Saturday, October 04, 2008

ESCONDIDO:Barron aims to restore city's reputation, attract corporations : North County Times - Californian

ESCONDIDO:Barron aims to restore city's reputation, attract corporations : North County Times - Californian: "A political novice, Barron said he has learned quite a bit about leadership serving as president of the Las Palmas Homeowners Association the past few years."
Escondido is in north San Diego County. Their mayor has some big ideas. I hope his HOA experience stands him in good stead.

Home crisis hampers HOAs |

Home crisis hampers HOAs | "Homeowners' associations got lost somewhere in the shuffle of the home mortgage lending crisis.

No one knows that better than Deby Wine, the president of the Brandy Station Homeowners Association.

The Manassas Park HOA has become a revenue graveyard where many residents pay their quarterly association dues late or don't pay at all, said Win"

And I wouldn't be expecting a federal HOA bailout anytime soon. The bread line is pretty long right now.

Bill Clinton's drive to increase homeownership went way too far - BusinessWeek

Bill Clinton's drive to increase homeownership went way too far - BusinessWeek: "Add President Clinton to the long list of people who deserve a share of the blame for the housing bubble and bust. A recently re-exposed document shows that his administration went to ridiculous lengths to increase the national homeownership rate. It promoted paper-thin downpayments and pushed for ways to get lenders to give mortgage loans to first-time buyers with shaky financing and incomes. It’s clear now that the erosion of lending standards pushed prices up by increasing demand, and later led to waves of defaults by people who never should have bought a home in the first place."
This item is from February. The blog author relies on and links to analysis by Prof. Joseph Mason of Drexel Univerisity who analyzes the Clinton Administration's National Homeownership Strategy. This policy got underway in 1994 or 1995 and was intended to increase the home ownership rate by making it possible for people to buy houses even though they could not come up with a down payment, did not have enough money to make normal interest-plus-principal payments, or otherwise couldn't afford to buy a house in the first place. Clinton gave numerous speeches throughout his administration boasting of the success of the program.

As I keep saying, I don't see how any one culprit can be identified here. But Clinton is skating on what amounted to the intentional creation of a world of bad debt, backed up by GSEs.

French PM says world 'on edge of abyss' | Business News | Reuters

French PM says world 'on edge of abyss' | Business News | Reuters: "Prime Minister Fillon, whose country is hosting an emergency summit of Italian, British and German leaders on Saturday, said only collective action could solve the financial crisis. He said he would not rule out any solution to stop any bank failing.

'The world is on the edge of the abyss because of an irresponsible system,' Fillon said, alluding to widespread anger over past lax regulation of financial markets and excessive lending."

Here in the US the media portray this as an American problem and the political class seems to go along with that, but the fact is that European banks have been doing the same things that drove American banks under. It wasn't just based on risky home loans. All kinds of debt were used to create a bizarre unregulated aftermarket consisting of various forms of derivatives that I don't remotely understand. George Soros has a book out on this. Back in March he was predicting that the crash of the $50 trillion credit default swap market would dwarf the previous bank failures. I'm not a Soros fan but his argument on the failure of the neoclassical economics model is very persuasive. - Lawmaker Accused of Fannie Mae Conflict of Interest - Politics | Republican Party | Democratic Party | Political Spectrum - Lawmaker Accused of Fannie Mae Conflict of Interest - Politics | Republican Party | Democratic Party | Political Spectrum: "WASHINGTON — Unqualified home buyers were not the only ones who benefitted from Massachusetts Rep. Barney Frank’s efforts to deregulate Fannie Mae throughout the 1990s. So did Frank’s partner, a Fannie Mae executive at the forefront of the agency’s push to relax lending restrictions. Now that Fannie Mae is at the epicenter of a financial meltdown that threatens the U.S. economy, some are raising new questions about Frank's relationship with Herb Moses, who was Fannie’s assistant director for product initiatives. Moses worked at the government-sponsored enterprise from 1991 to 1998, while Frank was on the House Banking Committee, which had jurisdiction over Fannie."
That is "partner" as in "life partner," not business partner.

