September 23, 2008
And The Jackassery Continues....
Hidden in an article reporting that Cheney's going to go hunt up some support for the $700,000,000,000 bailout is this admission that the Bush Administration has been sitting on it for some time:
Fratto insisted that the plan was not slapped together and had been drawn up as a contingency over previous months and weeks by administration officials. He acknowledged lawmakers were getting only days to peruse it, but he said this should be enough. [my emphasis]
Which raises three questions for me:
A) First, as we'll discuss today in the book salon on Woodward's War Within, the Bush Administration refused to admit Iraq was FUBAR even while, for seven months, they were drumming up a new strategy because it was FUBAR. They did so because they didn't want to affect the mid-term elections. So has the Bush Administration been formulating a plan to bail out their buddies, in secret, because they didn't want to let the voters know how badly they had fucked up the American economy before November?
B) And if that is true, how much worse has the economy gotten--and how much more expensive will the bailout be--because the Bushies were trying to hide yet another colossal Republican failure?
C) Or, did they simply not tell us about their f***-up so they could spring the $700,000,000,000 surprise on us on a Friday and demand results by Monday? The Shock Doctrine at work!
Though, I guess "A" and "C" are not necessarily either/or propositions.
Once again, facts are stubborn things. Never mind that the Bush administration implored Congress to regulate GSE no fewer than 18 times during 2008 alone (that's roughly twice a month).
Never mind that Barney Frank "saw no crisis" and pooh-poohed talk of regulating Fannie Mae and Chuck Schumer blocked the 2005 reform bill:
I want to begin by saying that I am glad to consider the legislation, but I do not think we are facing any kind of a crisis. That is, in my view, the two government sponsored enterprises we are talking about here, Fannie Mae and Freddie Mac, are not in a crisis. We have recently had an accounting problem with Freddie Mac that has led to people being dismissed, as appears to be appropriate. I do not think at this point there is a problem with a threat to the Treasury.
Never mind that in the wake of the worst financial crisis in recent history, Barney Frank was still pushing GSEs to make risky loans:
Stunned global investors won’t give financial firms any more money, forcing the firms into bankruptcy if they’re not lucky, or into the arms of Uncle Sam or of much bigger companies, if they are. But as the House Financial Services Committee proved on Tuesday, the public sector somehow feels it can continue to ignore reality—at least for a little longer.
The committee, chaired by Massachusetts Rep. Barney Frank, took steps to gut a modest reform of the bad lending policies that helped get us into this mess. By voice vote, members moved to overturn a ban on something called “seller-financed down payments” for some government-guaranteed mortgages. Congress largely banned government support for such mortgages just two months ago at the request of the Federal Housing Administration.
The FHA and the Department of Housing and Urban Development have provided ample evidence that these loans are just too risky for taxpayers to take on. Under a seller-financed down payment, a homebuyer doesn’t put any money down. Instead, the seller, usually a property developer, provides the homeowner with funds to prod along the sale of the house. The first problem with this approach is that it gives the homeowner little incentive to negotiate on the purchase price of a home, since it seems to him that he’s getting a good deal—after all, the developer is kicking in thousands of dollars, which seems generous. The developer in turn finds it easier to charge an inflated price for the house, making it more likely that the government won’t get its money back if the home ever goes into foreclosure. And in fact the homeowner is more likely to default: since the value of the home is quite likely inflated, he is more likely to have difficulty selling it for the price he paid if he runs into financial trouble. Having none of his own money at stake, he also has less incentive to struggle to make his payments.
As HUD official Margaret Burns testified last year, seller-financed down payments “have had a significant negative impact on FHA’s business for the last several years. Loans made to borrowers who rely on these types of seller-funded gifts perform very poorly. The foreclosure rates on these loans are more than twice those of all other home purchase loans insured by FHA. Moreover, FHA experiences higher loss rates from the sale of the properties associated with these particular foreclosures, a reflection of the overvaluation that occurs with these programs.” Those loss rates could get worse; the government compiled them before the most severe period of housing declines began in many markets.
