Posts Tagged ‘Senate’

The Elizabeth Warren Quote That Has Everyone Talking

Monday, October 17th, 2011

Elizabeth Warren, who is running for the Senate in Massachusetts as a progressive Democrat, has caused controversy between the right and left with the following statement: “There is nobody in this country who got rich on his own. Nobody. You built a factory out there — good for you. “But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers that the rest of us paid to educate. Part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

Speaking at a small gathering at a supporter’s house, Warren also said “My favorite part of looking at this hole, we got in this hole, one billion dollars, uh, one trillion dollars, on tax cuts for the rich under George Bush. We got into this hole two trillion dollars on two wars that were put on a credit card for our children and grandchildren to pay off. And we got into this hole one trillion on a Medicare drug program that was not paid for and was 40 percent more expensive than its needs to be because it was a giveaway to the drug companies. That’s just four trillion right there. So part of the way you fix this problem is don’t do those things! I hear all this, oh this is class warfare, no! You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory. Now look.”

Warren, a Harvard law professor, is leading in polls in Massachusetts. Brown showed no interest in discussing politics on the day when the Democratic-leaning Public Policy Polling survey showed him behind Warren for the first time in a general election match-up. “There’s going to be plenty of polls. I don’t think about polls. Never been a big poll guy,” Brown said.

The website Behind Blue Lines takes an opposite approach. It notes that “Ah, Professor, have you ever heard of property taxes, excise taxes, income taxes, fuel taxes – and on and on? The entrepreneur pays them too, I can assure you. They pay for the roads, schools, firemen and police – often several times over. And who’s this ‘we’, anyway? Would that be ‘we’ as in know-betters like you? Or would it be ‘we’ in the sense of all the people who pay taxes, including the miscreant who ‘builds a factory’ (and creates valuable products and services benefiting all) and ‘hired workers’ (and paid them taxable wages and benefits). The ‘work the rest of us did’, indeed. What stinks the most about her tirade, however, is the arrogant assumption that we are all state property. That everything we are, including our very selves, belongs to government. I feel obliged to point out that her campaign was forced to admit that she was paid $192,722 for her ‘services’ on the TARP panel.

Fannie and Freddie to Marry?

Tuesday, August 2nd, 2011

Mortgage finance giants Fannie Mae and Freddie Mac might find themselves merged into a single government-run entity.  Representative Gary Miller (R-CA) is set to unveil a bill that would create a utility-like entity and phase out government-controlled Fannie Mae and Freddie Mac.  The new company would buy mortgages and repackage them as government-backed securities.  The major difference from Fannie and Freddie lies in the fact that it would not have shareholder investors.  The National Association of Homebuilders and the National Association of Realtors are expected to support the proposal, which reflects concerns by the industry, consumer groups and some policymakers that a complete withdrawal of government support for home lending could make the housing recession go further downhill.

A competing proposal by Representatives Gary Peters (D-MI) and John Campbell (R-CA) would create a minimum of five private companies to replace the two co-called government-sponsored enterprises, or GSEs.  The point of contention for many lawmakers is whether to provide a government backstop for mortgages and on what terms to provide the guarantee.  House Financial Services Committee Chairman Spencer Bachus (R-AL) is trying to forge a consensus among Republican members.  Any bill that is generated by Bachus’ committee and is passed by the Republican-led House would likely still be in jeopardy once it reaches the Democratic-controlled Senate.

“There was the idea that people were so tired of taxpayer losses related to housing that the traditional housing lobby would not be able to retaliate effectively,” said Jim Vogel, chief of agency debt research at Memphis-based FTN Financial. “It’s time to start waving the housing flag again.”

That would represent a sea change from February, when the Treasury Department recommended selling off Fannie Mae and Freddie Mac holdings within 10 years; Jeb Hensarling (R-TX) wanted to do it in half that time.  Since then, homebuilders, real estate agents, investment banks, civil rights leaders and consumer advocates have lobbied to retain a government role — including the unspoken federal guarantee behind Fannie Mae and Freddie Mac.  Congress created the programs as private companies to expand home ownership.

