Chris Dodd Doesn't Get the Irony

Sen. Chris Dodd's pot calls GM's kettle black:

CHICAGO -- A senator who will help determine whether the auto industry gets a $15 billion bailout said Sunday that the head of General Motors should step down, telegraphing what could be a congressional demand for a top-line shake-up in Detroit in exchange for financial life support.

Rick Wagoner, the chief executive of GM, "has to move on," said Christopher Dodd, D-Conn., chairman of the Senate Banking, Housing and Urban Affairs Committee. He spoke on CBS' "Face the Nation."

"I think you have got to consider new leadership," Dodd said. Asked if that should be a condition of any bailout, he added, "I think it is going to have to be part of it."

"I think it's clear GM is in the worst shape," Dodd said before specifying the need for Wagoner to step down.

Let us not forget that it was Chris Dodd, along with other Democrats like Rep. Barney Frank, who interfered with efforts to reform Freddie Mac and Fannie Mae and gave us the mortgage crisis that has now rippled through the economy and helped bring about the downfall of the housing market and the auto industry. It seems to me that by Dodd's own standards he should have resigned months ago.

U.S. Taxpayer Stadium

With the government's announced bailout of Citibank, will we get to rename Mets Stadium in New York?

The New York Mets theme song for the 2009 season is "We built this Citi." The question is whether the Citi will stand.

Questions about whether the humungous 20-year, $400 million naming rights deal that the bank agreed to two years ago for the new Mets stadium would stand up, began when the global financial crisis started. Then the 53,000 jobs cut at Citi, the second largest single job cuts in terms of volume in history. And last night, the government injecting $20 billion into Citigroup.

Sure, the $20 million a year is a drop in the bucket, but the important point to make here is that the folks at Citi are at least behaving as if the Mets made this contract so locked up, that they couldn't get out of it no matter what the financial situation was.

"You know, those (naming rights) decisions were made in a different time and a different place and we have a legal and binding agreement around that and so I never heard it discussed," Citi's CFO Gary Crittenden told Erin Burnett on our "Squawk on the Street" this morning. "I don't think it's an issue."

For $20 billion to keep Citi in business, I think it's only fair that the Mets change the name to "U.S. Taxpayer Stadium".

This Week's Bailouts

Just a couple more bailouts to think about:

FEDS TO THE RESCUE: CITI

Needed: TV Network bailout?; Bad economy slows ad sales...

Wouldn't it have been easier if the government had just written each of us a check for $1 million?

Downey Savings Collapses

Another former competitor in my banking days has gone bust:

Federal authorities seized Newport Beach-based Downey Savings and Loan as the thrift fell below capital requirements to stay in business, authorities said late Friday.

The Federal Deposit Insurance Corp. announced it was turning over management of the 51-year-old thrift to Minneapolis-based U.S. Bank. As part of the same action, the FDIC also turned over Pomona-based PFF Bank & Trust to U.S. Bank.

The combined 213 branches of the two failed banks will operate under normal hours Saturday.

“Depositors will automatically become depositors of U.S. Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage,” the announcement said.

Under the takeover deal, U.S. Bank will be responsible for the first $1.6 billion in losses. Customers with mortgages will be eligible for loan modifications similar to plans offered to clients of IndyMac Bank, which the FDIC seized in July.

Downey Financial Corp., which opened its first branch in Downey in 1957, grew into a regional bank with $13.9 billion in assets, 170 branches in California and Arizona and more than 1,800 employees.

Downey is the largest Orange County-based federally-insured bank to face a takeover in the current crisis. Also Friday, the FDIC seized the Community Bank in Loganville, Ga., which had total assets of $681 million.

Downey’s demise had long been anticipated. The stock closed Friday at 18 cents, down from $40.93 on Nov. 30, 2007.

Wow. Their headquarters building has been a fixture for years by South Coast Plaza in Costa Mesa.

Don't Leave Home Without Your Federal Bailout

Another big company reaches out for some Federal bucks:

The Federal Reserve on Monday evening granted a request by American Express to become a bank holding company, giving it access to low-cost financing from the Fed.

