Bailout Proposal: Beware Of Section 8
Here’s what it says:
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Furthermore, the bailout plan may include foreign banks. Nicole Belle at Crooks and Liars has the exchange on this between Paulson and Stephanopoulos:
So, will foreign financial institutions be eligible to have their assets bought?
PAULSON: Yes, and they should, because as you think about this, if a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution.
That’s a distinction without a difference to the American people. The key here is about protecting the system.[..]
But, remember, this is about protecting the American people and protecting the taxpayers. And the American people don’t care who owns the financial institution. If a financial institution in this country has problems, it’ll have the same impact…
Let’s just keep in mind the history of this administration’s financial mismanagement, chronicled here by Think Progress:
IRAQ RECONSTRUCTION
-$142 million wasted on reconstruction projects that were either terminated or canceled. [Special Inspector General for Iraq, 7/28/08]
-“Significant” amount of U.S. funds for Iraq funneled to Sunni and Shiite militias. [GAO Comptroller, 3/11/08]
-$180 million payed to construction company Bechtel for projects it never finished. [Federal audit, 7/25/07]
-$5.1 billion in expenses for Iraq reconstruction charged without documentation. [Special Inspector General for Iraq Reconstruction report, 3/19/07]
-$10 billion in spending on Iraq reconstruction was wasteful or poorly tracked. [GAO, 2/15/07]
-Halliburton overcharged the government $100 million for one day’s work in 2004. [Project on Government Oversight, 10/8/04]
KATRINA
-Millions wasted on four no-bid contracts, including paying $20 million for an unusable camp for evacuees. [Homeland Security Department Inspector General, 9/10/08]
-$2.4 billion in contracts doled out by FEMA that guaranteed profits for big companies. [Center for Public Integrity investigation, 6/25/07]
-An estimated $2 billion in fraud and waste — nearly 11 percent of the $19 billion spent by FEMA on Hurricanes Katrina and Rita as of mid-June. [New York Times tally, 6/27/06]
-“Widespread” waste and mismanagement on millions for Katrina recovery, including at least $3 million for 4,000 beds that were never used. [GAO, 3/16/06]
DEFENSE CONTRACTS
-A $50 million Air Force contract awarded to a company with close ties to senior Air Force officers, in a process “fraught with improper influence, irregular procedures, glaring conflicts of interest.” [Project on Government Oversight, 4/18/08]
-$1.7 billion in excessive fees and waste paid by the Pentagon to the Interior Department to manage federal lands. [Defense Department and Interior Department Inspectors General audit, 12/25/06]
-$1 trillion unaccounted for by the Pentagon, including 56 airplanes, 32 tanks, and 36 Javelin missile command launch-units. [GAO, 5/18/03]
Good point, Alan.
It amazes me that these so called patriotic conservatives are so fine and dandy with foreign companies owning America, but they sure hate the poor brown people who provide cheap labor that the corporations love so much.
September 21st, 2008 at 6:46 pm
The foreigners wouldn’t be able to buy our companies if we didnt’ have to go begging for foreign oil because of the Oil Embargo imposed on America by the Democrats
September 21st, 2008 at 7:51 pm
We will take our country back from these treasonous left wing traitors. Already the liberal media newspapers are shrinking down to nothing. People realize they are talking points and shills for the Left wing Democraps. Now with the mistreatment of Sara Palin the big TV media NBC ABC CBS CNN have exposed their total bias. The thought of a normal mother and Christian woman who does not want abortion in her life is the enemy. America wake up. I agree with Bruno and John W. Obama and his group is beyond belief and is not to be trusted with our nation. He cannot even talk without stuttering. He cannot speak without a teleprompter. The media has the nerve then to say McCain is to old and out of touch. I do believe Bruno because of the 200 million dollars from Iran and Saudi banks under $25 each to Obama. You do not need names on contributions for less than $25. When questioned Obama said he is following the law. Yeah like camel turds can fly and Rev. Wright and Farrakhan love white Christians Jews and America.
September 21st, 2008 at 9:47 pm
Hey John:
Before you argue in someone’s defense, you should at least know how to spell their name right. Typical republican, talking (typing) faster than you think.
September 21st, 2008 at 10:24 pm
MY FRIENDS, I think Alan is on to something here MY FRIENDS, because you know there is something REALLY creepy about John McCain saying MY FRIENDS to us ALL the time, when we r CLEARLY not his friend based on our opinion of who he might have been 8 years ago and who he is now MY FRIENDS after sucking up to the Christianist Right and Neoconservatives he detested MY FRIENDS.
So perhaps MY FRIENDS we should be using this MY FRIENDS just as much MY FRIENDS and as meaningfully MY FRIENDS as John McCain does MY FRIENDS?
September 21st, 2008 at 10:30 pm
John,
Could you please be so kind as to provide some documentation to back up any of the things you just said?
Best regards,
CDP
September 21st, 2008 at 10:36 pm
Several years ago, I remember reading something by a rightwingnut where it was explained that gently replacing traditional American institutions with rightwingnut dreams would never fly.
Most Americans would recognize the proposed replacement institutions for what they were long before they had a chance to sprout. The flawed wingnut dreams only meant to make most of us poorer. The solution was to first destroy and take down traditional institutions, destroy the old things and force a change.
Once the old organizations were flattened and out of the way, replacement rightwingnut facilities could then be constructed to fill the void left by the absence of the old ones.
This is worrisome. It’s almost as if we were under attack. A financial war of attrition.
