3 Graphs: How Obama's "Financial Reform" Crushed the Economy

These results are certainly apropos of any "financial reform" bearing the names of Barney Frank and Chris Dodd.

It is rare that a single law can have a significant adverse effect on the enormous U.S. economy. But there has never been anything like the Dodd-Frank Act. Signed into law by President Obama on July 21, 2010, its extraordinary effect in slowing the economy is coming into focus as its second anniversary approaches.

As shown in the chart below, the U.S. economy had a few reasonably good quarters of recovery after the crisis, particularly the third and fourth quarters of 2009 and the first quarter of 2010. These were not of Reagan quality, of course, but they suggested that the economy was beginning to heal.

On June 30, 2010, however, the Democrat-controlled House voted along party lines to adopt the House version of Dodd-Frank. That was expected, of course, but two weeks later two Republican Senators—Scott Brown of Massachusetts and Olympia Snowe of Maine—announced they would vote for cloture in the Senate. These two votes virtually assured that the bill would pass the Senate and eventually become law. Almost immediately, GDP growth in the third quarter of 2010 began to slow. It has never recovered.

...Although event studies like this are always subject to question, the fact that the same patterns are seen in overall GDP and in two major sectors of the economy lends support to the idea that they had the same cause. Moreover, no other event at the outset of the third quarter of 2010 can explain the two-year persistence of the decline that followed...

The act also had very substantial unintended consequences. In part, this was the result of the short shrift that the relevant congressional committees gave to specific provisions before adopting the law [which] was rushed through Congress only 18 months after the Obama administration took office and 13 months after the first draft of the law was available to Congress and the public. This would have been warp speed for any one of the major provisions in the act. For a law with dozens of complex, radical, and occasionally contradictory provisions, adopting it so quickly and with so little real understanding of its effects verged on dereliction of duty...

...For example, in the Title IX provisions on housing finance reform, two completely new and important concepts were introduced that had no clear meaning—the “Qualified Residential Mortgage” (QRM) and the “Qualified Mortgage” (QM)... now—almost two years after the act was signed into law—there is still no regulation that defines this key term... Similarly, the Consumer Financial Protection Bureau (CFPB), another creation of the act, recently put off promulgating its definition of the QM until the end of 2012, conveniently after the election...

In short, like Fannie Mae, Freddie Mac, Social Security, Medicare, "Great Society" and every other enormous, failed government program, Dodd-Frank is guaranteed -- that's right, I said it: guaranteed -- to fail.

One day, hundreds of years from now, historians will look upon this era's Democrat Party with amazement. How could any political party, they will ask, continue to pile program upon program without seriously evaluating the results of their prior failures?

The answer is simple. In their craven, white-knuckled death grip on power, Democrats are willing to promise anything, no matter how destructive it will be to society as a whole.

Obamonopoly, the most exciting board game you'll never get to play

READ THE REST...









You can now stop wondering why there have never been any investigations, or trials, or imprisonments of those behind the housing meltdown and the worst financial crisis since the Great Depression.


Background reading:
Real Clear Politics: The ACORN Obama Knows
Sweetness & Light: ACORN and the Mortgage Crisis
William J. Clinton: Remarks to the National Association of Home Builders
New York Post: The Real Scandal
Jammie Wearing Fool: Obama and Fannie Mae
Ace o' Spades: Unidentified bus runs over Franklin Raines
The Root Cause (of the Mortgage Crisis)

Say, Anyone Know How President Obama's Mortgage Modification and Home-Buyer Tax Incentive Programs Worked Out?

Answer: Just as well as the Stimulus, Cash-for-Clunkers, "green jobs" programs and the rest of the President's exercises in central planning. Which is to say: it's another Obama record!

Today's new annualized home sales print was 307k, below expectations of 315k (yet oddly better than last month's downward revised which moved from 313k to 303k, wink wink nudge nudge Census bureau). This is not to be confused with the actual number of houses sold which came at a whopping 25k, and the third month in a row in which under 500 homes sold in the over $750,000 category.

Yet the most notable data point was the average new house sale price which dropped to $242,300. This is the lowest price since 2003! Something tells us that an MBS LSAP [Ed: i.e., monetization of securitized mortgage debt by the Fed] is pretty much guaranteed at this point.

And I simply adore the shrill shrieks of the drones when confronted with these increasingly dire statistics after three years under the Obama regime. They follow the same general template:

"After eight years of Bush (please note the heart-wrenching affliction -- that all drones suffer -- of Bush Tourette's Syndrome, even after all these years), what d'ya expect? It would'a been worse if he hadn't a'done it!"

Really, drones?

