Archive for the ‘Economy & Budget’ Category

“Fannie and Freddie Forever”

Following the release of the 2,000-page Dodd-Frank financial regulation bill last Friday, fixed-income portfolio manager Christine McConnell told Businessweek ^[1]: “Clarity is good. [Once financial institutions] understand the rules of the road they’ll be able to accommodate their business models.” There is only one problem: passage of the Dodd-Frank bill doesn’t provide any clarity. In fact, it does the exact opposite. The New York Times ^[2] explains: “The bill, completed early Friday and expected to come up for a final vote this week, is basically a 2,000-page missive to federal agencies, instructing regulators to address subjects ranging from derivatives trading to document retention. But it is notably short on specifics, giving regulators significant power to determine its impact.”

In other words, this law is going to be continually rewritten by federal bureaucrats for years to come. And the continued uncertainty it will create is just the beginning of its faults ^[3]:

Permanent Bailout Authority:
The Dodd-Frank bill creates an “orderly liquidation” process by which regulators are empowered to seize financial institutions that they believe are in danger of failing and liquidate them. While the lack of a broadly accepted process for closing down large financial institutions helped lead to the massive bailouts of 2008 and 2009, this liquidation process is problematic. Federal regulators are granted broad powers to seize private firms they feel are in danger of default, and these powers are subject to insufficient judicial review. Such governmental discretion to seize private property is constitutionally troubling.

Trusting the Same Regulators that Failed Last Time:
The legislation establishes a new 10-member Financial Stability Oversight Council composed of regulators that would be responsible for monitoring and addressing system-wide risks to the financial system. This council would also have nearly unlimited powers to draft financial firms into the regulatory system and even force them to sell off or close pieces of themselves. Unfortunately, it is extremely difficult to detect systemic risk before a crisis has occurred, and the council would serve mainly as a group to blame for failing at an almost impossible task. On the other hand, its huge powers are much more likely to destabilize the financial system by stifling innovative products while failing to detect dangers posed by existing ones.

Brand New Innovation Killing Regulators:
The bill also creates a new Bureau of Consumer Financial Protection with broad powers to regulate the financial products and services that can be offered to consumers. The new agency would nominally be part of the Federal Reserve System, but it would have extraordinary autonomy. This autonomy would impede the efforts of existing regulators to ensure the safety and soundness of financial firms, as rules imposed by the new agency would conflict with that goal. For many consumers, this would make credit more expensive and harder to get.

Micromanaging the Market:
The conference committee also added a form of the “Volcker rule” which would largely prohibit any bank or other institution with FDIC-insured deposits from undertaking proprietary trading or from owning or sponsoring hedge funds or private equity funds. While the legislation does reject the near-total ban on such investments, the difference between legitimate and traditional activities and those the Volcker rule seeks to ban would be difficult, if not impossible, to determine. Attempting to do so would require an intrusive, expensive regulatory compliance system that by its nature would micromanage day-to-day activities.

Fannie and Freddie Forever:
Despite much rhetoric about ending bailouts, the bill does nothing to address Fannie Mae and Freddie Mac, two of the largest recipients of federal bailout money. These two government-sponsored enterprises, now in federal receivership, helped fuel the housing bubble. When it popped, taxpayers found themselves on the hook for some $150 billion in bailout money. The failure to address their future is a serious error and shows just how hollow are claims that this agreement will prevent future crises.

These are just some of the major flaws in a bill that is just one House and Senate vote away from President Barack Obama’s desk (a fuller list can be found here ^[3]). But final passage is not as sure today as it looked Friday. The passing of Sen. Robert Byrd (D-WV) ^[4] leaves the majority one vote short of the 60 needed to move for a final vote. In addition, the insertion of an estimated $20 billion in new taxes ^[5] has Sen. Scott Brown (R-MA) reconsidering his original vote in favor of the measure. Scott released a statement ^[6] explaining: “My fear is that these costs would be passed onto consumers in the form of higher bank, ATM and credit card fees and put a strain on lending at the worst possible time for our economy. I’ve said repeatedly that I cannot support any bill that raises taxes.”

Explaining that the Dodd-Frank bill would force banks to either take on more risk to recoup earnings diminished by reform or behave too conservatively in order to avoid losses, financial analyst Chris Mutascio summarized ^[1] the ultimate effect of the legislation: “Pick your poison—neither tastes good to us and we believe neither is particularly good for the economy and job growth.”

