Where's the Outrage?

In yesterday's lead article, USA Today outed Congressional misbehavior and criminal negligence concerning the financial meltdown. So now we should all be aware that BOTH political parties, along with myriad other villains, are to blame. As ordinary citizens, the only group over whom we have any control is Congress. So my question is this:

Where is the outrage?

Why have the Democrats, who engineered and protected the great social experiment in home ownership for millions of unqualified buyers under the guise of Fannie and Freddie, been left unharmed, at the ready to gain additional seats in Congress, whilst Republicans bear the brunt of the blame? Do we want policies coddling those who default on mortgages (and you just wait and see- credit cards as well) to expand?? Has personal responsibility become a quaint, old fashioned notion?

Don't get me wrong. I still feel that members from both parties ought to be fired, and a new legion of uncontaminated Congressmen and women be offered a seat at the table. Should they too become corrupted by the influences in Washington, then good riddance to them next election. But to keep the current batch of foxes and weasels who raided the henhouse on watch demonstrates either complete ignorance of the issues at hand, or unbridled partisanship. In the current economic climate, when we need to be thinking as AMERICANS, both characteristics are deplorable.

All the King's Idiots

Check out this article from USA today which describes how Congress screwed up our financial system. If the culprits cannot even admit that they were bought off by Wall Street and Fannie and Freddie, why should we trust them to put Humpty Dumpty back together again?

FYI,the article does not mention this, but Barack Obama received the second highest dollar contributions from Fannie and Freddie. Hmmmm, Why did they like him so much?

How Congress set the stage for a fiscal meltdown

By Ken Dilanian, USA TODAY
WASHINGTON — During last week's presidential debate, John McCain and Barack Obama sparred over what caused the financial crisis.
"The match that lit this fire," McCain said, came from the government-sponsored mortgage companies Fannie Mae and Freddie Mac, which backed risky home loans "with the encouragement of Sen. Obama and his cronies … in Washington."
Obama shot back: "The biggest problem was the deregulation of the financial system. … Sen. McCain, as recently as March, bragged about the fact that he is a deregulator."
It was a classic example of Washington finger-pointing. McCain and the GOP blame Fannie and Freddie — which were taken over by the government last month — because the troubled mortgage agencies' biggest backers were Democrats who said they wanted to increase access to homeownership.
Meanwhile, Obama and other Democrats highlight Republicans' longtime focus on limiting regulations for the financial industry.

