Friday, February 12, 2010
Former Lutheran pastor admits child porn
Andrew Spallek, the former pastor of Salem Lutheran Church in Black Jack, pleaded guilty to a federal child pornography possession charge Wednesday and admitted possessing 13 images of children engaged in sex acts.
Spallek, 49, of Florissant, resigned as pastor on Sept. 23, citing “personal reasons.” He was indicted the next day in U.S. District Court in St. Louis on two child porn charges....
The Federal Government Is Bribing States to Create More Welfare Dependency?!?
If you want to get depressed or angry, the New York Times has an article celebrating the effort by politicians at all levels of government to lure more people into the food stamp program. New York City is running ads in foreign languagues asking people to stick their snouts in the public trough. The City is even signing up prisoners when they get out of jail. The state of New York, meanwhile, actually set up quotas for enrolling new recipients. And on the federal level, there apparently is a program that gives states “bonuses” for putting more people on the dole. No wonder one out of every eight Americans is receiving food stamps....
Read his lips: Obama backs off on middle class tax hike ban
The White House brushed off questions about President Obama's new, "agnostic" stance on middle class tax increases, signaling a potential reversal on a key campaign promise.
"The president is just not going to get in the game of prejudging the outcome of a commission that, one hasn't been set up and hasn't met," said White House press secretary Robert Gibbs.
Obama is hoping for Republican support on a bipartisan commission to draft revenue generators and spending cuts.
But after repeatedly pledging not to raise taxes on families making less than $250,000 a year, Obama told Bloomberg he is now "agnostic" on such a plan.
"The whole point of it is to make sure that all ideas are on the table," Obama said. "So what I want to do is to be completely agnostic, in terms of solutions."
Asked how Obama's new agnosticism squares with his previous opposition to tax increases for the middle class, Gibbs said Obama "is not a member of this commission."...
...But politicians are uncommonly superstitious about raising taxes after promising not to. Former President George H.W. Bush famously lost his campaign for a second term after breaking his "read my lips, no new taxes" pledge.
Obama has been no less emphatic, telling a joint session of Congress and the nation last year that "If your family earns less than $250,000 a year, you will not see your taxes increased a single dime. I repeat: not one single dime."
The statement echoed a frequent pledge from the campaign trail, where Obama vowed to resist a middle class tax increase: "Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes," he told a New Hampshire audience in 2008...
Thursday, February 11, 2010
Housing in the New Millennium: A Home Without Equity is Just a Rental with Debt
This report assesses the prospects of the U.S. housing/mortgage sector over the next several years. Based on our analysis, we believe there are elements in place for the housing sector to continue to experience growth well above GDP. However, we believe there are risks that can materially distort the growth prospects of the sector. Specifically, it appears that a large portion of the housing sector's growth in the 1990's came from the easing of the credit underwriting process. Such easing includes:
* The drastic reduction of minimum down payment levels from 20% to 0%
* A focused effort to target the "low income" borrower
* The reduction in private mortgage insurance requirements on high loan to value mortgages
* The increasing use of software to streamline the origination process and modify/recast delinquent loans in order to keep them classified as "current"
* Changes in the appraisal process which has led to widespread overappraisal/over-valuation problems
If these trends remain in place, it is likely that the home purchase boom of the past decade will continue unabated. Despite the increasingly more difficult economic environment, it may be possible for lenders to further ease credit standards and more fully exploit less penetrated markets. Recently targeted populations that have historically been denied homeownership opportunities have offered the mortgage industry novel hurdles to overcome. Industry participants in combination with eased regulatory standards and the support of the GSEs (Government Sponsored Enterprises) have overcome many of them.
If there is an economic disruption that causes a marked rise in unemployment, the negative impact on the housing market could be quite large. These impacts come in several forms. They include a reduction in the demand for homeownership, a decline in real estate prices and increased foreclosure expenses....
A Perfect Storm of Ignorance
You are familiar by now with the role of the Federal Reserve in stimulating the housing boom; the role of Fannie Mae and Freddie Mac in encouraging low-equity mortgages; and the role of the Community Reinvestment Act in mandating loans to "subprime" borrowers, meaning those who were poor credit risks. So you may think that the government caused the financial crisis. But you don't know the half of it. And neither does the government.
A full understanding of the crisis has to explain not just the housing and subprime bubbles, but why, when they popped, it should have had such disastrous worldwide effects on the financial system. The problem was that commercial banks had made a huge overinvestment in mortgage-backed bonds sold by investment banks such as Lehman Brothers.
Commercial banks are familiar to everyone with a checking or savings account. They accept our deposits, against which they issue commercial loans and mortgages. In 1933, the United States created the FDIC to insure commercial banks' depositors. The aim was to discourage bank runs by depositors who worried that if their bank had made too many risky loans, their accounts, too, might be at risk.
The question of whether deposit insurance was necessary is worth asking, and I will ask it later on. But for now, the key fact is that once deposit insurance took effect, the FDIC feared that it had created what economists call a "moral hazard": bankers, now insulated from bank runs, might be encouraged to make riskier loans than before. The moral-hazard theory took hold not only in the United States but in all of the countries in which deposit insurance was instituted. And both here and abroad, the regulators' solution to this (real or imagined) problem was to institute bank-capital regulations. According to an array of scholars from around the world — Viral Acharya, Juliusz Jablecki, Wladimir Kraus, Mateusz Machaj, and Matthew Richardson — these regulations helped turn an American housing crisis into the world's worst recession in 70 years....
Five Decades of Failure Are Enough
With trillion-dollar deficits as far as the eye can see, policymakers need to scour the federal budget for departments to cut and eliminate. They should start with ones that are not just wasteful, but actively damaging to the economy. Top of the list would be the $60 billion Department of Housing and Urban Development.
HUD's negative impact on the economy is far larger than its multibillion-dollar budget.
HUD's policies played a key role in causing the housing boom and bust and then the recession in its wake. Weak lending standards on HUD-insured mortgage loans helped fuel risky non-prime lending. HUD also put pressure on banks and the failed housing giants Fannie Mae and Freddie Mac to make risky loans to underqualified borrowers. Thanks to those policies, Fannie and Freddie went bankrupt and already have received $112 billion in taxpayer bailouts.
Steady increases in home-buying subsidies in recent decades were motivated by political attempts to curry favor with special interests such as the Realtor and homebuilder lobbies. Politicians justify the subsidies on their claimed civic virtues. But, as we've seen in the wake of the housing bubble's bursting, there's nothing virtuous about putting people into homes they can't afford.
Since the financial crash, the politics of housing subsidies seem to have become even worse. The housing lobby groups continue pushing to expand federal intervention in housing markets, and politicians keep increasing subsides through the Federal Housing Administration and the Government National Mortgage Association, which insure and guarantee more than $700 billion in mortgages and mortgage-backed securities.
HUD's FHA has expanded so much that it is facing the possibility of an expensive taxpayer bailout because of rising defaults on mortgages it insures. As for Ginnie Mae, its portfolio has exploded, and there are growing concerns it could be the next Fannie or Freddie....
Fannie and Freddie: Budget Busters
It's looking increasingly like Fannie Mae and Freddie Mac are going to cost the US government much more than AIG. In its latest long-term budget outlook released in late January, the CBO projected that the AIG bailout would ultimately cost the Treasury $9 billion dollars. Indeed, the entire private financial industry bailout is ultimately expected to cost less than $30 billion; of the $99 billion that the CBO expects we will ultimately lose on TARP, half of the loss comes not from helping the "banksters", but from the Obama administration's decision to bail out the automakers. A further $20 billion will be spent on the Home Affordable Mortgage Program, aka the administration's mortgage modification plan.
By contrast, the nationalization of the Government Sponsored Entities is expected to cost the Federal government $64 billion between 2011 and 2020, on top of the $110 billion we've already spent. Fannie and Freddie have long defended themselves on the grounds that their underwriting standards weren't nearly as bad as those in the private sector. But they've certainly been better at socializing their losses; firms that controlled maybe half of the mortgage market will end up costing the taxpayer four times as much as the other troubled financial institutions....
Spain shoots the messenger
JUST when Greece looked like taking the prize for conspiracy theories (see previous posts), members of the Spanish government have cast caution to the winds and declared their economy is the victim of a still vaster plot that goes beyond profiteering and a desire to destroy the euro (the charges levelled in Greece). No, according to José Luis Rodríguez Zapatero, the prime minister, and José Blanco, his transport minister, the conspiracy goes beyond financial speculators to take in opinion-writers from the foreign press, whose goal is to derail European attempts to regulate financial institutions and markets more tightly.
Mr Blanco told Cadena Ser radio that attacks on Spain were attacks on the euro, and were "rather dirty dealings" on the part of speculators, who:
"now that they see we are emerging from the crisis, do not want to see better regulation of their activities, [but] want to be free to carry on pursuing their own interests... None of what is happening, including editorials in some foreign media with their apocalyptic commentaries, is happening by chance, or innocently. It is the result of certain special interests."
Here is Mr Zapatero:
"There is an attack underway by speculators against the euro, against tougher financial regulation of the financial system and of the markets"....
Hansen colleague rejected IPCC AR4 ES as having “no scientific merit”, but what does IPCC do?
...Remember, this guy is mainstream, not a sceptic, and you may need to remind yourself of that fact several times as you read through his comment on the executive summary of the chapter:
There is no scientific merit to be found in the Executive Summary. The presentation sounds like something put together by Greenpeace activists and their legal department. The points being made are made arbitrarily with legal sounding caveats without having established any foundation or basis in fact. The Executive Summary seems to be a political statement that is only designed to annoy greenhouse skeptics. Wasn’t the IPCC Assessment Report intended to be a scientific document that would merit solid backing from the climate science community – instead of forcing many climate scientists into having to agree with greenhouse skeptic criticisms that this is indeed a report with a clear and obvious political agenda. Attribution can not happen until understanding has been clearly demonstrated. Once the facts of climate change have been established and understood, attribution will become self-evident to all. The Executive Summary as it stands is beyond redemption and should simply be deleted....