Quick Hits:

• This morning, the Missile Defense Agency and U.S. Army soldiers of the 6th Air Defense Artillery Brigade successfully conducted a successful intercept test ^[7] for the Terminal High Altitude Area Defense (THAAD) missile defense element of the nation’s Ballistic Missile Defense System.
• Shallow water drillers tell CNN that President Obama’s deep water oil drilling ban has become a stealth ban on all Gulf drilling ^[8] forcing hundreds of layoffs with many more on the way.
• House Majority Whip James Clyburn (D-SC) is trying to insert a provision into the war supplemental funding bill ^[9] that would compel volunteer firefighters to join unions, threatening the survival of America’s nearly 26,000 volunteer fire departments.
• The lead attorney in the victorious Chicago Second Amendment case promises ^[10]: “There will be future cases, I will be bringing cases in the days and weeks to come.”
• President Obama’s political director Patrick Gaspard failed to disclose ^[11] that he was slated to receive a nearly $40,000 payout from the Service Employees International Union (SEIU) while he was working in the White House.

URL to article: http://blog.heritage.org/2010/06/29/morning-bell-the-dodd-frank-assault-on-economic-recovery/

URLs in this post:

[1] Businessweek: http://www.businessweek.com/investor/content/jun2010/pi20100627_761667.htm

[2] The New York Times: http://www.nytimes.com/2010/06/27/business/27regulate.html?hp

[3] its faults: http://www.heritage.org/Research/Reports/2010/06/Financial-Reform-in-Congress-A-Disorderly-Failure

[4] passing of Sen. Robert Byrd (D-WV): http://blog.heritage.org/2010/06/28/financial-regulation-after-robert-byrd/

[5] an estimated $20 billion in new taxes: http://www.washingtonpost.com/wp-dyn/content/article/2010/06/28/AR2010062805406.html

[6] statement: http://scottbrown.senate.gov/public/index.cfm/news?ContentRecord_id=32bc2413-6186-448e-8c82-4586544f8eea&ContentType_id=096fa988-9da3-4a1a-87bc-4ee9d9c2ef47&c705917c-84f4-49fd-a587-420cd0fcc26f&Group_id=c1234e1e-8810-4dac-b695-9f5e924bae2d&MonthDisplay=6&YearDisplay=2010

[7] a successful intercept test: http://www.mda.mil/news/10news0008.html

[8] stealth ban on all Gulf drilling: http://money.cnn.com/2010/06/25/news/economy/shallow_drilling_ban/index.htm

[9] insert a provision into the war supplemental funding bill: http://www.humanevents.com/article.php?id=37738

[10] promises: http://blog.heritage.org/2010/06/28/mcdonald-v-chicago-an-exclusive-interview/

[11] failed to disclose: http://www.politico.com/news/stories/0610/39110.html

Published on TheHill.com on April 27, 2010

The Republican Party is showing some starch by standing up to Harry Reid on the financial regulation bill. We can only hope they keep it up.

The Obama administration is selling a bill of goods inside the Beltway by saying that the GOP is getting into bed with the worst of Wall Street by opposing its bill. The truth is that the rest of the country fears big government a lot more than they fear big business and recognizes that Goldman Sachs and the other Wall Street giants feed at the Democratic trough as much or more than at the Republican one.

Republicans just need to keep pointing out that Goldman was the biggest donor to the Obama campaign, contributing $970,000 from its employees and PACs. (The combined donations of the staff and faculty of the University of California totaled $1.5 million, but they are hardly a coherent corporate entity like Goldman).

The financial regulation bill is a disaster in three major respects:

1. It gives incentives for irresponsibility by, in effect, guaranteeing banks’ survival by establishing a $50 billion rescue fund. In doing so, it gives the large banks a huge advantage and extends to them the same kind of implicit guarantee that once encouraged the likes of Freddie Mac and Fannie Mae to go on their lending spree. It is a key step in the conversion of big banks into quasi-public institutions, ultimately controlled by the government, levers through which the public sector can control the private.

2. By vesting the secretary of the Treasury with the power to seize — in a hostile takeover — any financial institution he deems too big to fail, it puts at risk of public takeover every such company in the nation. Granted, the FDIC now has the power to seize any bank. But the FDIC is headed by a nonpartisan board with a heritage of nonpolitical regulation. The secretary of the Treasury is an arm of the president. If a political appointee has the power to take over any financial institution — bank or non-bank — fire the board, replace the management, wipe out stock equity and sell off pieces of the company, it gives him a power that is so awesome it can undermine our democratic freedoms. What corporate executive will feel free to donate to Obama’s opponents or to speak out against the administration when doing so could cost him his job and his bank?

