Monday, May 14, 2012


Records show that four out of Obama's top five contributors are employees of financial industry giants - Goldman Sachs ($571,330), UBS AG ($364,806), JPMorgan Chase ($362,207) and Citigroup ($358,054).

Obama: JPMorgan Is 'One of the Best-Managed Banks'
By Mary Bruce | ABC OTUS News – 2 hrs 31 mins ago
Obama: JPMorgan Is 'One of the …
Lou Rocco / ABC News
Just hours after a top JPMorgan Chase executive retired in the wake of a stunning $2 billion trading loss, President Obama told the hosts of ABC's "The View" that the bank's risky bets exemplified the need for Wall Street reform.
"JPMorgan is one of the best managed banks there is. Jamie Dimon, the head of it, is one of the smartest bankers we got and they still lost $2 billion and counting," the president said. "We don't know all the details. It's going to be investigated, but this is why we passed Wall Street reform."
The full interview airs on "The View" Tuesday on ABC at 11 a.m. ET
While a powerhouse like JPMorgan might be able to weather an error that the bank's own CEO called "egregious," the president questioned what might happen to smaller institutions in similar situations.
"This is one of the best managed banks. You could have a bank that isn't as strong, isn't as profitable managing those same bets and we might have had to step in," he said. "That's why Wall Street reform is so important."
While touting his efforts to rein in the Wall Street behavior that led to the massive taxpayer bailout of the banks following the financial crisis, he noted his administration is still fighting for tough reform.
Pivoting to November, the president said Wall Street reform is one of the many critical areas where he and his Republican challenger, presumptive GOP nominee Mitt Romney, have a different vision for the future.
The president's full interview airs Tuesday on "The View." Tune into "World News with Diane Sawyer" tonight for more.
Nicole Gelinas
It’s Not About Jamie Dimon
We should look to markets, not men, to govern the economy.
14 May 2012
On Meet the Press yesterday, JPMorgan Chase chief Jamie Dimon epitomized what’s wrong with America’s approach to the financial crisis. The American media and political elite remain obsessed with personalities, looking for heroes and villains instead of focusing on what we really need: the dispassionate rule of law that would allow free markets to flourish. Meet the Press is for politicians, and Dimon performed like a model one. He spoke in short sentences and apologized directly: “I was dead wrong,” he offered, for having made a “terrible, egregious mistake.” Specifically, last Thursday, JPMorgan announced a $2 billion trading loss on a derivatives bet.
Theoretically, anyway, such a loss should be a matter between the bank and investors, not TV fodder. Yet Dimon’s business—too-big-to-fail banking—is no ordinary business. Washington’s willingness to subsidize failure means that Dimon’s job is as much political risk management as financial risk management. Because JPMorgan depends on Uncle Sam’s backing, one of Dimon’s key constituencies is politicians and government regulators. And one way to charm regulators—and the voters who elect the politicians—is through a killer interview.
In October 2008, the Bush administration, not normally a fan of government expropriation, forced nine big banks, including Dimon’s, to accept $125 billion in TARP money. The banks were deemed so important that they had to take the money to protect them against failure, whether they wanted it or not. Since then, the banks and the government have stayed bound together. President Obama’s Dodd-Frank financial reform law, enacted two summers ago, has tied the two sides closer still. The problems that led to the financial crisis, remember, included investors’ perception—honed over two decades of smaller-scale bailouts—that big banks were too big to fail. Dodd-Frank has given such banks an official title: “systemically important financial institutions.”
Another problem that led to the financial crisis was that, over the years, politicians and regulators determined that banks had become so good at risk management that they no longer needed to abide by consistent rules—fixed limits on borrowing, for example, so that banks could fail without leaving behind so much unpaid debt that they endangered the economy. Instead, banks could largely do what their executives wanted, as long as regulators believed, on a case-by-case basis, that they knew what they were doing.
In the aftermath of the JPMorgan mess, politicians and reporters have been invoking the Dodd-Frank law’s “Volcker Rule.” Named after Paul Volcker, the Federal Reserve chairman from the Carter and Reagan eras, the rule prohibits banks whose customers benefit from taxpayer-backed deposit insurance from engaging in “proprietary trading,” or speculation. But the Volcker Rule isn’t a rule at all: it prohibits behavior that has no set definition. Twenty-two months after Dodd-Frank became law, regulators have delayed enforcing the rule because they still cannot figure out what proprietary trading really is. Consider how JPMorgan lost all that money: creating derivatives that let it sell billions of dollars’ worth of protection against the risk that some corporate securities would default. That sure doesn’t sound like a good idea. Banks, because they’re lenders, are already at risk if people and companies default in droves.
But does selling such synthetic “insurance” constitute proprietary trading? Michigan Senator Carl Levin, who helped draft the Volcker Rule language, says it does. Bank officials have argued that such behavior is hedging, which would be okay under Dodd-Frank.
Real rules could govern Wall Street, but politicians must give regulators the backing to create and enforce them. Rather than worry about the Volcker Rule, politicians and reporters should be focusing on derivatives rules. One reason that Washington had to bail out the financial system four years ago was that financial firms such as AIG had taken on virtually infinite risk through the derivatives markets. Through derivatives, AIG could “sell” protection against other companies’ defaults with almost no cash down. Lo and behold, that’s what JPMorgan Chase was doing, too. Regulators should demand that traders—whether big banks or tiny hedge funds—put a set amount of cash down behind such bets, curtailing the amount of potential unpaid debt in the financial system. Regulators should also require that traders execute such transactions on open clearinghouses and exchanges—so that markets can determine which bets are going well and which aren’t, and clearinghouses can demand more money from traders to cover their losses. Such rules empower market signals, not regulatory micromanagement, to control risk. If such rules were in place, it’s unlikely Dimon would have visited the White House 18 times in three years, as he would have had no way to manipulate a restriction that, after all, applied to everyone.
The best way to stop bailouts is to limit borrowing and demand transparency. When markets know that financial firms have put a cash cushion behind their bets—and where the risk behind such bets lies—they’re unlikely to pull their money out of the financial system en masse, necessitating a government rescue. The Volcker Rule, by contrast, adds no such protection against future taxpayer rescues; all it does is unleash regulators to debate, in private, the definitions of risk.
Dodd-Frank gave regulators the authority to impose real rules on derivatives, and the regulators have done so. But lobbyists demanded and secured exceptions, which could eventually prove the rule. With such loophole-ridden reform, America has hardly set a good example for Europe, which lags even further behind in enacting derivatives rules. In fact, JPMorgan Chase may have executed the derivatives deals from London because the bank perceived London as a looser environment. Moving this activity around the world so that financiers can play inconsistent rules against one another does nothing to help the struggling Western economies.
The media and the politicians, however, would rather discuss people than arcane issues like financial rules. Look at how politely—almost obsequiously—NBC’s David Gregory treated Dimon. Gregory asked Dimon: “Here you are, Jamie Dimon, you’ve got a sterling reputation. . . . How does a guy like you make this mistake? If this happened at JPMorgan Chase . . . what about all the other banks out there? If somebody else made a mistake like this, would we be again talking about too big to fail and taxpayer bailouts?” Then, when asking delicate questions about potential criminal liability, Gregory unconsciously switched from “you” to “the bank.” Lowly regulators will hardly be more willing to take on Dimon and his colleagues.
Focusing on one man represents bailout thinking. Policymakers continue to be distracted from the rules needed to protect the economy from the consequences—including corporate failure—of the bad decisions that individuals can make. Nearly four years after the financial crisis began, Washington seems to have learned almost nothing.




"In general, these are professional prognosticators," said Ritsch. "And they may be putting their money on the person they predict will win, not the candidate they hope will win."

Records show that four out of Obama's top five contributors are employees of financial industry giants - Goldman Sachs ($571,330), UBS AG ($364,806), JPMorgan Chase ($362,207) and Citigroup ($358,054).


Mortgage-aid revisions paying off for lenders and some borrowers

Changes to streamline the Home Affordable Refinance Program are helping some underwater homeowners get lower-interest loans. Those still-above-market rates, meanwhile, are boosting banks' profits.

By E. Scott Reckard, Los Angeles Times
May 9, 2012
A newly streamlined government plan to reward homeowners who diligently pay their underwater mortgages is proving a bonanza for banks, which by one estimate may pocket $12 billion in extra revenue by refinancing loans.

The revisions to the Obama administration's 3-year-old Home Affordable Refinance Program have yielded mixed results for homeowners, analysts and mortgage professionals say.

Some responsible homeowners are indeed getting lower-interest loans despite owing far more than their homes are worth. But others have loans that don't qualify, or must jump through hoops the plan was supposed to eliminate, such as on-site appraisals and extensive paperwork.

What's more, critics say, homeowners who get new loans are being stuck with higher rates than necessary, often half a percentage point or more. That's because banks are refinancing only their own borrowers, instead of competing against one another, which would drive rates down.

"The banks should charge lower than the market interest rate because the new version of the program means less work and less risk for them. Instead, they are charging more," said Amherst Securities analyst Laurie Goodman, who titled a recent report on the program "And the Winner Is ... the Largest Banks."

The program is a key part of President Obama's efforts to bolster the ravaged housing market. Administration officials including Housing and Urban Development Secretary Shaun Donovan are pressuring Congress to pass a law enabling the program to be used to help more homeowners.

"There's a real urgency here because interest rates today are at the lowest level they have ever been," Donovan testified Tuesday before the Senate Banking Committee. "But as the economy continues to improve, the expectations are this window of record low interest rates may not last for a long time."

