I caught Newt on Greta Van Sustern's Fox News program last night defending his consulting firm's $1.6MM from Freddie Mac. According to Gingrich, he didn't lobby members of Congress. Rather, he and his firm allegedly 'provided ideas and solutions' to problems posed by Freddie's management. Elsewhere, I believe in the Wall Street Journal, it was reported that one of those 'problems' was how to posture Fannie to conservatives in order to curry favor with them and avoid constraints, if not wholesale destruction.
My problem with Newt's consulting in this matter was that it's inconceivable that he would have needed all the billable hours required to amount to $1.6MM to tell Freddie's management they were pissing up a rope, and that there was no way of doing what they envisioned.
That conservatives would never see a benefit from a poorly-regulated, vote- and protection-buying bonus machine which crowded out saner, more explicitly risk-priced alternatives for securitizing US residential mortgages.
Sadly, in response to Greta, Newt began to place great emphasis on the pricing levels of his consultancy work, insisting they were below-average to average among other competitors.
But that's hardly the point. The point is a conservative of Gingrich's stripe should never have had that much to offer Freddie. And Newt should have had the good sense, as a former Speaker of the House, to understand how it would look, in retrospect, when someone discovered how much his firm earned from essentially consorting with the enemy.
This is more about a serious lapse in political judgement, which seems to be Newt's salient liability as a candidate.
Showing posts with label Mortgages. Show all posts
Showing posts with label Mortgages. Show all posts
Friday, November 18, 2011
Friday, November 11, 2011
Fighting Crony Capitalism In Residential Housing Brokerage
Wednesday's Wall Street Journal carried an editorial excoriating Ron Phipps, president of the National Association of Realtors, for his misleading and largely false letter to the editor in the same edition of the paper.
Here's Phipps' letter in its entirety:
The Wall Street Journal would have people believe that hard-working, middle-class families are not affected by lower conforming loan limits, when nothing could be further from the truth ("More McMansion Subsidies," Review & Outlook, Nov. 1). The representatives in Congress who support higher loan limits understand that this is not a partisan issue, as you are trying to make it out to be.
The majority of markets impacted by the loan-limit decline are not high-cost areas. For example, more than 100 counties throughout the Midwest and more than 200 counties in the South have seen loan limits decline by more than $64,000.
And despite how your editorial tries to position the issue, the loan limits are not the same as reforming Fannie Mae and Freddie Mac. Allowing the mortgage loan limits to expire in October was an arbitrary decision. Creating more market disruptions before reforming mortgage markets will only hurt our recovery.
The Senate measure to reinstate the limits is temporary—restoring the higher limits while the housing and mortgage markets stabilize. Recently, economist Mark Zandi said policy makers could shore up the housing market by "extending the current higher conforming loan limits that are set to decline in a few weeks." Borrowers, not taxpayers, will bear the entire cost of the higher loan-limits provision.
As people across the country are trying to gain a foothold in these trying times, we need to give them the resources to do so. The National Association of Realtors applauds the members of Congress who are standing up for America's families rather than turning their backs on them.
Ron Phipps
President
National Assn. of Realtors
Washington
Here's the related staff editorial referring to Phipps' letter:
To understand why 90% of U.S. mortgages are still underwritten by taxpayers, look no further than the nearby letter from Ron Phipps of the Realtors lobby. He makes clear that the Realtors, like the rest of the housing-subsidy crowd, are working hard to get Congress to reinstate a $729,750 loan-limit for Fannie Mae and Freddie Mac guarantees.
Notice how Mr. Phipps doesn't mention that dollar figure, perhaps because it makes a howler of his claim that the loan-limit reduction in October to $625,500 is somehow a blow to the "middle class." As House Financial Services Chairman Spencer Bachus and several colleagues note in a November 7 letter to GOP appropriations conferees, "the lower loan limits only affect a very small slice of wealthier homeowners in high cost areas." Only 1.3% of all loans done by Fannie, Freddie and the Federal Housing Administration would be affected by the change.
Another lobby classic is Mr. Phipps's claim that letting the loan-limit fall in October was "arbitrary" and that the Realtors only want a "temporary" extension. But any temporary program has to end sometime, and Congress first raised the loan limit on a temporary basis in 2008. It has since extended the higher loan-limit three times, and if it were extended again the Realtors would no doubt plead for another "temporary" extension the next time it expires, ad infinitum.
Reducing the loan limit is a modest attempt to restore some private competition to the mortgage market, at least at the high end. Mr. Phipps says this issue shouldn't be "partisan," by which he seems to mean that both parties should remain wholly owned Realtor subsidiaries. For Republicans who run the House, this is not a test of their partisanship. It is a test of their alleged free-market, tea-party principles.
The Realtor letter is at least educational, a reminder that one reason the U.S. economy is so burdened with government is that many alleged capitalists want government to guarantee their business. That's known as crony capitalism.
I wrote in this recent post concerning a Paul Ryan speech vilifying this sort of crony capitalism. It's helpful to see it up close in Phipps' letter. This is what my Congressman, Leonard Lance, is supporting, as I explained in this recent post.
John Boehner's House GOP will continue to be vulnerable so long as morons like Lance consent to be used by crony capitalists like Phipps to mindlessly feather the nests of the nation's realtors while those house brokers lie about the real situation.
Mark Zandi is a liberal, neo-Keynesian, hacked-up economist who believes in more government in business and more government spending for everything. He's a Democratic patsy.
Realtors don't want housing prices to fall to market-clearing levels because they'll share the pain of falling prices, not to mention that their business is fighting off competition from cheaper, online-based sales channels for housing.
It's also very clear now, in the wake of a decade of disastrous federal housing policies, primarily driven by wrongheaded Congressional mandating of stupid GSE mortgage-backed bond guarantees for low-income housing, that housing isn't and shouldn't be a major drive of the US economy.
Housing isn't a good bet as an investment for most Americans. It retards labor mobility and exposes owners to bad local and state fiscal policies which result in higher property taxes and lower housing values.
It's time we put an end to this particular variant of crony capitalism. John Boehner and Paul Ryan would be well-advised to muzzle the GOP House members who are supporting Phipps and his association in trying to prolong higher lending limits for GSEs and, instead, speed exit of the GSEs from the market, then kill them.
Here's Phipps' letter in its entirety:
The Wall Street Journal would have people believe that hard-working, middle-class families are not affected by lower conforming loan limits, when nothing could be further from the truth ("More McMansion Subsidies," Review & Outlook, Nov. 1). The representatives in Congress who support higher loan limits understand that this is not a partisan issue, as you are trying to make it out to be.
The majority of markets impacted by the loan-limit decline are not high-cost areas. For example, more than 100 counties throughout the Midwest and more than 200 counties in the South have seen loan limits decline by more than $64,000.
And despite how your editorial tries to position the issue, the loan limits are not the same as reforming Fannie Mae and Freddie Mac. Allowing the mortgage loan limits to expire in October was an arbitrary decision. Creating more market disruptions before reforming mortgage markets will only hurt our recovery.
The Senate measure to reinstate the limits is temporary—restoring the higher limits while the housing and mortgage markets stabilize. Recently, economist Mark Zandi said policy makers could shore up the housing market by "extending the current higher conforming loan limits that are set to decline in a few weeks." Borrowers, not taxpayers, will bear the entire cost of the higher loan-limits provision.
As people across the country are trying to gain a foothold in these trying times, we need to give them the resources to do so. The National Association of Realtors applauds the members of Congress who are standing up for America's families rather than turning their backs on them.
