>Hank Paulson’s New Financial Governance

>I wholeheartedly suggest you click onto a column in the usually liberal Washington Post by Sebastian Mallaby. My comments and others follow. DWhite

dusanotes wrote:
I’m used to seeing a lot of liberal ideas that make no sense to a conservative. But today Sebastian Mallaby was right on, dead center. This is a great article by a very articulate writer. Long live
Sebastian and the American dollar.
Don White
http://political disconnect.blogspot.com
9/16/2008 10:37:41 AM
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chawsheen wrote:
Paulson seems to be a decent man but what can he do if he is trammelled by a tightly knit group of oligopolists whose motto is: WE ARE ALWAYS RIGHT, others, if not with us, are un-Americans.
9/16/2008 10:32:27 AM
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rcc_2000 wrote:
When George the First was President and ran against Clinton our economy was in turmoil. Clinton came to office on the mantra “it is the economy stupid”. The Dow was around 3000 when Clinton came into office. When he left office it was at 11,400. Then Bush came into office. after 8 years in office the Dow is actually lower than when he took office. Yet the GOP says that it is the party of business? All I know is that McCAin is weak on the economy, he has said he will rely on people like Phil Gramm, a man who is partially responsible for the mortgage crisis (see Gramm-Leach-Bliley Act) by loosening regulation on the mortgage markets and for investment banks. But that is not Phil Gramm’s only claim to fame he also had a hand in creating the “Enron Loophole” that basically set-up Enron’s crash because of the greed of his Enron buddies.

Historically, over the past 20 years it has been the Democrats that have been in power during the most prosperous years. BTW this stuff effects millions of working Americans who have their retirement tied to investments, these are the working folks who the GOP has screwed by stagnating their investments, lowered their property values and set the markets tumbling while the CEO’s of these failed companies make tens of millions of dollars (which they pass some on to the GOP).

The GOP is not pro-business it is pro-greed of corporate executives..
9/16/2008 10:08:29 AM
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charleydan wrote:
Bold gamble on Lehman? Nada.

Mac and Mae is a government entity and had to be covered, or for the government to claim bankruptcy and let countries dissolve it for assets. Not quite that simple, but the basic idea.

The others are all free enterprise. Many enterprises gambled(high risk) with their loans and lost and now pay. American people were involved because of their greed and now will pay with a depression if not a recession. Many with lost of home for buying more then they can afford. The whole mess is because of greed and many seen it coming, but like always only the responsible know the end.

The largest banks will be covered as they could trigger other banks to go in a domino affect.

The economy is sound. Money is being generated. Debt needs to be managed.

Government biggest debt is Medi and expected in short order to cost as much every year as our present expenditures for the whole government. 3 trillion a year.

Obama wants to add on to that by adding national health. Years ago health was a charity and was very affordable. Then went free-enterprise and look the mess we have now. National Health will be worse economically and service will be rock bottom.

Till the biggest lobbyist’s in America cut their wants and desires. America will increase it’s debt till it folds.

Who is the biggest Lobbyist in America, American Voters. And that is only the start. Of course it always is for a noble cause that the biggest lobbyist in America will not take care of for themselves or have not and now want others to do it for them.
9/16/2008 10:05:38 AM
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tc125231 wrote:
A comment on this mess by Stiglitz –who actually knows something, unlike this mouthpiece.

“Financial markets hinge on trust, and that trust has eroded. Lehman’s collapse marks at the very least a powerful symbol of a new low in confidence, and the reverberations will continue.”

http://www.guardian.co.uk/commentisfree/2008/sep/16/economics.wallstreet/print
9/16/2008 9:45:13 AM
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LeftGuy wrote:
It may be impossible to understand the global scope of this problem, but Mallaby hints at it if we read between the lines.

For once, let’s all put idealogy aside. O’Neill was able to bail out foreign governments (so did Rubin under Clinton)because investors believed that there was plenty of money in the US capital system (not the government alone, but in the entire system including the private sector). Today, the US would be unable to help Argentina, Brazil and Turkey due to lack of internal resources.

The central problem today is that no one in the world has the same level of faith in today’s system–please keep your idealogy aside for a moment before you respond.

Our capitalist system depends upon faith in private enterprise and the ability to financial markets to serve them. The last piece of this partnership has evaporated. And no one knows how long it will take before the partnership can be restored…months, years?

Worse, the problem is not confined to the US financial markets and the corporations that depend upon them. The entire global enterprise is holding a lot of worthless paper in the form of debt that can never be repaid. Hence the global system is teetering and foreign markets are reeling in turmoil like those in the US.