In response, Sens. Robert Menendez (D-N.J.) and Barbara Boxer (D-Calif.) said Tuesday that they would introduce legislation this week to extend streamlined refinancing to all underwater Fannie and Freddie borrowers and eliminate appraisal and upfront fees for homeowners using the program to obtain new loans.

The Home Affordable Refinance Program is less controversial than relief plans for delinquent borrowers. Few have objected to its goal of helping homeowners who pay their loans on time but can't refinance at today's record low rates because their home values have plummeted.

To qualify, borrowers must owe more than 80% of the current home value. They can't have missed a payment for the last six months and are allowed to have been late by 30 days only once in the last year.

As this year began, nearly 1 million loans had been replaced using the program, but only 1 in 10 had balances higher than 105% of the home value. The changes, phased in during the first quarter, aim to encourage refinances no matter how far underwater the loan is.

The program is for loans owned or backed by Fannie Mae and Freddie Mac, the government-supported mortgage buyers that handle 60% of U.S. home loans. It works by having mortgage customer-service providers, which are mainly arms of banks, refinance borrowers into new loans that are sold to Fannie or Freddie.

Because Fannie and Freddie already are stuck with the losses if the existing loans go bad, the thinking goes, substituting lower-interest new mortgages actually reduces everyone's risk. The homeowners have hundreds of dollars more each month, which makes them less likely to default — a boon to their local housing markets and a lift for the economy when they spend their extra cash.

The problem, Goodman said, is that the streamlined program minimizes processing costs for the existing loan servicers but not for competitors, who must collect nearly as much information about borrowers as though they were writing new loans.

The program also exempts existing servicers from having to reimburse Fannie and Freddie for losses on certain flawed mortgages — a multibillion-dollar problem these last few years for the big banks — while requiring competitors to bear that same risk.

President Obama envisioned a different scenario when he announced the revised program last fall.

"These changes are going to encourage other lenders to compete for that business by offering better terms and rates," he said. "And eligible homeowners are going to be able to shop around for the best rates and the best terms."

That wasn't the experience of Johnny James, who bought a Gardena condominium with a 20% down payment during the housing bubble and now owes $414,000 on a home Fannie Mae says is worth $266,000.

James and his wife, Yolanda Hatcher, have full-time jobs with Los Angeles County and excellent credit ratings. Since they hadn't missed payments on their Fannie Mae loan, they thought they were good candidates for a lower-interest refi.

But their servicer, Seterus Inc., said it was just a bill collector, not a lender. Their original lender, JPMorgan Chase & Co., said it would refinance only loans it is currently servicing. Wells Fargo & Co. said the same, and online mortgage specialist Quicken Loans said the condo was too far underwater to refinance.

"There's not a lot of help out there for folks like us," James said.

The couple turned to mortgage broker Jeff Lazerson, who said he submitted applications to eight lenders and found only one that would refinance them. The pending deal, which would cut their rate to 4.63% from 6.25%, was made after they fully documented their income and assets and paid for an on-site appraisal.

"This program has been billed as a worry-free way for responsible people to get a break on rates even if they're way underwater," said Lazerson, president of Mortgage Grader in Laguna Niguel. "From where I sit, it's a disaster."

James Parrott, senior advisor on housing at the White House's National Economic Council, said that even in its imperfect current version, the program would aid many of the half million or so borrowers who have applied to refinance since the latest revisions were made.

"Those people get dropped from 6% or 7% loans to somewhere around 4%," he said. "They will have hundreds of dollars more for themselves every month and thousands of dollars a year."

While proponents say the program makes winners out of all hands, it is not without detractors.

Alexandria, Va., banking consultant Bert Ely said easy-qualifier loans "are what got us into this mess in the first place" and that waiving legal liabilities for banks could result in another round of mortgage headaches in 2013 and beyond.

"What the government is sanctioning is kicking the can down the road, again," he said.

Like other administration plans to bolster housing, the voluntary Home Affordable Refinance Program had underperformed until recently. Lenders rarely refinanced loans bigger than 105% of the home's value even though they were permitted to go to 125%.

But that changed as the new rules loosened restrictions and did away with the 125% cap. Applications for these refinances rocketed from less than 5% of the mortgage market in December "to close to 25% and rising," Nomura Securities analyst Brian Foran wrote in a recent report.

The loans are more profitable as well. In the past, Foran said, lenders typically made 2% of the loan amount when selling a loan to Fannie or Freddie, so a $350,000 loan might yield $7,000 in revenue.

Because the banks are charging higher than market interest rates for loans made under the program, the mortgages are more valuable to investors and sell for more. The banks are typically making an extra 2% of the loan amount, Foran said — another $7,000 on the $350,000 loan, money that drops to the bottom line.

By Foran's calculations, writing more loans at higher profit could yield $12 billion in additional revenue for lenders.

All the big banks showed unexpected jumps in their first-quarter mortgage profits, in large part because of the revised government program, said Keefe, Bruyette & Woods research director Frederick Cannon.

"Interesting that [the program] would be so good for banks," he said.

October 10, 2009
Talking Business
Have Banks No Shame? No, they have obama!
A few months ago, I asked Simon Johnson, the former International Monetary Fund economist, now a prominent critic of the banking industry, what he thought the banks owed the country after all the government bailouts.
“They can’t pay what they owe!” he began angrily. Then he paused, collected his thoughts and started over: “Tim Geithner saved them on terms extremely favorable to the banks. They should support all of his proposed reforms.”
Mr. Johnson continued, “What gets me is that the banks have continued to oppose consumer protection. How can they be opposed to consumer protection as defined by a man who is the most favorable Treasury secretary they have had in a generation? If he has decided that this is what they need, what moral right do they have to oppose it? It is unconscionable.”
I couldn’t have said it better myself.
Starting on Wednesday, the House Financial Services Committee will take up a number of reforms proposed by the Obama administration, hoping to push them through the committee so they can be voted on the House floor as part of a larger financial reform package. Among the proposals the committee will tackle is, yes, the establishment of a new consumer financial protection agency.
The administration’s outline for this new agency — which would regulate mortgages, credit cards, debit cards, installment loans and any other product issued by a financial institution — was sent up to Capitol Hill in July. Since then, Barney Frank, the committee chairman, has made a number of substantial changes, none of which, I have to say, have strengthened the proposed legislation. He stripped the bill of the much-promoted “plain vanilla” provision, which would have forced, say, mortgage brokers to offer customers a 30-year fixed mortgage alongside any exotic option A.R.M. mortgage they wanted to push.
He has changed the nature of an oversight panel, so that it would consist of the top bank regulators — the very same regulators who did such a miserable job looking out for consumers during the housing bubble. He has tinkered with the way the agency will be financed, making it less onerous for the banking industry and more onerous for nonbank financial institutions that will come under the agency’s purview.
Saddest of all — at least from where I’m sitting — he abandoned the so-called reasonableness standard, which would have forced bankers to make sure their customers both understood the products they were buying and could afford them. Mr. Frank has said that such a provision would put bankers in an “untenable position.” Yet that is precisely what brokers are required to do when they sell a stock or a bond to their customers. Why shouldn’t the same standard apply to a banker making a mortgage loan?
Part of the reason Mr. Frank made those changes is that he needs the support of conservative Democrats if he hopes to turn this bill into law. But it is also because he felt a need to mollify, at least to some extent, the bank lobby, especially the community bankers who populate every Congressional district in the country. Indeed, in a recent missive to its members, the American Bankers Association trumpeted its success in helping make the bill more palatable to the banking industry.
Yet even now, despite its success in reining in the proposed agency, the banking industry is still lobbying fiercely against it. Edward L. Yingling, the president of A.B.A., borrowed a line from “Casablanca” to describe the impulse behind the proposed consumer agency. “They’re rounding up the usual suspects,” he complained to me the other day. “We’re the usual suspects.”
Not long ago, the A.B.A. sent an “action alert” to its member banks, pleading with them to call their congressman in a last-ditch effort to stop the bill. (“Passing more laws that will overly complicate and restrict the products our customers need is detrimental to our banks,” the note read in part.) And even if the bill does pass, the industry is hoping to pervert its purpose, so that it will become a means to stifle competition from nonbank financial institutions.
To which one can only ask: Have they no shame?
“There needs to be more focus on consumers,” Mr. Yingling insisted. “We agree with that.”
Whenever you talk to bankers or their lobbyists about the proposed agency, you hear some variation of what I’ve come to think of as the party line. It’s not that they’re against consumer protection, they say. (Heaven forbid!) Rather, they say, this new agency — larded as it will surely be with thousands of newly deputized bureaucrats, each one eager to impose burdensome new regulations — is simply not the way to go about it.
The current bank regulators, they point out correctly, already have consumer protection as part of their portfolios. “All they need to do is enforce the regulations already on the books,” one top banker told me recently. (Like all top bankers these days, he would speak only anonymously, fearing the wrath of the Treasury.)
What’s more — and this is the part that is really unbelievable — they insist that bankers weren’t the cause of the financial crisis. The entities that were peddling all those awful subprime mortgages were the nonbanks — the mortgage originators and mortgage brokers — who were almost entirely unregulated. “We have no objection to them regulating the nonregulated firms,” said Camden R. Fine, the president of the Independent Community Bankers of America.
Well, of course, he doesn’t. If the bankers can persuade Congress to change this agency’s mission so that it only regulates the nonbanks — something they are trying to do, and which Mr. Frank insists will not be successful — they will have succeeded in putting sand in the engine of their nonbank competitors.
In fact, nonbank financial institutions do need to be regulated; they weren’t exactly the good guys during the housing bubble. But neither were the bankers, something they’ve conveniently forgotten.
Who do you think was creating all those subprime mortgages that the brokers and originators were peddling? The banks, that’s who. I’ve had mortgage brokers tell me how bank salespeople put enormous pressure on them to ratchet up their sales of, say, option A.R.M., no-doc mortgages —mortgages the banks were offering, through the brokers — so they could make the loans and then bundle them to Wall Street for a hefty fee. Bankers were every bit as complicit in pushing mortgages on customers who lacked the means to pay them back.
Even now, banks are engaged in practices that are, at best, dubious, and at worst deceptive. How about, for instance, those rapacious debit card overdraft fees? My colleagues Ron Lieber and Andrew Martin have pointed out in recent articles that a decade ago, such fees barely existed; instead, the card was routinely rejected when a consumer tried to make a purchase with an empty bank account. Now, whether customers want overdraft protection or not, most banks cover the purchase and charge an absurdly high fee for the “privilege.”
No one can doubt that these fees hurt the very people who can least afford to pay them. (If you have college-age children, as I do, you know this firsthand.) But none of the regulators who are now supposed to be looking out for consumers were the least bit concerned. Only after the articles exposing these practices ran on the front page of The New York Times did several banks agree to abandon the fees for small overdrafts. But should it really require newspaper exposés to get banks to do the right thing?
Alas, without a consumer agency, that is pretty much what it takes. The real reason current regulators don’t pay more attention to consumer problems is not that they are evil (well, mostly they’re not), but that they have another mission that takes priority. They are charged with insuring the safety and soundness of the banking system. And safety and soundness means making sure that banks have enough capital — and are compensating for loan losses. When a bank decides to raise a customer’s credit card interest rate to 35 percent to make up for losses elsewhere in the credit card portfolio, that believe it or not, is a good thing from the perspective of safety and soundness. Even though it is a terrible thing for consumers.
Which is also why the bankers’ line about having their current regulators look out for consumers is so bogus. At the Federal Reserve, consumers will never come first; Alan Greenspan had the power to curb abusive subprime loans, but he just wasn’t interested. Nor is it any different over at the Office of the Comptroller of the Currency, the nation’s other big bank regulator. Not long ago, John C. Dugan, the comptroller, gave a speech in which he said — channeling Mr. Yingling — that the banks had not been responsible for the financial crisis. Regulators who take their talking points from the American Bankers Association don’t exactly inspire confidence that they’re looking out for consumers.
A consumer protection agency, on the other hand, wouldn’t have that dual mission; its sole goal would be to try to keep bank — and nonbank — customers from being gouged, deceived or otherwise taken advantage of. Without question, it would occasionally come into conflict with the safety and soundness regulators. But that is why that oversight panel exists: to hash out such conflicts.
There are those who believe that Mr. Frank’s changes have essentially gutted the bill. John Taylor, the chief executive of the National Community Reinvestment Coalition, told me that he now opposed the bill because it had been so watered down.
But most others still think it is a strong bill. Michael Calhoun, the president of the Center for Responsible Lending, called it “a reasonably strong bill,” despite the changes. And although I was worried at first when I saw provisions like plain vanilla and the reasonableness standard falling by the wayside, I’m now convinced that the new agency, as currently conceived, can still do a lot of good. It will have the authority to outlaw unfair products, and to force financial institutions treat their customers like, well, customers — and not lambs to be slaughtered.
Who could possibly be against that? Oh, right. The bankers are against it. And just a few days ago, The Wall Street Journal editorial page, that knee-jerk defender of corporate interests, came out against it as well.
That clinches it for me. The sooner we can pass the thing, the better.

