations at Fannie and Freddie.

10. The President Addresses The Nation - Bush explains the stakes involved for America with the subprime crisis.

11. McCain The Chessmaster Part II - McCain was responding to a 3 a.m. phone call in returning to Washington. He is given political cover and support by Bill Clinton.

12. A Spotlight On The Left's Subprime Crisis - A video summary of the origins of the subprime crisis with lots of footage of Rep. Barney Frank and others protecting Fannie Mae from regulation by the Bush Administration and McCain.

13. WaMu Swallowed Up In The Left's Subprime Swamp - Washington Mutual goes under because of toxic mortgage debt.

14. Dodd, ACORN, and the Penultimate Screwing of the Taxpayers - The left, the people responsible for the subprime crisis, proposed a deal that would have used the return on rehabilitated investments not for the benefit of taxpayers but to fund progressive advocacy organizations that are fundamentally corrupt.

15. Krauthammer On The Subprime Crisis: Time For A Return To Public Executions - America is livid over this fiscal crisis and wants a pound of flesh to satiate its cravings before beginning the job of putting our financial house back in order. Krauthammer things we should give it to them and suggests a return to the auto de fe, this time as a reality show.

16. The Subprime Crisis, Dems, Obama & McCain - a great video giving the history of the subprime crisis.

17. Subprime Crisis: Spin versus C-Span - a video of 2004 hearings in which the House Democrats heaped scorn on the idea that Fannie Mae and Freddie Mac were a disaster waiting to happen and fighting tooth and nail to preven any further regulation of Fannie and Freddie.

18. Thomas Sowell On The Subprime Crisis & Proposed Bailout - Economist Thomas Sowell weighs in on the need for the proposed bailout to stabilize the market and the politics at the root of this fiscal crisis.

19. Resolution of the Initial Subprime Crisis - Time For Investigation - A first look at the draft legislation and an outline of what else needs to happen to resolve this crisis.

20. The Treasury Dept. - Anerica's Newest Subprime Lender - The legislation to solve the subprime crisis is only aimed at part in shoring up financial markets. A large part of the bill requires that the Treasury Dept. act as the subprime lender of last resort.

21. The Subprime Crisis, ACORN & Obama, The Community Organizer - Obama's time as a community organizer was very much involved with ACORN's efforts to force subprime lending upon the financial institutions in Chicago.

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Nancy Pelosi Leads The Way To Defeat Of The Bailout (Updated)

The bomb-throwing Speaker of the House, Nancy Pelosi, has led the way to a failure of the bailout legislation in the House. Her speech today, blaming the supbrime crisis on Republicans, coupled with her failure to bring her own party in sufficient numbers to vote yes, has done the trick. Ninety-four members of her own party voted no. Republicans note that they thought they had 12 more votes in their own party until Nancy Pelosi - the leader of the party that owns the subprime crisis - blamed it all on Republicans. This woman is a clear and present danger to our nation.

I have written twenty-six posts on the origins of the subprime crisis, tracing it from . . .

the Clinton administrations regulatory changes to force the lowering of lending standards, to . . .

the Clinton Administration using the Community Reinvestment Act and Fannie/Freddie to drive an explosion of subprime lending, to . . .

Bush administration to reign in Freddie Mac begining in 2003 when the Enron style accounting scandal at Fannie Mae was exposed, to . . .

Democrats line in the sand defense against any tightening of standards or increased regulation, to . . .

Democrats, including Barney Frank, Chris Dodd, Chuck Schumer and Harry Reid, repeated denials that there was any danger in this subprime lending, to . . .

the failure in markets to adequately assess the risk of the subprime loans and related securities, to . . .

McCain's co-sponsor of legislation in 2005 to reign in Fannie and Freddie, warning of the dire consequences to our economy if it did not occur, to . . .

Sen. Chris Dodd and the Democrats killing of that legislation, to . . .

last summer, with Fannie and Freddie failing due to the subprime swamp, Sen. Dodd and Sen. Schumer wanted legislation to allow them to vastly expand their subprime holdings, hoping that would stabilize the market, to . . .

word now that Obama's time as a community organizer was spent assisting ACORN and other far left groups in their mission to force expansion of subprime lending in Chicago, to . . .

word now that the second largest recipient of campaign contributions from Fannie Mae was Obama.

With all of this in mind, see if yu can figure out why at least twelve Republicans who do not support this bailout legislation to begin with decided to cast a no vote after listening to this from Pelosi:



What needs to happen is every Republican House member needs to take the floor and find a microphone and start screaming about the subprime crisis from the rooftops. This is a crisis wholly created by the left's socialist intervention in the free market to begin with.

Other posts related to Subprime Crisis (from oldest to newest):

1. McCain, The Fannie and Freddie Crisis, and Obamafuscation - Obama and the entire Democratic Party are trying to blame Republicans for the subprime crisis. But this crisis was created by Bill Clinton and protected against Republican efforts to reign it in over a decade – until it failed, nearly pulling out entire economic system into a depression.

2. A Washington Post Front Page Hack Job - The Washington Post does a hit job on McCain, grossly distorting his record on regulatory matters and ignoring his cosponsoring of legislation to establish much stronger regulation of Fannie Mae and Freddie Mac.

3. Dodging a Depression - The NYT and WSJ document just how serious is the subprime crisis. Quite literally it brought us to the point of a complete and catastrophic stoppage of our financial systems. This was not a stock market crash, it was a lending and credit crash. The WSJ describes the events of the week leading up to the crisis point.

4. Obama & The "Family" Of Fannie Mae - Documenting Obama’s relationship to Fannie Mae.

5. The Origins – And Foreseeability – Of the Subprime Crisis - A 1999 article in the NYT describes the Clinton Administration forcing subprime loans onto America and also forecasts that this will create a house of cards that will fall apart in a down market.

