Obama Sued Citibank Under CRA to Force it to Make Bad Loans - UPDATED

UPDATE V: AUDIO - OBAMA SAID IN 2007 THAT GIVING SUB-PRIME LOANS TO PEOPLE WHO COULDN’T AFFORD THEM WAS A GOOD IDEA!!! Hotair.com comments HERE.


Obama Sued Citibank Under CRA to Force it to Make Bad Loans - UPDATEDSeptember 30, 2008 — iusbvision
UPDATE V: AUDIO - OBAMA SAID IN 2007 THAT GIVING SUB-PRIME LOANS TO PEOPLE WHO COULDN’T AFFORD THEM WAS A GOOD IDEA!!! Hotair.com comments HERE.
“I’ve been fighting alongside ACORN on issues you care about my entire career. Even before I was an elected official, when I ran Project Vote voter registration drive in Illinois, ACORN was smack dab in the middle of it, and we appreciate your work.” — Barack Obama, Speech to ACORN, November 2007
Do you remember how we told you that the Democrats and groups associated with them leaned on banks and even sued to get them to make bad loans by abusing the Community Reinvestment Act (see HERE and HERE)? The abuse of this act by ACORN and officials like Janet Reno was a factor in causing the economic crisis. The harasment suits filed under this act were used to get banks to lower credit standards and hand out high risk loans. Fellow bloggers have dug up the lawsuit below while researching Obama’s legal career. It is a typical example of an ACORN harassment lawsuit.
In these lawsuits, ACORN makes a bogus claim of Redlining (denying poor people loans because of their ethnic heritage). They protest and get the local media to raise a big stink. This stink means that the bank faces thousands of people closing their accounts and get local politicians to lobby to stop the bank from doing some future business, expansions and mergers. If the bank goes to court, they will win, but the damage is already done because who is going to launch a big campaign to get the bank’s reputation back?
It is important to understand the nature of these lawsuits and what their purpose is. ACORN filed tons of these lawsuits and ALL of them allege racism.
Case NameBuycks-Roberson v. Citibank Fed. Sav. Bank Fair Housing/Lending/InsuranceDocket / Court 94 C 4094 ( N.D. Ill. ) FH-IL-0011State/Territory IllinoisCase SummaryPlaintiffs filed their class action lawsuit on July 6, 1994, alleging that Citibank had engaged in redlining practices in the Chicago metropolitan area in violation of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691; the Fair Housing Act, 42 U.S.C. 3601-3619; the Thirteenth Amendment to the U.S. Constitution; and 42 U.S.C. 1981, 1982. Plaintiffs alleged that the Defendant-bank rejected loan applications of minority applicants while approving loan applications filed by white applicants with similar financial characteristics and credit histories. Plaintiffs sought injunctive relief, actual damages, and punitive damages.
U.S. District Court Judge Ruben Castillo certified the Plaintiffs’ suit as a class action on June 30, 1995. Buycks-Roberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 322 (N.D. Ill. 1995). Also on June 30, Judge Castillo granted Plaintiffs’ motion to compel discovery of a sample of Defendant-bank’s loan application files. Buycks-Roberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 338 (N.D. Ill. 1995).
The parties voluntarily dismissed the case on May 12, 1998, pursuant to a settlement agreement.Plaintiff’s Lawyers Alexis, Hilary I. (Illinois)FH-IL-0011-7500 FH-IL-0011-7501 FH-IL-0011-9000Childers, Michael Allen (Illinois)FH-IL-0011-7500 FH-IL-0011-7501 FH-IL-0011-9000Clayton, Fay (Illinois)FH-IL-0011-7500 FH-IL-0011-7501 FH-IL-0011-9000Cummings, Jeffrey Irvine (Illinois)FH-IL-0011-7500 FH-IL-0011-7501 FH-IL-0011-9000Love, Sara Norris (Virginia)FH-IL-0011-9000Miner, Judson Hirsch (Illinois)FH-IL-0011-7500 FH-IL-0011-9000Obama, Barack H. (Illinois)FH-IL-0011-7500 FH-IL-0011-7501 FH-IL-0011-9000Wickert, John Henry (Illinois)FH-IL-0011-9000
UPDATE: Hotair.com comments on this story HERE.
New York Post Article HERE:
THE seeds of today’s financial meltdown lie in the Community Reinvestment Act - a law passed in 1977 and made riskier by unwise amendments and regulatory rulings in later decades.
CRA was meant to encourage banks to make loans to high-risk borrowers, often minorities living in unstable neighborhoods. That has provided an opening to radical groups like ACORN (the Association of Community Organizations for Reform Now) to abuse the law by forcing banks to make hundreds of millions of dollars in “subprime” loans to often uncreditworthy poor and minority customers.
Any bank that wants to expand or merge with another has to show it has complied with CRA - and approval can be held up by complaints filed by groups like ACORN.
In fact, intimidation tactics, public charges of racism and threats to use CRA to block business expansion have enabled ACORN to extract hundreds of millions of dollars in loans and contributions from America’s financial institutions.
The Woods Fund report makes it clear Obama was fully aware of the intimidation tactics used by ACORN’s Madeline Talbott in her pioneering efforts to force banks to suspend their usual credit standards. Yet he supported Talbott in every conceivable way. He trained her personal staff and other aspiring ACORN leaders, he consulted with her extensively, and he arranged a major boost in foundation funding for her efforts.
And, as the leader of another charity, the Chicago Annenberg Challenge, Obama channeled more funding Talbott’s way - ostensibly for education projects but surely supportive of ACORN’s overall efforts.
UPDATE II: Fox News gets on the story
UPDATE III: CNS News Analysis
Under the Clinton administration, federal regulators began using the act to combat “red-lining,” a practice by which banks loaned money to some communities but not to others, based on economic status. “No loan is exempt, no bank is immune,” warned then-Attorney General Janet Reno. “For those who thumb their nose at us, I promise vigorous enforcement.”
The Clinton-Reno threat of “vigorous enforcement” pushed banks to make the now infamous loans that many blame for the current meltdown, Richman said. “Banks, in order to not get in trouble with the regulators, had to make loans to people who shouldn’t have been getting mortgage loans.”
This threat combined with the government backing of Fannie and Freddie set the stage for the current uncertainty, because the “banks could just sell the loans off to Fannie or Freddie,” who could buy them with little regard for negative financial outcomes, Richman said.
http://www.cnsnews.com/public/content/article.aspx?RsrcID=36048
UPDATE IV: Its about time …
Update VI: Investors business daily reports more on Obama’s work with ACORN
As the New York Times reports, “Aides to Mr. Obama said he had not directly reached out to try to sway any House Democrats who opposed the measure.” Is the reason the fact that the slush fund for ACORN in the original bill, siphoning off 20% of any future profits for such activist groups, was trimmed from the tree?
Obama, who once represented ACORN in a lawsuit against the state of Illinois, was hired by the group to train its community organizers and staff in the methods and tactics of the late Saul Alinsky. ACORN would stage in-your-face protests in bank lobbies, drive-through lanes and even at bank managers’ homes to get them to issue risky loans in the inner city or face charges of racism.
In the early 1990s, reports Stanley Kurtz, senior fellow at the Ethics and Policy Center, Obama was personally recruited by Chicago’s ACORN to run training sessions in “direct action.” That’s the euphemism for the techniques used under the cover of the federal Community Reinvestment Act to intimidate financial institutions into giving what have been called “Ninja” loans — no income, no job, no assets — to people who couldn’t afford them.
CRA was designed to increase minority homeownership. Whenever a bank wanted to grow or expand, ACORN would file complaints that it was not sufficiently sensitive to the needs of minorities in providing home loans. Agitators would then be unleashed.
Chicago’s ACORN used Alinsky’s tactics against institutions such as Bell Federal Savings and Loan and Avondale Federal Savings. In September 1992, the Chicago Tribune described the group’s agenda as “affirmative action lending.”
Obama also helped ACORN get funding. When he served on the board of the Woods Fund for Chicago with Weather Underground terrorist William Ayers, the Woods Fund frequently gave ACORN grants to fund its activist agenda.
In 1995, Kurtz reports, Obama chaired the committee that increased funding of ACORN and other community organizers. The committee report boasted that the fund’s “non-ideological” image “enabled the Trustees to make grants to organizations that use confrontational tactics against the business and governmental ‘establishments’ without undue risk of being accused of partisanship.”
The CRA empowered regulators to punish banks that failed to “meet the credit needs” of “low-income, minority and distressed neighborhoods.” It gave groups such as ACORN a license and a means to intimidate banks, claiming they were “redlining” poor and minority neighborhoods. ACORN employed its tactics in 1991 by taking over the House Banking Committee room for two days to protest efforts to scale back the CRA.
As a former White House staff economist writes in the American Thinker, Obama represented ACORN in a 1994 suit against redlining. ACORN was also a driving force behind a 1995 regulatory revision pushed through by the Clinton administration that greatly expanded the CRA and helped spawn the current financial crisis.
Obama was the attorney representing ACORN in this effort. Last November, he told the group, “I’ve been fighting alongside ACORN on issues you care about my entire career.” Indeed he has. Obama was and is fully aware of what ACORN was doing with the money and expertise he provided. The voters should be aware on Nov. 4 of the roles of both in creating the current crisis.
http://www.ibdeditorials.com/IBDArticles.aspx?id=307667123149723
UPDATE VII: Some on the left are saying that SNOPES.com has debunked this story, this is not so. Snopes is talking about another story that makes a different claim about this same lawsuit. It does not dispute that this lawsuit was one of a series of lawsuits that were filed by ACORN using Redlining and racism allegations to lower credit standards. It does not dispute that all of the ACORN CRA lawsuits claimed redlining and racism. It does not dispute that at other times ACORN used intimidation tactics against bank managers to try and make them give high risk loans. ACORNS activities have been widely reported by many news outfits in the last few days. We are glad that we were one of the first to get this story right.
Our other posts that explain every facet of the mortgage crash scandal are in detail HERE, HERE, HERE, HERE, HERE, HERE, HERE, HERE and HERE. - Editor
Possibly related posts: (automatically generated)
Nothing’s the Matter With Kansas
Activists Angered By Blame For Crisis
Watching the House Burn Down: What Caused Our Economic Crisis? - HUMAN EVENTS
Posted in Campaign 2008, Chuck Norton, Palin Truth Squad.
31 Responses to “Obama Sued Citibank Under CRA to Force it to Make Bad Loans - UPDATED”
Um, what? Says: October 1, 2008 at 9:34 pm
This is ridiculous. Did you even read the case summary? Did you even read ANYTHING before posting this nonsense?
