Obama goes after the second amendment

General Eric Holder's Department of Justice has used its "Operation Choke Point" to manipulate banks and third-party payment processors to drop whole categories of businesses the Obama administration disfavors, such as online arms and ammunition sellers, tobacconists, and payday lenders. Left-wing nonprofit allies of the Administration like the Center for Responsible Lending and Americans for Financial Reform have provided media support.

“This is not law enforcement. It is intimidation backed up by the might of the government.” http://capitalresearch.org/2015/03/operation-choke-point/

Manipulating lending institutions to achieve social ends.  Who would have thought?  Isn’t that how we got the housing bubble and bust beginning with the Community Reinvestment Act in the 1970s and ending in the Great Recession of 2008? (Actually, it isn’t over; you can still get zero down home loans).

And isn’t that how we’re accumulating mounting college loan debt—to achieve social ends by paying universities through the back door while unprepared students enter through the front? Sallie Mae is like Freddie Mac.  Equal opportunity.

http://www.washingtonpost.com/news/volokh-conspiracy/wp/2015/01/29/fdic-retreats-on-operation-choke-point/

http://dailysignal.com/2015/03/02/newt-gingrich-choke-point-beginning-real-tyranny-united-states/

http://spectator.org/articles/42211/true-origins-financial-crisis#!

http://www.inc.com/mark-cuban/video-student-loans-bubble.html

Gingrich and Fannie and Fred

"Mr. Gingrich made between $1.6 million and $1.8 million in two separate contracts with Freddie between 1999 and 2008. The former Speaker stuck to his line that "I was approached to offer strategic advice" and had warned the government-sponsored enterprises (GSEs) to stop lending to bad credit risks." WSJ Review & Outlook, Dec. 17, 2011.

I would have given them the same advice for free.

The Fed, Fannie and Fred

"[Tim Geithner, Ben Bernanke and Barney Frank] are calling to raise the debt ceiling. This will assist them with perpetuating the biggest legal government scam in history [financial institution bailouts of over $12 trillion]. Meanwhile, responsible middle class Americans are barely making it, as their investments are devalued and government expands, finding more ways to collect money from them to support its Ponzi scheme.

This is not capitalism gone amuck, as Barney Frank claims. The government bailing out private banks is not capitalism but quasi-socialism. There is a simple solution to fix this: the banks must be held accountable. There should be a way to sue the banks that originate the irresponsible investments and loans, even if they transfer their risky ventures to other banks. Nor should they be bailed out when they fail. For every bank that fails, another one that is more financially responsible is ready to step up and take its place. Fannie Mae and Freddie Mac are quasi-governmental lending agencies, so suing them would only hurt the taxpayers. They were responsible for the highest rates of foreclosures. They have grossly failed, and represent government at its worst, so the only solution is to eliminate them." Rachel Alexander

The Biggest Legalized Theft of Middle Class American Wealth - Page 1 - Rachel Alexander - Townhall Conservative

Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case

When will Congress call Fannie and Fred in for the hot seat tongue lashing?. Never. Both parties are to blame. Better to go after "big oil" or bankers or evil capitalists. Their mistakes were no accident, they are 100% the fault of the Congress which created the Federal National Mortgage Association, known as Fannie Mae, in 1938 to expand home ownership by buying mortgages from banks and other lenders and bundling them into bonds for investors. It set up the Federal Home Loan Mortgage Corp., Freddie Mac, in 1970 to compete with Fannie.

Fannie Mae and Fred Mac will cost the American taxpayer more than the BP spill and clean up. Estimated at $160 billion and rising, possibly to $1 trillion.

Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case « Finance Blog

Looking back at the origins of FHA

The right margin of this interesting article from Woman’s Day about an early FHA backed mortgage is missing because my grandmother who clipped it was interested in the quilt pattern on the other side (Star and Ring). From the clothing and hair styles, I’d place it about 1948 because the husband isn’t in uniform and those drapes look familiar.

FHA has had an interesting history. On the one hand, it allowed generations of Americans to own their own homes, but the unintended consequences are it contributed mightily to our current recession brought on by the collapse of the housing market.

