Category Archives: Real Estate

Obama's home loan modification program was talked up by the bailout-friendly news media as a potential "ray of light" for struggling homeowners.

But on June 21, Associated Press reported the mortgage assistance program is "falling flat."

The broadcast networks supported the mortgage modification and housing bailout when Obama launched it in 2009, after criticizing Treasury Secretary Henry Paulson's plan for not doing "enough" to fix the problem. ABC, CBS and NBC haven't mentioned the new figures since AP reported them.

"More than a third of the 1.24 million borrowers who have enrolled in the $75 billion mortgage modification program have dropped out," AP said. "That exceeds the number of people who have managed to have their loan payments reduced to help them keep their homes."

The "ambitious" Home Affordable Modification Program was supposed to help 3-4 million people. As of last month the number of dropouts (436,000) exceeded the permanent modifications by almost 100,000 (340,000).

This was part of the same housing bailout Rick Santelli condemned on CNBC saying "the government is promoting bad behavior." Santelli's rant against the housing bailout helped inspire thousands of Americans to protest bailouts and runaway government spending at Tea Parties around the country in 2009 and 2010.

But Santelli's opposition to a bailout was an exception among the pro-bailout news media. As recently as Feb. 18, 2010 ABC's Robin Roberts was praising the program as "what may be a ray of light for the millions of homeowners struggling to hold on to their piece of the American dream."

Roberts and Bianna Golodryga downplayed problems saying that there had been "hiccups" in the program, but placed the blame for those problems on banks unwilling to work with homeowners, rather than on the government.

Golodryga's report also included an expert who criticized the program from the left saying it was "nowhere near the size and scope of what we need to, to stem this tide." Golodryga is engaged to White House budget director Peter Orszag, who announced his resignation June 22, 2010.

ABC's Jeffrey Kofman also found left-wing criticism of the program to incorporate in his story. On Feb. 18, 2009, Kofman mentioned concerns "that a $75 billion bailout can't single handedly turn around an $11 trillion housing market. But they say it is a start."

Roughly a month later, CNBC's Diana Olick acknowledged that the $75 billion program had "fallen short" of helping the 3-4 million homeowners on "Nightly News" March 26, 2010. At that time, she reported that only 200,000 permanent modifications had been done. But Olick didn't criticize the Obama administration's decision to expand the plan to more borrowers.

In 2009, when Obama's two-part mortgage bailout was launched, CBS had no criticism or difficult questions in its "Early Show" segment March 5. The night before, Katie Couric described the plan as "relief for struggling homeowners" on "Evening News."

Now it appears the bailout didn't work and may jeopardize the economic recovery, according to CNBC's Larry Kudlow.

Kudlow reacted to the latest mortgage modifications data on June 22, saying that "Housing in particular looks vulnerable to that double-dip [recession]. And all these goofy, temporary tax credits and mortgage modifications and other forms of temporary stimulus nearly steal activity from the future and never work permanently, as Milton Friedman argued [years ago]."

‘Controversial' Program Struggles, Despite Network Support

Like other bailouts, the networks favored the mortgage bailout and loan modification program when it was announced in 2009. Now that the program is a failure don't expect a retraction. So far the networks have ignored the new data Treasury released on June 21.

Since the broadcast networks haven't done much reporting on the problems with the loan modification program, people might wonder why it isn't working.

According to AP, "A major reason so many have fallen out of the program is the Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out."

AP also warned that more foreclosures could be ahead as people leave the program.

The Washington Post reported that about half of the program dropouts "received another type of loan modification from their banks." Only 7 percent have gone into foreclosure, according to CNNMoney.com.

The timing of the news was bad for politicians trying to pass another housing bailout - this one $3 billion in loans for homeowners who are out of work.

Politicians should be wary given the outrage already directed against mortgage bailouts, since it was the potential housing bailout that angered many and led to tea parties across the country. Santelli's initial rant condemned the proposed housing bailout and touched a nerve with traders and America at large.

"And in terms of modifications, I'll tell you what, I have an idea. You know the new administration's big on computers and technology," Santelli declared.

"How about this, (Mr.) President and new administration - Why don't you put up a web site to have people vote on the Internet as a referendum to see if we really want to subsidize the losers' mortgages, or would we like to, at least, buy cars and buy houses in foreclosure and give them to people who might have a chance to actually prosper down the road, and reward people that could carry the water, instead of drink(ing) the water."

After traders reacted with claps and cheers, CNBC's Joe Kernen replied, "Rick, they're like putty in your hands."

Santelli denied that and continued saying, "This is America! (turns around to address pit traders) How many of you people want to pay for your neighbors' mortgage that has an extra bathroom and can't pay their bills? Raise their hand. (traders boo; Santelli turns around to face CNBC camera) President Obama, are you listening?"

Networks Back Mortgage Rescues, or Complain They're Not Big Enough

Obama's mortgage bailout was praised by the many in network news media, after an earlier mortgage rescue designed by former Treasury Secretary Henry Paulson was attacked from the left by the broadcast networks because it wouldn't help "enough people."

"It sounds as if it doesn't help anybody who had their mortgage rate increased or got foreclosed in 2007," ABC "World News" anchor Charles Gibson complained on Dec. 5, 2007.

"CBS Evening News" sympathized with a Texas couple who "can't afford" to keep their large ranch home (complete with horses), supposedly because of the rate increases on their mortgage.

CBS also ignored skepticism of a homeowner bailout on April 2, 2008, arguing that since the government had bailed out banks, mortgage holders should get the same assistance.

"Now to the foreclosure crisis that has so many Americans worried about losing their homes," "Evening News" anchor Katie Couric said that night. "After the government helped rescue Bear Stearns, calls grew louder for Washington to help struggling homeowners as well. Today on Capitol Hill, there was at least the promise of some assistance."

In July 2008, ABC's Golodryga called "a sweeping housing bailout bill" "good news for potential homeowners."  

The networks also endorsed the $700 billion "rescue" package in 2008 that was voted down by 228 representatives including 132 "rebellious" conservatives and 94 Democrats.

Rep. Mike Pence, R-Ind., was one of those who voted against it because "The decision to give the federal government the ability to nationalize almost every bad mortgage in America interrupts a basic truth of our free market economy."

The list of reporters and anchors who championed the first bailout that failed and ultimately the bill that passed on Oct. 3, was long and included CBS's Anthony Mason, ABC's Betsy Stark, Bianna Golodryga and Jake Tapper, NBC's Tom Brokaw and CNBC's Jim Cramer all called for the government to be the knight in shining armor with taxpayer dollars. Cramer was interviewed repeatedly on NBC and CNBC and even appeared on rival network ABC during "Nightline."

It wasn't just housing bailouts. ABC, CBS and NBC also promoted the nearly $800 billion stimulus bill. They campaigned for the biggest spending bill in history, picking pro-stimulus speakers more often than opposing speakers and almost completely failed to ask how the enormous bill would be paid for.

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Today the leading Austrian economic think tank, the Ludwig von Mises Institute held a conference at the University Club in Manhattan in which Marc Faber, famed contrarian investor and publisher of the “Gloom, Boom and Doom Report” gave his perspective on the financial crisis and his outlook for the future.

Below are his main points and entertaining quotes:

• Central banks will never tighten monetary policy again, merely print, print, print
• Bubbles used to be concentrated in 1 sector or region in the 19th century, but off of the gold standard this concentration has ended
• “The lifetime achievement of Greenspan and Bernanke is really that they created a bubble in everything…everywhere.”
• “Central banks love to see asset prices go up,” and their policy reflects their desperation to perpetuate this
• US housing bubble that Greenspan could not spot (even though he has recently spotted bubbles in Asia) stands in stark contrast to that of Hong Kong in 1997, where prices fell by 70%, yet none of the major developers went bankrupt; this was a result of a system not built on excessive debt like that of the US
• “You have to ask what they were smoking at the Federal Reserve,” during the housing bubble, as prices were increasing by 18% annually when interest rates started to steadily rise in 2004
• Over the last couple of years, when the gross increase in public debt has exceeded the gross decrease in private debt, markets have risen, whereas when private debt growth has outpaced public debt growth, markets have tanked
• The next 3-5 years will be highly volatile

• Americans must re-think what constitutes a safe asset; in a “traditional” period, one would generally rank from most to least safe assets: cash, Treasuries, corporate bonds, equities, commodities
• However, last year Economist Gregory Mankiw articulated the position which according to Faber essentially echoes that of Fed #2 Janet Yellen and pervades much of the Fed generally, that “The problem is that people are saving money instead of spending, and we have to get the bastards spending to keep the economy going,” so the key is to inflate the money supply at something like 6% per annum
• Thus, Faber says “As far as I’m concerned, the Federal Reserve will keep interest rates at 0, precisely 0…in real terms”
• As such, cash and longterm bonds will be a bad place to hold one’s money; equities are an avenue to preserve wealth (but this is a risky proposition, given the effects of rampant currency depreciation); precious metals are a sound place for wealth preservation
• As for the US being the most important economy for the world, there is a sea change going on right now; recently car sales in emerging economies (such as Brazil, China) are outpacing those of the US, Europe and Japan; oil consumption in emerging markets is increasing, while in the developed world it is contracting; the whole world does not depend on American consumption anymore – 60% of total exports are now going to the emerging world when one includes E. Europe; the US is still a large economy but it is not growing, while the growth in the emerging world is and will continue to be strong
• “People still think of emerging market economies as poor cousins, but because 80% of the world’s people are here, in aggregate the consumption is huge.”; these are not saturated markets and they are growing rapidly
• “Everybody should have 50% of their money in the emerging world, outside the West.”; people should also keep the custody of their assets overseas
• Contrary to what the talking heads are saying, markets are not out of control, central banks are out of control printing money
• The drivers of growth in the emerging world will be the urbanization of India and China; stocks won’t necessarily rise in the short term, but there will be significant growth in Asia in the long run
• The shift in economic power from West to East has been remarkable in speed, largely due to the rapid industrialization of the emerging world and the speed at which information travels today
• There will be a massive increase in resource-intensive industries and new export markets, met with increased volatility and tension around the world
• The supply/demand characteristics of oil are great due to the need for oil in China, India, rest of Asia
• Oil is the top priority for China, as they are now a net importer
• US has a huge strategic advantage over China given that we have access to our own oil, and that of Mexico, Canada, the Middle East and off the western Coast of Africa, in addition to the ability to travel on the Atlantic or Pacific Ocean; meanwhile, China sources 95% of their oil from the Middle East, and while they are building pipelines throughout Eastern Europe for example, their oil supply points in terms of ports for example are limited, and the US has defense bases surrounding these areas; Chinese subs could sink our boats however; the Russians are also not happy about our forces being in the region, and tensions will grow as the need for natural resources in these nations grows
• Eventually, there will be war and one will want physical commodities “not paper from UBS or JP Morgan”
• In war, cities will not offer safety because one can get bombed, water may be poisoned, electricity shut off; instead, one should buy a house in the middle of nowhere/on the countryside
• The tremendous economic Sophism of the day is that a nation can print its way into prosperity; “If debt and money printing equaled prosperity then Zimbabwe would be the richest country.”
• “Mugabe is the economic mentor of Ben Bernanke.”
• Our fiscal situation is much more horrendous than it is made out to be; total debt (public and private) as a percentage of GDP counting unfunded liabilities is an astounding 800% of GDP, more than double that during 1929
• Sovereign credits in the Western world are all bankrupt, but before bankruptcy governments will print money; US government leaders will try to postpone the hour of truth, pushing the problems off till succeeding Presidents and Congressmen
• If deficits didn’t matter as many like Economist James Galbraith argue today, why should citizens even pay taxes?  It would make everyone happier if they didn’t
• Faber is sure that the economists in academia are intelligent and they study the textbooks hard, but they study the wrong textbooks and are totally inconsistent in their philosophy
• In an environment of money-printing and high volatility that exists in the US and that will be created by future policy, physical gold is the best thing to own
• Once currency depreciation does take place, stocks may become very cheap, as happened when the Mexican peso depreciated by 95% in the early 80s, as the fund managers invested in Mexican equities completely undervalued them after currency collapse
• In a nutshell Faber says he is essentially bearish on everything, though he favors commodities (especially physical precious metals and agriculture), owning a house in the countryside, equities in emerging markets tied to resources (especially necessities like water and oil) and healthcare, and most of Asia including especially Japanese stocks
• There is no means of avoiding a total collapse in the West; at the first train station in 2008, the financial system went bust but didn’t die, at the next station nations will go bust (though this could take 5-10 years or less), but first they will print money as this is the most politically tenable option, and ultimately the world will go to war
• All of us will be doomed

Bear in mind that Faber said all of this quite matter-of-factly.