Why on earth, then, did Barney Frank & co. overturn the seller-financing ban, increasing the risk to the taxpayer?
...Frank and his colleagues remain keen on coddling the tenacious bad-lending lobby (including the National Association of Homebuilders and what’s left of the banking industry), which desperately needs suckers to buy newly built homes at inflated prices so that builders can pay back at least some of their construction debt to the banks and investors. Frank is certainly not looking out for average-Joe home buyers and sellers with this action. Just as bad, it seems that he and his colleagues haven’t noticed that the rest of the country, and indeed the world, have begun paying the price of the private sector’s era of no-down-payment, 100-percent home-loan financing.
But then this should not surprise us. After all, past performance is often a good predictor of future events:
If only the really smart folks had been able to stop George W. Bush and those horrid Republicans from causing this problem in the first place:
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
Published: September 30, 1999
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 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 times. 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.''
And then there are all those Republicans (like the top three beneficiaries of campaign contributions from Fannie Mae/Freddie Mac) who are in the pay of the GSEs:
Yep. Not only should the Republicans not have caused this problem which (according to the arch-conservative NY Times) was predicted in 1999 when the Clinton administration began its drive to increase minority home ownership and could have been avoided by a Republican reform bill that was blocked by Democrats, but they really had no business actually being prepared for the disaster they repeatedly warned the public about and tried to prevent.
Here's a thought for you. How about knocking off the finger pointing and concentrating on a solution? Because I have a funny feeling there's plenty of blame to go around.
Or is that too bipartisan for you?
Posted by Cassandra at September 23, 2008 07:54 PM
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How many investigations has this congress started to look into the Bush administration?
Curious they had rather sober serious hearings today? I did not hear frog-march even once.
Posted by: Pile On at September 23, 2008 09:04 PM
This mess is more about fiduciary malfeasance than a bad economy and the bailout is becoming just another attempt at socializing all industries.
Unfortunately for all of us the government has once again become the payer of choice, it is my observation that if this bailout goes through we are in for a serious increase in the rate of inflation as the dollar gets even weaker.
Thank you Congress.
Posted by: David M at September 23, 2008 09:33 PM
I think someone is bitterly clinging to their party loyalty here. :)
Let go of your restraint and let the anger flow through you. Join the darkside! That's where that idiot Barney Frank is.
As I read somewhere else a few minutes ago, if they had said the bankers were all neocons, Andrew Sullivan would be all over this.
Posted by: Don Brouhaha at September 23, 2008 09:38 PM
Everybody now: grab your ankles & crack a smile.
Posted by: Boquisucio-The-Chump at September 24, 2008 12:51 AM
"I have a funny feeling there's plenty of blame to go around."
Me too. Check this out, FWIW: http://www.votenobailout.org/
Posted by: camojack at September 24, 2008 03:36 AM
I don't like the blame game anymore than anyone else; but I do think it's important to figure out why this happened in order to take steps to stop it from happening again. I just wish that the "players" in this farce would be honest about their mistakes and stop trying to justify their actions or deflect responsibility to others. I wish they'd accept responsibility and help figure out a way out of the quagmire they helped create; preferably a solution that won't grow government bigger than it already is, that will require accountability for bad decisions, and that will not "shaft" the taxpayer. Well, a woman can dream. . .can't she?
Posted by: lela at September 24, 2008 08:07 AM
I agree with you, David. But better the Paulson plan than the Dodd plan and I'm not really sure what other choice we have. The folks who keep saying, "just let us continue to deal with failures and runs on an ad hoc basis" haven't explained two things:
1. How they're going to stop the erosion of investment confidence that builds with each failure and makes future failures/runs more rather than less likely, and
2. How continuing to bail banks out on a individual basis contributes any less to a sense of corporate entitlement than a one time bailout. The same question pertains: if you did it for X, why not for Y?
