Mike's Noise

Pint-size Propaganda

Everyone is talking about this "grassroots" video, linked this morning by Drudge.  It is a "We Are The World"-type production featuring children praising Barack Obama:

The video was produced by Kathy Sawada, a a teacher at the elite Colburn School of Performing Arts in Los Angeles.  Here is how Sawada describes the making of the video:

As Sunday approached, a neighbor volunteered a home. Production wizards got wind of the project and offered their help in recording it. The likes of Jeff Zucker, Holly Schiffer, Peter Rosenfeld, Darin Moran, Jean Martin, Andy Blumenthal, and Nick Phoenix rearranged schedules to participate. Holly Schiffer was able to get three High Definition cameras (Panasonic HVX250's), and an AVID editing facility. When Jeff Zucker went to pick up the camera package, Ted Schilowitz happened to be there and offered a RED camera set up on a Steadi Cam.

What we accomplished in a few hours on a Sunday afternoon embodies the nature of the Obama campaign: its grassroots inspiration, its inclusiveness, its community building. People pitched in quickly for a cause that resonated with them. There were not many conditions: "Think this is a good idea? Want to help? Great. Sunday at 12:00." At the heart of the project were 22 children and their music. The willingness of all involved to come together for them was a testament to our hope, unity, courage, joy and belief in the future represented by these children.

Bob Owens asks, "Does a concert-quality musician in an elite school in the middle of the most ego-centric city in the United States count as a "grassroots" effort?"  Owens also provides some brief bios of those involved:

Here's a partial list of those who helped produce this "grassroots" effort:

• Jeff Zucker — American television executive, and President & CEO of NBC Universal.
• Post-producer (former choreographer?) Holly Shiffer.
• Motion picture camera operator/steadicam specialist Peter Rosenfeld (appropriately enough, worked in "Yes Man," a movie about " a guy challenges himself to say 'yes' to everything for an entire year."
• Darin Moran, another motion picture industry professional, who just finished filming — how appropriate — Land of the Lost.
• Andy Blumenthal, Hollywood film editor.

Grassroots all the way, baby

(UPDATE: The Politico is reporting that NBC has denied that "the" Jeff Zucker was "involved" with this video.)

But of course!  In the elite Hollywood circles of the mega-rich, these folks are just your average next-door neighbors.  It's kind of like Sen. Christopher Dodd thumbing through his Rolodex and calling Countrywide CEO Angelo Mozilo personally when he needed a home loan.  Doesn't everybody have those kinds of connections?

What this is, of course, is astroturfing, an effort by a group of professionals to simulate grassroots political involvement.  What you're really looking at is the brainwashed progeny of some of Hollywood's richest, most talented, and most powerful players in a carefully orchestrated demonstration of Orwellian goodthinking.

Brainwashed, you say?  Read some of the hopey-changey-syrupy-smothered-in-rich-creamery-butter lyrics the kids sing:

Now's the moment, lift each voice to sing
Sing with all your heart!
For our children, for our families,
Nations all joined as one.
Sing for joy and sing abundant peace,
Courage, justice, hope!
Sing together, hold each precious hand,
Lifting each other up;
Sing for vision, sing for unity,
Lifting our hearts to Sing!

Sure, one of the kids wrote a little ditty called "We're Gonna Change The World" that appears in the video, but come on -- do you think for a minute that the Colburn School held a contest for songs praising John McCain as well?  This has nothing to do with "22 children and their music."  It's a group of well-connected Hollywood elites rehearsing the kind of propaganda that we will be forced to endure on TV, radio, movies, and online for the next four years if Barack Obama wins.

And for many of us, watching children performing propaganda engineered by wily adults is a bit disturbing.  Captain Ed Morrisey says that the video reminded him of "Tomorrow Belongs To Me" from the movie Cabaret.  If you don't know it:

I was reminded of this page from a German children's coloring book, reproduced in Time-Life's Prelude To War, p. 114:

Translation -

My Leader!
(the child speaks:)
I know you well and love you, like father and mother.
I shall always obey you, like father and mother.
And when I grow up I shall help you, like father and mother.
And you will be proud of me, like father and mother.

I'm sure that many people will be reminded instead of Jesus Camp, and the religious indoctrination of children offered by various sheltered fundamentalist sects around the world.  The difference, of course, is that religious fundamentalists pledge their allegiance to God, not to a man.  They also believe almost universally that mankind is broken and lost without God's guidance.  And their indoctrination is generally a private matter, taught in churches and private schools, not the kind of global effort that accompanied Stalinism, Naziism, or (I shudder as I write this) Obamaism.

The Anchoress was quite broken up by this video, and wasted no time encapsulating the efforts by Obama forces and Democrats to silence their opponents, which have been projected onto conservatives and President Bush:

To paraphrase Mark Steyn: when this many people I don’t trust are telling me something must be done for my own good…I don’t want it. I want to be far away from it.

We’re being sold a bill of goods, I think. I look at that beautiful child, with her lovely, lilting voice and her open mien, and I see lines for bread, lines for shoes, lines for meat, lines, lines, lines. I see the privileged few driving by the lines and giving the raised fist, encouraging the proletariat to “keep it real.”

There are extremists who behave in extreme ways - and with extreme hate - on both sides. The truth is the far right and the far left are so alike in their excesses that they are mirrors of each other, or twins of hate.

