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New Documents Show Government Misled Public on Fannie/Freddie Takeover Print
Thursday, 27 July 2017 08:43

Taibbi writes: "In August 2012, a few months before Barack Obama told Mitt Romney the Eighties had called and wanted their foreign policy back, the U.S. government made a momentous and little-discussed decision."

A For Sale sign in front of a house. (photo: Bloomberg News)
A For Sale sign in front of a house. (photo: Bloomberg News)


New Documents Show Government Misled Public on Fannie/Freddie Takeover

By Matt Taibbi, Rolling Stone

27 July 17


Following Tuesday's successful Senate vote, at least several days of drama lie ahead

n August 2012, a few months before Barack Obama told Mitt Romney the Eighties had called and wanted their foreign policy back, the U.S. government made a momentous and little-discussed decision. It unilaterally changed the terms of the bailout of Fannie Mae and Freddie Mac, seizing all of the companies' profits.

The government originally insisted on a 10 percent annual dividend in exchange for what ultimately became a $187 billion rescue. In 2012, the government quietly changed that 10 percent deal to one in which the state simply seized all profits. Government regulators euphemistically described this as "fully capturing financial benefits." The press paid almost no attention to this event.

"New Bailout Terms for Fannie, Freddie," wrote the Washington Post, in a page-8 yawner. "Treasury Pinches Fannie and Freddie," sighed the Philadelphia Inquirer, in 439 words on page 7.

This was not, however, an inside-pages news story. It was one of the most important decisions of the bailout era.

Also known as the government-sponsored entities, or GSEs, Fannie Mae and Freddie Mac were two of the biggest companies on earth, and held about $5 trillion in mortgage debt.

They had gone bust during the crash years for a variety of reasons, mostly due to incompetent and corrupt management. But by the summer of 2012, with the real estate market in recovery, the companies weren't bust anymore. On the contrary, they were about to start making money again – enormous piles of it, in fact.

The government has always insisted it didn't know this. Not just in the summer of 2012 but numerous times since, officials have insisted that they needed 100 percent of Fannie and Freddie's profits because they wanted to protect taxpayers from likely future losses, and because Fannie and Freddie would otherwise be unable to pay back what they owed.

Mario Ugoletti, a special adviser to the director of the federal housing agency, said in 2013 of the companies' debts that it was "unlikely that [Fannie and Freddie] would be able to meet that amount consistently without drawing additional funds from Treasury."

But documents just released in a court case show that the government privately believed just the opposite before it made its historic decision to "sweep" the GSE revenues.

One key document is a memo from Mary Miller, assistant Treasury secretary for the financial markets, to then-Treasury Secretary Tim Geithner. Dated December 11th, 2011, Miller writes to Geithner that "Freddie is expected to be net income positive by the end of 2012, and Fannie by the end of 2013."

In another memo, circulated through the agencies, analysts concluded that the government would end up getting more through the "revenue sweep" than it would through "if the 10% [dividend] was still in effect."

The only reason this story is hitting the headlines at all this week is because the government's 2012 decision triggered an all-out pitched battle between two investor groups. Those who bet on Fannie and Freddie's revival were wiped out by the government's 2012 decision, while those who shorted the firms have made fortunes.

The documents that came out this week were released in a lawsuit brought by Fannie and Freddie shareholders who believe that the government stole billions of dollars in profits from them.

The ordinary American is not likely to care much about the outcome of that case, unless the general principle of the government unilaterally seizing the profits of private companies strikes him as bothersome.

But this story has vast implications beyond a fight over investment returns.

Lurking underneath the scandal derisively termed "Fanniegate" is a monstrous struggle for future profits. The fight here is not just about the profits generated by the GSEs, but what to do about them generally. Finance lobbyists have successfully forged a bipartisan consensus that the companies need to be privatized. Essentially, Wall Street wants to step into the shoes of Fannie and Freddie.

In most versions of GSE reform currently winding their way through Congress, the same too-big-to-fail banks that blew up the mortgage markets in 2008 would assume most of the responsibilities of Fannie and Freddie. Crucially, securitized mortgages would continue to enjoy government backing under many of these proposals.

