Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Month: December 2009 Page 2 of 5

Oh Wait, the Freddie/Fannie Scam is Now Unlimited

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On December 24, 2009

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Update: Go read Numerian.

Per Bloomberg:

The U.S. Treasury Department will remove the caps on aid to Fannie Mae and Freddie Mac for the next three years, to allay investor concerns that the companies will exhaust the available government assistance.

The two companies, the largest sources of mortgage financing in the U.S., are currently under government conservatorship and have caps of $200 billion each on backstop capital from the Treasury. Under the new agreement announced today, these limits can rise as needed to cover net worth losses through 2012.

The Obama administration is “beginning to realize it’s not getting better and it’s not likely to get better” soon in the housing market, said Julian Mann, who helps oversee $5.5 billion in bonds as a vice president at First Pacific Advisors LLC in Los Angeles. “They don’t want the foreclosures now, so they’re saying, we’ll pay whatever it takes to continue to kick the can down the road.”

Basically, at this point, almost all mortgage lending is guaranteed by the federal government under the FHA, or it doesn’t happen.  Private lending has pretty much dried up.

Since there’s no way Freddie and Fannie took unlimited losses, one has to wonder what all this money is going to be used for.  Is it to make up losses they don’t want to admit?  Is it to make future bad mortgage loans?  Is it so they can take bad debt from the banks and put the government at risk for it?

Notice also how they’ve made an unlimited commitment without consulting Congress.  You only need Congressional approval to spend money on wars and healthcare, when it comes to bailing out banks, apparently the Presidency controls the power of the purse all by itself.

It’s also interesting that this is unlimited till the end of 2012.

(See also the earlier post when it was just a 400 billion increase, not unlimited.)

The 400 Billion Fannie Mae and Freddie Mac Robbery

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On December 24, 2009

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Jane Hamsher connects the dots over at FDL. The NYTimes has reported:

Fannie Mae and Freddie Mac, which buy and resell mortgages, have used $112 billion — including $15 billion for Fannie in November — of a total $400 billion pledge from the Treasury. Now, according to people close to the talks, officials are discussing the possibility of increasing that commitment, possibly to $400 billion for each company, by year-end, after which the Treasury would need Congressional approval to extend it.

Now, on the face of it, this makes no sense whatsoever.   They’ve only spent $112 billion of 400 billion and they need another 400 billion?  There two most likely possibilities, which aren’t mutually exclusive are that Freddie and Fannie have a ton of bad crap on the books that they haven’t acknowledged yet.  I have always believed that their losses would be much higher than originally acknowledged.  The second is what Jane suggests, and which I think must be part of the picture:

The White House knows it can’t get approval for more TARP money through Congress, so the administration is going to double the commitment to Fannie and Freddie from $400 billion to $800 billion, and then they can use the money to buy up more toxic assets from the banks

Jane also points out that due to a bill Rahm authored, there is no inspector for Freddie and Fannie.

Because there is a good chance the Fed will be audited, and because banks are still very impaired with bad debt (ie. they still need to be bailed out) Freddie and Fannie may be the only place left to store all the toxic financial wage—to take it off the banks hands.  In the meantime, this is a back door extension of TARP, done this way because the administration knows that Congress would never approve it.

With Friends Like Democratic Congresspeople

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On December 24, 2009

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Well, well, well.  It turns out that Acorn broke no laws.  None.  In the last five years.

But the Democratic Congress still threw them under the bus, with an illegal bill of attainder, banning them from receiving any government money.  Very similar to how they censured MoveOn for daring to challenge Petraeus.

Can you imagine the Republicans doing the same?  When the Swift Boat Vets lied repeatedly about John Kerry, did the Republicans vote to censure them?

And for that matter, did Dems try and censure the Swift Boat Vets?

Democrats constantly throw their own supporters to the wolves.  It’s one of the reasons there is little real loyalty on the left.  On the right, someone may occasionally have to take a bullet for the team, but afterwards they’re well taken care of and even rehabilitated if possible.  And major conservative organizations aren’t repudiated, nor do Republican leaders generally speak of “conservatives” with the sort of contempt that Democratic leaders reserve for liberals and progressives.

