[Rhodes22-list] Brad, Economics/Politics - Significant Post about economicandpoliticalmess
Michael D. Weisner
mweisner at ebsmed.com
Tue Sep 23 11:27:22 EDT 2008
Brad,
I tend to think that the "ideal house" is slightly larger than 1400 sq ft.
In this area, we are seeing more and more older couples, retired or still
working, in the 1800-2200 sq ft house. These typically have enough room for
the occasional child still at home or "visiting" and are able to support
immediate family (with spouse & kids) gatherings (overnights, 3-4 beds, 2
baths.) They are not unreasonable to heat or cool if they are multi-story
dwellings, fairly well insulated.
But what the heck do I know, I never thought that the US would have bought
into the Denali/Tahoe/Expedition product lines.
Quality time in the hangar: priceless - that's what Bud & Gojo were invented
for ... enjoy
Mike
s/v Shanghai'd Summer ('81)
Nissequogue River, NY
From: "Brad Haslett" <flybrad at gmail.com>Sent: Tuesday, September 23, 2008
9:31 AM
> Mike,
>
> Sorry about the mix-up, that's what happens when you stay-up too late.
> Airplanes have lost 30% or more in value the last year with the fuel
> costs going up. What department do I apply to for my "I made a bad
> financial decision and I want some money back"?
>
> The spec house I built in 2002 in an 80 year old neighborhood was
> about 1400 square feet with another 500 ft designed in upstairs that
> could be finished (the buyer purchased the home in the framing stage
> and opted to finish the upstairs). The architect did marvelous job of
> making it look from the outside like it had been in the neighborhood
> forever, and he incorporated some ideas of mine that I imported from
> Europe and Asia to make it "live" bigger than it was. I keep watching
> the market on the MS Gulf Coast to build but real estate there is
> still overpriced. The target market is around 1200-1400 ft sq around
> $130,000. It can't be done right now with current lot prices but
> maybe someday when reality settles in, who knows? When the dust
> settles on this real estate meltdown, I anticipate the market moving
> to smaller houses (but my crystal ball is cracked and often cloudy).
>
> Run the world for me, will ya? I'm off for some of that "quality hangar
> time".
>
> Brad
>
> On Tue, Sep 23, 2008 at 7:43 AM, Michael D. Weisner <mweisner at ebsmed.com>
> wrote:
>> Brad,
>>
>> Your old boss was a truly wise fellow, one never knows how desperate the
>> seller can be (or why he is selling.) Big house "bargains" - agreed -
>> been
>> there ... bigger simply means higher taxes, heating bills and harder to
>> sell
>> nowadays on LI.
>>
>> As far as your Bo goes, if you had waited, you wouldn't have had all that
>> "quality time" in the hangar (maybe more stick time?) And the Mooney?
>> Wrong Mike - Mike Cheung has the Mooney 231.
>>
>> Mike
>> s/v Shanghaid'd Summer ('81)
>> Nissequogue River, NY
>>
>> From: "Brad Haslett" <flybrad at gmail.com>Sent: Tuesday, September 23, 2008
>> 12:46 AM
>>> Mike,
>>>
>>> They're going to live in it but they have the same problem as everyone
>>> else, they have to sell their house. My neighborhood has been a hot
>>> one for the first eight years we were here and most homes sold FSBO in
>>> less than a week. Now they're taking 90 to 180 days, which while
>>> better than average, is much slower than what we're used to seeing.
>>>
>>> One thing I learned almost 30 years ago from my old boss when I was
>>> selling airplanes, "son, don't ever make an offer on an airplane we
>>> don't want in our inventory no matter how cheap the price, you never
>>> know what a man might actually take". The same goes with houses now.
>>> It's only a "bargain" if you need the house. The last thing I want is
>>> a bigger house - been there, done that.
>>>
>>> Had I known the market for airplanes was going to tank I might have
>>> waited and bought something in a later vintage. How's the market on
>>> your Mooney doing? One would think it would be the least affected
>>> because of the fuel efficiency.
>>>
>>> Brad
>>>
>>> On Mon, Sep 22, 2008 at 11:30 PM, Michael D. Weisner
>>> <mweisner at ebsmed.com> wrote:
>>>> Brad,
>>>>
>>>> So much for the bargains. Hopefully, your friends will be able to pull
>>>> the
>>>> rabbit out of the hat and salvage the deal.
>>>>
>>>> So, were they planning to move to the McMansion or was it just for
>>>> investment? What will become of the second home?
>>>>
>>>> I think that your concept of hunkering down is the best at this time.
>>>> We
>>>> are very happy not to have a mortgage obligation with the uncertainty
>>>> of
>>>> the
>>>> immediate future.
>>>>
>>>> Mike
>>>> s/v Shanghaid'd Summer ('81)
>>>> Nissequogue River, NY
>>>>
>>>> From: "Brad Haslett" <flybrad at gmail.com>Sent: Tuesday, September 23,
>>>> 2008
>>>> 12:19 AM
>>>>> Mike,
>>>>>
>>>>> It's not just the "bad" neighborhoods. The neighborhood next to mine
>>>>> is a McMansion neighborhood with houses in the 5-6000 square foot
>>>>> range. Some acquaintances of ours made a "low ball" offer on one of
>>>>> two houses in forclosure in that neighborhood, and much to their shock
>>>>> the bank took it. Now they are having to replace light fixtures,
>>>>> faucets, HVAC units, anything that could be removed, and, they're
>>>>> making two house payments. Now if you want a house razed, my brother
>>>>> has that down to a science. We've taken down houses with less than ten
>>>>> feet separating it from the next one. He chews out the center with the
>>>>> trackhoe and makes the house fall in on itself. I can't stand to
>>>>> watch it and I'm a brave man.
>>>>>
>>>>> Brad
>>>>>
>>>>> On Mon, Sep 22, 2008 at 10:56 PM, Michael D. Weisner
>>>>> <mweisner at ebsmed.com> wrote:
>>>>>> Herb,
>>>>>>
>>>>>> Buying "cheap" real estate can result in some real problems. On the
>>>>>> face
>>>>>> of
>>>>>> it, it sounds like a great idea; buy up houses at low prices and rent
>>>>>> them
>>>>>> to the folks who can't afford to own them. Unfortunately, many of
>>>>>> the
>>>>>> areas
>>>>>> that are affordable have significant foreclosure problems encouraging
>>>>>> higher
>>>>>> crime due to the large number of abandoned homes. In some of the
>>>>>> areas,
>>>>>> the
>>>>>> homes are gutted for the copper pipe and wire content which is sold
>>>>>> as
>>>>>> scrap, leaving a shell that needs to be razed. It may be to your
>>>>>> benefit
>>>>>> that you are not so well off!
>>>>>>
>>>>>> There are some real sailboat bargains out there, if you have any
>>>>>> money
>>>>>> left
>>>>>> after buying up all that bad paper in the bailout.
>>>>>>
>>>>>> Mike
>>>>>> s/v Shanghaid'd Summer ('81)
>>>>>> Nissequogue River, NY
>>>>>>
>>>>>> From: "Herb Parsons" <hparsons at parsonsys.com>Sent: Monday, September
>>>>>> 22,
>>>>>> 2008 11:40 PM
>>>>>>>I wish I were a well-financed man, I'd be buying up some rental
>>>>>>>houses
>>>>>>> right now. Folks that lose their homes will still need a place to
>>>>>>> live,
>>>>>>> and houses are going to be cheap to buy.
>>>>>>>
>>>>>>> Brad Haslett wrote:
>>>>>>>> Herb,
>>>>>>>>
>>>>>>>> It goes back further than that. Between Fannie & Freddie, FHA, and
>>>>>>>> VA
>>>>>>>> housing loans, and the home mortgage interest deduction, the
>>>>>>>> federal
>>>>>>>> 'gubment' has been waaaay too involved in the housing market. My
>>>>>>>> home
>>>>>>>> loan is with the credit union where I bank and they hold the paper.
>>>>>>>> Trust me, they made damn sure I was able to pay the money back
>>>>>>>> before
>>>>>>>> they made the loan. Like a lot of Depression era programs, Fannie
>>>>>>>> may
>>>>>>>> have sounded good in the beginning but should have been eliminated
>>>>>>>> decades ago. President Johnson spun off Fannie to a quasi
>>>>>>>> private/public company to make his budget numbers look better and
>>>>>>>> created Freddie for competition. The seeds of destruction were
>>>>>>>> planted
>>>>>>>> a long time ago. Ed posted a list of proposals and warnings from
>>>>>>>> the
>>>>>>>> Bush Whitehouse earlier - 43 was aware of the problem as well as
>>>>>>>> the
>>>>>>>> Congress, it was just cross-purpose with the liberal agenda.
