Readers Beware: For those who are about to embark on this particular issue of Powers on Politics I have to warn you. First, this is going to be one of those things that if you already have high blood pressure you will want to put this down because it could cause your brain to explode. Second, there is so much information that I have had to sort through (and I am certainly NOT complaining) so I can only pray that I can put it out to you so that it is readable. It’s going to be hard to understand, I’m sorry about that, I’ll try to be as clear and make it as simple as possible, but there are so many layers in what I am about to tell you that it will be difficult to keep it easy. Now let me give you a little background before we get started….
Starting early last week a pair of closely related mortgage companies began having huge problems(or rather those problems became public). Stocks were falling, and it seemed that they were going to collapse completely. There were no companies or banks willing to take them over, because of some background information that I will get into more later, and therefore it seemed as though they were doomed to fail. Yet by Monday of this week, so the 15th, the Feds reached out and took control of Fannie (I never know how to spell Fanny…Fannie…whatever) Mae and Freddie Mac. Now it cost a grand total of taxpayer money that is being rounded to about $1.6 Trillion (yeah that’s “rillion” with a T)mark. On Monday alone the government wrote out a nice hefty taxpayer dollar check of $200 billion dollars.
The next day-Tuesday for those watching their calendars-another mortgage giant by the name of the Lehman Brother’s was filing for bankruptcy. This time no one came to bail them out-halleluiah! However there were plenty of other companies having trouble including Country Wide, AIG, Bear Sterns, etc. In particular AIG began to tank badly on Wednesday and by the end of the day the government had announced that they would be spending $85 billion dollars on saving them as well. Is it just me or are we digging ourselves into a deeper hole? So that’s where we are…the real question is-what’s the WHOLE story?
So when-on the eleventh it was discovered that Fannie and Freddie were going to need a quick bailout and the government took control(or more control) of the pair there were people out there who weren’t happy. But wait it gets better, here’s how the top executives of the companies are doing. A man by the name of Franklin Reines (I’ll just apologize in advance for the spelling) who was a big Clinton budget guy left Fannie in 2004 because he was overstating earnings within the company by $6.3 TRILLION dollars (holy Moses is right!). Yet the case against him was settled for $24.7million dollars and all charges were dropped. Just to make sure justice was upheld, however, he also had to give back stock that he bought with $77 that was only worth $9, and had to pay an additional $2 million for an insurance policy…the only problem with that was that it wasn’t coming out of his own pocket, it was out of…YOUR pocket. $1.8 million was given to financially strapped individuals…except again it isn’t coming out of his pocket because he sued Fannie for it! What he gets in return for giving up all of this is $5.3 million in unspecified benefits, and a $114, 000 pension, and free life insurance for him and his wife until they croak…isn’t justice awesome!
Then we have another CEO from Fannie by the name of James Johnson, this guy was Obama’s Vice Presidential pick strategist, this guy got $1.9 million after cooking the books all in the upstanding quest to get a bonus every time-even when he didn’t make the grade for receiving a bonus. Now he gets big benefits in another office, though he had to reimburse Fannie for less than half of what he swindled from them.
Andy Fasto was a CEO from Freddie, had the same story as the Fannie pair, managed to get a good $37 million. Jeanie Gorlick who is apart of this as well was key in building up a wall to prevent communication between the CIA & FBI so that it was more difficult to charge the two companies on anything. You think these are bad…we aren’t done yet….
Recently three top Fannie executives left or retired from the company and they have some benefits that they are going to be receiving as well. Fannie CEO Daniel Mudd is to receive $8.4 million for compensation, Fannie’s former Chief Executive Richard Syron is going to get $15.5 million though it is said he might give up $8.8 million in a cash grant (he’s too kind!). Fannies former Chief Business Officer is due to get $1.6 million as soon as he’s terminated (we wouldn’t want to toss him out empty handed now would we).
This is some of the stuff that’s been going on behind the scenes, but before I can continue to describe just what caused these companies to fail (though I think we’re seeing some pretty good reasons right now) I need to get into AIG and the other companies first.
Lehman Brothers Gone, Merrill Lynch Taken Over, AIG Saved: On Monday along with everything that was going on with Fannie and Freddie the company Lehman Brothers Holdings Inc. was filing for Chapter 11 (I’m sorry but I can’t explain anything about this) bankruptcy protection, in an attempt to sell off key business units. Associated Press © 2008.
