A little publicized political story, if played out to the satisfaction of California Democrats (read: Progressives), would not only set the stage for a politically motivated raid on the US Treasury, it would afford President Obama, his administration and political operatives plausible deniability in any “coincidental” benefit to Mr. Obama’s re-election campaign. And if you don’t think that has David Axelrod, Valerie Jarrett and David Plouffe salivating, you haven’t been paying attention for the past three years.

According to a report by TheHill.com:

“A long list of California Democrats is urging President Obama to name a new housing regulator using a controversial recess appointment.

“In a letter to the president, more than two dozen House members said the temporary head of the Federal Housing Finance Agency (FHFA), Edward DeMarco, simply hasn’t done enough to help struggling homeowners avoid foreclosure. The lawmakers are pushing the president to name a permanent director ‘immediately.’

“‘FHFA has consistently and erroneously interpreted its mandate far too narrowly and as such has failed to take adequate action to help homeowners,’ the lawmakers wrote. ‘Installing a permanent director of the FHFA will allow the FHFA to move forward to make key decisions that will help keep families in their homes and improve our economy.’”

Okay, let’s first examine the FHFA. According to their website:

“The Federal Housing Finance Agency (FHFA) was created on July 30, 2008, when the President signed into law the Housing & Economic Recovery Act of 2008. The Act gave FHFA the authorities necessary to oversee vital components of our country’s secondary mortgage markets – Fannie Mae, Freddie Mac and the Federal Home Loan Banks…FHFA’s mission is to provide effective supervision, regulation and housing mission oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Banks to promote their safety and soundness, support housing finance and affordable housing, and support a stable and liquid mortgage market…”

The reason the California congressional delegation is pushing for a permanent replacement for Mr. DeMarco has little to do with the well-being of California’s citizens whose mortgages are both underwater or in foreclosure. It has everything to do with 2012 being an election year. The California delegation’s letter to President Obama urging the so-called “recess appointment” of a new FHFA director presents as a gift to the Obama re-election effort. I say “so-called recess appointment” because the US Senate is in pro-forma session and it is unconstitutional for the president to make recess appointments when either house of Congress is in session. I and the rest of the Conservative and Republican rank-and-file are still waiting for congressional Republicans to do something about the initial round of “recess appointments.” Of course, one needs a spine to stand-up to a bully, so we probably shouldn’t hold our collective breath.

(more…)

At Real Clear Politics, Big Government contributor Charles C. Johnson has a piece examining all of the Washington insiders, Newt Gingrich included, that are feeding at the Fannie Mae and Freddie Mac trough:

… Gingrich was only passing through a revolving door that other Washington insiders had entered long before him. He left Congress in 1998, the same year that his former chief of staff Arne Christenson became Fannie Mae’s senior vice president for regulatory policy. Christenson left in 2004 after complaining of the “constant outside scrutiny” (read: congressional oversight) to which Fannie Mae was subjected. “People want us to be a passive little company that just buys and sells loans,” he told Washingtonian magazine in August 2002. Fannie aspired to more — a lot more. Born of the New Deal, it morphed into one of the world’s biggest financial service companies, handling some $8 trillion annually.

Its former CEO, Franklin Delano Raines, aspired to a lot more too. Raines was a longtime Democratic Party hand who became Fannie Mae’s vice chairman in 1991. The Harvard-trained Rhodes scholar left to become Bill Clinton’s director of the Office of Management and Budget in 1996 and was touted as a potential running mate to Al Gore in 2000. He returned to Fannie in 1999, becoming “the first black man to head a Fortune 500 company,” according to Ebony magazine. The job was lucrative. He received over $90 million in compensation. But it came with some congressional oversight and that proved too much. Raines left Fannie in 2004 when it became embroiled in an accounting scandal.

(more…)

Forty-four of 46 Republican Senators vowed they would not approve “any consumer financial bureau director unless the agency was put under a five-member outside board, had its work checked periodically by bank examiners and had its budget approved by Congress rather than the Federal Reserve.”

