Obama used landmark lawsuit to force banks to make subprime loans to those who couldn't afford them

With all the false claims about so-called predatory lending, we may have found the person initially responsible for the problem.  From the Daily Caller:

President Barack Obama was a pioneering contributor to the national subprime real estate bubble, and roughly half of the 186 African-American clients in his landmark 1995 mortgage discrimination lawsuit against Citibank have since gone bankrupt or received foreclosure notices. 

As few as 19 of those 186 clients still own homes with clean credit ratings, following a decade in which Obama and other progressives pushed banks to provide mortgages to poor African Americans. 

The startling failure rate among Obama’s private sector clients was discovered during The Daily Caller’s review of previously unpublished court information from the lawsuit that a young Obama helmed as the lead plaintiff’s attorney. [RELATED: Learn about the 186 class action plaintiffs] 

Since the mortgage bubble burst, some of his former clients are calling for a policy reversal. 

“If you see some people don’t make enough money to afford the mortgage, why would you give them a loan?” asked Obama client John Buchanan. “There should be some type of regulation against giving people loans they can’t afford.” . . .

Democrats frustrated that one of their own won't forgive billions in mortgages

After all, it is just taxpayer money.  What can DeMarco be hesitating about?  Krugman wants DeMarco fired, so he must be doing something right.  From Politico:

Treasury Secretary Timothy Geithner and congressional Democrats blasted the Federal Housing Finance Agency on Tuesday after the regulator announced it would not allow Fannie Mae and Freddie Mac to offer loan principal reductions to struggling homeowners, as tensions over how to improve the sluggish housing market remain high before the November elections.
Democrats have been pressuring the FHFA, the independent agency in charge of overseeing the taxpayer supported mortgage giants, for months to back off its opposition to allowing Fannie and Freddie to provide some debt forgiveness to homeowners.
The regulator’s acting director, Edward DeMarco, has been unmoved by their arguments, and has infuriated some Democrats.
“It is incomprehensible that Mr. DeMarco would reject the chance to save up to a billion dollars in taxpayer funds while helping nearly half a million homeowners stay in their homes,” Rep. Elijah Cummings of Maryland, the top Democrat on the House Oversight and Government Reform Committee, said in a statement on Tuesday.
In the latest effort to entice DeMarco to move in the Obama administration’s direction, Treasury had proposed earlier this year allowing Fannie and Freddie to participate in a program where the cost of loan writedowns would be covered with remaining funds from the 2008 bank bailout law — the Troubled Asset Relief Program (TARP).
On Tuesday, DeMarco rejected the idea, arguing that his agency’s job is to protect taxpayers from losses resulting from the government’s rescue of Fannie and Freddie in 2008 and the proposed use of TARP funds does not address that concern.
“I have concluded that Fannie Mae and Freddie Mac’s adoption of [the Treasury program] would not make a meaningful improvement in reducing foreclosures in a cost effective way for taxpayers,” DeMarco wrote to lawmakers on Tuesday. . . .

Notice the objective headline on this over at Bloomberg.com: "Regulator Leaves Underwater Homeowners High and Dry"

DeMarco, acting director of the Federal Housing Finance Agency, said today that he won't allowFannie Mae and Freddie Mac to engage in debt relief for borrowers who owe much more than their homes are worth.
In doing so, DeMarco clearly put ideology ahead of economics, hindering the housing market's recovery in the process. . . .

You have to love the claims that giving away money is the way to save it.

The most mind-boggling aspect is that FHFA's own analysis shows principal reduction would save the taxpayer-backed mortgage giants as much as $3.6 billion compared with other modification efforts. . . . . 

So you think that the housing market is recovering?

The Case-Shiller Index makes it hard to argue that the housing market has recovered. Apparently the results tomorrow are expected to show an additional, if small, further drop in prices. Data is available here.

