Like it or not - Wall and Main Street Are Connected!

President Bush has basically one goal in terms of domestic policy - stop the financial bleeding, apply a tourniquet and unfreeze our financial system. I am not sure he is even thinking about helping elect McCain and the McCain people have certainly relegated GW's participation to one that is less than visible.

Pelosi and Reid, as always, are driven by a desire to increase their ranks in Congress and now get Obama elected. They have said as much and I take them at their word. Their actions suggest nothing otherwise and speak even louder than their words.

McCain has a burning desire to get elected but I am not sure he has gone about it in the most propitious way to accomplish his goal - partly because of circumstances beyond his control and partly because of things he has done or failed to do. There is no love lost between himself and GW either.

Obama , like McCain has a burning desire to get elected as well and the odds have increased a bit that he will but there is still a lot of time for current patterns to reverse. Obama has not demonstrated any brilliance during the recent financial catharsis that has gripped the nation but I am not sure anyone has an answer or solution. He has, however, tried to score points during his recent post first debate campaign appearances and to the extent that he is a politician seeking a political office that is as one should expect. However, to the extent that much of his rhetoric does not have the ring of truth and goes against the grain of his previous commitment to run a "change" campaign all you can say is why be surprised and if Obama can get away with it so be it.

Half truths are fodder that politicians live off and it is up to a discerning public to decipher and distill. We will find out about that in November.

President Bush did not encourage financial institutions to make bad loans, nor did he incite people to buy homes to flip. Neither did he tell Greenspan to provide cheap money to feed the public's appetite for spending beyond their means. He did engage us in a costly war, he did not stand up to a "porky Congress" inhabited by habitual spenders. GW will surely be blamed for everything because it happened on his watch.

The fact that he inherited a nation burdened by debt his administration did not create, a Social Security System soon to be in deficit and a health system gone wild will be forgotten but he will be blamed for tax relief for the "rich", which actually produced enormous revenues, which Congress (both Democrats and Republicans) spent like water. That is the way the cookie crumbles and that will be a large part of his legacy. (This prescient article was sent to me by a fellow memo reader and appeared in the New York Times, nine years ago. See 1 below.)

When an overweight patient who has smoked, eaten nothing nutricous nor exercised dies in the dentist chair the dentist is blamed. "Fair and Balanced" may be an expression of The Fox Nightly News but that is neither the way it shakes out in the real world nor is that the way partisans will spin it. We love to find blame and pin tails on victims because it gives us comfort and passes the buck over to someone else. Honest and objective reasoning is not a treasured characteristic. Sound bites and garbage has become the fare of the day

In the final analysis though, it is "We The People" who have the ability to change the direction of our country and the best way to do that is how we conduct and educate ourselves and by whom we elect to Congress, not so much the White House. The President is there for 8 years, at best, and Congress persons can be there, and generally are, for much longer terms. This gives Congress a decided advantage except when the president is capable of leading the nation through the bully pulpit and has the guts to protect the Oval Office's Constitutional independence. Reagan and Clinton had the verbal skills, GW does not.

Perhaps Obama will be able to do so because he is a master at empty phraseology. Certainly McCain lacks that soaring but questionable gift. Placing our nation's future in the hands of Pelosi and Reid and then turning the Presidency over to a Democrat President, who like Clinton is Socialistically minded, is a bit unsettling but we have survived worse I guess. (I am reminded of The Fairness Doctrine , The Housing Regulatory Enterprise Act of 2005 among others. See 2 below.)

As for McCain, should he be elected, he will probably be politically blocked in his every move so I suspect any accomplishments will be determined by what Pelosi and Reid choose not to oppose. Compromising with the devil, for the sake of progress, is not the kind I would necessarily favor.

Frankly, I do not understand why anyone would want to be president but we have many who do and eventually we sort it out to two and some lesser mortals. The next four years will prove very interesting regardless of who occupies the Oval Office because they will have to deal with two emerging powers - Russia and China -, renegade Islamic nations, like Iran and Syria, seeking nuclear capability, a N Korea regime that has proven it can break its word and suffer no more than their people already are, a basket case of morality called Europe, a feckless U.N. and a domestic financial structure that is in an ICU on life support. (See 3 and 3a below.)