Privatized profits, socialized losses. Who doesn't love that formula?

It would be the ultimate triumph for Wall Street, and the ultimate shocker ending to the crash era. After nearly blowing up the planet with a mortgage bubble and getting bailed out by taxpayers, banks would now be handed control of the real estate markets and granted permission to reap massive profits trading government-backed mortgages until the end of time.

Even worse: legislative concepts like Corker-Warner and Crapo-Johnson would not just privatize Fannie and Freddie, but eliminate the affordable housing component of their original missions.

The GSEs are essentially huge piles of money that buy mortgages. They do this ostensibly in service of a utility-like function to keep the real estate markets liquid. Part of their mission has always been to invest in low- and middle-income mortgages, to give the private sector an incentive to create and lend to those who need affordable housing.

That mandate is likely to disappear once the reform is finished. "Access to affordable housing for millions of people is at stake," says John Taylor of the National Community Reinvestment Council. "Even a lot of Democrats seem unaware of this."

It should be noted that despite legends to the contrary, Fannie and Freddie's affordable housing mission did not cause the 2008 crash.

In fact, the Financial Crisis Inquiry Commission concluded that delinquency rates for GSE loans were "substantially lower" than those of the private banks and mortgage companies that were lending subprime loans to anyone with a pulse during that era.

The crash was caused by greed, not social policy. The problem was that banks were using derivative tricks to successfully disguise toxic subprime loans as good investments. All that housing credit was available because it was profitable for banks to offer it, not because they were forced by Fannie/Freddie or anyone else to lend it.

But probably because Fannie and Freddie were so unpopular after the crash – deservedly, in part, because of numerous scandals involving its executives – the companies were treated very differently than other bailout recipients.

While other Wall Street firms that needed taxpayer or Fed rescues were allowed to quickly repay their debts and get out from under additional restrictions, Fannie and Freddie were specifically barred from ever repaying their obligations.

By 2015, the GSEs had paid $228 billion to the government, or $41 billion more than the $187 billion bailout. This prompted a letter from Sen. Chuck Grassley asking why the companies had not been released from debt.

The Treasury Department answered, in essence, that the bailout had not been a loan, but an "ongoing financial commitment."

This was not a debt that could be paid back. Like a restaurant owner who accepts protection from the mob, the GSEs were and are in an unseverable relationship.

As of today, Fannie and Freddie have paid $130 billion to the government above and beyond its original rescue, at least according to some calculations. The ongoing seizure of such gigantic sums continues to be one of the weirder subplots of the post-crash era, and these newly released documents only add to the mystery.


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So Do We Know Where the Secretary of State Is? Print
Written by <a href="index.php?option=com_comprofiler&task=userProfile&user=11104"><span class="small">Charles Pierce, Esquire</span></a>   
Wednesday, 26 July 2017 13:27

Pierce writes: "The hell? The Secretary of State is 'taking a little time off,' and we don't know where, and the State Department spokesperson doesn't know if it counts as a vacation, but we should all ask the AP reporter if we want to know if the Secretary of State is on holiday on the company dime?"

Sec. of State, Rex Tillerson. (photo: Getty)
Sec. of State, Rex Tillerson. (photo: Getty)


So Do We Know Where the Secretary of State Is?

By Charles Pierce, Esquire

26 July 17

 

h, hell, why not one more little bit of weird-ass news on Tuesday, courtesy of Business Insider?

When asked about the discrepancies between Tillerson's public schedule and his reported movements, and why the department hadn't updated the press on his whereabouts, Nauert said Tillerson "does have the ability to go away for a few days on his own." "Just taking a little time off," Nauert said of Tillerson's unannounced absence. "He's got a lot of work. He just came back from that mega-trip overseas, as you all well know — many of you were over there with the G-20." Asked why she didn't just say Tillerson was on vacation, Nauert said she didn't know the standard protocol for listing private days. She said Matt Lee, a diplomacy writer for The Associated Press, would probably know.

