This story is quite disturbing. The Obama administration is sliding down a slippery, or should I say, slimy slope. In Q4 of last year fear mongering was the tactic of choice to push policy (e.g. auguring global financial ruin if senators didn’t quickly pass questionable legislation.) In Q1 & Q2 of this year financial market manipulation was the potion incorporated to conjure up support for far-reaching and possibly destructive government controls. Apparently Q3 ushers in a new age of coercion. When I read the story below I wonder: Is this a show of unbridled audacity (to use an Obama term) or is this the beginnings of something altogether more desperate? As ratings slip and agendas meet resistance is this how our “esteemed” president and his “brilliant” entourage conduct themselves?

Please take a good look at the June 30 post. You may feel a more acute impact of the cartoon’s message after reading about the behavior described in the story below. Shouting, expletives and coercion are a common trait for the gaggle depicted.

Geithner vents as overhaul stumbles – WSJ
WSJ reports Treasury Secretary Timothy Geithner blasted top U.S. financial regulators in an expletive-laced critique last Friday as frustration grows over the Obama administration’s faltering plan to overhaul U.S. financial regulation, according to people familiar with the meeting.

The proposed regulatory revamp is one of President Barack Obama’s top domestic priorities. But since it was unveiled in June, the plan has been criticized by the financial-services industry, as well as by financial regulators wary of encroachment on their turf. Mr. Geithner told the regulators Friday that “enough is enough,” said one person familiar with the meeting. Mr. Geithner said regulators had been given a chance to air their concerns, but that it was time to stop, this person said.

Among those gathered in the Treasury conference room were Federal Reserve Chairman Ben Bernanke, SEC Chairman Mary Schapiro and FDIC Chairman Sheila Bair. Friday’s roughly hourlong meeting was described as unusual, not only because of Mr. Geithner’s repeated use of obscenities, but because of the aggressive posture he took with officials from federal agencies generally considered independent of the White House. Mr. Geithner reminded attendees that the administration and Congress set policy, not the regulatory agencies. Mr. Geithner, without singling out officials, raised concerns about regulators who questioned the wisdom of giving the Federal Reserve more power to oversee the financial system.

Clunker plan gives car sales a lift – WSJ
The Wall Street Journal reports U.S. auto sales in July climbed to their highest pace in 11 months, as customers rushed to showrooms amid uncertainty about the future of the federal government’s “Cash for Clunkers” incentive program.

Now, car makers, the Obama administration and the Senate face tough decisions about how to respond to the clunker program’s apparent success. The administration on Monday stepped up a campaign to persuade senators to approve $2 bln more in funding before Congress goes on vacation at the end of the week. The House on Friday approved a $2 bln funding extension. Administration officials have warned the program could be forced to end. But some key senators in both parties are balking. White House spokesman Robert Gibbs said Monday that President Barack Obama would use a Tuesday lunch meeting with Senate Democrats to push for an extension of the program. The administration gained ground Monday when Senators Susan Collins (R., Maine) and Dianne Feinstein (D., Calif.,) dropped their opposition to additional funding, saying data released by the administration persuaded them that most vehicles scrapped so far have been sport-utility vehicles and trucks, and that 60% of the people using the program had purchased cars.

What they don’t tell you:

These cars need to have a lot of mileage on them to be considered “clunkers”

People driving old “clunkers” typically come from an income bracket that can’t afford a new car

This plan is encouraging these people to spend money they could be using to pay down debt or worse, inducing an increased debt burden
The incentive program requires car dealers destroy each clunker’s engine and drivetrain. This will drive up the cost of used car parts that lower-income car owners who don’t enter the program depend on.

Pulling demand forward, while possibly good for opinion polls, will make the future rather daunting for the auto companies.

History, unfortunately, must repeat itself. This demand pull through is identical to the shenanigans Barney Frank and his cohorts concocted in the real estate market and we all know how that ended. Barney’s bunch forced banks to lend to individuals who could not afford the home they were buying. Predictably, demand dried up and foreclosures exploded when the well ran dry.

Tags: auto sales, Barney Frank, cash for clunkers, castro, chavez, dianne feinstein, obama, ortega, susan collins, timothy geithner

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A must read story from the Investors Business Daily. The story illustrates how government meddling clearly led to the ruination of the housing market and in turn the financial crisis. We must understand what happened and raise our collective voice if we are to save the health care system from a similar fate.

