• And oh yeah, Mikey here is what the WSJ had to say about the financial meltdown and the role of Fan and Fred in this fiasco. You say you are reading a book on the subject, that basically blames Wall Street and everyone else except Congress and in particular Frank and Dodd - but don't worry I'm not expecting any response.

    By the end of 2008, Fannie and Freddie held or guaranteed approximately 10 million subprime and Alt-A mortgages and mortgage-backed securities (MBS)—risky loans with a total principal balance of $1.6 trillion. These are now defaulting at unprecedented rates, accounting for both their 2008 insolvency and their growing losses today. Since 2008, under government control, the two agencies have continued to buy dicey mortgages in order to stabilize housing prices.

    There is more to this ugly situation. New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A.

    It is easy to see how this misrepresentation was a principal cause of the financial crisis.
    Market observers, rating agencies and investors were unaware of the number of subprime and Alt-A mortgages infecting the financial system in late 2006 and early 2007. Of the 26 million subprime and Alt-A loans outstanding in 2008, 10 million were held or guaranteed by Fannie and Freddie, 5.2 million by other government agencies, and 1.4 million were on the books of the four largest U.S. banks.

    The vast majority of these MBS were rated AAA, because the rating agencies' models assumed that the losses that are incurred by subprime and Alt-A loans would be within the historical range for the number of high-risk loans known to be outstanding.

    But because of Fannie and Freddie's mislabeling, there were millions more high-risk loans outstanding. That meant default rates as well as the actual losses after foreclosure were going to be outside all prior experience. When these rates began to show up early in 2007, it was apparent something was seriously wrong with assumptions on which AAA ratings had been based.

    Why Fannie and Freddie did this is still to be determined. But the leading candidate is certainly HUD's affordable housing regulations, which by 2007 required that 55% of all the loans the agencies acquired had to be made to borrowers at or below the median income, with almost half of these required to be low-income borrowers.

    Another likely reason for Fannie and Freddie's mislabeling of mortgages was their desire to retain congressional support by "rolling the dice" while making believe they weren't betting.

    January 7, 2010 at 2:02 p.m.

  • No answer - LOL!

    January 7, 2010 at 11:59 a.m.

  • lol

    January 7, 2010 at 11:19 a.m.

  • Let me be the first here to say that Chris Matthews is a real jackass. His question about what Republicans have done in the last 20 years could have just as easily been asked of a Democrat or for that matter anyone in government.

    Secondly the jackass asks questions and then he doesn't allow the respondent time to answer the questions particularly if the respondent doesn't agree with the jackass's agenda - a fine example of jouralism.

    The Democrats on the other hand brought us this financial meltdown that we are experiencing and the runaway spending that promises to make things worse, much worse.

    And finally I had to chuckle when I heard that the Mayor of New York City said the city needed 200 million dollars to provide security for the 911 conspirator trials.

    I wonder how much it would cost to hold the trial at Gitmo? Oh I know, Gitmo is used by the radical Islamist for recruiting, yeah right!!!

    January 7, 2010 at 11:14 a.m.

  • Victore
    Interesting points but being an aficionado of polling data, I have to accept the results. When people are asked if they preferred public option, it polls well. This particular bill does not poll well with liberals or conservatives. The people are confused, the administration has failed in this regard, but once it is passed the Democratic legislators and the one Republican will be given the opportunity to sell its good points and convince the people that status quo is not acceptable. It's an uphill battle.

    I think the crystal ball can work for the 2010 off year elections but it cannot be a good predictor of the 2012 because the unemployment numbers might come down by then.

    I don't think Health Care Reform (just my opinion) will turn out to be a failure for Democrats because like Social Security and Medicare it will take time for the results to take hold. I think that the 30 million additional health-care recipients will be grateful.

    You're right the independants tend to be more fiscal conservative and the stimulus package has got to come through before they will be convinced.

    When we are engaged in two wars (neither popular), unemployment is in the double digits, Congress is in gridlock, I don't believe any man in the world could have a decent approval rating. Banks that were bailed out, are charging consumers 30% interest rates, lobbyists for Wall Street and the insurance companies are passing out money like there was no tomorrow, and the CEOs are still receiving high bonuses ,so I think the voters are rightfully angry,but it is not only government. To be truthful, a complete turnover in Washington will not help matters until Congress get serious about campaign finance laws.

