Obama’s Economic Programs Bog Down – Hollow Political Slogans Leave Empty Political Promises

The Obama Presdiency is now 6 months old – his election took place 7 months ago. He is 1/8 of the way through his presdeincy. Time for his Freshman Year mid-term grades ………..  

THE STIMULUS PACKAGE AND UNEMPLOYMENT 

Obama promises more than 600,000 stimulus jobs

WASHINGTON – President Barack Obama is promising to deliver more than 600,000 jobs through his $787 billion stimulus plan this summer, repackaging a pledge the administration made weeks earlier as the economy continues to lose hundreds of thousands of jobs each month. (THE LARGEST SPENDING PROPOSAL IN THE HISTORY OF THE WORLD – COSTING EVERY AMERICAN, MAN, WOMAN AND CHILD, THOUSANDS OF DOLLARS EACH. Even if  the Obama promise is kept it will cost the American Taxpayer $1.3 million dollars for every job created – WOW – what a success – a part time, make work, Government C ontsrtuction job that will pay a worker $20,000, true a much needed $20,000, but at what cost ! $1.3 Million per job? For those that doubt the math 787 Billion is written this way $787,000,000,000,. Divide that by the 600,000 and you get $1,331,000 per job.

Obama’s promise to create large numbers of jobs — a vow that Vice President Joe Biden made last month — quickly drew criticism from oponents and economists who have argued his stimulus plan thus far hasn’t delivered.

“I think these estimates are overly optimistic,” said Arpitha Bykere, a senior analyst with RGE Monitor.

The government reported last week that the number of unemployed continues to rise; the unemployment rate now sits at 9.4 percent, the highest in more than 25 years. Hundreds of thousands of Americans continue to lose jobs each month.

Just how much of an impact Obama’s recovery program had on the pace of job losses is up for debate. Obama has claimed as many as 150,000 jobs saved or created by his stimulus plan so far, even as government reports have shown the economy has lost more than 1.6 million jobs since Congress approved funding for the program in February. ( 3 million jobs have been lost since Obama was elected – more jobs have been lost since Obama’s election than during the enitire 8 years of the Bush presidency)

Republicans remain critical of the stimulus spending, slamming it as a big government program that ultimately will do little for recovery. With only a fraction of the federal money actually spent thus far, it’s premature to give the stimulus plan credit for economic trends, congressional Republicans said last week.

“I think the economy is just as likely to begin to recover on its own, wholly aside from this, before much of this has an impact. So I’m very skeptical that this massive sort of spending binge that we’ve engaged in is going to have much of an impact,” said Senate Minority Leader Mitch McConnell, R-Ky, in March 2009.

Obama initially offered his stimulus plan as a way to put people back to work, a promise that 3.5 million jobs would be saved or created. The administration’s predictions that unemployment would rise no higher than 8 percent already have been shattered. Unemployment stands at 9.4% and is rising. The Obama Adminstration’s projection at a worse case secnario for unemployment, 8.0%, has been crushed. Unemployment is already 25% percent higher and is rising.  http://finance.yahoo.com/news/Obama-repackages-stimulus-apf-15470798.html

OBAMA’S MORTGAGE ASSISTANCE PROGRAM 

NEW YORK (AP) — The Federal Reserve announced a $1.2 trillion plan three months ago designed to push down mortgage rates and breathe life into the housing market.

But this and other big government spending programs are turning out to have the opposite effect. Rates for mortgages and U.S. Treasury debt are now marching higher as nervous bond investors fret about a resurgence of inflation.

That’s the Catch-22 threatening to make an awful housing market potentially worse and keep the economy stuck in a funk. Kick-starting the economy requires higher spending, but rising rates mean fewer Americans will be able to refinance their home loans. And some potential buyers will be shut out of the market by higher monthly payments they won’t be able to afford.

Yields on 10-year Treasury notes, a benchmark for home mortgages and other consumers loans, jumped from 2.5 percent in March around the time of the Fed announcement to as high as 3.7 percent in recent days. 30-year mortgage rates jumped more than a quarter-point this week to 5.29 percent, the highest level since December, Freddie Mac reported.