Ron Phipps
President
National Assn. of Realtors
Washington
Here's the related staff editorial referring to Phipps' letter:
To understand why 90% of U.S. mortgages are still underwritten by taxpayers, look no further than the nearby letter from Ron Phipps of the Realtors lobby. He makes clear that the Realtors, like the rest of the housing-subsidy crowd, are working hard to get Congress to reinstate a $729,750 loan-limit for Fannie Mae and Freddie Mac guarantees.
Notice how Mr. Phipps doesn't mention that dollar figure, perhaps because it makes a howler of his claim that the loan-limit reduction in October to $625,500 is somehow a blow to the "middle class." As House Financial Services Chairman Spencer Bachus and several colleagues note in a November 7 letter to GOP appropriations conferees, "the lower loan limits only affect a very small slice of wealthier homeowners in high cost areas." Only 1.3% of all loans done by Fannie, Freddie and the Federal Housing Administration would be affected by the change.
Another lobby classic is Mr. Phipps's claim that letting the loan-limit fall in October was "arbitrary" and that the Realtors only want a "temporary" extension. But any temporary program has to end sometime, and Congress first raised the loan limit on a temporary basis in 2008. It has since extended the higher loan-limit three times, and if it were extended again the Realtors would no doubt plead for another "temporary" extension the next time it expires, ad infinitum.
Reducing the loan limit is a modest attempt to restore some private competition to the mortgage market, at least at the high end. Mr. Phipps says this issue shouldn't be "partisan," by which he seems to mean that both parties should remain wholly owned Realtor subsidiaries. For Republicans who run the House, this is not a test of their partisanship. It is a test of their alleged free-market, tea-party principles.
The Realtor letter is at least educational, a reminder that one reason the U.S. economy is so burdened with government is that many alleged capitalists want government to guarantee their business. That's known as crony capitalism.
I wrote in this recent post concerning a Paul Ryan speech vilifying this sort of crony capitalism. It's helpful to see it up close in Phipps' letter. This is what my Congressman, Leonard Lance, is supporting, as I explained in this recent post.
John Boehner's House GOP will continue to be vulnerable so long as morons like Lance consent to be used by crony capitalists like Phipps to mindlessly feather the nests of the nation's realtors while those house brokers lie about the real situation.
Mark Zandi is a liberal, neo-Keynesian, hacked-up economist who believes in more government in business and more government spending for everything. He's a Democratic patsy.
Realtors don't want housing prices to fall to market-clearing levels because they'll share the pain of falling prices, not to mention that their business is fighting off competition from cheaper, online-based sales channels for housing.
It's also very clear now, in the wake of a decade of disastrous federal housing policies, primarily driven by wrongheaded Congressional mandating of stupid GSE mortgage-backed bond guarantees for low-income housing, that housing isn't and shouldn't be a major drive of the US economy.
Housing isn't a good bet as an investment for most Americans. It retards labor mobility and exposes owners to bad local and state fiscal policies which result in higher property taxes and lower housing values.
It's time we put an end to this particular variant of crony capitalism. John Boehner and Paul Ryan would be well-advised to muzzle the GOP House members who are supporting Phipps and his association in trying to prolong higher lending limits for GSEs and, instead, speed exit of the GSEs from the market, then kill them.
Wednesday, November 2, 2011
Why I Despise My Congressman- Leonard Lance
I don't respect my Congressman. Don't like him, either. He's one of those hacked-up former state pols who slithered into a largely red district, but was never ready for prime time on the Hill.
Yesterday's Wall Street Journal named him- Leonard Lance, R-NJ, as a signatory to a letter from Bill Posey, R-FL, asking to raise Fannie's and Freddie's maximum loan limits again.
This is the sort of boneheaded crony capitalism about which Paul Ryan spoke in a speech referenced in Peggy Noonan's weekend column in the Journal. About which more later this week.
I wish I could have voted for someone more conservative and less, well, hacked-up than Lance in 2010. He's an embarrassment to the GOP. His 'finest' moment had to be when he had question time in front of Ben Bernanke, and all he could manage was to stumble through the script written by his aides, which contained no questions, but, rather, video/sound bites for Lance's next campaign.
Disgusting.
So is Lance's empty-headed agreement to give two GSEs which have cost taxpayers $142B in losses more lending authority. I liked the Journal's comparison of Posey's claim that the amendment won't cost taxpayers "one dime," so reminiscent of Bubba Clinton's promise, in 1995, that doing the same back then wouldn't "cost the taxpayers on extra cent?"
Yeah. Right.
Yesterday's Wall Street Journal named him- Leonard Lance, R-NJ, as a signatory to a letter from Bill Posey, R-FL, asking to raise Fannie's and Freddie's maximum loan limits again.
This is the sort of boneheaded crony capitalism about which Paul Ryan spoke in a speech referenced in Peggy Noonan's weekend column in the Journal. About which more later this week.
I wish I could have voted for someone more conservative and less, well, hacked-up than Lance in 2010. He's an embarrassment to the GOP. His 'finest' moment had to be when he had question time in front of Ben Bernanke, and all he could manage was to stumble through the script written by his aides, which contained no questions, but, rather, video/sound bites for Lance's next campaign.
Disgusting.
So is Lance's empty-headed agreement to give two GSEs which have cost taxpayers $142B in losses more lending authority. I liked the Journal's comparison of Posey's claim that the amendment won't cost taxpayers "one dime," so reminiscent of Bubba Clinton's promise, in 1995, that doing the same back then wouldn't "cost the taxpayers on extra cent?"
Yeah. Right.
Thursday, November 18, 2010
The Skeleton In Spencer Bachus' Closet
As the GOP begins to name its House committee chairmen, the Wall Street Journal peeked into the closets of a few Republicans. What it reported in last Wednesday's edition, in its lead staff editorial, was troubling.
It turns out that Alabam's Spencer Bachus, a frequent guest on CNBC, was far less conservative and responsible regarding Fannie Mae than he has been talking recently. Specifically, the Journal cited Bachus' efforts in 2005 and 2007 to fend off tighter regulation and stiffer capital requirements for the GSE.
Not coincidentally, Bachus "was the single largest House recipient of campaign cash from Fannie and Freddie from 1989-2008."
The editorial argued for Californian GOP Representative Ed Royce to take over the Financial Services committee.
From what I read, though, it's clear that Bachus' recent charade is just that. And that he should be denied control of this important House committee.
It turns out that Alabam's Spencer Bachus, a frequent guest on CNBC, was far less conservative and responsible regarding Fannie Mae than he has been talking recently. Specifically, the Journal cited Bachus' efforts in 2005 and 2007 to fend off tighter regulation and stiffer capital requirements for the GSE.
Not coincidentally, Bachus "was the single largest House recipient of campaign cash from Fannie and Freddie from 1989-2008."
The editorial argued for Californian GOP Representative Ed Royce to take over the Financial Services committee.
From what I read, though, it's clear that Bachus' recent charade is just that. And that he should be denied control of this important House committee.
Monday, October 25, 2010
Andrew Cuomo's Forgotten Past
I'm simply amazed that New York Democratic gubernatorial candidate Andrew Cuomo has been able to distance himself from the damage he personally caused as Bill Clinton's HUD secretary.
Perhaps only Barney Frank, Chris Dodd and Kent Conrad bear as much personal responsibility for the recent housing finance crisis and the financial meltdown it triggered.
Cuomo's ineptitude was reinforced by a recent article in the Wall Street Journal entitled Audit Faulted Cuomo's HUD Overhaul.
Within the piece, details inform us that,
"The Inspector General's audit report also claimed that senior officials under Mr. Cuomo sought to impede investigators examining the program and took the unusual step of asking the Inspector General's office for the names of HUD employees who spoke with auditors.
Several HUD employees "feared reprisal" and urged investigators to keep their communications confidential, according to the audit report."