    I really don't think it was anything wrong with leaving the Republicans out of the conference bill because they clearly showed that all they were going to do was obstruct and delay. This will be a Democrat Bill to rise and fall on its merits.

    Cap-and-Trade has already been voted on in the house but transparency was not a problem, besides that watered-down bill will be gutted if it never sees the light of day. The kind of transparency I want is the truth…. This bill is about big oil, coal, lobbyists, politics and environmentalists, so why not put all the cards on the table, let the people know who will benefit if it is passed or goes down in flames because it's not really about climate change.

    January 7, 2010 at 11:05 a.m.

  • Mike,
    You might be right; the Dems might run on a few positive points, but only in the mid-term elections. If they continue with these shady deals behind closed doors over cape and trade, the incumbents will lose big time. If healthcare passes it will be historic and a complete failure for the Dems. The reason I say this, it is because they have not listen to the American people, which polls clearly shows this Bill is bad and unwanted… So 2012 will tell all, there will be a shift in power. Obama and his ideologue have not been accepted as he thought it would. And that is based on his approval rating, which is not good this early in his Presidency. I will note the independents are not happy with congress and Obama; they will decide the outcome of the mid-term and 2012 elections…

    January 7, 2010 at 10:23 a.m.

  • You took me by surprise I had no idea that you were Democrat… President Obama won by seven percentage points….69, 456,897 to McCain's 59,934,814 but he won 365 electoral votes to McCain's 173… He did have a mandate but I think you meant that he only 52.9% of the total votes. Evidently you're not as partisan as I am, so you are probably more levelheaded.

    What a coincidence, I thought that Chuck Hagel should have been Obama's running mate (wrote a blog saying so) but after Biden was chosen I thought Hagel should have been Secretary of Defense. Chuck Hagel is a conservative Republican but he is a straight shooter...A rare breed in Washington.

    I disagree slightly with your take on health care reform because, if you watched the 20+ Democratic presidential debates, health care was the number one issue, right there with Iraq. As I said gerrymandered districts, more Republicans leaving office than Democrats, and the fact that the GOP does not have alternatives will allow the Dems to hold the majority (IMO)…i.e.. Every so often, Chris Matthews will come up a zinger like he did yesterday when he asked, Republican strategist Todd Harris, to name one thing the Republican Party has done for America in the last 20 years..No answer... I think this will be an anti incumbent off -year election, the Democrat or Republican label won’t cut it... True, the Democratic base will not show up because they don't have anything to be excited about. This healthcare reform bill is seen as an early Christmas present for the lobbyist and insurance companies…. I think once health care is passed, the Democrats can run on the few positive features such as, not being denied based on pre-existing conditions (2014), riskier customers cannot be charged astronomical premiums, Medicare drug benefits will improve, children will be allowed to stay on their parents insurance longer, and out-of-pocket cost will be capped based on income and they have to make the case the insurance premiums will rise even without health care reform.

    Yes, Glenn Beck and Keith Olbermann are just entertainers and should not be taken seriously when it comes to the nation's politics. Sure, a blind squirrel will find a nut periodically but who has the patience to watch.

    Waywardwind will be happy if the incumbents are kicked out, and Victore, Mike, and reyrey all agree it will be an interesting off year election.

    January 7, 2010 at 9:35 a.m.

  • Mike, keep in mind that Libberman ran as an independent after he lost the Democratic runoff. I consider myself and blue Democrat and I was tired of seeing Delay and his fellow Republicans break havoc but Pelossi and her friends are not doing anything better. I spent time up in Nebraska and had a chance to meet Sen Hagel. Now this man is a Republican but if you were to meet him, you would think that he is a Democrat. Nelson on the other hand, he is a Democrat but acts like a Republican. My point is, we need people that are willing to work with the other party. Obama only won by 2% and that was mostly independents. Those independents are having second thoughts now. Republicans are highly mistaken if they think that they have our votes just because we do not like Democrats and and Independents are not Libertarians. We are center people willing to listen to whoever can takes us there but without stomping on other people rights. We do not want more taxes but we know that taxes are a necessary evil so society can function. I do agreed that Glenn Beck is a lunatic but sometimes, if there smoke, chances are that there was or is a fire. I do not buy everything that he says, just like I dont buy everything that Keith Olbermman says. Each of them have an agenda but I am smart enough to understand that. The Democrats are going to lose a lot of seats in 2010 and it will be because the arrogance that they are showing towards the health care program. To most independents, we do not see why there is such a rush to pass it, except that if they wait, they will not be able to do it because the political climate. That means that they do not feel secure about it. Regardless, this year is going to be fun watching political careers coming down.

