Jim Johnson, who not only served as an economic adviser to Obama but also originally ran his running-mate search committee. http://hotair.com/archives/2008/09/19/mccain-ad-jim-johnson/
In Las Vegas, Obama targeted his message to Hispanic and African-American voters. He promised to reform the health care system, create a teacher corps, reform bankruptcy laws and clean up the mortgage business. “I will crack down on predatory lenders — who all too often target the African-American community, target the Hispanic community — with tough new penalties that treat mortgage fraud like the crime that it is,”
Obama stated at a rally this morning. I wonder if these people also know how these institutions are intertwined with his campaign funds.
Senator Obama talks a tough game on the financial markets but the facts tell a different story. He took more money from Fannie and Freddie than any Senator but the Democratic chairman of the committee that regulates them. He put Fannie Mae’s CEO who helped create this disaster in charge of finding his Vice President. Fannie’s former General Counsel is a senior advisor to his campaign. Whose side do you think he is on? When I pushed legislation to reform Fannie Mae and Freddie Mac, Senator Obama was silent. He didn’t lift a hand to avert this crisis. While the leaders of Fannie and Freddie were lining the pockets of his campaign, they were sowing the seeds of the financial crisis we see today and enriching themselves with millions of dollars in payments. That’s not change, that’s what’s broken in Washington.
Under Raines, Fannie Mae committed “extensive financial fraud.” Raines made millions. Fannie Mae collapsed.
The same Franklin Raines, who reaped millions from Fannie Mae and gets a guaranteed lifetime pension of $110,000 per month after he left amidst a huge mismanagement scandal and, according to the Washington Post, “perpetrated ‘extensive financial fraud’” at Fannie Mae.
Taxpayers? Stuck with the bill. Barack Obama. Bad advice. Bad instincts. Not ready to lead.
McCain received $117,500 from Lehman Bros.
Obama received $370,524 from Lehman Bros.
How about AIG?
John McCain got $36,875 from AIG
Barack Obama raked in $75,899 (+205%)
The ad links Obama to Raines for two reasons — Obama, in just 4 years, received more campaign contributions from Fannie Mae and Freddie Mac than all U.S. Senators except one: Chris Dodd, who happens to be head of the Senate Banking Committee.
NOTE: Obama’s money was given over a period of 4 years and Dodd’s over 20. Let’s do some simple math and we see that on a yearly basis, Obama raked in 4 times as much. What was Fannie buying?
Got that? Barack Obama, the guy who supposedly is not beholden to special interests, took three times as much money from Lehman Brothers and more than twice as much from AIG.
Gee, and who did the now Government financed mortgage broker Fannie Mae give its money to when it wanted to influence a politician?
Top Recipients of Fannie Mae/Freddie Mac Campaign Contributions, 1989-2008Name Office State Party Grand Total
Dodd, Christopher S CT D $165,400
Obama, Barack S IL D $126,349 ($6000 came from the PAC)
Kerry, John S MA D $111,000
What about McCain?
The folks at Fannie Mae didn’t show him a lot of love. According to Open Secrets:
McCain, John S AZ R $21,550 (all from individuals).
and who tabbed the former head of Fannie Mae to head up his Vice Presidential search team? OBAMA, that’s who. Back in May Barack turned to Jim Johnson, former CEO of Fannie Mae. Who is Johnson?
Johnson served as Fannie Mae CEO from 1991 to 1998 and has a long history in both Washington politics and business. He served on the boards of numerous companies, including The Goldman Sachs Group, KB Home, and Target Corporation, and has been Vice Chairman of Perseus LLC. He also was a corporate finance managing director for Lehman Brothers. He was an executive assistant for Vice President Walter Mondale (1977-1981) and a U.S. Senate staff member. Johnson also helped screen running mates for Democratic presidential nominees Walter Mondale in 1984 and John Kerry in 2004.
When it came time for a tough decision who did Barack turn to? A former community organizer per chance? Hell no! He went with the inside the beltway uber lobbyist.
So, Obama bots, save your sanctimonious bullshit. When it comes to cozying up to big players and wealthy Wall Street types smack in the middle of the lastest scandals and crises, Barack Obama is in a league of his own. That is “change” you want to believe in? What a goddamned joke!!
Deal with reality, John McCain wisely was not in bed with these guys. Will the media ask Barack to explain? Probably not.
And to further drive home the point (hat tip to ivet for the link) here is John McCain back in 2006 railing against the power of lobbyists like Fannie Mae:
The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.
For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.
I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.