May I then refer you to One Chart to Rule Them All? This is a joint product of The New York Times and The Los Angeles Times, which patiently explains to even the most radicalized Leftist how the mortgage crisis began. Enjoy, miscreants!

Obama Silent as Millionaires and Billionaires at Fannie and Freddie Collect Huge Bonuses From the Taxpayer

After literally years of demonizing "millionaires and billionaires" (which, best I can figure, means people who make $200,000 a year), the President has gone curiously silent about a certain segment of the rich: the guys running Fannie Mae and Freddie Mac into the ground.

Barack Obama has exhorted supporters to object to large bonus payouts at financial institutions that took TARP bailout money. The House Oversight Committee and its chair, Rep. Darrell Issa, want to know why Obama hasn’t objected to the ridiculous levels of compensation at the two largest bailout recipients — Fannie Mae and Freddie Mac...

...lucrative compensation packages may be appropriate for profitable companies in the private sector, but substantial questions exist whether they are appropriate for entities in taxpayer-funded conservatorship, especially those that are bleeding billions of dollars each quarter. In this context, it is important to remember that taxpayers – not corporate shareholders – are footing the bill for these lavish bonuses.

Countdown to Democrat outrage in: three... two... never.

Compulsive Intervention Disorder

President Obama and other Democrats have routinely pinned the blame for the 2008 housing crisis on the mistakes of the prior administration. In fact, two years ago the New York Times published a 5,100-word article alleging that the Bush administration’s housing policies had “stoked” the foreclosure crisis and, therefore, the financial meltdown. Using a variety of governmental mechanisms, the Times alleged, Bush seduced millions of people into mortgages that they ultimately couldn’t afford.

The Times has forgotten -- or, more likely, chosen to ignore -- a long and sordid history of government involvement with housing.

In 1922, Secretary of Commerce Herbert Hoover, overreacting to a tiny dip in home ownership rates reflected by the 1920 census (from 45.9% in 1910 to 45.6%), warned that three-quarters of all Americans would be renters within a few decades (experts believe that the small drop was actually related to the after-effects of World War I).

The New York Times echoed Hoover's urgency, "The nation’s stability [is] being undermined... The masses [are] losing their struggle for a better life.”

Without waiting to see if postwar prosperity might change the trend, Hoover launched a program of aggressive government intervention into the housing market. Hoover's Own Your Own Home program prompted GM, U.S. Steel and -- most significantly -- federally chartered banks to dive into the housing business.

From 1927 to 1929, national banks’ mortgage lending increased 45 percent. Despite an obviously overheated market, The New York Times applauded the “wave of home-building” turning America into "a nation of home owners."

The 1930 census revealed 47.8% of U.S. households were living in their own homes.

But all was not well. Foreclosures rose from 2% in 1922 to 11% in 1927.

The October 1929 stock market crash touched off bank runs and cash-starved institutions stopped lending altogether.

By 1933, 1,000 homes were foreclosing each day.

Hoover's Own Your Own Home program had created a housing bubble. Mortgage loans more than doubled in less than ten years, a primary reason that 750 financial institutions failed in 1930 alone.

Construction jobs also fell 70% from 1929 to 1933.

You might thank that Hoover's housing debacle would have taught politicians the dangers inherent in engineering housing policy.

Instead, the feds reacted to the crisis by forming the Home Owners' Loan Corporation (HOLC). HOLC was a New Deal bailout organization that turned government into an even bigger player in the housing market. HOLC would buy up troubled mortgages from banks and allow homeowners to refinance.

HOLC turned into a massive federal agency, reaching 20,000 employees at its height. Despite the new loans it negotiated, 20% of these reformulated mortgages defaulted.

HOLC loan officers characterized two thirds of the defaults as borrowers refusing to renoegotiate, as homeowners rightly figured that the government wouldn't kick them out of their homes.

And despite all of its purchases of bad loans, mortgage lending never revived during the thirties.

The feds' attempts at central planning continued with the Federal Home Loan Bank system to provide funds to banks; the Federal Housing Administration to insure loans; the Federal National Mortgage Association (Fannie Mae) to purchase insured mortgages; and the Federal Savings and Loan Insurance Corporation to prevent future bank runs.

Put simply, the U.S. government had federalized much of the mortgage market.

1944's GI Bill included government-subsidized mortgages for returning veterans. By 1949, more than half of U.S. households owned homes and 40% were government-subsidized.

As homeownership grew, political pressure to allow riskier loans increased. As a result, the government eased its lending requirements, approving riskier loans and extending terms.

Predictably, the failure rate on FHA-insured loans spiked by 500% from 1950 to 1960.

By contrast, the foreclosure rate of conventional mortgages barely changed at all; many traditional lenders had maintained strict underwriting standards.