Home sales fall by 5.4% last month, prices rise only because mix of homes being sold changed

When is the housing market finally going to recovery? With interest rates at record lows, one would have thought that it would be booming right now. From the Associated Press:

Americans bought fewer homes in June than May, indicating the weak economy could make a modest housing recovery choppy.
The National Association of Realtors said Thursday that sales of previously occupied homes fell 5.4 percent in June to a seasonally adjusted annual rate of 4.37 million homes. That's the fewest since October.
Sales are up 4.5 percent from a year ago, evidence that the market is still recovering. But the annual sales pace is below the 6 million that economists consider healthy. The June drop in completed re-sales contrasts with more encouraging data that show gains in new residential construction, higher builder confidence and more signed contracts to buy previously owned homes.
"It is only one month and the rest of the housing indicators have all continued to show improvement," said Jennifer Lee, senior economist at BMO Capital Markets. "Let's hope this June decline is a blip."
The number of first-time buyers, critical to a housing recovery, made up just 32 percent of sales. That's down from 34 percent in May. In healthy markets, first-time buyers make up more than 40 percent of the market.
The median home price rose 5 percent to $189,400. That's mostly because sales of more expensive homes rose, while sales of cheaper homes fell, the Realtors group said. . . .

Home sales and prices continue falling

Seasonal adjustments are starting to have huge problems and produce misleading information. From the Washington Post:

. . . Without adjusting for seasonal differences, the survey of prices in 20 metropolitan areas fell to its lowest level since the housing market downturn began.
But analysts pointed to bright spots hidden in the data — and some ventured that the housing market may have finally found its low.
. . . . the existing inventory of new homes for sale had fallen sharply since a year ago. The inventory of homes, measured in the number of months they would take to sell, stood at 5.3, down from seven a year ago, according to an analysis by the High Frequency Economics consulting firm. Inventory is considered a key sign of future housing investment.
Through March, sales technically fell, to 328,000, but only because the sales figures reported by the Commerce Department in February were adjusted sharply upward, from 313,000 to 353,000. Without that adjustment, the March data would have registered a 4.8 percent increase. . . .

Can the government be trusted to regulate companies properly?

It constantly seems as if the government can not separate politics from what it does. Now the government is going after S&P at least in part because it downgraded the US credit rating. The government is also going after S&P for not foreseeing a financial crisis that the government itself didn't foresee. The bottom line is this: if S&P doesn't rate bonds and other assets properly, people won't pay them very much for their ratings. The market punishes S&P for the mistakes that it makes. Apparently, politicians are telling the New York Times that they are letting S&P's downgrade of the US impact their judgments on punishing the company. That is not good. Does anyone think that will make S&P's evaluations of the US better in the future?

The Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews.

The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations. . . .

As Maggie Thatcher said: "The problem with socialism is that eventually you run out of other people's money"

Total US debt is increasing by much more than the deficit.

Total US govt financial system support seen at $3.7 trln

* US support swells by $700 bln in past year-watchdog

* Mortgage, housing commitments account for most of rise

* TARP watchdog criticizes Obama housing rescue efforts

By David Lawder

WASHINGTON, July 21 (Reuters) - Increased housing commitments swelled U.S. taxpayers' total support for the financial system by $700 billion in the past year to around $3.7 trillion, a government watchdog said on Wednesday.

The Special Inspector General for the Troubled Asset Relief Program said the increase was due largely to the government's pledges to supply capital to Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) and to guarantee more mortgages to the support the housing market.

Increased guarantees for loans backed by the Federal Housing Administration, the Government National Mortgage Association and the Veterans administration increased the government's commitments by $512.4 billion alone in the year to June 30, according to the report.

"Indeed, the current outstanding balance of overall Federal support for the nation's financial system...has actually increased more than 23% over the past year, from approximately $3.0 trillion to $3.7 trillion -- the equivalent of a fully deployed TARP program -- largely without congressional action, even as the banking crisis has, by most measures, abated from its most acute phases," the TARP inspector general, Neil Barofsky, wrote in the report.

The total includes Federal Reserve programs and a myriad of asset guarantees, including Federal Deposit Insurance Corp. protection for bank deposits. . . .

Meanwhile the housing market is continuing to collapse: Construction Slows, Inventories Build Amid Weak Job Growth, Tax-Credit End.

