(Reuters) – Home prices fell more steeply than expected in November, and consumer confidence soured in January, highlighting the hurdles still facing the economic recovery.

The S&P/Case-Shiller composite index of single-family home prices in 20 metropolitan areas declined 0.7 percent on a seasonally adjusted basis, a survey showed on Tuesday, a bigger drop than the 0.5 percent economists expected.

The decrease added on to the 0.7 percent decline seen in October from September.

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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.

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On today’s edition of Coffee and Markets, Brad Jackson is joined by Francis Cianfrocca to discuss the latest jobs news and Obama’s plan for a trillion-dollar housing refinancing plan.

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.

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The untold story of the Obama Administration’s widely reported, $335 million discrimination settlement with Countrywide Financial Corporation is that, under a secret Justice Department program, a chunk of the money won’t go to the “victims” but rather leftist groups not connected to the lawsuit.

The Department of Justice (DOJ) will determine which “qualified organizations” get leftover settlement cash and Democrat-tied groups like the scandal-plagued Association of Community Organizations for Reform Now (ACORN) and the open-borders National Council of La Raza (NCLR) stand to get large sums based on the hastily arranged deal which got court approval in just a few days.

Judicial Watch has investigated this controversial arrangement and in 2010 sued the DOJ to obtain information about the policy directing big portions of cash settlements from its civil rights lawsuits to organizations not officially connected to the cases. In response to JW’s lawsuit, the DOJ was forced to acknowledge that it has no official guidelines regarding “qualified organizations” that get leftover settlement funds and that it doesn’t monitor how the money is used.

In the Countrywide case, details of the unscrupulous arrangement are buried deep (page 10 of the 17-page settlement) in the court document where Bank of America’s Countrywide Financial Corporation agrees to pay to resolve allegations that it discriminated against qualified black and Hispanic borrowers. The lender denies all of the charges, but wanted to end the case and caved into the government’s terms.

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The Political Class has honed a dangerous skill, building the perfect undetectable fraud machine. Americans need to learn to spot these scams for their own protection and realize that the perpetrators can come from either political party and often work in cahoots with attorneys or big business.

Think about three seemingly unconnected news stories, all examples of costly or dangerously indictable fraud machines…

• The economic collapse of 2008 was caused in part by relaxed mortgage rules that allowed borrowers to get a home loan without a down payment or even proof of income in some cases.
• In the Pigford settlement, claimants were able to get $50,000 checks by asserting without proof that they had “attempted to farm.”
• In a move strongly supported by the NAACP and other liberal advocacy groups, the Obama Department of Justice just stopped South Carolina’s plan to put in place some minimal ID requirements for voting. Currently voters in a number of states don’t need to show any photo ID or other identity checks in order to cast a ballot.

All three stories are examples of systems that have been intentionally set up with such low standards that they invite fraud. But ingeniously, they have also been set up in a such a way that makes them almost critic-proof because the lack of standards makes detection of fraud nearly impossible. When the system is questioned, the defenders, creators and beneficiaries then point to the lack of “proof” of fraud as a reason to keep the status. Thus, a self-perpetuating fraud scheme is kept alive as long as possible.

Make no mistake, these scams are costly….

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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.

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When asked about the “Occupy Wall Street” movement in October, Massachusetts Senate candidate Elizabeth Warren praised it to the hilt. “I created much of the intellectual foundation for what they do,” she told the Daily Beast. Yet when pressed in November on the OWS adherents’ increasingly violent tactics, she told a Boston TV interviewer: “Everybody has to follow the law. There’s no exception on that.”

But Warren’s apparent disavowal of the tactics of OWS and like-minded community organizers may not be shared by Richard Cordray, President Obama’s nominee to head the Consumer Financial Protection Bureau that Warren designed. Cordray has long supported ESOP, formerly known as the East Side Organizing Project, an Ohio housing advocacy group that has distinguished itself by storming into banks and launching plastic “shark attacks” on the lawns of private homes. ESOP’s leaders brag about what they call their “organized hits” on banks and other targets, which have included the home of the late Congressman and Housing and Urban Development Secretary Jack Kemp.

