Does Wall Street have come culpability in the financial meltdown we suffered? Of course they do. But so far, Democrats have chosen to focus only on that and ignore the culpability shared to an even larger degree by government.
Slipping through the news cycle yesterday at about 5pm eastern was this little jewel:
Freddie Mac is asking for $10.6 billion in additional federal aid after posting a big loss in the first three months of the year. It’s another sign that the taxpayer bill for stabilizing the housing market will keep mounting.
The McLean, Va.-based mortgage finance company has been effectively owned by the government after nearly collapsing in September 2008. The new request will bring the total tab for rescuing Freddie Mac to $61.3 billion.
The fact that Freddie Mac and his ailing sister Fanny Mae have been hemorrhaging money since September 2008 with no end it sight didn’t stop them from paying retention bonuses to their officers even while private payments such as that were vilified and demonized.
Another bit of fiction that Democrats in Congress like to use is that both are “quasi-governmental” entities, or, in fact, really private institutions. In fact they’re not at all:
As the CBO notes in a recent background paper, the standards for when to include government-sponsored entities in the budget go back to the 1960s, when a Presidential commission laid out a set of questions.
To wit: “Who owns the agency?” (In the case of Fan and Fred, taxpayers.) “Who supplies its capital?” (Taxpayers.) “Who selects its managers?” (The federal government.) And finally, “Do the Congress and the President have control over the agency’s program and budget, or are the agency’s policies the responsibility of the Congress or the President only in some broad ultimate sense?” (The feds have control in every sense.)
All that happened in September of 2008 is Hank Paulson put them in conservatorship. In fact, Freddie and Fannie alone will account for up to $391 billion in bailouts over 10 years according to the CBO. So why are the Democrats pointedly ignoring these two institutions? Reread the CBO background paper, especially the part about who selects the managers and who has control over the agency’s program and budget, not to mention control over it’s policies.
Ezra Klein tries to wave it all away as he delicately attempts to explain how Freddie and Fanny are really beneficial to society as a whole and not financial black holes. But now matter who hard he tries, he can’t quite avoid the truth:
The mortgage giants, slightly confusingly, do not sell mortgages. They buy them from the banks that sell them. About 90 percent of them, to be precise. They do that to make mortgages — and thus home ownership — cheaper. That’s fine. If the country wants to encourage home ownership as a policy, subsidizing banks so they can offer better mortgage terms is a sensible way to do it.
I assume he typed that with a straight face. Uh, no Ezra, that’s not the way to do it. That “policy” (Community Reinvestment Act) which was hardly endorsed by the “country” is precisely what incentivized sub-prime mortgages (you sell ‘em, we’ll buy ‘em no matter how bad they are) and the eventual collapse. So that makes it anything but “sensible”.
Klein then attempts to further the myth of “quasi-governmental” status for the two institutions and, in a rather amusing and round about way, admits they were the cause of the whole thing:
Rather than using taxpayer dollars to subsidize mortgages, they were borrowing money very cheaply because their quasi-governmental status assured the market that there’d be a taxpayer bailout in the case of any sort of collapse. That is to say, their business model relied on markets ignoring the risk of their activities. And then, because they were private companies with shareholders to please, they also got into slicing and dicing mortgage packages to make money like an investment bank rather than a housing policy. In theory this should’ve worried the markets where they borrowed their money, but again, the government backstop saved them. Forget too-big-to-fail. This was not-allowed-to-fail.
Their “business model” relied on markets ignoring the risk of their activities? No. Instead their policy (CRA) directed that Fannie and Freddie ignore the risk an buy these mortgages that were a bad deal. In effect, by direction of a policy that encouraged and incentivized it, mortgage companies complied with the CRA and Freddie and Fannie bought the bad paper.
Klein denies this had anything much at all to do with the collapse of the mortgage market – even with $391 billion in bailouts staring him in the face. The most he’ll admit too is they were “part of the problem.” And that is at least better than the Democrats will do.
