Late last week, the U.S. House passed a Joint Resolution disapproving of the FCC’s Net Neutrality regulations, which were issued by the agency late last December.  Such a Resolution through the Congressional Review Act (CRA) works to nullify actions by agencies through a streamlined procedure, which keeps amendments off, and requires only simple majorities in each body of Congress, plus the President’s signature, to take effect.

The CRA Resolution has doubtless been a contentious process.  The new Congress, with its conservative majority in the House and a stronger conservative minority in the Senate, has enabled the legislative branch to become more assertive when it comes to agency activities.  The CRA tactic reflects that change in approach.

Not surprisingly, however, its progress has broken primarily across party lines, with Republicans supporting it because they generally feel the FCC lacks the congressional authority to issue its Net Neutrality regulations in the first place; and Democrats moving against it because by and large they believe in the FCC’s regulations, no matter how they’re arrived at.

The vote passed 240-to-179.  Beyond the House vote, its progress in the Senate, and at the President’s desk – if it gets that far – remains uncertain.  Regardless, this has not stopped detractors of the Resolution to use it as yet another public forum to voice support for the FCC’s likely illegal, new regulations.

Of late, two of the louder voices against the Resolution have been former Speaker of the House, Nancy Pelosi, and Internet millionaire turned Colorado Congressman, Jared Polis.

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In the wake of recent reports that Shorebank’s financial status worsened in the second quarter, some interesting new developments have surfaced.

Yesterday afternoon, Fox Business News reported that Shorebank will now be the target of a federal investigation, to look into whether political pressure was exerted on Wall Street banks to give money to help the troubled Chicago community lending bank reach the monetary threshold needed to allow the bank to qualify for federal TARP funds.

Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program (TARP), has said that he will begin looking into whether or not top-level political operatives (e.g., Eugene Ludwig, former comptroller of the currency under President Bill Clinton) and FDIC chief Sheila Bair were involved in exerting direct pressure to force Wall Street banks such as JP Morgan Chase, Goldman Sachs, and others to give money (which now totals more than $150 million) to the ailing bank.  Interestingly enough, Shorebank has been involved in raising private capital to qualify for TARP funds despite the fact that Shorebank senior vice president Michelle Collins emphatically stated just last year that Shorebank would take “no TARP money.”

Although the Obama administration has officially denied any involvement in helping to prop up Shorebank, the rush by other banks to come to its aid has been nothing short of remarkable.  More than a few eyebrows have been raised in response to the general flurry of activity shown by other, larger banks seeking to involve themselves in helping to rescue Shorebank.

For example, Lloyd Blankfein, Goldman Sach’s chief executive, was personally involved in making phone calls to encourage other Wall Street banks to inject capital into the the failing Shorebank.  This, in a stated effort to allow Goldman Sachs to fulfill its obligations under the 1977 Community Reinvestment Act.  (Interestingly, Ron Grzywinski, one of the founders of Shorebank, was the only banker to testify before Congress in favor of the Community Reinvestment Act.)

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The Central Illinois 9/12 Project became one of the first to expose — beginning this past March on BigGovernment.com – Shorebank’s extensive green and microfinancing agendas, in anticipation of that bank’s impending bailout.  Shorebank, a Chicago-based, community-based investment bank, is focused on domestic and foreign microfinancing, is heavily engaged in the financing of “green” projects and “green” jobs, and has a host of ties to the Obama and Clinton administrations.  Most recently, we wrote in April about Shorebank seeking a “bailout” from larger financial firms that have previously received bailout money from the federal government. Congresswoman Jan Schakowsky had previously proposed that the bank receive funds from the State of Illinois to help cover its loss of capital since the beginning of the nation’s economic downturn in 2008.

As we previously wrote, Shorebank would potentially be eligible for TARP funds if it were to be recognized as a “Community Development Financial Institution.” In order to to received needed federal TARP money and prevent seizure by the FDIC, Shorebank needed to receive appropriate matching funds from private sources.  News stories have been released over the past several days indicating that Shorebank has potentially received such funding.

Shorebank has reportedly received $20 million from General Electric, $20 million from Goldman Sachs, and $20 million from Citigroup – with additional large funds being promised by J.P.Morgan Chase, Bank of America, and Morgan Stanley. Shorebank also has received funds from the Northern Trust Corporation, State Farm, and Harris N.A.  It has been reported that the bank could also receive funds from Wells-Fargo and PNC Financial Services.  Assistance from these financial institutions puts Shorebank’s raised capital from private sources within the range needed to make it eligible for TARP funds.