6. Covering The Left’s Fannie - The NYT tries to play up old ties of a McCain campaign worker with Fannie Mae while minimizing the fact that McCain himself, in 2005, co-sponsored legislation that may well have prevented the fiscal crisis we are in now.

7. The Left’s Subprime Meltdown - A post by the Anchoress discusses this subprime crisis as a creation of the left and a system that was protected to the end by the left. She adds additional sites, quotes and links to explain the mosaic.

8. Fannie & Freddie, McCain & Obama, Subprime & Wall St.The WSJ discusses both how the subprime loan market came about and how Democrats, including Obama, were both the cause of the problem and the roadblock to a solution that would have averted this catastrophe. Dafydd at Big Lizard's explains how Mortgage Backed Securities worked on Wall Street.

9. A Doddering Fool & Charlatan - Chris Dodd is up to his ears in the subprime crisis. With our economy teetering on an actual depression due to the Fannie/Freddie/subprime loan crisis, it was not merely surreal to watch Senator Chris Dodd chair an emergency hearing of the Senate Banking Committee to evaluate the Treasury's proposed rescue plan, it was obscene.

10. Finally – Oversight - The FBI has finally announced criminal investigations at Fannie and Freddie.

11. When Will They File As A 527 – The NYT continues its wholly biased reporting on the subprime crisis, refusing to report on the genesis of the crisis and instead, reporting on the relationship between Fannie Mae and Rick Davis of McCain’s campaign team.

12. McCain The Chessmaster - Opining on the potential risks and rewards of McCain's decision to cancel campaigning, return to Washington to take part in negotiations over a response to the subprime crisis, and tentatively cancel the Friday debate.

13. The President Addresses The Nation - Bush explains the stakes involved for America with the subprime crisis.

14. McCain The Chessmaster Part II - McCain was responding to a 3 a.m. phone call in returning to Washington. He is given political cover and support by Bill Clinton.

15. A Spotlight On The Left's Subprime Crisis - A video summary of the origins of the subprime crisis with lots of footage of Rep. Barney Frank and others protecting Fannie Mae from regulation by the Bush Administration and McCain.

16. WaMu Swallowed Up In The Left's Subprime Swamp - Washington Mutual goes under because of toxic mortgage debt.

17. Great Moments In Leadership - Obama phones it in on the subprime crisis.

18. The "No Deal" - McCain Responds - The left is blaiming McCain for failure of a deal on the subprime crisis. McCain answers in a memo.

19. Dodd, ACORN, and the Penultimate Screwing of the Taxpayers - The left, the people responsible for the subprime crisis, proposed a deal that would have used the return on rehabilitated investments not for the benefit of taxpayers but to fund progressive advocacy organizations that are fundamentally corrupt.

20. Krauthammer On The Subprime Crisis: Time For A Return To Public Executions - America is livid over this fiscal crisis and wants a pound of flesh to satiate its cravings before beginning the job of putting our financial house back in order. Krauthammer things we should give it to them and suggests a return to the auto de fe, this time as a reality show.

21. The Subprime Crisis, Dems, Obama & McCain - a great video giving the history of the subprime crisis.

22. Subprime Crisis: Spin versus C-Span - a video of 2004 hearings in which the House Democrats heaped scorn on the idea that Fannie Mae and Freddie Mac were a disaster waiting to happen and fighting tooth and nail to preven any further regulation of Fannie and Freddie.

23. Thomas Sowell On The Subprime Crisis & Proposed Bailout - Economist Thomas Sowell weighs in on the need for the proposed bailout to stabilize the market and the politics at the root of this fiscal crisis.

24. Resolution of the Initial Subprime Crisis - Time For Investigation - A first look at the draft legislation and an outline of what else needs to happen to resolve this crisis.

25. The Treasury Dept. - Anerica's Newest Subprime Lender - The legislation to solve the subprime crisis is only aimed at part in shoring up financial markets. A large part of the bill requires that the Treasury Dept. act as the subprime lender of last resort.

26. The Subprime Crisis, ACORN & Obama, The Community Organizer - Obama's time as a community organizer was very much involved with ACORN's efforts to force subprime lending upon the financial institutions in Chicago.

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The Subprime Crisis, ACORN & Obama, The Community Organizer

In 2006, while John McCain was on the floor of the Senate trying to get legislation passed to reign in Fannie and Freddie and headoff this subprime disaster, Barack Obama was nowhere to be found. That is not surprising. Obama's work as a private citizen and a community organizer centered in large measure around promotion of subprime lending. An article today from Stanley Kurtz tells the story.
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This from Stanley Kurtz writing in the NY Post:

WHAT exactly does a "community organizer" do? . . . Here's a big part of the answer: Community organizers intimidate banks into making high-risk loans to customers with poor credit.

In the name of fairness to minorities, community organizers occupy private offices, chant inside bank lobbies, and confront executives at their homes - and thereby force financial institutions to direct hundreds of millions of dollars in mortgages to low-credit customers.

In other words, community organizers help to undermine the US economy by pushing the banking system into a sinkhole of bad loans. And Obama has spent years training and funding the organizers who do it.

THE seeds of today's financial meltdown lie in the Community Reinvestment Act - a law passed in 1977 and made riskier by unwise amendments and regulatory rulings in later decades.

CRA was meant to encourage banks to make loans to high-risk borrowers, often minorities living in unstable neighborhoods. That has provided an opening to radical groups like ACORN (the Association of Community Organizations for Reform Now) to abuse the law by forcing banks to make hundreds of millions of dollars in "subprime" loans to often uncreditworthy poor and minority customers.

. . . In fact, intimidation tactics, public charges of racism and threats to use CRA to block business expansion have enabled ACORN to extract hundreds of millions of dollars in loans and contributions from America's financial institutions.

Banks already overexposed by these shaky loans were pushed still further in the wrong direction when government-sponsored Fannie Mae and Freddie Mac began buying up their bad loans and offering them for sale on world markets.