Even if you disagree with his points on the trajectory of the West, it cannot hurt to understand and prepare for the worst case scenario while still hoping for the best.

Today the leading Austrian economic think tank, the Ludwig von Mises Institute held a conference at the University Club in Manhattan in which Marc Faber, famed contrarian investor and publisher of the “Gloom, Boom and Doom Report” gave his perspective on the financial crisis and his outlook for the future.

Below are his main points and entertaining quotes:

• Central banks will never tighten monetary policy again, merely print, print, print
• Bubbles used to be concentrated in 1 sector or region in the 19th century, but off of the gold standard this concentration has ended
• “The lifetime achievement of Greenspan and Bernanke is really that they created a bubble in everything…everywhere.”
• “Central banks love to see asset prices go up,” and their policy reflects their desperation to perpetuate this
• US housing bubble that Greenspan could not spot (even though he has recently spotted bubbles in Asia) stands in stark contrast to that of Hong Kong in 1997, where prices fell by 70%, yet none of the major developers went bankrupt; this was a result of a system not built on excessive debt like that of the US
• “You have to ask what they were smoking at the Federal Reserve,” during the housing bubble, as prices were increasing by 18% annually when interest rates started to steadily rise in 2004
• Over the last couple of years, when the gross increase in public debt has exceeded the gross decrease in private debt, markets have risen, whereas when private debt growth has outpaced public debt growth, markets have tanked
• The next 3-5 years will be highly volatile

• Americans must re-think what constitutes a safe asset; in a “traditional” period, one would generally rank from most to least safe assets: cash, Treasuries, corporate bonds, equities, commodities
• However, last year Economist Gregory Mankiw articulated the position which according to Faber essentially echoes that of Fed #2 Janet Yellen and pervades much of the Fed generally, that “The problem is that people are saving money instead of spending, and we have to get the bastards spending to keep the economy going,” so the key is to inflate the money supply at something like 6% per annum
• Thus, Faber says “As far as I’m concerned, the Federal Reserve will keep interest rates at 0, precisely 0…in real terms”
• As such, cash and longterm bonds will be a bad place to hold one’s money; equities are an avenue to preserve wealth (but this is a risky proposition, given the effects of rampant currency depreciation); precious metals are a sound place for wealth preservation
• As for the US being the most important economy for the world, there is a sea change going on right now; recently car sales in emerging economies (such as Brazil, China) are outpacing those of the US, Europe and Japan; oil consumption in emerging markets is increasing, while in the developed world it is contracting; the whole world does not depend on American consumption anymore – 60% of total exports are now going to the emerging world when one includes E. Europe; the US is still a large economy but it is not growing, while the growth in the emerging world is and will continue to be strong
• “People still think of emerging market economies as poor cousins, but because 80% of the world’s people are here, in aggregate the consumption is huge.”; these are not saturated markets and they are growing rapidly
• “Everybody should have 50% of their money in the emerging world, outside the West.”; people should also keep the custody of their assets overseas
• Contrary to what the talking heads are saying, markets are not out of control, central banks are out of control printing money
• The drivers of growth in the emerging world will be the urbanization of India and China; stocks won’t necessarily rise in the short term, but there will be significant growth in Asia in the long run
• The shift in economic power from West to East has been remarkable in speed, largely due to the rapid industrialization of the emerging world and the speed at which information travels today
• There will be a massive increase in resource-intensive industries and new export markets, met with increased volatility and tension around the world
• The supply/demand characteristics of oil are great due to the need for oil in China, India, rest of Asia
• Oil is the top priority for China, as they are now a net importer
• US has a huge strategic advantage over China given that we have access to our own oil, and that of Mexico, Canada, the Middle East and off the western Coast of Africa, in addition to the ability to travel on the Atlantic or Pacific Ocean; meanwhile, China sources 95% of their oil from the Middle East, and while they are building pipelines throughout Eastern Europe for example, their oil supply points in terms of ports for example are limited, and the US has defense bases surrounding these areas; Chinese subs could sink our boats however; the Russians are also not happy about our forces being in the region, and tensions will grow as the need for natural resources in these nations grows
• Eventually, there will be war and one will want physical commodities “not paper from UBS or JP Morgan”
• In war, cities will not offer safety because one can get bombed, water may be poisoned, electricity shut off; instead, one should buy a house in the middle of nowhere/on the countryside
• The tremendous economic Sophism of the day is that a nation can print its way into prosperity; “If debt and money printing equaled prosperity then Zimbabwe would be the richest country.”
• “Mugabe is the economic mentor of Ben Bernanke.”
• Our fiscal situation is much more horrendous than it is made out to be; total debt (public and private) as a percentage of GDP counting unfunded liabilities is an astounding 800% of GDP, more than double that during 1929
• Sovereign credits in the Western world are all bankrupt, but before bankruptcy governments will print money; US government leaders will try to postpone the hour of truth, pushing the problems off till succeeding Presidents and Congressmen
• If deficits didn’t matter as many like Economist James Galbraith argue today, why should citizens even pay taxes?  It would make everyone happier if they didn’t
• Faber is sure that the economists in academia are intelligent and they study the textbooks hard, but they study the wrong textbooks and are totally inconsistent in their philosophy
• In an environment of money-printing and high volatility that exists in the US and that will be created by future policy, physical gold is the best thing to own
• Once currency depreciation does take place, stocks may become very cheap, as happened when the Mexican peso depreciated by 95% in the early 80s, as the fund managers invested in Mexican equities completely undervalued them after currency collapse
• In a nutshell Faber says he is essentially bearish on everything, though he favors commodities (especially physical precious metals and agriculture), owning a house in the countryside, equities in emerging markets tied to resources (especially necessities like water and oil) and healthcare, and most of Asia including especially Japanese stocks
• There is no means of avoiding a total collapse in the West; at the first train station in 2008, the financial system went bust but didn’t die, at the next station nations will go bust (though this could take 5-10 years or less), but first they will print money as this is the most politically tenable option, and ultimately the world will go to war
• All of us will be doomed

Bear in mind that Faber said all of this quite matter-of-factly.

Even if you disagree with his points on the trajectory of the West, it cannot hurt to understand and prepare for the worst case scenario while still hoping for the best.

Today the leading Austrian economic think tank, the Ludwig von Mises Institute held a conference at the University Club in Manhattan in which Marc Faber, famed contrarian investor and publisher of the “Gloom, Boom and Doom Report” gave his perspective on the financial crisis and his outlook for the future.

Below are his main points and entertaining quotes:

• Central banks will never tighten monetary policy again, merely print, print, print
• Bubbles used to be concentrated in 1 sector or region in the 19th century, but off of the gold standard this concentration has ended
• “The lifetime achievement of Greenspan and Bernanke is really that they created a bubble in everything…everywhere.”
• “Central banks love to see asset prices go up,” and their policy reflects their desperation to perpetuate this
• US housing bubble that Greenspan could not spot (even though he has recently spotted bubbles in Asia) stands in stark contrast to that of Hong Kong in 1997, where prices fell by 70%, yet none of the major developers went bankrupt; this was a result of a system not built on excessive debt like that of the US
• “You have to ask what they were smoking at the Federal Reserve,” during the housing bubble, as prices were increasing by 18% annually when interest rates started to steadily rise in 2004
• Over the last couple of years, when the gross increase in public debt has exceeded the gross decrease in private debt, markets have risen, whereas when private debt growth has outpaced public debt growth, markets have tanked
• The next 3-5 years will be highly volatile

• Americans must re-think what constitutes a safe asset; in a “traditional” period, one would generally rank from most to least safe assets: cash, Treasuries, corporate bonds, equities, commodities
• However, last year Economist Gregory Mankiw articulated the position which according to Faber essentially echoes that of Fed #2 Janet Yellen and pervades much of the Fed generally, that “The problem is that people are saving money instead of spending, and we have to get the bastards spending to keep the economy going,” so the key is to inflate the money supply at something like 6% per annum
• Thus, Faber says “As far as I’m concerned, the Federal Reserve will keep interest rates at 0, precisely 0…in real terms”
• As such, cash and longterm bonds will be a bad place to hold one’s money; equities are an avenue to preserve wealth (but this is a risky proposition, given the effects of rampant currency depreciation); precious metals are a sound place for wealth preservation
• As for the US being the most important economy for the world, there is a sea change going on right now; recently car sales in emerging economies (such as Brazil, China) are outpacing those of the US, Europe and Japan; oil consumption in emerging markets is increasing, while in the developed world it is contracting; the whole world does not depend on American consumption anymore – 60% of total exports are now going to the emerging world when one includes E. Europe; the US is still a large economy but it is not growing, while the growth in the emerging world is and will continue to be strong
• “People still think of emerging market economies as poor cousins, but because 80% of the world’s people are here, in aggregate the consumption is huge.”; these are not saturated markets and they are growing rapidly
• “Everybody should have 50% of their money in the emerging world, outside the West.”; people should also keep the custody of their assets overseas
• Contrary to what the talking heads are saying, markets are not out of control, central banks are out of control printing money
• The drivers of growth in the emerging world will be the urbanization of India and China; stocks won’t necessarily rise in the short term, but there will be significant growth in Asia in the long run
• The shift in economic power from West to East has been remarkable in speed, largely due to the rapid industrialization of the emerging world and the speed at which information travels today
• There will be a massive increase in resource-intensive industries and new export markets, met with increased volatility and tension around the world
• The supply/demand characteristics of oil are great due to the need for oil in China, India, rest of Asia
• Oil is the top priority for China, as they are now a net importer
• US has a huge strategic advantage over China given that we have access to our own oil, and that of Mexico, Canada, the Middle East and off the western Coast of Africa, in addition to the ability to travel on the Atlantic or Pacific Ocean; meanwhile, China sources 95% of their oil from the Middle East, and while they are building pipelines throughout Eastern Europe for example, their oil supply points in terms of ports for example are limited, and the US has defense bases surrounding these areas; Chinese subs could sink our boats however; the Russians are also not happy about our forces being in the region, and tensions will grow as the need for natural resources in these nations grows
• Eventually, there will be war and one will want physical commodities “not paper from UBS or JP Morgan”
• In war, cities will not offer safety because one can get bombed, water may be poisoned, electricity shut off; instead, one should buy a house in the middle of nowhere/on the countryside
• The tremendous economic Sophism of the day is that a nation can print its way into prosperity; “If debt and money printing equaled prosperity then Zimbabwe would be the richest country.”
• “Mugabe is the economic mentor of Ben Bernanke.”
• Our fiscal situation is much more horrendous than it is made out to be; total debt (public and private) as a percentage of GDP counting unfunded liabilities is an astounding 800% of GDP, more than double that during 1929
• Sovereign credits in the Western world are all bankrupt, but before bankruptcy governments will print money; US government leaders will try to postpone the hour of truth, pushing the problems off till succeeding Presidents and Congressmen
• If deficits didn’t matter as many like Economist James Galbraith argue today, why should citizens even pay taxes?  It would make everyone happier if they didn’t
• Faber is sure that the economists in academia are intelligent and they study the textbooks hard, but they study the wrong textbooks and are totally inconsistent in their philosophy
• In an environment of money-printing and high volatility that exists in the US and that will be created by future policy, physical gold is the best thing to own
• Once currency depreciation does take place, stocks may become very cheap, as happened when the Mexican peso depreciated by 95% in the early 80s, as the fund managers invested in Mexican equities completely undervalued them after currency collapse
• In a nutshell Faber says he is essentially bearish on everything, though he favors commodities (especially physical precious metals and agriculture), owning a house in the countryside, equities in emerging markets tied to resources (especially necessities like water and oil) and healthcare, and most of Asia including especially Japanese stocks
• There is no means of avoiding a total collapse in the West; at the first train station in 2008, the financial system went bust but didn’t die, at the next station nations will go bust (though this could take 5-10 years or less), but first they will print money as this is the most politically tenable option, and ultimately the world will go to war
• All of us will be doomed

Bear in mind that Faber said all of this quite matter-of-factly.