“If the meltdown continues in the bond market, then mortgage yields will soon be at levels that choke off refinancing activity,” said economist Ed Yardeni, who runs his own investment firm. “Even worse, they could abort any necessary recovery in home sales and prices.”

One explanation is that bond investors anticipate a greater supply of government debt being sold to fund federal spending. Investors are also increasingly fearful that the trillions of dollars the government will need to borrow in the coming years to finance the various stimulus programs will lead to a new bout of inflation.

The White House estimates that the government will rack up an unprecedented $1.8 trillion budget deficit this year — more than four times last year’s all-time high. (THAT IS RIGHT THE OBAMA WHITEHOUSE ADMITS THEY HAVE INCREASED DEFICIT SPENDING 400% MORE THAN IN THE BUSH WHITE HOUSE)

“The bond market is calling the Federal Reserve out,” said Mike Larson, a real estate analyst at Weiss Research Inc. in Jupiter, Fla. “Investors are saying that the Fed can’t just print money out of thin air to finance a massive deficit.”

Fed Chairman Ben Bernanke acknowledged Wednesday in congressional testimony that large budget deficits could threaten financial stability by eventually eroding investor confidence and endangering the economy’s prospects for long-term health.

For a brief period of a few weeks sales of new and existing homes began to trend higher. Mortgage refinancings also jumped, allowing borrowers to lock in lower rates. Fee income from this activity helped lift profits at many battered banks and gave consumers more disposable income to spend, which helped lift their confidence about the economy’s prospects. All that was good for the nation’s businesses.But now, surging mortgage rates are threatening to undermine all that. Seventy percent of refinancing activity could be knocked out as rates close in on 5.5 percent, according to Mark Hanson, a managing director at the independent research firm Field Check Group of Menlo Park, Calif. (At the time of this posting rates have already climbed to 5.79 percent for those with “excellant credit”). Also, many homeowners who wanted to refinance didn’t lock in the super-low rates in April when the refi boom took off. “Half the deals in the pipeline are dead,” Hanson said. “People were applying to refinance to improve their situation, but now they are seeing it won’t be much improved.” All this means that even though mortgage rates are still low by historical standards, many of the trends that seem to be pointing to economic recovery in recent months could be undone fast.

http://finance.yahoo.com/news/ALL-BUSINESS-Bondmarket-rout-apf-15457158.html

12 percent are behind on mortgage or in foreclosure

AP

NEW YORK – A record 12 percent of homeowners with a mortgage are behind on their payments or in foreclosure as the housing crisis spreads to borrowers with good credit. And the wave of foreclosures isn’t expected to crest until the end of next year, the Mortgage Bankers Association said Thursday.

The foreclosure rate on prime fixed-rate loans doubled in the last year, and now represents the largest share of new foreclosures. Nearly 6 percent of fixed-rate mortgages to borrowers with good credit were in the foreclosure process.

At the same time, almost half of all adjustable-rate loans made to borrowers with shaky credit were past due or in foreclosure. There were no signs of improvement.

The pain, however, is spreading throughout the country as job losses take their toll. The number of newly laid off people requesting jobless benefits fell last week, the government said Thursday, but the number of people receiving unemployment benefits was the highest on record. These borrowers are harder for lenders to help with loan modifications.

“We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin. “Foreclosures were bad last year? It’s going to get worse.”

Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.

“We’re right in the middle of this third wave, and it’s intensifying,” said Mark Zandi, chief economist at Moody’s Economy.com. “That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast.”

Those sliding into foreclosure today are more likely to be modest borrowers whose loans fit their income than the consumers of exotically lenient mortgages that formerly typified the crisis.

Mortgage rates above 5 pct for 1st time in 3 months

http://news.yahoo.com/s/ap/20090528/ap_on_bi_ge/us_foreclosures

In February Obama stood before a crowd of 50,000 in Phoneix Arizona and outlined his program – now, 4 months later here are rthe facts:

Under a program announced in February by the Obama administration, the government is to spend $75 billion on incentives for mortgage servicing companies that reduce payments for troubled homeowners. [The Obama Administration claimed the program would help 4 million home owners]. But three months after the program was announced, a Treasury spokeswoman, Jenni Engebretsen, estimated the number of loans that have been modified at “more than 10,000 but fewer than 55,000.” [Why can’t the Government be more exact than this – a 45,000 mortgage gap between 10,000 and 55,000. Where is the $75 Billion in Taxpayer money going? If the “true number” of modified mortagges is 10,000,  the Obama program cost taxpayers $7.5 million per mortgage. Who is kidding who? Someone is robbing the US Taxpayer blind, fewer people have been helped NATIONALLY than attented the speech in Phoenix] 

In the first two months of the year alone, another 313,000 mortgages landed in foreclosure or became delinquent at least 90 days, according to First American CoreLogic.

