It sounds interesting but I am not sure that I agree with you completely….

Your topic %TITLE% was interesting when I found it on %DAY% searching for %KEYWORD%. Thanks, %URL%…

I have several things in common with you but also have several views in direct conflict with your own.

First off, as a former college pitcher, I think you are one of the finest competitors to play the game. I have also been a WoW player for three years though recently retired when my second child was born. I agree with you on gold farming etc. It has destroyed the economy of the game in some respects though I think Blizzard made some mistakes with prices of goods and the time it takes to gather gold in the game to advance your character. I was part of a guild that nearly cleared Sunwell and was first or second to kill all the bosses in Black Temple and other raiding instances. If you have not raided the high end 25 man content it is worth seeing. Though I still argue that Naxx was the best instance ever made. You will see it reincarnated in WOTLK if you haven’t already. My server was firetree though I canceled my account for now to spend more time with my kids!

But on to the areas where we have a huge fundamental disagreement. I am a supporter of Barack Obama as you might guess. I am also employed in the finance arena and have both my CFA and MBA so I think I can speak with some knowledge on the areas you cited in your blog.

Many have commented that you are just spewing vitriol and discussing areas where you have no knowledge. I think everyone has the right to their own opinion so I can’t call you out on that. What I will say is that blame can not be thrown at the feet of any one individual, party or corporation (or set of corporations if you choose Fannie and Freddie).

A crisis of this magnitude (and this is a larger one than many of us could ever imagine) has many at fault. I will list those at fault (in my view) but in no particular order. I will also add a bit of personal commentary.

1) Consumer – the American consumer has leveraged him or herself massively over the past few decades. While you can blame a company for writing mortgages that individuals can’t afford, you have to blame the individuals to some extent for not taking personal responsibility and doing the math themselves on what they can afford. As a Republican, you of all people should agree with that. Even as a democrat I think the consumer is partly at fault. And you can consider any homebuyer a consumer.

2) Mortgage underwriters – (e.g. Countrywide) It is the mortgage underwriter who makes or receives the initial contact. It is the mortgage underwriter who collects the initial information on the person borrowing the money. It is the mortgage underwriter who can be aggressive or more consultative in assessing the loan and the candidate’s willingness or ability to pay. In the old days (100 yrs ago….), the local bank officer knew the person in the town applying for the loan and even knew the house he was buying. They shared friends and shared a history. In our society (inevitable), we got away from this and likely can never return. Too difficult. So underwriters share the blame.

3) Investment Banks – Once Countrywide and other firms wrote the loans, they either A) kept the loans on their books (and they regret this as you recall Countrywide was one of the first firms to fall as it was eventually acquired by Bank of America very early in the crisis) or they sold them to investment banks to be packaged into CDOs etc. The investment banks bought all these crap loans and they packaged them into complex securities, put leverage on them and repackaged them again. This is a complex topic but many of these securities were then sold in tranches that appeared not very risky but in fact were junk all the way through. (see my next contributor to the crisis for more)

4) Ratings agencies – the ratings agencies (Moody’s, S&P etc) gave these CDOs and other pooled vehicles ratings (e.g. AAA, A+ etc). As we learned later, the ratings agencies did not have a good grasp of the risks involved in the securities. They also received a fee for rating the packaged debt. (imagine if they gave it a low grade…would they get the business to rate that investment bank’s debt in the future? Surely you must understand conflicts of interest…. That is Exhibit A)

5) Fixed income management firms – In the end someone had to buy these CDOs and unpackaged mortgage debt. Fixed income management firms were guilty in part because they provided the market for this.

You the consumer get a loan you can’t afford from an underwriter, it is packaged by an investment bank and rated by a rating agency and sold to a fixed income firm. Voilah!! All co-conspirators in this mess.

Now Freddie and Fannie are certainly guilty in all of this, and the Dems and Reps are guilty in letting FNM and FRE run to freely for sure. An earlier poster only cited the Democrat’s mistakes but I can assure you the right and far right is just as guilty in letting the two firms run free. Both sides were successfully lobbied by these firms. Don’t kid yourself in thinking one party is innocent. It only makes you look like you don’t know what you are talking about.

So that is my take on this.

It looks like Barack Obama will win this election. I think this is a wonderful event for our nation on many many levels.