>>>>>>>> However,
>>>>>>>> as amusing as it is to study the history of this issue, it does
>>>>>>>> nothing to solve the problem. I don't think most folks realize how
>>>>>>>> close to the brink we came. Here's a newspaper article on the
>>>>>>>> experience and a really good analysis from an astute blogger.
>>>>>>>>
>>>>>>>> http://www.nypost.com/seven/09212008/business/almost_armageddon_130110.htm
>>>>>>>>
>>>>>>>> http://meganmcardle.theatlantic.com/archives/2008/09/how_close_was_the_financial_sy.php
>>>>>>>>
>>>>>>>> There's only two solutions to this problem that I can see, either
>>>>>>>> flush the "turd" loans out of the system or give banks a reprieve
>>>>>>>> on
>>>>>>>> FASB 157 and temporarily suspend "mark to market" accounting. Nancy
>>>>>>>> and Harry are clueless demagogues. There's plenty of smart people
>>>>>>>> on
>>>>>>>> both sides of the isle. Now would be a good time for some real
>>>>>>>> leaders of both parties to take control and tell some of the bigger
>>>>>>>> mouths (Barney Franks for example) to STFU.
>>>>>>>>
>>>>>>>> Whatever the solution, I think we've got some tough sledding ahead
>>>>>>>> of
>>>>>>>> us.
>>>>>>>>
>>>>>>>> Brad
>>>>>>>>
>>>>>>>> On Mon, Sep 22, 2008 at 9:41 PM, Herb Parsons
>>>>>>>> <hparsons at parsonsys.com>
>>>>>>>> wrote:
>>>>>>>>
>>>>>>>>> Brad,
>>>>>>>>>
>>>>>>>>> Clinton Administration?
>>>>>>>>>
>>>>>>>>> Did that article say "under increasing pressure from the Clinton
>>>>>>>>> Administration to expand mortgage loans among low and moderate
>>>>>>>>> income
>>>>>>>>> people"
>>>>>>>>>
>>>>>>>>> That's got to be bogus. This mess was caused by the Republicans
>>>>>>>>> dammit,
>>>>>>>>> all those kool-aid drinkers couldn't possibly be wrong...
>>>>>>>>>
>>>>>>>>> Since we're blowing away a little smoke from the "let's blame the
>>>>>>>>> Republicans" kool-aid fans, fast-forward from 1999 to 2005, and
>>>>>>>>> take
>>>>>>>>> a
>>>>>>>>> look at the Federal Housing Enterprise Regulatory Reform Act of
>>>>>>>>> 2005.
>>>>>>>>>
>>>>>>>>> In part, here's what Charles Hagel had to say about it: "Our
>>>>>>>>> legislation
>>>>>>>>> would create a new independent world class regulator for Fannie
>>>>>>>>> Mae,
>>>>>>>>> Freddie Mac and the Federal Home Loan Banks. Our bill provides the
>>>>>>>>> new
>>>>>>>>> regulator with enhanced regulatory flexibility and enforcement
>>>>>>>>> tools
>>>>>>>>> like those afforded to the Federal Deposit Insurance Corporation,
>>>>>>>>> the
>>>>>>>>> Federal Reserve System, the Office of the Comptroller of the
>>>>>>>>> Currency
>>>>>>>>> and the Office of Thrift Supervision. "
>>>>>>>>>
>>>>>>>>> Here's what McCain (a co-sponsor) had to say about it: "For years
>>>>>>>>> I
>>>>>>>>> have
>>>>>>>>> been concerned about the regulatory structure that governs Fannie
>>>>>>>>> Mae
>>>>>>>>> and Freddie Mac--known as Government-sponsored entities or
>>>>>>>>> GSEs--and
>>>>>>>>> the
>>>>>>>>> sheer magnitude of these companies and the role they play in the
>>>>>>>>> housing
>>>>>>>>> market. OFHEO's report this week does nothing to ease these
>>>>>>>>> concerns.
>>>>>>>>> In
>>>>>>>>> fact, the report does quite the contrary. OFHEO's report
>>>>>>>>> solidifies
>>>>>>>>> my
>>>>>>>>> view that the GSEs need to be reformed without delay."
>>>>>>>>>
>>>>>>>>> Would have been nice, huh?
>>>>>>>>>
>>>>>>>>> Unfortunately, the bill never made it out of committee. Chris Dodd
>>>>>>>>> was
>>>>>>>>> on the committee at the time, and is now chairs it. He's the all
>>>>>>>>> time
>>>>>>>>> highest receiver of money from the Fannie-Freddie lobbies. It's
>>>>>>>>> worth
>>>>>>>>> noting that Obama is #2 in receiving those lobby monies.
>>>>>>>>>
>>>>>>>>> But, ignore all that. Pelosi says it's all the Republican's fault.
>>>>>>>>> Would
>>>>>>>>> that be cherry, or grape kool-aid?
>>>>>>>>>
>>>>>>>>> Hey politics fans, see if you folks can guess who said this back
>>>>>>>>> in
>>>>>>>>> 2005
>>>>>>>>> - "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 market, and the economy as a
>>>>>>>>> whole."
>>>>>>>>>
>>>>>>>>>
>>>>>>>>>
>>>>>>>>> Brad Haslett wrote:
>>>>>>>>>
>>>>>>>>>> Mike,
>>>>>>>>>>
>>>>>>>>>> Here's a New York Time's article from 1999 that may shed some
>>>>>>>>>> light
>>>>>>>>>> on
>>>>>>>>>> how this mess got started.
>>>>>>>>>>
>>>>>>>>>> Brad
>>>>>>>>>>
>>>>>>>>>> --------------------------
>>>>>>>>>> http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&scp=1&sq=september%201999%20fannie%20mae&st=cse
>>>>>>>>>>
>>>>>>>>>> September 30, 1999
>>>>>>>>>> Fannie Mae Eases Credit To Aid Mortgage Lending
>>>>>>>>>> By STEVEN A. HOLMES
>>>>>>>>>>
>>>>>>>>>> In a move that could help increase home ownership rates among
>>>>>>>>>> minorities and low-income consumers, the Fannie Mae Corporation
>>>>>>>>>> is
>>>>>>>>>> easing the credit requirements on loans that it will purchase
>>>>>>>>>> from
>>>>>>>>>> banks and other lenders.
>>>>>>>>>>
>>>>>>>>>> The action, which will begin as a pilot program involving 24
>>>>>>>>>> banks
>>>>>>>>>> in
>>>>>>>>>> 15 markets -- including the New York metropolitan region -- will
>>>>>>>>>> encourage those banks to extend home mortgages to individuals
>>>>>>>>>> whose
>>>>>>>>>> credit is generally not good enough to qualify for conventional
>>>>>>>>>> loans.
>>>>>>>>>> Fannie Mae officials say they hope to make it a nationwide
>>>>>>>>>> program
>>>>>>>>>> by
>>>>>>>>>> next spring.
>>>>>>>>>>
>>>>>>>>>> Fannie Mae, the nation's biggest underwriter of home mortgages,
>>>>>>>>>> has
>>>>>>>>>> been under increasing pressure from the Clinton Administration to
>>>>>>>>>> expand mortgage loans among low and moderate income people and
>>>>>>>>>> felt
>>>>>>>>>> pressure from stock holders to maintain its phenomenal growth in
>>>>>>>>>> profits.
>>>>>>>>>>
>>>>>>>>>> In addition, banks, thrift institutions and mortgage companies
>>>>>>>>>> have
>>>>>>>>>> been pressing Fannie Mae to help them make more loans to
>>>>>>>>>> so-called
>>>>>>>>>> subprime borrowers. These borrowers whose incomes, credit ratings
>>>>>>>>>> and
>>>>>>>>>> savings are not good enough to qualify for conventional loans,
>>>>>>>>>> can
>>>>>>>>>> only get loans from finance companies that charge much higher
>>>>>>>>>> interest
>>>>>>>>>> rates -- anywhere from three to four percentage points higher
>>>>>>>>>> than
>>>>>>>>>> conventional loans.
>>>>>>>>>>
>>>>>>>>>> ''Fannie Mae has expanded home ownership for millions of families
>>>>>>>>>> in
>>>>>>>>>> the 1990's by reducing down payment requirements,'' said Franklin
>>>>>>>>>> D.
>>>>>>>>>> Raines, Fannie Mae's chairman and chief executive officer. ''Yet
>>>>>>>>>> there
>>>>>>>>>> remain too many borrowers whose credit is just a notch below what
>>>>>>>>>> our
>>>>>>>>>> underwriting has required who have been relegated to paying
>>>>>>>>>> significantly higher mortgage rates in the so-called subprime
>>>>>>>>>> market.''