Inside the Climate Bunker
...But even as his credentials and honors stacked up -- from the government of France anointing him an "Officier de la legion d'honneur" to GQ India naming him 2009's "Global Indian of the Year" (FP even named him a "top global thinker" last year) -- Pachauri couldn't quite discipline his tongue. Or perhaps he didn't care what impression his verbal zingers left. In 2008, he told the Chicago Tribune: "I tell people I was born a Hindu who believes in reincarnation. It will take me the next six lives to neutralize my carbon footprint. There's no way I can do it in one lifetime."
But he attracted the most attention for barbs directed at his critics, calling those who've questioned IPCC reports "flat-earthers" -- "they are indulging in is skulduggery of the worst kind," he told the Financial Times -- and generally bristling at the prospect of unwanted scrutiny, without providing clear answers to valid questions about his stewardship. ("My conscience is clear," he announced to the New York Times this week.) But while Pachauri's larger-than-life persona and propensity for conducting himself as though beyond reproach catches attention, these characteristics don't in and of themselves defame the organization he heads -- as much as global-warming deniers are happy to seize upon any opportunity to poke holes in climate science in general.
There is, however, at least one item in the recent round of Pachauri-bashing that does the U.N. panel no credit: a glaring error in an IPCC report about the date by which Himalayan glaciers are likely to have disappeared entirely. The underlying technical report of the panel's 2007 climate assessment erroneously stated that by 2035 the glaciers would be gone entirely, when scientific consensus places the date much later (studies cited by the BBC project a date closer to 2350 -- more than 300 years later).
The 2035 date was an alarming, attention-grabbing finding -- and many journalists, including Stephan Faris last year in Foreign Policy, cited it as evidence that global warming is an urgent crisis. But, after the Indian government released its own report with conflicting glacier-melt data last fall, glacier scientists went back to the IPCC report and began to raise questions about the 2035 date. The chatter among experts was picked up in Science magazine last year, before spilling into the mainstream media, which has already been primed by the "Climategate" saga and a disappointing outcome in Copenhagen to turn climate-science disputes into heightened political narratives. (The initial error may have come because the IPCC cited a decade-old interview in The New Scientist which quoted a scientist mentioning the date 2035, as opposed to sourcing peer-reviewed scientific literature.)
With all the attention, one might think the IPCC would by now have a precise and consistent explanation -- or point to an ongoing investigation -- for how this error crept in. Alas. ...
..."That statement [about Himalayan glacier melting by 2035] is in the literature that the report cites, but it's not a statement consistent with other scientific information available ... It should not have made it into final report."
In other words, an outlier source was picked up by the chapter's authors. But what of the vaunted review process? With all the input and reactions from some so many scientific experts, did no one flag that item as questionable?
"No ... In principle, [our process] should have turned over every rock and leaf in the forest."
Interestingly, the error did come to light last fall, nearly two years after the report's initial publication, when competing glacier-melt data was released by India's ministry of environment and forests. That discrepancy quickly focused the attention of international glaciologists on both sets of data, and questions about the particulars of IPCC glacier data soon surfaced. (This, of course, raises the question of whether the IPCC's process for soliciting peer comments is targeting the right people.) ...
Forced Unionization
Michelle Berry runs a day-care business out of her home in Flint, MI. She thought that she owned her own business, but Berry's been told she is now a government employee and union member. It's not voluntary. Suddenly, Berry and 40,000 other Michigan private day-care providers have learned that union dues are being taken out of the child-care subsidies the state sends them. The "union" is a creation of AFSCME, the government workers union, and the United Auto Workers.
This racket means big money to AFSCME, which runs the union, writes the Mackinac Center for Public Policy, a free-market think tank....
...Patrick Wright, a lawyer for the Macknac Center, says the union was forced on the women after a certification election conducted by mail in which only 6,000 day-care providers out of 40,000 voted....
Rep. Murtha died after doctors accidentally cut intestines: report
Veteran congressman John Murtha (D-Penn) died from an infection after doctors accidentally cut into his intestine during routine surgery, Fox News confirmed on Monday.
The 77-year-old died at 1:18 p.m. on Monday with his family by his bedside at Virginia Hospital Center in Arlington, Virginia.
He was first hospitalized with gallbladder problems in December and had scheduled surgery to remove his gallbladder on January 28 at the National Naval Hospital in Bethesda, Md.
He went home, but was hospitalized again two days later when complications developed, ending up in intensive care at Virginia Hospital.
According to a source close to Murtha - confirming a report in Politico - doctors inadvertently cut his intestine during the surgery, causing an infection....
No Exit in Sight for U.S. As Fannie, Freddie Flail
MCLEAN, Va.—When Charles E. Haldeman Jr. became Freddie Mac's chief executive officer in August, the ailing housing-finance giant had already consumed $51 billion of government money to stay afloat. It's likely to need even more.
Freddie's federal overseers nevertheless have instructed Mr. Haldeman to focus on something that isn't likely to make the bleak balance sheet look any better: carrying out the Obama administration plan to allow defaulted borrowers to hang onto their homes....
...On Dec. 24, Treasury said there would be no limit to the taxpayer money it was willing to deploy over the next three years to keep the two companies afloat, doing away with the previous limit of $200 billion per company. So far, the government has handed the two companies a total of about $111 billion.
The government is willing to tolerate such open-ended exposure for two reasons. First, it sees the companies as essential cogs in the fragile housing market. Fannie and Freddie buy mortgages originated by others, holding some as investments and repackaging others for sale to investors as securities. Together with the Federal Housing Administration, they fund nine in 10 American mortgages. Worries about potential insolvency would cripple their ability to fund home loans, which would hamstring the market.
Second, the companies are a convenient tool for the administration to use in its campaign to clean up the housing mess.
"We're making decisions on [loan modifications] and other issues, without being guided solely by profitability, that no purely private bank ever could," Mr. Haldeman said in late January in a speech to the Detroit Economic Club....
Fannie, Freddie and You
...So whatever bad incentives the implicit federal guarantee creates have been offset by the fact that Fannie and Freddie were and are tightly regulated with regard to the risks they can take. You could say that the Fannie-Freddie experience shows that regulation works....
Why the Media Ignored a Scandal
...Maybe they admired Edwards' cancer-stricken wife, Elizabeth. Maybe they saw no good in exposing Edwards' sordid acts. Maybe they looked down on the National Enquirer. Or maybe they were just biased. "In the case of John Edwards," said Washington Post media reporter Howard Kurtz, "even though it was clearly out there -- everybody in America knew about this well before CNN and the New York Times and the Washington Post got into this game -- there was still a great reluctance."
Of course, in the end the story came out anyway -- but only after the sheer weight of Edwards' corruption made the facts impossible to ignore, even for sympathetic journalists.
Well, Naturally We're Liberal
...Rather, academe leans left because it takes a proportionally significant number of liberal-arts professors to hone the basic intellectual skills that we expect of college graduates: things like interpretive reading, cogent writing, critical thinking, and a sense of a shared historical tradition and the major issues currently confronting our society and world. If those abilities and insights aren't addressed by the liberal arts, then they certainly won't be in Introduction to Finance, Calculus II, or Biochemistry.
So the real question isn't why academe is so liberal, but rather, Why are instructors in the liberal arts so, well, liberal? I think there are three basic reasons, all of them what common sense might predict, all rather obvious, and none in need of fancy research involving such things as "occupational role modeling" and "vocational engendering."
First, as the Times article notes, virtually all instructors in the liberal arts are aware of the disparity between their level of education and their financial situation. There's no secret that the liberal arts are the lowest-compensated sector of academe, despite substantially more advanced study than business instructors and the equivalent of those in the natural sciences. Just as important, there are few opportunities for liberal-arts scholars to supplement their incomes by serving on government and corporate boards, filing patents and licenses, and, of course, obtaining generous research grants. You don't have to be a militant Marxist to recognize that people's political persuasions will align pretty well with their economic interests. It's real simple: Those who have less and want more will tend to support social changes that promise to accomplish that; those who are already economic winners will want to conserve their status.
I don't mean to suggest that issues of conscience beyond the confines of crass self-interest don't play an important role for many in the liberal arts, but their basic economic condition virtually assures that those in the liberal arts will be natural-born liberals. Who, after all, would want to preserve a situation in which others who are equivalently educated and experienced—doctors, engineers, lawyers, scientists, colleagues in other areas, and, yes, chief executives—receive vastly more compensation, sometimes by a factor of 10 or 100?...
...A second reason that liberal-arts professors tend to be politically liberal is that they have very likely studied large-scale historical processes and complex cultural dynamics. Conservatives, who tend to evoke the need to preserve traditional connections with the past, have nonetheless contributed least to any detailed or thoughtful study of history. Most (although, of course, by no means all) prominent historians of politics, literature, the arts, religion, and even economics have tended, as conservatives claim, to be liberally biased. Fair enough. But if you actually take the time to look at history and culture, certain conclusions about human nature, society, and economics tend to force themselves on you. History has a trajectory, driven in large part by the desires of underprivileged or oppressed groups to attain parity with the privileged or the oppressor....
...As President Obama recently put it, any open-minded review of history (and perhaps especially American history) teaches at least one clear lesson: There is a "right side of history," Obama said—the side of those who would overcome prejudice, question unearned privilege, and resist oppression in favor of a more just condition.
If you don't study history, whether because it doesn't pad quarterly profits, isn't sufficiently scientific or objective, or threatens your own economic status, then you won't know any of that. ...
...It is because we liberal-arts professors have a personal stake in our relative economic status; we have carefully studied the actual dynamics of history and culture; and we have trained ourselves to think in complex, nuanced, and productive ways about the human condition that so many of us are liberals. Most of us agree with President Obama that there is a "right side of history," and we feel morally bound to be on it. Although we'd like to see some parity in compensation with our colleagues, we chose our fields with full awareness of the tradeoff. Part of our compensation lies in knowing that our studies can complement our standing on the "right side," rather than having our basic commitments dictated to us by the limitations of other, narrower professions....
