The Subprime Mortgage Crisis and Great Recession was caused by Bill Clinton and Fannie Mae and Freddie Mac

Posted by PITHOCRATES - December 18th, 2011

Week in Review

The Securities and Exchange Commission (SEC) has filed civil fraud charges against Fannie Mae and Freddie Mac for their part in the subprime mortgage crisis.  The charges say they misled investors about their subprime mortgage risk exposure (see SEC charges ex-Fannie, Freddie CEOs with fraud by Derek Kravitz, Associated Press, posted 12/16/2011 on The Washington Times).

According to the lawsuit, Fannie told investors in 2007 that it had roughly $4.8 billion worth of subprime loans on its books, or just 0.2 percent of its portfolio. The SEC says that Fannie actually had about $43 billion worth of products targeted to borrowers with weak credit, or 11 percent of its holdings…

Freddie told investors in 2006 that it held between $2 billion and $6 billion of subprime mortgages on its books. The SEC says its holdings were actually closer to $141 billion, or 10 percent of its portfolio in 2006, and $244 billion, or 14 percent, by 2008.

In a May 2007 speech in New York, Syron said Freddie had “basically no subprime exposure,” according to the suit.

Not 0.2% but 11%.  Not 0% but 10-14%.  This is some serious misrepresentation of the subprime mortgage risk exposure.  It goes from virtually no risk to a risk great enough to cause, well, a Great Recession.

Fannie and Freddie buy home loans from banks and other lenders, package them into bonds with a guarantee against default and then sell them to investors around the world…

Fannie and Freddie had traditionally purchased a small number of subprime mortgage loans, which involved borrowers with credit problems who could not qualify for cheaper prime loans. But starting in the late 1990s many firms started purchasing subprime loans, and Fannie and Freddie followed suit.

Yes, the late 1990s.  Just after the Clinton White House began pressuring lenders to qualify more unqualified borrowers.  In their Policy Statement on Discrimination in Lending.  As noted in a previous post.

Wall Street isn’t to blame for the subprime mortgage crisis.  Bill Clinton started it with his Policy Statement on Discrimination in Lending.  And then Fannie and Freddie bought these high risk mortgages and sold them as safe investments.  If anyone is to blame for the Great Recession it’s government.  And the government sponsored enterprises Fannie and Freddie.


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Public School Teachers get Paid Well because they Champion Government and Demonize Capitalism

Posted by PITHOCRATES - December 18th, 2011

Week in Review

Public school teachers make about twice as much as people in the private sector.  At least according to the federal government’s Bureau of Labor Statistics (see Dept. of Labor: Public School Teachers Are Highest Paid State Workers; Compensation Doubles the Average in Private Industry by Terence P. Jeffrey posted 12/14/2011 on

Public school teachers receive greater average hourly compensation in wages and benefits than any other group of state and local government workers and receive more than twice as much in average hourly wages and benefits as workers in private industry, according to a new report from the Bureau of Labor Statistics.

Public primary, secondary and special education teachers are paid an average of $56.59 per hour in combined wages and benefits, BLS said in the report released last week.

That is slightly more than twice the $28.24 in average hourly wages and benefits paid to workers in private industry.

…state and local government workers…take in an average of $40.76 per hour, according to BLS…

For each hour at work, according to BLS, the average American public school teacher is paid $4.78 in retirement and savings benefits alone.

The average private sector worker, according to BLS, is paid $1.02 per hour in retirement and savings benefits–or less than one-fourth the average hourly retirement and savings benefits paid to public school teachers.

It’s good to be in the aristocracy.  At least twice as good as being in the private sector.  No wonder they are protective of their collective bargaining rights.  Especially for those benefits.  Which are about 4 times better as they are in the private sector.

If you ever wonder why people are so intent on growing the size of the government this is why.  The bigger the government the bigger the taxes.  And the more wealth they can redistribute to those in this aristocracy.

When in doubt follow the money.  And if you do you’ll find the biggest piles of it at the feet of public school teachers.  The next biggest pile will be at the feet of public sector workers.  You see, the teachers get more.  Because they teach our kids that they deserve more.  And they also champion government and demonize capitalism.  That’s why young people vote Democrat.  Until they have careers and families of their own.  And get smarter.  At which point they start voting Republican.


