Fannie mae

Many investors are nervous because of the current
uncertainty in the stock market, and the general lack of liquidity in the
financial markets. Now, however, is NOT the time to sell. There are some unique
buying opportunities in a market that has lost 20% of its value. If you can avoid the herd mentality fueled by
the same type of speculation that caused this crisis, there are good profits to
be gained in the future - if you are prudent and patient. The American economy
is still the strongest in the world. Success from Wall Street to Main Street,
however, may have something to do with who is elected President in 2008.

READ THE ENTIRE OP ED HERE!

Is this the first volley in the October Surprise? 

David Asman of Fox News has put together a scathing, devastating documentary which completely exposes the Democrats' responsibility for destroying our economy including FDR, Lyndon Johnson, Jimmy Carter, Bill Clinton, Chuck Schumer, Barney Frank, Chris Dodd, and yes - Barack Obama, our favorite community organizer who was single-handedly responsible for ACORN forcing banks to lend to unqualified buyers which has now mushroomed into today's economic disaster. 

It's called Saving Our Economy: What'$ Next?   It airs in about 15 minutes, and will air again tonight. Check the link for local time. 

UPDATE:  These videos were taken down from YouTube.  If you didn't have an opportunity to watch this program in its entirety, you'll be able to to see it this coming Saturday, October 11, at 9 pm EST.

Saving Our Economy: What'$ Next?  Part 2, Part 3, Part 4, Part 5, Part 6

Front Page from CT largest's paper, the Hartford Courant

 Crumbling Financial Giants Gave Generously To Dodd

When a Democratic takeover of Congress put Christopher Dodd in charge of the powerful Senate Banking Committee, Connecticut's senior senator eagerly met with reporters, outlining his generally pro-industry positions, but pledging to put consumers — and the long-term health of the economy — first.

"At the end of my tenure on this committee," Dodd said in early 2007, "I want it to be said that the safety and soundness of our financial institutions was not weakened on my watch."

A year and a half later, Dodd acknowledges that the nation's finances are in an "economic maelstrom." And while Washington engages in an urgent search for after-the-fact fixes, there is also plenty of finger-pointing, and there are enduring questions about whether campaign cash — millions and millions in campaign cash — blinded Dodd and other overseers to the excesses of industry........
 

But now, some of Dodd's heartiest patrons have become the poster companies for the Wall Street implosion: AIG Insurance, Lehman Brothers, Merrill Lynch and Bear Stearns. And although Dodd has emerged in recent weeks as a key player in efforts to stabilize the economy, the five-term senator is also facing criticism that he and others in Washington did too little, too late to rein in those generous companies before the crash...........

I'm proud of my chairmanship," Dodd said in an interview Friday. He said he considered himself a pro-consumer lawmaker and said campaign cash plays no role in his thinking.

"It's an ugly system, and I hate it," Dodd said of the campaign-finance game. But he added, "I never have — nor would I ever — let a campaign contribution affect what I care about, what I champion, how I vote, how I hold hearings. Ever."

But although supporters see that as leadership, opponents call it opportunism.

They note, for example, that although Dodd amassed a strong rhetorical record on the housing crisis, it was not until 10 months ago that he introduced legislation aimed squarely at the industry, ....

But by then, the fatal damage was done. Bear Stearns had collapsed six months earlier, and in a matter of weeks after the bill became law, Lehman Brothers limped into bankruptcy court, and the federal government was compelled to bail out insurance firm AIG International and seize mortgage giants Fannie Mae and Freddie Mac.

All of those companies had put substantial money behind Dodd: more than $200,000 from PACs and employees of AIG in the past six years. Another $200,000 from Bear Stearns. And six-figure donations from Lehman and other companies now struggling under bad mortgage debt.

Of course, Dodd defends this record as consistent with his general philosophy

I'm not allergic to business. I'm not hostile at all," Dodd said at a December 2006 press conference as he took control of the Banking Committee.

http://www.courant.com/news/politics/hc-dodd0929.artsep29,0,3321771.story?page=1

Depends what business, Senator. You certaintly were very hostile to the telecommunications industry. Even shutting down the U.S. Senate to filibuster a bill to provide them immunity from lawsuits http://www.thenextright.com/ironman/chutzpahs-reward. Connect the dots , my friends. The Telecoms only donated $22,000 to Dodd last cycle.http://www.opensecrets.org/industries/recips.php?ind=B08&cycle=2004&recipdetail=S&mem=Y&sortorder=U   If you don't ante up, powerful Senators can be very  allergic to your business; especially if plantiff's trial lawyers have put a better bid on the table.

