Arkansas Blog

Anybody with any knowledge knew along that housing was a big bubble. That isn't even the issue. The only question we have is why was there no leadership of any kind within or outside of the industry?

Not to worry GRP, strangeglove will be along shortly with his "damming" memo from 1999 that patently shows it was all caused by the dems. The rethugs are all innocent as new bern lammies.

This entire article is well worth reading:
http://www.cjr.org/the_audit/audit_roundup_700_billion_in_a.php?page=all

Audit Roundup: $700 Billion in a New Light
Enough to buy top 23 banks; Depression talk, etc.

Jonathan Weil of Bloomberg has an eye-opening column about the need to inject capital into the system, rather than just buy up dud assets, as the bailout plan has proposed. What's especially enlightening is he presents the $700 billion figure in a context I haven't seen:
For that much money, at yesterday's prices, the government could buy 23 of the 24 banks in the KBW Bank Index, including Bank of America Corp. and Wells Fargo & Co. And it still would have money left to buy a stake in JPMorgan Chase & Co., the largest company in the index.
Wowzas!
Weil says the European takeover of Fortis this weekend, which gave taxpayers a nearly 50% stake in the company, is how the bailout should work:
That's how a government intervention is supposed to work. The company gets fresh capital, which has the added benefit of not being fake. The buyers get equity. Legacy shareholders get slammed with dilution. And if the company recovers, the government can sell shares to the public later, maybe even at a profit.
And he makes another sound proposal:
As for the illiquid assets still on banks' balance sheets, the best way to find out what they're worth is to start disclosing every conceivable piece of data about them, right down to the daily cash flows they produce. A big reason subprime mortgage-related securities aren't selling is that outsiders can't see what's underlying them on a timely basis.
Martin Wolf of the FT-one of the smartest commentators around, says Congress is risking another Great Depression by rejecting a bailout, however deeply flawed it is.
We are watching the disintegration of the financial system. Finance is the web of intermediation binding economic agents to one another, across both space and time. Without it, no modern economy can survive. Yet that is now threatened, with the ongoing collapse in trust and flight to safety. We can indeed run this experiment. But why should we?
Speaking of Great Depressions, David Leonhardt of the NYT provides some economic history, which I don't think we can get enough of right now.

SNIP

Not thanks AT. I've had enough spin and political ideology for awhile. At least until after the election. Has Fox News made those people completely mad? What are they afraid of? Anything worse that W and Cheney have done? A third Clinton term? Facts in general? It's truly pitiful.

I swear I'm gonna have to slap SOMEONE if I hear one more right-wing talking head explaining how all this Wall Street crap is from poor people, mainly minorities, getting houses they couldn't afford. Anyone who believes that the lily white guys of Wall Street lost billions because they were giving money/homes to poor people rather than lining their rich white boy's club is as stupid as Monkeyboy's dwindling fan club.

I'd be thrilled to think that some of 'missing' billions went to buy homes for poor folks...but it ain't so.

Rush Limbaugh and his ditto heads are ignorant beyond belief...racist and sexist, too.

Go on and say it, Max, it was that smirking ferret Paul Greenberg who was attacking Krugman even recently for pointing out what was getting ready to happen.

I'll say it: Greenberg mocked Krugman repeatedly, and though I'm not ready to call Greenberg a ferret, he certainly wrote smirkingly. Now, will Mr. Greenberg have the class to acknowledge that he was wrong? And even if he took up this little challenge from an insignificant poster on a blog I'm sure he NEVER reads, will he acknowledge his error in a non-smirking way? I'll bet my shrinking 401(k) that he won't, that he can't.

McCain Defends Deregulation of Financial Industry

John McCain defended his support of deregulating the financial industry. He was asked about his views last night on 60 Minutes.

Scott Pelley: "In 1999, you were one of the senators who helped pass deregulation of Wall Street. Do you regret that now?"

