What did he know and when did he know it?
When Democrat Andrew Romanoff made noises about mounting a primary challenge to Senator Michael Bennet (D-CO), the White House contacted Romanoff and made an interesting — and arguably corrupt — counteroffer:
Jim Messina, President Barack Obama’s deputy chief of staff and a storied fixer in the White House political shop, suggested a place for Romanoff might be found in the administration and offered specific suggestions, according to several sources who described the communication to The Denver Post.
…several top Colorado Democrats described Messina’s outreach to Romanoff to The Post, including the discussion of specific jobs in the administration. They asked for anonymity because of the sensitivity of the subject.
I’m from Illinois. I’ve lived in Chicago. This is typical of the dirty political culture Obama hails from. And it’s almost exactly the same act of political corruption that led to Governor Rod Blagoyevich’s arrest and removal from office.
As Ed notes, apparently “Hope and Change” really means “Chicago on the Potomac.” Will Obama and his MSM bootlickers be able to squash the notion of an independent investigation, or might Barry and Rod someday share a cell?
UPDATE: Dem fundraiser Norman Hsu gets 24 years. When will the other Hsus drop?
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Ron:
I’d just say do a google search on “Rod Blagoyevich”
Mikeca, your reference to “fairy dust” shows that you truly have no understanding of how structured debt products are actually structured, and how that can affect the ratings of various tranches. Chalking up things you don’t understand to “magic” is what primitives do.
I was being whimsical.
I understand the principal behind these structured debt products, perhaps better than many of the Wall Street bankers that were creating them. They used detailed mathematical models to back up their credit rating. Clearly these models complete failed to accurately estimate the risk. The mathematical models were based on assumptions and the models were clearly applied in situations were the assumptions were not true. That happened because the people using the models didn’t really understand the models and the assumptions behind them. They viewed the models as if they were magic.
If the Wall Street bankers and rating agencies had really understood their models, they would not have misused them in cases where they did not apply and we could have avoided the worst of the financial melt down we have experienced in the last couple of years.
mikeca:
I bet you’re a big fan of computer models when it comes to Anthropogenic Global Warming, eh? Maybe you should think about those models as you point out the flaws of these models.
All models are based on assumptions. It is likely that some of the computer modeling done by the banks was flawed to some degree.
But that was not the root cause, nor the driving mechanism of the bubble. If you are asserting that the entire bubble was caused because people put too much trust in flawed computer models, I’ll just make you this offer.
Admit the same thing about Anthropogenic Global Warming, and I’ll concede you have a point on the banks.
Nice try Mikeca, but speaking very generally about mathematical models doesn’t show that you have more than a superficial understanding of this subject.
However, that is quite a change in tone. All your past comments have been indicting Wall Street for conspiring to give these securities ratings that they did not deserve, but now you are just saying that the models were incorrectly specified? So are the ratings agencies evil or just incompetent, or does it depend on which argument suits your current agenda?
Paul! Hey! Give him a chance to disavow the AGW models before you point out his latest attempts to squirm out of your crushing grip of reason!
This is a silly question. Of course the models used in the Global Warming predictions should be examined very carefully and the assumptions should be questioned. That does not mean they are right or wrong, but they certainly need to be examined carefully.
NEWS FLASH: I am under no obligation to show that I have anything more than a superficial understanding of the subject.
If you have a though understanding of the subject, you have completely failed to demonstrate it. Your comments demonstrate a total lack of understanding of even basic economics.
The GSEs were buying what was represented as AAA rated MBS by the Wall Street banks and credit rating agencies. That should have been a safe investment. It wasn’t a safe investment, because the MBS were really junk bonds or at least much lower quality then they were represented to be.
Your argument seems to be that because the GSE’s wanted to buy some of these MBS, that forced Wall Street bankers to generate more and more AAA rated MBS and push their models into regions were they were not valid. Thus it was the GSE’s that forced the Wall Street bankers to stamp AAA ratings on junk bonds.
