Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon by Gretchen Morgenson & Joshua Rosner

Fanniegate: Gamechanger For The GOP?
WALTER RUSSELL MEAD – June 7, 2011

Economy: As the “recovery summer” turns into a nightmare, one thing has become painfully clear: This is the most economically incompetent administration since the Great Depression.

Two years into the Obama era, when the U.S. should be enjoying a booming recovery from the 2007-08 meltdown, with millions of new jobs and higher incomes for all, all we see is economic wreckage from the unbelievably foolish policies pursued by the White House and the Democrat-controlled Congress.

Whether it’s the $862 billion “stimulus” that turned into a welfare program for bankrupt states and public unions, or the $700 billion TARP program that became a giant dish of pork for Democrats and their supporters, or the job-killing duo of health care and financial reform, Obama, Pelosi, Reid et al. seem oblivious to the deep and lasting damage they’re doing to America’s economy.

Friday’s frightening jobs report was only the latest in a series of releases indicating the “recovery” is faltering. Unemployment in July was unchanged at 9.5%, but a net 131,000 jobs were lost on top of 97,000 more than first accounted for in May and June.

“Recovery summer”? Time for another sobriquet.

The White House response? On Friday, after release of the jobs report, Labor Secretary Hilda Solis touted the economy’s “turnaround” and credited “strong and immediate action” President Obama took after entering office. The only real problem, she hinted, was Republicans who refuse to support a $26 billion bailout for state and local governments and their pampered unions.

“There is no room for partisan roadblocks when Americans are depending on their government’s action and the stakes are so high,” Solis said. In this White House, economic recovery is always just one massive stimulus or bailout bill away.

Solis also repeated — with the stock market selling off 100 points as she spoke — the bogus claim made by the White House and uncritically parroted by its media pals that timely action “saved or created more than 2.5 million American jobs.”

As we’ve said, this is utter nonsense. Completely made up. And, by the way, the official who made it up — Council of Economic Advisers chairwoman Christina Romer — quit on Friday to return to academia, her reputation for accuracy in tatters.

Here’s the real record: America has lost 4.1 million jobs since Obama took office and 7.7 million since the recession began in December 2007. So most of the jobs lost have been under this administration. Whatever else you might call Obamanomics, “successful” isn’t it.

Doing more arithmetic, since the start of 2010 we’ve averaged 93,000 new jobs a month. That’s below the 120,000 we need just to soak up new job-market entrants. At this rate, it will take nearly seven years just to get back to 2007′s number of jobs .

Despite all this, Obama has resorted to blaming — who else? — President Bush for his own mistakes. And by name.

You’d never know that Democrats controlled Congress for Bush’s last two years, or that policies they enacted during their many decades in power — in particular, using Fannie Mae and Freddie Mac to issue trillions of dollars of mortgages to unqualified borrowers — are the root cause of our crisis.

We’ve watched in amazement as the ruling Democrats continue to repeat their mistakes from the 1990s that caused our crisis, including leaving Fannie and Freddie untouched and raising spending by an incredible $17 trillion over the next 10 years.

Instead of slashing spending, as common sense and economic reality would dictate, some want to let Bush’s 2001 and 2003 tax cuts expire. Those cuts were responsible for the economy’s recovery from the triple whammy of the 1999-2000 stock market meltdown, the Y2K debacle and the 2001 recession.

At the same time, Americans will be hit with a blizzard of new regulations and higher taxes from this year’s health-care and financial reform laws. That could sink the economy again.

The regulatory and tax siege has sent America’s entrepreneurial, job and wealth-creating class reeling. The so-called progressive left now in charge of government has used class warfare to divide us — always blaming the “rich” (anyone who earns more than $200,000), entrepreneurs and businesses for not doing enough.

Virtually no one in Obama’s cabinet has any experience of note in business or the private sector. As with most progressives, they believe bigger government is always the solution to our problems, which explains their egregious incompetence.