So when Republicans refused to confirm the President’s nominee, Richard Cordray, to head the Consumer Financial Protection Bureau, America’s number one duffer shouldn’t have been surprised.

Senate Republicans maintained that voting down the nomination of Cordray had everything to do with the Dodd-Frank financial reform agency lacking oversight, and nothing to do with the candidate Obama chose to head it up. In other words, Republicans wanted to take consumer protection a step further than the President was willing to go, vowing that they’d agree to confirm a director, but not before additional consumer safeguards and supervision are put in place.

As for Obama’s nominee Richard Cordray, besides being the former Attorney General of the state of Ohio and acting as chief enforcement officer at the Consumer Financial Protection Bureau for the last year, Cordray is a five-time undefeated Jeopardy champion. Which may be why, when chiding Republicans for blocking his appointment, the President kept mentioning game playing.

(more…)

In all this debate, I fear both parties have missed a critical point.

Both versions of this bill impose a permanent new tax on every mortgage backed by Fannie Mae and Freddie Mac.

To pay for an additional two months of tax relief under the Senate version or 12 months under the House version, more than $3,000 of new taxes will be imposed on every $150,000 mortgage backed by Fannie or Freddie.

A family taking out a $250,000 mortgage will pay $5,000 more in taxes–directly and solely because of this bill– hidden in their future mortgage payments.

This is atrocious public policy.

(more…)

From Bloomberg:

Daniel Mudd, the former chief executive officer of Fannie Mae, andRichard Syron, ex-CEO of Freddie Mac, were sued by the U.S. Securities and Exchange Commission for understating by hundreds of billions of dollars the subprime loans held by the agencies.

The lawsuits filed today in Manhattan federal court were followed by an SEC statement that it had entered into non- prosecution agreements with each lender. Fannie Mae, the government-sponsored enterprise which issues almost half of all mortgage-backed securities, and Freddie Mac, the McLean, Virginia-based mortgage-finance company, had “agreed to accept responsibility” for their conduct, the SEC said.

(more…)

From BloombergNews:

On the morning of July 21, before the Eton Park meeting, Paulson had spoken to New York Times reporters and editors, according to his Treasury Department schedule. A Times article the next day said the Federal Reserve and the Office of the Comptroller of the Currency were inspecting Fannie and Freddie’s books and cited Paulson as saying he expected their examination would give a signal of confidence to the markets.

A Different Message

At the Eton Park meeting, he sent a different message, according to a fund manager who attended. Over sandwiches and pasta salad, he delivered that information to a group of men capable of profiting from any disclosure.

Around the conference room table were a dozen or so hedge- fund managers and other Wall Street executives — at least five of them alumni of Goldman Sachs Group Inc. (GS), of which Paulson was chief executive officer and chairman from 1999 to 2006. In addition to Eton Park founder Eric Mindich, they included such boldface names as Lone Pine Capital LLC founder Stephen Mandel, Dinakar Singh of TPG-Axon Capital Management LP and Daniel Och of Och-Ziff Capital Management Group LLC.

After a perfunctory discussion of the market turmoil, the fund manager says, the discussion turned to Fannie Mae and Freddie Mac. Paulson said he had erred by not punishing Bear Stearns shareholders more severely. The secretary, then 62, went on to describe a possible scenario for placing Fannie and Freddie into “conservatorship” — a government seizure designed to allow the firms to continue operations despite heavy losses in the mortgage markets.

(more…)

Rep. Barney Frank (D-MA) announced today that he will retire from Congress at the end of his term. Frank cited a series of scandals as his reasons for leaving–from the prostitution ring that ran from his apartment in the late 1980s; to his role in placing his then-boyfriend in a job at government-backed mortgage giant Fannie Mae in the 1990s, while Frank was on the House Financial Services Committee; to new questions raised today about Frank’s potential involvement in the unfolding insider trading scandal in Congress.

Frank finally apologized for his role in the housing bubble that led to the financial crisis of 2007-8 and set the stage for the worst recession since the Great Depression. Frank had shielded Fannie Mae and Freddie Mac from regulation, which in turn encouraged banks and buyers to embrace unstable mortgages. These were repackaged and sold as securities whose instability was masked due to their implicit government guarantees.