September 21st, 2008 at 11:10 pm
Beware of Section 8 which provides for zero government oversight? But Alan, why would that ever worry you? Hell, the CIA and the Department of Homeland Security have had those priviledges for years and only abused them a teeny tiny bit! Like, you know, embezzling a few millions here and there, running drugs out of foriegn countries and missles into others, overthrowing elected governments, small stuff like that.)Actually Alan, an abusive agency with zero oversight and access to tons of money is JUST what the doctor ordered for this country. Maybe it will take actually suffering under an open tyranny before Americans wake the heck up to their los of freedom and work to restore it.
September 21st, 2008 at 11:13 pm
Other than raise the min. wage and thereby increasing unemployement , has the Democrat Congress done anything?
September 21st, 2008 at 11:23 pm
After reading section 8 of the Bailout draft myself, it is clear that we are watching the biggest financial fraud perpetrated by the same folks that gave us the biggest military debacle (Iraq) in history. Heck, it was almost at the same time of year when the last national emergency was used to rush through legislation that wasn’t read, on the basis that the “sky is falling”. It was 9/11 and the Patriot act! See any similar pattern here? Heck they already took away my rights, my pay, my house, my retirement and kids education, and now the Bushies want me to sign loan documents for my grandchildren at “gunpoint.” Sadly, the American public seems willing to help them carry the money out of the treasury and put it on these greed heads saddles. THEIR SHOULD BE NO BAILOUT OF THESE BANKS!! Let supply side economics be exposed for the ponzi scheme to transfer wealth to the rich that it is, even if the consequences are painful. At least it would be a lesson we as a people would not forget the next time a new shade of lipstick is picked for this pig. Sorry Mr. Paulson, the emperor has no clothes!!
September 21st, 2008 at 11:24 pm
Phillip: It’s the Democrat Party that forced the Banks to go bankrupt.
Why do you ignorant ideologues keep lying about the cause of this?
September 21st, 2008 at 11:29 pm
Who’s going to pay for all this liberalizm ? Just us working poor ! [the former middle class]. Thanks to NAFTA and the open borders. Oh; and the Mexican truckers!
September 22nd, 2008 at 12:20 am
VIVA LA revolution ! VOTE OUT THE ENCUMBENTS !
September 22nd, 2008 at 12:21 am
Funny how we had 8 years of republican control, to do anything that they wanted to pass to be passed, yet because the dems had a 1 seat lead in the senate for 2years that it is the dems fault. Anything that the dems would have proposed would have had to pass hail bush, which wasn’t going to happen. You repugths had the run of the house, and you ran into the ground. So you want another 4 years, to lead the US into the 2nd great depression, maybe start a few more senseless wars, and make sure exxon and its ilk makes the most profit in history…. sorry, no thanks.
September 22nd, 2008 at 12:40 am
Jamminj, the Dems are the ones who caused this.
This is from the NYT 23 Oct 1999
The legislation repeals the Glass-Steagall Act, or, as it is formally known, the Banking Act of 1933, which broke up the powerful House of Morgan and divided Wall Street between investment banks and commercial banks. It also makes significant changes to the Bank Holding Company Act of 1956, which had restricted what banks could do in the insurance business.
The Glass-Steagall Act was enacted after the stock market crash of 1929 and the ensuing banking crisis and Great Depression. On the day it was signed, along with the National Industrial Recovery Act and other measures, President Franklin D. Roosevelt called the package “the most important and far-reaching legislation ever enacted by the American Congress.”
…
The breakthrough in Friday’s legislation came in a backroom meeting at the Capitol soon after midnight, when a group of moderate Senate Democrats — led by Christopher Dodd of Connecticut and Charles E. Schumer of New York — forced a compromise between Gramm and the White House over the legislation’s effect on the Community Reinvestment Act, a 1977 anti-discrimination law intended to encourage lending to minorities and others historically denied access to credit.
Dodd, whose state is home to the nation’s largest insurance companies, and Schumer, with strong ties to Wall Street, have long sought legislation to repeal the Glass-Steagall Act. Both men said in interviews Friday that they moved to strike a compromise after it became apparent that the legislation might be killed, as it was last year by Gramm, over the debate about the Community Reinvestment Act.
Gramm had maintained that he did not want anything in the bill that would expand the application of the Community Reinvestment Act because it was, he said, unnecessarily burdensome to banks. He had sought a provision that would exempt thousands of smaller banks from the law. He also wanted a provision that would expose what he has described as the “extortion” committed by community groups against banks by requiring the groups to disclose any special financial deals the groups extract from the banks.
But the White House found that provision unacceptable and had its own ideas about community lending. It wanted the legislation to prevent any bank with an unsatisfactory record of making loans to the disadvantaged from expanding into new areas, like insurance or securities.
The White House had insisted that the President would veto any legislation that would scale back minority-lending requirements. Four days of intense negotiations between Summers, Gene Sperling, the President’s top economic policy adviser, and Gramm, while moving the two sides closer, failed to resolve the differences.
..
After receiving calls from executives of some of the nation’s leading financial companies, Dodd and Schumer began trying to work out a compromise. An agreement was quickly reached on the issue of banks and expanded powers – no institution would be allowed to move into any new lines of business without a satisfactory lending record.
The lawmakers bogged down on Gramm’s insistence that all community organizations disclose to the regulators what benefits they get from banks. Some Democrats expressed the fear that Gramm’s proposal would require the Boy Scouts to file reports with the regulators.
Ultimately, the following provisions were drawn up and both the White House and Gramm said they could accept them:
¶Banks will not be able to move into new lines of business unless they have satisfactory lending records.
¶Community groups will have to make disclosures to regulators about certain kinds of financial deals with banks that they have pressed to make loans under the Community Reinvestment Act.