Foreclosure Alley - SoCal Connected

Foreclosure Alley - SoCal Connected: "For the past few years, the Inland Empire in Riverside County has been one of the fastest growing counties in the state - home to a major housing boom. But now the Inland Empire is pretty much the poster child for the foreclosure crisis. In the newer developments, house after house sits vacant - either up for auction, for sale by a bank or going for what’s called a “short sale” which is when the owner owes more than the house is worth."
Wow. All they need is some zombies staggering around. What a disaster.
Thanks to Fred Pilot for this grim link.

Friday, October 03, 2008

Woman, 90, shoots self inside foreclosed home -

Woman, 90, shoots self inside foreclosed home - "(CNN) -- A 90-year-old Akron, Ohio, woman who shot herself as sheriff's deputies tried to evict her from her foreclosed home became a symbol of the nation's home mortgage crisis Friday. Fannie Mae foreclosed on the Akron, Ohio, home of Addie Polk, 90, after acquiring the mortgage in 2007. Addie Polk is being treated at Akron General Medical Center after shooting herself at least twice in the upper body Wednesday afternoon, her city councilman said."

Fannie Mae Eases Credit To Aid Mortgage Lending - New York Times

New York Times, September 30, 1999: Fannie Mae Eases Credit To Aid Mortgage Lending: "In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders. The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring. Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans."
And there you have the essence of the problem. The Clinton Administration and the banking industry were eager to have Fannie Mae underwrite the enormous risk involved in lending money to people so they could buy houses that were beyond their means.

Feral cats to be trapped - Milford, MA - The Milford Daily News

Feral cats to be trapped - Milford, MA - The Milford Daily NewsFRANKLIN —The Highwood Condominium Association's board of trustees has decided to trap and euthanize a colony of feral cats at the complex that has been the center of a neighborhood dispute, according to Animal Control Officer Cindy Souza. The move may be illegal, however, depending on who actually owns the woods where the cats roam and eat, she said.
It says at one time they had over 200 of these creatures and they were jumping out of trash bins and biting people. A feral cat bit my son when he was 6 and we were vacationing in St. Maarten. They look cute up until they attack. But why does the association have to do this? Shouldn't the Animal Control people be doing this on public land, and going on private land with the association's permission, instead of reading from the rule book?

Quick Takes: Protest Over Political Ban at Illinois, Another Scandal for Pa. Loan Agency, Patent Loss for Johns Hopkins, Sick Students at Georgetown, Ig Nobel Prizes :: Inside Higher E

Protest Over Political (make that "Obama") Ban at Illinois: "Faculty members held a rally at the University of Illinois at Urbana-Champaign to back the Obama presidential campaign Thursday to show that they will not follow guidelines issued by the university that bar them from rallies or wearing political buttons on campus, the Chicago Tribune reported. The university says it isn’t enforcing the guidelines, which it says are required by state law."
Nothing will happen to them for defying the ban. The U of I faculty will continue electioneering for Obama in every arena, including the classroom, and nothing will be done about it.

Schwarzenegger to U.S.: State may need $7-billion loan - Los Angeles Times

Schwarzenegger to U.S.: State may need $7-billion loan - Los Angeles Times: "SACRAMENTO -- California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent."
California isn't the only government that can't get a loan. But that state has been spending and regulating itself into insolvency for a long time, and the voters have made it worse by passing initiative measures that crippled the government (property tax cap, term limits, etc.) Add to that a new pattern of population movement--immigration of low income people and out-migration of the middle class to Nevada, Utah, Arizona, Colorado, etc., topped off with socialist mayors running LA and SF, oblivious to economic realities. The last thing the state needed was having their credit card cut up.

Thursday, October 02, 2008


TEACHERS TOLD NOT TO WEAR OBAMA BUTTONS - New York Post: "The teachers union has been handing out thousands of Barack Obama campaign buttons to its members, sparking a clampdown by education brass.