The Fed said it had approved the application for American Express and a related company, American Express Travel Related Services, to become bank holding companies. The approval represented the latest reshaping of the financial services industry, which is undergoing its worst credit crisis in decades.

In announcing the action, the Fed said “emergency conditions exist that justify expeditious action on this proposal.”

“Given the continued volatility in the financial markets,” said Kenneth I. Chenault, chief executive of American Express, “we want to be best-positioned to take advantage of the various programs the federal government has introduced or may introduce to support U.S. financial institutions.”

Mr. Chenault said in a statement that the decision to become a bank holding company would not fundamentally alter the company’s core focus on the credit card payments industry, nor would it require any significant divestitures of its operations.

Does this mean Secretary Paulson gets a platinum card?

Where Did $2 Trillion Go?

This report from Bloomberg is troubling:

Nov. 10 (Bloomberg) -- The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

``The collateral is not being adequately disclosed, and that's a big problem,'' said Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. ``In a liquid market, this wouldn't matter, but we're not. The market is very nervous and very thin.''

Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months, in the midst of the biggest financial crisis since the Great Depression.

``It's your money; it's not the Fed's money,'' said billionaire Ted Forstmann, senior partner of Forstmann Little & Co. in New York. ``Of course there should be transparency.''

Could it be that some of this money is going to banks previously thought sound and the revelation would create additional panics in the market? Perhaps, but if the government is going to toss around that kind of taxpayer money, the taxpayers should know where it's going.

Two More Big Banks Fail

This one was a little surprising:

WASHINGTON (AP) - Regulators shut down Houston-based Franklin Bank and Security Pacific Bank in Los Angeles on Friday, bringing the number of failures of federally insured banks this year to 19.

Back in my Bank of America days Security Pacific was our big competition. I'm really surprised to see that one fail.

The Age of Prosperity is Over

That's the title of a Wall Street Journal article by Arthur Laffer, the created of Reaganomics, who is lamenting the way government is taking over the financial markets:

About a year ago Stephen Moore, Peter Tanous and I set about writing a book about our vision for the future entitled "The End of Prosperity." Little did we know then how appropriate its release would be earlier this month.

Financial panics, if left alone, rarely cause much damage to the real economy, output, employment or production. Asset values fall sharply and wipe out those who borrowed and lent too much, thereby redistributing wealth from the foolish to the prudent. This process is the topic of Nassim Nicholas Taleb's book "Fooled by Randomness."


David GothardWhen markets are free, asset values are supposed to go up and down, and competition opens up opportunities for profits and losses. Profits and stock appreciation are not rights, but rewards for insight mixed with a willingness to take risk. People who buy homes and the banks who give them mortgages are no different, in principle, than investors in the stock market, commodity speculators or shop owners. Good decisions should be rewarded and bad decisions should be punished. The market does just that with its profits and losses.

No one likes to see people lose their homes when housing prices fall and they can't afford to pay their mortgages; nor does any one of us enjoy watching banks go belly-up for making subprime loans without enough equity. But the taxpayers had nothing to do with either side of the mortgage transaction. If the house's value had appreciated, believe you me the overleveraged homeowner and the overly aggressive bank would never have shared their gain with taxpayers. Housing price declines and their consequences are signals to the market to stop building so many houses, pure and simple.

But here's the rub. Now enter the government and the prospects of a kinder and gentler economy. To alleviate the obvious hardships to both homeowners and banks, the government commits to buy mortgages and inject capital into banks, which on the face of it seems like a very nice thing to do. But unfortunately in this world there is no tooth fairy. And the government doesn't create anything; it just redistributes. Whenever the government bails someone out of trouble, they always put someone into trouble, plus of course a toll for the troll. Every $100 billion in bailout requires at least $130 billion in taxes, where the $30 billion extra is the cost of getting government involved.

If you don't believe me, just watch how Congress and Barney Frank run the banks. If you thought they did a bad job running the post office, Amtrak, Fannie Mae, Freddie Mac and the military, just wait till you see what they'll do with Wall Street.