“I don’t think there’s any chance of government measures making more than a small dent,” said Alan Ruskin, chief international strategist at RBS Greenwich Capital.

Last year, foreclosures expanded sharply as the economy shed an average of 256,000 jobs each month. Since then, the job market has deteriorated further, with an average of 665,000 jobs vanishing each month.

http://www.nytimes.com/2009/05/25/business/economy/25foreclose.html?pagewanted=1&sq=May%2025,%202009%

OBAMA’S ENERGY PROGRAM.

Candidiate Obama and the Democrats, including Nanacy Pelosi, promised the American Publci to prusue and “all avalaible means” energy policy when it came to making America Independent. The promises included and increase in the exploration and development of domestic America’s gas and oil reserves. Democrats joinmed Republicans and echoed the chant or working Americans across this Country in a chant of “Drill Baby Drill”. Since agining office Obama and Speaker of the House Pelosi have blocked this development at every turn. Did you know that American Oil Companies offered to pay the State of California $45 Billion Dollars a year to develop off shore oil resources and the democrats refused. $45 Billion dollars, enough money to balance the budget of the State of California at the time. What have we received instead, empty promises. The price of a barrel of oil has topped $70 a barrel, thanks mainly to the activities of oil speculators, not to a sudden surge in the US economy, and gasoline prices are headed to $4.50 a gallon, manipulated by an Administration that wants artifically high gasoline prices to support the economic agenda of its finanical backers in the “Green Inustries”. How will $5.00 a gallon gasoline help the unemployed?

OBAMA ON FOREIGN POLICY

North Korea, Iran, the U.S. as apology central

Yes We Can, Yes We Can, Yes We Can ……… The question is “yes you can” what?

Obama’s First Term Freshman Grades: What do you think? Should they be higher or lower than what he earned at Columbia in his Freshman Year?  What were Obama’s grades at Columbia? No one knows, he won’t release the transcripts.

ATT/SBC/YAHOO Poll – Obama and the Economy – How Is He Doing?

Obama and the economy Results

Q. The president’s progress with the battered economy has been both praised and criticized. How well are his efforts measuring up with you?

Extremely well. We are undoubtedly moving in the right direction. 17%
Fairly well. There’s still a long way to go. 15%
Not well at all. His plans are hurting more than helping. 65%
Not sure/No opinion. 2%

23,078 votes

Participate in the Poll here:

http://js.polls.yahoo.com/quiz/quiziframe.php?poll_id=46067

Obama’s Economic Recovery Program Is Failing – New Wave of Mortgage Foreclosures, Unemployment Continues To Rise, Automakers Prepare to Shut Plants – Layoff 10’s Of Thousands

As job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures.

In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories.

With many economists anticipating that the unemployment rate will rise into the double digits from its current 8.9 percent, foreclosures are expected to accelerate. [Remember, the Obama Administration predicted a maximum unemployment rate of 8.9 in its projections of economic recovery- McAuley’s World]

That could exacerbate bank losses, adding pressure to the financial system and the broader economy.

“We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin. “Foreclosures were bad last year? It’s going to get worse.”

Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.

“We’re right in the middle of this third wave, and it’s intensifying,” said Mark Zandi, chief economist at Moody’s Economy.com. “That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast.”

Those sliding into foreclosure today are more likely to be modest borrowers whose loans fit their income than the consumers of exotically lenient mortgages that formerly typified the crisis. [Now that we have wasted 100’s of Billions in tax payer dollars helping the reckless and those not qualified to be homeowners, where is the assistance for those who played by the rules? Mc Auley’s World].