The Department of Education - which has a long-standing policy barring teachers from wearing campaign buttons in schools - is set to send out an e-mail this week from Schools Chancellor Joel Klein laying down the law."
This is looking like a concerted effort by teachers' unions to use their access to students for pro-Obama activism. Clearly, the Obama campaign knows how to influence and organize young people. And the teachers' unions are not hindered by rules against activism in the classroom.

Virginia Teachers Union Sparks Outrage With 'Obama Blue Day' - Elections

Virginia Teachers Union Sparks Outrage With 'Obama Blue Day' - Elections: "Virginia Republicans are in an uproar after the state teacher's union sent an e-mail to its members encouraging them to wear blue-colored shirts to school to show their support for Barack Obama.

State Republicans are calling it an undisguised attempt to influence students' political views.

The Virginia Education Association sponsored 'Obama Blue Day' on Tuesday. In an e-mail sent last week, it urged teachers to participate by dressing in blue."
What They Said About Fan and Fred - "House Financial Services Committee hearing, Sept. 10, 2003:

Rep. Barney Frank (D., Mass.): 'I worry, frankly, that there's a tension here. The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios. . .'

Sen. Charles Schumer (D., N.Y.): 'And my worry is that we're using the recent safety and soundness concerns, particularly with Freddie, and with a poor regulator, as a straw man to curtail Fannie and Freddie's mission. And I don't think there is any doubt that there are some in the administration who don't believe in Fannie and Freddie altogether, say let the private sector do it. That would be sort of an ideological position.'
There is more, and from a number of Democrats who are now blaming the whole thing on the Republicans. It wasn't all the Democrats fault, either, but it does take a certain chutzpah for Barney Frank to say the things he has said in the last week, after saying what he did five years ago. He was warned, and so were others, and they not only ignored the warnings, they criticized the people who delivered the news.

Financial Crisis: So much for tirades against American greed - Telegraph

Financial Crisis: So much for tirades against American greed - Telegraph: "It took a weekend to shatter the complacency of German finance minister Peer Steinbrück. Last Thursday he told us that the financial crisis was an 'American problem', the fruit of Anglo-Saxon greed and inept regulation that would cost the United States its 'superpower status'. Pleas from US Treasury Secretary Hank Paulson for a joint US-European rescue plan to halt the downward spiral were rebuffed as unnecessary. By Monday, Mr Steinbrück was having to orchestrate Germany's biggest bank bail-out, putting together a €35 billion loan package to save Hypo Real Estate. By then Europe was 'staring into the abyss,' he admitted. Belgium faced worse. It had to nationalise Fortis (with Dutch help), a 300-year-old bastion of Flemish finance, followed a day later by a bail-out for Dexia (with French help).

Within hours they were all trumped by Dublin. The Irish government issued a blanket guarantee of the deposits and debts of its six largest lenders in the most radical bank bail-out since the Scandinavian rescues in the early 1990s. Then France upped the ante with a €300 billion pan-European lifeboat for the banks. The drama has exposed Europe's dark secret for all to see. EU banks took on even more debt leverage than their US counterparts, despite the tirades against ''le capitalisme sauvage'' of the Anglo-Saxons."
I made note below of Steinbruck's condescension. Now it turns out that our sophisticated European betters, from whom we in the colonies need to learn so much, are in even worse shape due to their own risky credit practices.

Wednesday, October 01, 2008 Editorials, Political Cartoons, and Polls from Investor's Business Daily -- Fannie, Freddie Critic Ridiculed In 2000 Editorials, Political Cartoons, and Polls from Investor's Business Daily -- Fannie, Freddie Critic Ridiculed In 2000: "It is now consensus that Fannie Mae and Freddie Mac are at the heart of the systemic meltdown we are seeing in the mortgage market. They are costing taxpayers billions through their own bailouts and through the role they played in fueling an artificial mortgage boom. But eight years ago, when I testified before Congress that Fannie Mae and Freddie Mac's 'special privileges create a serious hazard to the market, to taxpayers (and) to the economy,' my criticism of these sacred financial entities was met with ridicule."
He wasn't alone. Other people said similar things, and there was even legislation introduced that would have increased oversight of the GSEs. Nothing passed because numerous members of Congress rushed to Fannie Mae's defense. Maybe somebody should see who got what campaign contributions from whom. Maybe somebody with subpoena power might want to look into what other benefits certain people might have received.