That’s not actually what happened today, though it is what should have happened long ago. Instead, Frank is retiring because he barely survived a tough challenge by Sean Bielat in the 2010 elections, because redistricting will make it harder for him to hold onto his seat, and because he cannot foresee Democrats re-taking the House. The road ahead is rough, and Frank believes he has better–perhaps more lucrative–things to do.

I am not celebrating Frank’s departure–partly because it is long overdue, partly because it would have been more satisfying to see him defeated, and partly because he is somewhat responsible for launching my political career in an exchange that went viral on YouTube:

As I recalled in Jonah Goldberg’s anthology, Proud to Be Right (HarperCollins 2010): (more…)

Rep. Spencer Bachus (R-AL), under pressure from conservatives, liberals, and his own constituents, has announced that the House Financial Services Committee, which he chairs, will hold hearings on Dec. 6 to consider legislation to prevent insider trading by members of Congress.

From Breitbart.tv:

Both the House and the Senate are now planning hearings on congressional insider trading, following exposés by Breitbart editor Peter Schweizer in his new book, Throw Them All Out. (more…)

Operation Fast and Furious has left a hideous scar on our nation to date. It should result in the prosecution of Attorney General Eric Holder, former U.S. Attorney Dennis Burke, and a slew of ATF supervisors who oversaw the ridiculous operation from the word go. As a result of their foolishness and criminality, taxpayer money was used in the purchase of weapons intentionally passed to criminals, Border Patrol Agent Brian Terry is dead, hundreds upon hundreds of Mexican citizens have been killed, and over one thousand firearms are still unaccounted for. (Although the lion’s share of those weapons will probably be found in Mexico, we know some are undoubtedly in the U.S. because they keep showing up at crime scenes in Arizona and Texas.)

Yet as bad as Fast and Furious was, and will continue to be when as more facts unfold, I am persuaded that Obama’s clear usurpation of the Constitution via his misuse of Executive Orders is worse.

In other words, although Fast and Furious was a completely lawless situation that has endangered both Mexicans and Americans physically, and which is being used even now to push for more gun control, it was largely conducted under a cover of secrecy. But Obama’s attempts to legislate from the White House are being done right in the open and pose a clear violation to the separation of powers established by our Founding Fathers nearly 225 years ago. This strikes at the very core of our nation’s foundation by disrupting the pattern and order of government set forth in the Constitution, as well as the customs and conventions we’ve trusted heretofore.

(more…)

From Investor’s Business Daily:

President Obama says the Occupy Wall Street protests show a “broad-based frustration” among Americans with the financial sector, which continues to kick against regulatory reforms three years after the financial crisis.

“You’re seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on the abusive practices that got us into this in the first place,” he complained earlier this month.

But what if government encouraged, even invented, those “abusive practices”?

Rewind to 1994. That year, the federal government declared war on an enemy — the racist lender — who officials claimed was to blame for differences in homeownership rate, and launched what would prove the costliest social crusade in U.S. history. (more…)

From Investors Business Daily:

While not blameless, Wall Street is an easy scapegoat. And investment houses that made billions slicing and dicing mortgages into CDOs, derivatives, credit default swaps and other exotic paper are easy to demonize. But the problem wasn’t these financial instruments. Or even the obscene profits they generated. Mortgage-backed securities were nothing new, and we’ve always had speculation in the market.

The problem was the underlying assets: low-quality mortgages. We’ve never had so many junk home-loans poisoning the financial well before. And who poisoned the well? Washington and its affordable-housing policies.

It was Washington that declared prudent home-lending standards racist and gutted traditional underwriting rules in the name of diversity. It was government that created the risk on Main Street.

(more…)

There is a long 20^th century history of Wall Street protests in America.  After all, Wall Street is the financial center of the country. Today, we’re in a financial crisis so Wall Street (or its financial center equivalent in other cities) is the logical place to protest, right?

Actually, we think it’s a poor second to Lafayette Park across from the White House — where the current crisis was hatched and nurtured.  No, this isn’t an anti Obama screed.  His predecessors (several of them) are far more to blame for the current economic disarray in which we find ourselves, although we think his proposed remedies are anything but remedial.

