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I have been toying with a blogger blog (my main one is on wordpress) to check out the functionality…
And somehow I ended up with a few readers, so I decided to make it a kind of a news aggregator with links to news stories, opinion pieces and blogs of interest that will be updated daily.
I will still maintain this one, but please come check out the other one regularly… and if you think i missed something, you can always email me at firstname.lastname@example.org
You can get the info on the fact that the Bailout failed all over the place, so I am not going to cite the info for you… what I am going to do instead is talk about why it failed and what happens next.
Well, when the bill was submitted, it was sold to the public in the wrong manner.
Yes, in politics you have to “sell” ideas to the public first, so that people aren’t unhappy with your decisions and vote you out of office.
Instead of harping on the “if we don’t do this” negatives for the banks, they should have talked about the positive things that the bill would have done for the average person, but because it was framed in the worst way the initial reaction from the public amounted to 200 million people saying… “Oh, hell no. You are gonna bailout Wall Street fat cats?!?!”
Once the initial reaction passed, the pulic began begrudgingly to accept that the bill was gonna happen, even though they were none too pleased… and then the Democrats politicized the hell out of it.
Reid called out McCain, so McCain called him on his bluff and headed to DC. Reid then backpeddaled when Obama decided to stay on the trail. Bush said ”oh hell no, you are not gonna callout my boy and then sit on the sidelines” and ordered Obama back to DC too. Pelosi began bashing the Republicans saying that the Democrats bear no responsibility what-so-ever. Obama led some talks, apparently poorly, that ended up in shouting matches. Democrats began to rail against the “failed Republican economic philosphy” when in actuality, the Dems bear as much responsibility as the Republicans, the Banks and, honestly, the people that took loans they could not afford or did not understand.
And then the Democrats started earmarking the bill… for organizations like ACORN and it’s subsidiaries.
The blogosphere and the Republicans gave a unanimous “WTF? Oh, hell no! You are not giving 20% of the profits to ACORN!” This then filtered up to the mainstream, and then the public got jittery once again, and I don’t blame them. Earmarking the damn Bailout bill for an organization that is complicit in the subprime crisis, is registering Democratic voters and is under investigation for voter registration fraud in a very large number of states… this is not the way to win over Republicans.
It is because of these fumbles in handling the bill starting with Bush, and then with the Democrats that the bill was doomed to failure.
The optomistic estimates were that it was going to be close, but it was not. At all. As a matter of fact, the estimated 40 Democrats that were going to vote against it turned into 90+.
The blame for the bills failure certainly cannot not be lain at the feet of the House Republicans as Democrats comprised about 45% of the Nay votes, but I am sure they are going to try to spin it that way. As a matter of fact, many in the House are laying the blame squarely on the shoulders of Nancy Pelosi and her alone.
So, it failed… now what?
Well, there will inevitably some sort of bill that comes out. The new iteration will be either massively larger or significantly smaller… my guess, unfortunately, is larger.
Also, in the meantime, the stock market is going to continue to freak out. My guess is that we are going to see the Dow drop below 10,000. This is going to have the interesting effect, considering the circumstances, of pushing down the yield on the 10 year bond.
The reason the yield on the 10yr bond is significant is that mortgage rates tend to follow it, so as the yield drops, it is very likely that mortgage rates will too… and if the yield hits the floor, and rates follow, then there is going to be a mini-refi boom and very possibly a run on housing currently on the market. I mean, if rates drop to the low 5′s or even high 4s for 30 year fixes… all those houses on the market with their depressed values will start to be snapped up… investment companies will not be able to resist.
Another thing that I would not be surprised to see happen is that the Fed might just drop rates another quarter in the next few days and open up borrowing capabilities for even more banks at cheaper rates.
If these two things happen in tandem… the market may correct itself… if there is a swift enough reaction from the Fed and the banks can hold on for a few weeks longer.
We are looking at some razor thin margins here and who knows what might really happen, but just because this bill did not pass does not mean that there is a death-knell sounding yet.
Either way, this is going to be a close call… we shall see what happens, but if rates drop significantly and oil prices continue to slide as they did today, then we may not need the bailout at after all.
The draft Bail Out Law appears to have what was stated in the media – sort of – as its provisions for the troubled assets relief program (“TARP”), and as to its other provisions.
There is a FDIC type insurance program that “may” be developed, where the Secretary may determine by category or class the troubled assets to be guaranteed and the premium associated with that class – with the methodology for setting the premium for a class and a discussion of the appropriateness of the class of assets for participation made available to the public, and with the premiums set at a level to create reserves sufficient to meet anticipated claims, based on an actuarial analysis.