Take a good look at Senator Dodd. These are the people likely to be given carte blanche over our nation's economy in the immediate future---career politicians who are corporate socialists.

 I can only hope then we will be left with a few coins of change after they are done. 

In the excerpts from hearings to investigate Fannie Mae and Freddie Mac's illegal bookkeeping, Rep Richard Baker (R-LA) says "It is indeed a very troubling report, but it is a report of extraordinary importance not only to those who wish to own a home but to the taxpayers of this country who would pay the cost of a clean-up of an enterprise failure. The analysis makes clear that more resources must be brought to bear to ensure the high standards of conduct are not only required, but more importantly, they are actually met."

Rep Maxine Waters (D-CA): "Through nearly a dozen hearings where, frankly, we were trying to fix something that wasn't broke..." [no pun intended there, I'm quite sure]

This is a long video, but well worth the effort. It clearly indicates Republicans attempting to oversee and obtain accountability for Fannie Mae and Freddie Mac, with complete resistance on the part of Democrats. One of the most chilling scenes involves the praise heaped upon the now completely discredited (and sacked) Obama campaign advisor and former Fannie Mae CEO Franklin Raines. When questioned as to why Fannie Mae's capital had fallen below the absolute minum level of 5%, Franklin Raines said "These investments are so riskless that the capital for holding them should be under 2%".

Note: there are already 800 comments on YouTube for this video. As of this post, it's only been up for two days.

The CT press was trying to make sense of the utter collapse of confidence in our financial markets this weekend.

So they went seeking the story from Senate Banking Committee Chairman Chris Dodd, who proceeded to make no sense at all.

  http://www.stamfordadvocate.com/localnews/ci_10580864

http://www.theday.com/re.aspx?re=6170c810-d216-4cf1-af4d-64b821153459

Now Chris has a rather difficult task, since as I was told long ago being honest is easier than being deceitful, since it's hard to keep track of all your prior false statements.

Let's start with this one. 

   At the end of my tenure on this committee, I want it to be said that the safety and soundness of our financial institutions was not weakened on my watch," Dodd said.

While John McCain is rightfully criticizing Barack Obama for his ties to the Freddie Mac and Fannie Mae debacle, he has yet to fess up to his own Freddie/Fannie connections. What gives here?

Does John McCain think we are just too stupid to understand his own duplicity in such matters or is he simply telling us what we want hear, while he will do what is necessary after the election to earn those Freddie/Fannie contributions?

The moral of the story is: Let's have the whole truth, John, and nothing but the truth before you tell us what you would do if elected President.

 It's just the right thing to do.

ex animo

davidfarrar

Free framing/messaging advice for Republicans: don't let Democrats get away with turning this into conventional wisdom...

[I]t is certainly not too soon to look beyond the current crisis to the flaws and fallacies of the anti-regulatory ideology that has held Washington in its grip since the Reagan years and allowed the financial excesses that are now stressing the system to the breaking point.

Every time somebody cries "if only we had regulated!", they need to be asked two questions...

1. What regulation would have prevented this economic problem without creating even greater problems?
2. When, prior to this crisis, did you propose it?

I told you so isn't a very valuable contribution if you did not, in fact, tell us so.

It is particularly dumb to reflexively blame this problem on Republicans, as Nancy Pelos did, or to reflexively assume Democrats must be better, as Paul Krugman does.  Especially when facts like this, from 2003, are readily available...

• "The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago."
• "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."
• "[Representative ] Oxley [and] [Senator] Shelby ... announced their intention to draft legislation... [...] ''The current regulator does not have the tools, or the mandate, to adequately regulate these enterprises,'' Mr. Oxley said at the hearing."  [NOTE: Oxley and Shelby are Republicans]
• "Among the groups denouncing the proposal today were the ... Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing."
• ''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''"
• "[Representative Melvin L. Watt, Democrat] 'I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing.""

Republicans advocated reform, Democrats blocked it.   Then there's this, from 2006.

• "[Fannie Mae and Freddie Mac] are entities that have demonstrated over and over again that they are deeply in need of reform.
• "[T]he report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.
• "I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.  I urge my colleagues to support swift action on this GSE reform legislation."

