Jobs were lost in virtually every sector: manufacturing, construction, and especially the service sector, which had been the sector that provided job strength over the last few years.

In summary, there is nothing to like about this report and it is likely to get worse. Estimates on unemployment rate range from 7% to 9% by the middle of 2009.

Read more here on how the “Economy Sheds Jobs.”

Goldman Sachs, which had the most accurate call on the employment report, is now calling for a -3.5% GDP for 4th qtr 2008 and a -2% for 1st qtr 2009.

Also: The market expects a .50 cut in the Fed Funds rate in December to an overall rate of .5%.

This call leads us to wonder whether we are going to move into a Japanese-style economy from the 1990s in which lending rates were literally 0 but savings were still very significant and borrowing anemic. Banks did not fully recognize losses. Inflation was not an issue given that borrowing needs were non-existent. This scenario is not the case here in the United States since our deficit borrowing will be enormous!!

Equity markets are expected to open flat to slightly higher this morning. Actually those markets opened up app 1% and got as high as 2.5% but have come back down to +1% after the GM earnings. (11:30 am).

Bonds are lower with rates up by app 8-10 basis points.

Commodities are mixed with early call on gold up 2-3% but copper is lower … again … oil also looks like it will open slightly lower but moved higher in sync with the overall market.

The auto situation continues to receive a lot of focus. The “cash burn” rate for Ford and GM is between 2-3bln a month.

The Big 3 are asking for 50bln in capital to address health care costs and liquidity … expect them to get it from Uncle Sam with Uncle Sam taking warrants in the companies … all that said, indications are that the auto companies will have layoffs and cost cuts wherever possible. Ford posted earnings of -$1.31 per share vs expectations of -.93. GM posted earnings (how is it that they are called earnings when in fact they are losses?!) of -$7.35 per share vs expectations of -$3.94. This GM situation is truly dire.

Read more here how “Ford Plans More Cuts.”

All the focus on bank lending really needs to focus on the ability of the banks and brokers to “sell” those loans (mortgages, auto loans, credit card loans, et al) to investors through the “securitization” process.

Investors are very cautious and have little appetite at current rates to buy these loans. Given that lack of demand, banks are not willing to lend. Ultimately rates for these products need to move higher to attract investors.

The idea that Freddie and Fannie will be the buyer of last resort for these mortgages is a movie that we have seen before and it has a very bad ending.

Read more here on how “JP Morgan’s Illiquid Assets Rise.”

Speaking of Fannie: Expect a RECORD loss when they post 3rd qtr earnings.
Another situation that bears watching is AIG … they are trying to sell divisions to repay Uncle Sam but are meeting with little demand currently or buyers are very cautious as they can’t get financing for the purchase.

With all of the government intervention currently and more intervention expected, it is not a stretch to say that as taxpayers we are all investors in the biggest multi-strategy hedge fund in the world. Problem is, I think that our “investment” may in many circumstances be like that roach motel. We can get it, but just how the heck do we get out …??

Last but not least … Warren Buffett purchased preferred stakes in Goldman Sachs at 125 with a 10% dividend and warrants to purchase more at 115 … Goldman closed yesterday at app 81 … yes down 35% from Buffett’s purchase … Buffett did the same trade with General Electric when GE was at 22.25 … GE closed yesterday at 18.3 … yes down app 20% … Warren is smart but he has the luxury of time and excess cash … those investments were made in late September.

I caution you from focusing too much on the day-to-day swings in the markets and continue to assess the trends in the economy. Bounces are temporary. Markets correct by price and time.

Granted we have had app a 40% correction in price, but we will likely now suffer from either more price corrections or a market that at best “treads water” thus a time correction.

We hope you had a Happy Friday!!

……..

Ed.’s Note: Our apologies for not posting this story on Friday. It was entirely the editor’s fault. LD wrote this by mid-day Friday. We will try to do better.

At the end of the Democratic Primary season, this was the situation:

Popular Vote
Senator Hillary Rodham Clinton: 17,857,446, (48.04%)
Senator Barack Obama: 17,584,649 (47.31%)

Pledged delegates

Senator Hillary Rodham Clinton: 1,730.5 (39.17%)
Senator Barack Obama: 1,747.5 (39.55%)

(source)

Then, for no apparent good reason, in June Howard Dean and Nancy Pelosis decided THEY, not the delegates chosen by the electorate and not the superdelegates appointed via proper party procedure, were going to decide who would represent the top of the ticket for the general election. Now that same leadership wants YOU to legitimize their undemocratic and unprincipled methods by putting their selected candidate into the White House on November 4.

But WE can say no to the subversion of democratic principles within the Democratic Party. We can say no with our votes and by urging our fellow Democrats to pay attention to the particulars of the candidate Howard Dean and Nancy Pelosi selected to represent the Democratic Party.

Put this ad on the air and let America know that our voices count.

Over the next 24 hours and across the internet, we as a community will urgently be raising money to run edgy and persuasive ads made by Democrats in key battleground states. Generous contributors have pledged $500 in matching funds. Your voice counts. Please contribute now

CLICK ON ROSIE TO DONATE:

Or go to Democrats For Principle Before Party - The Denver Group’s general election website, where you can view other ads the group is running:

A former Illinois bank official, now claiming whistleblower status, says bank officials replaced a loan reappraisal that he prepared for a Chicago property that was purchased by the wife of now-convicted felon Tony Rezko, part of which was later sold to next-door neighbor Barack Obama.

In a complaint filed Thursday in the Circuit Court of Cook County, Kenneth J. Connor said that his reappraisal of Rita Rezko’s property was replaced with a higher one and that he was fired when he questioned the document.

Mr. Connor, a real estate and commercial credit analyst at the Mutual Bank Corp. in Chicago, also noted in the complaint that the bank received a grand jury subpoena in October 2006 requiring it to produce information concerning Mrs. Rezko’s purchase, including the bank’s files on the property.

The media, who for the most part have ignored the shady land deal between the felon Tony Rezko and Barack Obama, may now be shamed into at least examining the matter in light of their relentless scrutiny of Joe the Plumber. This was a fairly sophisticated money laundering transaction. For starters, Tony Rezko was one of Barack Obama’s major fund raisers. The property that Barack and Michelle Obama wanted to buy had an asking price of $1.95 million dollars. They got a sweetheart loan and bought the house for $1.65 million. Why? Because the owners of the home were able to sell the adjacent lot on the same day to Tony Rezko and his wife for $125,000 dollars more than the land was worth. The Rezkos paid full price, $625,000 for a strip of land adjacent to the house, that according to the appraiser is only worth $500,000.

The inimitable John Batchelor is on this like a chicken on a bug.