Even if you disagree with his points on the trajectory of the West, it cannot hurt to understand and prepare for the worst case scenario while still hoping for the best.

The man who predicted the bursting of the housing bubble as well as 2008's economic collapse says that what happened in the markets around the world today is just the next stage in the financial crisis.

"The first stage was this massive re-leveraging of the private sector that led to the financial crisis and which has responded now with a massive re-leveraging of public sectors with budget deficits of the order of 10 percent," Nouriel Roubini aka Dr. Doom told CNBC's Maria Bartiromo.

"So I think that the markets are realizing that we have socialized a lot of the private losses with unsustainable fiscal deficits."

He believes the bond markets in parts of Europe seriously began realizing the depth of the problem today cautioning, "And soon enough they're going to wake up in the United States" (video follows with partial transcript and commentary):  

MARIA BARTIROMO, CNBC: Let me bring in Nouriel Roubini, he is on the telephone right now. He had a report out earlier about the implication of Greece, and really looking at the United States in terms of the debt load there and, and comparing the two. Nouriel, thank you for joining us. Give us your sense of what's behind this 3 ½ percent sell-off in the markets today.

NOURIEL ROUBINI: Well, my interpretation is that now there is a rise of sovereign risk in a number of advanced economies. There's Greece, there's Portugal, and Spain. And this is just the next stage of this financial crisis of the last few years. The first stage was this massive re-leveraging of the private sector that led to the financial crisis and which has responded now with a massive re-leveraging of public sectors with budget deficits of the order of 10 percent, and I imagine OCD expecting that public debt is going to double as a share of GDP in all advanced economies. So I think that the markets are realizing that we have socialized a lot of the private losses with unsustainable fiscal deficits. Today the bond market which (?) have woken up in Greece, in Spain, in Portugal, in U.K., in Ireland in Iceland. And soon enough they're going to wake up in the United States.

For those unfamiliar with Roubini, he has gotten the name "Dr. Doom" for his fabulous call in the middle part of the last decade when he said that housing prices were exploding in a speculative frenzy that would eventually sink the entire economy.  

As the New York Times wrote in August 2008:

On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac. 

The man who predicted the bursting of the housing bubble as well as 2008's economic collapse says that what happened in the markets around the world today is just the next stage in the financial crisis.

"The first stage was this massive re-leveraging of the private sector that led to the financial crisis and which has responded now with a massive re-leveraging of public sectors with budget deficits of the order of 10 percent," Nouriel Roubini aka Dr. Doom told CNBC's Maria Bartiromo.

"So I think that the markets are realizing that we have socialized a lot of the private losses with unsustainable fiscal deficits."

He believes the bond markets in parts of Europe seriously began realizing the depth of the problem today cautioning, "And soon enough they're going to wake up in the United States" (video follows with partial transcript and commentary):  

MARIA BARTIROMO, CNBC: Let me bring in Nouriel Roubini, he is on the telephone right now. He had a report out earlier about the implication of Greece, and really looking at the United States in terms of the debt load there and, and comparing the two. Nouriel, thank you for joining us. Give us your sense of what's behind this 3 ½ percent sell-off in the markets today.

NOURIEL ROUBINI: Well, my interpretation is that now there is a rise of sovereign risk in a number of advanced economies. There's Greece, there's Portugal, and Spain. And this is just the next stage of this financial crisis of the last few years. The first stage was this massive re-leveraging of the private sector that led to the financial crisis and which has responded now with a massive re-leveraging of public sectors with budget deficits of the order of 10 percent, and I imagine OCD expecting that public debt is going to double as a share of GDP in all advanced economies. So I think that the markets are realizing that we have socialized a lot of the private losses with unsustainable fiscal deficits. Today the bond market which (?) have woken up in Greece, in Spain, in Portugal, in U.K., in Ireland in Iceland. And soon enough they're going to wake up in the United States.

For those unfamiliar with Roubini, he has gotten the name "Dr. Doom" for his fabulous call in the middle part of the last decade when he said that housing prices were exploding in a speculative frenzy that would eventually sink the entire economy.  

As the New York Times wrote in August 2008:

On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac. 

While questions swirl about the ins and outs of the Securities and Exchange Commission charges against Goldman Sachs (NYSE:GS), and the eventual result is no clearer.

According to CNBC "Mad Money" host Jim Cramer, after the release of several e-mails from Goldman traders, including Fabrice Tourre, who described the investments at the firm "like Frankenstein," the investment bank finds itself in an untenable position.

Cramer told MSNBC's April 26 "Morning Joe" that Goldman really has no defense if, as the government alleges, Goldman misled investors when it established a mortgage-backed security in 2007 for a hedge fund client looking to bet against the housing market. And that's in addition to facing heat from shareholders for not revealing that it received a Wells Notice from the SEC.

"What makes this worse than most situations is that it's entirely possible this young guy, who's now holding the whole firm hostage, Fabrice Tourre - it's entirely possible that he sold it fraudulently," Cramer said. "If he did, then Goldman has no defense. So, what I would emphasize at this particular moment is that this guy is way too powerful. The hearings are going to go badly. Goldman knew they were going to have a Wells Notice, knew they were going to get prosecuted. They didn't reveal it. It was totally material. Again they did that wrong."

Cramer argued that Goldman would have better served by approaching the government hat in hand rather than taking an aggressive tack against the charges. As things are, however, he predicted serious consequences for the firm and its management.

"The main thing you have to understand is that Goldman has basically said, ‘Government, you're just dead wrong,' instead of saying, government, ‘We're sorry, what do you need to do?'" Cramer explained. "In order to end this, if it's a settlement, they will have to pay the largest fine in history and it's questionable whether senior management's going to be able to stay. A lot of this is Goldman's doing."

"Morning Joe" co-host Mika Brzezinski was skeptical of Cramer's analysis, telling him to "separate the fact that you worked there," and asked why criminal charges aren't being pressed against employees at Goldman Sachs.

"Look, because they haven't referred it," Cramer explained. "Remember, who commissioners said - no, no, it's not criminal. As a lawyer, it's not criminal."

But the "Mad Money" host said it isn't frivolous either. The government "has a real case," he said, that "Goldman has to settle. This is a ridiculous thing Goldman is doing." The bottom line, according to Cramer is a settlement for "$2 Billion, $3 billion, and management may not stay."

In the past 20 months, liberal media members have routinely blamed 2008's financial crisis on George W. Bush, Republicans, Wall Street, and greed.

Someone that has hardly ever been accused of having a hand in what led to the tumult is former President Bill Clinton.

As NewsBusters has been reporting almost since the crash began, it was Clinton who signed into law two key bills -- the Financial Services Modernization Act of 1999 and the Commodity Futures Modernization Act of 2000 -- that ushered in the malfeasance that almost toppled the world economy.

On Saturday, a former editorial page editor for the Wall Street Journal, George Melloan, made the connection even stronger as he pointed a finger at someone most in the media have shamelessly given a pass for his involvement in this crisis (h/t @RLMcMahon):

To promote "affordable" housing, Bill Clinton had excused the two giant government-sponsored housing finance agencies, Fannie Mae and Freddie Mac, from normal banking rules, allowing them leverage ratios far in excess of the limits on ordinary lenders. Banks were forced to write risky mortgage loans, a large number of which were then folded into mortgage-backed securities that Fannie, Freddie and others sold internationally with triple-A ratings.

This business seized up, crippling banks throughout the world, when holders began to realize that the assets that backed the securities, home mortgages, were going under water at an alarming rate.

Of course, Melloan was right. As the New York Times reported in September 1999:

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

Wait. It got better:

These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. '

Ah yes. Franklin Raines, proud of reducing down payment requirements. Wasn't that a BIG part of the problem? You bet: 

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.'' 

Yet now, almost eleven years later, the media blame Bush, Republicans, Wall Street, greed, and anybody that doesn't have a "D" next to his or her name.

Fortunately, Melloan wasn't done setting the record straight: 

One of the great ironies of our times is that the two strongest defenders of the Fannie-Freddie shell game, Chris Dodd and Barney Frank, are now in charge of reforming banking regulation. 

Would this be the case if our media had been honest about the causes of the 2008 collapse when it happened?

If Dodd and Frank had "R's" next to their names, would they be at all involved in reforming banking regulation?

Maybe most importantly, how much different might the 2008 election results have been if the Obama-loving press would have told the truth about this issue before people went to the polls? 

The Pentagon rescinded the invitation of evangelist Franklin Graham to speak at its May 6 National Day of Prayer event because of complaints about his previous comments about Islam.

The Military Religious Freedom Foundation expressed its concern over Graham's involvement with the event in an April 19 letter sent to Secretary of Defense Robert Gates. MRFF's complaint about Graham, the son of Rev. Billy Graham, focused on remarks he made after 9/11 in which he called Islam "wicked" and "evil" and his lack of apology for those words.

Col. Tom Collins, an Army spokesman, told ABC News on April 22, "This Army honors all faiths and tries to inculcate our soldiers and work force with an appreciation of all faiths and his past comments just were not appropriate for this venue."

In a press release, Family Research Council president Tony Perkins called the Army's decision "further evidence that the leadership of our nation's military has been impaired by the politically correct culture being advanced by this Administration. Under this Administration's watch we are seeing the First Amendment, designed to protect the religious exercise of Americans, retooled into a sword to sever America's ties with orthodox Christianity."

Graham's comments could certainly be considered inflammatory, but it should be noted that the Obama Administration hasn't always backed away from controversial religious leaders.

An April 17 front page Washington Post article by Krissah Williams on Rev. Al Sharpton detailed how he has been an "ally" to Barack Obama since the 2008 election:

Sharpton has been among the president's chief defenders against criticism from television host Tavis Smiley that "black folks are catching hell" and that the president should do more to specifically help blacks.

"We need to try to solve our problems and not expect the president to advocate for us," Sharpton said on his radio show. "It is interesting to me that some people don't understand that to try to make the president do certain things will only benefit the right wing, who wants to get the president and us."

Williams also noted several times in the article the link between Obama cabinet officials and Sharpton, with officials speaking at his National Action Network conference and regularly appearing on his radio program.

But Sharpton is not without his own controversies, to say the very least. Earlier this spring he told Fox News "The American public overwhelmingly voted for socialism when they elected President Obama."

Last fall Sharpton played a role in blocking Rush Limbaugh's ownership bid of the NFL's St. Louis Rams, going so far as to send a letter to NFL Commissioner Roger Goodell. The letter read in part, "Rush Limbaugh has been divisive and anti-NFL on several occasions, with comments about NFL players, including Michael Vick and Donovan McNabb, and his recent statement that the NFL was beginning to look like a fight between the Crips and the Bloods without the weapons was disturbing."   