Tuesday, February 09, 2010
Labour's 'secret plan' to lure migrants
The release of a previously unseen document suggested that Labour’s migration policy over the past decade had been aimed not just at meeting the country’s economic needs, but also the Government’s “social objectives”.
The paper said migration would “enhance economic growth” and made clear that trying to halt or reverse it could be “economically damaging”. But it also stated that immigration had general “benefits” and that a new policy framework was needed to “maximise” the contribution of migration to the Government’s wider social aims.
The Government has always denied that social engineering played a part in its migration policy.
However, the paper, which was written in 2000 at a time when immigration began to increase dramatically, said controls were contrary to its policy objectives and could lead to “social exclusion”.
Last night, the Conservatives demanded an independent inquiry into the issue. It was alleged that the document showed that Labour had overseen a deliberate open-door policy on immigration to boost multi-culturalism.
Voting trends indicate that migrants and their descendants are much more likely to vote Labour.
The existence of the draft policy paper, which was drawn up by a Cabinet Office think tank and a Home Office research unit, was disclosed last year by Andrew Neather, a former adviser to Tony Blair, Jack Straw and David Blunkett.
He alleged at the time that the sharp increase in immigration over the past 10 years was partly due to a “driving political purpose: that mass immigration was the way that the Government was going to make the UK truly multi-cultural”. ...
Pastor charged with sexually assaulting child
RIVER ROUGE — A reverend from a Detroit church was charged this morning with repeatedly molesting an underage boy.
Russell Walter Schaller was arraigned on six counts of third-degree criminal sexual conduct. Twenty-sixth District Judge Raymond Charron ordered the 35-year-old River Rouge man held in the Wayne County Jail on a $100,000 cash bond.
Schaller is the senior pastor at Greater St Johns Missionary Baptist Church in Detroit. A message seeking comment from church officials was not immediately returned....
Retired Pastor Arrested for Molestation
Gibson. PA (WBNG Binghamton) Another allegation against a retired priest from Susquehanna county.
This time, he's accused of molesting a minor at his home in Gibson nearly 20 years ago.
Father Ralph Elwood Johnson was arrested Friday at State Police Barracks in Gibson.
The 82-year old is charged with 15 counts each of Involuntary Deviate Sexual intercourse, Indecent Assault, and Corruption of a Minor.
But this is not the first accusation of molestation.
Over the years, 2 other victims have come forward claiming they too were abused by the Episcopal Priest. ...
B.C. church still paying youth pastor convicted of pedophilia
VANCOUVER -- A B.C. youth pastor convicted of pedophilia in Mexico is still being paid by his parish.
Brad Firth, the former supervisor of youth activities at St. David's Anglican Church in Tsawwassen, has been receiving "compassionate pay" since being arrested on the Baja peninsula, about an hour south of Tijuana, in 2004.
"He is suspended with reduced pay," said Rector Rev. Paul Woehrle. "We are giving something to support him and his son."
Woehrle said the money -- $1,000 a month -- goes toward buying additional food and water and for physical, mental and emotional counselling for Firth and his adopted Haitian son.
The parish is also covering his legal fees.
Asked about how the parish justifies paying a convicted pedophile, Woehrle said: "We had a plan that says until the appeal process is exhausted we would continue this financial support....
Monday, February 08, 2010
Public-sector unions bleed taxpayers
...States such as New York, New Jersey and California, where public-sector unions are strong, now face enormous budget deficits and pension liabilities. In such states, the public sector has become a parasite sucking the life out of the private-sector economy. Not surprisingly, Americans have been steadily migrating out of such states and into states like Texas, where public-sector unions are weak and taxes are much lower....
...One-third of last year's $787 billion stimulus package was aid to state and local governments -- an obvious attempt to bolster public-sector unions. And a successful one: While the private sector has lost 7 million jobs, the number of public-sector jobs has risen. The number of federal government jobs has been increasing by 10,000 a month, and the percentage of federal employees earning over $100,000 has jumped to 19 percent during the recession.
Obama and his party are acting in collusion with unions that contributed something like $400,000,000 to Democrats in the 2008 campaign cycle. Public-sector unionism tends to be a self-perpetuating machine that extracts money from taxpayers and then puts it on a conveyor belt to the Democratic party....
Sunday, February 07, 2010
The global warming guerrillas
Journalists are wont to moan that the slow death of newspapers will mean a disastrous loss of investigative reporting. The web is all very well, they say, but who will pay for the tenacious sniffing newshounds to flush out the real story? ‘Climategate’ proves the opposite to be true. It was amateur bloggers who scented the exaggerations, distortions and corruptions in the climate establishment; whereas newspaper reporters, even after the scandal broke, played poodle to their sources.
It was not Private Eye, or the BBC or the News of the World, but a retired electrical engineer in Northampton, David Holland, whose freedom-of-information requests caused the Climategate scientists to break the law, according to the Information Commissioner. By contrast, it has so far attracted little attention that the leaked emails of Climategate include messages from reporters obsequiously seeking ammunition against the sceptics. Other emails have shown reporters meekly changing headlines to suit green activists, or being threatened with ostracism for even reporting the existence of a sceptical angle: ‘Your reportage is very worrisome to most climate scientists,’ one normally alarmist reporter was told last year when he slipped briefly off message. ‘I sense that you are about to experience the “Big Cutoff” from those of us who believe we can no longer trust you, me included.’...
The Great IPCC Meltdown Continues
...There is however one teensy-weensy little problem. As Professor Chris Field, the lead author of the IPCC’s climate impact team has now told reporters that he can find “no evidence” to support the claim in the IPCC’s 2007 report.
There’s more. When the glacier story broke, IPCC apologists returned over and over again to a saving grace. The bogus glacier report appeared in the body of the IPCC document, but not in the much more carefully vetted Synthesis Report, in which the IPCC’s senior leadership made its specific recommendations to world leaders. So it didn’t matter that much, the apologists told us, and we can still trust the rigorously checked and reviewed Synthesis Report.
But that’s where the African rain crisis prediction is found — in the supposedly sacrosanct Synthesis Report.
So: the Synthesis Report contains a major scare prediction — 50% shortfall in North African food production just ten years from now — and there is no serious, peer-reviewed evidence that the prediction is true....
Origins of an American Kleptocracy
...Just consider Fannie Mae's torrid leadership history: James A. Johnson (Fannie CEO 1991-1998, Democratic luminary, Obama fundraiser, John Kerry vice presidential selection committee chair, $21 million in Fannie compensation). Franklin Raines (Fannie CEO 1999-2004, Clinton's Director Office of Management and Budget, $90 million+ in Fannie compensation later the subject of a civil suit) Daniel Mudd (Fannie CEO 2005-2008, $80 million in Fannie compensation) Herbert M. Allison (Fannie CEO 2008-2009, National Finance Chair, John McCain Campaign). Freddie's record is no better....
New errors in IPCC climate change report
The Intergovernmental Panel on Climate Change’s (IPCC) report is supposed to be the world’s most authoritative scientific account of the scale of global warming.
But this paper has discovered a series of new flaws in it including:
* The publication of inaccurate data on the potential of wave power to produce electricity around the world, which was wrongly attributed to the website of a commercial wave-energy company.
* Claims based on information in press releases and newsletters.
* New examples of statements based on student dissertations, two of which were unpublished.
* More claims which were based on reports produced by environmental pressure groups.
They are the latest in a series of damaging revelations about the IPCC’s most recent report, published in 2007.
Last month, the panel was forced to issue a humiliating retraction after it emerged statements about the melting of Himalayan glaciers were inaccurate.
Last weekend, this paper revealed that the panel had based claims about disappearing mountain ice on anecdotal evidence in a student’s dissertation and an article in a mountaineering magazine.
And on Friday, it emerged that the IPCC’s panel had wrongly reported that more than half of the Netherlands was below sea level because it had failed to check information supplied by a Dutch government agency. ...
Pastor convicted of sexually abusing boys
GOSHEN – The former pastor of the Newburgh Church of God was convicted by an Orange County Court jury late Friday on all counts of an indictment that charged him of abusing three young boys over a two year period.
The jury deliberated for 2½ hours before finding Humberto Cruz, 39, guilty of all the charges against him, the most serious of which was course of sexual conduct against a child in the first degree, said District Attorney Frank Phillips.
Those charges stem from contact with two boys who were under the age of 13 during the time of the abuse from July 2004 through July 2006, said Phillips....
Former minister gets 4 life sentences for child sex crimes
The local minister arrested in October for sexually abusing and sodomizing four boys pleaded guilty to the allegations Friday and will now spend the rest of his life in prison.
Ralph Lee Aaron, 54, was the pastor of Grace Christian Fellowship in Andalusia before being terminated from the position shortly after his arrest.
District Attorney Greg Gambril said Aaron appeared “remorseful” as he pleaded before Judge Frank “Trippy” McGuire to one count of first-degree sodomy and three counts of production of obscene matter involving a child under 17. For each of those counts, Aaron received one life sentence, and the time will run consecutively.
“Which means that unless the law changes, Ralph Aaron will never get out of prison,” Gambril said. “Because of his misdeeds, he will never be eligible for parole and he will die in prison. This deal is essentially one life sentence for each of his victims.”...
Saturday, February 06, 2010
The great global warming collapse
In 2007, the most comprehensive report to date on global warming, issued by the respected United Nations Intergovernmental Panel on Climate Change, made a shocking claim: The Himalayan glaciers could melt away as soon as 2035.
