McCain wrong about Fannie Mae & Freddie Mac CEO severance

September 19, 2008

Poor John McCain. He’s having a REALLY bad week and not getting a lot right.   From MSNBC’s First Read comes the following:

From NBC’s Mark Murray and NBC/NJ’s Adam Aigner-Treworgy
On the campaign trail in Minnesota today, McCain incorrectly suggested that the executive pay that former Fannie Mae CEOs Frank Raines and Jim Johnson earned came from taxpayers.

“That same executive got $21 million of your money,” McCain said of Johnson. “And the other CEO, another supporter of Senator Obama, Mr. Raines got $25 million of your money. Let’s tell them to give it back. Let’s tell them to give it back.”

Lucian Bebchuk of Harvard Law School, an expert on corporate governance, confirmed to First Read that Fannie Mae and Freddie Mac were private companies until being recently taken over by the federal government (which came after Raines’ and Johnson’s tenures).

If John McCain was a boxer, his corner would be throwing in the towel at this point. It’s time for the voters to throw in the towel on John McCain. Enough!!

Obama/Biden in 2008

Democrat Dave


GOP screw-up costs taxpayers $1 trillion to fix

September 19, 2008

I don’t know about you, but, I’ve had about as much fun with the economic news this week as I can stand.   Think Exxon-Valdez.   I’m sure you remember it: the huge oil spill in Alaska when Captain Hazelwood got drunk and allowed his huge tanker ship to run aground.   We’ve hit the rocks and created a massive problem that will be felt for years to come.  This isn’t a blip on the radar–this is a massive implosion of key parts of our economy because the underlying foundation turned out to be little more than a house of cards. It’s a $1 trillion problem by some estimates, perhaps more.

The current financial crisis is the result of a whole bunch of collosal screw-ups by a whole bunch of people.   In this instance, the lack of liquidity (cash) and the questionable viability of loans put a stranglehold around our economy. Things got so tightly bound, that our entire economy was put at risk. We’ve never seen anything like this.

The problem isn’t the result of a few “adjustments” that need to be made as George Bush mentioned earlier this week–it’s the result of foundational, systemic issues in our economy and a lack of an ethical and moral compass in our financial institutions. When things only rise in value, that covers a lot of abuse. But, when things start to correct and go down, that can spell disaster.

A home is “under water” when the value is less than the debt against it. The businesses that are failing are “under water”–the debt exceeds the value of the portfolio which means there is no way to get cash out of the assets by borrowing against them or through equity markets.

But, a whole lot more of this problem is due to lack of government oversight brought on by the likes of John McCain’s chief economic advisor, Phil Gramm, former GOP U.S. Senator from Texas and former lobbyist. Phil led the way on deregulation.

Frankly, I’m concerned that the same people who helped create the problem are now, in a matter of hours, going to prescribe a solution to something so complex that even a guy like Alan Greenspan didn’t see this coming several years ago when he headed the Federal Reserve!   I can only hope that there is some divine inspiration that leads us to a viable solution.  We can’t afford to screw this up again.

I applaud Barack Obama’s restraint to not prescribe a quick fix.  I shake my head at John McCain who is throwing out ideas just to look like he’s doing something to look “presidential.” This, like many things in the world, is very complex and requires a thoughtful, reasoned approach. The B.S. of “you can’t blink” is just that–B.S.

To not understand history is to repeat it.  Here’s some excerpts from a Wall Street Journal article dated 19SEP08 (today) called “The Woe on Wall Street” with respect to a new book called “The World is Curved”, subtitled “Hidden Dangers to the Global Economy” by David M. Smick that are particularly noteworthy today:

Mr. Smick warns — with prescience, as it turns out — that financial disaster lurks just beyond the horizon, thanks to reckless investment banks, rash hedge funds, fraudulent Chinese bankers and American voters who are learning to hate the taste of free trade. Mr. Smick’s book arrives just in time to give you that final nudge out onto the ledge.

The real problem running throughout the system was not a lack of new regulations. It was a lack of skin — that is, skin in the game. Mortgage brokers turned into fly-by-nighters, immune from the effects of reckless decisions. Local bankers securitized loans and packed them off to some naïve investor or to a rating agency manned by analysts who weren’t sharp enough to get a job at Bear Stearns or Lehman. Homebuyers who put nothing down or lied about their income could pack up and run off, leaving no skin behind. The entire housing sector began to look like a motel renting rooms by the hour, as johns and hookers snuck out during the wee hours. Where were the regulators? 

Everybody involved knew this was happening. These unscrupulous lending practices fueled the dramatic rise in real estate prices and, now that access to capital for home buyers has been severely restricted, it is what is causing home prices to fall precipitously and why buyers for homes are few and far between. Afterall, a home is only worth what a willing buyer can finance. It’s tough to get a loan when it doesn’t appraise for the selling price. Foreclosures are driving down everyone’s home value.

And, this story and many like it will cost the U.S. taxpayers approximately $1 trillion, maybe more. George Bush and the GOP–the Captain Hazelwood of the U.S.–don’t deserve our votes or consideration in this election. They’ve abdicated their right to lead this great nation.  Enough!!

As they do in the baseball game, we (the manager) need to walk to the mound and take the ball away. It’s time to bring in a new pitcher–a new team-that won’t fall asleep at the wheel.

Vote for Barack Obama and Joe Biden in November. Democrat Dave