Furthermore, Sharpton, the race huckster, owes his current status to his involvement in a string of contemptible incidents in New York. In the 1987 Tawana Brawley case, he slandered an innocent man in the course of defending an infamous "race crime" hoax. He was sued and lost a judgment for $345,000, without ever retracting or apologizing for his accusation. His race demagoguery resulted in violence and deaths on more than one occasion.

Safe to say, Franklin Graham's remarks about Islam, however objectionable, didn't incite murder.

The Pentagon rescinded the invitation of evangelist Franklin Graham to speak at its May 6 National Day of Prayer event because of complaints about his previous comments about Islam.

The Military Religious Freedom Foundation expressed its concern over Graham's involvement with the event in an April 19 letter sent to Secretary of Defense Robert Gates. MRFF's complaint about Graham, the son of Rev. Billy Graham, focused on remarks he made after 9/11 in which he called Islam "wicked" and "evil" and his lack of apology for those words.

Col. Tom Collins, an Army spokesman, told ABC News on April 22, "This Army honors all faiths and tries to inculcate our soldiers and work force with an appreciation of all faiths and his past comments just were not appropriate for this venue."

In a press release, Family Research Council president Tony Perkins called the Army's decision "further evidence that the leadership of our nation's military has been impaired by the politically correct culture being advanced by this Administration. Under this Administration's watch we are seeing the First Amendment, designed to protect the religious exercise of Americans, retooled into a sword to sever America's ties with orthodox Christianity."

Graham's comments could certainly be considered inflammatory, but it should be noted that the Obama Administration hasn't always backed away from controversial religious leaders.

An April 17 front page Washington Post article by Krissah Williams on Rev. Al Sharpton detailed how he has been an "ally" to Barack Obama since the 2008 election:

Sharpton has been among the president's chief defenders against criticism from television host Tavis Smiley that "black folks are catching hell" and that the president should do more to specifically help blacks.

"We need to try to solve our problems and not expect the president to advocate for us," Sharpton said on his radio show. "It is interesting to me that some people don't understand that to try to make the president do certain things will only benefit the right wing, who wants to get the president and us."

Williams also noted several times in the article the link between Obama cabinet officials and Sharpton, with officials speaking at his National Action Network conference and regularly appearing on his radio program.

But Sharpton is not without his own controversies, to say the very least. Earlier this spring he told Fox News "The American public overwhelmingly voted for socialism when they elected President Obama."

Last fall Sharpton played a role in blocking Rush Limbaugh's ownership bid of the NFL's St. Louis Rams, going so far as to send a letter to NFL Commissioner Roger Goodell. The letter read in part, "Rush Limbaugh has been divisive and anti-NFL on several occasions, with comments about NFL players, including Michael Vick and Donovan McNabb, and his recent statement that the NFL was beginning to look like a fight between the Crips and the Bloods without the weapons was disturbing."   

Furthermore, Sharpton, the race huckster, owes his current status to his involvement in a string of contemptible incidents in New York. In the 1987 Tawana Brawley case, he slandered an innocent man in the course of defending an infamous "race crime" hoax. He was sued and lost a judgment for $345,000, without ever retracting or apologizing for his accusation. His race demagoguery resulted in violence and deaths on more than one occasion.

Safe to say, Franklin Graham's remarks about Islam, however objectionable, didn't incite murder.

"New figures show foreclosures in the U.S. are up about 35-percent from a year ago," Matt Lauer kicked off an April 20 segment of "Today" that encouraged homeowners - even those financially comfortable - to simply walk away. "And a growing reason why are people who simply choose to walk away from their mortgage even when they can afford it."

"Experian, the credit-monitoring service, says 588,000 borrowers - or 18-percent of those who have defaulted on their mortgages in the past year - did it for strategic reasons and not because they're broke," NBC's George Lewis reported. "It's called a strategic default, walking away from a home and enduring foreclosure out of frustration with a bad investment."

On the scene with the Schreur family in Folsom, California, Mr. Schreur acknowledged in an interview that although his family was not in any financial distress, a sharp decline in house value incited the family to default, as any other option "made no sense."   

NBC didn't just champion financial irresponsibility, it gave viewers a resource to help them practice it, giving generous air time to "You Walk Away," a company dedicated in helping thousands walk away from their mortgage, generous advertisement. (ABC's "Good Morning America" did the same back in February.)

"One bit of advice? Don't feel guilty," Lewis stated.

"People have this misperception that people who walk away are doing something unethical," Chad Ruyle, a co-founder of the company said. "To me, they're making a good ethical decision because they're taking care of themselves and their family and it's a business decision."

"Today" did give some brief time to John Courson, President of the Mortgage Bankers Association, who urged homeowners to refrain from strategic defaults.

"What does that do to other properties and the value of your neighborhood? The consequences are dire," Courson said.

"While owning one's own home is still a large part of the American dream, many people who've walk away from their mortgages and are now renting say they found a certain peace of mind. The Schreur's say their strategic default left them feeling a lot better ... A feeling now shared by many in this country," Lewis closed.

In studios, Matt Lauer interviewed "Today" financial editor Jean Chatzky.

"There are people who say you made a deal, you have a commitment, you have a mortgage, it hurts your neighbors. Is that a fair argument?" Lauer asked.

Not to Chatzky. 

"It's an understandable argument, but I think when you look at the business case, it is just as understandable to walk away from a bank that lent you more than you could afford on a property that was not as valuable as both of you thought," said Chatzky.

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

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

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

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

So, let’s pick up from June 30, 2008.

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

The report, written by the left-wing Center for Responsible Lending (CRL), condemned IndyMac’s lending practices.  The conclusions in it were drawn entirely from statements by laid-off IndyMac employees and consumer advocacy trial attorneys with active lawsuits against the lender, which drew a great deal of criticism and sparked cries of bias within the industry.  Nonetheless, the general public connected with that report and it drove the last nail into IndyMac’s coffin, further poising CRL as the champion for – and direct beneficiary of – federal financial regulation.

In addition to the timely coincidence of the CRL report having released almost in concert with Schumer’s letter, the fact that it came from CRL is even more curious.

This is an organization that is no stranger to Capitol Hill. Democrats have invited CRL to testify before Congress on a multitude of occasions.

And frequently among those guests invited from CRL to testify has been… Eric Stein.

A staunch proponent for social justice in affordable housing and payday lending, Stein had long been the President/SEO of CRL’s parent network, the Center for Community Self-Help.  For over 30 years, Self-Help has billed itself as a non-profit organization that serves the interests of minorities and the disadvantaged by financing loans and investing in real estate development in “low-wealth communities.”  In parallel, Stein had also served as Senior Vice President of CRL, which serves as the research and policy arm to Self-Help.

Stein’s biography also illustrates other positions that may have been beneficial relationships for CRL, including his employment with Fannie Mae, and an employment stint with Congressman David Price (D-NC).  Incidentally, Congressman Price has received nearly $5 million in federal grants for Self Help Ventures Fund, one of Self-Help’s many affiliates, located in the same district.

Stein was also a member of the Community Development Advisory Council of the Federal Reserve Bank of Richmond.

So, where is Eric Stein today?  Working in the United States Treasury Department, and gearing up to head the CFPA.

In early 2009, President Obama appointed Stein to the newly created position of Deputy Assistant Secretary for Consumer Protection, where Stein has been key in writing the consumer protection language in the proposed financial reform legislation. He is also in charge of designing the dually proposed Consumer Financial Protection Agency.  Should the bill become law, Stein is expected to head the new agency, which will have immense powers that extend far beyond mortgages and financial investments.

That’s a lot of power to be held by one unelected official.  Especially for one so closely tied to an organization that stands to benefit immensely from this new agency and the legislation behind it.

So, what do we know about this organization with which Stein has spent so many years of his career?

We first introduced the Center for Responsible Lending to you a few weeks ago, but let’s take a closer look at the organization and its parent, Center for Community Self Help.

The Center for Community Self-Help:  Born From the CRA

After the Community Reinvestment Act (CRA) was passed in 1977, most of its implementation began rolling out around 1979.  And in 1980, the Center for Community Self Help was founded with its focus on serving the very market that was now the beneficiary of the new redlining laws. Soon after, Self-Help joined with Fannie Mae to establish a program for borrowers who were underserved by banks in the primary market.  With this new secondary market underway, it was Self-Help that collected all of the information from Fannie Mae’s borrowers, tracked their loans, and produced analysis that was then used to put pressure on the larger banks to issue more loans to underserved communities.  As Deborah Momsen-Hudson, Vice President & Director of Secondary Marketing, put it, “We’re an R&D lab for the financial industry.”

In direct response to the research produced by Self-Help and Fannie Mae, the CRA laws were subsequently expanded in 1995 to establish quotas for issuing mortgages to residents of underserved communities and to levy fines against lenders that did not meet those quotas.  The new laws also required institutions to offer ATMs and local branch services in areas that were previously considered low usage, high risk areas for crime.

But as always, there were unintended consequences.

Peter Wallison has written an excellent analysis of how the unintended consequences of the 1995 changes to the Community Reinvestment Act laws greatly contributed to the financial crisis:

Together, the tighter CRA requirements and the affordable-housing regulations imposed on the GSEs substantially reduced the standards that had to be met to qualify for a mortgage. The number of CRA loans was not large, but they required banks to devise ways of lending to people who would not previously have qualified for a mortgage. Once Fannie and Freddie began accepting loans with low down payments and other liberalized terms, the same unsound standards were extended to borrowers who could have qualified under the traditional underwriting standards. In addition, federal regulations encouraged bank lending for housing in preference to other lending, and tax policy favored borrowing against (and thus reducing) the equity in a house.

These policies were effective in the sense that they achieved some of the intended results. Between 1995 —when lending quotas based on the CRA became effective—and 2005 , the proportion of American households that owned their own home rose from 64 percent, where it had been for about twenty-five years, to 69 percent (Vlasenko 2008 ). A measure of the unintended results of federal policy, however, is that home prices doubled between 1995 and 2007 ; and that the housing bubble was composed—to an unprecedented degree—of subprime and other nonprime and risky loans. Banking-capital regulations and the deductibility of interest on home-equity loans made a crisis inevitable once this housing bubble collapsed.

Coincidentally, these were – and remain – the very markets that Self-Help serves and the very services that Self-Help offers.  The regulations that Self-Help lobbied to bring about delivered for them fruitful gains, as the pool of secondary mortgage customers exploded, and the demand for short-term lending and easy access to cash and ATM services skyrocketed.  Hence, the Self-Help network expanded from mortgage lending to Credit Unions, short term lending, real estate development, and the financing of community facilities, such as schools, non-profits, and day-care centers.

And it’s a model upon which our government has based an entire entitlement program.  In 1994, President Clinton modeled the Treasury Department’s Community Development Financial Institution Fund after Self-Help’s lending plans.

The Center for Responsible Lending:  Crisis Creator?

After the successful results gained by Self-Help’s research in the 1990’s, the parent network expanded to include a designated research and policy arm, The Center for Responsible Lending.  Founded in 2002, CRL is “an affiliated nonprofit research and policy organization dedicated to curbing predatory lending.”

Much like the Center for American Progress is the think-tank that provides all the research to support the left-wing agenda, CRL serves that same role for the left specifically for matters concerning the financial and real estate industry.  Their research papers pool data from other liberal sources and are often aided by the canvassing and mobilizing efforts of establishment left-wing groups like ACORN and organized labor.  Just as in the Health Care “crisis”, their reports often seem to be cleverly timed to coincide with certain events to force a particular policy issue or create a financial or housing equality “crisis”, and at times may even be aided along by Washington insiders.

Case in point:  IndyMac.

