How Obama blamed backward and forward

Although President Obama complained for 6-7 years about President Bush and the economy he inherited, you didn't hear him mention the recession Bush inherited. Not the falling economy after 9-11, but the 2000 recession. The reason he didn't use Bush's method to restore stability was Bush had used a TAX CUT, not stealing from Peter the employed to pay Paul the unemployed.  Bush’s method didn't give Washington more power over our lives. Democrats hate, hate, hate for you to keep more of your money to make your own decisions.

Specifically, EGTRRA of 2001:

*Increased the tax-deductible contributions people could make to their IRA accounts.
*Doubled the child tax credit from $500 to $1,000.
*Expanded the Earned Income Tax Credit.
*Provided greater tax deductions for education expenses and savings.
*Reduced the gift tax.
*Provided relief from the Alternative Minimum Tax.
*Phased-out the estate and generation-skipping transfer taxes so that they were eliminated in 2010.
*Reduced the “marriage penalty” by doubling the standard deduction for married couples. It also doubled the income threshold for married couples for the 15 percent tax bracket. *Those measures made the tax rates equivalent to what the couples would have had if they were single.
*Eliminated the planned phase-out of personal exemptions for those earning over $150,000, and the phase-down of itemized deductions for those earning over $100,000.

And the burst housing bubble of 2007-2008? You can thank the Community Reinvestment Act of 1977. Our wise politicians actually believed that if you put a low income worker deeper in debt for a housing mortgage, you could lift the family out of poverty with just the appearance of affluence. They new better than local bankers. What? Require 20% down like our first home loan in 1962? You must be a bigot. And they invited speculators in. Sort of like the current education debt, which no one wants to examine, not even Trump.

The housing mess has a long history

We've all seen the pressure to lower standards and make homeowners of people who can't save the downpayment, can't pay the mortgage, can't meet the minimum standards, but I was unaware how far back government interference in the housing market went--back to the early 1920s with Herbert Hoover when he was Secretary of Commerce. Or even 1913, if you figure the home mortgage deduction. And I knew about rent controls creating an artificial "housing shortage" after WWII. I knew what had been required of us even with our first home purchased in 1962, but we never used FHA or VA, and sort of assumed that's the way it was until the 70s or 80s. Guess not. There's a lot I didn't know about how housing became a political football for both parties and invited crime and corruption to flourish. Catch up on the history beginning with Hoover, and follow it all the way up to now. See Obsessive Housing Disorder.

"The next stop on the road to 2008 was a fateful campaign to lower lending criteria, which, the housing advocates argued, were racist and had to change. The campaign began in 1986, when the Association of Community Organizations for Reform Now (Acorn) threatened to oppose an acquisition by a southern bank, Louisiana Bancshares, until it agreed to new “flexible credit and underwriting standards” for minority borrowers—for example, counting public assistance and food stamps as income. The next year, Acorn led a coalition of advocacy groups calling for industry-wide changes in lending standards. Among the demanded reforms were the easing of minimum down-payment requirements and of the requirement that borrowers have enough cash at a closing to cover two to three months of mortgage payments (research had shown that lack of money in hand was a big reason some mortgages failed quickly).

The advocates also attacked Fannie Mae, the giant quasi-government agency that bought loans from banks in order to allow them to make new loans. Its underwriters were “strictly by-the-book interpreters” of lending standards and turned down purchases of unconventional loans, charged Acorn. The pressure eventually paid off. In 1992, Congress passed legislation requiring Fannie Mae and the similar Freddie Mac to devote 30 percent of their loan purchases to mortgages for low- and moderate-income borrowers."

So we're doing more of the same, trying to refinance these failed homeowners, offering rock bottom rates, wondering why it isn't working?

"As Harvard economist and City Journal contributing editor Edward Glaeser has observed, mortgage lenders have finally “recovered their sanity”—only to have government dangling subsidized low interest rates and tax credits in front of them and their potential customers all over again. Behind these efforts is a fundamental misconception among politicians that housing drives the American economy and therefore demands subsidy at virtually any cost."