Sen. McCain: "No. I think the deregulation was probably helpful to the growth of our economy."

Whoa! 'Sl' gonna have a cow! Maybe he can pull a PALIN "know-nothingism."

It is inaccurate to say that the CRA is what "caused" this situation. It may have played some role, but so did Fannie and Freddie's decision to "ease credit requirements" in 1999.

If you really want to give out an "i told you so award" give it to Peter Wallison - from the article:

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

clicky

"More than half of subprime loans were made by independent mortgage companies not subject to comprehensive federal supervision; another 30 percent of such originations were made by affiliates of banks or thrifts, which are not subject to routine examination or supervision, and the remaining 20 percent were made by banks and thrifts."
Media Matters

Nuff said. Bullshit is bullshit. I ROLMAO at laura ingraham. She just had to work in Blame Bill. They're so addicted to Blaming Clinton it's like an addiction.

I listened to Dopehead Lush Limbaugh rant on today about CRA and Fannie and Freddie. I was counting 8 major lies per hour.

We have abbreviations for miles traveled per hour, revolutions per minute, words read per minute.
How about Lies Per Hour for talk radio?

LPH. LPH. Sounds good to me. How's about you truckers?

.

Of course with Bush and cheney, only doing news spots we need to modify the above to

Lies Per Minute. LPM.

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I don't think so ARKBLOG. Your democratic propaganda has been soundly refuted not only by reputable articles but by video tape of some notable demos castigating regulators of Fannie/Freddie. Please note below:
By: Charles R. Smith

One does not have to look very far to find the root cause of our current financial dilemma.

Despite the partisan political spin that it's "all George Bush's fault," the facts were well documented in 2006 by the audit report of the Office of Federal Housing Enterprise Oversight (OFHEO).

It is the failure of the mainstream media to kick the spin and put out the facts before the American people.

According to the auditors, "During the period covered by this report - 1998 to mid-2004 - Fannie Mae reported extremely smooth profit growth and hit announced targets for earnings per share precisely each quarter. Those achievements were illusions deliberately and systematically created by the Enterprise's senior management with the aid of inappropriate accounting and improper earnings management."

The audit report is specific - telling why the Fannie Mae folks inflated their books and who was responsible for the systematic mirrors and smoke game to inflate earnings.

"By deliberately and intentionally manipulating accounting to hit earnings targets, senior management maximized the bonuses and other executive compensation they received, at the expense of shareholders. Earnings management made a significant contribution to the compensation of Fannie Mae Chairman and CEO Franklin Raines, which totaled over $90 million from 1998 through 2003. Of that total, over $52 million was directly tied to achieving earnings per share targets."

So while Franklin Raines, currently adviser to Senator Obama, walks free with millions in his pockets, homeowners and taxpayers all over America are paying the price of his failed leadership.

How did this happen? The answer again comes from the audit report: Basically, the management at Fannie Mae hid the payouts from public view.

"Enterprise executives purposely obscured their official disclosures of executive compensation and failed to provide complete information on the post-employment compensation awarded to former CEOs," noted the audit report.

The whole story, as documented by the audit report, goes from one tale of falsehoods followed by another chapter on cover-ups.

"Fannie Mae senior management achieved those earnings targets by regularly manipulating earnings," notes the report.

"During the period covered by this report, Fannie Mae senior management systematically withheld information about the Enterprise's operations and financial condition from the board of directors, its committees, its external auditors, OFHEO, the Congress, and the public, or disclosed information that was incomplete, inaccurate, or misleading," states the audit report.

While the books looked great - good enough to pay out millions to Raines and others at Fannie Mae - the facts behind the scenes pointed to a crumbling empire ready to collapse.

"Fannie Mae consistently took a significant amount of interest rate risk and, when interest rates fell in 2002, incurred billions of dollars in economic losses," states the report.

Worse still, when it appeared the cover-ups were failing and the auditors were closing in on the truth, the executives at Fannie Mae combined forces with Democrats in Congress to try to replace the auditors.

