And So I Go: Yesterday, Today and Tomorrow

Posts Tagged ‘Bail out 2008

Democrats on path to repeat housing disaster | Washington Examiner

While we are all concerned with the Dems killing us with a massive health care reform bill after this disasters of the Bail Out, Stimulus Plan, Cash for Clunkers and who knows what else the Democrats are working overtime behind the scenes to give us another Financial Crisis!   This is what I mean by “who knows what else”  because there is so much going on  under the table and in the cloak rooms of Congress, and with the very same players who had been involved the first time around.

…..Democratic majorities are pressing hard to expand some of the very policies that led to the reckless home lending that in turn helped lead to the great financial meltdown. If Chairman Barney Frank and his fellow Democrats have their way, we’ll do it all again — and more.

At issue last week was H.R. 1479, the Community Reinvestment Modernization Act of 2009, sponsored by Democratic Rep. Eddie Bernice Johnson. It would expand and strengthen the 1977 Community Reinvestment Act, which required banks to make loans in low-income areas that many lenders had traditionally shunned.

After the meltdown, some conservatives blamed the CRA for almost solely causing the crisis by requiring banks to make risky loans to unqualified borrowers. It was an unfair charge. “CRA had at best an incremental role in the U.S. housing debacle,” says J.D. Foster, an economist at the Heritage Foundation. But CRA did help create the conditions in which disaster could occur.

So the 1977 Community Reinvestment Plan did not create the problem and in many cases when used wisely it did help cities revitalize slum areas into viable living/commercial areas.  Cities used the loans and grants available thru CRA to build public housing and low income housing  that is true but buyers had to qualify for the purchase of these units.  It was only when politicians began putting pressure on the officials to “do more” that problems arose.

The problems began in the 1990s, when Congress made it harder for lenders to do business if they had not passed the CRA “exam” — that is, if they had not met the government-imposed standards for loans to low- and moderate-income borrowers.

“From 1995 on, there was an incredible push by the Clinton and Bush administrations in every way they could — CRA, Fannie Mae, Freddie Mac, and other ways — to increase the homeownership rate,” says Russell Roberts, a professor of economics at George Mason University. “What that did was to push up the price of housing, and that made it imaginable to lend money to people you never would have lent money to, on terms you wouldn’t have done before.”

In particular, Fannie Mae began to aggressively promote homeownership using the Community Reinvestment Act to give loans to people who couldn’t afford them. Fannie went to bankers and said, make as many CRA loans as you can; we’ll buy them and take them off your hands. “Our approach to our lenders is ‘CRA Your Way,’ ” top Fannie executive Jamie Gorelick told the Mortgage Bankers Association in 2001. “Fannie Mae will buy CRA loans from lenders’ portfolios; we’ll package them into securities; we’ll purchase CRA mortgages at the point of origination. …”

Fannie promised to buy billions and billions of dollars worth of CRA loans because it was under pressure to do so from the Department of Housing and Urban Development, which in turn was under pressure from Congress, which set ambitious quotas for low- and moderate-income loans.

The policy ended in a lot of people losing their homes.

People were given these low rate interest loans with ARM adjustable Rate Mortgages.  With the promise from lenders that their homes value would rise and they would then be able to refinance their loans and still keep the payments low enough for them to make.  Then the ARM’s began coming due and people were not able to refinance leading to the foreclosures and eventually to the collapse of the housing markets where home values were in many cases far less that the mortgage on them (under water).

In the meantime the banks were bundling all these mortgages together and selling them to Fannie and Freddie.  But before selling to Fannie and Freddie they did a musical chairs thing where they sold the bundles to each other with each buyer adding a profit to the top and selling them again in a game called Derivatives.  In the original mortgages the property itself is the collateral, meaning if the buyer can’t pay the  mortgage holder get the property in place of money.  In the musical chairs derivatives game the mortgages in the bundles   have no solid hold in your hand value.  Derivatives only value is the gamble that the buyer will pay for the property,  it is in other words based on nothing.  And like in musical chairs the buyer of the derivatives who gets caught when there are no longer any chairs left (when the market crashes) gets caught holding a worthless bag or bundled mortgages on foreclosed and devalued homes/properties.

