Sunday, June 28, 2009
The Phony Time-Gap Alibi For The Community Reinvestment Act
Perhaps one of the most misleading points made by those who wish to completely exonerate the Community Reinvestment Act’s role in encouraging lenders to adopt loose standards for mortgages is to insist that a statute originally put in place in 1977 could not have played a role in a housing bubble 25 years later. This point ignores the profound changes in the CRA and related fair housing that occurred in the subsequent years.
In the first place, it should be noted that the attempt to exonerate the CRA seems to turn on the idea that the act didn’t encourage much lending at all. This, of course, runs completely contrary to the advocates of the CRA during the housing boom. Back then, they were bragging about how effective the CRA had been in spurring lending....
...In 1989, President George H.W. Bush signed into law the Financial Institutions Reform Recovery and Enforcement Act that included provisions to increase public oversight of the way the CRA was enforced. Regulators were required to issue public, written performance evaluations of banks, including a system that rated bank compliance as Outstanding, Satisfactory, Needs To Improve or Substantial Non-Compliance. This public scrutiny began to push banks to make more loans to low-income borrowers, a process that often involved putting in place relaxed lending standards.
Shortly afterward, Fannie Mae and Freddie Mac addressed bank fears that the low-income lending with relaxed standards would unduly increase risk by beginning to securitize “affordable” mortgages. This was the beginning of subprime lending. It was the “pull” factor that complimented the “push” factor of the CRA.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, which opened the door for interstate banking and encouraged a new wave of banking M&A, made the ratings under the CRA a test for determining whether acquisitions would be allowed. That same year, the Fed refused to allow a Hartford, Connecticut bank to acquire a New Hampshire bank on fair housing and CRA grounds.
This was the first time the Fed had ever taken this kind of action, and it had profound effects through the banking sector. It sent a strong signal to the banks that the Fed would closely scrutinize lending practice, limiting the ability of banks to grow or make acquisitions if they were found to have insufficient low income or minority lending. Banks immediately responded by lowering down payment requirements and using more flexible income criteria.
The CRA defenders like to claim that the statute did not require these things, but the enforcement of the act did. Banks knew what kind of lending would increase their CRA compliance and meet with the approval of the regulators. CRA defenders often like to say that banks didn’t need to adopt standards that involve high loan-to-value ratios, low down payments, and loosey-goosey income tests. But this counter-factual claim is without basis in reality: the defenders cannot point to banks that did pass scrutiny of regulators and received top ratings from regulators without adopting these standards. The fact is that banks loosened standards because that is what regulators required. Any proposals that other strategies could have been employed is simply conjecture and second-guessing.
And there can be no doubt that the regulators were pushing for “no down payment” loans and 100 percent loan-to-value ratios. They also urged automated under-writing and reliance on credit scoring, two more factors that have since been viewed as contributing to overly-risky lending...
...After all, one of the tests for whether banks were engaged in discriminatory lending was whether they had adopted standards that were stricter than those approved of by regulators. Stricter standards were assumed to be evidence of discrimination, and if they had a disparate impact the matter was even worse. So when a Fed governor tells banks that they should be making no down-payment, 100% LTV loans based on credit scores and automated underwriting, we shouldn't be surprised that they started making these kind of loans.
In 1995, regulators began to enforce the CRA in a very different way than they had in the past. Instead of focusing on the process of bank lending, the new regulations were focused on objective performance evaluations. At the same time, regulators began disclosing more information about particular banks. As one commenter put it at the time, “We have learned from 30 years of CRA policy that what is measured gets done.” In short, publicly measuring low-income loans encouraged more of it. And the way regulators advised making low income loans involved features we now regard as toxic....
...In early 2005, largely at the behest of the banking sector, the Office of Thrift Supervision implemented new rules that were widely perceived as weakening the CRA. Supervision of banks with under $1 billion in assets was loosened, and larger banks were allowed to voluntarily reduce the amount of regulator scrutiny of their “investment” and “service”–two long-standing categories of assessment under the CRA.
This had two unintended consequences that would later prove to be very costly. In the first place, it increased CRA scrutiny of larger banks, who were now the main focus of regulators. This put even more pressure on the banks to make CRA loans. Secondly, by allowing banks to de-emphasize “investment” and “service,” the new regulations created an even greater incentive for banks to meet CRA obligations by making home loans.
As we’ve shown elsewhere, the CRA had a clear and strong role in loosening lending standards. Those who claim the long time gap between its original passage are probably ignorant of the profound changes in the law and the way it was enforced...
E-mails indicate EPA suppressed report skeptical of global warming
The Environmental Protection Agency may have suppressed an internal report that was skeptical of claims about global warming, including whether carbon dioxide must be strictly regulated by the federal government, according to a series of newly disclosed e-mail messages.
Less than two weeks before the agency formally submitted its pro-regulation recommendation to the White House, an EPA center director quashed a 98-page report that warned against making hasty "decisions based on a scientific hypothesis that does not appear to explain most of the available data."
The EPA official, Al McGartland, said in an e-mail message (PDF) to a staff researcher on March 17: "The administrator and the administration has decided to move forward...and your comments do not help the legal or policy case for this decision."
The e-mail correspondence raises questions about political interference in what was supposed to be an independent review process inside a federal agency--and echoes criticisms of the EPA under the Bush administration, which was accused of suppressing a pro-climate change document.
Alan Carlin, the primary author of the 98-page EPA report, said in a telephone interview on Friday that his boss, McGartland, was being pressured himself. "It was his view that he either lost his job or he got me working on something else," Carlin said. "That was obviously coming from higher levels."
E-mail messages released this week show that Carlin was ordered not to "have any direct communication" with anyone outside his small group at EPA on the topic of climate change, and was informed that his report would not be shared with the agency group working on the topic.
"I was told for probably the first time in I don't know how many years exactly what I was to work on," said Carlin, a 38-year veteran of the EPA. "And it was not to work on climate change." One e-mail orders him to update a grants database instead. ...
...Carlin has an undergraduate degree in physics from CalTech and a PhD in economics from MIT. His Web site lists papers about the environment and public policy dating back to 1964, spanning topics from pollution control to environmentally-responsible energy pricing.
After reviewing the scientific literature that the EPA is relying on, Carlin said, he concluded that it was at least three years out of date and did not reflect the latest research. "My personal view is that there is not currently any reason to regulate (carbon dioxide)," he said. "There may be in the future. But global temperatures are roughly where they were in the mid-20th century. They're not going up, and if anything they're going down."
Carlin's report listed a number of recent developments he said the EPA did not consider, including that global temperatures have declined for 11 years; that new research predicts Atlantic hurricanes will be unaffected; that there's "little evidence" that Greenland is shedding ice at expected levels; and that solar radiation has the largest single effect on the earth's temperature. ...
Saturday, June 27, 2009
Southern Baptists tackle member losses
Southern Baptists are facing a membership decline that could shrink the nation’s largest Protestant denomination by nearly half in 40 years, its convention president said Tuesday....
...The denomination is declining at a rate that could shrink its membership from 16.2 million to 8.7 million by 2050, Hunt said. Total membership of Southern Baptist churches was 16,228,438 last year, down nearly 38,400 from 2007, according to LifeWay, the convention’s research and publishing arm....
...Both Klein and Lewis are skeptical about Barack Obama. “I’ve been at rallies and seen him speak, and I feel that feeling that one feels,” Lewis says. “It is thrilling. And it’s churlish not to allow yourself to be thrilled. We crave inspiration, and it’s a bleak life to always be dissecting things. But the main feeling that Obama creates in me is fear, because I see people fooling themselves. If you actually look at his policies, what they reflect is the triumph of the right-wing political paradigm since Reagan, and I think he could set things back dramatically, because for young people who are getting engaged in politics for the first time, for them to be disillusioned is very, very damaging.” Because Klein doesn’t expect much from any politician, she doesn’t spend time wishing Obama were more progressive. “I don’t want to appear too cynical, but when I first saw the ‘Yes We Can’ rock video that Will.I.Am made, my first response was ‘Wow, finally a politician is making ads that are as good as Nike’s,’ ” she says. “The ‘Yes We Can’ slogan means whatever you want it to mean. It’s very ‘Just Do It.’ When you hear it, you catch yourself thinking, Yeah! We’re gonna end torture and shut down Guantánamo and get out of Iraq! And then you think, Wait a minute, is he really saying that? He’s not really saying that, is he? He’s saying we’re going to send more troops to Afghanistan. He’s telling regular people what they want to hear, and then in the back rooms he’s making deals and signing on to the status quo. But if people don’t like where Obama is they should move the center.” To this end, Klein has been taking every opportunity to call for the nationalization of the oil companies. “It’s the job of the left to move the center,” she says. “Get out there and say some crazy stuff! And then, suddenly, it’ll seem more reasonable for politicians to take riskier positions.”...
White House Weighs Order on Detention
Obama administration officials, fearing a battle with Congress that could stall plans to close the U.S. prison at Guantanamo Bay, are crafting language for an executive order that would reassert presidential authority to incarcerate terrorism suspects indefinitely, according to three senior government officials with knowledge of White House deliberations.
Such an order would embrace claims by former president George W. Bush that certain people can be detained without trial for long periods under the laws of war. Obama advisers are concerned that an order, which would bypass Congress, could place the president on weaker footing before the courts and anger key supporters, the officials said. ...