As Ohio treasurer and attorney general, Cordray lobbied for state and federal funding for ESOP and publicly praised funders of the group as “the real heroes.” And in a highly unusual move for a nominee awaiting confirmation, Cordray returned to Ohio in October to be the keynote speaker at the group’s gala dinner.

Since his nomination in July to head the bureau created by the Dodd-Frank financial “reform” law, Republicans have held fast against confirmation. But largely, they haven’t made Cordray’s state record an issue. They have focused instead on structural defects in the agency’s design, such as the massive new powers the bureau will have to ban financial products it deems “abusive” and its lack of accountability to Congress.

These criticisms are valid, but they may not be enough to hold Senate Republicans together without criticism of the nominee’s merits. Just before Thanksgiving, Scott Brown (R-Mass.), facing a tough reelection challenge from Warren, became the first GOPer to commit to voting for Cordray. The Democrat-controlled Senate plans to hold a vote on his confirmation this week, possibly as early as Tuesday. Human Events‘ Neil McCabe reports that in addition to Maine Sens. Susan Collins and Olympia Snowe, other GOP targets for Cordray supporters include Alaska’s Lisa Murkowski, Tennessee’s Bob Corker, and Cordray’s home state Senator Rob Portman of Ohio (though Portman seemed to reaffirm his opposition in a statement to Human Events last week).

But Cordray’s support of ESOP needs further scrutiny, particularly since as head of the bureau, he will have the power to help funnel federal support to ESOP and like-minded community organizers with virtually no oversight by Congress. And a report by Bloomberg News suggests that Cordray specifically blessed ESOP’s “organized hits” on banks and homes.

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If you haven’t already, take a gander at a column authored by former Treasury Secretary and Clinton economic adviser Larry Summers in yesterday’s Washington Post.

In it, Summers contends that to truly turn around the nation’s housing market – a key economic indicator and driver – one must, in effect, double down on the sector, spending more in both public and private dollars.

“The central irony of a financial crisis is that while it is caused by too much confidence, borrowing and lending, and spending,” argues Summers, “it can be resolved only with more confidence, borrowing and lending, and spending. This is true, above all, of housing policies.”

That’s just dandy. True to the dogma of his former boss, Summers apparently believes we haven’t done enough damage to the housing market through Freddie Mac and Fannie Mae, and Uncle Sam needs to be more involved in driving home construction and sales.

That is best carried out through financing, he posits. “[C]redit standards for those seeking to buy homes are too high and too rigorous,” Summers argues. Uhh, can someone quickly get him a history book and turn to the chapters from a few years ago where the housing market began to collapse? The reason wasn’t tightened credit but the exact opposite. Our lending institutions sponsored by the feds such as Freddie and Fannie were practically giving loans to anyone who asked for them – senseless amounts of money with little-to-no credit backing to vouch for the security of the loans. (more…)

From The Hill:

In Thursday’s retirement announcement, [U.S. Rep Dennis] Cardoza said he’s “dismayed by the administration’s failure to understand and effectively address the current housing foreclosure crisis.”

“Home foreclosures are destroying communities and crushing our economy,” he said, “and the administration’s inaction is infuriating.”

Cardoza also took a shot at the news media for what he characterized as a “general lack of attention to moderate members of Congress.”

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From the Associated Press:

Sales of new homes fell to a six-month low in August. The fourth straight monthly decline during the peak buying season suggests the housing market is years away from a recovery.

The Commerce Department said Monday that new-home sales fell 2.3 percent to a seasonally adjusted annual rate of 295,000. That’s less than half the roughly 700,000 that economists say must be sold to sustain a healthy housing market.

New-homes sales are on pace for the worst year since the government began keeping records a half century ago.

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With a flamboyant downgrade of the outlook for economic growth, jobs, and profits, Wednesday’s 280 point Dow plunge to launch the so-called June stock swoon is a warning shot across the bow.