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Egypt getting Chummier with Hamas, Hamas Reiterates their Earnest Desire for Israel to Die

Posted by PITHOCRATES - December 18th, 2011

Week in Review

Whenever people talk about peace in the Middle East you keep hearing that Israel is the problem.  That they need to compromise.  Go back to the 1967 borders.  If the Israelis did that then there would be peace.  At least, that’s what they say.  But listening to Hamas it doesn’t sound like Israel will get any lasting peace.  No matter what they compromise away (see On Anniversary, Hamas Repeats Vows on Israel and Violence by FARES AKRAM posted 12/14/2011 on The New York Times).

The Hamas movement celebrated the 24th anniversary of its founding on Wednesday by reasserting that it would never recognize Israel nor abandon violence…

Political changes in Egypt, Tunisia and Libya augur well for Hamas’s brand of Islamist politics, and the flags of those countries were present on the stage.

This doesn’t sound like anyone who wants to compromise to get a lasting peace.  It sounds more like someone who will refuse to any deal that includes an Israel on the map.  Not much of a bargaining position.  In exchange for land Israel gets nothing but its own demise?  Now I’m no skilled negotiator.  But I don’t think that’s a good deal for Israel.

Oh, incidentally, the one name left out of this report is Iran.  Who is quite chummy with Hamas.  And Hezbollah.  Another group none too keen with an Israel on the map.  All of this Arab Spring doesn’t seem to be favoring Israel.  Especially with the flag of long-time trading partner and neighbor Egypt on the stage with Hamas.  Something that would never have happened with Hosni Mubarak in office.  Of course, he’s no longer in office.  Because Barack Obama told him he had to go.  And he did.  Making the Middle East a far more dangerous place than it has been for a long, long time.


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Asylum Seekers get Lost at Sea trying to make it to Australia and Free Market Capitalism

Posted by PITHOCRATES - December 18th, 2011

Week in Review

People fleeing Afghanistan, Turkey and Iran have packed a rickety boat passed twice its capacity to find a better life (see Rescue bid as migrant boat sinks off Indonesia posted 12/17/2011 on BBC News Asia).

A rescue operation is under way after a boat carrying hundreds of asylum seekers sank off the Indonesian island of Java…

Thousands of asylum seekers try to reach Australia by sea every year, many paying people-smugglers in Indonesia to transport them.

The United States has the same problem with asylum seekers from Cuba.

Interesting, isn’t it?  So many people risk their lives to get to Australia and the United States.  Two countries with free market capitalism.  Both sired from the British Empire.  This is interesting because so many people hate the U.K. and the United States.  They say that they are the source of all evil in the world.  And renounce them and their capitalism every chance they get.  Yet these are the destination choice of asylum seekers everywhere.  These countries following in the capitalistic ways of Great Britain.

Perhaps the U.K. and the United States aren’t the source of all evil in the world.  I mean, it’s hard to go against the asylum seekers on this one.  You just don’t risk your life to go to someplace worse.


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The Real Unemployment Rate is Closer to 11%, or 20% if you Include the Underemployed

Posted by PITHOCRATES - December 18th, 2011

Week in Review

If at first you fail, lie, lie and lie again (see Wonkbook: The real unemployment rate is 11 percent by Ezra Klein posted 12/12/2011 on The Washington Post).

Typically, I try to tie the beginning of Wonkbook to the news. But today, the most important sentence isn’t a report on something that just happened, but a fresh look at something that’s been happening for the last three years. In particular, it’s this sentence by the Financial Times’ Ed Luce, who writes, “According to government statistics, if the same number of people were seeking work today as in 2007, the jobless rate would be 11 percent…”

Since 2007, the percent of the population that either has a job or is actively looking for one has fallen from 62.7 percent to 58.5 percent. That’s millions of workers leaving the workforce, and it’s not because they’ve become sick or old or infirm. It’s because they can’t find a job, and so they’ve stopped trying. That’s where Luce’s calculation comes from. If 62.7 percent of the country was still counted as in the workforce, unemployment would be 11 percent. In that sense, the real unemployment rate — the apples-to-apples unemployment rate — is probably 11 percent. And the real un- and underemployed rate — the so-called “U6” — is near 20 percent.

There were some celebrations when the unemployment rate dropped last month. But much of that drop was people leaving the labor force. The surprising truth is that when the labor market really recovers, the unemployment rate will actually rise, albeit only temporarily, as discouraged workers start searching for jobs again.