Obama contemplates Executive Order for detention without charges
...This specific article is even worse than the usual one of its type, since it's particularly uncritical in passing along administration claims without any skepticism (I addressed each of the "justifications" for Obama's preventive detention proposal -- Obama has to do this because of what Bush did; we can't get convictions because of Bush's torture; it's common in War to do things like this, etc. etc. -- here). Worse, the article does not provide any information about the Obama officials whose mission the reporters are dutifully carrying out, so there's no way to assess their motives.
Those journalistic practices produce egregious sentences like this: "'Civil liberties groups have encouraged the administration, that if a prolonged detention system were to be sought, to do it through executive order', the official said." I'd love to know which so-called "civil liberties groups" are pushing the White House for an Executive Order establishing the power of indefinite detention. It's certainly not the ACLU or Center for Constitutional Rights, both of which issued statements vehemently condemning the proposal (ACLU's Anthony Romero: "If President Obama issues an executive order authorizing indefinite detention, he’ll be repeating the same mistakes of George Bush"). ...
‘The Police Became a Mob’
... Men punched Jude’s face and torso; when he fell to the ground, they kicked his head and thighs. The partygoers behaved as a mob. Not a single person in the house tried to stop the attack or even to call for aid. Jon Clausing, who had slashed Harris’s face, explained his conduct as “just kind of going along with everybody.” That is the way of the mob. Society has police forces to pose a counterweight to mobs, yet here the police became a mob.
Schabel and Martinez were on duty and had not been drinking, so they should have put a stop to the violence. Instead Schabel joined it, while Martinez watched. On being told that Jude had stolen Spengler’s badge, Schabel called Jude a “motherfucker” and stomped on his face until others could hear bones breaking. After telling Martinez “I’m really sorry you have to see this,” Daniel Masarik picked Jude off the ground and kicked him in the crotch so hard that his body left the ground. Jon Bartlett then took one of Schabel’s pens and pressed it into each of Jude’s ear canals, causing severe injury and excruciating pain. The men also broke two of Jude’s fingers by bending them back until they snapped. Spengler put a gun to Jude’s head and said: “I’m the fucking police. I can do whatever I want to do. I could kill you.” Bartlett used a knife to cut off Jude’s jacket and pants, leaving him naked on the street in a pool of his own blood...
Medicare Costs Are Higher, Not Lower
...Dr. Robert Book, in a new Web Memo entitled “Medicare Administrative Costs Are Higher, Not Lower, Than for Private Insurance,” argues against the claims put forth by Dr. Hacker:
Health care reform is a complex problem, of which administrative costs is only one component. However, for policymakers and ordinary Americans to understand these issues, journalists, analysts, and advocates have an obligation to avoid “playing with numbers”–either through inadvertent misunderstanding of what the numbers represent or through a deliberate choice of misleading numbers that appear to support a desired policy.
The fact is that, in recent years, Medicare administrative costs per beneficiary have substantially exceeded those costs for the private sector, this despite the fact that, as critics note, private insurance is subject to many expenses not incurred by Medicare. Contrary to the claims of public plan advocates, moving millions of Americans from private insurance to a Medicare-like program will result in program administrative costs that are higher per person and higher, not lower, for the nation as a whole....
"As Naked an Abuse of Government Power as Could be Imagined"
...The controversy centers on Sotomayor's vote in a 2006 eminent domain case, Didden v. Village of Port Chester. New York entrepreneur Bart Didden says Port Chester condemned his land after he refused to pay $800,000 (or grant a 50 percent stake in his business) to a developer hired by the village. One day after Didden refused to pay those bribes, Port Chester began eminent domain proceedings against him.
As University of Chicago law professor Richard Epstein put it, "The case involved about as naked an abuse of government power as could be imagined." But that didn't stop Judge Sotomayor and two of her colleagues on the 2nd Circuit Court of Appeals from upholding the district court decision that ruled in favor of the village....
Unions’ Health Benefits May Avoid Tax Under Proposal
...The U.S. Senate proposal to impose taxes for the first time on “gold-plated” health plans may bypass generous employee benefits negotiated by unions.
Senate Finance Committee Chairman Max Baucus, the chief congressional advocate of taxing some employer-provided benefits to help pay for an overhaul of the U.S. health system, says any change should exempt perks secured in existing collective- bargaining agreements, which can be in place for as long as five years.
The exception, which could make the proposal more politically palatable to Democrats from heavily unionized states such as Michigan, is adding controversy to an already contentious debate. It would shield the 12.4 percent of American workers who belong to unions from being taxed while exposing some other middle-income workers to the levy. ...
The Climate Change Climate Change
...Among the many reasons President Barack Obama and the Democratic majority are so intent on quickly jamming a cap-and-trade system through Congress is because the global warming tide is again shifting. It turns out Al Gore and the United Nations (with an assist from the media), did a little too vociferous a job smearing anyone who disagreed with them as "deniers." The backlash has brought the scientific debate roaring back to life in Australia, Europe, Japan and even, if less reported, the U.S.
In April, the Polish Academy of Sciences published a document challenging man-made global warming. In the Czech Republic, where President Vaclav Klaus remains a leading skeptic, today only 11% of the population believes humans play a role. In France, President Nicolas Sarkozy wants to tap Claude Allegre to lead the country's new ministry of industry and innovation. Twenty years ago Mr. Allegre was among the first to trill about man-made global warming, but the geochemist has since recanted. New Zealand last year elected a new government, which immediately suspended the country's weeks-old cap-and-trade program.
The number of skeptics, far from shrinking, is swelling. Oklahoma Sen. Jim Inhofe now counts more than 700 scientists who disagree with the U.N. -- 13 times the number who authored the U.N.'s 2007 climate summary for policymakers. Joanne Simpson, the world's first woman to receive a Ph.D. in meteorology, expressed relief upon her retirement last year that she was finally free to speak "frankly" of her nonbelief. Dr. Kiminori Itoh, a Japanese environmental physical chemist who contributed to a U.N. climate report, dubs man-made warming "the worst scientific scandal in history." Norway's Ivar Giaever, Nobel Prize winner for physics, decries it as the "new religion." A group of 54 noted physicists, led by Princeton's Will Happer, is demanding the American Physical Society revise its position that the science is settled. (Both Nature and Science magazines have refused to run the physicists' open letter.)
The collapse of the "consensus" has been driven by reality. The inconvenient truth is that the earth's temperatures have flat-lined since 2001, despite growing concentrations of C02. Peer-reviewed research has debunked doomsday scenarios about the polar ice caps, hurricanes, malaria, extinctions, rising oceans. A global financial crisis has politicians taking a harder look at the science that would require them to hamstring their economies to rein in carbon....
Government Health Plans Always Ration Care
Only by expanding government control of health care can we bring down its cost. That's the faulty premise of the various proposals for health reform now being batted around Washington. The claimed cost control depends on politically safe ideas such as preventive care or the adoption of electronic health records. And neither--even according to the Congressional Budget Office--will do much to reduce spending.
If these proposals are implemented and fail to produce savings, government will turn to a less appealing but more familiar tool to cut costs: the regulation of access to drugs and medical services. Medicare is already going down this path. What will be new about government-run health care is the instrument of regulatory control. There will be an omnipotent federal health board. Buried in current reform proposals, this board deserves closer scrutiny.
Our best look at this construct comes from a bill released by the Senate Health, Education, Labor and Pensions (HELP) Committee. The bill calls for a "Medical Advisory Council" to determine what medical products and services are "essential benefits" and those that shouldn't be covered by a public insurance plan....
...Like Medicare's recent decisions to curtail the use of virtual colonoscopies, certain wound-healing devices, and even a branded asthma drug, the board's decisions will be one-size-fits-all restrictions. Such restrictions don't respect variation in preferences and disease, which make costly products suitable for some even if they are wasteful when prescribed to everyone.
Moreover, these health boards prove that policy makers know they'll need to ration care but want to absolve themselves of responsibility. Some in Congress and the Obama administration recently tipped their hand on this goal by proposing to make recommendations of the current Medicare Payment Advisory Committee (MedPAC) legally binding rather than mere advice to Congress. Any new health board's mission will also expand over time, just as MedPAC's mandate grew to encompass medical practice issues not envisioned when it was created.
The idea of an omnipotent board that makes unpopular decisions on access and price isn't a new construct. It's a European import. In countries such as France and Germany, layers of bureaucracy like health boards have been specifically engineered to delay the adoption of new medical products and services, thus lowering spending....
...In short, other countries where government plays a large role in health care aren't shy about rationing. Mr. Obama's budget director has acknowledged that rationing reduces costs. Peter Orszag told Congress last year when he headed the Congressional Budget Office that spending can be "moderated" if "diffusion of existing costly services were slowed."...
Fannie, Freddie asked to relax condo loan rules: report
Two U.S. Democratic lawmakers want Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery, the Wall Street Journal said.
In March, Fannie Mae (FNM.N)(FNM.P) said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from 51 percent, the paper said. Freddie Mac (FRE.P)(FRE.N) is due to implement similar policies next month, the paper said.
In a letter to the CEO's of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70 percent sales threshold "may be too onerous" and could lead condo buyers to shun new developments, according to the paper.
The legislators asked the companies to "make appropriate adjustments" to their underwriting standards for condos, the paper added....