Already, the government is slowing its efforts to prop up the housing market.  Beginning this fall, the cap on Fannie and Freddie-backed mortgages — loans where taxpayers are on the hook if borrowers don’t pay — will decline in some regions.  At the height of the housing crisis, Congress raised the cap to $729,750 in areas where homes are most expensive.  After October, that will fall to $625,500.  The limit varies by county.  Mortgages that are too expensive to get backing from Fannie and Freddie are called jumbo loans and usually have higher interest rates and require larger downpayments.  That maximum was set by Congress in 2008 in an attempt to ensure that borrowers could continue to obtain loans in particularly expensive housing markets during the credit crunch, especially in prime real estate locations, such as New York, Los Angeles and Washington, D.C.

The Deal Book column in the New York Times thinks that the idea of merging Fannie and Freddie is not as outrageous as it may at first seem.  “Consider the math: For the first six months of this year, both companies spent $1.825 billion in overhead costs combined; on an annualized basis, that means the companies are spending about $3.65 billion.  Given that the companies do pretty much the same thing – buying mortgages from banks, insuring them and creating mortgage-backed securities – there might be opportunities for savings if many of their managers and staff are, to put it politely, redundant.  Conservatively, a combined Fannie and Freddie could probably cut a third of its overhead and staff, saving some $1.2 billion annually.  The way Wall Street values companies, that means – presto – billions more in value, perhaps as much as $18 billion or $19 billion, could be created overnight.”

“It would instill a huge amount of confidence. The market will know that both entities combined will have much more consistent, stable margins,” John Lekas, chief executive of Leader Capital, an investment firm, said on CNBC last week. He added that it “doesn’t cost taxpayers one nickel.”

Additionally, Fannie and Freddie are on track in 2011 to spend about $1.8 billion on what is known as “foreclosure costs,” which means maintaining and selling thousands of homes that became part of their ownership portfolios after the owners were unable to pay the mortgage.  The costs are staggering, given that Fannie and Freddie together own approximately 153,000 foreclosed homes. “This is just one of the costs that Fannie and the rest of us will pay to dig out of a very big hole,” says Karen Petrou, of Federal Financial Analytics.  When she says “the rest of us,” she is telling the truth.  Fannie Mae’s tab to American taxpayers is up to $86 billion since September 2008 when it was taken into government conservatorship.  During the 1st quarter of 2011, Fannie racked up $488 million in foreclosure-related expenses, including holding costs (insurance, taxes and maintenance); valuation adjustments for changes in market value; gains/loss when the property is sold; legal fees; eviction costs; weatherization costs to prevent pipes from bursting; costs to secure the property; and repair costs.

“We want to make sure that we’re comparable with the market or with the neighborhood,” said Elonda Crocket, a Fannie Mae executives who is part of the management team of its massive portfolio of foreclosed properties.  The goal is to stabilize the neighborhoods where there are foreclosed homes and get the properties to a condition where first-time homebuyers want to purchase them.  “We want to make sure that we can maximize our return on the investment,” she said.  In 2010, Fannie Mae repaired 87,000 foreclosed homes.

“It makes them — I think — indisputably the largest purchaser of paint and general appliances for these homes they’re fixing up,” said Guy Cecala, publisher of Inside Mortgage Finance.  “If they don’t maintain the houses, then the neighborhoods go downhill, other people are put at risk and the housing crisis gets worse because you have still more downward pressure on overall house prices,” Petrou said.

TARP: Money Well Spent

Wednesday, March 23rd, 2011

A top Treasury official defended the federal government’s $700 billion bank bailout financial crisis-response program at a hearing where the effort was criticized by members of a watchdog panel insisting that it did more for Wall Street than Main Street. “The cost of TARP is likely to be no greater than the amount spent on the program’s housing initiatives,” said Timothy Massad, acting assistant secretary of the Treasury for the Office of Financial Stability, to the Congressional Oversight Panel that oversees the Troubled Asset Relief Program (TARP).  “The remainder of the programs under TARP — the investments in banks, credit markets and the auto industry — likely will result in very little or no cost,” he said.

Panel member J. Mark McWatters, a Dallas-based CPA ad tax attorney, argued that it is difficult to call TARP a success when the unemployment rate is still approximately nine percent and millions of Americans are fighting foreclosure.  Panel Chairman Ted Kaufman – who was Vice President Joe Biden’s chief of staff of 19 years and temporarily replaced him in the Senate – said that Wall Street bankers ended up in better shape than Main Street.  “It’s not a tough economy on Wall Street, it’s a tough economy everywhere else,” Kaufman said.