Read the rest of it here. And if you think this whole mess if bad, President Obama and the Obamites in Congress will be bringing us national health care as well, and if it works anything like the way government health care works in other parts of the world, we're all in a heap of trouble.

Looking For the Last Honest Journalist

Democrat and newspaper columnist Orson Scott Card is bemoaning the current state of newspaper journalism in which every effort is made to protect his fellow Democrats at the expense of the truth. He writes a powerful condemnation of his own industry that you can read here.

Get Greedy - Buy American

That's the advice from financial wizard Warren Buffett:

THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

Read the rest of his advice and history lessons here.

Should We Stop Paying Our Mortgage?

Peter Schiff has some suggestions for those of you who are currently paying your mortgage: stop.

If you are a mortgage holder who is either struggling with crushing payments, bitter for having overpaid for your home during the bubble, or who has extravagantly refinanced when prices were rising, the government's landmark $700 billion bailout package has an important message for you: stop making your mortgage payments . . . immediately. Furthermore, if you believe that with some planning and sacrifice you may be able to meet your mortgage obligations, the government's message is clear: relax, don't bother.

While angry voters have labeled the package as a bailout for Wall Street, it is more akin to a “Get out of Jail Free” card for anyone who acted irresponsibly during the boom. Here's why.

Nobody likes foreclosure, least of all politicians. The new law clearly indicates that the government will make major efforts to reduce foreclosures through “term extensions, rate reductions and principal write-downs” of the troubled mortgages that it buys from the private sector. In other words, your new landlord will bend over backward to keep you in your home. The legislation telegraphs this by including a provision that extends until 2013 the exclusion of loan reductions from taxable income.

When a financial institution holds a mortgage, homeowners must live with the fear of foreclosure. Private institutions only have obligations to shareholders. In the case of a defaulting borrower, they will look to recover as much of their principal as possible. If foreclosure is their best option, they will take it in a heartbeat.

The government has no such obligations. Its only goal is to keep voters happy. After supposedly bailing out the fat cats on Wall Street, no politician wants to be accused of evicting struggling families. Once you understand this, all of your anxiety should melt away. Why pay your mortgage if foreclosure is off the table, and if you know that lower payments, and possibly a reduced loan amount, would result? A tarnished a credit rating is a small price to pay for such a benefit.

Read the rest of it here. I'm sure most of this is tongue-in-cheek, but there's a lot of truth in this column. Socialism kills productivity and has been doing that for 100 years. Importing it to the United States isn't going to make it work.

Obama Will Invite ACORN to Help Him Shape His Agenda

That's what he said just last year:

I wonder how long until the Obamites get YouTube to kill that video?

Follow the Bouncing Dow

Good news - the Dow gained 700 points! Bad news - the Dow dropped 700 points first, and the index barely made it to positive numbers before falling again. Now running 300-600 points down.

It's gonna be a long day.

UPDATE: Dow traded in over a 1,000 point range - from +300 to -700, ending up a little more than 112 down. It could have been another bloodbath, but right now it's just a nick.

John Boehner: Cut Off Funding for ACORN

The GOP is quickly catching on to the seriousness of the ACORN voter fraud and their potential impact on both the election and the mortgage crisis. Today Minority Leader John Boehner called for an end of federal funding for the corrupt organization:

House Republican leader John A. Boehner of Ohio escalated the war on ACORN today, calling for it to be cut off from all federal money and going so far as to call for a ban on ACORN contracting with candidates for federal office.

ACORN, a community organizing group allied with Democrats, has been blamed by the GOP for pushing housing policies that Republicans say contributed to the housing crisis. It has been the subject of investigations for voter registration fraud and its Nevada offices were recently raided. …

ACORN receives federal money through the affordable housing trust fund after that money has been sent to states and local governments. So Congress, to keep the group from getting money, would need to specifically forbid ACORN from being eligible to get federal funds.

“Contracting for services between candidates for federal office and ACORN, as Sen. Obama has done, must end,” says Boehner. “Now that the taxpayers own Fannie Mae, any funding from Fannie Mae’s nonprofit foundation to ACORN must stop.”

