Wednesday, October 08, 2008

Corporate Veal

I know some of you (OK, one of anonymous one of you...) will accuse me of engaging in class warfare, but when I read about AIG execs taking a week-long, cushy vacation at an upscale resort one week after being bailed out, I get a little grumpy. I start thinking that, if things get REALLY desperate in this country, and people are getting kind of hungry, then why not drag a few of these fine fellows off of their massage tables, cook them up, and sate that gnawing hunger? I know, I know, maybe it's not the most appealing looking meal, but imagine how good you'll feel afterwards!


Sharon Spotbottom said...


jack raffin said...

man, that article is horribly annoying. why is this crap happening?

again, i don't whether to laugh or cry, but cool picture/colors nonetheless.

Holley T said...

right on.

Looney Moon Cartoons said...

See, this is why I don't pay my taxes. (note to the government: I'm just kidding)

Adam T said...

Infuriating. Those people are sociopaths. Any mentally healthy person would feel shame for not being competent at their job and driving a once successful company into the ground. Apparently that doesn't bother them at all.

Our tax dollars are being spent on apricot face scrubs, sea weed wraps, and massages with happy endings for TOTAL FAILURES.

The one good thing about this financial crisis is that it has made it clear to me that America's financial and political systems stopped rewarding merit a long time ago. These people aren't our intellectual betters. They don't have a superior work ethic. They just have the ability to exploit others and situations and get away with it. And that's nothing to be proud of.

Vincent Waller said...

mmmmm succulent long pig.

Anonymous said...

I wouldn’t accuse you of class warfare. They should have been fired for running AIG into the ground in the first place, and now they should reimburse the government for the cost of the retreat.

However, the money spent at the retreat and the AIG bailout figures pale in comparison to amount of the Housing Bailout.

So how about an artistic rendering of the culpability of the following characters in the Housing Bailout of Fannie Mae and Freddie Mac?

"These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

"I want to roll the dice a little bit more in this situation towards subsidized housing"
--Democrat Barney Frank, now Chairman of the House Financial Services Committee

"We do not have a crisis at Freddie Mac and particularly Fannie Mae under the outstanding leadership of Frank Raines"
--Democrat Representative Maxine Waters

"Like a lot of my Democratic colleagues I was too slow to appreciate the recklessness of Fannie and Freddie. I defended their efforts to encourage affordable homeownership when in retrospect I should have heeded the concerns raised by their regulator in 2004. Frankly, I wish my Democratic colleagues would admit when it comes to Fannie and Freddie, we were wrong."

--Democrat Representative Artur Davis (That was his statement years after he attacked the regulator in hearing for questioning Fannie Mae and Freddie Mac's accounting and finances.)

Or how about Franklin Raines:

"In the four years since he stepped down as Fannie Mae's chief executive under the shadow of a $6.3 billion accounting scandal, Franklin D. Raines has been quietly constructing a new life for himself," Ms. Huslin's story began. "He has shaved eight points off his golf handicap, taken a corner office in Steve Case's D.C. conglomeration of finance, entertainment and health care companies and, more recently, taken calls from Barack Obama's presidential campaign seeking his advice on mortgage and housing matters." –Washington Post

“Regulators have said that of the $90 million paid to Mr. Raines from 1998 to 2003 at least $52 million — more than half — was tied to bonus targets that were reached by manipulating accounting,” --NY Times

Jim Johnson, Former head of Fannie Mae and Obama VP search committee member:

An Office of Federal Housing Enterprise Oversight report in September accused the company of improperly deferring $200 million of estimated expenses in 1998, which allowed management to receive full annual bonuses. Had the expenses been recorded that year, no bonuses would have been paid, the report said.
Fannie Mae reported paying bonuses in 1998 to Johnson, who received $1.932 million; Raines, who then was chairman-designate, $1.11 million; Chief Operating Officer Lawrence M. Small, $1.108 million; Vice Chairman Jamie S. Gorelick, a former deputy attorney general (under Clinton-ed.), $779,625; Chief Financial Officer J. Timothy Howard, $493,750; and Robert J. Levin, who was executive vice president for housing and community development, $493,750. –Washington Post

Fannie Mae had reported it paid Johns $6million, but it was actually $21 million. -- Office of Federal Housing Enterprise Oversight

There’s lots more. And after serving only two years in the Senate, Obama was the #2 recipient of funds from Fannie Mae at $126,349, right behind Democrat Senator Christopher Dodd ($165,400) and in front of Democrat Senator John Kerry ($111,000).