There is a Financial Stability Oversight Board, which shall be responsible for reviewing the exercise of authority making recommendations, as appropriate, reporting any suspected fraud, and with authority to ensure that the policies implemented by the Secretary are— (1) in accordance with the purposes of this Act; (2) in the economic interests of the United States; and (3) consistent with protecting taxpayers, in accordance – in other words it can over-rule the Secretary.
Of course, the Secretary shall have authority to manage troubled assets purchased under this Act, and sell – at a price determined by the Secretary, sell those assets purchased under the Act.
There is a FORECLOSURE MITIGATION authorization to the Secretary saying he SHALL implement a plan and MAY use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures (Hillary Clinton’s idea that she has been pushing for a few years). The Secretary SHALL consent to reasonable requests for loss mitigation measures,including term extensions, rate reductions, principal write downs, increases in the proportion of loans within a trust or other structure allowed to be modified, or removal of other limitation on modifications. To the extent that the Federal property manager holds, owns, or controls mortgages, mortgage backed securities, and other assets secured by residential real estate, including multifamily housing, the Federal property manager shall implement a plan that seeks to maximize assistance for homeowners and use its authority to encourage the servicers of the underlying mortgages to take advantage of the HOPE for Homeowners Program under section 257 of the National Housing Act or other available programs to minimize foreclosures.
To the extent that FOREIGN financial authorities or banks hold troubled assets as a result of extending financing to financial institutions that have failed or defaulted on such financing, such troubled assets qualify for purchase the Bill.
EXECUTIVE COMPENSATION LIMITS sort of apply to ANY financial
institution that sells troubled assets to the Secretary under
this Act and they will be in effect as long as the Secretary
holds an equity or debt position in the financial institution.
But they only apply to the top five persons as disclosed in
filings under current SEC rules, and then they only apply if
the auction purchases have transferred $300 million of assets
to the Secretary from that financial institution. The only
restriction is that those five may not get any “golden parachute”,
but the Secretary can demand their compensation be limited to
“appropriate standards for executive compensation and corporate
governance” for any “new” contract. That $400,000 salary limit
did not last long.
AUCTION PURCHASES are not required, nor is the process of asset acquisition detailed – except that the Secretary is to seek minimization of long term cost and maximum benefit to taxpayers – where “maximum benefit” can mean over paying for assets so as to get credit flowing more quickly – so it is a bit of a con-job. However, the Secretary is to – where appropriate -USE MARKET MECHANISMS like buy at lowest prices, and use market mechanisms like auctions or reverse auctions. A bit of trust is involved here.
We can pretend that a financial institution is OK by using assets values that are higher than current market values as MARK TO MARKET accounting can be changed by the SEC as needed to give the illusion – if doing so is a good idea, I guess.
The second part not so much, but I REALLY like the first part.
UPDATE: Looks like they pulled the advert…
Basically, the first 3/4ths of the ad consists of a fake news cast showing that McCain won the election and part of an acceptance speech, etc… then at the end it says “It doesn’t have to be that way” “Change” or something like that…
Anyway, I really liked the imagery of McCain winning and the anonymous broadcaster saying “NBC news predicts that John McCain will be the 44th President of the United States!”
I must say that this election season has been the craziest I have ever seen. I feel like I have stepped through the looking glass and what was down is now up.
In the most recent of unexpected twists… I think Bill O’Reilly might be my new hero?
via MOUNTAIN SAGE
As the mortgage crisis and the bailout negotiations unfold, Obama is on the stump making claims about how he was always for increased controls and wanted reform for Fannie and Freddie long ago. How he saw the Republican economic model as fundamentally flawed…
This comes from a post put up by Deja Vu on Capital Hill and I think it perfectly encapsulates exactly how completely full of it Barack Obama really is…
OBAMA: Well, I think there are a whole host of areas where Republicans in some cases may have a better idea.
WALLACE: Such as?
OBAMA: Well, on issues of regulation. I think that back in the ’60s and ’70s a lot of the way we regulated industry was top-down command and control, we’re going to tell businesses exactly how to do things.
And you know, I think that the Republican Party and people who thought about the markets came up with the notion that, “You know what? If you simply set some guidelines, some rules and incentives, for businesses — let them figure out how they’re going to, for example, reduce pollution,” and a cap and trade system, for example is a smarter way of doing it, controlling pollution, than dictating every single rule that a company has to abide by, which creates a lot of bureaucracy and red tape and oftentimes is less efficient.
Of course that was back in the day of April of this year. Who could have predicted this totally unexpected crisis as a result of the deregulation that Obama found so inspiring?
As usual, Deju Vu hits the nail right on the head.
The most interesting thing about it is that the Republican in the race was actually for more controls and clarity… but of course Obama can’t let you believe that. He has to lie his ass off to cover up how full of crap he is.
Obama… real change or just changing his shorts?
Reverse Auction Design – will it be in the final bill?