No single government decision sparked the crisis, but collectively the candidates had a point: Both parties in Congress played important roles in setting the stage for the ongoing financial meltdown.
They did so in moves that reflected not just their ideological priorities, but also the wishes of special interests that have spent millions aggressively lobbying Washington and contributing to lawmakers' campaigns.
By not reining in increasingly risky investments made by Fannie and Freddie — and by keeping complex financial instruments known as derivatives free from most government oversight — Congress chose not to impose barriers that economists widely agree could have helped stave off the crisis that continues, even after lawmakers approved a $700 billion emergency bailout package for Wall Street.
Here is a look at how Congress' actions on two key fronts became significant factors in the financial crisis:
1. Not checking derivatives
In 2000, a united financial services industry persuaded Congress to allow a vast, unregulated market in derivatives, which are contracts in which investors essentially bet on the future price of a stock, commodity, mortgage-backed security or other thing of value.
Derivatives — so named because their value derives from something else — also are known as hedges, swaps and futures. They are designed to lower risks for buyers and sellers, but in some cases, economists now say, they gave investors a false sense of security.
Today, derivatives are compounding the risks to a shaky economy because they are tied to complex mortgage securities that have plummeted in value. Instruments called credit default swaps, for example, were supposed to insure investors against default of mortgage-backed securities. With a mass collapse of those bonds, it's not clear how the swaps can pay off.
The ultimate fear, as Fortune magazine put it, is that swaps can cause "a financial Ebola virus radiating out from a failed institution and infecting dozens or hundreds of other companies."
Derivatives are traded privately, and their estimated national value is huge: $531 trillion. Losses from derivatives helped bring down Wall Street powerhouse Lehman Bros., and led the government to spend nearly $123 billion so far bailing out the giant insurer AIG.
The bill barring most regulation of derivative trading was inserted into an 11,000-page budget measure that became law as the nation was focused on the disputed 2000 presidential election. It was sponsored by Republican Sens. Phil Gramm of Texas and Richard Lugar of Indiana — with support from Democrats, the Clinton administration and then-Federal Reserve chairman Alan Greenspan. Few opposed it.
Sen. Tom Harkin, an Iowa Democrat who help negotiate the bill for Democrats, says he put aside his qualms because Wall Street and Greenspan were adamant that less regulation would help the stock market.
"All of the Wall Street crowd, all of the investment firms, the Morgan Stanleys, the Goldman Sachs … that steamroller just rolled over anything," he says. Wall Street promised to police itself "and Congress bought it."
Better regulation could have provided greater transparency and ensured that enough collateral was in place for derivatives to meet their obligations, says economist Susan Wachter of the University of Pennsylvania's Wharton School. "It's totally obvious in retrospect that this was not good public policy," she says.
But a decade ago, many saw derivatives as a way to smooth the gears of free-market capitalism. That's why the financial industry was alarmed in March 1998, when a little-known agency called the Commodity Futures Trading Commission sought to regulate derivatives.
Financiers erupted. They feared the plan would invalidate existing contracts, and they argued derivatives often were uniquely tailored hedges against risk that could not abide one-size-fits-all rules. Greenspan, then-Securities and Exchange Commission chairman Arthur Levitt and then-Treasury secretary Robert Rubin said in a statement they had "grave concerns" about regulating such agreements.
A report by President Clinton's economic team recommended against regulation. At congressional hearings, Greenspan argued that sophisticated market players would check one another, and if derivatives were regulated here such investments would go overseas.
A bill barring derivatives from being regulated as futures contracts passed the House in October 2000, by a vote of 377-4.
But Gramm, chairman of the banking committee, was not satisfied. Gramm told USA TODAY at the time he wanted language making clear that banking products could not be regulated by the commodities agency. After the fall election, leaders of both parties cut a deal and in December 2000 inserted it in the budget bill.
"The work of this Congress will be seen as a watershed, where we turned away from the outmoded, Depression-era approach to financial regulation," Gramm said then.
The wall against regulation was a watershed in another way. Financial services employees and political action committees made $308.6 million in political donations in 2000, up from $175 million in the previous presidential election year, says the Center for Responsive Politics. Wall Street and the banking, insurance and real estate industries spent $3.2 billion on lobbying in the past decade, the center reports. AIG spent $73 million.
More than a quarter of the $3.9 million in campaign money Gramm raised from 1997 through 2002 came from the financial services sector, and nine of his top 10 donors, grouped by economic interest, were employees of financial companies that use or trade in derivatives, according to election records compiled by the center.