The hell? The Secretary of State is "taking a little time off," and we don't know where, and the State Department spokesperson doesn't know if it counts as a vacation, but we should all ask the AP reporter if we want to know if the Secretary of State is on holiday on the company dime?

Secretaries of State don't normally "take a little time off" without notice. If this actually were Moscow in the old days, we'd be wondering why Tillerson didn't go to the opera tonight. There is nothing normal about these people. Nothing at all.


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Trump Just Kicked Transgender Troops out of the Military. This One Ugly Quote Says It All. Print
Wednesday, 26 July 2017 13:22

Sargent writes: "President Trump announced this morning that he will be banning transgender troops from serving in the military, and all indications are that this may also end up kicking out thousands of them who are already serving."

President Trump. (photo: PBS)
President Trump. (photo: PBS)


ALSO SEE: The Military Spends Five Times as Much on Viagra
as It Would on Transgender Troops’ Medical Care

Trump Just Kicked Transgender Troops out of the Military. This One Ugly Quote Says It All.

By Greg Sargent, The Washington Post

26 July 17

 

resident Trump announced this morning that he will be banning transgender troops from serving in the military, and all indications are that this may also end up kicking out thousands of them who are already serving. The Post reports:

President Trump said he will ban transgender people from serving in the military in any capacity, a reversal of the Obama administration decision that would have allowed transgender recruits to serve, he announced on social media on Wednesday.

Citing the need to focus on victory, Trump said that the military cannot accept the burden of higher medical costs and “disruption” that transgender troops would require.

“After consultation with my Generals and military experts, please be advised that the United States Government will not accept or allow transgender individuals to serve in any capacity in the U.S. Military,” Trump wrote on Twitter. “Our military must be focused on decisive and overwhelming victory and cannot be burdened with the tremendous medical costs and disruption that transgender in the military would entail.”

According to a recent RAND Corp. study, around 4,000 transgender people currently serve in the U.S. military. They would presumably be expelled. Gay rights advocates are already threatening legal action against the move. As The Post notes, a bipartisan majority in the House (24 Republicans and 190 Democrats) recently rejected a measure that would have “blocked the Pentagon from offering gender transition therapies to active duty service members,” but this has remained a “pet cause” for conservatives.

Defense Secretary Jim Mattis was supposed to be examining whether to continue former president Barack Obama’s policy of allowing transgender service, and Mattis’s review was due in December. It’s unclear whether Trump simply steamrolled this process to rush forth his ban.

There will be plenty of time to debate the legal and substantive merits of the policy. But for now, I wanted to focus on the politics of it. Here is how one administration official justified the move in a quote given to Axios’s Jonathan Swan:

This forces Democrats in Rust Belt states like Ohio, Michigan, and Wisconsin to take complete ownership of this issue. How will blue collar voters in these states respond when senators up for reelection in 2018 like Debbie Stabenow are forced to make their opposition to this a key plank of their campaigns?

In emails to me this morning, top Democrats flatly rejected the notion that they need to fear the politics of this debate. Guy Cecil, the head of Priorities USA, the Super PAC that is staking out a central role in opposing Trump for Democrats, told me:

The comments only serve to reveal how morally repugnant this administration really is by playing politics with our country’s defenses and attacking fellow Americans who honorably serve to protect our freedom. It also reveals a fundamental misunderstanding of how Senate campaigns work. If this is their approach, than 2018 will definitely be a banner year for Democrats.

Meredith Kelly, a spokesperson for the Democratic Congressional Campaign Committee, emailed me:

President Trump’s attack on Americans who want to step up and make incredible sacrifice to serve our country is disgusting, and it’s made worse by the political calculation behind it. Every Republican should speak out against it. President Trump is a draft dodger and if he wants to talk about 2018, we’ve got dozens of veteran candidates who have already shown what it looks like to step up and serve our country to keep us safe, and are ready to do it again in Congress.

Swan, the reporter who floated that administration official’s quote, subsequently tweeted that it did not represent the full range of views in the White House. If so, that’s good to hear, and let’s hope that administration officials clarify this. But in a certain sense, the quote does neatly capture a larger, important truth about how Trump and his administration have sought to appeal to his voters: There is much more of a culture-war dimension to their communications and political strategy than is commonly acknowledged.

