NOVATOWNHALL

People are changing their minds. Read about it here.

Also here is the best summary of how the mess started and why exactly the bailout federal intervention is necessary.

This needs to be widely circulated.

Excellent commentary at Hot Air.

Read it in the Washington Times.

[UPDATE: Please read through the links in this post. A half-understanding of the problem is no understanding at all.]

I haven’t taken a position because I couldn’t understand fully what is happening. Thus no desperate calls for you to contact your congressman or senator.

Now I am beginning to understand and now I see why everyone is in such a hurry to see some sort of bailout coming from Washington.

There is talk, such as on Lou Dobbs tonight, comparing the political aspect of this crisis to the battle against comprehensive immigration reform, in which the majority of Democrats allied with the Bush administration to push something through, while some feisty Republicans on the Hill, bolstered by a flood of support from American citizens, stopped the locomotive in its tracks. We the people stopped a wrongheaded plan that would have changed our country irrevocably for the worse.

I don’t think that battle is quite the right analogy for what faces us now. A better analogy for what faces us now is more like: We the people are out on the ice in the middle of a lake, and the ice is cracking, and we are about to fall in and die - if a bailout is not crafted in Washington this weekend and passed on Monday.

When this guy started speaking up in favor of the bailout a few days ago it got my attention because everything I was reading had me leaning toward the idea this was another big, dumb government screw up. I figured, well Ace can be wrong about things, just like anyone.

Then I read this, and then this, then just now I read this. Holy crap.

We need the frickin’ bailout like yesterday. Voting against it is national suicide.

So, yeah, I am calling out again for action so, like before, we can save our country:

E-mail and phone your congressman’s office and then e-mail and phone your senator’s office, and if you don’t get through call one of their local offices, and tell them to vote for the bailout.

Tell your family and friends about this. E-mail about it. Blog about it.

Yeah, some prominent Democrats were responsible for the fact we are in this mess but that is not the point and it’s no reason to oppose the federal bailout. That would be like if Barney Frank ran you over with his car and you refused to get in the ambulance because Barney Frank was at fault.

Dobbs reported that our legislators are getting bombarded with calls which are majority against the bailout. This is lunacy. This is NOT like the immigration battle. The only similarity is they are both taking place in Washington DC. The correct vote on this one is “Yes.” Lou Dobbs is not right about everything.

This is really, really bad. Don’t futz around, make those calls.

TGIF, another work week down the tubes, and another trash can full of credit card offers and personal loan applications.

Experiencing a moment of bewilderment, I asked Mrs, Shiplap, “if there is a credit crunch, why am I still getting all of these in the mail?”. “I don’t know, I’m still getting them also” she replied.

Pondering this further, the logical assumption that I have reached is yes, there is a credit crunch, but only for those who have no credit, or bad credit. Isn’t this the way credit is supposed to work? Isn’t forgetting this basic tenet how we got into this mess in the first place?

Maybe, just maybe, given our current state of affairs, the understanding that no credit means no credit, is a very wise philosophy.

This is the most comprehensive and accurate explanation of the U.S. financial crisis I have seen. Watch it, copy the link, post it on your blog, and spread the word to everyone you know.

Burning Down The House: What Caused Our Economic Crisis?

Thanks to Cmac.

Three weeks ago the mortgage securities scandal was not even on the radar of popular culture. Now, it is issue number one and Congress is poised to pass quick legislation to address it. That fact right there should give everyone reason for pause.

By way of comparison, our energy crisis has been brewing in the open for decades, and even seven years after 9-11 Congress is still stalemated: We have no nuclear plants being built, no new oil refineries, no new areas opened for drilling, no new shale oil operations.

When Congress is poised to act quickly, to paraphrase the old maxim, we should all reach for our guns. What sort of lunacy might our federal government be about to introduce?

Case in point: Barney Frank is currently one of the leading legislative figures in the debate. In a sane world, Barney Frank would be sitting in the corner with a dunce cap on his head.