It might make for dramatic political rhetoric but any politician that does not understand there is a connection between Main Street and Wall Street, does not understand our capitalistic society. Wall Street and Main Street are intertwined for those who do understand how our economy works unless they are more interested in spreading the manure of populist babble. (Again I repeat learn about The Fairness Doctrine , The Housing Regulatory Enterprise Act of 2005 among others. See 2 below.)

We are a resilient nation, we have many strengths and when we are effectively led and act united we can solve most anything. I do not see that in our picture for the foreseeable and that is very sad. (To understand why plug in http://www.youtube.com:8/TheMouthPeace)


Dick

1) September 30, 1999 -Fannie Mae Eases Credit To Aid Mortgage Lending
By 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.

2) The Financial Mess: How We Got Here
By Professor Abraham H. Miller

"How can you vote Republican when they so messed up the economy?" a liberal friend screams at me with such vehemence that I had to put the phone a full arms length from my ear. Of course, my friend never heard of the Community Reinvestment Act. He is one of those mindless liberals who thinks that George Bush and the Republicans are responsible for everything from Global Warming to Hurricane Katrina to the attempted genocide of the entire black population of New Orleans.

He claims to be informed but he doesn't remember those dire warnings going back nine years ago that the Community Reinvestment Act would eventually cause a major financial and banking crisis in this country.

The Community Reinvestment Act was pushed hard by Bill Clinton, although it originated under Jimmy Carter. Asked about it the other day on one of the morning TV talk shows, Clinton said times back then were different. Fannie and Freddie had lots of money and he (in his infinite wisdom) decided that the money should not go to share holders or to executive compensation, but should be used to put the poor into homes.

As you can imagine, wonderful things happen when the government strong arms corporations as to how they should spend their money and, better yet, how they should assess the qualifications of home buyers. So the country's biggest buyers of mortgages were pressured into lowering the qualifications of applicants, in order to increase the percentage of poor that got mortgages. By 2006, 30% of all mortgages went to people who in any other circumstances wouldn't qualify.

Now the political left would like you to know that the CRA-controlled institutions did not lend the largest percentage of sub-prime mortgages. But that's information by deception, because the mortgage business is a competitive business. If the government strong arms one part of the business, the other part will respond. And strong arm was what the Clinton administration did, even using the Office of the Comptroller of the Currency to pressure banks to lend more money to the disadvantaged. Caught in the act, a spokesman for the office noted that its abuse of power was "for the best of intentions:" the same inclination used to pave the road to hell.

In the short run, all sorts of money was to be made by lowering standards and processing sub-prime loans for the poor. The Wall Street Journal raised concerns about Fannie's and Freddie's capital requirements. Senator Phil Gramm (R, TX) raised issues about community pressure groups, such as Barack Obama's ACORN, extorting money from banks by holding their feet to the CRA fire, and threatening to militate against mergers and acquisitions unless the banks entered into preferential agreements with community groups.

The Gramm-Leach-Bliley Act cut down on CRA reporting requirements and upped the ante for groups such as ACORN, forcing them to disclose their relationships with local banks.

Fannie and Freddie became big contributors to the Democratic Party. The sub-prime business paid off-at least while the bubble was growing. And the Kerry, Hillary and Obama campaigns have numbered among the leading recipients of the largess of the two mortgage lenders.

Franklin Raines, the Fannie Mae C.E.O. from 1999 to 2004, had been budget director in the Clinton administration. The left would not like you to be reminded that Raines has been a consultant to the Obama campaign, according to the Washington Post, and that Freddie and Fannie number among the top 5 contributors to Obama's run for the presidency. Raines is being sued for the recovery of 50 million in compensation acquired by the alleged manipulation of Fannie's books. Now, that's not change we can believe in. That's Washington as we have come to know and "love" it.