>>>>>>>>>>
>>>>>>>>>> Demographic information on these borrowers is sketchy. But at
>>>>>>>>>> least
>>>>>>>>>> one study indicates that 18 percent of the loans in the subprime
>>>>>>>>>> market went to black borrowers, compared to 5 per cent of loans
>>>>>>>>>> in
>>>>>>>>>> the
>>>>>>>>>> conventional loan market.
>>>>>>>>>>
>>>>>>>>>> In moving, even tentatively, into this new area of lending,
>>>>>>>>>> Fannie
>>>>>>>>>> Mae
>>>>>>>>>> is taking on significantly more risk, which may not pose any
>>>>>>>>>> difficulties during flush economic times. But the
>>>>>>>>>> government-subsidized corporation may run into trouble in an
>>>>>>>>>> economic
>>>>>>>>>> downturn, prompting a government rescue similar to that of the
>>>>>>>>>> savings
>>>>>>>>>> and loan industry in the 1980's.
>>>>>>>>>>
>>>>>>>>>> ''From the perspective of many people, including me, this is
>>>>>>>>>> another
>>>>>>>>>> thrift industry growing up around us,'' said Peter Wallison a
>>>>>>>>>> resident
>>>>>>>>>> fellow at the American Enterprise Institute. ''If they fail, the
>>>>>>>>>> government will have to step up and bail them out the way it
>>>>>>>>>> stepped
>>>>>>>>>> up and bailed out the thrift industry.''
>>>>>>>>>>
>>>>>>>>>> Under Fannie Mae's pilot program, consumers who qualify can
>>>>>>>>>> secure
>>>>>>>>>> a
>>>>>>>>>> mortgage with an interest rate one percentage point above that of
>>>>>>>>>> a
>>>>>>>>>> conventional, 30-year fixed rate mortgage of less than
>>>>>>>>>> $240,000 --
>>>>>>>>>> a
>>>>>>>>>> rate that currently averages about 7.76 per cent. If the borrower
>>>>>>>>>> makes his or her monthly payments on time for two years, the one
>>>>>>>>>> percentage point premium is dropped.
>>>>>>>>>>
>>>>>>>>>> Fannie Mae, the nation's biggest underwriter of home mortgages,
>>>>>>>>>> does
>>>>>>>>>> not lend money directly to consumers. Instead, it purchases loans
>>>>>>>>>> that
>>>>>>>>>> banks make on what is called the secondary market. By expanding
>>>>>>>>>> the
>>>>>>>>>> type of loans that it will buy, Fannie Mae is hoping to spur
>>>>>>>>>> banks
>>>>>>>>>> to
>>>>>>>>>> make more loans to people with less-than-stellar credit ratings.
>>>>>>>>>>
>>>>>>>>>> Fannie Mae officials stress that the new mortgages will be
>>>>>>>>>> extended
>>>>>>>>>> to
>>>>>>>>>> all potential borrowers who can qualify for a mortgage. But they
>>>>>>>>>> add
>>>>>>>>>> that the move is intended in part to increase the number of
>>>>>>>>>> minority
>>>>>>>>>> and low income home owners who tend to have worse credit ratings
>>>>>>>>>> than
>>>>>>>>>> non-Hispanic whites.
>>>>>>>>>>
>>>>>>>>>> Home ownership has, in fact, exploded among minorities during the
>>>>>>>>>> economic boom of the 1990's. The number of mortgages extended to
>>>>>>>>>> Hispanic applicants jumped by 87.2 per cent from 1993 to 1998,
>>>>>>>>>> according to Harvard University's Joint Center for Housing
>>>>>>>>>> Studies.
>>>>>>>>>> During that same period the number of African Americans who got
>>>>>>>>>> mortgages to buy a home increased by 71.9 per cent and the number
>>>>>>>>>> of
>>>>>>>>>> Asian Americans by 46.3 per cent.
>>>>>>>>>>
>>>>>>>>>> In contrast, the number of non-Hispanic whites who received loans
>>>>>>>>>> for
>>>>>>>>>> homes increased by 31.2 per cent.
>>>>>>>>>>
>>>>>>>>>> Despite these gains, home ownership rates for minorities continue
>>>>>>>>>> to
>>>>>>>>>> lag behind non-Hispanic whites, in part because blacks and
>>>>>>>>>> Hispanics
>>>>>>>>>> in particular tend to have on average worse credit ratings.
>>>>>>>>>>
>>>>>>>>>> In July, the Department of Housing and Urban Development proposed
>>>>>>>>>> that
>>>>>>>>>> by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's
>>>>>>>>>> portfolio be made up of loans to low and moderate-income
>>>>>>>>>> borrowers.
>>>>>>>>>> Last year, 44 percent of the loans Fannie Mae purchased were from
>>>>>>>>>> these groups.
>>>>>>>>>>
>>>>>>>>>> The change in policy also comes at the same time that HUD is
>>>>>>>>>> investigating allegations of racial discrimination in the
>>>>>>>>>> automated
>>>>>>>>>> underwriting systems used by Fannie Mae and Freddie Mac to
>>>>>>>>>> determine
>>>>>>>>>> the credit-worthiness of credit applicants.
>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>>> On Mon, Sep 22, 2008 at 9:05 AM, Michael D. Weisner
>>>>>>>>>> <mweisner at ebsmed.com> wrote:
>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>>>> Brad,
>>>>>>>>>>>
>>>>>>>>>>> Thanks for the story. It was well written and very interesting.
>>>>>>>>>>> Haslett on
>>>>>>>>>>> Hassett.
>>>>>>>>>>>
>>>>>>>>>>> If you are interested in viewing the original S.190 bill, you
>>>>>>>>>>> may
>>>>>>>>>>> find
>>>>>>>>>>> it
>>>>>>>>>>> at:
>>>>>>>>>>> http://www.govtrack.us/congress/bill.xpd?bill=s109-190
>>>>>>>>>>>
>>>>>>>>>>> Sponsor:
>>>>>>>>>>> Sen. Charles Hagel [R-NE]
>>>>>>>>>>>
>>>>>>>>>>> Cosponsors [as of 2007-01-08]
>>>>>>>>>>> Sen. Elizabeth Dole [R-NC]
>>>>>>>>>>> Sen. John McCain [R-AZ]
>>>>>>>>>>> Sen. John Sununu [R-NH]
>>>>>>>>>>>
>>>>>>>>>>> If you're a purist and do not want the commentary and analysis,
>>>>>>>>>>> you
>>>>>>>>>>> may find
>>>>>>>>>>> the text at the LoC:
>>>>>>>>>>> http://thomas.loc.gov/cgi-bin/query/C?c109:./temp/~c109wHZu09
>>>>>>>>>>>
>>>>>>>>>>> Mike
>>>>>>>>>>> s/v Shanghaid'd Summer ('81)
>>>>>>>>>>> Nissequogue River, NY
>>>>>>>>>>>
>>>>>>>>>>> From: "Brad Haslett" <flybrad at gmail.com>Sent: Monday, September
>>>>>>>>>>> 22,
>>>>>>>>>>> 2008
>>>>>>>>>>> 9:09 AM
>>>>>>>>>>>
>>>>>>>>>>>
>>>>>>>>>>>> Ed,
>>>>>>>>>>>>
>>>>>>>>>>>> Thanks, I still don't have a good grip on all these debt swap
>>>>>>>>>>>> and
>>>>>>>>>>>> derivative contracts but then neither did Warren Buffet. Anyway
>>>>>>>>>>>> you
>>>>>>>>>>>> slice it, Fannie and Freddie were what brought this house of
>>>>>>>>>>>> cards
>>>>>>>>>>>> down (see attached).
>>>>>>>>>>>>
>>>>>>>>>>>> Brad
>>>>>>>>>>>>
>>>>>>>>>>>> -----------------------------
>>>>>>>>>>>>
>>>>>>>>>>>>
>>>>>>>>>>>>
>>>>>>>>>>>> Commentary by Kevin Hassett
>>>>>>>>>>>> More Photos/Details
>>>>>>>>>>>>
>>>>>>>>>>>> Sept. 22 (Bloomberg) -- The financial crisis of the past year
>>>>>>>>>>>> has
>>>>>>>>>>>> provided a number of surprising twists and turns, and from Bear
>>>>>>>>>>>> Stearns Cos. to American International Group Inc., ambiguity
>>>>>>>>>>>> has
>>>>>>>>>>>> been
>>>>>>>>>>>> a big part of the story.
>>>>>>>>>>>>
>>>>>>>>>>>> Why did Bear Stearns fail, and how does that relate to AIG? It
>>>>>>>>>>>> all
>>>>>>>>>>>> seems so complex.