Further on in the article, Cuomo's attempts to get these names, and the excuses offered by his minions, are provided. It makes for incredibly transparent and disturbng reading,
"Saul Ramirez, a deputy secretary under Mr. Cuomo, said the requeset for the names was "standard procedure" and intended to help headquarters organize the schedules of field staffers involved in the auditing process."
It's a non-answer answer, isn't it?
But, moving back to the big picture, it's simply incredible to me that Cuomo has so successfully danced away from his culpability for the housing mess. And now wants to run an entire state.
It's probably a mark of the inadequacy of political opposition in New York that none of Cuomo's opponents seems to have bothered to connect the dots and hang this liability around the son of a former governor of the state.
Which I guess demonstrates that New York has a bad habit of selling its Senate seats to carpetbaggers and allowing for way too much plutocracy and cronyism in important elected state positions.
Perhaps only Barney Frank, Chris Dodd and Kent Conrad bear as much personal responsibility for the recent housing finance crisis and the financial meltdown it triggered.
Cuomo's ineptitude was reinforced by a recent article in the Wall Street Journal entitled Audit Faulted Cuomo's HUD Overhaul.
Within the piece, details inform us that,
"The Inspector General's audit report also claimed that senior officials under Mr. Cuomo sought to impede investigators examining the program and took the unusual step of asking the Inspector General's office for the names of HUD employees who spoke with auditors.
Several HUD employees "feared reprisal" and urged investigators to keep their communications confidential, according to the audit report."
Further on in the article, Cuomo's attempts to get these names, and the excuses offered by his minions, are provided. It makes for incredibly transparent and disturbng reading,
"Saul Ramirez, a deputy secretary under Mr. Cuomo, said the requeset for the names was "standard procedure" and intended to help headquarters organize the schedules of field staffers involved in the auditing process."
It's a non-answer answer, isn't it?
But, moving back to the big picture, it's simply incredible to me that Cuomo has so successfully danced away from his culpability for the housing mess. And now wants to run an entire state.
It's probably a mark of the inadequacy of political opposition in New York that none of Cuomo's opponents seems to have bothered to connect the dots and hang this liability around the son of a former governor of the state.
Which I guess demonstrates that New York has a bad habit of selling its Senate seats to carpetbaggers and allowing for way too much plutocracy and cronyism in important elected state positions.
Tuesday, October 12, 2010
"The Politics of Foreclosure"
I borrowed this post's title from the Wall Street Journal's lead staff editorial this weekend. How appropriate it is.
With all the faux-shock and surprise attending the nearly-simultaneous announcements by the nation's largest commercial banks that they are halting foreclosures, it's useful to examine the essentials.
Specifically, as the Journal piece notes, nobody has argued that any of the foreclosures harmed borrowers who were actually paying their mortgages. No mistakes of that nature were made. The only issue is some quibbling over whether, as the editorial contends,
"The result is the same, but politicians understand the pain that results when the anonymous paper pusher who kicks you out of your home is not the anonymous paper pusher who is supposed to kick you out of your home. Welcome to Washington's financial crisis of the week."
If you haven't figured this out already, here's what is really going on. Chase, the first of the big banks to 'discover' this meaningless error, is headed by a liberal CEO, Jamie Dimon. He was among the most frequent business leader visitors to Wonderboy's White House in the first year or so. Even named by Wonderboy as a favored, leading banker.
US commercial banks are sitting on large numbers of foreclosed mortgages which, ordinarily, would be sold at distressed prices, to free up lending capital. But this is political suicide. Ever since the middle of 2008, during the last presidential election cycle, Democratic candidates competed with ever-more generous foreclosure halt demands. Continuing with foreclosures and disposals would drive home prices through the floor, probably dampen consumer confidence, and delay any nascent economic recovery.
Of course, the resulting recovery would be "real," and, for a change, smaller investors would get a chance to buy assets at fire sale prices. Just like the big hedge funds in late 2008.
But that's not going to happen. Because this administration doesn't believe in market dynamics, and the bankers who depended on the federal government for rescue capital dare not cross Wonderboy.
So a new reason has been found to stop the foreclosure clock. It's a paperwork foul-up. No end in sight. Egregious paper shuffling mistakes which must be stopped, investigated, corrected, etc.
It's a farce, of course, But looks good for the Democrats and serves to delay the inevitable correction of prices in the housing market.
It's just politics as usual....nothing more.
With all the faux-shock and surprise attending the nearly-simultaneous announcements by the nation's largest commercial banks that they are halting foreclosures, it's useful to examine the essentials.
Specifically, as the Journal piece notes, nobody has argued that any of the foreclosures harmed borrowers who were actually paying their mortgages. No mistakes of that nature were made. The only issue is some quibbling over whether, as the editorial contends,
"The result is the same, but politicians understand the pain that results when the anonymous paper pusher who kicks you out of your home is not the anonymous paper pusher who is supposed to kick you out of your home. Welcome to Washington's financial crisis of the week."
If you haven't figured this out already, here's what is really going on. Chase, the first of the big banks to 'discover' this meaningless error, is headed by a liberal CEO, Jamie Dimon. He was among the most frequent business leader visitors to Wonderboy's White House in the first year or so. Even named by Wonderboy as a favored, leading banker.
US commercial banks are sitting on large numbers of foreclosed mortgages which, ordinarily, would be sold at distressed prices, to free up lending capital. But this is political suicide. Ever since the middle of 2008, during the last presidential election cycle, Democratic candidates competed with ever-more generous foreclosure halt demands. Continuing with foreclosures and disposals would drive home prices through the floor, probably dampen consumer confidence, and delay any nascent economic recovery.
Of course, the resulting recovery would be "real," and, for a change, smaller investors would get a chance to buy assets at fire sale prices. Just like the big hedge funds in late 2008.
But that's not going to happen. Because this administration doesn't believe in market dynamics, and the bankers who depended on the federal government for rescue capital dare not cross Wonderboy.
So a new reason has been found to stop the foreclosure clock. It's a paperwork foul-up. No end in sight. Egregious paper shuffling mistakes which must be stopped, investigated, corrected, etc.
It's a farce, of course, But looks good for the Democrats and serves to delay the inevitable correction of prices in the housing market.
It's just politics as usual....nothing more.
Monday, August 23, 2010
More Congressional Deception Re: Countrywide Sweetheart Loans
It's recently been revealed that the Senate Democrats, in a parting gift to Chris Dodd, the resigning Democrat from Connecticut, covered up just how many sweetheart mortgage loans he received as a "Friend of Angelo" Mozillo.
It's been known for some time that Dodd and Kent Conrad received such loans, though both continually denied knowing so.
Now, it's become public that Dodd received, according to the Wall Street Journal,
"as many as six VIP loans, including refinancings, from Countrywide Financial, not just the two in 2003 that triggered the investigation."
We apparently won't know whether Kent Conrad was similarly favored, because the ethically-challenged Republican Senate leadership made a deal to submarine any more details of the Countrywide VIP program.
As much as many of us loathe the Democrats in Congress, this deal makes it clear why we also have plenty of that hatred left for Mitch McConnell and John Boehner, too.
It's been known for some time that Dodd and Kent Conrad received such loans, though both continually denied knowing so.
Now, it's become public that Dodd received, according to the Wall Street Journal,
"as many as six VIP loans, including refinancings, from Countrywide Financial, not just the two in 2003 that triggered the investigation."
We apparently won't know whether Kent Conrad was similarly favored, because the ethically-challenged Republican Senate leadership made a deal to submarine any more details of the Countrywide VIP program.
As much as many of us loathe the Democrats in Congress, this deal makes it clear why we also have plenty of that hatred left for Mitch McConnell and John Boehner, too.
Friday, August 20, 2010
Two Pols Rewrite History Re: Fannie & Freddie
The Wall Street Journals of the week I was away contained some fascinating articles regarding Fannie Mae and Freddie Mac.
