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Today, four former CEOs of Fannie Mae and Freddie Mac testified before the on how their companies’ actions may have “contributed to the ongoing crisis.” Blaming Fannie, Freddie, the Community Reinvestment Act (CRA), and low-income people is one of conservatives’ favorite talking points. In September, Rep. Michele Bachmann (R-MN) touted an article criticizing the CRA for pushing “Fannie and Freddie to aggressively lend to minority communities.”
But as the Wonk Room’s Pat Garofalo points out, at the beginning of today’s hearing, Chairman Henry Waxman (D-CA) said that 400,000 documents amassed by the committee showed that the right-wing claim is nothing more than a conservative myth. Later in the hearing, Rep. Edolphus Towns (D-NY) asked the four CEOs whether poor people caused the current financial crisis. All said “no”:
- Richard Syron, former Freddie CEO: “I would think that it wasn’t mostly trying to do things for poor people.”
- Daniel Mudd, former Fannie CEO: “[W]hen the market goes down, it’s the folks who are the closest to the margin who — who get hurt first and longest every time.”
- Leland Brendsel, former Freddie CEO: “I cannot recall ever being forced to make — or to purchase a mortgage loan that I didn’t feel, as a matter of policy at Freddie Mac, was a good mortgage loan, a sound mortgage loan, and an attractive mortgage loan for the homebuyer or the owner of an apartment building.”
- Franklin Raines, former Fannie CEO: “I do not believe that poor people are the cause of the current financial crisis. … Most of the losses, as I read the record, have come on mortgages that were made to middle-class and upper-middle-class people, not to poor people.”
Congress passed the Community Reinvestment Act in 1977, requiring banks “to lend throughout the communities they serve.” In the 1990s, greater mortgage lending to lower-income households by CRA-coveed banks increased the homeownership rate for lower-income and minority families. As CAP scholar Tim Westrich has written, “The real culprits in the mortgage mess are non-bank mortgage companies — not covered by CRA — that originated the lion’s share of bad mortgages at the heart of the crisis. They made an estimated 50 percent of subprime loans in 2005.”
Numerous other scholars, including Nobel-winning economist Paul Krugman and Center for Economic and Policy Research co-director Dean Baker, have also explained that while Fannie and Freddie made many bad decisions, they weren’t primarily to blame for the financial crisis. At a hearing in September, former top government economic experts agreed that conservatives were pushing myths, rather than facts.
Source: Think Progress
Moscow, Russia (AHN) – Russian Prime Minister Vladimir Putin said Thursday Moscow has received positive signals from U.S. president-elect Barack Obama’s circle and his government can respond accordingly to improve Russia-U.S. relations.
In a televised question-and-answer meeting with Russian citizens in Moscow, Putin referred to the positive signals as the indications made by people close to Obama about two main issues that have strained relations between the two countries: the U.S. missile defense shield to be based in Poland and the Czech Republic and the NATO expansion in Europe
Citing the circle, Putin said the incoming president is considering re-evaluating the Bush administration’s plan to deploy anti-missile batteries in Europe near the Russia border.
Another positive signal, according to Putin, is Obama’s apparent position not to hurry in admitting Georgia and Ukraine into NATO.
“If these are not just words and translate into real actions, we will respond in kind and our American partners will immediately feel this,” Putin said, according to Agence France-Presse. “We hope very much there will be positive changes.”.
No v. 21 (Bloomberg) — President-Elect Barack Obama’s transition team is exploring a swift, prepackaged bankruptcy for automakers as a possible solution to the industry’s financial crisis, according to a person familiar with the matter.
A representative of Obama’s team has already contacted at least one bankruptcy-law firm to say that Daniel Tarullo, a professor at Georgetown University’s law school who heads Obama’s economic policy working group, would call to discuss the workings of a so-called prepack, according to this person.
U.S. lawmakers yesterday delayed until December a vote on whether to give General Motors Corp., Ford Motor Co. and Chrysler LLC a $25 billion bailout. GM today said it would idle production at four plants an extra week and return some corporate jets to conserve cash. Automakers could use a judge-supervised bankruptcy to reduce debt and reject expensive contracts.
