The Left and Right, Both, Can Get on this Bandwagon (Guest Post)

I saw this yesterday on Facebook on economist, writer, professor Robert Reich's page:

The heads of government-controlled housing finance agencies Fannie Mae and Freddie Mac will each get whopping raises -- from $600,000 this year to $4 million next. Congress set up Fannie and Freddie so Americans could get mortgages more cheaply. In the financial crisis the agencies were bailed out with nearly $190 billion of taxpayer dollars, and taxpayers are still backstopping them. They’re overseen by the Federal Housing Finance Agency, whose director, Mel Watt, just approved the pay raises.

Watt says the $4 million pay packages are necessary to keep the two heads, Timothy Mayopoulos and Don Layton, from bolting for the private sector (Mayopoulos has been complaining about his salary). Baloney. The President of the United States will get $400,000 this year; the Vice President, $233,000; Senators, $193,400; the Chief Justice of the United States, $258,100; Associate Justices, $246,800; cabinet secretaries, $199,700. We don’t pay any of them $4 million to keep them doing their jobs.

Mayopoulos (below, left) joined Fannie in 2009 as general counsel after being fired by Bank of America. When Layton joined Freddie in 2012 after retiring from J.P. Morgan, he called it “a great opportunity to participate in public service.” Which is precisely the point. If they’re public servants, they shouldn’t be paid a penny more than cabinet secretaries. If they’re not public servants, and if Fannie and Freddie are just like any private-sector mortgage lenders, these two agencies should be abolished.

From a friend today on Facebook, on the banks

His post: 

I would like to congratulate the banking industry for a job well done!



Now we have all the clowns in Washington in the same car. They want to reward you on putting 1 in 5 Americans on unemployment. Taking the whole global economy to it's k...nees. Your unbridled greed in the commodity markets have caused many a parent worldwide to worry on how they can fed their children. Playing with grain futures that is so you after all. Those end of year bonuses do look good, don't they. After all you do have to spend more time in the Hampton's, too get away from all the slums in the city.


Taking peoples nest eggs and a making an omelet out of them.


Now they want to give you total control of the housing market. So here's your reward Fannie-Mae and Freddie-Mac. Come on how can you mess up the housing sector.


Good job bankers keep up your contempt of those around you and I hope that someday not to repay you for your actions.


--From a taxpayer in need
 
My response:
 
AND they're still fighting to be totally, completely and utterly unregulated, as they are right this moment---and they have the Republicans fighting for them so it doesn't happen!! What a great bunch of people!

One of our own on under-reported stories in our media right now

From The Huffington Post just now:

From William K. Black, professor at the University of Missouri-Kansas City and author of the book,"The Best Way to Rob a Bank Is to Own One":


The things I think are critical and badly underreported are:

1. The astonishing amount of mortgage fraud (literally, millions of cases annually) and how it hyperinflated the bubble and led to the Great Recession.

2. The fact that these mortgage frauds were overwhelmingly due to consciously fraudulent lending practices in which the CEOs of seemingly legitimate entities used accounting tricks as their “weapon of choice" to report higher profits and get bigger bonuses. (George A. Akerlof and Paul R. Romer got it right in the title to their 1993 article: Looting: The Economic Underworld of Bankruptcy for Profit.)

3. The disgraceful lack of prosecutions which has resulted from regulators virtually ending the practice of making criminal referrals and the pathetic March 2007 "partnership" that the FBI entered into with the Mortgage Bankers Association (the trade association of the "perps") that led the FBI and the Department of Justice to (implicitly) define out of existence fraud by the lenders (and to conceive of them as the "victim" -- which they are, but only of their controlling officers). Bush administration attorney general Michael Mukasey in June 2008 notoriously refused to create a national task force against mortgage fraud based on his claim that mortgage fraud was analogous to "white collar street crime."

4. The "echo" epidemics of fraud set off by the primary epidemic of accounting “control fraud". The fraud designed by CEOs in turn kicked off an epidemic of fraud among loan brokers and appraisers. Reporters should explore the concept of the Gresham's-style dynamic in which bad ethics were a competitive advantage and drove good ethics out of the marketplace.

5. The massive foreclosure fraud we are seeing now as another "echo" epidemic. To optimize their accounting control fraud, lenders gutted underwriting. That led to "fraud in the inducement" (vis a vis borrowers), endemic documentation problems, and an extraordinary numbers of defaults. The process required tens of thousands of real estate financing personnel to commit fraud on a daily basis as their core function. Some of these people are unemployed, but many are in the industry and are presently engaged in loan servicing. Now that their job is to foreclose on properties, there is no reason to expect that they would suddenly become honest, and they haven't.