So what is happening now that the tax payers have been forced to buy these  game players out?   Congress is setting things up so that round two can begin!  But they are broadening the player base by getting more financial institutions involved and therefore more properties sold.  Now couple that with the federal government’s $8500 tax credit allowing people to buy a home with absolutely nothing down as the tax credit can be used for the down-payment.  Or, as many are doing: using the  minimum amount for the down payment and the rest of the tax credit to purchase what ever else the new home buyers may want to spend it on.  (A tax credit for those of you who may not understand is a promise of payment from the government.  A person’s income tax is figured and what they owe is deducted from the “credit” and then the government sends them a check for the rest.  It is NOT money they over paid in income taxes as is the normal tax refund.)

Republicans on the Financial Services Committee strongly oppose the plan. “Instead of looking to expand the number of institutions that must abide by CRA regulations, I think we should reassess the role this and other government mandates played in the financial collapse and consider scaling it back,” California Rep. Ed Royce said at the hearing.

In private conversation, other Republicans were more emphatic. “There is clearly arguable evidence that the CRA is at the root of this financial meltdown,” said one GOP committee member. “So what do they do? They try to expand CRA.”

That’s an overstatement of CRA’s role in the housing mess, but it’s right about the Democratic plan. Denying that CRA, Fannie and other institutions played any role in setting the stage for disaster, they’re proposing more of what helped get us into trouble in the first place. It’s no way to fix the problem.

The bottom line is that if you were planning to buy a home this is certainly a good time to do it because prices are still very low and the government is giving you a nice chunk of change  AND regardless of your ability to pay the  Rep. Barney Franks in our Congress is making sure there is some financial institution out there who will give you a mortgage.

Oh, and one more point: President Obama is going to the United Nations and vowing to the world that never again will the United States have a financial melt down because he is seeing to financial reforms that will put “restraints” on financial institutions.     Who knows maybe he is sincere and really doesn’t know any of this is happening just like he really didn’t know ACORN was “getting a bunch of money” from the government.  BB

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Bankers Face Sweeping Curbs on Pay – WSJ.com

While the Congress needs to keep a closer watch on the Federal Reserve  it seems they want the Federal Reserve to keep a closer watch on banks.  You will recall that the Constitution gives Congress the power to regulate and print money.  Congress gave this power to a private company called the Federal Reserve.   The financial crisis we are still hurling thru was caused because the Congress did not keep adequate watch over the Federal Reserve and encouraged Fannie Mae and Freddie Mac (at that time private companies now taken over by the government) to make unsound  mortgage loans to people who couldn’t afford them.  We can thank Rep Barney Frank of the House Finance Committee and Senator Dodd of the Senate Banking Committee for that.  They not only did not enforce the rules against much that the Fed and the banks were doing but they actually encouraged the bad banking practices that lead to the ultimate break down.  Now it is an open secret that Wall Street has returned to the very lucrative practices of dealing in derivatives that got the country into the mess, and again nothing is being done.  But something is being proposed:  Again Congress is secretly trying to pass on its duties  of supervising the Fed off on little clerks in windowless little offices while  making loud noises about “reining in the Fed!”  (just Washington as usual covering their buns while keeping their fingers in the pie so they too can pull out a plum or two):

The Fed’s plan would, for the first time, inject government regulators deep into compensation decisions traditionally reserved for the banks’ corporate boards and executives.

[average wall street bonuses]

Under the proposal, the Fed could reject any compensation policies it believes encourage bank employees — from chief executives, to traders, to loan officers — to take too much risk. Bureaucrats wouldn’t set the pay of individuals, but would review and, if necessary, amend each bank’s salary and bonus policies to make sure they don’t create harmful incentives.

A final proposal is still a few weeks from completion and could be revised along the way, according to people familiar with the matter. It requires a vote by the central bank’s board, but no congressional approval.

The U.S.’s largest banks, about 25 in number, would get especially close scrutiny. The central bank intends to compare these banks as a group to see if any practices stand out as unusually dangerous to their firms.

The Fed’s latest move marks another striking exertion of power by the nation’s central bank since the financial crisis struck with ferocity two years ago. It has bailed out firms such as  American International Group Inc. (AIG) and has flooded the financial system with money.The Fed itself believes it has the legal authority to take such action through its existing supervisory powers, which are designed to oversee a bank’s soundness.

Taxpayers face heavy losses on auto bailout – Yahoo! News

My regular readers will remember well I am sure the two weeks I spent keeping them informed on the Bail Out  Bill proceedings and screaming my fool head off with tens of thousands of other Americans NOT to pass the TARP Bill.    It was a huge mistake that the Wall Street gangsters  with their man  in place as Treasury Secretary Paulson scammed President Bush into  backing.  Both McCain and Obama endorsed and  voted for the bill also.

