Democratic Blog News

Monday, December 22, 2008

Obama Talks Bipartisan Unity As Republicans Prepare To Bash And Obstruct

Updated December 23, 2008 at 10:00 AM

As incoming President Barack Obama talks bipartisan unity and works to staff his White House and assemble his Cabinet, Republicans are preparing a toolbox of minority tricks and tuning up the vast right wing noise machine so they are ready to obstruct Democrats at every turn.

Today, the New York Times had an article about how right-wing talk radio is gearing up to aggressively go after President Obama over the next four years. The eight years of Clinton-bashing during the Clinton administration years may seem tame by comparison. Rush Limbaugh demonstrated his commitment to this Obama-bashing crusade today on his radio show by blaming Democrats for the current economic crisis. This theory is quickly becoming a right-wing favorite. Karl Rove and Bill O’Reilly also recently claimed that the economic crisis was deliberately manufactured — not by Democrats but by journalists who wanted to help elect Obama.

After years of habitually resisting and belittling attempts to use a key House committee as a mechanism to investigate and hold the White House accountable, Republicans are saying they now want to get into the White House oversight game.

Rep. Darrel Issa (R-CA), who will become the ranking minority member of the House Oversight and Government Reform Committee, is making clear President Obama will be firmly in his sights.
A day after he was formally selected as ranking member last week, Issa ousted 14 of 39 Republican committee staffers, including many senior aides. Outgoing staffers said they were told the panel's minority will shift its focus away from legislation toward oversight of federal agencies.

By bringing in aides with investigative backgrounds, committee Republicans believe they can increase their capacity to conduct independent investigations, despite lacking the majority's subpoena power.
To be sure, Republicans plan to push the talking point that President Barack Obama should be as subjected to Congressional scrutiny as any of his predecessors, and Republicans will press an adversarial relationship in every legislative-executive branch interaction in the 111th congressional session.

Of course, a look at Issa's past performance he'll hardly be interested in an even-handed approach to good governance as he will be in using his committee perch for partisan grandstanding.

Sen. Arlen Specter (R-Pa.), the ranking minority member of the Judiciary Committee, has said he will attempt to slow down the process of confirming Eric Holder as Obama's attorney general, citing lingering "concerns" about the nominee’s role in various areas while part of the Clinton Administraion. Specter's "concerns" are bogus as it has come to light that this is nothing more than a Republican obstructionist strategy being driven by Karl Rove. Ceci Connolly, national staff writer for the Washington Post, said as much on Sunday, passed on a bit of hill gossip the Sunday edition of "The Chris Matthews Show." Connolly said, "Word on the street is that Karl Rove is going to be helping lead the fight against Obama's nominations as part of the Republican Party's strategy.

Arizona Sen. Jon Kyl, the second-ranking Republican in the U.S. Senate, warned president-elect Barack Obama that he would filibuster Obama's appointments if those nominees were not to acceptable to conservatives. (I'll add, by the way, that Kyl was one of the conservative Republicans who, in 2005, supported the "nuclear option," against Democrats which would have eliminated filibustering from congressional rules leaving Democrats with no voice in the Senate, period. That, of course, was when Republicans controlled congress.) Senators from South Carolina, Georgia, Oklahoma, Texas and Kentucky, have also vowed to obstruct Obama's agenda by filibustering Obama's nominations and legislative proposals.

Remember when the Republican party was accusing Democrats of being obstructionists for just mentioning the word "filibuster" as the Republicans push a very partisan congressional agenda, particularly the confirmation of extreme right-wing judges, when Republicans controlled congress? Republicans were singing a different tune after they became the minority party in the 110th Congress. The number of cloture votes forced by Senate minority Republicans skyrocketed in the 110th Congress following the Democratic takeover of the Senate and Harry Reid's assumption of the majority leader position.