Teachers asked to remove Obama buttons in class - Santa Cruz Sentinel

Teachers asked to remove Obama buttons in class - Santa Cruz Sentinel: "SOQUEL -- Teachers at Soquel High School have agreed not to wear 'Educators for Obama' buttons in the classroom after a parent complained that educators were attempting to politically influence his daughter and other students."
Hey, what about all the teachers who were wearing McCain buttons? Oh...there weren't any. What a surprise.

Tuesday, September 30, 2008

Saudi woman driver hurt after defying ban

Saudi woman driver hurt after defying ban: "A young woman in Saudi Arabia who defied ultra-conservative kingdom's ban on women driving was injured when the car span out of control and plunged into a stream, a newspaper reported on Tuesday. The unnamed woman in her 20s 'stole' her brother's car on Sunday, picked up a female friend and drove at high speed through a town in the Eastern Province before losing control of the vehicle, Al-Riyadh said. The car hit an electricity pole and plunged into an irrigation channel. Both the driver and her friend were taken to hospital in serious condition, the paper said."
The Saudi version of Thelma and Louise. And these policies continue because the nation sits on an ocean of crude oil.

White Sox win AL Central: Twins trying to return champagne to Liquor World

Yes, this one is gone. 461 feet, to be exact. Thome does the scoring, Danks does the pitching, Jenks cleans up. And we are off to Tampa Bay.

Feds, D.A. rebuffed HOA members - Face To Face: Final Take - Las Vegas Sun

Feds, D.A. rebuffed HOA members - Face To Face: Final Take - Las Vegas Sun: "he woman who brought her suspicions about collusion on her homeowners association board to the attention of the FBI says she didn't get far. Wanda Murray tells Jon on tonight's program that the feds deemed the issue a civil matter and had no interest. Ditto for the District Attorney, where Murray says she and her neighbors failed to get past the secretary.

So what got law enforcement to take notice? Tune in tonight to hear State Sen. Mike Schneider's (D-Clark) contention that the alleged activity extends beyond Nevada."

So now we have two different stories of how this investigation got started, but Senator Mike's story is not out yet...stay tuned. Expiring minds want to know.
From the Center for California Homeowner Association Law: the inside scoop on the Las Vegas HOA investigation

"So how exactly did five senior homeowners get the FBI to investigate possible fraud and collusion in their homeowner association? By doggedly collecting association records, by studying the facts, by keeping their ears open, by being patient, and by not giving up –- for three long years. On Aug. 22, 2005, Bill Farnsworth, Wanda Murray and three other owners of condominiums at the Rhodes Homes development of Vistaña walked into the local headquarters of the Federal Bureau of Investigation. In their possession was a 3-inch thick, three-ring binder full of records and other papers documenting -- at the least -- what they thought were serious conflicts of interest involving their homeowner association board of directors. At the most, they believed the records showed a possibility of collusion between members of the board, which included a former Las Vegas police lieutenant, to steer work toward a Las Vegas construction firm, Silver Lining Construction. The group of angry and diligent senior homeowners appears to have been on to something. The names contained in their three-ring binder largely correspond to those in a federal warrant served last week on two management companies, two association law firms, and seven associations. Read the story of these patient, dogged seniors on the CCHAL website [] The link is"
Fascinating story and well worth reading. Thanks to Marjorie Murray of CCHAL for sending this note. But there is another account out there saying that the owners were initially rebuffed by the DA and the FBI, who viewed it as a civil matter. That would be par for the course. Something else, other than a citizen complaint, must have happened to trigger the criminal probe.

Monday, September 29, 2008

Biden Focuses on Debate Prep, Mishears Question on Rejection of Bailout Bill - From The Road

Biden Focuses on Debate Prep, Mishears Question on Rejection of Bailout Bill - From The Road: "As he exited the hotel for his dinner break, Biden was asked “Senator, can we get your reaction to the House bill not passing?”

