Monday, October 12, 2009

U. S. Government Supports More Risky Business, Ignores Private Sector Solutions and History

Deja Vu All Over Again.  Or, here we go again.  Headline in Wall Street Journal, Front Page September 28, 2009:  "$35 Billion Slated For Local Housing".  Barney Fife (oops, Frank, of the House Financial Services committee) and his henchmen at ACORN, Fannie Mae and Freddie Mac put this nation and the entire financial organization of the world at risk.  He starting small by threatening banks to put up money so poor folks who couldn't afford to could "buy" houses.  What exactly is the definition of "sub-prime"?  He expanded that concept until Fannie Mae and Freddie Mac were guaranteeing a trillion or two dollars worth of these sub-prime and marginal mortages. That expansion failed misearbly AND BARNEY BLAMED EVERONE BUT THE CAUSE: BARNEY FRANK and the U. S. is in a crippling recession  with 17,000,000 unemployed by some accounts and in hock another $10,000,000,000,000 give or take.  Now that failed, President Obama is "close" to commiting another taxpayer $35,000,000,000 to help those stupid "beleaguered state and local housing agencies" by giving them more dough to blow.  These local government-operated housing finance agencies, such as ACORN's, need funding for these sub-sub-prime loans.  So here comes Obama to ACORN's rescue.  Well,  I don't know if ACORN is now involved since its child-prostitution scandal, but it was.  Oh, that man, Barney Fife (oops. Frank) was the author (or his henchmen were) of identical legislation earlier in the year. 

This is the story of dangerous ignorance by the U. S. central bank, the Federal Reserve. The good news is the stock market is up 40% from March lows (as of June 3, 2009). The bad news is that the reason is a flood, no, tsunami, of dangerous market distorting and inflationary liquidy. Interest rates have crept up with the $900 billion expansion of the Fed's balance sheet, by its buying treasury and mortgage-backed (Fan and Fred) securities. Is it another balloon to burst? Stay tuned.

And now get this. U. S. Government financial regulators had concerns about the lack of banking and financial expertise of the Board of Directors of the Bank of America Corp. And so selected to be chairman is Walter Massey. Mr. Massey has no banking experience. None. He spent much of his career in academia. He was president of...the historically black men's college in Atlanta, Georgia, Morehouse College where he and current CEO Kenneth Lewis met while raising money for that institution. Let's see, he's black. Is he simply a politically-correct black body (who was on the boards of McDonald's Corp. and Motorola Inc. but I am sure "affirmative action" and "diversity" had nothing to do with this) thrown to molllify President Obama?

The government is supporting risky lending of General Electric Corp, parent of Obama-supporting NBC and CSNBC and MSNBC. Also wholly-owned sub, GE Capital is raising tens of billions of dollars guaranteed by the Obama government guarantee. $48,000,000,000 in longer-term debt and $20,00,000,000 in short-term commerical paper. Its guaranteed interest costs are far less than that of non-guaranteed debt, giving GE a leg up over many competitors.

And municipal debt? A part of Obama's so-called "stimulus" program pays 35% of state and local issued taxable debt's interest. "Build America Bonds" alters municipal debt from "subsidies to the wealthy" via interest free of federal income taxes for investors to obligations of, yes, U. S. taxpayers, the majority of which are the same wealthy people who used to buy tax-free municipal obligations. A double whammy on those targeted by Obama to equalize their wealth with the non-rich. It is said that this change may lead to "staggering costs" to the U. S. upwards of $25,000,000,000 over the next 30 years. But that's now pocket change to Obama.

The following is a tale of two stories. The first, a possible brilliant solution, from the private sector but one that doesn't garner votes for politicians and will take a long time to slog through. It makes sense and will be ignored by government: "INNOVATIVE BANK OFFERS A WAY OUT OF DEBT CYCLE", headline, front page Seattle Times, Sunday, May 24, 2009. (

The other, "TAX CREDIT CAN BE BRIDGE TO NEW HOME", ( Same Seattle Times paper, page E 1, Real Estate Section discusses people who don't have enough money to make a down payment on the purchase of a house being able to immediately monetize an $8,000 federal tax credit for first-time home purchasers. President Obama's Housing and Urban Development Departmetn's Secretary, Shaun Donovan, touted the Federal Housing Administration's change from prior practice. Yes, let's continue making it easy for people who can't afford houses into them. Democratic Congress Majority, President Obama, don't you get it? Are potential votes so important? This is exactly what caused the financial bust that has engulfed our economy! I'd guess that people who don't pay any federal income tax -- nearly 50% of the population will still be able receive this welfare check and put it up to buy a house they can't afford. FHA finances closing costs and other fees. Skin in the game? NOT! And now FHA insures one-third of all new mortgages, up from 2% in 2006.

And we elect these idiots?

Further proof is the article: "California is its own worst enemy" ( which discusses where the United States of America is headed fast under the Democratic oligarchy. Required reading for those who won't read it and if they did they'd ignore it: Democrat politicians.

Can Congress be bought? A group of financial firms engaged a multimillion dollar lobbying effort to pursuade Congress to change an accounting issue which was at the heart of the financial "meltdown". "Mark to (no) Market", which forced the low valuation of mortgage-backed and similar securities when no explicit values were obtainable. The financial firms were forced to make huge write-offs which, they argued, were not reliable and, if given time to work out the sale of securities over time, would have been vastly higher. These write-offs arguably caused the crisis. Rep. Paul Kanjorski (DEMOCRAT from Pennsylvania) who heads the House Financial Services subcommittee got $18,500 and strongly pushed the revision by the Financial Accounting Standards Board (FASB). Other Democrats were also "not bought', Reps. Perlmutter, Lucas, Ackerman and a Republican, but who cares about the minority? (Bachus of Alabama). Oh, yes the highly honest and reputable Rep. Barney Frank who heads the House Financial Services Committee, got his, too. Essentially, they threatened broadened oversight on FASB, causing three members to "threaten" resignation. Of course that was a hollow threat. And the institutions got the help their money bought.

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