One example: White House spokesman David Axelrod and some in the media have questioned why businesses, which have a record $1.8 trillion in the bank, refuse to expand and hire new workers. The implication, of course, is that they’re somehow subverting Obama and showing a lack of patriotism.

But the fact is, they’re alarmed at the gross incompetence and sheer lack of economic understanding of this administration. With so much uncertainty hanging over the future, only a fool would commit huge sums of money to expand a business right now.

Don’t believe it? Listen to what key U.S. business groups said Friday after July’s disastrous jobs data were released.

“The current of employment is too slow to replace the more than 8 million jobs lost in the recession — not in the next year or two, perhaps even not in the next five years,” said Bart van Ark, chief economist of the Conference Board.

“Policies that have increased taxes, increased regulation and increased uncertainty have clearly not been a prescription for returning America to work,” said Martin Regalia, chief economist for the Chamber of Commerce. That about sums it up.

The light is going on over the heads of Obama’s own advisers. In addition to Romer, who foolishly forecast in 2009 that unemployment wouldn’t go above 8% if the $862 billion stimulus was passed, Budget Director Peter Orszag, his reputation damaged after gilding the data in Obama’s budget for two years, also is leaving.

Sorry, but changing personnel won’t help. Unless and until the policies change, the economy will only muddle along at best — and at worst, tumble back into recession.

The 2,315 page Dodd-Frank financial regulation bill that President Obama will sign today should not be called “financial reform.” Instead the bill, which passed the Senate 60-39 last week when Massachusetts Senator Scott Brown joined Maine Senators Olympia Snowe and Susan Collins to grant cloture, should be called what for what it is: pages and pages of massively costly, counterproductive and possibly unconstitutional mandates on nearly every type of business except for those government-sponsored enterprises at the root of the crisis. And while the bill claims to crack down on excesses on Wall Street, its harshest impact will likely be on Main Street businesses that had nothing to do with the meltdown.

A front-page Wall Street Journal article this week noted that “far from Wall Street, President Barack Obama’s financial regulatory overhaul… will leave tracks across the wide-open landscape of American industry.” The Journal notes that “the bill will touch storefront check cashiers, city governments, [and] small manufacturers.”

But one thing it will leave totally untouched is the government-sponsored enterprises Fannie Mae and Freddie Mac, which new research by Congress’s Financial Crisis Inquiry Commission and other bodies shows was even more of a prime factor in the subprime boom than originally assumed. The Federal Housing Finance Agency now reports that Fannie and Freddie purchased 40 percent of all private-label subprime securities in 2003 and 2004. Indeed, according to Edward Pinto, housing scholar and Fannie’s former chief credit officer, millions of mortgages to borrowers with credit scores of less than 660, considered by prominent researchers to be the dividing line for subprime loans, had been labeled by Fannie and Freddie as prime going back as early as 1993.

Rather than wait for Congress’s own Financial Crisis Inquiry Commission to issue its report in December to examine the role of the GSEs and other causes, Congress passed a bill that will not prevent future bubbles and imposes untold costs that will put the country in danger of slipping back into a recession.

New collateral requirements on derivatives could cost U.S. companies as much as $1 trillion in lost capital and liquidity, according to the International Swaps and Derivatives Association. And as the WSJ piece notes, these costs would hit not just big banks, but farmers who use derivatives to hedge the price of their crops and fuel for their tractor. The new Consumer Financial Protection Bureau could also hit retailers that issue credit tangentially related to their business, such as small stores that offer layaway plans.

On the other side of the retail ledger, some of the biggest retailers also got an unjustified mandated benefit with the Durbin amendment that puts price controls on the interchange fees they pay to process credit cards. This corporate welfare for fat cat merchants will mean higher costs to consumers, community banks, and credit unions.