The Dow tanked alongside a batch of dismal economic data. The ISM manufacturing index, ADP employment, Case-Shiller home prices, and consumer confidence are all pointing to 2 percent growth or less, rather than the kind of 5 percent growth we ought to be getting coming out of a deep recession.

The economy now looks like a Government Motors engine that’s stalling out. Or perhaps, with energy and food inflation, and housing deflation at the same time, the economy is acting like a pinball machine on permanent tilt.

There’s a key message here: Big-government stimulus never works.

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It is ironic that China is demanding greater control of the World Bank and International Monetary Fund, just as the nation’s banking system is about to be devastated by the white hot flames of inflation.
From a distance, China’s economy seems to be the poster child of sustainable growth. Recent government reports show the economy expanding by 9.7%, retail sales up a blistering 17.4%, foreign reserves at $3 trillion, and inflation only 5.4%. But these statistics mask a dark side; Chinese communist authorities have been artificially holding down fierce inflationary pressures by subsidizing consumer prices.

Over the last six months the government artificially restricted increases in retail food prices to 11%, while wholesale commodity food prices have jumped by 35%. In the last two months the government capped retail gasoline price increases at 10%, even as Middle East turmoil caused crude oil prices to leap by over 30%.
Most Americans believe that the secret-weapon of the “China Economic Miracle” has been currency manipulation of Chinese yuan’s exchange rate with the U.S. dollar. In the past two years as Asian economies and foreign exchange reserves expanded dramatically, the yuan gained only 4.6% versus the dollar. This modest rise compares currency gains of 31% for the Indonesian rupiah, 22% for the South Korean won, and 21%for the Singapore dollar. China has subsidized its exporters by recycling its export earnings back into over-valued U.S. dollars. The strategy makes China’s exports more competitive, but at the cost of spiking inflation at home.

The less known and far more important secret-weapon of the “China Economic Miracle” is the absolute control of the banking industry by China’s four largest state-owned banks (“SOB”); Industrial and Commercial Bank, Agricultural Bank, People’s Bank of China and Construction. Since the government does not provide adequate social welfare programs and restricts its citizen’s investment options to bank accounts, about 40% of Chinese household income is deposited in SOBs each month. The SOBs then leverage the deposits by ten times and loan 75% of this massive amount of cash at extremely low interest rates to state-owned-enterprises (“SOE”). The other 25% of lending is allocated to real estate development.

China is no stranger to bankers making risky loans to communist party officials and their crony real estate developers. During the Asian Financial Crisis of the mid-1990s, it is estimated that 40% of all SOB loans were non-performing and most were written off. The Chinese paid for the SOB losses with a 76% devaluation of their currency that crushed the people’s buying-power by 76%. From 1997 to 2004 Chinese frivolous lending was somewhat restrained, but since 2003 the bureaucrats have mandated a massive expansion of lending. In comparison to the U.S. and Europe where bank lending is flat, SOBs have been expanding loans by 25% annually.

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On today’s edition of Coffee and Markets, Brad Jackson is joined by Francis Cianfrocca to discuss the housing data and the hidden costs of inflation. Then Pej talks about Chuck Schumer’s conference call gaffe.

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:

Housing market: 13% of all U.S. homes are vacant
Home price declines deepen in major US markets
How Low Will Home Prices Go?
Food Inflation Kept Hidden in Tinier Bags
Inflation worries push consumer confidence lower
On a Senate Call, a Glimpse of Marching Orders
Schumer coordinates Dem budget attack on GOP

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A previous post of mine at International Liberty addressed the issue of whether Republicans were right to trim the IRS’s budget. The following case study of IRS thuggery should convince everyone that the answer is a resounding yes.

First, some background. The federal government made a rather troubling decision a few years ago to investigate, persecute, prosecute, and ultimately imprison a random home-loan borrower named Charlie Engle for the crime of mortgage fraud.