Fannie and Freddie acted in response to Clinton administration pressure to boost homeownership rates among minorities and the poor. However compassionate the motive, the result of this systematic disregard for normal credit standards has been financial disaster.

ONE key pioneer of ACORN's subprime-loan shakedown racket was Madeline Talbott - an activist with extensive ties to Barack Obama. She was also in on the ground floor of the disastrous turn in Fannie Mae's mortgage policies.

Long the director of Chicago ACORN, Talbott is a specialist in "direct action" - organizers' term for their militant tactics of intimidation and disruption. Perhaps her most famous stunt was leading a group of ACORN protesters breaking into a meeting of the Chicago City Council to push for a "living wage" law, shouting in defiance as she was arrested for mob action and disorderly conduct. But her real legacy may be her drive to push banks into making risky mortgage loans.

In February 1990, Illinois regulators held what was believed to be the first-ever state hearing to consider blocking a thrift merger for lack of compliance with CRA. The challenge was filed by ACORN, led by Talbott. Officials of Bell Federal Savings and Loan Association, her target, complained that ACORN pressure was undermining its ability to meet strict financial requirements it was obligated to uphold and protested being boxed into an "affirmative-action lending policy." The following years saw Talbott featured in dozens of news stories about pressuring banks into higher-risk minority loans.

IN April 1992, Talbott filed an other precedent-setting complaint using the "community support requirements" of the 1989 savings-and-loan bailout, this time against Avondale Federal Bank for Savings. . . .

Two months later, aided by ACORN organizer Sandra Maxwell, Talbott announced plans to conduct demonstrations in the lobbies of area banks that refused to attend an ACORN-sponsored national bank "summit" in New York. She insisted that banks show a commitment to minority lending by lowering their standards on downpayments and underwriting - for example, by overlooking bad credit histories.

By September 1992, The Chicago Tribune was describing Talbott's program as "affirma- tive-action lending" and ACORN was issuing fact sheets bragging about relaxations of credit standards that it had won on behalf of minorities.

And Talbott continued her effort to, as she put it, drag banks "kicking and screaming" into high-risk loans. A September 1993 story in The Chicago Sun-Times presents her as the leader of an initiative in which five area financial institutions (including two of her former targets, now plainly cowed - Bell Federal Savings and Avondale Federal Savings) were "participating in a $55 million national pilot program with affordable-housing group ACORN to make mortgages for low- and moderate-income people with troubled credit histories."

What made this program different from others, the paper added, was the participation of Fannie Mae - which had agreed to buy up the loans. "If this pilot program works," crowed Talbott, "it will send a message to the lending community that it's OK to make these kind of loans."

Well, the pilot program "worked," and Fannie Mae's message that risky loans to minorities were "OK" was sent. The rest is financial-meltdown history.

IT would be tough to find an "on the ground" community organizer more closely tied to the subprime-mortgage fiasco than Madeline Talbott. And no one has been more supportive of Madeline Talbott than Barack Obama.

When Obama was just a budding community organizer in Chicago, Talbott was so impressed that she asked him to train her personal staff.

He returned to Chicago in the early '90s, just as Talbott was starting her pressure campaign on local banks. Chicago ACORN sought out Obama's legal services for a "motor voter" case and partnered with him on his 1992 "Project VOTE" registration drive.

In those years, he also conducted leadership-training seminars for ACORN's up-and-coming organizers. That is, Obama was training the army of ACORN organizers who participated in Madeline Talbott's drive against Chicago's banks.

More than that, Obama was funding them. As he rose to a leadership role at Chicago's Woods Fund, he became the most powerful voice on the foundation's board for supporting ACORN and other community organizers. In 1995, the Woods Fund substantially expanded its funding of community organizers - and Obama chaired the committee that urged and managed the shift.

That committee's report on strategies for funding groups like ACORN features all the key names in Obama's organizer network. The report quotes Talbott more than any other figure; Sandra Maxwell, Talbott's ACORN ally in the bank battle, was also among the organizers consulted.

MORE, the Obama-supervised Woods Fund report acknowledges the problem of getting donors and foundations to contribute to radical groups like ACORN - whose confrontational tactics often scare off even liberal donors and foundations.

Indeed, the report brags about pulling the wool over the public's eye. The Woods Fund's claim to be "nonideological," it says, has "enabled the Trustees to make grants to organizations that use confrontational tactics against the business and government 'establishments' without undue risk of being criticized for partisanship."

Hmm. Radicalism disguised by a claim to be postideological. Sound familiar?

The Woods Fund report makes it clear Obama was fully aware of the intimidation tactics used by ACORN's Madeline Talbott in her pioneering efforts to force banks to suspend their usual credit standards. Yet he supported Talbott in every conceivable way. He trained her personal staff and other aspiring ACORN leaders, he consulted with her extensively, and he arranged a major boost in foundation funding for her efforts.

And, as the leader of another charity, the Chicago Annenberg Challenge, Obama channeled more funding Talbott's way - ostensibly for education projects but surely supportive of ACORN's overall efforts.

In return, Talbott proudly announced her support of Obama's first campaign for state Senate, saying, "We accept and respect him as a kindred spirit, a fellow organizer."

IN short, to understand the roots of the subprime-mort gage crisis, look to ACORN's Madeline Talbott. And to see how Talbott was able to work her mischief, look to Barack Obama.

Then you'll truly know what community organizers do.

Read the entire article.

Other posts related to Subprime Crisis (from oldest to newest):

1. McCain, The Fannie and Freddie Crisis, and Obamafuscation - Obama and the entire Democratic Party are trying to blame Republicans for the subprime crisis. But this crisis was created by Bill Clinton and protected against Republican efforts to reign it in over a decade – until it failed, nearly pulling out entire economic system into a depression.

2. A Washington Post Front Page Hack Job - The Washington Post does a hit job on McCain, grossly distorting his record on regulatory matters and ignoring his cosponsoring of legislation to establish much stronger regulation of Fannie Mae and Freddie Mac.