First off, that is an absolute nonsense argument in my opinion. It’s like the 5th grader who claims he had to cheat on the test because his parents wanted him to get a good grade. If you are using a mathematical model to assess risk, and you misuse the model, that is your mistake. You should be held accountable for not understanding the limits of the model you are using.
Your argument also completely neglects the other factors, like the FDIC bank capital ratio rule change in 2002, were creating a huge demand for AAA rated MBS.
I think the truth is that everyone was making so much money on Wall Street, both at the banks and at the rating agencies, that no one wanted to look carefully or question the models they were using to see if they were still valid for the next deal. If a deal had to be killed because the model didn’t apply, companies would get less revenue and people would get smaller bonuses. This is what always happens in a financial bubble. Until the bubble bursts, everybody sticks there head in the sand and ignores the obvious while they try to get as rich as possible as quickly as possible.
Blago actually demanded and took cash.
Someone got that link for me, maybe?
Why does cash make a difference Ron? Is cash the only valuable commodity in the universe?
It’s not “cash” that makes the difference it’s whether or not someone was influenced to take an action they would not otherwise have taken in exchange for anything “of value.” It is pretty clear, I think, to most people, that a cushy appointment in an administratin government job would qualify as something “of value.”
Anyway, here’s one federal statute on corrupt influence and here’s an excerpt:
” (b) Whoever–
(1) directly or indirectly, corruptly gives, offers or promises
anything of value to any public official or person who has been
selected to be a public official, or offers or promises any public
official or any person who has been selected to be a public official
to give anything of value to any other person or entity, with
intent–
(A) to influence any official act; or
(B) to influence such public official or person who has been
selected to be a public official to commit or aid in committing,
or collude in, or allow, any fraud, or make opportunity for the
commission of any fraud, on the United States; or
(C) to induce such public official or such person who has
been selected to be a public official to do or omit to do any
act in violation of the lawful duty of such official or person;
…”
Let’s see, Andrew Romanoff is the Speaker of the House of Colorado, so I think he qualifies as a public official. So here we have someone offering a public official something of value in order to influence an official act.
I think that’s pretty cut and dried, don’t you?
The statute is cut and dried and yes, CC, cash versus checks or of course other “value” are all the same.
But.
Cash is cash. When you have a freezer full of it, you have some ’splainin’ to do.
Everything else, I think, you can explain away, short of someone wearing a wire and hearing you really make the quid pro quo offer.
Ron:
I believe I have said that I would be very surprised if this incident led to even impeachment (which is easier in some ways because it’s a political act, ask Bill Clinton) in part because people are so cynical about this sort of thing.
But that does not change the point that if this were a Republican, the press would be screaming hysterically about the obvious corruption and how this proves the President is just another evil Republican dirty trickster.
Besides the obvious point that the absolute best you can say about this is that Obama is not remotely a “hope and change” politician, at BEST he’s just another Chicago political thug playing from the Daly political machine deck of dirty tricks.
But you won’t see that in the NY Times, CBS, NBC, ABC, CNN, MSNBC or virtually any other media outlet either.
My opinion is that Obama’s OTHER abuses of power are more obviously impeachable, but nobody even TALKS about the sheer overreach of Obama firing the CEO of GM, for example. You tell me where the Constitution says he can do that.
MikeCA, I’ve asked on the Acron thread, understand if you haven’t gotten back to it over there & at the risk of transgressing some blogging rule or etiquette:
“Mikeca, just so I understand, in your view:
(1) did the government try to manipulate/alter the home market so that people with less than stellar credit could buy houses, and
(2) if so, was the government successful?
thanks”
The definition of ‘manipulate’ is “To influence or manage shrewdly or deviously” or “To tamper with or falsify for personal gain”. Clearly the government was not trying to manipulate the housing market.
I doubt that any court would find that running for the US Senate was an “official act” for a member of the state legislature. An official act is something a government official does as part of his job. Any resident of CO can decide to run for the US Senate. You don’t have to be in the legislature. Deciding to run for the US Senate is a personal decision not an official act.
mikeca:
I am absolutely certain you would have said the same thing if we were talking about George W. Bush. Right.