Democratic Congresspeople, as a group are weak people without strategic sense or the ability to bargain.  The exceptions, the strong ones, are unfortunately mostly conservadems – Republicans in drag like Ben Nelson.

If 40% of Dems are thinking of not voting in 2010 it’s exactly because Democrats won’t stand up for their own base.  For their own people and what those people believe in and need.  They only stand up for Pharma, banks, insurance companies and other entrenched powers.

Loyalty.  It’s a two way street.  And neither the White House, nor Congress, have shown any.

The House Bill Ain’t That Much Better

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On December 22, 2009

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While I’m enjoying seeing some Progressives come out against the Senate bill, noting that it’s worse than nothing, the fact of the matter is that the House Bill wasn’t that much better.  The public option in the House bill was so weak that insurance provided by it was expected to have higher premiums than private plans, and while the subsidies were more generous they weren’t so high that they wouldn’t have driven many folks into bankruptcy.

I am heartened that there was a red line that some would not cross, especially my ex-colleagues at FDL, but I am mystified because the fundamental arguments that are being used apply almost as much to the House plan as the Senate plan with a few exceptions.

At this point I don’t suppose it matters.  The Senate plan is what’s going to pass, any changes to it will be minor, since Nelson and Lieberman will walk if anything major is changed and there isn’t a block of progressive Representatives with enough guts to threaten to do the same and mean it.

But I wonder if there’d been a firestorm earlier, from the left, pushing for a better House bill, if the envelope might not have been moved left enough to get a better bill.  This last minute firestorm, while welcome, seems unlikely to change anything.  Perhaps complaining earlier wouldn’t have either.  I guess we’ll never know.

An Evening Rant To All the Fools Who Think Bernanke Saved the World And Obama has done the right things

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On December 21, 2009

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So very glad to hear your opinions. Unlike most of the morons who think Obama/Bernanke/Paulson/Geithner did the right thing, I predicted almost everything that happened to the economy, in many cases years in advance, and I sure as hell don’t think so.

But what do I know? Unlike the people who call the shots, I have a consistent record of being right far far more than chance would allow.  Therefore, as with everyone else who called their shots right far in advance I have no say, but have to listen to morons who didn’t call it right tell us how they had no choice but do stupid things like not nationalize banks, not force banks to actually increase lending, not force bondholders to take a haircut, not institute massive progressive taxation and not pass a health care bill which is a massive giveaway to the medical industry of the US.

Great.

I hope all you morons who think there was no other choice but to do what has been done enjoy the right wing populist backlash that Obama and the Dems, by doing the wrong things over and over again, have made virtually inevitable.

God I wish Canada wasn’t right next to America.  Being in a dingy attached by a chain to the Titanic, while the Titanic is run by morons cheered on by fools is immensely depressing.

America’s Future: Sheriff Joe Arpaio

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On December 21, 2009

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As you may be aware, Sheriff Joe, he of the infamous tent cities and constant violation of civil rights, is considering running for Arizona governor.  And there’s reason to believe  that if he does he’ll probably win.

My guess is that Joe Arpaio is the future of America.  There is a swelling tide of right wing populism, now that Democrats have refused to allow left-wing populism any purchase.  The anger is building as people on the ground see that banks and insurance companies and other fat cats are being taken care of, while ordinary people lose their jobs, their houses, and the very hope they were promised by Barack Obama.

The health care bill being passed is only going to intensify this.  Most of the benefits don’t kick in till 2014, but the taxes kick in before then.  The talking point of being forced to buy bad insurance is going to be used, over and over again.

When I was a kid, I grew up in large part in Vancouver.  Vancouver at the time had a lot of Chinese and a huge influx of Sikhs, yet there was very little racism.  I commented on that to my Dad once, a man who had grown up in the Great Depression and who had lived and worked all over the world, including in the southern US in the 50s, and his response is one I’ve always remembered.