“It creates the environment to deal with GM’s problems but limits government financial commitment,” said bankruptcy lawyer Mark Bane of Ropes & Gray in New York.
Bankruptcy is just one option being examined. Obama told CBS News’s “60 Minutes” on Nov. 16 that government aid to automakers might come in the form of a “bridge loan,” advanced if the industry could draw up plan to make itself “sustainable.” The president-elect earlier urged Congress to approve as much as $50 billion to save automakers, using the model of Chrysler’s bailout in 1979.
Tarullo referred questions on a prepack to the transition team press office. Team spokeswoman Stephanie Cutter said, “We have not put out anything specific for the auto industry except that something needs to be done immediately.”
GM, the largest U.S. automaker, said it might run out of cash as early as the end of the year and that the risk was even greater by mid-2009. GM Chief Executive Officer Rick Wagoner said this week GM would have to liquidate if it filed for bankruptcy.
The automaker probably has weeks rather than months left before it runs out of money unless it gets federal aid, Jerome York, an adviser to billionaire Kirk Kerkorian and a former GM board member, told Bloomberg Television yesterday.
In a prepackaged bankruptcy, an automaker would go into court with financing in hand after reaching agreement with lenders, workers and suppliers on what each would give up and on the business plan to be followed. The process might take six to 12 months, compared with two to five years if the automakers followed an ordinary Chapter 11 proceeding and worked out agreements under a judge’s supervision, Bane said.
Automakers would have to depend on government financing to restructure in bankruptcy court and probably couldn’t attract private loans until they were ready to emerge from the process, Bane said.
Officials of the three automakers told members of Congress this week that they had studied a pre-arranged bankruptcy, championed by Republican lawmakers such as Senator Bob Corker of Tennessee, before dismissing the idea as unworkable.
Mr Obama’s spokesman, Robert Gibbs, said yesterday that the plight of automakers was one of a number of issues discussed in a two-hour meeting with Mr Bush to discuss the transfer of power at a time of war and financial crisis. Other issues included housing, mortgage foreclosures, and, more generally, “the need to get the economy back on track”.
The parlous state of the American car industry was highlighted last Friday when General Motors – the biggest US car manufacturer – reported a $2.5 billion net loss for the third quarter, bringing its total losses to nearly $57 billion since the beginning of 2005.
Ford Motor Company’s $129 million quarterly loss, meanwhile, brought to nearly $24.5 billion the deficit it has run up since plunging into the red in 2006. The privately-held Chrysler LLC is also thought to be fast running out of cash – one reason, analysts believe, why its parent, Cerberus Capital Management, was so eager to sell Chrysler to General Motors.
The New York Times, citing unnamed people familiar with the discussion, said that Mr Obama went into his post-election meeting with Mr Bush primed to urge him to support emergency aid for the car industry.
The Bush Administration is reluctant to give carmakers access to the bailout fund, even though the Democrats say it could legally do so.
Linking the issue with the Colombia free trade deal could delay any move until after Mr Obama’s inauguration on January 20. US union leaders oppose the agreement because of numerous murders of trade unionists in Colombia at the hands of right-wing paramilitary squads closely linked to the Colombian armed forces.
President-elect holds a briefing laying out his transition plan and plans to resolve the financial crisis.
Obama to act swiftly on economy
Everyone knows that Obama would be dealt a stiff hand ~ if he were to become President.
Obama tells people what he thinks and in the direction he thinks we should go in. Look at the convention – when Obama accepted his party’s nomination – I think what many of detractors saw were the Greek columns – I barely noticed – because it was what he said that was important – he said it was not over – the Republican attack machine is going to come after him to try to win this election. Which is one of the reasons I built this blog, that and the appearance of Sarah Palin – who has either reached or is safely on her way back to Alaska:-}. When Obama became President-elect he said that there is a lot of work to do and it is going to take time. Obama’s a guy with some good ideas – and not only America but much of the world is with him – and once he becomes President – it would be difficult to understand why he wouldn’t work to get these things done. If you scroll down and listen to the speech that Obama made when he announced his candidacy for President – it sounds very similar to the speeches he used to end his campaign with — but more in his very first speech – he tells you what he is going to do once he is elected – after telling you the route by which he was going to get elected – and he got elected. The inaugurated is in January – and I am sure – a good day that will be. Most of all we trust him.