The culture war is back

It is often claimed that Trump won his voters — particularly in the Rust Belt — with a “populist economic nationalism” that appealed to their economic anxieties and their dissatisfaction with elites who have shafted them on issues such as trade and immigration. But on multiple issues — from health care to taxes — Trump has governed like much more of an orthodox, plutocrat-friendly Republican — a Paul Ryanesque limited-government conservative — than he signaled he would, supporting fiscal policies that would dramatically roll back the safety net and Wall Street regulations while massively cutting taxes for the rich and corporations. Pretty much all that remains of Trump’s populist economic nationalism is the mass deportations, the travel ban, and the vow to defend coal and manufacturing jobs from pointy-headed elitist regulators both domestic and international.

Trump has promised to renegotiate our trade deals, but there’s no telling whether he will do so in a way that benefits workers. Meanwhile, another key element of his populist nationalism — the vow of massive infrastructure spending — is stalled, and may end up amounting to nothing. In a sense, the infrastructure issue also confirms the point: Recall that when top Trump adviser Stephen K. Bannon vowed huge infrastructure spending, he promised to get “shipyards” and “ironworks” all “jacked up.” As Jonathan Chait put it, there was no economic rationale for this; it reflected little more than “nostalgia for the manly work of an older generation.” The same goes for Trump’s vow to restore the glory of an old economic order based on coal and manufacturing, which is also suffused with far more cultural nostalgia than policy reality.

And now we’re told that Trump’s latest move on transgender troops is all about a culture-war-laden appeal to Rust Belt voters in advance of 2018.


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FOCUS: President Trump, Give Us the Full Story on the JFK Assassination Print
Wednesday, 26 July 2017 12:17

Excerpt: "Later this year - unless President Trump intervenes - the American people will get access to the last of thousands of secret government files about a turning point in the nation's history: the 1963 assassination of President John F. Kennedy."

President John F. Kennedy and first lady Jackie Kennedy in Washington on May 3, 1961. (photo: Reuters)
President John F. Kennedy and first lady Jackie Kennedy in Washington on May 3, 1961. (photo: Reuters)


President Trump, Give Us the Full Story on the JFK Assassination

By Larry J. Sabato and Philip Shenon, The Washington Post

26 July 17

 

ater this year — unless President Trump intervenes — the American people will get access to the last of thousands of secret government files about a turning point in the nation’s history: the 1963 assassination of President John F. Kennedy.

The National Archives this week released several hundred of the documents, which come from CIA and FBI files, and of course, JFK researchers are scrambling to see whether they contain any new clues about the president’s murder. But many more documents remain under seal, awaiting release by this October, the 25-year deadline set by the 1992 Kennedy Assassination Records Collection Act.

The law gives only one person — the president — the ability to stop the release from happening. He can act only if he certifies in writing that the documents would somehow endanger national security.

We know we speak for an army of historians, political scientists, journalists and concerned citizens who have studied the JFK assassination when we say that it is time for the federal government to release everything in the custody of the Archives. This is the moment for full transparency about a seminal event that cost many Americans’ trust in their government.

The 1992 law has already brought some welcome transparency. It resulted in the release of millions of pages of documents regarding the assassination, including the 441 files from the CIA and FBI made public Monday. But about 3,150 other documents remain totally under seal, along with tens of thousands of pages that have been only partially unsealed because intelligence and law-enforcement agencies opposed their release in the 1990s.

Those are the documents that Trump could try to keep secret. And sadly, he appears to be under pressure to do so. Both of us have written books about the assassination and have a keen interest in what the president decides. Congressional and other government officials have warned us in confidence in recent weeks that at least two federal agencies will make formal appeals to the White House to block the release of some of the files.

Which agencies? Which files? The officials would not say, but it is already known that the CIA, the FBI and the Justice Department prepared most of the still-secret documents. If they’re the agencies objecting, is the president prepared to overrule them in the name of openness?