¶Wholesale financial institutions, a new kind of business that takes large, uninsured bank deposits, cannot be affiliated with commercial banks.
¶Small banks with satisfactory or excellent track records of lending to the underserved would be reviewed less frequently under the Community Reinvestment Act. As a practical matter smaller banks are reviewed about every three years. The deal struck today allows all rural banks and banks with less than $250 million in assets to undergo examination once every five years if their last exam resulted in an “outstanding” grade and every four years if they last scored “satisfactory.”
For more than 20 years, Congress has tried unsuccessfully to rewrite the nation’s financial services laws and repeal Glass-Steagall, particularly as many other industrial nations had no similar restrictions on their banks. But until recently, the three main industries affected by the legislation — banks, securities companies and insurers — had competing interests and were able to lobby any legislation to a standstill.
That all changed in recent years as the lines between the industries began to blur and it became more broadly acknowledged that a deregulation of financial services could be beneficial to insurers, bankers and securities firms alike. Once the three industries rallied around the legislation, they became a formidable political force, raising millions of dollars for lawmakers and pressing both Republican leaders in Congress and the White House for new legislation.
http://partners.nytimes.com/library/financial/102399banks-congress.html
September 22nd, 2008 at 12:52 am
Gramm-Leach-Bliley Act 1999
The bills were introduced in the Senate by Phil Gramm (R-TX) and in the House of Representatives by James Leach (R-IA).
Many of the largest banks, brokerages, and insurance companies desired the Act at the time.
Senator Phil Gramm led the Senate Banking Committee which sponsored the Act; he later joined UBS Warburg, at the time the investment banking arm of the largest Swiss bank. Gramm registered as a UBS lobbyist in 2004 and began advising John S. McCain as his top economic adviser and general co-chairman during McCain’s 2008 presidential campaign.
Economist Robert Kuttner (among others) has criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis. Economists Robert Ekelund and Mark Thornton have made similar criticisms, arguing that while “in a world regulated by a gold standard, 100% reserve banking, and no FDIC deposit insurance” the Financial Services Modernization Act would have made “perfect sense” as a legitimate act of deregulation, under the present fiat monetary system it “amounts to corporate welfare for financial institutions and a moral hazard that will make taxpayers pay dearly
As the economic debacle facing Americans continues to materialize, those responsible are running for cover with ten Republican senators refusing to attend their own national convention. Four years ago we observed that the so-called “Republican philosophy” of small government, sound money, and balanced budgets was illusory in terms of the history and then-current policies of the Republican Party. However, even we would never have guessed how awful the Republican Party economic policy would become. From mere mercantilism, the Republican Party is now flirting with comprehensive socialist economic policy and another Great Depression.
[edit]
September 22nd, 2008 at 1:20 am
You leave out the fact the Democrats forced provisions that guarnanteed that banks would resell loans into the market that were destined to fail.
That is the root cause of the problem. If the banks would not forced to give up their normal mortgage requirements there would be no bad debt.
And in addition Fannie/Freddie were on a bad debt buy/selling spreee to enrich the Democrat fatcats who ran it.
September 22nd, 2008 at 1:45 am
“…and may not be reviewed by any court of law …”
Welcome once again to the Bush police state. Do not question your government! Your fuhrer has spoken!
Sieg heil! Sieg heil! Sieg heil!
September 22nd, 2008 at 1:52 am
That’s part of the Constitution. You Leftists have no shame.
September 22nd, 2008 at 2:00 am
This is the part of the Law that the Clintons, Schumer, Dodd and others adeded:
Gramm-Leach-Bliley Act of 1999
Pass Senate 90 – 8
TITLE I—FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND INSURANCE COMPANIES
Subtitle A—Affiliations
SEC. 103. FINANCIAL ACTIVITIES.
‘‘(2) CRA REQUIREMENT.—Notwithstanding
8 subsection (k) or (n) of this section, section
9 5136A(a) of the Revised Statutes of the United
10 States, or section 46(a) of the Federal Deposit In11
surance Act, the appropriate Federal banking agen12
cy shall prohibit a financial holding company or any
13 insured depository institution from—
14 ‘‘(A) commencing any new activity under
15 subsection (k) or (n) of this section, section
16 5136A(a) of the Revised Statutes of the United
17 States, or section 46(a) of the Federal Deposit
18 Insurance Act; or
19 ‘‘(B) directly or indirectly acquiring control
20 of a company engaged in any activity under
21 subsection (k) or (n) of this section, section
22 5136A(a) of the Revised Statutes of the United
23 States, or section 46(a) of the Federal Deposit
24 Insurance Act (other than an investment made
25 pursuant to subparagraph (H) or (I) of sub-
1 section (k)(4), or section 122 of the Gramm-
2 Leach-Bliley Act, or under section 46(a) of the
3 Federal Deposit Insurance Act by reason of
4 such section 122, by an affiliate already en5
gaged in activities under any such provision);
6 if any insured depository institution subsidiary of
7 such financial holding company, or the insured de8
pository institution or any of its insured depository
9 institution affiliates, has received in its most recent
10 examination under the Community Reinvestment Act
11 of 1977, a rating of less than ‘satisfactory record of
12 meeting community credit needs’.
September 22nd, 2008 at 2:15 am
Hey Alan,
It’s been eons since I appeared on your NYC ent radio show wayyy back in the day, but I’ve followed you on TV ever since. And not to watch Sean Hannity (how DO you sit there and listen to that idiotic blather day after day?)
After his “interview” with Sarah Palin, his journalism card should be revoked. He lobbed more softballs than a high school team…and more disturbingly, she couldnt handle those. What a country…how can this be happening?