The plaintiffs sued because the bank was discriminating against black applicants with similar financial characteristics as white applicants. It had nothing to do with “forcing” banks to give mortgages to ANYONE…rich or poor. Only that IF a bank CHOSE to give a mortgage to a white applicant with financial characteristics equaling XYZ, it must also give a mortgage to black applicants with financial characteristics equaling XYZ. Banks could have still chosen not to give a mortgage to ANYONE, black or white or brown, unless they had had an income above $100K, for example. Or unless they had a credit rating of 700 or above, for example. The bank STILL had the choice of whether to write bad mortgages.
Are you a moron? Do a little research and use a little common sense next time. Stop blaming Obama, and start putting the blame where it belongs…on the banks and lenders who gave billions in mortgages to people who couldn’t afford it, and now the banks and lenders are reaping the whirlwind of their stupid business decisions. And we, the taxpayers, are expected to “save” these banks and lenders from the consequences of their poor business decisions? Please.
[Of course I read the summary, all of ACORN's CRA lawsuits allege the same thing, I discussed the allegation in the post because they are always the same......but whoops I guess you didn't read the entire post. This is what happens when you type BEFORE you read the post carefully.
Next time try reading the ENTIRE post and then start typing. The order of those things IS important. - Editor]
Joan Donahue Says: October 2, 2008 at 12:07 am
It’s particularly racist to assume that all blacks who apply for loans are poor. Banks in Chicago had routinely denied blacks loans when they were just as qualified as whites. This was such a problem that many organizations worked to end this self-destructive practice by banks. The term redlining was invented in Chicago, because it happens so often there.
The Department of Justice as recently as 2004 charged a bank with redlining:
http://www.usdoj.gov/opa/pr/2004/July/04_crt_478.htm
WASHINGTON, D.C. - The Justice Department today announced the filing and resolution of a lawsuit against a Chicago lender. First American intentionally avoided serving the credit needs of residents and small businesses located in minority neighborhoods, a practice commonly referred to as redlining. First American has agreed to invest $5.7 million and open new branches in these minority neighborhoods to settle the lawsuit.
“All Americans should be able to access the financial markets without regard to their race,” said R. Alexander Acosta, Assistant Attorney General for Civil Rights. “We will continue to oppose vigorously any discrimination in credit and lending services.”
[Hi Joan,
These bogus allagations of racism was one of the tools used to lean on banks to make bad loans. Janet Reno made it clear in no uncertain terms that this was a tool that she would use to pressure banks into making more high risk loans. Keep in mind that for a loan to be a good risk the property values in the area cannot have a lowering property value. It is no secret that areas where there are lots of innner city minorities have the worst schools. The school system is a major factor in a property's value. Interesting that almost all failing inner city schools are controled by Democrats. That is just one factor of many that goes into a property's increasing or decreasing value.
Under the Clinton administration, federal regulators began using the act to combat “red-lining,” a practice by which banks loaned money to some communities but not to others, based on economic status. “No loan is exempt, no bank is immune,” warned then-Attorney General Janet Reno. “For those who thumb their nose at us, I promise vigorous enforcement.”
The Clinton-Reno threat of “vigorous enforcement” pushed banks to make the now infamous loans that many blame for the current meltdown, Richman said. “Banks, in order to not get in trouble with the regulators, had to make loans to people who shouldn’t have been getting mortgage loans.”
This threat combined with the government backing of Fannie and Freddie set the stage for the current uncertainty, because the “banks could just sell the loans off to Fannie or Freddie,” who could buy them with little regard for negative financial outcomes, Richman said.http://www.cnsnews.com/public/content/article.aspx?RsrcID=36048
- Editor]
Oil Energy Me Says: October 2, 2008 at 2:19 am
After reading your ENTIRE article (and by calling your ramblings that I’m lowering the standards of journalism), your central conceit is clearly wrong.
The banks weren’t forced to make bad loans, they were forced to stop discriminating against financially-similar borrowers of different ethnicities.
You might have heard of something called the civil rights movement, this is a clear extension of that. There are enough legitimate reasons to criticize Obama, stopping racism is not one of them.
Next time try thinking about that and then start typing (and I’m lowering the standards of thought to include what you do)
Bank’s werent forced to make bad loans you say?? Where have you been in the last two weeks? How do you think this economic crisis happened? Have you not seen the text of the hearings on Fannie Mae and Freddei Mac; the video’s, the articles in the press, the WSJ, the IBD etc etc?? The evidence is overwelming which is why we have several lengthy, evidence filled articles on the subject posted on this very site.
[You don't find it peculiar that ACORN's lawsuits are all basically the same? What can I say folks, denial is more than just a river in Egypt - Editor]
Marianne Says: October 2, 2008 at 2:53 am
It is interesting that corrupt former Fannie Mae CEOS are now financial advisers to Obama. That says a lot about Democrats.
mariannehttp://heavenawaits.wordpress.com/http://heavenawaits.wordpress.com/democrats-crashed-wall-street/
Larry Cox Says: October 2, 2008 at 2:54 am
Very Interesting clip. I had no Idea Osama i mean Obama did such things. But we all know he’s somewhat of a socialist at heart. I don’t care if he’s black, white, or purple with orange polka dots. Keep him away from the White House. America isn’t ready for a Marxist revolution or a Muslim invasion. Just vote for Ron Paul and have him repeal the 16th amendment, abolish the IRS, make a 24% sales tax across the 50 states and we’ll get out of this financial bind we’re in. Check out http://www.fairtax.org and you’ll see why!
Dan Says: October 2, 2008 at 5:06 am
Some people just don’t get it. It is a common tactic to file a motion for discovery based on a bogus complaint in the hopes of finding “facts” that will back up the original complaint. A fishing expedition is all it is. They then get the media involved in the claim of discrimination and seek to totally discredit the financial institution. Rather than have it’s name dragged through the mud the financial institution settles to save time, money and further exploitation by the press.
isilanes Says: October 2, 2008 at 5:12 am
Dear iusbvision,
I read your post and can’t but cry for the poor banks. You see, being forced to do bad things to preserve the good fame they have always been renowned for… That’s so sad.
It is us the poor that crashed the banks, not their greed to harvest money form even the poorest of the poorest, giving every guy and the dog a credit they don’t need at a rate they can barely pay.
Thanks for making me see it.
C.S. White Says: October 2, 2008 at 6:09 am
In the end, EVERYONE is to blame for this mess, from Dems for saying there wasn’t a problem with Fannie and Freddie, most likely because they benefited from the program politically and financially (checkout the 2004 C-Span 2 video on hearing warning about the today’s crisis at http://newsmediaexposed.wordpress.com/) to Republicans for not following through on instituting proper oversight and charges against the offenders, to the banks for lending the money.
I have a theory that this popular culture of political correctness is what has scared Republicans into submission and will post my thoughts on this at http://bycwhite.com.
Newagegop Says: October 2, 2008 at 6:20 am
The underlying “facts” proported by Obama and ACORN have been proven to be false. The study they cited was wrong. The study cooked the numbers to falsely accuse Citibank of racism. It is their tactic.
Reality will eventually have to be accepted, if those represented by liberals ever want a better life. Racism is not murdering 4000 blacks a year or forcing 13,000,000 black abortions since 1973 liberalism is. Racism isn’t providing the worst schools in America or creating urban poverty liberalism is.
Facts exist and liberalism kills. Don’t believe me go look up the 10 worst urban crime, poverty, and school systems in America, then look up who has run those cities for the last 20 years. Black America has been enslaved by liberals, they just don’t realize it.
rex84 Says: October 2, 2008 at 7:38 am
The banks weren’t forced to give bad loans? Are you sure? Read this:
From the Wall Street Journal:
September 30, 1999Fannie Mae Eases Credit To Aid Mortgage LendingBy STEVEN A. HOLMES
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.
Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.
”Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
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.”
Under Fannie Mae’s pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 — a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation’s biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990’s. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University’s Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent. In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.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.
P. Soliz Says: October 2, 2008 at 9:29 am
Vote NO to the bailout plan…contact your representative…this plan is giving money to all the wrong places.
20% to Acorn??? why is a democratic liberal group being given our tax payer money!
VOTE NO
DGSaunders Says: October 2, 2008 at 9:53 am
Last I recall, in 1994 credit lending standards were much much tighter, and 99% of the people delinquent with loans today received their mortgages within the last 5 years. Fail.
[Hey there ace - in 1994 the standards were much tighter, what we have been cataloging here is the efforts to make them not just less tight, but loose as a grease covered goose. The ACORN lawsuits and pressure from Janet Reno to make high risk loans were big steps in that process. - Editor]
Ed Darrell Says: October 2, 2008 at 1:22 pm
If it’s a bogus claim, the judge wouldn’t allow it.
In short, you’re claiming that enforcing the law and getting justice is not a good thing. How bizarre.
Doesn’t that make you more anarchist than libertarian?
[Is this the best argument you can come up with in the face of overwhelming verifiable facts? - Editor]
Linda Says: October 2, 2008 at 2:45 pm
This is completely ridiculous. Red-lining has been illegal and enforced since the 60’s. Obama was a civil rights attorney. The issue was a civil rights issue. WTF are you talking about? The sub-prime mortgage mess has happened because the lenders are greedy and the borrowers are stupid and want more than they can afford.
Apples and oranges.
[Linda,
Take a look around, every major newspaper including the New York Times as far back as 1999 has been saying that the government coercing lenders into making these loans is going to lead to a disaster. The Federal reserve testified to it and the Mortgage Regulator OFHEO warned Congress for years to fix this. All the evidence is not only here on this site, but everywhere you can look that has any credibility. Time to stop drinking the Kool-Aide and wake up. - Editor]
