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  • Morning Bell: The Left's Crony Capitalism Exposed

    In 2004, after a tip from a whistle blower who was later fired, the Office of Federal Housing Enterprise Oversight (Ofheo) issued a report finding that the government-sponsored entity Fannie Mae had engaged in Enron-like accounting machinations that allowed Fannie to overstate its earnings and underestimate the risk the company faced. The accounting wizardry Fannie engaged in was designed so that Fannie could meet profit targets to maximize bonus payments to company executives like Clinton administration deputy attorney general Jamie Gorelick and Carter administration assistant director for domestic policy Franklin Raines.

    For years, conservatives have been critical of how Fannie, and Freddie Mac, have leveraged their government-sponsored advantages (including exemptions from state and federal taxes, lower capital requirements, and the ability to borrow at rates well below those paid by private companies), to create a co-monopoly in the housing finance sector. When Fannie’s accounting scandal came to light in 2004, conservatives pushed hard for reforms to phase out Fannie and Freddie. Led by former Walter Mondale and Barack Obama campaign adviser James Johnson, Fannie and Freddie pushed back hard, raising millions of dollars for members of the relevant oversight committees and opening up “Partnership Offices” that funneled money into various housing projects in districts of key members of Congress.

    Fannie also bought off activist groups such as the corrupt Association of Community Organizations for Reform Now (ACORN), which has been indicted, multiple times across the country, for vote fraud (Obama worked closely with ACORN as a street organizer in Chicago). Fannie’s lobbying efforts paid off as liberal politicians such as Sen. Chuck Schumer (D-N.Y.) and Rep. William Clay (D-Mo.) worked to kill any real reform of Freddie and Fannie. The Washington Post reports: “In an internal memo in 2004, Fannie Mae executive Daniel H. Mudd affirmed what the company’s critics had long contended: In the political arena, ‘we always won’ and ‘we took no prisoners.’”

    Fannie was created during the New Deal to make homes more affordable for lower- and middle-income Americans. Freddie was added years later for the same purpose. Fannie and Freddie have long outlived their purpose as the market for repackaging loans as securities is now well developed. When the housing market is booming, they are not needed, and they have both gone well beyond their original mission and are now backing loans for wealthy (witness Speaker Nancy Pelosi’s continued efforts to raise the cap on the size of the loans that Fannie and Freddie can buy).

    Many parts of the bill the Senate passed last week only continue the worst aspects of the crony capitalism at the hard of Freddie’s success. This is especially true of the Community Development Block Grant funds that have long been a goal of partisan housing activist groups like ACORN. There is an opportunity here to use the recapitalization the White House is now proposing to re-organize housing finance by breaking up Fannie and Freddie and creating several smaller truly private entities that can compete.

    Quick Hits:

    Posted in Ongoing Priorities [slideshow_deploy]

    52 Responses to Morning Bell: The Left's Crony Capitalism Exposed

    1. LYNN WILLIAMS EL PA says:

      Once again it is clear that this country is in trouble not from the people but from the people we send to represent us. when will we get smart enough to quit being Republicans or Democrates but "We the People"?

    2. Paul Able, Little Fa says:

      I enjoy reading these articles, but don't you proof read anything? There are wrong words in nearly every post.

    3. Mark,houston says:

      "Lynn" your exactly right,unfortunatly we always here people say the same thing " When will washington realize that it is 'we the people'".Well , it is we the people , it always has been . So when will "we the people" finally stand up and with one booming action take OUR country back ? victory over the problems facing this great society will not be found in washington but within ourselves . we must get the courage to dump these bozos who say they represent us.forget "republican",forget "democratic" but remember AMERICA!

    4. ACORN is busted, USA says:

      You all still don't get it, do you?

      http://www.nytimes.com/2008/07/09/us/09embezzle.h

    5. Pingback: Fortinbras :: Morning Bell: The Left’s Crony Capitalism Exposed » The Foundry :: July :: 2008

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    11. Mike Moore, Pittsbur says:

      In reading your article, I have to conclude that no Republican or conservative ever lobbied for Freddie or Fannie – highly unlikely. And that although the Republicans have controlled Congress since 1994 and the White house since 2001, that the Democrats somehow managed to block all efforts to reform Freddie and Fannie – once again, highly unlikely. Sounds to me like this blog is all about blaming those not in power in an attempt to deflect the fact that those in power (the Republicans) refused to reform these organizations. In other words, Republicans seldom practice what they preach.