But we have never had such an extreme “leader” so close to the White House. Oh, I know, we’ve heard for 8 years about “the fascist Bush” but reasonable people know it’s hooey; they know that Bushbots have not actively organized to shut down liberal talk radio, they have not tried to intimidate, harass or suppress the many who have told lies and untruths about him.  For all of the preening rhetoric about “Bushhitler” the ones spouting it have known full well that Bush was no fascist; that he was not going to shut them down, or make their ideas and films unavailable. They’ve known it. They know, too, that they’ve been projecting their own instincts to silence “patriotic dissent” on a guy who would never do it.

I think they won’t have to project for much longer.

She closes her post with an excerpt from Michael Radford's film version of Orwell's 1984.

God help us if that is our future.

Others blogging:

Michelle Malkin
WizBang (Kim Priestap)
Roger L. Simon

Bailout Blowup

Much was said a short while ago about the disheartening fact that only 9% of Americans expressed confidence in our Congress.  Yesterday's bailout vote showed why even 9% was undeserved.

First, the bill.  Michelle Malkin called it a shit sandwich.  (Well, okay, she was polite and called it a "crap sandwich."  But I'm not going to mince words.)  It was authored by Democrats, with Republicans deliberately excluded from authorship.  Nice.  Let's here it for bipartisanship, guys. 

The the primary purpose of the bill was to apportion $700 billion in federal money (that's just a starting point, by the way -- when have you ever seen a government program cost less than its projection?) that was to be used to buy "troubled assets" (i.e. bad debts) from banks, thus relieving the banks of the debt liabilities while providing them with operating cash.  The bill would have also mandated the creation of a federal insurance program (like the FDIC) to insure institutions holding large amounts of troubled assets; such an insurance program would act as a mechanism to ensure that bad debts do not sink more financial institutions.  But when Republicans finally got their hands on the bill, they found it stuffed full of pork (a bailout of union pension funds) and perks (a plan to skim revenue and give the proceeds to ACORN Housing and other race-based agitators who are tied exclusively to Democrats) and sneaky add-ons that would never otherwise pass (a ban on oil shale production). 

After these things were brought to light, Republicans managed to use public outcry as leverage and get many of those things removed, but the full text of the bill still has not been made public.  (Correction:  the bill was not made public until Sunday afternoon, barely enough time for anyone to discuss it before the Monday morning vote.)  After analyzing the bill, the Republican Study Committee issued a summary of the bill that included these concerns:

• Fails to adequately penalize the debtholders and shareholders (including many of the executives themselves), who should bear the risk of any losses, and indirectly infuses capital directly onto the books of these financial institutions.


• Alters fundamentally the nation’s free-market system in that it broadly socializes firm’s money-losing mortgage assets and places the U.S. on a slippery slope whereby profits may also be nationalized.


• Cedes massive authority to Treasury. Given the fact that the Presidential election is a mere six weeks away and a new Secretary will take office in January 2009, lawmakers have absolutely no idea what individual will ultimately be exercising this vast new authority over the long-term.


• Sets up Treasury to pay inflated prices for assets. Since there is nothing in the proposal that forces the financial institutions to sell their assets at a discount rate or event at all, many of these owners may simply wait on the government to increase their bid, leading to more inflated prices than the market would currently bear.


• Creates the potential for an enormous bureaucracy that will be needed to administer the purchase and insurance programs.


• Increases the federal deficit and national debt. The new mandatory spending, will cause a massive increase in the national debt and an immediate (although smaller) increase in the federal deficit. These annual deficits are funded by selling government bonds purchased by a host of large investors, including foreign countries. However, there is a limit to the amount of bonds that a government can float without adverse financial effects.


• Aids financial institutions that may not pose a systemic risk. Some companies, such as AIG, may truly pose a systemic risk to the entire market. However, there is no requirement under the proposal that a company truly be “too big to fail.” Instead, any financial institutions with mortgage-related assets would be eligible.

And about that "massive authority" given to the Treasury -- Secretary of the Treasury Henry Paulson asked for the power to reapportion the money any way he chooses, with congressional and executive oversight strictly forbidden.  It's a scary, naked power grab by the Department of the Treasury, and something that we don't need. 

In addition, there is also the possibility that the government (specifically Treasury Secretary Henry Paulson, an investment banker by trade) could be using the current credit crisis to leverage the largest trade windfall in history. Here's how -- the Treasury buys $700 billion in loan notes, but these notes are actually bundles of bad and good mortgage loans.  Assuming that mortgage failures have peaked, the Treasury may actually be buying mostly good notes at firesale prices.  Then as the Treasury slowly increases the money supply to spur economic growth (something that no other "investor" has the power to do) these notes may actually net a staggering profit of over $1 trillion dollars for the US Treasury. 

Finally, the bill contained no indications that Congress actually understood what caused the current banking crisis, or was prepared to make some sacrifices in order to help the nation get through it. 

The bill utterly failed to address the federally-mandated race and income-based lending quotas that forced banks to get into the subprime/unsecured lending business in the first place.  Make no mistake about this -- banks were forced to loan money to high risk borrowers who were members of ethnic minorities, and they were forbidden to use normal risk-assessment tests such as real income and credit scores, on the basis that such tests were "racist."  Banks developed sub-prime, 100% financing programs because many low-income borrowers could not afford regular mortgage payments or did not have enough savings for a downpayment -- but banks had to lend money to these borrowers or else face audits, government interference in mergers and other normal business operations, and public castigation and harassment from minority advocacy groups.