Mr. Engle is far from blameless in this saga, but I noted in another post that it was rather odd that the government would target a nobody while letting all the big fish swim away. This episode certainly paints a picture of a government that has one set of rules for ordinary people, but an entirely different set of rules for the political elite and those who make big campaign contributions to that ruling class.

But I also noted that I’m not a legal expert and was unsure about the degree to which the big players actually broke laws, or whether they simply made stupid business decisions (often encouraged by bad government policy).

The most upsetting part of the story, though, is how the government wound up targeting Mr. Engle. It turns out that an IRS agent, Robert Norlander, must have been competing for the IRS’s Thug-of-the-Year Award (or maybe it was A-Hole-of-the-Year or Jerk-of-the-Year) because here are some of the things he did:

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The news is going from bad to worse for Ireland. The Irish Independent is reporting that the Swiss Central Bank no longer will accept Irish government bonds as collateral. The story also notes that one of the world’s largest bond firms, PIMCO, is no longer purchasing debt issued by the Irish government.

And this is happening even though (or perhaps because?) Ireland received a big bailout from the European Union and the International Monetary Fund (and the IMF’s involvement means American taxpayers are picking up part of the tab).

I’ve already commented on Ireland’s woes, and opined about similar problems afflicting the rest of Europe, but the continuing deterioration of the Emerald Isle deserves further analysis so that American policy makers hopefully grasp the right lessons. Here are five things we should learn from the mess in Ireland.

1. Bailouts Don’t Work – When Ireland’s government rescued depositors by bailing out the nation’s three big banks, they made a big mistake by also bailing out creditors such as bondholders. This dramatically increased the cost of the bank bailout and exacerbated moral hazard since investors are more willing to make inefficient and risky choices if they think governments will cover their losses. And because it required the government to incur a lot of additional debt, it also had the effect of destabilizing the nation’s finances, which then resulted in a second mistake – the bailout of Ireland by the European Union and IMF (a classic case of Mitchell’s Law, which occurs when one bad government policy leads to another bad government policy).

American policy makers already have implemented one of the two mistakes mentioned above. The TARP bailout went way beyond protecting depositors and instead gave unnecessary handouts to wealthy and sophisticated companies, executives, and investors. But something good may happen if we learn from the second mistake. Greedy politicians from states such as California and Illinois would welcome a bailout from Uncle Sam, but this would be just as misguided as the EU/IMF bailout of Ireland. The Obama Administration already provided an indirect short-run bailout as part of the so-called stimulus legislation, and this encouraged states to dig themselves deeper in a fiscal hole. Uncle Sam shouldn’t be subsidizing bad policy at the state level, and the mess in Europe is a powerful argument that this counterproductive approach should be stopped as soon as possible.

By the way, it’s worth noting that politicians and international bureaucracies behave as if government defaults would have catastrophic consequences, but Kevin Hassett of the American Enterprise Institute explains that there have been more than 200 sovereign defaults in the past 200 years and we somehow avoided Armageddon.

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Bryan Binkholder has no problem investing money to fix up homes. But when it involves spending more than $381,000 per home to fix up homes that will be worth $80,000 to $110,000 each upon completion, he draws the line.

“Chalk this up to another case of government gone wild, attempting to do something the free market would and will do at a greater efficiency and without tax payer dollars,” said Binkholder, a financial expert, investment adviser, active real estate investor and host of “The Financial Coach Show” on FM News Talk 97.1 in St. Louis. He shared his opinion with me during an online discussion stemming from the Friday publication of an article about the efforts of the nonprofit group, Beyond Housing, in the St. Louis Post-Dispatch.

The article in question used a plethora of facts and figures to highlight efforts to rehab homes in the crime-ridden North St. Louis neighborhoods that populate the Normandy School District. Unfortunately, however, it did not provide a cost-per-house breakout of dollars being spent or provide a glimpse of how many of those dollars were coming directly from taxpayers.

After reading the Post-Dispatch article, I set out to find people whom I hoped could provide just such a breakout.