At the same time the bank Merrill Lynch was taken over by the Bank of America. This deal between the banks would create a banking company bigger than Citigroup Inc, the largest bank within the US, at the same time Merrill Lynch is the largest brokerage firm. The Bank of America chairman CEO Ken Lewis saw this as a HUGE opportunity(who wouldn’t?!)
Then we come to AIG, the world’s largest insurer, was beginning to tank on Monday. In an attempt to save AIG the governor of New York David Paterson allowed the company to get into one of its subsidiaries for an emergency loan. As stocks fell down to 60%, or $20 billion dollars AIG’s shareholder value was destroyed. By this time the Secretary of the Treasury Henry Paulson was as adamant as the Bush administration about not bailing out any other companies on Wall Street. As Paulson put it he “never once” would make the American people save these companies. Come Wednesday, though, stocks were beginning to fall from an opening of around $3.82 to $2.15, then back up to $3.12 by 8:48am Mountain time. To save the day out came the government scooping up AIG into the same boat as Fannie and Freddie to prevent what many believed would be an unstoppable collapse of the financial sector, and worse the US economy; the announcement came on the local news at about 10:00pm Mountain time. Needless to say I died a little on the inside.
Okay, so this is all really confusing…at least for me. So I am going to use a story-while giving the full and complete credit to Glenn Beck for coming up with it on his Radio show, to explain. The way he explained it, though good, has a few things in it that I’m not going to put in here…just a little racy I think. Alright so let’s see if we can straighten out what’s been going on, on Wall Street.
Okay so you are living in a nice neighborhood, you are living in a fairly average sized house with a neighbor who has a house the same size. So you and your neighbor, both, are smart people. Then one day your neighbor leaves and comes back, and suddenly your opinion of him is beginning to fall a little. He went to Vegas and got married to…wait for it…Lindsey Lohan. Somehow you don’t think it’s going to work out, but your buddy assures you that everything is going to be okay.
Because your friend now is married to Lindsey Lohan he decides that he can upgrade his living a little, and he goes out and knocks down his house before rebuilding a bigger better one. Now you’re curious about how he can possibly afford this house, I mean yeah Lindsey’s rich but is she really THAT rich? So you ask him if he can really afford the house, and he tells you “Man do you have any idea just how drop dead gorgeous she is, she’s just something to look at!” Uh-okay. The conversation continues and soon you find out that Lindsey has a big-I mean HUGE collection of shoes. She loves shoes and she will spend anything to get herself any pair of shoes she wants. She even goes so far as to go out and buy a new pair of shoes or two every day. Soon you are just wondering how they afford those shoes, and you mention this to your friend who asks his new wife. She assures him that it’s okay because she’s “charging them”. You (and I for that matter) both know that this isn’t a good idea, and you say as much to your buddy who again says. “Yeah but she’s something’ to look at!”
After a while Lindsey has bought so many shoes that they have taken over the house to the point where your buddy is living in his vehicle while Lindsey is in the house with her shoes. Like any good friend you visit him occasionally but he still has it all right? Big house…that he doesn’t live in, lots of nice shoes…that he doesn’t wear because…well he’s a dude, and a wife to look at…livin’ the big life-yep. You know this can’t last so you go straight to Lindsey who tells you simply “The shoes are going to increase in value. We’re going to be VERY rich because these shoes are going for $4,000 a pair right now, but they’re definitely going up right now.” Meanwhile you’re thinking to yourself, uh…no. Those shoes ain’t worth ten bucks out of my pocket, whoever would purchase these for that much is an idiot…wait-Lindsey is buying these shoes…. “They are more than that, they have big brand names all over them!” Lindsey protests, but still you just shake your head she has no idea how the shoe market works. So the happy couple simply thinks you’re stupid because you don’t get it.
Finally you get your revenge (or rather you get to watch their world of shoes burn to the ground). The shoe store decides that it wants it’s money, it wants what Lindsey’s been charging. Nobody’s buying stupid shoes anymore, and they are definitely not buying them for $4,000. Now your neighbor and his wife Lindsey are panicked because they can’t possibly pay for all of those freakin’ shoes. Just when the problem looks insurmountable, however, the Monopoly Man comes over and begins throwing his money all over the place(you know that fun colored stuff that makes you rich in a totally fictional way?). He gives Lindsey all of this Monopoly money and says “here I’ll bail you out.” Happy as a clam Lindsey runs out and continues buying shoes. Now you think you are going to have a brain aneurism. Why is she buying more shoes! They are worthless! But, as usual, you buddy has a solution. “Monopoly money is good, see it’s green, and yellow, and orange, and blue, and it supports gay rights…you know rainbow colors!” You are beginning to wonder if there’s a sharp corner somewhere that you can bang your head on…it would be much less painful I’m sure. All the while Mr. Monopoly just keeps throwing out more fun money.