Ignoring all of these issues, the FHA embarked on a massive urban-loan program in the sixties and seventies. It turned out to be a catastrophic failure.

After the riots of 1968, the government passed a law giving poor families FHA-insured loans with nearly no down payments.

The result: massive real-estate flipping as speculators took advantage of the easy loan terms and uneducated home buyers. Foreclosures ran wild in more than 20 cities. The FHA became Detroit's biggest homeowner after it took about $200 million in losses. In New York, the tab ran more than $300 million. The final bill to taxpayers was estimated at $1.4 billion in losses.

Aside from the monetary losses, the program caused many neighborhoods to fall into ruins. Bushwick, a once-stable blue-collar Brooklyn community, became a burned-out husk of its former self as many buyers walked away from their properties and arsonists torched vacant homes. Entire blocks remained burned-out for years.

Once again, Washington's attempts at social engineering had failed as rampant speculation and corruption ran unchecked because the taxpayers were on the hook.

Again ignoring the problems endemic in any central planning of the housing market, the government next stepped into the breach in 1975.

Community agitators claimed studies were demonstrating that blacks were not receiving the same number of loans as whites; and the media jumped on the bandwagon. Experts pointed out, however, that creditworthiness of borrowers had not been taken into account.

Despite these obvious failings, Congress passed the Community Reinvestment Act (CRA) in 1977. It gave regulators the power to deny banks the right to expand if they didn’t lend at "acceptable rates" in poor neighborhoods. In 1979, the Federal Deposit Insurance Corporation (FDIC) rocked the banking industry when it used the CRA to deny the Greater New York Savings Bank to open a bank branch in Manhattan, claiming it hadn't met its lending obligations in Brooklyn.

The theme was repeated over and over again. In 1980, the FDIC told a Maryland bank that its expansion plans would be denied unless it started lending in the District of Columbia, though the bank had no branches there. Then the government began instructing wholesale banks—institutions without retail branches and that don’t lend to consumers —that they, too, had to implement urban lending programs.

Another milestone to the current meltdown was caused directly by the Association of Community Organizations for Reform Now (Acorn), which threatened to stop bank acquisitions in 1986 until it accepted "flexible credit and underwriting standards" for minority borrowers.

Acorn also successfully applied political pressure to Congress, which passed legislation in 1992 that required Fannie Mae and Freddie Mac to devote 30% of their loan portfolios to low- and moderate-income borrowers.

The campaign gathered inertia with the election of Bill Clinton, whose secretary of HUD, Henry Cisneros, began lobbying for zero-down loans, expanding federal insurance and using the CRA and other laws to force private money into low-income programs. Fannie and Freddie (also known as government-sponsored entities -- or GSEs) followed Cisneros' guidelines and further loosened underwriting standards, despite the FHA disaster of the sixties.

To meet the stated goals, the GSEs began enlisting large lenders to meet the new, flexible underwriting standards. In 1994, after accusions in Congress of "egregious redlin[ing]" by Rep. Maxine Waters (D-CA), the Mortgage Bankers Association (MBA) shocked the banking world by signing an agreement with HUD to increase minority lending. The first MBA member to enlist: Countrywide Financial, the firm at the center of the subprime meltdown.

As the volume of low-income loans increased, Wall Street began to take note.

In early 2000 the FDIC proposed increasing capital requirements for lenders making subprime loans, Carolyn Maloney (D-NY) and John J. LaFalce (D-NY) battled the attempts, urging the regulators “not to be premature” with stricter underwriting.

In 1999, despite new lenders in the market, the Clinton administration kept pushing aggressive mortgage products.

In July, HUD increased desired levels for the GSEs low-income lending. In September, the GSEs began purchasing loans made to “borrowers with slightly impaired credit”, lowering the bar still further. In the following years, Congress set higher goals for the GSEs.

By 2007, some $1 trillion in loans had been made to lower- and moderate-income buyers. And Countrywide was the biggest supplier of mortgages to low-income buyers for Fannie Mae.

There was no shortage of evidence that this approach was doomed to fail.

In October 1994, Fannie Mae head James Johnson reminded a banking convention that mortgages with small down payments had a much higher risk of defaulting (actually, three times more likely to default). Yet the very next month, Fannie expanded its program to include products with a 97 percent loan-to-value ratio (a 3% down payment), the result of more political pressure from Maxine Waters and others in Congress.

No matter how high ownership rates climbed, however, a new group below the bar needed help. Massive immigration during the nineties, for example, created huge new pools of prospective borrowers. The Congressional Hispanic Caucus created Hogar, an initiative that eased lending standards for immigrants, and mortgage lending to Hispanics soared. Today, in areas where Hispanics make up 25 percent or more of the population, foreclosure rates are now nearly 50 percent higher than the national average.