Truth In Lending By INVESTOR’S BUSINESS DAILY Posted Friday, July 10, 2009 4:20 PM PT
Behind The Meltdown: Many Americans are unaware of the causes of the greatest economic calamity of our lifetime. A new congressional report details how government politicized housing, wrecking the economy.Rep. Darrell Issa of California, ranking Republican on the House Oversight and Government Reform Committee, has released a report that every American should read.
The analysis details how powerful Democrats in Congress insisted that government-subsidized housing be geared to serve the purposes of social justice at the expense of sound lending.squeezed out their competition and cornered the secondary mortgage market. They took advantage of a $2.25 billion line of credit from the U.S. Treasury.
• Congress, by statute, allowed them to operate with much lower capital requirements than private-sector competitors. They “used their congressionally-granted advantages to leverage themselves in excess of 70-to-1.”
• The two GSEs were the only publicly traded corporations exempt from SEC oversight. All their securities carried an implicit AAA rating regardless of the quality of the mortgages.• The Department of Housing and Urban Development set quotas for GSE investment in affordable housing.
• Encouraged by an inaccurate 1992 Boston Federal Reserve Bank study charging racial discrimination in mortgage lending, the two GSEs were strongly pressured to “lower their underwriting standards, particularly on the size of down payments and the credit quality of borrowers.”(Barney Frank was perhaps the loudest voice calling for the subversion of underwriting standards. This is one of the reasons why I have repeatedly called for his removal. My issue with Barney is purely based on facts and not partisan prejudice as some may argue.)
• In 1992, Congress directed HUD to establish multiple quotas requiring mortgage quotes for low-income families.
• In 1995, the Clinton administration issued a National Homeownership Strategy, loosening Fannie and Freddie’s lending standards and insisting that lenders “work collaboratively to reduce homebuyer downpayment requirements.”
• The administration complained that in 1989 only 7% of mortgages had less than a 10% downpayment. By 1994, it wanted that raised to 29%.
• Reduced underwriting standards spread into the entire U.S. mortgage market to those at all income levels.
• A complete decoupling of home prices from Americans’ income fed the growth of the housing bubble as borrowers made smaller down payments and took on higher debt.
• Wall Street firms specializing “in packaging and investing in the lowest-quality tranches of mortgage-backed securities, profited hugely from the increased volume that government affordable lending policies sparked.”
• Wall Street firms, homebuilders and the GSEs used money, power and influence to block attempts at reform. Between 1998 and 2008, Fannie and Freddie spent over $176 million on lobbyists.
• In 2006, Freddie paid the largest fine in Federal Election Commission history for improperly using corporate resources to hold 85 fundraisers for congressmen, raising a total of $1.7 million.

Here are some highlights of Issa’s blow-by-blow account:

• With an implicit subsidy to American homeowners in the form of reduced mortgage rates, Fannie Mae and its sister government sponsored enterprise, Freddie Mac,

(The first three bullets illustrate to perfection what happens when the Gov’t interferes with the private market. Take note because now the Obama administration is feeding us the line that increased Gov’t involvement in the health care system will create healthy competition. THIS IS A LIE! WAKE UP PEOPLE!)

As the Issa report points out, “the real tragedy of the government’s affordable housing policy is the impact on average Americans, particularly those of modest means. “Millions of these borrowers, who were supposed to have been helped by federal affordable housing policy, have now been forced into delinquency and foreclosure, destroying their asset base, their credit, and in some cases their families.”

Tags: Barney Frank, clinton, darrell issa, Fannie Mae, financial crisis, housing market, hud, IBD, obama, truth in lending

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RCM Comment: We here at RCM have uncovered the mystery behind the housing troubles in the U.S. We have heard countless explanations and witnessed our colleagues struggle with the conundrum. Well, the super sleuths that we are, we have leaped the why in a single bound and here it is, get ready… “Barney Frank, the Massachusetts Democrat, is chairman of the House Financial Services Committee”:

Changes urged to rules on condo loans – WSJ
Democratic lawmakers are calling on Fannie Mae (FNM) and Freddie Mac (FRE) to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery. In March, Fannie Mae said it would no longer guarantee mortgages on condos in buildings where fewer than 70% of the units have been sold, up from 51%. Fannie Mae also won’t purchase mortgages in buildings where 15% of owners are delinquent on condo association dues or where one owner has more than 10% of units, which the firm sees as signals that a building could run into financial trouble. Freddie Mac will implement similar policies next month. In a letter to the chief executives of Fannie and Freddie, Reps. Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, and Anthony Weiner (D., N.Y.) warned that the 70% sales threshold “may be too onerous” and could lead condo buyers to shun new developments. (Isn’t that the point? New developments that are shaky need to stop so all the supply from overbuilding can come back into equilibrium with demand.) The legislators asked the companies to “make appropriate adjustments” to their underwriting standards for condos.

RCM Comment: Once again Barney illustrates his complete ignorance, stupidity, philistinism (Click here to continue the cathartic release) with regard to anything resembling sound economics. Has Barney learned nothing from the crisis? Last year I watched him accuse Fannie and Freddie of the very same weak lending practices he is now championing. We ask: Can anyone be this obtuse? What’s the hidden agenda? Will we find out Barney stands to benefit financially if condo communities are artificially inflated?

Let’s not forget that Freddie and Fannie are bankrupt entities. Any reduction in lending standards will likely lead to another trillion of losses. Who will pay for that? The American tax payer. Thanks Barney! Sixty-four thousand dollar question: When will Barney’s constituents wake up and vote him out of office?

Tags: Barney Frank, Reduction in Lending Standards

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Barney the Dinosaur has a child’s intellect, so he would not understand the damage he is causing. While Barney Frank’s intellect is certainly debatable, he’s an adult, so he should understand the damage, which makes him that much more dangerous.

A respected colleague of ours, Michael Johnson of M.S. Howell explains: “…government attempts to increase the consistency of their approach have increased speculation that all new bank holding companies – especially Goldman Sachs (GS) and Morgan Stanley (MS) – could be forced to announce large reductions in their dividends or raise dilutive capital to repay their original TARP loan and reduce government interference.” Naturally, either of these actions would be destructive to share prices. Don’t forget to thank your friendly congressman, Barney, if this should occur.

RCM Comment: Meredith has been on point throughout this crisis, so her thoughts bear close examination.

Meredith Whitney on CNBC says same thing will happen in the financial sector this year as last year, but with different assets being purged. Whitney says banks will purge assets, driving valuations lower, sending the equivalent marks on each others portfolios down. Says so much credit is going out of the system, so even if you’re ok, your credit situation is weakened, leading to a higher probability of default…Thinks April will be a very busy month as the stress test results are released and banks decide what to sell.

Tags: Barney Frank

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Tags: Barney Frank, bear trend, Congressional hearing, shortselling banks

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