The Bush administration in 2003 tried to change the system, to no avail. Congressman Barney Frank, (D, MA ) was in the forefront of stopping the Bush proposal to take control out of Fannie and Freddie and put it into a third overseeing organization. Frank too has emerged in the current crisis as one of the major critics of the administration.

Former Federal Reserve Chairman Alan Greenspan continued to raise the alarm over Fannie's and Freddie's weak capitalization. His concerns were ignored.

Former Congressman Michael Oxley (R,OH), then chairman of the House Financial Services Committee and co-author of the Sarbanes-Oxley Act, introduced a bill in 2005 in response to the growing problem, but Fannie and Freddie put their lobbyists to work and the bill died.

Democratic Senator Chris Dodd, who is now Chairman of the Banking Committee and who appears along side Majority Leader Harry Reid on television to discuss the current bailout negotiations, has had harsh words for the Bush administration for its alleged role in the crisis.

But the rest of us should have some harsh words for Senator Dodd. After all, the Bush administration in 2003 and Senator Phil Gramm even earlier, in 1999, had been working to change the system. Dodd, like Obama, has been a big recipient of campaign funds from Fannie and Freddie, organizations that Dodd oversees. Dodd has apparently been more consumed with campaign contributions from the mortgage giants than the responsibilities of oversight.

When I point out the long trail of Obama's corruption stretching back to his days in the Illinois legislature, my liberal friends invoke moral equivalence, "They're all corrupt."

There is no shame among the left. When they think Bush is responsible for the collapse of the banking system, they scream at you. When you point out that the Community Reinvestment Act created a pattern of abuse that now threatens the entire financial system, without hesitation liberals say, "They're all corrupt."

The Federal Deposit Insurance Corporation even has a web site so you could see how well your bank is meeting its obligations under the CRA. Those of you who had money in Washington Mutual, which just went belly up, will be happy to know that WaMu, over the five individual reporting periods, had almost exemplary ratings on its commitment to CRA. That should give WaMu depositors great joy, to compensate for the financial mess they may be in. If WaMu had been less responsive to the CRA and more responsive to the market, maybe it wouldn't be insolvent.

I am not suggesting that the CRA by itself led to the current crisis, but the CRA was the first and most important part of the food chain. The CRA caused the expansion in the number of questionable loans that lending institutions made, but Wall Street and insurance underwriters were all to willing to package these loans, enhance their ratings through convenient exercises in fantasy, sell them, and insure them with reserves that were more inadequate than the incomes of the people who got the loans in the first place..

The best thing that can emerge from the current financial crisis is the realization that the government needs to stop directing economic decision making. In a sense, the government is putting out a fire it started when it both created the CRA and assessed lending institutions by how well they were doing in response to the program. When Clinton decided, in his usual arrogance, that he knew better than the market how banks should lend money, the seeds were sown for the current financial disaster.

If you want to blame Bush for the current crisis, it might make you feel good, reinforce your sense of how the world works, enable you to find a meeting of the minds when you next engage your liberal friends over wine and quiche, but like so many things you believe and which make you feel good, it has no correspondence to reality.

3) Teheran: Enrichment will continue


Iran said Monday it will continue its disputed uranium enrichment activity despite a new UN resolution seeking suspension of the process.
Ahmadinejad tours the Natanz...



Iran's foreign ministry spokesman Hasan Qashqavi said in his weekly briefing that enriching uranium was Iran's "right" and that it intended to continue to do so.

He describes as "beyond the law" demands for the suspension of Iran's uranium enrichment.

The US and Russia on Friday sponsored a new UN resolution reaffirming three previous resolutions that imposed sanctions on Iran for refusing to halt its uranium enrichment program.

The US and several European nations say Teheran wants to build nuclear weapons. Iran denies the accusation.

Meanwhile, in a farewell interview with Yediot Aharonot published Monday, Prime Minister Ehud Olmert said talk of a unilateral Israeli strike on Iran was "part of our delusions of grandeur."