    12. Pingback: Michelle Malkin » Crony capitalism–and a Jamie Gorelick update

    13. Edwin Buck, Albuquer says:

      When you're playing with someone else money, you can be a high roller and bet as much as you can. I'm sure that if these people were playing with their own money, they would be on the conservative side of things.

    14. Steve Gilmore, India says:

      How could we have the largest TAXPAYER bailout of the S/L's and banks in the 1980's just 4 years after they deregulated the mortgage lending industry, and then they continue to deregulate and allow for 110 – 125% loans and not require lenders to verify borrowers income and capability to repay these loans?

      Then to top that off they took the independent appraisers and made them salaried employees of mortgage companies by enacting the direct endorsement program allowing for in house staff appraisers. No matter how many foreclosures you have if the loan is backed with adequate collateral then the lose would be minimum if any lose at all.

      Partial post from msnbc blog:

      Freddie Mac and Fannie Mae helped to eliminate the honest appraisers so to artificially inflate the home prices for higher profit, The Office of Thrift Supervision knew it, FHA/HUD had a HUGE hand in it. Mortgage Guaranty Insurance Corp. knew it.

      In the late 1980's the House Government Operation Committee said: "If sound valuation practices are not followed, HUD"S risks are increased." Yet they continued deregulating.

      Why? Because instead of being punished, everyone gets bonuses.

      I was put out of business because I tried to protect the public from exactly what is happening now, I have spent the last 20 years trying to get the MEDIA and Congress to address this issue.

      I cannot print a web site but go to http://appraiserspetition.com/
      How can a problem that was blamed for 1/2 of the LAST taxpayer bailout of these crooks STILL be a problem today? Your Congress and the MEDIA

      This is a letter I received when trying to get help as an appraiser in Texas.

      Our Congress not only knew this second bubble would bust they created the whole thing.

      Forgive my simplistic view, but if a mortgage has adequate collateral there would be very little to no loss to all, so why did Congress eliminate the honest appraisers that refused to succumb to the pressures to hit the "right numbers" in the 1980's after the last bailout?

      HENRY B GONZALEZ, TEXAS. CHAIRMAN

      BRUCE F VENTO. MINNESOTA CHARLES E SCHUMER. NEW YORK KWEISI MFUME, MARYLAND JOHN J. UFALCE. NEW YORK MAXINE WATERS. CALIFORNIA HERBERT C. KLEIN. NEW JERSEY CAROLYN B. MALONEY.NEW YORK PETER DEUTSCH, FLORIDA LUIS V. GUTIERREZ. ILLINOIS BOBBY L RUSH, ILLINOIS LUCILLE ROYBAbALLARD. CALIFORNIA THOMAS M. BARRETT. WISCONSIN ELIZABETH FURiiE. OREGON NYOIA M VELAZQUEZ, NEW YORK ALBERT RUSSELL WYNN. MARYLAND CLEO FIELDS. LOUISIANA MELVIN L WATT NORTH CAROLINA

      U.S. HOUSE OF REPRESENTATIVES

      SUBCOMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

      OF THE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS

      ONE HUNDRED THIRD CONGRESS B303 RAYBURN HOUSE OFFICE BUILDING WASHINGTON, DC 20515-6052

      MARGE ROUKEMA. NEW JERSEY DOUG BEREUTER. NEBRASKA THOMAS J. RIDGE. PENNSYLVANIA RICHARD H. BAKER. LOUISIANA CRAIG THOMAS. WYOMING JOE KNOLLENBERO. MICHIGAN RICK LAZIO. NEW YORK . ROD GRAMS, MINNESOTA SPENCER T. BACKUS III. ALABAMA MICHAEL N. CASTLE. DELAWARE DEBORAH PRYCE. OHIO TOBY ROTH. WISCONSIN

      BERNARD SANDERS. VERMONT (202) 225-7054

      May 18, 1994

      Mr. Steve G

      4820 Westgrove #2205

      Dallas, Texas 75248

      Dear Mr. G:

      I am writing in response to the recent letter regarding your unfortunate experiences as an appraiser in the past few years. First of all, I commend your meritorious honesty as a certified appraiser in the state of Texas. I sympathize with you and find it a shame that the fiduciary relationship you attempted to maintain with your employers went unnoticed and unrewarded.