3. Dodging a Depression - The NYT and WSJ document just how serious is the subprime crisis. Quite literally it brought us to the point of a complete and catastrophic stoppage of our financial systems. This was not a stock market crash, it was a lending and credit crash. The WSJ describes the events of the week leading up to the crisis point.

4. Obama & The "Family" Of Fannie Mae - Documenting Obama’s relationship to Fannie Mae.

5. The Origins – And Foreseeability – Of the Subprime Crisis - A 1999 article in the NYT describes the Clinton Administration forcing subprime loans onto America and also forecasts that this will create a house of cards that will fall apart in a down market.

6. Covering The Left’s Fannie - The NYT tries to play up old ties of a McCain campaign worker with Fannie Mae while minimizing the fact that McCain himself, in 2005, co-sponsored legislation that may well have prevented the fiscal crisis we are in now.

7. The Left’s Subprime Meltdown - A post by the Anchoress discusses this subprime crisis as a creation of the left and a system that was protected to the end by the left. She adds additional sites, quotes and links to explain the mosaic.

8. Fannie & Freddie, McCain & Obama, Subprime & Wall St.The WSJ discusses both how the subprime loan market came about and how Democrats, including Obama, were both the cause of the problem and the roadblock to a solution that would have averted this catastrophe. Dafydd at Big Lizard's explains how Mortgage Backed Securities worked on Wall Street.

9. A Doddering Fool & Charlatan - Chris Dodd is up to his ears in the subprime crisis. With our economy teetering on an actual depression due to the Fannie/Freddie/subprime loan crisis, it was not merely surreal to watch Senator Chris Dodd chair an emergency hearing of the Senate Banking Committee to evaluate the Treasury's proposed rescue plan, it was obscene.

10. Finally – Oversight - The FBI has finally announced criminal investigations at Fannie and Freddie.

11. When Will They File As A 527 – The NYT continues its wholly biased reporting on the subprime crisis, refusing to report on the genesis of the crisis and instead, reporting on the relationship between Fannie Mae and Rick Davis of McCain’s campaign team.

12. McCain The Chessmaster - Opining on the potential risks and rewards of McCain's decision to cancel campaigning, return to Washington to take part in negotiations over a response to the subprime crisis, and tentatively cancel the Friday debate.

13. The President Addresses The Nation - Bush explains the stakes involved for America with the subprime crisis.

14. McCain The Chessmaster Part II - McCain was responding to a 3 a.m. phone call in returning to Washington. He is given political cover and support by Bill Clinton.

15. A Spotlight On The Left's Subprime Crisis - A video summary of the origins of the subprime crisis with lots of footage of Rep. Barney Frank and others protecting Fannie Mae from regulation by the Bush Administration and McCain.

16. WaMu Swallowed Up In The Left's Subprime Swamp - Washington Mutual goes under because of toxic mortgage debt.

17. Great Moments In Leadership - Obama phones it in on the subprime crisis.

18. The "No Deal" - McCain Responds - The left is blaiming McCain for failure of a deal on the subprime crisis. McCain answers in a memo.

19. Dodd, ACORN, and the Penultimate Screwing of the Taxpayers - The left, the people responsible for the subprime crisis, proposed a deal that would have used the return on rehabilitated investments not for the benefit of taxpayers but to fund progressive advocacy organizations that are fundamentally corrupt.

20. Krauthammer On The Subprime Crisis: Time For A Return To Public Executions - America is livid over this fiscal crisis and wants a pound of flesh to satiate its cravings before beginning the job of putting our financial house back in order. Krauthammer things we should give it to them and suggests a return to the auto de fe, this time as a reality show.

21. The Subprime Crisis, Dems, Obama & McCain - a great video giving the history of the subprime crisis.

22. Subprime Crisis: Spin versus C-Span - a video of 2004 hearings in which the House Democrats heaped scorn on the idea that Fannie Mae and Freddie Mac were a disaster waiting to happen and fighting tooth and nail to preven any further regulation of Fannie and Freddie.

23. Thomas Sowell On The Subprime Crisis & Proposed Bailout - Economist Thomas Sowell weighs in on the need for the proposed bailout to stabilize the market and the politics at the root of this fiscal crisis.

24. Resolution of the Initial Subprime Crisis - Time For Investigation - A first look at the draft legislation and an outline of what else needs to happen to resolve this crisis.

25. The Treasury Dept. - Anerica's Newest Subprime Lender - The legislation to solve the subprime crisis is only aimed at part in shoring up financial markets. A large part of the bill requires that the Treasury Dept. act as the subprime lender of last resort.

Read More...

Summary only...

The Treasury Dept - America's Newest Subprime Mortgage Broker

You can find the draft legislation of the subprime bailout bill here. I just paroused it. It could not be any worse and still stand a chance of passing. It will be voted on today in the House. This is my analysis of the bill.

This legislation is far more than a stop gap to the financial system. It is a massive give-away to those who borrowed too much and are now in trouble. This legislation does not give a bankruptcy judge the power to change the terms of the contract and devalue assets. It's worse. It requires the Treasury Dept. do it. This is a travesty. It injects a whole new version of government intervention in the marketplace. Bottom line, this legislation is far less about taking care of Main Street than it is about insuring the votes of those on Easy Street.

There are several good points to this legislation. The good is that:

1. In the short term, this legislation might reopen the credit arteries of our nation and settle the markets. With most of the poison pills removed, that really is the alpha and omega.

2. The limitations on executive compensation and golden parachutes in Section 111 are far less onerous than they might have been. They are carefully circumscribed and limited in time. I cannot see them driving financial institutions out of the U.S.

3. I appreciate the market transparency required by Sec. 114 of placing all transactions on the web accessible to the public. It certainly will be a major step towards minimizing fraud and providing public accountability.