Linda Says: October 2, 2008 at 2:46 pm
Yuck. I feel sullied. I just looked around your website. You are a Coulter-clone. Ace.
[I am sure you do feel sullied. All those verifiable facts is enough to make any radicalized ideologue go crazy. No I am not an Ann Coulter Clone, I have not written five best selling books yet. Linda, I would challenge you to come back with some substance or some verifiable evidence, if you have any. - Editor]
goodtimepolitics Says: October 2, 2008 at 4:02 pm
Obama has recivied more money from Fannie Mae than any congressman except for Dodd! Tell me why “Linda” Tell me why “Ed Darrell”
There is no way a bank could stay in business and give out loans to people that can not pay them back! Thats what Obama force them to do!
quick question Says: October 3, 2008 at 1:45 am
Why didn’t the republicans fix this when they were in control of the house, senate and presidency?
Why didn’t they reverse all of these damaging policies many years ago, simply cut them off?
Oh - I think I know why. Look at the board of directors, the paychecks and cuts out of “being forced” to loan money the various parties received.
Ed Darrell Says: October 3, 2008 at 1:48 am
[Is this the best argument you can come up with in the face of overwhelming verifiable facts? - Editor]
I stated the facts under the law. The best argument you can make is a hallucination?
Ed Darrell Says: October 3, 2008 at 1:50 am
GTP, Fannie Mae and Freddie Mac aren’t loan originating agencies.
Neither agency can donate money to campaigns.
What in the world are you talking about?
quick question Says: October 3, 2008 at 3:31 am
[Obama has recivied more money from Fannie Mae than any congressman except for Dodd! Tell me why “Linda” Tell me why “Ed Darrell"]
http://www.opensecrets.org/news/2008/09/update-fannie-mae-and-freddie.html
Look at the header of the column.
“Total from Individuals”
So that’s not money FROM the institution, that’s money from individuals who work at the institution.
If I donate to a political campaign, you’d hardly say my place of employment is the one donating to it.
That page also goes on to say that 57% of the funds fannie mae had given to congress were to democrats.
Let’s do some rough math, shall we:
Pretend the total was 100,000 for simplicity’s (your) sake.57,000 of that went to democrats in congress43,000 of that went to non-democrats
236 dems in the house versus 198 repubs.57000/236 = ~2.42% of the total donations per member43000/198 = ~2.17% of the total donations per member
So slice those numbers any way you want, fannie mae’s contributions evened out to being non-partisan. Seeing as how the boards are decided within the gov and there was a point when republicans had complete control over everything, I’m not sure what your point is.
Because it should be the simple answers to the question:
If this was so threatening to the wellbeing of our country, why didn’t the republicans fix it when they had complete control over everything?
Why are the times when they DIDN’T have control constantly referred to?
Ed Darrell Says: October 3, 2008 at 4:04 am
Look at the header of the column.
“Total from Individuals”
So that’s not money FROM the institution, that’s money from individuals who work at the institution.
If I donate to a political campaign, you’d hardly say my place of employment is the one donating to it.
Exactly correct, which is why I wondered about GTP’s claim that it came from the corporation.
That page also goes on to say that 57% of the funds fannie mae had given to congress were to democrats.
Let’s do some rough math, shall we:
Pretend the total was 100,000 for simplicity’s (your) sake.57,000 of that went to democrats in congress43,000 of that went to non-democrats
236 dems in the house versus 198 repubs.57000/236 = ~2.42% of the total donations per member43000/198 = ~2.17% of the total donations per member
So slice those numbers any way you want, fannie mae’s contributions evened out to being non-partisan. Seeing as how the boards are decided within the gov and there was a point when republicans had complete control over everything, I’m not sure what your point is.
Because it should be the simple answers to the question:
If this was so threatening to the wellbeing of our country, why didn’t the republicans fix it when they had complete control over everything?
Why are the times when they DIDN’T have control constantly referred to?
Plus, there is the unspoken assumption that an employee donating money represents the views of the employer — which certainly is not true for most people I know — and the unspoken assumption that there is a quid pro quo for the donations, which is not evidenced anywhere.
Thanks for the data.
[Ed - First you said that they cant give money to anyone - and now you have this wrong too because you don't understand what you are looking at. That 57% is over the course of a 20 year period and that is to individual politicians. Look at the donations since BCRA was passed. Look at the amounts given to top Democrats vs top Republicans. While Fannie and Freddie gave at least a little money to everyone, the Republicans tried to get the enforcement out from under the bought off congressional banking committees and under real bank regulators in the Treasury Dept or the Fed. The Democrats blocked it in party line votes.
Look at this article HERE. http://online.wsj.com/article/SB121728651034091275.html
Fannie and Freddie spent $200 Million in partisan activities and donations, the vast majority to Democrat organizations. Also look at the amounts that they got since BCRA with the vast majority going to Democrats. Obama has been in the Senate 3 years and took more than all of the other senators put together but one and this list is of donations over a 20 year period.
http://iusbvision.wordpress.com/2008/09/15/corruption-you-can-believe-in-failed-sub-primes-and-mortgage-fraud-lendors-funneled-money-to-dodd-obama-the-most-fannie-freddie-gave-200-million-to-partisans-most-went-to-democrats-dodd-obama/
Be sure to read the above link carefully and watch the video of the hearings and you can watch the Democrats accuse the OFHEO monitors of lying when they told these congressional committees what was going on at Fannie Mae and Freddie Mac.
In OFHEO reports going at least back to 2003, they told the banking committees in Congress that they needed to reform the regulations and put real banking regulations in charge because Fannie and Freddie were not following Generally Accepted Accounting Practices.
Ed, you are so eager to exonerate your Democrat Party friends that you have lost all perspective. Perhaps you should take a deep breath stop and reconsider yourself and try and think objectively, because with all due respect, you haven't carefully read the information presented to you and are kinda making a fool of yourself. - Editor]
Sisyphus Says: October 3, 2008 at 6:51 am
It is unfortunate that many of loudest comments here are from those so uninformed.
The mortgage mess began with the Community Reinvestment Act of 1977 signed by Carter. The law was lightly enforced and not given serious force until the mid-1990s under Clinton and AG Janet Reno (D-Waco, Elian). Banks were bullied to give mortgages to high-risk borrowers without regard to typical standards like credit rating. It was a total disregard for normal credit standards.
In recent years, President Bush and John McCain sought to bring attention to FannieMae/Freddie Mac time bomb. They were ignored. Meanwhile, many Democrat Representatives like Barney Frank and Maxine Waters assured us that Fannie Mae and Freddie Mac were in good condition; there was nothing to worry about.
Democrats Franklin Raines, Jamie Gorelick, and Jim Johnson, profited millions thanks to exaggerated profits. Democrats in Congress — Chris Dodd and Barack Obama among them — received donations from Fannie Mae/Freddie Mac. (While these donations may have come from individuals, are we told who these individuals were?)
One cannot ignore basic economics. Democrats did exactly that (and do so in other areas as well) and I need not tell you where it’s gotten us.
[Hi Sis,
Thanks for the post, Lets talk about individual contributions for a moment. Why is it that donations from employees of companies count as donations from that company? When you look at even Factcheck.org's and the Center for Responsive Politics definition of corporate donations, they include donations from that companies employees.
The reason they do that is because when the BCRA restricted soft money donations and limited the amount of money that corporations could give, those companies would engage in employee bundling to get around the law. Employees would get a little bonus and they would in turn give money to a campaign that a company likes. America is a divided country almost 50/50 politically, so when the employees in a company give a single candidate or party over 80% of their so called "individual donations" since BCRA you know someone is gaming the system. That is why the Center for Responsive Politics, Factcheck.org and most newspapers include these donations as corporate donations. Corporate employees did not give maxed donations in such uniformity untill this law was made. Any solid Poli Sci student knows this. Next time some partisan tries to use the "individual donations" argument against you, slap them with this little nugget of campaign finance reality. - Editor]
The One and Only Vice Presidential Debate « Nicki’s Thoughts, Art & Friends Says: October 3, 2008 at 7:46 am
[...] how Obama had to know what was coming with subprime mortgages as he had, as a community organizer, sued Citibank under the Community Reinvestment Act in 1994 to force the bank to make bad loans. He did this as a partner with [...]
BobC Says: October 3, 2008 at 8:41 am
I have 3 points I have gathered from these mess of posts. I am a very tough, very undecided voter.
1) The case from its description was simply a lawsuit against a bank. It was settled out of court so there were no details to be made public. Any talk why it came about (in either direction) is speculation.
2) Some institutions donated money to politicians (their legal right) whose principles shared common goals? CALL THE MEDIA! Oh wait, that is not news. If I am choosing who I am going to donate money to I am going to donate to the candidate most likely to vote for what I want enacted. Why would I give my money to the candidate least like that? Donations are not the news story. The voting record is.
3) As a matter of history, Democratic involvement in promoting borrowing by risky homeowners is important. As a matter of current events, It has less to do with the current crisis. The economy would be fine if it was just subprime loans turning bad. The problem was their widespread tranching and use in the derivatives market. Who made that possible?
Seriously, who? It could be the same people. I don’t know. Was it even wrong for it to be allowed?
[Hi BobC,
1. ACORN filed tons of these harassment suits and Janet Reno threatened banks with it. Democrats leaned on lendors to make more high risk loans. All of this we have fully sourced and documented. We are not the only ones to report these facts, so keep reading.