6. The ongoing massive cover up of losses on bad assets, particularly by the “too big to fail” institutions, which I call “systemically dangerous institutions” (SDIs). Those institutions, along with Federal Reserve Board Chairman Ben Bernanke and Congress (at the behest of the Chamber of Commerce and with no opposition from the Obama administration) in April 2009 forced the Financial Accounting Standards Board (FASB) to change the rules so that the banks do not have to recognize their losses unless and until they sell the bad assets. The implications of this cover up are large (and rarely reported). At the very least, it means that Treasury Secretary Timothy Geithner's propaganda campaign about TARP saving the world at virtually no cost (perhaps even a "profit") is nonsense -- despite its success in influencing the Washington Post and Los Angeles Times. Consider:

A) The repayment of TARP funds does not mean the banks are healthy. Their asset values are often grossly inflated, which means their net worth is grossly inflated. That means that the claims that we have increased net worth requirements (and that Basel III will further increase net worth requirements) are false. Net worth requirements have meaning only if the accounting is honest

B) The repayment of TARP funds does mean that the banks are freed from any meaningful restraint on senior officer compensation. Note that absent the accounting lies the banks would often be reporting losses (and failure to meet required capital requirements, or outright insolvency) and could not pay their senior officers bonuses and would be subject to mandatory closure under the Prompt Corrective Action (PCA) law.

C) No commercial entity would have ever signed the TARP deals on the terms that the U.S. drafted for itself. The U.S. provided not only fresh money but an unlimitedde facto guarantee (along with permitting phony accounting). If the U.S. had negotiated competently it would have owned virtually all the shares of every TARP recipient (which, of course, was a political impossibility).

D) The accounting lies are stalling the recovery. Markets cannot clear promptly when one creates an incentive to hold massively overvalued assets for years.

E) The losses are still there, but the taxpayers are on the hook via Fannie and Freddie and the Fed (which has taken over a trillion dollars in toxic collateral at grossly inflated values).

7. The continued absence of effective regulation. It should be scandalous that President Obama left in charge, or even promoted, the anti-regulators who permitted the Great Recession. The (failed) anti-regulator of Fannie and Freddie, for example, remains FHFA's acting director. This is significantly insane as a matter of both economics and politics. (The administration doesn't even seem to realize the issue of integrity.)

8. The crises of state and local government and the lack of a rational basis for Republican and Blue Dog opposition to the proposed revenue sharing component of the stimulus bill. The compounding insanity of the administration failing to fight for its concept and failing to make explicit how badly its removal would harm the recovery, employment, and vital government services.

9. The insanity of accepting mass, long-term unemployment rather than having the government provide productive jobs for everyone willing to work (as the employer of last resort).

Links  http://www.huffingtonpost.com/2010/10/20/nine-stories-the-media-is_n_769620.html;

http://www.huffingtonpost.com/william-k-black/the-two-documents-everyon_b_169813.html

“A billion here and a billion there, and pretty soon you're talking real money."

For all the focus on the historic federal rescue of the banking industry, it is the government’s decision to seize Fannie Mae and Freddie Mac in September 2008 that is likely to cost taxpayers the most money. So far the tab stands at $145.9 billion, and it grows with every foreclosure of a three-bedroom home with a two-car garage one hour from Phoenix. The Congressional Budget Office predicts that the final bill could reach $389 billion. --Binyamin Applebaum, The New York Times, "Cost of Seizing Fannie and Freddie Surges for Taxpayers" Link to original post: http://www.nytimes.com/2010/06/20/business/20foreclose.html?_r=1 Have a great weekend, y'all.

One small satisfaction

The one thing--the only thing--I can take any small comfort from out of all this financial mess we're now dealing with--and will continue to be dealing with, for weeks or months or years to come--is that, out of all the socialism and fascism that is and will continue to come out of it, was all brought to us by the Republican Party.

Oh, yeah, the Republicans.

It was Senators John McCain and his pal Phil ("The United States is a nation of whiners") Graham that wanted to--and did--deregulate the banking industry that we're paying for now and will continue to pay for.

President Adolf Bush and his sidekick, Vice President Goerring Cheney want their tightly controlled, ultra-secret government with its listened to and watched public. That's where the Fascism has come.

And the socialism, what with buying the mortgage markets first, and then the insurance conglomerate, AIG and now, did you hear this? The Congress wants to cover banks on our loans over in Europe and, I guess, around the world.

Not stopping there, Rep. Barney Frank (yeah, OUR guy) said aloud this weekend that maybe we should throw more good federal tax dollars at the credit card industry, too.

Holy cow. Where is this going to stop?

And when?

And how soon?

I like my idea of just buying up the healthcare industry and nationalizing the energy industries.

My plan would have been cheaper.

And had a lot more benefits.


Good luck to us, people.

We need it.

Since we're in a buying mode...

Now that you and I--the American taxpayers--own the mortgage companies (Fannie Mae and Freddie Mac) and the largest insurance broker in the nation, I thought it only right that we put the next items on our shopping lists that we want.

