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Archive for September, 2008


Throw Dem Bum Out!  This is an old refrain about Congress and many other organizations.  I will be more polite.  Let us not renew the contracts of those in Congress, since they clearly hold party and self above country.  Simply not voting for any incumbent in Congressional races for the House and Senate means that come January 2009:

  • We will have 468 new people representing us.
  • Longstanding entrenched power bases brought on by seniority, will be gone.
  • Longstanding obligations to special interests will be gone.
  • Committees will be reshaped. 

The most important result from terminating the employment of these partisans will be a message to the entire Congress, including the 67 remaining incumbent Senators who are not up for reelection.  The message is: we expect the country to be their first priority and you and your party to be subsequent priorities.

Our country is mired in a highly volatile and national security level dangerous mortgage meltdown.  It is threatening our economy, the retirement economics of multiple millions, jobs, and lending – the lifeblood of this economy.  Yet, we are hearing comments that can be described as grandstanding.  We see members of Congress trying to use this situation for the inclusion of a pet project or some additional giveaway.  Some see this as an opportunity to just flatout spend our money.

We keep hearing who’s fault it is and see finger pointing.  Perhaps we should be seeing “asses and elbows”, please pardon the expression, working on the solutions.  This should be non-partisan.  We need to find our way and to correct our Titanic like course into that fateful field of icebergs.  Perhaps we could solve this problem quickly in a very non-partisan way, perhaps in a “we are in this together” way.  When the problem is solved and we have moved on, then we can suffer the chest beaters on how great they were, as all 535 members of Congress and the Bush Administration line up to take the credit.

We have so many problems facing this country with two problems standing out among the rest, energy and trade.  Read more about this in The Two Most Important Issues Facing America Today!

Our problems of education, trade, energy, quality jobs, internation disputes, and the general decline in this nation’s world stature are decades old and for the most part the bulk of the people sitting in Congress, particularly the Committee Chairmen and ranking members in the committees, have been involved in these problems for the duration.  Instead of finding solutions, they found ways to build power bunkers and become power fortresses in their respective house of Congress, this includes those who trample on the public trust – are you listening Charlie Rangle?  Unfortunately he is not alone and it is pervasive throught both parties.  There is nothing that can be done to disturb this cozy arrangement by those in Congress, yet with one pull of the ballot bar, one touch of a screen, or one “x” on a paper ballot, all of us frustrated Americans can make the disaster, we call Congress, go away.  We can establish a new and fresh Congress to work with whomever is elected President.

We can send a message that we expect representation and not the corruption that comes from power.  Yes, after a while Congress will revert back to what it is today, because we elect humans who succumb to the power.  If this happens againg, then we can just vote them out again.

VOTE FOR THE CHALLENGER IN ALL RACES – JUST SIMPLY DO NOT VOTE FOR THE INCUMBENT.  Don’t worry about your current Representative or Senator, as they will land on their feet, most likely with a great pension or plum job with a special interest group.  They will be fine, so you can send that message this general election.

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Update: March 2, 2009:

Watch almost any political talk show and you will hear a Democratic strategist or campaign person enthusiastically state that the deregulation of the banking industry meant that no one was watching Wall Street for you.  Barack Obama has even used the refrain “deregulation by the Republicans” to point a finger about the mortgage crisis.

Well deregulation did occur and it did change things in the banking industry.  First some background.  Until 1999, banks were restricted to certain businesses, Bill Clinton and a Republican Congress jointly deregulated the banking business.  An example is that previously they could not enter into the insurance or brokerage business.   Other factors were at play, such as interstate banking and states’ deregulation of banking.  Non-bank insurance companies and brokerage houses were actively offering money market checking accounts.  The sum of these changes placed banks at a disadvantage, since other non-regulated companies were divvying up the limited areas where bankers could operate.   For a more detailed read try The Case for Banking Deregulation or The Real Effects of U.S. Banking Deregulation.

Thus deregulation.  Did this mean that banks would no longer be regulated?  No.  Did this mean that bank regulators would go away?  No.  It simply meant that banks could enter brokerage, insurance, and other businesses to a modest degree, with restrictions.  This deregulation had nothing to do with the mortgage businesses of any bank or non-bank financial lending company.

Either the Democrats know this and choose to mislead you – not good, or do not know this and do not know what they are talking about – worse.  The real problem, about which no one talks, was the intensity to which Democrats and with a modicum of Republican support fell in love with Fannie Mae and Freddie Mac.

Watch: Saving Our Economy: What’s Next? to see just how much the Democrats were involved in causing this problem.

This seemed like the perfect vehicle for helping people of low income obtain a home.  This was the populists’ greatest tool.  Not only did Fannie and Freddie have an appetite for mortgage paper with lower credit requirements, they also had an appetite for lower equity requirements and to buy securitized mortgage assets.  Thus the subprime mortgage lending business was born.  The Achilles Heel of the subprime business was value of collateral.  As long as the collateral remained valued at or higher than the loan, it could be liquidated easily with minimum loss.

As the subprime lending business began to not only heat up, but to overheat, the demand for homes began to become intense, raising the sale prices and values precipitously.  Now the good part.  Lenders using collateral guidelines began to anticipate the future value of homes and created zero down lending with borrowed down payments, via a line of credit – ingenious, except that if the value of real estate faltered with a faltering economy, the house of cards would come tumbling down.  It happened.  This problem became so accute that the Bush administration five years ago asked Congress to reign in their twin prodigies, Fannie and Freddie, with regulation – the Democrats in the House and Senate blocked the effort.  Now let’s look at a primary cause of today’s financial meltdown.  Bad mortgage paper, due to undercollateralized loans, bought by investment houses and resold to investors as securitized mortgage assets represents nearly 2+% of our GDP.  The government had no choice but to step in or our economy, our dollar, and our standard of living would follow the bad mortgages down the proverbial tubes.

How did this happen?  Look to the Democrats more than to Republicans.  Democrats were in love and some were in bed with Fannie and Freddie.  Barack Obama cannot explain away the league leading MVP type of the size of contributions his campaigns received – now and in the past, from both of the these institutions and their leadership.  Chris Dodd has much explaining to do about his personal sweetheart mortgage, especially considering his position on the Senate Committee on Banking, Housing, and Urban Affairs.

Please note that when the Democrats get their hand caught in that political cookie jar, their standard procedure for being Teflon, is to loudly blame a target scape goat.  They did this when their environmental positions about drilling for oil placed this country into an energy vise.  Then they blamed big oil.  They are now screaming about deregulation causing the mortgage meltdown.  1999 banking deregulation had nothing to do with the mortgage crisis.  Yet, the new target scape goat is Republican deregulation of the banking industry.  Remember, the banking industry was deregulated in a bipartisan way between the Republicans and Bill Clinton.  That deregulation had nothing to do with the type of mortgages being made.

Some, so eager to point to banking deregulation as the cause of the mortgage crisis, fail to understand that the The Commodity Futures Modernization Act of 2000, was the act that mostly affected these swaps.  This bill was signed into law in 2000 by President Bill Clinton.  Read more on this at The Commodity Futures Modernization Act of 2000.

The International Herald Tribune has a good article on credit swaps.  It can be found at Obscure, large and arcane, credit default swaps face a big test.

Read about who is responsible for the melt down at: https://brokengovernment.wordpress.com/2008/10/05/democrats-out-politician-the-republicans-with-our-financial-crisis/

To read about how we can get beyond this meltdown, try Why isn’t the Housing Bailout Effort Working?

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