That quote comes from....John McCain.  Barack Obama did not sign onto the legislation.

The meltdown of Fannie and Freddie should be a transformative moment in American politics. It should discredit the whole Democratic economic agenda. It is too bad that it happened in the middle of the most interesting Presidential election in a generation because there are lessons to learn from it. Several points.

Let's start with some numbers. Contributions since 1989(!) to ALL members of Congress. Note that this is an aggregate over time. Note how a guy who has been in Congress for 3 years manages to come in 3rd on the list.

First, this is a Democratic scandal. In yesterday's WaPo Al Hubbard and Noam Neusner ask "Where was Senator Dodd?" The answer is clear. On the take. Open Secrets notes who gets money from these guys:

Fifteen of the 25 lawmakers who have received the most from the two companies combined since the 1990 election sit on either the House Financial Services Committee; the Senate Banking, Housing & Urban Affairs Committee; or the Senate Finance Committee. The others have seats on the powerful Appropriations or Ways & Means committees, are members of the congressional leadership or have run for president. Sen. Chris Dodd (D-Conn.), chairman of the Senate banking committee, has received the most from Fannie and Freddie's PACs and employees ($133,900 since 1989). Rep. Paul Kanjorski (D-Pa.) has received $65,500. Kanjorski chairs the House Financial Services Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, and Freddie Mac and Fannie Mae are government-sponsored enterprises, or GSEs.

But they miss the important point. The GSEs give to Democrats primarily.

And this is the second point. These are partisan instituttions. Republicans tried to reform it, but got out lobbied every time. Hubbard and Neusner described how this works:

The administration did not accept half-measures. In 2005, Republican Mike Oxley, then chairman of the House Financial Services Committee, brought up a reform bill (H.R. 1461), and Fannie and Freddie's lobbyists set out to weaken it. The bill was rendered so toothless that Card called Oxley the night before markup and promised to oppose it. Oxley pulled the bill instead.

When there was a Republican Congress, Congressional leadership tried to do the right thing, but Fannie and Freddie's lobbyists picked off some weak Republicans. With a Democratic Congress, Fannie and Freddie just feed at the trough.

Third, these guys are some of the most powerful figures in the Democratic lobbyist-operative firmament. Obama was forced to fire James Johnson, his first VP Vetter. Johnson had been CEO of Fannie Mae.  But it doesn't stop there. Johnson, while a consultant for Fannie and Countrywide, was passing out below market loans to Senator Dodd, among others.

The recent CEO of Fannie was Franklin Delano Raines. (what do you bet his parents politics were?) Raines was a Clinton OMB Director and worked in the Carter White House. Raines was replaced with an actual business guy.

Fourth, it doesn't stop there. Not only that, but the affordable housing racket is also used as a way to launder government money into corrupt Democratic voter registration practices. One of the organizations pushing subprime loans and other "affordable housing" financial vehicles... ACORN, which got a sweet deal in the Housing Bill.

What is the upshot of all of this?  The housing meltdown has both causes and effects that are ideologically aligned with Democratic objectives.  While gutting the regulatory apparatus for a huge segment of our economy, leading Democrats were receiving contributions and below market loans from the very people whose regulations their were gutting. It was used to move money into Democratic grassroots campaign vehicles. And it moved substantial parts of the economy into government control. According to financial analyst Barry Richoltz, "socialism for the rich."

This should be a long-term stain on the credibility of Democratic Party's economic management.  Too bad no one has the attention span to notice.

Frequently the media reports something that convinces me they have no clue what principles guide ordinary American voters and have no clue how the economy works.

Such is the case with the alleged "gaffe" Governor Palin made this weekend about the Fannie Mae/Freddie Mac implosion

Here's the breathless headline

Palin makes her first gaffe      

Gov. Sarah Palin made her first potentially major gaffe during her time on the national scene while discussing the developments of the perilous housing market this past weekend.

Speaking before voters in Colorado Springs, the Republican vice presidential nominee claimed that lending giants Fannie Mae and Freddie Mac had "gotten too big and too expensive to the taxpayers."

http://www.huffingtonpost.com/2008/09/08/palin-makes-her-first-gaf_n_124792.html

Only problem here: It wasn't a gaffe

I might actually have some expertise here, as I did legal work for years for a state chartered mortgage fund. Alaska has it's own such agency,  http://www.ahfc.state.ak.us/home/index.cfm?CFID=2233467&CFTOKEN=18106194 and a cursory review would indicate the organization's board of directors are largely Palin appointees. So much for the "rube" angle. I suspect Governor Palin knows a lot more about bonds and finance than Arianna Huffington.