Foreclosures Are Often In Lenders' Best Interest
Numbers Work Against Government Efforts To Help Homeowners
By Renae Merle
Washington Post Staff Writer
Tuesday, July 28, 2009
Government initiatives to stem the country's mounting foreclosures are hampered because banks and other lenders in many cases have more financial incentive to let borrowers lose their homes than to work out settlements, some economists have concluded.
Policymakers often say it's a good deal for lenders to cut borrowers a break on mortgage payments to keep them in their homes. But, according to researchers and industry experts, foreclosing can be more profitable.
The problem is that modifying mortgages is profitable to banks for only one set of distressed borrowers, while lenders are actually dealing with three very different types. Modification makes economic sense for a bank or other lender only if the borrower can't sustain payments without it yet will be able to keep up with new, more modest terms.
A second set are those who are likely to fall behind on their payments again even after receiving a modified loan and are likely to lose their homes one way or another. Lenders don't want to help these borrowers because waiting to foreclose can be costly.
Finally, there are those delinquent borrowers who can somehow, even at great sacrifice, catch up without a modification. Lenders have little financial incentive to help them.
These financial calculations on the part of lenders pose a difficult challenge for President Obama's ambitious efforts to address the mortgage crisis, which remains at the heart of the country's economic troubles and continues to upend millions of lives. Senior officials at the Treasury Department and the Department of Housing and Urban Development have summoned industry executives to a meeting Tuesday to discuss how to step up the pace of loan relief. The administration is seeking to influence lenders' calculus in part by offering them billions of dollars in incentives to modify home loans.
Still, foreclosed homes continue to flood the market, forcing down home prices. That contributed to the unexpectedly large jump in new-home sales in June, reported yesterday by the Commerce Department.
"There has been this policy push to use modifications as the tool of choice," said Michael Fratantoni, vice president of single-family-home research at the Mortgage Bankers Association. But "there is going to be this narrow slice of borrowers for which modifications is the right answer." The size of that slice is tough to discern, he said. "The industry and policymakers have been grappling with that."
The effort to understand the dynamics of the mortgage business comes as the administration is prodding lenders to do more to help borrowers under its Making Home Affordable plan, which gives lenders subsidies to lower the payments for distressed borrowers. About 200,000 homeowners have received modified loans since the program launched in March, while more than 1.5 million borrowers were subject during the first half of the year to some form of foreclosure filings, from default notices to completed foreclosure sales, according to RealtyTrac.
No doubt part of the explanation is that lenders are overwhelmed by the volume of borrowers seeking to modify their mortgages. Rising unemployment and falling home prices have added to the problem.
But a study released last month by the Federal Reserve Bank of Boston was downbeat on the prospects for widespread modifications. The analysis, which looked at the performance of loans in 2007 and 2008, found that lenders lowered the monthly payments of only 3 percent of delinquent borrowers, those who had missed at least two payments. Lenders tried to avoid modifying the loans of borrowers who could "self-cure," or catch up on their payments without help, and those who would fall behind again even after receiving help, the study found.
"If the presence of self-cure risk and redefault risk do make renegotiation less appealing to investors, the number of easily 'preventable' foreclosures may be far smaller than many commentators believe," the report said.
Nearly a third of the borrowers who miss two payments are able to self-cure without help from their lender, according to the Boston Fed study. Separately, Moody's, a research firm, estimated that about a fifth of those who miss three payments will self-cure.
When Adrian Jones fell behind on the mortgage payments for her Dallas home earlier this year, her lender asked her to cut other expenses. Jones said she eliminated movies and coffee breaks. She turned to family members for loans. When that failed to raise enough, she sold her second car.
"It hurt, but it also made sense. The debt was my responsibility," Jones said.
But six months later, after catching up on the mortgage, Jones is again feeling pinched after her hours as an office assistant at an architecture firm were cut. This time, she's not sure she can fix the problem herself.
"I am going to try, obviously," she said. "But it is getting harder and harder."
Like Jones, those who are most determined to meet their obligations are often unlikely candidates for loan modifications.
"These are the people who will get a second job, borrow from their family to keep up," explained Paul S. Willen, a senior economist at the Federal Reserve Bank of Boston and an author of its report. ". . . From a cold-blooded profit-maximizing standpoint, these are the people the banks will help the least."
Lenders also worry that borrowers may re-default even after receiving a loan modification. This only delays foreclosure, which can be costly to the lender because housing prices are falling
throughout the country and the home's condition may deteriorate if the owner isn't maintaining it. In some cases, lenders lose twice as much foreclosing on a home as they did two years ago, said Laurie Goodman, senior managing director at Amherst Securities.
American Home Mortgage Services, based in Texas, was willing to modify Edward Partain's mortgage on his Tennessee home last April after business at his beauty salon slowed and a divorce stretched his budget. But after months of negotiating with his lender, Partain said he was surprised to learn that it would only lower his payments by $90 a month, instead of the $250 decrease he expected.
"At $250, I would have had a chance, but after they added in late fees and payments, I couldn't do it," he said.
Partain soon fell behind on his payments again and went back to American Home Mortgage Services seeking a more affordable payment. Partain said he was told that he was ineligible for another modification because it had been less than a year since his last. A foreclosure sale was scheduled for late July.
After American Home Mortgage Services was contacted by The Washington Post about the case, the company said Partain would be considered for the federal foreclosure-prevention program and it delayed the sale by three months. Partain is relieved but anxious about the details.
"You want to wait and see what figures they come up with," he said.
Administration officials have not said publicly how many borrowers they expect to re-default under Obama's program.
But the experience of a separate program run by the Federal Deposit Insurance Corp. could be instructive. After taking over the failed bank IndyMac last year, the FDIC began modifying troubled mortgages held or serviced by the company. Richard Brown, the FDIC's chief economist, said the agency expects up to 40 percent of those borrowers to re-default.
Even at that rate, he said, the modification program is more profitable than doing nothing. "The idea that 30 to 40 percent re-default is a failure to a program is false," Brown said.
The administration has estimated that its foreclosure-prevention program would help 3 million to 4 million borrowers by 2012. But lenders' reluctance could limit the impact to less than half that, said Mark Zandi, chief economist for Moody's Coupled with re-defaults, this would mean that the number of people losing their homes to foreclosure could reach nearly 5 million by 2011, he said.
Mark A. Calabria, director of financial-regulation studies at the Cato Institute, warned that political rhetoric is driving the policy discussion. "What we really need to do is have an honest debate about what are the magnitudes of people we really can help," he said. But administration officials defended their program's progress, reporting that it has surpassed an initial goal of offering 20,000 modifications a week. These officials said they have taken into account the re-default risk and possibility for self-cure in designing the effort.
Michael S. Barr, assistant Treasury secretary for financial institutions, noted that the report by the Boston Fed does not cover the period since the administration launched its initiative. "We will continue to refine the program as new data becomes available," he said. "We are committed to studying the effectiveness and efficiency of the program, and we welcome outside analysis."
Willen, of the Boston Fed, said the government program could boost several-fold the number of seriously delinquent borrowers receiving modifications. But so few people had been getting their loans modified that even a dramatic increase in the percentage would still touch only a small fraction of troubled borrowers, he said.
"We're still not talking about a program that will stop a large number of foreclosures," he said. "We're talking about a program that, at the margins, will assist more people. It is unlikely we will see a sea change."
February 11, 2009
Op-Ed Columnist
Trillion Dollar Baby
So much for the savior-based economy.
Tim Geithner, the learned and laconic civil servant and financial engineer, did not sweep in and infuse our shaky psyches with confidence. For starters, the 47-year-old’s voice kept cracking.
Escorting us over the rickety, foggy bridge from TARP to Son of TARP by way of TALF — don’t ask — Geithner did not, as the president said when he drew on the wisdom of Fred Astaire, inspire us to pick ourselves up, dust ourselves off and start all over again.
The Obama crowd is hung up on the same issues that the Bush crew was hung up on last September: Which of the potentially $2 or $3 trillion in toxic assets will the taxpayers buy and what will we pay for them?
Despite the touting, the Treasury chief unveiled a plan short on illumination, recrimination, fine points and foreclosure closure. The Dow collapsed on its fainting couch as Sports Illustrated swimsuit models rang the closing bell.
It wasn’t only that Geithner’s own tax history — and his time as head of the New York Fed when all the bad stuff was happening on Wall Street, and when he left with nearly a half-million in severance — makes him a dubious messenger for the president’s pledge to keep the haves from further betraying the have-nots.
It wasn’t only that Americans’ already threadbare trust has been ripped by Hank Paulson’s mumbo-jumbo and the Democrats’ bad judgment in accessorizing the stimulus bill with Grammy-level “bling, bling,” as the R.N.C. chairman, Michael Steele, called it.
The problem is that the “lost faith” that Geithner talked about in his announcement Tuesday cannot be restored as long as the taxpayers who are funding these wayward banks don’t have more control.
Geithner is not even requiring the banks to lend in return for the $2 trillion his program will try to marshal, mostly by having the Fed print money out of thin air, thereby diluting our money, or borrowing more from China. (When, exactly, can China foreclose on us and start sending us toxic toys again?)
There’s a weaselly feel to the plan, a sense that tough decisions were postponed even as President Obama warns about our “perfect storm of financial problems.” The outrage is going only one way, as we pony up trillion after trillion.
Geithner is coddling the banks, setting it up so that either we’ll have to pay the banks inflated prices for poison assets or subsidize investors to pay the banks for poison assets.
As Steve Labaton and Ed Andrews wrote in The Times on Tuesday, Geithner won an internal battle with David Axelrod and other Obama aides who wanted to impose pay caps on every employee at institutions taking the bailout and set stricter guidelines on how federal money is spent. Geithner prevailed over those who wanted to kick out negligent bank executives and wipe out shareholders at institutions receiving aid.
In a move that would have made his mentor, Robert Rubin, proud, Geithner beat back the populists and protected the economic royalists. The new plan offers insufficient meddling with Wall Street, even though Wall Street shows no sign that the hardscrabble economy has pierced its Hermès-swathed world.
Wells Fargo, for instance, which has leeched $25 billion in bailout money, bought an inadvertently hilarious full-page ad in The Times to whinge about the junkets to Las Vegas and elsewhere it was forced to cancel because of public outrage. (The ad in The Times on Sunday could have cost up to $200,000, which may count as a bailout for our industry.)
“Okay, time out. Something doesn’t feel right,” John Stumpf, the president and chief executive of Wells Fargo wrote in an open letter defending their two decades of four-day employee recognition “events.” Calling them junkets or boondoggles is “nonsense,” he protested, adding about his employees: “This recognition energizes them.”
In this economy, simply having a job should energize them.
Geithner is wrong. The pay of all the employees in bailed-out banks, not just top executives, should be capped. And these impervious, imperial suits who squander taxpayers’ money after dragging the country over the cliff should all be fired — preferably when they come to D.C. on Wednesday in a phony show of populism on Amtrak and the shuttle to testify before Barney Frank.
Wall Street cannot be trusted to change its culture. Just look at the full-page ads that Bank of America (which got $45 billion) and Citigroup (which got $50 billion) are plastering in newspapers, lavishing taxpayer money on preening prose.
We don’t want our money spent, as Citigroup did, to pat itself on the back “as we navigate the complexities together.” Bank of America cannot get back our trust by spending more of our cash to assure us that it’s “getting to work” on getting back our trust.
Just get back to work and start repaying us.