[via The Jawa Report]

Key quote by Barney Frank defending government sponsored entities such as Fannie Mae and Freddie Mac:

The more people in my judgment exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the treasury - which I do not see, I think we see entities that are fundamentally sound financially, and withstand some of the disaster scenarios, and even if there were a problem the federal government doesn’t bail them out - but the more pressure there is there, then the less I think we see in terms of affordable housing.

So the priority has been, above all else, affordable housing. Think about that. Then think of the zeros involved.

Events are progressing so quickly in Washington, D.C. right now that there has been no opportunity to explain the current financial crisis in context. Legislation that has not even been thought through is on the verge of being passed.

Yes, something needs to be done quickly - I understand that. Banks are going to fail. Bad, bad thing.

But here’s where the zeros come in: The basic fact that a movement which began in the 1990s to provide home loans to people who should not have received those loans was suicidal for our economy is being glossed over. When you’re dishing out $200,000+ loans to millions and millions of people who did not qualify for those loans, you are creating a liability figure with a LOT of zeros.

And now that exposure is being offloaded to American taxpayers. The dream of affordable housing has been revealed as taxpayers footing the bill for everyone in the U.S. who could not afford a house.

Maybe a bailout has to happen to secure our economy: I don’t have the expertise to know if that is the only solution. But as the details of the bailout are being debated and incorporated into the pending legislation, we need to keep in mind that at the root of the crisis are loans to a great many people who should not have gotten them, morons in the financial services industry who treated those loans as assets, and government officials who nurtured the hari-kiri economics. It needs to be reported far and wide that that’s why we are in this mess.

If we are about to pass new laws that will fundamentally change the U.S. economy for years to come, we need to be sure the American taxpayers who have played by the rules do not end up footing the bill for those who were chasing ghosts.

And let’s also be sure everyone knows the ghost-chasers, those who made this all happen, include the same Democrats who are now attempting to steer the hastily-crafted legislation.

UPDATE: Check below the fold for informative comment by Blog Fu.

Read the rest of this entry »

President Bush gave a speech tonight trying to tell the people why Congress should “[commit] so much of the taxpayers’ hard-earned money” to purchase “the troubled assets, including mortgage-backed securities, now clogging the financial system.”  (Read the transcript here.)

Never mind how we  got into this mess — the short answer is the socialism of the 1930’s New Deal, which created Fannie Mae.  Now we need to look at the proposed solution.  This is the gist of it:

First, the plan is big enough to solve a serious problem. Under our proposal, the federal government would put up to $700 billion taxpayer dollars on the line to purchase troubled assets that are clogging the financial system.

In the short term, this will free up banks to resume the flow of credit to American families and businesses, and this will help our economy grow.

Second, as markets have lost confidence in mortgage-backed securities, their prices have dropped sharply, yet the value of many of these assets will likely be higher than their current price, because the vast majority of Americans will ultimately pay off their mortgages.

The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal.

Does anyone see the flaw in the plan?  What “taxpayer dollars”?  What “resources”?  We are now nearly 1.0e13 dollars in debt.  Where will the 7.0e9 dollars come from?  You guessed it — more debt.  So if these “troubled assets” were such a good deal, people would buy them instead of the bonds the government must sell to buy these “assets.”

The problem created by socialism, we’re going to fix with socialism.

The word BOHICA comes to mind.

We in Loudoun County are about to get hammered financially in the coming year and years to come. How much is hard to say, but if you take out a copy of your most recent pay stub and mentally subtract a few hundred dollars, that will give you some idea, and if you take out a copy of your most recent mortgage invoice and add a few hundred dollars, that will probably round out the picture.

And where is all that money that was just taken from you going?

Well, in large part it is going to subsidize illegal aliens who bought houses on extremely sketchy terms, as Michelle Malkin reveals today.

Actually, I also have some familiarity with this issue because an acquaintance who was in the mortgage business tried to explain a couple years ago that “something strange is going on” whereby people of dubious documentation and credit were being awarded loans that were never actually paid on, and because of the lag time in bank action they got to live in the house for the better part of a year - and even rent out rooms to make it very cash-positive - before being forced to move and do it all over again. This was confirmed to me in more concrete terms by one of the ladies at the Loudoun Community Association who documented an actual case of this recently.