These glaciers provide the headwaters for Asia's nine largest rivers and lifelines for the more than one billion people who live downstream. Melting ice and snow would create mass flooding, followed by mass drought. The glacier story was reported around the world. Last December, a spokesman for the World Wildlife Fund, an environmental pressure group, warned, “The deal reached at Copenhagen will have huge ramifications for the lives of hundreds of millions of people who are already highly vulnerable due to widespread poverty.” To dramatize their country's plight, Nepal's top politicians strapped on oxygen tanks and held a cabinet meeting on Mount Everest.
But the claim was rubbish, and the world's top glaciologists knew it....
...Despite widespread efforts to play down the Climategate e-mails, they were very damaging. An investigation by the British newspaper The Guardian – among the most aggressive advocates for action on climate change – has found that a series of measurements from Chinese weather stations were seriously flawed, and that documents relating to them could not be produced.
Meantime, the IPCC – the body widely regarded, until now, as the ultimate authority on climate science – is looking worse and worse. After it was forced to retract its claim about melting glaciers, Mr. Pachauri dismissed the error as a one-off. But other IPCC claims have turned out to be just as groundless.
For example, it warned that large tracts of the Amazon rain forest might be wiped out by global warming because they are extremely susceptible to even modest decreases in rainfall. The sole source for that claim, reports The Sunday Times of London, was a magazine article written by a pair of climate activists, one of whom worked for the WWF. One scientist contacted by the Times, a specialist in tropical forest ecology, called the article “a mess.”
Worse still, the Times has discovered that Mr. Pachauri's own Energy and Resources Unit, based in New Delhi, has collected millions in grants to study the effects of glacial melting – all on the strength of that bogus glacier claim, which happens to have been endorsed by the same scientist who now runs the unit that got the money. Even so, the IPCC chief is hanging tough. He insists the attacks on him are being orchestrated by companies facing lower profits....
Revised, 8/21/2010
The Cause of the 2008 Mortgage Crash
According to two Minneapolis Federal Reserve economists:
The current crisis is rooted in the poor performance of mortgage loans made between 2005 and 2007. If the CRA did indeed spur the recent expansion of the subprime mortgage market and subsequent turmoil, it would be reasonable to assume that some change in the enforcement regime in 2004 or 2005 triggered a relaxation of underwriting standards by CRA-covered lenders for loans originated in the past few years. However, the CRA rules and enforcement process have not changed substantively since 1995.
Three things. The first is that the same Minneapolis Fed that published the above contradicts the claim that nothing important has changed substantively since 1995.
The second change the Minneapolis Federal Reserve left out is this change in 2005 involving the Community Reinvestment Act:
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.
Emphasis above mine. Differences in CRA performance between large and small banks is discussed below.
You can see the buildup of cumulative CRA lending in the chart below. The source of the data is the National Community Reinvestment Coalition (NCRC).
The third issue this overlooks is SEC rule changes in 2004. According to The World Bank (the link is a PDF):
The SEC rule change in 2004 that changed how the SEC figured the net capital requirements is now seen as a significant mistake. Some journalists have mistakenly called this deregulation. What these journalists fail to note is that this rule change was the antithesis of deregulation; rather it was the imposition of internationally coordinated regulatory standards—rules known as the “Basel Rules.” The Basel Committee rules were the consequence of years of work by the central bankers of the world and are based on the belief that a common set of global banking standards would result in more efficient use of capital and a more stable global financial system. The Basel rules call for banks to have capital reserves of eight percent on a risk weighted basis. Commercial loans had a risk weight of 100, so had to be backed by 8 percent capital in reserve. But AAA rated securities (like the securitized mortgage pools), had a substantially lower risk weight of 20 percent, so banks only had to have 1.6 percent capital in reserve to back investments in AAA rated securities....The SEC rule change was one of the regulatory failures that contributed to the financial crisis. But rather than a deregulation problem, this is a cautionary tale against agreement to internationally coordinated regulatory standards. If they substitute for prudential regulation, they could be a lot worse.
Another SEC rule change in 2004 replaced explict rules with SEC micromanaging. While the stated goal was to check the activity of investment banks in detail, the end result (given that the government did not know any more about what was going on than the bankers did) was that the government simply used the banker's models. Investments in mortgage backed securities were one of the reasons for the change:
But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency’s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.
On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.
They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.
Arnold Kling (who was an economist on the staff of the Federal Reserve Board in the 1980s and an economist with Freddie Mac) explains further:
To foster homeownership, policymakers promoted mortgage lending that was subsidized and lenient. Requirements for down payments were relaxed, as were requirements for borrowers to prove they had the ability to repay their loans....
Washington also was responsible for creating and supporting the process of mortgage securitization. At the time, this was viewed as a way to lower the cost of mortgage credit and stabilize the mortgage lending industry.
Finally, it was bank capital requirements designed by regulators that induced bankers to weave the crazy quilt of collateralized debt obligations, credit default swaps on mortgage securities and off-balance-sheet financing....
The problem here is that large institutions tended to perform much more poorly under the CRA than smaller ones (and large programs performed worse than small ones). This is made even more serious by how much a factor the large banks were; 94% of the $6 trillion in CRA commitments made between 1992 and 2008 "were made by banks and thrifts that were or ended up being owned by just four banks: Wells Fargo, JP Morgan Chase, Citibank, and Bank of America". These four banks, in addition to Fannie Mae and Freddie Mac, are responsible for "an estimated 70% or more of outstanding CRA loans". More on Bank of America's CRA performance below. Remember this the next time someone tries to defend government "affordable housing" initiatives by pointing to small programs from small lenders with good statistics, usually studied during the housing boom when rising prices prevented foreclosures (people sold homes they couldn't afford for a profit instead of letting the banks take them back). No statistic from any small program or small lender from before the crash proves these programs innocent of anything.
In the same study, Minneapolis Fed also claimed:
In total, of all the higher-priced loans, only 6 percent were extended by CRA-regulated lenders (and their affiliates) to either lower-income borrowers or neighborhoods in the lenders' CRA assessment areas, which are the local geographies that are the primary focus for CRA evaluation purposes. The small share of subprime lending in 2005 and 2006 that can be linked to the CRA suggests it is very unlikely the CRA could have played a substantial role in the subprime crisis.
This is consistent with Bank of America claim that in 3Q 2008 its CRA loans constituted 7% of its owned residential-mortgage portfolio. Unfortunately for the Fed (and for BoA), that 7% represented 29 percent of that portfolio's net losses (the numbers for first quarter 2009 were about 7% of the residential book, but about 24% of the losses). However, this 6 percent statistic leaves something out:
...it doesn't include subprime loans — or securities — bought by CRA-covered banks. Mortgages originated by independent mortgage companies can be bought by banks to get CRA credit. Nor does the study include the billions in public commitments big banks made to lend to low-income and minority households to buy off Acorn and other CRA lobbyists.
Large banks weren't the only institutions buying CRA loans (and securities based on those loans). Approximately 50% of CRA originations since the mid-1990s were acquired by Fannie Mae and Freddie (the GSEs) to help them meet HUD-mandated affordable housing (AH) goals. At the same time as CRA enforcement was hitting large institutions hard, Fannie and Freddie were ramping up:
It appears that this aggressive expansion of Fannie Mae and Freddie Mac into subprime lending was a political strategy adopted by their leaders in response to heightened congressional scrutiny and criticism in the wake of the accounting scandals at the agencies that emerged during 2003 to 2004 and which threatened to lead to a revocation of their favored status as government-sponsored enterprises. Fannie and Freddie aggressively restyled their lending operations as the promotion of affordable housing and actively encouraged retail lenders to generate mortgages with those characteristics. As a result, not only did the number of subprime loans explode in the 2005 to 2007 period, but a disproportionate number of these loans were made to the riskiest borrowers or had extremely high risk characteristics, such as negative amortization, interest-only, high-LTV, or very low FICO scores.
Peter J. Wallison, a commissioner of the Financial Crisis Commission, continues:
...The 1992 affordable housing goals required that, of all mortgages Fannie and Freddie bought in any year, at least 30 percent had to be loans made to borrowers who were at or below the median income in the places where they lived. Over succeeding years, the Department of Housing and Urban Development (HUD) increased this requirement, first to 42 percent in 1995, to 50 percent in 2000, and finally to 55 percent in 2007. It is important to note, accordingly, that this occurred during both Democratic and Republican administrations....
...[According to] Fannie's 2006 10-K report makes clear, is untrue:
You can see this GSE activity in this chart from Mark A. Calabria of Cato.org. According to Calabria, "during the bubble years, Fannie and Freddie were the largest single source of liquidity for the subprime market. And the chart doesn’t even take into account all the subprime whole loans being purchased by the GSEs." The vertical axis values are USD billions (bars) and market share (line).
In response to the Minneapolis Federal Reserve's defense of the CRA loans themselves, the statistics say otherwise:
...the epicenters of the mortgage crisis are inner-city urban areas--precisely those areas where the CRA was most applicable. As the Boston Federal Reserve put it in a massive 2008 study, "In the current housing crisis foreclosures are highly concentrated in [urban] minority neighborhoods." The study found that borrowers in these areas were seven times more likely to be foreclosed on than the general population. Analysis by the Pew Research Center and another by The New York Times found that mortgage holders in these areas had foreclosure rates four times higher than the national average.
One additional question. If Fannie and Freddie were lying about their profits from this activity, and that 'profitability' encouraged private entities to get into the business, are Fannie and Freddie absolved of any guilt concerning the results? Also, as the chart from Cato shows, the GSEs made MBS purchases from private entities. Private entities issuing an increasing amount of those securities doesn't get either GSE off the hook for them or their consequences, particularly when agents of Fannie claimed credit for that market when doing so suited their purposes.
The result?