      Unfortunately, the Congress cannot legislate honesty throughout the banking and appraisal industry. I am confident that there are many respectable banks and mortgage companies who are in great need of an appraiser with your integrity. Rest assured that I always fight to uphold the FHA guidelines and I will continue to maintain the most effective way to protect borrowers and deter unfair lending practices.

      Thank you for contacting me personally on this matter. With every best wish I remain

      Henry B. Gonzalez Chairman

      Of course they couldn't regulate HONESTY in the industry, the PAC's and lobbyist's were paying them to de-regulate it.

      Again, how can something that was declared; "a serious national problem costing taxpayers billions…" by a Congressional subcommittee in 1987 still be a problem TODAY?

      One real simple question:

      How does one:

      "maintain the most effective way to protect borrowers and deter unfair lending practices. "

      If one cannot regulate HONESTY in the banking and appraisal industries?

      Why (sorry, I lied about one question) when a Congressional subcommittee, chaired by Con. Doug Barnard, Jr, said:

      "…that it is extreme pressures on appraisers from real estate lenders and borrowers that MOST often cause bad appraisals."

      "Alarming numbers of lending institution officials regard appraisals as an obstacle to be overcome or a rubber stamp…"

      "While appraiser ineptitude is occasionally responsible for inadequate appraisals, MOST abusive practices result from explicit or implicit threats against appraisers, by real estate lenders and borrowers, that their services will be discontinued if they fail to provide the "right" numbers."

      did FHA/HUD enact the direct endorsement program allowing lenders to hire in-house staff appraisers, in 1985?

      They just took an independent entity and made him an employee of someone who viewed him as an "obstacle to be overcome"

      If the lenders had such a strong adverse effect on appraisers when they were independent contractors, what are they going to do now that the CONGRESS made them salaried employee's?

      Again go to the petition, HOW is this STILL a problem TODAY.

      YOUR Congress and a media owned by big business.

      And I have been after everyone from Congress to Presidents and especially THE MEDIA every since, for if all mortgaged home loans had ADEQUATE collateral and not backed by an artificial market this wouldn't / COULD'T happen,

      That's the whole point in having an independent appraisal. To make sure the bank, the borrower and MOST important the TAXPAYER is protected from unnecessary losses.

    15. Steve Gilmore, India says:

      I believe this is the proverbial barn door being closed after ALL the livestock are gone and butchered for market.
      http://www.ots.treas.gov/docs/4/481084.pdf

      When I was still in Dallas seeking help as afore printed letter shows, the OTS declined to ever step in and do anything.

      "Steve, we receive 4 to 5 calls just like yours every week, but our hands are tied, in fact they are trying to do away with all appraisers all together."

      Instead they just rendered the appraiser to a useless lap dog, who either gave what the lender/realtor what they wanted or they were eliminated.

      Because I refused to commit federal banking fraud by knowingly over evaluating real estate prices, so to protect the public from unnecessary losses, I was eliminated.

      We as appraisers were told/ordered to report indications of fraud, waste and mismanagement, yet when I did you can see what I ran into, again refer to above letter.

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    18. Willys says:

      Congress… 535 reasons to support term limits. NEVER vote for an incumbent.

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    44. conflated says:

      I agree with you completely. I definitely conflated them in a manner that doesn't look too good when linked from a site like Kotaku. The post serves as an introductory thought space for me to address both issues (games v escapsim, games as propaganda). I'd like to note that I don't say that all video games aren't escapist: "Video games don't *necessarily* do this" is what I wrote. Also,
      http://waronyou.com

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    48. The Sandlers and ACO says:

      The Sandlers and ACORN's connection is now publicly known,but the Whistleblowers of ACORN 8, a group of ACORN National Board Members, State and Local leaders of Acorn have been requesting Truth, Transperancy & Accountability for the last 9 months.

      It is time for investigations into ACORN and all of the dozens of shell organizations that house US Dollars. Once that investigation is undertaken in a serious fashion you will find that ACORN will fall like a house of cards.

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    51. home loan Kansas Cit says:

      Oh! This is awesome! Thanks for putting to rest a few

      misunderstandings I have read regarding this lately.

    52. Pingback: Barney Frank admits truth about Fannie

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