McCain’s last comment should lead his next batch of Presidential ads. Where was Barack? He was taking Fannie Mae money. Any questions?
McCain sounded the warning and no one listened:
McCain managed to predict the entire collapse that has forced the government to eat Fannie Mae and Freddie Mac, along with Bear Stearns and AIG. He hammers the falsification of financial records to benefit executives, including Franklin Raines and Jim Johnson, both of whom have worked as advisers to Barack Obama this year. McCain also noted the power of their lobbying efforts to forestall oversight over their business practices. He finishes with the warning that proved all too prescient over the past few days and weeks.
What was this bill? The act would have done the following:
(1) in lieu of the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development (HUD), an independent Federal Housing Enterprise Regulatory Agency which shall have authority over the Federal Home Loan Bank Finance Corporation, the Federal Home Loan Banks, the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac); and (2) the Federal Housing Enterprise Board.
Sets forth operating, administrative, and regulatory provisions of the Agency, including provisions respecting: (1) assessment authority; (2) authority to limit nonmission-related assets; (3) minimum and critical capital levels; (4) risk-based capital test; (5) capital classifications and undercapitalized enterprises; (6) enforcement actions and penalties; (7) golden parachutes; and (8) reporting.
It never made it out of committee. Chris Dodd, then the ranking member of the Banking Committee and now its chair, was in the middle of receiving preferential loan treatment from Countrywide Mortgage, one of the companies gaming the system in the credit crisis.
I warned from the start of stimulus-palooza that we were headed in this direction. Both political parties support these massive government interventions–from empowering judges to meddle with private contracts to backing billions in mortgage securities. This isn’t the last step. It’s the first. And you know who will end up getting screwed: The responsible and the frugal.
Let us take a quick look at Obama’s Finance Chair:
Let’s meet Barack Obama’s Finance Chairperson, Penny Pritzker. I thought you might like to know more about Penny Pritzker and the closing of Superior Bank, which was owned by the Pritzker family. The Pritzkers are one of the nation’s wealthiest families and heirs to the fortune created by the Hyatt hotels. Yes, Penny is a billionaire. Among their other endeavors, the Pritzkers were the owners of Superior Bank in Hinsdale, Illinois when it was seized. Yes, I did say seized. Penny Pritzker, Barack Obama’s great Chicago (of course!) friend was a pioneer you might say! She was a failed subprime lender who set the tone all the way back to 2001. She did it before it was even in style.
and automobile loans for securitization and sale in the secondary market. OTS found that the bank also suffered from poor lending practices, improper record keeping and accounting, and ineffective board and management supervision. Superior Bank suffered as a result of its former high-risk business strategy, which was focused on the generation of significant volumes of subprime mortgage Superior became critically undercapitalized largely due to incorrect accounting treatment and aggressive assumptions for valuing residual assets. OTS has determined that Superior Bank is insolvent, having incurred losses that have depleted all or substantially all of its capital. OTS also determined that Superior Bank was no longer able to transact business in a safe and sound manner. OTS (Office of Thrift Supervision) notified the bank of its serious concerns in July 2000. In light of these findings, OTS determined that closure and the appointment of FDIC as receiver were necessary to protect the interests of the bank’s insured depositors. As of March 31, 2001, the failed bank had total assets of $1.9 billion and total deposits of $1.5 billion. FDIC insures depositors’ accounts up to the statutory limit of $100,000. Superior is the only bank that OTS has closed in 2001, and only the fourth OTS-regulated institution closed in the past five years.
At the time of this seizure, it was determined that Penny Pritzker and her family owed $460,000,000 to the Federal Government. Nearly a half a billion dollars.
Also see Dan Riehl’s July 22, 2008, post Penny Pritzker: It Gets Worse? h/t Bessie
On a list of ten questions he’d like Sen. Barack Obama (D-Ill.) to answer, author and political analyst Earl Ofari Hutchinson recently listed the following as number 6:
The head of your campaign finance chair is Penny Pritzker. Before taking over Obama´s campaign finances, she headed up the borderline shady and failed Superior Bank. It collapsed in 2002. The bank engaged in deceptive and faulty lending, questionable accounting practices, and charged hidden fees. It made thousands of dubious loans to mostly poor, strapped homeowners. A disproportionate number of them were minority. Why does she still have a principal financial role in your campaign?