The Senate voted on 112 cloture vote motions in the 110th congress controlled by Democrats, exactly double the number (56) of cloture votes in the 109th Congress, when Democrats were in the minority and Republicans were in control. The 110th congress cloture motions were two-and-a-half times as many as the average number of cloture votes (44) over the previous nine Congresses. Of these cloture motions, 51 were rejected (meaning that Republicans succeeded in Filibustering an up-or-down vote) and 61 were passed....

With the Republican minority numbers slipping to just 41 Senators for the 111th Congress (assuming Al Franken wins in MN) Republicans seem prepared to use the threat of filibuster (cloture vote motions) to stall Obama from quickly forming a functioning administration and to kill all legislation they deem too progressive. Gee, if Republicans can make it look like Democrats can't govern by obstructing government, then maybe Republicans will have an issue to run on in 2010 to pick up a few House and Senate seats.

And then there is that old Republican "lawsuit" strategy to harass the Democrats and distract the media. Republican politicians like to campaign against "lawsuit abuse," the idea that trial lawyers are clogging the judicial system with pointless lawsuits. None-the-less right-wing groups like Judicial Watch, which as Politico notes existed almost solely for the purpose of harassing the Clinton administration, are gearing up to go after the Obama administration.

Judicial Watch President Tom Fitton announced his group was considering filing suit to prevent Hillary Clinton’s appointment as Secretary of State, based on the Ineligibility Clause of the Constitution. This [lawsuit] saber-rattling over the secretary of state appointment calls to mind the tactics of the Larry Klayman era. [Klayman was the founder and former Chairman of Judicial Watch.]

As the group ponders its latest legal action, it still awaits a pending FEC complaint it filed back in April against the junior New York senator over a fund raising event where Elton John performed. The complaint alleged that John wasn’t permitted to help Clinton raise money because he is not a citizen of the United States.

Also, last week a Judicial Watch investigator went down to Bill Clinton’s Presidential Library in Little Rock, Ark., to comb through papers that had been released on account of a Freedom of Information suit. The group is looking for information to use against Hillary Clinton and other Obama appointments that were associated with the President Clinton's administration.

Jake Siewert, who served as Bill Clinton’s White House press secretary, tells Politico that they "initially underestimated the amount of damage that Judicial Watch could do through the press and nuisance lawsuits." The incoming White House will not only have to deal with Judicial Watch's lawsuits, but seemingly an avalanche of lawsuits from the conspiracy theorists who still refuse to accept that Barack Obama is qualified to become the next president.

As Alan Keyes' running mate, Wiley Drake, tells the OC Weekly, that they intend to make this issue dog the Obama administration "much like the White Water and then Monica Lewinsky controversies dogged Clinton’s presidency":

...it will be even more so than the Lewinsky thing. I think it will dog Obama because one of our attorneys, Gary Kreep [of the United Justice Foundation] said we will do everything we can to fight this battle. If we win this case, we will keep him out of the White House. If we lose, Gary and his committee of lawyers, and many of us are supportive of this, if Mr. Obama is indeed inaugurated, we will file a lawsuit against the inauguration for being illegal and against the chief justice of the Supreme Court for swearing in a usurper. And then, typically on the first day of office, the president signs a bunch of bills. Every bill or document he signs, we will file a separate lawsuit. For every decision he makes, it’s gonna to be tied up in court.

Bush Admin Hamstrung by Conservative "Trickle-Down" Ideology

House of Representatives Speaker Nancy Pelosi, Rep. Barney Frank and other Congressional Democrats are drafting legislation to target the remain $350 billion allocation of the Troubled Asset Relief Program (TARP) to reduce home foreclosures. "Absolutely nothing has been done to respect that part of the TARP legislation," Pelosi told reporters as she discussed Congress's agenda in coming weeks.

Secretary of Treasury Paulson argues the Conservative Ideology perspective that TARP funds should be used to generally prime the banking system pump to have loan availability back into the economy rather than to use TARP to target home foreclosures directly. Paulson says that Banks are expected to increase their loans because of the TARP federal aid. Paulson says, "It may be slow, but as funds for lending "trickle-down" through the market, more homeowners will resolve their foreclosure problems." Conservatives are still trying to make that old "trickle-down" economics thing work - will they never learn any new tricks?