4. By Sec. 117, The Comptroller General is required to do a "study to determine the extent to which leverage and sudden deleveraging of financial institutions was a factor behind the current financial crisis." This is actually far too limited in scope, but it is all we will get out of Congress.

5. Possibly the best thing to come out of this legislation is found in Sections 132 and 133, suspending the year old Mark to Market accounting rules that have contributed so heavilly to the current fiscal crisis. These sections also direct a study of the impact of the Mark to Market accounting rule.

Now for the bad - and it is bad:

As a threshold matter, this legislation should be designed simply to purchase distressed assets, get them off of the books, establish a value for them, and then resell them, all with the intent of protect the financial health of our nation with, in the end, as little harm to the taxpayers as possible. This legilation goes far beyond that. If you are a subprime borrower and Treasury purchased your loan - hey, its Christams time.

SEC. 109. FORECLOSURE MITIGATION EFFORTS.

(a) RESIDENTIAL MORTGAGE LOAN SERVICING STANDARDS.— To the extent that the Secretary acquires mortgages, mortgage backed securities, . . . the Secretary shall implement a plan that seeks to maximize assistance for homeowners and use the authority of the Secretary to encourage the servicers of the underlying mortgages, considering net present value to the taxpayer, to take advantage of the HOPE for Home
owners Program under section 257 of the National Housing Act or other available programs to minimize foreclosures. In addition, the Secretary may use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.
. . . .
(c) CONSENT TO REASONABLE LOAN MODIFICATION REQUESTS.— Upon any request arising under existing investment contracts, the Secretary shall consent, where appropriate, and considering net present value to the taxpayer, to reasonable requests for loss mitigation measures, including term extensions, rate reductions, principal write downs, increases in the proportion of loans within a trust or other structure allowed to be modified, or removal of other limitation on modifications.

(emphasis added)

This is nothing more than one more massive Democratic giveaway to buy their constituency. Allowing Treasury to work with existing homeowners on the margins is one thing. Making allowances for actual cases of fraud is one thing. Directing Treasury to become a super-subprime mortgage broker of the first resort is quite another. At best, this will cost the taxpayers dearly and further skew the housing market, lengthening the crisis and the shakeout from the housing bubble. At worst, this could become another economy threatening beast all on its own, though it would be with printed money and thus threaten inflation more than anything.

In case you do not understand where Democratic priorities lie from the above provisions, you can also take note of the Oversight provisions at Section 116. The first thing to which the Comptroller General is directed to examine in its inspection of the Treasury program is "foreclosure mitigation."

Section 125 might be entitled the Protect Democrats Act, the legislation establishes a Congressional Oversight Panel with unequal, weighted representation towards majority party. Thus we will have the same people who brought us the subprime debacle overseeing this massive program. Worse, the legislation authorizes the Democratic controlled panel to make recommendations for large scale reform of the regulatory system. These are the same people who refused to regulate Fannie Mae because they did not want to disturb "affordable housing," regardless of the cost. And as the above should make clear, their priorities have not changed.

Section 134 is the baby of Speaker Nancy Pelosi. Thus, not surprisingly, it is an abortion. It provides that, if in five years all funds are not recouped by the Treasury for this bailout, then the President "shall" submit legislation providing for a tax on the financial services industry. Its hard to enumerate all of the facets of the glaring stupidity of this one. For a start, it punishes the entire financial sector - who will merely pass through the taxes to any taxpayers foolish enought to use such arcane things as banks, S&L's, or have 401k's, etc. Two, how much of the shortfall will be due to the insane insistence of the left of preventing foreclosures on subprime loans. All of the taxpayers get our pockets picked a second time to cover Democratic largesse to their base. And three, this interjects uncertainty into the U.S. financial system both today - when we need it the least - and in the long term. This Pelosi abortion will assuredly effect foreign investment in our financial sector.

Would I vote for this bill if I were in Congress? Probably, because I believe the markets will fail without it. That said, I would get every one of my objections on record before taking that vote. Then, with the better part of a fifth of Wild Turkey coursing through my veins, . . . .

That said, this legislation goes nowhere near far enough. I will repeat the recommendations that I made in an earlier post:

I. We need a true non-partisan, non-Congressional commission to investigate the causes of this meltdown. This crisis begins and ends with the socialist left in Congress. In the middle are mortgage brokers and Wall St. The story needs to be told from beginning to end. It will not happen under Congress, but there is nothing stopping President Bush from appointing such a commission the day after the above legislation is passed.

This is a crisis that, on a fiscal scale, dwarfs 9-11. And it exposes fundamental problems in both our political and financial worlds that we fail to identify at our own peril. How our best financial minds ended up purchasing this toxic debt needs to be thoroughly investigated. The system used by Wall St. to analyze and value the now worthless securities needs to be pulled apart with the detail a post mortem. And our regulatory scheme needs to be overhauled. Treasury Secretary Henry Paulson has been calling for this for some time. Now seems an opportune moment to redo and streamline a regulatory system built for the last century. I have no faith, however, in the current Democratic Congress to carry this out in good faith.

II. The Community Reinvestment Act and all Clinton-era rules relating to subprime borrowing need to be revised to end government mandates for this scourge. There is nothing wrong with a government program to work with low and middle income folks to repair any credit problems. And I would support a program for such people to invest in a tax free fund in order to build up funds for a down payment. That is a market based approach. We know how the socialist approach works.

III. Fannie Mae, Freddie Mac, and indeed, the whole concept of Government Sponsored Enterprises (GSE's) that so distort the marketplace need to be scrapped.

IV. There needs to be criminal investigations of those involved in the Fannie Mae, Freddie Mac fiasco. This has begun - years too late. Nothing is clearer than the individuals who ran these institutions cooked the books. Franklin Raines should still be in jail following his conviction in 2004. His cell mates should be Chris Dodd, Janet Reno and Jamie Goerlock.

V. And lastly, I think that we really should seriously consider Charles Krauthammer's suggestion of public executions as regards this subprime crisis.