Every retiree and every worker who ultimately depends upon some type of private pension, whether self-directed or company sponsored, has a vested interest in seeing these global capital markets survive and ultimately recover. So we all have a stake in this.

Paulson faces the same question as Rubin and O’Neill: Intervene or let the markets collapse? The stakes this time around, however, are an order of magnitude higher than that faced in the past few decades. The S&L collapse and the demise of long term capital were managed successfully by a partnership between the government and the private financial sector. But this time around, it is the private financial sector that is in need of help.

I don’t know whether Paulson can avert total disaster, but I do know that he has the background and intelligence to do so.

He has my vote of confidence, as did Robert Rubin a decade ago. Bush did the right thing by getting him into this post at this time. Future presidents need to do the same.
9/16/2008 9:45:02 AM
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billcarr542 wrote:

>THE TRUTH ABOUT FANNIE AND FREEDIE

>What really happened Last Week In Real Estate News?

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September 10, 2008

Jim Stewart of the Wall Street Journal wrote an intelligent article entitled “Bailout Is No Quick Fix For Housing-Market Woes.”

MY WARNING TO POLITICIANS: Quit promising to pay for everthing under the moon with my pocketbook!!!

What else could Stewart say? What can anyone say about Secretary Hank Paulson’s action in taking down two corrupt companies last week? When I say corrupt, sure they had a lot of good things going for them too. Freddie and Fannie for years were able to prop up our nation’s housing industry.

Stewart says you can’t please everyone. Some actions are just necessary and sometimes you have to stop worrying who you’re going to step on and who will be helped. That was the kind of thing going through the secretary’s head, I’m sure. Sure it was! There are too many conflicting constituencies out there. But the only real constituent is the American taxpayer and this group was left to fend for themselves and will end up paying for this nationalization of two businesses which were led to believe that the government would protect them and everyone at all costs.

When will people learn that the government is we the people. The money to do anything of this nature must come from somewhere and it sure doesn’t come out of the personal pockets of the managers and directors of two almost defunct companies. Though I must say, these companies’ stockholders have lost millions of dollars because of mismanagement. It’s a scene of corruption all up and down the line and needs to be put in perspective.

First, the stockholders who were led to believe that they could invest in Fannie and Freddie almost with impunity. That is, that it was a sure thing, and why wouldn’t it be a great play? Put your money to work in an industry that hasn’t lost money forever. Plus the government ensures the viability of these two firms. I was almost tempted when I saw their stocks had plummeted clear down to a buck a share.

But the secretary did not go far enough. I don’t think he has communicated very well his intentions. He intends to break up these companies into several parts–allowing private enterprise–real private enterprise this time–to take on the risks the taxpayer bore before and future bailouts of stupid management. Isn’t it ironic. We the taxpayers bear all the risk of two failing companies, but we never once got paid one cent of stock dividends. Why does this bailout remind me of illegal patromony?

RISE UP AND PROTEST, TAXPAYERS. There’s no written law stating that we must cough it up each time some president and his secretary tells us do do so!!!!!!!!!!!! This is the most confiscatory idea ever and it’s got to stop!!!!!!!!!!

I’m pretty liberal with my criticism of Freddie and Fannie because they got sucked up in this housing boom of the 2005s and 2004s where everything was rosy, house prices escalating, nothing to worry about in the sub-prime arena. Next time under new management they who take over the reigns of buying housing loans in America should know this: The government will not bail you out if you run your companies into the ground. I repeat: No more bailouts at taxpayer expense.

Confine your purchases of paper to A-grade stuff, and leave the sub-prime market entirely alone to fend for itself until there isn’t a sub-prime market.

We the taxpayer do not owe the blessing of home ownership to those who can’t afford housing. That is my view and the view of most Republicans. Unbeknown to most voters is the fact that this is not Obama’s view. He will “cling” to his mantra that the government should continue to insure all Americans’ housing decisions, good or bad. He’s a socialist and he intends to run our private enterprise system into the ground.

But I say if the deals aren’t golden, if you vote for Obama you are voting for more of this crap. Pardon the French. Obama will continue to bail out the banks, mortgage companies, and, yes, even the Freddies and Fannies that backsytop the whole mess. He will stand on his forceful and fluent expression, his eloquent soap box, railing that we should not abandon the sub-prime people. EVER!

Well, the truth this one last time we have no choice. We will all get stuck for bailing out the system. But in the future we must abandon all sub-prime notions. Americans just can’t keep on guaranting dishonesty in housing, and that’s what it is when a person signs an agreement that he doens’t intend to, or cannot, perform.