“Occupy Wall Street” and “Wall Street Greed” are great memes.  They are highly memorable and easily passed on as a rallying cry. Unsurprisingly, President Obama and the left has sought to adopt them.  Of course, the protestors are an outgrowth of the wider sense of entitlement many young people have developed (including quotas disguised under the term “diversity”).  As George Will stated in his column in The Washington Post on October 13, 2011:

“Demands posted in [Occupy Wall Street’s] name include a ‘guaranteed living wage income regardless of employment’; a $20‑an‑hour minimum wage (above the $16.00 entry wage the UAW just negotiated with GM); ending ‘the fossil fuel economy’; ‘open borders’ so ‘anyone can travel anywhere to work and live’; $1 trillion dollars for infrastructure; $1 trillion dollars for ‘ecological restoration’; ‘free college education’, and forgiveness of ‘all debt on the entire planet.”

But abuses by Wall Street are an affect, not the cause of the current economic disarray. As anyone who has read our essays knows, we carry no brief for Wall Street excesses or those of the various Government Sponsored Enterprises (GSE’s) that are the real culprits. But Wall Street was simply the vehicle by which the White House, Congress, the Fed and the Washington bureaucracy carried out very ill advised objectives. As is well known by now, the seeds of our current discontent were sowed a quarter century ago when President Jimmy Carter signed the Community Reinvestment Act (CRA).  This legislation and the regulatory policies that it set in motion may have been well intentioned, but as history teaches, roads paved merely with good intentions often lead where no one wants to go.

(more…)

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the Occupy Wall Street protests in New York, growing criticism of Herman Cain’s 9-9-9 plan, and our drive to get Francis on NPR’s Marketplace.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

More Reasons Why Conservatives Should Take Occupy Wall Street Seriously
A few random thoughts on Occupy Wall Street, flash mobs, and 9/11
Spending on housing and vehicles
Business groups blast Cain’s 9-9-9 plan as job killer
Cain’s Sales Tax Would Hurt Consumer Spending ’For Some Years’
Let’s Start All Over Again
David Frum bids farewell to Marketplace
Email NPR and tell them you want our very own Francis Cianfrocca to replace David Frum on Marketplace
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[Ed Note: This is the first post to run at BigGovernment. It was published two years ago today. It still seems relevant.]

In 1995, President Bill Clinton stood before the nation and proclaimed, “The era of big government is over.” The following year, the federal budget deficit stood at 1.4% of GDP. Thirteen years later, in 2008, the deficit had doubled, to just over 3% of GDP. This year, the Congressional Budget Office estimates that the federal budget deficit will equal 11.4% of GDP.

As George Will would say, “Well.”

This is the real source of our “summer of discontent.” Yes, millions of Americans spent the month of August holding Tea Parties, attending town halls, organizing, marching and protesting against ObamaCare, i.e. Congressional and Administration proposals to reconstruct the entire health care sector. But to suggest that health care alone is at the root of this backlash is to miss the forest for the trees. To paraphrase Democrat strategist James Carville, “It’s the big government, stupid.”

Since last September when the financial markets stumbled, we’ve seen a Wall Street bailout, government takeovers of AIG, Citigroup, Fannie Mae, Freddie Mac, GM, Chrysler, and numerous banks. The Federal Reserve has opened its discount window to almost all-comers and has taken the unprecedented step of aggressively buying up the federal government’s own debt. Congress rushed through a “stimulus to nowhere,” moved closer to a “cap-and-trade” remake of the energy sector and openly talked about higher taxes and more regulation.

White House Chief of Staff Rahm Emanuel famously said that, “You never want a serious crisis to go to waste.” Ronald Reagan said, “Government isn’t the solution to our problem. Government is the problem.” The administration has turned this observation upside down, proclaiming that Big Government will lead us to a better world. In August, we heard America singing, “Enough!”

