http://query.nytimes.com/…

Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES

Published: September 30, 1999

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.

…

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae’s and Freddie Mac’s portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

It was obvious to just about everyone… yet Democrats in particular… the likes of Dodd, Clinton, Schumer, Reid, Obama, etc. endorsed and in several cases explicitly benefited from the Community Reinvestment Act, Fannie Mae and Freddie Mac.

The CRA was not the only or even the most important aspect which lead to the current crisis. Bad lending couldn’t have been sustained or would have been possible if not for the Federal Reserves incredibly low interest rates and market manipulation. The CRA was the vehicle which the rode the low interest wave to creating the boom.

http://www.bloomberg.com/…

The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed’s emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

The Fed’s expansion of liquidity, the biggest since credit markets seized up last year, came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone.

“Today’s blast of term liquidity will settle the funding markets down, and allow trust to slowly be restored between borrowers and lenders,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. On the other hand, “the Fed’s balance sheet is about to explode.”

Is that hyperinflation I hear? Who needs Congress when you already have the power to bailout these institutions in other ways?

All the money in the world wouldn’t help this… why do they continue to try?

http://www.washingtonpost.com/…

Starting next year, there will be four new pennies to collect, celebrating the 200th anniversary of the birth of Abraham Lincoln.

The obverse (or heads) part of the coin will stay the same, showing the 16th president facing to the right.

But the reverse (tails) part of the coin will show different times in the life of Lincoln, who is widely considered to be one of the country’s greatest leaders for freeing the slaves and saving the Union during the Civil War.

The designs for the new pennies were shown for the first time yesterday near the Lincoln Memorial.

The first new penny will be available Feb. 12, Lincoln’s 200th birthday. It will show a log cabin to honor his birth and childhood in Kentucky.

The others will show his life as a young man in Indiana, his professional life in Illinois and his presidential years in Washington (when the U.S. Capitol was being built).

The other side of the penny will continue to show the likeness of Lincoln designed by Victor David Brennan. It was introduced on the Lincoln penny 100 years ago.

A Lincoln commemorative silver dollar also will be issued next year.

Abraham Lincoln did not really free the slaves. The 13th Amendment did. The Emancipation Proclamation said “all persons held as slaves within any States, or designated part of the State, the people whereof shall be in rebellion against the United States, shall be then, thenceforward, and forever free.” Only those slaves captured by the North by that point were set free. Maryland and Delaware were both slave states and not on of the supposed rebel states. While not recognized by any other government the Confederate States of America was a separate nation with it’s own government defined by their own (though heavily borrowed from the USA) constitution. Therefore from their perspective the Emancipation Proclamation meant as much as if it had come from England. Lincoln also said this of the Corwin Amendment, “[H]olding such a provision to now be implied Constitutional law, I have no objection to its being made express and irrevocable.” which read:

No amendment shall be made to the Constitution which will authorize or give to Congress the power to abolish or interfere, within any State, with the domestic institutions thereof, including that of persons held to labor or service by the laws of said State.

As for saving the Union… a highly questionable action. Even if ruled unconstitutional there is plenty of evidence that such a claim is incorrect from a legal standpoint. For example: When ratifying the new constitution, Virginia (1788), New York (1788), and Rhode Island (1790) included clauses indicating they were free to leave the new federal government confederation should it become oppressive. It seems obvious that they would not have joined if they believed it was a one way trip. From a moral standpoint its reprehensible. The Declaration of Independence clearly says:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

Lincoln was in no way a great leader but a statist who put his beliefs in keeping together a union of people who did not wish to be under the same government umbrella above the lives of over 600,000 individuals.

For more information read Thomas DiLorenzo’s books Lincoln Unmasked and The Real Lincoln. Many complain his views are one sided but given the works written in excess of Lincoln’s greatness I think that’s excusable. You can also find a decent interview with DiLorenzo on CSPAN’s Q&A at Google video.

Sept. 11th, 2008:

• John McCain’s interview: Part 1, Part 2, Part 3, Part 4
  • Says outright he’s against compulsory service.
  • Advocates growing the military several times.
  • Claims private industry provides services better, wishes to create partnerships with business instead of having the government take on those roles.
  • Points to the creation of the Department of Homeland Security as bipartisan cooperation that is needed to gain trust and support of the public.
  • “It’s not about the individual, it’s about the cause we serve.”
  • “I think the all voluntary force is having difficulty recruiting and retaining because we are too small and we need to expand the size of our military and we need to do it as rapidly as possible. And we got to perhaps offer additional incentives.”
  • Apparently, without knowing what the Serve America Act does, McCain says he would sign the bill as president.
  • Would rather have the private sphere perform the voluntarism and only have the government provide incentives.
• Barack Obama’s interview: Part 1, Part 2, Part 3, Part 4, Part 5
  • “Each and everyone of us are going to have, are going to make commitments in terms of improving fuel efficiency in our cars and homes. And the government is going to be in partnership with citizens to make that happen.”
  • “America is the greatest country on earth but it didn’t just happen on its own. It’s not a gift only. Although it is a great blessing we’ve received. It’s a responsibility. And part of what makes America work is the fact that we believe in individual responsibility and self reliance but we also believe in mutual responsibility, in neighborliness, in a sense that we are committed to something larger than ourselves.”
  • Speaks of growing the military. Getting those in urban areas to be equally represented in the military.
  • Wants more people in the military and non-military service regardless of whether there is a war.
• Interviewed a City Year ‘volunteer’ but my questions and pins on my book bag (”Taxation is theft”, “Ron Paul 2008″) scared them off. The Service Nation handler asked me to turn off the camera, that he didn’t want any problems, that it was a positive event. The City Year ‘volunteer’ said he couldn’t speak on the topic as a representative of City Year.