Im keeping my liberal hopes up by making daily campaign slogans…the latest: McCain/Palin: She Can’t Tell The Truth, He Can’t Remember It!
Keep fighting the good fight and trying to get the Kool Aid drinkers to change their beverage of choice!
Best,
Alan Carter
September 22nd, 2008 at 2:17 am
[...] Yikes! [...]
September 22nd, 2008 at 11:13 am
“In 2007, Wall Street’s five biggest firms– Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley – paid a record $39 billion in bonuses to themselves.” ABC’s Political Punch — I say no Bail Out!
AND
Senator John McCain’s campaign manager, Rick Davis, was paid more than $30,000 a month for five years as president of an advocacy group set up by the mortgage giants Fannie Mae and Freddie Mac to defend them against stricter regulations!
http://www.nytimes.com/2008/09/22/us/politics/22mccain.html?ref=politics
More McCain Hypocrisy! I now understand why McCain who has been Chairman of the Commerce Committee for years says he knows very little about the economy, the one truth he has been honest about, because it has always been about Corp. first, only and last!
September 22nd, 2008 at 11:30 am
Obama’s Real-Estate Bust
He did for Illinois taxpayers what shady mortgage lenders have done for the economy.
By David Freddoso
Last week, Sen. Barack Obama compared the Savings and Loan bailout of the late 1980s to the situation of the mortgage-securities markets today:
Too many S&Ls took advantage of the lax rules set by Washington to gamble that they could make big money in speculative real estate. . . . [T]hey made hundreds of billions in bad loans, knowing that if they lost money, the government would bail them out. And they were right. The gambles did not pay off, our economy went into recession, and the taxpayers ended up footing the bill. Sound familiar?
Indeed, it does sound familiar — it sounds a lot like what Barack Obama did to Illinois taxpayers as a state senator in Springfield. Using his elected office and his clout, Obama helped Tony Rezko and other unscrupulous low-income housing developers obtain millions of dollars in state grants, tax credits, low-interest loans, and regulatory advantages.
Taxpayers had no serious chance of recouping these “investments” in Rezko and other developers. And many beneficiaries went one step farther, depriving the public of even the benefits they could have gotten. These developers took government help to build low-income housing, and then let their buildings deteriorate into uninhabitable slums.
To date, the most complete account of this sad story is Binyamin Appelbaum’s piece in the Boston Globe. Not only does it demonstrate the monumental failure of the low-income-housing policy that Obama vocally championed as a state senator, it gives a detailed look at how some of Obama’s donors and friends — the beneficiaries of that policy — neglected their own housing developments at the expense of the inhabitants.
There is no indication that Obama approved (or even knew) of the massive and systemic neglect of these properties in his own state-senate district. But there is also no question that he was an enabler in these transactions. He cosponsored at least six bills to give special tax breaks, tax credits, building-and-maintenance subsidies, and zoning exemptions to the developers. In 1998, he wrote letters to state and city officials requesting $14 million for a project developed by Tony Rezko and another close Obama friend — the politician’s old law-firm boss, Allison Davis.
In his Globe piece, Appelbaum describes the low-income Grove Parc Plaza complex, which was developed by Davis:
Mice scamper through the halls. Battered mailboxes hang open. Sewage backs up into kitchen sinks. In 2006, federal inspectors graded the condition of the complex an 11 on a 100-point scale — a score so bad the buildings now face demolition.
Sewage backups seem to be a common problem in Davis’s low-income slums — another of his buildings, Appelbaum reports, was cited in 2007 “after chronic plumbing failures resulted in raw sewage spilling into several apartments.”
Valerie Jarrett, Obama’s campaign adviser and the subject of a recent fawning interview by Katie Couric, is the chief executive of the company that managed that Grove Parc slum until just recently. Appelbaum writes that her company managed another housing complex until its condition became so poor that the federal government seized it in 2006.
Cecil Butler, another Obama donor, had his Lawndale Restoration complex confiscated by the government in 2006 “after city inspectors found more than 1,800 code violations.”
Appelbaum’s piece gives some sense of just how closely Obama was, and still is, tied to the slum-lord world. He’s taken contributions from its big players and pushed legislation favorable to them. His closest ally in that sphere has been Rezko, who raised $250,000 for Obama’s campaigns before being convicted on unrelated corruption charges earlier this year.
Rezko had been leveraging his fundraising abilities to win alliances with other politicians long before Obama got his start. He applied for his first subsidized-housing loan from the City of Chicago six days after Mayor Richard M. Daley’s election in 1989. Within the first six years of Daley’s reign, Rezko’s company, Rezmar, received $24 million in government loans and $8.5 million in federal tax credits. Over the following decade, it would rake in more than $100 million in loans from the city, state, and federal governments, as well as private bank loans to fix up 30 Chicago buildings for low-income public housing.
Despite all this cheap and free taxpayer money, all of Rezko’s 30 buildings eventually ran into financial difficulties. As of 2007, 17 had gone into foreclosure. Six were boarded up and abandoned.
The City of Chicago sued Rezmar at least a dozen times for failing to heat its properties. During the winter of 1997, Rezmar claimed it lacked the funds to heat a 31-unit building in Englewood on the south side of Chicago — one of eleven Rezmar buildings in Obama’s state-senate district. Tenants there went without heat from late December 1996 through mid-February 1997. Despite his company’s financial hardship, Rezko signed a $1,000 check for the campaign fund of the newly elected state senator Barack Obama on January 14, 1997.
When Barack Obama talks about risky real-estate investments and failures of government oversight, remember how he put Illinois taxpayers on the hook for some of the worst real-estate investments of all — investments in his close friend and in other slum landlords who took the public’s money and betrayed their trust.
