A Mortgage Crisis Chronology

Here's a great article describing what led up to the our current economic situation.

It demonstrates that without the social experiment of the Community Reinvestment Act our economy would not be in its current state.

Hopefully it also wakes us up to the idiocy of putting those most at fault for its destruction in charge of its resurrection.

It's a must read, but I've summarized below:

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(1977) Jimmy Carter, pressed by grassroots organization and opposed by bankers, made law the Community Reinvestment Act (CRA).

The asserted that "regulated financial institutions are required by law to demonstrate that their deposit facilities serve the convenience and needs of the communities in which they are chartered to do business...regulated financial institutions have continuing and affirmative obligation" to meet these needs.

(1980s) Community organizations, including ACORN, began to reshape CRA in government-imposition as the "affirmative obligation" phrase might suggest as lending institutions resist bad lending practices in poor minority communities.

(1990s) Community organizer Barrack Obama works closed with ACORN activists by employing tactics like crowding bank lobbies, blocking drive-up tellers and demonstrating at the homes of local bank executives in effort to "convince" them to make risky loans in poor and minority areas.

(1994) Obama and others represent organizers in a class action lawsuit alleging that Citibank had "intentionally discriminated against the plaintiffs on the basis of race."

(June 1995) Clinton Administration announces a bold home ownership strategy with included monumental loosening of credit standards and imposition of sub prime lending quotas.

Janet Reno announces, "We will tackle lending discrimination wherever it appears." Going further, "No loan is exempt; no bank is immune...for those who thumb their nose at us, I promise vigorous enforcement."

(1997) Clinton's HUD Secretary, Andrew Cuomo boasts, "GSE [Government Sponsored Entities, like FNMA and Freddie Mac] present in the sub prime market could be of significant benefit to lower-income families, minorities, and families living in under served areas..."

(1998) FNMA falsifies accounting records by shifting $200 million in 1998 expenses to later periods triggering $27 million in bonuses for top executives, including over a $1 million for its CEO, Franklin Raines.

(April 1998) Cuomo admits CRA lending policies amount to "affirmative action" lending and that risks are greater and defaults will be higher than the rest of the mortgage portfolio.

(Early 2000) City Journal warns that Clinton administration had turned CRA into "a vast extortion scheme against the nation's banks."

(March 2000) Rep. Richard Baker (R-LA) proposes a bill to reform Fannie and Freddie's oversight regulations.

Rep. Barney Frank (D-MA) dismissed the idea stating that concerns are "overblown" and that their is "no federal liability there whatsoever."

George Bush's Treasury Department testifies in favor of Fannie/Freddie regulation, calling for private market discipline, increased transparency and market competition. A Fannie spokesman calls his words "inept, " "irresponsible" and "unprofessional."

(June 2001) Rep. Baker pursues his bill to transfer regulatory authority over Fannie and Freddie to the Fed.

Rep Paul Kanjorski (D-PA) calls his proposal "a solution in search of a problem," stating that the current "system with two regulators is operating increasingly effectively."

(February 2003) The GSE regulator warns that unexpected problems at a GSE could immediately spread into financial sectors beyond the housing markets.

(June 2003) Freddie Mac understates profits by $6.9 billion!

(July 2003) GOP senators (Hagel, Dole & Sununu) introduces legislation to address more regulation of Fannie and Freddie. The bill is blocked by Democrats.

(September 2003) Rep. Baker (R-LA) warns, "I have concerns that if appropriate resources aren't allocated for internal risk management, the consequences will be far more severe than just a real estate slowdown."

The New York Times reports that the Bush administration recommends "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago." In the same report, Democrats, "fear that tighter regulation of companies could sharply reduce their commitment to financing low-income and affordable housing."

Bush Treasury Secretary John Snow testifies to enact "legislation to create a new Federal agency to regulate and supervise" Fannie and Freddie.