After Obama took office he put his own Wall Street gamester and tax cheat Geithner in full charge of passing out the money.  (Then he added a TARP (Bail Out) Czar to help Geithner  pass out the bucks because even using both hands and asking no questions to any of the hands being held out for their fair share Geithner couldn’t shell out fast enough!)

The TARP fund is still about 70% intact and congress can do the right thing and stop it right here, but don’t hold your breath.  After all, one of the aims of this Administration and Dem. Congress is to swamp the Americans with a debt they can not possibly repay.   They are even admitting this and calling it an “unsustainable debt” meaning at some point all the taxes paid from a nation being wrung dry will not even be able to pay the interest on the debt. And they further  have the  gall to tell us what a failure the program is and STILL DO NOTHING!

WASHINGTON – Taxpayers face losses on a significant portion of the $81 billion in government aid provided to the auto industry, an oversight panel said in a report to be released Wednesday.

The Congressional Oversight Panel did not provide an estimate of the projected loss in its latest monthly report on the $700 billion Troubled Asset Relief Program. But it said most of the $23 billion initially provided to General Motors Corp. and Chrysler LLC late last year is unlikely to be repaid.

The prospect of recovering the government’s assistance to GM and Chrysler is heavily dependent on shares of the two companies rising to unprecedented levels, the report said. The government owns 10 percent of Chrysler and 61 percent of GM. The two companies are currently private but are expected to issue stock, in GM’s case by next year.

The shares “will have to appreciate sharply” for taxpayers to get their money back, the report said.    For example, GM’s market value would have to reach $67.6 billion, the report said, a “highly optimistic” estimate and more than the $57.2 billion GM was worth at the height of its share value in April 2008. And in the case of Chrysler, about $5.4 billion of the $14.3 billion provided to the company is “highly unlikely” to ever be repaid, the panel said.

The Congressional Oversight Panel was created as part of the Troubled Asset Relief Program, or TARP. It is designed to provide an additional layer of oversight, beyond the Special Inspector General for the TARP and regular audits by the Government Accountability Office.

The panel’s report recommends that the Treasury Department consider placing its auto company holdings into an independent trust, to avoid any “conflicts of interest.”

The report also recommends the department perform a legal analysis of its decision to provide TARP funds to GM and Chrysler, their financing arms and many auto parts suppliers. Some critics say the law creating TARP didn’t allow for such funding.

Other agencies have also projected large losses on the loans and investments provided to the industry. The Congressional Budget Office estimated in June that taxpayers would lose about $40 billion of the first $55 billion in aid.

Washington Times – BURMAN: Catastrophic budget failure

With Congress going back to Washington and continuing the debate over the Cap and Trade Bill and Health Care Reform  we the people need to be reminded of why we had the Tea Party rallies and  Townhall revolts and we certainly need to keep the pressure on  so this Congress DOES NOT PASS EITHER ONE OF THESE BILLS.  AND WHILE THEY ARE AT IT THEY SHOULD TAKE BACK THE STIMULUS AND TARP MONEY NOT ALREADY SPENT SINCE BOTH PROGRAMS HAVE PROVED A FAILURE.

With this in mind I copied most of this article right here because I want you to read it carefully.  Then keep sending emails, making phone calls and going to any rallies anywhere near you.  The Democrats are running scared but their leadership is in a defiant mode and just may sway those more moderate Democrats  if we let them forget how we the people feel.

The Congressional Budget Office (CBO) , famous for understatement, concludes that “current policies are unsustainable.” This is true whether it looks at the Obama administration’s official budget or a future in which all of the Bush tax cuts expire and the middle class gets swallowed by the alternative minimum tax. What CBO means is, either way, we are doomed.

Here’s what CBO predicts will happen if we continue current policies:

Next year, our debt will exceed 60 percent of our total economic output, or gross domestic product (GDP). We would not meet the standards Poland and Estonia needed to qualify for admission into the European Union.

In 2023, our debt will exceed 100 percent of GDP – the highest level since World War II ended.

By 2076, debt will be more than 6.5 times GDP. Put differently, with current policies, there’s no chance that children born today will get much of their promised Social Security and Medicare benefits.

The really bad news? This bleak scenario is wildly over-optimistic. It assumes that the economy keeps growing at historical rates, and interest rates on government bonds stay low.