The other chunk of your money is going to pay for educating the children of illegal immigrants in Loudoun County, as I hinted at in this post and which was confirmed inadvertantly at last night’s public meeting in Sterling. A Loudoun County public school teacher calling for everyone to sing Kumbaya stated that “many of my students have parents who may not have documentation and cannot speak English.” Shortly thereafter, Supervisor York referred to our current $178 million deficit. It was late so I was not inclined to point out the connection, but the connection needs to be spelled out - loudly and clearly and in huge letters: Your real estate taxes are going to skyrocket because Loudoun County has become Northern Virginia’s safe landing zone for illegal aliens. And if you want to know what you are getting for your money … well, don’t think too hard about that.

The Oil Drilling Ban finaly expired today, despite Pelosi’ best efforts.  Nancy got a black eye.  Still in the final analysis, the Democrats managed to step back from the precipice on this one.

“this capitulation by Democrats following months of Republican pressure is a big victory for Americans struggling with record gasoline prices,” said House GOP leader John Boehner of Ohio.

Democrats had clung to the hope of only a partial repeal of the drilling moratorium, but the White House had promised a veto, Obey said.

Just last week, the House passed legislation to open waters off the Atlantic and Pacific coasts to oil and gas drilling but only 50 or more miles out to sea and only if a state agrees to energy development off its shore.

Republicans called that effort a sham that would have left almost 90 percent of offshore reserves effectively off-limits.

Read the rest of this entry »

Facilitator.

From Newsbusters:

The three top campaign donation recipients from Fannie Mae were all Democrats. Chairman of the Senate Banking Committee Senator Chris Dodd (D-CT) got $165,000, Senator Barack Obama (D-IL) was given $126,349, and failed presidential candidate Senator John Kerry (D-MA) took $111,000 from the folks at Fannie Mae…

…So what, you may ask? Well, there is a reason that these Fannie Mae officials donated to Democrats. It was because Democrats continued to stymie Republican efforts to fix these failing lending agencies. Democrats protected these rotten lending practices and the Fannie Mae executives knew who were the sugar daddies that needed greasing.

Read it all.

People speculated - made dumb, greedy decisions - from financial institution executives to homeowners, and are about to be shielded from the consequences of those decisions while those who acted responsibly are going to pick up the tab for many years to come. If you can handle rising blood temperature, go read this excellent, short narrative by Jim Manzi which lays out the history in understandable terms.

What will be essential is that … The ultimate resolution assures that prior investors in these financial institutions and their executives bear very large financial penalties. Irresponsible homeowners should as well. Expect big political battles over the definition of “irresponsible.”

We have all heard repeatedly from Obama these last few days, how the current home lending crisis is the fault of George Bush. While Bush has thrown his own logs onto this fire, Bush cannot be help responsible for the creation of this mess we are in today.

In November of 2003, Allen J. Fishbein, Director For Housing and Credit Policy, Consumer Federation of America, testified before a House subcommittee on the history and the exposure of subprime lending in America. In his testimony, he highlights several key areas :

From Credit Gatekeeper to Credit Peddler — Subprime lending specialists are subjected to less scrutiny than banks and other depository institutions, making this market a fertile ground for predatory lending practices;

Lending without regard to a borrower’s ability to repay. Instead of establishing the borrower’s ability to pay, predators underwrite the property and charge very high origination and other fees that are not related to the risk posed by the borrower.

From 1993-1999, the number of loans reported by subprime specialists increased tenfold from 104,000 subprime refinance loans in 1993 to 1 million in 2000. In 1994 , the $35 billion in subprime mortgages represented less than 5 percent of all mortgage originations. By 2002, subprime lending had increased to $213 billion to 8.6 percent of originations in a high volume refinance year (subprime originations in recent years have represented as much as 13 percent of the mortgage market).

The Fishbein Testimony

How did we get there ? We can begin by taking a look at the reform of the Community Redevelopment Act (CRA) of 1993, by President Bill Clinton. This reform was credited with increasing the number of loans to small businesses and to low and moderate income borrowers for home mortgages. Much of the increase in home loans was made possible by lenders such as Countrywide, who do not offset loan risk exposures with savings deposits as is the case with traditional lenders, such as your corner bank. This created a secondary market for for home loans, and allowed CRA sub-prime loans to flourish. The first securitization of CRA loans began in October 1997, by Bear Sterns.