These guys will end up costing the taxpayers a trillion. That’s 2.27 million AIG retreats. Or, as Thomas Sowell puts it:

"A trillion seconds ago, no one on this planet could read and write. Neither the Roman Empire nor the ancient Chinese dynasties had yet come into existence. None of the founders of the world's great religions today had yet been born.

That's what a trillion means. Put a dollar sign in front of it and that's what the current bailout may cost."

chrisallison said...

Now that's what I call a modest proposal!

Brian said...

Quite a modest proposal methinks...

Dominic said...

The guillotine's function during the French Revolution now makes sense.

Domonymous said...

Phil Gramm, the former GOP Senator and now economics advisor to McCain, who called Americans a bunch of whiners wrote most of the deregulation legislation. Gramm spearheaded efforts to pass banking deregulation laws, including the landmark Gramm-Leach-Bliley Act in 1999, which removed Depression-era laws separating banking, insurance and brokerage activities. Between 1995 and 2000, Gramm was the chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. In 1990 Gramm made a failed effort to amend the Iraq International Law Compliance Act of 1990.

IF the Republicans wanted Freddie and Fannie regulated - they controlled the Congress and the White House in 2003 - they could have done it!

And now the GOP, party of deregulation, paints themselves as regulators. The Republican party always accusing Democrats of being socialists, has brought the U.S. a step closer to socialism. Oh, the irony!

becky said...

That veal's got a nice comb-over there!

Anonymous said...

To Donomymous, from Gateway Pundit:

Bush Called For Reform of Fannie Mae & Freddie Mac 17 Times in 2008 Alone... Dems Ignored Warnings

For many years the President and his Administration have not only warned of the systemic consequences of financial turmoil at a housing government-sponsored enterprise (GSE) but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties. President Bush publicly called for GSE reform 17 times in 2008 alone before Congress acted.

Unfortunately, these warnings went unheeded, as the President's repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems.

The White House released this list of attempts by President Bush to reform Freddie Mae and Freddie Mac since he took office in 2001.
Unfortunately, Congress did not act on the president's warnings:

** 2001

April: The Administration's FY02 budget declares that the size of Fannie Mae and Freddie Mac is "a potential problem," because "financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity."

** 2002

May: The President calls for the disclosure and corporate governance principles contained in his 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac. (OMB Prompt Letter to OFHEO, 5/29/02)

** 2003

January: Freddie Mac announces it has to restate financial results for the previous three years.

February: The Office of Federal Housing Enterprise Oversight (OFHEO) releases a report explaining that "although investors perceive an implicit Federal guarantee of [GSE] obligations," "the government has provided no explicit legal backing for them." As a consequence, unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market. ("Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO," OFHEO Report, 2/4/03)

September: Fannie Mae discloses SEC investigation and acknowledges OFHEO's review found earnings manipulations.

September: Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend that Congress enact "legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises" and set prudent and appropriate minimum capital adequacy requirements.

October: Fannie Mae discloses $1.2 billion accounting error.

November: Council of the Economic Advisers (CEA) Chairman Greg Mankiw explains that any "legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk." To reduce the potential for systemic instability, the regulator would have "broad authority to set both risk-based and minimum capital standards" and "receivership powers necessary to wind down the affairs of a troubled GSE." (N. Gregory Mankiw, Remarks At The Conference Of State Bank Supervisors State Banking Summit And Leadership, 11/6/03)

** 2004

February: The President's FY05 Budget again highlights the risk posed by the explosive growth of the GSEs and their low levels of required capital, and called for creation of a new, world-class regulator: "The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore…should be replaced with a new strengthened regulator." (2005 Budget Analytic Perspectives, pg. 83)