Fannie Mae and Freddie Mac sweetened the pot by offering to buy those risky loans and selling them as derivative bonds, backing them with the full faith and credit of the US Government.  The whole thing soon spiraled out of control as investors bought up these bonds, expecting them to be fail-safe long term investments.  The greed of banks (who were making good money from these bonds, and stupidly expected a windfall when the higher interest rates of subprime mortgages eventually kicked in) and bond traders is certainly to blame for part of the problem, but the record clearly shows that Fannie Mae, Freddic Mac, ACORN Housing, and numerous other organizations funneled millions of dollars in lobbying money and soft-money political contributions to Democrats so they would kill any legislation aimed at regulating or expanding oversight of Fannie and Freddie.  And to no one's surprise -- since it was written by Democrats -- the bill did not include any kind of lobbying reform or financial accountability for the CEO's and other corporate officers of Fannie and Freddie.

And how about some good faith offerings that showed Congress was really serious about helping out the taxpayer?  Perhaps some cuts in government spending, or a 12 month moratorium on earmarks?  Nope.  Nowhere to be found in the bill.

So was the defeat of the bill a good thing?  Yes and no.  Remember, two weeks ago Harry Reid said "No one knows what to do."  But in just a few days, House Democrats were able to miraculously put this bill together.  Haste usually means poorly-conceived ideas and ill-informed decisions.  There is an old maxim: "Unusual cases make bad law."  Steve Schippert notes, "Is it not troublesome that the "Bush Tax Cuts" have a defined shelf life and the largest government program in our history does not?" 

On the other hand, many people are still worried about an impending credit crunch that could force banks to end or severely restrict commercial lines of credit -- the money that businesses (generally large ones, or those that have irregular or seasonal cash flow) regularly borrow in order to keep operating.  The funding in this bill would have kept banks solvent and forestalled a bigger credit crunch.  No one was expecting a miracle cure; the best we could have hoped for was a crash landing instead of terminal velocity impact.

Now on to the Democrats, and their party's feckless leadership.

A mere party line vote would have ensured the bill's passage.  The House did not need a 2/3 supermajority, because the President promised to sign the bill as soon as it landed on his desk.  Yet, 95 Democrats voted "NO" on the bill.  What does this say about Nancy Pelosi's leadership?  Just before the vote, Pelosi (who declared last week that Democrats bore absolutely no responsibility for the current credit crunch) delivered a shrill kick in the balls to Republican House members, blaming them and the Bush White House for everything currently wrong with our financial system.  Her statement was one of the most ugly, deceitful partisan attacks I have ever heard.  Here is an excerpt:

$700 billion. A staggering number, but only a part of the cost of the failed Bush economic policies to our country. Policies that were built on budget recklessness when Pres. Bush took office, he inherited Pres. Clinton’s surpluses - four years in a row budget surpluses on a trajectory of $5.6 trillion in surplus. And with his reckless economic policies, within two years, he had turned it around. And now 8 years later, the foundation of that fiscal irresponsibility, combined with an “anything goes” economic policy, has taken us to where we are today.

Critics claim that Republicans who switched their vote after Pelosi's vitriolic rant were spineless.  But I ask, if someone keeps kicking you in the balls, how many times are you going to get back up and be kicked again?  The truth is that the Republican vote did not matter one bit.  The entire Republican delegation could have voted "NO" and the bill would have still passed.  That's what being the minority party means. 

Democrats, you can't have it both ways.  You can't blame the Republican minority for derailing this bill, while claiming that the Democrat minority was essentially powerless in 2003 and 2005, when they defeated two major Republican GSE reform bills.

Did Nancy Pelosi deliberately sink this bill, on the assumption that its defeat will hurt John McCain?  Considering the fact that this bill has been nothing but an exercise in divisive partisan politics and finger pointing, that accusation comes as no surprise.  Way to go Nancy.  You've certainly earned that single-digit confidence rating.

...

Fabius Maximus has a good post on the bill: "A Quick Guide To The Emergency Economic Stabilization Act of 2008."  And you should read his archives, which are linked at the bottom of his post.  He claims to not be an economist or a banker, yet his grasp of the problem is amazing, and his writing is easy to understand.

Fox News put together a good 2-part report explaining how Fannie Mae and Freddie Mac enabled banks to comply with federal mandates and make risky loans to unqualified minority borrowers:

And here is another video featuring excerpts from a 2004 House hearing on Fannie Mae and Freddie Mac's violation of regulatory rules.  This is when the Fannie Mae accounting scandal was just beginning to unravel.  Watch Congressional Democrats defend Fannie Mae and attack the regulators!  Rush Limbaugh has a transcript and commentary.

It's Here!

As promised - Andrew Sullivan, who hates Sarah Palin, reposted a 1984 video of Palin modeling a swimsuit as part of the Miss Alaska pageant.  How anyone could believe that such a video would be harmful is beyond me. 

I'm sure that the president of Pakistan has already cached his copy of the video ...

Are the poor to blame for the current credit crisis?

In the wake of last week's major lending market collapse, many conservatives have drawn a bead on low income housing as the root of the problem.  While there are some truths to their claims, I believe it is unfair to lay the blame completely at the feet of affordable housing advocates and their political allies.

To begin with, it is probably good to explain why we needed affordable housing legislation in the first place.