On August 3, former Fannie CEO Frank Raines wrote a lie-filled letter to the Journal's editors, the facts of which an accompanying staff editorial kindly noted.
In Raines' case, he, according to the Journal staff piece, rewrote history in a manner very flattering to himself and that made Fannie and Freddie out to be saviors of the US mortgage industry.
According to Raines, Wall Street had abandoned the mortgage sector, when, in truth, it was driven out by low-cost, subsidized federal activity which resulted in the meltdown of the entire US financial sector.
On the other hand, we have Barney Frank doing an abrupt about-face this week, now insisting that Fannie and Freddie need to be shuttered.
Quite a change from "roll the dice" Barney of only a few years ago, when he was happily, and publicly, playing roulette with taxpayer money in the residential mortgage arena.
Could Barney be taking seriously the growing voter disgust with his personally having cost them hundreds of billions of dollars of losses?
Yesterday's lead staff Journal editorial claimed to support Frank's newfound beliefs, and I'm sure they do. The question is, how can you trust someone so fickle and shallow?
Barney Frank obviously has no shame, and doesn't care that his video record makes him out to be a liar and an opportunist.
Much like Frank Raines, actually.
On August 3, former Fannie CEO Frank Raines wrote a lie-filled letter to the Journal's editors, the facts of which an accompanying staff editorial kindly noted.
In Raines' case, he, according to the Journal staff piece, rewrote history in a manner very flattering to himself and that made Fannie and Freddie out to be saviors of the US mortgage industry.
According to Raines, Wall Street had abandoned the mortgage sector, when, in truth, it was driven out by low-cost, subsidized federal activity which resulted in the meltdown of the entire US financial sector.
On the other hand, we have Barney Frank doing an abrupt about-face this week, now insisting that Fannie and Freddie need to be shuttered.
Quite a change from "roll the dice" Barney of only a few years ago, when he was happily, and publicly, playing roulette with taxpayer money in the residential mortgage arena.
Could Barney be taking seriously the growing voter disgust with his personally having cost them hundreds of billions of dollars of losses?
Yesterday's lead staff Journal editorial claimed to support Frank's newfound beliefs, and I'm sure they do. The question is, how can you trust someone so fickle and shallow?
Barney Frank obviously has no shame, and doesn't care that his video record makes him out to be a liar and an opportunist.
Much like Frank Raines, actually.
Monday, May 24, 2010
Barney Frank's Lie Caught On Video
Here are two videos which conclusively prove Barney Frank is lying about his longtime support for government-assisted housing finance.
The first video, as noted, is from several years ago.
This next video is from last week. I actually saw the interview in which Frank lied. This clip includes a key portion of the same video as shown above.
Thanks to technology, scum like Barny Frank can no longer lie with absolute impunity. Rather than having to sift through a paper trail years old, you can now just search YouTube and catch the bastard in the act on video.
The first video, as noted, is from several years ago.
This next video is from last week. I actually saw the interview in which Frank lied. This clip includes a key portion of the same video as shown above.
Thanks to technology, scum like Barny Frank can no longer lie with absolute impunity. Rather than having to sift through a paper trail years old, you can now just search YouTube and catch the bastard in the act on video.
Friday, October 30, 2009
Glenn Beck's Flawed Argument
Earlier this week, I believe on Wednesday evening, Glenn Beck went through a fairly complex explanation of how the US unwisely intertwined federal housing policy, low interest rates and excessive spending to arrive at our current debacle.
He then, understandably, discussed the folly of depreciating the US dollar in order to repay creditors with cheaper currency. Again, understandably, he cited the failed German Wiemar Republic.
But then he veered into dangerous and, unfortunately, intellectually wrong territory. Beck began to suggest that, like the Germans in the 1920s and '30s, the US might issue land-backed debt, because so many mortgages are held by Freddie Mac, Fannie Mae and, though he didn't mention it them by name, the FHA and VA mortgage programs.
In a rare misstep, Glenn said that the government "owns" these mortgages, and implied that, therefore, the feds can just claim them as assets, against which to issue dollar-denominated debt.
But that's not true. Not by a long shot.
Here's how things would have to work for that to be true. Mortgages backing a specific Fannie or Freddie debt issue would have to default. Upon default, it's possible that the owners of the GSE-issued securities might choose to take possession of the properties. But the details here are very important.
GSE's (Fannie, Freddie, as well as non-publicly owned VA and FHA programs) buy mortgages from originating institutions. To do that, they issue debt, with the implied backing of the US Treasury. Then they package the mortgages into pools and sell bonds backed by the income from the pools of mortgages.
The money they receive for these bonds goes to buy more mortgages. When the GSEs wish to expand, they issue more debt.
But they don't "own" a vast collection of mortgaged homes. They typically only "own," which is to say, hold, home mortgages for seasoning and packaging into bonds.
And, to reiterate, Fannie or Freddie wouldn't even "own" the homes connected to those mortgages securing their bonds if the borrowers defaulted. The bondholders would, or could, own them.
It's a nuanced point to many, but I think important. What Beck went on to contend, on the back of assuming the federal government simply "owns" the homes bought by mortgages which may eventually have secured Fannie or Freddie bonds, would simply be unrealistic.
Because this sort of misunderstanding of the actual mechanics by which all of these mortgages could be held, and the underlying homes and land owned by the federal government, and used to back other bonds, could materially damage Beck's credibility.
He then, understandably, discussed the folly of depreciating the US dollar in order to repay creditors with cheaper currency. Again, understandably, he cited the failed German Wiemar Republic.
But then he veered into dangerous and, unfortunately, intellectually wrong territory. Beck began to suggest that, like the Germans in the 1920s and '30s, the US might issue land-backed debt, because so many mortgages are held by Freddie Mac, Fannie Mae and, though he didn't mention it them by name, the FHA and VA mortgage programs.
In a rare misstep, Glenn said that the government "owns" these mortgages, and implied that, therefore, the feds can just claim them as assets, against which to issue dollar-denominated debt.
But that's not true. Not by a long shot.
Here's how things would have to work for that to be true. Mortgages backing a specific Fannie or Freddie debt issue would have to default. Upon default, it's possible that the owners of the GSE-issued securities might choose to take possession of the properties. But the details here are very important.
GSE's (Fannie, Freddie, as well as non-publicly owned VA and FHA programs) buy mortgages from originating institutions. To do that, they issue debt, with the implied backing of the US Treasury. Then they package the mortgages into pools and sell bonds backed by the income from the pools of mortgages.
The money they receive for these bonds goes to buy more mortgages. When the GSEs wish to expand, they issue more debt.
But they don't "own" a vast collection of mortgaged homes. They typically only "own," which is to say, hold, home mortgages for seasoning and packaging into bonds.
And, to reiterate, Fannie or Freddie wouldn't even "own" the homes connected to those mortgages securing their bonds if the borrowers defaulted. The bondholders would, or could, own them.
It's a nuanced point to many, but I think important. What Beck went on to contend, on the back of assuming the federal government simply "owns" the homes bought by mortgages which may eventually have secured Fannie or Freddie bonds, would simply be unrealistic.
Because this sort of misunderstanding of the actual mechanics by which all of these mortgages could be held, and the underlying homes and land owned by the federal government, and used to back other bonds, could materially damage Beck's credibility.
Tuesday, October 27, 2009
Edolphus "Ed" Towns' Hand Is Forced On Countrywide Investigation
Last week I wrote this post concerning Edolphus "Ed" Towns (D-NY) shameful squelching of his committee's members' push to investigate the so-called "Friends of Angelo" VIP mortgage progam.