When I said Freddie and Fannie managers were corrupt I meant it. It was they who funded all those Democrat slush funds, money all of us paid for in taxes, and now will pay for again. Money that should have been available for Freddie and Fannie to bail themselves out. Shame on you Obama. Shame on you Biden. You’re part of the problem, not the solution!

These bailouts, starting with Bear Sterns and on and on, are driving retirees like me to the poor house. And it’s really the sub-prime people who abandoned us with their decision to take on more debt than they were capable of handling?

Stewart said “I wish I felt like joining the party that sent the Dow Jones Industrial Average up nearly 300 points on Monday on news of the Treasury plan to put mortgage giants Fannie Mae and Freddie Mac into a “conservatorship.” I say I’m glad I didn’t!

Maybe the only good coming out of Secretary Paulson’s action is for a constituency we don’t often think about. It’s good news only in contrast to letting the companies flounder and setting off a global financial crisis. That’s the constituency of people throughout the world, world opinion, foreign countries that depend on America, and so forth.

I like one part of Paulson’s announcement. He said the companies will no longer be managed as though they had a fiduciary duty to shareholders.

So in whose interests will they be managed? Not those of the taxpayers, who are on the hook for billions in losses?

Is it in the banks’ interest–those who need Fannie and Freddie to keep buying mortgage securities?

Or is it in the interest of the real-estate agents and home builders, who want the companies to prop up real-estate values?

It is certainly in the interest of the affordable-housing advocates, who want easier lending and underwriting policies so more people can own homes.

The truth is this: Fannie and Freddie were operated unprofitably, and that’s why they had to be placed into conservatorship. But if that’s true, so were the banks and mortgage companies. Yes, and we’re seeing the fallout of that with banks and mortgage firms like Wachovia, Washington Mutual, and others ready to topple and investment banker Lehman Brothers in like trouble. The whole system was one big mess. And don’t discount the people who thought they were buying good-deal houses whose values would continue to rise into infinity. Dream on, American public. But now come back to reality because those kinds of fairy tales are only told in Disneyland.

One good thing: The housing recession can’t last forever. Alan Greenspan--where have we heard that name before?–predicts that late this year or early next year housing prices will stabilize. Then, maybe then, as with all things that come down maybe the prices will gradually–in a sane manner–inch upward so that people who want to sell their houses can do so and still make enough to pay their closing costs, agent’s commission, and make buck in addition…or maybe not.

http://houseabcs.blogspot.com

>Mortgage News Tops Them All

>Political Disconnect chose to lead today’s stories with the blockbuster one on Fannie Mae and Freddie Mac getting gobbled up by the Feds.

Apparently, the best journalistic minds in America agreed with me. Slate highlights all the big papers and they’re right in line with my blog. “The New York Times, Washington Post, and Los Angeles Times lead with the news the papers have been previewing all weekend as the U.S. government officially took control of mortgage giants Fannie Mae and Freddie Mac yesterday.”

We asked in the blog a lot of questions. But one that jumps out and doesn’t need explanation is this: The government now has control over the companies that fund around two-thirds of all new home mortgages. Or, as the LAT succinctly summarizes: “Washington’s move means the federal government will directly back the great majority of the nation’s home mortgages.”

And if the magnitude of that fact is still not clear, the papers all make sure to emphasize that this is A Big Deal. The NYT calls it “a seismic event” and the Wall Street Journal characterizes it as the “most dramatic market intervention in years.”

Maybe I should have bought some of that $1.00 stock.

>Government Takes Over Mortgage Companies–Does That Mean Government Takes Over The Market?

>September 8, 2008

Orlando–Secretary of Finance Henry Paulson has some tall explaining to do. The American taxpayer demands it. He recently took over Fannie Mae and Freddie Mac, ousted their president and CEO and assumed management of two very poorly financed and managed companies.

First, President Bush and Paulson should come on national television and explain these actions. In a free country with a market-driven economy what the administration did is tantamount to something you hear about in dictatorships, not in America. Here’s what they could say:

“Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil . . . at home and around the globe.” That’s actually what Treasury Secretary Henry M. Paulson said in announcing the government’s actions.

“A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance. And a failure would be harmful to economic growth and job creation,” he said. We’ll we know that, but why wasn’t action taken sooner?

Question One: Explain in simple language why these firms are so important to the American economy. Why not a simple bailout like Bear Sterns and let them go on their way? It’s obvious, their leadership was inept or dishonest. Give Americans the full facts about what went on, even if it hurts the Bush Administration. Don’t gloss over it. Tell us what’s coming up next. We’re about fed up with bailouts at our expense. It weakens the dollar and makes it harder to put meat and potatoes on the table. Inflation is already really hurting us. Why play so high and loose with our money?