The data shows that the principal buyers [of almost 25 million subprime and other nonprime mortgages—almost half of all U.S. mortgages] were insured banks, government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, and the FHA—all government agencies or private companies forced to comply with government mandates about mortgage lending. When Fannie and Freddie were finally taken over by the government in 2008, more than 10 million subprime and other weak loans were either on their books or were in mortgage-backed securities they had guaranteed. An additional 4.5 million were guaranteed by the FHA and sold through Ginnie Mae before 2008, and a further 2.5 million loans were made under the rubric of the Community Reinvestment Act (CRA), which required insured banks to provide mortgage credit to home buyers who were at or below 80% of median income. Thus, almost two-thirds of all the bad mortgages in our financial system, many of which are now defaulting at unprecedented rates, were bought by government agencies or required by government regulations.
According to Michael Cembalest, the Chief Investment Officer of JP Morgan Private Bank, "What emerges from new research is something quite different: government agencies now look to have guaranteed, originated or underwritten 60% of all “non-traditional” mortgages, which totaled $4.6 trillion in June 2008. What’s more, this research asserts that housing policies instituted in the early 1990s were explicitly designed to require US Agencies to make much riskier loans, with the ultimate goal of pushing private sector banks to adopt the same standards."
CRA push + GSE pull + regulation changes = mortgage crisis.
For more information, check out The Community Reinvestment Act, Evaluated
The Cause of the 2008 Mortgage Crash
According to two Minneapolis Federal Reserve economists:
The current crisis is rooted in the poor performance of mortgage loans made between 2005 and 2007. If the CRA did indeed spur the recent expansion of the subprime mortgage market and subsequent turmoil, it would be reasonable to assume that some change in the enforcement regime in 2004 or 2005 triggered a relaxation of underwriting standards by CRA-covered lenders for loans originated in the past few years. However, the CRA rules and enforcement process have not changed substantively since 1995.
Three things. The first is that the same Minneapolis Fed that published the above contradicts the claim that nothing important has changed substantively since 1995.
The second change the Minneapolis Federal Reserve left out is this change in 2005 involving the Community Reinvestment Act:
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.
Emphasis above mine. Differences in CRA performance between large and small banks is discussed below.
You can see the buildup of cumulative CRA lending in the chart below. The source of the data is the National Community Reinvestment Coalition (NCRC).
The third issue this overlooks is SEC rule changes in 2004. According to The World Bank (the link is a PDF):
The SEC rule change in 2004 that changed how the SEC figured the net capital requirements is now seen as a significant mistake. Some journalists have mistakenly called this deregulation. What these journalists fail to note is that this rule change was the antithesis of deregulation; rather it was the imposition of internationally coordinated regulatory standards—rules known as the “Basel Rules.” The Basel Committee rules were the consequence of years of work by the central bankers of the world and are based on the belief that a common set of global banking standards would result in more efficient use of capital and a more stable global financial system. The Basel rules call for banks to have capital reserves of eight percent on a risk weighted basis. Commercial loans had a risk weight of 100, so had to be backed by 8 percent capital in reserve. But AAA rated securities (like the securitized mortgage pools), had a substantially lower risk weight of 20 percent, so banks only had to have 1.6 percent capital in reserve to back investments in AAA rated securities....The SEC rule change was one of the regulatory failures that contributed to the financial crisis. But rather than a deregulation problem, this is a cautionary tale against agreement to internationally coordinated regulatory standards. If they substitute for prudential regulation, they could be a lot worse.
Another SEC rule change in 2004 replaced explict rules with SEC micromanaging. While the stated goal was to check the activity of investment banks in detail, the end result (given that the government did not know any more about what was going on than the bankers did) was that the government simply used the banker's models. Investments in mortgage backed securities were one of the reasons for the change:
But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency’s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.
On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.
They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.
Arnold Kling (who was an economist on the staff of the Federal Reserve Board in the 1980s and an economist with Freddie Mac) explains further:
To foster homeownership, policymakers promoted mortgage lending that was subsidized and lenient. Requirements for down payments were relaxed, as were requirements for borrowers to prove they had the ability to repay their loans....
Washington also was responsible for creating and supporting the process of mortgage securitization. At the time, this was viewed as a way to lower the cost of mortgage credit and stabilize the mortgage lending industry.
Finally, it was bank capital requirements designed by regulators that induced bankers to weave the crazy quilt of collateralized debt obligations, credit default swaps on mortgage securities and off-balance-sheet financing....
The problem here is that large institutions tended to perform much more poorly under the CRA than smaller ones (and large programs performed worse than small ones). This is made even more serious by how much a factor the large banks were; 94% of the $6 trillion in CRA commitments made between 1992 and 2008 "were made by banks and thrifts that were or ended up being owned by just four banks: Wells Fargo, JP Morgan Chase, Citibank, and Bank of America". These four banks, in addition to Fannie Mae and Freddie Mac, are responsible for "an estimated 70% or more of outstanding CRA loans". More on Bank of America's CRA performance below. Remember this the next time someone tries to defend government "affordable housing" initiatives by pointing to small programs from small lenders with good statistics, usually studied during the housing boom when rising prices prevented foreclosures (people sold homes they couldn't afford for a profit instead of letting the banks take them back). No statistic from any small program or small lender from before the crash proves these programs innocent of anything.
In the same study, Minneapolis Fed also claimed:
In total, of all the higher-priced loans, only 6 percent were extended by CRA-regulated lenders (and their affiliates) to either lower-income borrowers or neighborhoods in the lenders' CRA assessment areas, which are the local geographies that are the primary focus for CRA evaluation purposes. The small share of subprime lending in 2005 and 2006 that can be linked to the CRA suggests it is very unlikely the CRA could have played a substantial role in the subprime crisis.
This is consistent with Bank of America claim that in 3Q 2008 its CRA loans constituted 7% of its owned residential-mortgage portfolio. Unfortunately for the Fed (and for BoA), that 7% represented 29 percent of that portfolio's net losses (the numbers for first quarter 2009 were about 7% of the residential book, but about 24% of the losses). However, this 6 percent statistic leaves something out:
...it doesn't include subprime loans — or securities — bought by CRA-covered banks. Mortgages originated by independent mortgage companies can be bought by banks to get CRA credit. Nor does the study include the billions in public commitments big banks made to lend to low-income and minority households to buy off Acorn and other CRA lobbyists.
Large banks weren't the only institutions buying CRA loans (and securities based on those loans). Approximately 50% of CRA originations since the mid-1990s were acquired by Fannie Mae and Freddie (the GSEs) to help them meet HUD-mandated affordable housing (AH) goals. At the same time as CRA enforcement was hitting large institutions hard, Fannie and Freddie were ramping up:
It appears that this aggressive expansion of Fannie Mae and Freddie Mac into subprime lending was a political strategy adopted by their leaders in response to heightened congressional scrutiny and criticism in the wake of the accounting scandals at the agencies that emerged during 2003 to 2004 and which threatened to lead to a revocation of their favored status as government-sponsored enterprises. Fannie and Freddie aggressively restyled their lending operations as the promotion of affordable housing and actively encouraged retail lenders to generate mortgages with those characteristics. As a result, not only did the number of subprime loans explode in the 2005 to 2007 period, but a disproportionate number of these loans were made to the riskiest borrowers or had extremely high risk characteristics, such as negative amortization, interest-only, high-LTV, or very low FICO scores.
Peter J. Wallison, a commissioner of the Financial Crisis Commission, continues:
...The 1992 affordable housing goals required that, of all mortgages Fannie and Freddie bought in any year, at least 30 percent had to be loans made to borrowers who were at or below the median income in the places where they lived. Over succeeding years, the Department of Housing and Urban Development (HUD) increased this requirement, first to 42 percent in 1995, to 50 percent in 2000, and finally to 55 percent in 2007. It is important to note, accordingly, that this occurred during both Democratic and Republican administrations....
...[According to] Fannie's 2006 10-K report makes clear, is untrue:
[W]e have made, and continue to make, significant adjustments to our mortgage loan sourcing and purchase strategies in an effort to meet HUD's increased housing goals and new subgoals. These strategies include entering into some purchase and securitization transactions with lower expected economic returns than our typical transactions. We have also relaxed some of our underwriting criteria to obtain goals-qualifying mortgage loans and increased our investments in higher-risk mortgage loan products that are more likely to serve the borrowers targeted by HUD's goals and subgoals, which could increase our credit losses....
You can see this GSE activity in this chart from Mark A. Calabria of Cato.org. According to Calabria, "during the bubble years, Fannie and Freddie were the largest single source of liquidity for the subprime market. And the chart doesn’t even take into account all the subprime whole loans being purchased by the GSEs." The vertical axis values are USD billions (bars) and market share (line).
In response to the Minneapolis Federal Reserve's defense of the CRA loans themselves, the statistics say otherwise:
...the epicenters of the mortgage crisis are inner-city urban areas--precisely those areas where the CRA was most applicable. As the Boston Federal Reserve put it in a massive 2008 study, "In the current housing crisis foreclosures are highly concentrated in [urban] minority neighborhoods." The study found that borrowers in these areas were seven times more likely to be foreclosed on than the general population. Analysis by the Pew Research Center and another by The New York Times found that mortgage holders in these areas had foreclosure rates four times higher than the national average.
One additional question. If Fannie and Freddie were lying about their profits from this activity, and that 'profitability' encouraged private entities to get into the business, are Fannie and Freddie absolved of any guilt concerning the results? Also, as the chart from Cato shows, the GSEs made MBS purchases from private entities. Private entities issuing an increasing amount of those securities doesn't get either GSE off the hook for them or their consequences, particularly when agents of Fannie claimed credit for that market when doing so suited their purposes.
The result?
The data shows that the principal buyers [of almost 25 million subprime and other nonprime mortgages—almost half of all U.S. mortgages] were insured banks, government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, and the FHA—all government agencies or private companies forced to comply with government mandates about mortgage lending. When Fannie and Freddie were finally taken over by the government in 2008, more than 10 million subprime and other weak loans were either on their books or were in mortgage-backed securities they had guaranteed. An additional 4.5 million were guaranteed by the FHA and sold through Ginnie Mae before 2008, and a further 2.5 million loans were made under the rubric of the Community Reinvestment Act (CRA), which required insured banks to provide mortgage credit to home buyers who were at or below 80% of median income. Thus, almost two-thirds of all the bad mortgages in our financial system, many of which are now defaulting at unprecedented rates, were bought by government agencies or required by government regulations.