Lou Dobbs Tonight Tuesday July 29, 2008
Despite countless hearings about manipulative and abusive practices by credit card companies, Congress has failed to enact a proposed Credit Card Holders Bill of Rights. Rep. Carolyn Maloney, who has championed the bill, has been told that despite the necessity of passing the legislation, support is evaporating rapidly, as many are unwilling to take on the banks.

Lenders Fighting Mortgage Rewrite
Measure Targets Bankrupt Homeowners
1.                  By Jeffrey H. BirnbaumWashington Post Staff WriterFriday, February 22, 2008; D01
The nation's largest lending institutions are lobbying hard to block a proposal in Congress that would give bankruptcy judges greater latitude to rewrite mortgages held by financially strapped homeowners.
The proposal, which could come to a vote in the Senate as early as next week, is being pushed by Democratic congressional leaders and a large coalition of groups that includes labor unions, consumer advocates, civil rights organizations and AARP, the powerful senior citizens' lobby.
The legislation would allow bankruptcy judges for the first time to alter the terms of mortgages for primary residences. Under the proposal, borrowers could declare bankruptcy, and a judge would be able to reduce the amount they owe as part of resolving their debts.
Currently, bankruptcy judges cannot rewrite first mortgages for primary homes. This restriction was adopted in the 1970s to encourage banks to provide mortgages to new home buyers.
The Democrats and their allies see the plan as an antidote to the recent mortgage crisis, especially among low-income borrowers with subprime loans. The legislation would prevent as many as 600,000 homeowners from being thrown into foreclosure, its advocates say.
"We should be giving families every reasonable tool to ensure they can keep a roof over their heads," said Sen. Richard J. Durbin (Ill.), the Senate's second-ranking Democrat and author of a leading version of the legislation.
But the banks argue that any help the proposal might provide to troubled homeowners in the short run would be offset by the higher costs that borrowers would have to pay to get mortgages in the future. The reason, banks say, is that they would pass along the added risk to borrowers in the form of higher interest rates, larger down payments or increased closing costs.
If banks were unable to pass on the entire cost, they could be forced to trim their profits.
"This provision is incredibly counterproductive," said Edward L. Yingling, president of the America Bankers Association. "We will lobby very, very strongly against it."

The Durbin measure is part of a larger housing assistance bill being pushed by Democrats in the Senate. A separate version of the measure was approved late last year, mostly along party lines, by the House Judiciary Committee. The Bush administration has said that it opposes both provisions as overly coercive and potentially detrimental to the already strained mortgage market.
Lobbyists for major banks have made the proposal's defeat a top priority. They have been meeting at least weekly to coordinate their efforts and have fanned out on Capitol Hill to meet with lawmakers and their staffs.
At least a dozen industry associations have banded together to fight the proposed legislation. They include the American Bankers Association, the Financial Services Roundtable, the Consumer Bankers Association and the Mortgage Bankers Association. These groups and others have signed joint letters to lawmakers on the issue.
In one of their letters, sent to Senate leaders last week, the groups wrote that the legislation would "have a very negative impact in the financial markets, which are struggling in part because of difficulties in valuing the mortgages that underlay securities [and] would greatly increase the uncertainty that already exists."
Bank lobbyists have also gone online to make their case. The mortgage bankers have set up a Web site,, that can calculate how much mortgage costs might increase by state and by county if the Durbin measure were to become law. "Cram down" is the industry term for a forced easing of mortgage terms.
Supporters of the measure are also sending letters and meeting with lawmakers. A letter urging a quick vote on the proposal was delivered to Senate Majority Leader Harry M. Reid (Nev.) last week. It was signed by 19 organizations, including the Consumer Federation of America, the AFL-CIO, the National Council of La Raza, the U.S. Conference of Mayors and AARP.
The letter said, "The court-supervised modification provision is a commonsense solution that will help families save their homes without any cost to the U.S. Treasury, while ensuring that lenders recover at least what they would in a foreclosure."
The Center for Responsible Lending, a pro-consumer watchdog group that backs Durbin's effort, is trying to instigate voter e-mails to lawmakers on the subject. The group's Web site includes a page that allows people to send electronic notes supporting the measure to their elected representatives with just a few clicks of a mouse.
AARP spokesman Jim Dau said his group will also ramp up its efforts. It may soon ask its activists to urge lawmakers to back the mortgage-redrafting legislation. AARP, which is the nation's largest lobby group, has a list of 1.5 million volunteers whom it says it can call upon to contact lawmakers on legislative matters.