Economy.com expects that 60 percent of the mortgage defaults this year will be set off primarily by unemployment, up from 29 percent last year.

Over all, more than four million loans worth $717 billion were in the three distressed categories in February, a jump of more than 60 percent in dollar terms compared with a year earlier.

Under a program announced in February by the Obama administration, the government is to spend $75 billion on incentives for mortgage servicing companies that reduce payments for troubled homeowners. [The Obama Administration claimed the program would help 4 million home owners]. But three months after the program was announced, a Treasury spokeswoman, Jenni Engebretsen, estimated the number of loans that have been modified at “more than 10,000 but fewer than 55,000.” [Why can’t the Government be more exact than this – a 45,000 mortgage gap between 10,000 and 55,000. Where is the $75 Billion in Taxpayer money going? If the “true number” of modified mortagges is 10,000,  the Obama program cost taxpayers $7.5 million per mortgage. Who is kidding who? Someone is robbing the US Taxpayer blind] 

In the first two months of the year alone, another 313,000 mortgages landed in foreclosure or became delinquent at least 90 days, according to First American CoreLogic.

“I don’t think there’s any chance of government measures making more than a small dent,” said Alan Ruskin, chief international strategist at RBS Greenwich Capital.

Last year, foreclosures expanded sharply as the economy shed an average of 256,000 jobs each month. Since then, the job market has deteriorated further, with an average of 665,000 jobs vanishing each month.

http://www.nytimes.com/2009/05/25/business/economy/25foreclose.html?pagewanted=1&sq=May%2025,%202009%20Mortgage%20foreclosures%20&st=cse&scp=1

GM announces an additional 47,000 job cuts amid palns to shut 5 US auto plants.   (February 2009). http://www.wilx.com/home/headlines/39750882.html

U.S. to steer GM toward bankruptcy … The Obama administration is preparing to send General Motors into bankruptcy as early as the end of next week under a plan that would give the automaker tens of billions of dollars more in public financing as the company seeks to shrink and re-emerge as a global competitor, sources familiar with the discussions told the Washington Post. http://scoop.chrysler.com/2009/05/22/us-to-steer-gm-toward-bankruptcy/

Chrysler confirms 6 additional plant closings – May 2009. http://scoop.chrysler.com/2009/05/06/chrysler-issues-plant-closing-statement/ 

GM plans to shut 14 more auto plants, reduce employees by 20,000.  (April 2009) Gm announces planned cuts did not go far enopugh, additional cuts planned. http://money.cnn.com/2009/04/17/news/companies/gm_jobs/?postversion=2009041712

From the WSJ: Mortgage Defaults, Delinquencies Rise

… A spokesman for the FHA said 7.5% of FHA loans were “seriously delinquent” at the end of February, up from 6.2% a year earlier. Seriously delinquent includes loans that are 90 days or more overdue, in the foreclosure process or in bankruptcy.

The FHA’s share of the U.S. mortgage market soared to nearly a third of loans originated in last year’s fourth quarter from about 2% in 2006 as a whole, according to Inside Mortgage Finance, a trade publication. That is increasing the risk to taxpayers if the FHA’s reserves prove inadequate to cover default losses. http://www.calculatedriskblog.com/2009/03/fha-mortgage-defaults-increase.html

 

 

Economic Recovery – New Data 04-16-09

Is the economy on the road to recovery or is someone blowing smoke in your eyes.

My advice, cover your eyes.

The unemployment numbers are up again – that is right – up. The rate of increase has slowed, however, unemployment is still increasing. We have had 8 straight weeks of 600,000+ in unemployment claims. This weeks numbers are slightly smaller than last weeks numbers – but we are still adding huge numbers of newly unemployed. Compared to this week last year, twice as many people filed for unemployment claims this year.

MSNBC will try to tell you things are looking better – “Single-family home construction, while depressed, appears to be leveling off.” http://www.msnbc.msn.com/id/30244453

Wow, is that misleading.

“Single-family sector actually stabilized in March at an annual rate of 358,000 units, the same as February. Two months of stability could signal that single-family home building is finding a bottom although at a very low level, analysts said.”