Gramm, who left office in 2003 and went to work for UBS, was a top economic adviser to GOP presidential nominee John McCain until he stepped down in July after saying the USA had become "a nation of whiners" about the economy.
Noting that he has always favored deregulation, Gramm scoffs at the idea he was influenced by campaign money. The derivatives provision didn't cause the credit collapse, he adds.
"The crisis was caused by government," Gramm says. He cites the Community Reinvestment Act, which he says "forced banks to make subprime (mortgage) loans" to people who couldn't afford them.
Democrats, including Harkin, and many economic analysts dispute that. As for what he learned, Harkin says, "Don't pay attention to Wall Street when it comes to issues like this."
2. Protecting Fannie, Freddie
In 2005, Congress rejected a Republican-sponsored bill aimed at curbing risky investments by mortgage giants Fannie Mae and Freddie Mac, thanks to resistance from mostly Democrats. It was the latest in a string of unsuccessful attempts to rein in the two agencies. In this case, Congress ignored Greenspan's warning about the financial risks Fannie and Freddie were taking on.
The agencies were designed to expand homeownership by injecting money into the home mortgage market and encouraging banks to lend more. They buy loans from banks and guarantee them, holding some in their portfolios and selling others as mortgage-backed securities.
With implicit government backing, Fannie and Freddie have been able to borrow money at below-market rates. In recent years, the companies borrowed to buy billions' worth of complex mortgage-backed securities. The investments earned big returns. Fannie and Freddie's stock soared. Their executives were paid tens of millions of dollars.
Republicans sought to reduce the size of the companies' portfolios, arguing they were too risky.
Then the housing bubble burst. Fannie and Freddie didn't cause the financial meltdown, but they fueled it by becoming one of the biggest purchasers of toxic mortgage products, says Harvard economist Kenneth Rogoff.
"There was tremendous coddling of Fannie and Freddie in the face of a lot of evidence that they really weren't helping homeowners all that much," Rogoff says. "I think it was very, very clear what was coming, and that they were a huge, huge risk to the American financial system. … It really was criminal neglect."
Fannie and Freddie spent $175 million on lobbying in the last decade, according to the Center for Responsive Politics. The companies' employees and PACs gave nearly $5 million in contributions since 1989, by the center's count.
Until they were taken over, Fannie had 13 lobbying firms on its payroll this year; Freddie had 33. Both packed their boards with politically connected people such as Democrat Rahm Emanuel, a former Clinton aide who joined Freddie's board in 2000 before he became a congressman. Both hired well-connected lobbyists such as Rick Davis, now McCain's campaign manager.
In seeking to crack down on Fannie and Freddie, Republicans were encouraged by banks that didn't want government-subsidized competition. But there also was a chorus of warnings that the highly leveraged corporations could pose a risk to the economy.
In 2003 and 2004, both companies were wracked by accounting scandals that led to the ouster of top managers.
In 2005, Sen. Richard Shelby, R-Ala., sponsored legislation to shrink the agencies' portfolios. McCain later added his name as a co-sponsor. The bill passed the Senate Banking Committee, but every panel Democrat voted against it. That signaled that the bill wouldn't get the 60 votes needed to pass in the Senate. Obama was not on the banking panel; there is no record of him doing anything on the bill.
Sen. Chris Dodd, D-Conn., a senior member of the banking committee, is the largest recipient of political contributions from Fannie and Freddie employees and PACs, having received $165,400 since 1989, according to the center.
Dodd said he backed Fannie and Freddie because they encouraged homeownership. "I've never ever in my life been affected by a campaign contribution," he said in an interview. He noted that when he became banking committee chairman, he helped pass a bill restricting mortgage agencies' investment practices in 2007. By then, it was too late to stop the financial disaster.
In the House, Republicans and Democrats agreed on a different bill that passed easily. But the Bush administration opposed it, calling it weak. The effort failed.
The next year, Freddie Mac paid the largest election fine ever, $3.8 million, after regulators found it used corporate funds illegally to pay for fundraisers. From 2000 to 2003, Freddie Mac held 85 events that raised $1.7 million, mostly for Republicans on the House Financial Services Committee, regulators found.
Rep. Barney Frank, then the ranking Democrat on financial services and now the chairman, says he and his colleagues were not soft on Fannie and Freddie. "Yes, they lobbied strongly, but I was one of the most successful ones in challenging them."
Frank had no apologies. Rep. Artur Davis, D-Ala., by contrast, offered a rare Washington mea culpa: "Like a lot of my Democratic colleagues, I was too slow to appreciate the recklessness of Fannie and Freddie," he said in a statement. "Frankly, I wish my Democratic colleagues would admit, when it comes to Fannie and Freddie, we were wrong.