John writes:

Startling news this morning from a bizarre break in the mystery of what Tony Rezko is telling prosecutors in Chicago in exchange for a better deal on his conviction for graft and corruption. In the Washington Times — not from either of the Chicago papers — there is a report of a whistleblower lawsuit by previously unknown bank clerk Kenneth J. Connor against his former employer, the Mutual Bank Corporation in Chicago, for firing him because he refused to go along with an apparent real estate fraud involving the house that Barack Obama lives in. The details are complex, including the inflating of the value of the lot that Rita Rezko purchased and later sold a piece of to Barack Obama, including the fact that the bank owner, Amrish Mahajan, is a long-time Rezko crony and creditor, and I point to the gifted encyclopedic site The Real Barack Obama for a full explanation and savvy speculation of the reason Mr. Connor is upset. The heart of it is that Mr. Connor refused to go along with a fraud with regard the lot at 505o South Greenwood Avenue that Rita Rezko (as a cut-out for her husband Tony) bid on and purchased between January and June 2005 in order to make it possible for Barack and Michelle Obama to bid on and purchase their mansion at 5046 South Greenwood Avenue in Hyde Park. Mr. Conner now reveals all this in a lawsuit against the bank that fired him because he wouldn’t play along. Stepping around Mr. Conner’s ambition, there is the much more fetching clue here that the prosecutors have raced way past talking to Tony Rezko about the “Board Games” that led to his conviction, past Tony Rezko’s corrupt dealings raising cash for Governor Rod Blagojeich, past Tony Rezko’s years of skimming and cheating and bullying in Chicago, to go right after the critical piece of the Obama house deal that underlines that something is rotten in Hyde Park. Kenneth J. Conner doesn’t file a lawsuit in civil court unless he has spoken at great length with U.S. Attorney Patrick Fitzgerald’s office in front of a Grand Jury with regard the criminal investigation of Rezko and his clients. And the extremely irregular and unexplained purchase of the Hyde Park mansion for the newly elected and then sworn-in Senator Barack Obama in 2005 is a major mystery. On Sunday 12, when I spoke to Natasha Korecki, Chicago Sun-Times, re Rezko talking, I was convinced that the prosecution is pursuing the governor’s vulnerability first, and that the senator’s vulnerability was left till later if at all. Now I see, as can anyone who has studied the byzantine pleasure palace of Cook County, that Mr. Fitzgerald and his team have hold of secrets within secrets, and that Tony Rezko’s talking is like 3-in-1 oil, it lubricates the whole investigation of the governor and the senator. The lot! They are on to Rita Rezko’s lot! That is the backdoor to Barack Obama’s self-described “boneheaded” deal with Tony Rezko. That is the backdoor to what really happened between Tony Rezko and Senator-elect Obama and the Wondisfords sellers and the two silent-so-far realtors who were both friends of Tony Rezko.

Mr. Fitzgerald’s Clock is Ticking

It is follow the money. It is always follow the money. Who paid for the lot? Who paid for the house? When and how? Note that the Conner lawsuit also mentions that the grand jury was seeking, as far ago as October 2006, information on Rita Rezko’s checking account and loan file at the Mutual Bank. Her checking account. Fitzgerald is deeply involved in how 5050/5046 South Greenwood, the lot and the house (right), was passed over to Senator and Mrs. Obama. Mention also that another of my very best Chicago sources writes me that Mr. Fitzgerald best accelerate, his clock is ticking, and his tenure is iffy in an Obama Justice Department with a Democratic dominated Congress and an ineffective Chicago media

.

–The repeal of Glass-Stegall (GLBA) is a total non-event in the midst of the current economic turmoil. What this repeal did was allow commercial banks to get more deeply involved with investment banking activities. Thus, JP Morgan, Citigroup, Bank of America were able to utilize their significant balance sheets and capital bases to become a force on Wall St.. Fast forward ten years and it is those institutions that are now thankfully supporting and bailing out our system.

–Throughout the 90s and into the early part of this century, Freddie Mac and Fannie Mae were utilizing their significant lobbying power to gain an ever increasing portion of the overall U.S. mortgage market. They had the enormous advantage of being able to borrow at just marginally over U.S, government rates given the “implied” but not explicit backing of Uncle Sam. I mean, come on. That worst case scenario could never come to pass!!

While Freddie and Fannie were designed to provide liquidity to the market in the form of bundling mortgages into securities, charging a guarantee fee for return of principal to the investors in these MBS, and then selling the MBS into the private market, they decided to “grow their business”. Just how did they grow? Given their ability to borrow at very cheap rates they decided to effectively grow their own internal portfolios. This business model was nothing more than a massively levered hedge fund under the guise of “helping the homowner”. In order to grow these portfolios, though, they needed more mortgages. Thus they went directly to the mortgage originators and worked with them to increase the mortgage terms and types that they would buy.

–As Freddie and Fannie were executing this strategy, there were 3 groups that stood up and said that this activity was getting out of control. Who were they?? On Capitol Hill, Senator Richard Baker (R-LA) carried the torch. There were actually a number of large banks including Chase and Citi that formed a group called FM Watch that complained that Freddie and Fannie were taking market share from them in their own mortgage origination business. This group was conflicted because the investment banking arms of these institutions were pressured by Freddie and Fannie to quell their complaints or they would refrain from doing business with them. Lastly, the Wall St. Journal was vociferous in their complaints that these entities were getting out of control. Freddie and Fannie responded that they were merely trying to fulfill their mission of providing affordable rates to potential homeowners.

–Well how was the impact of Freddie and Fannie on the overall mortgage rates that passed through to the consumer. A number of private studies put the “benefit” of Freddie and Fannie to the American homeowner at between 2 and 4 basis points, In layman’s terms, if a homeowner would have gotten a 6.75% rate then having F/F on the scene helped them get a 6.72% rate. Now wait a minute, you mean the system was taking all that risk and F/F grew their internal “hedge fund” portfolios to north of 1.5 trillion for a benefit of 3bps. How does that work? Well, the benefits accrued to the shareholders and the executives including Franklin Raines and Jim Johnson, who took out multiple millions. (Raines specifically took out 90mil)

–As this scenario played out, Senator Baker and then Senator McCain and other Republicans started to get up in arms about the enormous “systemic” risk that was developing. To be fair, Freddie Mac did work to root out the most egregious “predatory lending” that had been undertaken. That said, Freddie was the buyer of the bulk of sub-prime product in the market and without their bid the “overly aggressive” lending would not have taken place to the extent that it did. Fannie was the buyer primarily of Alt-A product which included a lot of the loans without full documentation.

–Both F/F were effectively cooking their books. Freddie actually made more money than they were reporting (putting revenue away for future years) while Fannie had truly pathetic risk management and grossly overstated earnings. Both firms reporting of earnings were totally driven by “maximizing” executive bonus packages. Very simply, heads I win, tails you (meaning Uncle Sam and taxpayers) LOSE!!

–Even in the midst of this while Baker, McCain, the WSJ and others were railing on how these agencies were managed, regrettably the necessary regulations and oversights never got out of committee because the Democrats, primarily Dodd, Schumer, and Frank crushed it. At this juncture, Barack Obama votes present. He was not willing to stand up to his party because he was in bed with F/F and was well on his way to being the second greatest beneficiary of their largesee only after Chris Dodd. To think that this crowd is now going to hold hearings to “review” this crisis is akin to the “inmates running the asylum!!

–While Franklin Raines, Jim Johnson, and Tim Howard were ushered out at Fannie, and Leland Brendsel was pushed out at Freddie there were no real dramatic changes. Their regulator OFHEO was given some greater oversights but F/F knew that they had their “friends on the Hill” in their back pocket to stymie real regulation.

–Well, American homeowners got their 3bps but are now stuck with a multiple hundred billion dollar price tag along with the price of the systemic risk that went along with it.

–One may ask, why did this happen at F/F and not Ginnie Mae? Well, Ginnie does not run a big internal hedge fund and merely bundles FHA- and VA-insured mortgages, takes a guarantee fee for return of principal to the investor and then lets the securities go into the private market. It works just fine.

LD

Obama tells a future Comrade that his pie is about to be raided.