Yesterday's Wall Street Journal reported that Democratic Representatives Mike Quigley, of Illinois, and Paul Hodes, of New Hampshire, broke party ranks and joined California Republican Darrell Issa to force Towns to issue the relevant subpoenas to Bank of America for the Countrywide records.
Covering any federal and state officials, plus those at Freddie Mac and Fannie Mae, the subpoenaed records should finally cast light on the truth of denials by Democratic Senators Kent Conrad and Chris Dodd that they never knew they received special treatment.
Of course, Towns' foot-dragging might save Dodd, who is in the fight of his life to retain his Senate seat.
But, having heard and seen both Dodd's and Conrad's sanctimonious denials, it's going to be fascinating to see what evidence emerges from the Countrywide files, phone and email records.
Oh, and let's not forget Ed Towns, either. Remember, he, too, denied receiving any special treatment on his Countrywide mortgages.
I suppose it's way too much to hope that Quigley's and Hodes' votes presage a wholesale return to Congressional members voting and acting for the public good. But maybe it's a small start.
Yesterday's Wall Street Journal reported that Democratic Representatives Mike Quigley, of Illinois, and Paul Hodes, of New Hampshire, broke party ranks and joined California Republican Darrell Issa to force Towns to issue the relevant subpoenas to Bank of America for the Countrywide records.
Covering any federal and state officials, plus those at Freddie Mac and Fannie Mae, the subpoenaed records should finally cast light on the truth of denials by Democratic Senators Kent Conrad and Chris Dodd that they never knew they received special treatment.
Of course, Towns' foot-dragging might save Dodd, who is in the fight of his life to retain his Senate seat.
But, having heard and seen both Dodd's and Conrad's sanctimonious denials, it's going to be fascinating to see what evidence emerges from the Countrywide files, phone and email records.
Oh, and let's not forget Ed Towns, either. Remember, he, too, denied receiving any special treatment on his Countrywide mortgages.
I suppose it's way too much to hope that Quigley's and Hodes' votes presage a wholesale return to Congressional members voting and acting for the public good. But maybe it's a small start.
Monday, October 19, 2009
The Shame of Edolphus Towns (D-NY)
To the sullied names of Democratic Senators Chris Dodd and Kent Conrad, we can now add the name of New York Democratic Representative Edolphus Towns.
Towns has refused to take a vote in his committee to investigate Countrywide Financial's "Friends of Angelo" VIP mortgage loan program.
Of course, Towns' own two mortgages from Countrywide have no bearing on the matter, do they?
Not at all. Not in Frisco Nan's new House of Responsibility and Transparency.
California Republican Representative Darrell Issa is pressing for this investigation, and even Illinois Democrat (and Rahm Emmanuel replacement) Congressman Mike Quigley favors taking the vote and even publishing the names of any Congressional Members who accepted favors from Countrywide and Mozillo.
But Towns still refuses to either recuse himself or take that vote.
Apparently, a recent committee meeting at which the vote was again skipped saw the Democratic Representatives slinking out the back door of the meeting room.
Towns is a disgrace to his state and the nation. He openly supports tax cheat and fellow Black Caucus and New York Representative Charlie Rangel, too.
It's corrupt representation like this that weakens our Republic. And, hopefully, will lead to a change of party majority in the House next year.
Towns has refused to take a vote in his committee to investigate Countrywide Financial's "Friends of Angelo" VIP mortgage loan program.
Of course, Towns' own two mortgages from Countrywide have no bearing on the matter, do they?
Not at all. Not in Frisco Nan's new House of Responsibility and Transparency.
California Republican Representative Darrell Issa is pressing for this investigation, and even Illinois Democrat (and Rahm Emmanuel replacement) Congressman Mike Quigley favors taking the vote and even publishing the names of any Congressional Members who accepted favors from Countrywide and Mozillo.
But Towns still refuses to either recuse himself or take that vote.
Apparently, a recent committee meeting at which the vote was again skipped saw the Democratic Representatives slinking out the back door of the meeting room.
Towns is a disgrace to his state and the nation. He openly supports tax cheat and fellow Black Caucus and New York Representative Charlie Rangel, too.
It's corrupt representation like this that weakens our Republic. And, hopefully, will lead to a change of party majority in the House next year.
Thursday, February 5, 2009
Chris Dodd's Lies On Countrywide Loan Disclosures
Connecticut Senator Chris Dodd half-heartedly came forth with information about his sweetheart loans from failed mortgage originator Countrywide a few days ago.
As I mentioned in this post last October, Dodd had been told he was a 'friend of Angelo' Mozilla, and accorded special, favorable treatment on two mortgage loans. Dodd was, and is, chairman of the Senate Finance Committee, and, as such, holds sway over matters important to Countrywide.
When the whistle blew on his shameful bribe-taking, Dodd promised to make public documents pertaining to the affair.
He lied.
What Dodd did, since mid-summer, is to have stalled the process. He hid behind a Senate ethics panel for a while. Then claimed to be conferring with his attorney.
Earlier this week, Dodd's minions laid out some papers involving the Countrywide matter in a single room in the Senator's offices in Hartford, CT. Selected reporters were allowed to read, but not copy, nor take, the material.
That's it. That is Dodd's version of full disclosure.
The man should be strung up in the public square in Hartford and pelted with rotten fruit, then forbidden to hold public office ever again.
Coming in a week when Wonderboy's cabinet was being stuffed with tax cheats, Dodd seems of a piece with this approach of the Democratic party.
Basically, if you can get power, you can rise above the law and violate it with impunity.
As I mentioned in this post last October, Dodd had been told he was a 'friend of Angelo' Mozilla, and accorded special, favorable treatment on two mortgage loans. Dodd was, and is, chairman of the Senate Finance Committee, and, as such, holds sway over matters important to Countrywide.
When the whistle blew on his shameful bribe-taking, Dodd promised to make public documents pertaining to the affair.
He lied.
What Dodd did, since mid-summer, is to have stalled the process. He hid behind a Senate ethics panel for a while. Then claimed to be conferring with his attorney.
Earlier this week, Dodd's minions laid out some papers involving the Countrywide matter in a single room in the Senator's offices in Hartford, CT. Selected reporters were allowed to read, but not copy, nor take, the material.
That's it. That is Dodd's version of full disclosure.
The man should be strung up in the public square in Hartford and pelted with rotten fruit, then forbidden to hold public office ever again.
Coming in a week when Wonderboy's cabinet was being stuffed with tax cheats, Dodd seems of a piece with this approach of the Democratic party.
Basically, if you can get power, you can rise above the law and violate it with impunity.
Monday, February 2, 2009
John Conyers' Stupid Mortgage "Reform" Ideas
Liberal House member John Conyers (D-MI) is, to judge from his editorial in last Friday's Wall Street Journal, not a very bright man. Not at all.
His piece, entitled "Loan Modification Can Stop the Foreclosure Crisis," pretty much distills his small-minded, near-term obsession with home foreclosures, rather than the longer term health of the mortgage industry.
Conyers wrote,
"I introduced the Helping Families Save Their Homes In Bankruptcy Act of 2009 to give courts the power to modify mortgages to bring them in line with underlying home values. For families in distress, this is a much-needed reform. And considering the realistic alternatives, it is fair to all concerned.
For more than three decades, the bankruptcy code has permitted the very kind of court modification we are considering today, for every other form of secured debt, including loans secured by second homes, investment properties, luxury yachts, and jets. For over 20 years, this very kind of modification has been available for home mortgages already -- if the home is a family farm. There is no indication that this has in any way increased the cost of credit for any of these kinds of loans.
As for my legislation, we have narrowed it to apply only to existing mortgages. So it will have no effect on new mortgages and cannot impact their cost. This is one reason why Citigroup is now among the many business and consumer groups that support this proposal. It's also one reason why the Obama administration supports my bill.