Seventy five to eighty years ago, inner-city neighborhoods were largely populated by European immigrants, who toiled at backbreaking blue collar jobs, and accumulated only minimal amounts of wealth.  Many of these older residents lived as tenants all their lives, never owning a home or a stake in the apartments where they lived.  The children of these residents, who weathered the Great Depression in these neighborhoods, came home from World War II and attended college on the GI Bill.  Many of them became professionals, joined the expanding middle class, and moved to the suburbs in the 1950's and 1960's.  When their parents retired, they moved out with them.  A few of the original residents remained, but of those, most stayed because they could not afford to move.

After WWII, a new influx of blue collar tenants moved into these neighborhoods, the majority of which were "non-white" -- blacks from the South, and immigrants from the Caribbean, Mexico, and South America.  These residents also rented, and owned little accumulated wealth.  Almost without exception, none of these residents could afford to purchase apartment buildings or storefront businesses within these neighborhoods.  A shadowy amalgamation of banks and other investors ended up owning these properties.  In some cases, rent controls meant that the property owners could not earn enough money in rental income to afford regular maintenance of their properties.  In others, the owners simply refused to spend the money.

Then during the 1960's, the urban renewal craze hit America's big cities.  Municipalities discovered that old residential and commercial areas could be razed, and in their place parks, civic centers, sports stadiums (and ancillary businesses like parking garages, hotels, and restaurants) could be erected, providing millions of dollars in badly-needed revenues.  This encouraged cities to deliberately neglect older neighborhoods, since it was much easier (and vastly cheaper) to acquire blighted neighborhoods through imminent domain powers than to have to purchase them on the open market.

As blue collar jobs began to move out of the inner cities, crime, out-of-wedlock pregnancies, drugs, alcoholism, and vandalism began to take their toll on inner city neighborhoods.  Run-down properties became decrepit.  When conditions deteriorated further, buildings were abandoned.  In areas where urban renewal was unlikely to happen, property owners attempted to recover what value they could from their properties through self-inflicted vandalism and arson.  As a result, insurers refused to underwrite those properties.  Banks refused to loan any money for the purchase or renovation of properties in those neighborhoods.  The outlook for the remaining residents seemed hopeless.

However, in the 1970's, pioneering community organizing efforts began to change that.  Residents rallied around neighborhood landmarks and began demanding that cities invest money in their neighborhoods in proportion to what wealthier areas received.  And they began pressuring banks and savings and loans to begin making small loans available to neighborhood residents.

A major community organizing milestone was the 1977 Community Reinvestment Act, signed into law by Jimmy Carter, which made it illegal for banks to "redline" blighted neighborhoods.  As a result of the CRA, major improvements began to be made in many poor urban neighborhoods.  This was a good thing.  It brought a sense of accomplishment to community residents, and rekindled a spark of hope among the millions who were prisoners in America's inner cities.

Unfortunately, after a decade and a half, common sense financial planning in urban neighborhoods began to be supplanted by the notion that "more of a good thing is always a better thing."

Perhaps in an effort to contrast themselves from the mythical 1980's "decade of greed" allegedly masterminded by the Republican party and evil Wall Street financiers, the Clinton Administration began a steady push to expand housing loans in low-income areas.  Investors Business Daily explains,

Lenders who refused would find themselves castigated publicly as racists. As noted this week in an IBD editorial, no fewer than four federal bank regulators scrutinized financial firms' books to make sure they were in compliance.

Failure to comply meant your bank might not be allowed to expand lending, add new branches or merge with other companies. Banks were given a so-called "CRA rating" that graded how diverse their lending portfolio was.

It was economic hardball.

"We have to use every means at our disposal to end discrimination and to end it as quickly as possible," Clinton's comptroller of the currency, Eugene Ludwig, told the Senate Banking Committee in 1993.

And they meant it.

In the name of diversity, banks began making huge numbers of loans that they previously would not have. They opened branches in poor areas to lift their CRA ratings.

Meanwhile, Congress gave Fannie and Freddie the go-ahead to finance it all by buying loans from banks, then repackaging and securitizing them for resale on the open market.

That's how the contagion began.

With those changes, the subprime market took off. From a mere $35 billion in loans in 1994, it soared to $1 trillion by 2008.  (emphasis added)

During the late 1990's, financial accountability at large mortgage lending houses largely evaporated via two extremely risky policies. 

First, loans to low-income borrowers were financed a sub-prime rates.  Normally, interest rates are calculated based on the prime rate, which is determined by the Federal Reserve, plus reasonable adjustments that cover banking costs and potential risks associated with the borrower.  Having a lower-than-average income usually translates into a higher potential risk, and therefore a higher interest rate.  This practice has obviously been abused (credit cards companies come to mind immediately) but in an effort to make loans more affordable to low income borrowers, banks were encouraged to loan money at rates below the prime rate.  This meant that banks were not collecting enough money in interest payments to offset the cost of defaulted loans.

Second, banks were allowed to make unsecured loans; in other words, banks were allowed to increase the value of their loans beyond the security value of their deposits, which is a very dangerous thing to do.  The mechanism that allowed them to do this was a clever scheme that allowed Fannie Mae to bundle unsecured mortgage loans and other financial instruments from banks and other lending institutions together, and sell them as givernment-vetted long-term securities (bonds, essentially) in the secondary market -- "Pooled FNMA Certificates."  Curiously, the first firm granted this privilege was Bear, Stearns, & Co.