The author points out the damage the home mortgage deduction has done, as well as other government subsidies, regulations and programs. Good article. And Obama owes ACORN big time, so we're in for more of the same on the road to "recovery." Go read it.

Two ways to judge the economy of the 21st century

If you're retired, or were near retirement in 2000, as I was, just go back and look at your statements. My pension carrier, State Teachers Retirement of Ohio, in the mid to late 90s was busy throwing money at art and a newly remodeled building with all the latest of everything for its employees. They had so much money they didn't know what to do with it. Then came the tech bust and the party was over by 1999. At least that's what my 403-b statements from TIAA-CREF said. President Bush inherited a floundering economy in 2001--and I don't blame Clinton--there were too many dollars chasing too few opportunities and people were throwing money at any app, widget and dot com business that had a 23 year old in sweats and T running R&D. My funds had fully recovered by December 2003, I think it was, and then soared. Not bad considering 9/11 and all the bad media sob stories about "this economy." Team Kedwards in 2004 really moaned about the terrible economy--worst since the Great Depression Kerry and Edwards said. The day after the election on 2004, the Democrats shut up. But not for long. They drug out the same sad, sad stories from Appalachia and poverty moving to the suburbs for the 2006 elections, and took many seats in Congress. And Republicans let them do it. Here in Ohio our candidate, an African American, was smeared because of Governor Tafts golfing misdeed. Also, he didn't talk and walk white or spread guilt around or write autobiographies about non-accomplishments. Democrats also said we were losing the war, but that's another non-story that worked.

I have another way to judge the economy, both that of the mid-90s and the mid-2000s. My premiere issue magazine collection. Advertising out the wazoo during the days when the media was telling us how awful things were in mid-2000s. Id' seen the same thing in the late 1990s--Wired was so fat you almost couldn't find the stories. Industry Standard, before it went belly up, was just an amazing array of ads. So much advertising, and much of it inappropriate for the readership, that you almost can't imagine what the marketing departments must have been thinking. People in those positions must have thought they had the golden touch, that they couldn't do anything wrong.

I'm getting ready to review the premier issue of Cottage Living, September/October 2004. Here's the ads that appear before page 60.

Woodbridge wine--full page
kitchen appliances 2 full pages, 1/3 mostly white
women's fashion 1 full page each for J. Jill and Talbot
Andersen window 2 full pages
Pergo 2 full pages
Princess Cruises 2 full pages
VISA
ROC
Neiman Marchus
Ford Expedition
Chevy Equanox 2 full pages
Levi Strauss 2 full pages
Citi 2 full pages
Highlander
Jenn-Air 2 full pages
LL Bean
Lowes
Harchow
Bulova
Megerian rugs
Gevalia
WISP (Glade)
Emend (chemo therapy) 2 full pages
Show House (Moen faucets)
Norwegian Cruiseline

Yes, the run up was heady. So much money chasing so few products. Meanwhile, back in DC, every American had a right to a home, whether or not they could make the payments, whether or not their credit rating was awful, whether or not they when it balooned, they couldn't possibly make the payment. Money was being handed out by the fistful from a variety of government agencies to non-profits to make sure enough people got signed on--no down payment? no problema. No job--not to worry. The value of the house was supposed to go up. And so we had a really toxic mix; tainted investments, and the boys minding the store were just watching the boys.

Now we'll have to wait and see if we'll have the Bush-Obama version of Hoover-Roosevelt. Let's hope Obama doesn't give us a 10 year Depression the way FDR did.

The sale of National City, pt.2

I'm still looking for my last dividend check--the one for thirty two cents. The top three executives will get golden parachutes with a combined value of $40 million following the sale (adjusting I assume for the current value of the stock which must not be too terrific); Peter Raskind, Daniel J. Frate, John L. Garney.

Ohio's progressives, socialists and marxists will scream about greed and the failure of capitalism, but I won't. I owned a few shares for about 30 years and did nothing except open the envelope four times a year, endorse the dividend check, and take it to the bank. It was never huge--probably not more than $30-$50 a year, but it was more than the cost of gasoline to drive to the bank, which the most recent one wasn't.