Posted by: Cassandra at September 24, 2008 10:15 AM
First of all, to accept either proposal as viable solutions to this mess, we must start by welcoming and accepting one deucey of a lie. The Federal Government is our cradle-to-grave protector and benefactor; a Big Brother who is there to catch us wherever and whenever we stumble. But hey, since it’s the Republicans who started this Hegelian dialectic, who am I to argue.
As I read Paulson’s Power Grab, he wants to have unlimited, and unreviewable powers to purchase mortgage backed securities, at his own discretion. Please read Section 2(a)(b) and Section 8. In other words, an opaque and unaccountable usurpation of power by The Executive.
And how are we to pay for all of this, well charge it to our collective credit card, of course. Our new credit limit is upped to $11.315 Trillion, of course. That’s not counting the many more bailouts standing in line out the door. The U.S. Automotive Industry is begging for $50 Billion. The IndyMac’s Bailout already cost us about $8 Billion. If this relatively small bank failure drained 10% of the FDIC’s funds, what will happen when there’s a run on the true giants of the industry? Washington Mutual, Bank of America, Citi-Bank; well charge it on our collective credit card, of course. Estimates on this scenario would bring another $5 Trillion for us to bare. Bailouts-bailouts-bailouts, until this tidal wave of debt swamps us all. And with so many Trillions in debt floating around, the value of the dollar will become meaningless. We may better get used to a Zimbabwean style economy.
But I digress. At least Dodd’s plan attempts to put some transparency and accountability to the current Paulson’s plan. It would establish an Oversight Board, requires transparency of all transactions, gives The GAO auditory powers, and yes, restricts Executive Compensation on those companies benefiting from this boondoggle.
Normally I don’t give a rat’s petooty on what a private entity pays its employees; but if we the taxpayers are the ones to save their hides from the mess that they themselves created, I don’t want to see my money to feather their beds.
But what does this little ‘Rican know? I’m just one Chump called upon too clean the scatological mess that other’s created.
Posted by: Boquisucio-The-Chump at September 24, 2008 01:27 PM
Rather than respond here, I responded in a post :)
Please don't take my bad temper personally. It's not aimed at you. I am just as frustrated as you guys.
And, I may well be all wet :) Feel free to take exception to anything I've said - it's why I decided to put my answer in a separate post!
Posted by: Cass at September 24, 2008 02:00 PM
Me chaffing at The Weiner Dog Goddess??? Perish the thought!
Posted by: Boquisucio at September 24, 2008 02:12 PM
My little Weiner Beast has been very ill.
Last week, I thought that I was going to have to have him put to sleep. This week, he seems to be rallying :) If anyone is inclined to pray for dogs, a good word o two with the man upstairs would be very much appreciated.
He has been my buddy through several deployments, and a faithful friend.
Posted by: Cass at September 24, 2008 02:21 PM
Weiner Beast prayer vigils have begun.
Posted by: man riding unicycle naked at September 24, 2008 04:00 PM
Our little furry friends can be worrisome at times like this, but I truly believe that they make our lives much better for their being with us, even when accounting for the sadness when they're gone. My two remaining boys are 17 and 14 respectively, and not in the greatest of health. The vet even pulled me aside to have 'the talk' the last time I picked them up.
But I will pray for your little one Cass. The more joy we have with them now will make the pain less when they're gone.
Posted by: MikeD at September 24, 2008 04:32 PM
I grew-up with many dogs in my life; and am very grateful for their friendship. They do fill a great big hole in us, which is sorely left empty when they are gone.
Weiner-dog positive vibes to Maryland.
Posted by: Boquisucio at September 24, 2008 04:56 PM
Thanks, Mike :)
He is getting a whole lot of ear-rubbing lately.
And I will pass the weiner-dog vibes on to his Highness. Right now he is sitting on my foot.
Posted by: Cass at September 24, 2008 06:52 PM