Question Two: If things are so bad, why didn’t you see it coming? Why did you wait so long to take such drastic action? Is someone in Washington falling asleep. Why weren’t the Democrats calling for Bush to do something before now? Or maybe they were. If readers have some information, please comment.

Question Three: How much? How much is this going to cost you and me, Mr. and Mrs. American taxpayer? Why doesn’t anyone have a handle on the costs? Or is it so bad you can’t face us with the facts? Come on, George Bush, you owe a full accounting, and not next week but right now. Someone knows precisely how bad things got. Someone also knows how much it may cost the U.S. taxpayers…

Question Four: Mr. Paulson, what makes you sure you can manage mortgage companies any better than their predecessors? True, you were previously the Chairman and Chief Executive Officer of Goldman Sachs, one of the world’s largest and most successful investment banks. The firm acts as a financial advisor and money manager for corporations, governments, and wealthy families around the world. Goldman offers its clients mergers & acquisitions advice, underwriting services, asset management, and engages in proprietary trading, and private equity deals. It is a primary dealer in the U.S. Treasury securities market.

Good so far. What else do we know about you? Since the President refuses to give us owners of Fannie and Freddie the full scoop, I’ll fill you in on Paulson. Oh, by the way, it does seem odd that we are only owners in bailout situations? If we want full ownership we have to pay a buck a share. What’s with that?

Like Al Gore, he’s a global warming nut. But to offset that, he earned his Eagle Scout award in the Boy Scouts of America and got his Bachelor of Arts in English from Dartmouth College in 1968. We don’t know his GPA, but he spent his fall afternoons butting heads on the gridiron, earning honorable mention All American as an offensive lineman. All of that is good for running America’s mortgage system? And after all of that he still believes in global warming? Actually, most of us do. What we don’t believe in is that running our cars is warming the atmosphere. Neither does Al Gore. He runs an airplane, a bigger house than yours, and a huge SUV.

President Ford (and Justice Byron “Whizzer” White) was also a football player, wasn’t he, and it didn’t ruin his thinking patterns…not much? He just couldn’t swing a golf club without hitting people.

Paulson was born in Palm Beach, Florida, to Marianna Gallaeur and Henry Merritt Paulson, a wholesale jeweler, but was raised in Barrington Hills, Illinois. I’m glad his parents took him away from the rich kids in Palm Beach to train him right up north. He is a member of Phi Beta Kappa and dummies don’t get in that exclusive club. The ideal ΦBK has demonstrated intellectual integrity, tolerance for other views, and a broad range of academic interests. Each year, about one college senior in a hundred, nationwide, is invited to join Phi Beta Kappa. He was also president of his Christian organization on campus.

He met his wife Wendy during his senior year. The couple have two adult children, Henry Merritt III and Amanda Clark, and became grandparents in June 2007. They maintain homes in Washington, DC and Barrington Hills, Illinois. None of that Palm Beach stuff.

In 1970 Paulson received a Master of Business Administration degree from Harvard Business School.

Career highlights

Paulson was Staff Assistant to the Assistant Secretary of Defense at The Pentagon from 1970 to 1972. He then worked for the administration of U.S. President Richard Nixon, serving as assistant to John Ehrlichman from 1972 to 1973. He came out untainted, and that’s a credit to his integrity.

He joined Goldman Sachs in 1974, working in the firm’s Chicago office. He became a partner in 1982. From 1983 until 1988, Paulson led the Investment Banking group for the Midwest Region, and became managing partner of the Chicago office in 1988. From 1990 to November 1994, he was co-head of Investment Banking, then, Chief Operating Officer from December 1994 to June 1998; eventually succeeding Jon Corzine (now Democrat Governor of New Jersey) as its chief executive. His compensation package, according to reports, was US$37 million in 2005, and US$16.4 million 2006. His net worth has been estimated at over $700 million. I’m wondering if he bought some houses during the 2005 mortgage value runup and got a government bailout?

Paulson has personally built close relations with China during his career. In July 2008 it was reported by The Daily Telegraph that: “Treasury Secretary Hank Paulson has intimate relations with the Chinese elite, dating from his days at Goldman Sachs when he visited the country over 70 times.”

Civic activities

Paulson has been described as an avid nature lover. Most Eagle Scouts Are. He has been a member of The Nature Conservancy for decades and was the organization’s board chairman and co-chair of its Asia–Pacific Council. In that capacity, Paulson worked with former President of the People’s Republic of China Jiang Zemin to preserve the Tiger Leaping Gorge in Yunnan province.

Paulson is also on the Board of Directors of the Peregrine Fund; was the founding Chairman of the Advisory Board of the School of Economics and Management of Tsinghua University in Beijing; and, previously served as chairman of the influential trade group, the Financial Services Forum.