September 22nd, 2008 at 11:45 am
Stop pasting all this garbage from your idiotic radical right-wing web sites. No one reads it. It’s just wearing out scroll wheels everywhere.
September 22nd, 2008 at 12:11 pm
jimmcc01 —
Preach it!
September 22nd, 2008 at 12:23 pm
How the Democrats Created the Financial Crisis: Kevin Hassett
Commentary by Kevin Hassett
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_hassett&sid=aSKSoiNbnQY0
Sept. 22 (Bloomberg) — The financial crisis of the past year has provided a number of surprising twists and turns, and from Bear Stearns Cos. to American International Group Inc., ambiguity has been a big part of the story.
Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex.
But really, it isn’t. Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally.
Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street’s efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves.
In the times that Fannie and Freddie couldn’t make the market, they became the market. Over the years, it added up to an enormous obligation. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home.
The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them.
Turning Point
Take away Fannie and Freddie, or regulate them more wisely, and it’s hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.
It is easy to identify the historical turning point that marked the beginning of the end.
Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission’s chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie’s position on the relevant accounting issue was not even “on the page” of allowable interpretations.
[SEE LINK FOR REST OF STORY]
September 22nd, 2008 at 1:02 pm
The auther of How the Democrats Created the Financial Crisis: Kevin Hassett is an advisor for the McCain campaign, AND director of economic-policy studies at the right wing think tank, the AEI.
You can get an ENTIRELY different view from:
http://www.nytimes.com/2008/09/22/us/politics/22mccain.html?_r=1&oref=slogin&ref=politics&pagewanted=print
________________________________________
September 22, 2008
Loan Titans Paid McCain Adviser Nearly $2 Million
By DAVID D. KIRKPATRICK and CHARLES DUHIGG
Senator John McCain’s campaign manager was paid more than $30,000 a month for five years as president of an advocacy group set up by the mortgage giants Fannie Mae and Freddie Mac to defend them against stricter regulations, current and former officials say.
Mr. McCain, the Republican candidate for president, has recently begun campaigning as a critic of the two companies and the lobbying army that helped them evade greater regulation as they began buying riskier mortgages with implicit federal backing. He and his Democratic rival, Senator Barack Obama, have donors and advisers who are tied to the companies.
But last week the McCain campaign stepped up a running battle of guilt by association when it began broadcasting commercials trying to link Mr. Obama directly to the government bailout of the mortgage giants this month by charging that he takes advice from Fannie Mae’s former chief executive, Franklin Raines, an assertion both Mr. Raines and the Obama campaign dispute.
Incensed by the advertisements, several current and former executives of the companies came forward to discuss the role that Rick Davis, Mr. McCain’s campaign manager and longtime adviser, played in helping Fannie Mae and Freddie Mac beat back regulatory challenges when he served as president of their advocacy group, the Homeownership Alliance, formed in the summer of 2000. Some who came forward were Democrats, but Republicans, speaking on the condition of anonymity, confirmed their descriptions.
“The value that he brought to the relationship was the closeness to Senator McCain and the possibility that Senator McCain was going to run for president again,” said Robert McCarson, a former spokesman for Fannie Mae, who said that while he worked there from 2000 to 2002, Fannie Mae and Freddie Mac together paid Mr. Davis’s firm $35,000 a month. Mr. Davis “didn’t really do anything,” Mr. McCarson, a Democrat, said.
Mr. Davis’s role with the group has bubbled up as an issue in the campaign, but the extent of his compensation and the details of his role have not been reported previously.
Mr. McCain was never a leading critic or defender of the mortgage giants, although several former executives of the companies said Mr. Davis did draw Mr. McCain to a 2004 awards banquet that the companies’ Homeownership Alliance held in a Senate office building. The organization printed a photograph of Mr. McCain at the event in its 2004 annual report, bolstering its clout and credibility. The event honored several other elected officials, including at least two Democrats, Gov. Edward G. Rendell of Pennsylvania and Representative Artur Davis of Alabama.
In an interview Sunday night with CNBC and The New York Times, Mr. McCain noted that Mr. Davis was no longer working on behalf of the mortgage giants. He said Mr. Davis “has had nothing to do with it since, and I’ll be glad to have his record examined by anybody who wants to look at it.”
Asked about the reports of Mr. Davis’s role, a spokesman for Mr. McCain said that during the time when Mr. Davis ran the Homeownership Alliance, the senator had backed legislation to increase oversight of the mortgage companies’ accounting and executive compensation. The legislation, however, did not seek to change their anomalous structure as private companies with federal support.
The spokesman, Tucker Bounds, also noted that the Homeownership Alliance included nonprofit organizations like Habitat for Humanity and the Urban League. “It’s not controversial to promote homeownership and minority homeownership,” Mr. Bounds said. More than a half-dozen current and former executives, however, said the Homeownership Alliance was set up mainly to defend Fannie Mae and Freddie Mac by promoting their role in the housing market, and the two companies paid almost the entire cost of the group’s operations.
“They were financed largely, possibly exclusively, by Fannie and Freddie,” said William R. Maloni, a Democrat who is a former head of industry relations for Fannie Mae. “We thought it would be helpful to have someone who was a broadly recognized Republican to be the face of the organization, and that person became Rick Davis.” Mr. Maloni added, “Rick, for that purpose, turned out to be quite good.” (Several executives said Mr. Davis’s compensation was not unusual for the companies’ well-connected consultants.)
The federal bailout of the two mortgage giants has become an emblem of what critics say is the outdated or inadequate regulatory system that allowed the financial system to slide into crisis this summer.