Rep. Barney Frank (D-MA): "I do not think we are facing any kind of a crisis." He continued, "I believe that we have probably done too little rather too much to push them to meet the goals of affordable housing..."

(October 2003) Fannie Mae discloses a $1.2 billion accounting error.

(November 2003) Council of Economic Advisers warns that the enormous size of mortgage-backed securities market could have a ripple effect throughout the financial system from even a small mistake in Fannie or Freddie's risk management.

(September 2004) Fannie's regulator reports that CEO Franklin Raines manipulated its accounting to overstate profits. Finally, realizing that greater regulation was imminent, Fannie produced TV ads before the Senate committee vote depicting a hard-up Latino couple and how increased regulation would hurt their American Dream. They prevailed.

(October 2004) Rep. Baker (R-LA) again warned about the coming crisis, calling the two behemoths Frankenstein-like that has "grown so powerful that it can intimidate and arrogantly flout all accountability to the very government that created it."

Rep. Maxine Waters (D-CA): "Mr. Chairman, we do not have a crisis at Freddie Mac, and particularly at Fannie Mae, under the outstanding leadership of Mr. Frank Raines."

Rep. Gregory Meeks (D-NY): "And as well as the fact that I'm just pissed off at OFHEO [their regulator], because if it wasn't for you I don't think we'd be here in the first place..."

Rep. Ed Royce (R-CA): "In addition to our important oversight role in this committee, I hope that we will move swiftly to create a new regulatory structure for Fannie Mae..."

Rep. Lacy Clay (D-MI): "This hearing is a political lynching of Franklin Raines."

[This is a great exchange during between the members of HR banking committee that goes on and on. I urge you read it in the full article.]

(January 2005-July 2006) Sen. Chuck Hagel (R-NE) reintroduces the GOP bill for new regulation of Fannie and Freddie.

Alan Greenspan testifies that the size of the GSE portfolios "poses a risk to the global financial system. It would be difficult, if not impossible, to bail out the lenders [Fannie & Freddie]"

Bloomberg writes, "If that bill had become law, then the world would be different today...But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee...That such a reckless political stand could have been taken by the Democrats was obscene even then."

(September 2008) Rep. Arthur Davis (D) admits Democrats were in error: "Like a lot of my Democratic colleagues I was too slow to appreciate the recklessness of Fannie and Freddie. I defended their efforts to encourage affordable home ownership when in retrospect I should have heeded the concerns raised by their regulator in 2004."

Oops! (But an honest man who can admit his mistakes!)

Empathy or Justice: A Political Thing

Our country's courts as you know have come under attack in recent years for so called "legislating from bench" and setting aside the rule of law they took an oath to enforce to instead preach their own political/social/moral viewpoint. We all have a right and responsibility to be upset as this violates the whole construct of our three separate branches of government.

After all, Federal judges (as well as presidents) take an oath to "preserve, protect, and defend the Constitution".

How might this issue, and the courts in general, change under an Obama administration?

By the end of this January, 6 of the 9 justices on the Supreme Court will be over 70 years old. It is anticipated by many that Obama will get to make four appointments in his first term and two more in a second term. Additionally, 9 of the 13 federal appeals courts are also expected to swing left by way of future Obama appointments.

Therefore, it is essential for us to all understand under what criteria Obama will change the face of the American justice system:

In 2007 Obama said: ""[W]e need somebody who's got the heart, the empathy, to recognize what it's like to be a young teenage mom. The empathy to understand what it's like to be poor, or African-American, or gay, or disabled, or old. And that's the criteria by which I'm going to be selecting my judges."

Hmmm? Empathy is nice, but shouldn't our judges base their decisions on the objective rule of law? In fact, that lady in the long gown holding the scales of justice - what's that wrapped around her head? Oh yeah! It's a blindfold!!! Hence, the application of justice is meant to be blind to the individual circumstances of those involved and instead be objective and fair regardless of how much we may empathize with either party. Rich versus poor, old vs. young, government vs. citizen, corporation vs. shareholder - are all entitled to fair justice not having anything to do with how we may empathize with one over the other. Rooting for the underdog is not a function of justice (save that for the World Series). At least that is what the Founders thought to be a pretty good idea.