Tilting at Green Windmills
The Spanish professor is puzzled. Why, Gabriel Calzada wonders, is the U.S. president recommending that America emulate the Spanish model for creating "green jobs" in "alternative energy" even though Spain's unemployment rate is 18.1 percent -- more than double the European Union average -- partly because of spending on such jobs?
Calzada, 36, an economics professor at Universidad Rey Juan Carlos, has produced a report that, if true, is inconvenient for the Obama administration's green agenda, and for some budget assumptions that are dependent upon it.
Calzada says Spain's torrential spending -- no other nation has so aggressively supported production of electricity from renewable sources -- on wind farms and other forms of alternative energy has indeed created jobs. But Calzada's report concludes that they often are temporary and have received $752,000 to $800,000 each in subsidies -- wind industry jobs cost even more, $1.4 million each. And each new job entails the loss of 2.2 other jobs that are either lost or not created in other industries because of the political allocation -- sub-optimum in terms of economic efficiency -- of capital....
...The president's press secretary, Robert Gibbs, was asked about the report's contention that the political diversion of capital into green jobs has cost Spain jobs. The White House transcript contained this exchange:
Gibbs: "It seems weird that we're importing wind turbine parts from Spain in order to build -- to meet renewable energy demand here if that were even remotely the case."
Questioner: "Is that a suggestion that his study is simply flat wrong?"
Gibbs: "I haven't read the study, but I think, yes."
Questioner: "Well, then. [Laughter.]" ...
...Still, one can be agnostic about both reports while being dismayed by the frequency with which such findings are ignored simply because they question policies that are so invested with righteousness that methodical economic reasoning about their costs and benefits seems unimportant. When the president speaks of "new green energy economies" creating "countless well-paying jobs," perhaps they really are countless, meaning incapable of being counted.
For fervent believers in governments' abilities to control the climate and in the urgent need for them to do so, believing is seeing: They see, through their ideological lenses, governments' green spending as always paying for itself. ..
California's dubious distinction
If you want to see how the Obama big-government agenda will play out for us in the future, look no further than California, his dream high-tax state which votes overwhelmingly Democrat.
If you follow the Democratic agenda, you end up with financially-strapped states from which businesses and taxpayers are leaving in droves. Even with the highest tax rates in the USA (10 percent plus, not counting city taxes), these states run the biggest deficits. Compare that to the zero income tax state of Texas, which balances its budget and created more jobs in 2008 than all 49 other states combined....
...Hollywood is still in bed smoking a cigarette, celebrating the afterglow of its love affair with Obama. The "environmental president" recently flew his crew out to California ($265,000 in Air Force One costs) for two Democratic fundraisers in L.A. Because Hollywood is always a model of equality and fairness, there were two-tiered donor events.One hosted by Stephen Spielberg and Jeffrey Katzenberg cost $15,000 a head to attend, the other was $1,000 per person, presumably hosted by Carrot Top and Kathy Griffin. Even as they celebrate diversity, egalitarianism and affirmative action, our Hollywood elite feel it important for the nation to not to lose sight of a fundamental truth: there should always be an A-list and a B-list....
Viewpoint: Questions Arise Over IndyMac Loan Mods
...Perhaps the single largest question for anyone watching the unfolding saga over loan modifications, and the political posturing on Capitol Hill and by regulators over the need to “do more” to help troubled homeowners, has been this: what about IndyMac Federal Bank?
The bank, seized by regulators and placed into the hands of the Federal Deposit Insurance Corp. in August after an Alt-A lending binge left it too vulnerable to a collapse of much of the U.S. mortgage market, has become the veritable poster child for government-led intervention into troubled mortgages. On August 20, FDIC officials rolled out an ambitious plan for mortgage modifications, one they said at the time would set the example for how aggressive loan modifications should work. Implicit in the program was an indictment of existing servicers, who ostensibly weren’t doing enough to help their borrowers....
...Nonetheless, a 50 percent recidivism rate on loan modifications suggests that loan modifications — IndyMac led or not — aren’t usually the sort of world-saving panacea that many regulators and lawmakers expect.
As for the performance results, file them under “patently obvious” to any mortgage market participant that has ever been around loan servicing before. More than a few people versed in the field — myself included — rolled our eyes at the insinuation that the FDIC could do better than other loan servicers at modifying troubled mortgages. While we still don’t know for sure, this type of data is exactly the reason why. It’s not that anyone wishes the FDIC fails in its attempt; Ms. Bair’s heart is in the right place, after all. It’s just that we know better...
Modified mortgages often re-default
...The FDIC has already modified more than 5,000 delinquent mortgages owned or serviced by failed lender IndyMac /quotes/comstock/11i!idmcq (IDMCQ 0.03, 0.00, -1.54%) and Bair's broader proposal is modeled on those efforts.
Under the IndyMac program, eligible homeowners have been offered more affordable monthly payments through reduced interest rates on the loans, extended amortization and deferred principal payments.
Lender Processing Services told analysts at Keefe, Bruyette & Woods that the results of such modification are often uninspiring.
"Industry evidence indicates that in a majority of instances loan modifications simply delay the timeline from default to foreclosure but don't prevent them from taking place," Nathaniel Otis and William Clark, analysts at KBW, wrote in a note to investors on Tuesday.
For the industry in general, after mortgages are modified roughly 25% go delinquent again after just one post-modification payment and more than half end up delinquent after several post-modification payments, Lender Processing Services told the analysts. ...
Is Government Health Care Constitutional?
...The Supreme Court created the right to privacy in the 1960s and used it to strike down a series of state and federal regulations of personal (mostly sexual) conduct. This line of cases began with Griswold v. Connecticut in 1965 (involving marital birth control), and includes the 1973 Roe v. Wade decision legalizing abortion.
The court's underlying rationale was not abortion-specific. Rather, the justices posited a constitutionally mandated zone of personal privacy that must remain free of government regulation, except in the most exceptional circumstances. As the court explained in Planned Parenthood v. Casey (1992), "these matters, involving the most intimate and personal choices a person may make in a lifetime, choices central to personal dignity and autonomy, are central to the liberty protected by the Fourteenth Amendment. At the heart of liberty is the right to define one's own concept of existence, of meaning, of the universe, and the mystery of human life."
It is, of course, difficult to imagine choices more "central to personal dignity and autonomy" than measures to be taken for the prevention and treatment of disease -- measures that may be essential to preserve or extend life itself. Indeed, when the overwhelming moral issues that surround the abortion question are stripped away, what is left is a medical procedure determined to be "necessary" by an expectant mother and her physician.
If the government cannot proscribe -- or even "unduly burden," to use another of the Supreme Court's analytical frameworks -- access to abortion, how can it proscribe access to other medical procedures, including transplants, corrective or restorative surgeries, chemotherapy treatments, or a myriad of other health services that individuals may need or desire?
This type of "burden" analysis will be especially problematic for a national health system because, in the health area, proper care often depends upon an individual's unique physical and even genetic history and characteristics. One size clearly does not fit all, but that is the very essence of governmental regulation -- to impose a regularity (if not uniformity) in the application of governmental power and the dispersal of its largess. Taking key decisions away from patient and physician, or otherwise limiting their available choices, will render any new system constitutionally vulnerable.
It is true, of course, that forms of rationing already exist in our current system. No one who has experienced the marked reluctance to treat aggressively lethal illnesses in the elderly can doubt that. However, what may be permissible for private actors -- including doctors and insurance companies -- is not necessarily lawful when done by the government....
Wednesday, June 24, 2009
Andrew Cuomo and Fannie and Freddie
There are as many starting points for the mortgage meltdown as there are fears about how far it has yet to go, but one decisive point of departure is the final years of the Clinton administration, when a kid from Queens without any real banking or real-estate experience was the only man in Washington with the power to regulate the giants of home finance, the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), better known as Fannie Mae and Freddie Mac.
Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country's current crisis. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded "kickbacks" to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why.
What he did is important—not just because of what it tells us about how we got in this hole, but because of what it says about New York's attorney general, who has been trying for months to don a white hat in the subprime scandal, pursuing cases against banks, appraisers, brokers, rating agencies, and multitrillion-dollar, quasi-public Fannie and Freddie....
...And that's not an accident: Perhaps the only domestic issue George Bush and Bill Clinton were in complete agreement about was maximizing home ownership, each trying to lay claim to a record percentage of homeowners, and both describing their efforts as a boon to blacks and Hispanics. HUD, Fannie, and Freddie were their instruments, and, as is now apparent, the more unsavory the means, the greater the growth. But, as Paul Krugman noted in the Times recently, "homeownership isn't for everyone," adding that as many as 10 million of the new buyers are stuck now with negative home equity—meaning that with falling house prices, their mortgages exceed the value of their homes. So many others have gone through foreclosure that there's been a net loss in home ownership since 1998....
...In 2000, Cuomo required a quantum leap in the number of affordable, low-to-moderate-income loans that the two mortgage banks—known collectively as Government Sponsored Enterprises—would have to buy. The GSEs don't actually sell mortgages to borrowers. They buy them from banks and mortgage companies, allowing lenders to replenish their capital and make more loans. They also purchase mortgage-backed securities, which are pools of mortgages regularly acquired by the GSEs from investment firms. The government chartered these banks to pump money into the mortgage market and, while they did it, to make a strong enough profit to attract shareholders. That created a tug-of-war between their efforts to maximize shareholder value, which drove them toward high-end mortgages, and their congressionally mandated obligation to finance loans for those who needed help. The 1992 law required HUD's secretary to make sure housing goals were being met and, every four years, set new goals for Fannie and Freddie.