2. Yes they had priciples in common alright, the principle was to enrich themselves by abandoning Generally Accepted Accounting Practices while slicking the palms of everyone around it with $200 million. OFHEO, the Treasury and the Federal Reserve all warned Congress to fix the problem and Democrats said that all of these people raising concerns were either racist, lying or just plain wrong.... we posted the video of the hearings for your viewing pleasure.
3. The securities based on those martgages went bad because the banks and Freddie and Fannie knew that these loans were bad. The banks at least have an excuse, they were coerced (strong armed) by the government to make these bad loans and sell them to Fannie and Freddie (but some of them were gaming the system like Freddie and Fannie were).
I am glad that you are reading the articles posted here, but you may wish to read them more carefully next time. - Editor]
BobC Says: October 3, 2008 at 10:46 am
Wow. There was some misunderstandings here.
1) Yes, I got that. I am a strong believer that government exists only for rent seeking. I am looking at this case with reasonable doubt. I know we do not have to apply that concept to dismissed cases or in public opinion but without details of the case there is a lot of speculation. I am not saying it isn’t a bogus suit. We live in a society that settles out of court a lot of bogus suits. But that is not solid enough that this case is one of them. It is fishy, but I am not convinced it is fact.
Also, this would be a win for Obama. Citing him as a good lawyer doesn’t really discourage votes.
2) Once again, you are stating their political record and trying to inflate the behavior by coupling it with donations. The donations aspect does not affect me. I only care about the individual’s record. I AM NOT DEFENDING ANYBODY’S RECORD.
3) They went band for a lot of reasons. As I said before, governments engage in rent seeking. Wait, I am not even sure if there is an argument on point. I agree with,”The securities based on those martgages went bad because the banks and Freddie and Fannie knew that these loans were bad.” My statement was if the securities did not penetrate the market so deeply we also would not have this problem. I don’t see a contradiction between us.
BobC Says: October 3, 2008 at 10:54 am
Oh, and one more thing. Do not take the “convinced as fact” thing as an edorsement on this issue or any issue. It is just very hard to prove what a person’s intentions were to the extent it is a fact.
I agree these lawsuit arguement has a lot of believability. I hope you can agree that it does not have certainty.
[That's fine BobC - as you know plain text is often a difficult and incomplete form on communications, especially in a shorthand format like this. So I have no problem at taking you at your word :-)- Editor]
nextgen08 Says: October 3, 2008 at 12:38 pm
This is not the reason for the mortgage meltdown, not even close. If you want to learn about the actual events that lead to this crisis we are in, check out this link:http://www.nextgen-politics.com/2008/09/the-evolution-of-a-financial-crisis-part-i-the-back-story/
This is a step-by-step account of what actually happened that lead us to where we are today. It was the investment industry that pushed banks to make bad loans, not community organizers, but it makes for a flashy headline doesn’t it?
Jerame Clough-Next Gen Politics
[Jerame,
Community organizers like ACORN were a step in the process, we have written five articles here explaining all that happened and Human Events, and Investers Business Daily and Bloombrg News came out with a similar analysis AFTER we did. After the ball was rolling some in the investment industry did indeed push mortgage investments because the price of the house could be used as an asset and in an inflating housing market that could skew the value of the mortgage securities, which is why we need mark to market rules fixed.
The real question is, who got this ball rolling, and who was warned repeatedly to stop the ball, had the power to do it easily and simply refused to.
Dereugulation wasn't deregulation at all, it was just some changes and Bill Clinton said so. By the way, Biden Voted for Gramm-Leach-Bliley and Clinton signed it. It passed the Senate 90-8.
http://iusbvision.wordpress.com/2008/10/01/clinton-says-that-obama-is-wrong-about-economic-crisis/
http://iusbvision.wordpress.com/2008/09/21/in-plain-english-how-did-the-biggest-financial-scandal-in-history-happen/
http://iusbvision.wordpress.com/2008/09/28/the-video-that-says-it-all-democrats-on-banking-committee-lying-about-status-of-fannie-mae-and-freddie-mac-saying-they-are-fine-and-dont-need-reform/
http://iusbvision.wordpress.com/2008/09/21/bush-administration-warned-congress-over-20-times-reforms-were-needed/
Factcheck.org:
The truth is, however, the Gramm-Leach-Bliley Act had little if anything to do with the current crisis. In fact, economists on both sides of the political spectrum have suggested that the act has probably made the crisis less severe than it might otherwise have been.
Factcheck.org isnt always right but they get it right most of the time.
I read the analysis that you linked to and with all due respect, it is not a serious attempt at an honest explanation... it is closer to CYA for the man who took the second highest amount of money from those directly responsible for this mess and Bush bashing when his administration repeatedly asked Congress to fix the problem. OFHEO and the Feferal Reserve even asked the Congressional banking committies to fix this. Republicans voted for it and Democrats blocked it. This was all so avoidable and if it was fixed just a few years ago we would not be here talking about this.
This problem happened in a series of layers, but some layers are far thicker than others and you are ingnoring some of the thickest. - Editor]
Darky Says: October 3, 2008 at 3:58 pm
All I got to say is the gov’t pressured banks into giving out risky loans. Obama supported people who launched frivolous lawsuits against said banks, alleging racism. Banks were willing to give out bad loans. People were more than happy to take out loans they couldn’t afford and now that it’s all hitting at the same time, everyone’s looking for someone else to blame. You can’t blame the bank for giving the loan to someone who couldn’t afford it without taking a look at the person choosing to take on a bigger payment than they can handle. Adding on the rediculousness of ARMs, and come on, people! You take out a loan with an adjustable rate, hoping said rate will go down. But when has the bank ever lowered an interest rate? That costs them money, so the only place for the rates to go is up. I place a big chunk of blame on those who took out too much loan and especially on those who willingly took on an ARM.
Neo Says: October 4, 2008 at 5:02 pm
Chicago Sun-Times
Diane Stearns Says: October 6, 2008 at 8:23 pm
I worked for Bell Savings & Loan Association from 1960 to 1970. Now, I know that’s a long time ago, but red-lining at that time was not at all a secret–if anything, the loan officers boasted and laughed about it. There were certain areas of the city (non-white) where home loans would not even be considered regardless of ability to pay.
Here’s another oldie you can laugh about, but it is the absolute truth. When a husband and wife wanted a mortgage, and the worman was working, she had to sign a pledge that she would not become pregnant during the term of the loan.
Illinois at that time did not allow branch banking–so, people couldn’t easily go somewhere else to get a loan. There were only so many lenders, and if you were a person of color, regardless of your excellent credit or the amount of money you had to put down, there would not be a loan granted. Was this wrong? Of course! Was anything done about it? No! The result of red-lining then and now is that you end up with white neighborhoods and black neighborhoods–and never the twain shall meet.The problem we have now is NOT that lenders made bad loans in black neighborhoods, it is because lenders made bad loans in white neighborhoods to people who were spending far more than they could afford. Families bought homes with ARM’s, often with balloon payments down the line, and their salaries didn’t adjust to meet the payments. The financial crisis has absolutely nothing to do with integration–it has to do with greed and thinking that the bigger, the better. Buy the largest home on the block, max out the credit cards, have three cars in the garage, etc., etc. We have become a nation of spenders who don’t seem to feel any concern about what might be down the road. Well folk’s, this is what is down the road!
[Hi Diane thanks for your post, while I do not disagree that redlining was done in the 60's and 70's. It wasn't until the 1990's that the CRA was abused and misapplied deliberately to force banks to lower credit standards. CRA abuse from 1993 on was one of the important layers that contributed to this mortgage collapse. - Editor]
LT Says: October 7, 2008 at 3:01 am
Did anybody read the above article about the expansion of Fannie in the 1990’s? The CRA was being expanded at that time to ease the requirements of ‘conventional’ loans. Fannie and Freddie, by lowering their standards, were making it easier for low to moderate income people to get lower rate loans. The article states that, until this move was made, those borrowers had to take loans in the `subprime’ market at interest rates ’several points higher’. Not to mention, that these loans reduced to the conventional rate after two years of payments. These do not sound like the 5 year interest only loans with huge balloon payments that are, from what I understand, in large part responsible for the current foreclosure pandemic.
Also, it makes this statement about where much of the pressure (and lobbying I suspect) came from:
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.
I don’t really believe the current economic problem is necessarily partisan (I tend to lean to the left, so of course I would love to place more responsibility right…, but as I was saying :) ). I think the real problem here is the conflict of interest that is becoming increasingly evident from nearly all politicians in Washington. Special interests are dictating policy, and, as it is happening, the rest of us are left arguing over who is “more responsible” for problem X and how politician Y is better than Z because Y is wearing garment A.
Seriously folks, we were just smacked in the face by the whole of our elected body. It is time that, as a country, we demand that the real issues facing this country be addressed. Personally, I would like to see campaign finance reform that removes the corporate and special interest influence from politics, but at any rate I think its time we demand real leadership from both party candidates. When it is not provided we need to demand accountability from our congressional representatives - after all, they are responsible for keeping the executive branch in check (as opposed to caving into scare tactics).
Point - we need to stop playing on the sideline. One thing Obama had right, whether or not you agree with his position or motives, he made moves to organize and fight for issues. This country would be a better place if more Americans got involved at that level.
Subpoint - Maybe we are to blame for the current mess. We put politicians in office (through action or inaction) who are not serving our interests as a country. Many of these are still in office.