Go get 'em, and be sure to tie Democrats to them as you go. If there's one thing we can hope for out of this election is that ACORN as an organization will be so poisoned in the minds of the public that no congressman will ever be able to sneak funds for them into another bill.

In a related post, Iowahawk reports on a new ACORN lawsuit:

ACORN Files Voting Rights Suit on Behalf of Imaginary-Americans

ST. LOUIS - Attorneys for the voting registration organizations ACORN and Project Vote filed an anti-discrimination voting rights suit in the U.S. Federal District court this morning, alleging the United States government is involved in "a widespread, systematic effort to disenfranchise Imaginary-Americans and deprive them of access to polls."

"Participation in our electoral process is a fundamental right, and the foundation of our democracy," said ASDF ASDFG, a spokesperson for the National Association for the Advancement of Imaginary People, one of the groups named as plaintiffs in the class action. "We will not be silent when government denies people access to the polls on the basis of color, or sex, or existential status."

Read the rest here.

Dow Drops Below 9,000 - UPDATE Down 679

Doesn't anybody want to buy stocks anymore? With about 40 minutes left in the trading day the Dow is down 377 points to 8880. Back when the bailout was first proposed one pundit said if no bailout was done the Dow would drop to 8300. With the bailout we're only 600 points above that.

UPDATE: Another bloodbath. Down 679 to close at 8579. Is there a bottom? The Dow has dropped 5500 points in one year.

5,000,000 Fraudulent Mortgages in the Hands of Illegal Aliens

Thank you Barney Frank, Chris Dodd, ACORN, and other Democrats:

One illegal alien was arrested this year in Tucson after allegedly using a stolen social security number to buy two homes and rack up over $780,000 in bad debt.

Some five million fraudulent home mortgages are in the hands of illegal aliens, according to the U.S. Department of Housing and Urban Development.

It's not known how many of those have contributed to the subprime housing mortgage meltdown, but it has affected every state, including Arizona.

The problem began years ago when banks were forced to give mortgages without confirming social security numbers or borrower identification. As a result, illegal immigrants were able to obtain home mortgages which they could not afford.

Once again the good intentions of the Democrats meet up with reality in a way that hurts us all.

SNL Scrubs Barney Frank's Role in Mortgage Crisis From Sketch

I had a post yesterday on a Saturday Night Live sketch that blasted Dems for the mortgage mess but mysteriously disappeared from the NBC website on Tuesday. The video showed up again later with "minor" changes, mainly removing a chyron graphic that said "People who should be shot" under the characters playing Herbert and Marian Sandler, California liberal activists who sold a portfolio of mortgage securities to Wachovia for $24 billion which is now basically worthless.

Top of the Ticket reports today that a careful analysis of the video show that the graphic was not all that was removed:

The video was later reposted and a spokesman explained "upon review we caught certain elements in the sketch that didn't meet our standards. We took it down and made some minor changes."

In an interview with Gold, the show's executive producer, Lorne Michaels, said the Sandlers were distraught but had not demanded the changes. He noted the "People who should be shot" line was deleted as was a reference to their "corrupt activities."

But a comparison of the two versions shows that actually a little more than that was cut. What also was excised was any mention of the involvement of Massachusetts' Rep. Frank in the Sandler subprime mess.

Frank is the influential chairman of the House Financial Services Committee and an ardent political protector of Fannie Mae and Freddie Mac, which participated in the subprime problem.

In the original skit Sandler addresses Frank, saying, "And thank you Congressman Frank as well as many Republicans for helping block Congressional oversight of our corrupt activities."

To which Frank replies enthusiastically, "Not at all!"

All that's gone in the new version, which Show Tracker has posted here.

That's too bad for Frank's Republican opponent in the House election next month for the Bay State's Fourth District, which includes Brookline and Newton. Frank's opponent is little-known Republican Earl Henry Sholley, who could use any embarrassing ammunition like the SNL sketch.