Other posts related to Subprime Crisis (from oldest to newest):

1. McCain, The Fannie and Freddie Crisis, and Obamafuscation - Obama and the entire Democratic Party are trying to blame Republicans for the subprime crisis. But this crisis was created by Bill Clinton and protected against Republican efforts to reign it in over a decade – until it failed, nearly pulling out entire economic system into a depression.

2. A Washington Post Front Page Hack Job - The Washington Post does a hit job on McCain, grossly distorting his record on regulatory matters and ignoring his cosponsoring of legislation to establish much stronger regulation of Fannie Mae and Freddie Mac.

3. Dodging a Depression - The NYT and WSJ document just how serious is the subprime crisis. Quite literally it brought us to the point of a complete and catastrophic stoppage of our financial systems. This was not a stock market crash, it was a lending and credit crash. The WSJ describes the events of the week leading up to the crisis point.

4. Obama & The "Family" Of Fannie Mae - Documenting Obama’s relationship to Fannie Mae.

5. The Origins – And Foreseeability – Of the Subprime Crisis - A 1999 article in the NYT describes the Clinton Administration forcing subprime loans onto America and also forecasts that this will create a house of cards that will fall apart in a down market.

6. Covering The Left’s Fannie - The NYT tries to play up old ties of a McCain campaign worker with Fannie Mae while minimizing the fact that McCain himself, in 2005, co-sponsored legislation that may well have prevented the fiscal crisis we are in now.

7. The Left’s Subprime Meltdown - A post by the Anchoress discusses this subprime crisis as a creation of the left and a system that was protected to the end by the left. She adds additional sites, quotes and links to explain the mosaic.

8. Fannie & Freddie, McCain & Obama, Subprime & Wall St.The WSJ discusses both how the subprime loan market came about and how Democrats, including Obama, were both the cause of the problem and the roadblock to a solution that would have averted this catastrophe. Dafydd at Big Lizard's explains how Mortgage Backed Securities worked on Wall Street.

9. A Doddering Fool & Charlatan - Chris Dodd is up to his ears in the subprime crisis. With our economy teetering on an actual depression due to the Fannie/Freddie/subprime loan crisis, it was not merely surreal to watch Senator Chris Dodd chair an emergency hearing of the Senate Banking Committee to evaluate the Treasury's proposed rescue plan, it was obscene.

10. Finally – Oversight - The FBI has finally announced criminal investigations at Fannie and Freddie.

11. When Will They File As A 527 – The NYT continues its wholly biased reporting on the subprime crisis, refusing to report on the genesis of the crisis and instead, reporting on the relationship between Fannie Mae and Rick Davis of McCain’s campaign team.

12. McCain The Chessmaster - Opining on the potential risks and rewards of McCain's decision to cancel campaigning, return to Washington to take part in negotiations over a response to the subprime crisis, and tentatively cancel the Friday debate.

13. The President Addresses The Nation - Bush explains the stakes involved for America with the subprime crisis.

14. McCain The Chessmaster Part II - McCain was responding to a 3 a.m. phone call in returning to Washington. He is given political cover and support by Bill Clinton.

15. A Spotlight On The Left's Subprime Crisis - A video summary of the origins of the subprime crisis with lots of footage of Rep. Barney Frank and others protecting Fannie Mae from regulation by the Bush Administration and McCain.

16. WaMu Swallowed Up In The Left's Subprime Swamp - Washington Mutual goes under because of toxic mortgage debt.

17. Great Moments In Leadership - Obama phones it in on the subprime crisis.

18. The "No Deal" - McCain Responds - The left is blaiming McCain for failure of a deal on the subprime crisis. McCain answers in a memo.

19. Dodd, ACORN, and the Penultimate Screwing of the Taxpayers - The left, the people responsible for the subprime crisis, proposed a deal that would have used the return on rehabilitated investments not for the benefit of taxpayers but to fund progressive advocacy organizations that are fundamentally corrupt.

20. Krauthammer On The Subprime Crisis: Time For A Return To Public Executions - America is livid over this fiscal crisis and wants a pound of flesh to satiate its cravings before beginning the job of putting our financial house back in order. Krauthammer things we should give it to them and suggests a return to the auto de fe, this time as a reality show.

21. The Subprime Crisis, Dems, Obama & McCain - a great video giving the history of the subprime crisis.

22. Subprime Crisis: Spin versus C-Span - a video of 2004 hearings in which the House Democrats heaped scorn on the idea that Fannie Mae and Freddie Mac were a disaster waiting to happen and fighting tooth and nail to preven any further regulation of Fannie and Freddie.

23. Thomas Sowell On The Subprime Crisis & Proposed Bailout - Economist Thomas Sowell weighs in on the need for the proposed bailout to stabilize the market and the politics at the root of this fiscal crisis.

24. Resolution of the Initial Subprime Crisis - Time For Investigation - A first look at the draft legislation and an outline of what else needs to happen to resolve this crisis.

Read More...

Summary only...

Resolution Of The Initial Problems Caused By The Subprime Crisis - Time For Investigation & Resolution

If you hear any of the above individuals utter the words "affordable housing" or "Democrats bear no responsibility" or "Democrats have cleaned up the mess," should a brick you are carrying mysteriously leave your hand and, guided by mystical forces, become lodged in the mouth of the speaker, pray that I am on your jury. You can be assured that you will not be convicted.

The Rogues Gallery pictured above is from the NYT front page story announcing an agreement on the main points of a bailout plan. While the individuals pictured above, Nancy Pelosi, Barney Frank, Chris Dodd and Harry Reid, appear happy and smug, there is not a single taxpayer who should feel anything but all consuming anger and a desire for 700 billion pounds of flesh.