It was created in 1934 during the Great Depression because housing loan periods used to be much shorter with a final balloon payment, and when the economy failed, many people lost their homes. But there were also some fairly stiff standards on the quality of the home, a modest down payment and the ability of the buyers to pay. After 25 years or so, politicians decided this was unfair to African Americans who were being left behind in the decaying inner cities as whites moved out to newer housing stock (like in the picture of the Knudsen family home near Washington D.C.).

So that’s how we got all this “creative financing” with the seller, instead of the buyer, providing the down payment, but not really, because it actually came from a non-profit organization like a church or community group (think ACORN) which got the money from the government. In 2000, these types of mortgages made up less than 2% of FHA insured mortgages. By 2007, that percentage jumped to 35%. And I guess you know the rest of the story.

“The FHA’s standard insurance program today is notoriously lax. It backs low downpayment loans, to buyers who often have below-average to poor credit ratings, and with almost no oversight to protect against fraud. Sound familiar? This is called subprime lending—the same financial roulette that busted Fannie, Freddie and large mortgage houses like Countrywide Financial.” WSJ, Aug. 11, 2009

To be fair, conventional loans during the same time period were also requiring nothing down, so there’s plenty of blame to go around when mortgage lenders, non-profits dependent on government grants, home flippers with venture capital and politicians collude.

But this is just a reminder that more government interference in the housing market is not necessarily a good thing. The current housing credit of $8,000 for “first time buyers” (and there’s tremendous fraud in this) is costing us taxpayers something like $48,000 for each one.

Incidentally, Dorothy Ducas, the author of the Woman's Day article had a very interesting career and would make an interesting topic for a thesis if it hasn't been done.

Is it time to kill off Fannie and Fred?

Here’s a list, in reverse order, of WSJ articles on the poorly run Fannie Mae--back to February 2002, early in the Bush administration, the earliest one in Feb. 2002 comparing the risk to Enron. Was anyone listening?

"As for interest-rate risk, Fan and Fred hedge with a giant and complex program using all manner of derivatives. At the end of 2000, their combined derivative position was valued at $780 billion. Even scarier, these hedges are only as good as the counterparties' ability to pay up. But Fan and Fred don't disclose the identity of their parties, so investors have no idea how much risk comes from possible counterparty failure. (By the way, last year Fan's derivative strategy went, um, somewhat amiss and she had to write down shareholder equity by $7.4 billion.)

Fan and Fred also pool mortgages and then sell those securities -- that is, they retain the credit risk since they guarantee the soundness of the mortgages and buyers assume the interest-rate risk. But Fan and Fred have recently been buying back their own securities; each now holds 30% of all mortgage-backed securities outstanding. Simply put, they are re-assuming interest-rate risk. Not necessarily a terminal practice when interest rates are stable, but dangerous if rates turn volatile."

We know Fan and Fred and their federal co-conspirators in Congress (called committee "oversite", or fox guarding the hen house) are in part to blame for the current meltdown and housing crisis. The like to blame a corporate "greed", but it's bad loans chasing even worse risks. Then there is today’s alarming editorial in WSJ that points out that in addition to our $6.6 trillion debt held by the public (up from $5.3 trillion a year ago), you and I are guaranteeing $5.3 trillion in Fannie and Fred liabilities!

So I ask you, what if there had never been a Fannie Mae or Freddie Mac?

“In 1938, the Federal government established Fannie Mae to expand the flow of mortgage money by creating a secondary market. Fannie Mae was authorized to buy Federal Housing Administration-insured mortgages, thereby replenishing the supply of money to lend to future homeowners.

Freddie Mac is a stockholder-owned corporation chartered by Congress in 1970 to keep money flowing to mortgage lenders to ensure that there was funding available for future homeowners. Freddie Mac purchases single-family and multifamily residential mortgages. They help homeowners and renter get lower housing costs and better access to home financing.” from Singing Blog

So Fannie is a holdover from the Depression era and Fred from the 70s. Maybe they should have been killed off when WWII and not FDR's socialist programs restored the economy? In theory, the interest rate is supposed to be 1/4 percent lower, but considering how mortgage loans have fluctuated from 4.5% (about 5 years ago) to 10.5% (about 22 years ago) during my own mortgage commitment years (we've owned 5 homes since 1961), how really has that 1/4 percent made a difference to home owners, who seem to find the means no matter what the rate, other than to encourage bad behavior and poor credit? Plus, it's one more playground of regulation for the likes of the Barney Franks of Congress. In truth, I can't blame all this on the old Barn--he hasn't been in charge long enough to have created all the mess, but I'd like to see every chair of that committee still alive and not in a nursing home testify before the American people about why we the people need Fannie and Fred and to hear a few mea culpas.