100 billion going to ACORN! That is enough to scuttle the entire thing.

100 billion going to ACORN! That is enough to scuttle the entire thing. Locally we could have "fun" with that I've watched way too much CNBC in the last ten months since my constitutionally protected first funding MN PERA early retirement. CNBC seems fair overall in their coverage (great Sarah Palen interview done before the announcement) but I saw no indication of this credit crisis coming to a head. I knew the basics of "creative financing" were bad but didn't see an immediate crisis. The 1977 CRA was always throwing a lot of money at the "hood". I lived in the Minneapolis Phillips neighborhood for a couple of years before buying a house in the Longfellow neighborhood. I recall getting a lot of very attractive finance programs if I would want to buy in he Phillips neighborhood. For the neighborhoods like Phillips this was good to attract responsible homeowners but like the Jeffersons I wanted to "move on up" and not deal with the hassles of the "hood". Buying in Longfellow definitely improved my "quality of life" (here in Longfellow someone took my ten year old garden hose but even there an ex girlfriend with a propensity for "borrowing" things is a key suspect. That is my "crime of the decade" here in Longfellow. My old Phillips nieborhood is holding on due to immigrants who didn't know about the "creative financing" thing where repayment of the loan is optional. Go to the near North Side and it's far worse. Would responsible people want to buy a house in a "war zone"? They dumped huge amounts of money into North Minneapolis and they have this huge default percentage. This did nothing to help the responsible people who bought houses there. A former roommate just filed criminal charges against a North Minneapolis building inspector who solicited money for a marginal scrap lumber violation. I think it was $300 to remove it and "make the complaint go away". This person had a court related job so this person knew how to set a trap and deal with it. You might recall that Barak Obama was "associated" with a few Chicago Real Estate projects in the "hood" that defaulted. Somehow the mainstream media doesn't seem interested in this. Also, the figure of some called "sub prime mortgages at risk is under 5% of total owner occupied housing. I don't thing the vast majority of the public, including myself, who paid off my mortgage in under 20 years and never did a takeout will be be sympathetic to these "something for nothing" sub prime borrowers. There will need to be a bailout but who caused it. That said, I suspect the public has little sympathy for the six, seven and eight figure compensation "geniuses" on the "supply" side. If any impropriety, lock them up for life sharing a cell with "spike" and throw away the key. This prosecution should go deep.