Nevermind any grand policy proposals. Sholley's still trying to get Frank to agree to simple public debates. Frank dismisses his GOP challenger, saying he simply can't make the dates Sholley has suggested. And that's that.

SNL finally got a sketch right and the Dems and their liberal activist money machines complained. Poof, down the memory hole.

McCain Proposes Massive New Federal Mortgage Program

I guess $700 billion just isn't enough:

WASHINGTON (AP) -- Republican presidential candidate John McCain is proposing a $300 billion program for the federal government to buy up bad home mortgages and allow homeowners to keep their houses.

McCain said: "Until we stabilize home values in America, we're never going to start turning around and creating jobs and fixing our economy and we've got to get some trust and confidence back to America."

In an unusual step, McCain announced the plan during Tuesday's debate. He said that as president he would direct the federal government to purchase mortgages directly from homeowners and mortgage providers. The loans would be replaced with fixed-rate mortgages, ostensibly at a loss to the government.

"Is it expensive? Yes," McCain said.

I keep hoping that some of Sarah Palin's conservatism will rub off on him, but clearly the only way to get elected president is to constantly promise bigger and bigger government.

If McCain really wants to stimulate the economy, don't buy up the bad mortgages, buy up some good ones and let those homeowners have the money to spend. THAT would get the economy going.

It's Tough Being Bailed Out by the Taxpayers

It's so tough that the only thing to make you feel better is a weekend at an exclusive Orange County resort:

WASHINGTON (AP) - Less than a week after the federal government had to bail out American International Group Inc. (AIG), the company sent executives on a $440,000 retreat to a posh California resort, lawmakers investigating the company's meltdown said Tuesday.

The tab included $23,380 worth of spa treatments for AIG employees at the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government it needed to stave off bankruptcy.

The retreat didn't include anyone from the financial products division that nearly drove AIG under, but lawmakers were still enraged over thousands of dollars spent on catered banquets, golf outings and visits to the resort's spa and salon for executives of AIG's main U.S. life insurance subsidiary.

"Average Americans are suffering economically. They're losing their jobs, their homes and their health insurance," House Oversight Committee Chairman Henry Waxman, D-Calif., scolded the company during a lengthy opening statement. "Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation."

I've been to the St. Regis and it's apectacular resort, but whoever the bonehead is that authorized this trip right on the heels of a government bailout ought to be drawn and quartered.

And then shot.

SNL Has Standards?

Who knew?

A “Saturday Night Live” skit that skewered President Bush, Democrats, homebuyers and subprime lenders for their roles in the mortgage meltdown was removed from the program’s website because it “didn’t meet out standards,” a spokesman for the show said Tuesday. An edited version of the skit will be re-posted online soon, the spokesman said.

The skit, a parody of a C-SPAN news conference, ridiculed subprime borrowers, housing speculators and Herbert and Marion Sandler, the real-life couple who built Golden West Financial into a subprime lending powerhouse and sold it to Wachovia before the subprime collapse. At one point in the skit, the Herb Sandler character says he made $24 billion off the subprime boom. Graphics then appear labeling the Sandlers as “People who should be shot.”

“Upon review, we caught certain elements in the sketch that didn’t meet our standards,” a spokesman for the program said in an E-mail message Tuesday. “We took it down and made some minor changes and it will be back online soon.”

This is the same show that joked about Todd Palin being involved in an incestuous relationship with his daughter. That bit met their standards.

The skit was actually quite funny and right on the mark in its portrayal of Nancy Pelosi, Barney Frank, George Soros and Herbert and Marian Sandler. Of course, they played Bush as a dummy, but they actually got the facts right about Dems blocking attempts to reform Fannie Mae and Freddie Mac and the type of lending the Dems were encouraging.

Here's a version of the skit without most of the chyrons that appeared below some of the characters. There's some thought that the wording on those chyrons, especially the words "People Who Should Be Shot" below Herbert and Marian Sandler, is what got the video pulled - probably at the request of their lawyer. By the way, the Sandlers are huge lefty supporters and contributors like George Soros.