"Fannie Mae senior management sought to interfere with OFHEO's special examination by directing the Enterprise's lobbyists to use their ties to Congressional staff to 1) generate a Congressional request for the Inspector General of the Department of Housing and Urban Development (HUD) to investigate OFHEO's conduct of that examination and 2) insert into an appropriations bill language that would reduce the agency's appropriations until the Director of OFHEO was replaced," noted the report.

So who helped out the Fannie executives?

In 2007, Sen. Dodd, D-Conn., the chairman of the Senate Banking, Housing and Urban Affairs Committee, called on Fannie Mae and Freddie Mac's regulators to lift the portfolio caps. He argued that allowing the two firms to buy more subprime mortgages, at least temporarily, would inject much needed liquidity into the market and calm the financial markets. Of course, that was like offering heroin to an addict.

Sen. Dodd called Bush's proposed stronger regulations on Fannie Mae "inane" and recommended the president "Immediately reconsider his ill-advised" proposals."

In 2000, when Republicans introduced a reform act for Fannie, Rep. Frank dismissed the bill, saying concerns were "overblown" and that there was "no federal liability there whatsoever."

In 2002, as alarm bells were ringing, Frank dismissed them with "I do not regard Fannie Mae and Freddie Mac as problems," according to a Sept. 10 Wall Street Journal article.

When the accounting scandal finally broke open, Rep. Frank acted quickly . . . to cover the whole thing up.

"I do not think we are facing any kind of a crisis," stated Frank.

When the scandals began to engulf Fannie Mae and Freddie Mac sending them spiraling down the tubes, Frank reacted with a comment that is enough to make one's head spin.

In the same article, Frank noted, "I think Wall Street will get over it if the two collapsed."

Oh, and where was Obama? In his short term in Congress, Obama has raked in more Fannie Mae donations than any other member of Congress in 20 years except Dodd. Obama has sought the campaign advice of two former Fannie Mae CEOs who took money based on the "purposely obscured" accounting documented by the audit report. Obama has bundlers and advisers from the collapsed institution sprinkled over his campaign like sugar over cookies.

Where was John McCain? In 2005, Sen. McCain proposed legislation that could have prevented this whole mess to reform Fannie and Freddie.

McCain's legislation was defeated by Dodd and the Senate Democrats. Since then Dodd along with Democrat Sens. Obama, John Kerry, and Hillary Clinton - the top four recipients of Fannie and Freddie campaign contributions from 1988 to 2008 - actively opposed any reform measures and supported weakening existing regulations.

So while the mass media spins it all George Bush's fault, the very same people who oversaw the disaster at Fannie Mae and Freddie Mac are now in charge of the rescue effort.

And if the above article is not enough, please note this article from the NYTIMES:
September 30, 1999

Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program b! y next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''F! annie M ae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic tim! es. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or he! r month ly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

UNBELIEVABLE!

"Where ignorance is bliss, 'Tis folly to be wise."
--Thomas Gray

Good Gawd!

Charles R. Smith
is an exclusive columnist for NewsMax.com as its "CyberWar" expert and is currently President and CEO of SOFTWAR, his own consulting company.

NEWSMAX...Ha Ha Ha Ha!

Yea, well I didn't see any refutation of these articles point by point. One of the articles is the NYTIMES. That is one of your papers. Make fun of the source. However, I know that you do that because you have absolutely no way of refuting their truth. You have been caught red handed in your incompetency. The democrats are the criminals that most of us have always known them to be. EAT IT!!!!!!!!!!!!!!!!! Isn't it embarassing to be caught red handed in your lies?
Dr. Strangelove

stranglelove, nobody reads your stuff.

.

'Reasoning with a [RightWingNut] drunkard is like
going under water with a torch to seek for a drowning man.'
--The Sacred Kural.

Or...

a Palin "Know-nothingism" enabler!