According to Michael Cembalest, the Chief Investment Officer of JP Morgan Private Bank, "What emerges from new research is something quite different: government agencies now look to have guaranteed, originated or underwritten 60% of all “non-traditional” mortgages, which totaled $4.6 trillion in June 2008. What’s more, this research asserts that housing policies instituted in the early 1990s were explicitly designed to require US Agencies to make much riskier loans, with the ultimate goal of pushing private sector banks to adopt the same standards."
CRA push + GSE pull + regulation changes = mortgage crisis.
For more information, check out The Community Reinvestment Act, Evaluated
NIWA reveals NZ original climate data missing
From the "A goat ate my homework" excuse book:
More major embarrassment for New Zealand's 'leading' climate research unit NIWA tonight, with admissions that it "does not hold copies" of the original reports documenting adjustments to New Zealand's weather stations.
The drama hit the headlines worldwide in late November when serious questions were raised about the "adjustments" NIWA had made to weather records. The adjusted data shows a strong warming trend over the past century, whereas unadjusted records had nowhere near as much warming.
NIWA promised to make its data and corrections fully available, but responding to an Official Information Act request their legal counsel has now admitted it cannot provide copies of the original adjustment records....
...“NIWA’s website carries the raw data collected from representative temperature stations, which disclose no measurable change in average temperature over a period of 150 years. But elsewhere on the same website, NIWA displays a graph of the same 150-year period showing a sharp warming trend. The difference between these two official records is a series of undisclosed NIWA-created ‘adjustments’.
“Late last year our coalition published a paper entitled ‘Are We Feeling Warmer Yet?’ and asked NIWA to disclose the schedule detailing the dates and reasons for the adjustments. The expressed purpose of NZCSC was to replicate the calculations, in the best traditions of peer-reviewed science.
“When NIWA did not respond, Hon Rodney Hide asked Oral and Written Questions in Parliament, and attended a meeting with NIWA scientists. All to no avail, and the schedule of adjustments remained a secret. We now know why NIWA was being so evasive - the requested schedule did not exist.
“Well qualified climate scientist members of our coalition believe that NIWA has forfeited confidence in the credibility of its temperature recording procedures, and that it cannot be trusted to try to cover up its own ineptitude by in-house adjustments. What is needed is open access in the public domain to all of the known reasons for post-reading adjustments to enable independent climate analysts to make their own comparative assessments of temperature variations throughout New Zealand since the middle of the 19th century,” said Mr Dunleavy....
Climategate: WWF, the ‘Para-Governmental Organization’ at the Center of the Storm
...What we do know, however, is that WWF has in recent years been one of the principal purveyors of climate alarmism. It would seem that the organization has still further expanded its brief to cover the conservation not only of “all living things,” but even of that non-living and, frankly, purely notional thing known as “climate.” It was thus WWF that served as the cited source for the IPCC’s now famously debunked claim, according to which at current rates of “warming” the Himalayan glaciers could be expected to melt by 2035. Indeed, Donna Laframboise has turned up dozens of citations of WWF in the IPCC’s 2007 “Fourth Assessment Report,” on everything from “mudflows and avalanches” to the allegedly destructive effects of climate change on “marine fish and shellfish.” Richard North of the EUReferendum blog has uncovered yet another dodgy WWF-referenced claim on the alleged effects of climate change on the Amazonian forests.
That the IPCC’s assessment would rely so heavily on the claims of an activist organization raises obvious questions about its objectivity. But the issues raised by the IPCC’s reliance on WWF are even more troubling than might appear on first glance. For exactly what sort of activist organization is WWF? It is commonly assumed that it is a private advocacy organization funded by donations from the public: in other words, a “non-governmental organization” or “NGO.” But closer inspection of WWF’s finances reveals that the “NGO” moniker is here — as indeed in so many cases — a misnomer. It would be more accurate to describe WWF rather as a “PGO”: a para-governmental organization. In fact, WWF receives massive funding from states. Moreover, it receives massive funding not from just any states, but from precisely that federation of states that has made combating supposed “global warming” into one of its highest policy priorities, if not indeed its highest priority — namely, the European Union.
According to European Commission data, WWF was awarded nearly €9 million in EU support in 2008 alone. In 2007, the figure was over €7.5 million. Most of this support came in the form of ostensibly project-linked grants to WWF-International or its national affiliates. It is typical for the EU to provide support to so-called NGOs in the form of project grants. The largest single grant — bizarrely, for €3,499,999 — went to WWF-International in 2007. Its ostensible purpose was for a project on “Strengthening Indigenous Community Based Forest Enterprises (CBFEs) in Priority Ecoregions in Latin America, Asia-Pacific and Africa.”
Intriguingly, in the same year, WWF-International was awarded €128,700 out of the EU’s research budget, under the heading “RTD support for Community [i.e. EU] policies.” “RTD” stands for “Research and Technological Development.” The subject of this “research support” for EU policies is not provided in the Commission’s so-called “Financial Transparency” database. But the code number for the contract (CCR.IES.C382691.X0.2) indicates that it was connected to the EU’s Institute for Environment and Sustainability (IES) — perhaps to the latter’s Climate Change Unit....
Employer told not to post advert for 'reliable' workers because it discriminates against 'unreliable' applicants
...When she ran the ad past a job centre, she was told she couldn't ask for 'reliable' and 'hard-working' applicants because it could be offensive to unreliable people.
'In my 15 years in recruitment I haven't heard anything so ridiculous,' Mrs Mamo said yesterday.
'If the matter wasn't so serious I would be laughing out loud.
Job Centre
'Unfortunately it's extremely alarming. I need people who are hardworking and reliable - and I am pleased to discriminate in that way. If they're not then I really can't use them. The reputation of my business is on the line.
'Even the woman at the jobcentre agreed it was ridiculous but explained it was policy because they could get sued for being dicriminatory against unreliable people. ...
Rising FHA default rate foreshadows a crush of foreclosures
The share of borrowers who are falling seriously behind on loans backed by the Federal Housing Administration jumped by more than a third in the past year, foreshadowing a crush of foreclosures that could further buffet an agency vital to the housing market's recovery.
About 9.1 percent of FHA borrowers had missed at least three payments as of December, up from 6.5 percent a year ago, the agency's figures show.
Although the FHA's default rate has been climbing for months and eating into the agency's cash, the latest figures show that the FHA's woes are getting worse even as the housing market shows signs of improvement. The problems are rooted in FHA mortgages made in 2007 and 2008. Those loans are now maturing into their worst years because failures most often occur two to three years after a mortgage is made.
If the trend continues and the FHA's cash reserves are exhausted, the federal government would automatically use taxpayer money to cover the losses -- a first for the agency, which has always used the fees it charges borrowers to pay for its losses. ...
Cloudy Future for Fannie and Freddie
...And, given the alarm in some quarters over the mounting budget deficit, these two giants and their vast obligations are likely to remain conveniently — and controversially — off the federal books. Fannie Mae and Freddie Mac have obligations of $3.9 trillion to investors who bought bundles of mortgages that the companies assembled....
...Republicans are trying to emphasize the companies’ longtime Democratic ties. They attacked the Treasury Department in December when the government announced multimillion-dollar pay packages for the companies’ top executives.
“Awarding millions of dollars in bonuses on the taxpayers’ dime is unconscionable,” Representative Jeb Hensarling, Republican of Texas, wrote to the Treasury secretary in a letter signed by 70 Republicans. ...
Climategate scientist 'hid flaws in data', say sceptics
...Climate sceptics have suggested that some of the higher readings may be due not to a warmer atmosphere, but to the so-called "urban heat island effect", where cities become reservoirs of heat and are warmer than the surrounding countryside, especially during the night hours.
Professor Jones and a colleague, Professor Wei-Chyung Wang of the State University of New York at Albany suggested in an influential 1990 paper in the journal Nature that the urban heat island effect was minimal – and cited as supporting evidence a long series of temperature measurements from Chinese weather stations, half in the countryside and half in cities, supplied by Professor Wei-Chyung. The Nature paper was used as evidence in the most recent report of the UN's Intergovernmental Panel on Climate Change.
However, it has been reported that when climate sceptics asked for the precise locations of the 84 stations, Professor Jones at first declined to release the details. And when eventually he did release them, it was found that for the ones supposed to be in the countryside, there was no location given. ...
Jacobson: Moving to Plan B for Labor’s Pains
...Thus, we have today’s hearing for Becker, a longtime strategist and lawyer for organized labor. If they can’t get “card check” through a broad, participatory legislative process, they’ll push to grab a similar victory through the federal board’s ability to regulate without approval of the people’s Representatives.
As such, this hearing — demanded by Sen. John McCain (R-Ariz.), who is troubled by Becker’s blatantly anti-employer views — signals that we have officially hit plan B on the administration’s strategy for pandering to the organized labor lobby. This new course will focus on the quiet job-killer of regulation and card check by fiat. ...
...At a fundamental level, this strategy — which is playing out as the administration also looks to back off climate legislation in favor of regulation through the Environmental Protection Agency — aims to move important fights from highly visible (highly accountable) debates among elected officials to obscured rulemaking by bureaucrats. The goal is to use leverage away from the eyes of the public, which clearly is not enamored of labor’s agenda. ...
Friday, February 05, 2010
Leaked climate change emails scientist 'hid' data flaws
...The apparent attempts to cover up problems with temperature data from the Chinese weather stations provide the first link between the email scandal and the UN's embattled climate science body, the Intergovernmental Panel on Climate Change, as a paper based on the measurements was used to bolster IPCC statements about rapid global warming in recent decades.
Wang was cleared of scientific fraud by his university, but new information brought to light today indicates at least one senior colleague had serious concerns about the affair.