When it comes to JFK’s murder, what secret can be worth keeping nearly 54 years after those shots rang out in Dealey Plaza? In the 1990s, intelligence agencies might have been able to argue legitimately that some documents needed to stay under seal because they revealed the identity of American spies and law-enforcement informants who were still living and could be in danger if their cover were blown.

But decades later, logic suggests that almost all those people are now dead; if a handful are still alive, provisions can be made to protect them, if necessary. What lingers today is the widely held belief among Americans that the truth about a landmark moment in the nation’s history is still being hidden.

Almost as soon as the Warren Commission issued its September 1964 findings that Lee Harvey Oswald killed Kennedy and there was no evidence of a conspiracy, it became apparent that the investigation led by Chief Justice Earl Warren was seriously flawed. In large part, this was because the CIA, the FBI and other agencies had withheld evidence from the commission and its investigative staff, apparently to cover up their own bungling before the assassination.

The evidence did not necessarily point to a conspiracy in Kennedy’s death — at least not the sort of dark, tangled plot imagined by many theorists. But the commission should have dug more deeply into Oswald’s mysterious six-day trip to Mexico City two months before the assassination, when he met with high-level Soviet and Cuban embassy personnel. While 21st-century forensic science demonstrates that Oswald was almost certainly the lone gunman in Dallas, it’s possible that people at home or abroad knew he was plotting to kill Kennedy and might have encouraged him — by definition, possible co-conspirators. Or at a minimum, they did not try to stop Oswald.

By the late 1960s, opinion polls showed that, largely due to the Warren Commission’s shortcomings, most Americans had rejected the official story. What happened in the decades since is both understandable and toxic. Much of the public came to assume that if their government would not tell the truth about the murder of the president, it could not be expected to be honest about anything else — for example, human-caused climate change or the safety of childhood vaccines.

Trump, no stranger to promoting conspiracy theories, has a chance to show that he is committed to resolving some of the biggest conspiracy theories in American politics. We hope he welcomes the opportunity. If the documents in the National Archives are released in full, the president will receive credit for having struck a blow for transparency and, at least on this issue, attempting to show that the government no longer has anything to hide.

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FOCUS: John McCain's Tragic Contradictions Print
Wednesday, 26 July 2017 10:51

Cassidy writes: "In voting for McConnell’s motion, McCain participated in precisely the sort of cynical partisan political maneuver that he inveighed against."

John McCain voted to move the G.O.P. health-care bill 
forward, and then inveighed against precisely the sort of cynical 
partisan political maneuver that he had just participated in. (photo: Andrew Harrer/Bloomberg/Getty Images)
John McCain voted to move the G.O.P. health-care bill forward, and then inveighed against precisely the sort of cynical partisan political maneuver that he had just participated in. (photo: Andrew Harrer/Bloomberg/Getty Images)


John McCain's Tragic Contradictions

By John Cassidy, The New Yorker

26 July 17

 

fter seven years and four months, the Republican quest to repeal Obamacare has taken on vampiric qualities. A number of times since March, it has appeared to be dead, but each time it has resurrected itself. The latest occasion came on Tuesday afternoon, when Vice-President Mike Pence broke a tie in the Senate on a procedural motion that Mitch McConnell, the Senate Majority leader, had put forward.

If this motion, which called on the Senate to take up discussion of the health-care bill that the House of Representatives passed in May, had been defeated, the repeal effort would likely have been finished. But McConnell and his colleagues managed to cobble together just enough votes to keep their ambitions alive.

The swing vote was cast by Shelley Moore Capito, the junior senator from West Virginia, who, last week, had joined with two of her Republican colleagues, Maine’s Susan Collins and Alaska’s Lisa Murkowski, to block McConnell’s idea of having a vote solely on repealing the A.C.A., without putting in place any replacement measures. If Capito had stuck with Collins and Murkowski, both of whom voted against the procedural motion on Tuesday, it, too, would have failed. But, after meeting with Donald Trump in her home state on Monday, Capito put party loyalty before the interests of her constituents, about a third of whom are on Medicaid.