Last year, lenders began foreclosing on roughly 2.3 million homes; some experts believe that before the crisis is over, 8 million homes will have been foreclosed upon.

Despite all of these lessons, Washington is preparing for the next housing debacle.

Barney Frank (D-MA) has aggressively resisted attempts to privatize the GSEs, which would eliminate both the risk to taxpayers and the political influence endemic in the series of failures. And the Obama administration’s various mortgage bailout plans have not only failed, they also eerily resemble the New Deal’s HOLC.

Behind all of these efforts are fundamental misconceptions about central planning; that masterminds in Washington can somehow perform better than the free market, where conventional underwriting programs have succeeded admirably in the past without government regulation.

If nothing else, the last ninety years have proven that political tampering in the housing market results in nothing less than disaster. And we're on course for more, if we keep electing big government Statists to office.

The pinnacle of this senseless treadmill is having the likes of Chris Dodd and Barney Frank -- arguably as responsible as any two living individuals for the most recent crisis -- writing the "fixes" for the financial system; or President Obama's pursuit of reduced underwriting standards that "repeats [the] mistakes of the past".

What's that definition of insanity, again?

It's time to get government out of the housing business, once and for all.


Based upon: Steven Malanga's outstanding Obsessive Housing Disorder in City Journal.

Madoff's SEC regulators get off scot-free; liberals who bleat endlessly for more regulation hardest hit

I just love it when progressives and big government Republicans prattle endlessly about the need for more regulation. Every industry in America is regulated to an unprecedented degree, with thousands upon thousands of federal bureaucrats micromanaging light-bulbs, shower heads, the size of toilet tanks, gas mileage, energy exploration, dishwasher design, and everything else you can think of.

And no industry is more regulated than financial services.

After the housing market melted down thanks to eight decades of government tinkering, none other than Sen. Chris Dodd and Rep. Barney Frank -- prime culprits in the debacle -- put themselves in charge of "fixing" the financial system.

And the fixes consisted of thousands of pages of new regulations.

Dodd and Frank curiously ignored their financial benefactors -- Fannie Mae and Freddie Mac -- which contributed mightily to the disaster. Barney Frank used his pull to get his lover a job at Fannie (no pun intended) and Chris Dodd received sweetheart loan deals under the table.

In other words, the regulators were themselves in need of regulation.

A prime example of this kind of cronyism and corruption involves the aftermath of the Bernard Madoff Ponzi Scheme. Madoff's multi-billion dollar fraud represented the biggest and most obvious failure of the Securities and Exchange Commission (SEC), an agency designed to protect investors against precisely this type of crime.

Despite seventeen (17) years of warnings about Madoff, the SEC declined to seriously investigate until it was too late.

And what happened to the all-too-cozy regulators who should have heeded the warnings and protected investors from Madoff? You guessed it: virtually nothing. Not one was fired.

The Washington Post reported on its Web site Friday that seven SEC employees had been disciplined, based on details provided by a person familiar with the actions. A second source, an official involved in the process, told The Post that Schapiro had received recommendations to fire an employee over the mishandling of the Madoff case.

Later Friday, Nester confirmed details and added that an eighth employee also received disciplinary action. A ninth employee, who was facing a potential seven-day suspension, resigned before disciplinary action was taken, Nester said.

The punishments given the SEC employees varied and included suspensions, pay cuts and demotions.

The employee recommended for termination received one of the more severe penalties, a 30-day suspension along with a reduction in pay and grade. Another was given a pay cut of 5.7 percent. At the low end, one employee was suspended for seven days, another for three days and two others were issued counseling memos, a step below a reprimand.

What needs to be regulated is government itself. Crony capitalism is rampant in Washington, with politicians like Dodd and Frank out to enrich themselves at taxpayer expense.

We don't need more regulations or regulators. What we need are more controls on government, to protect the people from predators like these corrupt slime-balls.


Related: Compulsive Intervention Disorder

Who you should thank for Bank of America's new $5 monthly debit card fee

I'm assuming you've heard about Bank of America's controversial decision to add a $5 monthly fee to each debit card account. Here's why they did it (hint -- thank the Dodd-Frank "financial reform" bill):

The new $5 monthly fee Bank of America is charging debit card holders wasn't just picked because the spreadsheet guys really like Subway $5 footlongs. There's actually a calculation behind it. Here's the math.

ConsumerAffairs.com explains how under the old rules, debit card fees usually amounted to an average of 44 cents per transaction. The new rules cap the fees at 24 cents per transaction. That's 20 cents per swipe they're not making.

Now, the average consumer has 25 debit card transactions per month. Multiply the 20 cents 25 times and you get $5 as the amount, on average, Bank of America stands to lose per debit card holder per month.