While I do not think that Obama (or McCain) has the knowledge to deal with this economic mess, I have much more confidence in Obama’s economic team than I do in McCain’s economic team. I think Summers, Rubin, Volcker, Goolsbee, Reich, and Tyson all have the experience and knowledge to lead us through this crisis. So while neither candidate is capable in this area, the key is having the judgement to put the right people into place. On that point, Obama wins while McCain’s team has not proved itself. I think McCain even mentioned Meg Whitman for Treasury Secretary or Fed Chairman at one point. I do not think that would be a good idea. She did a decent job leading Ebay, but Ebay is not the U.S. Treasury.

I think when we decide on a candidate to vote for, we should really focus on judgement because it is good judgement that allows our candidates to choose the team around them. It is the team around them that ultimately shapes the policies and actions of an administration.

On judgement I think Obama wins in a blowout. McCain’s selection of Palin shows a bit less judgement and bit more politics in my view. While I am not going to cite her as horribly unqualified to be President, I will say that sheis a surprising choice and her knowledge base must climb significantly (particularly on world affairs/events) for her to match Obama. She could not come close to matching Biden or McCain in that area. So I think any neo con or anyone who just feels that our foreign policy decisisions are important should really step back and think about having her on the ticket and what it might mean if she had to step in as Chairwoman and CEO of America.

Best of luck with the rest of your baseball career and good luck in WoTLK.

Subprime Suspects
Posted by Barry Ritholtz on Tuesday, October 07, 2008 | 09:37 PM
in Credit | Real Estate | Really, really bad calls | Taxes and Policy

Dan Gross gets medieval on the wingbut meme that Fannie Mae and the CRA was responsible for the housing and credit mess:

“We’ve now entered a new stage of the financial crisis: the ritual assigning of blame…On the Republican side of Congress, in the right-wing financial media (which is to say the financial media), and in certain parts of the op-ed-o-sphere, there’s a consensus emerging that the whole mess should be laid at the feet of Fannie Mae and Freddie Mac, the failed mortgage giants, and the Community Reinvestment Act, a law passed during the Carter administration. The CRA, which was amended in the 1990s and this decade, requires banks—which had a long, distinguished history of not making loans to minorities—to make more efforts to do so. The thesis is laid out almost daily on The Wall Street Journal editorial page and in the National Review . . .

But none of these issues is the cause of the problem. Not by a long shot. From the beginning, subprime has been a symptom, not a cause. And the notion that the Community Reinvestment Act is somehow responsible for poor lending decisions is absurd.

Here’s why.

The Community Reinvestment Act applies to depository banks. But many of the institutions that spurred the massive growth of the subprime market weren’t regulated banks. They were outfits such as Argent and American Home Mortgage, which were generally not regulated by the Federal Reserve or other entities that monitored compliance with CRA. These institutions worked hand in glove with Bear Stearns and Lehman Brothers, entities to which the CRA likewise didn’t apply. There’s much more. As Barry Ritholtz notes in this fine rant, the CRA didn’t force mortgage companies to offer loans for no-money down, or to throw underwriting standards out the window, or to encourage mortgage brokers to aggressively seek out new markets. Nor did the CRA force the credit-rating agencies to slap high-grade ratings on subprime debt.”

Go read the entire piece . . .

>

So if we’re in bad shape, how can the Republicans not accept most of the blame? They’ve been calling most of the shots because they’ve been in the voting majority. They’d be taking most of the credit if things were good, wouldn’t they? As a parent, you try to teach your kids to take responsibility for their actions. What kind of example are these leaders setting when everytime something goes wrong, they rush to blame the Democrats. They should step up, admit they made mistakes, admit the need to do some soul searching, and try to learn from this.

Dann
http://www.walkaboutjones.com

This is totally unrelated to the topic, but I’m going to keep posting this same post every so often, just so you know how much it means/meant to all of us. Thank You for your 2004 ALCS Game 6 performance. They should be playing that game on NESN every week. You defied the curse, the gutsiest performance I’ve ever seen, on any level (and I’ve seen quite a few).

Love the posts and the site. Hope to see you back in the Sox lineup next year! By the way, any chance you will be seen at the Hub with the guys during the post-season? Even the curly red headed freak from the globe misses seeing ya!

1977: Pres. Jimmy Carter signs the Community Reinvestment Act into Law. The law pressured financial institutions to extend home loans to those who would otherwise not qualify. The Premise: Home ownership would improve poor and crime-ridden communities and neighborhoods in terms of crime, investment, jobs, etc.

Results: Statistics bear out that it did not help.

How did the government get so deeply involved in the housing market? Answer: Bill Clinton wanted it that way.

1992: Republican representative Jim Leach (IO) warned of the danger that Fannie and Freddie were changing from being agencies of the public at large to money machines for the principals and the stockholding few.