More of what got us to our financial meltdown in housing

Have you noticed that the GSEs Fannie and Freddie are front and center of the stimulus?

"Before Wall Street screamed bloody murder at the opening of 2008, President Bush was resisting pressure to lift the financial limit on the mortgages Fannie Mae and Freddie Mac purchase and securitize. The Office of Federal Housing Enterprise Oversight (OFHEO), the GSEs’ wimpy watchdog, also objected to lifting the limit and continues to do so post stimulus agreement. The present GSE limit is $417,000. The stimulus would snap the cap to $625,500, and to $729,750 in extra pricey housing markets. Allowing Fannie and Freddie to purchase and securitize jumbo mortgages, the oversize loans MBS investors now shun as too risky. Link

How we got here--a quick review



HT Taxmanblog

Foreclosure counseling

Yesterday I was listening to 700 am in Cincinnati and heard an ad for Hope Now Alliance which was all warm and fuzzy about helping people facing foreclosure. "Betcha they put them there," was my response to the radio. So today I looked them up. Yessiree, same old gang that put people into homes with "gift" downpayments, and balooning mortgages and probably did no credit checks or background sifting are part of this group, thrown together to get more government money for foreclosure counseling when they were about to loose their sorry as- jobs in the mortgage industry.

So how does a floundering GSE with ties to Congress and in the tank lobbyists for Obama (if no party is mentioned, assume Democrat, because Republicans are usually noted) put on a Santa Claus face?

"Freddie Mac** has instructed its national network of mortgage servicers and foreclosure attorneys to stop all planned foreclosure sales and evictions involving Freddie Mac-owned mortgages during the holiday season.

The move is designed to give more homeowners facing foreclosure or eviction additional time to take advantage of the newly announced streamlined mortgage modification program, says Freddie Mac CEO David M. Moffett.

This should allow homeowners to work out agreements with mortgage services to avoid foreclosure. All foreclosure sales slated from Nov. 26, 2008, to Jan. 9, 2009, will be temporarily stopped. The program applies to single-family and 2-4 unit properties.

Not all these apples are bad, but I wouldn't want to be in the same basket with ACORN and La Raza, one a communist agitation group spoiling many elections with illegal voters, the other wants the SW to return to Mexico.

Members:

ACORN Housing Corporation
Catholic Charities USA
Citizens’ Housing and Planning Association, Inc.
Consumer Credit Counseling Service of Atlanta
HomeFree- USA
Homeownership Preservation Foundation
Housing Partnership Network
Mission of Peace
Mississippi Homebuyer Education Center- Initiative
Mon Valley Initiative
Money Management International, Inc.
National Association of Real Estate Brokers- Investment Division, Inc.
National Community Reinvestment Coalition
National Council of La Raza
National Credit Union Foundation
National Foundation for Credit Counseling, Inc.
National Urban League
NeighborWorks America
Neighborhood Assistance Corporation of America
Rural Community Assistance Co.
Structured Employment Economic Development Co.
West Tennessee Legal Services, Inc.

**Who is Fred? The Federal Home Loan Mortgage Corporation (FHLMC) (NYSE: FRE), commonly known as Freddie Mac, is an insolvent government sponsored enterprise (GSE) of the United States federal government.

The FHLMC was created in 1970 to expand the secondary market for mortgages in the US. Along with other GSEs, Freddie Mac buys mortgages on the secondary market, pools them, and sells them as mortgage-backed securities to investors on the open market. The U.S. government seized control of the mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE), called GSEs, in September 2008, placing the liabilities of more than $5 trillion of mortgages onto the backs of the U.S. taxpayer.