As we reported previously, Citigroup, Bank of America, and Chase all received tens of billions of dollars in taxpayer money from TARP.  Does this then mean that Shorebank is being bailed out by bailout money?

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On April 30th, Progressives marched on Wall Street to vilify Wall Street banks and bankers. Who organized that march? It was a group called National People’s Action (NPA), and their anti-capitalist campaign is ominously titled Showdown In America.

You might be thinking “Crap. Not another Alinsky community organizing group and its damn acronym!” – but this is one to which you need to pay very close attention. This group is at the very center of the real estate bubble-bust brought on by the dreaded CRA, and they are organizing an army of unions to march on Wall Street and blame the entirety of the economic disaster on the evil rich.

The first thing that you need to know about NPA is that their now-deceased leader, Gail Cioncotta, is credited in community organizing circles for authoring the Community Reinvestment Act. Her group is also credited with honing the tactic of storming into banks and occupying their lobbies.

Another thing you need to know is that in 2003, NPA’s sister organization, the National Training and Information Center (NTIC), was busted by the Justice Department for misappropriating millions of federal grant dollars from community development projects,  using the funds instead to train community organizers to lobby the government. On top of that, the Justice Department found that they committed fraud as they tried to cover up their actions.

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In old movies (and a lot of new ones too), there is the usual formula of romantic tension between the leading man and the leading lady.  They usually start out hating each other but ultimately find themselves drawn to each other.  This usually culminates in a climactic argument, during which the woman expresses her total contempt and disdain for the man:  “I hate you!” He then grabs her, pulls her close, and plants a big, passionate kiss on her.  She, of course, succumbs, and the two then declare their undying love for each other.

President Obama and the Democrats are engaged in this coy Love-Hate faux drama with Goldman Sachs and the rest of Wall Street.  Obama has railed continually against the “fat cats” on the Street, whom he blames loudly and repeatedly for the financial crisis.  They do, of course, bear some of the responsibility.  But wouldn’t it be nice and refreshing to hear him level
his ire at the ACTUAL main perpetrators of the crisis: Fannie Mae and Freddie Mac?   Of course, he can’t do that, because that would mean admitting fault with the social engineering of the Jimmy “My Name is Earl” Carter and Bill “Bubba” Clinton-supported Community Re-Investment Act and other misguided and destructive left-wing economic policies.

No, he’s stuck to the safe script: the surefire populist message that all of the banks are bad, Goldman is the worst of the worst, and that they need to be spanked like a Terrible Twos Terror Child.

Just one problem:  Obama accepted nearly $1 million from Goldman folks during the 2008 presidential campaign.

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The activity surrounding the controversial Consumer Financial Protection Agency (CFPA) in the financial reform legislation is really picking up these days.  But many Americans would never know it.  It seems Democrats may have learned something from the experience of the health care bill after all.  In their efforts to avert a repeat disaster of losing control of the message, they appear to be taking every step necessary to ensure that the public engages as little as possible in this debate.

But I assure you, this is a debate that the American public should engage in, pronto.

Because behind the scenes, certain lobbyists are quietly but aggressively scurrying about, pushing hard for the passage of the CFPA in a power grab by the Executive Branch that would dwarf the Health Care Reform bill and the Patriot Act.  And with the passage of the proposed CFPA, one man in particular with a history tied to some of the deepest tentacles in the financial crisis – and to the Community Reinvestment Act changes of 1995 – would gain the power to selectively manipulate the entire landscape of the financial, small business and housing markets.

Last week, we reintroduced you to an early trigger in the financial crisis, with good reason. In “Death by Senator: As Financial Reform Looms, We Revisit IndyMac,” we revisited the role that Senator Chuck Schumer’s (D-NY) very public letter played in the fall of one financial institution.  As I ended that piece, I teased that there was more to the story that would soon follow.

So, let’s pick up from June 30, 2008.

Merely days after the now infamous Schumer letter triggered a run on the bank that would total over $1.3 billion, this lengthy and scathing report was released to the public:

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In the midst of the radical social atmosphere of the 1960s, a group of Chicagoans, Ron Grzywinski, Milton Davis, James Fletcher, and Mary Houghton, came together to found South Shore Bank in the 1973 with a goal to provide loans to minority owned small businesses.

Ron Grzywinski had banking experience with Hyde Park Bank. Milton Davis was a University of Chicago employee and the Chicago leader of the Congress of Radical Equality (CORE).  James Fletcher had previously worked in President Johnson’s administration as part of the internal transition team and with the Citizen’s Action Program in the Office of Economic Opportunity.  Mary Houghton, at that time, was running a daycare program for low income families.