Think of the damage a justice system would cause by applying justice based on personal opinions, biases and empathy. Justice will become political (exactly what our Constitution attempts to shield if from). If the law is unjust then fix it, otherwise enforce it!

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However, fixing the law in Obamaland might also be painful...

In 2001, Obama said the Supreme Court under Earl Warren...

"Never ventured into the issues of redistribution of wealth and sort of more basic issues of political and economic justice in this society." He continued, stating the court wasn't that radical because it "didn't break free from the essential constraints that were placed by the Founding Fathers in the Constitution."

Political and economic justice? Break free from the Founders constraints? What might that entail? How about the following:

1. A federal constitutional right to welfare;
2. A federal constitutional mandate of affirmative action wherever there are racial disparities, without regard to proof of discriminatory intent;
3. A right for government-financed abortions through the third trimester of pregnancy;
4. The abolition of capital punishment and the mass freeing of criminal defendants;
5. Ruinous shareholder suits against corporate officers and directors;
6. Approval of huge punitive damage awards, like those imposed against tobacco companies, against many legitimate businesses such as those selling fattening food

(The above summarizes an editorial in the WSJ. Feel free to check it out.)

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I know many are displeased with the course of the current administration, and with good reason. But always remember that the policies of George W. Bush do not exemplify sound conservative principles; they have been largely absent during his two terms.

John McCain may veer more to truer conservative principles - but, he may not (there is good reason to doubt it).

However, one thing is certain! Obama (with unfettered support of the legislature) will drive us further from our roots than GW or McCain every did or would. The bedrock that has made the US the strongest, greatest nation on earth will be greatly challenged and most definitely altered. Institutions such as the free market and capitalism will become the monsters that must be slain by a government that tells us it knows best regardless of how it constantly fails to prove it!

Fiscal responsibility during the most pressing economic times of recent memory will most assuredly be disregarded more than ever before.

We hope things will improve! We all know that we need change! Maybe you don't believe McCain is the right change or enough change. But you must believe Obama's change is radical and catastrophically damaging!

Our First Snow

Our first snow! Yikes! It wasn't much, but the wind is howling and
with the wind chill its around 15 degrees this morning. The good news
is, the sun is coming out and will hopefully melt it all soon and
tomorrow it should be back to around 60!

Welcome Max!

OK, I said it would never be done again! Giving up Drexel nearly 10 years ago was tramatic and took a long time to get over. The idea of having another dog was furthest from our mind for the longest time.

However, since the kids are a little older and moving to CO without knowing anyone, we considered it again. The fact the CO is dog country also made it more likely (tie posts are common outside most stores here).

Until this weekend, the plan was for Spring, but this weekend Lisa worked a Women's Expo event where a dog training and boarding business was also working. This group also helps buyers find breeders, and sometimes end up with dogs that just didn't work out for the original buyers (in this case because the buyer had bigger dogs that weren't compatible). She fell in love with a 9-month old cream-colored Shih-Tzu named Max. Although the timing wasn't quite what we had planned, he is already crate-trained and house-broken and the kids love him. After meeting him we decided it was a good fit for our family.

So, welcome Max!

Landscaping Before and After

We did some work recently in the front planting beds. This slide show is a before and after. We're not quite done - we'll do some annuals and perennials next season.

Mike on Bass

 

Lisa said to me a Saturday ago that it was time for me to go buy a bass. I had been talking about it off and on for years but always found an excuse to forget about it. She researched where the local music stores are and we were off after church the next day.

Even after I played around at the store for 2 hours and found one I really liked, I was all prepared to walk out empty handed. She had none of that, and I ended coming home with this Peavey Grind 4-string and a little Line 6 practice amp.

I must say that I love it. But, boy do I have work to do...

Thanks Lisa.