>>>>>>>>>>>>
>>>>>>>>>>>> But really, it isn't. Enough cards on this table have been
>>>>>>>>>>>> turned
>>>>>>>>>>>> over
>>>>>>>>>>>> that the story is now clear. The economic history books will
>>>>>>>>>>>> describe
>>>>>>>>>>>> this episode in simple and understandable terms: Fannie Mae and
>>>>>>>>>>>> Freddie Mac exploded, and many bystanders were injured in the
>>>>>>>>>>>> blast,
>>>>>>>>>>>> some fatally.
>>>>>>>>>>>>
>>>>>>>>>>>> Fannie and Freddie did this by becoming a key enabler of the
>>>>>>>>>>>> mortgage
>>>>>>>>>>>> crisis. They fueled Wall Street's efforts to securitize
>>>>>>>>>>>> subprime
>>>>>>>>>>>> loans
>>>>>>>>>>>> by becoming the primary customer of all AAA-rated
>>>>>>>>>>>> subprime-mortgage
>>>>>>>>>>>> pools. In addition, they held an enormous portfolio of
>>>>>>>>>>>> mortgages
>>>>>>>>>>>> themselves.
>>>>>>>>>>>>
>>>>>>>>>>>> In the times that Fannie and Freddie couldn't make the market,
>>>>>>>>>>>> they
>>>>>>>>>>>> became the market. Over the years, it added up to an enormous
>>>>>>>>>>>> obligation. As of last June, Fannie alone owned or guaranteed
>>>>>>>>>>>> more
>>>>>>>>>>>> than $388 billion in high-risk mortgage investments. Their
>>>>>>>>>>>> large
>>>>>>>>>>>> presence created an environment within which even
>>>>>>>>>>>> mortgage-backed
>>>>>>>>>>>> securities assembled by others could find a ready home.
>>>>>>>>>>>>
>>>>>>>>>>>> The problem was that the trillions of dollars in play were only
>>>>>>>>>>>> low-risk investments if real estate prices continued to rise.
>>>>>>>>>>>> Once
>>>>>>>>>>>> they began to fall, the entire house of cards came down with
>>>>>>>>>>>> them.
>>>>>>>>>>>>
>>>>>>>>>>>> Turning Point
>>>>>>>>>>>>
>>>>>>>>>>>> Take away Fannie and Freddie, or regulate them more wisely, and
>>>>>>>>>>>> it's
>>>>>>>>>>>> hard to imagine how these highly liquid markets would ever have
>>>>>>>>>>>> emerged. This whole mess would never have happened.
>>>>>>>>>>>>
>>>>>>>>>>>> It is easy to identify the historical turning point that marked
>>>>>>>>>>>> the
>>>>>>>>>>>> beginning of the end.
>>>>>>>>>>>>
>>>>>>>>>>>> Back in 2005, Fannie and Freddie were, after years of
>>>>>>>>>>>> dominating
>>>>>>>>>>>> Washington, on the ropes. They were enmeshed in accounting
>>>>>>>>>>>> scandals
>>>>>>>>>>>> that led to turnover at the top. At one telling moment in late
>>>>>>>>>>>> 2004,
>>>>>>>>>>>> captured in an article by my American Enterprise Institute
>>>>>>>>>>>> colleague
>>>>>>>>>>>> Peter Wallison, the Securities and Exchange Comiission's chief
>>>>>>>>>>>> accountant told disgraced Fannie Mae chief Franklin Raines that
>>>>>>>>>>>> Fannie's position on the relevant accounting issue was not even
>>>>>>>>>>>> ``on
>>>>>>>>>>>> the page'' of allowable interpretations.
>>>>>>>>>>>>
>>>>>>>>>>>> Then legislative momentum emerged for an attempt to create a
>>>>>>>>>>>> ``world-class regulator'' that would oversee the pair more like
>>>>>>>>>>>> banks,
>>>>>>>>>>>> imposing strict requirements on their ability to take excessive
>>>>>>>>>>>> risks.
>>>>>>>>>>>> Politicians who previously had associated themselves proudly
>>>>>>>>>>>> with
>>>>>>>>>>>> the
>>>>>>>>>>>> two accounting miscreants were less eager to be associated with
>>>>>>>>>>>> them.
>>>>>>>>>>>> The time was ripe.
>>>>>>>>>>>>
>>>>>>>>>>>> Greenspan's Warning
>>>>>>>>>>>>
>>>>>>>>>>>> The clear gravity of the situation pushed the legislation
>>>>>>>>>>>> forward.
>>>>>>>>>>>> Some might say the current mess couldn't be foreseen, yet in
>>>>>>>>>>>> 2005
>>>>>>>>>>>> Alan
>>>>>>>>>>>> Greenspan told Congress how urgent it was for it to act in the
>>>>>>>>>>>> clearest possible terms: If Fannie and Freddie ``continue to
>>>>>>>>>>>> grow,
>>>>>>>>>>>> continue to have the low capital that they have, continue to
>>>>>>>>>>>> engage
>>>>>>>>>>>> in
>>>>>>>>>>>> the dynamic hedging of their portfolios, which they need to do
>>>>>>>>>>>> for
>>>>>>>>>>>> interest rate risk aversion, they potentially create
>>>>>>>>>>>> ever-growing
>>>>>>>>>>>> potential systemic risk down the road,'' he said. ``We are
>>>>>>>>>>>> placing
>>>>>>>>>>>> the
>>>>>>>>>>>> total financial system of the future at a substantial risk.''
>>>>>>>>>>>>
>>>>>>>>>>>> What happened next was extraordinary. For the first time in
>>>>>>>>>>>> history,
>>>>>>>>>>>> a
>>>>>>>>>>>> serious Fannie and Freddie reform bill was passed by the Senate
>>>>>>>>>>>> Banking Committee. The bill gave a regulator power to crack
>>>>>>>>>>>> down,
>>>>>>>>>>>> and
>>>>>>>>>>>> would have required the companies to eliminate their
>>>>>>>>>>>> investments
>>>>>>>>>>>> in
>>>>>>>>>>>> risky assets.
>>>>>>>>>>>>
>>>>>>>>>>>> Different World
>>>>>>>>>>>>
>>>>>>>>>>>> If that bill had become law, then the world today would be
>>>>>>>>>>>> different.
>>>>>>>>>>>> In 2005, 2006 and 2007, a blizzard of terrible mortgage paper
>>>>>>>>>>>> fluttered out of the Fannie and Freddie clouds, burying many of
>>>>>>>>>>>> our
>>>>>>>>>>>> oldest and most venerable institutions. Without their
>>>>>>>>>>>> checkbooks
>>>>>>>>>>>> keeping the market liquid and buying up excess supply, the
>>>>>>>>>>>> market
>>>>>>>>>>>> would likely have not existed.
>>>>>>>>>>>>
>>>>>>>>>>>> But the bill didn't become law, for a simple reason: Democrats
>>>>>>>>>>>> opposed
>>>>>>>>>>>> it on a party-line vote in the committee, signaling that this
>>>>>>>>>>>> would
>>>>>>>>>>>> be
>>>>>>>>>>>> a partisan issue. Republicans, tied in knots by the tight
>>>>>>>>>>>> Democratic
>>>>>>>>>>>> opposition, couldn't even get the Senate to vote on the matter.
>>>>>>>>>>>>
>>>>>>>>>>>> That such a reckless political stand could have been taken by
>>>>>>>>>>>> the
>>>>>>>>>>>> Democrats was obscene even then. Wallison wrote at the time:
>>>>>>>>>>>> ``It
>>>>>>>>>>>> is
>>>>>>>>>>>> a
>>>>>>>>>>>> classic case of socializing the risk while privatizing the
>>>>>>>>>>>> profit.
>>>>>>>>>>>> The
>>>>>>>>>>>> Democrats and the few Republicans who oppose portfolio
>>>>>>>>>>>> limitations
>>>>>>>>>>>> could not possibly do so if their constituents understood what
>>>>>>>>>>>> they
>>>>>>>>>>>> were doing.''
>>>>>>>>>>>>
>>>>>>>>>>>> Mounds of Materials
>>>>>>>>>>>>
>>>>>>>>>>>> Now that the collapse has occurred, the roadblock built by
>>>>>>>>>>>> Senate
>>>>>>>>>>>> Democrats in 2005 is unforgivable. Many who opposed the bill
>>>>>>>>>>>> doubtlessly did so for honorable reasons. Fannie and Freddie
>>>>>>>>>>>> provided
>>>>>>>>>>>> mounds of materials defending their practices. Perhaps some
>>>>>>>>>>>> found
>>>>>>>>>>>> their propaganda convincing.