On Tuesday, the U.S. Census Bureau said single-family housing starts in June fell by 0.7%, to a seasonally adjusted annual rate of 454,000. The U.S. started 1.47 million homes in 2006, before the housing bubble popped.

Future construction looks even weaker. Permits for single-family starts fell 3% in June, following big declines in both May and April. "We're hovering at post-World War II lows," said Ivy Zelman, president of Zelman & Associates, a research firm. . . .

Apparently extending large parts of the "stimulus" isn't a stimulus

From Fox News:

If it looks, feels and sounds like a stimulus, then is it a stimulus?

Democrats say no. They call their growing list of proposed economic relief efforts an extension of Obama's original $787 billion stimulus package, passed by Congress earlier this year with minimal Republican support.

But the price tag for these new proposals is adding up.

Democrats are considering extending unemployment and health benefits, as well as extending and perhaps expanding a popular tax credit for first-time home buyers and creating a new credit for companies that add jobs.

Extending unemployment benefits through 2010 would cost about $100 billion, according to the liberal Center on Budget and Policy Priorities.

It's unknown exactly how much it would cost to extend subsidies for laid-off workers to help them keep the health insurance their former employers provided, known as COBRA. That's because congressional leaders haven't settled on the length of an extension, or how to pay for it. But the current program, which covers workers laid off through the end of the year, costs nearly $25 billion.

Extending the homebuyer tax credit to next summer would cost about $16.7 billion, economists say. It's not clear how much the employer tax credit would cost. But a similar proposal that was dropped from the first stimulus package had a cost of $19.5 billion.

President Obama also wants Congress to approve $250 payments to more than 50 million seniors to make up for no cost-of-living increase in Social Security next year. The total cost: $14 billion.

Taken together, the proposals could add up to nearly $200 billion, looking a lot like another economic stimulus package . . .

While searching the web, I came across these seven promises that the Obama administration broke with its first stimulus.

Broken Promises in Record Time
1. Make government open and transparent.

2. Make it "impossible" for Congressmen to slip in pork barrel projects.

3. Meetings where laws are written will be more open to the public. (Even Congressional Republicans shut out.)

4. No more secrecy.

5. Public will have 5 days to look at a bill.

6. You’ll know what’s in it.

7. We will put every pork barrel project online.

What is the impact of this on Banks' willingness to lend?: "Barney Frank threatens to stop foreclosures

Do these politicians understand that they help a few people out in the short run and really damage the loan market in the long run? Statements from Barney Frank and the President cause damage even if no bill is ever passed. From the AP:

A senior House Democrat threatened banks Wednesday that if they don't volunteer to save more homeowners from foreclosure, Congress will make them.
In a sternly worded statement, Rep. Barney Frank said Congress will revive legislation that would let bankruptcy judges write down a person's monthly mortgage payment if the number of loan modifications remain low.

Frank, chairman of the House Financial Services Committee, also said his committee won't consider legislation to help banks lend unless there is a "significant increase" in mortgage modifications.

Frank's statement was aimed at adding momentum to a deal struck Tuesday between Treasury Secretary Timothy Geithner and more than two dozen mortgage companies. The two sides agreed to set the goal of adjusting 500,000 loans by Nov. 1.

But it was far from clear whether that would happen.

Loan servicers say they are still trying to play catch up to a deluge of customer requests by hiring and training thousands of new employees. Banks also are trying to sort through which customers face a legitimate financial hardship.

Also, many loans have been bundled and sold to investors as securities, complicating efforts to modify the terms.

Congress tried earlier this spring to pass legislation that would give people a chance to keep their homes by filing for bankruptcy. But while President Barack Obama said he supported the measure, he did little to see it through and it was defeated amid an aggressive lobbying effort by banks. . . . .

What a mess: "Democrats' Stimulus Plan May Reach $700 Billion"

So what is another $700 billion? I didn't think that the first money should have been spent and I think that this will be even less desirable. This from the Washington Post:

Facing an increasingly ominous economic outlook, President-elect Barack Obama and other Democrats are rapidly ratcheting up plans for a massive fiscal stimulus program that could total as much as $700 billion over the next two years.