The mainstream media and politicos from both parties were caught flat-footed by the push-back from average citizens. Each news-cycle brought a new theory for the protests: “astroturf,” angry “mobs,” distortions and misinformation, kooks and conspiracy nuts, and, inevitably (and perhaps most offensively) racism (MSNBC amazingly even cut the head off a black man holding a gun to make the point that white racist extremism was behind the entirety the protests).  The elites have convinced themselves that, once Congress is safely cocooned on Capitol Hill, and engaged in some Kennedy-esque legislating—a tweak here, a nip-and-tuck there—ObamaCare will be back on track and the Administration can continue its march to reshape America.

The elites are whistling past the graveyard. The ground has shifted. It could just be that deficits above 10% of GDP are the new $4 a gallon gas, i.e. the tipping point that awakens the silent majority and recalibrates political dynamics. Americans are setting aside parochial self-interest and reaching to reclaim the legacy of the Founders.

(more…)

So far the U.S. government has bailed out Fannie Mae and Freddie Mac to the tune of at least $130 billion, and perhaps as much as $1 trillion. And yet, the Obama administration continues to stonewall the release of documents that could shed light on why Fannie and Freddie failed, thereby sending the economy into a tailspin from which we have yet to recover. (Those records are housed at the Federal Housing Finance Agency (FHFA) now that Fannie and Freddie are owned and operated by the federal government.)

Judicial Watch is especially interested in documents related to the political contributions of Fannie and Freddie. And we’ve gone to court to get our hands on them. Unfortunately, our efforts sustained another setback when an appellate court sided with the government and ruled that Fannie and Freddie’s records are not subject to Freedom of Information Act (FOIA) law and may continue to be kept secret:

The Federal Housing Finance Agency (FHFA) has been the conservator of Fannie Mae and Freddie Mac since 2008. Judicial Watch filed a request under the Freedom of Information Act (FOIA) asking the FHFA to disclose records of Fannie and Freddie that show how much money they gave to political campaigns. But it is uncontested that no one at the FHFA has ever read or relied upon any such documents. The district court held that the documents are not agency records subject to FOIA, and we agree.

So, in other words, because no one at the FHFA, the agency in charge of Fannie Mae and Freddie Mac, has “read or relied upon” the documents, they are not considered agency records under FOIA, and cannot be released.

(more…)

Standard & Poor’s government-credit-ratings guru David Beers played his cards close to the vest on the topic of a U.S. downgrade in our CNBC interview this week. However, this head of S&P’s global sovereign-ratings business — with a staff of 80 covering 126 countries — issued three strong warnings to the debt-ceiling negotiators in Washington.

Beers avoided direct comments on any of the key debt-limit plans. But when I asked him about joint congressional committees that would report back with additional budget savings at the end of the year, he said, “Well, naturally, it’s going to raise questions . . . we would have to look at the balance of incentives and disincentives that might increase or decrease the probability of that type of approach being effective.”

In other words, both the Harry Reid plan and the John Boehner plan could contribute to a downgrade this summer since it’s uncertain whether joint committees will get the necessary votes for large-scale budget cuts and deficit reduction by year-end. There are no guarantees.

I then asked Beers about a two-step debt increase. This is part of Speaker Boehner’s plan — a roughly $1 trillion debt-ceiling hike now and a roughly $1.8 trillion increase next year. Beers has a problem with that.

(more…)

Organizing for America is back to being Obama for America now that the never ending campaign of President Obama is calling itself one again. Other than that, not much has changed with Team Lightbringer.

The campaign has just released a new video, “How Wall St. Reform is working for you”, that tells a nice story which, none too coincidentally, dovetails perfectly with the president’s caterwauling about “THE RICH!” during the debt ceiling negotiations.

The tale begins by detailing the lead-up to the meltdown that we’re all-too-familiar with at this point. Well, many of us are, anyway. On the other side of the political aisle many of the overwhelming contributing factors have all but been ignored. The video completely forgets to mention the roles that Fannie and Freddie played because honesty doesn’t fit the narrative here. And what, you ask, is that narrative?

That the government is here for you and your lives would be miserable without it, of course.

Even when it’s the government that helped bring the pain in the first place.