Cuomo's predecessor, Henry Cisneros, did that for the first time in December 1995, taking a cautious approach and moving the GSEs toward a requirement that 42 percent of their mortgages serve low- and moderate-income families. Cuomo raised that number to 50 percent and dramatically hiked GSE mandates to buy mortgages in underserved neighborhoods and for the "very-low-income." Part of the pitch was racial, with Cuomo contending that Fannie and Freddie weren't granting mortgages to minorities at the same rate as the private market. William Apgar, Cuomo's top aide, told The Washington Post: "We believe that there are a lot of loans to black Americans that could be safely purchased by Fannie Mae and Freddie Mac if these companies were more flexible."
While many saw this demand for increasingly "flexible" loan terms and standards as a positive step for low-income and minority families, others warned that they could have potentially dangerous consequences. Franklin Raines, the Fannie chairman and first black CEO of a Fortune 500 company, warned that Cuomo's rules were moving Fannie into risky territory: "We have not been a major presence in the subprime market," he said, "but you can bet that under these goals, we will be." Fannie's chief financial officer, Timothy Howard, said that "making loans to people with less-than-perfect credit" is "something we should do." Cuomo wasn't shy about embracing subprime mortgages as a possible consequence of his goals. "GSE presence in the subprime market could be of significant benefit to lower-income families, minorities, and families living in underserved areas," his report on the new goals noted....
Hi-tech helps Iranian monitoring
Iran is well known for filtering the net, but the government has moved to do the same for mobile phones.
Nokia Siemens Network has confirmed it supplied Iran with the technology needed to monitor, control, and read local telephone calls. ...
...The product allows authorities to monitor any communications across a network, including voice calls, text messaging, instant messages, and web traffic.
But Nokia Siemens says the product is only being used, in Iran, for the monitoring of local telephone calls on fixed and mobile lines.
Rather than just block traffic, it is understood that the monitoring system can also interrogate data to see what information is being passed back and forth.
A spokesman described the system as "a standard architecture that the world's governments use for lawful intercept".
He added: "Western governments, including the UK, don't allow you to build networks without having this functionality." ...
700 NYC teachers are paid to do nothing
NEW YORK – Hundreds of New York City public school teachers accused of offenses ranging from insubordination to sexual misconduct are being paid their full salaries to sit around all day playing Scrabble, surfing the Internet or just staring at the wall, if that's what they want to do.
Because their union contract makes it extremely difficult to fire them, the teachers have been banished by the school system to its "rubber rooms" — off-campus office space where they wait months, even years, for their disciplinary hearings.
The 700 or so teachers can practice yoga, work on their novels, paint portraits of their colleagues — pretty much anything but school work. They have summer vacation just like their classroom colleagues and enjoy weekends and holidays through the school year....
Monday, June 22, 2009
Report Debunking UN's Global Warming Alarmism is Backed by 31,478 U.S. Scientists
The Nongovernmental International Panel on Climate Change (NIPCC) has issued a rebuttal to the United Nation's International Panel on Climate Change. The report challenges the theory that man somehow has played a major role in changing the global climate, and also challenges the need to adopt painful and costly measures to combat this perceived threat, such as giving up meat in our diets.
Where many in the AGW community would have you believe that there is a consensus over global warming theory, the reports showcases the ongoing debate on the topic and support for alternative theories. Over 31,478 American scientists signed a petition in the appendix citing “there is no convincing scientific evidence that human release of carbon dioxide, methane, or other greenhouse gases is causing or will, in the foreseeable future, cause catastrophic heating of the Earth’s atmosphere and disruption of the Earth’s climate."
Unlike the UN's IPCC, which is chaired by Rajendra Pachauri, an Indian economist with no formal climatology training, the NIPCC is headed by two esteemed climatologists, each with a large body of work in the field....
... * Climate models suffer from numerous deficiencies and shortcomings that could alter even the very sign (plus or minus, warming or cooling) of earth’s projected temperature response to rising atmospheric carbon dioxide (CO2) concentrations.
* The model-derived temperature sensitivity of the earth--especially for a doubling of the preindustrial CO2 level--is much too large, and feedbacks in the climate system reduce it to values that are an order of magnitude smaller than what the IPCC employs.
* Real-world observations do not support the IPCC’s claim that current trends in climate and weather are “unprecedented” and, therefore, the result of anthropogenic greenhouse gases.
* The IPCC overlooks or downplays the many benefits to agriculture and forestry that will be accrued from the ongoing rise in the air’s CO2 content.
* There is no evidence that CO2-induced increases in air temperature will cause unprecedented plant and animal extinctions, either on land or in the world’s oceans.
* There is no evidence that CO2-induced global warming is or will be responsible for increases in the incidence of human diseases or the number of lives lost to extreme thermal conditions.
Sunday, June 21, 2009
Housing Boom and Bust
...When the political crusade for affordable housing took off and built up steam during the 1990s, the share of their incomes that Americans were spending on housing in 1998 was 17 percent, compared to 30 percent in the early 1980s. Even during the housing boom of 2005, the median home took just 22 percent of the median American income.
What created the illusion of a nationwide problem was that, in particular localities around the country, housing prices had skyrocketed to the point where people had to pay half their income to buy a modest-sized home and often resorted to very risky ways of financing the purchase. In Tucson, for example, “roughly 60% of first-time home buyers make no down payment and instead now use 100% financing to get into the market,” according to the Wall Street Journal. Almost invariably, these locally extreme housing prices have been a result of local political crusades in the name of locally attractive slogans about the environment, open space, “smart growth,” or whatever other phrases had political resonance at the particular time and place.
Where housing markets have been more or less left alone — in places like Houston or Dallas, for example — housing did not take even half as big a share of family incomes as did comparable housing in places like the San Francisco Bay Area, where heavily hyped political crusades had led to severe restrictions on building. It was in precisely these extremely high housing-cost enclaves that the kind of people for whom the national housing crusade expressed much concern — minorities, low-income people and families with children — were forced out disproportionately....
...Lenders did not spontaneously begin to lend to people who would not have qualified for loans under the traditional criteria that had evolved out of years of experience in the market. Such risky loans were made under growing pressures from government regulatory agencies and politicians, and even threats of prosecution from the Justice Department if the statistical profiles of borrowers whose loan applications were approved did not match the government’s preconceptions.
The growth in subprime loans was one way of meeting arbitrary quotas for lending to people who did not meet the criteria for loan approval that had prevailed for years. Quota lending was one of many political patches put over problems caused by previous political “solutions.” Often these interventions have focussed on some limited goal, with no real concern about, or even awareness of, the wider ramifications of what they were doing. It is doubtful whether most of the state politicians of the past who enacted laws to prevent branch banking had anything in mind more far-reaching than enabling local banks to avoid having to compete with branches of much bigger and better-known banks. It seems even less likely that these local politicians felt any responsibility for the thousands of bank failures during the Great Depression of the 1930s....
Stimulus = Welfare + Quotas + Corruption
Obama’s $787 billion stimulus package is now being used to force states to adopt racial quotas in government contracts, even if their state constitution or civil-rights laws forbid such quotas. Slate’s Mickey Kaus reports that “CalTrans, the huge state agency that spends billions in federal highway construction funds, ’sets a quota of having 6.75 percent of contracts go to women or members of a targeted group–African American, Asian-Pacific American, and Native American.’”
The stimulus package also repealed welfare reform, as Kaus and the Heritage Foundation have noted. Obama ran campaign ads claiming to support welfare reform, even though he had actually fought against welfare reform as an Illinois legislator.
Obama claimed the stimulus package was needed to prevent the economy from suffering from “irreversible decline,” but the Congressional Budget Office admitted that the stimulus package would shrink the economy “in the long run.” The stimulus package has since destroyed thousands of jobs in America’s export sector, and subsidized countless examples of government waste and corruption.
Recently, Obama fired an inspector general, Gerald Walpin, who uncovered millions of dollars of waste and fraud in the AmeriCorps program, including by a prominent Obama supporter, endangering the Obama supporter’s ability to administer federal stimulus spending in Sacramento....
ABC Self-Nationalizes For Obama
But that's the story as ABC crosses the line from journalism to advocacy in turning its coverage of health care over to the White House.
This Wednesday, on every show from "Good Morning America" (kicking things off with an interview with the president) to "World News Tonight" (broadcast from the Blue Room) to a prime-time special called "Prescription for America" (and emanating from the East Room), the network will puff the Obama administration's trillion-dollar plan to nationalize U.S. health care.
The all-day, White House-based coverage itself amounts to a nationalization — this one of a major media outlet in support of an administration that will return the favor for access at the cost of objectivity and the public's right to know.
Don't think it isn't. This isn't your grandfather's propaganda. Forget public service announcements. Just as some newspaper ads trick themselves up to look like news stories to enhance their credibility, making a partisan program indistinguishable from the nightly "news" is a propaganda tool in the same vein.
Nobody has figured this out better than Barack Obama's political operation, which has manipulated almost all the mainstream media since he began running for the presidency.
Under the cover of news, ABC can present the president's side of the health reform issue as "factual" and leave out the real costs and concerns about government control and rationing of health care. Personal stories that tug at the heartstrings will be featured prominently, as will unchallenged canards about the wonders of socialized medicine....