But he ends up doubling back on himself without seemingly knowing it:
Of course, you don’t necessarily need to eliminate Fannie and Freddie. You could solve the problem by fully incorporating them into the government and making them a straightforward housing subsidy rather than a stealth housing subsidy hidden within a profit-maximizing company. But it’s not clear that bringing more major institutions under the control of the government is going to be popular, either. So what do you do?
Well, it’s hard to say. Procedurally, Democrats think that the Fannie and Freddie question is a housing market question and should be dealt with in the context of a major housing-policy bill. What that bill will do, however, is anyone’s guess. And that’s pretty much where we are on Fannie and Freddie.
As pointed out, they both are “fully incorporated” into government whether that’s technically true or not. They’re certainly not private, and they’ve never really been “quasi-governmental”. They’ve been organs that execute government policy, no matter how absurd or costly. And recommending the two institutions be handled in the context of a “major housing-policy bill”, further cements the point that they’re part of the government that executes policy as it pertains to the housing industry.
And by the way – the payments to these two institutions are being kept “off the books” – meaning they don’t have to be accounted for in budgeting.
Until and unless these two institutions are addressed within any “comprehensive” financial reform bill, the bill isn’t worth the powder to blow it to hell. And when Sen. Chris Dodd (D-CT) announces, “we’ve ended the ‘too big to fail’ debate. So no longer do I expect any argument to be made that this bill exposes the American taxpayer” feel fully entitled to shout that which fans normally shout at officials at sporting events who get the call wrong.
[ad] Empty ad slot (#1)!
Thank you for your service. Now hush up and go home Sen. McCain:
“Obviously that would be a serious mistake…at least until we find out as much information we have,” McCain said during an appearance on “Imus in the Morning” when asked whether the suspect, 30-year-old Faisal Shahzad, a naturalized American citizen from Pakistan.
“Don’t give this guy this Miranda rights until we find out what it’s all about,” McCain added.
Really? Is that the way it works now?
You may not like the law, Mr. McCain but that doesn’t mean you can selectively apply it – the SCOTUS has been very clear about doing such things.
Of course, you have to remember, this is the same guy that was so concerned about campaign financing that he sponsored a law that trashed the 1st Amendment and then claimed he’d rather have clean elections than free speech.
[ad] Empty ad slot (#1)!
Editor and Publisher: “Sky isn’t falling as fast as you might think; ignore chunks coming through ceiling around you”
The newspaper industry loves dramatic headlines. At least, until they’re looking at their own problems. Then it’s time to look for a silver lining, even if it’s a pretty tarnished one. So here’s the headline for the Editor and Publisher article that tells us that circulation for newspapers, which fell 10.6% last year, fell again this year by 8.6%:
Like Newspaper Revenue, Decline in Circ Shows Signs of Slowing
I guess the good news is that instead of plunging to oblivion immediately, they’re merely on a rapid glide path towards it, with no noticable prospect of reversing course. For any other industry or trend (e.g. global warming), I’m guessing we would see somewhat more dramatic headlines.
Newspapers are high-volume businesses. As a whole lot of newspapers in medium-to-large cities discovered in the last twenty years, it isn’t necessary to lose all, or even most, of your subscribers to become non-viable as a business. A certain reasonably sized subscriber base is required to sustain a large staff, a huge printing press facility, and a distribution network.
So how much more loss on top of the 20% in the last two years will it take for the major to start imploding? I don’t know, but it’s hard to see how they can tolerate more than four or five more years of that type of decline with anything like their current business model.
But they’re determined to find good news:
And newspapers — including some that reported big declines in print paid circ — showed significant growth when print and online audiences are combined.
OK, but for any major newspaper that doesn’t have “Wall Street” in its name, there’s no direct revenue from online “circulation”, and any advertising money from an on-line presence is a small fraction of the advertising revenue in print publication. Nobody except Google has figured out a way to turn online content into significant revenue, and it seems pretty unlikely that stodgy newspapers will be the ones to do it.