That amount, more than the nation has spent over the past six years in Iraq, would rival the sum Congress committed last month to rescuing the country's financial system. It would also be one of the biggest public spending programs aimed at jolting the economy since President Franklin D. Roosevelt's New Deal.

Hints of a hefty new spending program began emerging last week. New Jersey Gov. Jon Corzine (D), an Obama adviser, and Harvard economist Lawrence H. Summers, whom Obama has chosen to lead his White House economic team, both raised the possibility of $700 billion in new spending. Yesterday, Obama adviser and former Clinton administration Labor secretary Robert Reich and Sen. Charles E. Schumer (D-N.Y.) also called for spending in the range of $500 billion to $700 billion. . . .

The Obama Market

The WSJ has this:

The voters may be full of hope about the looming Obama Presidency, but so far investors aren't. No President-elect in the postwar era has been greeted with a more audible hiss from Wall Street. The Dow has lost 1,342 points, or about 14%, since the election, with the S&P 500 and Nasdaq hitting similar skids. The Dow fell another 4.7% yesterday.

Much of this is due to hedge fund deleveraging, as well as dreadful corporate earnings reports and pessimism that the recession will be deeper than many had hoped. We also don't want to read too much into short-term market moves. But there's little doubt that uncertainty, and some fear, over Barack Obama's economic agenda is also contributing to the downdraft.

The substance of what Mr. Obama has promised for the economy is bearish for stocks. The threat of higher tax rates, especially on capital gains and dividends, now may be getting priced into the market. Add that to investor doubts about Democratic policies on unions, health care and trade -- and no wonder stocks are falling. Lower stock prices in turn reduce household net worth, thus slamming consumer confidence and contributing to what appears to be a consumer spending strike. . . .

Obama on ACORN and other Community Activist Groups: "calling all of you to help up shape the agenda"

This is from an address that Obama gave in 2007 to a group of community organizers.

With all the claims about fraudulent voter registration, Politico notes that "Obama’s campaign has also shelled out about $800,000 to an ACORN subsidiary, Citizens Services Inc., to help with voter registration efforts. Although ACORN says it is nonpartisan, its registration efforts tend to be focused among groups friendly to Democratic candidates."

McCain has a new ad discussing Obama's connections with ACORN

"ACORN's Senator"

From Investor's Business Daily:

Barack Obama wasn't just the second-largest recipient of Fannie Mae and Freddie Mac political contributions. He was also the senator from ACORN, the activist leader for risky "affirmative action" loans. . . .

As the New York Times reports, "Aides to Mr. Obama said he had not directly reached out to try to sway any House Democrats who opposed the measure." Is the reason the fact that the slush fund for ACORN in the original bill, siphoning off 20% of any future profits for such activist groups, was trimmed from the tree? . . .

Obama campaign tries to get NRA ads pulled

Not content to make its case to the public, the Obama campaign is threatening legal action from its general counsel to make television stations stop running the ads. The Obama campaign cites FactCheck.org and the Washington Post. Yesterday I ran a piece that showed that both of those sources were completely wrong in their claims (see also this). Click on these scanned images of the cease and desist letters to make them larger and readable.

Former Fannie Mae chairman Jim Johnson Still Working in Obama Campaign

The Politico has this:

Johnson to lead Obama briefing
Former Fannie Mae chairman Jim Johnson was dumped from Obama's vice presidential search team, but he's still playing a behind-the-scenes role on the campaign.

Former Senator Tom Daschle, a top Obama backer, emailed a select list this afternoon that he and Johnson would be leading a briefing intended largely for Clinton's campaign brain trust next month.

"Jim Johnson and I have scheduled another informal breakfast discussion and update on the campaign early next month," he wrote to a list including Senator John Kerry, James Carville, and Richard Holbrooke, as well as Clinton's former top campaign aides, including Howard Wolfson, Geoff Garin, and Harold Ickes.

Johnson's involvement comes at a moment when political association with the failed mortgage giants is particularly toxic. He was already the subject of a McCain ad attacking Obama. . . .