President-elect Barack Obama has begun an effort to tamp down what his aides fear are unusually high expectations among his supporters, and will remind Americans regularly throughout the transition that the nation’s challenges are substantial and will take time to address.
Visitors offered wishes to Barack Obama at a wall built Wednesday near the Lincoln Memorial.
Mr. Obama’s advisers said they were startled, if gratified, by the jubilation that greeted the news of Mr. Obama’s victory in much of the United States and abroad. But while the energy of his supporters could be a tremendous political asset as Mr. Obama works to enact his agenda after taking office in January, his aides said they were looking to temper hopes that he would be able to solve the nation’s problems or fully reverse Bush administration policies quickly and easily, especially given the prospect of a deep and long-lasting recession.
“We have talked about this,” said Robert Gibbs, a senior adviser to Mr. Obama. “It’s important that everybody understands that this is not going to happen overnight. There has to be a realistic expectation of what can happen and how quickly.”
Joel Benenson, Mr. Obama’s campaign pollster, said he thought that the public appreciated the problems that the president-elect was facing and would judge him against that backdrop.
“I don’t think they view him as a miracle worker who in two months is going to solve an economic crisis,” Mr. Benenson said. “It is a matter of being straightforward with people about what we are going to achieve and how fast it’s going to take.”
Mr. Obama will hit that theme at a news conference he is expected to hold over the coming days, and in most of his public appearances from here on out, aides said. They said they would discourage the traditional yardstick for measuring the accomplishments of a new president — the first 100 days. Mr. Obama told an interviewer toward the end of his campaign that it was more appropriate to talk about the first 1,000 days.
Mr. Obama’s advisers said that the tone of his victory speech on Tuesday night — sober and devoid of the arm-pumping that would typically be in an address of that sort — reflected his awareness of these circumstances. Mr. Obama warned that the promises that led Americans to embrace his candidacy — be they as specific as expanding health care or as broad as changing the tone of Washington — might take as long a term to carry out.
The caution reflected the inevitable perils of taking control of the White House at such a difficult time, particularly after a campaign that stirred so much hope among voters. The economic crisis will certainly complicate Mr. Obama’s more ambitious domestic efforts like broadening health care coverage and cutting taxes for most Americans. His call for a change in the tone in Washington would require a sharp shift in history. Even with substantial Democratic majorities in the Senate and the House, passing major legislation could still be time-consuming for Mr. Obama and require compromises.
Mr. Gibbs said one of the main challenges for Mr. Obama was tamping down expectations a bit without making anyone think he was moving away from the promises of his campaign.
“The flip side of this — and I want to make sure this is also clear — we also believe that it is paramount to begin doing everything we said we would do in the campaign,” Mr. Gibbs said. “We know expectations are high. But disappointment if we didn’t try to do the things that we said we were going to do would be far, far greater than anything else. People went to the polls and elected Barack Obama because they believed the fact not only that he could do what he said, but that he would try to do what he said.”
The challenge facing Mr. Obama today is similar to one that faced Bill Clinton in 1992, the last time a president arrived in Washington with anything approaching the level of excitement Mr. Obama’s election set off around the country.
As Election Day approached in 1992, it was apparent from the crowds that Mr. Clinton drew, in their size and their faces, that his supporters expected big things after a campaign in which Mr. Clinton had promised a dramatic revamping in health care coverage and programs for the poor. At the time, a senior adviser who was traveling with him, Paul Begala, warned Mr. Clinton to add some caveats to his speeches, to avoid voter letdown should it take time to accomplish things as president.
“I remember talking about this to him in the closing days of the campaign,” Mr. Begala said. “And he started saying, ‘We didn’t get into this overnight and we’re not going to get out of it overnight.’ ”
“So I remember him talking about it and doing it — and it didn’t have any effect on the citizens,” Mr. Begala said. That was one reason, he said, that Democrats lost control of Congress two years later.