According to Massad, TARP will end up spending no more than $475 billion; 86 percent of which has been disbursed.  To date, Treasury has received $277 billion back, including $241 billion in repayments and $36 billion in additional income. The Treasury expects to receive an additional $9 billion, which will leave $150 billion outstanding through various investments.  The department hopes to recover those funds over the next several years.  “TARP helped bring our financial system back from the brink and paved the way for an economic recovery,” Massad said.  “Banks are better capitalized, and the weakest parts of the financial system no longer exist.  The credit markets on which small businesses and consumers depend — for auto loans, for credit cards and other financing — have reopened.  Businesses can raise capital, and mortgage rates are at historic lows.  We have helped bring stability to the financial system and the economy at a fraction of the expected costs.”

William Nelson, deputy director of the Federal Reserve’s division of monetary affairs, agrees with Massad. In testimony about the Fed’s program to restart the asset-backed securities markets with backing from the Treasury’s TARP program, Nelson said even that program is unlikely to experience any losses.  “The Term Asset-Backed Securities Loan Facility (TALF) program helped restart the ABS markets at a crucial time, supporting the availability of credit to millions of American households and businesses,” Nelson said, adding that of the more than 2,000 loans worth $70 billion that were extended through the Fed’s facility, 1,400 totaling $49 billion were repaid early.  Remaining loans are current, and the collateral backing the loans is retaining its value, “significantly reducing the likelihood of borrower default.”

“As a result, we see it as highly likely that the accumulated interest will be sufficient to cover any loan losses that may occur without recourse to the dedicated TARP funds,” Nelson said.  Europe, by contrast, did not act as aggressively to apply stimulus with the result that financial crises occurred in countries like Ireland and Greece.

The House That Started a Foreclosure Frenzy

Thursday, October 28th, 2010

Meet the hard-luck Maine homeowner whose faulty papers ignited a foreclosure crisis.     A small, weathered, blue-gray house in Denmark, ME, set off a national uproar about the foreclosure crisis when its owner, Nicolle Bradbury, lost her job and stopped paying her mortgage two years ago.  The family, which includes Bradbury’s disabled husband and two children, lives on food stamps and welfare. When the bank started to foreclose on the house, Bradbury contacted Pine Tree Legal Assistance, a non-profit group and was lucky enough to have her file read by retired attorney Thomas A. Cox, who decided to help her as much as possible.

Cox’s act set off a national foreclosure uproar, with the attorneys general of all 50 states opening investigations into the bad paperwork and questionable methods behind many of them.  The Senate plans to hold a hearing and the federal government is taking a closer look.  The housing market – currently fueled by foreclosure sales – is chaotic.  All this occurred because Cox thought something about Bradbury’s foreclosure file didn’t look right.

In reading Bradbury’s filing, Cox noticed that the documents from GMAC Mortgage were approved by an employee whose title was “limited signing officer”, which indicated that the person who approved the foreclosure likely knew little about the case.  When Cox won the right to get a deposition from the employee in question, he learned that the individual had signed off on as many as 400 foreclosures a day, and that no one at GMAC Mortgage had actually reviewed the documents.

“A lot of people say we just want a free ride,” according to Bradbury.  “That’s not it.  I’ve worked since I was 14.  I’m not lazy.  I’m just trying to keep us together.  If we lost the house, my family would have to break up.”  Unfortunately, Bradbury is almost certain to lose her house, despite the errors made in the foreclosure process.  “Had GMAC followed the legal requirements, she would have lost her home a long time ago,” said Geoffrey S. Lewis, another attorney on the case.

To listen to The Alter Group podcast on solving the foreclosure crisis, click here.

Solar Farm to Sprout on White House Roof

Thursday, October 21st, 2010

A new green initiative is joining the White House's already famous organic vegetable garden.A new green initiative is joining the White House’s already famous organic vegetable garden.  President Barack Obama plans to install solar panels on top of the White House’s living quarters to heat water and provide power to some of the historic mansion. The panels are scheduled to be in place by the spring of 2011, according to Energy Secretary Steven Chu.

Former President Jimmy Carter installed a $30,000 solar water-heating system for West Wing offices during 1976; they were removed 10 years later.  George W. Bush installed a solar system that provided power to a maintenance building, parts of the White House and to heat water for the swimming pool.  President Obama, who is a strong supporter of renewable energy, has been under pressure from the solar industry and environmental activists like to lead by example.  According to White House sources, solar panels have been under discussion since the Obama family first took up residence at 1600 Pennsylvania Avenue.

