Pin the Tail on the Donkey

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Permalink Reply by Sandy Cope on December 8, 2008 at 1:29pm

Teriffic article George- I read the AP article yesterday. My immediate thought was the same as yours. The MSM, high on their major role in electing the incoming president, will make every effort possible to blame the Republicans and Bush for the economic "meltdown." To begin their article with saying that some tickets to a baseball game had such an enourmous influence on anyone was ludicrous. Kanjorski (D) PA is that crooked no doubt, but I can't believe he would be so enthralled with baseball tickets to become complicit in a scheme. I don't even know what position he has in the House, but I don't ever remember him ever being vocal about anything. Is he a sacrifical lamb for the Libs? Then they name some other names, that are so meaningless, it is laughable. Whatever could Frank Luntz (from Luntzes dunces) have to do with Freddie and Fannie disaster. Yet, it is notable that Barney Frank, Chris Dodd and as in the IBD piece Carper are never mentioned.

Any article that makes statements like "based on confidential documents"-"unnamed sources" and "spoke on condition of annominity" has no credibility. By the way I read a few weeks ago that many, and some major newspapers are cancelling their contracts with the AP. They cite financial reasons, but it more likely has to do with picking up false, unfactual, unauthorized and deceptive articles written by a crew of anything but journalists, who are there just to spew their partisan political personal opinions.

It has long been the gripe of those of us in the party that we have had no leadership in our R elected officials. McCain started out saying that he would name names with respect to the Democrats at fault for the meltdown, however, he never did. He could have owned the winning end of the entire mess had he had the you know what's to take it on the road. He may even have had the presidency. There are so few in the Senate and House who are willing to stand up and do the right thing in pointing the finger right at who is at fault. If some R doesn't start doing this soon, we will be in the wilderness for a long time.

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Permalink Reply by George Daily on December 8, 2008 at 3:23pm

You're right on, Sandy. I'd like to get some feedback from the VRP and RNC about this issue. There really should be a major public relations campaign going now. Why isn't there? Does anyone know?

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Permalink Reply by George Daily on December 9, 2008 at 5:34am

Roger Neal said:

Why is no one holding Franklin Raine's feet to the fire for the meltdown of the mortgage industry and Fannie May's complicity during said meltdown? Ninety million dollars in compensation for a completely inept oversight of what is ultimately taxpayer dollars is not only extravagant, but outright thievery in my opinion. And why didn't anyone from either side of the fence notice the red flags that were popping up all over the place better than three years ago when foreclosures started to skyrocket?

I'm going to openly admit that I am vehemently against bailing out any private institutions that have suffered a fiscal implosion due to mismanagement and "creative bookkeeping" tactics. That would include THE BIG THREE.

Sorry......sometimes I feel an overwhelming compulsion to simply vent.

We now return you to your regularly scheduled program, already in progress.

Roger

The "red flags" were noticed. Here's a link to a YouTube video of a Fox News report that summarizes the the events fairly well.

http://www.youtube.com/watch?v=gzEIMco49AE

I probably have links to a dozen articles documenting this disaster. I've been researching it for months. It comes down to this; Democrats, including Barney Frank, Chris Dodd and Chuck Schumer protected the former Clinton Administration officials then running Fannie Mae and Freddie Mac and lobbied them to relax mortgage underwriting standards to appease low-income and minority "community groups" like ACORN in exchange for votes and campaign work, such as fradulent voter registration drives. This compromised the entire mortgage industry, created the "housing bubble", the "subprime crisis" and eventually, a worldwide "Financial Melt Down."

Democrats and useful allies in the media are trying to lay the blame on "Reaganomics", "Republican de-regulation", "eight years of Bush policy" and so on. The fact is that this is the biggest political scandal in history and Democrats have their fingerprints all over it. For some reason I don't understand, Republicans aren't telling the people.

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Permalink Reply by Brad Smith on December 9, 2008 at 10:22am

Certainly, this entire situation wouldn't be nearly as bad if Freddie and Fannie had not been allowed to run riot. These two monstrosities leveraged their ability to borrow from the government at rates far below anyone else could get money to increase the size of their portfolios and create an artificial secondary market for sub-prime securities. However, there's plenty of blame to spread.

Regulation isn't a binary argument, there is a necessary role that the government plays in market coercion. Of course we're "haggling over the price" because there are good ways to regulate (e.g. market transparency which produces rational action) and bad ways to regulate (e.g. controls which break the natural pricing mechanism). I'll illustrate by walking you through the anatomy of a "bear raid" which encapsulates what happened at most of the investment banks.