Wells Fargo Discrimination (San Francisco)

Reply to:
Date: 2008‑04‑16, 6:16AM PDT

Discrimination, Customer Data Privacy & Security at Wells Fargo
Several former employees of Wells Fargo have created a website and blog at to document real and perceived employment discrimination or disability discrimination at Wells Fargo and to discuss customer data privacy and security issues at Wells Fargo. Several people have submitted their stories to the site, but more narratives are needed and requested. Your contribution is welcome!

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Wells Fargo Injustice

January 8, 2008
Baltimore Is Suing Bank Over Foreclosure Crisis
Baltimore’s mayor and City Council are suing Wells Fargo Bank, contending that its lending practices discriminated against black borrowers and led to a wave of foreclosures that has reduced city tax revenues and increased its costs.
The recent surge in homeowner defaults nationwide, generated by lax lending practices during the real estate boom, has officials bracing for a range of problems that often accompany foreclosures. Some municipalities, including Cleveland and Buffalo, are trying to make lenders responsible for abandoned properties to ward off crimes like arson, drug use and prostitution.
But the civil suit that officials in Baltimore are filing in United States District Court may presage another type of litigation against lenders by municipalities facing shortfalls in their budgets.
In the suit, Mayor Sheila Dixon joined with the City Council to ask that the court bar Wells Fargo from charging higher fees to black borrowers. Many of these borrowers paid more under the bank’s subprime lending program, designed for less creditworthy consumers, and are more likely to default on their loans.

In 2006, Wells Fargo made high-cost loans, with an interest rate at least three percentage points above a federal benchmark, to 65 percent of its black customers in Baltimore and to only 15 percent of its white customers in the area, according to the lawsuit. Similarly, refinancings to black borrowers were more likely to be higher cost than to white ones and to carry prepayment penalties.
The complaint requests unspecified damages to cover the diminished property tax revenues and higher costs that the city said it had incurred. Additional costs include those for fire and police protection in hard-hit neighborhoods and expenditures to buy and rehabilitate vacant properties.
Kevin Waetke, a Wells Fargo spokesman, rejected the contention that race was a factor in the bank’s pricing of mortgage loans. “We do not tolerate illegal discrimination against or unfair treatment of any consumer,” Mr. Waetke said. “Our loan pricing is based on credit risk. We are committed to serving all customers fairly — our continued growth depends on it.”
But Suzanne Sangree, chief solicitor for the Baltimore City Law Department, said: “This wave of foreclosures in minority neighborhoods really threatens to undermine the tremendous progress the city has made in developing distressed neighborhoods and moving the city ahead economically. Wells Fargo could do a lot, as well as other banks that have engaged in similar practices, to help to curb the flood of foreclosures that the city is experiencing now.”
Among the practices cited by the city, Wells Fargo allowed mortgage brokers to charge higher commissions when they put borrowers in loans with higher interest rates than the customers qualified for based on their credit profiles. The bank also failed to underwrite mortgage loans to traditional criteria, the suit said, setting up the borrowers for default. Such practices were common at many lenders during the boom.
Now, Baltimore is a city in a foreclosure crisis, according to the complaint. Citing figures from the Maryland Department of Housing and Community Development, the suit said foreclosure-related events in the city, including notices of default, foreclosure sales and lenders’ purchases of foreclosed properties, rose more than five times between the first and second quarters of 2007.
Wells Fargo has been the largest or second-largest provider of mortgage loans to Baltimore borrowers since 2004, according to the lawsuit. From 2004 through 2006, Wells Fargo made at least 1,285 mortgage loans a year to area residents with a total value of more than $600 million. Wells Fargo now has the largest number of foreclosures in Baltimore of any lender, the suit stated.
Half of the Wells Fargo foreclosures in 2006 occurred in census tracts with populations that were more than 80 percent black, the suit said. Meanwhile, only 16 percent of the foreclosures were found in tracts with populations that are 20 percent or less black. Figures for 2007 were similar, the city said.
John P. Relman, a lawyer at Relman & Dane in Washington, represents the City of Baltimore in its case against Wells Fargo. “Foreclosures have a more profound effect in minority communities because they are closest to the line of distressed neighborhoods in many cities,” Mr. Relman said. “That causes big problems for the cities, not just the lost income from taxes but also the long-term social costs. Programs are going to be needed to stabilize the communities to be rebuilt.”
The Baltimore complaint cited a 2005 study showing that foreclosures required more municipal services and higher costs. The study, commissioned by the Homeownership Preservation Foundation of Minneapolis, identified 26 different costs incurred by government agencies responding to foreclosures in Chicago and in Cook County, Ill., in 2003 and 2004. The analysis concluded that total costs reached $34,199 for each foreclosure.  @



Culture of Corruption: Obama and His Team of Tax Cheats, Crooks, and Cronies

by Michelle Malkin

Editorial Reviews

In her shocking new book, Malkin digs deep into the records of President Obama's staff, revealing corrupt dealings, questionable pasts, and abuses of power throughout his administration.

From the Inside Flap

The era of hope and change is dead....and it only took six months in office to kill it.

Never has an administration taken office with more inflated expectations of turning Washington around. Never have a media-anointed American Idol and his entourage fallen so fast and hard. In her latest investigative tour de force, New York Times bestselling author Michelle Malkin delivers a powerful, damning, and comprehensive indictment of the culture of corruption that surrounds Team Obama's brazen tax evaders, Wall Street cronies, petty crooks, slum lords, and business-as-usual influence peddlers. In Culture of Corruption, Malkin reveals:

* Why nepotism beneficiaries First Lady Michelle Obama and Vice President Joe Biden are Team Obama's biggest liberal hypocrites--bashing the corporate world and influence-peddling industries from which they and their relatives have benefited mightily

* What secrets the ethics-deficient members of Obama's cabinet--including Hillary Clinton--are trying to hide

* Why the Obama White House has more power-hungry, unaccountable "czars" than any other administration

* How Team Obama's first one hundred days of appointments became a litany of embarrassments as would-be appointee after would-be appointee was exposed as a tax cheat or had to withdraw for other reasons

* How Obama's old ACORN and union cronies have squandered millions of taxpayer dollars and dues money to enrich themselves and expand their power

* How Obama's Wall Street money men and corporate lobbyists are ruining the economy and helping their friends In Culture of Corruption, Michelle Malkin lays bare the Obama administration's seamy underside that the liberal media would rather keep hidden.

           Hardcover: 376 pages

           Publisher: Regnery Publishing (July 27, 2009)

           Language: English

           ISBN-10: 1596981091

           ISBN-13: 978-1596981096



Records show that four out of Obama's top five contributors are employees of financial industry giants - Goldman Sachs ($571,330), UBS AG ($364,806), JPMorgan Chase ($362,207) and Citigroup ($358,054).




July 1st 2008

Wall Street firms have chipped in more than $9 million to Barack Obama. Zurga/Bloomberg

Wall Street is investing heavily in Barack Obama.

Although the Democratic presidential hopeful has vowed to raise capital gains and corporate taxes, financial industry bigs have contributed almost twice as much to Obama as to GOP rival John McCain, a Daily News analysis of campaign records shows.

"Wall Street wants change and wants a curtailment in spending. It wants someone who focuses on the domestic economy," said Jim Cramer, the boisterous host of CNBC's "Mad Money."

Cramer also does not discount nostalgia for the go-go 1990s, when Bill Clinton led the largest economic expansion in history.

"It wants a Clinton like in 1992, but not a Hillary Clinton," he said. "That's Barack Obama."

For both candidates, Wall Street's investment and banking sectors have become among their portliest cash cows, contributing $9.5 million to Obama and $5.3 million to McCain so far.

It's a haul that is already raising concerns that, as the nation's faltering economy has become issue No. 1, the two candidates may have a hard time playing tough on issues like market regulation or corporate-tax loopholes.

"No matter who wins in November, Wall Street will have a friend in the White House," said Massie Ritsch of the Center for Responsive Politics, which crunched the data for The News.

Wall Street's generosity toward Obama, in particular, would seem to run counter to its self-interests.

In addition to calling for corporate and capital gains tax hikes, Obama has proposed raising income taxes on those earning more than $250,000.

But Wall Street is often motivated by something more than money - winning.

"In general, these are professional prognosticators," said Ritsch. "And they may be putting their money on the person they predict will win, not the candidate they hope will win."

Records show that four out of Obama's top five contributors are employees of financial industry giants - Goldman Sachs ($571,330), UBS AG ($364,806), JPMorgan Chase ($362,207) and Citigroup ($358,054).

McCain's top five include Wall Street's Merrill Lynch ($230,310) and Citigroup ($219,551).

Obama's Wall Street haul is not the biggest ever. That distinction belongs to President Bush, who as an incumbent in 2004 raised $10,852,696 from Wall Street interests through April that year - about $1 million more than Obama.

Obama's aides dismiss any suggestion he might be beholden to Wall Street, noting that 93% of his donations are $200 or less and that he took his tough economic message straight to Wall Street in a 2007 speech at Nasdaq headquarters.

"Sen. Obama went to Wall Street to tell executives that our economy isn't working if they alone are prospering but people living on Main Street are not," Obama spokesman Tommy Vietor said.

U.S. home foreclosures hit record level, boosted by California

A sharp drop in prices is cited, along with the resetting of ARM loans in California and Florida.

By E. Scott Reckard
Los Angeles Times Staff Writer

September 6, 2008

The decline of housing markets in California and Florida has led to record numbers of foreclosures and is causing even good borrowers to pay more for loans, according to analysis and statistics released Friday.

To add to the bleak picture, the government Friday reported the eighth straight month of declining employment, increasing pressure on borrowers burdened by tumbling home prices and loans with rising interest rates. The U.S. jobless rate jumped in August to a nearly five-year high of 6.1%, with nonfarm payrolls down 84,000.