For me, I only want two things.

There are two things that this country needs and needs badly.

The first thing we need is to buy the health care system nationwide.

No kidding.

Virtually the rest of the free world has done this--and it works. Why not the United States? Let's buy it and then take the profit out of the industry. Again, the rest of the world has done it--and it works--why shouldn't we? Then we could all have the affordable health care and better health we should all have, as a right as living, breathing human beings.

Why should we let the hospitals, doctors, pharmaceuticals, insurance companies and all other leeches of the American health care system do their best to get rich off the rest of us, all at our ridiculously high expense?

The answer is: we shouldn't.

And the other thing I want?

It wouldn't even cost.

Let's nationalize the energy industry.

We can get rid of those leeches, too.

What I've been saying

Pimco: U.S. bank system capital insufficient

Fri Sep 12, 2008 5:38pm EDT
By Jennifer Ablan

NEW YORK (Reuters) - Mohamed El-Erian, the chief executive of top bond fund Pimco, said on Friday that the U.S. banking system doesn't have enough money to weather the current credit crunch related to massive mortgage-related losses.

Complete article here: http://www.reuters.com/article/ousiv/idUSN1244742820080912
_________________________________________________________

This is what I've been saying.

When you consider the takeover of both Fannie Mae and Freedie Mac, add in the 11 banks that have already failed this year (that one last week, remember, in Nevada, is expected to cost 500 million dollars alone), Bear Stearns, Lehman Brothers next and then the other 116 banks that are on the FDIC's list of "troubled" banks, folks, we ain't got enough money.

That's right.

The United States of America doesn't have enough money, ladies and gentlemen.

Hang on to your seats.

Oh, and the driver of the bus is asleep at the wheel.

But don't panic.

(P.S. Merrill Lynch is crumbling now, too.)

How far is this going?

And where do we say "stop!"?

Lehman Brothers' situation keeps getting worse and worse. They're going to start selling off portions of the company.

All well and good, right?

But I heard on the radio this morning (NPR, of course), that the government may have to go in and bail them out.

Sound familiar?

It seems we keep going through this again and again lately.

This on top of taking over 11 failed banks this year, so far, Fannie Mae and Freddie Mac and Bear Stearns.

So next is Lehman Brothers?

Sure glad we're a capitalistic system, aren't you?

In the same radio story, it told of both former car giants Ford and GM going to the Feds to ask for "low interest loans", to get them through their rough spots--which they created, of course.

Holy cow.

Where does it stop?

At what point are we either going to say "enough!" or just give up and admit we're a socialistic country?

If we're going to do socialism and the government is going to own business, let's have them buy the health care and energy systems (oil, in particular) and call it a day.

THAT we'd benefit from.

But not cars--not the auto industry.

What kind of system are we running here, exactly?

News flash: we can't afford all of this.

What's going on

So, yesterday, before breakfast--on our way to breakfast, really--we read in the newspaper (it wasn't on CNN, amazingly enough-- I guess no boobs were involved so it's not news) that Fannie Mae and Freddie Mac were being "seized" (scary, huh?) by the Federal Government and another bank failed. (see yesterday's entry).

Then, after breakfast, driving to a lesson on tile installation (for the kitchen, if you must know), we drove past one young man, with his car windows down, yelling into his car phone about how--"Oh, yeah?--well, I been cheatin' on your ass for a LONG time!"

Nice.

Then, a very short time later, in that same drive, a big, black SUV pulls up alongside our car at a stoplight, windows also down, radio blaring, so we could hear this person's preacher, at full voice, yelling of some outrage or another.

The point?

It seems that, with all the changes in our society--our falling financial and moral stature in the world (thank you, George W. Bush and everyone who voted Republican in the last 2 elections, along with anyone and everyone else at fault), we're sliding rather precipitously into a real 2nd-class world status, it seems.

With so many people either un- or under-insured, regarding healthcare, so many mortgages defaulting, so many in debt in so many ways--credit cards, more loans, etc., it's a lot to keep up with.

All this change is difficult to track and digest.

And you know how it is with changing societies.

In them, reactionary thoughts and feelings flood in. It's always been that way.

Everyone wants to go back to "the good ol' days".

It was true in Russia and the Soviet Union. Heck, it's still that way over there. They want a strong-armed dictator to tell everyone just how things are--and should be.

Trouble is, most people suffer from "going back".

The people bringing you Socialism

Sure a bank failed last night--the nation's 11th this year--as I predicted but hoped wouldn't happen. But the big news, along with this bank failure, is the government stepping in to "seize" Fannie Mae and Freddie Mac.

That's gonna hurt.

For people in the industry, it was writing on the wall but to the rest of the American public, it's news. And it's gonna cost.

It'll be billions. Literally.