In addition, the bill contains provisions that will empower special interests at the expense of ordinary shareholders and that may exceed the limits of the U.S. Constitution. The bill’s “orderly liquidation” authority will allow the Federal Reserve and the Treasury Department not only to bail out firms whose failure is deemed to be a threat to “financial stability,” but to actually seize firms that are not even asking for a bailout.

Read more @ The American Spectator…….

Photo credit: media.photobucket.com

By: Michael G. Franc NRO Online

The Democrats’ populist assault on all things Wall Street, we are told, helps them politically regardless of the legislative outcome.

Democrats, NBC Nightly News reported, “actually scheduled [Monday’s] vote knowing they would lose and they did because they see it as a political win — better able to paint Republicans as too friendly with Wall Street.” Roll Call adds “Democrats got exactly what they wanted Monday night: a concrete way to try to tar Republicans as beholden to Wall Street schemers who would put the country in danger of another financial industry collapse.” The take at Fox News was no different: “Democrats believe the staging of such votes will help them portray Republicans as agent of Wall Street greed.”

Should they succeed in painting the GOP as the slaves of Wall Street, it will surely rank among the most brazen attempts to redefine political reality in quite some time. Why? Because, if campaign contributions amount to any sort of referendum on the 2008 election, the Democrats won going away among these “Wall Street schemers.” Politically, if not culturally, the denizens of Wall Street reside comfortably in the Democratic column.

Conduct a few searches on the Huffington Post’s Fundrace 2008 site and you’ll see what I mean. Search by “employer.” When it comes to all the major Wall Street firms currently gracing our front pages, the results may floor you and should be posted in the cubicle of every editor in every mainstream media outlet in America.

Here are some examples, all of which relate to giving during the 2008 presidential election:

· Over 550 employees of Goldman Sachs contributed enough to one or more of the 2008 presidential candidates to show up on the Federal Election Commission’s data base — 388 contributed over $814,000 to Democrats while only 163 favored the GOP, dropping a more modest $258,000 into their coffers.

· At Lehman Brothers 310 employees voted Democratic with their contributions, to the tune of $642,000; meanwhile, 154 cut checks to Republicans totaling about $262,000.

· Nearly 500 Morgan Stanley employees sent over $834,000 to the Democrats while 247 of their colleagues deposited less than half that amount (under $400,000) in Republican campaign accounts.

· Fannie Mae and Freddie Mac employees favored the Democrats by a 6 to 1 margin, sending $220,000 to the Democrats and only $37,500 to the GOP.

The Democrats cleaned up in similarly spectacular fashion at other big banks and financial firms, including Bank of America, Bear Stearns, UBS, Wells Fargo, Barclay’s Capital, and Citibank/Citigroup. (Merrill Lynch employees were the sole exception to this rule.)

While these searches are limited (I only searched for the biggest and best known firms), they are nevertheless revealing. Over 3,550 employees of these firms voted for the Democrats with their pocketbooks, sending them over $5 million; fewer than half that number (1,620) sided with the Republicans, whose take was approximately $2.25 million.

read more at nro.com……

By DEBORAH SOLOMON

WASHINGTON—The U.S. government’s rescue of wobbly companies and financial markets is starting to look far less expensive or long-lasting than once feared.

As momentum grows at companies that looked like zombies just a few months ago to repay taxpayers for lifelines they got during the financial crisis, the projected cost of the bailout is shrinking to just a fraction of previous estimates. Treasury Department officials say the tab is likely to reach $89 billion, which includes the Troubled Asset Relief Program, capital injections into Fannie Mae and Freddie Mac, loan guarantees by the Federal Housing Administration and Federal Reserve moves such as buying mortgage-backed securities and propping up the commercial-paper market.

Treasury officials are increasingly optimistic that even American International Group Inc. could be on its own within a year, with officials discussing ways to extricate the government from its 80% stake in the insurer, according to people familiar with the situation. AIG is on track to repay its loan to the Fed through asset sales that will raise $51 billion.

Read More at……..WSJ.COM