In the shoe market, however, life isn’t going so good. The shoe stores are getting ready to collapse so they run over to the Shoe Reserve and plead their case. “Our biggest Shoe company is about to fail…HELP US!” Not wanting to let the big shoe store to fail the Shoe Reserve calls up the Monopoly Man and tell him that if he will back up the shoes with the Monopoly money then they will take all the shoes and put them into the shoe reserve. Everyone thinks that’s awesome, I mean where better to put shoes than in the Shoe Reserve? Lindsey and all of her shoe debt is cleared and she’s free to learn her lesson and never do it again. The problem is Lindsey has a terrible disease called the Shoe disease and goes out and continues to buy shoes.
Lindsey doesn’t see a problem with this, she can get all the shoes she wants without a problem, and she thinks that no one can get hurt here. Wrong, let’s say-if you’re a woman (if not you now have a wife…congratulations!)-you decide you want a pair of shoes for yourself. Nothing fancy just a pair of tennis shoes to go jogging in. The only problem is that you can’t take out a loan from the bank for shoes because all of the Monopoly money is tied up in the Shoe Reserve. Only the big buyers like Lindsey can get to any of these shoes, so that people like you are going to have to be stuck wearing holey sneakers because there’s no money available for small time buyers.
This is-in essence(you know minus the shoes)-what happened with the big companies on Wall Street…hope that cleared something up. (Credit of this story belongs to Glenn Beck).
Blame Game: Now you’re probably beginning to wonder who we can correctly point a finger at so that everyone knows who caused this mess in the first place. First we have to go back to the Community Reinvestment Act started by President Carter in 1970. The idea was to make people like minorities, and poor people able to get loans from banks. In a study by the Boston Federal Reserve in 1992 suggested that there was racism going on within banks. For instance a black man and a white man went in to get a loan for a house for $80,000. The black guy doesn’t get the loan even though he has a net worth of $10 million, it was assumed that because a bank wouldn’t give a loan to a black guy with that sort of net worth it had to be racism. Needless to say it was rushed into Washington as fast as the poller’s legs could carry them, and Congress grabbed it.
Within the space of a couple of months another University came forward to point out some errors made within the raw data. Apparently the black guy who had $10 million in assets actually only had $1,000 in assets (you’d think someone could tell the difference between three zeros and what…five zeroes…if they can’t count maybe they shouldn’t be in such high offices. Just a thought). Because no one looked back and revised it, or ignored it if they noticed, it was just sent right over to Congress.
In 1992 more “discrimination” was documented when there was none. Banks were being accused of being racist because they had minimum lending requirements in place. So they could have a minimum of $10,000 because there’s no money for them at $2,000, or $20 thousand because there wasn’t any money in $10,000. Because of this they were being called racist (seems smart to me). If they asked people to verify their income they were racist. Due to the decision to revise the Community Reinvestment Act was put on the table.
The CRA entered the picture as a way to keep banks from being racist. Banks now had to verify to the bureaucracies that they weren’t being discriminatory, even when individuals simply raised their hands saying “Uh-excuse me CRA…I’m black…and I’m being hated on by the banks…yeah.” May god help the Bankers souls. ACORN-a community activist thing…began saying that things like criteria on income level, income verification, credit history, and savings history were outdated and unnecessary was discrimination. Feeling attacked, or flat harassed, Congress passed the law of sub prime mortgages. Now those who didn’t qualify 30 year fixed mortgage could still get into a home, and the banks were no longer able to be discriminatory. In 1994 there were less than 5% mortgages that were sub prime, the same poll taken again in 2006 showed that it had risen 15 percentage points to 20%. For those who don’t get what a sub prime is (I didn’t) it’s basically a lower mortgage that puts people in homes…you know serves the American Dream? It was forced upon every bank on every loan, and if it wasn’t followed through then you were classified as a racist bank or loan office. Worse if ACORN decided you were racist they would open up a branch nearby and in essence run you out of town by preventing you from defending yourself, as well as disabling your ability to merge with other banks. Because you didn’t do the low interest rate, or didn’t allow a mortgage without verification you were taken to task by Washington.