Although I cannot find sufficient evidence to back up this theory at the time of this writing, it seems reasonable to me to assume that much of the financing for the so-called Tech Bubble of the late 90's could have been raised, and then absorbed as losses, through the mechanism of secondary market bundled mortgage securities -- if bonds or other instruments used to raise cash for the tech market financing were bundled with the unsecured mortgages.  As long as the value of the mortgages remained high, losses from the Tech Bubble could have been absorbed with relative safety by major financial institutions and insurers.   

It also seems reasonable to assume that the tech bust of 2000 - 2001 would have driven more investors (who were disillusioned with the stock markets, specifically the tech sector) toward mortgage securities, which then would have driven the value of these securities even higher due to increased demand.  In addition, the Federal Reserve has continually printed more and more money and made it available at lower and lower interest rates, in an effort to keep the economy growing.

All of this worked beautifully as long as the value of real estate continued to climb.  Greater demand for homes and a ready supply of mortgage cash meant that home prices soared year after year.  And as the book value for real properties steadily increased, the resulting increases in equity value translated into more and more money that could be borrowed against the current (and future) value of the property.

During the late 90's and early 2000's, bankers, politicians, and investors swore by the old maxim that "no bad news is good news."  This philosophy was responsible for the major accounting scandals of 2001 - 2002, which revealed that many business executives were more interested in perpetually rising earnings and stock valuations than they were in using standard accounting principles or actually making money.  It should come as no surprise that Fannie Mae itself was involved in a multi-billion-dollar accounting shell game that came unraveled in 2005.

Warning signs were abundant, yet criticism dating back as far as 1997 was generally ignored.  In 2003, the Bush Administration attempted to impose stricter oversight over Fannie Mae and Freddie Mac, specifically through the creation of a special department within the US Treasury to oversee those institutions.  Democrats balked at the idea and eventually defeated it, claiming that Fannie and Freddie were sound financially, and that any attempt to increase regulation would result in a decrease in available affordable housing ... and no one wanted to be accused of racism.  Republicans proposed another mortgage lending regulation program in 2005.  This program also failed after House Democrats drastically altered the Senate version of the bill, and it died in committee.

The whole thing came crashing down this year, with the softening and eventual meltdown of the overinflated California and east coast real estate markets, the near-bankruptcies of Merrill Lynch, Bear, Stearns, & Co., and CitiGroup, the bankruptcy of Lehman Brothers, the collapse of Fannie Mae and Freddie Mac, and the meltdown of insurance giant AIG (which had heavily invested its cash reserves in Fannie and Freddie).  Now the Federal Reserve and US Treasury Department are negotiating with Congress to approve a plan for the Federal Government to underwrite a minimum of $700 billion in bad debts.

So where does the blame lie?  Certainly not with the original Community Investment Act, or with the funds that the act originally managed to channel into blighted neighborhoods across the nation.

The correct answer, I think, is related to good old American greed, and virtually no one is completely exempt:

• The greed of homeowners who used their homes as ATM's, because they believed that the value of their homes would never decrease, and that they were free to spend as much borrowed money as they wanted, without ever having to worry about paying it back
     
  
• The greed of banks, who continued to loan unsecured money simply because bundled loan securities were selling like hotcakes, and the influx of cash from those sales was intoxicating
     
  
• The greed of investment groups, and their political allies, who earned billions off the trading of those mortgage loan securities
     
  
• The greed of investors, who bought billions and billions of dollars worth of those mortgage securities, because those investments were promised to be fail-safe
     
  
• The greed of mortgage lenders and their agents, who took home billions of dollars in fees, commissions, and bonuses, based on the sale of risky sub-prime mortgages, interest-only loans, and reverse mortgages
     
  
• The greed and ignorance of first-time home buyers who should never have qualified for a mortgage in the first place, who believed that they were entitled to get something for nothing, and felt no need to honor their financial obligations
     
  
• The greed of housing advocacy groups, who had no problem playing the race card if it meant generating a continuous supply of low-income borrowers for mortgage lenders, and therefore millions upon millions of dollars in fees and grants
     
  
• The greed of politicians who sold out to Fannie Mae, Freddie Mac, and affordable housing advocacy groups through lobbying money and campaign contributions, playing the race card and playing partisan politics as long as it kept those funds coming through the door

The Bible famously states that the love of money is the root of all evil.  I've never been against earning an honest buck, but perhaps it would do us all a lot of good to consider that sacred advice the next time we see a financial scheme that seems too good to be true.

...

The Anchoress has a thought-provoking explanation of much of this as related by Mark Levin on his radio program Friday.  Levin is audibly upset and passionate as he explains his take on the issue, and I think he comes down a little too hard on the affordable housing market.  Otherwise, it's a fascinating listen.

Also, Britain's Financial Times places a substantial portion of the responsibility for our current financial mess on the shoulders of Alan Greenspan.  Are they correct?

ADDED:  Since I checked her blog this morning, The Anchoress has yet another fabulous post about the faith aspect of all this.  She bemoans the fact that none of our current leadership seems to have the humility to ask God for wisdom and an understanding mind, like Solomon.  She explains:

And the prayer should not be, “O, Lord, fix this economy so that we do not suffer,” or “O Lord, fix the economy so that our guy wins!”  It should be something like:

“Have mercy on us in our confusion and weakness. Give unto us and our nation, and our leaders, Lord, an understanding heart, that we might trust your guidance and do your will, that, should it please you, we may recognize the firm path of rescue, one that treads upon honest ground and leads us to a place of secure foundation. You are our Rock, O Lord. Help us to lean upon you in these troubled times, to turn toward your light and truth, that we may safely steer this dangerous and murky road. Help us to mindful of those in particular need, the elderly, the unwell, that they do not escape our vision, but call us to proceed with extra care, and a determined dependence upon your light. We ask this through our Lord, Jesus Christ, your Son, who lives and reigns with you and the Holy Spirit, One God, forever.”