Finally, to those who argue that this legislation constitutes some form of "moral hazard," which will encourage reckless borrowing in the future, I would simply ask them to come to Detroit, my home town."
There are quite a few things wrong with Conyers' assertions.
First, any reasonable, educated adult voter knows that once you give a small exception to a standing rule to either the courts or Congress, it will be enlarged and distorted as time passes. So this is a classic 'camel's nose under the tent' approach that Conyers advocates. And he knows it.
Conyers focuses, in the second quoted paragraph, on the cost of credit. He gives no evidence, so we really can't believe his contention. It simply has no evidentiary basis in the column. But that's not the whole picture. Often, it's not the price of credit, but its very unavailability that is a problem. The asset classes which Conyers cites are much smaller asset-backed markets than home mortgages. And are generally viewed as riskier loans to buy.
Home mortgages are different because it is presumed that while someone might just let their boat, jet or investment real estate be repossessed, they will want to remain in their home. And home mortgages are just about the most securitized asset on the planet. So allowing some local municipal or district court judge to begin capriciously doling out mortgage relief will chill the market for securitized debt backed by home loans.
Conyers states that Citicorp supports his bill, but fails to mention that the US government effectively owns that bank. And it is generally accepted that Citicorp's management caved on this issue in exchange for continued access to Federal funding in the future.
Nobody with a brain who is not a libeal really believes the current restriction of this bill to existing mortgages will last through the next few years. It will only be a matter of time before the legislation is 'modified' so that more homeowner loans are included, and, in time, will simply become a part of the mortgage market.
This is precisely why limited government is to be preferred in an economic democracy like ours. Once Congress begins to encroach a little bit on some aspect of business, it gradually takes more and more power unto itself.
Make no mistake. If this measure passes, the future of mortgage finance will be far different than the past, and not in a good way. Excepting the past sixteen years of ill-advised Federal pressure on commercial banks to make and securitize risky, low-downpayment mortgages to unqualified borrowers, the US mortgage finance markets have functioned well for decades. This legislation will end that, as investors shy away from assets, the value of which can be arbitrarily reduced by some unknown local court judge.
Conyers' insistence that we all 'come to Detroit' to see the shape its in dodges the question of how it got that way. Probably by poor- read liberal- city management and risky borrowing by its defaulting homeowners.
By the way, didn't the Detroit mayor get bounced out of his job? Yes, surely Detroit is a model case for efficient government in the first place. More to the point, it is not the place you would look to for an example of normal operation of the mortgage markets.
Conyers' then plays on class prejudices with this choice passage near the end of his editorial,
"If we can spend $700 billion to bail out the brokers on Wall Street, the very least we can do is allow working Americans who are willing to repay their debts as best they can, under court supervision, the dignity of staying in their homes. With one in 10 homeowners behind on their mortgages, and 10 million foreclosures expected over the next several years, the time for meaningful action is now."
It's clear Conyers barely understands the financial services sector. The firms which were "bailed out" were investment and commercial banks. His reference to "brokers" is off the mark and refers to a rather small, increasingly unrepresentative and unprofitable part of the financial services business mix. His verbiage is designed to incite class warfare and hatred of one economic class by another.
John Conyers' liberal diatribe about mortgage loan modification by local courts is an example of why Americans rightly worry about Congressional encroachment into their economic lives.
His piece, entitled "Loan Modification Can Stop the Foreclosure Crisis," pretty much distills his small-minded, near-term obsession with home foreclosures, rather than the longer term health of the mortgage industry.
Conyers wrote,
"I introduced the Helping Families Save Their Homes In Bankruptcy Act of 2009 to give courts the power to modify mortgages to bring them in line with underlying home values. For families in distress, this is a much-needed reform. And considering the realistic alternatives, it is fair to all concerned.
For more than three decades, the bankruptcy code has permitted the very kind of court modification we are considering today, for every other form of secured debt, including loans secured by second homes, investment properties, luxury yachts, and jets. For over 20 years, this very kind of modification has been available for home mortgages already -- if the home is a family farm. There is no indication that this has in any way increased the cost of credit for any of these kinds of loans.
As for my legislation, we have narrowed it to apply only to existing mortgages. So it will have no effect on new mortgages and cannot impact their cost. This is one reason why Citigroup is now among the many business and consumer groups that support this proposal. It's also one reason why the Obama administration supports my bill.
Finally, to those who argue that this legislation constitutes some form of "moral hazard," which will encourage reckless borrowing in the future, I would simply ask them to come to Detroit, my home town."
There are quite a few things wrong with Conyers' assertions.
First, any reasonable, educated adult voter knows that once you give a small exception to a standing rule to either the courts or Congress, it will be enlarged and distorted as time passes. So this is a classic 'camel's nose under the tent' approach that Conyers advocates. And he knows it.
Conyers focuses, in the second quoted paragraph, on the cost of credit. He gives no evidence, so we really can't believe his contention. It simply has no evidentiary basis in the column. But that's not the whole picture. Often, it's not the price of credit, but its very unavailability that is a problem. The asset classes which Conyers cites are much smaller asset-backed markets than home mortgages. And are generally viewed as riskier loans to buy.
Home mortgages are different because it is presumed that while someone might just let their boat, jet or investment real estate be repossessed, they will want to remain in their home. And home mortgages are just about the most securitized asset on the planet. So allowing some local municipal or district court judge to begin capriciously doling out mortgage relief will chill the market for securitized debt backed by home loans.
Conyers states that Citicorp supports his bill, but fails to mention that the US government effectively owns that bank. And it is generally accepted that Citicorp's management caved on this issue in exchange for continued access to Federal funding in the future.
Nobody with a brain who is not a libeal really believes the current restriction of this bill to existing mortgages will last through the next few years. It will only be a matter of time before the legislation is 'modified' so that more homeowner loans are included, and, in time, will simply become a part of the mortgage market.
This is precisely why limited government is to be preferred in an economic democracy like ours. Once Congress begins to encroach a little bit on some aspect of business, it gradually takes more and more power unto itself.
Make no mistake. If this measure passes, the future of mortgage finance will be far different than the past, and not in a good way. Excepting the past sixteen years of ill-advised Federal pressure on commercial banks to make and securitize risky, low-downpayment mortgages to unqualified borrowers, the US mortgage finance markets have functioned well for decades. This legislation will end that, as investors shy away from assets, the value of which can be arbitrarily reduced by some unknown local court judge.
Conyers' insistence that we all 'come to Detroit' to see the shape its in dodges the question of how it got that way. Probably by poor- read liberal- city management and risky borrowing by its defaulting homeowners.
By the way, didn't the Detroit mayor get bounced out of his job? Yes, surely Detroit is a model case for efficient government in the first place. More to the point, it is not the place you would look to for an example of normal operation of the mortgage markets.
Conyers' then plays on class prejudices with this choice passage near the end of his editorial,
"If we can spend $700 billion to bail out the brokers on Wall Street, the very least we can do is allow working Americans who are willing to repay their debts as best they can, under court supervision, the dignity of staying in their homes. With one in 10 homeowners behind on their mortgages, and 10 million foreclosures expected over the next several years, the time for meaningful action is now."
It's clear Conyers barely understands the financial services sector. The firms which were "bailed out" were investment and commercial banks. His reference to "brokers" is off the mark and refers to a rather small, increasingly unrepresentative and unprofitable part of the financial services business mix. His verbiage is designed to incite class warfare and hatred of one economic class by another.
John Conyers' liberal diatribe about mortgage loan modification by local courts is an example of why Americans rightly worry about Congressional encroachment into their economic lives.
Monday, February 11, 2008
Hillary's Mortgage Default Moratorium Becomes Moot AND Unwanted!