>>>>>>>>>>>>
>>>>>>>>>>>> But we now know that many of the senators who protected Fannie
>>>>>>>>>>>> and
>>>>>>>>>>>> Freddie, including Barack Obama, Hillary Clinton and
>>>>>>>>>>>> Christopher
>>>>>>>>>>>> Dodd,
>>>>>>>>>>>> have received mind-boggling levels of financial support from
>>>>>>>>>>>> them
>>>>>>>>>>>> over
>>>>>>>>>>>> the years.
>>>>>>>>>>>>
>>>>>>>>>>>> Throughout his political career, Obama has gotten more than
>>>>>>>>>>>> $125,000
>>>>>>>>>>>> in campaign contributions from employees and political action
>>>>>>>>>>>> committees of Fannie Mae and Freddie Mac, second only to Dodd,
>>>>>>>>>>>> the
>>>>>>>>>>>> Senate Banking Committee chairman, who received more than
>>>>>>>>>>>> $165,000.
>>>>>>>>>>>>
>>>>>>>>>>>> Clinton, the 12th-ranked recipient of Fannie and Freddie PAC
>>>>>>>>>>>> and
>>>>>>>>>>>> employee contributions, has received more than $75,000 from the
>>>>>>>>>>>> two
>>>>>>>>>>>> enterprises and their employees. The private profit found its
>>>>>>>>>>>> way
>>>>>>>>>>>> back
>>>>>>>>>>>> to the senators who killed the fix.
>>>>>>>>>>>>
>>>>>>>>>>>> There has been a lot of talk about who is to blame for this
>>>>>>>>>>>> crisis.
>>>>>>>>>>>> A
>>>>>>>>>>>> look back at the story of 2005 makes the answer pretty clear.
>>>>>>>>>>>>
>>>>>>>>>>>> Oh, and there is one little footnote to the story that's worth
>>>>>>>>>>>> keeping
>>>>>>>>>>>> in mind while Democrats point fingers between now and Nov. 4:
>>>>>>>>>>>> Senator
>>>>>>>>>>>> John McCain was one of the three cosponsors of S.190, the bill
>>>>>>>>>>>> that
>>>>>>>>>>>> would have averted this mess.
>>>>>>>>>>>>
>>>>>>>>>>>> (Kevin Hassett, director of economic-policy studies at the
>>>>>>>>>>>> American
>>>>>>>>>>>> Enterprise Institute, is a Bloomberg News columnist.
>>>>>>>>>>>>
>>>>>>>>>>>>
>>>>>>>>>>>> Last Updated: September 22, 2008 00:04 EDT
>>>>>>>>>>>>
>>>>>>>>>>>>
>>>>>>>>>>>>
>>>>>>>>>>>> On Sun, Sep 21, 2008 at 6:53 PM, Tootle <ekroposki at charter.net>
>>>>>>>>>>>> wrote:
>>>>>>>>>>>>
>>>>>>>>>>>>
>>>>>>>>>>>>> Brad,
>>>>>>>>>>>>>
>>>>>>>>>>>>> Have you seen this site?
>>>>>>>>>>>>>
>>>>>>>>>>>>> http://www.occ.treas.gov/ftp/deriv/dq403.pdf
>>>>>>>>>>>>>
>>>>>>>>>>>>> Ed K
>>>>>>>>>>>>> Greenville, SC, USA
>>>>>>>>>>>>> http://www.nabble.com/file/p19599807/stock%2Btip.gif
>>>>>>>>>>>>> stock+tip.gif
>>>>>>>>>>>>>
>>>>>>>>>>>>>
>>>>>>>>>>>>>
>>>>>>>>>>>>> Ed, Brad,
>>>>>>>>>>>>>
>>>>>>>>>>>>> First, thanks Brad for taking the time to post all this stuff.
>>>>>>>>>>>>>
>>>>>>>>>>>>> Next, Ed, while I agree with most of what you have said I
>>>>>>>>>>>>> gotta'
>>>>>>>>>>>>> take
>>>>>>>>>>>>> this with a grain of salt
>>>>>>>>>>>>>
>>>>>>>>>>>>>
>>>>>>>>>>>>>
>>>>>>>>>>>>>> and 2.
>>>>>>>>>>>>>> the people who were reporters, editors or commentators did
>>>>>>>>>>>>>> not
>>>>>>>>>>>>>> have
>>>>>>>>>>>>>> appropirate education to understand what they reported or
>>>>>>>>>>>>>> chose
>>>>>>>>>>>>>> not
>>>>>>>>>>>>>> report
>>>>>>>>>>>>>> the issues. [This goes back to my comments to Captain Rummy]
>>>>>>>>>>>>>>
>>>>>>>>>>>>>>
>>>>>>>>>>>>> Appropriate education is way over-rated. I have none to speak
>>>>>>>>>>>>> of
>>>>>>>>>>>>> and
>>>>>>>>>>>>> I
>>>>>>>>>>>>> have been watching incredulously as this whole thing unfolded.
>>>>>>>>>>>>> I
>>>>>>>>>>>>> think
>>>>>>>>>>>>> all this proves is that some of the most prestigious colleges
>>>>>>>>>>>>> in
>>>>>>>>>>>>> the
>>>>>>>>>>>>> country graduate some of the least sensible people. It doesn't
>>>>>>>>>>>>> take
>>>>>>>>>>>>> a
>>>>>>>>>>>>> rocket scientist to figure out that you can't loan money to
>>>>>>>>>>>>> people
>>>>>>>>>>>>> who
>>>>>>>>>>>>> aren't going to pay it back and remain in business for long.
>>>>>>>>>>>>> You
>>>>>>>>>>>>> can't
>>>>>>>>>>>>> continually make risky loans and expect to be able to pass the
>>>>>>>>>>>>> risk
>>>>>>>>>>>>> on
>>>>>>>>>>>>> to some greater fool forever. Eventually even the dimmest bulb
>>>>>>>>>>>>> is
>>>>>>>>>>>>> going
>>>>>>>>>>>>> to figure out he's being taken for a ride.
>>>>>>>>>>>>>
>>>>>>>>>>>>> So, lets not try to claim that more education would have
>>>>>>>>>>>>> helped
>>>>>>>>>>>>> these
>>>>>>>>>>>>> fools. What was and is obvious to a high school graduate
>>>>>>>>>>>>> should
>>>>>>>>>>>>> have
>>>>>>>>>>>>> been child's play for someone with "higher education" yet,
>>>>>>>>>>>>> they
>>>>>>>>>>>>> show
>>>>>>>>>>>>> us
>>>>>>>>>>>>> a complete lack of common sense. It seems you can't get good
>>>>>>>>>>>>> sense
>>>>>>>>>>>>> through education.
>>>>>>>>>>>>>
>>>>>>>>>>>>> Rik
>>>>>>>>>>>>>
>>>>>>>>>>>>> Ayn Rand was a prophet - - it isn't my fault
>>>>>>>>>>>>>
>>>>>>>>>>>>>
>>>>>>>>>>>>>
>>>>>>>>>>>>> Tootle wrote:
>>>>>>>>>>>>>
>>>>>>>>>>>>>
>>>>>>>>>>>>>> Brad,
>>>>>>>>>>>>>>
>>>>>>>>>>>>>> 1. Thank you for your posts on this subject. There are
>>>>>>>>>>>>>> those
>>>>>>>>>>>>>> who
>>>>>>>>>>>>>> quibble
>>>>>>>>>>>>>> that this series of posts is not sailing related. Well it
>>>>>>>>>>>>>> is.
>>>>>>>>>>>>>> Because
>>>>>>>>>>>>>> it
>>>>>>>>>>>>>> concerns our freedom to sail, buy a boat, keep a small sail
>>>>>>>>>>>>>> boat
>>>>>>>>>>>>>> maker
>>>>>>>>>>>>>> in
>>>>>>>>>>>>>> business. It is important to understand the basics of
>>>>>>>>>>>>>> business,
>>>>>>>>>>>>>> economics
>>>>>>>>>>>>>> and ethics.
>>>>>>>>>>>>>>
>>>>>>>>>>>>>> 2. Warren Buffet was not the only one who understood the
>>>>>>>>>>>>>> problems
>>>>>>>>>>>>>> with
>>>>>>>>>>>>>> the
>>>>>>>>>>>>>> mortagages, loans and financial instuments involved. The
>>>>>>>>>>>>>> important
>>>>>>>>>>>>>> thing
>>>>>>>>>>>>>> to
>>>>>>>>>>>>>> comprehend is 'The holy media' did not understand. Why? Two
>>>>>>>>>>>>>> important
>>>>>>>>>>>>>> reasons: 1. It flies in the face of liberalism and their
>>>>>>>>>>>>>> advocacy, and
>>>>>>>>>>>>>> 2.