From the few details of the bailout plan that are leaking out, this deal still appears problematic. Some of the provisions may well have longterm, unintended consequences. Or they may in fact be reasonable, we will have to wait for the final legislation and read it line by line. At least most of the poison pill provisions added by the left to benefit their far left constituency have apparently been removed thanks to House Republicans. Regardless, this is just a first step. There are many things missing from the above plan that are desperately needed in the wake of this crisis.

This from the NYT:

Congressional leaders and the Bush administration reached a tentative agreement early Sunday on what may become the largest financial bailout in American history, authorizing the Treasury to purchase $700 billion in troubled debt from ailing firms in an extraordinary intervention to prevent widespread economic collapse.

Officials said that Congressional staff members would work through the night to finalize the language of the agreement and draft a bill, and that the bill would be brought to the House floor for a vote on Monday.

The bill includes pay limits for some executives whose firms seek help, aides said. And it requires the government to use its new role as owner of distressed mortgage-backed securities to make more aggressive efforts to prevent home foreclosures.

In some cases, the government would receive an equity stake in companies that seek aid, allowing taxpayers to profit should the rescue plan work and the private firms flourish in the months and years ahead.

The White House also agreed to strict oversight of the program by a Congressional panel and conflict-of-interest rules for firms hired by the Treasury to help run the program. . . .

There is more detailed information at the WSJ:

1. The first $250 billion will be available immediately with other funds being made available as needed based on Congressional authorization.

2. The legislation "will expand the range of firms that can sell troubled assets to the government to include pension plans, local governments and community banks serving 'low- and middle-income families.'"

3. The government "would be able to receive warrants it could hold until maturity from financial firms on assets received either through auctions or through direct purchases."

4. The legislation "would institute new executive compensation requirements for participating companies, including "no multi-million dollar golden parachutes," limits on compensation generally, and the ability to recover "bonuses paid based on promised gains that later turn out to be false or inaccurate."" This could be problematic indeed. Punishing Wall St. seems to me something that could have many undesirable unintended consequences, from keeping firms from participating to driving financial services overseas.

5. The plan provides for "the federal government to recoup money for taxpayers if the asset-purchase program isn't making money after a certain amount of time. A House leadership aide said early Sunday morning that details were not immediately available. But the general concept was to provide Congress with a mechanism that would be triggered perhaps within five years to allow lawmakers to offset some, if not all, of the bailout costs." While I am all for repayment of taxpayer funds, I wonder how much uncertainty this will cause, either now or in five years. Further, I would like to see funds recouped from those who violated laws and regulations at all levels rather than a general plan to target the market as a whole.

6. Democrats have agreed "to drop a proposal to devote 20% of potential profits to an affordable housing fund . . ." This was the far left organization/ACORN full employment plan. It was - and should have been - a deal killer.

7. The legislation includes "requirements that Treasury seek to mitigate and reduce foreclosures where possible. . . [T]he legislation would allow the Treasury to work with cash-strapped homeowners whose mortgages are purchased by the federal government to refinance into a more affordable mortgage." I have real problems with this. This has the potential to be another boondoggle and redistribution program, particularly with Chris Dodd and Barney Frank riding herd on oversight. I want to see how this is written into the legislation.

8. "Other foreclosure-prevention measures include an extension of the tax holiday for homeowners who face foreclosure, as well as a tax break for community banks that held shares of Fannie Mae and Freddie Mac. The rescue plan will allow affected banks to take an immediate tax deduction on losses from investments in the two firms, which were taken over by the federal government earlier this month." This sounds palatable.

9. "It also includes a bipartisan oversight board appointed by members of both parties in Congress, an inspector general to monitor Treasury decisions, and regular audits from the Government Accountability Office. Treasury will also have to post publicly and online transactions made through the troubled asset program." I appreciate the transparency provision. I have real problems with an oversight board that will no doubt be populated by the same Democrats whose economic ignorance and desire to redistribute wealth got us into this mess in the first place. If the board provides for proportional representation rather than equal representation, it should be a non-starter.

10. "[T]he tentative agreement reached Saturday allows for judicial review of Treasury decisions." This sounds like a bone to the plaintiff's bar. This is an invitation to add billions to the costs of this program and to slow down its complete implementation by years.

Hot Air informs us that the far left's attempt to load up the bill with goodies for their constituencies - beyond the ACORN Lifetime Funding provision discussed above - have also been removed from the bill:

- Provision to provide unions and other activist groups with proxy access for corporate boards

- Provision to mandate shareholder votes on compensation issues (union priority)

- A provision to allow trial judges to arbitrarily adjust mortgages, creating bonanza for trial lawyers

- A provision to require the government to sell to state and local governments at a discount homes the government acquires as a result of foreclosure

Perhaps most importantly, Hot Air tells us that the new legislation "also suspends mark-to-market rules and requires a study on their effects on the collapse."

This from the AJC:

“Mark to market” is an accounting measure that took effect last year, which forces companies to disclose information about the immediate market value of their assets. Gingrich says it has forced a “spiral” of devaluation; supporters of the practice say that it forces businesses to reveal poor investments, and is a mere scapegoat in the current debate.

You can find a detailed explanation of the accounting rule and the problems it has created in a tightening and risk averse market at the Washington Post. Changing this accounting rule might, by itself, radically effect the current subprime crisis.

All of these are but a single step along a long road. There needs to be much more.

I. We need a true non-partisan, non-Congressional commission to investigate the causes of this meltdown. This crisis begins and ends with the socialist left in Congress. In the middle are mortgage brokers and Wall St. The story needs to be told from beginning to end. It will not happen under Congress, but there is nothing stopping President Bush from appointing such a commission the day after the above legislation is passed.

This is a crisis that, on a fiscal scale, dwarfs 9-11. And it exposes fundamental problems in both our political and financial worlds that we fail to identify at our own peril. How our best financial minds ended up purchasing this toxic debt needs to be thoroughly investigated. The system used by Wall St. to analyze and value the now worthless securities needs to be pulled apart with the detail a post mortem. And our regulatory scheme needs to be overhauled. Treasury Secretary Henry Paulson has been calling for this for some time. Now seems an opportune moment to redo and streamline a regulatory system built for the last century. I have no faith, however, in the current Democratic Congress to carry this out in good faith.