It also emerges that documents which Wang claimed would exonerate him and Jones did not exist....
...The Guardian has learned that of 105 freedom of information requests to the university concerning the climatic research unit (CRU), which Jones headed up to the end of December, only 10 had been released in full.
The temperature data from the Chinese weather stations measured the warming there over the past half century and appeared in a 1990 paper in the prestigious journal Nature, which was cited by the IPCC's latest report in 2007.
Climate change sceptics asked the UEA, via FOI requests, for location data for the 84 weather stations in eastern China, half of which were urban and half rural.
The history of where the weather stations were sited was crucial to Jones and Wang's 1990 study, as it concluded the rising temperatures recorded in China were the result of global climate changes rather the warming effects of expanding cities.
The IPCC's 2007 report used the study to justify the claim that "any urban-related trend" in global temperatures was small. Jones was one of two "coordinating lead authors" for the relevant chapter.
The leaked emails from the CRU reveal that the former director of the unit, Tom Wigley, harboured grave doubts about the cover-up of the shortcomings in Jones and Wang's work. Wigley was in charge of CRU when the original paper was published. "Were you taking W-CW [Wang] on trust?" he asked Jones. He continued: "Why, why, why did you and W-CW not simply say this right at the start?"...
The Public-Union Ascendancy
It's now official: In 2009 the number of unionized workers who work for the government surpassed those in the private economy for the first time. This milestone explains a lot about modern American politics, in particular the paradox that union clout with Democrats has increased even as fewer workers belong to unions overall.
The Bureau of Labor Statistics reported recently that 51.4% of America's 15.4 million union members, or about 7.91 million workers, were employed by the government in 2009. As recently as 1980, there were more than twice as many private as public union members. But private union membership has continued to decline, even as unions have organized more public employees. The nearby chart shows the historical trend.
Overall unionism keeps declining, however, with the loss of 771,000 union jobs amid last year's recession. Only one in eight workers (12.3%) now belongs to a union, with private union employment hitting a record low of 7.2% of all jobs, down from 7.6% in 2008. Only one in 13 U.S. workers in the private economy pays union dues. In government, by contrast, the union employee share rose to 37.4% from 36.8% the year before....
...The political scientists Fred Siegel and Dan DiSalvo recently wrote in the Weekly Standard about the 2006 example of former New Jersey Governor Jon Corzine shouting to a rally of 10,000 public workers that "We will fight for a fair contract." Mr. Corzine was supposed to be on the other side of the bargaining table representing taxpayers, not labor....
Climate change emails between scientists reveal flaws in peer review
...The head of the CRU, Professor Phil Jones, as a top expert in his field, was regularly asked to review papers and he sometimes wrote critical reviews that may have had the effect of blackballing papers criticising his work.
Here is how it worked in one case.
A key component in the story of 20th-century warming is data from sparse weather stations in Siberia. This huge area appears to have seen exceptional warming of up to 2C in the past century. But in such a remote region, actual data is sparse. So how reliable is that data, and do scientists interpret it correctly?
In March 2004, Jones wrote to Professor Michael Mann, a leading climate scientist at Pennsylvania State University, saying that he had "recently rejected two papers [one for the Journal of Geophysical Research and one for Geophysical Research Letters] from people saying CRU has it wrong over Siberia. Went to town in both reviews, hopefully successfully. If either appears I will be very surprised".
He did not specify which papers he had reviewed, nor what his grounds for rejecting them were. But the Guardian has established that one was probably from Lars Kamel a Swedish astrophysicist formerly of the University of Uppsala. It is the only paper published on the topic in the journal that year.
Kamel analysed the temperature records from weather stations in part of southern Siberia, around Lake Baikal. He claimed to find much less warming than Jones, despite analysing much the same data.
Kamel told the Guardian: "Siberia is a test case, because it is supposed to be the land area with most warming in the 20th century." The finding sounded important, but his paper was rejected by Geophysical Research Letters (GRL) that year.
Kamel was leaving academic science and never tried to publish it elsewhere. But the draft seen by the Guardian asserts that the difference between his findings on Siberia temperatures and that of Jones is "probably because the CRU compilation contains too little correction for urban warming." He does not, however, justify that conclusion with any data or analysis.Kamel says he no longer has a copy of the anonymous referee judgments on the paper, so we don't know why it was rejected. The paper could be criticised for being slight and for not revealing details about its methods of analysis. A reviewer such as Jones would certainly have been aware of Kamel's views about mainstream climate research, which he had called "pseudo-science". He would also have known that its publication in a journal like GRL would have attracted the attention of professional climate sceptics. Nonetheless, the paper raised important questions about the quality of CRU's Siberian data, and was a rare example of someone trying to replicate Jones's analysis. On those grounds alone, some would have recommended its publication....
Deregulation and the Financial Crisis
...In spring 2008, at the request of the Treasury Department, the Fed and the Comptroller of the Currency supervised a special process of stress testing by the nineteen largest U.S. financial institutions (most of which were bank holding companies with large subsidiary banks). Table 1 is taken from a report by the Fed on the stress tests and shows the aggregate projected losses for all nineteen institutions in an economically adverse scenario. For purposes of this discussion, two items in this table stand out--the very large projected losses on first and second lien mortgages and the projected trading and counterparty losses. The former is consistent with the hypothesis advanced at the outset of this Outlook--that the largest banks committed themselves to make large numbers of CRA-qualifying loans in order to gain regulatory approval for expansions in the late 1990s and 2000s. The total projected residential mortgage losses for Bank of America, Citibank, JP Morgan Chase, and Wells Fargo are $167 billion out of a total for all nineteen institutions of $185 billion. The mortgage losses of the other banks in the survey were negligible....
Edward J. Pinto: Establishing the Role of the Community Reinvestment Act in the Financial Crisis
...If the tidal wave of CRA’s and GSE AH loans created the housing bubble, then these same loans created the so called “affordability gap”.
It was a seemingly unclosable “affordability gap” that spawned the worst excesses of subprime and Alt-A by the private sector, CRA, and the GSEs.....
...Added to the mix is the false comparison – CRA loans performed better (or no worse) than self-denominated subprime loans.
• The true test is a comparison to traditionally underwritten loans with a 20% down payment. Being 7-10 times more risky than this loan type is not acceptable.
• Looked at by a CRA researcher, a person who dies from falling off a 20 story building and breaks every bone in his body is 2 times worse off than a person who dies falling off a 10 story building and breaks only half his bones. The CRA researcher reports the 10 story fall half as bad and ignores the fact that both died.
– CRA loans are also favorably compared to so called “prime” loan delinquencies, even though 35%-50% of these prime loans used “innovative or flexible” underwriting.
• When Fannie’s subprime & Alt’s loans are removed from its data so as to yield its traditionally underwritten loans, the serious delinquency rate drops from 4.72% (all loans) to 1.78% (traditional loans). This is the true point of comparison. CRA loans do not compare well by this metric....
...Countrywide (1): in 2001 committed to finance $100 billion in community lending through 2005. It exceeded this goal by early 2003. In 2003 it announced an expanded $600 billion goal, extended to 2010. In 2005 it announced an expanded $1 trillion goal. Countrywide was the first national lender to sign HUD’s CRA-like Declaration of Fair Lending Principles and Best Practices in 1994.
– Washington Mutual (3): in 1998 committed $120 billion, gets OTS approval of Dime merger in 2003, simultaneously establishes 10-year, $375 billion commitment to low- and moderate-income borrowers. Enters into an $85 billion 5-year strategic alliance with Fannie for similar borrowers.
– Chase Home Finance (4): In 2003 announces $500 billion commitment to meet home financing needs of underserved borrowers and is pleased to work with Fannie Mae to help millions of families from underserved segments with the American dream of homeownership.
– CitiMortgage (5): in 1998 committed to $115 billion in community lending through 2007, in 2003 committed to finance $200 billion in community lending through 2010 and exceeded this goal in 2005, with lending to date totaling $224.5 billion. It received the highest possible CRA rating - “outstanding” for all 5 of its constituent banks.
– Bank of America (6): at 2004 hearing on its merger with FleetBoston notes “a remarkable national commitment to loan and invest $750 billion for community economic development over the next 10 years.” For 2005-2007, 44% in CA, AZ, FL, and NV. In 2009 announces it’s doubling commitment to $1.5 trillion ($1 trillion for housing).
Pinto How Did Paul Krugman Get It So Wrong
...Let’s start with the assertion that GSEs only buy mortgages made to borrowers with substantial downpayments. While it is generally accepted that a substantial down payment would be 20% or more of a home’s value, let’s be charitable and call a down payment of 10% or more substantial. Over the period 1992-2007 Fannie and Freddie acquired $1.3 trillion in home purchase loans with a 5% or less, amounting to 62% of all such conventional loans originated nationwide over the same period.
These loans are now defaulting at 7-8 times the level of the GSEs’ traditionally underwritten loans with <=90% LTV. Fannie started buying loans with only 3% down as early as 1994 and by 2000 Fannie was buying loans with no downpayment. How about Krugman’s claim that the GSEs didn’t do any subprime lending? Over the period 1997-2007 they acquired a total of $2.2 trillion in subprime loans and private securities backed by subprime loans. Conventional subprime loans came in two “flavors”. The first group consisted of loans with a FICO score of less than 660 (a regulatory definition of subprime), loans which Fannie now says are similar to subprime loans in risk but have not been classified by it as subprime. The GSEs acquired $1.5 trillion of this type of subprime loan. These loans are now defaulting at 8-9 times the level of their traditionally underwritten loans with a FICO >=660. A second group consisted of private mortgage backed securities backed by subprime loans denominated as such by the originator. The GSEs acquired $700 billion of these securities, amounting to 33% of all such privately issued subprime securities. The loans backing these securities are now defaulting at 18-19 times the level of the GSEs’ traditionally underwritten loans with a FICO >=660.
