American Elephants


Bush and McCain each tried to reform Fannie Mae. Democrats Blocked them both times. by The Elephant's Child

First from the New York Times: Note the date!

September 11, 2003– The Bush Administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be 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,

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies.  It would exercise authority over any new lines of business.  And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken.  A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

From the Congressional Record: Again, Note the Date!

FEDERAL HOUSING ENTERPRISE REGULATOR REFORM ACT OF 2005
The United States Senate, May 25, 2006

Sen. John McCain [R-AZ]:  Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives.  In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets.  The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac. …

For Years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac — known as Government-sponsored entities or GSEs— and the sheer magnitude of these companies and the role they play in the housing market.  OFHEO’s report this week does nothing to ease these concerns.  In fact, the report does quite the contrary.  OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.

Democrats blocked both attempts to reform Fannie Mae.

Thanks to Sweetness &Light which has printed these two articles in full.

Barack Obama is out trying to blame this all on the Bush Administration, as usual, and scare people as much as he can, — so that he can promise to “rescue” them.  But his solutions are the worst possible, and his speeches are irresponsible.

First Trust economists note that:

The most important thing to remember is that the emphasis belongs on the word financial. These financial market problems are not a result of general market weakness, otherwise known as a recession.  In fact, real GDP has grown 2.2% in the past year and accelerated to a 3.3% annualized growth rate in the second quarter.

The economy is not taking down investment banks; lousy lending standards and the excessive use of leverage are taking down investment banks.

This whole thing had its’ beginnings in a well-intentioned law during the Carter Administration, The Community Redevelopment Act, which was designed to encourage minority homeownership.  President Clinton, influenced by multiculturalism, encouraged it further by dictating where mortgage lenders could lend.  Tough new regulations required that lenders increase their lending in high-risk areas where they had no choice but to lower lending standards to make loans that sound business practices had previously rejected.  Clinton cronies Franklin Raines and Jamie Gorelick became multimillionaires through their supervision of the quasi-governmental agencies that came to manage the real estate market in America.

Low interest rates in the marketplace persuaded Investment banks to purchase packages of sub-prime loans, and risky decisions and a little greed, of course, let them use too much leverage.

This is not the first time that Investment Banks have failed and disappeared. E.F. Hutton, Goodbody & Company, and Kidder Peabody are three of the vanished.  Today’s Investment Banks did not do anything against the law, they just exercised bad business judgment.

Unemployment in the economy is largely confined to the housing crisis with home builders and related trades suffering, as well as the auto industry and related trades and now there will be some investment bankers on the unemployment line.

They are in trouble because they are affected by unfortunate laws made by a Congress that does not always understand what they do. Remember that most congressmen never read the bills that they sign. Congress has long been inclined to well-intentioned regulation to help the poor and save the planet.  They fall in love with the goals, and never consider or learn about the consequences of what they do.

It seems kind to help a poor family get into a house larger than they can really afford, with less of a down payment, but it isn’t really kind.  Kindness would be helping them to learn how to work hard and save their money, and how to move up to better jobs. Government can make it easier for private industry to build smaller, more affordable houses, without telling them what kind of houses to build, where to build them and under what qualifications to sell them.

The great problem with Socialism is their pursuit of “social justice”.  They believe that they can make the poor — not poor — by taking money from the well-to-do and giving it to the poor.  Never works.  Though there is extraordinary mobility in our society, those who are induced into dependency on government are inclined to lose that mobility.

Barack Obama, in all his economic plans, is extraordinarily invested in the pursuit of “social justice”. That should be a serious warning.



Obama’s Statements Are Raising Some Huge Questions. by The Elephant's Child
September 17, 2008, 7:14 pm
Filed under: Iraq, Military, Terrorism, The Constitution | Tags: , ,

The Obama campaign objected to the article from Amir Taheri that I quote  in the article below. The campaign’s response says that Taheri’s article was “filled with distortions”, but their rebuttal centers on a technical point: the differences between two Iraqi-US accords that are being negotiated — the Status of Forces Agreement which will set rules governing US military personnel in Iraq (SOFA) and the Strategic Framework Agreement, to settle the legal basis for the US military presence in Iraq in the years ahead (SFA).

One agreement cannot be settled without the other, for the two are interlinked. The Obama campaign waffles and misconstrues, but the record ends up confirming just what Taheri suggested in his article:

Obama preferred to have no agreement on US troop withdrawals until a new administration took office in Washington.

Obama has changed position on another key issue.  In [an] NBC report, he pretends that US troops do not have a  “clear mandate.” Now, however, he admits that there is a clear mandate from the UN Security Council and that he’d have no objection to extending it pending a bilateral Iraq-US agreement.

This may seem technical, but it is important to understand.  Obama is merely a candidate for the office of President of the United States.  He has no authority and no right to pretend to any. Senators don’t get to run around the world trying to make policy. Democrats seem to have lost a sense of the constitution, and what rights are given to what branch of the government.  Former presidents have no business going around the world making foreign policy speeches.  Candidates who claim expertise in constitutional law should know better.  It should be an election changing error on Obama’s part.

Obama has demonstrated a great lack of understanding of American foreign policy, of our position in the world, and of our responsibilities and challenges.  His claim that he knows more about foreign policy than his opponents because he lived in Indonesia when he was 6 to 10 and has relatives in Africa is laughable. He sneered at senatorial trips abroad when they met with government officials, as unimportant, yet is with governmental officials that the American government must deal.  In his own meetings with foreign officials, as in the case of Iraqi officials he seems more interested in using them to further his ambitions than in learning from them.

In a long interview with the pan-Arab daily Asharq al-Awsat, [Iraqi Foreign Minister Hoshyar] Zebari says’ “Obama asked my why, in view of the closeness of a change of administration, we were hurrying the signing of this special agreement, and why we did not wait until the coming of the new administration next year ang agree on some issues and matters.”

Again, note that Zebari mentions a single set of agreements, encompasssing both SFA and SOFA. Zebari continues’ “I told Obama that, as an Iraqi, I believe that even if there is a Democratic administration in the White House it had better continue the present policy instead of wasting a lot of time thinking what to do.”

He now talks of “the prospect of lasting success,” perhaps hoping that his own administration would inherit the kudos…He has even abandoned his earlier claim that toppling Saddam Hussein was “illegal” and admits that the US-led coalition’s presence in Iraq has a legal framework in the shape of the UN mandate.

In other words, Obama was trying to derail current US policy, whild Zebari was urging him not to “waste time.”

…Obama no longer talks of “withdrawal” but of “redeployment” and “drawdown” — which is exactly what is happening now.

While I am encouraed by the senator’s evolution, I must also appeal to him to issue a “cease and desist” plea to the battalions of his sympathizers — who have been threatening me with death and worse in the days since my article appeared.

Obama’s ambitions have run away with him, and his desires exceed his knowledge of the office he seeks.  It is very important to look closely at his claims and his promises , and consider what the facts are and if his promises hold water.  They don’t.




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