Ok, 358,000 units. Three years ago this headline was in the news, “Housing Starts Peak Again in February”, “Total housing starts increased by 0.5 percent to a seasonally adjusted annual rate of 2,195,000 million units, setting a new 21-year-record for the second month in a row, the U.S. Commerce Department reported. The February construction pace was 15.8 percent above a year ago.” http://grounds-mag.com/news/housing_february_041205/

385,000 versus 2,195,000. Looks like we have a long way to go.

Things have leveled off OK, at all time low levels. I guess you can read optimism into those numbers, but, even if the current number of starts are doubled, we would only be building 1/4 of the number of houses that were built 3 years ago.

As to the unemployment numbers – “The total number of people remaining on the jobless benefit rolls rose, topping 6 million for the first time. That’s the highest on records dating from 1967.” In 1983 unemployment topped 9.1% http://www.reuters.com/article/ousiv/idUSTRE51I3CC20090219

Don’t be fooled by earnings reports from Wells Fargo and Goldman Sachs, both received Billions in bailout dollars. Both have been allowed to restate the value of “toxic mortages” they have on their books with the recent change in accounting rules.

Goldman Sachs received $13 billions in bailout money. See: http://www.ritholtz.com/blog/2009/04/taxpayer-funded-gs-profits/ , http://www.1440wallstreet.com/index.php/comments/goldman_sends_out_b_team_to_answer_aig_questions/ , http://www.tradingmarkets.com/.site/news/Stock%20News/2233686/

Goldman Sachs full exposure to these “Toxic Mortgage” assets is unknown. What do the Goldman Sachs numbers mean – no one really knows. http://www.tradingmarkets.com/.site/news/Stock%20News/2233686/

Former Treasury Secretary Paulson had previously served as CEO of Goldman Sachs where he was paid $12,700,000 in annual salary. http://www2.goldmansachs.com/s/prospectus/Management.html, http://www.tradingmarkets.com/.site/news/Stock%20News/2233686/

Conservative Journalist Michelle Malkin said it best here: http://michellemalkin.com/2008/09/22/why-henry-paulson-must-be-contained/

Some are calling for criminal investigations. It is about time!

Then there was this report, “J.P. Morgan profit off as provision for bad loans jumps”, “J.P. Morgan Chase & Co. on Thursday said first-quarter profit fell 10% as reserves for consumer loan losses continued to grow alarmingly”. http://www.marketwatch.com/news/story/jp-morgan-profit-off-bank/story.aspx?guid=%7B1773E31A%2D43DE%2D4D1D%2DBED7%2DFFA6BA8EAA13%7D&dist=TNMostRead

What do the J.P. Morgan numbers mean? Who knows? With a change in the accounting rules, they could mean anything, or nothing. What is the banks “real” exposure to nonperforming consumer mortgages and credit card debt? How large will the future write downs need to be?

As for the economy. By the numbers, the elevator is still on the way down, but the rate of descent maybe slowing. Unemployment has already surpassed 9% and the Obama Administration projected it would not pass 8.9%. Economists are now projecting an unemployment rate of 11% before winter 2009.

Mortgage foreclosures are scheduled to resume this week as the “voluntary” moratorium on foreclsoures has ended. http://www.predictify.com/q/97687

Remember this, the Stock Market does not measure economic activity. The economy can be in recession and shrinking while the Stock Market is making gains – During the 11 years of the Great Depression the Stock Market closed up in 6 of the 11 years. http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm

UPDATE: London Protests Turn Violent As Obama Arrives For G20 – Live Web Feed Link / Videos

04:00 PM ETS Update: Updated Videos Here: http://news.sky.com/skynews/Home/UK-News/G20-Arrests-As-Protesters-Storm-RBS-Bank-And-Clash-With-Police-In-City-Of-London/Article/200903415252669?lpos=UK_News_Top_Stories_Header_0&lid=ARTICLE_15252669_G20%3A_Arrests_As_Protesters_Storm_RBS_Bank_And_Clash_With_Police_In_City_Of_London