3. The newly established Consumer Financial Protection Agency will have the power to approve or reject any loan instrument offered by any company in the land. A mattress company that wants to let customers go 60 days before paying will have to get CFPA approval before extending credit. The bureaucratic bottleneck will slow economic activity, encourage corruption and retard consumer spending. It will be big government at its worst.

The entire political premise of the Obama administration’s efforts to pass this bill is flawed: Republicans will not be blamed for protecting the banks if they vote down this bill. Voters will not believe that the GOP is in cahoots with Wall Street. They will understand that the Republicans in Congress protected them from the massive growth of government.

Obama’s power-grabs have been so frequent and so blatant that he has no credibility on this subject. Voters expect him to be fighting to grow government and to be hostile to private enterprise. And they are wise to his close connection with Wall Street despite his occasional forays into populism.

This is a bill the Republican Party can kill with political impunity, and hopefully they will have the courage to do so.

The current administration is determined to instigate Financial Reform against the “evil” banks and Wall Street, What is suspicious is their real motive, and their redefinition of the word “reform” to mean “control”. By not wanting a crisis to go to waste, they are attempting to gain control over our capital and financial system for their purposes without fixing the real problems of “The Great Recession”.

To start, we need to examine the causes of the current economic crises; in the Fall of 2007 our economy was in a sustained growth period with low unemployment, and with the “surge” the Iraqi War was looking winnable! Then partisan politics kicked in. The political schemers knowing that they couldn’t use the war to gain the US Presidency decided to use the “1992 model” and use the economy as the main issue. A campaign using a chorus of unison talking points was started to jawbone how bad the economy was. This began the erosion of consumer confidence during the holiday season and the economy began to stall. The economy tightened due to uncertainty. Then the effects of the “Sub Prime” or “Junk” mortgages forced upon the banks under the “Community Reinvestment Act” hit and the downward spin began. This cascade increased. slowing the economy, slowing consumer purchases, slowing production, and slowing real estate sales, The people with “balloon payment” mortgages could not refinance their loans, causing defaults and foreclosures. With all this bad paper being sold upwards and accumulated in the big banks, the capital holdings of these big banks became questionable and the bank funds froze, credit halted, choking off funding to industry, and causing a stock market crash that devalued our overvalued stocks, pensions, and property. The world wide financial system almost came down, resulting in the suspension of commerce. They tried to bring back the economy by bail-outs, pork spending, social programs, industry takeovers, cover ups, wage controls, excuses, and happy talk.

Now, the “Finance Reform Act” proposed does nothing to fix the politics and greed that caused the problem, and just grows more government. To fix the real problems we must demand that:

• No bank should be too big to fail. Community, State, National, and International Banks should be kept separate, and not allowed to buy or control banks outside of their class.
• Banks should not be forced to accept sub prime or high risk mortgages,
• Loans and mortgages with balloon interest rates should be outlawed.
• Banks or brokers issuing a loan should guarantee and retain responsibility for that loan.
• Loans should not be sold to other financial institutions without the loanee’s approval.
• The churning of financial and real property accounts by brokers should not be allowed.
• The award of any broker commission should only be granted for the original sale.
• All financial instruments must be separated or bundled by type and risk for any resale.
• The Community Reinvestment Act should be repealed.
• Freddie Mac and Fannie Mae should be reorganized because they have been mismanaged and under audited while bribing Congress to see nothing wrong.
• Felony indictments should be issued for all persons involved in illegal, deceptive acts in the application, issuance, resale, management, auditing, or governance of financial instruments.

We must repair our greed abused financial system by adopting the above, and by fixing the political abuse with our votes. We must resist this administration’s attempt to gain control over our capital and our financial system, so they can redistribute the wealth.

REMEMBER IT’S OUR MONEY, NOT THEIR MONEY!

JR Lynn April 20, 2010

Obama pushes for financial reform, suggesting that Wall Street’s excessive risk taking is to blame.  What is not addressed in the reform plan is any reform of Fannie and Freddie or Community Reinvestment Act that pushed under-qualified home buyers into mortgages they could not afford, facilitated government-backed instruments that lower perceived risk to investors and was driving force in housing bubble.