At the time that Fannie Mae and Freddie Mac recruited Mr. Davis to run the Homeownership Alliance in 2000, they were under new pressure from private industry rivals and deregulation-minded Republicans who argued that the two companies’ federal sponsorship gave them an unfair advantage and put taxpayers at risk. Critics of the companies had formed their own Washington-based advocacy group, FM Watch. They were pushing for regulations that would deter the companies from expanding into new areas, including riskier and more profitable mortgages.
Mr. Davis had recently returned to his lobbying firm from running Mr. McCain’s unexpectedly strong 2000 Republican primary campaign, which elevated Mr. McCain’s profile as a legislator and Mr. Davis’s as a lobbyist.
“You can say what you want about free-market distortions, but people like the system because it gets them into houses cheap,” Mr. Davis said to Institutional Investor magazine in 2000, adding that he would run the advocacy group out of his Alexandria, Va., lobbying firm.
The organization also hired Public Strategies, a communications firm that included former Bush adviser Mark McKinnon. Mr. Davis wrote letters and gave speeches for the group. In April 2001, he sent out a press release headlined, “It’s Tax Day — Do You Know Where Your Deductions Are? For Most Americans, They’re in Your Home.”
But by the end of 2005, Fannie Mae and Freddie Mac were recovering from accounting problems and re-examining costs, former executives said. The companies decided the Homeownership Alliance had outlived its usefulness, and it disappeared.
John Harwood contributed reporting.
September 22nd, 2008 at 1:26 pm
That contradicts nothing you idiot. Who ever said there were zero Republicans involved with FM? No one.
Democrats controlled FM. Democrats in Congress and the Clinton White House instituted the regulations that were the cause of the bad debt.
If you have facts to the CONTRARY and not in the SUPPLEMENTAL , let me know.
September 22nd, 2008 at 2:01 pm
Calling me an idiot will CERTAINLY prove that McCain’s advisor is telling the truth about McCain’s opposition.
I love how you go right from Clinton, (leaving out Bush) to the 2 years of the Democratic Congress, (leaving out the 12 years of Republican Congress).
September 22nd, 2008 at 2:08 pm
How the Democrats Created the Financial Crisis: Kevin Hassett
Commentary by Kevin Hassett
Sept. 22 (Bloomberg) — The financial crisis of the past year has provided a number of surprising twists and turns, and from Bear Stearns Cos. to American International Group Inc., ambiguity has been a big part of the story.
Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex.
But really, it isn’t. Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally.
Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street’s efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves.
In the times that Fannie and Freddie couldn’t make the market, they became the market. Over the years, it added up to an enormous obligation. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home.
The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them.
Turning Point
Take away Fannie and Freddie, or regulate them more wisely, and it’s hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.
It is easy to identify the historical turning point that marked the beginning of the end.
Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission’s chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie’s position on the relevant accounting issue was not even “on the page” of allowable interpretations.
Then legislative momentum emerged for an attempt to create a “world-class regulator” that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.
Greenspan’s Warning
The clear gravity of the situation pushed the legislation forward. Some might say the current mess couldn’t be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie “continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,” he said. “We are placing the total financial system of the future at a substantial risk.”
What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.
Different World
If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.
But the bill didn’t become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn’t even get the Senate to vote on the matter.
That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: “It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.”
Mounds of Materials
Now that the collapse has occurred, the roadblock built by Senate Democrats in 2005 is unforgivable. Many who opposed the bill doubtlessly did so for honorable reasons. Fannie and Freddie provided mounds of materials defending their practices. Perhaps some found their propaganda convincing.
But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.
Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.
Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.
There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear.
Oh, and there is one little footnote to the story that’s worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.
(Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He is an adviser to Republican Senator John McCain of Arizona in the 2008 presidential election. The opinions expressed are his own.)
To contact the writer of this column: Kevin Hassett at khassett@aei.org
September 22nd, 2008 at 2:15 pm
Jane R, why would we believe a McCain advisor about McCain’s opposition?
From the WaPo, The Pinocchio Test
McCain campaign states:
“Obama has no background in economics. Who advises him? The Post says it’s Franklin Raines, for “advice on mortgage and housing policy.” Shocking. Under Raines, Fannie Mae committed “extensive financial fraud.” Raines made millions. Fannie Mae collapsed. Taxpayers? Stuck with the bill.”
–McCain video release, September 18, 2008.
An already nasty presidential election campaign is getting nastier. The meltdown on Wall Street has touched off frantic attempts by both the McCain and Obama camps to secure political advantage and indulge in guilt by association. Over the past 24 hours, both campaigns have issued video press releases (let’s not call them ads until they actually air somewhere) attempting to show that the other side’s “advisers” are somehow responsible for the crisis. The latest McCain attack is particularly dubious.
The Facts
The McCain video attempts to link Obama to Franklin Raines, the former CEO of the bankrupt mortgage giant, Fannie Mae, who also happens to be African American. It then shows a photograph of an elderly white woman taxpayer who has supposedly been “stuck with the bill” as a result of the “extensive financial fraud” at Fannie Mae.
The Obama campaign last night issued a statement by Raines insisting, “I am not an advisor to Barack Obama, nor have I provided his campaign with advice on housing or economic matters.” Obama spokesman Bill Burton went a little further, telling me in an e-mail that the campaign had “neither sought nor received” advice from Raines “on any matter.”
So what evidence does the McCain campaign have for the supposed Obama-Raines connection? It is pretty flimsy, but it is not made up completely out of whole cloth. McCain spokesman Brian Rogers points to three items in the Washington Post in July and August. It turns out that the three items (including an editorial) all rely on the same single conversation, between Raines and a Washington Post business reporter, Anita Huslin, who wrote a profile of the discredited Fannie Mae boss that appeared on July 16. The profile reported that Raines, who retired from Fannie Mae four years ago, had “taken calls from Barack Obama’s presidential campaign seeking his advice on mortgage and housing policy matters.”