There have been further clashes between police and G20 activists tonight as officers try to control hundreds of demonstrators after a day of violence.  Many of the protesters gathered near the Bank of England in the City of London. In a nearby street, TV pictures showed lines of police rushing the crowd. People have been throwing glass bottles towards officers, with many angry at not being allowed to leave.  “One has to assume the protesters will be making their way out as soon as the police feel they can control them as they leave. “Earlier in the day, riot police had to be sent in after activists attacked a uniformed officer and stormed a branch of the Royal Bank of Scotland in the City. A handful of men with black scarves obscuring their faces and hoods over their heads smashed a hole in the windows with a metal pole and crawled in.Protesters removed equipment, daubed graffiti on the walls, threw a chair through a window and started a small fire. Some protesters dragged barriers between themselves and the police but officers surged forward to pull them away. Outside the Bank of England, an effigy of a banker hung from the traffic lights was set on fire, releasing fumes of pungent black smoke.Sky’s Stuart Ramsay, at the scene, said: “A small stream of people was allowed through, about 20 or 30, and they are being marched off down the road and away. But then the police cordon immediately sealed itself.  

END UPDATE

Original Post:

Protests Turn Violent As Obama Arrives In London –  Rock Star No Longer

From The BBC: http://news.bbc.co.uk/1/hi/uk/7976905.stm

                               http://news.bbc.co.uk/2/hi/7975597.stm

Protestors occupy Bank of Scotland Building – LIVE IN YOUR WEB BROWSER: Fox News/Sky News London http://interactive.foxnews.com/livestream/live.html?chanId=2 

 LONDON —  Thousands of G20 protesters jammed downtown London on Wednesday, storming and smashing the windows at a Royal Bank of Scotland building. Others tried to storm the Bank of England, pelting police with eggs and fruit and rocking the barricades designed to control them.

One police officer was injured after being hit with a large pole during the demonstration and other officers were forced to retreat behind metal barriers as scuffles with the crowd intensitied, Sky News reported.

Demonstrators shouted “Abolish Money!” and clogged streets in the financial district known as “The City” even as Prime Minister Gordon Brown and President Barack Obama held a news conference in the British capital.

http://www.foxnews.com/story/0,2933,511981,00.html

Riot Cops Go In As G20 Protesters Storm Bank

Riot police have been sent in after G20 demonstrators attacked a uniformed officer and stormed a branch of the Royal Bank of Scotland in central London.

Protesters smashed windows at the RBS building and clambered inside.

Sky News crime correspondent Martin Brunt said he had seen police CCTV pictures of the demonstrators removing equipment and starting a small fire.

Police on foot backed up by a line of mounted officers lined up outside the branch as smoke bombs were thrown by a baying crowd.

Earlier, a protester hit an officer with a large pole during large-scale protests ahead of the G20 summit of world leaders.

A group of officers was forced to retreat behind metal crowd barriers outside the Bank, apparently because of the crush of the crowd in front of them.

Missiles – including fruit – were thrown towards police as red smoke rose above the crowd.

He said some 50 officers ran in and made arrests.

Scuffles also broke out between police and demonstrators near the Corn Exchange. http://news.sky.com/skynews/Home/UK-News/G20-Arrests-As-Protesters-Gather-In-London—Thousands-Take-To-The-Streets/Article/200903415252669?lpos=UK_News_Carousel_Region_0

SKY NEWS VIDEO LINK – SEE ALL SKY NEWS VIDOES: http://video.news.sky.com/skynews/?videoSourceID=1302399

JUST HOW DID THIS HAPPEN?

 If You Are Protesting Remember:  Keep Calm and Carry On – OR BECOME A TARGET.  

Listen To The Morons On CNBC – They Have No Clue – . 

Yes I remember The Violence and Protests In 1999 Seattle, Do You.

GEE, I THOUGHT OBAMA WAS THE ANSWER – I GUESS NOT!

   

Breaking News Update:FBI investigating companies at heart of meltdown

WASHINGTON – The FBI is investigating four major U.S. financial institutions whose collapse helped trigger a $700 billion bailout.

Two law enforcement officials said Tuesday the FBI is looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, and insurer American International Group Inc. Additionally, a senior law enforcement official said Lehman Brothers Holdings Inc. also is under investigation.

The inquiries will focus on the financial institutions and the individuals that ran them, the senior law enforcement official said.

The law enforcement officials spoke on condition of anonymity because the investigations are ongoing and are in the very early stages.