:::::::::::::::::::::::::::::::::::::::::::::::::

All for the Glorious Cause, Comrades! All for the Glorious Cause!

lf you plan to benefit heavily from Barack Obama’s so-called “tax cuts,” you will have to be part of the population that doesn’t pay any taxes at all.

The rest of you will be paying more.

The Fair Housing Act and Community Reinvestment Act have already found a way to redistribute your income and tax money by ensuring by force that home loans went to people with virtually no ability to pay at all, bringing Fannie Mae down and subsequently Wall Street. This move also sucked down any investments you made through sacrifice and personal responsibility. But when it comes to Barack Obama, personal responsibility, paying your own mortgage and bills and making sacrifices to save and shore up against your own future is not a respectable way to live.

Under Barack Obama’s “Plan” you are truly screwed if you are working at taking responsibility for your own behaviors. His “tax cut” plan is the next leg to killing the middle class, while he pretends he cares so much for them. His tax cut has nothing whatsoever to do with middle class “working families” and everything to do with expanding the welfare state and redistributing the income of those same “working families”. “Working families” are already paying to bail out Fannie Mae’s redistribution of assets to Non Working Families. Now comes the next forced step for you involuntary Comrades.

No wonder every previously dead Anti-American party in our country is feeling refreshed. Obama’s plan for “tax credits” is more Socialist talk for transferring of money from taxpayers to non-taxpayers.

Like good little socialists, you will work and then you will share your money with people who don’t earn as much as you do - faster than you can say Karl Marx.

It doesn’t matter that you worked your way through college for years to get a better job. It doesn’t matter if you work two jobs. It doesn’t matter if you bust your ass in overtime. It doesn’t matter if you don’t buy things you can’t afford and you live within your means. It doesn’t matter if you sacrifice one thing for another. Your reward will not match the rewards of others who may do none of these things. It’s as simple as that. When Barack obama says he is going to “cut taxes” for 95% of America, he really means he is also going to give money away to more than a third of America–people who pay no taxes at all.

There are millions of immigrants in America who left their countries to get away from governments like the one Barack Obama has planned.

The Wall Street Journal has it nailed today.

One of Barack Obama’s most potent campaign claims is that he’ll cut taxes for no less than 95% of “working families.” He’s even promising to cut taxes enough that the government’s tax share of GDP will be no more than 18.2% — which is lower than it is today.

It’s a clever pitch, because it lets him pose as a middle-class tax cutter while disguising that he’s also proposing one of the largest tax increases ever on the other 5%. But how does he conjure this miracle, especially since more than a third of all Americans already pay no income taxes at all? There are several sleights of hand, but the most creative is to redefine the meaning of “tax cut.”

For the Obama Democrats, a tax cut is no longer letting you keep more of what you earn. In their lexicon, a tax cut includes tens of billions of dollars in government handouts that are disguised by the phrase “tax credit.”Mr. Obama is proposing to create or expand no fewer than seven such credits for individuals:

- A $500 tax credit ($1,000 a couple) to “make work pay” that phases out at income of $75,000 for individuals and $150,000 per couple.

- A $4,000 tax credit for college tuition.

- A 10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).

- A “savings” tax credit of 50% up to $1,000.

- An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.

- A child care credit of 50% up to $6,000 of expenses a year.

- A “clean car” tax credit of up to $7,000 on the purchase of certain vehicles.

Here’s the political catch. All but the clean car credit would be “refundable,” which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer — a federal check — from taxpayers to nontaxpayers. Once upon a time we called this “welfare,” or in George McGovern’s 1972 campaign a “Demogrant.” Mr. Obama’s genius is to call it a tax cut.

The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation’s Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.

The total annual expenditures on refundable “tax credits” would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center. This means that the tax-credit welfare state would soon cost four times actual cash welfare.By redefining such income payments as “tax credits,” the Obama campaign also redefines them away as a tax share of GDP. Presto, the federal tax burden looks much smaller than it really is.

Yes, you have read correctly, folks. The welfare state will quadruple, Comrade. A person who pays NO tax whatsoever will be getting all these “Tax refunds” in the name of “Fairness”. They will get a refund check from the IRS consisting of money they never even paid. In other words, it’s the next step in Obama’s plans for The Glorious Cause - Socialism.

Please be sure to go here and read about the rest of the impact of this pathetic Socialist’s Plans for you, suckers. Want to beat the system. Work part time and stay home and watch TV the rest of the time. If you calculate it right, you will get all those tax “refunds” and earn as much as you do now–for doing nothing. Your government will take care of you, Comrade!

From my blog, “Uppity Woman“

Everyone here has heard most of the elements of the post presented below. Some have even talked about the theory presented therein. Before you get bored and skip some of the rehashing, remember this. NoQuarter attracts more new viewers these days than Oberburp has in the past year. The new visitors deserve full qualification of facts, people and events before they can digest theories. This is a long post, but one worth reading.

Therefore I suggest that the following article, written by a kindergarten teacher, should be read by us and shared with anyone who is light Obama or center fence. There are two things amazing I find about people who will dedicate their lives to teaching five year old kids. One. They have to find a smile, every Monday through Friday Morning, before they greet the kids. Two. They get to hear the greatest questions about subjects we quit questioning.

One last thing. This kindergarten teacher is a man who joined me, and a lot of other people, to create the June 19th Seneca160 project, honoring Hillary. I am not discussing her now. I just want you to take in Shtu’s thinking. Get off the minute-by-minute news for a moment and provoke some thought. You might just find a way to create convincing posts, on your own blogs, that will move some votes.

NQ is The blog of bloggers.

- Eastan McNeal

Now. For Shtuey’s Piece

At the outset I must thank Ms Placed Democrat’s Renaissancelady 48 and Eastan McNeal at No Quarter for their exhaustive research, love of country, and wise counsel.

How did we get here? How is it that “subprime mortgages” have brought us to the brink of economic collapse? Most people believe it is due to the predatory lending practices of financial institutions. That is the lie you have been sold. The truth is far more insidious. We are in fact on the brink of economic disaster because of the people who have sent Barack Obama.

In order to understand how this happened we must begin with Saul Alinsky , the radical socialist who, after spending a great deal of time with the Al Capone crime family in Chicago, realized that the same shakedown tactics used by the mob to extort business, and control politicians, could be used by activists to shakedown banks and political institutions to advance a socialist agenda.

These were tactics utilized by groups like ACORN, in an effort to lobby the government to pass laws that forced lending institutions to issue mortgages to low income/”at risk” borrowers who often had no way of paying the money back.

But ACORN members probably did not lobby for these laws to bring down our economy, at least not knowingly. I believe that, apart from the leaders at the top, rank and file ACORN members legitimately believed they were fighting for low-income housing. But ACORN’s backers were simply using Alinsky’s method (never reveal your real agenda) to serve their own purposes.

Who are these people? You know the names of two of them: Bill Ayers and Barack Obama. I suspect that they are more front men than anything else, though who knows who Ayers was with while he was in hiding?

Where did ACORN get the funds to engage in the widespread lobbying (read extortion) that allowed them to shakedown lenders and politicians?