Since this has now become a campaign issue, I asked Huslin to provide the exact circumstances of the quote. She explained that she was chatting with Raines during the photo shoot, and asked “if he was engaged at all with the Democrats’ quest for the White House. He said that he had gotten a couple of calls from the Obama campaign. I asked him about what, and he said ‘oh, general housing, economy issues.’ (’Not mortgage/foreclosure meltdown or Fannie-specific,’ I asked, and he said ‘no.’)”
By Raines’s own account, he took a couple of calls from someone on the Obama campaign, and they had some general discussions about economic issues. I have asked both Raines and the Obama people for more details on these calls and will let you know if I receive a reply.
The Pinocchio Test
The McCain campaign is clearly exaggerating wildly in attempting to depict Franklin Raines as a close adviser to Obama on “housing and mortgage policy.” If we are to believe Raines, he did have a couple of telephone conversations with someone in the Obama campaign. But that hardly makes him an adviser to the candidate himself — and certainly not in the way depicted in the McCain video release.
September 22nd, 2008 at 2:26 pm
[...] Administration has snuck in this little clause about how Paulson’s actions in [...]
September 22nd, 2008 at 6:27 pm
Dear Alen
Reading your posting about our Tax money was like my college education. My mouth was open. Goodness! I always wounder what happened to my Fedaral tax money. Now I know. May be Gov. Sarah Palin is correct. We need to know where our money go. May be it should be in internet.
We hear “tid bit” that our Social security have no money. Madicare might colaps. Your info is good. Now I know all politicians are cruks. Democrats and Republicans both are bad. Who can we trust with our money?
September 22nd, 2008 at 8:24 pm
Of course some of the same banks that will have these bad loans lifted from their books will be appointed to liquidate the homes for the government and will rake in millions for their “service to the treasury”. We can’t get Congress off their well paid rears to do anything positive for the country, but when the greed head bankers call, it is very clear to me for whom the bell tolls….you and I. May democracy in the U.S RIP.
September 22nd, 2008 at 8:50 pm
Georg,
I never heard anymore about Bruno after I asked if I should report him for threatening me, or if he was just a phony?
September 23rd, 2008 at 2:15 pm
This is out of the Saul Alinsky handbook. He said you claim your advisory is doing evil things. You also discredit him to take away their credibility. I personally think every thing Bruno said is 100% accurate and true!
September 23rd, 2008 at 2:28 pm
Georg,
You believe what you want, if you have an explaination as to why he is telling me that I’m on a watch list and there is a blue van watching me….
Little old me, on this little site, no op ed in major papers or networks, just Alan Colmes’ site…Wow!
And furthermore, if he IS for real, and they are watching me…..I must be a heck of a lot more important than I could have imagined, (see how silly it is?)
I Still find Bruno quite comical.
September 23rd, 2008 at 2:48 pm
Right back at ya, Patricia:
Subject: Red versus Blue comparison
Subject: Comparisons
I’m a little confused. Let me see if I have this straight…..
* If you grow up in Hawaii, raised by your grandparents, you’re ‘exotic, different.’
* Grow up in Alaska eating moose burgers, a quintessential American story.
* If your name is Barack you’re a radical, unpatriotic Muslim.
* Name your kids Willow, Trig and Track, you’re a maverick.
* Graduate from Harvard law School and you are unstable.
* Attend 5 different small colleges before graduating, you’re well grounded.
* If you spend 3 years as a brilliant community organizer, become the first black President of the Harvard Law Review, create a voter registration drive that registers 150,000 new voters, spend 12 years as a Constitutional Law professor, spend 8 years as a
State Senator representing a district with over 750,000 people, become chairman of the state Senate’s Health and Human Services committee, spend 4 years in the United States Senate representing a state of 13 million people while sponsoring 131 bills and serving on the Foreign Affairs, Environment and Public Works and
Veteran’s Affairs committees, you don’t have any real leadership experience.
* If your total resume is: local weather girl, 4 years on the city council and 6 years as the mayor of a town with less than 7,000 people, 20 months as the governor of a state with only 650,000 people, then you’re qualified to become the country’s second highest ranking executive.
* If you have been married to the same woman for 19 years while raising 2 beautiful daughters, all within Protestant churches, you’re not a real Christian.
* If you cheated on your first wife with a rich heiress, and left your disfigured wife and married the heiress the next month, you’re a Christian.
* If you teach responsible, age appropriate sex education, including the proper use of birth control, you are eroding the fiber of society.
* If , while governor, you staunchly advocate abstinence only, with no other option in sex education in your state’s school system while your unwed teen daughter ends up pregnant , you’re very responsible.
* If your wife is a Harvard graduate lawyer who gave up a position in a prestigious law firm to work for the betterment of her inner city community, then gave that up to raise a family, your family’s values don’t represent America’s.
* If you’re husband is nicknamed ‘First Dude’, with at least one DWI conviction and no college education, who didn’t register to vote until age 25 and once was a member of a group that advocated the secession of Alaska from the USA, your family is extremely admirable.
OK, much clearer now.=============
September 23rd, 2008 at 2:49 pm
Yaaay Sarah!
Oh, no, wait…doesn’t that mean you hate women, and dudes, and babies, and regular folks with values??