Gretchen Carlson interviews Valerie Jarrett, senior advisor to Obama:

Peter Schiff explains:

Wisconsin GrandSons of Liberty

We the people are the rightful masters of both Congress and the courts, not to overthrow the Constitution but to overthrow the men who pervert

the Constitution.” Abraham Lincoln

~~~For Immediate Release!~~~~~~~

Contact:  larryg@wisconsingrandsonsofliberty.com
Phone:  414-465-8683

Laid Off & Tea’d Off Rally

State Capitol grounds, Madison

April 16th — 8am to Noon

Franklin  To highlight Wisconsin’s lost jobs and problematic unemployment and to protest the state’s job-killing, heavy business-tax policies; Wisconsin GrandSons of Liberty announces an April 16^th rally in Madison from 8am to noon.  This follows on the heels of the Tax Day Tea Party. The Laid Off & Tea’d Off Rally expects to attract people from all industries who have been laid off, forced to retire or who are former business owners currently looking for employment.  Also invited are workers, employers. and family members concerned about job-killing actions like Combined Reporting, Cap & Trade, and Card Check, as well as those whose unemployment benefits are running out.

Thousands of Wisconsinites are affected by the economic downturn and onerous business environment the Doyle Administration created.  This is a chance for the people to speak out and the legislators to take notice of them.

# # #

~~~~~~~~~~~~~ PRESS RELEASE ~~~~~~~~~~~

Content copyright 2010              
www.WisconsinGrandSonsofLiberty.com All rights reserved

A Message from Jim Mulleady, read to Senator Feingold while he was at a Listening Session in St. Germain, Saturday, March 20, 2010:

You are not listening.

Yes, you visit all 72 counties in Wisconsin every year. You should be applauded for that.

But, you are not listening.

70% of Americans do not want this.

We will not forget the “Cornhusker Kickback”. We will not forget the “Louisiana Purchase”, “Gator Aid”, “deem and pass”, $100 M for Connecticut hospitals, special deals for Massachusetts, Montana and others. We will not forget the handing over of judge seats, NASA Directorships and the rest of the bribes given for this poor piece of legislation.

We certainly will not forget the way that Congress ignored Article 1, Section 7 of the Constitution.

We will not forget the $500B cuts to Medicare. We will not forget the CBO’s projection that this bill will cut the deficit by $13B.

We have not forgotten that stimulus plan of 2009 was to limit unemployment to 8%. We have not forgotten that Medicare costs 10 times what the CBO projected. Congress and the CBO do not have a very good record of forecasting.

We have not forgotten that the National Debt has risen by a factor of 3 under this President and this Congress.

You support this bill. You believe that this bill does not go far enough and that there should be a single payer option. This county, this state and the people of this nation disagree with you. It is private enterprise that built this nation. It was not the government. It was liberty that made this the most powerful nation the world has ever seen. It was limited government and a government by the people, for the people that distinguished us from the rest of the world.

Now we are facing an economic crisis far worse than anyone even realizes. We are close to Moody’s lowering our bond rating. The rest of the world has lost faith in our ability to pay our bills. When each living breathing American owes $40,000, I cannot blame the rest of the world.

And you have decided not to listen.

You and Washington do not know better than the rest of us. You and Washington have gotten us into this mess. You have the opportunity to stand up against the bribes, appointments, Chicago style politics of thugs and intimidation. You can stand up and say “I will not support the President. I stand against the status quo of closed doors, position giveaways and special interests.”

Nancy Pelosi said when she became Speaker of the House that she was going to “drain the swamp”. The process used with this bill and the promises made, positions granted will be made the focus of 2010 and 2012 elections and I will predict that this will make Watergate look petty. Are you going to put aside your personal views and vote the way of the people? Or are you going to be part of the swamp that is to be drained?

Click to News of the North Article for complete report, thorough coverage with photos and video from yesterday’s event in St. Germain:
http://newsofthenorth.net/article/Top_Stories/National/Sen_Feingold_faces_wrath_on_health_care_bill_on_eve_of_vote/37758

ST. GERMAIN – Sen. Russ Feingold came to St. Germain on Saturday, March 20, for his 32nd “listening session” of 2010 and 1,256th since 1993 and heard a lot of anger from a sometimes raucous and hostile crowd.

About 100 people showed up at the Community Center at noon for the one-hour meeting and, as expected, health care was the big topic.