“Things are fine now, because there are enough jobs.  As soon as things get bad, you just watch how racism and hatred flare up.”

When people are down, they can either come together in shared hope and work for a better future, or they can fragment into identity groups, looking for scapegoats for what’s wrong with their world.  Sherrif Joe offers the boot: the sense of a strong man enforcing the laws and making bad people pay—bad people who aren’t like you.

He offers simple solutions to hard problems.  His solutions won’t work, but they offer certainty and a sense of direction when people have none.

So do other right wing populist canards like tort reform (everyone hates lawyers) and a flat tax (who likes trying to figure out their tax form) and fighting terrorists.  They don’t work.  They won’t work.  But no one is offering the sort of left wing populism that will work, and the only other thing on offer right now is a Democratic party which seems to bail out every corporation in the land, while ignoring citizens.

So America’s going to get a right wing populist backlash.  The Tea Parties, which left-wingers were laughing at 6 months ago, are now as popular or more popular than either of the major political parties.

Populist rage is one of those forces you either harness or get flattened by.  Looks like “flattened by” is what Democrats have chosen.  Unfortunate for them, and even more unfortunate for America, because the Tea Party’s solutions not only won’t work, they’ll make things worse.

But, as Churchill once said, “Americans always do the right thing, after doing all the wrong things first”.

I guess we’ve got another cycle of wrong things to go.  I wonder if, after that, America will be strong enough for any of the right things to work.

Note: edited to reflect that Sherrif Joe isn’t running yet, just considering it, though polls show that if he runs he will probably win.  Mea culpa.

A Cadillac Plan is one where you get the care you need

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On December 18, 2009

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Seriously, someone explain to me what is wrong with Cadillac plans.  Yes, they cost more.  That’s because they’re the only plans where you stand a chance of actually getting the care you really need, when you need it, and not going bankrupt.  We should want more of them, but that can’t be done because we can’t afford it.

Unless, of course, the US went to something rational—like, say, Medicare-for-all, instead of trying to reinvent the wheel.  Why?  Because Medicare-for-all would cut health care costs by at least a third.

The health care crisis  isn’t about people not having insurance, it’s about people not getting the health care they need when they need it without having to pay money they can’t afford.  When I go to a Canadian hospital, I never, ever, even see a bill.

And unless you’re a multi-millionaire, I get better care than you get too.

Money For Nothing and Climate Change for Free

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On December 18, 2009

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One of the main stumbling blocks at Copenhagen is the US’s insistence on outside verification of carbon reducation claims.   China doesn’t want this verification, but the US is right to insist on it.

Chinese econonmic statistics are even more fictional than their American counterparts.  They are what the Chinese want them to be.  Moreover, carbon offsets in particular, according to those I know who have spent time in China and are involved in the industry, are often entirely fictional.  They exist only on paper.

It’s one of the best business in the world. You get money for nothing more than some fraudulent paperwork.

China doesn’t want independent confirmation not just because they want to continue the fraud games, but because independent confirmation could be used as a cross-check on many of the official economic statistics.  If you know how many power plants, factories, cars and so on there are: if you know how fast forests are being cut down, coal dug up and so on, then you can figure out what the economic statistics should really look like.

Reagan once said to “trust but verify”.  There’s a lot of money to be made in the carbon game, not just by China but by many other countries and private interests.  Anything that isn’t verified is bunk and worthless and even outside of China the evidence is that much of the carbon offset market is already fraudulent.

As with health care “reform”, a deal at any cost isn’t worth it.

If countries are really serious about global warming, then what they would do is set up a system whereby the amount of carbon created by a country is taken out of any purchases by that country of another country’s currencies, or would build them into tarifs, so that tarifs are based on the level of carbon that country produces.  And if a country won’t allow verification, then they will estimate it and take the high end, worst estimate.

Except, of course, that that would require reforming foreign exchange markets and rethinking the modern version of “free” trade.  And that the powers that be want to do even less than they want to save a billion or more lives due to global warming.

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