September 23rd, 2008 at 2:54 pm
I love Bruno. and he speaks life. You speak doom and gloom. All you do is attack with no answers. Where we come from in Ohio you are called hate mongers. Bruno speaks life. By the way I am a Democrat who will vote for Sarah
September 23rd, 2008 at 2:55 pm
Sara Palin and John McCain are real live people. You are judged by the company you are with. Obama and the Left Wing are around holly wood perverts, communists animal rights terrorists. Muslim terrorists and the extreme gay rights anti christians. I rest my case
September 23rd, 2008 at 2:59 pm
Gloria,
I think it’s YOU guys who are doom and gloom.
Listen to yourself,
” holly wood perverts, communists animal rights terrorists. Muslim terrorists and the extreme gay rights anti christians.”
Fear, Terror the blacks are coming, the gays are coming,
the brown people are coming, the blue vans are coming
for your fellow Americans.
I’m sorry for you.
The hatred is just oozing.
September 23rd, 2008 at 3:03 pm
Sarah, you are so biased… We know Sarah Palin’s personal life and love her for it, facing challenges and overcoming them and achieving greatness. That’s how America is defined. Every time you try and belittle Palin, you are only opening our eyes to the fact that hey… she represents me, my neighborhood, community, family, etc. who are not perfect but try to overcome their obstacles by being responsible and moral. If anyone tries teaching my 5 children sex education in Kindergarten or any other grade without my explicit permission and knowledge of what they are teaching… they will hear it from me. And wow, Obama graduated from Harvard? I can hardly relate. Don’t teach abstinence or taking responsibility for getting pregnant? just kill them off and if they survive an abortion? Kill them anyway. Impressive for a sick, immoral future. Tell me more about his Christianity? Please! I’m dying for any sense of morals. He’s married for 19 years but believes in abortion and killing a live baby? You can’t pick and choose which Christian morals make him honorable.
September 23rd, 2008 at 3:45 pm
and thanks Patricia for the post on Obama’s wife.. it sounds like she really sacrificed to stay home with her children! Please, more like steal money to live the life of luxury at everyone else’s expense.
September 23rd, 2008 at 3:50 pm
It’s amazing that ALL the lies told about Obama were started by the same people who smeared McCain, saying that he had an illegitimate black baby, was a KGB agent, gave troop movements to the Viet Cong,…Blah, blah.
I guess when you have NOTHING else, all you can do is go to liberal sites and spread the lies.
I just don’t know who’s worse, those who know they are lying, or those who just repeat anything they hear.
September 23rd, 2008 at 3:54 pm
ADD: I can tell you that Barack and Mee-chele dont give their kids Christmas presents.
September 23rd, 2008 at 4:05 pm
The Definition of Liberalism: a mindset which requires no action on the part of the individual; the use of an unlimited monetary supply to correct any difficulty; blame others if the difficulty remains difficult.
September 23rd, 2008 at 4:12 pm
The Definition of ‘The Conservative’:
Someone who posts his own uniformed view as fact.
P.S. Obviously, I am referring to the poster ‘The Conservative’, not to one who considers himself a conservative, in general
September 23rd, 2008 at 4:23 pm
I wish our politicians were as pure as Sarah and OldLefty think the lefties are.
I can’t believe someone actually has the notion that either party in Washington is without fault.
Must feel good living in laa laa land.
September 23rd, 2008 at 4:37 pm
Funny thing is, I have always been more critical of Democrats,(I am after all, Lefty, not Demy)) but this is amazing to me that when Rush Limbaugh charges people to post, (I don’t know about ANYBODY else), and Alan provides this site for you to insult him for free, It’s all we can do to counter all the slurs and smears.
You might not have the time to scold your own side on the right wing sites if Liberals were all over repeating EVERY smear that Bush and Rove spread about McCain, and EVERY tabloid rumor about PALIN.
Although David Sirota had an excellent column taking BOTH sides to task for the bailout in Monday’s Denver Post.
September 23rd, 2008 at 5:24 pm
And by the way, The Conservative,
“As Mankind becomes more liberal, they will be more apt to allow that all those who conduct themselves as worthy members of the community are equally entitled to the protections of civil government. I hope ever to see America among the foremost nations of justice and liberality.”
George Washington
September 23rd, 2008 at 5:27 pm
[...] the plan he proposed specifically [...]
September 23rd, 2008 at 6:14 pm
T Mason: “I wish our politicians were as pure as Sarah and OldLefty think the lefties are. I can’t believe someone actually has the notion that either party in Washington is without fault. Must feel good living in laa laa land.”
T, you’re the one who refuses to hold your party members accountable. It’s one thing to require they be “without fault,” but it’s another to be completely blind to the faults of the last 8 years.
Eight years when Republicans have been in power.
But wait, that’s not entirely the case. They had the power when Clinton was in the White House, as well. That’s how we got NAFTA.
September 25th, 2008 at 10:19 am
Oldlefty quotes our first prez:
Bah – just another leftwing commie loon who drank too much kool aid.
If you want to quote a hero, quote Rush Limbaugh. He would have been in ‘The Nam’ if it had not been for the fact that he had an anal cyst!
September 25th, 2008 at 10:39 am
The Jacobin Left is another but Liberal. Liberal stood for Liberty and Freedom. Equal dignity of people.
The Jacobin Left stands for tryanny and control. Equality of poverty. Conformity of thought.
Mankind’s progress is not assured in any one direction but a continual struggle between Freedom and Collectivism.
The Left today is clearly on the Freedom-Losing side.
September 25th, 2008 at 11:46 am
[...] original Paulson plan was never going to fly. Here’s how they [...]
September 28th, 2008 at 10:26 pm
Idaretosay Jacob %-PPP
December 17th, 2008 at 12:34 am