Sept. 12th, 2008:

• I spoke with a fellow blogger regarding my reason for being at the summit. She was there on behalf of the Case Foundation which is a Service Nation Coalition member.
• Richard Stengel, managing editor of TIME, effectively asks “why not have compulsory service?” during presidential forum. The tone of the questions and the fact it’s brought up more than once indicates to me he is in favor of mandatory service. In his own brief speech he talks of the most known part of the Declaration of Independence but casually bypasses arguably the most important line. Focusing on “consent of the governed” instead of “that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” Implying, IMO, he prefers a positive law democracy vs natural law republics.
• Jon Bon Jovi speaks on his private charities. Many examples of service and voluntarism given were in fact actual privately performed.
• Vartan Gregorian, President, Carnegie Corporation of New York tells us [Part 2]: “We’re not here as Democrats or Republicans or as libertarians, socialists, Green party members, or members of other organizations. We are here today first and primarily as Americans.” Claims being a citizen is the highest achievement.
• Admiral Michael Mullen [Part 2]: “the soldiers in Iraq are protecting our democracy at home. They are there because of what happened on 9/11.” I thought Iraq had nothing to do with 9/11. How is it that our invasion of Iraq is protecting us? “There is no greater reward than working for something greater than yourself.” “Keep singing (God Bless America), keep waving (flags), and keep serving!” Yay nationalism/fascism!
• Michael Bloomberg [Part 2]: “We are the beneficiaries of those who give their lives to defend us.” “Service should be asked of everyone and should be open to everyone. So we are creating new programs.”
• University president’s [Part 2]: Speak of giving out grants to those who volunteer at school. Making voluntarism mandatory parts of the education process.
• Alan Khazei: Misuses/misrepresents the Emancipation Proclamation. Need a new role for government. Funding public/private mix of service. “Getting government to do what works.” Speaks of Gandhi, abolitionists, and others. All of who worked against government.
• George H. W. Bush
• Bill Clinton
• Town Hall [Part 2,3,4,5,6]

These are all the videos I’m going to upload… at least for the time being.

Sorry about the last few not having notes. Too lazy to watch them. You can find some notes I took during the event here.

http://www.bloomberg.com/…

AIG dropped 34 percent to $2.54 by 1:26 p.m. in Germany, after falling 80 percent in the past week in New York on concern the company would go bankrupt. The seizure in credit markets and more than $500 billion of losses related to subprime mortgages forced the government to take over Fannie Mae and Freddie Mac, which control about half of America’s $12 trillion in home loans, and drove Lehman Brothers Holdings Inc. out of business.

“I am floored,” said former Treasury counsel Peter Wallison in an interview. “No one could have possibly imagined this a few months ago. I can’t imagine why the Fed would do this unless they were sure AIG’s failure posed systemic risk.”

No one? Not a single person? Really, Mr. Wallison? I’m pretty sure the Austrians were. I’m pretty sure I recall Ron Paul talking about the bad things coming at presidential debates, TV interviews and written works.

UPDATE:

Here is one on Fannie and Freddie from 2003:

Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.

Despite the long-term damage to the economy inflicted by the government’s interference in the housing market, the government’s policy of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.

Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary, but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts.

http://www.reuters.com/…

An $85 billion government rescue of insurer American International Group Inc looked increasingly likely on Tuesday to stave off a bankruptcy that would have thrown world markets back into turmoil.

The Federal Reserve will extend AIG $85 billion in exchange for a nearly 80 percent stake to bail out the troubled insurance giant, a person briefed on the matter said.

The deal would avoid the biggest corporate bankruptcy ever and follows a government bailout of mortgage lenders Freddie Mac and Fannie Mae just over a week ago.

Then AIG shares, which had sunk 21 percent in regular trading, fell as much as 48 percent in after-hours dealings after reports of a rescue that could wipe out shareholders.

The New York Times, which had reported that AIG could file as soon as Wednesday for bankruptcy protection, later reported the deal with the Fed.

“This would mean another shareholder wipeout,” said David Ader, head of government bond strategy at RBS Greenwich Capital in Greenwich, Connecticut.

Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson were briefing members of Congress on the deal on Tuesday evening, a Treasury official told Reuters.

“They’re too big to fail. AIG touches too many people and too many companies globally, and it would be much more of a disorderly event if it went bankrupt than it was with Lehman,” said Anton Schutz, president of Mendon Capital in Rochester, New York.

Of course they did. The government goes back on it’s claim, tax payers get it in the ass and the economic problems will continue that much longer.

I bet Lehman Bros. is a bit pissed.

UPDATE:

A bit more info over at CNN:

The line of credit to AIG, which is available for two years, is designed to help the company meet its obligations, the Fed said. Interest will accrue at a steep rate of 3-month Libor plus 8.5%, which totals 11.31% at today’s rates. AIG will sell certain of its businesses with “the least possible disruption to the overall economy.”

AIG will sell certain of its businesses with “the least possible disruption to the overall economy.” The government will have veto power over the asset sales and the payment of dividends to shareholders.

The company’s management will be replaced, though Fed staffers did not name the new executives. The board will remain. For customers, it will be business as usual, officials said.

Two years ain’t no bridge loan.