Officials said the new inquiries bring to 26 the number of corporate lenders under investigation over the past year.

Spokesmen for AIG, Fannie Mae and Freddie Mac did not immediately return calls for comment Tuesday evening. A Lehman spokesman did not have an immediate comment.

Just last week, FBI Director Robert Mueller put the number of large financial firms under investigation at 24. He did not name any of the companies under investigation but said the FBI also was looking at whether any of them have misrepresented their assets.

Over the past year as the housing market cratered, the FBI has opened a wide-ranging probe of companies across the financial services industry, from mortgage lenders to investment banks that bundle home loans into securities sold to investors. Mueller has previously said the FBI’s hunt for culprits in the nation’s subprime mortgage crisis focused on accounting fraud, insider trading, and failure to disclose the value of mortgage-related securities and other investments.

The investigations revealed Tuesday come as lawmakers began considering whether to approve emergency legislation that would give the government broad power to buy up devalued assets from troubled financial firms.

In the past two weeks, the government has taken over Fannie Mae and Freddie Mac, the country’s two biggest mortgage companies, with a bailout plan that could require the Treasury Department to put up as much as $100 billion for each of them over time if needed to keep them afloat as mortgage losses mount.

Last week, the Federal Reserve provided an emergency $85 billion loan to AIG, which teetered on the brink of bankruptcy. Lehman Brothers was forced to file for bankruptcy after attempts to engineer a private rescue fell apart. All the companies were laid low from bad bets on complex mortgage-related securities tied to sub-prime mortgage loans.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke made the joint decision last week that the only way to stop the carnage was to address the symptoms of all the troubles, billions of dollars in bad mortgage debt sitting on the books of major financial companies. This debt has triggered the worst credit crisis in decades, causing credit markets to essentially freeze up despite the fact that the Fed joined with major central banks around the world to pump billions of dollars of reserves into the financial system.

Additionally, the FBI is investigating failed bank IndyMac Bancorp Inc. for possible fraud. Countrywide Financial Corp., formerly the nation’s largest mortgage lender and now owned by Bank of America Corp., is also under scrutiny.

http://news.yahoo.com/s/ap/20080924/ap_on_go_ca_st_pe/financial_meltdown_investigation

This article originally claimed that the Fed was addressing the “root cause” of the problem – that is incorrect – the bad debt on the books – from bad mortgages – are in fact the “symptoms” of the broken system. The root cause is the underwriting of these bad loans. The proposed bailout is silent as to what will be done to prevent a repeat of the horrendous lending practices.  

Obama “Deregulation Caused This Crisis” – An Ignorant Claim Or Political Spin?

Obama continues to blame the current financial crisis on “deregulation”. Either Obama knows that  claim to be false or he is ignorant of how this crisis evolved:

The path to our current cirisis started with these steps;

Step 1).  Mortgage Underwriting standards were lowered – begining in the early 1990’s. http://www.foxnews.com/story/0,2933,424945,00.html

The Federal Reserve’s Board of Governor’s created a new set of standards to govern Mortgage Lending practices. http://www.foxnews.com/story/0,2933,424945,00.html 

The Federal Reserve’s involvement in creating this problem gives one reason to question if the Public should trust the Federal Reserve to oversee the proposed bailout. 

The lowered standards minimized the importance of a borrowers Credit History, Downpayment, Job History or Income. These “tried and true” criteria were called “outdated”. The Boston Federal Reserve created a Manual outling the  “new criteria” in 1992.   http://www.foxnews.com/story/0,2933,424945,00.html 

These rules were “pushed” by Fannie Mae to the extreme. Those who co-operated were rewarded.

One lender singled out by Fannie Mae for special praise for following these new criteria was Countrywide:

Countrywide tends to follow the most flexible underwriting criteria permitted under [Government Sponsored Enterprises] and FHA guidelines. Because Fannie Mae and Freddie Mac tend to give their best lenders access to the most flexible underwriting criteria, Countrywide benefits from its status as one of the largest originators of mortgage loans and one of the largest participants in the [Government Sponsored Enterprises] programs. When necessary — in cases where applicants have no established credit history, for example — Countrywide uses nontraditional credit, a practice now accepted by the [Government Sponsored Enterprises].