Say I have a lot of cash and want to wreck someone like Lehman Brothers so I can make short money. The first thing I do is run around buying up CDS contracts on their debt, which I can do undetected pretty much because of the Commodity Futures Modernization Act which essentially ensures that CDS contracts and other forms of derivatives remain unregulated (BAD deregulation - interference with market transparency). Now, the word gets out that their debt is getting harder and harder to insure because the more contracts I buy up the higher the price goes, so the other guys out there trying to buy insurance on the debt begin to take notice. This in turn filters back to the rating agencies who begin to flip out and consider a downgrade. Rumors start to fly that somehow Lehman debt is unstable. Voila - by artificially increasing the price of the debt contracts I've been about to create the illusion of risk because of lack of transparency. Now I can begin my short selling in earnest because of Naked Short Selling (SEC regulatory failure) and the lack of an Uptick Rule (BAD deregulation/SEC failure). To put this in plain english, I don't even have to borrow the shares or wait for an uptick in price to short, I can just place unlimited sell orders due to bad deregulation messing with the natural pricing model effecting the security. The downward pressure on the share price combined with the greatly increased cost to insure the debt makes the ratings agencies freak out and downgrade the companies debt, so now I've just compounded both factors. Now I've created a serious situation because Lehman is sitting there levered at about 30:1 and created a scenario where Lehman has to go to the capital market to raise cash right after their debt has been downgraded and their share price has tanked.

Phew. That's a whole lot of bad deregulation and lack of enforcement isn't it? Let's look at one factor on the flip side, which is Mark-To-Market accounting. FAS 157 is essentially an overreaction to the Enron situation (BAD regulation) which is a one-size-fits-all rule that states that you have to mark assets on your books to the approximate value of what you could get on the open market. So, if you're holding a CDO and the underlying mortgages are performing BUT the market for that instrument on the open market is .20 on the dollar you have to mark down that asset on your books to .20 on the dollar which forces you to take a huge paper loss and increases your liquidity requirement, which helps lead to the situation I described above, even if the value of the underlying security would be much, much higher were it simply just allowed to mature (the mortgages). You can see how this regulation works brilliantly for liquid assets for which there is a vibrant market but fails miserably for illiquid assets which don't get traded very often. So, a well-intentioned regulation ends up greatly contributing to a companies distress.

The point is that you need to be careful how you go about regulation. Regulations which increase market transparency to level the playing field are generally good (although sometimes, like mark-to-market, where the intent is to increase transparency to the investor by not allowing a company to inflate values backfires). Deregulation which makes it possible to artificially interfere with the pricing mechanism is generally bad.

I guess what I'm trying to say is that we should be careful when we point fingers. There were a whole lot of clueless and greedy people who contributed to this mess, Republicans and Democrats alike.

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Permalink Reply by George Daily on December 9, 2008 at 11:58am

Brad Smith said:

Certainly, this entire situation wouldn't be nearly as bad if Freddie and Fannie had not been allowed to run riot.

I guess what I'm trying to say is that we should be careful when we point fingers. There were a whole lot of clueless and greedy people who contributed to this mess, Republicans and Democrats alike.

Brad,

My point is that there is one, single, absolutely necessary element of the whole mess that had to exist and without which this disaster could not have reached the magnitude it has. That element is the debasement of mortgage underwriting and credit standards by Fannie Mae and Freddie Mac. All the derivatives depended on the soundness of the mortgages.

To say that there was bad regulation, no regulation, SEC regulatory failure, Sarbanes-Oxley, greed and incompetence is to say that even though the Democrats mugged the economy and the financial system the cops are partly to blame. This argument, though I understand it, does not persuade me.

Moreover, I believe that anyone, Republican (especially) or Democrat that lobbied Fannie or Freddie to drop lending standards should not hold any position of power or authority. I just can't find any Republicans to name.

I do not contend that appropriate regulation would not have mitigated the problem or that it isn't necessary in the future. So, I don't disagree with you there. I do contend that anyone with an IQ equal to their age must certainly know that making trillions of dollars in mortgages to people without the means to repay those loans is probably not a wise course.

BTW, in his opening statement at the hearing today in the House Oversight and Government Reform Commitee, Rep. Issa called for an independent investigation into the role of government in the financial crisis. Waxman did not look pleased.

Obviously, I'm wound up on this matter and believe I know what I'm writing about. If my facts are wrong, please let me know.

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Permalink Reply by Brad Smith on December 9, 2008 at 1:16pm

George Daily said:

Brad,

My point is that there is one, single, absolutely necessary element of the whole mess that had to exist and without which this disaster could not have reached the magnitude it has. That element is the debasement of mortgage underwriting and credit standards by Fannie Mae and Freddie Mac. All the derivatives depended on the soundness of the mortgages.