For those just tuning in, the basics for these guys are absolutely horrible. Traditionally, the biggest chunks of their print advertising revenue include:
– Movie listings
– Automotive dealership ads
– Retail chain ads
Now lets take these one at a time. Classifieds have almost been destroyed by Craigslist. Teenagers would no more think of buying a newspaper to check movie listings than they would consider buying a leisure suit. Car sales are down, we don’t know when they’re coming back, and that entire industry is going through a re-structuring. Retail is in turmoil, as shown by the vaporization of Circuit City, Linens and Things, Media Play, S&K Menswear, and others.
It looks unlikely that any one of these four will get significantly better as revenue sources for newspapers. The top two are gone for good. I suppose the last two might stabilize if the economy improves, though I certainly would bet on merely slower declines instead of increases.
Newspapers also have the same problem as broadcast news programs: an aging customer base. Young people are shifting their reading habits away from print publications in general and newspapers in particular. This has been going on a while, and in the absence of all other factors presages a decline to irrelevance for print pubs.
That doesn’t even touch on the ongoing drop in quality and increase in bias many of us see in newspapers. I used to occasionally actually put money in a rack for USA Today. No more. I see it in hotels a few times a year, and it’s just awful. I’m considering stopping reading it even when it’s free because it’s just a waste of time.
It’s interesting, in fact, to note that the only major newspaper with a small increase in circulation was the Wall Street Journal. I don’t consider the WSJ to have gold-plated quality, but they at least try to do some in-depth work and not be totally blinded by their biases.
As a counterpoint, the very liberal San Francisco Chronicle has the largest percentage drop among the majors, down 22.68% in one year! Another year or two like this, and San Francisco will be left with no significant daily newspaper. That is, unless the Chronicle just does the same thing as the other majors in the Bay area and combines with the San Jose Mercury News:
There was a new kid in the top 10 as the San Jose Mercury News posted a weekday circulation of 516,701 by incorporating the Oakland Tribune and Contra Costa Times as editions of the Mercury News.
For those of us who love to beat up the majors for incompetence and biased reporting, take note: indulge while you can. With numbers like these, who knows how long it will last.
Over at Intrade the contract for passage of the healthcare reform bill has dropped from 84.7 to 77 in the last two hours.
Of course it took a steep dive a couple of days ago and recovered, so it might not mean anything. I guess we’ll know in 36 hours.
*** Update 2:45 PM CST ***
Three hours later and it’s back around where it started. I guess Pelosi got over whatever snag came up. Even though the counts don’t show her with the votes yet, the people putting down money clearly think she’s going to come up with them from somewhere.
From Lord Monckton, as he takes apart climate alarmists:
The fact is, they’re crooks. That’s what they really are. I call them the traffic light tendency. They call themselves green because they’re too yellow to admit they’re really Reds.
It’s at about 8:25 in the video. But watch the whole thing, even though it’s about half an hour. It’s worth it if you want a no-holds-barred slamming of the climate Cassandras. Charts and graphs included, no extra charge.
Kathryn Jean Lopez frets about legalization of marijuana at The Corner:
Do moms on the Right want legalization? And are their children a driving motivator?
Even if you believe there’s a high chance that your teen will try or use pot, don’t you hope he doesn’t? And aren’t there decent reasons for that? That may not be the final determinant on what your position on legalization is, but it is so … right?
I would hope that any freedom-oriented thinker would understand that “what I want my children to do” is a completely separate subject from “what I think should be legal”.
No, I don’t want my teens smoking pot. Or smoking cigarettes. Or drinking.
But I don’t favor prohibition of alcohol. We tried that one. I don’t favor prohibition of cigarettes either; I think it would be even worse. And both of those substances are arguably more addicitive and damaging than pot.
Using protection of our children to justify controlling the behavior of adults is anti-freedom. We all make fun of it when the left does it. It’s no less silly when social conservatives do it.
[ad] Empty ad slot (#1)!
The FTC says we bloggers are untrustworthy folks who might, *gasp*, try to influence people’s opinions for nefarious reasons, and not divulge all the payoffs, bribes, “promotional samples”, and other stuff we get that obviously drives us to be such unscrupulous shills. So I guess I better come clean about things for my prudent and judicious overlords at the FTC.