As I said, “something like that.”  Solomon’s prayer seems pretty good to me, all by itself.

This is your brain on liberalism

I've been blogging about a lot of serious stuff lately, so here is something to make you laugh, or at least roll your eyes and groan really loudly:

from The Crescat... via The Anchoress.

Stuff from my desktop - Sept. 20, 2008

The investment sector of our economy, which relies heavily on debt, is in financial trouble.  This week brought about the bankruptcy of one of America's oldest and largest investment firms, Lehman Brothers, and the collapse of insurance giant AIG, which suddenly found itself without legs because it was heavily invested in mortgage giants Freddie Mac and Fannie Mae.  When Fannie and Freddie collapsed last week, their stock became essentially worthless and AIG lost a substantial portion of its cash reserves.  The Federal Reserve will now secure half the value of AIG, worth roughly $85 billion.

This article from the NYT Freakonomics blog, which clearly explains the Fannie/Freddie collapse, the bankruptcy of Lehman Bros., and the bailout of AIG, is an absolute must read if you want to understand what happened this week.

John McCain has taken a lot of heat for saying that the fundamentals of our economy remain strong.  He was also pilloried for stating several months ago that he was "always for less regulation" , although the rest of his quote (conveniently omitted by Democrats) states that "there is a need for government oversight".

But is McCain right?  Read this Yahoo! News story and marvel at this:

New York's investment community was experiencing "a rather difficult crisis of confidence," but one where people haven't given up hope that opportunities to make money are still out there, somewhere.

Then consider the fact that foreign governments and investment firms are jumping at the chance to invest in struggling American financial institutions.  Despite the great debts that sunk those firms, there is still a considerable amount of real property wealth in this country, as well as positive future valuations for productivity and economic growth, the factors that keep the stock markets in positive territory.  Inflation is still low; unemployment has risen slightly but is only 60% of what it is in "progressive" European socialist states like France and Germany; consumer prices have risen this year, but not out of proportion to rising fuel costs; there has yet to be a single quarter of negative economic growth, so we are still no where near a recession.  American investors seem to have confidence that the massive, unpredicented government intervention this week will actually bring about economic stability -- the Dow swung wildly (down over 800 points at one point) but ended the week down only 34 points.

As I see things, we took it on the chin this past week, but those blows involved finally coming to grips with some extremely dangerous lending and debt policies that allowed financial firms to grow far beyond their ability to responsibly manage their debts and assets.  "Too big to fail" really just means "too big," period.  In order to maintain stability, the Federal Reserve (which is simply the financial arm of our federal government) ended up involved at an unprecedented level in the operation of our financial markets.  If you are a strict believer in laissez-faire economics and regret the abandonment of the gold standard 35 years ago, then undoubtedly you are very upset right now.  I am not an expert in these things, but the positive reaction of the stock market seems to indicate to me that we will weather these crises intact, though perhaps a bit humbled.

...

In California, Gov. Schwarnenegger vowed to veto the state budget, stating that it was overstuffed with deficit spending and accounting tricks.  The state's Democratic leadership capituated, and yesterday signed a budget compromise.

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Did you know that we formally handed over security of Iraq's Anbar Province to Iraqi forces three weeks ago?  This is a huge milestone, and I imagine if a Democrat was in the White House it would have been celebrated with front page headlines from major newspapers and endless "special reports" on network news broadcasts.  General Petraeus has also publicly speculated that American troops could pull out of Bagdhad by next summer.  This has got to be bad news for Democrats, who wanted to be able to take credit by themselves for the eventual troop draw-downs in Iraq.

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A few weeks ago, Forbes Magazine ranked Hollywood's most overpaid actors and actresses, based on the amount of money they make for the studio versus how much they are paid.  Actress Nicole Kidman tops the current list, earning only $1 in box office receipts for every dollar she was paid.

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A group of conservative Evangelical pastors has declared that clergy have a constitutional right to endorse political candidates from their pulpits, and is openly defying the IRS.  This is interesting, since liberal churches have been involved in social and political action for decades, and rarely draw the ire of the tax man.  Specifically, Democrats have made black churches into one of their most effective political grandstands.

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On the other side of the world, the Large Hadron Colider at CERN in Switzerland has successfully completed its first tests.  Fortunately for us, the elementary particle interactions that occurred in the machine's artificially-created environment (which simulates conditions in the universe just fractions of a second after the "Big Bang") did not create an earth-swallowing a black hole, as some theorists had feared.

Meanwhile, back in the States, Bell Laboratories officially announced that it would be pulling the plug on its fundamental physics research department -- a department that produced scores of invaluable patents and developed such crucial techonolgies as the negative feedback amplifier, information theory, sonar, radar, the transistor, and the laser.  In the process, Bell Laboratories scientists took home six Nobel prizes.

Fannie Mae - whose fault is it anyway?