The Self-Help Money Machine

Under Eric Stein’s leadership, Self-Help and CRL have certainly expanded quite a bit, reaching their tentacles into a multitude of different areas.  Spreading out from beneath this primary partnership of the two flagship organizations, there is a structure of at least 10 major affiliates, and another 37 sub-affiliates, consisting of an entire network of credit unions, mortgage and short-term lending, venture funds, real estate development companies, and investment companies.  Couple that with a slew of paid lobbyists (some of whom have worked for Congresswoman Jan Schakowsky), and maybe you’ll wonder too why a non-profit like Self-Help would require such sophistication.

The primary source of funding behind Self-Help and CRL since its inception has been non other than the notable subprime/Alt-A loans king and queen, Herb and Marion Sandler.

You may recognize the Sandlers from their various philanthropy projects like the Center for American Progress, and various media outlets, as well as their investments in groups with other notable investors like George Soros.  Or maybe from the SNL skit they ordered off the Internet.

But the Sandlers’ most relative and probably best-known investment was California headquartered GoldenWest Financial/World Savings bank.  The couple are said to have made off with $2.3 billion in cash after they sold off World Savings bank to Wachovia in 2006.  Shortly thereafter, Wachovia collapsed from the weight of the toxic loans that had been bundled up into World Savings’ portfolio, far from the sunlight of peering eyes.

In fact, the Department of Justice and the Securities and Exchange Commission are both investigating claims that Golden West/World Savings lied about the quality of its loans to its investors and broke the law by fraudulently luring customers into loans they could never afford.

Self-Help and its CRL affiliate may seem like one of those charitable do-good organizations that is improving communities all across America and lifting Americans out of poverty thanks to the generous funding of benefactors like the Sandlers.  But the reality is, the faces of the corporate elite may often be masked behind well-intended (and sometimes not so well-intended) do-gooders.

We must always do our due diligence and at least ask the question:  Is it possible that there are ulterior motives at play here?  Is the Self-Help network a sincere collective of honest do-gooders?  Or do they have a vested interest in seeing a repeat of the financial reform of the Clinton years, only this time on steroids?  Look at their competitors and think about which organization the new CFPA would favor.

Needless to say, we should be asking the same of Mr. Stein, the current Treasury executive who ran this organization for so many years, who worked for Fannie Mae, who worked for a Congressman who coincidentally secured millions in funding for Self-Help, who has appeared frequently before Congress to push for financial regulation, and who is now just one heartbeat away from controlling the engine of our entire nation’s economic system.

All this, and still, we haven’t even scratched the surface on this story yet.  Continue to stay tuned…

The White House has now tapped $14 billion in TARP funds to expand the administration's existing mortgage assistance program. 

Matt Lauer introduced the "Today" show March 29 discussion of the program saying: "New help for millions of homeowners who are facing foreclosure. The Obama administration is rolling out new incentives to the federal mortgage relief program - so what's different this time?"

"If you're unemployed, this is going to give you an ability to have your monthly payments lowered for three months, maybe even six months," CNBC's Sharon Epperson told Lauer, before noting the requirements and assistance for those "underwater." 

Lauer asked if interest or principal reductions were in the mix for homeowners. 

"This is the principal - this is what's different about this program. We're talking about principal reduction - that's significant and a number of lenders have already come out with their own programs from this beyond what the federal government has done," Epperson replied. 

"What is the incentive to the lender though?" Lauer asked. 

"They're going to get a subsidy, this time they get a financial incentive," Epperson answered. "This time they're going to get a subsidy on the dollar that they're able to reduce your principal by. So that is one reason why they might want to do it now." 

Epperson said that the government's goal was to prevent three million to four million foreclosures. But Lauer and Epperson only briefly alluded to the failure of the initial program. Lauer stopped short of criticizing the Obama administration saying only that it was their "second attempt at this."

Ronald D. Orol of MarketWatch pointed out some of the problems with the first program on March 26. That program, Fannie Mae and Freddie Mac's Home Affordable Refinance Program (HARP), "has converted fewer than 200,000 temporarily modified home loans into permanent modifications - well below the goal of helping 3 million to 4 million struggling homeowners avoid foreclosure by the end of 2012." (Emphasis added)

According to the Wall Street Journal, HARP has been criticized for lengthy delays, high fees, and reluctant banks. Ultimately, WSJ's Nick Timiraos reported that only "around 2,000 borrowers who owed more than 105% of their home's value had refinanced under that program last year."

Epperson expressed some doubt about the plan on the basis that lenders do not have to participate, but did not suggest any free-market solutions to home foreclosures.

"He dug into the idiocy and negligence that produced the worst financial crisis since the Great Depression," Steve Kroft opened a segment of the March 14 CBS "60 Minutes," featuring author Michael Lewis' latest work - "The Big Short: Inside the Doomsday Machine."

If Lewis "dug into the idiocy and negligence," he did so selectively - or that's what viewers could conclude from the long "60 Minutes" report, which concerned itself with how "some of Wall Street's smartest minds managed to destroy $1.75 trillion of wealth in the sub-prime mortgage markets." Somehow, in a 24-minute report about the sub-prime mortgage meltdown, nobody ever said where all the bad loans originated.

Lewis told Kroft that the financial crisis was "a story of mass delusion."

"How can they not look at the numbers?" Kroft asked. "How can Wall Street be selling all these, buying all of these mortgages and repackaging them and not realizing they are not very good mortgages?"

It's a fair question. But so are these: "Where did all these bad mortgages originate? Why were loans being made to high-risk credits in the first place?"

Kroft didn't ask them because their answers wouldn't have fit the narrative. Just like his like-minded colleagues in the media, Kroft didn't mention the role of the 1977 Community Reinvestment Act in forcing banks to loan to high-risk credits - not to mention the central role of "government-sponsored enterprises" such as Fannie Mae and Freddie Mac.

The only mention of government culpability came when Kroft asked Lewis why financial institutions made so much money after the financial crisis.

"No one asked them how they made all this money. If you look at the businesses right now, they're heavily government-dependent," Lewis said. "You have access to a zero-percent loan in virtually unlimited quantities from the Federal Reserve. You can take that money and reinvest it in treasury bonds or in government securities agencies - you will get the spread - and you can do it over and over. You're essentially borrowing from the government and lending to the government, and taking a cut."

The banks and brokerages, according to Lewis, had little incentive to not act recklessly, and inevitably cause financial turmoil.

"Wall Street is able to delude itself because it's paid to delude itself," Lewis reminded Kroft. "And that's one of the central messages of the story - you have to be very careful with how you incentivize people because they will respond to the incentives."

"He dug into the idiocy and negligence that produced the worst financial crisis since the Great Depression," Steve Kroft opened a segment of the March 14 CBS "60 Minutes," featuring author Michael Lewis' latest work - "The Big Short: Inside the Doomsday Machine."

If Lewis "dug into the idiocy and negligence," he did so selectively - or that's what viewers could conclude from the long "60 Minutes" report, which concerned itself with how "some of Wall Street's smartest minds managed to destroy $1.75 trillion of wealth in the sub-prime mortgage markets." Somehow, in a 24-minute report about the sub-prime mortgage meltdown, nobody ever said where all the bad loans originated.

Lewis told Kroft that the financial crisis was "a story of mass delusion."

"How can they not look at the numbers?" Kroft asked. "How can Wall Street be selling all these, buying all of these mortgages and repackaging them and not realizing they are not very good mortgages?"

It's a fair question. But so are these: "Where did all these bad mortgages originate? Why were loans being made to high-risk credits in the first place?"

Kroft didn't ask them because their answers wouldn't have fit the narrative. Just like his like-minded colleagues in the media, Kroft didn't mention the role of the 1977 Community Reinvestment Act in forcing banks to loan to high-risk credits - not to mention the central role of "government-sponsored enterprises" such as Fannie Mae and Freddie Mac.

The only mention of government culpability came when Kroft asked Lewis why financial institutions made so much money after the financial crisis.

"No one asked them how they made all this money. If you look at the businesses right now, they're heavily government-dependent," Lewis said. "You have access to a zero-percent loan in virtually unlimited quantities from the Federal Reserve. You can take that money and reinvest it in treasury bonds or in government securities agencies - you will get the spread - and you can do it over and over. You're essentially borrowing from the government and lending to the government, and taking a cut."

The banks and brokerages, according to Lewis, had little incentive to not act recklessly, and inevitably cause financial turmoil.

"Wall Street is able to delude itself because it's paid to delude itself," Lewis reminded Kroft. "And that's one of the central messages of the story - you have to be very careful with how you incentivize people because they will respond to the incentives."

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

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

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

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

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

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

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

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

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

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

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

In any event, to fix the housing market requires these folks to be foreclosed upon.  Keeping homes off the market artificially suppresses supply, propping up prices that already necessarily needed to fall, as house prices rose to unjustifiable levels due to the Fed’s pump priming, the CRA and the surge in demand these two factors engendered.  To keep people in homes they cannot afford besides creating moral hazard and distorting banks’ balance sheets also has the effect of keeping worthy buyers from purchasing homes at decreased prices.  It further prevents apartment owners from renting out their excess inventory to underwater and/or insolvent former homeowners.  The effects of the government intervention in the housing market are amplified significantly when one considers the volume of securities backed by mortgages not being adequately serviced.

Government has no business in throwing this market into disequilibrium.  But President Obama believes otherwise.  In campaigning for Harry Reid and while announcing a further imprudent measure to provide $1.5 billion in mortgage relief in five states hit acutely by the downturn, Obama had this to say about the housing market:

“Now, government has a responsibility to help deal with this problem. Government can’t solve this problem alone. We got to be honest about that. Government alone can’t solve this problem. And it shouldn’t…It can’t stop every foreclosure, and tax dollars shouldn’t be used to reward the very irresponsible lenders and borrowers who helped bring about the housing crisis. But what we can do is help families who’ve done everything right stay in their homes whenever possible.”

This is typical Obama.  He knows how to frame the issue so that while what he is saying sets a dangerous precedent, he comes off as pragmatic.  He uses his rhetoric to appease those being taken advantage of by his policy, while spinning nicely the fact that he is going to screw them over. It is akin to when he defended himself as an “ardent defender of the free market” while touting his massive intervention into all aspects of the economy at the recent “Business Roundtable.”

Every single time he addresses an issue, you can bet that it will follow the same formula: “on the one hand [insert rational, conservative argument], but on the other [insert emotional/generally bleeding heart, liberal argument].”  It allows him to come off as a moderate and practical leader while he obfuscates the public by saying nothing.  His true stripes only show when he speaks in front of his people.

At the end of the day, the man should be judged by his actions and not his words, and his actions in the housing market are illustrative of his overall view of government’s role in the economy.  Wherever market forces are working to correct the imbalances and malinvestments of a 70-year credit expansion, this President is going to implement policies to prevent the market from working and perpetuate an illusory economy.

Factor in his foreign policy and treatment of our war with Islam, and you get the sense that this President is intentionally trying to hurt this country.  Somewhere, Jeremiah Wright is smiling.  Ironically, for all of President Obama’s apologies for our arrogance and destructiveness, as he helps sully our preeminence and power with his own policies, he remains the most arrogant and destructive American of all.

The adverb that begins with a "U" made yet another appearance yesterday in connection with an economic report. The related noun that begins with an "S" came along for the ride.

The news concerned sales of new homes. They fell "Unexpectedly" to their lowest level since 1963, when the U.S population was about 40% lower. The decline was a "Surprise" to economists, who had predicted an increase.

It continues to fascinate that the "Unexpected" news that came as a "Surprise" to economists during a large portion of the Bush 43 administration more often than not was to the upside, while the trail of "Unexpected Surprises" during the current administration is littered with downers.

Ahead of the news, the Associated Press appeared ready to play up what it thought would be good news, and then exiled its reports to remote corners when things didn't go as expected.