These four individuals had often met to discuss ways in which they could help the needs of urban society by becoming a financial intermediary for social development and community actions. These discussions led to the creation of a minority lending program at Hyde Park Bank. With the influence of Al Raby, a Chicago black rights leader, they looked for the next step to continue their goals of providing loans to small businesses in neighborhood development. Grzywinski stated, ” community-based organizations appeared to be the only organizations in society that cared about the broad range of needs that exist in urban communities”.

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In a further attack on the housing market, the New York Times recently reported that President Obama may be amending his loan modification program to make it even more difficult for defaulting homeowners to be foreclosed upon.  The Times states:

The Obama administration, under intense pressure to help millions of people in danger of losing their homes, is considering a ban on foreclosures unless they have first been examined for potential modification, according to a set of draft proposals.

That would raise the stakes from the current practice, which strongly encourages lenders to evaluate defaulting borrowers for a modification but does not make it mandatory.

Meg Reilly, a Treasury Department spokeswoman, said Thursday that the proposed foreclosure ban was “one of the many ideas under consideration in the administration’s ongoing housing stabilization efforts.” The proposal was first reported by Bloomberg News.

To be fair, the effects of this program may be minimal, with some interpreting the ban to be more about PR than anything substantive:

Laurie Goodman, a senior managing director at the Amherst Securities Group who has been highly critical of the government’s modification program, said even if the proposal came to pass, it would not be “a major change. We think there is a large public relations element to this.”

…The Mortgage Bankers Association said its members were already doing what the administration was considering.

“Lenders generally go to foreclosure as a measure of last resort, after all other options, including loan modification, are exhausted,” said John Mechem, the trade group’s vice president for public affairs.

Any enhancements the government made to the modification program would be unlikely to stem many foreclosures, said Howard Glaser, a prominent housing consultant.

Regardless of the impact however, this potential loan modification addendum adds insult to the injury of an already wrongheaded and destructive policy, and will only prolong the pain in the housing market.

The reasons for the woes in housing are quite simple.  Banks extended mortgages to borrowers that were poor credit risks, and many borrowers took out mortgages that they shouldn’t have either out of speculation or profligacy.  That the depression is throwing people out of work and keeping many jobless exacerbates the problem, in that unfortunately many who could have reasonably expected to afford their homes now cannot given their lack of sufficient cash flow.  Of course, truly prudent buyers might have saved to purchase their homes outright with cash.

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I come bearing bad news.  Reform of our financial services industry is going to be a failure.  Leave aside the preconceived notions that politicians will come up with faulty or halfhearted regulations, that they are writing bills in cahoots with the big banks or conversely ACORN & Co. or that the Obama administration in general is anti-business.

While these ideas may all have merit, the reason that financial reform will be disastrous is that all legislation points towards dealing with symptoms rather than addressing the root causes of our financial collapse. While of course the narrative in the MSM centers on greedy “fat cat” bankers taking big risks and predatory lenders taking advantage of hapless borrowers, the fact of the matter is that in every aspect of this crisis government was the major enabler.  Ironically all financial reform centers around giving government more power.

Consider housing.  As we know, under the CRA and due to the “activities” of ACORN and subsidization from our taxpayer-owned siblings Fannie and Freddie, banks granted mortgages to borrowers far riskier than they would have in an uninhibited mortgage market.  That one of the innovations to meet the demand for mortgages was, for example, the adjustable-rate mortgage which reset to sky-high rates after a specified amount of time was not predatory but rather the natural way for banks to compensate for the massive incremental risk being taken by lending to uncreditworthy borrowers.

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Reading this account of discussions at the “U.S. Federal Trade Commission workshop on the future of journalism in the Internet age,” it appears “legacy media” might just slash and burn the First Amendment, shredding it to pieces on their journey to statist organ status.

In their desperation to stay alive, as newspapers and other legacy channels of distribution collapse, surviving publishers will maneuver themselves for prime suckling positions on the public teat. The keepers of the teat appear willing to enable the feast.

Federal and state officials this year have explored how the government might play a role in helping ease the financial travails of news organizations. Sen. Benjamin Cardin (D., Md.) this spring proposed a bill that would allow newspapers to operate as tax-exempt institutions. [MORE - WSJ]

“Public” money comes with a labyrinth of exponentially multiplying political strings attached. Just ask GM, AIG, and BofA.

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