Mark Twain said that figures don’t lie but liars figure.  And the Obama administration has been lying with the unemployment numbers.  Because their Keynesian economic policies have been an abject failure.  And no president ever won reelection with an unemployment rate above 8%.  So when your true unemployment rate is near 11% you play with the numbers.  And magically report that 11% is only 8%.  Giving you at least a snowball’s chance in hell of reelection.  As long as no one understands the unemployment picture is best described with the U6 number.  Which is currently near 20%.

Figures don’t lie but liars figure.  And it is apparent that the Obama administration must be full of liars.  Because they’ve been figuring the hell out of these unemployment numbers.


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Brazil is Rich in Resources but Beset with Poverty Despite its Social Spending

Posted by PITHOCRATES - December 18th, 2011

Week in Review

The Portuguese colonized Brazil.  Which is why Portuguese is one of the top ten most spoken languages in the world.  Because there are a great many Brazilians speaking Portuguese.  So there is a strong bond between Brazil and Europe.  Home of tiny little Portugal (and a wonderful dessert wine.  Port).  Perhaps a little too strong (see Brazil state struggles with poverty despite rich natural resources posted 12/12/2011 on the Los Angeles Times).

Brazil’s huge northern state of Pará is about three times the size of California, home to much of the Amazon rain forest and is the second-largest producer of the nation’s most important export, iron ore.

But poverty levels are well above the national average…

Even opponents of the bill, however, recognized the predicament, and it’s one that is repeated in parts of Peru, Colombia and elsewhere in South America: the lack of central government representation for states that are resource-rich (be it mining, gas or other commodities) but poverty-stricken.

“We can’t accept that in this country, natural resources benefit companies, but not its people,” said Simão Jatene, governor of Pará. “The Brazilian fiscal system is extremely perverse with respect to Pará…”

In Brazil, the last decade of economic growth has brought tens of millions of Brazilians out of poverty, powered by commodities exports, consumer credit growth and social spending. But the country still remains extremely unequal, across class and geographical lines. Some parts of the southeastern cities of São Paulo and Rio de Janeiro have a higher gross domestic product per capita than rich European countries, while in remote parts of Pará, residents who are struck ill must brave a five-day boat ride to the nearest hospital for treatment, O Globo reported.

The Amazon rain forest, eh?  Perhaps part of the problem is the environmentalists trying to save the rain forest.  Preventing any development there.  Condemning these people to a life of poverty.  Because it is usually a trade off.  Save the planet.  Or save man.  Rarely can you do both.  At least the way the environmentalists see it.  Who won’t be happy until they take civilization back to the days of Neanderthal.  And you know there are those out there who would bitch about Neanderthal’s use of tools changing his environment, too.  Which is the greatest crime man can make.  Changing his environment.

The lack of central government is the problem?  Funny.  The lack of central government didn’t stop the British and the Industrial Revolution they kicked off.  And the lack of central government didn’t appear to be a problem for Andrew Carnegie as he created a steel revolution in the United States.  Which is far bigger than California.  Yet the economy of the country grew so great it topped the mighty British Empire from the top spot.  One country with a limited central government.  Besting another country with a limited central government.

The problem the Brazilians have is spelled out in this article.  Their economy has been driven by the export of commodity materials.  Exporting raw materials?!?  This isn’t capitalism.  This is mercantilism.  And why only some Brazilians are living the good life.  They need to ignite an engine of economic exchange within Brazil.  Use those raw materials in domestic industries.  Build factories to transform them into consumer goods that Brazilians will buy with their factory wages.  Like the Americans did in the 19th century.  And we did that with less central government than we have today.  And I’m guessing that’s the only problem Brazil has.  Too much government.

Any country has the human capital to do what the Americans and the British did.  They just need the key to unlock that capital.  And the key to that lock is called free market capitalism.  Brazil is already far down this road.  They just need to let the rest of their country play catch-up.  And they’ve got to back off on the social spending.  Or else they’ll end up like Europe and their Eurozone.  Fighting for their life.  From excessive social spending.  If European capitalists had any advice for the Brazilians it would be this; don’t do it.  Don’t follow them down the Road to Serfdom.  Be free.  Stay free.  And let capitalism be free.


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