Obama Administration

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“We Are All Socialists Now: The Perils and Pro...
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Well, they’re at it again.  Do you remember all those complaints about mortgage lenders and their unethical practices?  Hidden fees, rate switches, delays at closing, etc?  Well, they haven’t stopped.

http://boss.blogs.nytimes.com/2010/02/01/for-some-arc-loan-borrowers-an-expensive-surprise-caps-the-long-wait/

“And Ms. Essl found one more unpleasant surprise waiting for her in the closing papers: a nearly $600 fee, to cover the cost of a lien search. ‘Nowhere, anywhere through this whole process,’ she said, weariness evident in her voice, ‘did anybody say there were fees of that magnitude.'”

and

“For Ms. Essl’s $20,000 loan, the…fee worked out to 3 percent.”

Hidden fees in the range of an extra 3%?  So, if you borrowed at 6%, you’re now borrowing at 9%.

Who is the unscrupulous institution?

The federal government, of course.

It’s true that the fees aren’t being charged by the government but by the banks loaning the money.  But, the fees are charged because the government requires collateral on every loan, which means a lien search must be done.

And, the fees aren’t even the worst part:

“Sharon Essl, a restaurant owner in New Jersey, commented that after submitting an application to Wells Fargo on July 31 — and resubmitting it three more times — her loan was finally approved two months later. ‘But — wait for it,’ she wrote. ‘Still have not closed!’ In an interview, Ms. Essl said that she received the closing papers last Monday and that the first installment of funds was due by Jan. 28 — four months after she was approved.”

and

“In December, Elease Caracci wrote… that she had won approval for her A.R.C. loan in early August but had yet to receive any money.”

Four months is a big deal to any small business.

When are voters going to understand that the pipe dream they’re handed on the campaign trail is just that?  A dream.  When the government gets involved, the strategy is good about 25% of the time and the execution is good about 2% of the time.

A million march to US Capitol to protest again...
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I’m very disappointed in the disingenuous way our president continues to wage war on the nation’s banks. Yesterday, he unveiled a new tax on these institutions meant to recapture the money spent on TARP. As reported by NPR, the President lays out a compelling story:

“[These banks]…owe their continued existence to the American people, folks who have not been made whole and who continue to face real hardship in this recession. We want our money back and we’re going to get it.”

In other words, if the US government hadn’t made TARP money available to these banks, they would have gone bankrupt.

As you know by now, this is a complete and utter lie. Almost all of the TARP recipients were forced to take the money so the few banks that actually did need the funds wouldn’t be stigmatized and experience a run.

And, as I mentioned before, these same banks that were forced to take the money were also forced to pay interest on it.

But, you know what; it wouldn’t be so bad if he were merely lying. Frankly, that’s par for the Obama administration.

What gets me is the hypocrisy. Check out this quote:

“My determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of [these] firms”

Which firms are those, Mr. Obama? Do they include Fannie Mae and Freddie Mac?

http://online.wsj.com/article/SB126161634214403629.html?mg=com-wsj (subscription required)

Fannie, Freddie Disclose Big Jump in CEOs’ Pay

“The companies on Thursday disclosed new pay packages under which Fannie CEO Michael Williams and Freddie CEO Charles (Ed) Haldeman Jr. will earn as much as $6 million a year, including bonuses, well above their current terms. The packages came with the blessing of the Treasury, which has pumped a combined total of about $112 billion of capital into the companies over the past year to keep them in operation, and the Federal Housing Finance Agency, or FHFA, which regulates the companies.”

That’s right. We pumped $112 billion of capital into these companies and their CEOs are getting big jumps in pay. By the way, when were those approved? Oh, that’s right, Christmas Eve. Nice transparency.

Well, hey, do Freddie and Fannie have to repay the $112 billion they got?

Answer: no. Despite being the overwhelming majority underwriter of the horrible loans that started this mess. Classy move, Obama.

Oh, but Obama has some suggestions for the banks who do have to repay taxpayer money:

“What I’d say to these executives is this: Instead of sending a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I suggest you might want to consider simply meeting your responsibilities. And I’d urge you to cover the costs of the rescue not by sticking it to your shareholders or your customers or fellow citizens with the bill but by rolling back bonuses for top earners and executives.”

I literally swore (sorry, Love!) last night as I listened to a supposedly educated man, and leader of the free world, make this statement.

Meeting their responsibilities? What responsibilities are those? The responsibility, under your party’s Community Reinvestment Act to make loans to people who can’t afford them? The responsibility to amp up those loans when a Democrat-led Senate threatened to sue the banks for not loaning enough in the 1990’s?

And where are they going to get the money to pay these fines? From their customers and shareholders and fellow citizens. THEY HAVE NO OTHER SOURCE OF MONEY!!

Oh, except the Treasury, when it’s forced on them.

Mr. Obama, please stop your populist temper tantrum, quit speaking out of both sides of your mouth and get down to the fundamental job government should be doing: ensuring a free market and free information for all participants.

Cover of the English translation
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As you’ve probably heard, Obama’s “pay czar” (seriously, czar is the best word for this?) has cut compensation for the top 25 executives at 10 firms who got substantial amounts of government money.  The cuts were an average of 50%, with some as much as 90%-100%.

Treasury Secretary Tim Geithner says the Treasury has the authority to do this because these firms received substantial amounts of taxpayer money in the financial crisis.

Here’s the thing:  “received” is a pretty audacious word for him to use.  These companies were forced to take the money.  They had no choice.

The Obama Administration, once they’d forced these firms to take this money, then turned around to their lap dogs, I mean the new media, and trumpeted how these firms had taken money from taxpayers and, boy, was Obama going to start telling them what to do.

Here are the actions the Obama Administration has taken since then:

  • Treasury, in conjunction with the Fed, forced (literally, they threatened to have him fired) the Bank of America Chairman/CEO to buy Merrill Lynch, telling him to deceive his shareholders in the process.  Once he did this, the shareholders found out and had him fired as Chairman.  Then the Treasury forced him to retire.  And then forced him to take $0 compensation for 2009.
  • For the two auto firms who took money (GM, Chrysler), the Administration completely subverted existing bankruptcy law to literally steal from the secured creditors of these companies and give ownership of the companies to the unions.  When these creditors filed lawsuits, they received threatening calls from the Treasury and subsequently all dropped their suits.  Except one pension fund, I believe.  I love that fund.
  • And now, these 10 companies (8 banks, 2 auto companies) have had their top 25 executives get their pay hammered.

Now, if I’m a top executive at XYZ company and my pay just got cut by 50%, my thought is, polish up the resume.  Find some other sucker to get paid half to deal with the government all day.

And, since the pay rate is half, how many other top-tier executives are going to come on board?  Yeah, approximately 0.  Which leaves these systemically important companies positioned to pick up the cast-offs and no-names that weren’t smart enough to run these companies WHEN THEY WERE HEALTHY.  Much less when they need to recover from a crisis.

Cover of the English translation
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But wait, CNN thinks this isn’t a big deal:

“Who cares if Wall Street ‘talent’ leaves? If lower pay lures some of Wall Street’s finest away, so be it. It’s not as if the best and brightest were doing a good job to begin with.”

Because if even the best and brightest couldn’t avoid this mess, we should definitely put less intelligent/skilled/experienced people in charge.

It will be interesting to see if there’s an exodus of executive talent at these companies.  I’m guessing it won’t happen en masse but if you look over the next two years, I’ll bet we see over 50% of these top 25 leaving these companies.