Global warming activists from brought one of Jimmy Carter’s solar panels from Unity College in Maine to Washington, D.C., in an effort to persuade President Obama and other world leaders to install panels on their residences.  Bill McKibben,’s founder, believes the administration is doing the right thing.  “If it has anything like the effect of the White House garden, it could be a trigger for a wave of solar installations across the country and around the world,” McKibben said.

The price tag for the White House solar project is not yet known as it is still in the design phase.  Another question is how much electricity it will generate.  According to a survey of available roof space, the system has the potential to include 25 to 75 panels and could produce up to 19,700 kilowatt hours of annual electricity.  A typical household would save $3,200 a year on their electricity bill and $1,000 on heating water.

“Around the world, the White House is a symbol of freedom and democracy,” Chu said.  “It should also be a symbol of America’s commitment to a clean energy future.”

Elizabeth Warren Tapped to Create Consumer Financial Protection Bureau

Monday, September 27th, 2010

President Obama slips Elizabeth Warren in without Senate confirmation process.President Barack Obama’s decision to name Wall Street’s archenemy Elizabeth Warren as his special advisor to direct the creation of the Consumer Financial Protection Bureau bypasses the often confrontational Senate confirmation process.  The Harvard law professor is now tasked with building a new government agency that will crack down on abusive financial practices such as mortgages and credit cards from the ground up.  President Obama – who has known Warren since his law school days – has named her “assistant to the president” — a desirable title in inner White House circles.  Warren will report directly to both the president and to Treasury Secretary Timothy Geithner.  Importantly, Warren will have direct access to the president, making her, in effect, the Secretary of the Treasury overseeing all consumer lending.

By naming Warren an adviser rather than as the agency head, President Obama avoided the congressional confirmation process, which Republicans likely would have used to derail the nomination. “Clearly putting her in this role cements her imprint on the agency, whether she ultimately leads it or not.  It also implies there’s going to be a transfer of power from the other regulators sooner rather than later.  I think it would be better, though, for the agency to have a Senate-confirmed agency head, if that’s even possible,” said Ed Mills, an analyst with FBR Capital Markets.

Wall Street’s reaction was predictable, given Warren’s unpopularity there.  “It’s a thumb in the eye to people trying to address real issues,” said Matt McCormick, a portfolio manager and banking analyst with Bahl & Gaynor.  “It is obviously more political than focused on correcting ills of what happened in the financial industry.  I really doubt she will have the ability to bring people together considering the political nature of her appointment. It is troubling.”

“The Consumer Financial Protection Bureau will empower all Americans with the clear and concise information they all need,” President Obama said at the Rose Garden announcement.  “Never again will folks be confused or misled by the pages of barely understandable fine print that you find in agreements for credit cards or mortgages or student loans.”

Support the National Alzheimer’s Project Act in Congress

Wednesday, July 14th, 2010

Legislation to create the National Alzheimer’s Project Act is quietly working its way through Congress.  By 2050 – just 40 years from now — nearly 16 million Americans will be afflicted with Alzheimer’s Disease.  Surprisingly, there is not yet a national plan to deal with this looming crisis, although one has been proposed on Capitol Hill.  The National Alzheimer’s Project Act (NAPA) would establish an inter-agency advisory council to address the government’s efforts on Alzheimer’s research, care, institutional services, and home- and community-based programs.  S.B. 3036 and H.R. 4689 would create a government agency to exclusively deal with Alzheimer’s issues.

Co-sponsored by Senators Michael Bennet (D-CO), Birch Bayh (D-IN), Susan Collins (R-ME), Russ Feingold (D-WI) and Jon Tester (D-MT), the proposal would create a special office within the White House to coordinate research, clinical care and services with the goal of preventing, caring for and curing Alzheimer’s Disease.

“Alzheimer’s takes a tremendous emotional and financial toll on over 75,000 Coloradans and their families,” according to Bennet.  “Yet our nation’s healthcare system is not set up to appropriately coordinate and share the research we’re doing to prevent, cure and care for our patients.  This bill will streamline the country’s research efforts so that we can better find ways to combat this disease while also making much better use of our taxpayer dollars.”

Approximately half of Americans who live to 85 will suffer from Alzheimer’s.  Once the legislation is passed by the House of Representatives and the Senate, the Office of the National Alzheimer’s director would be named to the Domestic Policy Council and the Office of Science and Technology.  This director would have input into all policy aspects of the disease, as well as focus on high-risk groups and those underserved by existing Alzheimer’s programs.