>>>>>>>>>>>>>> the people who were reporters, editors or commentators did
>>>>>>>>>>>>>> not
>>>>>>>>>>>>>> have
>>>>>>>>>>>>>> appropirate education to understand what they reported or
>>>>>>>>>>>>>> chose
>>>>>>>>>>>>>> not
>>>>>>>>>>>>>> report
>>>>>>>>>>>>>> the issues. [This goes back to my comments to Captain Rummy]
>>>>>>>>>>>>>>
>>>>>>>>>>>>>> I am sure the lady accountant who broke the Enron scandal
>>>>>>>>>>>>>> understands
>>>>>>>>>>>>>> what
>>>>>>>>>>>>>> the financial and accounting issues are.
>>>>>>>>>>>>>>
>>>>>>>>>>>>>> I am sure that those who support 'Progressivism' do not care
>>>>>>>>>>>>>> to
>>>>>>>>>>>>>> understand
>>>>>>>>>>>>>> the real results of their advocacy. Thank you for pointing
>>>>>>>>>>>>>> out
>>>>>>>>>>>>>> Obama's
>>>>>>>>>>>>>> financial advisors use of the problem causing techniques.
>>>>>>>>>>>>>>
>>>>>>>>>>>>>> Again, thank you for the information.
>>>>>>>>>>>>>>
>>>>>>>>>>>>>> Ed K
>>>>>>>>>>>>>> Greenville, SC, USA
>>>>>>>>>>>>>> Addenda:
>>>>>>>>>>>>>>
>>>>>>>>>>>>>> 1. "Character isn't something you were born with and can't
>>>>>>>>>>>>>> change,
>>>>>>>>>>>>>> like
>>>>>>>>>>>>>> your fingerprints. It's something you weren't born with and
>>>>>>>>>>>>>> must
>>>>>>>>>>>>>> take
>>>>>>>>>>>>>> responsibility for forming." Jim Rohn
>>>>>>>>>>>>>>
>>>>>>>>>>>>>> 2. "Leaders are made, they are not born. They are made by
>>>>>>>>>>>>>> hard
>>>>>>>>>>>>>> effort,
>>>>>>>>>>>>>> which is the price which all of us must pay to achieve any
>>>>>>>>>>>>>> goal
>>>>>>>>>>>>>> that is
>>>>>>>>>>>>>> worthwhile." Vince Lombardi
>>>>>>>>>>>>>>
>>>>>>>>>>>>>> 3. "Most of the poverty and misery in the world is due to
>>>>>>>>>>>>>> bad
>>>>>>>>>>>>>> government,
>>>>>>>>>>>>>> lack of democracy, weak states, internal strife, and so on."
>>>>>>>>>>>>>> George
>>>>>>>>>>>>>> Soros
>>>>>>>>>>>>>>
>>>>>>>>>>>>>>
>>>>>>>>>>>>>> Brad Haslett-2 wrote:
>>>>>>>>>>>>>>
>>>>>>>>>>>>>>
>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> Ed,
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> It will take years to unravel this whole puzzle and no doubt
>>>>>>>>>>>>>>> a
>>>>>>>>>>>>>>> lot
>>>>>>>>>>>>>>> of
>>>>>>>>>>>>>>> money will be made writing books about it, but here's what
>>>>>>>>>>>>>>> we
>>>>>>>>>>>>>>> know
>>>>>>>>>>>>>>> for
>>>>>>>>>>>>>>> now. The economy was about to grind to a stop like an
>>>>>>>>>>>>>>> engine
>>>>>>>>>>>>>>> running
>>>>>>>>>>>>>>> without oil, ie, financial institutions were about to stop
>>>>>>>>>>>>>>> lending
>>>>>>>>>>>>>>> money because no one trusted anyone. The root cause was a
>>>>>>>>>>>>>>> lot
>>>>>>>>>>>>>>> of
>>>>>>>>>>>>>>> really nasty mortgages made with horrendous lending
>>>>>>>>>>>>>>> practices.
>>>>>>>>>>>>>>> Add
>>>>>>>>>>>>>>> in
>>>>>>>>>>>>>>> some new debt instruments that no one really understood (Mr.
>>>>>>>>>>>>>>> Buffet
>>>>>>>>>>>>>>> excepted) and the problems accelerated. The "fix", if you
>>>>>>>>>>>>>>> want
>>>>>>>>>>>>>>> to
>>>>>>>>>>>>>>> call
>>>>>>>>>>>>>>> it that, is for the federal government to allow financial
>>>>>>>>>>>>>>> institutions
>>>>>>>>>>>>>>> to dump their toxic assets, clean up their books, and go
>>>>>>>>>>>>>>> back
>>>>>>>>>>>>>>> to
>>>>>>>>>>>>>>> "mark
>>>>>>>>>>>>>>> to market" accounting with assets of determinable value.
>>>>>>>>>>>>>>> What
>>>>>>>>>>>>>>> this
>>>>>>>>>>>>>>> will cost the government is unknown because the value of the
>>>>>>>>>>>>>>> assets to
>>>>>>>>>>>>>>> be dumped is unknown. Just like the RFC during the Great
>>>>>>>>>>>>>>> Depression
>>>>>>>>>>>>>>> and the Resolution Trust in the late 80's, some of these
>>>>>>>>>>>>>>> assets
>>>>>>>>>>>>>>> do
>>>>>>>>>>>>>>> have value and the taxpayer will get some of their money
>>>>>>>>>>>>>>> back.
>>>>>>>>>>>>>>> One of
>>>>>>>>>>>>>>> ideas being floated now is a reverse auction where
>>>>>>>>>>>>>>> institution
>>>>>>>>>>>>>>> bids
>>>>>>>>>>>>>>> down to a price that they are willing to sell the government
>>>>>>>>>>>>>>> the
>>>>>>>>>>>>>>> bad
>>>>>>>>>>>>>>> assets. This is truly new territory. Lehman Brothers had a
>>>>>>>>>>>>>>> chance
>>>>>>>>>>>>>>> to
>>>>>>>>>>>>>>> be acquired by Bank of Korea and CITIC bank of China months
>>>>>>>>>>>>>>> ago
>>>>>>>>>>>>>>> but
>>>>>>>>>>>>>>> thought they could get a better price. Now they'll settle
>>>>>>>>>>>>>>> for
>>>>>>>>>>>>>>> pennies
>>>>>>>>>>>>>>> on the dollar.
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> Ever heard of a NINJA loan? Neither had I until a couple of
>>>>>>>>>>>>>>> years
>>>>>>>>>>>>>>> ago
>>>>>>>>>>>>>>> and it didn't make sense then and it sure as hell doesn't
>>>>>>>>>>>>>>> now.
>>>>>>>>>>>>>>> NINJA
>>>>>>>>>>>>>>> - no income, no job or assets. Who in their right mind
>>>>>>>>>>>>>>> would
>>>>>>>>>>>>>>> make
>>>>>>>>>>>>>>> such a loan? No one, unless they thought they could palm
>>>>>>>>>>>>>>> the
>>>>>>>>>>>>>>> risk
>>>>>>>>>>>>>>> off
>>>>>>>>>>>>>>> on someone else. Fanny and Freddie are the biggest culprits
>>>>>>>>>>>>>>> in
>>>>>>>>>>>>>>> this
>>>>>>>>>>>>>>> mess. Now here's where it gets interesting. They and most
>>>>>>>>>>>>>>> banks
>>>>>>>>>>>>>>> operated using sound lending practices until the late 70's
>>>>>>>>>>>>>>> when
>>>>>>>>>>>>>>> the
>>>>>>>>>>>>>>> Community Reinvestment Act was passed by Carter. (I'm going
>>>>>>>>>>>>>>> to
>>>>>>>>>>>>>>> use
>>>>>>>>>>>>>>> a
>>>>>>>>>>>>>>> "cheap and easy" citation here instead of financial news
>>>>>>>>>>>>>>> articles
>>>>>>>>>>>>>>> to
>>>>>>>>>>>>>>> save time)
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> http://en.wikipedia.org/wiki/Community_Reinvestment_Act
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> Clinton strengthened the act in 1995 and shoved more bad
>>>>>>>>>>>>>>> lending
>>>>>>>>>>>>>>> practices down bankers throats. One of the "leaders" in
>>>>>>>>>>>>>>> subprime
>>>>>>>>>>>>>>> mortgages was Superior Bank in Chicago.
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> http://query.nytimes.com/gst/fullpage.html?res=9C05E4D71E3CF934A3575BC0A9679C8B63&sec=&spon=&pagewanted=1
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> Superior went belly-up in 2001. Who ran Superior? Penny
>>>>>>>>>>>>>>> Pritzker, B
>>>>>>>>>>>>>>> Hussein Obama's finance 2008 finance chairman, financial
>>>>>>>>>>>>>>> sponsor,
>>>>>>>>>>>>>>> and
>>>>>>>>>>>>>>> also chairman of the successor to the Chicago Annenberg
>>>>>>>>>>>>>>> Challenge.