A nearly 500-point drop in the Dow Jones Industrial Average on Wednesday was a reminder that Mr. Obama’s election did not bring the financial crisis to a close, and that the economic downturn could limit his ability to pursue his full agenda right off the bat by demanding an immediate focus on trying to pull the nation out of recession. And, even if Americans are ready to bear with Mr. Obama as he pursues policy proposals, they may not as readily accept the sort of compromise that legislative accomplishment often requires.
With the Democrats falling short of a filibuster-proof 60-seat majority in the Senate on Tuesday, his agenda will probably require some modicum of horse trading for Republican support. Further complicating the picture, Mr. Obama’s winning coalition includes new voters who will be watching him closely but may not have patience for the deliberative give and take that accomplishment in Washington often demands.
“He’s got to lower some expectations, indicate the limits he’s confronting,” said Leon Panetta, a former chief of staff to Mr. Clinton. “He’s got a story to tell about how he’s confronting the worst crisis that any president has faced in modern history, and I think he can make clear that he’s going to try to deal with these problems one at a time.”
How to rack up debt seems to be the first lesson many American college kids learn these days. In Bloomington, the staff at the famed Mother Bear Pizzeria consists of mostly Indiana University students working their way through school. Catching the rare free moment between orders, workers explained the stress they are feeling in these rocky economic times. The recent credit crunch at the banks and the chaos on Wall Street has already added to their worries – undercutting family credit records, draining stock funds, and causing some students to question what their future will hold.
People all across the country are suffering the fallout from Wall Street’s financial H-Bomb. ANP producer David Murdock and McClatchy Newspaper journalist Tony Pugh have set out on a journey across America to see how economic shock waves from last week’s DC drama are being felt across the land. Their road trip begins in the well-heeled town of Greenwich, Connecticut, where mountains of Wall Street money have created a community seemingly isolated from the tribulations of the common man, but even here, some cracks are beginning to show and those who depend on the rich are beginning to feel the pain.
For the most part, Asian banks have remained unscathed and economies relatively robust compared with other parts of the world. But tumbling Asian stock markets, marked on Monday by near-panic selling, is signaling just how little confidence there is among bankers and investors that the $700 billion bailout of U.S. banks will end the financial crisis.
Instead, worries are growing that a severe economic downturn in the U.S. and Europe could hurt export-driven Asian economies more than originally thought. Turmoil in Europe as governments scramble to cobble together their own bailout packages has convinced Asia that the contagion will spread far from Wall Street. “We felt pretty good that our economies are stronger,” says Song Seng Wun, an economist at CIMB-GK Research in Singapore. “Problems seemed to be other people’s problems.” But recent events “have made us realize that we aren’t entirely safe. It looks like the problem might be closer to home.”
That’s because credit markets, which affect the ability of businesses and governments to borrow to fund day-to-day operations, continue to tighten in Asia as banks become more nervous about lending. In Hong Kong, the one-month interbank lending rate has doubled in the past month to 4%. Central banks are trying to pump liquidity into financial markets to avert a credit crunch. India on Monday cut the amount of cash that banks must deposit with the central bank in an attempt to loosen credit. “Credit markets are quite global,” says Kirby Daley, senior strategist at financial services firm Newedge Group in Hong Kong. “It is inescapable, if the credit crisis continues to worsen, that Asia must be affected.”
Oct. 3 (Bloomberg) — The U.S. lost the most jobs in five years in September and earnings rose less than forecast as the credit crisis deepened the economic slowdown.
Payrolls fell by 159,000, more than anticipated, after a 73,000 decline in August, the Labor Department said today in Washington. The jobless rate, the last one reported before the presidential election, remained at 6.1 percent. Hours worked reached the lowest level since records began in 1964.
The world’s largest economy may be headed for bigger job losses as the worst financial meltdown since the Great Depression causes consumers and companies to retrench. A sinking labor market and rising borrowing costs raise the odds Federal Reserve policy makers will cut interest rates by their Oct. 29 meeting.
“The financial panic is a body blow to business confidence, and companies are now battening down the hatches,” Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “We’re in store for very sizable job losses across many industries. A rate cut by the Fed could come before the next meeting.”