When J.P Morgan and Chase merged together the first thing they did was pay a huge donation toward ACORN, how better to protect yourself than by paying off those who are after you? Then the CEO of Freddie Mac made mortgage down payments more affordable as well as dropped down payments to all time lows. Everyone was thrilled.
President Bush, not to be left in the dust on the issue, sought to initiate a law that wanted to enact a zero down payment plan which took out the 3% down payment minimum for single family mortgages. Though Obama wants to see affordable housing for every individual that wanted it…you know ‘cause it’s a right….riiiiiight….
2007 brought out Barney Frank who was deeply disturbed by the discrimination within the mortgage grants in Boston saying that they must be addressed. At the same time Chris Dodd took credit in helping pass the Community Reinvestment Act along with the Reverend Jesse Jackson. There seemed to be only one person who was worried about what was going on. In reply to a question asked by Larry Kudlow, John McCain said this about that: “Absolutely there were people that predicted that the Community Reinvestment Act might lead to reckless and unsound lending practices just short of a fill in the amount of I don't like to use the word quota, but certain percentages of a home of the bank's lending practices, it has to be reexamined. It has to be judged by its effect. We need to find out how this particular system affected the overall insolvency of the subprime lending issue and I think I'm not saying it needs to be repealed but it certainly needs to be examined and what its effects have been and we'll be able to figure that out.” This while Nancy Pelosi and Harry Reid want to create yet another government agency, this one to monitor mortgage companies, banks, and loan companies even more than it had ever been before.
Going back to Clinton’s presidency it was he who brought the Community Reinvestment Act back and boosted it’s power even further. These sub prime mortgages that were high-risk and are now held by many as greedy and worse “predatory”. These sub primes were on the market and were being traded around on Wall Street, this was doomed to be a train wreck from the beginning. It was also the Clinton administration that mismanaged the quasi-governmental agencies that began taking over the real-estate market in the US.
In 1999 a man (previously mentioned) that came fresh from the Clinton administration-Franklin Raines-took control of Fannie Mae using it for many (also previously mentioned) of his personal money needs. This all before he left in 2005. He wasn’t the only Clinton guy to get into all of this. Janet Reno’s aide Jeanie Gorelick also managed to get off with some $75 million.
Before Raines was kicked out he had managed to gone over to talk to a sub prime giant company Countrywide Financial, a company which ended up having to be saved from bankruptcy by Banks of America. During this same period Clinton was pushing for Fannie and Freddie to buy mortgage from low income households. This corruption is getting ready to really cost the taxpayers some big money, and the funny thing is…no one is calling for these individuals to get roasted like their counterparts at Enron did during that scandal.
Bailout, Yes or No?: Here’s the truth on my opinion on these bailouts. I don’t like them; I don’t think the government should have run to the aid of these companies because they were the ones that were stupid. I say out with the bad and let’s bring on the good guys. Besides this we are running up an incredible bill here on the credit of the US. I just plain don’t trust the government to do something right, after all they screw up so much stuff. Besides that I don’t want to see the American taxpayers get stuck with paying off these companies and those crooks that got them into this in the first place. But it has been brought to my attention by Glenn Beck(yeah I know I am a radio buff) that perhaps these bailouts are a necessary evil. Now I’m not just saying this information comes from Glenn, in fact I also am getting this from Mitt Romney as well. So here’s what they have to say.
Two days after announcing that they were bailing out AIG the Officials made an announcement that there would be some changes to their original plan. Now they are looking to allow the purchasing of car loans, credit card debt, and other devalued assets as well as the mortgages that could end up forcing the price tag on this lovely package to shoot up to $2 trillion. (Don’t have an aneurism, please, just stick with me.) So with all of this here is what makes the bailout a potential need.
Last week Ben Bernanke and Henry Paulson(you know the Secretary Treasury guy) were trying VERY hard to bail out everyone. They were trying to build up a firewall without putting out the all too important figurative fire. After trying to throw up so many things that were meant to stop the meltdown nothing worked and the problem just kept getting bigger. These two were in the room with a bunch of democrats and republicans who are trying hard to just figure out what to do.