I was at Costco last week and they gave me a free sample of some cheese bread. I didn’t like it much. But they also gave me a sample of some powdered Acai berry kool-aid type stuff, and it wasn’t bad. Full disclosure: it was totally free. Just like samples at Costco always are, but I mention it just in case the FTC needs to know.
I got a new voter registration card, and I’ve been meaning to blog about this. See, we changed our land line to a mobile number, and that apparently triggers something at the election commission in Nashville to assume that we had moved away. So we had to fill out some forms telling them otherwise, and get a new card. But it was free, and I got it in the mail a couple of weeks ago. Do I have to divulge that the voter registration card was free when I talk about it? Better not take any chances.
I’ve discussed before how AT&T sucks toxic waste as a company. I have seen no improvement since I made that post. But I should disclose that they give me free stuff every month, according to items on my bill which have zero cost. Well, they say it’s free, though my $150 bill suggests that I’m paying for it in there somewhere. My son just got a free phone from them, because his old one broke, but we had to sign a two-year contract extension to get it, so I’m not sure if that counts. I guess I should consult a lawyer who specialized in FTC rules. Anyway, AT&T sucks toxic waste, and I’m pretty sure I don’t say that because they supposedly give me free stuff, but just in case I need to disclose any of this, I’ve now done so.
Do I have to disclose it again next month when I get my bill with the zero cost items? Guess I need to talk to my FTC law specialist on that one too.
I got a free brownie from my son last night. I was the best brownie I’ve ever eaten. Honest, and the fact that my son produced it or has nothing to do with that assessment. I think it’s because he used half-and-half instead of water in the mix. Anyway, I got it for free, and I’m telling you it was great, so this is my disclosure about it.
Oh, I almost forgot the most important disclosure! Two weeks ago, a wild turkey was in my carport. He seemed to be enjoying himself, so I parked in the front yard and left him alone. He left behind this beautiful tail feather.
I put up a Twitter post about it, so I guess I need to disclose the tail feather because that influenced my decision to put something on the Internet about the turkey.
In conclusion, let me say that even though I have a very large turkey living in my back yard, I think the FTC bureaucrats who created this stupid disclosure rule are even bigger turkeys.
I am still allowed to say that, aren’t I?
I just watched a video in which House Republican Whip Eric Cantor appeared with one of his Democratic colleagues from Virginia to discuss healthcare. You can watch it here if you like.
Though I can tell you right now that there’s not much point to it. It consists virtually 100% of empty, meaningless politician-speak from both congressmen. Despite some decent attempts on the part of the interviewer to get them to answer some tough questions, they both just dodged them and mumbled platitudes about “educating voters” and “the status quo is unsustainable”.
Educating voters isn’t going to do a damn thing. Voters are sick to death of Washington telling them what to do. Democrats in Congress (and many Republicans) insist that there be a mandate to buy health insurance, and I think they have vastly underestimated the pushback they are getting right now and how much worse it would be if they actually passed it. Any bill with a ghost of chance of passing also has new taxes and new spending, and voters are (1) not fooled by any shell games claiming otherwise, and (2) profoundly sick of both taxes and spending.
Saying “the status quo is unsustainable” is pointless because it says absolutely nothing about whether any of the current proposals would make the system any more sustainable. Given the $47 trillion Medicare and Social Security already has in liabilities, creating another entitlement to increase that amount looks like the silliest possible response.
I expected such empty blathering from the Democrat. Any Democratic member of Congress is caught right now between a hard-left leadership who want government control over when people go to the bathroom and the Blue Dogs who know they’ll be looking for another job if any healthcare bill with a lot of government interference is passed. Not to mention a president who can’t seem to make up his mind on what he’s willing to settle for on healthcare, and whose only strategy is to flap his gums.
But have the Republicans learned nothing from 2006-2009? Has the Tea Party movement made no impact on them? Do they not sense the rising anti-government attitude in voters? Are they so incredibly clueless that they can’t learn the lesson from Reagan’s landslide and the 1994 takeover of Congress?