From the money diverted to them by Bill Ayers and Barack Obama, via the Chicago Annenberg Challenge, and the Woods Fund, as well as with your tax dollars allocated by Congressional Democrats; the same Congressional Democrats that have received hundreds of thousands of dollars from Freddie and Fannie in the form of campaign contributions; the same Congressional Democrats that ignored Republican calls for the regulating and reform of Freddie and Fannie — the institutions that took subprime mortgages, bundled them, and infected financial institutions worldwide … all in the name of granting minorities and low income families access to housing (always the trouble begins with the most honorable of intentions, or at least it is made to seem so), but with the Leftists’ hidden purpose of initiating a worldwide economic collapse.

All of it was accomplished with ACORN as the muscle.

The root of the problem lies with the Community Reinvestment Act. The CRA was passed in 1977 and, according to Thomas J. DiLorenzo,

“compels banks to make loans to low-income borrowers and in what the supporters of the Act call “communities of color” that they might not otherwise make based on purely economic criteria.”

DiLorenzo goes on to explain:

The original lobbyists for the CRA were the hardcore leftists who supported the Carter administration and were often rewarded for their support with government grants and programs like the CRA that they benefited from. These included various “neighborhood organizations,” as they like to call themselves, such as “ACORN” (Association of Community Organizations for Reform Now). These organizations claim that over

$1 trillion in CRA loans have been made, although no one seems to know the magnitude with much certainty.

A U.S. Senate Banking Committee staffer told me about ten years ago that at least $100 billion in such loans had been made in the first twenty years of the Act.

So-called “community groups” like ACORN benefit themselves from the CRA through a process that sounds like legalized extortion. The CRA is enforced by four federal government bureaucracies: the Fed, the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation. The law is set up so that any bank merger, branch expansion, or new branch creation can be postponed or prohibited by any of these four bureaucracies if a CRA “protest” is issued by a “community group.” This can cost banks great sums of money, and the “community groups” understand this perfectly well.

It is their leverage. They use this leverage to get the banks to give them millions of dollars as well as promising to make a certain amount of bad loans in their communities.

A man named Bruce Marks became quite notorious during the last decade for pressuring banks to earmark literally billions of dollars to his organization, the “Neighborhood Assistance Corporation of America.” He once boasted to the New York Times that he had “won” loan commitments totaling $3.8 billion from Bank of America, First Union Corporation, and the Fleet Financial Group. And that is just one “community group” operating in one city – Boston.

Banks have been placed in a Catch 22 situation by the CRA: If they comply, they know they will have to suffer from more loan defaults. If they don’t comply, they face financial penalties and, worse yet, their business plans for mergers, branch expansions, etc. can be blocked by CRA protesters, which can cost a large corporation like Bank of America billions of dollars. Like most businesses, they have largely buckled under and have surrendered to their bureaucratic masters.

Consequently, banks in every community in America have been forced to hold a portfolio of bad loans, euphemistically referred to as “subprime” loans. In order to compensate themselves for the added risk of extending these loans, many lenders have increased the lending fees associated with mortgage loans. This is simply an indirect way of doing what banks always do – and what they must do to remain solvent: charging effectively higher rates of interest on riskier loans.

But this is discriminatory!, complained the “community organizations.” Thus, if one browses the ACORN web site, one can read of their boasts of having “predatory lending laws” passed in numerous states which outlaw such fees, prohibiting banks from protecting themselves from the added risk involved in making forced loans to “subprime” borrowers.

According to the Consumer Rights League :

• ACORN leveraged the Community Reinvestment Act in order to attack lenders’ reputations and secure financial resources for itself; it has also endorsed loans offered by companies that fund ACORN operations
• ACORN’s decades of lobbying and publicity seeking have contributed to the current housing crisis by lowering lending standards
• Despite raking in a troubling 40 percent of its revenue from taxpayers over the last three years, ACORN Housing Corporation’s actions range from controversial to borderline illegal:
  • AHC has worked to obtain mortgages for undocumented workers
  • AHC relies on undocumented income, “under the table” money that may not be reported to the Internal Revenue Service
  • ACORN’s “financial justice” operations attack lenders for “exotic” loans, but AHC has recommended ten-year interest-only loans (which deny equity to the buyer) and reverse mortgages (which can be detrimental to senior citizens)
  • AHC may have violated federal law by failing to maintain a proper distinction between its tax-exempt housing work and the aggressive political activities of ACORN.

CRL goes on to report:

To understand the current subprime credit mess is to glimpse a world in which a politically active organization with a non-profit housing arm reaps millions of dollars through “rent seeking” or manipulation of favorable laws. ACORN and its non-profit housing arm have taken in millions of taxpayer and corporate dollars by abusing a three-decade-old law intended to help the poor obtain housing. For decades, the activist organization known as ACORN has grabbed headlines—and cash—by attacking mortgage lenders in the name of citizens’ rights. Considerably less attention has been paid to the amount of taxpayer money that funds ACORN Housing Corporation (AHC) and to the financial rewards ACORN has amassed.

But from whom did ACORN learn these Alinsky tactics? In part, from Barack Obama.

As I said earlier, I believe rank and file ACORN members legitimately believe they are lobbying for minority and low income housing, unknowingly advancing a larger agenda to destroy our economic and financial institutions. But how has the cabal managed to infect the credit market worldwide? Let’s ask Penny Pritzker,

Barack Obama’s campaign finance chair.

It is now well documented that Pritzker was one of the driving forces behind the subprime mortgage fiasco, unleashing toxic loans into the market like a financial Typhoid Mary. Her bank, Superior, was the first to go under, and yet she made millions.

From Dennis Bernstein’s report:

Though Superior Bank collapsed years before the current sub-prime turmoil that is rocking the world’s financial markets – and pushing those millions of homeowners toward foreclosure – some banking experts say the Pritzkers and Superior hold a special place in the history of the sub-prime fiasco.

“The [sub-prime] financial engineering that created the Wall Street meltdown was developed by the Pritzkers and Ernst and Young, working with Merrill Lynch to sell bonds securitized by sub-prime mortgages,” Timothy J. Anderson, a whistleblower on financial and bank fraud, told me in an interview.

“The sub-prime mortgages,” Anderson said, “were provided to Merrill Lynch, by a nation-wide Pritzker origination system, using Superior as the cash cow, with many millions in FDIC insured deposits. Superior’s owners were to sub-prime lending, what Michael Milken was to junk bonds.”

In other words, if you traced today’s sub-prime crisis back to its origins, you would come upon the role of the Pritzkers and Superior Bank of Chicago.

Only a fool would believe that it is a coincidence that a man who helped train ACORN in the use of Alinsky tactics, and with Bill Ayers helped fund ACORN, selected the originator of the subprime mortgage vehicle that is destroying our economy to be his campaign finance chair.

But what was the lightbulb moment?

What was the missing piece of the puzzle?

It didn’t start falling into place for me until John McCain announced his mortgage rescue plan at the second Presidential debate.

Inspired by Hillary Clinton’s editorial in the Wall Street Journal, McCain is advancing what is essentially FDR’s Home Owners Loan Corporation idea that kept millions of Americans in their homes. It is a proven plan for success.

But Obama rejects it. Not only does he reject it, but Obama does so based on conservative talking points, namely that McCain’s plan would reward institutions’ unethical practices; practices that banks were forced to adopt because of ACORN’s coercive lobbying efforts, the passage of the CRA, and a mortgage vehicle essentially invented by his campaign finance chair. But in this rejection Obama strays from his usual modus operandi.

As we saw in the primaries, when the opposition issues a plan, Obama waits a few days and then announces the same plan. The media praise him and everyone genuflects. The most notable example of this was when Senator Clinton advocated a multibillion dollar stimulus package in the spring. One week later Obama released a virtually identical plan. Not so this time.