Biden interrupted the question with a “Hey folks,” to reporters and then said “Oh, things are going well.”

Biden’s press secretary, David Wade, sent an e-mail minutes later, saying “the senator thought you asked how prep was going” for this week’s debate with Gov. Sarah Palin.

Prior to Biden's departure, the press was moved further away from the hotel's exit, perhaps far enough away that it prevented Biden from clearly hearing the question."

When Biden shows he is out of touch, the press painstakingly explains it away. But when Palin asks Charlie Gibson for a clarification of an ambiguous question, the press portrays her as a dunce.

Power Line: Was the Bailout Vote a Partisan Set-Up?: "Everyone has heard about the weirdly partisan and inaccurate rant which Pelosi contributed to the debate on the bailout bill. But that speech did not take place in a vacuum. Public opinion is running strongly against the bill, and it required political courage to vote for it. If you look at the list of those who voted 'No' in both parties, it is mostly members who are engaged in tough re-election campaigns. This is true on both sides of the aisle.

That being the case, and given the fact that the legislation was in fact a negotiated, bipartisan compromise, the first duty of the majority party is to line up its members to support the majority's bill. But evidence is growing that the Democrats did no such thing.

As of yesterday, the Democrats' House whip, Jim Clyburn said that he hadn't even begun 'whipping' Democratic representatives, and wouldn't do so unless and until he got orders from Nancy Pelosi. Today, Democratic Congressman Peter DeFazio told NPR that he never was 'whipped' on the bill. So Pelosi evidently left Democrats to vote their consciences--which is to say, vote against the bill if they thought it was politically necessary--while counting on Republicans to put the bill over the top.

This is a classic Charlie Brown and the football maneuver. Pelosi gives a speech that frames the issue, falsely, as the issue, falsely, as the result of bad Republican policies, then allows her own threatened representatives to do the popular thing while expecting Republicans to take one for the team by casting an unpopular vote. Which, of course, their Democratic opponents would use against them, thereby increasing the Democratic majority in the House.

If this was Pelosi's plan it failed, in part, perhaps, because her over-the-top partisan diatribe tipped off Republicans as to what was afoot. If, as it now appears, it's true that the Democrats made no serious effort to pass the bailout bill, it is just one more example of the failure of leadership we have seen since they took control of Congress."

This is Powerline's explanation of why the bailout bill collapsed in the House. It is the only explanation for Pelosi's behavior that makes sense to me. I read Pelosi's speech and it was an attack on the Republicans she was expecting to vote for it. Here are some documents that are posted on the House Financial Services Committee web page along with the bill and summaries of it:

On Housing Finance, the Difference between Democrats and Republicans Has Been Night and Day

The Truth about the Community Reinvestment Act

The Truth versus the Republicans on the Regulation of Subprime Mortgages and Fannie Mae and Freddie Mac

The Democrats were being highly partisan in presenting this bill to the public as a fix for Republican failures, which is not true. That would be fair enough given that they have the majority, as long as they pass it as a Democrat bill. But Pelosi wanted to have her cake and eat it. She let the Democrats off the hook. Pelosi did not use her power to get all the Democrats in line, which she certainly could have done. She was counting on a whole lot of Republican support. She got lots of them, but not enough. About 94 Democrats voted against it, and they are a laundry list of the left wing of her party. The Democrats, not the White House, wrote this bill, and Pelosi seriously screwed up. Now it is back to the drawing board and we will see what happens later this week.

Homeowner links cameras to city cops :: CHICAGO SUN-TIMES :: Chicago Crime

Homeowner links cameras to city cops :: CHICAGO SUN-TIMES :: Chicago Crime: "Hill has become the first private homeowner to take the city up on its unprecedented offer to connect privately owned exterior surveillance cameras to Chicago's 911 emergency center...Nearly two dozen colleges, businesses and high-rises also have agreed to share their video with the 911 center to create a panoramic view of disaster scenes.