Meanwhile, they were being paid big bucks to figure out how to manage demands that they live up to the crazy expectations of the law and regulations to loan easy money to people who may not be able to pay it back. A law, the Community Reinvestment Act, which started small and quietly during the 1970s, with good intentions. People whose homes may never appreciate, but may depreciate, to fund builders and city services which also jumped into "the American dream" bubble. Easy money--that's what government tampering with the banks and credit did for us. Even churches got into the act, although I don't think they did the political advocacy of the left wing, ACORN type organizations. They too set up corporations, hired people, fixed up homes, "stabilizing neighborhoods," "strengthening community," to help the poor, everyone from Mennonites, to Catholics to Lutherans. But they did it with government money so they'd qualify for loans.

"The Clinton administration has turned the Community Reinvestment Act, a once-obscure and lightly enforced banking regulation law, into one of the most powerful mandates shaping American cities—and, as Senate Banking Committee chairman Phil Gramm memorably put it, a vast extortion scheme against the nation's banks. Under its provisions, U.S. banks have committed nearly $1 trillion for inner-city and low-income mortgages and real estate development projects, most of it funneled through a nationwide network of left-wing community groups, intent, in some cases, on teaching their low-income clients that the financial system is their enemy and, implicitly, that government, rather than their own striving, is the key to their well-being." "The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities," City Journal, Winter 2000

So yes, they were greedy, but when you try to strangle a business, any business, with regulations while also demanding that it perform as a sugar daddy social worker for the poor and low income, you just might find them looking for loop holes to outsmart those guys who float in and out of the beltway, who lobby, and populate endless think tanks.

It's Congress that I'd like to drop from a plane without a parachute, golden or otherwise. It was a stupid affirmative action scheme even back during the Clinton years, but there was time to remedy it. (Bruce Marks , primary culprit--story from 2004) Bush couldn't pull his people together when he had a Republican Congress, and the Democrat Congress blocked any effort, even those late ones, to fix the problem. If Gore had won in 2000, we'd be in exactly the same spot. Had you thought of that? We'd probably gone to war since the whole WMD meme started in the 90s with the Democrats, but even if we hadn't, the economic system still would have failed because the same policies chasing the same easy credit would have been there.

Now we're in a recession, and about to do the Hoover-Roosevelt two step all over again, only this time it will be Bush-Obama. Let's hope it won't take a decade of more tampering and 25% unemployment this time.

Sub-prime, from the archives

I wrote this April 25, 2007, complaining about the way the topic was written up in USAToday. It began with the obligatory sob story, and it wasn't until the middle of the article you found what was going down. Even so, I gleaned these facts from the article (perhaps the reporter figured the editor wouldn't read that far). I haven't changed a word of it, so all this was well known 18 months ago long before we knew this meltdown was going to happen. The only words missing are CRA and ACORN. It was reported in the news, discussed on talk radio and cable panels, and commented on in the blogosphere. And still people are falling for Obama's ridiculous lies.

A closer look at the middle paragraphs:

• Minority home buyers helped fuel the housing boom--49% of the increase between 1995-2005. [Note that this trend of "empowering" minorities by burdening them with impossible debt began under Clinton, and any attempt to reverse it has brought condemnation on Bush.]
• 73% of high income ($92,000-$152,000) blacks and 70% of high income Hispanics had subprime loans, compared to 17% whites.
• Lenders were supported by politicians and "community leaders" eager to promote minority home ownership.
• When Illinois (Cook Co.) tried to establish credit counseling programs for new minority buyers by targeting ZIP codes, the program was pulled as being "racist".
• Access became a buzz word at the expense of sound lending policies.
• Buyers/borrowers with poor credit or low salaries who wanted a cheap deal is a large part of the problem.
• Investigation by a counseling group found 9% of those in trouble were victims of fraud; the rest was poor judgement and poor financial skills.
• Rather than focus on the borrowers' poor financial skills, it appears that new regulations and programs will pounce on predatory lenders.
• Government investigations of charges even before the current problem came to light showed a "good chunk" [not my term] of higher loan cost is attributed to borrower's income, not to race or ethnicity.

But this is America, where nothing happens if it isn't about poverty, race, gender or disability.