On the other hand, if it were George W. Bush, I WOULD have said the same thing.
Oh, and nice job of cherry-picking definitions of “manipulate” that you think will help you out, as if the rest of us don’t know that there are many other definitions of the word, and those don’t match your interpretation.
That was pretty weasely way to provide a non-answer to P Mike, bravo! We’re not fooled though, it’s obvious you don’t want to provide a good faith answer.
As for this:
Your argument seems to be that because the GSE’s wanted to buy some of these MBS, that forced Wall Street bankers to generate more and more AAA rated MBS and push their models into regions were they were not valid. Thus it was the GSE’s that forced the Wall Street bankers to stamp AAA ratings on junk bonds.
Nope, never made anything remotely close to that argument, you are just desperately making shit up now. All I’ve been doing is pointing out where you were factually incorrect (GSEs weren’t in subprime, GSE’s weren’t a large part of the market for subprime, etc) There were a lot of parties involved in this market, and they all deserve some blame. You blame it all on a “totally unregulated free market” which is a condition that does not exist here, and Wall Street bankers that “stamp AAA on junk bonds” – though of course, Wall Street bankers don’t rate their own securities, which I am positive you are aware of, and therefore are clearly being intentionally dishonest in your above sentence.
Lets quantify this Mikeca, would you agree that if these securities were truly deserving of junk ratings, then the default rate on these securities should be somewhere in the neighborhood of the default rate of junk bonds?
The Free Dictionary list 4 definitions for ‘manipulate’:
1. To move, arrange, operate, or control by the hands or by mechanical means, especially in a skillful manner: She manipulated the lights to get just the effect she wanted.
2. To influence or manage shrewdly or deviously: He manipulated public opinion in his favor.
3. To tamper with or falsify for personal gain: tried to manipulate stock prices.
4. Medicine To handle and move in an examination or for therapeutic purposes: manipulate a joint; manipulate the position of a fetus during delivery.
Definitions 1 and 4 do not appear to be relevant to P Mike’s usage, so I quoted the other two.
Perhaps manipulate does not mean what you think it means.
mikeca, you crack me up.
So you post the four definitions as if they support your argument. The VERY FIRST definition is the definition most reasonable people would agree with. That definition says NOTHING about nefarious intent, it simply says you DO it. Definition 1 is not only RELEVANT to P Mike’s post it is EXACTLY WHAT IT MEANT.
Your post implied that “manipulation” implied nefarious intent.
I ask again, do you even read your own posts?
Definition 1:
To move, arrange, operate, or control by the hands or by mechanical means, especially in a skillful manner
So you think the government used it hands or sent out its mechanical robots to control the home mortgage market?
mikeca:
How the hell do you think they wrote the bills?
You are seriously out of your league mikeca. Resorting to these sorts of pathetic semantic contortions to try to wriggle out of your own words is just pathetic.
I’ve told you before that the main reason I don’t “debate” with you much is that you seem incapable of rational discourse. This is an example of what I mean. I don’t mean you are incapable of “civil” disourse, I mean you simply aren’t capable of recognizing or fabricating a rational argument.
Oh, now you’re going to say that I misused “fabricating” because that means you have to use your HANDS.
I’ll let Paul get back to making you look like a fool.
Paul chose to use the word ‘manipulate’ in his question because it has the implication of nefarious intent. The government clearly had no nefarious intent. It was trying to bring stability to the housing market and insure that all people who could afford to buy a home, had a fair chance to obtain a home mortgage.
Now people who hate their government assign nefarious intent to anything the government does, but that is their problem.
Wrong. The main reason you don’t like to “debate” with me is that I am not overwhelmed by your childish, middle school caliber arguments.
mikeca:
I won’t speak for Paul, but I believe you INFERRED “nefarious intent” from Paul’s use of “manipulate.” I think Paul used it in its first definition sense, and implied only the best of (naive, soft-headed) intentions. You are simply projecting your prejudices onto your opponents. It’s that simple.