The vote was also marked by the dramatic appearance of John McCain, who returned to the Senate for the first time since being diagnosed with brain cancer. After receiving a standing ovation from his colleagues, McCain cast a vote in favor of McConnell’s motion, and then spoke from the floor of the Senate with great passion. After referring to his thirty-year career in the Senate, and his work with politicians of widely divergent views from both parties, he went on:

I hope we can again rely on humility, on our need to coöperate, on our dependence on each other to learn how to trust each other again and by so doing better serve the people who elected us. Stop listening to the bombastic loudmouths on the radio and television and the Internet. To hell with them. They don’t want anything done for the public good. Our incapacity is their livelihood.

Let’s trust each other. Let’s return to regular order. We’ve been spinning our wheels on too many important issues because we keep trying to find a way to win without help from across the aisle. That’s an approach that’s been employed by both sides, mandating legislation from the top down, without any support from the other side, with all the parliamentary maneuvers that requires.

We’re getting nothing done. . . . We’ve tried to do this by coming up with a proposal behind closed doors in consultation with the Administration, then springing it on skeptical members, trying to convince them it’s better than nothing, asking us to swallow our doubts and force it past a unified opposition. I don’t think that is going to work in the end. And it probably shouldn’t.

These were stirring words, and they contained a lot of truth. But what good did this verbal tour de force do? In voting for McConnell’s motion, McCain participated in precisely the sort of cynical partisan political maneuver that he inveighed against. For months now, McConnell has been scheming to shove through a monumentally consequential reform without any hearings, markups, or efforts to reach out to Democrats. After last week, when this scheming looked destined to fail, he called for Tuesday’s vote on the “motion to consider”—even though he had not made clear what sort of measure the members would be taking up.

McCain supported McConnell’s motion. In doing so, he helped enable the Majority Leader to pursue his fallback strategy: getting practically any sort of measure passed and tossing the details of reform over to a Senate-House conference, which would deliberate in secrecy, with little input from anyone outside the G.O.P. leadership.

The Senate is now set to vote on three bills that have practically no chance of getting fifty-one votes: a repeal-only bill; the “repeal-and-replace” bill that McConnell originally proposed; and a revised version of the McConnell bill that includes an amendment from Ted Cruz, of Texas, which would allow insurers to sell cheap catastrophic-insurance policies outside of the Obamacare exchanges. After these votes are held, McConnell is expected to propose a so-called “skinny” repeal bill, which calls for the repeal of the individual and employer mandates but leaves everything else to be decided by the House-Senate conference.

If he had been following his own advice, McCain would have broken with McConnell and voted against the motion. If the motion had failed, the Republican leadership would have had little choice but to start talks with the Democrats about patching up the Obamacare insurance exchanges and, perhaps, making modest changes to Medicaid. Indeed, earlier this month, after McConnell’s repeal-and-replace bill failed to garner the support of fifty-one Republicans, Lamar Alexander, the chairman of the Senate health committee, announced plans to convene bipartisan hearings on ways to stabilize the individual-insurance markets. Now that McConnell’s motion has passed, such plans are in abeyance.

To be sure, this is only an interim victory for the Republican leadership: the ultimate outcome of their repeal efforts remains uncertain. Even if McConnell succeeds in punting the ball over to a House-Senate conference, the full Senate will eventually have to vote on a final piece of legislation, which will have specific terms that can be analyzed and discussed. Getting a final bill passed won’t be easy.

For now, though, the G.O.P. campaign against Obamacare is still alive, and it owes its life to subterfuge. In the House, Speaker Paul Ryan managed to assemble a majority for his bill only by persuading his colleagues that any flaws it contained would be fixed in the Senate. That didn’t happen. Instead, McConnell now wants to abdicate the Senate’s deliberative responsibilities and kick things back to the House.

As McCain noted, these “responsibilities are important, vitally important, to the continued success of our Republic. And our arcane rules and customs are deliberately intended to require broad coöperation to function well at all. The most revered members of this institution accepted the necessity of compromise in order to make incremental progress on solving America’s problems and to defend her from her adversaries.”

For his long record of service to the country, his bravery, and his acerbic streak, McCain is himself widely revered. It is a great pity, indeed a tragedy, that he and many other Republican senators didn’t act upon his words.


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