With over 100,000 individual designed mortgage-related securities, obligations, and other instruments outstanding, further divided by multiple rated tranches, auctions to price each piece are not workable. But the Mortgage Bailout Bill depends on price discovery via auction – and as far as I can tell does not have rules for that discovery. So we are left with “trust me” and regulations to be announced later. Knowing loan vintage, maturity, loan type, interest rate, location, payment history, FICO score, and initial loan/value ratio will not prevent are narrowly restricted, a package of some degree of heterogeneity in any package of loans. Prior over-the-counter trading in mortgage-related assets has ended because computer models are no longer trusted for price discovery.
The Paulson program of auctions for mortgage-related assets seems to be intended to be a one-time event – why I do not know since a standardized investment form and an exchange for that form would seem to be the best way to avoid our current problem in the future. But as I understand the Bailout Bill, the plan is to have each asset hit the auction block once and then stopping there, or stopping once the money runs out.
In some statements Fed Chairman Ben S. Bernanke appeared to identify as the objective finding a “hold-to-maturity” value – but that means paying a great deal more than market value – later he indicated he was referring to the higher market value post auction because of US Gov ownership of the asset was the value he wanted to pay – this is a major difference – and still sounds like an “auction” with a floor that is above market value. Will there be anything in the Bill to address this? Treasury can not just offer to buy the Banks non-saleable assets – a Bank would be a fool if it did not greatly over price those assets in that situation. Treasury can not commit to purchasing the entire quantity offered of a given package – it must allocate its budget among the various packages available for sale – buying a portion of each package.
The Packages (packages of assets since individual auctions for each asset design is impractical because every asset is an individual design) will give good price discovery, but by definition, the more heterogeneous the package the more likely the US Taxpayer will be screwed because of the adverse selection problem of relatively inferior assets being disproportionately offered for sale at the lowest prices. Treasury will end up buying the worst of the lot and, if a single price is paid for all units, overpaying, with Banks with higher quality assets asking for a higher bid, and finding they can not sell at that higher price – but with the high quality asset bank being screwed as it is forced to mark down its higher quality asset to the price given for the low quality package.
The order of sale of the packages will determine how badly the taxpayer is screwed – Treasury must start with packages of securities having severely depressed prices in their computer model, relatively simple features, and substantial face value owned (e.g., straight pass-through securities with subprime mortgage collateral), Will this requirement be in the Bill?
With luck we will be able to end the now stalled “over-the-counter” markets, replacing it with an exchange and standardized packages, with a non-standard package area in that exchange (as exists now at our exchanges).
We will still need to buy and sell some assets purely by looking at the computer model output – but where that output is not trusted today because input parameters are felt to be possibly incorrect, it will be easier to get to a sale once the newly available market data generated by auctions are used, to estimate the contribution to value of the various asset characteristics. Applying the estimated models to the non-auctioned assets would then yield a predicted price for each asset. Transparency requires that today’s “proprietary” formulas be reveal – they caused this mess and have no value, so with luck they will be donated to Treasury and we will not pay the Banks for that bit of information.
While writing the piece about how the Democrats attempted to earmark the bailout to divert funds to ACORN, it occurred to me that some of my readers might not completely understand who or what ACORN is, how they are related to the Democratic Party, how Obama is intertwined with this group and why the inclusion of this group is so significant.
To explain further, I am going to defer to NancyA of NoQuarter and Renaissancelady48, and Larry Johnson of NoQuarter and Eastan Macniel, also of NoQuarter. These people have done some ground breaking work on ACORN.
Here is a recommended selection of reading…. (in no particular chronological or informational order)
http://noquarterusa.net/blog/2008/08/29/acorn-project-vote-and-voter-fraud/ (with a contribution from yours truly )
Lots of good reading… that should tell you everything you need to know about the people that Obama keeps diverting money to and who he chooses to associate with!
UPDATE: Just Say No Deal has a great graphic up!
First… This was not a game changer.
This was not Kennedy/Nixon in 1960. This was not Carter/Reagan in 1980. And this was not Clinton/Bush/Perot in 1992.
So what was it? It was just ok. An average debate that is unlikely to have much of an impact on anything.
I think this quote found on Townhall says it best…
“Is the race now different than it was at 9 p.m. eastern time?” asked ABC commentator George Will. “The answer I think is no. This wasn’t a game changer. Both had their familiar personas. Barack Obama was the rather tweedy professor conducting a national seminar. John McCain was a rather hotter personality, the national scold.”
And I will leave it at that.
Today, John McCain is once again setting aside his Presidential campaign and is ready to delay or cancel the debate he is expected to perform best in, the foreign policy debate, so that he can be at the forefront of the Bailout efforts and make sure that the American people get the best possible solution in a timely manner.
On the other hand, Barack Obama has not suspended his campaign, has bought up all of the advertizing time the McCain forfeited to take care of the American people, has his surrogates running horrendously offensive ads that tell people that McCain is going to die of cancer in graphic detail, and is spending his mornings at the gym….