So there you have the business reason for the $5.

Gee, I'm stunned.

You mean central planning didn't work (again)?

Pity the Obama Democrats can't and won't ever learn this simple economic truth.

Awesome: Obama proposal would allow debt collectors to robo-call cellphones

It seems that Americans just can't get enough of the Obama Democrats' policies.

Seriously, consumers are reveling in new regulations that force banks to dramatically hike fees and ban credit cards for stay-at-home parents.

No, Americans want more regulations. So President Obama is happily obliging by suggesting that debt collectors be allowed to robo-call consumers' cellphones:

To the dismay of consumer groups and the discomfort of Democrats, President Barack Obama wants Congress to make it easier for private debt collectors to call the cellphones of consumers delinquent on student loans and other billions owed the federal government...

...The little-noticed recommendation would apply only to cases in which money is owed the government, and is tucked into the mammoth $3 trillion deficit-reduction plan the president submitted to Congress.

Despite the claim, the administration has not yet developed an estimate of how much the government would collect, and critics reject the logic behind the recommendation.

"Enabling robo-calls (to cellphones) is just going to lead to more harassment and abuse, and it's not going to help the government collect more money," said Lauren Saunders of the Boston-based National Consumer Law Center. "People aren't paying their student loans because they can't find a job."

President Subprime McDowngrade is really doing a bang-up job: not only is he killing jobs with out-of-control bureaucracies like the NLRB and the EPA, he's letting new swarms of debt collectors run wild on the little people.

Now I know this comes as quite a shock for liberals, but here's the real headline: Inexperienced, un-vetted community organizer makes surprisingly lousy president.

Another success story for central planning: Fed rule will ban credit cards for many stay-at-home parents

Isn't it amazing how everything the Obama administration touches -- aside from our military and intelligence communities -- turns to crap?

A federal rule kicked in Saturday that will prevent many applicants from qualifying for new credit card accounts.

The Federal Reserve's rule told credit card companies that they no longer can consider household income when assessing the creditworthiness of an individual who applies for his or her own card. Under the rule, only an individual's own salary or other income -- rather than combined household income -- can be considered.

One major effect of the new regulation: Stay-at-home moms (or dads) without significant outside income no longer will be able to open their own credit card accounts -- and establish their own credit histories to build their credit scores. Compliance with the rule became mandatory Oct. 1, 2011.

"From an economic standpoint, this is a whopper," said Manisha Thakor, founder of the Women's Financial Literacy Initiative, a financial fellow at Wellesley College and a Houston-based financial analyst. "Not only will be harder to build a credit score, but this ruling is tantamount to assigning a zero dollar value to the work stay-at-home parents do day in and day out to keep households running."

...Previously, an individual member of a household could qualify for a credit card account by pointing to the combined income of several members of that household. For instance, in the case of a married couple, a stay-at-home wife without any independent income could qualify for and obtain a credit card under only her own name -- and establish her own credit history -- by pointing to the salary of her husband.

That no longer will be the case. Now, she must prove that she can make the payments with only her own resources, a nearly impossible hurdle for many homemakers to overcome.

"They're going to be stuck, really stuck," said Barbara Shapiro, a Boston-area registered investment adviser, vice president of the HMS Financial Group and a certified divorce financial analyst. "It makes these people completely unable to buy an airline ticket, rent a car or do anything that requires a credit card.

"We're becoming a cashless society," Shapiro said. "What are these people supposed to do?"

What indeed?

Maybe they can survive on hope, change, pink ponies and unicorn dreams.


Hat tip: Laughing Conservative.

First House Subpoena Targets Beneficiaries of Countrywide Mortgage Sweetheart Deals -- Including Democrats Chris Dodd and Kent Conrad

President Obama likes to call the current financial crisis the "worst since the Great Depression". And I think we all would admit that the meltdown was fueled, in large part, by bad loans backstopped by the American taxpayer through Fannie Mae and Freddie Mac.

So where are the investigations? Where are the criminal charges? Why isn't anyone serving time, especially the Democrats who raped and pillaged Fannie and Freddie -- for hundreds of millions of dollars -- before it collapsed? Well, for obvious reasons, Nancy Pelosi and Harry Reid stonewalled investigations because it would cost them political capital.

Thankfully, now that the American people have booted Pelosi out of the speaker's seat, we may soon learn the rest of the story.

Taxpayers wanting the whole story of how Countrywide Financial used its VIP loan program to grease politicians and reward its partners at Fannie Mae and Freddie Mac may soon have it. Thanks for this belated act of political hygiene go to House Oversight Committee Chairman Darrell Issa, who Wednesday issued a subpoena to Bank of America, which bought Countrywide during the financial crisis.