Congress Will Examine the Fed’s Actions During the Financial Crisis

Tuesday, May 25th, 2010

A bipartisan Senate votes to investigate the Fed’s actions before and during the financial crisis.  In a rare moment of bipartisanship, the Senate voted 96 – 0 to attach a modified version of an amendment proposed by Sen. Bernard Sanders (I-VT) to the financial regulatory bill to investigate transparency in emergency lending practices by the Federal Reserve during the financial crisis.  “This amendment begins the process of lifting the veil of secrecy of perhaps the most powerful federal agency,” Sanders said.  The vote also is a nod to public frustration with the government’s Wall Street bailout.

President Barack Obama has asked Congress to enact reform legislation that will make capital markets less susceptible to crises.  The Senate’s vote will clarify the Fed’s emergency lending practices during the crisis when it put hundreds of billions of dollars into the financial markets to stabilize the economy.  The proposal marks the first time the Fed has been investigated this thoroughly by Congress.

The Senate wants to scrutinize the Fed’s role in the time leading up to and during the financial crisis to determine if there were any regulatory gaffes.  Passage of the amendment allows a one-time audit of the Fed’s emergency lending since December 2007.  Additionally, the Fed will have to publicly disclose detailed data about which financial institutions it has lent money to by December 1.  Although the Fed initially was uneasy about the audit, its comfort level has now improved.  According to Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, “I’m comfortable with the modified Sanders amendment.”

EPA Can Bypass Congress and Act on Climate Change

Tuesday, May 11th, 2010

There may be only one way to enact climate-change legislation.Congress — wary of 2010 mid-term elections – appears to be unlikely to pass climate change legislation this year, writes Jeffrey D. Sachs in Scientific American.

According to Sachs, “The fracture lines are countless, but probably the most important one runs through public opinion.  A recent poll showed only 36 percent of Americans believing that the evidence of human-induced climate change is firm, down from 47 percent in early 2008.  The rise of unemployment has perhaps made people more reluctant to accept adverse news on living standards.  There is also considerable public confusion about climate science and possible remedies.”

The coal and oil lobbies are powerful; their opposition to climate-change legislation is well-financed and highly organized.  Environmental groups have difficulty reaching consensus, with many opposing nuclear power and coal use.  Conservationists have even fought renewable energy sources, such as wind turbines near farms and coastlines, solar thermal plants in desert states and high-voltage transmission lines close to homes.

Sachs believes that the Environmental Protection Agency – with the mandate provided by the Clean Air Act – could do an end run around Congressional inaction by imposing a schedule of emissions standards impacting electric companies and cars, trucks and buses.  Finally, a plan needs to be articulated because the public fears that climate-change legislation might impact jobs and living standards.  Although the Obama administration has pledged to reduce greenhouse gas emissions 17 percent by 2020, the public does not know how the government intends to meet that goal.

Volcker Rule Seeks to Regulate Financial Markets

Wednesday, March 31st, 2010

President Obama’s proposed Volcker Rule financial regulation bill faces an uncertain future on Capitol Hill.  A draft of President Barack Obama’s financial reform legislation has been sent to Congress.  Dubbed the Volcker Rule in honor of the former Federal Reserve chairman’s  aggressive pursuit of these regulations, the five-page proposal will ban proprietary trading and mergers that give banks more than a 10 percent market share as measured by liabilities that are not insured deposits.  Passage of the bill would bar banks from owning or investing in private equity firms and hedge funds.

The rule, designed to reduce the possibility of another financial crisis, exempts mergers that exceed the market-share limit in instances where a firm takes over a failing bank so long as regulators approve.  Also exempted are trading in Treasury and agency securities, including debt issued by Ginnie Mae, Fannie Mae and Freddie Mac.

The legislation, which has been criticized by both Republicans and Democrats, would reduce banks’ ability to take risks.  It is a reaction to the more than $1.7 trillion in writedowns and credit losses that followed the subprime mortgage meltdown in late 2007.  Congressman Barney Frank (D-MA), chairman of the House Financial Services Committee, prefers a five-year transition period rather than the two years suggested in the president’s proposal.

Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York says the exemptions may help avoid market disruptions that could impact small investors.  “The market is made up of many unseen hands with different objectives and investment horizons, and if you pull out the speculators making short-term bets, like prop trading banks, then” the individual investor is “going to be the one who suffers.”