Revisions added 4,000 to payroll figures previously reported for August and July. The Labor Department said it was “unlikely” that Hurricane Ike, which struck the Gulf Coast last month, “had substantial effects” on payrolls figures.
After today, the total decline in payrolls so far this year has reached 760,000. The economy created 1.1 million jobs in 2007. [...]
The jobless rate is up 1.4 percentage points from September 2007. Since World War II, the rate has risen only twice during similar periods before presidential elections. In both cases — when Bill Clinton defeated George H. W. Bush in 1992 and when Ronald Reagan beat Jimmy Carter in 1980 — the incumbent party lost the election.
Americans will go to the polls on Nov. 4 and the October jobs report is due Nov. 7.
“Voters are extremely angry, and they want someone to blame,” said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis.
Democratic presidential nominee Barack Obama has opened up a lead over Republican rival John McCain in the aftermath of their first debate and amid growing concerns about the economy, according to a Pew Research Center survey taken Sept. 27 to Sept. 29. A mid-September poll from Washington-based Pew had shown the candidates were in a statistical dead heat.
Earlier in September, a Bloomberg/Los Angeles Times poll showed more respondents said Obama would do a better job handling the financial crisis than McCain, and almost half of the voters believed he had better ideas to strengthen the economy than his rival.
We just followed McCain down the steps following the vote to ask him about the reaction of House Republicans to the vote.
He didn’t appreciate the company.
McCain: “Excuse me, you’re bothering me.”
Politico: “I’m bothering you?”
McCain: “Excuse me, I have to go.”
John McCain celebrated his own role in the final federal government bailout package Monday on stage in front of several hundred Ohioans gathered for a campaign rally.
“I believe that inaction was not an option,” the Republican presidential candidate said. “I put my campaign on hold for a couple of days last week.” To applause, he continued: “I know that many of you have noticed it’s not my style to simply phone it in.”
That sentiment — not “phoning it in” was the campaign line throughout the weekend. On Friday at the first presidential debate, close McCain confidante Sen. Lindsey Graham praised McCain’s return to Washington. “This is one you just can’t phone in,” he said.
A McCain spokeswoman on the plane ride to Mississippi expressed the same. “Meeting face-to-face with people is always more effective than phoning it in,” she said.
And yet, the Arizona senator spent a lot of time on the phone. At the end of last week and over the entire weekend in Washington, he made lots of phone calls, many from his Northern Virginia condo, across the Potomac River from Capitol Hill.
Let’s rewind the clock and start at the beginning. Last Thursday, McCain returned to Washington and headed straight for Capitol Hill. After a few meetings there, he went to one at the White House and then retired to his condo by 6:30 p.m. to make phone calls.Friday morning, McCain traveled to Capitol Hill for less than two hours then flew to Mississippi for the first presidential debate. He rushed back to Northern Virginia after the debate, getting in well after midnight, but never went to Capitol Hill once during the weekend. Instead, he made phone calls from both his residence and his Arlington, Va., campaign headquarters.
On Saturday, McCain called a slew of top players, including President George W. Bush, Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke. He also called three senators (Mitch McConnell of Kentucky, Judd Gregg of New Hampshire and Jon Kyl or Arizona) and 10 Republican House members including Minority Leader John Boehner of Ohio.
McCain was spotted several times making the less-than-one-minute drive between his headquarters and his residence — on his cellphone.
Asked why he wasn’t making the trek to the Hill, McCain senior adviser Mark Salter responded: “Because he can effectively do what he needs to do by phone,” and added, “He’s calling members on both sides, talking to people in the administration, helping out as he can.”
On Sunday, during an appearance on ABC-TV’s “This Week,” McCain again said he wasn’t just “phoning” it in. “I did the best that I could,” he said of his work on the package. “I came back because I wasn’t going to phone it in.”
On Monday, he went so far as to slam his opponent, Democratic contender Barack Obama, for not doing enough. “That’s not leadership, that’s watching from the sidelines,” he said of Obama. “And watching from the sidelines is exactly what got us into this mess.”
McCain also defended the criticism coming at him. “You know remarkably some people have criticized my decision to put my country first,” he said. “But I’ll never be a president who sits on the sidelines when this country faces a crisis. I’ll never do that.”