John Courtney, commenting in March 2007 at Bob McCarty’s BMW blog, asked
… when is someone going to talk about Obama financial campaign chairman – Penny Pritzker, that cost the Federal Government – taxpayers one billion dollars when Superior Bank failed, and 450 million dollars still owed to the FDIC – and they gave her 15 years to pay back – no interest, if Obama get elected is he going to waive this money owed, all the people the work so hard for there money Obama talks about, hundreds of them, lost there money at Superior Bank, Ms. Pritzker is the only one that made out on that deal.
For those who do not know, “billionaire business mogul” Penny Pritzker was named in January 2007 as Sen. Barack Obama (D-Ill.)’s national finance chairman.
The New York Times reported December 11, 2001, that the Pritzkers had agreed to pay a “record $460 million” spread out over 15 years to the federal government to avoid being punished” for Superior Bank’s failure. It was “the largest settlement ever in the failure of a banking institution. The failure itself is one of the largest in the last decade, one that some estimate could cost the government up to $1 billion.”
“Regulators said Superior had collapsed because of poor lending practices and sloppy bookkeeping,” Time wrote. “The bank specialized in loans to people with poor credit histories, a practice called subprime lending.”
The Obama Subprime plan
Max Fraser wrote January 28, 2008, in The Nation:
Barack Obama’s proposal is tepid by comparison, short on aggressive government involvement and infused with conservative rhetoric about fiscal responsibility.
Edwards’s plan includes a mandatory moratorium on foreclosures, a freeze on rising interest rates for at least seven years, federal subsidies to help homeowners keep up with payments and restructure loans, and explicit measures to rein in predatory lenders and regulate the financial sector. Clinton’s plan is weaker–a voluntary moratorium, a shorter freeze, less commitment to new regulations–but she has promised $30 billion in federal aid to help reeling homeowners and communities.
Only Obama has not called for a moratorium and interest-rate freeze. Though he has been a proponent of mortgage fraud legislation in the Senate, he has remained silent on further financial regulations. And much like his broader economic stimulus package, Obama’s foreclosure plan mostly avoids direct government spending in favor of a tax credit for homeowners, which amounts to about $500 on average, beyond which only certain borrowers would be eligible for help from an additional fund.
When asked if Obama would hold these financial institutions accountable for losses incurred by homeowners and investors, his campaign refused to comment.
Five years ago the NYT reported that the Bush administration recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis. Under the plan a new agency would have been created with the Treasury Department to assume supervision of Fannie Mae and Freddie Mac. The new agency would have the authority to set one of two capital reserve requirements for the companies. It would determine whether the two are adequately managing the risks of their ballooning protfolios.
The NYT reported 5 years ago that both Fannie and Freddie have issued more than $1.5 trillion in outstanding debt was broken. Freddie Mac manipulated its accounting to mislead investors. Both Fannie and Freddie reluctantly supported the plan. Democrats objected because “they were not facing any kind of financial crisis,” said Rep Barney Frank of MA, the ranking Dem on the Financial Services Committee. Reason being that if “people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.” Representative Melvin L. Watt, Democrat of North Carolina, agreed. ”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said
The Dems had forced lenders to assume more risk at lower interest rates in the 1990s. Problem: The Community Redevelopment Act encouraged minority home ownership and in doing so helped create the market for the risky subprime loans that the Dems now decry as greedy and predatory.
The market was fueled by greed and over leveraging in the secondary market for subprimes, vis-avis mortgaged backed securities traded on Wall Street. The seed was planted a long time ago. We are watching the seeds bear fruit. Bad loans to people who truly could not afford a subprime loan.
The Dems now want to shift blame back to the Republicans who had tried to increase oversight and curtail risk in lending practices while reducing patronage at the giant GSEs. Bush let this get out of hand, but the origins of the disaster and efforts to keep bad policy falls on the laps of the Democrats.
The blame game plays out both ways. Sad. Fallout:
Three things seem certain:
* The investment-banking industry will shrink to far fewer players. The survivors will be a lot more risk averse than their departed competitors, and will use the lessened competition to increase their profit margins.
* Just as we’ve seen the textile, auto and steel industries shrink in the face of foreign competition, we’ll see the financing of American business move overseas. Increasingly, the money that our firms will need to finance investment will come from the sovereign wealth funds of the Middle East and Asia. Not all of it (and certainly not all of the deal-making skill needed to put this money to profitable work), but enough of it to make an office in Dubai eventually as important as one on Wall Street. One Goldman Sachs banker told me that he’d never been in the Middle East until recently; now he’s there several times every month.
* Finally, we’re likely to see an increased disparity between the performance of financial institutions and the performance of what we call the “real economy.”