In a Thursday afternoon story on the small rise in the Case Schiller home price index, the AP's Adrian Sanz was talking of recovery, while inventing a new economic concept (bold is mine):

Home prices rise 0.3 percent in December

Home prices edged up in December, the seventh straight monthly gain and another sign the housing market continues its bumpy recovery.

... for homeowners who currently owe more on their mortgages than their properties are worth, rising prices will rebuild equity.

...Home sales data for January, out later this week, are also expected to show gains over year-end levels as buyers took advantage of low interest rates and temporary tax credits.

I hate to break it to you, Adrian, but if you're underwater on your mortgage, rising prices, especially given the tiny one you reported, serve almost entirely to reduce negative equity. To "rebuild" equity, you first have to have some.

The next morning, an unbylined AP report also anticipated the home sales gain:

New home sales likely posted a rebound in January but economists are worried that the housing recovery could be headed for tougher times once government support ends.

Economists surveyed by Thomson Reuters expect sales of new homes rose 5.3 percent in January to a seasonally adjusted annual rate of 360,000 units. The Commerce Department will release the report on new home sales at 10 a.m. EST Wednesday.

Out came the report (the PDF press release is here), and the AP moved the news into a brief "Summary Box," the kind that I suspect doesn't get picked up by subscribing outlets as often as regular narratives:

RECORD LOW: Sales of new homes plunged 11.2 percent to an annual sales pace of 309,000 units in January, the lowest level on government records going back to 1963.

The "S-word" made its appearance in a multi-item "Business Highlights" summary:

Sales of new homes plunged to a record low in January, underscoring the formidable challenges facing the housing industry as it tries to recover from the worst slump in decades.

The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who were expecting a 5 percent increase over December's pace.

Reuters (HT Karl at Hot Air) pitched in with the "U-word":

Sales of new homes unexpectedly fell to a record low in January while demand for loans to buy homes hit a 13-year low last week, fanning fears of renewed weakness in the housing market.

Interestingly, the Reuters paragraph just excerpted differs from what Karl found there when he did his post:

Sales of newly built single-family homes unexpectedly fell to a record low in January, according to government data on Wednesday that hinted at potential trouble for the fragile housing market recovery.

Karl's questions in response to what he saw still stands, though in revised form. His question was, "Potential trouble? Really? Mine, in light of the revision, would be, "Renewed weakness? When did the weakness ever stop?"

The new home sales news is nowhere to be found in the AP's current video rotation at its business stories. Oh, but there is an item with a smiling picture of the president about how foreclosures have declined (could they possibly have gotten any worse?). Additionally, consistent with what I noted three weeks ago (at NewsBusters; at BizzyBlog), seven of the 11 vids in AP's rotation are about Toyota's troubles.

One would hope that the economists who continue to get their predictions wrong, and the media outlets that carry them, are going to recognize that what the Wall Street Journal and Investors Business Daily have been referring to as "the Uncertainty Economy," and which I have personalized by calling it the "POR (Pelosi-Obama-Reid" economy" has cast a pervasive pall over the entire economy, and must be considered in some way when formulating predictions.

Until it is, we're going to keep seeing "Unexpected Surprises."

Cross-posted at BizzyBlog.com.

Last Friday, New London, Connecticut's newspaper The Day carried the first bit of news in years that might be construed as positive about the city's Fort Trumbull area, part of which became the subject of the infamous Kelo v. New London Supreme Court decision in June 2005. Twenty-four hours later, further detail also carried at the Day showed that the "good news" is really a cruel joke on homeowners who fought for the right to keep their properties.

The Kelo decision turned the clear language in the U.S. Constitution's Fifth Amendment on its head by affirming the right of the city to take private property from individual homeowners for a "public purpose" (not a specific "public use" as the Amendment requires).

The city convinced the Supreme Court that it had "a carefully considered development plan." The trouble was when that plan met the real world during the three-plus years after the July 2006 final settlement between the city, the State of Connecticut, and final eminent-domain holdouts Susette Kelo and Mike Cristofaro, no developer wanted to get involved. Kelo's house (pictured above via the New York Times) was moved to a separate site and serves as a monument to her and others' heroic efforts.

Despite the hard feelings all around, one can see why the Day's Friday coverage of Thursday's news indicating a bit of movement in a moribund situation might be cause for limited cheer:

NLDC votes to negotiate with potential developer for Fort Trumbull

New London – The New London Development Corp. executive board voted unanimously today to begin negotiations with Westport developers Irwin and Robert Stillman to build 80 townhouses in Fort Trumbull.

The townhouses would be located on 6.5 acres that was once part of the Naval Undersea Warfare Center adjcent to Fort Trumbull State Park and the Coast Guard station.

The Stillmans were the only developer to respond for a "request for qualifications" issued in December by the NLDC.

"(The Stillmans) seem well qualified and seem responsive to the interests of the community," NLDC executive director John Brooks said.

The Stillman organization has built hotels, condominiums, single family homes, offices, shopping centers in the New York metropolitan area.

The bitter irony, of course, is that the developer would be building townhouses in an area (but, to be clear, not on the same site) where a neighborhood full of perfectly good though aged homes had been.

It is clear from initial reports that everyone believed that what would was involved would be owner-occupied properties. TV station WTNH even sought out Cristofaro for comment:

"They killed a neighborhood, that's what they did, just to create a new neighborhood that meets their standards. That's a shame," he said.

As part of Cristofaro's agreement with the city, he gets first dibs on any new housing.

"That is what we wanted. We wanted to remain in Fort Trumbull," he said.

But a day later, the Day reported that what might have been "only" a bitter irony was really an insult to everyone's intelligence (bolds are mine):

Westport firm envisions 'charming' townhouses

New London - A proposed residential development at Fort Trumbull would take its inspiration and style cues from the Greek revival architecture on Starr Street.

Following a unanimous vote Friday by its executive board, the New London Development Corp. will start negotiating with a Westport developer that has proposed "a village of historic and charming character.''

Father and son developers Irwin and Robert Stillman want to build 80 rental townhouses in the Fort Trumbull peninsula.

The city took properties and demolished houses and other buildings to make way for a development of homes and a conference center/hotel. But no new construction has taken place at Fort Trumbull in the 10 years since.

Contributing to the delay were an eminent domain case that reached the U.S. Supreme Court, other court cases, environmental challenges and the downturn in the economy.

You read that right -- the developer has proposed building rental properties.

Either the developer or the city, whoever retains title to the properties, will be the ones who will profit from operating the proposed rental-property complex, and will benefit from any upturn in area real estate values that might occur after the properties are built. Perhaps the city or the developer will cash out by "going condo" several years down the road.

I don't think Mike Cristofaro would have spoken with WTNH he had known that the proposed development only involves rentals. His "first dibs" on new housing more than likely doesn't include an ownership stake in the development, and I suspect he would have no interest in it in any event. Given the time that has already elapsed and the time it will take to get the units built, it may be that the City, its New London Development Corporation, and the developer intend to build no owner-occupied units until the nine-year term of Cristofaro's "first dibs" option expires. In other words, they may be working on cutting Cristofaro out by sticking with rentals only until after 2015. Given other vindictive events in this sordid saga (examples here and here), I don't see how anyone can rule out that possibility.

My second bold in the Day excerpt demonstrates that the paper continues to strain mightily to avoid using what seems to be the worst of all four-letter words in New London: Kelo.

One would think that this outrageous twist in one of the most important property-rights cases in American history might get noticed nationally. So far, it hasn't been. Because it makes a government and five Supreme Court justices who refuse to honor the clear language of the Constitution look bad, I wouldn't count on seeing any.

Cross-posted at BizzyBlog.com.

The Obama administration's Home Affordable Modification Program (known as "HAMP" to lenders and services, and MHA, or "Making Home Affordable" to the general public) is "failing."

I only learned this because I looked at the Associated Press's feeds on Christmas evening and saw this headline -- "No consequences for lying borrowers."

In an item time-stamped December 25, AP national business columnist Rachel Beck (note: not a reporter) used language that would ordinarily cause many in the press to characterize such a person as a hard-hearted meanie to describe the results of this core Obama initiative this far:

No consequences for lying borrowers

The government shouldn't reward liars. But that's the effect of changes to the Obama administration's failing program to help homeowners modify their mortgages.

Until recently the rules were clear: if you grossly understated your income to qualify for the program, you had to restart the loan modification process.

.... The program isn't working like it's supposed to.

.... How's the government responding? By letting homeowners who fudge their income numbers off the hook with little more than a wink and a nod.

The directive was actually issued on December 16 (PDF). Its first few paragraphs read as follows:

Critical Home Affordable Modification Program Waiver Granted to Participating Servicers

Effective today, a new critical Home Affordable Modification Program (HAMP) Waiver is granted to participating servicers, as detailed below.

Permanent HAMP Waiver for Elimination of the 25% Trial Period Restart Rule #20091203

Supplemental Directive 09-01 (issued April 6, 2009) required borrowers to be reevaluated for a HAMP trial period if their verified income (as evidenced by the borrower's documentation) exceeded the initial income information used by the servicer to place the borrower in the trial period by more than 25%. The borrower would be reevaluated based on the program eligibility and underwriting requirements and, if eligible, would have to restart the trial period.

With the issuance of this waiver, borrowers are no longer required to restart the trial period. The trial period payments would not be adjusted, but the permanent modification terms would be based on the borrower's higher verified income.

Note the word "permanent." For the duration of the program there will be no sanctions to loan modification applicants who seriously understate their income in an attempt to get approved for lower payments. If caught, they just have to revise what they previously submitted. Unless the dark side of human nature has magically changed during the past Christmas season, this will of course encourage unethical applicants, a number of whom surely fudged on their existing mortgage apps, to see how much fibbing they can get away with.

Here is other choice text from Beck's blast (some of what follows was between sections already excerpted above):

.... The federally funded Home Affordable Modification Program was aimed at getting banks to rework mortgages for homeowners in order to slow the pace of foreclosures. The government set a goal of modifying up to 4 million mortgages over the next three years.

.... Since March, just 31,000 homeowners have won permanent relief (out of 728,000 modifications under way, according to a December 10 program press release -- Ed.). One big reason why is that lenders are doing what they should have been doing all along - requiring things like proof of income.

.... Under the $75 billion program, lenders are paid by the government to alter mortgages in hopes that cheaper loans will lead to fewer defaults.

.... Borrowers say lenders are permitting trial modifications, but few are being made permanent. Lenders say borrowers aren't providing all the necessary paperwork to get loans permanently altered.

.... The government needs this program to work - and fast. That's the only way to explain the Treasury Department's waiver of a requirement punishing borrowers who understate their income by 25 percent or more when trying to get a modification.

That means a borrower who had told a lender he made $75,000 but was found to make $100,000 doesn't have to restart the modification process. Under the waiver announced Dec. 16, that person now gets to continue the trial period instead of being rejected immediately.

.... Dishonesty fed the housing bust. Let's not let it ruin the chances for its repair.

AP beat reporters and the rest of the press had roughly six business days before Christmas to find this news and report on it. Based on the results of a Google News search from December 16-23 on "loan modification trial" (not entered in quotes, sorted by date with duplicates included) would seem to indicate that almost no one did.

Of the 143 results returned, a large plurality were of Alan Zibel's December 21 AP report on the program's status. Zibel revealed nothing about the permanent HAMP waiver. The only listings that I saw that even hinted at the existence of the permanent waiver of the income-fudging start-over in its headline were two (here and here) at eCreditDaily.com and one MortgageNewsDaily.com. Even those titles ("New Rules Poised to Speed Up Foreclosure Rescues," "‘Critical’ Waiver Should Speed Up Mortgage Redos," and "HAMP Waiver Eliminates Trial Period Restart Rule") were vague -- especially compared to Beck's. Distressingly, quite a few of the remaining results seem to blame the mortgage lenders and servicers for program's problems, with very little fire directed towards the bureaucracy or at borrowers who are fibbing or not following through.