Several people made statements, most of which were critical of the health care bill now before the House, or interrupted the Democratic Wisconsin senator with catcalls although appreciative applause also broke out at times from some in the audience who supported the health care legislation.

But for the most part it was a confrontational session as speaker after speaker blasted what they see as government takeover of the health care system. Outside a few protesters carried signs opposing “Obama care.” Another said, “Are you listening?”

The placard-carrying critics included Rudy Fuys of Boulder Junction, who said he was “outraged by the taking of $500 billion out of the Medicare program. That’s ridiculous. Myself and many other seniors have paid for this our whole lives and it’s gone. How can they force this on the American people?”

Another critic, James Lynn of Cloverland, said, “They totally corrupted the government and it’s unconstitutional.” Loyd Black (see video clip below) questioned the senator on whether the law should apply to everyone.

Feingold defended his support of health care reform, noting that the vast majority of Americans favored universal health care. (see video clip below), and that he was standing on principles espoused during his previous election campaign.

In discussing the soaring federal deficit and the need to cut spending, he lauded passage of the Control Spending Now Act provision to cancel unspent transportation earmarks, which won Senate approval last week on an 87-11 vote. He said the amendment could save taxpayers at least $478 million a year and considerably more over time.

Feingold also lent his support to an amendment to place a year-long ban on earmarks, although the move was defeated; he likewise endorsed a plan by House Republicans to impose a year-long prohibition on earmarks.

Another subject that came up during a pre-session interview was unemployment. Feingold said the new jobs bill, which President Obama signed into law last week, includes a payroll tax break to make it a bit easier to business to hire more workers.

“But even with this bipartisan effort becoming law, we must remain focused on creating jobs and strengthening the economy. And since the new payroll tax break expires at the end of the year, more must be done. I strongly favor the approach my own jobs tax credit bill takes, which is to provide firms with a tax break for the next two years to help them expand their payroll and put people back to work.”

Other questions dealt with illegal immigration sparking a testy exchange with Kim Simac of Eagle River, a member of the Northwoods Patriots Group (see video clip below). Deficit spending and global warming also came up, but the subject that was on most minds was health care.

Dr. William Raduege, a family physician who works in Land O’ Lakes, Wis., representing the Wisconsin Medical Society, said there should be a permanent fix for what he called the flawed Medicare payment system for doctors and hospitals, without which access to care would be threatened and limited. (see video clip below)

As the health care debate winds down this weekend and the House is on the verge of an up-or-down vote, Democrats appeared confident that the measure would pass after several months of contentious debate, which has not only split both major parties but also the country, according to public opinion polls. House Democrats were quoted Sunday morning as saying they had enough votes — at least 216 are needed — to pass the bill.

Before the listening session, Feingold, a member of the Senate Foreign Relations Committee, spoke with NN.N about a new strain in U.S.-Israeli relations stemming from the Israeli government’s announced plans to expand settlements in east Jerusalem, and the growing possibility that former Wisconsin governor and Republican Tommy Thompson may run against him this fall. (see video clip below). Feingold was first elected senator in 1992 and is seeking a third term.

While other states are initiating “Freedom to Breathe Acts” to ensure that additional legislation to regulate CO2 does not occur, DOYLE and WISCONSIN are moving full steam ahead.  Now is our time to act!

SAVE JOBS!

Stop the Wisconsin Global Warming Bill!
Please Contact Your State Lawmaker Today

Americans for Prosperity CALL TO ACTION

We urge all to help send a message to our legislators to oppose Senate Bill 450 and Assembly Bill 649, which would significantly increase the cost of energy and threaten Wisconsin jobs with unaffordable global warming regulations.

Please take two minutes and CLICK HERE to send a message to your State Representative and State Senator to tell them that this legislation would have a devastating impact on Wisconsin’s economy.

Please take action today as the Legislative Committee will be meeting on Assembly Bill 649 on Monday. Thanks for your help and support.

Mark Block
State Director - Americans for Prosperity WI

Americans for Prosperity (AFP) is a nationwide organization of citizen leaders committed to advancing every individual’s right to economic freedom and opportunity. AFP believes reducing the size and scope of government is the best safeguard to ensuring individual productivity and prosperity for all Americans. AFP educates and engages citizens in support of restraining state and federal government growth, and returning government to its constitutional limits. For more information, visit www.americansforprosperity.org

“Even the Democrats who voted for the disastrous state budget are complaining about all of the hidden tax and fee increases…”