The big problem was that Wednesday night the entire market froze up, with everything beginning to collapse around the ears of the Wall Street guys. It was like a replay of October 30th 1929, the day after the stock market collapse with stocks shooting up and down and no one really able to control it. So Bernanke-a guy who is an expert on the Great Depression-comes into the room and informs the room that the credit lines in the financial system have gone cold; they aren’t moving period. It was this close from totally ending the ebb and flow of lending within the United States, and people were running out of the country with insanely huge amounts of money.
Bernanke made it clear that if this wasn’t taken care of the complete failure of countless numbers of businesses, including those small mom-and-pop businesses would be wiped out within days. What was equally upsetting was that those BIG businesses that the US runs on were going to all out collapse and lay in ruins at the bemused feet of those in the room. When those who were within the meeting got out they were looking weak and shaken, Chris Dodd summed it up by saying “it was as sobering a meeting as any of us have ever attended in our careers here.”
This is all happening behind the curtain while we are all waiting for the show. What they are trying to do in Washington right now is slow down the crash. We are going to crash, but depending on what those in Congress and the Senate decide we might crash a little softer. Instead of slamming headlong into the cliffs we’re going to land in the lake. It’s going to hurt, it isn’t going to save everything, but rather than letting the entire thing to go down in a ball of flame we’ll sacrifice some to save the most important portion of the economy. Unfortunately we have to let some of this stuff burn to the ground, just like in a forest fire, you’ve gotta let the fire clean up the earth, but you also have to protect the important buildings in the nearby town.(Thanks again to Glenn Beck for such a useful metaphor!). You won’t be keeping every building safe, you’ll definitely lose homes, businesses, but those important can’t-lose buildings like the hospital will remain protected. We’ve gotta go for the lesser of two evils. If we don’t let it go out and burn down something then it’s going to burn down everything.
If any good news can come out of this it has to be that if those weasels in Washington can keep their greed in check then we might be able get through this looking like holey-cheese but without totally disintegrating ourselves. Basically what needs to happen is only those who are behind this whole mess-aka Mr. Raines, etc. should get roasted-THEY should be paying this not us. There are actually some individuals-you know the good guys-in Washington who want to keep the payment for all of this away from the American people, they want to see the evil people who were crooked paying for their mess.
However, at the same time-as of yesterday-the weasels are beginning to prevail. They are trying to shove all of this extra stuff into the bill, or law, or whatever, that they are trying to pass up on the Hill. They want to expand the loans and money stuff that’s covered in this bill from just mortgages and real estate to credit card debt, and a few other things that I mentioned momentarily above. That can’t be allowed to happen. In essence if this passes the way it is it will change our entire financial system, and it will bleed into the government as well, into a socialist system. People we need to stop this. We can-maybe-accept the bailout, but we can’t let our country be changed away from the democracy that it is. If you want to stop this I encourage you to go over to your phone and call your Senator or Congressman. Please help us stop this!
So Here’s the Scoop: This is most of the information that I could shove into this without totally overwhelming you…well that’s not true…but I hope no one suffered from a brain explosion. If you did I’m sorry, though you might not be able to read that I am at this point. Oh well, I warned you. If more information comes up I will bring it to you, for now…try not to scream. Again don’t forget that you can comment on this, I readily invite every comment from anyone. Thanks for reading, and again try not to have a panic attack.
Chene’
Works Sited: A friend who read the first issue suggested that I should put a way to show where I got my information from-you know a sort of Works Sited page, so that everyone can see what I’m talking about. She also suggested that I should put statistics in this, I think these links should cover it. Please feel free to look into all of these for yourselves.
Glenn Beck Transcripts: www.glennbeck.com
http://www.hometownannapolis.com/cgi-bin/read/2008/09_14-61/BUS
Alan Zibel AP Business Writer-Sept. 14, 2008 Answers To Your Fannie & Freddie Questions
http://www.creativeinvest.com/fnma/index.html
Fannie Mae & Freddie Mac and Corporate Welfare
The Real Culprits in This Meltdown Mon. Sept. 15, 2008
By Glenn Beck Wed. Sept. 17, 2008
1 comment:
You got this one right. This isn't an example of Capitalism failing but rather one of socialist intervention causing disaster. Liberal theology is based around "fairness" rather than anything that actually works in the real world.
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