...ABC insists it will present a balanced picture — as balanced, we suppose, as the political contributions of ABC News employees who gave 80 times more to Obama's campaign ($124,421 to $1,550) as they did to his opponent, John McCain....
Volcker & Hedge Funds
...I’d also like to remind the eager-to-regulate crowd that when the market tanked, the highly regulated banks suffered most. When their market capitalization was down about 50%, I remember that the unregulated hedge funds were only down about 18%. So why is regulation always the “solution?”
VA officials grilled over botched colonoscopies
Lawmakers sharply criticized the Veterans Affairs Department on Tuesday about why a national scare over botched colonoscopies earlier this year didn't prompt stronger safeguards at the agency's medical centers.
Agency officials apologized for the continued weaknesses and told a House subcommittee they would do better. VA Secretary Eric Shinseki said he would be disciplining staffers.
The strong reaction came as the agency's inspector general reported that fewer than half of VA facilities selected for surprise inspections last month had proper training and guidelines in place. That was months after the VA launched a nationwide safety campaign over the discovery of errors at facilities in Miami, Augusta, Ga., and Murfreesboro, Tenn., that could have exposed veterans to HIV and other infections....
Cost Concerns as Obama Pushes Health Issue
...An analysis released Monday by the nonpartisan Congressional Budget Office raised the hurdles for draft legislation in the Senate just as its Health, Education, Labor and Pensions Committee planned to begin voting on Wednesday. The office concluded that a plan by the committee’s Democratic leaders, Senators Edward M. Kennedy of Massachusetts and Christopher J. Dodd of Connecticut, would reduce the number of uninsured only by a net 16 million people. Even if the bill became law, the budget office said, 36 million people would remain uninsured in 2017.
That finding came as a surprise. Robert D. Reischauer, an economist who headed the budget office when Congress tackled the health care issue in the Clinton administration, said that if so many people remained uninsured, it might not be feasible to cut special federal payments to hospitals that serve many low-income people.
Mr. Obama said Saturday that the government could save $106 billion over 10 years by cutting such hospital payments as more people gained coverage....
...The practical problem for Mr. Obama is that by all accounts, the savings and efficiencies he envisions will not occur quickly, certainly not in the 10-year time frame of budget scorekeeping for purposes of passing legislation.
The budget office estimated that 39 million people would get coverage through new “insurance exchanges.” But at the same time, it said, the number of people with employer-provided health insurance would decline by 15 million, or about 10 percent, and coverage from other sources would fall by 8 million.
In effect, the office said, millions of people would get a better deal if they bought insurance through an exchange because they could qualify for federal subsidies not available if they stayed in their employers’ health plans. Subsidies are expected to average $5,000 to $6,000 a person....
...But a VAT could violate Mr. Obama’s campaign pledge not to raise taxes on households with incomes under $250,000 a year.
The Last Trillion-Dollar Commitment
...Managing their political risk required the GSEs to offer Congress a generous benefits package. Campaign contributions were certainly one element. Between the 2000 and 2008 election cycles, the GSEs and their employees contributed more than $14.6 million to the campaign funds of dozens of senators and representatives, most of them on committees that were important to preserving the GSEs' privileges. And Fannie knew how to "leverage" its giving, not just its assets; often it enlisted other groups that profited from the GSEs' activities--the securities industry, homebuilders, and realtors--to sponsor their own fundraising events for the GSEs' key congressional friends. In addition to campaign funds, the GSEs--Fannie Mae in particular--enhanced their power in Congress by setting up "partnership offices" in the districts and states of important lawmakers, often hiring the relatives of these lawmakers to staff the local offices. Their lobbying activities were legendary. Between 1998 and 2008, Fannie spent $79.5 million and Freddie spent $94.9 million on lobbying Congress, making them the twentieth and thirteenth biggest spenders, respectively, on lobbying fees during that period. Not all of these expenditures were necessary to contact members of Congress; the GSEs routinely hired lobbyists simply to deprive their opponents of lobbying help. Since lobbyists are frequently part of lawmakers' networks--and are often former staffers for the same lawmakers--these lobbying expenditures also encouraged members of Congress to support Fannie and Freddie as a means of supplementing the income of their friends.
n the same vein, Fannie and Freddie hired dozens of Washington's movers and shakers--at spectacular levels of compensation--to sit on their boards, lobby Congress, and in general help them to manage their political risk. (An early account of this effort was an article entitled "Crony Capitalism: American Style" that appeared in The International Economy in 1999. A later version of the same point was made in Investor's Business Daily nine years later.) The GSEs also paid for academic research to assure the public that the GSE mission was worthwhile and that the GSEs posed minimal risks to taxpayers. For example, Nobel laureate Joseph Stiglitz coauthored an article in 2002 purporting to show that the risk of GSE default producing taxpayer loss was "effectively zero."
One of the most successful efforts to influence lawmakers came through community groups. Both Fannie and Freddie made "charitable" or other gifts to community groups, which could then be called upon to contact the GSEs' opponents in Congress and protest any proposed restrictions on the activities or privileges of the GSEs. GSE supporters in Congress could also count on these groups to back them in their reelection efforts....
...Even if the earlier affordable housing projects were not losers, however, they represented a new and extra-constitutional way for Congress to dispense funds that should otherwise have flowed through the appropriations process. In one sense, the expenditures were a new form of earmark, but this earmarking evaded the constitutional appropriations process entirely. An illustration is provided by a press release from the office of Senator Charles E. Schumer (D-N.Y.), one of the most ardent supporters of the GSEs in Congress. The headline on the release, dated November 20, 2006--right in the middle of the GSEs' affordable housing spending spree--was "Schumer Announces up to $100 Million Freddie Mac Commitment to Address Fort Drum and Watertown Housing Crunch." The subheading continued: "Schumer Unveils New Freddie Mac Plan with HSBC That Includes Low-Interest Low-Downpayment Loans. In June, Schumer Urged Freddie Mac and Fannie Mae Step Up to the Plate and Deliver Concrete Plans--Today Freddie Mac Is Following Through." If this project had been economically profitable for Fannie or Freddie, Schumer would not have had to "urge" them to "step up." Instead, using his authority as a powerful member of the Senate Banking Committee--and a supporter of Fannie and Freddie--he appears to have induced Freddie Mac to make a financial commitment that was very much in his political interests but for which the taxpayers of the United States would ultimately be responsible.
Of course, Schumer was only one of many members of Congress who used his political leverage to further his own agenda at taxpayer expense and outside the appropriations process. The list of friends of Fannie and Freddie changed over time; while the GSEs enjoyed broad bipartisan support in the 1990s, over the past decade, they have become increasingly aligned with the Democrats. This shift in the political equilibrium was especially clear in the congressional reaction to the GSEs' accounting scandals of 2003 and 2004....
...Fannie and Freddie reaped significant benefits from the careful management of their political risk. In June 2003, in the wake of the failures of Enron and WorldCom, Freddie's board of directors suddenly dismissed its three top officers and announced that the company's accountants had found serious problems in Freddie's financial reports. In 2004, after a forensic audit by OFHEO, even more serious accounting manipulation was found at Fannie, and Raines, its chairman, and Timothy Howard, its chief financial officer, were compelled to resign.
It is eloquent testimony to the power of Fannie and Freddie in Congress that even after these extraordinary events there was no significant effort to improve or enhance the powers of their regulator. The House Financial Services Committee developed a bill that was so badly weakened by GSE lobbying that the Bush administration refused to support it. The Senate Banking Committee, then under Republican control, adopted much stronger legislation in 2005, but unanimous Democratic opposition to the bill in the committee doomed it when it reached the floor. ...
...The events in 2003 and 2004 had undermined the legitimacy of the GSEs. They could no longer claim to be competently--or even honestly--managed. An important and respected figure, Alan Greenspan, was raising questions about whether they might be creating excessive risk for taxpayers and systemic risk for the economy as a whole. Greenspan had suggested that their most profitable activity--holding portfolios of mortgages and MBS--was the activity that created the greatest risk, and three Federal Reserve economists had concluded that the GSEs' activities did not actually reduce mortgage interest rates. It was easy to see at this point that their political risk was rising quickly. The case for continuing their privileged status had been severely weakened. The only element of their activities that had not come under criticism was their affordable housing mission, and it appears that the GSEs determined at this point to play that card as a way of shoring up their political support in Congress....
...The GSEs' confidence in the affordable housing idea was bolstered by what appears to be a tacit understanding. Occasionally, this understanding found direct expression. For example, in his opening statement at a hearing in 2003, Representative Barney Frank (D-Mass.), now the chairman of the House Financial Services Committee, referred to an "arrangement" between Congress and the GSEs that tracks rather explicitly what actually happened: "Fannie and Freddie have played a very useful role in helping to make housing more affordable, both in general through leveraging the mortgage market, and in particular, they have a mission that this Congress has given them in return for some of the arrangements which are of some benefit to them to focus on affordable housing." So here the arrangement is laid out: if the GSEs focus on affordable housing, their position is secure...
...In 1995, HUD, the cabinet-level agency responsible for issuing regulations on the GSEs' affordable housing obligations, had ruled that the GSEs could get affordable housing credit for purchasing subprime loans. Unfortunately, the agency failed to require that these loans conform to good lending practices, and OFHEO did not have the staff or the authority to monitor their purchases....