Treasury Secretary Henry Paulson said Friday that Congress will need to release the last half of the $700 billion rescue fund because the first $350 billion has been committed. Paulson said he intends to allocate the second installment of $350 billion to financial system much as he allocated the first installment of $350 billion. Paulson, a former Wall Street market executive, pumped $250 billion of the first TARP installment, in market fashion, to buy stock in hundreds of banks as a way to bolster their balance sheets and get them to resume more normal lending.

Key Democrats, including House Speaker Nancy Pelosi and House Financial Services Committee Chairman Barney Frank, complain that the Treasury's $700 Troubled Asset Relief Program, or TARP, has done little to help struggling homeowners as it pumped the first $350 billion into the balance sheets of banks and other financial firms with little visible benefit. She and Frank are preparing "legislation that specifically requires that provisions of the TARP legislation [to target the foreclosure problem] be honored, when congress releases the additional funds," Pelosi said.

After receiving $350 billions in aid from U.S. taxpayers, the nation's largest banks say they can't track exactly how they're spending the TARP money or they simply refuse to discuss it.

"We've lent some of it. We've not lent some of it. We've not given any accounting of, 'Here's how we're doing it,'" said Thomas Kelly, a spokesman for JPMorgan Chase, which received $25 billion in emergency bailout money. "We have not disclosed that to the public. We're declining to."

The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what's the plan for the rest?

None of the banks provided specific answers. The answers, or more accurately the lack of answers, highlight the secrecy surrounding the Troubled Asset Relief Program. Congress intended for the banks to lend the money to resolve the home foreclosure meltdown - not to hoard it or spend it on corporate bonuses, junkets or to buy other banks. But there is no regulatory oversight or even a review process in place to make sure that's happening and there are no consequences for banks who misuse the money. After all, Republicans, and in particular George Bush, are not ones to let facts and experience get in the way of ideology, particularly on something as abhorrent as government oversight and regulation of business.

Perhaps one reason banks are mum about how they are using TARP funds is, according to an AP study, that after banks received the taxpayer money top executives rewarded themselves with cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management. The AP Study found that the total amount of bonus money given to nearly 600 bank executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines.

Even though neither the Banks nor Treasury Secretary Paulson can specifically outline how the banks have used TARP bailout funds or how the funds are being used to address the home foreclosure problem, Paulson is insisting that congress release the second TARP installment of $350 billion directly to banks.

Legislation demanding that the second installment of $350 billion be targeted for home foreclosure mitigation will be ready within the next couple of weeks, said Steven Adamske, an aide to Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee.

Most Democrats -- in Congress and on President-elect Barack Obama's team -- favor pressing lenders to renegotiate troubled mortgages. That is the tack of the Streamlined Modification Program, championed by Federal Deposit Insurance Corporation Chairman Sheila Bair. The SMP is aimed at trimming foreclosures and ending fire sales by offering a guarantee to lenders that modify a mortgage so payments are trimmed to 31% of a home owner's gross income.

If banks cut interest rates or stretch out the life of a loan, Washington would cover part of the lender's losses should a homeowner re-default. Bair says the plan would save 1.5 million homeowners at a cost of $24.4 billion. When Bair first suggested pushing lenders harder to modify iffy mortgages last spring, it was dismissed by the Bush Administration. Since then Bair has very successfully instituted many of her ideas at IndyMac, the failed thrift the FDIC took over in July. Secretary Paulson argues that Bair's plan is inappropriate for the Treasury's $700 billion rescue, because it would be an expenditure rather than an investment that would earn a return.

Congress may delay releasing the second installment of $350 billion to President Bush's Secretary Paulson and wait to release the funds to Obama's Treasury Secretary, Timothy Geithner, who supports directly targeting the money for foreclosure mitigation. Senate Republicans have threatened to filibuster legislation to directly use TARP funds for foreclosure mitigation.