Harbor Freight retail stores.

I could find no feedback option for the retail stores. I was at the Signal Hills Minnesota store. I was there and it was slow but they had no available shopping carts! You have to keep in mind that a lot of the more senior people in construction and such have bad knees or hips. (including me) I went to shop for tools but it was literally painful without a shopping cart, which doubles as a walker. I got a few thing but the lack of a shopping cart/walker became too much so I curtailed the shopping after two items. I saw a half a dozen cart with restock stuff. The staff responded to customer requests but otherwise they were chatting rather than restocking.
I have bad knee and hip joints and usually figure shopping to be exercise with shopping cart to be walkers. I saw a few other customers "leaning" that day. This cannot be good for business.
I visited the "Harbor Freight south" because I also wanted to visit the Super K Mart there. (I bought $80 there with a shopping cart)
I regularly shop at the smaller Columbia Heights store. I have nothing but praise for the staff at the Northern store.

A medical device opine by me.

I will cross post at my http://65y.com I don't want to "name names" here because I was given good answers when asked (after my internet research).
Basically three years ago I fell off a bicycle and had a very painful knee. I had/have Health Partners who referred me to a specialist. Judging from the office I lot of local sports figures have used this doctor so I figure that he is competent.
I had knee joint necrosis shown by X-Ray and MRI. This doctor correctly predicted that my tendon injuries would heal themselves with time and that things would go better if I lost weight. These are all true. He mentioned a three month waiting list for knee replacements and asked me if I want to get on the list.
I told him that I had two years before the option of early civil service retirement, which I took http://ruleof90.com so I hoped to "tough it out" until then. He wished me luck but advised me to lose weight and questioned weather my knee would hold out that long.
My "out of pocket" costs" were reasonable, I think $10 per visit and 10% or $100 for the MRI were reasonable. Again, this was Health Partners.
Three years later I have retired and have not had knee replacement surgery. The knee joint is maybe six or seven on mobility things that give me some trouble. The tendons are near the top of the list and they would probably be a lot worse with a knee replacement. Part of it is "first pain". Tonight I was working on a challenging home repair project where I was on my feet constantly for more than two hours. Initially, some joint pain but mostly minor muscle pain. Nothing serious.
Anyway, when I was in this doctor's office there was a woman from a nursing home who had to be over 80 and there was a transportation dilemma that I overheard. The woman's daughter arrived and she and the staff were discussing transport option back to the nursing home for her mother. I overheard the doctor explaining to the daughter how the woman was a candidate for a knee replacement.
The old woman barely recognized her daughter (my mother, until her death recognized me the moment I got near her, bless her, and hugged and kissed me enough to make girlfriends jealous but she was diagnosed with dementia)
The old woman in the doctors office had classic dementia/Alzheimer's symptoms and she was in nursing home but the doctor was setting her up for a hip replacement!
Before I retired I worked with a couple of people with hip replacements. You have a three month rehab time with hip replacements and that assumes you are motivated. That's on par with a knee replacement. I have a number of people at work who had had knee replacements or knew someone at work so I kept track of the rehabs. Typically three months and this is with motivation and aggressive rehab.
That said, if I decided on a knee-replacement I would trust this doctor to do it, but he seems to advise them like "popcorn". The rehab cost is huge after the surgery. I wondered how this 80 year old woman with Alzheimer's would handle rehab, which I considered very tough.
Again, I considered my out of pocket costs of under $200 to be reasonable and all my questions were answered well but I consider myself to be very informed.

A posting of mine in the Star Tribune discussion group.

http://ww2.startribune.com/user_comments/comments.php?d=asset_comments&asset_id=27340044&section=/politics/national/president

For once I heard of a story negative of the democrats on the Star Tribune first.
My congratulation to the Star Tribune. The "credit card trap" tends to it the natural constituency of democrats hardest, the young, the less educated and those without adequate financial reserves. Making it easier to collect credit card debt makes credit card companies more likely to offer "easy" credit. It would be interesting to see if Biden every recused himself from a vote on credit reform because of his son's employment in the industry. If not, this could be "fun". My main current issue is the the bar smoking ban with my http://freedomtoact.com but when I talk with young people I try to discuss credit cards. Typically, they agree with my premise but say it is hard to break the habit. As for me my credit card max was $3K but now I am debt free, paid off the mortgage on http://searshouse.com in under 20 years and was able to retire from civil service at age 57.

Pension Envy

An interesting term from this Forbes article. Another variation might be "equity envy".

http://www.forbes.com/entrepreneursfinance/2008/06/17/pension-fund-retirement-ent-fin-cx_kw_0617whartonpension.html
New Scrutiny Of Public Pension FundsKnowledge@Wharton 06.17.08, 2:00 PM ET