But neither is likely to happen. As CBO says, parenthetically, “Starting in the 2060s, projected deficits become so large and unsustainable that CBO’s textbook growth model cannot calculate their effects.”

Translation: We’re heading over a cliff!

CBO’s projections assume that interest rates will stay low. But with these massive deficits, rates will eventually rise to reflect the growing riskiness of government bonds. Berkeley economist David Romer has shown that investors may, overnight, go from being willing to lend to the government at low rates to being afraid to hold T-bills at any price. If this happens, the rise in rates could be extreme – not just a percentage point or two.

Can’t happen? It was just a few months ago when exactly the same fate befell highly rated corporate bonds. Suppose the Treasury held an auction and nobody came?

Ideally, this dismal situation will be averted. Investors should look at the CBO report and demand higher interest rates right now, and progressively steeper rates in the future if our fiscal house is not put in order. This would put pressure on policymakers to cut deficits.

Unfortunately, there are two problems with this self-correcting scenario. First, it might choke off a nascent recovery. Second, it assumes financial markets are rational and foresighted. Yeah, right. And remember much of our debt is held by foreigners whose cash fuels our purchases of their oil and consumer goods. They’ll keep lending – at least for a while – to prop up their own economies.

When the bubble bursts, two things could happen, both bad. One is that the U.S. defaults on its bonds. This would cripple financial institutions that are legally required to hold government securities and create a foreign policy fiasco since other governments hold so much of our debt.

Or, we could print money to pay back the bonds coming due. This creates inflation – a lot of inflation. Think Weimar Republic or Argentina. (CBO helpfully points out that hyperinflation is economically inefficient since it drives people to barter.)

At the same time, the government would have no choice but to slash spending and raise taxes. This, plus very high interest rates, would drive the U.S. and world economies into a depression that could span decades – dwarfing today’s painful downturn.

Taxes would rise to levels that would make a Scandinavian revolt. And the government would not be able to provide anything but the most basic public services. We would no longer be a great power (or even a mediocre one), and the social safety net would evaporate.

We can still avoid this disaster, but we need to act quickly. The sooner we move to reduce our deficits, the smaller the required tax increases and/or spending cuts will be. The reason is straightforward: The less debt we accumulate, the smaller our interest payments. On our current trajectory, CBO projects that by 2031, interest on the debt will cost more than Social Security. And, again, that assumes implausibly low interest rates.

So, after Mr. Elmendorf finishes explaining why our current policies are disastrous,. I’d like all of the Senate Budget Committee members to say what they plan to do about it If they answer “cut wasteful government spending” or “tax people making over $250,000,”    (THAT WON’T DO IT!  BB) Mr. Elmendorf should remind them that we’d have to cut government spending or increase taxes by an average of 8.2 percent of GDP over the next 75 years to prevent the debt from increasing – and more if we continue to defer action. That sum equals all discretionary spending, including national defense, or all income tax collections in 2008. Cutting waste or taxing rich people alone isn’t enough.

It’s time to make some hard choices. Or we’re doomed.

• Leonard Burman is an Institute Fellow at the Urban Institute and director of the Tax Policy Center.

I simply can not understand how anyone can look at the figures and continue to insist on more government programs!  I am totally baffled by the attitude of the Democrats in
Congress.  These are not stupid people  so how can they continue on the course they are taking when every economist in the country is telling them we can not sustain the debt.  Pass an enormously expensive health care bill in 2009 so that the entire country will go bankrupt and lose everything before 2040.  And I do mean EVERYTHING.  The government will be busted and the people will all be on their own with nothing: no Social Security, no Medicare or Medicaid, no welfare programs to help the needy, no pension plans from companies because companies will have already gone bankrupt or fled the country,  no federal pension insurance for these companies because the companies have never put in the money required by the program and the government has not enforced the rules and made the companies pay into the guaranteed pension plan,  no federal employees pensions.  No jobs, no food, nothing at all.  The country stopped dead.