Notable among the members of Bush’s cabinet, Paulson has said he is a strong believer in the effect of human activity on global warming and advocates immediate action to decrease this effect. That “human activity” is a nice way of saying you cars caused global warming of which I disagree.

Out With It Now! Or get out of the way and let us private citizens hire an ombudsman who can hire independent CPAs to figure it out if it still boggles your mind.

I’m really surprised Congress isn’t asking for an investigation–this thing is that big. And I don’t say that because of party affiliation.

I’m a Republican. Let’s be done with Washington politics. We’re all fed up with it. Let the chips fall where they may.

We’re the kind of country that really looks down on government taking over anything, let alone the mortgage companies–Fannie Mae and Freddie Mac.
I honestly believe Washington is broke and can’t manage anything, let alone the entire mortgage industry.

American citizens and Wall Street are wondering what this is going to cost us the taxpayers. They were saying over CNBC this morning that Fanny Mae had lost more than 90 percent of its value over the past year. That was before the ticker tape started up. Frankly, there is much we don’t know. How much are the Fed regulators going to have to speak up for these companies to get the market going again?

Wall Street is open: Wall street is reacting positively this morning. Secretary of Finance Hank Paulson’s action was greeted positively. People vote with the pocketbook on Wall Street. Among other companies that are up today, Washington Mutual is up 17.5 percent. Of course, they just fired their leader.

In other important news: Oil prices are up $3 at $118 per barrel due to hurricane Ike heading for the Gulf.

Apparently Fannie and Freddie are open–as I write–Fannie Mae is down 83 percent, Freddie is down 80 percent. Each is selling for only a dollar a share. Is that a good buy or should you be wary before investing. Be wary! But remember, it’s the Federal Government you’re investing in. How bad can it get?

Cuba is in the depths of Ike’s storm. More than 900,000 people have fled to higher ground. Winds are 125 mph, with Ike moving westerly 14 mph. Outer bands only extend about 50 miles, so it won’t hit Miami. It may develop into a weak category one. Between Thursday and Saturday morning it could reach Louisiana and could strengthen into a category two or three.

This one appears to be headed more toward Houston than New Orleans. Homeowners in each area are scurrying. There will likely be mandatory evacuations, depending on the severity of the winds at landfall.

http://houseabcs.blogspot.com

>When’s The Fed Going To Get Out In Front?

>
U.S. Treasury Secretary Henry Paulson, Jr. said last week the nation’s financial difficulties would last deep into 2009 and that the Bush Administration was doing all it could to right the ship of state.

I hope he meant, Bush is doing all he wants to do, which is nothing because we the solvent don’t owe the “inventive”, speculative, and foolish few our hard earned tax dollars.

But the fact remains, Paulson said, there were 1.7 million housing foreclosures in 2007 and there likely will be 2.5 million more this year.

That was last week’s news.
Now the New York Times reports Fed Chairman Ben Bernanki, Jr. yesterday coming out with an announcement dressed up as a “new revelation.” The headlines said: “Fed Sees Turmoil Persisting Deep Into Next Year.” Hurrah,or is it hooray or hoorah these days? They finally got it right. That’s not news, New York Times, that’s what Paulson said a week ago.

Most of these are cases where the Federal Government can’t and shouldn’t do anything to save the houses for these speculators.

My question is why should we? Why should 95 percent of the people who have mortgages which did not go into foreclosure throw a life-line out to the 5 percent who were reckless and bought over their heads? That’s a very bad precedent to set in a country that was founded on free enterprise.

When is the Fed going to get out in front on America’s economy?
In a much belated announcement, Fed Chairman Ben Bernanke announced that the Fed would issue long-awaited rules that would restrict exotic mortgages and high-cost loans for people with bad credit.

A little late for that rule, wouldn’t you say? This is acknowledged to be the prime reason the housing failures occurred in the first place. Where is that charlatan Allen Greenspan when you don’t need him?

One such step would extend low-interest lending programs to Wall Street’s largest investment banks into next year. The programs, one of which was set to expire in September, can continue only if the Fed issues a finding that there are “unusual and exigent circumstances” that justify them.

Mr. Bernanke also recommended that Congress grant the Fed broader authority to monitor and supervise the financial markets to assure greater stability in the future. But with time running out on this session, lawmakers are unlikely to adopt such legislation before next year.

Again, the problem with the Fed is “too little, too late.”

Today’s a great time to buy a property. If anyone is interested, today’s Ditech rate on home loans is 5.86% or 6.117 apr.

http://houseabcs.blogspot.com