They include Boeing, Macy's, the Chicago Mercantile Exchange, the Chicago Board Options Exchange, Blue Cross-Blue Shield, Golub & Company, JPMorgan Chase Bank, Sears Tower, Prudential Plaza, the Cook County Administration Building, Rush Hospital, Columbia College, Harold Washington College, St. Xavier University, DePaul University, Roosevelt University, Ike Sims Village and an association of State Street merchants.

After the deadly school shootings at Northern Illinois University and Virginia Tech, DePaul is hooking up at least 15 cameras at its Lincoln Park and South Loop campuses at a cost of roughly $10,000 for computer servers and switches."

I wonder if any condo buildings are on the list. It says "high-rises," but that would include business towers.
FBI investigates Las Vegas HOA corruption/ September 26, 2008 at Center for California Homeowner Association Law: "According to a law enforcement source, the FBI is investigating whether individuals were placed on homeowners association boards who, in turn, would direct business stemming from construction defect lawsuits to select companies.

At issue, according to the source, is whether HOA members were steering contracts to certain construction companies.

Other sources said there has long been speculation that some HOA representatives were hiring certain law firms to handle construction defect lawsuits in exchange for kickbacks.

State Sen. Mike Schneider, D-Las Vegas, a lawmaker who has been involved in homeowners association issues before the Legislature, said the speculation involved management companies steering construction defect business to law firms in exchange for kickbacks."

I don't know anything about the merits of the cases that are being investigated, but the political ramifications intrigue me. I'm wondering if this case will turn out to be Exhibit A for why Nevada needs to pass legislation cutting back on the ability of community associations to file construction defect suits. Developers in many states have been arguing for decades that CID construction defect litigation is a racket.

Now here we are with the housing market in tatters. New homes are not selling, developers are in bad shape financially, and of course attorneys representing all the existing developments are filing litigation regardless. Now, on top of everything, the credit markets just imploded.

This case, if it proves to be a real example of criminal conduct, could be the wedge that developers need to open a policy window and enact such measures as:

1. Mandatory binding arbitration
2. Caps on attorney fees
3. Caps on damages--such as going to the traditional rule of cost of repair or diminution in value, whichever is less. Often the diminution in value is zero or very speculative. Cost of repair is the only thing that makes sense for an HOA.
4. Mandatory meet and confer requirements with the developer having a chance to repair
5. Having court appointed experts do the repair estimate
6. Changing the burden of proof or the test for recovery, or otherwise raising the bar for proving the case

Here is some historical background. In 1995, California passed a law that made it harder to file these suits. My informal understanding of things is that a number of California construction defect attorneys migrated to Las Vegas and Arizona in hopes of finding greener pastures in the desert, so to speak. These attorneys have done well for themselves, but now I think they may find themselves in an uncomfortable spotlight. This is a hard issue, because if there are serious defects in original construction, there has to be a real remedy for these associations. There has been a lot of shoddy construction, especially during housing booms. But the fees are so high for the attorneys involved, and the risks and cost of litigation so high for the developer and insurance companies, that there is always a temptation for some practitioners to trump up a damage claim in the hope of a settlement. If you want examples of ethical attorneys pursuing valid claims, you can find them, but if you want bad apples, you can find those too.
O'S DANGEROUS PALS - New York Post: "WHAT exactly does a 'community organizer' do? Barack Obama's rise has left many Americans asking themselves that question. Here's a big part of the answer: Community organizers intimidate banks into making high-risk loans to customers with poor credit.

In the name of fairness to minorities, community organizers occupy private offices, chant inside bank lobbies, and confront executives at their homes - and thereby force financial institutions to direct hundreds of millions of dollars in mortgages to low-credit customers.

In other words, community organizers help to undermine the US economy by pushing the banking system into a sinkhole of bad loans. And Obama has spent years training and funding the organizers who do it."

I wonder if this will go anywhere as an issue. Probably not. With a colossal economic bomb exploding five weeks before the election, on top of the five-year Iraq war and presidential job approval ratings that are like winter temperature in Fairbanks, it is hard to see how Obama can lose.