    January 6, 2010 at 8:47 p.m.

  • I'm just trying to keep you honest Mikey and correct your...ah...endless stream of liberal socialist talking points.

    January 6, 2010 at 6:25 p.m.

  • This blog centers on the retirements of Christopher Dodd and Byron Dorgan and the political ramifications; not "Glass-Steagall"... It was just the one positive thing I remember about Bryon Dorgan when I was writing this blog.

    My final two or three blogs will be a summaries from the book "Too Big to Fail" by Andrew Ross Sorkin...I will cover the Moody Ratings, Hank Paulson, Goldman Sachs..Etc. I'm not going to waste my afternoon arguing with you.

    January 6, 2010 at 4:54 p.m.

  • This comment was removed by the user.

    January 6, 2010 at 4:48 p.m.

  • Mikey, it was not a Wall Street bubble it was a housing bubble that collapsed. And below is some cut and paste about the repeal of Glass Steagel Act (GLBA). The repeal would have never passed without the help of Clinton's Treasury Secretary, Robert Rubin. Who left his position to become CEO of Citigroup, where he recklessly rode that company into the ground speculating on mortgage backed securities, Apparently he was suckered by the "triple A" ratings of those securities like so many other investors including the Chinese.


    Prior to the passage of GLBA in 1999, investment banks were already capable of holding and trading the very financial assets claimed to be the cause of the mortgage crisis, and were also already able to keep their books as they had. Also, greater access to investment capital as many investment banks went public on the market explains the shift in their holdings to trading portfolios

    After GLBA passed, most investment banks did not merge with depository commercial banks. In fact, the few banks that did merge weathered the crisis better than those that did not.

    In response to criticism of his signing the bill when President, Bill Clinton said in 2008:

    "I don't see that signing that bill had anything to do with the current crisis. Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch by Bank of America, which was much smoother than it would have been if I hadn't signed that bill.... On the Glass-Steagall thing, like I said, if you could demonstrate to me that it was a mistake, I'd be glad to look at the evidence."

    In February 2009, one of the act's co-authors, former Senator Phil Gramm, wrote in its defense that:

    "...if GLB was the problem, the crisis would have been expected to have originated in Europe where they never had Glass-Steagall requirements to begin with. Also, the financial firms that failed in this crisis, like Lehman, were the least diversified and the ones that survived, like J.P. Morgan, were the most diversified."

    "Moreover, GLB didn't deregulate anything. It established the Federal Reserve as a superregulator, overseeing all Financial Services Holding Companies. All activities of financial institutions continued to be regulated on a functional basis by the regulators that had regulated those activities prior to GLB."


    January 6, 2010 at 4:19 p.m.

  • waywardwind

    You're right that won't happen but it's because of the gerrymandered districts, their ability to soak up lobbyist money, and some people vote on ideology not issues.... This will change as the new voters replace the graybeards...i.e. Texas's largest city voted in an openly gay mayor.Why? It's about the issues;not ideology... I think people are hurting so bad that party labels, gender,race, and ideology take a back seat to ideas and solutions...i.e...In the recent New Jersey and Virginia governor's races; the candidates did not win on charisma, hateful rhetoric, or ideology... Both candidates concentrated on jobs and solutions.

    It doesn't make me any less partisan but I can read the tea leaves.

    I don't have anything against lawyers;I still think it is a honorable profession.

    January 6, 2010 at 12:20 p.m.

  • Mike..."Incumbents are not safe these days."

    That's the best news of the decade. I'd like to see all of'em get fired and have to find REAL jobs. Of course, that won't happen because their pensions will support them very nicely. Besides, they're all lawyers and I hate the idea of almost 500 lawyers looking for someone to sue.

    January 6, 2010 at 12:06 p.m.

  • Victore
    Stranger things have happened but don't let it get you down :-)

    I agree, that race will be as interesting, as the Florida Senate seat; where it looks gleam for Charlie Crist.

    January 6, 2010 at 11:52 a.m.

  • Mike, I actually agree with you, nice blog… I think Dodds seat will be an interesting horse race that I would not bet on. There is a large independent voter base in his home state.

    January 6, 2010 at 11:36 a.m.