Lawmakers Reach Accord on Huge Financial Rescue
Vote is Imminent on $700 Billion Bailout Plan

By Lori Montgomery and Paul Kane
Washington Post Staff Writers
Sunday, September 28, 2008; 2:56 AM

Congressional leaders and the Bush administration this morning said they had struck an accord to insert the government deeply into the nation's financial markets, agreeing to spend up to $700 billion to relieve Wall Street of troubled assets backed by faltering home mortgages.

Democrats also made a number of concessions, abandoning demands that bankruptcy judges be empowered to modify home mortgages on primary residences for people in foreclosure. They also agreed not to dedicate a portion of any profits from the bailout program to an affordable housing fund that Republicans claimed would primarily assist social service organizations that support the Democratic Party, the official said.

With home prices plummeting, many of those assets are now almost worthless, and investors have lost confidence in many of the firms that hold them. That has undermined some of the biggest names on Wall Street and caused banks to stop lending money, sparking a credit crisis that threatens to deliver a devastating blow to businesses, consumers and the broader economy.

September 28, 2008

Everybody’s Business

In Financial Food Chains, Little Guys Can’t Win

IMAGINE, if you will, that a man who had much to do with creating the present credit crisis now says he is the man to fix this giant problem, and that his work is so important that he will need a trillion dollars or so of your money. Then add that this man thinks he is so indispensable that he wants Congress to forbid any judicial or administrative questioning of anything he does with your dollars.

You might think of a latter-day Lenin or Fidel Castro, but you would be far afield. Instead, you should be thinking of Treasury Secretary Henry M. Paulson Jr. and the rapidly disintegrating United States of America, right here and now.

But I am getting ahead of myself. First, I am furious at what the traders, speculators, hedge funds and the government have done to everyone who is saving and investing for retirement and future security. Millions of us did nothing wrong, according to the accepted wisdom of the age. We saved. We put a large part of our money into the stock market, as we were urged to do. Because the market wasn’t at ridiculously high levels, it seemed prudent to invest in broad indexes, foreign indexes and small- and large-cap indexes.

Now we have had the rug pulled out from under us. Our retirements have been put into severe jeopardy. The “earnings” part of those price-to-earnings ratios turns out to have been fiction for some financial companies, which normally account for a big part of total corporate earnings. In fact, earnings of giant finance players were often wildly negative, creating a situation rarely seen since the Great Depression, when the aggregate earnings of the Dow 30 were negative.

The current negativity occurred because of wild, casino-type operations of big finance players, creating liabilities way beyond anything we could have reasonably expected. This looks a lot like theft on a spectacular scale — of our wallets, our peace of mind, our futures.

Second, according to what I hear from my betters in the world of finance, the most serious problems are not with the bundles of subprime mortgages themselves — a large but not lethal quantum as far as I can tell — but with derivatives contracts tied to subprime and other dicey debt. These contracts are superficially an attempt to “insure” against risks of default, hence the name “credit-default swaps.” In fact, they are an immense wager — which anyone with lots of money or borrowing ability can enter — about how mortgage-backed bonds, leveraged loan bonds, student loan bonds, credit card bonds and the like will perform.

These wagers entail amounts many times larger than the total of subprime loans. In fact, there are roughly $62 trillion in credit-default swap derivatives out there, compared with about $1 trillion of subprime mortgages. These derivatives are “weapons of financial mass destruction,” in the prophetic words of Warren E. Buffett. (Apparently believing that the worst is over, at least for one big investment bank, Mr. Buffett is now investing in Goldman Sachs.)

The swaps market has been unregulated. It has been just a lot of people making bets with one another. Some of them made incredibly fortunate payoff wagers against the mortgage bonds, using credit-default swaps as their wagering vehicle. I am not sure who the big winners are, but they are out there, and the gains were big enough to cripple the part of Wall Street on the losing side of the bets.

Almost no one (except Mr. Buffett) saw this coming, at least not on this scale. But let’s get back to the man of the hour. Why didn’t Mr. Paulson, the Treasury secretary, see it? He was once the head of Goldman Sachs, an immense player in the swaps world. Didn’t people at Treasury have a clue? If they didn’t, what was going on in their heads? If they did, why didn’t they do something about it a year ago, when saving the world would have been a lot cheaper?

If Mr. Paulson and Ben S. Bernanke, the chairman of the Federal Reserve, didn’t see this train coming, what else have they missed? What other freight train is barreling down the track at us?

All of this would be bad enough. But by far the most terrifying item I read in my morning paper last week was this: Mr. Paulson demanded that Congress forbid judicial review of his decisions on use of the money in the mortgage bailout. This would amount to an abrogation of the Constitution. Not only would his decisions be sacrosanct and above the law, but so would the actions of his pals in the banking world in connection with this bailout.

The people whose conduct got us into this catastrophe have not only taken our money, hopes and peace of mind, but they apparently also want a trillion or so more dollars to put into their Wall Street Buddy System Fund. This may be the most dangerous attack on the law in my lifetime. What anarchists even dared consider this plan? Thank heaven that minds more devoted to the Constitution on Capitol Hill are questioning this shocking request.

By the way, if we are actually thinking about tossing the Constitution out the window, why not simply annul these credit-default swap contracts? With that done, the incomprehensibly large liability of the banks would cease, and we wouldn’t need this staggering bailout. Shouldn’t we consider making the speculators pay some of the price?

WE have survived housing-price corrections before. Why is this one causing so much anguish? It must be the side bets, the credit-default swap bets, multiplying the effect of the housing downturn many times over. Maybe we should just get rid of these exotic bets and start again without them. “Insurance” on market moves is always a bad idea, because it does not tamp down market disruptions but instead greatly magnifies them — as in the disastrous effect of “portfolio insurance” in the 1987 crash.

Then there was Mr. Paulson’s insistence that there be no compensation caps for executives of companies being bailed out by the factory workers, the farmers, the schoolteachers and the medical doctors. He told a skeptical Congress on Tuesday that if these caps were put into place, bank executives simply wouldn’t participate in the bailout or sell us suckers their debts. Fine with me. If the banks are in good enough shape so that petulant executives can simply opt out rather than live on a few million a year, maybe we don’t need the bailout at all. Maybe we would be better off if those executives simply bailed out and were replaced by people with more sense and more patriotism.

One final little thought bubbles into my mind: Maybe the bailout should not be of the banks at all, but of homeowners themselves. Maybe if we make the government the buyer of last resort of homes, we will stabilize the markets, stabilize the debt associated with the markets and take the gain out of the credit-default swaps for the speculators. Yes, price would be a huge issue, but so it is for Mr. Paulson’s plan for buying debt from banks.

Why not? We do it for farmers. Why not for the individual homeowner? Oh, right. Because Treasury secretaries don’t know any of those people.

Ben Stein is a lawyer, writer, actor and economist. E-mail:

September 20, 2008


Hard Truths About the Bailout

The fifth major federal bailout this year — after Bear Stearns, Fannie Mae, Freddie Mac and the American International Group — is now in the works. Taxpayers have every right to be alarmed and angry. The latest plan is not necessarily a bad one, and officials had to move quickly to prevent credit markets from seizing up.

But make no mistake, this crisis could have been avoided if regulators had enforced rules and officials had dared to question risky lending and other dubious practices.

No sacrifice for the bankers

By Barry Grey
15 October 2008

There will be no letup in Wall Street bankers’ ruthless pursuit of profits and personal wealth. While the government and politicians of both parties are calling for all Americans to “sacrifice” for the sake of the “nation,” the CEOs of major banks and financial companies are exploiting the crisis of their own making to extract new concessions from the government.

The American Bankers Association on Monday demanded that government regulators scrap accounting rules that require banks and financial firms to write down the value of worthless assets on their balance sheets.

The arrogance of the bankers is so brazen than even the Wall Street Journal is warning that their behavior could spark a popular backlash. In a cautionary article entitled “Street’s Demands May Stir Public Wrath,” the Wall Street Journal wrote on Tuesday: “You would have thought the Street’s last surviving chieftains would be a contrite bunch by now, eager to reform their industry and help rebuild their country.

“At least until you heard Goldman Sachs Group Inc.’s Lloyd Blankfein, JPMorgan Chase’s James Dimon, Blackstone Group LP’s Stephen Schwarzman, BlackRock Inc.’s Larry Fink and Silver Lake’s Glenn Hutchins assemble for a panel session at the New York Stock Exchange last week organized in part by the Wall Street Journal...

“While America buckles in for years of sacrifice, the five chiefs took a different approach. The group pulled straight from the what-government-can-do-for-you school of 2006, lobbying for Wall Street tax breaks, the repeal of Sarbanes-Oxley and against the distraction of class-action lawsuits.”

* (get on their free daily emails)

Obama prepares another trillion-dollar bank bailout

3 February 2009

While most media attention is focused this week on the Senate debate on the economic stimulus package, the Obama administration is preparing to roll out a new plan to bail out the banks, involving a trillion dollars or more in public assets.

Under the plan, which Treasury Secretary Timothy Geithner is expected to announce within the next two weeks, the government will buy up virtually worthless mortgage-backed securities and other "toxic" assets held by the banks and provide guarantees against future losses for much of their remaining assets. It will also continue to inject cash directly into the banks.

Well aware of popular opposition to the Wall Street bailout, the White House and the media are engaged in a calculated campaign to soften up public opinion and pave the way for a taxpayer handout to the financial elite even bigger than the $700 billion already doled out in the Troubled Asset Relief Program (TARP), which was rushed through Congress last autumn with the support of then-presidential candidate Obama. The total cost of government cash infusions, loans and guarantees to the major banks and financial firms, already estimated at $8 trillion, will soar even higher, by far eclipsing the money allocated in the so-called stimulus and recovery program.