Covering Their Fannies

While Senators Chuck Dodd (D-CT) and Barney Frank (D-MA) play the part of "avenging angels" as stated below in the UK-based Independent, and lay all blame for the financial crisis square on the Bush administration, many Americans are unaware that their fingerprints are all over the root cause of the mess.

Meanwhile, Charles Shumer (D-NY) and Jack Reed (D-RI) have made lots of noise recently decrying the executive severence pay for Mr. Raines and Mr. Mudd, CEO's of Fannie and Freddie. Guess who blocked reform of these very institutions back in 2005 as members of the Senate Banking Sub Committee in a party line vote? Senators Shumer and Reed. As a consequence, the reform bill never even made it to the full Senate for a vote.

From The Independent, Friday, October 3rd, http://www.independent.co.uk.opinion/, is this piece by Dominic Lawson outlining the real story behind Fannie and Freddie's implosion.

"Dominic Lawson: Democrat fingerprints are all over the financial crisis";
The least well off are going to face the most stringent terms for mortgages
Friday, 3 October 2008

Of all the characteristics of a successful politician, none is more essential than bare-faced cheek. Never has this been more evident than in the past fortnight, as senior Democrat members of the US legislature have sought to lay all the blame for the country's financial crisis on the executive arm of Government and Wall Street.
Neither of these two institutions is blameless – far from it. Yet when I see such senior Democrats as Barney Frank, Chairman of the House Financial Services Committee, and Christopher Dodd, Chairman of the Senate's Banking Committee, play the part of avenging angels – well, I can only stand in silent awe at the sheer tight-bottomed nerve of it. These are men with sphincters of steel.
What is the proximate cause of the collapse of confidence in the world's banks? Millions of improvident loans to American housebuyers. Which organisations were on their own responsible for guaranteeing half of this $12 trillion market? Freddie Mac and Fannie Mae, the so-called Government Sponsored Enterprises which last month were formally nationalised to prevent their immediate and catastrophic collapse. Now, who do you think were among the leading figures blocking all the earlier attempts by President Bush – and other Republicans – to bring these lending behemoths under greater regulatory control? Step forward, Barney Frank and Chris Dodd.
In September 2003 the Bush administration launched a measure to bring Fannie Mae and Freddie Mac under stricter regulatory control, after a report by outside investigators established that they were not adequately hedging against risks and that Fannie Mae in particular had scandalously mis-stated its accounts. In 2006, it was revealed that Fannie Mae had overstated its earnings – to which its senior executives' bonuses were linked – by a stunning $9.3billion. Between 1998 and 2003, Fannie Mae's executive chairman, Franklin Raines, picked up over $90m in bonuses and stock options.
Yet Barney Frank and his chums blocked all Bush's attempts to put a rein on Raines. During the House Financial Services Committee hearing following Bush's initiative, Frank declared: "The more people exaggerate a threat of safety and soundness [at Freddie Mac and Fannie Mae], the more people conjure up the possibility of serious financial losses to the Treasury which I do not see. I think we see entities that are fundamentally sound financially." His colleague on the committee, the California Democrat Maxine Walters, said: "There were nearly a dozen hearings where we were trying to fix something that wasn't broke. Mr Chairman, we do not have a crisis at Freddie Mac and particularly at Fannie Mae under the outstanding leadership of Mr Franklin Raines."
When Mr Raines himself was challenged by the Republican Christopher Shays, to the effect that his ratio of capital to assets (that is, mortgages) of 3 per cent was dangerously low, the Fannie Mae boss retorted that "our assets are so riskless, we could have a capital ratio of under 2 per cent".
Maxine Walters' complaint about previous attempts to bring the great state-sponsored housing finance bodies under stricter control was partly a reference to Bill Clinton's efforts. Last week the former President acknowledged that "responsibility" for the absence of proper regulation rested "with Democrats who were resisting any efforts of Republicans in Congress, and earlier when I was President and tried to impose tighter standards on Fannie Mae and Freddie Mac". Then, as now, members of his own party saw all such initiatives as unwonted attacks on the chances for low-earners, and particularly African-Americans, to own their own homes.
From its inception in 1938 Fannie Mae (and later Freddie Mac) was designed to make housing finance available to "ordinary Americans". This was a noble aim. In the 1970s another Democrat President, Jimmy Carter, introduced legislation which demanded that such bodies enhance their lending to minorities. Again, this was based on a noble idea: to stamp out racism in the mortgage market. Thus by 1998 you had the Federal Reserve Bank of Boston producing a document entitled "Closing the Gap: a Guide to Equal Opportunities Lending", which instructed banks that an applicant's "lack of credit history should not be seen as a negative factor" in obtaining a mortgage. As Stephen Malanga of the Manhatta *Institute notes: "Of course the new federal standards couldn't just apply to minorities. If they could pay back loans under these terms, then so could the majority of loan applicants. Quickly, these became the new standards in the industry. As the housing market boomed, banks embraced these new standards with a vengeance. Between 2004 and 2007, Fannie Mae and Freddie Mac became the biggest purchasers of subprime mortgages from all kinds of applicants, white and minority, and most of these loans were based on lending standards promoted by the Government."
One of the few journalists to see where this would lead was Jeff Jacoby, of the Boston Globe. Last week he reminded his readers what he had written in 1995: "Our banks are knowingly approving risky loans to get the feds and the activists off their backs... When the coming wave of foreclosures rolls through the inner city, which of today's self-congratulating bankers, politicians and regulators plans to take the credit?". Jacoby adds now: "Barney Frank doesn't. But his fingerprints are all over this fiasco."
It's true that the improvident lending was not initiated by Fannie and Freddie: their role in this was to buy these loans and sell them on – but then the music stopped. Cynical students of the American political system will note that the biggest recipient of campaign contributions from the munificent duo of Fannie and Freddie over the past 20 years was one Christopher Dodd, Democrat Chairman of the Senate's Banking Committee.
Rather surprisingly, given that he has only been in the Senate for four of those years, the second biggest beneficiary was Barack Obama. In August the Washington Post reported that Obama's presidential campaign team had sought the advice of Franklin Raines "on mortgage and housing policy matters". Perhaps Mr Obama's team just wanted to know where all the bodies are buried – there are rather a lot of them.
The saddest outcome of all this within America – apart from the crippling cost to the nation's taxpayers – is that the very people the Democrats had intended to help will be the biggest victims: for many years to come banks will demand the most stringent terms for mortgages to the least well off.
In the meantime, let us praise Congressman Artur Davis of Alabama, who confessed this week: "Like a lot of my Democrat colleagues I was too slow to appreciate the recklessness of Fannie and Freddie when in retrospect I should have heeded the concerns raised. I wish my Democrat colleagues would admit that we were wrong." I fear Congressman Davis will not go far with this attitude – but at least he will be able to look at himself in the mirror.