Not only has Obama rejected a plan originally put forward by a Democratic President, he has offered no solution of his own.

Why? Because Barack Obama needs economic turmoil to get into office.

It is the one thing that has opened any polling advantage for Obama in the election. And once in office the nationalization of our banking system will be easily executed. Treasury Secretary Paulson is already laying the groundwork by advocating the government purchase of bank stock.

Once in control of America’s financial institutions, it would be very easy, under the guise of halting the current economic crisis, to completely nationalize American banks and begin a widespread socialist wealth redistribution program which has been part of the Ayers/Obama agenda since the Chicago Annenberg Challenge. Crazy? Here’s what Ayers said at an education forum in Venezuela, in the presence of Hugo Chavez:

“the political educational reforms under way here in Venezuela under the leadership of President Chavez.

“We share the belief that education is the motor-force of revolution. . . .”

“Teaching invites transformations, it urges revolutions large and small. La educacion es revolution.”

Read what Jon Markman has to say on the ramifications of Obama’s economic and tax policies. And take a look at a recent survey of CEOs.

These people are very concerned with job creation.

They require a President whose policies will allow them, in a weakened economy, to generate the jobs that will put Americans back to work, and drive the economic engine forward. Not only do they feel that McCain’s policies will allow them to generate those jobs, they overwhelmingly fear an Obama presidency. CEOs know what any fool should know; government does not create jobs (the lie that Obama tells us), companies and corporations create jobs; in a capitalist society.

And consider what is happening between Great Britain and Iceland. Interesting that British banks, that ended up being bought up by Iceland, secretly held ACORN assets. It’s a new world order after all. Eastan McNeal goes on to explain:

The first step toward ensuring that the goal of everyone equally owning everything is to first make sure that nobody owns anything. The only path to a functioning socialist democracy is through a temporary trip through a communist demise. In other words, every corporation and entrepreneur must be eliminated and their personal empires destroyed and turned over to the single payer-payee government larges before the collective wealth of the world can be redistributed and shared equally with and for all.

Obama is using home foreclosures, job loss, and economic collapse as a means of gaining power for himself and his backers; the most prominent, and the one who stands to gain the most, George Soros, makes money in part by destablizing foreign currencies as he did in Thailand in 1997.

Obama wants to win the White House on the back of your suffering while George Soros stands to make a killing.

The end result? A socialist takeover of financial institutions to effect a redistribution of wealth in any mode they please.

Do you trust a man who bought a $1.3 million mansion, with the help of a convicted felon, to equally redistribute the world’s wealth?

Would you trust a man who gained his party’s nomination through voter suppression and intimidation, and who voted to continue a regime of warrantless wire tapping, to preserve democracy?

No, me neither. That’s not leadership. That’s not change we can believe in.

Oh, and check out the freshman Senator from Illinois promising that ACORN will help him set his presidential agenda (and read Larry Johnson’s post on Sunday, “Barack Worked For ACORN, Promises to Do So Again.”

There is only one sure thing standing in the way of a leftist takeover of our financial institutions, and possibly the ending of democracy as we know it;

electing John McCain President of the United States on November 4th.

Speaking of Obama and ACORN, it’s about time the McCain campaign spoke up about what we’ve been saying for months:

Click here to visit Shtuey’s blog and read this post WITH links. NQ regulars know where the links go. New visitors, visit Shtu and come back and comment with us.

**********Truthteller asks bloggers and reporters to direct their attention to Amrish Mahajan and the Mutual Bank of Harvey.**********

Mike Robinson’s AP article entitled “Obama Fundraiser, Convicted of Fraud, Spills Beans,” corroborates what we at No Quarter have been writing for weeks: Antoin “Tony” Rezko is cooperating with federal prosecutors interested in Barack Obama. While the national media’s attention to this topic is long overdue, I am not prepared to state that it is too little, too late. I am, however, disappointed.

Also disappointing but somewhat predictable is the blogosphere’s bungled reception of Mike Robinson’s article. Of course those who have embraced Obama will dismiss the story as so much yellow journalism. One blogger claims that prosecutors are interested in Blagojevich and not Obama. But looming in the blind spot of that blogger’s necessarily tendentious gaze is Rezko’s 9 JUN 2008 letter to Judge Amy St. Eve and the reference to Obama as “Individual D” in the superseding indictment and the proffer of evidence filed by Fitzgerald and his prosecutors during the Rezko trial. Obama’s name can be printed again and again on the surface of the legal documents filed during the proceedings of the Rezko trial, but these writers with all their “naked” insight will clothe the verifiable record with their blindness. Knowledge production, it seems, has been lifted from its evidentiary supports when Democrats write about Barack Obama and Antoin “Tony” Rezko.

And yes, those Democrats include some ostensible Hillary Clinton Democrats. Seizing upon the following quotation in a Chicago Sun-Times column, one blogger believes the AP story heralds the end of the political careers of Alexi Giannoulias and Barack Obama:

Sneed hears rumbles political fund-raiser/fixer Tony Rezko, who is now singing sweetly to the feds from his cell at the Metropolitan Correctional Center, has been talking about his “dealings” with a Chicago bank, which has political connections.

Stay tuned.

While Rezko was a customer of Alexi Giannoulias’s Broadway Bank, where he amassed a debt of $450,000 after writing bad checks at Las Vegas casinos, and while Giannoulias did write loans for Rezko, I do not believe one can aver with the confidence of the blogger I cite above that federal prosecutors are now focusing on Giannoulias, even if Giannoulias was tied to Rezko by his opponent during his 2006 bid for the office of Illinois state Treasurer. Allow me to be clear: Obama bundler, mobster banker and Obama protégé Giannoulias is, to be sure, embroiled in the Rezko scandal and in other aspects of Chicago politics any political observer would find unsavory, but he is not in my opinion the topic of the conservation occurring between Rezko, Rezko’s attorney and Fitzgerald’s team of prosecutors. I do admit he is grist for the mill of impetuous bloggers who desire web traffic and a controversial headline or two, however. Because I tend to rely on evidence and not on hearsay, I believe we should focus our attention on Amrish Mahajan and the Mutual Bank of Harvey, not on Giannoulias and the Broadway Bank, if we are to assign names to the financial institution about which Sneed of the Chicago Sun-Times has heard “rumblings.” Although Mahajan is not known to readers of No Quarter and to the national media, I imagine they will desire more information on the unscrupulous banker once they read the information I unpack below the fold. And yes, Obama is involved, deeply involved.

My interest in Amrish Mahajan and the Mutual Bank of Harvey was picqued by this list of contributors in Rezko’s bundling network provided by the Chicago Sun-Times last March. View the second page of the document, and notice the following entry:

The data available in the Sun-Times spreadsheet is corroborated by the following data, which is democratically available at the Federal Election Commission’s website:

MAHAJAN, AMRISH
CHICAGO, IL 60607
MUTUAL BANK

OBAMA, BARACK
VIA OBAMA FOR ILLINOIS INC
12/20/2003 500.00 24020030170
04/14/2004 1000.00 24020461757

Not only was Mahajan a member of Rezko’s bundling network; his bank, the Mutual Bank of Harvey, granted Rita Rezko the $500,000 mortgage she needed in order to purchase the lot on which the Obama mansion in Chicago sits. As many of you may recall, the Obamas could not have purchased the mansion they could not afford unless transactions for the mansion and the lot closed on the same day. Obama needed to locate someone who would buy the lot, and he approached Rezko, the convicted slumlord with whom Obama toured the property before they mutually agreed to the following arrangement:

The home and lot sales closed on June 15, 2005. A land trust controlled by the Obamas bought the house for $1.65 million, and the Obamas secured a $1.32 million mortgage from Northern Trust to complete that purchase. That same day, Rezko’s wife, Rita Rezko, bought the side lot for $625,000. A $37,000- a-year Cook County employee, she secured a $500,000 mortgage from Mutual Bank of Harvey.