After decades in obscurity, public pension funds are drawing attention as civic organizations raise concerns about the programs' costs, and as some funds take activist investment stands, such as demanding divestment from companies that do business in Sudan or Iran.
The public face of government pension funds was explored at a Wharton Impact Conference titled "The Future of Public Employee Retirement Systems," sponsored by Wharton's Pension Research Council and the Boettner Center for Pensions and Retirement Research. Researchers at the conference presented two papers about the nature of opposition to traditional defined-benefit plans for public employees and the true costs of activist pension investment policies.
"Everybody is paying more attention to pensions than they were 30 years ago partly because of the aging population -- and the civil servant population is aging more quickly than the population as a whole," said Olivia Mitchell, Wharton professor of insurance and risk management. Mitchell is also executive director of the Pension Research Council and director of the Boettner Center, which co-sponsored the conference. "The costs of their retiree benefits are burgeoning and as those costs increase, everybody has to pay more attention to them."
Even though public pension funds have done a relatively good job of providing for members' retirement, ideologically driven organizations, such as Americans for Prosperity, a Washington, D.C., nonprofit that promotes limited government and free markets on the local, state and federal levels, are rising up to roll back benefits, according to Beth Almeida, Executive Director of the National Institute on Retirement Security.
Almeida presented a paper at the conference titled "The New Intersection on the Road to Retirement: Public Pensions, Economics, Perceptions, Politics and Interest Groups." She wrote the paper with Kelly Kenneally, a communications consultant, and David Madland, director of the American Worker Project at the Center for American Progress.
Too Big to Ignore
"Public pension plans were for decades sleepy things that nobody paid attention to," said Almeida in an interview. But in recent years they have begun to aggressively pre-fund their liabilities, increasing the level of investment dramatically. At the same time, public pension funds began to invest in assets, including equities, with additional risk compared to the "plain vanilla" investments they had made since the 1950s.
As a result, the funds have grown to about $3 trillion in value. "Obviously, with an investment that large, it becomes a focus and people are interested in taking a look at it," said Almeida.
Almeida and her co-authors examined survey data related to public pensions and examined case studies from four states that recently had been under pressure to cut back on traditional plans and move toward the type of defined-contribution plan common in the private sector.
The survey data revealed most citizens are uninformed about public pensions and have little interest in changing the system. According to the paper, "There does not appear to be a real groundswell of discontent on the issue of public pensions and no demand rising up from ordinary citizens for wholesale changes. It appears that efforts to dismantle public pensions are tied to partisan politics and organized ideological interest groups."
While the survey research showed individual Republicans had little concern about public plans, there was a correlation between Republican-controlled legislatures and movements to dismantle traditional government pension plans.
To understand that connection the authors examined four states--Alaska, Colorado, California and Utah--that have experienced movements to change their government plans. The authors discovered that the most important element driving change was the presence of an ideologically motivated group urging a move toward more individual responsibility in public pension finance.
However, Almeida noted that Alaska and West Virginia, which had moved toward defined contribution plans, now have "buyer's remorse" and are taking steps back toward traditional defined-benefit plans for public employees.
Pension Envy
Almeida said the research indicates that the ideological bent of activists pushing toward defined-contribution programs "talks past" the voters, which may ultimately lead to failed policy. "What these cases show is that when these policies aren't enacted on a fully fleshed-out analysis of policy but a more ideological approach, there's a bigger risk that policy will be enacted that folks will come to regret later," said Almeida.
During the conference Mitchell raised the issue of "pension envy," which she described as antagonism toward public defined-benefit plans that seem lavish compared with what most private sector employees can expect.
"Ultimately, the question will be how much more [in] taxes will taxpayers be willing to kick in to fund these benefits, particularly if they themselves don't feel they are in a comparable situation," said Mitchell in an interview. She said pension envy is particularly strong when it comes to public employees who "double-dip," or continue to work in another job after retiring at a full pension from another employer.
Mitchell said that in most cases the pension benefit comes in return for deferred compensation throughout the worker's career and represents a promise that was made. However, she added, many pension plans have formulas that make it easy for public employees to enrich themselves by spiking their final salary to increase their level of benefits in retirement.
She recalled incidents of public transit drivers getting into accidents in the last months of their career because they were exhausted from working excessive overtime to boost their final salary. "I don't have a big problem with people taking a pension according to the rules and then going on to work if they need the money, but I do think some of these rules are easy to manipulate and that's where there needs to be more public oversight."
Activist Funds
Pension funds that take on activist social causes were examined by Brad Barber, professor of finance at the graduate school of management at the Davis campus of the University of California. He presented a paper titled, "Pension Fund Activism: The Double-Edged Sword."He described two types of pension fund activism: "shareholder activism" and "social activism."
Funds act as shareholder activists when they use their clout as investors to pressure companies into practicing good governance--for example, dropping poison pill takeover defenses.
Barber researched the question of whether shareholder activism enhances investment portfolios. He tracked the California Public Employees' Retirement System, which has been investing in corporate equities since 1984. In 1987 CalPERS launched its governance program aimed at improving corporate performance. In addition to its public crusades, CalPERS does extensive behind-the-scenes negations at companies to influence governance.
Barber tracked the performance of the CalPERS focus list over the past 15 years and found indications that shareholder activism enhances the value of its portfolio. However, he said the evidence was not scientifically sound. Nonetheless, he added that substantial theoretical work underpins the notion that shareholder activism does improve results for investors.
He is less certain about social activism. Again he turned to CalPERS, which has been ordered by legislation to use its influence to demand corporations divest from businesses in South Africa, Sudan and Iran. The CalPERS board has also taken stands against corporations on social grounds. In October of 2000, overriding the recommendation of its staff, the board ordered the fund to divest from tobacco companies.
Limits of Activism
The board also called for the resignation of Safeway CEO Steven Burd in 2004, when the grocery chain was in the midst of a labor dispute. Sean Harrigan, a food workers' union official was president of CalPERS at the time and was ousted from his position later that year. Harrigan said he was removed under pressure from business and Republican Governor Arnold Schwarzenegger.
Barber said the Safeway actions diminished CalPERS' credibility. "My concern is that these institutions do engage in a lot of sensible actions. We really need them as watchdogs of corporations. But if you also get them engaged in questionable activities with a political motivation or social motivation they think is noble ... those interventions could be questioned."
At a minimum the decision to divest from any company, for any reason, constrains investment options and limits a fund's ability to benefit from a diverse portfolio, Barber pointed out.
In an interview after the conference, Barber cited a 1971 article by Milton Friedman that appeared in The New York Times in which the Nobel-winning economist argues that corporate executives who take on "social" responsibilities for the company are, in effect, acting as civil servants.
"If they are to be civil servants, then they must be elected through a political process," Friedman wrote. "If they are to impose taxes and make expenditures to foster 'social' objectives, then political machinery must be set up to make the assessment of taxes and to determine through a political process the objectives to be served."
Barber said the discussion boils down to how to allocate resources. Social activism might be appropriate if it can generate a profit or return on investment.
For example, for funds interested in environmental sustainability, he pointed to project financing that could be used to retrofit buildings to conserve energy. Many small building owners are reluctant to lay out the capital necessary to retrofit their properties. Large pension fund investors, however, could finance the renovations and earn back a return by having the building owners pay them back with their energy savings. In some cases, insulation can create savings of 30% on energy bills, Barber noted.
"A lot of companies in the private equity and venture capital arena can think cleverly about how to use finance to solve some of these problems," said Barber. "Large investors should be focusing on what venture capital and private equity investments are out there."
Measuring Carbon Footprints
Another environmental initiative gaining attention is disclosure of a company's carbon footprint to guide investment. Barber said that might be justified because research on disclosure policies indicates companies can lower their cost of capital if they have high-quality disclosure policies.
Barber noted that companies need to take social issues into consideration as they conduct their business. The classic example is Wal-Mart, which suffered a backlash when it focused solely on low costs without regard to the impact of its business on local communities. "I think some of the bad publicity they've gotten has materially hurt shareholders," said Barber. "That's an example of how taking their eye off those issues might have destroyed shareholder value."
Mitchell pointed out that interpretations of the Employee Retirement Security Act of 1974 prohibits private-sector pension funds from taking any actions that are not solely in the best financial interests of plan members. As a result, most pension activism has been focused on the public sector.
She cited the example of CalPERS' decision to divest from tobacco companies, which, Barber noted in his paper, limited investment returns. "Who bears the cost is unclear," said Mitchell. "In the case of a defined-benefit plan what it means is somebody down the road will have to pay more ... or benefits may be lower than expected."
Another problem is reaching agreement on what causes to support or ignore. "There are a lot of flavors of activism," Mitchell remarked. In addition to tobacco, alcohol and other "sin" products, she said social activism has extended to military procurement and weapons companies. She also noted there is a movement to create Islamic funds in which no interest is incurred in keeping with interpretations of the Koran.
"The point is what's up for you may be down for someone else. It gets difficult to get people to agree on which flavor of activism they like," said Mitchell.
"I see the role for activism in pension investment more clearly when it's a defined-contribution plan and individual investors can read and review the evidence and put their money where their hearts are," she continued. "In the case of a defined-benefit plan what I worry about is that the money managers may be exerting funds for some sort of political or social judgment which might not be consistent with either the risk the pension plan should bear or with the views of the participants who may have to kick in more money or have their benefits cut if the performance is not satisfactory."