Setting the Record Straight on GSE's role in the economy

Since we're in for another round of FDR type "fixer-uppers" to weigh down the economy, the response to who's at fault is up at the White House Web page. Even if you're an avid Bush basher, you really ought to take a look, because your 401-k or 403-b has been just as damaged as mine, but for some reason, you just might think that by raising taxes, you'll get some back. Don't think it works that way--at least it didn't in the 1930s.

The chronology starts in April 2001 with the FY 2002 budget, "the size of Fannie Mae and Freddie Mac is "a potential problem," because "financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity." (2002 Budget Analytic Perspectives, pg. 142)" Democrats forget Bush inherited a recession and was probably trying to figure out how to fix it. Having poor people borrow both the mortgage and the down payment from the government was not a healthy way to go. Foreclosures were already showing that.

Read all the way through to August 2007 (chronology ends in September 2008), the last time I think this steam roller could have been halted and around the time I started blogging about it: "August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying "first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options." (President George W. Bush, Press Conference, the White House, 8/9/07)" I even wrote a poem about it in September 2007--not only were Barney and Chris not listening to the President, they weren't listening to Norma! Once the Democrats controlled Congress, there was no turning this thing around. Now they get the whole sticky wad.

Obama's team was much faster at taking advantage of this problem (by lying) than was the disorganized, flabby McCain team, so most of you bought into the, "it's the President/Republicans fault" meme and that action was needed immediately. I've spent more time deciding what to have for Thanksgiving Dinner than these Porkers did figuring this one out. We'll stay in this mess until someone smart about not raising taxes figures it out. I'm already retired, so please hurry up!

We own Fannie and Fred, let's investigate

"Now that Fannie Mae and Freddie Mac’s failures have forced the federal government to put both into conservatorship — costing taxpayers some $200 billion — Americans, who now own the two entities, are entitled to know what role the government-sponsored enterprises (GSEs) played in creating this mess." Here.

Will Nancy, Frank and Chris ever allow this? Barney Frank claims he didn't know his partner 20 years ago was running a gay sex ring out of Frank's home, and 2 years ago he stonewalled an investigation of Fannie. He's not going to get smarter, folks. Throw him out.

"So why didn’t Congress do anything about these taxpayer-financed “bastions of privilege” sooner? Lest anyone ask questions about what they were up to, Fannie and Freddie also showered elected officials on Capitol Hill with campaign cash to keep their mouths shut and vociferously defend their accounting practices."

Dear George, Henry and Ben

Your bailout stinks. In a few months you'll be gone and you are handing the Democrats a federalized economy while you're still in office, what they planned for later on in the Obama years. You're not even going to make them work for it! I don't want to blame this all on President Clinton, because he had a Republican Congress to work with, but getting a home loan used to be very different before the mid-90s. It took 20% down, and our housing cost couldn't exceed 35% of our monthly after tax income. It's possible that since you guys are all rich, you've forgotten how we ordinary folks scrimped and saved and did without to pay our mortgages. Then someone brilliant decided we needed to move everyone into "the American dream," without considering who could or would pay. Then we got the NINJA loans, and even wealthy people took advantage of your lax no interest, no assets loans during the housing bubble. Yes, some minorities and poor people got into homes, most of which they couldn't afford. Again, I don't blame just the Democrats--I seem to remember something laudatory about this in the last State of the Union address.

You, President Bush, proposed in 2001 and 2003 the overhaul in the housing finance industry. It was blocked by liberal Democrats. That's a failure of leadership; we can't blame only the Democrats. Then Senator McCain with three other Senate Republicans tried to reform the government’s involvement in lending in 2005 and again that was blocked by Democrats. So he's not the "can't we all get along guy" that he thinks he is. And Obama? He was missing in action or not on board. (Why is this guy always out of the room when an important vote is taken? He's actually getting points for his absenteeism!)

Maybe you think I’m excusing you, but I’m not. You are the leaders. Why did you let the Democrats bamboozle us, and why put them in charge again when they've made such a mess? Now you are going to make the tax paying, honest, bill paying American pay for the mistake the two parties made together? Barney Frank and Chris Dodd are the reigning Democrats in banking and finance, and the rules were changed during the Clinton administration and it was former members of his administration who drove these GSEs into the ground and walked away with Golden Parachutes.