Our major financial institutions are dropping like flies -- Merrill Lynch, JP Morgan Chase, Citigroup, Lehman Brothers, Fannie Mae, Freddie Mac -- along with some major collateral damage such as insurer AIG, which was heavily invested in Fannie Mae and Freddie Mac (their stock is now worth pennies) and has suddenly lost its cash reserves.

This is an election year, and Democrats want to win the White House and retain their majority control over Congress, so it is a sure bet that Republicans will be blamed for everything.

Fortunately, for those of us who like to see all of the facts before we make a decision, the Internet allows us to search news stories from the past 5 or 10 or 15 years, and track the financial meltdown from the time it was just a blip on the radar of a few astute folks, to the current market crisis.  Here are some interesting items that have recently been dug up by bloggers:

The three biggest total recipients of political contributions from Fannie Mae and Freddie Mac are: Chris Dodd, Barack Obama, and John Kerry.  All are Democrats.  This list is even more stunning when you consider that Obama has only been in the US Senate less than three years, compared to Dodd (27 years) and Kerry (23 years).  I'm going to guess that Obama's close ties to community organizing and advocacy outfits like ACORN, with their longstanding support for affordable housing, made Obama the most attractive member of the Senate in terms of supporting anything that Fannie and Freddie wanted.  And get this -- Congressional Democrats want to give ACORN and other advocacy groups money from Fannie and Freddie's coffers in the form of an "Affordable Housing Trust Fund."

Near the end of July, John McCain directly addressed the ill fortunes of Fannie Mae and Freddie Mac, and pushed for stronger regulation of both those entities.  This is before the bottom fell out of Fannie and Freddie.  At that time, Barack Obama had yet to make a statement about the solvency of Fannie and Freddie, or to propose a solution to the problem.

Whose policies led to the credit crisis?  Five years ago, the Bush Administration outlined the oversight problems at Fannie Mae and Freddie Mac and proposed much tighter government regulation of them, specifically a new federal oversight agency.  Speaking for the Democrats, Congressman Barney Frank said, "These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis.  The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."  In other words, in 2003, Democrats believed that more regulation was a bad idea, because it would put a damper on their expanded affordable housing programs.  The "free market" had nothing to do with Bush's proposal or the Democrats' opposition to it.

The Clinton Administration pushed for an aggressive expansion of community development and affordable housing funds, luring banks into providing these loans with guarantees that Fannie Mae and Freddie Mac would be underwriting them.  Two long-time Clinton cronies, Franklin Raines and Jamie Gorelick (of pre-9/11 law enforcement "wall" fame) together raided Fannie Mae for over $100 million in compensation, while their financial incompetence and accounting shenanigans cost the company billions.

Here's Robert B. Reich, former Clinton Administration Secretary of Labor, on MSNBC last night (transcript from RushLimbaugh.com):

REICH: In the latter years of the Clinton administration -- when I was not there any longer, I should add -- there was an attempt by Alan Greenspan and Bob Rubin and a few others to deregulate financial markets, and they did.  They split commercial banking off from investment banking.  And many people say, "Well, that was the beginning of the problem," and then, of course, in 2003-2004, Alan Greenspan reduced short-term interest rates to the point where every single bank wanted to lend money.  I mean, if you could stand up straight you could get a bank loan because there was so much pressure to get that money out the door.  Money was so cheap.  So, yes, there is some responsibility on Democrats, some responsibility on Alan Greenspan and the Fed.

This Washington Post editorial sheds a stunning amount of light on the additional 2005 attempt by Republicans to shore up Fannie Mae and Freddie Mac with additional oversight and regulation, and the successful efforts of Fannie/Freddie lobbyists and their Democrat acolytes to defeat those reforms.  To wit:

President Bush was receptive to reform. He withheld nominees for Fannie and Freddie's boards -- a presidential privilege. While it would have been valuable politically to use such positions to reward supporters, the president put good policy above good politics.

In subsequent years, officials at Treasury and the Council of Economic Advisers (especially Chairmen Greg Mankiw and Harvey Rosen) pressed for the following: Requiring Fannie and Freddie to submit to regulations of the Securities and Exchange Commission; to adopt financial accounting standards; to follow bank standards for capital requirements; to shrink their portfolios of assets from risky levels; and empowering regulators such as the Office of Federal Housing Oversight to monitor the firms.

The administration did not accept half-measures. In 2005, Republican Mike Oxley, then chairman of the House Financial Services Committee, brought up a reform bill (H.R. 1461), and Fannie and Freddie's lobbyists set out to weaken it. The bill was rendered so toothless that [Andrew] Card called Oxley the night before markup and promised to oppose it. Oxley pulled the bill instead.

During this period, Sen. Richard Shelby led a small group of legislators favoring reform, including fellow Republican Sens. John Sununu, Chuck Hagel and Elizabeth Dole. Meanwhile, Dodd -- who along with Democratic Sens. John Kerry, Barack Obama and Hillary Clinton were the top four recipients of Fannie and Freddie campaign contributions from 1988 to 2008 -- actively opposed such measures and further weakened existing regulation.

The story is certainly complicated, but much of the evidence suggested that it was Democrats, not Republicans, who opposed mortgage lending reforms and additional regulation of Fannie Mae and Freddie Mac.  Their opposition was linked directly to their support for "affordable housing" (a prominent civil rights/racial issue) and the lobbying dollars that they recieved from Fannie and Freddie.  Money definitely talked, and it was Democrats who were listening.

ADDED: Linked by JayTea at Wizbang.  Thanks buddy, and welcome WizBangers!