By March 7, the bank will need to produce all documents related to the company's VIP program, also known as the "Friends of Angelo" program in honor of former Countrywide CEO Angelo Mozilo. Mr. Mozilo ran the subprime factory at the center of the housing bubble. Sweetheart loans for his "friends" at Fannie, Freddie and on Capitol Hill were part of a strategy to keep the mortgage party going, with minimal oversight of the loans originated by Countrywide and then guaranteed by Fan and Fred (and taxpayers).

In 2009 Mr. Issa persuaded then-Oversight Committee Chairman Ed Towns to issue a similar subpoena. But to protect the less-than-innocent, Mr. Towns asked that names be redacted. The identities of political "friends" in the House were sent only to the ethics committee, where they seem to have fallen down a well. Senate names were not shared with anyone.

Mr. Issa's new subpoena seeks the whole story, unredacted. The scuttlebutt is that most of the 30 Capitol Hill loans went to staff, not elected officials. But revealing internal discussions of why the firm helped "friends" like former Sen. Chris Dodd and Sen. Kent Conrad may suggest important reforms. However that turns out, it probably won't take a subpoena to understand why such reforms were absent from the law Mr. Dodd co-authored last year.

Dodd has never come clean on the full extent of his shady dealings with Countrywide. Which is why he no longer serves the fine people of Connecticut in the Senate.

Now, given all of this information, does it strike you as odd that Dodd and co-conspirator Barney Frank authored the latest "financial reform" bill?

Yes, it does, doesn't it? Criminally odd, in fact.


Update: Jane Jamison is underwhelmed with the choice of opening salvo.

Remember All Those Banks That TARP Rescued? Looks Like Their Exposure to the European Debt Crisis Is No Prob--RUN AWAY!! RUN AWAY!!

As if U.S. banks didn't have enough troubles, we discover this delightful news out of the Bank of International Settlements (BIS).

Last night, the BIS released its latest quarterly review, as always chock full of useful information. The one major item that caught our eye was the updated exposure toward the PIIGS [Portugal, Ireland, Italy, Greece, Spain] countries by various foreign banks. And specifically the brand new category that had never been disclosed before by the BIS, namely the "other exposures" category, which per a rather closeted footnote is defined as: "other exposures consist of the positive market value of derivative contracts, guarantees extended and credit commitments." This is exposure that appears for the first time in an official BIS document. And it is sizable: while total foreign claims stood at $2,281 billion, the newly disclosed category accounts for a whopping two thirds of a trillion: $668 billion...

...How generous of the BIS to share this data which as recently as 2 years ago may have been considered as material, and these days is merely dismissed with a laugh. After all who cares unless the potential loss has at least 12 zeroes in it. Yet what is most significant for the US taxpayer... is that US exposure to the P(I)IGS (Italy excluded, for the time being - give it a few months), has just tripled as a result of this revelation. While before it was "common knowledge" that US banks have nothing to lose should Europe go down the drain, it has now been revealed that US banks actually have $353 billion in exposure, of which $233 billion is of this newly revealed "other category."

And now that it is pro forma common knowledge that should the PIGS fails, that at least a few domestic banks would be wiped out, it also should be appreciated why the ECB will do everything to prevent an impairment to bondholders: with just under $2.3 trillion in potential partial or full losses on total exposure, the domino effect would blow up Europe overnight, then promptly wipe out the US and the rest of the world with it.

The country with biggest exposure to the PIGS is not surprisingly Germany with $513 billion, followed by France at $410 billion, Great Britain at $370 billion, and... the US at $353 billion... Here [is a pretty chart] that show[s] just how screwed Europe (and America) is:

Just remember, folks: Tim Geithner is the only man smart enough to get us out of this mess.

What's Really Behind Bernanke's 'Quantitative Easing II'?

It's clear that Fed Chairman Ben Bernanke is out of control. His latest gaffe: blaming China for the failure of QE2 to spur anything but fear.

In speeches before a European Central Bank conference in Frankfurt, Ben Bernanke went on an unprecedented attack, accusing China of throwing a monkey wrench into the global recovery, blaming China for slow global growth and a potential "End to the Tepid U.S. Recovery".

He also said "The current international monetary has a structural flaw" calling on the "global community, over time, to devise an international monetary system that more consistently aligns the interests of individual countries with the interests of the global economy as a whole."

Finally, he put up a misguided defense of Quantitative Easing that is sure to not go over well in the global community.

If Bernanke was trying to spook the markets, provoke China, cause a currency war, and get Congress to launch an extremely foolish set of tariffs, he would have been hard pressed to deliver a more powerful speech.

Blaming China for America's out-of-control spending is a little like pinning Michael Moore's ever-expanding gut on Ronald McDonald.