Look, you idiots: You can win big when you strongly advocate smaller government principles. When you don’t, at best you tread water, and at worst you get your butts kicked.
Watching Cantor pour out the same old politician’s blather was painful. Based on that one video, I never expect to support this guy for anything. And he’s part of the GOP leadership, supposedly the best they’ve got. Well, if he’s one of the best, they’re still as lost as they were in 2006.
I see many signs that 2010 could be a landmark year. Two months ago, I summarized Obama’s failings to that point, and since then he’s racked up scandals with his czars, seen his buddies at ACORN exposed as the criminals many of us thought they were, and had his make-nice efforts toward Iran shown to be naive and pointless.
But absent any Republican leadership on a real change in direction, none of that will make a big difference. Oh, I think the Democrats will lose a fair number of seats in the House in any case, because of depressed turnout among Democrats in marginal districts. The Republicans may well pick up three or four Senate seats too. But without a clear message concerning their desire to trim the size, cost, and intrusiveness of government, they will gain no loyalty or long-term support from those people who have finally reached their agony threshold on big government.
They’ll just drift for two years, using the same strategy that got the Democrats in the White House, which is to hope voters are so sick of the other side they will vote for a change, any change. And, of course, even if that works, they won’t do anything about reducing the size and scope of government, hoping the whole debt mess doesn’t finally reach critical mass on their watch.
With a clear message, I believe the GOP could do a rerun of 1994. But I don’t know a single person among them capable of carrying the banner for that message. It sure as heck is *not* Eric Cantor.
You may remember that in my last post about ACORN (about the Census Bureau ending its relations ship with ACORN) I ended it calling for a complete defunding of ACORN. I’m pleased to announce that the Senate has heard me.
OK, I know better, but I’ve always wanted to say something like that – there, I’ve got it out of my system. If they won’t listen to a town full of tea partiers, I doubt they’re listening to me.
My guess is the third pimp sting in NYC did ACORN in. It becomes much harder to claim the people telling the faux pimp and prostitute how to scam the loan industry and the IRS weren’t trained to do so when they’re the third group to do it.
The Senate voted Monday to block the Housing and Urban Development Department from giving grants to ACORN, a community organization under fire in several voter-registration fraud cases.
The 83-7 vote would deny housing and community grant funding to ACORN, which stands for the Association of Community Organizations for Reform Now.
The action came as the group is suffering from bad publicity after a duo of conservative activists posing as a prostitute and her pimp released hidden-camera videos in which ACORN employees in Baltimore gave advice on house-buying and how to account on tax forms for the woman’s income. Two other videos, aired frequently on media outlets such as the Fox News Channel, depict similar situations in ACORN offices in Brooklyn and Washington, D.C.
The Senate’s move would mean that ACORN would not be able to win HUD grants for programs such as counseling low-income people on how to get mortgages and for fair housing education and outreach.
The 7 voting against were 6 Democrats and 1 Socialist:
* Dick Durbin (D-IL)
* Roland Burris (D-IL)
* Robert Casey (D-PA)
* Kirsten Gillibrand (D-NY)
* Patrick Leahy (D-VT)
* Bernie Sanders (I-VT)
* Sheldon Whitehouse (D-RI)
Apparently what ACORN has engaged in is all right with them.
I’m surprised, given the present atmosphere in DC that a real, honest to goodness bi-partisan vote could be made – but I guess the third video is a charm.
ACORN has sucked down 53 million tax payer dollars since 1994. My guess is they’ll dissolve ACORN, wait a few months and then reinvent themselves as some new group named after a nut. And as an aside, I have to wonder if the IRS will now review the tax forms submitted with ACORN as the preparer – with the advice they were handing out in Baltimore, DC and NYC there may be enough in back taxes and penalties to pay for all the uninsured and save ourselves from Obamacare. The silver lining in all of this.
Oh who am I kidding – I’m dancing in the street over this bit of misfortune and, hopefully, the demise of one of the most corrupt taxpayer supported organizations out there.
So long ACORN.
[ad] Empty ad slot (#1)!