To say that there was bad regulation, no regulation, SEC regulatory failure, Sarbanes-Oxley, greed and incompetence is to say that even though the Democrats mugged the economy and the financial system the cops are partly to blame. This argument, though I understand it, does not persuade me.

Moreover, I believe that anyone, Republican (especially) or Democrat that lobbied Fannie or Freddie to drop lending standards should not hold any position of power or authority. I just can't find any Republicans to name.

I do not contend that appropriate regulation would not have mitigated the problem or that it isn't necessary in the future. So, I don't disagree with you there. I do contend that anyone with an IQ equal to their age must certainly know that making trillions of dollars in mortgages to people without the means to repay those loans is probably not a wise course.

BTW, in his opening statement at the hearing today in the House Oversight and Government Reform Commitee, Rep. Issa called for an independent investigation into the role of government in the financial crisis. Waxman did not look pleased.

Obviously, I'm wound up on this matter and believe I know what I'm writing about. If my facts are wrong, please let me know.
George,

We agree 100% about Freddie and Fannie.

If you want to find some Republicans to name, you can start with the 29 Republican Senators who refused to sign Chuck Hagel's letter back in 2005 begging (then) Majority Leader Frist to allow his reform legislation to come up for a vote. Lamar Alexander, Olympia Snowe, Christopher Bond, and Mitch McConnell all fall into this category (Although Mitch gets a pass because Senate leadership doesn't generally sign correspondence going to the leader, and he was the whip at the time).

I'm angry at the Libs who mugged the system. I'm angry at the regulatory cops who were blissfully asleep with doughnuts stuffed in their mouths. I'm even angrier at these so-called Republicans who sold out our conservative principles and looked the other way when they had a chance to do something about it.

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Permalink Reply by George Daily on December 10, 2008 at 6:50am

Brad Smith said:

George Daily said:

Brad,

I believe that anyone, Republican (especially) or Democrat that lobbied Fannie or Freddie to drop lending standards should not hold any position of power or authority. I just can't find any Republicans to name.


George,

We agree 100% about Freddie and Fannie.

If you want to find some Republicans to name, you can start with the 29 Republican Senators who refused to sign Chuck Hagel's letter back in 2005 begging (then) Majority Leader Frist to allow his reform legislation to come up for a vote. Lamar Alexander, Olympia Snowe, Christopher Bond, and Mitch McConnell all fall into this category (Although Mitch gets a pass because Senate leadership doesn't generally sign correspondence going to the leader, and he was the whip at the time).

I'm angry at the Libs who mugged the system. I'm angry at the regulatory cops who were blissfully asleep with doughnuts stuffed in their mouths. I'm even angrier at these so-called Republicans who sold out our conservative principles and looked the other way when they had a chance to do something about it.

Brad,

The 2005 legislation passed in the House but was unamiously opposed by Democrats in the Senate Banking Committee. For the lack of any Democrat support a political judgement not to bring the bill to a vote because the votes weren't there is a call that can be criticized. That 29 Republican Senators did not co-sponsor the bill, which I appreciate is an indication of enthusiasm, is not the same as voting against it.

In any event, neither of these is the same as actively lobbying the GSEs to eliminate mortgage underwiting credit standards. This brings me back to the mugger and cops anology.

And, you bring up another excellent point for discussion in another thread. I agree with you about the failure of Republicans to adhere to conservative principles. But, I'm not as angry that some Republicans are not conservative as I am that some Democrats are muggers. That difference would be a good subject for another thread because it seems to me that Republican reaction to Democrat mischief is Republican introspection and self-blame. Meanwhile the Democrats move on to the next victim.

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Permalink Reply by Sandy Cope on December 10, 2008 at 11:56am

George- I am not trying to change the main subject of what you have been discussing here "the Meltdown", and all of those at fault, but today we are witnessing another "mugging" by the Democrats with the Auto Bailouts.

http://start.localnet.com/article.php?article=D94VUL281.html

The Democrats, unfortunately along with the current President, have tried to block any Republican involvement in writing legislation to push forward another fatally flawed Bill in order to keep the Big 3 on life support. In reading the above unfinished and still developing progress of the legislation, it is noted that the Republicans have been on the outside looking in while Bush and the Democrats craft a policy that many Republican Senators find to be severly lacking.

I believe you asked the question above "Why aren't the Republicans shouting out"? Mitch McConnell has made statements in the Senate against the auto bailouts as the legislation does nothing to address the problems with the UAW pertaining to wages, benefits and etc. I believe he has said that there is a danger with this as it will be giving the Big 3 a government issued ATM card. There are a few other Senators who have spoken out about it on less than prime-time TV Newscasts. Why aren't these Republicans on the steps of the Capitol Building, with the biggest microphones available, telling the public about the dangers and the true implications of this legislation? Are we so lacking in Republican leadership that those that who were voted into office to support our party's positions and ideals in the Congress are still walking around with their tails between their legs?