But on the merits of the issues (remember those?), there is more to the problem than the Community Reinvestment Act. However, that entire policy--forcing banks to lend to low-income borrowers--needs to be examined. McCain should be raising this issue loud and clear, and Obama should explain why we need this policy.

Sunday, September 28, 2008 Advisers greet a financial 'Facebook' - InvestmentNews: "A free multimedia site for senior financial executives, MeettheBoss .com, which was launched this month, is a virtual community intended to foster communication among an elite group with shared interests."
MEETTHEBOSS.COM is being called a virtual gated community. How nice for them to have a place where they can discuss plummeting stock prices, bankruptcy, golden parachutes, and government bailouts.

AB 2846 Assembly Bill - ENROLLED

AB 2846 Assembly Bill - ENROLLED: signed by The Governator of Kaleeforneea: "This bill would provide that, if a dispute exists between the owner of a separate interest and the homeowners' association regarding any disputed charge or sum levied by the association, and the amount in dispute does not exceed the jurisdictional limits of the small claims court, the owner of the separate interest may pay under protest the disputed amount and all other amounts levied, including certain fees, costs, and other specified amounts, and commence an action in small claims court."
My understanding is that Marjorie Murray and her organization, the Center for California Homeowner Association Law, have been pushing this concept for a long time. Congratulations, and I hope it works. And thanks to Fred Pilot for the notice.

German leader warns U.S. superpower era is over - "Indeed, it looks increasingly likely that the dollar will not even remain the leading reserve currency. For several years, Arab nations, led by Saudi Arabia, that were alarmed by the financial measures included in the Patriot Act have quietly been transferring hundreds of billions of dollars into euros. And strongly anti-American but major oil-producing nations such as Iran and Venezuela certainly have been talking themselves in that direction. Now Russia, the largest combined oil and gas energy exporter in the world, is talking about using its record financial reserves to create a gold ruble. The dollar has not been backed by gold since President Franklin D. Roosevelt was forced to effectively devalue it by taking it off the gold standard in 1933."
But let's keep talking about Sarah Palin's interview with Katie Couric and Barack Obama's bracelet. Important stuff like that. We wouldn't want the presidential campaign to get bogged down in press coverage of tedious public policy issues.
Behind AIG's Crisis, Blind Eye to a Web of Risk - "Although America’s housing collapse is often cited as having caused the crisis, the system was vulnerable because of intricate financial contracts known as credit derivatives, which insure debt holders against default. They are fashioned privately and beyond the ken of regulators — sometimes even beyond the understanding of executives peddling them.

Originally intended to diminish risk and spread prosperity, these inventions instead magnified the impact of bad mortgages like the ones that felled Bear Stearns and Lehman and now threaten the entire economy."

This is why the blame is all over the place, from Main Street to Wall Street to Washington, DC. People bought houses they knew they couldn't pay for. Banks lent them money, using a host of "here comes the foreclosure" deals: interest only, ARMS, no down payment, no verification of income and assets, and so on. Anything to make the loan. The federal reserve kept overall interest rates low to induce even more borrowing, and mortgage rates stayed low as well. Politicians ordered lenders to make risky loans to "first time home buyers" and got Fannie Mae into the business of buying them, and also left the derivatives market unregulated. Investors bought mortgage backed securities that everybody knew were backed by high-risk loans because of the guarantees from Fannie Mae and insurers. Insurers came up with "creative" credit derivatives such as the various kinds of credit default swaps to deal with the risk. But the whole house of cards was premised on housing prices going up forever, even though it had to be obvious to everybody that such a thing is completely impossible. And every single person in the housing market knew that sooner or later, when prices stopped going up, a huge number of people were going to lose their homes to foreclosure. They didn't know how far the consequences would go, but they sure knew the foreclosures were coming.

By the way, AIG's stock price went from $22.76 per share on Sept.8 to $2.05 on Sept. 17. Biggest insurance company in the world.