For Some Patients, Replacement Hips Only Squeak By

I'm eligible for knee replacements but putting it off as long as possible. Steps are tough but I have double railings to the basement so I get by. Greg Lang
For Some Patients, Replacement Hips Only Squeak By
By BARNABY J. FEDER
The New York Times
Published: May 18, 2008
The first time John L. Johnson's artificial hip squeaked, he was bending down to pick up a pine cone in his yard in Thomasville, Ga. Johnson looked up, expecting to find an animal nearby.
Susan O'Toole, a nutritionist at Montefiore Medical Center in the Bronx, who first squeaked going up stairs after getting home from her hip-replacement surgery in 2005, said she thought it was the banister she was gripping.
And Edward Heary, an apprentice appraiser in Hatboro, Pa., said clients sometimes look with embarrassment or concern at their floorboards when he walks though their homes.
As all three patients - and hundreds of others - discovered once they pinpointed the source of the noises, they had become guinea pigs in an unfolding medical mystery.
Their artificial hips are made of ceramic materials that were promoted as being much more durable than older models. But for reasons not yet fully understood, their hips started to squeak, raising questions about whether the noises herald more serious malfunctions.
"There is something amiss here," said Douglas E. Padgett, chief of adult reconstructive and joint replacement service at the Hospital for Special Surgery in New York.
More than 250,000 Americans get total hip implants each year, a procedure that generally costs nearly $45,000. Hip replacements have a success rate of more than 90 percent, based on patients' achieving relatively pain-free mobility after recovery periods that range from a few months to a year.
Any artificial hip can occasionally make a variety of noises. But until Stryker, a medical products company, began marketing highly durable ceramic hips in the United States in 2003, squeaking was extremely rare.
Now, tens of thousands of ceramic hips later - from Stryker and other makers that entered the field - many patients say their squeaking hips are interfering with daily life. One study in the Journal of Arthroplasty found that 10 patients of 143 who received ceramic hips from 2003 to 2005, or 7 percent, developed squeaking.
Meanwhile, no squeaks occurred among a control group of 48 patients who received hips made of metal and plastic.
"It can interrupt sex when my wife starts laughing," said one man, who discussed the matter on the condition that he not be named.
Dozens Get 2nd Replacement
Beyond annoyance and embarrassment, many patients and their surgeons fear that the squeaky ceramic hips may signal that the joints are wearing out prematurely. That could force patients to undergo the very operation - a second replacement of the same joint - they had hoped to avoid by choosing ceramics.
Already, dozens of patients have elected to endure subsequent surgeries to replace the noisy hips. Some have sued Stryker, the pioneer and market leader, which some doctors say has been slow to take their patients' concerns seriously.
Last fall, the Food and Drug Administration issued a warning to Stryker, saying it had failed to take the steps needed to prevent squeaking and other problems. Clouding things further, Stryker last year recalled ceramic hip parts made at its factory in Cork, Ireland, after determining that some did not meet its sterility specifications.
Stryker says none of the problems underlying the recall or the warning letter from the FDA reflect problems that cause squeaking, which it contends occurs in less than 1 percent of implants.
Whatever the actual frequency, some investigators who have looked at the problem say the squeaking seems to be associated with extreme flexing of the ceramic implants, but exactly how is unclear. In X-rays, many of the squeaking hips appear to be perfectly aligned.
Some patients squeak even they are walking normally, such as O'Toole or Michael Mueller, a software executive in Scottsdale, Ariz. Mueller is so frustrated with squeaks, pain and popping noises for which he blames his ceramic hip that he has displayed his problem on YouTube.
Although there have been no reported cases of serious mishaps, some surgeons fear that the ceramic material might shatter at some point, leaving a patient with so many inflammatory shards in the hip that a doctor could never find them all.
"Catastrophic failure has been a concern in the past with older ceramic components," said James M. Bried, a surgeon in Poway, Calif.
Ceramic materials have been used since the 1960s. Bried, who implanted Mueller's hip last year, said he was concerned that squeaking might be "a harbinger of something similar."
Mueller said Bried told him to consider getting the hip replaced "sooner rather than later."
Stryker says such fears are overblown.
"It is important to keep this in perspective," said Aaron R. Kwittken, a spokesman for Stryker. "Published research shows squeaking is rare compared with other total-hip-related risks like infection, dislocation and leaving patients with uneven leg length."
Attorneys Weighing In
But plaintiffs lawyers, who have already filed scores of lawsuits on behalf of ceramic hip patients, are gearing up to argue that squeaking is not a minor problem for many who experience it.
"We're in the infancy of this," said Douglass A. Kreis, a personal injury lawyer in Pensacola. His clients include O'Toole and Johnson, who has had his ceramic hip replaced.
Most artificial hips, whatever material they are made of, share a basic design: a socket implanted in the pelvis, into which a spherical head is fitted. The head is attached to a spike that is driven into the femur, or thigh bone, to anchor it.
Durability is paramount with artificial hips. Patients worry that they will outlive their artificial hips and require a second, more extensive and even more expensive procedure at an age when their bodies may be less able to cope with the trauma.



Find this article at: http://www2.tbo.com/content/2008/may/18/na-for-some-patients-replacement-hips-only-squeak-

A few months back I retired at age 57. I figure since age sixteen I had only had a month or so not working at least part time. I rarely missed a day of work. I left over 400 hours of accumulated sick leave behind when I retired. It took me only a week to adjust to not working. I like to say I am "busy doing nothing". I was going to get digital cable and sign up for Netflix after I retired but I haven't, too many "pots on the stove". Looks like this will keep me busy until Spring so I can put off the fancy TV until next winter.I had a fairly good job with good pay but as the early retirement option approached it quit being "fun". If I needed to work it wasn't bad but, to answer the hypothetical question: I had won a million dollars would I quit the job? The answer is yes! That one million dollars would be enough to cover my situation, if for example, I woke out of a coma at age 57. First off, how important is work to your socialising? At work I saw a lot of people who have a lot of their social interaction involved with work. I called this "talking at people". I made a few friends at work but none became my "drinking buddies". I don't think I ever "sexaully harrassed" at work but being a white male there were "two strikes" against you so I avoided dating women from work. As you age the "marketplace" increasingly favors the single male (though "Hot Chick Friday" here does not encourage the process of dating women closer to my age.) . Many middle age women are still pretty "hot" including a lot of the single mothers whose children are now on their own. They raised their children on tight budgets so they can be very practical. Bridge health insurance is a tough one. I got the same coverage through work at only a token cost. If you have to get it market, it can be very expensive.In retirement, especially early retirement, money is very relavent. I paid off my mortgage on http://searshouse.com and all other debts a couple of years before early retirement. I had autopay on these through the work credit union. As these zeroed out I kept the very substantial payroll deduction in place so I was "paycheck poor" but saving a substantial amount the last few years of work. My goal now is to no longer accrue savings but not dip into the "nest egg". I have a solid "defined pension". I no longer pay union dues, SSI or medicare and am now in the lowest tax bracket. My monthly "take home" is around $500 per month more than before. This extra "take home" makes all the difference.As far as other income goes the pension is high enough so I will probably wait until age 66 for Social Security. I figure this will be for medical and other age related costs.As for other work I can pretty do anything I want in the private sector. I haven't really checked but I think I have under $5K left in the lowest tax backets so beyond that, with work on the books the government will get 40%. If I like the work it is worth it but otherwise not. I worked on things like paying off the mortgage so my housing costs are low.Retirement, especially early retirement is nice if you have the finances lined up. As my last boss said "Retirement is doing what you want to do."Oddly, my "internet activism" for lack of a better term has gone way down since retirement. I've done a lot of reading/research but not a lot of posting, even to my own websites. Perhaps it is a way to "let off steam" and my "stress" is way down.BTW: I was up in the northern burbs Wednesday. Mountain Crest Beer is $7.99 a flat/case. http://www.topvaluliquor.com/As they say at http://minhasbrewery.com/ "Damn good beer!". A benifit of retirement is that I could make my weekly trip to the Northern burbs from "south of the I-35W collapse on Wednesday. On Thursday snow was erroniously predicted.