The structure of this transaction begs the following question: What bank would lend a government employee who earns $37,000 per annum a $500,000 mortgage? What bank would assume such a risk?

The Mutual Bank of Harvey, of course, for the Mutual Bank of Harvey’s President is a man who is deeply connected to the Chicago machine that backed Barack Obama. Indeed, Amrish Mahajan was one of Mayor Daley’s first political appointments in 1989, when he was named to a seat on Chicago’s Plan Commission, where he would be joined by Obama’s former boss and Rezko’s business partner Allison Davis and by Valerie Jarrett, Daley’s Chief of Staff who chaired the Commission from 1991-1995. Mahajan, in other words, worked with those who devised and profited from Daley’s failed public housing experiment in Chicago, a public housing policy Obama helped fund as state Senator and US Senator.

Rezko, according to the Boston Globe, was one of the major beneficiaries of Obama’s legislative advocacy for funding of Daley’s public housing experiment. Other major beneficiaries are Jarrett and Allison Davis. Mahajan was also a beneficiary, for his bank had made $3.4 million dollars in loans to Tony Rezko’s slum landlord business since 2002. A banker for one of the slumlords who benefitted from the Daley housing program Obama helped bankroll, Mahajan was returning a favor when he wrote a $500,000 mortgage in 2005 for the wife of one of his clients. Although Tony’s financial problems were mounting in 2005, and although Rita earned only $35,000 per annum, Mahajan underwrote the mortgage. Favors must be reciprocated, I guess, especially when one can satisfy two parties at once: the person with whom one has a complicated relationship in real estate and the politician who helped finance that complicated relationship as state Senator and US Senator.

I doubt federal investigators are interested in the Mahajans solely for their involvement in the property deal involving Obama, Mahajan and the Rezkos. The Mahajans, I believe, are the foci of their probe for many reasons.

• Anita Mahajan, the wife of Amrish, has been involved with questionable real estate deals that are the subject of federal probes with Governor Blagojevich’s wife, Patricia
• Anita Mahajan exploited lucrative no bid contracts with the Department of Children and Family Services to steal $2.1 million from Illinois taxpayers; she was charged and released on a $250,000 bond in March 2007
• “Uncle Amrish” has raised more than a half million for Blagojevich and approximately $50,000 for Mayor Daley, whose father helped launch Mahajan’s banking career
• “Uncle Amrish” also helped Obama purchase a house he could not afford

The real estate transaction involving Rita Rezko, the Obamas and Mutual Bank of Harvey is just the tip of the iceberg. Indeed, the Mutual Bank of Harvey seems to be at the center of all the corruption in Chicago. To quote former Donald Perillo, Chicago insurance mogul and son of the lawyer for Al Capone, in the Chicago Tribune article I cite above:

Donald Parrillo said he isn’t surprised to see Mahajan mix it up with politics and business. “He got that attitude from the Parrillo family,” the former alderman said. “He wanted to get in the game.”

And Mahajan certainly is in the game. The banker of the Chicago machine, he is also the man who wrote the mortgage for Rita Rezko that facilitated Obama’s purchase the mansion he could not afford. This is why I believe prosecutors are interested in Harvey Mutual Bank. Not only did Rezko receive loans from this institution; this bank is heavily involved in problematic real estate dealings involving Blagojevich and Obama. And if I may quote Rezko in the 9 JUN letter he wrote to Judge Amy St. Eve:

Your Honor, the prosecutors have been overzealous in pursuing a crime that never happened. They are pressuring me to tell them the “wrong” things that I supposedly know about Governor Blagojevich and Senator Obama. I have never been party to any wrongdoing that involved the Governor or the Senator. I will never fabricate lies about anyone else for selfish purposes. I will take what comes my way, but I will never hurt innocent people. I am not Levine, Loren, Mahru , or Winter.”

Rezko is now talking, and prosecutors are presently interested in a politically connected financial institution. I bet Obama now regrets paying Rita Rezko $104,500 for the strip of the land in the lot on which his house sits in January 2006. Acquired with the assistance of a questionable $500,000 mortgage from Amrish Mahajan’s Mutual Bank of Harvey, this lot and Obama’s desire to expand his yard by bit was the catalyst for all the investigative reports into Obama’s deep ties to Rezko. By the way, Rita’s lot is only accessible through the front gate of Obama’s home; it is not a separate property, and it was never intended to be a separate property.

“It was a mistake to have been engaged with him at all in this or any other personal business dealing that would allow him, or anyone else, to believe that he had done me a favor,” Obama says of the real estate transactions with Rezko. I wonder if now he also believes it was a mistake for him to serve as the legislator who represented and bankrolled Richard Daley, Amrish Mahajan, Valerie Jarrett, Allison Davis and the Chicago Plan Commission. But at least he and Michelle have a house, a house the Mutual Bank of Harvey, the politically connected bank that wrote loans for Rezko, helped them procure in 2005. Too bad that house will be the end of Barack Obama.

—————————————————-
No Quarter dossier on Obama and Rezko:

• Rezko, Giannoulias, Obama - Dominoes?
• CORROBORATED: Rezko Speaks, Prosecutors Interested in Obama Listen
• More Than Just a Boneheaded Mistake
• The Epistolary Rezko
• The Illinois Combine II: The DNC Moves Into Chicago
• Obama’s Gangster Mentality
• Prescience: “Will Rezko Blow Up Obama?”
• “CHICAGO MACHINE”
• The Tipping Point?
• Barack, The Truth Ain’t A Smear
• Recently Unsealed Documents Confirm Obama Heavily Embroiled in Rezko Case
• Boston Globe Exposé, Part II: Barack Obama (D-Slumlord) Is Aloof, Oblivious, Dangerous
• Boston Globe Exposé, Part I: Introducing Cecil Butler, Obama’s West Side Slum Landlord Patron
• Patrick Fitzgerald Issues Obama A Warning
• What Hypocrite Obama Should Have Discussion during His Wesleyan Commencement Address
• Barack Obama’s Candidacy as a Take on The Picture of Dorian Gray
• A Majority of One: On Losing the Democratic Base
• Ok, So Tell Us What IS Allowed
• Two Lone Voices Speak for Millions of Us
• What’ll Be Left of the Democratic Party
• It Ain’t Over: Obama MAY Have to Pay the Piper After All
• Obama to Donate Contribution from Rezko’s Iraqi Friend
• Be My Friend, Godfather
• Jaws V, Starring Barack Obama
• The Chicago Three: Obama, Ayers & Rezko
• Charlie Gibson, Will You Ask Barack about Nadhmi Auchi?
• Saddam Hussein, Barack Hussein Obama’s Hidden Real Estate Partner?
• Barack “I-Didn’t-Know” Obama
• Those Who Haunt Him
• Hillary’s Campaign Comes out Swinging
• “Nobie and Obama”
• Authorization to Use Misleading Falsehoods
• What We’ve Noticed about the Speech
• This Is for Main Street (And for the Forgotten People Barack Obama Doesn’t Know)
• Michelle Obama: “Give Us Something Here”
• Rezko Muckrakers Alert!
• The Forgotten People
• Irrefutable Proof That Obama’s Own District Was Home to 11 Rezko Foreclosed Properties
• Speak the Truth, Fallout Be Damned
• The Rezko Saga: Two Videos
• Get Your Daily Rezko Dose Here
• The Media’s Panderbears, Part I
• Sunday Scoops: Rezko-gate and Adviser-gate
• Obama’s Prime-Slime Advisors
• Good Morning, Barack! (Rezko Got Jobs for Your Staffers? Do Tell.)
• Today’s Rezko Trial Scoops (And Prosecutors on $20K Kickback to Obama)
• ABC News: Rezko $50 Million in Debt
• 312.321.2417
• (Pants on Fire!) Lynn Sweet: Obama and His Taking Questions on Rezko
• Rezko Trial: Obama May Be Witness
• Obama’s Judgment on the Eve of Judgment Day
• Truthtelling from Lanny Davis (What about “Iron My Shirt?”)
• Experience, and Experiences (of the Rezko Sort)
• No He Can’t Because Yes They Will
• More Questions on Rezko
• “Obama Bagman” in Jail
• Democratic Death Wish
• How to Buy A Mansion You Can’t Afford
• Will Rezko Blow Up Obama?
• It is “Possible” Obama Was Aware of Rezko’s Financial and Legal Woes
• 20-Year Associate of Obama Arrested
• Look before You Leap: Obama’s Mobbed-Up Allies
• Politics Is A Blood Sport
• BREAKING: ABC News Reports $100,000 from Rezko That Obama Hasn’t Returned
• CNN on Rezko and Obama: This Is Obama’s “Slumwater”
• FACT CHECK: Obama, His Contributor Rezko, The Slum Landlord Business
• A Dope with Hope?
• Obama/Rezko: It Comes down to Judgment
• Didn’t Obama Watch The Firm
• Steve Clemons on Tonight’s Debate
• Patrick Fitzgerald Ties Obama to Rezko Indictments
• All in for Hillary
• Obama, His Lobbyists and His Cronies

RezkoWatch contains even more information on Obama’s deep and problematic ties to convicted slumlord and notorious political fixer Antoin “Tony” Rezko.

Also listen to our NQR Radio Show entitled “READING REZKO with Truthteller and SusanUnPC”

The American Issues Project, in a press release from today, says the ad seeks to put the blame of the crisis on Washington liberals:

Our ad seeks to set the record straight and let the American people know who is responsible for this $700 billion catastrophe,” said Ed Martin, the organization’s president. “While liberals and some in the media try to affix blame to the Bush Administration for the housing crisis and resulting financial meltdown, this is one case where the real impetus for all these troubles is crystal clear. It was not the free market but government supported and propped-up institutions Fannie and Freddie that are the root cause. All roads for this failure lead back to liberals and their close ties to these two government institutions.

The initial ad buy is for $1 million and it will run on cable news networks.

Below is the first ad on Obama’s ties to domestic terrorist Bill Ayers:

Here are some No Quarter posts on the first American Issues Project ad and Bill Ayers:

The 527’s Reply to Obama’s Efforts to Quash Ayers Ad

Obama’s New Bill Ayers Lie

BREAKING NEWS: David Axelrod Talking Regularly with Bill Ayers?

Swiftboating or Vetting?

Quibbles and Bits - Aug 26

ACORN welcomes the opportunity to renegotiate a package that will actually do something for homeowners on Main Street and not just bail out Wall Street. Ninety-five Democrats voted against the bailout bill because it did not do nearly enough for families struggling to pay the mortgage and who are teetering on the brink of foreclosure. If a better plan comes back that will do more to assist struggling homeowners, it stands a chance of passing.

There’s no doubt that Acorn leaders are in shock that their organization’s receipt of government monies was excised from the House bill voted on, and defeated, yesterday. It’s not as if the influential left group hasn’t already received a huge boost this year; Acorn received more than $200 million dollars through a housing bill that President Bush signed into law in July 2008. You can learn more about that housing bill here.

Here’s more from Maude Hurd, Acorn’s president:

“The foreclosure crisis, which did not begin last week but more than a year ago, will continue unabated by the current bailout proposal. To really solve our broader economic woes, we must address the underlying problem of unnecessary foreclosures. One critical way to do this is to include bankruptcy shelter in the bailout package, which was dropped from the negotiations over the weekend.

More bankruptcies?

Hurd didn’t end there:

“Another way to stem foreclosures is to include tighter language directing the Treasury Secretary to prioritize purchasing those distressed assets like whole mortgages where Treasury would have the authority to modify the mortgages and avoid unnecessary foreclosures. Additionally, Treasury could be directed not to purchase any securities or other assets that lack such authority to modify. This would ensure that the public’s investment in Wall Street’s bad assets actually results in a reduction in foreclosures, so that we can stabilize home prices and restore liquidity in a permanent way to our markets. That’s the recipe for a bailout in which both Main Street and Wall Street can benefit.”

Well then. ACORN has no place in the negotiations since the group is not an extension of the U.S. government. Secondly, ACORN has failed to recognize its role in the increase of subprime mortgages influenced by the group’s “direct action” tactics. And, last, in my opinion the group deserves no more money from our government, given Acorn’s involvement in voter fraud in several states, its aggressive approach to pushing for questionable home loans, and accusations of financial fraud. It is time to stop the flow of taxpayer dollars for more foreclosures through ACORN’s actions.

January 1, 2007 The International Economy

Fannie and Freddie post-election: the significance of the Democratic victories.

BYLINE: Owen Ullman

A decade ago, Fannie Mae and Freddie Mac, the United States’ two mortgage financing behemoths, were flying high. They were among the most profitable companies in the world, had political connections to the White House and Congress, earned enormous bonuses for their corporate chieftains, and did not have to play by the same rules as other corporations. For all that, they could thank their congressional charters, which established them as Government Sponsored Enterprises (GSEs).

Those charters, which remain in place, grant them lines of credit from the Treasury, exempt them from local taxes, allow lower capital requirements than banks must meet, and spare them the mandatory disclosure requirements imposed on other public corporations. Most importantly, the implicit guarantee that Uncle Sam would bail them out in a crisis means a lower risk premium of roughly twenty-five basis pointswhen they borrow money. That quarter-point advantage is the basis oftheir lucrative business of buying and securitizing mortgages in thesecondary market.

As they grew larger and richer, critics warned that their lack of transparency and weak federal oversight would get them in deep trouble. Not a chance, they countered arrogantly. Well guess what? Like Icarus flying to close to the sun, the two companies have fallen far andfast onto their–dare we say–fannies.
It turns out the critics were right on the mark about the abuses that could result from lax accountability. Freddie paid a fine in 2003to settle charges that it misstated prior earnings by nearly $5 billion. Last December, Fannie reported that it overstated past profits by $6.3 billion. Meanwhile, federal regulators are trying to recover bonuses the top executives of each company received during the time earnings were misstated. In a suit filed against Fannie on December 18 to recover $115 million in compensation, the Office of Federal Housing Enterprise Oversight (OFHEO) said former Fannie Mae CEO Franklin D.Raines and other executives used numerous ruses to boost the company’s bottom line, and thus their bonuses.