1993: Clinton extensively rewrote Fannie Mae and Freddie Mac’s rules turning the quasi-private mortgage-funding firms into semi-nationalized monopoies dispensing cash and loans to large Democratic voting blocks and handing favors, jobs and contributions to political allies. This potent mix led inevitably to corruption and now the collapse of Freddie and Fannie.

1994: Despite warnings, Clinton unveiled his National Home-Ownership Strategy which broadened the CRA in ways congress never intended.

1995: Congress, about to change from a Democrat majority to Republican, Clinton orders Robert Rubin’s Treasury Dept to rewrite the rules. Robt. Rubin’s Treasury reworked rules, forcing banks to satisfy quotas for sub-prime and minority loans to get a satisfactory CRA rating. The rating was key to expansion or mergers for banks. Loans began to be made on the basis of race and little else.

1997 – 1999: Clinton, bypassing Republicans, enlisted Andrew Cuomo, then Secretary of Housing and Urban Developement, allowing Freddie and Fannie to get into the sub-prime market in a BIG way. Led by Rep. Barney Frank and Sen. Chris Dodd, congress doubled down on the risk by easing capital limits and allowing them to hold just 2.5% of capital to back their investments vs. 10% for banks. Since they could borrow at lower rates than banks their enterprises boomed.

With incentives in place, banks poured billions in loans into poor communities, often “no doc”, “no income”, requiring no money down and no verification of income. Worse still was the cronyism: Fannie and Freddie became home to out-of work-politicians, mostly Clinton Democrats. 384 politicians got big campaign donations from Fannie and Freddie. Over $200 million had been spent on lobbying and political activities. During the 1990′s Fannie and Freddie enjoyed a subsidy of as musch as $182 Billion, most of it going to principals and shareholders, not poor borrowers as claimed.

Did it work? Minorities made up 49% of the 12.5 million new homeowners but many of those loans have gone bad and the minority homeownership rates are shrinking fast.

1999: New Treasury Secretary, Lawrence Summers, became alarmed at Fannie and Freddie’s excesses. Congress held hearings the ensuing year but nothing was done because Fannie and Freddie had donated millions to key congressmen and radical groups, ensuring no meaningful changes would take place. “We manage our political risk with the same intensity that we manage our credit and interest rate risks,” Fannie CEO Franklin Raines, a former Clinton official and current Barack Obama advisor, bragged to investors in 1999.

2000: Secretary Summers sent Undersecretary Gary Gensler to Congress seeking an end to the “special status”. Democrats raised a ruckus as did Fannie and Freddie, headed by politically connected CEO’s who knew how to reward and punish. “We think that the statements evidence a contempt for the nation’s housing and mortgage markets” Freddie spokesperson Sharon McHale said. It was the last chance during the Clinton era for reform.

2001: Republicans try repeatedly to bring fiscal sanity to Fannie and Freddie but Democrats blocked any attempt at reform; especially Rep. Barney Frank and Sen.Chris Dodd who now run key banking committees and were huge beneficiaries of campaign contributions from the mortgage giants.

2003: Bush proposes what the NY Times called “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago”. Even after discovering a scheme by Fannie and Freddie to overstate earnings by $10.6 billion to boost their bonuses, the Democrats killed reform.

2005: Then Fed chairman Alan Greenspan warns Congress: “We are placing the total financial system at substantial risk”. Sen. McCain, with two others, sponsored a Fannie/Freddie reform bill and said, “If congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole”. Sen. Harry Reid accused the GOP ;of trying to “cripple the ability of Fannie and Freddie to carry out their mission of expanding homeownership” The bill went nowhere.

2007: By now Fannie and Freddie own or guarantee over HALF of the $12 trillion US mortgage market. The mortgage giants, whose executive suites were top-heavy with former Democratic officials, had been working with Wall St. to repackage the bad loans and sell them to investors. As the housing market fell in ’07, subprime mortgage portfolios suffered major losses. The crisis was on, though it was 15 years in the making.

2008: McCain has repeatedly called for reforming the behemoths, Bush urged reform 17 times. Still the media have repeated Democrats’ talking points about this being a “Republican” disaster. A few Republicans are complicit but Fannie and Freddie were created by Democrats, regulated by Democrats, largely run by Democrats and protected by Democrats. That’s why taxpayers are now being asked for $700 billion!!

If you doubt any of this, just click the links below and listen to your lawmakers own words. They are condeming!

Postscript: ACORN is one of the principle beneficiaries of Fannie/ Freddie’s slush funds. They are currently under indictment or investigation in many states. Barack Obama served as their legal counsel, defending their activities for several years.