MORE:  Here's a link to a video of Daniel Mudd (son of CBS newsman Roger Mudd), CEO of Fannie Mae (he succeeded Franklin Raines) addressing the Congressional Black Caucus in 2005 and telling them, "In many ways I want to tell you today you are also the conscience of Fannie Mae."  Ouch.  Apparently Fannie Mae's conscience failed it, and big time.

One of the aspects of the Fannie/Freddie fiasco that has not been widely explored is the relationship between low-income housing and civil rights political activism. The sad truth is that Fannie/Freddie reform meant that Republicans would have to butt heads with the racial activists of the CBC.  And you know what that means -- if evil white Republicans question or oppose the CBC, they are "racists."

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Even though Barack Obama has made a big deal out refusing to take "corporate" donations during this election, he has scooped up millions of dollars in individual campaign contributions from officers, executives, and "bundlers" with deep ties to Lehman Brothers, Merrill Lynch, Goldman-Sachs, and other deep-pocket financial institutions.  And here's much more from Matthew Cooper, writing for Portfolio.com, who investigates more individual contributions and lobbying money that Obama has accepted. 

For those who still don't get it, this is not about tit-for-tat between McCain and Obama lobbyists.  It is about the fact that Obama was supposed to be an agent of change, a "community" man completely disconnected from corporate deep pockets, looking out for the little guy and doing what is right, as opposed to what corporate benefactors pay him to do.  So far, such independence seems to be, to use Bill Clinton's phrase, only a fairy tale.

Also, the Los Angeles Times says that Obama has effectively "voted present" with respect to recent economic crises, by refusing to either endorse or disapprove of last week's government's bailouts and management takeovers, and for refusing to discuss any details of his economic plan. 

We Don't Like Ike

Hurricane Ike, a massive 600 mile wide storm at the upper limit of Category 2 (max. sustained winds near 110 mph) that had already carved a path of destruction through the Carabbean, made landfall around 2am today near Galveston Island.  Hurricane conditions have been reported from Freeport all the way to Sabine Pass.

My hometown of Port Arthur lies just north of Sabine Pass.  As of this morning, the seawall along Proctor Street held, although there was some topping of levees reported.  Jefferson County (where Port Arthur is located) and Orange County (just to the east) were under mandatory evacuation orders.  Drainage District 7 officials decided yesterday that it was too dangerous to leave the levee pumps manned during the night, which means that any spillover water would flood streets and low-lying areas rather than being pumped back into the outlet system.

The expected storm surge at Galveston was 20 feet or greater, at least five feet above the Seawall.  The surge also brought Eagle Point (in Galveston Bay), Port Arthur, and Calcasieu Pass (in western Louisiana) all 10 to 12 feet above normal.  Major flooding is expected in Galveston and Houston.  High winds are buffeting Houston, damaging its skyscrapers and other tall structures.  Many fires are also burning in Galveston and Houston, since emergency crews can't get to them.  (Yes, a hot fire can burn in the presence of strong winds and driving rain.  9/11 conspiracy kooks might have trouble wrapping their heads around that, but it does happen, particularly if the fires are fed by broken gas mains.)

Now consider this -- hundreds of thousands of Southeast Texans evacuated the area a few weeks ago ahead of Hurricane Gustav, which missed the area entirely.  Apparently, residents are suffering from "evacuation fatigue" brought on by Gustav, and Rita three years ago.  As a result, tens of thousands (maybe more) failed to evacuate Jefferson County. Tens of thousands also remained in Galveston and Houston, so the possibility of fatalities from the storm could be frighteningly high.

Another concern is the massive concentration of oil refineries stretching from Houston to Port Arthur.  These facilities produce over half of the gasoline and diesel fuel sold in America.  Motiva's Port Arthur refinery is the sixth largest in Texas and 12th largest in the United States; an expansion now under way would make Motiva Port Arthur the largest refinery in the United States.  According to this Wikipedia entry, the largest refinery in Texas is ExxonMobil's Baytown facility, which is located -- you guessed it -- on Galveston Bay.  Depending on the damage inflicted by the storm, the region's refining capacity could take months to recover, pushing gasoline over $4.00 a gallon.  Diesel fuel may go as high as $6.00.

Please keep the residents of Southeast Texas in your prayers, and myself as well, since I still have many friends and family who live there.

Brendan Loy, the "Weather Nerd" is providing excellent coverage with meteorological commentary.  He also has a page with live storm surge graphs.

As usual, Michelle Malkin and Glenn Reynolds are providing good link roundups.  KFDM.com has a considerable amount of information about the Beaumont-Port Arthur area.

Seven years ago today

Here's a link to my 2996 Project piece in remembrance of Luis Morales, an employee of Windows on The World restaurant, located in the WTC North Tower.

Old wine, new skins, or something like that

So Barack Obama flubbed big-time yesterday when he egged on his crowd with a reminder that pigs in lipstick are still pigs, and that rotten fish in a new wrapper will still stink.  That blunder might cost him dearly, since "pit bull in lipstick" is now Sarah Palin's signature line.

The Palin nomination is a gift that keeps on giving for a number of good reasons, and at the top of that list is the fact that Palin has caused voters to question Obama's plans for "change."  To the skeptics like myself, Obama's "change" is nothing more than simply giving more power and money to the Democrat majority in Congress.  Perhaps I should remind Barack Obama:

(h/t to Michelle Malkin and others who are blogging this)