...One of the sources of Krugman's confusion may have been Fannie and Freddie's strange accounting conventions relating to subprime loans. There are many defi-nitions of a subprime loan, but the definition used by U.S. bank regulators is any loan to a borrower with damaged credit, including such objective criteria as a FICO credit score lower than 660. In their public reports, the GSEs use their own definitions, which purposely and significantly understate their commitment to subprime loans--the mortgages with the most political freight. For example, they disclose the principal amount of loans with FICO scores of less than 620, leaving the reader to guess how many loans fall into the category of subprime because they have FICO scores of less than 660. In these reports, too, Alt-A loans--which include loans with little or no income or other documentation and other deficiencies--are differentiated from subprime loans, again reducing the size of the apparent GSE commitment to the subprime category. These distinctions, however, are not very important from the perspective of realized losses in the subprime and Alt-A categories; loss rates are quite similar for both, even though they are labeled differently. In its June 30, 2008, Investor Summary report, Fannie notes that credit losses on its Alt-A portfolio were 49.6 percent of all the credit losses on its $2.7 trillion single-family loan book of business. Fannie's disclosures indicate that when all subprime loans (including Alt-A) are aggregated, at least 85 percent of its losses are related to its holdings of both subprime and Alt-A loans. They are all properly characterized as "junk loans."...
...Instead, it seems likely that the event responsible for the GSEs' change in direction and culture was the accounting scandal that each of them encountered in 2003 and 2004. In both cases, they lost their reputation as well-managed companies and began to encounter questions about their contribution to reducing mortgage rates and their safety and soundness. Serious observers questioned whether they should be allowed to continue to hold mortgages and MBS in their portfolios--by far their most profitable activity--and Senate Republicans moved a bill out of committee that would have prohibited this activity.
Under these circumstances, the need to manage their political risk became paramount, and this required them to prove to their supporters in Congress that they still served a useful purpose. In 2003, as noted above, Frank had cited an arrangement in which the GSEs' congressional benefits were linked to their investments in affordable housing. In this context, substantially increasing their support for affordable housing--through the purchase of the subprime loans permitted by HUD--seems a logical and even necessary tactic.
Unfortunately, the sad saga of Fannie and Freddie is not over. Some of their supporters in Congress prefer to blame the Fannie and Freddie mess on deregulation or private market failure, perhaps hoping to use such false diagnoses to lay the groundwork for reviving the GSEs for extra constitutional expenditure and political benefit in the future. As the future of the GSEs is debated over the coming months and years, it will be important to remember how and why Fannie and Freddie failed. The primary policy objective should be to prevent a repeat of this disaster by preventing the restoration of the GSE model.
Dubya's Double Dip?
...The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble....
Credit Where Credit Is Due
...Neeraj Mehra, Amritsar, India: Mr. Greenspan has done a disservice to the nation by creating the housing boom. As a layman-observer, that’s the lingering thought I’ve had. Your article reaffirms it.
The question I have is this: Did he do the right thing — acting morally by engineering a housing boom, more as a bridge loan, until something else showed up at the horizon to shore up the economy — because he didn’t have a choice, or did he undertake a path of mere political expediency? And, that’s a question that’s nagging me for a while.
Would appreciate it if you could shed some light.
Paul Krugman: As Paul McCulley of PIMCO remarked when the tech boom crashed, Greenspan needed to create a housing bubble to replace the technology bubble. So within limits he may have done the right thing....
Who Does Paul Krugman Think He’s Fooling?
...Where to begin? First let’s stipulate that Fannie and Freddie never did “any subprime lending” … but not for the reason Krugman states. Freddie and Fannie never do any lending: They buy mortgages from lenders only, so that those lenders have more cash to make other loans (like subprime ones). But Krugman is either lying or being intentionally obtuse when he says “Fannie and Freddie buy only mortgages issued to borrowers who made substantial down payments and carefully documented their income.”...
...Let’s review that last paragraph again. Krugman is trying to convince his readers that Freddie and Fannie are only innocent bystanders in the housing bubble. Fannie and Freddie purchased 44 percent of the subprime securities in 2004. Does that sound like the behavior of an innocent bystander to you?
Saturday, June 20, 2009
EX-NYERS RIPPING OFF MEDICAID MILLIONS
ALBANY - New York is wasting tens of millions of dollars annually by paying the medical expenses of thousands of former residents who have long since moved out of state, an explosive new audit has found.
The scathing - and still-secret - audit determined that nearly 30,000 people in New York City alone were improperly on the state's Medicaid rolls from November 2006 to November 2007, even while they were enrolled in the Medicaid programs of other states.
Auditors from state Comptroller Thomas DiNapoli's office, using federally developed computerized record checks in 44 states, determined that nearly 13,000 of the former city residents "should have been investigated" for violation of New York's Medicaid regulations, according to the audit, a copy of which was obtained by The Post.
It's not clear why the other 17,000 out-of-staters were not identified as targets for a probe. ...
New York Medicaid Fraud May Reach Into Billions
...New York's Medicaid program is by far the most expensive and most generous in the nation. It spends far more - now $44.5 billion annually - than that of any other state, even California, whose Medicaid program covers about 55 percent more people. New York's Medicaid budget is larger than most states' entire budgets, and it spends nearly twice the national average - roughly $10,600, more than any other state - on each of its 4.2 million recipients, one in every five New Yorkers.
That generosity was born of good intentions when Gov. Nelson A. Rockefeller signed the program into law in 1966, following the state's tradition of creating big antipoverty programs. But Medicaid has become far more than the child of that altruism, having morphed into an economic engine that fuels one of the state's biggest industries, leaving fraud and unnecessary spending to grow in its wake.
There are no precise estimates for the cost to the state's program. Officials who have spent their careers chasing unscrupulous doctors and other providers in New York Medicaid say the losses to taxpayers here are probably higher than typical estimates of overall health care fraud. The Government Accountability Office in Washington and others have estimated that 10 percent of all health care spending nationally is lost to "fraud and abuse."
James Mehmet, who retired in 2001 as chief state investigator of Medicaid fraud and abuse in New York City, said he and his colleagues believed that at least 10 percent of state Medicaid dollars were spent on fraudulent claims, while 20 or 30 percent more were siphoned off by what they termed abuse, meaning unnecessary spending that might not be criminal. "So we're talking about 40 percent of all claims are questionable," Mr. Mehmet said - an amount that would approach $18 billion a year.
Despite the debate, and the enormous sums at stake, Albany has never formally studied how much of the huge government investment in Medicaid is lost to criminal activity and abuse. ...
The Politics of Controlled Crisis
...For cryin' out loud, we have a single payer government health care system called Medicaid that has a 40% fraud and 'legal graft' rate from coast to coast! (Or at least on both of them.)
Not waste and inefficient procedures. Fraud and graft!
Why? Simple. No politician in New York or California ever gets a vote from denying medical benefits to anyone -- it only costs them votes. "Heartless politicians deny medical care to the poor..." The very same argument being used to beat up insurance companies in Congressional hearings today. Add to that all the money the politicians collect from the medical services providers -- hospitals, unions of health care workers, suppliers, etc.
That's an awful lot of political incentive against cost efficiency. Where is the incentive for it?...
...When Spitzer was AG of New York why did he totally ignore the notorious massive graft in NYS Medicaid, which he was explicitly charged under the law to police, to pursue Wall Street instead, which was the jurisdiction of the SEC and Feds? Because that's how political incentives apply to government medical care programs.
Reality is this: Politicians will hand out medical benefits with no more efficiency retraints than today until the day arrives when they feel the pain of having to raise taxes to pay for them. Then they will apply "cost saving measures" by hacking the govt's health care budget with a meat cleaver from the top down -- making the whole system even less efficient than ever.
Why? Because it follows from the only political incentives they feel: (1) Get votes by handing out more benefits; then (2) avoid losing votes by stopping tax increases with budget caps, enforced top-down.
Politicians have no incentive, zero, to deliver "cost efficiency" in medical care. That only cost them votes, so they effectively are against it. Look at Medicaid from New York to California. Orszag admitted it to Postrel!...
Ruin Your Health With the Obama Stimulus Plan: Betsy McCaughey
...But the bill goes further. One new bureaucracy, the National Coordinator of Health Information Technology, will monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective. The goal is to reduce costs and “guide” your doctor’s decisions (442, 446). These provisions in the stimulus bill are virtually identical to what Daschle prescribed in his 2008 book, “Critical: What We Can Do About the Health-Care Crisis.” According to Daschle, doctors have to give up autonomy and “learn to operate less like solo practitioners.”
Keeping doctors informed of the newest medical findings is important, but enforcing uniformity goes too far.
Hospitals and doctors that are not “meaningful users” of the new system will face penalties. “Meaningful user” isn’t defined in the bill. That will be left to the HHS secretary, who will be empowered to impose “more stringent measures of meaningful use over time” (511, 518, 540-541)
What penalties will deter your doctor from going beyond the electronically delivered protocols when your condition is atypical or you need an experimental treatment? The vagueness is intentional. In his book, Daschle proposed an appointed body with vast powers to make the “tough” decisions elected politicians won’t make. ...
Baroness Warnock: Dementia sufferers may have a 'duty to die'
The veteran Government adviser said pensioners in mental decline are "wasting people's lives" because of the care they require and should be allowed to opt for euthanasia even if they are not in pain.