Or take a 1998 sales pitch from Bear Stearns, which also followed the Boston Fed manual:

Credit scores. While credit scores can be an analytical tool with conforming loans, their effectiveness is limited with [Community Reinvestment Act] loans. Unfortunately, [Community Reinvestment Act] loans do not fit neatly into the standard credit score framework… Do we automatically exclude or severely discount … loans [with poor credit scores]? Absolutely not.

Given these lending practices mandated by the Fed and encouraged by Fannie Mae and Freddie Mac, the resulting financial problems for financial institutions such as Countrywide and Bear Stearns are not too surprising.

Noted Economics Professor Stan Liebowitz, University of Texas (Dallas) states, “such reckless behavior by [Fannie Mae and Freddie Mac] has lead to their financial meltdown and to the financial problems for the whole country. During Franklin Raines’ chairmanship of Fannie Mae, they were a major proponent of relaxing standards.”

Step 2). Congress blocked suggested reform aimed at correcting the crisis early on. Take a look at Congressman Barney Frank, Chairman of the House Financial Services Committee, Wikipedia Biography.  http://en.wikipedia.org/wiki/Barney_Frank  The Bio not only claims that, ” Frank “sits at the center of power.” but boasts, “In 2003, Frank opposed Bush Administration and Congressional Republican efforts for the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis of 1980’s. Under the plan a new agency would have been created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry. “These two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis,” Frank said. He added, “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.” http://en.wikipedia.org/wiki/Barney_Frank

Also read Senator Christopher Dodd, (Dem CT) Wikipedia Biography. That biography notes,  “Dodd was elected to the Senate in the 1980 election“, From 1995 to 1997, he served as General Chairman of the Democratic National Committee.” Dodd is Chairman of the Senate Banking Committee. The biography goes on to note, “The Center for Public Integrity has criticized Dodd for “being the leading advocate in the Senate on behalf of the accounting industry.” Political consultant and commentator Dick Morris wrote that Dodd had received more from accounting firm Arthur Andersen than any other Democrat and bore responsibility for trying to shield accounting firms from investor fraud liability in cases such as the Enron scandal.” Arthur Anderson was forced to surrender it license to practice Accounting in the US. The Biography goes on to note, “Senator Dodd was involved in issues related to the federal takeover of Fannie Mae and Freddie Mac.” “The Housing and Economic Recovery Act of 2008 before Congress in the summer of 2008, Treasury Secretary Hank Paulson sought provisions enabling the Treasury to add additional capital and regulatory oversight over these government sponsored enterprises. Dodd denied rumors these firms were in financial crisis. He called the firms “fundamentally strong” said they were in “sound situation” and “in good shape” and to “suggest they are in major trouble is not accurate” . He suggested observers were panicking “There’s sort of a panic going on today, and that’s not what ought to be. The facts don’t warrant that reaction, in my opinion,” http://en.wikipedia.org/wiki/Christopher_Dodd

The Congress also blocked other legislation intended to tighten accounting standards and increase regualtory oversight of Fannie Mae.   http://www.govtrack.us/congress/record.xpd?id=109-s20060525-16&bill=s109-190

http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&node=&contentId=A58272-2002Jul11&notFound=true

Contrary to Obama’s Claim – there have been no Congressional Proposals to de-regulate Fannie Mae or Freddie Mac in the last 10 yrs. Fact – Democrats prevented any regulatory changes proposed to limit Fannie & Freddie’s activities – to return to “traditional mortgage underwriting”.

Step 3). The men appointed to run Fannie and Freddie abandoned their public duties for private gain. One hid his true salary from Congress, two others were accussed of lying to Congress, three have plead guilty to criminal charges and paid millions of dollars in Civil Fines. Three have taken special “VIP Loans” from Countrywide Bank – Countrywide is under FBI investigation for Securities Fraud. To read a more detailed summary of their misconduct see: https://mcauleysworld.wordpress.com/2008/09/21/the-fannie-mae-five-five-key-players-who-broke-the-system/ 

This informatiopn copmes from public records – either candidate Obama knows his accusations are hollow political spin or he is truely ignorant of what has transpired.

If you can’t admit what caused a problem – you can’t fix the problem.

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