Iran was the world's problem, not just Israel's, he said.

"The thought that if America, Russia, China, Britain and Germany cannot deal with the Iranians we Israelis can ... is an example of a loss of perspective," added the outgoing prime minister.

3a) ElBaradei urges Iran to end secrecy



A six-year probe has not ruled out the possibility that Iran may be running clandestine nuclear programs, the chief UN nuclear inspector said Monday, urging Iran to reassure the world by ending its secretive ways.
Director General of the...



Europe also urged Teheran to fully cooperate with a UN probe that is trying to assess all of its past and present nuclear activities. An EU statement on the opening session Monday at the International Atomic Energy Agency's 145-nation conference declared: "The international community cannot accept the prospect of Iran acquiring nuclear weapons."

Iran, along with ally Syria, figures directly at the Vienna conference because they are among four nations seeking their geographic region's nomination for a seat on the IAEA's decision-making 35-nation board.

Iran's bid is strategic. Teheran is running to counteract a US push to have Afghanistan or Kazakhstan elected over Syria, which is under IAEA investigation for allegedly hiding a secret nuclear program, including a nearly completed plutonium producing reactor destroyed last year by Israel.
RELATED

* Teheran: Enrichment will continue

If the regional group does not agree on a candidate, the conference will be asked to vote on which nation should take the board seat.

In his opening speech, chief UN nuclear inspector Mohamed ElBaradei, the head of the IAEA, focused on Iran's refusal to suspend its uranium enrichment program and alleged past plans to develop the bomb.

The UN Security Council approved a resolution Saturday critical of Teheran's defiance on uranium enrichment, which can create both nuclear fuel and the fissile core of warheads.

Urging Iran to "implement all transparency measures ... required to build confidence in the exclusively peaceful nature of its nuclear program," ElBaradei declared: "This will be good for Iran, good for the Middle East region and good for the world."

He also warned the session that his organization is increasingly stretched in trying to carry out responsibilities that include nonproliferation and preventing terrorists from acquiring the bomb.

"All is not well with the IAEA," ElBaradei declared, appealing for greater financial support and more authority for his agency.

The annual meeting allows the agency's member countries to set policies that range from strengthening nonproliferation to carrying out medical and scientific research. But tensions between Islamic members and the West threaten to hamper decision-making at this session.

The tradition of consensus has normally led all sides to bridge sometimes substantial differences and opt for compromise for most of the conference's 52-year history. A vote on any topic is unusual and considered a huge dent in the meeting's credibility.

But frustration among Muslim countries over Israel's refusal to put its nuclear program under international purview, and resistance from Israel to Muslim pressure on the issue, threatens to force a vote for the third year running.

As in the past two years, Muslim IAEA members were expected to put forward a resolution urging all Middle East nations to refrain from testing or developing nuclear arms and urging nuclear weapons states "to refrain from any action" hindering a Middle East nuclear-free zone.

After losing the vote two consecutive years, Islamic nations are threatening to up the ante this year, warning they will call for a ballot on every item, no matter how uncontroversial, unless they get conference backing on the Israeli nuclear issue.

Arab members - backed by Iran - this year have again asked conference organizers to include an item on Israel - a move being protested by Israel.

Focusing on Israel by name "is substantially unwarranted and flawed," said a letter prepared for review by the conference from Israel Michaeli, the Israel's IAEA representative.

Sponsors of the item should instead "address the most pressing proliferation concerns in the Middle East," the letter said, an allusion to Iran's defiance of UN Security Council sanctions for refusal to stop uranium enrichment.

A draft of the document made available to The Associated Press "expresses concern about the Israeli nuclear capabilities" and urges Israel to throw its atomic activities open to full IAEA view.

Dozens of nuclear organizations are using the meeting to stage events of their own. One of them, the Washington-based Nuclear Threat Initiative, launched a new organization, the World Institute for Nuclear Security, which aims to prevent terrorists from getting the bomb by providing a forum for nuclear specialists.