Dodd's Peek-A-Boo Disclosure
...Countrywide was for years the biggest single customer of Fannie Mae, the giant government-sponsored mortgage securitizer that has since gone into federal conservatorship. Much of Countrywide's business was built around its ability to sell loans to Fannie, and Mr. Mozilo helped push Fannie to accept dodgier and dodgier paper. Mr. Dodd in turn supported this goal by pressing Fannie to do more for "affordable" housing.
This nexus between Mr. Dodd's public duties and Countrywide's interests is a serious matter involving the Senator's personal ethics and accountability to taxpayers who will be paying for Fannie's bad loans for years to come....
Thursday, February 04, 2010
Fannie, Freddie, and Ben
...Fannie Mae and Freddie Mac each run two lines of business. Their first line of business involves purchasing mortgages from primary mortgage originators, such as community bankers; packaging them into securities known as mortgage-backed securities (MBS); enhancing these MBS with credit guarantees; and then selling the guaranteed securities....
The GSEs' second line of business is the main focus of my remarks today. It involves the purchase of mortgage-backed securities and other types of assets for their own investment portfolios...
...This line of business has raised public concern because its fundamental source of profitability is the widespread perception by investors that the U.S. government would not allow a GSE to fail, notwithstanding the fact that-- as numerous government officials have asserted-- the government has given no such guarantees. The perception of government backing allows Fannie and Freddie to borrow in open capital markets at an interest rate only slightly above that paid by the U.S. Treasury and below that paid by other private participants in mortgage markets. By borrowing at this preferential rate and purchasing assets (including MBS) that pay returns considerably greater than the Treasury rate, the GSEs can enjoy profits of an effectively unlimited scale. Consequently, the GSEs' ability to borrow at a preferential rate provides them with strong incentives both to expand the range of assets that they acquire and to increase the size of their portfolios to the greatest extent possible....
The White House's Illegal Piggy Bank
TARP: The OMB director is grilled over the misuse of bank bailout funds for purposes other than intended by Congress. This taxpayer money wasn't intended to be the administration's perpetual slush fund.
When the specifically targeted and named Troubled Asset Relief Program was enacted, we were told it was a necessary and wise investment. It would stabilize the financial system and keep credit and money moving. We would even get our money back and then some.
Many banks didn't want the money or need it. Some were told to take it or they'd be audited. So they took it. The banks, eager to break free from federal interference, paid the money back with some interest. The money was intended to be returned to the Treasury for deficit reduction. But an administration that touts a token discretionary spending freeze has no such intention.
This is more than government failing to keep a promise. This is a patently unconstitutional act, as Republican Sen. Judd Gregg of New Hampshire tried to point out to Office of Management and Budget Director Peter Orszag on Monday over administration plans to transfer bailout funds to a new small-business loan program....
Wednesday, February 03, 2010
Largest-ever federal payroll to hit 2.15 million
The era of big government has returned with a vengeance, in the form of the largest federal work force in modern history.
The Obama administration says the government will grow to 2.15 million employees this year, topping 2 million for the first time since President Clinton declared that "the era of big government is over" and joined forces with a Republican-led Congress in the 1990s to pare back the federal work force. ...
Tuesday, February 02, 2010
Barney Frank, Predatory Lender
...the financial crisis was caused by the meltdown of almost 25 million subprime and other nonprime mortgages—almost half of all U.S. mortgages—the narrative changed. The new villains were the unregulated mortgage brokers who allegedly earned enormous fees through a new form of "predatory" lending—by putting unsuspecting home buyers into subprime mortgages when they could have afforded prime mortgages. This idea underlies the Obama administration's proposal for a Consumer Financial Protection Agency. The link to the financial crisis—recently emphasized by President Obama—is that these mortgages would not have been made if regulators had been watching those fly-by-night mortgage brokers.
There was always a problem with this theory. Mortgage brokers had to be able to sell their mortgages to someone. They could only produce what those above them in the distribution chain wanted to buy. In other words, they could only respond to demand, not create it themselves. Who wanted these dicey loans? The data shows that the principal buyers were insured banks, government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, and the FHA—all government agencies or private companies forced to comply with government mandates about mortgage lending. When Fannie and Freddie were finally taken over by the government in 2008, more than 10 million subprime and other weak loans were either on their books or were in mortgage-backed securities they had guaranteed. An additional 4.5 million were guaranteed by the FHA and sold through Ginnie Mae before 2008, and a further 2.5 million loans were made under the rubric of the Community Reinvestment Act (CRA), which required insured banks to provide mortgage credit to home buyers who were at or below 80% of median income. Thus, almost two-thirds of all the bad mortgages in our financial system, many of which are now defaulting at unprecedented rates, were bought by government agencies or required by government regulations. ...
Cloudy Future for Fannie and Freddie
...Treasury officials say more details may be forthcoming, although they decline to say when. To many experts, however, the message is that Fannie and Freddie are likely to remain wards of the state for years.
And, given the alarm in some quarters over the mounting budget deficit, these two giants and their vast obligations are likely to remain conveniently — and controversially — off the federal books. Fannie Mae and Freddie Mac have obligations of $3.9 trillion to investors who bought bundles of mortgages that the companies assembled. ...
...Republicans are trying to emphasize the companies’ longtime Democratic ties. They attacked the Treasury Department in December when the government announced multimillion-dollar pay packages for the companies’ top executives.
“Awarding millions of dollars in bonuses on the taxpayers’ dime is unconscionable,” Representative Jeb Hensarling, Republican of Texas, wrote to the Treasury secretary in a letter signed by 70 Republicans. ...
Rising FHA default rate foreshadows a crush of foreclosures
...Although the FHA's default rate has been climbing for months and eating into the agency's cash, the latest figures show that the FHA's woes are getting worse even as the housing market shows signs of improvement. The problems are rooted in FHA mortgages made in 2007 and 2008. Those loans are now maturing into their worst years because failures most often occur two to three years after a mortgage is made.
If the trend continues and the FHA's cash reserves are exhausted, the federal government would automatically use taxpayer money to cover the losses -- a first for the agency, which has always used the fees it charges borrowers to pay for its losses. ...
Haiti says Baptists may be tried in US
PORT-AU-PRINCE, Haiti — Haiti's prime minister said Monday it's clear to him that the 10 U.S. Baptists who tried to take 33 children out of his quake-ravaged country without permission "knew what they were doing was wrong."
But Prime Minister Max Bellerive also told The Associated Press his country is open to having the Americans go before courts in the United States because his own nation's judicial system was devastated by the Jan. 12 earthquake.
The aborted Baptist "rescue mission" has become a distraction for a crippled government trying to provide basic life support to millions of earthquake survivors.
But the prime minister said some legal system needs to determine whether the Americans were acting in good faith -- as they claim -- or are child traffickers in a nation that has struggled to fight exploitation of children....
..."One (9-year-old) girl was crying, and saying, 'I am not an orphan. I still have my parents.' And she thought she was going on a summer camp or a boarding school or something like that," said George Willeit, a spokesman for the SOS Children's Village....
US Housing Bubble v2.0
... Supporting home prices is an explicit policy goal of the Government. As the White House stated in the announcement of HAMP for example, “President Obama’s programs to prevent foreclosures will help bolster home prices.”
In general, housing obeys the laws of supply and demand: higher demand leads to higher prices. Because increasing access to credit increases the pool of potential home buyers, increasing access to credit boosts home prices. The Federal Reserve can thus boost home prices by either lowering general interest rates or purchasing mortgages and MBS. Both actions, which the Federal Reserve is pursuing, have the effect of lowering interest rates, which increases demand by permitting borrowers to afford a higher home price on a given income.
Similarly, the Administration is boosting home prices by encouraging bank lending (such as through TARP) and by instituting purchase incentives such as the First-Time Homebuyer Tax Credit. All of these actions increase the demand for homes, which increases home prices. In addition to direct Government activity, home prices can be lifted by general expectations among homebuyers of future price increases...
Danny Williams travels to U.S. for heart surgery
The heart and soul of Newfoundland politics is in for repair – and it's not in his home province or even in Canada, for that matter.
Newfoundland Premier Danny Williams is scheduled for heart surgery in the United States, a move that throws into question his province's and his nation's health-care system.
A source confirmed to The Globe and Mail late Monday that Mr. Williams has left St. John's for an undisclosed destination in the U.S. to have heart surgery later in the week.
The 59-year-old Conservative left Monday morning, spokeswoman Elizabeth Matthews said, without disclosing his location. While some of his critics were tight-lipped Monday night, the online public questioned his exodus – why the care he needed was not available in Canada, or whether he preferred treatment in the U.S. ...
Danny Williams going to U.S. for heart surgery
Newfoundland and Labrador Premier Danny Williams is set to undergo heart surgery this week in the United States.
CBC News confirmed Monday that Williams, 60, left the province earlier in the day and will have surgery later in the week.
The premier's office provided few details, beyond confirming that he would have heart surgery and saying that it was not necessarily a routine procedure....
The heart and soul of Newfoundland politics is in for repair – and it's not in his home province or even in Canada, for that matter.
Newfoundland Premier Danny Williams is scheduled for heart surgery in the United States, a move that throws into question his province's and his nation's health-care system.
A source confirmed to The Globe and Mail late Monday that Mr. Williams has left St. John's for an undisclosed destination in the U.S. to have heart surgery later in the week.
The 59-year-old Conservative left Monday morning, spokeswoman Elizabeth Matthews said, without disclosing his location. While some of his critics were tight-lipped Monday night, the online public questioned his exodus – why the care he needed was not available in Canada, or whether he preferred treatment in the U.S. ...
Danny Williams going to U.S. for heart surgery
Newfoundland and Labrador Premier Danny Williams is set to undergo heart surgery this week in the United States.
CBC News confirmed Monday that Williams, 60, left the province earlier in the day and will have surgery later in the week.
The premier's office provided few details, beyond confirming that he would have heart surgery and saying that it was not necessarily a routine procedure....
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