The door was now open. In the period of 1993-1998, CRA loans grew by 39%, while traditional loans grew by 17%.

White House Press Briefing on CRA Reform

Bush’s contribution to this mess was a rush, early in his administration, to provide the “American Dream” of home ownership to anyone who wanted one, independent of financial qualifications. We know now that this policy has it’s price.

Fannie Mae also played heavily in the sub-prime lending arena, following Bear Sterns, and Lehman Brothers toward financial ruin. As the Washington Post recently reported :

In January 2007, as years of loose mortgage lending were about to send the nation’s housing market into devastating decline, Fannie Mae chief executive Daniel H. Mudd wrote a confidential memo to his board.

Discussing the company’s successes, Mudd said one of Fannie Mae’s achievements in 2006 was expanding its involvement in the market for subprime and other nontraditional mortgages. He called it a step “toward optimizing our business.”

A month later, Fannie Mae outlined plans to further expand its activities in the subprime market. The company recognized the already weak performance of subprime loans but predicted that they would get better in 2007, according to another Fannie Mae document.
.
.
Since then, Fannie Mae’s exposure to loosely underwritten mortgages has produced billions of dollars of losses and sent its stock price plummeting, prompting the federal government to prepare for a potential taxpayer bailout of the company. This month, Fannie Mae reported that loans from 2006 and 2007 accounted for almost 60 percent of its second-quarter credit losses.

Read Story at Washington Post

This prediction missed by an Alaska mile : “that they would get better in 2007″.

Credit must be given to Bush for an attempt to fix this in 2003 :

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
Full Story

Much of Fannie Mae’s problems occurred on the watch of Franklin Raines, Fannie Mae’s CEO.

Mr. Raines, former Clinton Budget Director, currently serves as economic adviser to Barack Obama.

John McCain also discusses Mr. Raines Here

How else can one respond to the government’s takeover of Fannie Mae and Freddie Mac?  I’m sure our resident socialists will be happy (or at least they would be if anyone but Bush had done it), but this is unbelievable.  Where the hell is Bush’s constitutional authority to take over these companies and assume such massive debt?  And even better, according to the LA Times:

Domestic reports indicate that China holds about $376 billion of Fannie and Freddie debt, Cao said, “so if those two companies went bankrupt, with all the securities that China’s central bank and the foreign exchange bureau hold, they could also go bankrupt.”

He said China’s central bank’s capital amounts to just $3 billion to $4 billion, after huge losses from the falling U.S. dollar and housing market. “I believe the central bank will definitely decrease the proportion of dollars” that it holds in the future, Cao said, echoing sentiments across Asia.

Tim Condon, chief Asia economist for ING Financial Markets in Singapore, thinks stock and bond markets in Asia, excluding China, will likely be big beneficiaries of the Fannie-Freddie rescue plan.

All the more reason to let them fail.  China’s purchase of these bonds fueled the bubble, so China should lose when the bubble bursts, not be bailed out by people (U.S. Taxpayers) who have been paying ludicrous prices for housing brought on by cheap debt, never-mind the increased property taxes.  That’s called Capitalism — you places your bets and you takes your chances.

But no, we have to bail out not only the idiots that took out adjustable rate mortgages when interest rates were at all-time lows (where did they think the interest rates were going to go, anyway?), but we also have to bail out the idiots who lent money to people who were taking such loans because they could not afford the higher interest rate of a fixed-rate mortgage.  When failure has no consequences, behavior gets riskier and riskier.  Actually, that’s wrong, because there is no risk anymore!  The risk is taken on by the government (taxpayers)!

I have to say it again: Holy sh!t.

Here’s a simple question for our Socialist/Marxist friends:

Does someone who retires at 65 with $500k in the bank deserve as much government assistance as someone the same age who has worked at minimum wage jobs, 40 hours a week, from the age of 18?

Why or why not?