So, who’s putting Country First? Who’s putting the American people first? Who’s putting you and your family… first?
Barack Obama just doesn’t get it.
UPDATE: You should see the Senate version of the bill… I just got done reading it… holy god.
Note: Background info on ACORN as a follow up has been posted HERE
Back to our original programming…
No wonder the Republicans are freaking out over this bill and the whole thing is about to fall through…
The friggin Democrats put EARMARKS in the bill!!!!
And not only are they trying to earmark the bill, they are earmarking the bill for ACORN, an activist group that is under investigation for voter registration fraud in several states.
Leave it to the Democrats….
Will it never end? Seriously?
For more info MM is keeping updates.
UPDATE: An explanation from Papau2 (An Author Here On Texas Hill Country)
Sen. Lindsay Graham has jumped a few logic hurdles to get from the Affordable Housing Trust Fund — part of the legislation that passed the Senate Banking Committee in May and is poised to come to the Senate floor as early as this week — to a 20% of bailout bill will go to groups like the ACORN and the National Council of La Raza.
The “trust fund” does get its revenues from a legislatively fixed share of the surpluses of the government’s Federal Housing Administration or the profits from the government-sponsored enterprises Fannie Mae and Freddie Mac. The latest version — in the housing and GSE oversight bill that cleared the Senate Banking Committee in May — would establish the fund by taking 1.2 basis points of interest from Fannie and Freddie’s loan portfolio — about $500 million a year. – over the 2 year life of the bailout that is 1 billion out of $700 billion in the rescue bill with $625 million going to Acorn and such groups for “housing aid”- after two years, all of the money to Acorn would go to the housing grant for bailing out troubled homeowners through FHA guarantees of modified loans (Richard Shelby in May stated he had reached a “compromise” with committee chairman Chris Dodd on the housing fund such that money from the “trust fund” would be used to fund the bill’s main action of bailing out troubled homeowners through FHA guarantees of modified loans. After two years, all of the money would go to the housing grant. The version of the bill that passed the Senate committee in May “diverted” half of the money intended for the housing trust fund in its first year and 25% in its second year, but after that 100% of the funds go into the housing trust fund).
The trust fund would allow recipients (Acorn and such) to use the money for lobbying and possibly political campaigning only because the prohibitions on using the funds for lobbying and political activity contain virtually no teeth in enforcing these bans. There are no explicit requirements for recipients of the grants to fill out timesheets for housing activity, or restrictions on groups using grant money to pay employees who also happen to do other things — such as lobbying and political campaigning. And there are really no penalties other than being forced to give the money back and being disqualified for a new grant.
It is true that ACORN histrory includes election fraud and misuse of federal funds with several ACORN workers indicted and/or convicted of voter registration fraud with phony signatures, and with Acorn sanctioned specifically for misuse of federal housing funds. In 1994, the ACORN Housing Corporation (AHC) received a grant from the newly created Americorps to assist low-income families at finding housing. In applying for the grant, the AHC claimed its activities were completley separate from ACORN – only to find out one year later via the Americorps Inspector General that “AHC used Americorps grant funds to benefit ACORN either directly or indirectly” with several instances of cost-shifting from ACORN’s lobbying group to the housing entity, and also found several instances of steering recipients of housing counseling into ACORN memberships.
I came across this on AnnieNYC’s blog today and it is fantastic. Highly recommend the read!
This is my 2nd post on why nobama, but i figured now that I’ve finally made my choice of the lesser of 2 evils, even though I do not necessarily endorse my choice, but rather nothing on top, I’ll go into why Nobama for me. I am a Democrat. I have never voted for a Republican candidate but I will this year. And here is why.
Much more at the link. Go read it. Leave a comment.
Remember, the campaigns and the media do read our blogs. By leaving your comment, you are telling them what you think… often times directly.
Love your blogs, Make Your Voice Heard, Leave A Comment.
That is the concern of opponents of Proposition 8, a measure on the November ballot that would amend the state constitution to ban same-sex marriage, which was legalized in May by the State Supreme Court.
Mr. Obama, the Democratic presidential nominee, is against the measure. But opponents of the proposed ban worry that many black voters, enthused by Mr. Obama’s candidacy but traditionally conservative on issues involving homosexuality, could pour into voting stations in record numbers to punch the Obama ticket — and then cast a vote for Proposition 8….
Still, the tendency of black voters to oppose gay marriage extends beyond religion. Patrick J. Egan, an assistant professor of politics at New York University who has studied black voting patterns on same-sex marriage, said black voters consistently polled much lower than white voters on approval for same-sex marriage, about 16 percentage points, even when religion was not a factor.
Intersting little tidbit… It will be fascinating to see how this works out?
We shall see I guess….