Among those I talked to Friday were Jim Holtzman, director of the Office of Community Development for St. Louis County Government, and Chris Krehmeyer, president and CEO of Beyond Housing. It was a third person, however, who provided the kind of comprehensive information that caused me to seek Binkholder’s opinion.

Margaret Lineberry, the new Kansas City-based executive director of the Missouri Housing Development Commission, offered the most-detailed answers to my questions during an e-mail exchange that followed a friendly phone call Friday morning. In case you’re not familiar with MHDC, it’s an organization that administers federal and Missouri Low Income Housing Tax Credit programs, federal HOME funds, the U.S. Department of Housing and Urban Development Project Based Section 8 rental assistance contracts, the direct MHDC funding of several housing assistance programs and the Affordable Housing Assistance Program Tax Credit.

Most notable in my exchange with Lineberry was her reply to one of my questions:

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In February of this year, I wrote a study (co-authored with Mike Flynn) about the lessons of the Japanese “Lost Decade.” At the end of the 1980s, Japan faced a very similar situation to ours: an asset bubble burst, the economy went into recession, and the financial sector stumbled. In that study we argued (as did others in separate publications) that if American didn’t properly learn the lessons of the Lost Decade, that we too would suffer a similar long night of economic malaise. Unfortunately, the warning has not been heeded.

Japan spent most of the 1990s screwing around with monetary policy, increasing taxes on its citizens, and spending trillions on stimulus projects. Sound familiar? The result was 10-years of stagnant economic growth, out of control unemployment, and national debt rising to double the rate of GDP, all while the rest of the world laughed at the nation that appeared to be returning to empire status. And that is where we are headed.

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And then, we drove down to DC…

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Read the full transcript and listen to the audio here.

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The Baltimore adventure with ACORN started off as a silly idea, both absurd and incredible by all accounts. But it stuck, and quickly escalated into a full blown operation with scripts, method acting, undercover gear, scandalous outfits, fast minds, good hearts, plenty of humor and healthy homemade blueberry muffins.

When I pitched the “prostitute goes into ACORN seeking housing” idea to James O’Keefe at the beginning of the summer, I had absolutely no idea how he would respond. He came back with, “Would you be willing to portray the prostitute?  And if so, when can you do this?”

Needless to say, the project had officially begun.

An idea conceived on an afternoon jog would soon birth material evidence.

Most people come up with ridiculous ideas, things that graze against societal norms. However, not all are capable of action because not all are comfortable with action. Many lack the desire for truth and justice, most don’t even know to want it.  But on occasion, the previous join forces. The right people with the appropriate calling unite against a common enemy, then the sky is the limit and hell is the target. There will be no compromises, only adaptation and infiltration. (more…)

A famous community organizer once said, “The only way to upset the power structure in your communities is to goad them, confuse them, irritate them and, most of all, make them live by their own rules.  If you make them live by their own rules, you destroy them.” Impossible demands can irritate modern leftists in ways nothing else can, whether it’s by banning Lucky Charms cereal because it’s racist against Irish people, calling Planned Parenthood saying you want to donate money for black abortions in the name of Margaret Sanger, or making Sen. Snowe sign an oversized bailout check for a billion dollars to Amtrak, in her own office.

~

The scenario we posed the ACORN Housing employees in Baltimore is due to the application of similar power tactics. We gave ACORN a taste of its own medicine.  ACORN was alleged to be thug-like, criminal, and nefarious.  This criminal behavior was evidenced by a video of Baltimore ACORN community organizers breaking the locks on foreclosed homes.  Instead of railing against their radicalism, it is best to bring out this type of radicalism. Hannah Giles and I took advantage of ACORN’s regard for thug criminality by posing the most ridiculous criminal scenario we could think of and seeing if they would comply–which they did without hesitation.

Additionally, instead of focusing on foreclosure itself, which has become seemingly as politicized as abortion, we focused on crimes more difficult for the left to defend: trafficking of young helpless girls and tax evasion. The first group represents the severely disadvantaged, the second a threat to the distribution of wealth. (more…)