If the previous year of record foreclosure rates, falling home values, a declining stock market, and continuing inflation have seemed like too much catastrophe for the US economy to bear, just wait. A second (Tsunami Size) wave of foreclosures are set to begin in the spring of 2009. This is when another round of Option ARMs mortgages will begin to reset making monthly mortgage payments instantly unmanageable for millions of additional home owners. This will be the first major test for the Obama Administration and Congressional Democrats.

Option ARMs mortgages were sold, at the height of the mortgage bubble, to homeowners eager to cash in on rising property values and keep their mortgage payments as low as possible. What makes the coming option ARM resets most worrying is who they were marketed to and what the "option" part of the mortgage really means. These borrowers had relatively good credit ratings when they took the loans, but many people taking these loans did not fully understanding how they worked and why their "apparent" interest rate and monthly payments were so low.

Since congress repealed the 1968 Truth In Lending Act in 1994, mortgage brokers selling the option arms mortgages were not compelled to fully explain how the mortgages worked. To the contrary, the language of these mortgages was often convoluted and opaque, explicitly designed to mislead the borrower.

Option ARMs mortgages allowed homeowners to pay only a small portion of the interest on their loan every month for the first two or three years. The larger portion of the interest payment was added back into the total mortgage amount over that two or three year period until the "reset" date. In other words, borrowers keep making monthly payments only to find out that their loan amount got bigger every month. When the payments reset, based on the prevailing interest rates and interest inflated loan total, which is now far greater than the property's value due to all that accrued interest, the monthly mortgage payments become instantly unmanageable for many homeowners.

The steep declines in real estate markets over the past year due to the foreclosure crisis is helping to fuel a self-sustaining cycle of foreclosures, followed by property value decrease, followed by more foreclosures. This helps to accelerate how quickly and how deeply homeowners find themselves "underwater" in a house they can't sell for the amount of their interest inflated mortgage. And few homeowners feel good about sending in a higher mortgage payment every month when they realize their equity has been completely eliminated by the interest inflated loan amount and the collapsing U.S. housing market. So, in 2009, banks are facing a second wave of mortgage holders who will have no other option than to just walk away from their house when their payments reset.

Related Postings:

Tim Geithner, Obama's Secretary of Saving the World

AP Study Finds TARP Funds Given To Banks Went To Bank Execs As Bonuses

Post Script:

Secretary of Saving the World
Tim Geithner's daunting to-do list at the Treasury Department.
Slate.com

Timothy Geithner, the New York Fed chief, was tapped by President-elect Obama to serve as Treasury Secretary. In the last year, the United States has effectively nationalized the financial sector. Thanks to Secretary Paulson's and Secretary Bernanke's occasionally frantic efforts to fend off systemic collapse, the government now largely owns AIG, Fannie Mae, Freddie Mac, and chunks of several banks as well as oodles of dodgy assets pledged as collateral for loans. Paulson and Bernanke have spent, promised, loaned, guaranteed, or assumed in liabilities amounts that are now approaching $14 trillion.

Secretary Geithner will have to function partly as a money manager to decide what to do with the portfolio of shares Treasury now holds in big banks like Citi. Like a private-equity magnate, he'll have to decide the appropriate capital structure and ultimate disposition of companies, like AIG, that have become wards of the state. And with the remaining $350 billion of the Troubled Asset Relief Program, he'll be the investment banker in chief, deciding who might be bailout-worthy.

Saturday, December 20, 2008

AP: $1.6B Went To Bailed-Out Bank Execs

Newsweek
By Associated Press Writers FRANK BASS and RITA BEAMISH
Dec 21, 2008

On the verge of failure, bank executives collected financial bonanzas, AP study finds.

Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.

The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue.

Read the rest of the story in Newsweek.