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Permalink Reply by George Daily on December 10, 2008 at 1:19pm

Sandy Cope said:

George- I am not trying to change the main subject of what you have been discussing here "the Meltdown", and all of those at fault, but today we are witnessing another "mugging" by the Democrats with the Auto Bailouts.

http://start.localnet.com/article.php?article=D94VUL281.html

The Democrats, unfortunately along with the current President, have tried to block any Republican involvement in writing legislation to push forward another fatally flawed Bill in order to keep the Big 3 on life support. In reading the above unfinished and still developing progress of the legislation, it is noted that the Republicans have been on the outside looking in while Bush and the Democrats craft a policy that many Republican Senators find to be severly lacking.

I believe you asked the question above "Why aren't the Republicans shouting out"? Mitch McConnell has made statements in the Senate against the auto bailouts as the legislation does nothing to address the problems with the UAW pertaining to wages, benefits and etc. I believe he has said that there is a danger with this as it will be giving the Big 3 a government issued ATM card. There are a few other Senators who have spoken out about it on less than prime-time TV Newscasts. Why aren't these Republicans on the steps of the Capitol Building, with the biggest microphones available, telling the public about the dangers and the true implications of this legislation? Are we so lacking in Republican leadership that those that who were voted into office to support our party's positions and ideals in the Congress are still walking around with their tails between their legs?

Hi Sandy!

I don't know what's happening in the House but from what I heard from Republican senators today, the auto bail out in it's present form is probably not going to happen.

I don't mind discussing this but we should try to keep threads from wandering too much. Why don't you start a new thread?

Following up on my concern that Democrats and the MSM may suceed in tarring Republicans with blame for the Melt Down; I've Learned that the ranking Republican on the House Committee for Government Affairs and Oversight, Congressman Darrell Issa of California, has introduced legislation to create a National Commission on the Financial Crisis. The commission would be similar to the national commission created in the wake of 9/11. Congressman Issa’s bill is co-sponsored by eight fellow Republicans. No Democrats have agreed to co-sponsor the bill. The legislation has been forwarded to the House Financial Services Committee chaired by Democrat Congressman Barney Frank.

Congress and the American people need to know what went wrong in order to prevent it from happening again and to hold those responsible, inside and outside of government, accountable. Please help by urging your congressman to support H.R. 7275.

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Permalink Reply by Mark Collins on December 14, 2008 at 9:13pm

For a brief second that last paragraph got my hopes up. How do we expect to get an investigation going when it must first go through one of the very architects of the crisis. Mr. Frank. The Clinton Kronies in Fannie and Freddie made billions off of the fraudulent practices, the whole mess achieved the ultimate political goal for the liberals, and the monetary beneficiaries used that money to fund liberal campaigns. Do you reallly the they'll allow a legitimate investigation?

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Permalink Reply by George Daily on December 15, 2008 at 6:47am

Mark Collins said:

For a brief second that last paragraph got my hopes up. How do we expect to get an investigation going when it must first go through one of the very architects of the crisis. Mr. Frank. The Clinton Kronies in Fannie and Freddie made billions off of the fraudulent practices, the whole mess achieved the ultimate political goal for the liberals, and the monetary beneficiaries used that money to fund liberal campaigns. Do you reallly the they'll allow a legitimate investigation?

They're certainly not going to do it willingly!

There will have to be a groundswell of public opinion to make it happen. That's why I'm asking everyone to write to their representatives to support the bill. When Congress got mail running 1,000 to 1 against the $700B bail out, they choked. With public opinion 2 to 1 against the Auto Bail Out, it failed. We need to force Barney Frank to pass the bill out of committee or explain why.

The Melt Down is going to be the predicate and justification for everything the Democrats will try to do for the next four years and possibly beyond that. The GOP needs to get out in front of this and a National Commission is a way to do that.

It only takes a few seconds to email your representative at this site:
https://writerep.house.gov/writerep/welcome.shtml

If enough people wirte congress, newspaper editors, magazine editors, blogs, call talk shows, etc, etc.it could happen.

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Permalink Reply by Mark Collins on December 18, 2008 at 6:53pm

I couldn't agree with you more. I have my own post on the issue and I don't even think this was the result of a bunch of bumbling fools. I believe this was an intentional attempt at ruinging Capitalism by the liberals while getting a buch of their friends rich. The Republicans are in a Public Relations war and they're shooting pellet guns at a battleship.

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