>>>>>>>>>>>>>>> The
>>>>>>>>>>>>>>> point is, the demo model for subprimes was Superior and it
>>>>>>>>>>>>>>> failed.
>>>>>>>>>>>>>>> Pritzker was to the sub prime mortgage what Michal Malkin
>>>>>>>>>>>>>>> was
>>>>>>>>>>>>>>> to
>>>>>>>>>>>>>>> junk
>>>>>>>>>>>>>>> bonds.
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> In 2003 the Bush administration tried to reform Freddie and
>>>>>>>>>>>>>>> Fannie
>>>>>>>>>>>>>>> and
>>>>>>>>>>>>>>> was shot down, led by Barny Frank.
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> Some Senators saw the handwriting on the wall in 2005 and
>>>>>>>>>>>>>>> again
>>>>>>>>>>>>>>> tried
>>>>>>>>>>>>>>> to reform Fan & Fred.
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> http://www.govtrack.us/congress/record.xpd?id=109-s20060525-16&bill=s109-190#sMonofilemx003Ammx002Fmmx002Fmmx002Fmhomemx002Fmgovtrackmx002Fmdatamx002Fmusmx002Fm109mx002Fmcrmx002Fms20060525-16.xmlElementm0m0m0m
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> By 2007, the problems were too big too ignore because so
>>>>>>>>>>>>>>> many
>>>>>>>>>>>>>>> homeowners were defaulting. The financial markets stayed
>>>>>>>>>>>>>>> intact
>>>>>>>>>>>>>>> because these "toxic mortgages" were hidden behind some
>>>>>>>>>>>>>>> really
>>>>>>>>>>>>>>> clever
>>>>>>>>>>>>>>> debt instruments. Then everyone got scared.
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> I'll post more as information trickles in. Both political
>>>>>>>>>>>>>>> parties
>>>>>>>>>>>>>>> have their fingerprints all over this mess and Wall Street
>>>>>>>>>>>>>>> threw
>>>>>>>>>>>>>>> some
>>>>>>>>>>>>>>> good old fashioned GREED into mix for the final meltdown.
>>>>>>>>>>>>>>> Follow
>>>>>>>>>>>>>>> the
>>>>>>>>>>>>>>> money-
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> http://www.opensecrets.org/industries/mems.php
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> What interesting times we live in!
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> Brad
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>> On Sun, Sep 21, 2008 at 6:16 AM, Tootle
>>>>>>>>>>>>>>> <ekroposki at charter.net>
>>>>>>>>>>>>>>> wrote:
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> Brad,
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> You are the accountant on this forum. If there are others,
>>>>>>>>>>>>>>>> they
>>>>>>>>>>>>>>>> do
>>>>>>>>>>>>>>>> not
>>>>>>>>>>>>>>>> have
>>>>>>>>>>>>>>>> courage so speak up.
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> This is also an ethical question, a legal ethical question.
>>>>>>>>>>>>>>>> And
>>>>>>>>>>>>>>>> lawyers
>>>>>>>>>>>>>>>> should be speaking up. But alas, they claim Marxism is
>>>>>>>>>>>>>>>> good.
>>>>>>>>>>>>>>>> Or
>>>>>>>>>>>>>>>> they
>>>>>>>>>>>>>>>> say
>>>>>>>>>>>>>>>> their practice is limited to real estate transactions or
>>>>>>>>>>>>>>>> business
>>>>>>>>>>>>>>>> matters.
>>>>>>>>>>>>>>>> What the hell caused this mess?
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> In South Carolina when the state legislature is not in
>>>>>>>>>>>>>>>> session,
>>>>>>>>>>>>>>>> lawyer
>>>>>>>>>>>>>>>> represenatives represent clients before judges they elect.
>>>>>>>>>>>>>>>> Right
>>>>>>>>>>>>>>>> and
>>>>>>>>>>>>>>>> Wrong,
>>>>>>>>>>>>>>>> good and evil, when working in a gray areas, it is
>>>>>>>>>>>>>>>> important
>>>>>>>>>>>>>>>> that
>>>>>>>>>>>>>>>> actions
>>>>>>>>>>>>>>>> withstand the scrutiny of sunlight.
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> Brad said, "Here's something you don't hear much about -
>>>>>>>>>>>>>>>> I've
>>>>>>>>>>>>>>>> read
>>>>>>>>>>>>>>>> exactly
>>>>>>>>>>>>>>>> two articles that discussed "mark to market" including one
>>>>>>>>>>>>>>>> from
>>>>>>>>>>>>>>>> Steve
>>>>>>>>>>>>>>>> Forbes. He didn't name it but he's referring to FASB 157
>>>>>>>>>>>>>>>> (Financial
>>>>>>>>>>>>>>>> Accounting Standards Board) which went into effect November
>>>>>>>>>>>>>>>> 15,
>>>>>>>>>>>>>>>> 2008
>>>>>>>>>>>>>>>> that
>>>>>>>>>>>>>>>> requires all assets including level 3 assets which include
>>>>>>>>>>>>>>>> collateralized
>>>>>>>>>>>>>>>> debt obligations (what Warren Buffet described as "weapons
>>>>>>>>>>>>>>>> of
>>>>>>>>>>>>>>>> mass
>>>>>>>>>>>>>>>> financial
>>>>>>>>>>>>>>>> destruction" in 2002) to be shown on the books at market
>>>>>>>>>>>>>>>> value.
>>>>>>>>>>>>>>>> There
>>>>>>>>>>>>>>>> lies
>>>>>>>>>>>>>>>> the problem, no one knows what these obligations are
>>>>>>>>>>>>>>>> "worth"
>>>>>>>>>>>>>>>> and
>>>>>>>>>>>>>>>> when
>>>>>>>>>>>>>>>> faith
>>>>>>>>>>>>>>>> in these instruments failed, the system started grinding to
>>>>>>>>>>>>>>>> a
>>>>>>>>>>>>>>>> halt.
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> If the people had been honest and ethical from the get go
>>>>>>>>>>>>>>>> they
>>>>>>>>>>>>>>>> would
>>>>>>>>>>>>>>>> have
>>>>>>>>>>>>>>>> held the actions and the paper they were written on to
>>>>>>>>>>>>>>>> sunlight
>>>>>>>>>>>>>>>> and a
>>>>>>>>>>>>>>>> simple
>>>>>>>>>>>>>>>> test of right and wrong. These events remind me of the
>>>>>>>>>>>>>>>> lady
>>>>>>>>>>>>>>>> who
>>>>>>>>>>>>>>>> spilled
>>>>>>>>>>>>>>>> the
>>>>>>>>>>>>>>>> beans in the Enron situation. And the media said Enron was
>>>>>>>>>>>>>>>> big?
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> As you find time tell us where to find Steve's article and
>>>>>>>>>>>>>>>> Warrens
>>>>>>>>>>>>>>>> admonition. And post any relevant sources.
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> Yes, Marxism is at issue because of the Federal requirement
>>>>>>>>>>>>>>>> of
>>>>>>>>>>>>>>>> banks
>>>>>>>>>>>>>>>> to
>>>>>>>>>>>>>>>> loan
>>>>>>>>>>>>>>>> in questionable situations instead of holding federally
>>>>>>>>>>>>>>>> backed
>>>>>>>>>>>>>>>> loans
>>>>>>>>>>>>>>>> to
>>>>>>>>>>>>>>>> a
>>>>>>>>>>>>>>>> high standard. The government compelled bankers to
>>>>>>>>>>>>>>>> disregard
>>>>>>>>>>>>>>>> risks.
>>>>>>>>>>>>>>>> Dictatorship, Marxism, Socialism, Progressivism, call it
>>>>>>>>>>>>>>>> what
>>>>>>>>>>>>>>>> you
>>>>>>>>>>>>>>>> want,
>>>>>>>>>>>>>>>> it
>>>>>>>>>>>>>>>> is wrong and leads to garbage.
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> Ed K
>>>>>>>>>>>>>>>> Greenville, SC, USA
>>>>>>>>>>>>>>>> attachment:
>>>>>>>>>>>>>>>> http://www.nabble.com/file/p19593492/401k.jpg 401k.jpg
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> Ed,
>>>>>>>>>>>>>>>> The subject line should probably be edited to include
>>>>>>>>>>>>>>>> 'Politics'
>>>>>>>>>>>>>>>> since
>>>>>>>>>>>>>>>> that is always an aspect of economics, but let's stick
>>>>>>>>>>>>>>>> primarily
>>>>>>>>>>>>>>>> to
>>>>>>>>>>>>>>>> economics for now.