In any event, people who claim Fannie Mae is a "private corporation" forget its ancestry as a federal entity spun off in 1968 http://en.wikipedia.org/wiki/Fannie_Mae. Since then Fannie Mae and Freddie Mac have floated bonds on the tacit understanding that they were the functional equilivalent of US Treasury bonds i.e. default-proof. http://en.wikipedia.org/wiki/Fannie_Mae#cite_note-11    Needless to say, this enable them to make huge profits on arbitrage, as their cost of funds was lower than private sector mortgage poolers, while they could earn market rate on the mortgages they purchased. 

Here's where the problem kicked in. A quasi-public like a state HFA doesn't pay dividends and has to recycle profits back into housing. But Fannie Mae and Freddie Mac had an ability to keep buying loans and do whatever was necessary to drive up the price of their shares so as to enrich their shareholders and investors. Now a regular business has to worry about excessive expansion dlluting credit quality, and provoking S&P or Moody's to downgrade its paper. Then borrowing costs rise , profit margins shrink, and investors demand new sobriety (why the credit raters slept through the credit bubble is another story worth discussing).

But with the implicit federal bond guarantee, Fannie and Freddie could keep buying mortgages of worse and worse quality (and higher nominal yields) since----their credit window wasn;t about to close. And the bigger the loan portfolio and the weaker the underlying instruments, the higher the risk the implicit federal guarantee would be triggered if the bloated portfolio---now swollen by over a trillion dollars in subprime and Alt-A notes---http://www.townhall.com/columnists/LawrenceKudlow/2008/07/15/the_saga_of_fannie_and_freddie?page=2 stopped generating profits..

Federal regulators have seen the possible debacle coming for years. Here is the top federal regulator ,James Lockhart, who called the need for GSE reform "urgent" in 2006 

http://thehill.com/op-eds/fix-fiascos-at-fannie-mae-freddie-mac-2006-12-05.html

Why is reform necessary? The story of Fannie Mae’s and Freddie Mac’s unconstrained growth, earnings manipulation, accounting problems and gross mismanagement has been well-reported. It has cost shareholders tens of billions in market value, fines, and expenses to fix the problems; and in turn, shareholders have sued for billions of dollars. Despite being NYSE-listed companies, Fannie and Freddie will not file current quarterly financial reports until sometime next year at the earliest. It will take several years to truly fix all of their problems.

Of course, causing the GSE's to behave like responsible, accountable businesses was anathema to their executives, who sought out critics for punishment http://online.wsj.com/article/SB121677050160675397.html?mod=opinion_main_commentaries

The response of the Dinosaur Democrats in DC-(already owned and operated by the GSE's)http://www.opensecrets.org/news/2008/07/top-senate-recipients-of-fanni.html --?

use Fannie Mae and Freddie Mac as the vehcles to bail out Countrywide Financial  http://www.freedomworks.org/newsroom/press_template.php?press_id=2595  and provide a slush fund to ACORN  http://online.wsj.com/article/SB121702734269186275.html?mod=opinion_main_commentaries!!!!!!

The Wall Street Journal wrote at the time 

  "Fannie and Freddie are being encouraged to head for the deep end of the pool even as we wring our hands about their ability to swim." http://online.wsj.com/article/SB121702734269186275.html?mod=opinion_main_commentaries

And much as I predicted at the time, they drowned, even before assuming the ballast from the failed subprime lenders. 

The American public are starting to realize that the incompetence, inattentiveness and incestuous relationship between the career politicians running Congress and the GSE leadership will cost ordinary working stiffs close to $200 Billion. Perhaps the alternative was to revisit 1929, but that hardly makes this pill any less bitter to swallow, especially knowing the mess was years in the making.

Ken Lay insisted Enron wasn;t going to fail and died before he faced justice. How was Chris Dodd's false assurances of Fannie Mae's solvency any different?

News Flash to Huffington Post: the Hockey Mom knows the score of this game, and she's going to get folks out of the stands to put the responsible parties into the penalty box.  http://www.johnmccain.com/informing/news/newsreleases/4970ae86-e715-4781-9c94-0ea85dcb4d5f.htm

and another news flash to the DC establishment; There's not enough lipstick in North America to make the pig you fattened look any damm good.