February: CEA Chairman Mankiw cautions Congress to "not take [the financial market's] strength for granted." Again, the call from the Administration was to reduce this risk by "ensuring that the housing GSEs are overseen by an effective regulator." (N. Gregory Mankiw, Op-Ed, "Keeping Fannie And Freddie's House In Order," Financial Times, 2/24/04)

June: Deputy Secretary of Treasury Samuel Bodman spotlights the risk posed by the GSEs and called for reform, saying "We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System." (Samuel Bodman, House Financial Services Subcommittee on Oversight and Investigations Testimony, 6/16/04)

** 2005

April: Treasury Secretary John Snow repeats his call for GSE reform, saying "Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America… Half-measures will only exacerbate the risks to our financial system." (Secretary John W. Snow, "Testimony Before The U.S. House Financial Services Committee," 4/13/05)

** 2007

July: Two Bear Stearns hedge funds invested in mortgage securities collapse.

August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying "first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options." (President George W. Bush, Press Conference, The White House, 8/9/07)

September: RealtyTrac announces foreclosure filings up 243,000 in August – up 115 percent from the year before.

September: Single-family existing home sales decreases 7.5 percent from the previous month – the lowest level in nine years. Median sale price of existing homes fell six percent from the year before.

December: President Bush again warns Congress of the need to pass legislation reforming GSEs, saying "These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I've called on Congress to pass legislation that strengthens independent regulation of the GSEs – and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon." (President George W. Bush, Discusses Housing, The White House, 12/6/07)

** 2008

January: Bank of America announces it will buy Countrywide.

January: Citigroup announces mortgage portfolio lost $18.1 billion in value.

February: Assistant Secretary David Nason reiterates the urgency of reforms, says "A new regulatory structure for the housing GSEs is essential if these entities are to continue to perform their public mission successfully." (David Nason, Testimony On Reforming GSE Regulation, Senate Committee On Banking, Housing And Urban Affairs, 2/7/08)

March: Bear Stearns announces it will sell itself to JPMorgan Chase.

March: President Bush calls on Congress to take action and "move forward with reforms on Fannie Mae and Freddie Mac. They need to continue to modernize the FHA, as well as allow State housing agencies to issue tax-free bonds to homeowners to refinance their mortgages." (President George W. Bush, Remarks To The Economic Club Of New York, New York, NY, 3/14/08)

April: President Bush urges Congress to pass the much needed legislation and "modernize Fannie Mae and Freddie Mac. [There are] constructive things Congress can do that will encourage the housing market to correct quickly by … helping people stay in their homes." (President George W. Bush, Meeting With Cabinet, the White House, 4/14/08)

May: President Bush issues several pleas to Congress to pass legislation reforming Fannie Mae and Freddie Mac before the situation deteriorates further.

"Americans are concerned about making their mortgage payments and keeping their homes. Yet Congress has failed to pass legislation I have repeatedly requested to modernize the Federal Housing Administration that will help more families stay in their homes, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance sub-prime loans." (President George W. Bush, Radio Address, 5/3/08)

"[T]he government ought to be helping creditworthy people stay in their homes. And one way we can do that – and Congress is making progress on this – is the reform of Fannie Mae and Freddie Mac. That reform will come with a strong, independent regulator." (President George W. Bush, Meeting With The Secretary Of The Treasury, the White House, 5/19/08)

"Congress needs to pass legislation to modernize the Federal Housing Administration, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance subprime loans." (President George W. Bush, Radio Address, 5/31/08)

June: As foreclosure rates continued to rise in the first quarter, the President once again asks Congress to take the necessary measures to address this challenge, saying "we need to pass legislation to reform Fannie Mae and Freddie Mac." (President George W. Bush, Remarks At Swearing In Ceremony For Secretary Of Housing And Urban Development, Washington, D.C., 6/6/08)

July: Congress heeds the President's call for action and passes reform of Fannie Mae and Freddie Mac as it becomes clear that the institutions are failing.

In 2005-- Senator John McCain partnered with three other Senate Republicans to reform the government’s involvement in lending.

Democrats blocked this reform, too.

david gemmill said...

i dunno if that would be appetizing. Maybe we can just cut off their heads, send them to a taxidermist to fill them with some rubber and turn them into cool basketballs or soccer balls. The possibilities are endless!

domonymous said...