II. The Community Reinvestment Act and all Clinton-era rules relating to subprime borrowing need to be revised to end government mandates for this scourge. There is nothing wrong with a government program to work with low and middle income folks to repair any credit problems. And I would support a program for such people to invest in a tax free fund in order to build up funds for a down payment. That is a market based approach. We know how the socialist approach works.

III. Fannie Mae, Freddie Mac, and indeed, the whole concept of Government Sponsored Enterprises (GSE's) that so distort the marketplace need to be scrapped.

IV. There needs to be criminal investigations of those involved in the Fannie Mae, Freddie Mac fiasco. This has begun - years too late. Nothing is clearer than the individuals who ran these institutions cooked the books. Franklin Raines should still be in jail following his conviction in 2004. His cell mates should be Chris Dodd, Janet Reno and Jamie Goerlock.

V. And lastly, I think that we really should seriously consider Charles Krauthammer's suggestion of public executions as regards this subprime crisis.

Other posts related to Subprime Crisis (from oldest to newest):

1. McCain, The Fannie and Freddie Crisis, and Obamafuscation - Obama and the entire Democratic Party are trying to blame Republicans for the subprime crisis. But this crisis was created by Bill Clinton and protected against Republican efforts to reign it in over a decade – until it failed, nearly pulling out entire economic system into a depression.

2. A Washington Post Front Page Hack Job - The Washington Post does a hit job on McCain, grossly distorting his record on regulatory matters and ignoring his cosponsoring of legislation to establish much stronger regulation of Fannie Mae and Freddie Mac.

3. Dodging a Depression - The NYT and WSJ document just how serious is the subprime crisis. Quite literally it brought us to the point of a complete and catastrophic stoppage of our financial systems. This was not a stock market crash, it was a lending and credit crash. The WSJ describes the events of the week leading up to the crisis point.

4. Obama & The "Family" Of Fannie Mae - Documenting Obama’s relationship to Fannie Mae.

5. The Origins – And Foreseeability – Of the Subprime Crisis - A 1999 article in the NYT describes the Clinton Administration forcing subprime loans onto America and also forecasts that this will create a house of cards that will fall apart in a down market.

6. Covering The Left’s Fannie - The NYT tries to play up old ties of a McCain campaign worker with Fannie Mae while minimizing the fact that McCain himself, in 2005, co-sponsored legislation that may well have prevented the fiscal crisis we are in now.

7. The Left’s Subprime Meltdown - A post by the Anchoress discusses this subprime crisis as a creation of the left and a system that was protected to the end by the left. She adds additional sites, quotes and links to explain the mosaic.

8. Fannie & Freddie, McCain & Obama, Subprime & Wall St.The WSJ discusses both how the subprime loan market came about and how Democrats, including Obama, were both the cause of the problem and the roadblock to a solution that would have averted this catastrophe. Dafydd at Big Lizard's explains how Mortgage Backed Securities worked on Wall Street.

9. A Doddering Fool & Charlatan - Chris Dodd is up to his ears in the subprime crisis. With our economy teetering on an actual depression due to the Fannie/Freddie/subprime loan crisis, it was not merely surreal to watch Senator Chris Dodd chair an emergency hearing of the Senate Banking Committee to evaluate the Treasury's proposed rescue plan, it was obscene.

10. Finally – Oversight - The FBI has finally announced criminal investigations at Fannie and Freddie.

11. When Will They File As A 527 – The NYT continues its wholly biased reporting on the subprime crisis, refusing to report on the genesis of the crisis and instead, reporting on the relationship between Fannie Mae and Rick Davis of McCain’s campaign team.

12. McCain The Chessmaster - Opining on the potential risks and rewards of McCain's decision to cancel campaigning, return to Washington to take part in negotiations over a response to the subprime crisis, and tentatively cancel the Friday debate.

13. The President Addresses The Nation - Bush explains the stakes involved for America with the subprime crisis.

14. McCain The Chessmaster Part II - McCain was responding to a 3 a.m. phone call in returning to Washington. He is given political cover and support by Bill Clinton.

15. A Spotlight On The Left's Subprime Crisis - A video summary of the origins of the subprime crisis with lots of footage of Rep. Barney Frank and others protecting Fannie Mae from regulation by the Bush Administration and McCain.

16. WaMu Swallowed Up In The Left's Subprime Swamp - Washington Mutual goes under because of toxic mortgage debt.

17. Great Moments In Leadership - Obama phones it in on the subprime crisis.

18. The "No Deal" - McCain Responds - The left is blaiming McCain for failure of a deal on the subprime crisis. McCain answers in a memo.

19. Dodd, ACORN, and the Penultimate Screwing of the Taxpayers - The left, the people responsible for the subprime crisis, proposed a deal that would have used the return on rehabilitated investments not for the benefit of taxpayers but to fund progressive advocacy organizations that are fundamentally corrupt.

20. Krauthammer On The Subprime Crisis: Time For A Return To Public Executions - America is livid over this fiscal crisis and wants a pound of flesh to satiate its cravings before beginning the job of putting our financial house back in order. Krauthammer things we should give it to them and suggests a return to the auto de fe, this time as a reality show.

21. The Subprime Crisis, Dems, Obama & McCain - a great video giving the history of the subprime crisis.

22. Subprime Crisis: Spin versus C-Span - a video of 2004 hearings in which the House Democrats heaped scorn on the idea that Fannie Mae and Freddie Mac were a disaster waiting to happen and fighting tooth and nail to preven any further regulation of Fannie and Freddie.

23. Thomas Sowell On The Subprime Crisis & Proposed Bailout - Economist Thomas Sowell weighs in on the need for the proposed bailout to stabilize the market and the politics at the root of this fiscal crisis.

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