A Google News search (previous 30 days) on the first sentence of Beck's column (in quotes) came back with 83 results. Those results indicate that Beck's column was carried on these days Christmas Eve - 1 (in Oakland); Christmas Day - 67; December 26 - 9; December 27 - 3; December 28 - 1; December 29 - 2.

Thus, a truly revolting development in a costly program that is distorting the housing market, creating mountains of paperwork, and straining private-sector resources has gone virtually unnoticed. It will more than likely stay virtually unknown, unless readers here change that.

Cross-posted at BizzyBlog.com.

On Thursday, the Treasury Department issued a press release, called "Update on Status of Support for Housing Programs." Its fourth paragraph reads as follows:

At the time the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship in September 2008, Treasury established Preferred Stock Purchase Agreements (PSPAs) to ensure that each firm maintained a positive net worth. Treasury is now amending the PSPAs to allow the cap on Treasury's funding commitment under these agreements to increase as necessary to accommodate any cumulative reduction in net worth over the next three years. At the conclusion of the three year period, the remaining commitment will then be fully available to be drawn per the terms of the agreements.

Translation: No matter how badly things further deteriorate at these former government sponsored enterprises, both of which since last year in essence have become government-controlled enterprises, Uncle Sam (i.e., current and future generations of taxpayers) will cover their losses.

Here is how three different news outlets headlined this Treasury/Obama administration move:

• Wall Street Journal, Dec. 26 -- "U.S. Move to Cover Fannie, Freddie Losses Stirs Controversy."
• Associated Press, Dec. 25 -- "Treasury removes cap for Fannie and Freddie aid."
• New York Times, Dec. 24 (in Christmas print edition on Page B1) -- "New Aid for Fannie and Freddie."

It really is difficult to take the Times seriously any more.

James R. Hagerty and Jessica Holzer at the Journal and the AP's J.W. Elphingstone identified why the move was made just before year-end, and noted the attention-avoiding Christmas Eve timing of the announcement:

(WSJ, 4th and 8th paragraphs) "The timing of this executive order giving Fannie and Freddie a blank check is no coincidence," said Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee. He said the Christmas Eve announcement was designed "to prevent the general public from taking note."

.... The Treasury removed the cap on the size of available bailout funds by amending agreements it reached with the companies in September 2008, when the government seized control of the agencies under a legal process called conservatorship. The agreement allowed the Treasury to make amendments through the end of the year, without the consent of Congress. Changes made after Dec. 31 would likely involve a struggle with lawmakers over the terms.

(AP, 4th and 5th paragraphs) By making the change before year-end, Treasury sidestepped the need for an OK from a bailout-weary Congress.

While most analysts say the companies are unlikely to use the full $400 billion, Treasury officials said they decided to lift the caps to eliminate any uncertainty among investors about the government's commitments. But the timing of the announcement on a traditionally slow news day raised eyebrows.

Elphingstone's first sentence deserves special props: "The government has handed its ATM card to beleaguered mortgage giants Fannie Mae and Freddie Mac."

The Times article by Louise Story did not cite the December 31 deadline's existence.

The Journal and the AP stuck to the story itself, and also went into the realm of the quite generous pay packages the entities' execs are receiving. Neither chose to provide any background about how the two entities got to where they are. But Times's Story gave us this pitiful rendition of the true story:

The housing giants stumbled badly in the financial crisis after backing too many troubled loans. Late last year, the government put them into conservatorship, and since then they have provided most of the liquidity in the mortgage market, allowing homeowners to refinance and buy new homes. Now, announcing new long-term support for the companies, the Obama administration has effectively transformed them into arms of the government, using them to help carry out its mortgage modification programs.

I'm not buying what Story is selling in the second sentence of the excerpted paragraph about the two firms providing "most of the liquidity in the mortgage market." Instead, they represent a significant component of the pervasive administration-induced atmosphere of uncertainty that permeates and holds back the entire economy.

Story's story never tells us that it is the government, backed by Community Reinvestment Act requirements, that demanded that banks make these "troubled" (i.e., most subprime) loans, and that Fred and Fan buy them up. Some were kept on the entities' books; others were dumped (oh, I'm sorry, "securitized and issued to gullible investors"). All of this led to the systemwide mortgage-lending and housing messes.

It should also not be forgotten that Democratic cronies too numerous to mention made millions -- make that tens of millions -- as executives and board members while running these entities into the ground and deliberately keeping fraudulent books while they were in charge (Fred, Fan). Sadly, all three stories did.

Cross-posted at BizzyBlog.com.

If there's a Ground Zero for America's foreclosure mess outside of much of California and metro Las Vegas, it's probably Cleveland, the Northeast Ohio city known in most of the rest of the state as the Mistake on the Lake.

The Cleveland Plain Dealer's Mark Gillespie got out from behind his desk, committed some good old-fashioned journalism, and went looking for the mistakes that exacerbated the town's breathtaking home foreclosure rate. Lo and behold, he found that city government itself contributed mightily and extraordinarily negligently to the debacle. Go far enough into Gillespie's report, and you will also find an implicit admission that the Community Reinvestment Act (CRA) also played a pivotal role (bold is mine):

How Cleveland aggravated its foreclosure crisis

The city of Cleveland has aggravated its vexing foreclosure problems and has lost millions in tax dollars by helping people buy homes they could not afford, a Plain Dealer investigation has found.

The city provided mostly low-income buyers with down payment loans of up to $20,000 through the federally funded Afford-A-Home program, but did little to determine whether the people could actually afford to keep their homes.

That lack of oversight persisted for years, even as hundreds of loan recipients defaulted on mortgages, many within two years, the newspaper found by analyzing property and loan records covering the period between 2000 and 2007.

For example, nearly half of 584 homes sold by the top three for-profit companies that tapped into the program over the eight years have gone into foreclosure. More than one-third of those homes have sold at sheriff's sale or sit abandoned because banks did not take them back.

..... The loss in Afford-A-Home dollars from failed purchases from Cresthaven Development Corp., Rysar Properties Inc. and Pebblebrook Properties Inc. thus far totals more than $2.3 million.

Presented with the newspaper's findings, city officials acknowledged problems with the Afford-A-Home program and ordered tighter eligibility standards for buyers and sellers.

..... The program is primarily driven by companies that buy, renovate and resell houses. The companies typically seek city approval to sell properties using Afford-A-Home loans before renovations are completed. They are responsible for sending the buyers' Afford-A-Home applications to the city.

A Plain Dealer review of more than 50 Afford-A-Home files found borrowers who, according to their applications, earned as little as $15,000 a year when the city -- and mortgage lenders -- gave them loans.

One woman, according to a letter in her file, was homeless and living in a car with her children when she got $10,000 from the city. Another couple received food stamps and were jobless when they got an Afford-A-Home loan.

Through 2004, the first-lien mortgages for Afford-A-Home buyers typically came from local banks fulfilling federal requirements to lend money in poorer neighborhoods. The loans carried low interest rates.

Read the whole sickening thing.

The final bolded sentence in the excerpt shows that the CRA was a key element in Cleveland's catastrophe. CRA mandated that banks originating first-lien mortgages extend them to undeserving borrowers, or face brutal challenges to their ability to continue in business during regulators' audits and to other business moves such as mergers and acquisitions. As would be expected, short-term survival instincts overcame sound underwriting. Now, according to leftists, it's the banks' fault for doing what they were intimidated into doing.

But then, proving again that the term "government oversight" is usually an oxymoron, the city agency, even with no similar level of threat looming in the background, doubled down. Even if the apps were submitted by development companies who should have known better or were lying about certain key information (that appears to be the case in two sidebar stories Gillespie relates), that doesn't excuse the complete failure of oversight, and absolutely doesn't justify the program's continuance on auto-pilot for many years despite obvious early-stage problems.

Many in Cleveland still persist on blaming someone else for why the city's foreclosure situation is much worse that the vast majority of other cities in the US. Look in the mirror, guys. Every city's bankers faced similar CRA problems, and to the extent they did what first-lien lenders in Cleveland did, you can hang the blame on Uncle Sam and CRA. But it's Cleveland's residents who elected the people who created the agency that threw federal second-mortgage money at people with apparently little if any concern over whether it would be repaid, ultimately turning entire city blocks into barren wastelands. Though it's a popular claim among lefty bloggers in and around Metro Cleveland (maybe "Metro Mistake" is a more appropriate term), George Bush and the evil Republicans sure as heck didn't do this.

The establishment media-related question is this: How many other cities became similarly involved with this disastrous second-mortgage effort, with similarly disastrous results? I daresay Cleveland's mistakes have been made elsewhere, and more than once. My early nominees for PD-like investigations are Detroit and Chicago. Journalists there ought to get to work.

Cross-posted at BizzyBlog.com.

On yesterday's CNN Newsroom, anchor Kyra Phillips shifted to "Bad Boys" mode:

Lenders, lenders -- what you gonna do when they come for you? Call it an early Christmas present for people on the edge of losing their homes. The Obama administration cracking down on mortgage companies.

We'll tell you about it.

After the break:

PHILLIPS: Well, from your health (ph) to your home, the foreclosure crisis shows no signs of letting up, so the Obama administration is trying to fight back.

Personal Finance Editor Gerri Willis joining us live from New York.

So, Gerri, new hope for struggling homeowners?

To her credit, Willis was considerably more restrained:

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Well, we'll see, Kyra. You know, lots of changes announced today to the Making Home Affordable program. And as you know, this is the program the administration has put into place to change those mortgages that people had so much trouble with during the mortgage meltdown.

Unfortunately, it's really not helping a lot of people right now. It's scheduled to help four million. It's helping less than two percent of those people right now. So here are the changes they're putting in place.

And after reporting the details:

WILLIS: The administration here trying to make some changes to it, tweaks to it here and there, to make it more effective. But the devil's in the details.

We'll be watching these reports monthly to see how many people they're helping and if more Americans are really getting assistance. But some interesting changes, Kyra. More stick, less carrot.

Gerri's cautiousness is justified.  When Obama announced his plan in Mesa last February, the New York Times reported:

“This plan will not save every home, but it will give millions of families resigned to financial ruin a chance to rebuild,” Mr. Obama told a crowd here, in one of the communities hardest hit by the housing crisis.

Millions of families?  Not according to the the Congressional Oversight Panel's October report, "An Assessment of Foreclosure Mitigation Efforts after Six Months."  The liberal Center for Media and Democracy's PR Watch.org summarized:

To no one's surprise, the Congressional Oversight Panel released a report in October showing that these programs are failing. Fewer than 2,000 of the 500,000 loan modifications then in progress had become permanent under the program, and only a handful lowered the principle. The pace of the Treasury Department programs is so slow that most people are being foreclosed upon before they are even able to apply.

Yet to Kyra Phillips, fiddling at the margins of yet another failed Obama experiment is "an early Christmas present" and "the Obama administration is trying to fight back."  Bah, humbug!  
          

It's a development that I wouldn't wish on anybody, but one that the City of New London, Connecticut largely brought upon itself by pursuing and winning the Kelo v. New London case at the Supreme Court in June 2005.

Some "win." In what Ed Morrissey at Hot Air calls "a fitting coda to a chapter of governmental abuse," pharmaceutical manufacturer Pfizer is leaving the global research and development headquarters it built in New London just eight years ago.

The significance of the move should resonate nationally, because, as the Washington Examiner explains, Pfizer's original decision to locate in New London was driven by the City's promises to eliminate a nearby neighborhood -- promises which led to the Kelo litigation once residents, including Susette Kelo (pictured above), pushed back:

To lure those jobs to New London a decade ago, the local government promised to demolish the older residential neighborhood adjacent to the land Pfizer was buying for next-to-nothing. Suzette Kelo fought the taking to the Supreme Court, and lost. Five justices found this redevelopment met the constitutional hurdle of "public use."