Friday's Wall Street Journal carried a fascinating editorial by Nicole Gelinas entitled "The Rise of the Mortgage 'Walkers.'"
Essentially, Ms. Gelinas reports that mortgages have an embedded "put," allowing borrowers to simply mail the keys back to the lender, and default. She writes,
"The apparent willingness of borrowers to 'walk away' from mortgage debt," the analysts noted, "has contributed to extraordinary high levels of early default" on loans issued during the 18 months before the mortgage bubble burst. It expects losses to reach 21% of initial loan balances for subprime mortgages issued in 2006 and 26% for those issued in early 2007.
Such behavior, where not precipitated by willful fraud, shows that American homebuyers supposedly duped by their lenders aren't so dumb. They're perfectly capable of acting rationally without political interference.
While mortgage fraud has abounded in recent years, voluntary foreclosures are not by themselves evidence of a newfound irresponsibility on Americans' part. To be sure, until recently, mass-scale voluntary foreclosures were unthinkable. But markets have changed, and people are changing their behavior in response."
Ms. Gelinas notes that, as banks allowed home purchases with as little as no, or 5% down, at the housing market's peak, it was not surprising that, at some point, price declines would trigger this behavior. Note that these borrowers want to have foreclosure proceedings begun.
She further observes,
"In most cases, once a homebuyer splits, the mortgage-securities investors are stuck with the loss. In some states, including California and Arizona, this provision is the letter of the law. In others, the bank forgives the balance of the loan -- a common practice that's unlikely to change now, given the criminal and civil investigations banks are already sweating through.
Essentially, mortgage-bond investors, seemingly unwittingly, sold homebuyers a put option, without properly pricing it, and now homeowners are exercising that option. Moreover, prime borrowers in many markets face the same incentives.
Borrowers acted rationally in response to market forces and incentives during the bubble: Buy a house because prices always go up; you can't lose. Many are acting rationally now: Mail the keys back and un-borrow the money, because prices are sinking fast while the debt isn't. When the house was purchased not as a first home but as a rental investment, the decision is even easier. Politicians keep saying that Americans need protection from their big, bad lenders -- but that protection is already there.
Of course, there's a price. Mortgage "walkers" will take a hit to their personal credit rating. Yet this once-forbidding punishment may be discounted. That's because, just as when markets change their behavior, people change, when people change their behavior, markets change also.
If hundreds of thousands of people with decent work histories are going to have less-than-stellar credit because of foreclosures this year and next, they won't suffer so much as in the past. Many walkers are going to want to buy houses again some day; and when they do, lenders are going to want to make money lending them money to do so (hopefully requiring a good down payment). Investors searching for yield likely won't bypass what could be a large pool of borrowers."
Note the belief that, when markets turn around and lenders want to lend for housing, they'll overlook or adjust their credit processes for these borrowers who behaved rationally.
Ms. Gelinas sums up the situation thusly,
"Nobody is going to debtors' prison. Nobody is going to have to toil for 30 years and sacrifice their kids' future to pay off burdensome loans that they're stuck with forever because they overreached. (Even if banks and mortgage administrators pursue judgments for post-foreclosure loan balances, there's always bankruptcy as a last resort.)
As for Sen. Hillary Clinton and her proposed "moratorium on foreclosures": She may soon find that borrowers, not just lenders, are screaming to let them act within their contractual rights."
Sorry, Hill'. Guess that moratorium could get you into more trouble than just keeping your mouth shut on this issue. The specter of families in jail due to mortgage foreclosures isn't even remotely true.
I guess this goes to show what happens when a political poobah gets into her/his head to begin preaching on "solutions" to issues about which they clearly know very little. Creating more problems when a new solution isn't even necessary.
And you say you want this woman to be our next President?
Essentially, Ms. Gelinas reports that mortgages have an embedded "put," allowing borrowers to simply mail the keys back to the lender, and default. She writes,
"The apparent willingness of borrowers to 'walk away' from mortgage debt," the analysts noted, "has contributed to extraordinary high levels of early default" on loans issued during the 18 months before the mortgage bubble burst. It expects losses to reach 21% of initial loan balances for subprime mortgages issued in 2006 and 26% for those issued in early 2007.
Such behavior, where not precipitated by willful fraud, shows that American homebuyers supposedly duped by their lenders aren't so dumb. They're perfectly capable of acting rationally without political interference.
While mortgage fraud has abounded in recent years, voluntary foreclosures are not by themselves evidence of a newfound irresponsibility on Americans' part. To be sure, until recently, mass-scale voluntary foreclosures were unthinkable. But markets have changed, and people are changing their behavior in response."
Ms. Gelinas notes that, as banks allowed home purchases with as little as no, or 5% down, at the housing market's peak, it was not surprising that, at some point, price declines would trigger this behavior. Note that these borrowers want to have foreclosure proceedings begun.
She further observes,
"In most cases, once a homebuyer splits, the mortgage-securities investors are stuck with the loss. In some states, including California and Arizona, this provision is the letter of the law. In others, the bank forgives the balance of the loan -- a common practice that's unlikely to change now, given the criminal and civil investigations banks are already sweating through.
Essentially, mortgage-bond investors, seemingly unwittingly, sold homebuyers a put option, without properly pricing it, and now homeowners are exercising that option. Moreover, prime borrowers in many markets face the same incentives.
Borrowers acted rationally in response to market forces and incentives during the bubble: Buy a house because prices always go up; you can't lose. Many are acting rationally now: Mail the keys back and un-borrow the money, because prices are sinking fast while the debt isn't. When the house was purchased not as a first home but as a rental investment, the decision is even easier. Politicians keep saying that Americans need protection from their big, bad lenders -- but that protection is already there.
Of course, there's a price. Mortgage "walkers" will take a hit to their personal credit rating. Yet this once-forbidding punishment may be discounted. That's because, just as when markets change their behavior, people change, when people change their behavior, markets change also.
If hundreds of thousands of people with decent work histories are going to have less-than-stellar credit because of foreclosures this year and next, they won't suffer so much as in the past. Many walkers are going to want to buy houses again some day; and when they do, lenders are going to want to make money lending them money to do so (hopefully requiring a good down payment). Investors searching for yield likely won't bypass what could be a large pool of borrowers."
Note the belief that, when markets turn around and lenders want to lend for housing, they'll overlook or adjust their credit processes for these borrowers who behaved rationally.
Ms. Gelinas sums up the situation thusly,
"Nobody is going to debtors' prison. Nobody is going to have to toil for 30 years and sacrifice their kids' future to pay off burdensome loans that they're stuck with forever because they overreached. (Even if banks and mortgage administrators pursue judgments for post-foreclosure loan balances, there's always bankruptcy as a last resort.)
As for Sen. Hillary Clinton and her proposed "moratorium on foreclosures": She may soon find that borrowers, not just lenders, are screaming to let them act within their contractual rights."
Sorry, Hill'. Guess that moratorium could get you into more trouble than just keeping your mouth shut on this issue. The specter of families in jail due to mortgage foreclosures isn't even remotely true.
I guess this goes to show what happens when a political poobah gets into her/his head to begin preaching on "solutions" to issues about which they clearly know very little. Creating more problems when a new solution isn't even necessary.
And you say you want this woman to be our next President?
Sunday, December 16, 2007
More Idiotic Overreaction to The Mortgage Mess: Jesse Jackson's 'Marshall Plan'
Compounding the months-old Congressional hand-wringing over the subprime mortgage mess is an editorial in the Wall Street Journal on 7 December by Jesse Jackson.
A failed Presidential candidate and liberal-issue gadfly, Jackson weighed in with a piece ominously entitled "A Marshal Plan for Mortgages."