It is Time to Send Them Packing

Disgusted. Worried. Out of control. Fed up. I feel all of these the day after the people we voted into office passed the largest bail-out in American history; almost a trillion dollars laden with pork. I won't debate the merits of passing this repugnant bill, or whether more palatable alternatives could have been sought. It is a Done Deal, and we, the taxpayers, and our children, and our children's children, have been burdened with something the size and ramifications of which we cannot even begin to comprehend. No, my focus is on holding accountable those who caused this mess in the first place.

There are many villains whose actions resulted in this debacle, a Perfect Storm of corruption, greed, and utter denial. There are the Wall Street Fat Cats, who enriched themselves at the cost of their shareholders, and who are still sitting pretty on their huge piles of cash. There are the leaders of Fannie Mae and Freddie Mac, who changed the rules determining their compensation packages so that the more mortgage business they pulled in, whether good or bad, the bigger their personal pay load. There are ordinary Americans, who lived in denial, above their means, and bought houses and cars and flat screen TV's that they simply could not afford, and thought the band would continue to play on and on. And there are our Representatives in the House and Senate, who went to Washington to serve us, and instead, continously betrayed us, their constituents. The corruption and back room deals, the lobbying and pork, and the arrogance of the "We know better than you" attitude. It is unconsionable, and we do our best trying to get though our hectic days as they trample all over us, confident in the fact that we are not paying attention. Until it hits us head-on like a Mack Truck, as it has these past few weeks.

What can we do? We are left feeling powerless . We cannot control Wall Street or CEO greed. We cannot control our neighbors' fiscal irresponsibility. We cannot demand that the FBI investigate who did what and when. The web of responsibilty for this mess is unspeakably tangled. Congress promises to investigate, but guess who will be in charge of the investigations? The very Congressional leaders who benefited most from the crooks with whom they danced our futures away. Do you think it is likely that the most egregious parties will be held responsible? I think not. Not while the Inmates are running the Asylum.

A recent poll showed that 98% of Americans feel that Congress needs to be reformed. The last group of people to unite Americans so resoundingly flew planes into our buildings. Then, with One Voice, we said "Enough!". We went after the criminals with military weapons, and the fight goes on. We are once again faced with an unimaginably frightening challenge, the soundness of our economy and futures of our families, but this time, the criminals come from within. Once again, with One Voice, we must say "Enough!". Only this time, our weapon of choice is the most powerful one of all, the one which our founding fathers bestowed upon us; our Vote.

As Americans, not as Democrats or Republicans or Independents, we need to root out the corruption at its source. Congress has become a den of thieves, and make no mistake, ALL parties bear responsibilty. We must Send Them a Message with this election and VOTE OUT EVERY INCUMBENT in Washington. No partisanship. No "But I like my guy" or "He's been in office for many years and does good things for our state". If he's been in office for a long time, he had plenty of time to Stop the Nonsense, and he did not. He became part of the problem. If you cost your company 8% of it's gross earnings for the year through incompetence or corruption, you would be fired. Period. That's approximately the amount of our GDP that the bailout equals. These people will not take us, their constituents, seriously, until we tell them, "You're fired!". Perhaps then, the remaining Representatives and Senators will recognize that they must look out for OUR interests, not their own. History tells us that rampant, uncontrolled government corruption preceded the fall of the Roman Empire, whose principles our founding fathers used to forge our democracy. Use the power of your vote to say "Enough!" and save us and this country from the snakes lying within.