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> First, a quick personal note. My union called me this
>>>>>>>>>>>>>>>> week -
>>>>>>>>>>>>>>>> the
>>>>>>>>>>>>>>>> wife
>>>>>>>>>>>>>>>> of one of our members is dying from cancer and he has
>>>>>>>>>>>>>>>> burned
>>>>>>>>>>>>>>>> through
>>>>>>>>>>>>>>>> his sick leave to be by her side. They asked me to cover
>>>>>>>>>>>>>>>> one
>>>>>>>>>>>>>>>> of
>>>>>>>>>>>>>>>> his
>>>>>>>>>>>>>>>> trips last night, which I did. I contacted my superior in
>>>>>>>>>>>>>>>> the
>>>>>>>>>>>>>>>> training department and asked that he get the word out to
>>>>>>>>>>>>>>>> fellow
>>>>>>>>>>>>>>>> instructors to consider flying "back-side-of-the-clock"
>>>>>>>>>>>>>>>> trips
>>>>>>>>>>>>>>>> for
>>>>>>>>>>>>>>>> landing currency instead of the usual afternoon "gentlemen"
>>>>>>>>>>>>>>>> trips, and
>>>>>>>>>>>>>>>> they have stepped-up to the plate. This is a great
>>>>>>>>>>>>>>>> country,
>>>>>>>>>>>>>>>> and
>>>>>>>>>>>>>>>> I am
>>>>>>>>>>>>>>>> fortunate to work for a wonderful company and with a very
>>>>>>>>>>>>>>>> professional
>>>>>>>>>>>>>>>> union.
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> Now about this little "financial problem" we face, it is
>>>>>>>>>>>>>>>> bad.
>>>>>>>>>>>>>>>> Just as
>>>>>>>>>>>>>>>> in every major airline crash that leaves a smoking hole in
>>>>>>>>>>>>>>>> the
>>>>>>>>>>>>>>>> ground,
>>>>>>>>>>>>>>>> the press immediately jumps to conclusions, focuses on the
>>>>>>>>>>>>>>>> horror, and
>>>>>>>>>>>>>>>> is usually wrong in their analysis. What we are witnessing
>>>>>>>>>>>>>>>> here
>>>>>>>>>>>>>>>> is not
>>>>>>>>>>>>>>>> a crash (despite the MSM comparisons to 1929) but more like
>>>>>>>>>>>>>>>> a
>>>>>>>>>>>>>>>> GPWS
>>>>>>>>>>>>>>>> (ground proximity warning system) encounter - if immediate
>>>>>>>>>>>>>>>> action
>>>>>>>>>>>>>>>> isn't taken, disaster will be the result. Like every
>>>>>>>>>>>>>>>> aircraft
>>>>>>>>>>>>>>>> accident, the usual suspects start their spin, "It was the
>>>>>>>>>>>>>>>> pilots
>>>>>>>>>>>>>>>> fault", "It was Boeings fault", "It was the company's
>>>>>>>>>>>>>>>> fault",
>>>>>>>>>>>>>>>> "It
>>>>>>>>>>>>>>>> was
>>>>>>>>>>>>>>>> the weather". The reality takes years to discover and the
>>>>>>>>>>>>>>>> root
>>>>>>>>>>>>>>>> causes
>>>>>>>>>>>>>>>> are often something completely different than the original
>>>>>>>>>>>>>>>> pundits
>>>>>>>>>>>>>>>> analysis. And most importantly, there is usually plenty of
>>>>>>>>>>>>>>>> blame
>>>>>>>>>>>>>>>> and
>>>>>>>>>>>>>>>> responsibility to go around.
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> Here's the quick and dirty on what we know. The financial
>>>>>>>>>>>>>>>> markets
>>>>>>>>>>>>>>>> were about to shut down because the trust and faith in the
>>>>>>>>>>>>>>>> underlying
>>>>>>>>>>>>>>>> assets that props-up the entire system were suspect.
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> I'll go into a more thorough analysis tomorrow after a good
>>>>>>>>>>>>>>>> nights
>>>>>>>>>>>>>>>> sleep. Here's something you don't hear much about - I've
>>>>>>>>>>>>>>>> read
>>>>>>>>>>>>>>>> exactly
>>>>>>>>>>>>>>>> two articles that discussed "mark to market" including one
>>>>>>>>>>>>>>>> from
>>>>>>>>>>>>>>>> Steve
>>>>>>>>>>>>>>>> Forbes. He didn't name it but he's referring to FASB 157
>>>>>>>>>>>>>>>> (Financial
>>>>>>>>>>>>>>>> Accounting Standards Board) which went into effect November
>>>>>>>>>>>>>>>> 15,
>>>>>>>>>>>>>>>> 2008
>>>>>>>>>>>>>>>> that requires all assets including level 3 assets which
>>>>>>>>>>>>>>>> include
>>>>>>>>>>>>>>>> collateralized debt obligations (what Warren Buffet
>>>>>>>>>>>>>>>> described
>>>>>>>>>>>>>>>> as
>>>>>>>>>>>>>>>> "weapons of mass financial destruction" in 2002) to be
>>>>>>>>>>>>>>>> shown
>>>>>>>>>>>>>>>> on
>>>>>>>>>>>>>>>> the
>>>>>>>>>>>>>>>> books at market value. There lies the problem, no one
>>>>>>>>>>>>>>>> knows
>>>>>>>>>>>>>>>> what
>>>>>>>>>>>>>>>> these obligations are "worth" and when faith in these
>>>>>>>>>>>>>>>> instruments
>>>>>>>>>>>>>>>> failed, the system started grinding to a halt.
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> I'm not very happy about the federal government
>>>>>>>>>>>>>>>> nationalizing
>>>>>>>>>>>>>>>> roughly
>>>>>>>>>>>>>>>> 7% of the economy but let's hope this only a temporary jolt
>>>>>>>>>>>>>>>> of
>>>>>>>>>>>>>>>> medicine and the government will divest themselves of their
>>>>>>>>>>>>>>>> new
>>>>>>>>>>>>>>>> "ownership" position as quickly as they acquired it.
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> We'll discuss the culprits tomorrow.
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> Brad
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>> On Fri, Sep 19, 2008 at 6:26 PM, Tootle
>>>>>>>>>>>>>>>> <ekroposki at charter.net>
>>>>>>>>>>>>>>>> wrote:
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>>> Brad just posted a significant post to the list, but its
>>>>>>>>>>>>>>>>> significance
>>>>>>>>>>>>>>>>> gets
>>>>>>>>>>>>>>>>> lost in subject line. All shoud read his last post:
>>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>>> http://www.rhodes22.org/pipermail/rhodes22-list/2008-September/054616.html
>>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>>> I am referring to the briefing to Congress.
>>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>>> Ed K
>>>>>>>>>>>>>>>>> Greenville, SC, USA
>>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>>>
>>>>>>>>>>>>> http://www.nabble.com/file/p19599807/stock%2Btip.gif
>>>>>>>>>>>>> stock+tip.gif
>>>>>>>>>>>>> --
>>>>>>>>>>>>> View this message in context:
>>>>>>>>>>>>> http://www.nabble.com/Economics---Significant-Post-to-List-with-wrong-subject-line%21%21%21-tp19590875p19599807.html
>>>>>>>>>>>>> Sent from the Rhodes 22 mailing list archive at Nabble.com.
>>>>>>>>>>>>>
>>>>>>>>>>>>> __________________________________________________
>>>>>>>>>>>>> To subscribe/unsubscribe or for help with using the mailing
>>>>>>>>>>>>> list
>>>>>>>>>>>>> go
>>>>>>>>>>>>> to
>>>>>>>>>>>>> http://www.rhodes22.org/list
>>>>>>>>>>>>> __________________________________________________
>>>>>>>>>>>>>
>>>>>>>>>>>>>
>>>>>>>>>>>>>
>>>>>>>>>>>> __________________________________________________
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>>>>>>>>>>>> list
>>>>>>>>>>>> go
>>>>>>>>>>>> to
>>>>>>>>>>>> http://www.rhodes22.org/list
>>>>>>>>>>>> __________________________________________________
>>>>>>>>>>>>
>>>>>>>>>>>>
>>>>>>>>>>>>
>>>>>>>>>>>>
>>>>>>>>>>> __________________________________________________
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>>>>>>>>>>> go
>>>>>>>>>>> to
>>>>>>>>>>> http://www.rhodes22.org/list
>>>>>>>>>>> __________________________________________________
>>>>>>>>>>>
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>>>>>>>>>>>
>>>>>>>>>> __________________________________________________
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>>>>>>>>>> go
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>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>> __________________________________________________
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>>>>>>>>> go
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>>>>>>>>>
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>>>>>>>> to
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>>>>>>>>
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>>>>>>> to
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>>>>>>
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>>>>>> to
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>>>>>>
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