Bush White House Philosophy Stoked Mortgage Bonfire

GOP Blind Faith In Unregulated Markets Stoked Economic Crisis
A MUST READ!

The New York Times
By JO BECKER, SHERYL GAY STOLBERG and STEPHEN LABATON
Published: December 20, 2008

WASHINGTON — The global financial system was teetering on the edge of collapse when President Bush and his economics team huddled in the Roosevelt Room of the White House for a briefing that, in the words of one participant, “scared the hell out of everybody.”

It was Sept. 18. Lehman Brothers had just gone belly-up, overwhelmed by toxic mortgages. Bank of America had swallowed Merrill Lynch in a hastily arranged sale. Two days earlier, Mr. Bush had agreed to pump $85 billion into the failing insurance giant American International Group.

The president listened as Ben S. Bernanke, chairman of the Federal Reserve, laid out the latest terrifying news: The credit markets, gripped by panic, had frozen overnight, and banks were refusing to lend money.

Then his Treasury secretary, Henry M. Paulson Jr., told him that to stave off disaster, he would have to sign off on the biggest government bailout in history.

Mr. Bush, according to several people in the room, paused for a single, stunned moment to take it all in.

“How,” he wondered aloud, “did we get here?”

Eight years after arriving in Washington vowing to spread the dream of homeownership, Mr. Bush is leaving office, as he himself said recently, “faced with the prospect of a global meltdown” with roots in the housing sector he so ardently championed.

There are plenty of culprits, like lenders who peddled easy credit, consumers who took on mortgages they could not afford and Wall Street chieftains who loaded up on mortgage-backed securities without regard to the risk.

But the story of how we got here is partly one of Mr. Bush’s own making, according to a review of his tenure that included interviews with dozens of current and former administration officials.

From his earliest days in office, Mr. Bush paired his belief that Americans do best when they own their own home with his conviction that markets do best when let alone.

He pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent — and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards.

Mr. Bush did foresee the danger posed by Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants. The president spent years pushing a recalcitrant Congress to toughen regulation of the companies, but was unwilling to compromise when his former Treasury secretary wanted to cut a deal. And the regulator Mr. Bush chose to oversee them — an old prep school buddy — pronounced the companies sound even as they headed toward insolvency.

As early as 2006, top advisers to Mr. Bush dismissed warnings from people inside and outside the White House that housing prices were inflated and that a foreclosure crisis was looming. And when the economy deteriorated, Mr. Bush and his team misdiagnosed the reasons and scope of the downturn; as recently as February, for example, Mr. Bush was still calling it a “rough patch.”

The result was a series of piecemeal policy prescriptions that lagged behind the escalating crisis.

“There is no question we did not recognize the severity of the problems,” said Al Hubbard, Mr. Bush’s former chief economics adviser, who left the White House in December 2007. “Had we, we would have attacked them.”

Looking back, Keith B. Hennessey, Mr. Bush’s current chief economics adviser, says he and his colleagues did the best they could “with the information we had at the time.” But Mr. Hennessey did say he regretted that the administration did not pay more heed to the dangers of easy lending practices. And both Mr. Paulson and his predecessor, John W. Snow, say the housing push went too far.

“The Bush administration took a lot of pride that homeownership had reached historic highs,” Mr. Snow said in an interview. “But what we forgot in the process was that it has to be done in the context of people being able to afford their house. We now realize there was a high cost.”

For much of the Bush presidency, the White House was preoccupied by terrorism and war; on the economic front, its pressing concerns were cutting taxes and privatizing Social Security. The housing market was a bright spot: ever-rising home values kept the economy humming, as owners drew down on their equity to buy consumer goods and pack their children off to college.

Lawrence B. Lindsay, Mr. Bush’s first chief economics adviser, said there was little impetus to raise alarms about the proliferation of easy credit that was helping Mr. Bush meet housing goals.

“No one wanted to stop that bubble,” Mr. Lindsay said. “It would have conflicted with the president’s own policies.”

Read the rest of the story in The New York Times

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