It is now reported that Obama has dropped a provision that would allow bankruptcy judges to lower the principal and ease mortgage terms for distressed homeowners.

Indeed, one of the purposes of the stimulus package is to provide political cover, in the form of aid to "Main Street," for the offloading of Wall Street's losses onto the American people. Meanwhile, the stimulus plan, which does nothing to halt the destruction of jobs or the wave of home foreclosures, but includes lucrative tax write-offs for business and funnels government projects to private companies, is being weakened further at the behest of Wall Street and congressional Republicans. It is now reported that Obama has dropped a provision that would allow bankruptcy judges to lower the principal and ease mortgage terms for distressed homeowners.

The administration is mounting a public relations campaign—starting with Obama's public wrist-slap of Wall Street executives for continuing to reward themselves with billions in bonuses—to give the impression that it is cracking the whip on executive compensation. But as the Washington Post reports, "[T]he administration is likely to refrain from imposing tough restrictions on executive compensation at most firms receiving government aid" because "harsh limits could discourage some firms from asking for aid."

The new bank bailout, like every measure that has been devised in response to the financial meltdown, will be tailored entirely to the interests of the financial aristocracy. Under the terms of the plan, as outlined in various press reports, the bad assets accumulated through speculation and fraud will be transferred to a "bad bank" owned by the government. The government will buy these assets not at their actual market value, which is pennies on the dollar, but, according to the Financial Times, on the basis of a "valuation model," guaranteeing premium prices for bank executives and big shareholders.

Once these assets have been taken off the banks' books, as Max Holmes, a finance professor at New York University and chief investment officer of an asset management firm, told the New York Times, "[T]he stock prices of the good banks are likely to soar, as they will be the four best capitalized and cleanest banks in the world."

In other words, the ruling elite will emerge from this process richer than ever. The American people—who have no responsibility for the economic disaster—will be left to pay the bill through drastic cuts in social benefits, including bedrock programs like Social Security and Medicare, and a continuous erosion of their jobs and living standards.

The Wall Street crisis and the government response have exposed the reality of class relations in America.

The press is full of articles expounding on the economic, legal and moral hazards involved in any government restriction on the pay of bankers whose greed and criminality played a major role in the ruination of their own companies and the eruption of a global economic crisis deeper than any since the Great Depression. But Obama and Congress, Democrats and Republicans alike, had no problem making as a condition for emergency loans to the auto companies—a drop in the bucket compared to the trillions for the banks—the slashing of auto workers' wages and benefits to the level of non-union workers. And to enforce the impoverishment of the workers, the auto bailout law included a provision stripping them of the right to strike.

As Obama has made clear, there will be no examination or public exposure of the policies and methods that led to the crash of 2008, as if a rational solution can be found without such an investigation.

None of the executives will be held accountable for their actions, which have led to a staggering level of social misery. Already, still in its initial stages, the crisis has claimed scores of lives: tragic instances of killings and suicides provoked by the sudden loss of a job and the prospect of destitution and homelessness, the deaths of people whose utilities have been shut off, like the 93-year-old worker in Bay City, Michigan.

 There is no talk of criminal investigations or prosecutions.

No bankers are being grilled by Congress. There is no talk of criminal investigations or prosecutions. Instead, those who have played a central role in the Wall Street bailout, such as the new treasury secretary, Timothy Geithner, are being brought into the Obama administration to head up the next phase. Geithner spelled out whose interests are to be defended when he stated recently: "We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system."

The economic crisis is the result of the failure of the capitalist profit system. It was prepared over decades in which the American ruling elite dismantled much of basic industry in order to obtain higher levels of profit through ever more parasitic and reckless forms of financial speculation.

No progressive solution to the crisis can be found within the framework of the capitalist system. If the working class—the vast majority of the population—is to defend its interests, it must advance it own solution to the crisis.

This must begin with the fight for the nationalization of the banks and financial institutions and their transformation into public utilities under the control of the working class. All decisions on the allocation of financial resources must be made democratically in the interests of society as a whole.

As for the ill-gotten wealth of bankers whose methods precipitated the present crisis, it should be seized and used to finance emergency relief. The deposits and savings of working people and small business owners should be secured, and cheap credit made available to them.

Trillions must be made available to guarantee decent jobs, health care, education and housing for all, including the launching of genuine public works programs to provide jobs and rebuild the country's decayed physical, economic and cultural infrastructure.

Emergency measures must be taken to halt all foreclosures and evictions and provide immediate relief to all distressed homeowners and workers and young people burdened with crushing levels of debt.

The financial records of the major banks, financial firms and hedge funds must be opened to public inspection in order to reveal how society's resources were plundered for private gain. Those responsible must be held accountable, including by means of criminal prosecution.

This can be achieved only through the independent social and political mobilization of the working class. Mass resistance must be organized to oppose layoffs, home foreclosures and cuts in vital social programs, including strikes, plant occupations and demonstrations.

The working class must break the grip of the financial aristocracy and take political power into its own hands through the establishment of a workers' government. This requires a political break with the two parties of big business and the building of the Socialist Equality Party as the mass revolutionary party of the working class.

Jerry White

The Great American Bank Robbery

William K. Black, the former litigation director of the Federal Home Loan Bank Board who investigated the Savings and Loan disaster of the 1980s, discusses the latest scandal in which a single bank, IndyMac, lost more money than was lost during the entire Savings and Loan crisis. He will examine the political failure behind this economic disaster, in which not only massive fraud has taken place, but a vast transfer of wealth from the poor and middle class continues as the federal government bails out the seemingly reckless, if not the criminal. Black teaches economics and law at the University of Missouri, Kansas City and is the author of The Best Way to Rob a Bank Is to Own One.


David Lazarus


June 21, 2009

Denial, noun: An unconscious defense mechanism characterized by refusal to acknowledge painful realities, thoughts or feelings.

-- The American Heritage

Medical Dictionary

The banking industry wasted no time last week declaring its opposition to President Obama's proposal for a regulatory agency that would protect consumers from rapacious lending practices.

While acknowledging that "regulatory reform is badly needed," Edward Yingling, president of the American Bankers Assn., said the new agency would have "powers to mandate loans and services that go well beyond consumer protection."

The Financial Services Roundtable said it applauded "modernizing regulation of the financial services industry." But it too opposes the new agency "because it will not adequately serve the best interests of consumers and their financial institutions."

The Consumer Bankers Assn. chimed in by saying the proposed agency "would create a maze of regulations suppressing creativity and product innovation."

These guys just don't get it.

The reason Obama wants to create a Consumer Financial Protection Agency isn't that he's hell-bent on imposing his will on banks. It's that banks have consistently proved themselves unworthy of customers' trust.

From runaway credit card interest rates to mortgages that turn into one-way trips to foreclosure, lenders have repeatedly demonstrated their inability to deal with customers fairly and responsibly.

Instead, they place their own interests ahead of all other considerations, and in so doing expose frequently unsophisticated consumers to enormous risk and financial ruin.

The banks have only themselves to blame for why a Consumer Financial Protection Agency is needed.

"They wrecked the system," said Gail Hillebrand, senior attorney with Consumers Union. "What they're saying is that they want to keep doing business as usual. But business as usual has failed us."

In announcing measures to improve oversight of financial markets, Obama said that "a culture of irresponsibility" had taken root on Wall Street and elsewhere.

Acknowledging that many people took out loans they couldn't afford, he said "there were also millions of Americans who signed contracts they didn't always understand offered by lenders who didn't always tell the truth."

The Consumer Financial Protection Agency would be charged with ending deceptive practices and ensuring that information provided by lenders is accurate and easy to understand.

What's truly shocking is that this sort of thing has to be legislated. You'd think banks would be able to compete and succeed by treating customers with integrity. But left to their own devices, they do just the opposite.

"Companies compete not by offering better products but more complicated ones, with more fine print and more hidden terms," Obama said.

So like naughty children, they get a time out and some new rules to follow.

Wayne Abernathy, a spokesman for the American Bankers Assn., told me his industry has gotten a bum rap. Major lenders aren't to blame for problems making consumers' lives miserable, he said.

"I can't deny that's the impression out there," Abernathy said. "But it's not us."

He said the real culprits were smaller financial institutions operating primarily at the state level that were reckless in their lending practices.

"When their products blow up, we get tarnished," Abernathy said.

Well, no.

At least not when you consider that American Express, Bank of America, Capital One, Citigroup, Discover and JPMorgan Chase account for about 80% of the credit card industry.

Or when you consider that the top four mortgage lenders as of the first quarter of the year were Wells Fargo, BofA, Chase and Citi. Together they accounted for more than half of all residential loans originating in the period.

Obama is targeting the big boys because all roads lead to their doors. And it could be argued that if anyone should know better, they should.

It could also be argued that these guys should have nothing to fear from a Consumer Financial Protection Agency if, as they say, their business is already on the up and up. What's a little accountability among friends?

Banks say a new regulatory agency would increase their costs. Since when has treating people respectfully added to expenses? They say it will stifle creativity and innovation. That just sounds like an excuse for laziness.

The simple fact is that banks have lost consumers' trust and the onus is on them to earn it back. And while they're doing so, government regulators will be watching to make sure everyone plays nicely.

That's why we need a Consumer Financial Protection Agency.

That's why the bankers need to wake up to reality.