Bernanke said that China’s decision to undervalue the yuan has essentially thrown a monkey wrench into the global economic recovery... The result could be slow growth ahead “for everyone,” he said.

...“On its current economic trajectory, the United States runs the risk of seeing millions of workers unemployed or underemployed for many years,” Bernanke said.

Monetizing the debt -- which simply means the United States is being forced to conjure money from thin air to fund the operation of the government -- is an ominous sign by itself. Combined with harsh rhetoric against the country's biggest creditor, the Fed's policies are well nigh suicidal.

Andy Kessler, writing in The Wall Street Journal, explains the likely rationale behind Bernanke's erratic behavior.

Federal Reserve Chairman Ben Bernanke's $600 billion quantitative easing program has been roundly criticized in this country and around the world. So why is he doing it? Does he know something the rest of us don't?

...I have [an] explanation for the Fed's latest easing program: Without another $600 billion floating through the economy, Mr. Bernanke must believe that real estate (residential and commercial) would quickly drop, endangering banks...

...Mr. Bernanke is clearly buying time with our dollars. If real estate drops, we're back to September 2008 in a hurry. On Wednesday, the Fed announced that all 19 banks that underwent stress tests in 2009 need to pass another one. This suggests central bankers are nervous about real-estate loans and derivatives on bank balance sheets...

Rather than use his bully pulpit to harangue the President and Congress into sane spending policies, Bernanke instead is attempting a triple-reverse handspring off the high-beam. Odds are it ain't gonna work.

Only when we excise the cancerous lesions -- Fannie Mae, Freddie Mac and the other market-distorting entities -- can we return to a level of predictability and stability. But don't hold your breath. Facts, logic and reason have never been the Democrats' forte.

Oh, This is Rich: HuffPo Nut Can't Remember When Members of Congress Ever Met With Foreign Leaders Against the Will of the White House

Some crackpot named Amanda Terkel, writing at the execrable Stuffington Roast, is shocked -- shocked! -- that a member of the the House majority met with the Israeli P.M.

Rep. Eric Cantor (R-Va.) told Israeli Prime Minister Benjamin Netanyahu on Wednesday during a meeting in New York that the new GOP majority in the House will "serve as a check" on the Obama administration, a statement unusual for its blunt disagreement with U.S. policy delivered directly to a foreign leader...

...Ron Kampeas from the Jewish Telegraphic Agency news agency found Cantor's comments extremely surprising, writing, "I can't remember an opposition leader telling a foreign leader, in a personal meeting, that he would side, as a policy, with that leader against the president. Certainly, in statements on one specific issue or another -- building in Jerusalem, or somesuch -- lawmakers have taken the sides of other nations. But to have-a-face to face and say, in general, we will take your side against the White House -- that sounds to me extraordinary."

What a tool.

It's certainly easy to forget this meeting of Democrat Chris Dodd (D-CT) with Syrian dictator-slash-Iranian-terror puppet Bashar Assad against the wishes of the Bush White House.

Or this meeting between the pathetic John Kerry (D-MA) and Assad.

Or the time that the disgraceful Bill Nelson (D-FL) met with Assad.

And who could forget this meeting between Stretch Pelosi and Assad?

Not only did Democrat leaders meet with the head of the terror-state; not only did they fly across the globe to meet; but they also did so in the midst of the Iraqi conflict in which:

• Syria was secretly building its own nuclear facility (later destroyed by the Israelis, thankfully)...

• Credible military reports stated that Assad was (and is still) holding Saddam Hussein's WMDs...

• And, worst of all, Syria was actively exporting weapons to Iraq's insurgents during the war that were used to kill American troops.

In a late update to the article, however, Terkel happens to remember one of many visits by Democrat leaders to express support for Syria's terror-state, but only to attempt to point out GOP "hypocrisy".

Yes, dimwit, because Syria -- a puppet of Iran -- was and is a known terror-state and avowed enemy of the U.S. Its support for Hezbollah, for instance, was also instrumental in the bombing that killed 241 U.S. Marines.

Not that you'd remember any of that, "Terkel" -- if that is your name.


Hat tip: Memeorandum.

I didn't think Housing Wire was a horror website. Until today.

You wouldn't normally think of Housing Wire magazine as a horror periodical, but given the multi-decade rape of Fannie Mae by connected Democrats, you'd be wrong.

Two recent articles highlight the trouble we're in.

1. One In Five Distressed Homeowners At Risk of Losing Home:

Laurie Goodman, senior managing director at Amherst Securities, believes one in five distressed homeowners in the U.S. are facing, or may face, foreclosure... The analyst adds that little may be done to stem the tide of foreclosures without greater government intervention or significant principal reduction. Currently, she said 11.5 million home loans are non-performing or highly distressed.