Yet amid all the turmoil, lawsuits, and financial uncertainty befalling the companies, the current management teams at Fannie and Freddie have something to be thankful for in 2007: Democratic control of Congress.

The Democrats are less likely than Republicans to rein in the two companies’ financial practices. For the most part, Democrats like having leverage over the two GSEs so they can prod them to establish larger funds to make housing more affordable to low-income families. It is one of the top goals that the new House Financial Services Committee Chairman Barney Frank (D-MA) has promised to pursue.
Frank, who has one of the sharpest minds in Congress, also has predicted that Congress will pass a bill in 2007 to tighten regulation of Fannie Mae and Freddie Mac. That may be his intention, but the political reality is that the Democratic Party has many higher prioritiesto pursue after twelve years out of power. Frank’s counterpart in the Senate, Chris Dodd (D-CT) has not expressed any interest in going after the GSEs. So it is likely that any legislation will remain on the backburner.

18 August 2007 The Washington Post

Higher Caps Urged For Fannie, Freddie; Democrats Seek Bigger Role for Firms

BYLINE: David S. Hilzenrath; Washington Post Staff Writer

Leading Democrats pressed their case yesterday to give Fannie Mae and Freddie Mac a larger role in the troubled mortgage markets, arguing that the two companies should be allowed to buy bigger mortgages and more of them.

The market upheaval has shifted a long-running discussion of the government-sponsored finance companies from the esoteric edges of inside-the-Beltway policy arguments to the forefront of the debate over how Washington should respond to a credit crunch. It has given supporters of Fannie Mae and Freddie Mac fresh ammunition to challenge those who think the companies should be kept on a tighter leash.

Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee and a candidate for president, told reporters that regulators should raise limits on the companies’ mortgage investments by 5 percent so they can pump more money into the housing finance system. Together, Fannie Mae and Freddie Mac hold about $1.4 trillion of mortgages and securities backed by mortgages.

Dodd was elaborating on a position he staked out days earlier and was firing back at President Bush, who last week said Fannie Mae and Freddie Mac should be reformed before the government considers loosening their restraints.

Dodd said Congress can’t pass a reform bill fast enough to deal with the crisis at hand.

20 September 2007 The New York Times

Fannie Mae to Be Allowed to Expand Its Portfolio

BYLINE: By ERIC DASH

A government regulator gave Fannie Mae permission yesterday to slightly increase the amount of mortgages it can buy for its investment portfolio, a move that analysts say will do little to ease the strain on the housing market.

The moves, along with similar ones for Freddie Mac, should give the nation’s two biggest mortgage buyers a bit more flexibility in managing their portfolios. The changes are also intended to encourage the companies to purchase as much as $20 billion each in subprime loans.

But just two days ago, Ben S. Bernanke, the Federal Reserve chairman, in a letter to Representative Barney Frank of Massachusetts said relaxing the portfolio restrictions on Fannie Mae and Freddie Mac could prove ”ill advised.”

Wall Street analysts said that Ofheo’s changes would do little to ease the pressures on the housing market. And Fannie Mae, which has lobbied to raise the portfolio limit by 10 percent, and several Democratic lawmakers said yesterday that the moves did not go far enough.

In a statement, Senator Christopher J. Dodd of Connecticut, the chairman of the Banking Committee and a Democratic candidate for president, called Ofheo’s decision ”timid and inadequate.” He said the administration was ignoring the severity of the subprime mortgage crisis.

Others, however, suggested it could be a way for Fannie Mae and Freddie Mac to start regaining Ofheo’s trust.

”I actually think this was a smart way of giving the enterprises an opportunity to prove themselves,” said Josh Rosner, a managing director at Graham Fisher & Company who has been critical of Fannie Mae. Under the requirements, Fannie Mae and Freddie Mac must provide more frequent and detailed financial disclosures, including a monthly report that should more clearly parse out their purchases of subprime loans. . . .

It also came just two days after Mr. Bernanke sent a letter to Mr. Frank, the chairman of the House Financial Services Committee, that defended the current portfolio limits and urged Congress to move cautiously if it considers letting Fannie Mae and Freddie Mac buy mortgages over the current $417,000 limit.

16 November 2007 The Investor’s Business Daily

Freddie Mac’s Woes Come As Dems Try To Expand Lender; Sen. Schumer Not Giving Up; $2 bil loss, weak capital makes it harder to argue for larger Freddie, Fannie

BYLINE: SEAN HIGGINS

SECTION: FRONT PAGE NEWS; Pg. A01

LENGTH: 652 words

Freddie Mac on Tuesday declared a $2 billion third-quarter loss and warned it may have to slash its dividend and curb its mortgage buying to meet capital requirements.

A top Senate Democrat stuck to his solution: Let Freddie and Fannie get bigger. But it may be a harder case to make now. . . .

Big Problem, Bigger Solution?

Sen. Chuck Schumer, D-N.Y., said in a statement Tuesday that it should surprise no one that the government-sponsored enterprises have been “negatively impacted” by the credit crunch.

“Today’s news does nothing to lessen the critical role that the GSEs must play in providing much-needed liquidity to a struggling market,” Schumer said.

A spokesman for Schumer confirmed he was referring to his own plan to lift the GSEs’ portfolio caps by 10%, at least temporarily.

Leading Democrats had proposed lifting the GSE caps to alleviate the broader housing crunch.

But that was before GSEs looked like part of the problem, reporting huge third-quarter losses.

To reach its mandated level of capital, Freddie Mac has signaled it may voluntarily limit its growth.

That comes as Democrats were gearing up to push the opposite direction. Schumer, and Rep. Barney Frank, D-Mass., have both introduced bills that would lift the caps by 10%.

Their legislation would take 85% of that increase and use it to help refinance subprime mortgages at risk of foreclosure.

Frank is chairman of the House Financial Services Committee, which has authority over GSEs. Schumer is on the Senate Banking Committee. . . .

Republicans Favor Tight Curbs

Privately, a Senate Democratic aide conceded that enlarging GSEs now will be a “tough row to hoe.”
Senate Banking Chairman Christopher Dodd, D-Conn., didn’t mention expanding GSEs in a statement on Freddie’s losses.

Republicans have long opposed expanding the GSEs, arguing the risk of a financial crisis is too high.
“Because the GSEs are already large enough to pose a risk to the entire housing finance system, we must focus our efforts on making sure they are well-capitalized and well-regulated, rather than discussing ways to expand them,” Sen. Richard Shelby, R-Ala., the ranking Republican on the Senate banking panel, said in a release.

Freddie and Fannie can borrow at lower rates because Wall Street assumes the federal government would bail out them out in a crisis.

Robert Steel, a top adviser to Treasury Secretary Henry Paulson, told the Hill newspaper that Congress should focus on comprehensive GSE reform rather than raising the portfolio caps.

Those fears gained greater currency in 2004 when the GSEs were forced to restate past earnings lower. The scandal resulted in the forced departure of then-Fannie Mae Chairman Franklin Raines.
Congress later passed legislation giving the Office of Federal Housing Enterprise Oversight more authority over the GSEs.

Bottomline–Frank, Schummer, and Dodd, apart from being some of the top recipients of Fannie Mae and Freddie Mac largesse, did little to avert this crisis and in fact appear to have exacerbated it. So count me a sceptic when it comes to trusting these clowns to put together a bailout program. They ignored clear warnings. It is not a matter of opinion, it is a fact of history.