(more…)

“Austerity” is giving “unsustainable” strong competition for becoming the financial buzzword of the year.  However, within the Democratic Party and the political left, we seem still to have an abundance of something.  Unfortunately, that something is hypocrisy.  When we expect serious and mature leadership from our president to state publicly what he knows privately to be true, he ratchets up populist class warfare or chooses solutions aimed at placating the liberal allies on whose financial support his party depends.

Case in point.  Mr. Obama, three years after they were negotiated, finally acknowledges the jobs that would be created by Senate approval of the trade agreements with Korea, Panama and Columbia.  The president is now describing the agreement with South Korea, which will reduce Korean tariffs on U.S. cars and trucks and open what Ford Motor Co. described as “the most closed automotive market in the world” as one which will produce numerous jobs for Americans.  Last year South Korea imported 13,000 American cars while it exported 560,000 vehicles to the U.S.  White House spokesman, Jay Carney, stated “it is time to move forward [with the 3 agreements] which will support tens of thousands of jobs.”  Unfortunately, the president tied the approval of the treaties to spending close to a billion dollars on additional assistance to workers displaced from jobs, a program that has proven completely useless unless subsidizing unions is a national priority.  This at a time when the Administration is supposedly trying to reduce the deficit as a key element in the legislation it knows is vital as a precondition to raising the nation’s debt ceiling.

The president at a pre-July 4 press conference inveighed against millionaires, billionaires and owners of private jets, but intentionally ignored the real facts and distorted reality.  Or as one blogger, paraphrasing Charles Krauthammer stated it:

Never mind that in the grand scheme of things, the amount of tax that corporate jet owners are excused from paying is so minuscule that if the government collected it every year for 5,000 years, they would cover one year of the debt that the Obama administration has run up.  The point the president was trying to make, as he amps up his relentless class warfare argument, is that all over America children go to bed hungry while greedy fat cats get a tax break on the jets they buy.

This is a stunning reversal of reasoning.  The Wall Street Journal noted that the president’s 2009 stimulus plan specifically stated that “the aviation industry, which is cutting jobs as it suffers from declining shipments and cancelled orders, hopes the tax break in the economic stimulus bill . . . will persuade more companies to buy planes and snap a slump in general aviation.”

(more…)

Here’s a question: Why is repealing the Bush tax cuts such a constant obsession for the Democratic Party? Especially the top rates for the most successful earners and small business entrepreneurs?

It seems this is the Democratic answer for every single issue, every problem, every debate.

This, of course, saddens me enormously.

And so, always ready to help, I am recommending a 12-Step program to help them overcome their anger, resentment, and obsession over the Bush tax cuts. Democrats really need a Higher Power on this.

First, when tax rates were lowered across-the-board in mid-2003, the incentive effect kicked in to jump-start the economy immediately. Over the next four and a half years, before the financial meltdown slammed the economy– and that was a credit event, not a fiscal one—8.2 million jobs were created.

(more…)

WASHINGTON (AP) – Fannie Mae asked the government Friday for an additional $8.5 billion in aid after declining home prices caused more defaults on loans guaranteed by the mortgage giant.

The company said it lost $8.7 billion in the first three months of the year. Those losses led Fannie to request more than three times the federal aid it sought in the previous quarter. The total cost of rescuing the government-controlled mortgage buyer is nearing $100 billion—the most expensive bailout of a single company.

Combined with the bailout of sibling company Freddie Mac, the government expects their rescue to cost taxpayers about $259 billion. That money will cover the mortgage giants’ losses on soured loans made in the midst of the housing bubble.

Home prices declined on average 1.8 percent across the country during the January-March quarter, Fannie Mae said. That led to more foreclosures and to homeowners abandoning houses that were worth less than they owed on their mortgages.

“We expect our credit-related losses to remain elevated in 2011 as we continue to be negatively impacted by the prolonged decline in home prices,” President and CEO Michael Williams said in a statement.

The losses incurred in the first three months of the year are related to loans that were extended before 2009, Fannie Mae said. The company expects to make money on home loans that it acquired since January 2010. (more…)