State sues Wells for $1.5 billion

James Temple, Chronicle Staff Writer

Thursday, April 23, 2009

 (04-23) 13:58 PDT San Francisco -- Attorney General Jerry Brown filed a securities fraud lawsuit against Wells Fargo & Co. on Thursday, accusing the San Francisco bank of deceptively marketing a type of financial instrument and seeking to recover around $1.5 billion for thousands of California investors.

The Superior Court suit claims that three affiliates of the company falsely proclaimed so called auction-rate securities "as safe and liquid as cash," even though about 2,400state residents who invested in the financial instruments have been unable to recover their money for more than year.

An ARS is a long-term debt tool that in normal times functions like a short-term one, because it trades regularly through auctions. Until recently, people could get their money out in a matter of days and earned slightly higher returns than on a savings account. But the auction market collapsed in February 2008 as the economy weakened and credit markets tightened, freezing up the assets.

"More than 2,000 California investors who thought they could get their money back when they needed it, now can't," Brown said at a press conference in San Francisco. "What we're seeing today is another example of the complicated financial transactions, the so-called financial products, that have been part of this massive financial bubble that burst and caused so much suffering and continues to cause so much havoc in individual people's lives."

Wells Fargo, which announced record quarterly profits of $3.05 billion on Wednesday, disputed the allegations.

"We fully understand and deeply regret the effects this prolonged liquidity crisis has had on our clients," said Charles Daggs, chief executive officer of Wells Fargo Investments LLC, in a prepared statement. "Wells Fargo could not have predicted these extraordinary circumstances, and even with the benefit of hindsight is not responsible for them."

Brown said an economic downturn is a foreseeable event that doesn't excuse marketing the product as safe and highly liquid in the first place.

"It's misleading, it's a fraud and it violates the securities laws of California," he said.

The Wells Fargo statement didn't address the promotion of the products, the core issue in the complaint, and the company didn't immediately respond to a follow-up inquiry.

Across the country, nearly 5,700 investors purchased $2.9 billion worth of auction-rate securities from the Wells affiliates, according to Brown's office. Several major banks, including UBS and Merrill Lynch, compensated their customers for the securities in the months following the market lock up.

Senior Assistant Attorney General Mark Breckler, who met with Wells Fargo, said of the bank: "To date, they've taken the steadfast position that they're not liable." He declined to otherwise discuss the talks.

In addition to the cash value of the securities, the suit seeks the relinquishing of any profits tied to them and civil penalties potentially totaling hundreds of millions of dollars.


It will take Wells Fargo longer to repay TARP (DESPITE MASSIVE PROFITS)

Andrew S. Ross

Wednesday, June 10, 2009

Remember when Wells Fargo & Co. had to be dragged kicking and screaming into taking TARP money, said it couldn't wait to pay back the $25 billion, and Chairman Richard Kovacevich called the government's stress test asinine? The San Francisco bank sang a different tune on Tuesday when it explained why it wasn't one of the 10 major U.S. banks repaying the TARP loans.

"Our priority right now is to integrate Wachovia into Wells Fargo as smoothly and efficiently as possible to benefit our 70 million customers," e-mailed Wells Fargo spokesman Chris Hammond. "Through de-risking Wachovia's balance sheet, our $8.6 billion capital raise, and other internal capital generation, we expect to meet our capital requirements for buffer capital. We will work closely with our regulators to determine the appropriate time to repay the TARP funds while maintaining strong capital levels."

Translation: Last year's Wachovia acquisition weakened the bank's capital ratios, partly because Wells wrote down many of Wachovia's bad loans. Meanwhile, TARP money helped Wells go about its normal business, like lending money.

The bank already has raised $8.6 billion of the $13.7 billion in buffer capital the Federal Reserve required of Wells in the wake of the stress tests. Some of the rest is likely to come from earnings over the next two quarters, according to RBC Capital Markets analyst Joe Morford. The bank also will need to issue new debt, Morford said, to show the market it can issue debt without the federal government's guarantee. Only then, he says, will Wells Fargo be in a position to apply to pay back the TARP money.

"Plus, it is still an uncertain economic environment, and in our view having a little extra capital on hand isn't a bad thing for any bank these days," he said.


“Wells Fargo said last month that first-quarter profit jumped 53 percent from a year earlier as borrowers rushed to refinance mortgages amid record-low interest rates.”

Break chains of mortgage morality, lawyer says

Kenneth Harney

Sunday, November 29, 2009

(11-29) 04:00 PST WASHINGTON --

Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don't feel guilty about it. Don't think you're doing something morally wrong.

That's the incendiary core message of a new academic paper by Brent T. White, a University of Arizona law school professor, titled "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis."

White argues that far more of the estimated 15 million American homeowners who are underwater on their mortgages should stiff their lenders and take a hike.

Doing so, he suggests, could save some of them hundreds of thousands of dollars that they "have no reasonable prospect of recouping" in the years ahead. Plus the penalties are nowhere near as painful or long-lasting as they might assume.

"Homeowners should be walking away in droves," according to White. "But they aren't. And it's not because the financial costs of foreclosure outweigh the benefits." Sure, credit scores get whacked when you walk away, he acknowledges. But as long as you stay current with other creditors, "one can have a good credit rating again - meaning above 660 - within two years after a foreclosure."

Better yet, you can default "strategically": buy all the major items you'll need for the next couple of years - a new car, even a new house - just before you pull the plug on your current mortgage lender.

"Most individuals should be able to plan in advance for a few years of limited credit," says White, with minimal disruptions to their lifestyles.

What kind of law school professorial advice is this? Aren't mortgages legal contracts? In an interview, White said that in so-called anti-deficiency states such as Arizona and California, mortgage lenders have limited or no legal rights to pursue defaulting homeowners' assets beyond the house itself. In other states, lenders may decide it is not worth the legal expense to pursue walkaways, or consumers may be able to find flaws in the mortgage documents, disclosures or underwriting to challenge the original contract.

The main point, he says, is that too often people's "emotions" get in the way of clear financial thinking about mortgages, turning them into what he calls "woodheads" - "individuals who choose not to act in their own self-interest." Most owners are too worried about feelings of shame and embarrassment following a foreclosure, and ignore the powerful financial reasons for doing so.

Buttressing these emotions is a system that White labels "the social control of the housing crisis" - pressures and messages continually sent to consumers by the "social control agents," namely banks, government and the media. The mantra these agents - all the way up to President Obama - pound into owners' heads, says White, is that "voluntarily defaulting on a mortgage is immoral."

Yet there is an inherent imbalance in the borrower-lender relationship which makes this morality message unfair to consumers: Banks set the rules during the housing boom, handing out home loans with no down payments, no income checks, and inflated appraisals. Now that property values have dropped 20 percent to 50 percent in many areas, banks have been slow to modify troubled mortgages and reluctant to reduce principal debts.

Only when homeowners cut through the emotional fog and default strategically in large numbers, White argues, will this inequitable situation be seriously addressed.

How does White's 52-page manifesto go over with mortgage lenders? Predictably, not well. Officials at Fannie Mae and Freddie Mac - investors who fund the bulk of all new mortgages in the country - disputed White's characterization of how quickly after foreclosure a walkaway borrower can obtain a new loan. It's not three years, they said, it's a minimum of five years, absent extenuating circumstances such as medical or employment problems that caused the foreclosure.

"Borrowers who walk away from their mortgage obligations face serious consequences" including severely depressed credit scores for extended periods, said Brian Faith of Fannie Mae. In addition, he said, "there's a moral dimension to this as homeowners who simply abandon their homes contribute to the destabilization of their neighborhood and community."

Lewis Ranieri, CEO of several major mortgage-related companies and one of the pioneers of the mortgage securities industry, called White's entire argument "incredibly irresponsible and misinformed." Not only is the professor urging consumers to break legally binding contracts, said Ranieri, but if large numbers of them did so it would send home mortgage rates soaring and "tear apart the very basis" upon which mortgage lending rests - the understanding that borrowers will honor their commitments and pay back the money they borrowed.



Culture of Corruption: Obama and His Team of Tax Cheats, Crooks, and Cronies

by Michelle Malkin

Editorial Reviews

In her shocking new book, Malkin digs deep into the records of President Obama's staff, revealing corrupt dealings, questionable pasts, and abuses of power throughout his administration.

From the Inside Flap

The era of hope and change is dead....and it only took six months in office to kill it.

Never has an administration taken office with more inflated expectations of turning Washington around. Never have a media-anointed American Idol and his entourage fallen so fast and hard. In her latest investigative tour de force, New York Times bestselling author Michelle Malkin delivers a powerful, damning, and comprehensive indictment of the culture of corruption that surrounds Team Obama's brazen tax evaders, Wall Street cronies, petty crooks, slum lords, and business-as-usual influence peddlers. In Culture of Corruption, Malkin reveals:

* Why nepotism beneficiaries First Lady Michelle Obama and Vice President Joe Biden are Team Obama's biggest liberal hypocrites--bashing the corporate world and influence-peddling industries from which they and their relatives have benefited mightily

* What secrets the ethics-deficient members of Obama's cabinet--including Hillary Clinton--are trying to hide

* Why the Obama White House has more power-hungry, unaccountable "czars" than any other administration

* How Team Obama's first one hundred days of appointments became a litany of embarrassments as would-be appointee after would-be appointee was exposed as a tax cheat or had to withdraw for other reasons

* How Obama's old ACORN and union cronies have squandered millions of taxpayer dollars and dues money to enrich themselves and expand their power

* How Obama's Wall Street money men and corporate lobbyists are ruining the economy and helping their friends In Culture of Corruption, Michelle Malkin lays bare the Obama administration's seamy underside that the liberal media would rather keep hidden.

           Publisher: Regnery Publishing (July 27, 2009)

           Language: English

           ISBN-10: 1596981091

           ISBN-13: 978-1596981096