I can Cut and Paste, too:

Democrats Supported Regulatory Oversight But Objected to a White House Power Grab

[...] if the October 2004 hearings did not address concerns associated with Fannie's risky mortgages, what was everyone talking about? Something quite different, though [...] George Will could easily conflate the two concepts. An Administration report had skewered Fannie for engaging in some dodgy accounting practices - relating to timing differences over the recognition of income - which had a slight impact on its overall financial metrics. Fannie and its management deserved to be criticized and increased regulatory oversight was absolutely appropriate. But what the House Democrats [...] were objecting to was the Administration's level of overkill. From how they saw things, the Bush Administration was using the pretext of regulatory oversight to accomplish a power grab that would compromise the mission of Fannie Mae. Here's what Barney Frank said at the time:

"I believe we were well on the way, the chairman and I and the staffs, to putting together a bill that would have enhanced the regulator and could have passed. What stopped progress on a new bill was the Bush administration's determination to go beyond safety and soundness and into provisions that would have restricted the housing function.

"To the extent that people played games
[with accounting rules] to get bonuses, I'm outraged. People making that much money, let me put it this way, at the level of compensation of the top officers of Fannie Mae, they should get bonuses if they rush into a burning building a rescue a kid, maybe a cat, but not for doing their job. I think it is unseemly of them to be getting bonuses in the first place for doing what they're getting paid very well to do.

"To the extent that there was manipulation, that is very wrong and should be penalized. But I've seen nothing in here that suggests that the safety and soundness are at issue, and I think it serves us badly to raise safety and soundness as a kind of a general shibboleth, when it does not seem to be the issue."

Banks Governed by The Community Reinvestment Act Were Not The Ones Who Caused the Subprime Market to Expand

Daniel Gross in Slate attacks a lot of the same mythology discussed herein, focusing specifically on phony claims pertaining to the Community Reinvestment Act, which has been around for 30 years and never affected the soundness of the mortgage markets. The CRA never suggested that anyone compromise credit standards and it didn't apply to the mortgage lenders or investment banks who were pumping up subprime mortgages.

Hank Paulson: The mortgage crisis was caused by events that began during the run up to the 2004 election and ended soon after the Democrats took Congress in early 2007.

Again, to understand what happened, begin with understanding when things happened. In this regard, there's no secret. Everyone in financial services knows when and how things happened. Hank Paulson's report to the President reflected the common knowledge expressed by Treasury, the Fed, the SEC and the CFTC:

"The turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for US. subprime mortgages, beginning in late 2004 and extending into early 2007. " [emphasis in original text.]

We see this in all the numbers.

According to a survey by the New York Fed, about 77% of subprime mortgages and 85% of Alt-A mortgages were issued after 2004. What happened in 2004? Subprime mortgage securitizations were able to take off because, as Bloomberg reported, in August 2004 Moody's and Standard and Poor's loosened their standards for rating mortgage backed securities, which had traded in a highly liquid market for almost 20 years. The impact of the rating agencies' practices cannot be overstated. To date, banks have recognized about $500 billion in losses on subprime mortgages, the lion's share of which were packaged in securities originally rated AAA, i.e. presumed to always be salable at close to par.

In 2004 short term interest rates, reduced by Alan Greenspan to stimulate the economy going in to the election cycle, reached their lowest point, enabling certain buyers to get variable rate mortgages at teaser rates of 3% for the first two years.

Nowhere in Paulson's report will you find anything that suggests that the financial crisis was triggered by, as George Will put it, regulation that compelled lending to "non-productive borrowers" or by Fannie or Freddie, which had been around for decades, "rigging the housing market."

As a final aside, you may remember this little gem from the McCain campaign. It's an ad that claims Obama relied on economic advice from Franklin Raines, which wasn't actually true. What do you think McCain was getting at?

-- David Fiderer

Adam T said...

To the *nymouses. You guys are hilarious. You've turned this comment page into a microcosm of American politics.

You shift the attention away from the issue at hand. Then you cherry pick factoids to rewrite history in your party's favor, while the rest of us remain silent and bewildered that you guys can expend so much energy blaming each other for things that can no longer be changed. Are you guys actually members of Congress?