Of all the things that's to be said about all this--and there is a lot--what's ironic is that, if, indeed, we are slipping into more and more Socialism here--and we seem to be--it is the Republicans that have brought it about.

Let there be no doubt.

It was the Republicans who brought us the deregulated banking industry, which took us to all the high profits from bad loans that were handed out like so much candy, which begat this credit crisis and collapse of the banking industry.

So why would anyone put faith and trust back in Republicans, of all groups, at this time, by considering or even voting for that old rich white man, Sen. McCain (or "John Bush" as he was just referred to at the Republican National Convention this week, albeit unintentionally)? He is, as he himself said, unaware of how the financial system works.

Crazy.

Stay tuned, folks. It ain't over and it's gonna get uglier before it gets better.

This is how serious the situation is, folks

Paulson Seeks Authority to Shore Up Fannie, Freddie (Update3)

By Brendan Murray and Dawn Kopecki

July 13 (Bloomberg) -- Treasury Secretary Henry Paulson put the weight of the federal government behind Fannie Mae and Freddie Mac, the beleaguered companies that buy or finance almost half of the $12 trillion of U.S. mortgages.

Paulson, speaking on the steps of the Treasury facing the White House, asked Congress for authority to buy unlimited stakes in and lend to the companies, aiming to stem a collapse in confidence. The Federal Reserve separately authorized the firms to borrow directly from the central bank.

The announcements followed weekend talks between the firms, government officials, lawmakers and regulators, after Fannie Mae and Freddie Mac lost about half their value last week. Paulson and Fed Chairman Ben S. Bernanke are trying to prevent a collapse that would exacerbate the worst housing recession in 25 years and deepen the economic slowdown.

here's the orginal link:
http://www.bloomberg.com/apps/news?pid=20601068&sid=aSNZaHL2vs4A&refer=home


Pay attention, folks. This is huge news. These people NEVER get together on the weekends. They NEVER have meetings on Sundays, let alone announcements on the steps of the Treasury. Hell, they don't have to. Things are usually running smoothly.

Not now. Now, they're scrambling. This is big. This will be a big week in the markets.

"Officials from Treasury, the Fed and other regulators worked in close consultation throughout the weekend after growing investor fears about the companies' finances sent their shares and the overall market plummeting last week." (from Yahoo! link below).

Let's hope it all goes well.

The Fed. The FDIC. Fannie Mae and Freddie Mac, both. Hell, they're all engaged here.

"...some of Wall Street's biggest investors believe there was another message in the government's announcement — the rest of the financial sector seems unlikely to get a helping hand. Global banks and brokerages have already written down nearly $300 billion in soured mortgage investments — a number projected to ultimately reach $1 trillion." (http://news.yahoo.com/s/ap/20080714/ap_on_bi_ge/credit_crisis_new_phase)

"Former U.S. Treasury Secretary John Snow said that Fannie Mae and Freddie Mac have relied on leverage to fund their businesses in the same fashion as a hedge fund, and that the government should avoid taking them over."

"Congress ought to be embarrassed" for years of delays in passing legislation aimed at strengthening regulation of the two companies, Snow, now chairman of New York-based buyout fund Cerberus Capital Management LP, said in a telephone interview. He said he suggested when in office that "the business model they were using was really the model of a hedge fund." (from this link: http://globaleconomicanalysis.blogspot.com/)

"A critical test of confidence will come Monday morning, when Freddie Mac is slated to auction a combined $3 billion in three- and six-month securities."
From this link:
http://news.yahoo.com/s/ap/20080714/ap_on_bi_ge/mortgage_giants_crisis

You watch--Lehman Brothers is going down. Mark my words. And that's not the least of it, by a long shot.

Great question from Michael Sedlock at Mish's Global Economic Analysis:

"Since when in a supposedly capitalistic system should it be necessary for the Fed and Treasury to intervene in the markets on a day to day basis?"

More:

"To What Extent Did (Secretary of the Treasury) Paulson Lie?

Now we get to debate the meaning of the following:

"Keeping Fannie and Freddie in Current Form"
"There will be no nationalization of Fannie and Freddie"
"A government takeover will not be necessary"

It seems to me that an injection of $15 billion capital into Fannie Mae and Freddie Mac and creating a new class of Government Owned Securities is most emphatically NOT in agreement with the above ideas.

Paulson Is The Great Pretender

Hell, there is so much pretending going on it's hard to keep track. For starters, everyone is pretending Fannie and Freddie are solvent. If they were solvent there would be no need for a $15 billion injection. Secondly, the government directly owning a new class of shares is not keeping Fannie in its current form.

The big concern is "Where does it stop?" Opening up a $15 billion dollar window will be the first of 10 such operations. This is likely the start of a U.S. Taxpayer Bailout of China."

It's ugly, folks. And it's getting really, quite uglier. As I so frequently say, you'd better start paying attention.

I hope it's not too late.