The New London Day elaborates, while petulantly managing to avoid any mention of what has clearly become the local four-letter word -- "Kelo" (bold is mine):

The Pfizer Research and Development complex in New London will be closed by the pharmaceutical giant and its jobs consolidated in Groton. Sale or lease of the property, which encompasses more than three-quarters of a million square feet, could be a lengthy process. Though it comes as a blow to New London, the closure will not result in any major loss of jobs as a result of the Groton consolidation.

Pfizer earlier this year said nearly 20,000 jobs would be cut as a result of its merger with the New Jersey-based Wyeth. The company said Monday that about 15 percent of its overall R&D work force would be cut as part of that downsizing.

The announced closing of the New London site came as a blow to a city that had counted on Pfizer to help revive its fortunes. Instead, Pfizer's name became attached to a dispute over eminent domain that went all the way to the U.S. Supreme Court in a case that New London won on legal grounds even as it lost in the court of public opinion.

The loss of Pfizer as a keystone business in New London could put in further jeopardy the Fort Trumbull development that started in conjunction with Pfizer's move into the city but has left little but flattened buildings and eminent-domain angst in its wake.

Michael Joplin, president of the New London Development Corp., said Pfizer's withdrawal from the city will likely be a setback for a proposed hotel at Fort Trumbull. While the hotel would have attracted the general public as well as those visiting the proposed U.S. Coast Guard Museum at Fort Trumbull, Joplin said Pfizer had planned to make use of it as well.

"What we've lost here is an occupied property," Joplin said. "But it would have been worse yet if Pfizer had picked up its whole operation."

"All in all, I think we're lucky," said Tony Sheridan, president of the Chamber of Commerce of Eastern Connecticut. "The facility in New London was built with the best of intentions. If the industry can't support facilities in (both) New London and Groton ... hard decisions have to be made."

The Day's insistence on avoiding any mention of the word "Kelo" is a deplorable tradition that began almost immediately after final holdouts Susette Kelo and the Cristofaros settled with the City in mid-2006. The paper's persistence looks especially petty and childish today.

The reality-denying statements of Joplin and Sheridan above are self-evident embarrassments.

The Hartford Courant, which appears to have been the first to report the story yesterday at 12:55 p.m., also didn't mention "the dirty word."

The strain to avoid saying "Kelo" borders on the hysterical in the three-minute Fox 61 video embedded at the Courant link. Reporter Laurie Perez first made this reference to the case (blown chances to mention Kelo are in bold):

(0:25) "It wasn't that long ago that New London was wooing Pfizer to Fort Trumbull, and in a bitter and infamous eminent-domain battle, taking away private homes to make way for a business and technology park. Tonight, along with taking a look and the business and economic impact of Pfizer leaving there is as you might imagine, strong reaction from residents, wondering what exactly they lost their homes for.

After this build-up, Perez interviewed only one "resident," Mike Cristofaro, who is of course now a former Fort Trumbull resident:

(2:10) Perez: Former Fort Trumull homeowner Michael Cristofaro bears no ill will towards the drug company, but he says the eminent domain battle with the city and developers combined with today's news, is a bitter pill to swallow.

Cristofaro: There's nothing here. It's clear-cut. It's a dust bowl. I mean, that's what's sad. That was a 10-year battle, and here it is, 12 years later, and we could still be here. And we would still be paying the taxes on it. What does the City have now? They have nothing.

The local press's consistent refusal to utter Susette Kelo's last name is journalistic malpractice.

As to the press outside of the Nutmeg State, as I have noted in several previous NewsBusters and BizzyBlog posts, the national media have been proactively disinterested in developments -- or, more correctly stated, non-developments -- in the Fort Trumbull area.

After the ruling itself, the establishment media largely ignored the bitter struggle that ensued:

• Almost no one knows that a new party, One New London, whose express purpose was to prevent the New London Development Corporation from carrying out its Supreme Court-sanctioned actions, came out of nowhere and won two seats on the seven-seat City Council, losing out on a third seat by 19 votes.
• Almost no one knows that City Council, with the One New London Party members strongly dissenting, voted in May 2006, formalized in June, to evict the remaining holdouts, while demanding "past-due real estate taxes, claims for use and occupancy and claims to collect rent from third parties" to the tune of (I'm not kidding) $946,000 and change.
• Almost no one knows that infuriated city residents mounted what from all appearances was a successful petition drive to put the question of the city property takeover of the Kelo and Cristofaro properties on the ballot in just three weeks. Absent the petition and looming referendum overhang, it seems likely that City Council would have brought on the bulldozers. Instead, it began negotiations with Connecticut Governor Jodi Rell. Rell ultimately brokered a deal that, while constitutionally unacceptable, was probably the best anyone could have hoped for in the situation.

Going further back to the sordid history of the case itself, almost no one knows that the high-powered, politically-connected Italian Dramatic Club was allowed to remain in Fort Trumbull, while each and every home around it was leveled:

A notable exception to the NLDC's plan to clear-cut the neighborhood is the Italian Dramatic Club, a politically connected "social club" of Connecticut's political establishment, which is located in the very same neighborhood as all the homes targeted for destruction. Among the Italian Dramatic Club's patrons was former Connecticut Gov. John Rowland, who helped direct much of the State funding for the NLDC's work in New London and who resigned in June 2004 amid an ethics scandal. The club was informed in September 2000 that it could remain in the neighborhood. The un-elected NLDC decision to preserve the politically powerful Italian Dramatic Club while demanding that New Londoners move out led Fort Trumbull homeowner Matt Dery to quip that the NLDC's actions in his neighborhood have been both shameful and shameless.

As far as I can tell, establishment media coverage of Pfizer's latest move and its real-world relevance to the Kelo ruling has thus far been non-existent. A Google News search on "Pfizer Kelo" (not in quotes) at 11:00 a.m. came back with a dozen items, none from major establishment media outlets. A search on "Pfizer eminent domain" (again not in quotes) came back with 13, adding only the Hartford Courant report noted above. The Associated Press's coverage of the Pfizer-Wyeth facilities consolidations only says that "Groton, Conn. .... will add 1,500 workers from a nearby New London facility being closed."

The idea that news consumers outside of Connecticut don't have an interest in learning what has really happened at the site involved in the Supreme Court's odious Kelo ruling is patently absurd. Perhaps this four-year blackout has occurred because our journalistic gatekeepers would prefer that we not see a concrete demonstration of what can happen when a government gives in to its authoritarian impulses, and the courts fail in their duty to rein it in.

Cross-posted at BizzyBlog.com.

Monday’s CBS Early Show took time to highlight the selling power of the Obama family as correspondent Reynolds reported: “Bill Grimshaw thinks he has the perfect sales pitch for the house he’s trying to sell on Chicago’s south side....he lives right next door to the Obamas....because of this...special location, the sky could well be the limit.”

Reynolds gushed over how the Grimshaw family was “So close they let Obama use their living room as a backdrop to record a holiday message days before last year’s Iowa caucuses.” He then spoke with real estate agent Matt Garrison, who argued: “We anticipate an Obama – an Obama premium. We don’t know exactly how much that is.” Reynolds wondered: “An Obama premium?” Garrison reiterated: “Yeah, an Obama factor, an Obama premium.” Reynolds further explained: “For example, Matt says living next door to the Nobel Peace Prize winner could make Grimshaw a winner, too.” Garrison remarked: “We certainly think it makes the price go up.”

Grimshaw did note a downside to living next to the First Family: “It’s like getting into East Berlin every night. They had bomb sniffing dogs, mirrors that went under the car. We had to get out of the car, let the dogs sniff us. That part was not too nice.” Reynolds dispelled the concern: “But living barely 15 feet from history is obviously tempting. The listing is so special it has its own website, 5040Greenwood.com, which recorded 60,000 hits its first week....A residential ring side seat.”

This is not the first time CBS has touted the affect of the “Obama premium” on sales. While the First Family vacationed on Martha’s Vineyard in August, White House correspondent Chip Reid proclaimed: “One thing that’s going to give a huge boost to the economy is all the Obama paraphernalia...t-shirts, it’s baseball caps and magnets and coffee mugs and glasses. And restaurants are selling the ‘Baracko Taco.’ Bars are selling ‘Ale to the Chief.’ And all of it is selling like crazy.”

Here is a full transcript of the Monday segment:

8:00AM TEASE:

HARRY SMITH: And is this the safest neighborhood in the United States?

BILL GRIMSHAW: They had bomb sniffing dogs, we had to get out of the car, let the dogs sniff us.

SMITH: We’ll tell you what it takes to become the ‘First Neighbors.’

8:19AM TEASE:

KELLY COBIELLA: And still to come, want to become the ‘First Neighbor’ and live next door to President Obama? Yes, it’s possible. We’ll show you how.

8:44AM SEGMENT:

HARRY SMITH: When buying a house, there is more than just location. There is also the neighbors. So how would you feel living next door to the President of the United States? CBS News correspondent Dean Reynolds reports on a unique real estate offer.

[ON-SCREEN HEADLINE: First Neighbors; House Next to Obama’s Chicago Home For Sale]

DEAN REYNOLDS: Bill Grimshaw thinks he has the perfect sales pitch for the house he’s trying to sell on Chicago’s south side.

BILL GRIMSHAW: It’s the safest place in the city by far.

REYNOLDS: That’s because he lives right next door to the Obamas. Yes, the Obamas.

GRIMSHAW: We used to chat over the back fence, back porch neighbors.

REYNOLDS: So close they let Obama use their living room as a backdrop to record a holiday message days before last year’s Iowa caucuses.

BARACK OBAMA: I’m Barack Obama and I approve this message.

SASHA OBAMA: Merry Christmas.

MALIA OBAMA: Happy holidays.

REYNOLDS: The Grimshaw family has lived in the 103-year-old house since they bought it for $35,000 in 1973. But now he and his wife are empty nesters and ready to go. Obama paid 1.6 million for his home four years ago. Something Grimshaw noted. And what’s the asking price now?

GRIMSHAW: There is no asking price. That’s one of the remarkable things.

REYNOLDS: Houses in this neighborhood generally sell for $1.5 million to $2 million. But because of this one’s special location, the sky could well be the limit.

MATT GARRISON: Eight bedrooms, 3.5 baths.

REYNOLDS: Wow.

REYNOLDS: Matt Garrison is the real estate agent.

GARRISON: We anticipate an Obama – an Obama premium. We don’t know exactly how much that is.

REYNOLDS: An Obama premium?

GARRISON: Yeah, an Obama factor, an Obama premium.

REYNOLDS: For example, Matt says living next door to the Nobel Peace Prize winner could make Grimshaw a winner, too.

GARRISON: We certainly think it makes the price go up.

REYNOLDS: A semi-retired university professor, Grimshaw warns that living next door to the President requires an adjustment.

GRIMSHAW: It’s like getting into East Berlin every night. They had bomb sniffing dogs, mirrors that went under the car. We had to get out of the car, let the dogs sniff us. That part was not too nice.

REYNOLDS: But living barely 15 feet from history is obviously tempting. The listing is so special it has its own website, 5040Greenwood.com, which recorded 60,000 hits its first week. So you’re sitting on a good thing?

GRIMSHAW: If you’re getting calls from Singapore and Saudi Arabia, London, yeah, it’s an amazing thing.

REYNOLDS: A residential ring side seat. Dean Reynolds, CBS News, Chicago.

SMITH: What do you do when you want to go borrow a cup of sugar?

KELLY COBIELLA: Can you knock on the door?        

SMITH: Well, or-

COBIELLA: Or do you have go through the whole rigamarole

SMITH: And you know they’re not home. I mean, it’s – you know.