...Goodman spoke at Thursday's State of Housing webinar today, hosted by HousingWire. Several charts produced during the event paint a picture of a highly distressed housing market.

2. Mortgage delinquencies are in 'serious trouble,' says LPS analyst:

Kyle Lundstedt, managing director of the applied analytics division at Lender Processing Services, said the housing market remains in "serious trouble" as current mortgage delinquencies are above 7 million distressed homeowners... Perhaps most alarming to Lundstedt is the rise in prime mortgage delinquencies. "The prime markets are the place we've seen the most increase in foreclosure," he said

..."It's shocking the 13% of mortgage in Florida are in foreclosure," he said. "Not delinquent, not in default, but in foreclosure."

Anyone have Franklin Raines' number? Or Jamie Gorelick's?

I've got a few choice words for them, which I can't repeat in polite company.

What a Relief: Dodd-Frank Financial Reform Act Working Like a Champ as Fannie and Freddie Will Now Cost Taxpayers $700B, Up from $300B

The 111th Congress will go down in history as the worst, most irresponsible group of fiscal degenerates in all of American history. And you can quote me on that.

Unsatisfied with a trillion-dollar stimulus boondoggle... not content with taking over the health care industry... unhappy with "Cash-for-Clunkers" and nationalizing the auto industry and pillorying free enterprise and attacking the energy industry and...

[Cleansing breath]

..."fixing the financial system". That is, the very same men who protected the Fannie Mae crooks from a GOP crackdown, Chris Dodd and Barney Frank, cooked up yet another circle of stupidity by regulating the banking industry, Soviet-style.

And, like the rest of their disastrous programs, it too has failed.

Two weeks ago, the FHFA, using Moody's assumptions and modeling, said that a worst case scenario for Fannie and Freddie could result in total costs to taxpayers of $363 billion, an incremental $220 billion to the $148 billion already spent to keep the nationalized housing branch of the US government...

Today, S&P has released a stunner which says that actually fixing the GSEs, and "resolving and relaunching" the bankrupt entities, would actually cost as much as $685 billion, or over another half a trillion in taxpayer costs. And as for the reason why the market is surging, and will be until the US annexes Zimbabwe, now that it is pricing in QE 7, S&P says that according to its estimates, the backlog of shadow inventory is 40 months! Tomorrow: another trillion dollar capital defficiency hole, uncovered somewhere in the ponzi that is the US economy, will cause QE 8 to be priced in. And so on.

This economy still teeters on the precipice of disaster thanks to the massive deficit spending of the 111th Congress.

And the GSEs -- Fannie and Freddie -- are still fiscal time-bombs, still ticking away, thanks to the idiotic social engineering policies of the Statist Left.


Image: Woody.

Last Call for Liberty

"You would think they’d be saying thank you" -- Barack Obama, 4/15/2010
When they spent a trillion dollars of your money to repay union bosses for their support, they were laughing at you.

When they put 25,000 small businesses at risk by banning non-unionized shops from bidding on government construction projects, they were laughing at you.

When they nationalized the auto companies and flouted bankruptcy law to pay off the UAW bosses, they were laughing at you.

When they shoved the wickedly unpopular ObamaCare bill down your throats using bribes, cajolery and strong-arm tactics -- without even bothering to read their own disastrous bill, they were laughing at you.

When they passed a financial reform bill, spearheaded by the same men who had helped create the crisis in the first place and had shielded corrupt, Democrat-controlled institutions like Fannie Mae from oversight, they were laughing at you.

When they publicly demonized the nation's biggest banks while privately taking millions in contributions from them, they were laughing at you.

When they opened up the borders to murder, rape and mayhem -- disregarding the safety of citizens across the country -- to increase the odds of their reelection, they were laughing at you.

When they tried to tell you that "We Are All Socialists Now", they were laughing at you.

When they paid illegal aliens to openly canvas for Democrat votes, they were laughing at you.

When they called you racists, though you supported Allen West and 37 other wonderful black conservatives running for national office, they were laughing at you.

When they relentlessly tried to corrupt the voting process with amnesty for illegals, permitting felons to vote, and ACORN's skulduggery, they were laughing at you.

When they used your tax dollars to tar you as "tea-baggers", when your philosophy is that of America's founders, they were laughing at you.

When they tweeted birthday wishes to this era's Hitler while he builds nuclear weapons and plots America's destruction, they were laughing at you.

When they hand-delivered ballots to prisoners in jail but couldn't find a way to get military ballots to our armed forces in time for this election, they were laughing at you.

I will walk on f***ing broken glass to get to the polls tomorrow.

Are you fired up to save this country? Are you?? Well then I want to see you at the polls at zero-six-thirty-sharp. Hooah!