We have seen this happen to other countries, the most notable being the Soviet Union.  Anarchy ruled and the criminals ran wild.  Russia has always been a secretive country so little information got out as to how the people survived this period.  The rest of the world  governments helped the Soviet government  and the discovery  of the huge oil deposits finally pulled the country out of  the depths of depression.  But since the United States is the largest and strongest economy in the world when we go under there won’t be anyone to help us recover.  For decades now the countries of the world have held up the dollar and our economy so we would buy their products and build their economy.  However at a certain point our debt to these countries will be so great that we will no longer be able to pay the interest on our indebtedness (we never pay anything but the interest on our loans!)  And when we stop paying the interest on our debts the countries who depend on money from the United States will also fail.   If we are fortunate it will only be decades of suffering under a desperate depression; an entire generation of our grandchildren   will be left to suffer for our folly today.

There is one other possible solution:  it’s called war.  A nice long war  will  jump start the economy.  Instead of cars the companies will produce tanks and planes and ammunition.  In fact all business will go into hyper drive to supply the war effort.  Jobs will be plentiful and money will flow into people pockets and into the Treasury.  Governments have used war  to cover for their mistakes as long as there have been governments.  Either way the people, you and I, pay the price.  Not the elected representatives of the people, never them.  Because they and theirs never go to war and they have been amassing wealth for the decades the leaders who are spearheading this  stampede over the cliff have been in congress.   Rep. Barney Frank who as Chairman of the House Finance committee  is the most powerful man in Washington today because he controls the purse strings will probably suffer too since all the young men will be in uniform fighting the war he helped bring about.    BB

I have been a sometimes fan of Gerald Celente for years.  I say sometimes because he deals mainly in economic trends and predictions and I don’t have the money to invest anyhow,  but I like to check in every once in awhile.  He has been remarkably accurate in his predictions!  You can go to his site if you want more information, or you can take the Old Broad’s word for it :).

I am posting his predictions for my readers on my site today because what he is saying is not just financial trends that the big investors need to know, but how the financial trends are going to affect us:  you and me and our kids.  The things that are going to happen because of what our government has done and will be doing in the future.  He calls it Obamageddon.   This is serious stuff.

My first video however goes back to  to 2001  and is a reminder of how the  Financial Crisis 2oo8 got started and how, why and who started it, or let it happen.  We need to know that this situation was set up and allowed to develop and to know who in congress allowed it.  We need to know the face of the enemy so that we can continue to watch their future actions  in aiding and abetting the predictions that Celente makes.BB

Timeline shows Bush, McCain warning Dems of financial and housing crisis; meltdown

Gerald Celente on Fox News - Obamageddon is coming - 7-5-09Gerald Celente - 2009 Outlook' Worst economic collapse ever'Gerald Celente - 2009 OutlookUS continues to print dollars from thin air - RT 02 Jul 09The Dollar Will Become Worthless - Gerald Celente

Ever wonder how we as a nation got to the place we find ourselves now?  These videos were made in 1983 of a former KGB agent who deflected to America and may very well explain our current situation.  It does to me, at least.  I have lived it and watched this take place step by step and was concerned and upset but never thought of what was taking place in America as planned.  Of course I didn’t know Yuri Bezmenov then nor  had I heard him speak until I found these videos on line just this year.  Listen and learn.  Chilling!  BB

If you want more information on this or other topics please check my special pages at the top right hand side of my blog site. BB

Yuri Bezmenov, Former KGB agent on bringing Communism to America

Give me the right to issue and control a nation’s money and I care not who governs the country.” –Mayer Amschel Rothschild

I truly believe Federal Reserve Chairman Bernanke and Secretary of the Treasury Paulson scammed President Bush  into the Bail Out of September and October of 2008.  I do not however believe that President Obama was scammed as I believe he was and is part of this ploy to destroy the national banks around the world so as to form a one world monetary system.

Bernanke is at it again because the first Bail Out didn’t go far enough.  I guess too many independent little bankers around the world  stood up to the movers and shakers in time to save themselves.

Federal Reserve Chairman Ben Bernanke has launched a “more aggressive” campaign to defend the Fed’s efforts to prop up the U.S. economy.

But may members of Congress are not buying what Bernanke is trying to sell.  At a recent hearing, Ron Paul absolutely blasted Bernanke and made this stunning statement to him: “The Federal Reserve in collaboration with the giant banks has created the greatest financial crisis the world has ever seen.”

According to a new report, many of the large banks that got federal aid to support increased lending have instead used the money to make investments, repay debts or buy other banks.

Thanks to:  The Most Important News Daily

A video you really need to watch.  This is what the Federal Reserve can do to you.

The Judge Rules: The Feds Committed Extortion!Andrew Napolitano: The Verdict on Obama's Insane Financial Overhaul Plan


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