She insisted there was "nothing wrong" with people being helped to die for the sake of their loved ones or society....
...But in her latest interview, given to the Church of Scotland's magazine Life and Work, Lady Warnock goes further by claiming that dementia sufferers should consider ending their lives through euthanasia because of the strain they put on their families and public services.
Recent figures show there are 700,000 people with degenerative diseases such as Alzheimer's in Britain. By 2026 experts predict there will be one million dementia sufferers in the country, costing the NHS an estimated £35billion a year.
Lady Warnock said: "If you're demented, you're wasting people's lives – your family's lives – and you're wasting the resources of the National Health Service....
Divided We Stand
What would California look like broken in three? Or a Republic of New England? With the federal government reaching for ever more power, redrawing the map is enticing, says Paul Starobin
...There might be an austere Republic of New England, with a natural strength in higher education and technology; a Caribbean-flavored city-state Republic of Greater Miami, with an anchor in the Latin American economy; and maybe even a Republic of Las Vegas with unfettered license to pursue its ambitions as a global gambling, entertainment and conventioneer destination. California? America’s broke, ill-governed and way-too-big nation-like state might be saved, truly saved, not by an emergency federal bailout, but by a merciful carve-up into a trio of republics that would rely on their own ingenuity in making their connections to the wider world. And while we’re at it, let’s make this project bi-national—economic logic suggests a natural multilingual combination between Greater San Diego and Mexico’s Northern Baja, and, to the Pacific north, between Seattle and Vancouver in a megaregion already dubbed “Cascadia” by economic cartographers.
Devolved America is a vision faithful both to certain postindustrial realities as well as to the pluralistic heart of the American political tradition—a tradition that has been betrayed by the creeping centralization of power in Washington over the decades but may yet reassert itself as an animating spirit for the future. Consider this proposition: America of the 21st century, propelled by currents of modernity that tend to favor the little over the big, may trace a long circle back to the original small-government ideas of the American experiment. The present-day American Goliath may turn out to be a freak of a waning age of politics and economics as conducted on a super-sized scale—too large to make any rational sense in an emerging age of personal empowerment that harks back to the era of the yeoman farmer of America’s early days. The society may find blessed new life, as paradoxical as this may sound, in a return to a smaller form....
...All of this adds up to a federal power grab that might make even FDR’s New Dealers blush. But that’s just the point: Not surprisingly, a lot of folks in the land of Jefferson are taking a stand against an approach that stands to make an indebted citizenry yet more dependent on an already immense federal power. The backlash, already under way, is a prime stimulus for a neo-secessionist movement, the most extreme manifestation of a broader push for some form of devolution. In April, at an anti-tax “tea party” held in Austin, Governor Rick Perry of Texas had his speech interrupted by cries of “secede.” The Governor did not sound inclined to disagree. “Texas is a unique place,” he later told reporters attending the rally. “When we came into the Union in 1845, one of the issues was that we would be able to leave if we decided to do that.”...
...Today’s devolutionists, of all stripes, can trace their pedigree to the “anti-federalists” who opposed the compact that came out of Philadelphia as a bad bargain that gave too much power to the center at the expense of the limbs. Some of America’s most vigorous and learned minds were in the anti-federalist camp; their ranks included Virginia’s Patrick Henry, of “give me liberty or give me death” renown. The sainted Jefferson, who was serving as a diplomat in Paris during the convention, is these days claimed by secessionists as a kindred anti-federal spirit, even if he did go on to serve two terms as president.
The anti-federalists lost their battle, but history, in certain respects, has redeemed their vision, for they anticipated how many Americans have come to feel about their nation’s seat of federal power. “This city, and the government of it, must indubitably take their tone from the character of the men, who from the nature of its situation and institution, must collect there,” the anti-federalist pamphleteer known only as the Federal Farmer wrote. “If we expect it will have any sincere attachments to simple and frugal republicanism, to that liberty and mild government, which is dear to the laborious part of a free people, we most assuredly deceive ourselves.”...
...Not quite. In a globalized economy transformed by technological innovations hatched by happily-unguided entrepreneurs, history seems to be driving one nail after another into the coffin of the big, which is why the Obama planners and their ilk, even if they now ride high, may be doomed to fail. No one anymore expects the best ideas to come from the biggest actors in the economy, so should anyone expect the best thinking to be done by the whales of the political world?
A notable prophet for a coming age of smallness was the diplomat and historian George Kennan, a steward of the American Century with an uncanny ability to see past the seemingly-frozen geopolitical arrangements of the day. Kennan always believed that Soviet power would “run its course,” as he predicted back in 1951, just as the Cold War was getting under way, and again shortly after the Soviet Union collapsed, he suggested that a similar fate might await the United States. America has become a “monster country,” afflicted by a swollen bureaucracy and “the hubris of inordinate size,” he wrote in his 1993 book, “Around the Cragged Hill: A Personal and Political Philosophy.” Things might work better, he suggested, if the nation was “decentralized into something like a dozen constituent republics, absorbing not only the powers of the existing states but a considerable part of those of the present federal establishment.”...
The Long Road to Slack Lending Standards
...Eventually, the political climate changed, and Washington became a believer in the story. Crucial to this change was a Federal Reserve Bank of Boston study which concluded that although lender discrimination was not as severe as suggested by the newspapers, it nevertheless existed. This, then, became the dominant government position, even though subsequent efforts by other researchers to verify the Fed’s conclusions showed serious deficiencies in the original work. One economist for the Federal Deposit Insurance Corp. who looked more deeply into the data, for instance, found that the difference in denial rates on loans for whites and minorities could be accounted for by such factors as higher rates of delinquencies on prior loans for minorities, or the inability of lenders to verify information provided to them by some minority applicants.
Ignoring the import of such data, federal officials went on a campaign to encourage banks to lower their lending standards in order to make more minority loans. One result of this campaign is a remarkable document produced by the Federal Reserve Bank of Boston in 1998 titled “Closing the Gap: A Guide to Equal Opportunity Lending”.
Quoting from a study which declared that “underwriting guidelines…may be unintentionally racially biased,” the Boston Fed then called for what amounted to undermining many of the lending criteria that banks had used for decades. It told banks they should consider junking the industry’s traditional debt-to-income ratio, which lenders used to determine whether an applicant’s income was sufficient to cover housing costs plus loan payments. It instructed banks that an applicant’s “lack of credit history should not be seen as a negative factor” in obtaining a mortgage, even though a mortgage is the biggest financial obligation most individuals will undertake in life. In cases where applicants had bad credit (as opposed to no credit), the Boston Fed told banks to “consider extenuating circumstances” that might still make the borrower creditworthy. When applicants didn’t have enough savings to make a down payment, the Boston Fed urged banks to allow loans from nonprofits or government assistance agencies to count toward a down payment, even though banks had traditionally disallowed such sources because applicants who have little of their own savings invested in a home are more likely to walk away from a loan when they have trouble paying.
Of course, the new federal standards couldn’t just apply to minorities. If they could pay back loans under these terms, then so could the majority of loan applicants. Quickly, in other words, these became the new standards in the industry. In 1999, the New York Times reported that Fannie Mae and Freddie Mac were easing credit requirements for mortgages it purchased from lenders, and as the housing market boomed, banks embraced these new standards with a vengeance. Between 2004 and 2007, Fannie Mae and Freddie Mac became the biggest purchasers of subprime mortgages from all kinds of applicants, white and minority, and most of these loans were based on the lending standards promoted by the government. ...
...But this defense misses the point. In order to push banks to lend more to minority borrowers, advocates like the Boston Fed put forward an entire new set of lending standards and explained to the industry just why loans based on these slacker standards were somehow safer than the industry previously thought. These justifications became the basis for a whole new set of values (or lack of values), as no-down payment loans and loans to people with poor credit history or to those who were already loaded up with debt became more common throughout the entire industry....
Obama Seeks to Mandate More Risky, Low-Income Loans by Banks, in New Financial Rules
The President has just announced proposals for a major overhaul of the financial system. The proposals would force banks to make even MORE risky loans to low-income people. Even liberal newspapers like the Village Voice have admitted that “affordable housing” mandates are a key reason for the housing crisis and the massive number of defaulting borrowers. But Obama will not accept this reality. Instead, he wants to create a new “Consumer Financial Protection Agency” to rigorously enforce regulations pressuring banks to make loans to low-income borrowers, such as the Community Reinvestment Act. (Obama once represented ACORN, which pressures banks to make risky loans).
In explaining why there is supposedly a need for this new agency, when other agencies already enforce the Community Reinvestment Act and fair-lending laws, his regulatory blueprint complains that “State and federal bank supervisory agencies’ primary mission is to ensure that financial institutions act prudently, a mission that, in appearance if not always in practice, often conflicts with their consumer protection responsibilities.” (Pg. 54).
In other words, the power to force banks to make low-income loans should be given to an agency that has no duty to ensure prudent lending or to take into account the effects of such requirements on banks’ stability or viability....