Tell me why, George W. Bush, should we bail out these bad, bad decisions made at the federal level by the Democrats in Congress and your administration?

Cooking the books

"Shocking exposé hit the Street last week about one of the best-loved, all-American companies: Fannie Mae, the mortgage and financial services giant. The report, written by the company's regulator, the Office of Federal Housing Enterprise Oversight, offered a litany of accounting improprieties at the company. You might call it "In the Kitchen With Fannie: How to Cook the Books for Fun and Profit.""

That was the story four years ago, Sept. 26, 2004 in the NYT. But even with this report, Franklin D. Raines, the company's chief executive 4 years ago, and his predecessor, James Johnson, got their bonuses. (NYT Sept 26, 2008)

Then in April of this year, paying much less than the government ask for: "Raines, former Fannie chief financial officer Timothy Howard and former controller Leanne Spencer were accused in a civil lawsuit in December 2006 with manipulating earnings over a six-year period at the company, the largest U.S. financer and guarantor of home mortgages.

Raines, a Seattle native and prominent Washington figure who was President Clinton's budget director, is relinquishing company stock options, proceeds from stock sales and other benefits. His part of the settlement is worth $24.7 million. . ." He'd worked in two different Democratic administrations, made over $91 million from 1998-2004, and blamed the Bush Administration for his problems. [Does anyone in the government from the janitors to the President ever accept the blame for mistakes?] "Raines, the first black CEO of a Fortune 500 company, has been trying to restore his reputation and challenge shareholder suits. Raised in a Seattle family that relied on welfare checks, Raines broke through racial barriers to become an adviser to President Carter and head of the U.S. Office of Management and Budget from 1996 to 1998 under Clinton." (Seattle Times, April 18, 2008 [AP])

Breaking through racial barriers to be a first anything is not necessarily a guarantee of success. And just fining the perps more millions than the rest of us can imagine obviously doesn't solve the problem either.

So what did the Office of Federal Housing Enterprise Oversight report to the Congress [Chris Dodd, Chair of Banking, Housing and Urban Affairs and Barney Frank, Chair of Financial Services, both Democrats, now squawking and pointing fingers at Republicans] this year--four years later? Well, Fannie and Fred were rising to the challenge, the Director said.

"[Fannie and Fred] were able to fulfill their key mission of providing stability and liquidity to the conventional conforming loan market. Their support of the mortgage market grew by 15 percent in 2007 versus 8 percent growth in 2006, to a total of $5.0 trillion in guaranteed mortgage-backed securities outstanding and mortgage investments. Their market share of total mortgage originations grew from 37.4 percent in 2006 to 75.6 percent by the fourth quarter of 2007. There is increasing pressure for Fannie Mae and Freddie Mac to do even more to support the mortgage market, which is problematic in absence of GSE reform legislation to strengthen the regulatory process."

Do you feel stable yet? Did GSE reform legislation [that means Congress has to do something] happen? Did the Chris and Barney dog and pony show just toss the report into the circular file? And the press release explaining how they plan to get to root causes doesn't make me feel any better. Sort of sounds like the Secretary of the Treasury will be the most powerful man in the world. Don't remember electing him, do you?

How a bill becomes a law

by James Taranto in today's WSJ is very interesting, and he wrote it for the Kos Kidz misinformation being spewed at the Daily Kos, a far left-kook web site. By the time he finished I think I understood more about the 1999 Graham-Leach-Bliley Act which passed the Senate on a 90-8 vote, with both Reid and Obama running mate Joe Biden casting "aye" votes. ". . . without Gramm-Leach-Bliley, which abolished the barrier between commercial and investment banking, the recent deals that saved Bear Stearns and Merrill Lynch would have been impossible, since both of them involved a commercial bank acquiring a troubled investment bank." Story here.

And Obama's links to Freddie and Fannie don't sound good to me.

Top recipients of Fannie/Freddie donations:

#1 Chris Dodd
#2 John Kerry
#3 Barack Obama
#4 HIllary Clinton

How do you get to be #3 of the top 25 when you've spent so little time in the Senate? Maybe he's been text messaging them while on the road running for President the last 2 years? Sen. McCain wasn’t listed in the report.