His opening paragraph contains this sentence,
"But for the two million homeowners who face foreclosure over the next year because of the subprime mortgage crisis, their New Year's hopes rest not with themselves, but with policy makers in Washington and the investment community on Wall Street."
Wait. They face foreclosure "because of the subprime mortgage crisis?" I thought we had a mortgage crisis because of the behaviors of these delinquent or defaulting consenting borrowers.
Maybe I missed something. Or, more likely, Jackson simply misunderstands the concept known as 'cause and effect.' Perhaps this was not taught in Jackson's bible college?
Then Jackson gets down to his real message,
"It's time for another U.S. government-sponsored Marshall Plan. But instead of reconstructing Europe after World War II, today's Marshall Plan for mortgages would restore homeowners' and investors' confidence and dreams.
We already have a model for such a plan. It has been used successfully several times since the Great Depression, and has always worked. That model is the Reconstruction Finance Corporation. During the Depression, President Hoover used the independent government agency to provide $2 billion in aid to state and local governments, and for loans to banks, railroads and other businesses. Subsequently, President Roosevelt used it to finance the most creative aspects of his New Deal.
If we can save the S&Ls, we certainly can save homeowners with subprime mortgages. And whatever you call the revived agency, whether its middle name is Finance, Trust or even Mortgage, it is needed to rescue those Americans steered into subprime, adjustable-rate mortgages, often laced with hidden fees they never knew about."
He's not shy, is he? Nor stingy with your tax dollars. Even as he mixes metaphors. The title refers to the Marshal Plan, which reconstructed a ruined Europe after WWII, in order to prevent those still-free countries from falling under communism's hold.
However, in Jackson's text, he actually wants the RFC resurrected. Which is it, Jesse? Can't you get your request straight in even a relatively brief editorial?
I won't even touch the 'most creative aspects' of FDR's New Deal, other than to muse that maybe these were the unconstitutional parts subsequently struck down by an unpacked Supreme Court?
But, to Jackson's points. First, we aren't in the Great Depression. We haven't had anything near the equivalent of the original Black Friday of 1929. And the S&L's weren't saved, so much as forced into taking actions that altered their sector forever. Many went out of business, Jesse, because they lent long and borrowed short.
The moral there, and again, now, is that businesses and consumers must be made to pay the consequences for their economic decisions. That's the American Way. You have the freedom to succeed, or fail, Jesse. We can't just start handing out absolution, willy-nilly. Lessons learned by unwise, imprudent investors, lenders and borrows won't be soon forgotten.
Near the end of his plea for governmental intervention, Jackson writes,
"We must move immediately to adopt this Marshall Plan for mortgages or face the prospect of entire neighborhoods and communities becoming depressed and potentially abandoned. Unless we act, the crisis will continue to snowball. On Jan. 1, the interest rates on hundreds of thousands of home loans are scheduled to balloon, triggering an avalanche of foreclosures. Finding a permanent answer to this crisis should be a priority that unites all Americans, regardless of political party, ethnic background or income level. Financial institutions, politicians and local communities must work together to restructure mortgage loans and stem the rising numbers of foreclosures."
Jackson doesn't cite any facts or data in his closing call to arms. And, knowing he's not an economist, I'm not inclined to simply believe his hyperbole. It reads to me like a Jackson homily/diatribe- use the right phrasing and emphasis, and you can skip the facts.
And, by the way, a recent Journal editorial noted that recent analysis is showing that a surprising number of now-troubled mortgages were, in fact, instances of borrower fraud perpetrated on lenders and investors! Painting the entire situation with a broad brush is sure to have a host of negative consequences- rewarding imprudent adult borrowers, as well as fraudsters.
Better to just skip this idea of Jackson's. But if he thinks it's this serious, I'd welcome seeing Jesse donate most of his net worth to the cause and wear sackcloth instead of his usual expensive suits.
A failed Presidential candidate and liberal-issue gadfly, Jackson weighed in with a piece ominously entitled "A Marshal Plan for Mortgages."
His opening paragraph contains this sentence,
"But for the two million homeowners who face foreclosure over the next year because of the subprime mortgage crisis, their New Year's hopes rest not with themselves, but with policy makers in Washington and the investment community on Wall Street."
Wait. They face foreclosure "because of the subprime mortgage crisis?" I thought we had a mortgage crisis because of the behaviors of these delinquent or defaulting consenting borrowers.
Maybe I missed something. Or, more likely, Jackson simply misunderstands the concept known as 'cause and effect.' Perhaps this was not taught in Jackson's bible college?
Then Jackson gets down to his real message,
"It's time for another U.S. government-sponsored Marshall Plan. But instead of reconstructing Europe after World War II, today's Marshall Plan for mortgages would restore homeowners' and investors' confidence and dreams.
We already have a model for such a plan. It has been used successfully several times since the Great Depression, and has always worked. That model is the Reconstruction Finance Corporation. During the Depression, President Hoover used the independent government agency to provide $2 billion in aid to state and local governments, and for loans to banks, railroads and other businesses. Subsequently, President Roosevelt used it to finance the most creative aspects of his New Deal.
If we can save the S&Ls, we certainly can save homeowners with subprime mortgages. And whatever you call the revived agency, whether its middle name is Finance, Trust or even Mortgage, it is needed to rescue those Americans steered into subprime, adjustable-rate mortgages, often laced with hidden fees they never knew about."
He's not shy, is he? Nor stingy with your tax dollars. Even as he mixes metaphors. The title refers to the Marshal Plan, which reconstructed a ruined Europe after WWII, in order to prevent those still-free countries from falling under communism's hold.
However, in Jackson's text, he actually wants the RFC resurrected. Which is it, Jesse? Can't you get your request straight in even a relatively brief editorial?
I won't even touch the 'most creative aspects' of FDR's New Deal, other than to muse that maybe these were the unconstitutional parts subsequently struck down by an unpacked Supreme Court?
But, to Jackson's points. First, we aren't in the Great Depression. We haven't had anything near the equivalent of the original Black Friday of 1929. And the S&L's weren't saved, so much as forced into taking actions that altered their sector forever. Many went out of business, Jesse, because they lent long and borrowed short.
The moral there, and again, now, is that businesses and consumers must be made to pay the consequences for their economic decisions. That's the American Way. You have the freedom to succeed, or fail, Jesse. We can't just start handing out absolution, willy-nilly. Lessons learned by unwise, imprudent investors, lenders and borrows won't be soon forgotten.
Near the end of his plea for governmental intervention, Jackson writes,
"We must move immediately to adopt this Marshall Plan for mortgages or face the prospect of entire neighborhoods and communities becoming depressed and potentially abandoned. Unless we act, the crisis will continue to snowball. On Jan. 1, the interest rates on hundreds of thousands of home loans are scheduled to balloon, triggering an avalanche of foreclosures. Finding a permanent answer to this crisis should be a priority that unites all Americans, regardless of political party, ethnic background or income level. Financial institutions, politicians and local communities must work together to restructure mortgage loans and stem the rising numbers of foreclosures."
Jackson doesn't cite any facts or data in his closing call to arms. And, knowing he's not an economist, I'm not inclined to simply believe his hyperbole. It reads to me like a Jackson homily/diatribe- use the right phrasing and emphasis, and you can skip the facts.
And, by the way, a recent Journal editorial noted that recent analysis is showing that a surprising number of now-troubled mortgages were, in fact, instances of borrower fraud perpetrated on lenders and investors! Painting the entire situation with a broad brush is sure to have a host of negative consequences- rewarding imprudent adult borrowers, as well as fraudsters.
Better to just skip this idea of Jackson's. But if he thinks it's this serious, I'd welcome seeing Jesse donate most of his net worth to the cause and wear sackcloth instead of his usual expensive suits.
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