...Obama’s regulatory blueprint disingenuously claims that the Community Reinvestment Act, which pressures banks to make low-income loans, can’t have contributed to the mortgage crisis, because it existed for years before the crisis began. But it is not the Act’s passage, alone, that economists credit with causing the mortgage crisis, but rather the unrealistic regulations adopted to implement the Act many years after the Act’s passage. Those regulations went into effect not that long before the mortgage bubble began, as historian Clayton Cramer notes. Economists, investment bankers, and historians have long noted the role of the Community Reinvestment Act and its regulations in promoting the risky lending that spawned the financial crisis. Investors Business Daily has chronicled how “the Community Reinvestment Act” pressured lenders to make the risky loans that led to the mortgage meltdown.
The current mortgage crisis came about in large part because of Clinton-era government pressure on lenders to make risky loans in order to “make homeownership more affordable for lower-income Americans and those with a poor credit history,” the DC Examiner notes. “Those steps encouraged riskier mortgage lending by minimizing the role of credit histories in lending decisions, loosening required debt-to-equity ratios to allow borrowers to make small or even no down payments at all, and encouraging lenders the use of floating or adjustable interest-rate mortgages, including those with low ‘teasers.’”
The liberal Village Voice previously chronicled how Clinton Administration housing secretary Andrew Cuomo helped spawn the mortgage crisis through his pressure on lenders to promote affordable housing and diversity. “Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down . . . Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why.” (See Wayne Barrett, “Andrew Cuomo and Fannie and Freddie: How the Youngest Housing and Urban Development Secretary in History Gave Birth to the Mortgage Crisis,” Village Voice, August 5, 2008).
In drafting his financial regulation proposals, Obama has turned to Barney Frank and Chris Dodd, lawmakers who are among those most culpable in spawning the financial crisis. ...
...For example, “a high-ranking Democrat telephoned executives and screamed at them to purchase more loans from low-income borrowers, according to a Congressional source.” The executives of government-backed mortgage giants Fannie Mae and Freddie Mac “eventually yielded to those pressures, effectively wagering that if things got too bad, the government would bail them out.” But they realized the risk: “In 2004, Freddie Mac warned regulators that affordable housing goals could force the company to buy riskier loans.” Ultimately, though, Freddie Mac’s CEO, Richard F. Syron, told colleagues that “we couldn’t afford to say no to anyone.”
As a Washington Post story shows, the high-risk loans that led to the mortgage crisis were the product of regulatory pressure, not a lack of regulation. In 2004, even after banking officials “warned that subprime lenders were saddling borrowers with mortgages they could not afford, the U.S. Department of Housing and Urban Development helped fuel more of that risky lending. Eager to put more low-income and minority families into their own homes, the agency required that two government-chartered mortgage finance firms purchase far more ‘affordable’ loans made to these borrowers. HUD stuck with an outdated policy that allowed Freddie Mac and Fannie Mae to count billions of dollars they invested in subprime loans as a public good that would foster affordable housing.”
Lenders also face the risk of being sued for discrimination if they fail to make loans to people with bad credit, which often has a racially-disparate impact (proving that such impact is unintentional is costly and difficult, and not always sufficient to avoid liability under antidiscrimination laws). They also risk possible sanctions under the Community Reinvestment Act.
Banks get sued for discrimination no matter what they do. If they don’t make enough loans in low-income, predominantly minority neighborhoods, they get accused of “redlining,” and are subject to sanctions under politically-correct laws like the Community Reinvestment Act, which contributed to the financial crisis by pressuring lenders to make risky mortgage loans.
But if they do make such loans, they get accused of “reverse redlining,” and get sued by the liberal special-interest groups and municipalities that encouraged them to make such loans during the mortgage bubble. Baltimore and various borrowers have also brought “reverse redlining” lawsuits against banks.
The Washington Post reported that bond-rating agencies like Moody’s and Fitch are now getting sued, too, for “reverse redlining,” under the theory that they encouraged risky loans to low-income minorities (who subsequently regretted taking out those loans) by giving respectable ratings to the mortgage-backed securities produced by packaging those mortgage loans. The plaintiffs include the National Community Reinvestment Coalition, which has been pressuring lenders to make risky loans to low-income minorities for years. They blame the ratings-agencies for allowing lenders to make loans to minorities with “insufficient borrower income levels.”
Washington Post Blames Private Sector for Government Failures
...You don’t have to be a right-winger to see that government regulation caused, rather than mitigated, the mortgage crisis. An August 5 article in the liberal Village Voice explains how Clinton’s Secretary for Housing and Urban Development, Andrew Cuomo helped pave the way for the mortgage meltdown by ratcheting up federal affordable-housing mandates. Cuomo and HUD forced Fannie and Freddie to buy more sub-prime morgages, as part of Cuomo’s crusade to increase the number of minority homeowners. Now, of course, the crusade has backfired. Many minority homeowners have suffered financially as a result of recent falls in home value that wiped out their homeowners’ equity — a fall that resulted from buying homes during a mortgage bubble fueled by HUD’s pressure on lenders to make risky, high-interest loans to people with little savings (many of whom have defaulted, helping to drive lenders into bankruptcy). And they’ve ended up with costly high-interest mortgages in the process. (Ironically, Cuomo, now New York’s attorney general, blames lenders for causing the mortgage crisis through “predatory lending” — lending he helped promote as HUD secretary)....
Planting Seeds of Disaster
‘You’ve got only a couple thousand bucks in the bank. Your job pays you dog-food wages. Your credit history has been bent, stapled, and mutilated. You declared bankruptcy in 1989. Don’t despair: You can still buy a house.” So began an April 1995 article in the Chicago Sun-Times that went on to direct prospective home-buyers fitting this profile to a group of far-left “community organizers” called ACORN, for assistance. In retrospect, of course, encouraging customers like this to buy homes seems little short of madness....
...I’ve already told the story of Obama’s close ties to ACORN leader Madeline Talbott, who personally led Chicago ACORN’s campaign to intimidate banks into making high-risk loans to low-credit customers. Using provisions of a 1977 law called the Community Reinvestment Act (CRA), Chicago ACORN was able to delay and halt the efforts of banks to merge or expand until they had agreed to lower their credit standards — and to fill ACORN’s coffers to finance “counseling” operations like the one touted in that Sun-Times article. This much we’ve known. Yet these local, CRA-based pressure-campaigns fit into a broader, more disturbing, and still under-appreciated national picture. Far more than we’ve recognized, ACORN’s local, CRA-enabled pressure tactics served to entangle the financial system as a whole in the subprime mess. ACORN was no side-show. On the contrary, using CRA and ties to sympathetic congressional Democrats, ACORN succeeded in drawing Fannie Mae and Freddie Mac into the very policies that led to the current disaster....
...Critics of the notion that CRA had a major impact on the subprime crisis ask how a law passed in 1977 could have caused a crisis in 2008? The answer has a lot to do with ACORN — and the critical years of 1990-1995. While the 1977 Community Reinvestment Act did call on banks to increase lending in poor and minority neighborhoods, its exact requirements were vague, and therefore open to a good deal of regulatory interpretation. Banks merger or expansion plans were rarely held up under CRA until the late 1980s, when ACORN perfected its technique of filing CRA complaints in tandem with the sort of intimidation tactics perfected by that original “community organizer” (and Obama idol), Saul Alinsky.
At first, ACORN’s anti-bank actions were relatively few in number. However, under a provision of the 1989 savings and loan bailout pushed by liberal Democratic legislators, like Massachusetts Congressman Joseph P. Kennedy, lenders were required to compile public records of mortgage applicants by race, gender, and income. Although the statistics produced by these studies were presented in highly misleading ways, groups like ACORN were able to use them to embarrass banks into lowering credit standards. At the same time, a wave of banking mergers in the early 1990's provided an opening for ACORN to use CRA to force lending changes. Any merger could be blocked under CRA, and once ACORN began systematically filing protests over minority lending, a formerly toothless set of regulations began to bite....
...Another factor working in ACORN’s favor was that its increasing success with local banks turned those banks into allies in the battle with Fannie and Freddie. Precisely because ACORN’s local pressure tactics were working, banks themselves now wanted Fannie and Freddie to loosen their standards still further, so as to buy up still more of the high-risk loans they’d made at ACORN’s insistence. So by the 1993, a grand alliance of ACORN, national Democrats, and local bankers looking for someone to lessen the risks imposed on them by CRA and ACORN were uniting to pressure Fannie and Freddie to loosen credit standards still further.
At this point, both ACORN and the Clinton administration were working together to impose large numerical targets or “set asides” (really a sort of poor and minority loan quota system) on Fannie and Freddie. ACORN called for at least half of Fannie and Freddie loans to go to low-income customers. At first the Clinton administration offered a set-aside of 30 percent. But eventually ACORN got what it wanted. In early 1994, the Clinton administration floated plans for committing $1 trillion in loans to low- and moderate-income home-buyers, which would amount to about half of Fannie Mae’s business by the end of the decade. Wall Street Analysts attributed Fannie Mae’s willingness to go along with the change to the need to protect itself against still more severe “congressional attack.” News reports also highlighted praise for the change from ACORN’s head lobbyist, Deepak Bhargava.
This sweeping debasement of credit standards was touted by Fannie Mae’s chairman, chief executive officer, and now prominent Obama adviser James A. Johnson. This is also the period when Fannie Mae ramped up its pilot programs and local partnerships with ACORN, all of which became precedents and models for the pattern of risky subprime mortgages at the root of today’s crisis. During these years, Obama’s Chicago ACORN ally, Madeline Talbott, was at the forefront of participation in those pilot programs, and her activities were consistently supported by Obama through both foundation funding and personal leadership training for her top organizers....