LOL, you can play whatever silly games with yourself that you like to mikeca, I let the record of the actual comments speak for themselves and let the readers judge who is using the childish, middle-school caliber arguments.
You. are. a. trip. I mean every time I tell myself that liberals can’t really be that soft-headed and ideologically blinded, you reaffirm my faith in leftists.
Rhetorical games are an American conservative specialty. They relabel every thing they oppose with nefarious sounding names. The inheritance tax becomes the “death tax”. Any government attempt to control heath care cost becomes a “death panel”.
If you want to play that game, go right ahead. Just don’t expect me to blindly agree with you.
lol, as so many times before, I’m done with you on this. You have vastly overrated your effectiveness in this (as in most other) argument. And now you’re just pissed because so many people have called you out on your inability to create a defensible position.
Not the first time. Surely not the last.
Have a nice weekend mikeca.
Wait, the two examples you cite are calling a tax that is triggered by someone dying a “death tax” and panels that recommend euthenasia standards as “death panels”?
Are you literally made of fail? As in, tangible fail in protein form?
Mikeca, you are reading so much into my comments that you are assigning things to me that were actually said by others! Go re-read and see who actually asked you about government manipulation. I’m sure it was an innocent mistake though…
So, again Mikeca, do you want to try and quantify this? Would you agree that if these securities were truly deserving of junk ratings, then the default rate on these securities should be somewhere in the neighborhood of the default rate of junk bonds?
Paul, it may have been me that assigned P Mike’s “manipulation” comment to you. Still, my points still stand on the use of the word.
There has never been a tax on dying. If you is leave a large estate, and that estate is transfered to your decedents, there is a tax on the transfer. If you leave your estate to charity, there is no tax on that. The inheritance tax is part of the American belief that wealth should be earned rather than an accident of birth.
There were no panels recommending euthanasia standards. Every insurance company has a procedure for deciding what treatments it will pay for. If some drug will on average add one month to the life expectancy of cancer patients, that is a good thing, right? What if the drug cost $100,000? Is one month longer life worth $100,000? What if the drug cost $1,000,000?
Those are difficult questions to wrestle with, but every health insurance company is already making those kinds of decision. Labeling the people making those decisions a “death panel” is super charging the rhetoric. It only brings out the mindless, screaming dittoheads and makes any intelligent discussion of what are very difficult issues impossible.
“Those are difficult questions to wrestle with, but every health insurance company is already making those kinds of decision. Labeling the people making those decisions a “death panel” is super charging the rhetoric. It only brings out the mindless, screaming dittoheads and makes any intelligent discussion of what are very difficult issues impossible.”
Because we all have seen in the past eight years that the Left would never demagogue an issue, resort to supercharged rhetoric or engage in screaming.
No, nothing but calm, rational discourse from the Left. We should all be more like the Left.
Oh wait, that’s what we’re doing!
lol
I’m not sure what your point is.
The fear of future defaults can reduces a bond to junk bond status just as easily as an actual default. If Company A has been losing money and there is speculation they will soon go bankrupt, their bonds may become junk bonds, even though the company has never defaulted on a bond in history.
In late 2008 the market for MBS securities locked up. There were almost no buyers that wanted to buy MBS at a price a holder was willing to sell. The holders of MBS thought they were worth far more than buyers were willing pay for then.
Part of the problem was the complexity of the securities. It was hard to look at a pool of mortgages with a large subprime component and estimate what the eventual default rate on those mortgages would be. There is speculation that almost all the subpime loans of the last few years will eventually default.
Since you seem to know so much, why don’t you tell us what the default rate has been?
Okay MikeCA, through out “manipulated” and leave in “altered,”
and answer the question please.
Yes, but Mikeca, even securities backed by subprime can have a senior tranche that is overcollaterlized or has some other type of credit enhancement so it can absorb a fair amount of defaults without any losses, which is why that particular tranche gets the higher ratings. You are saying that the ratings were all incorrect, so I am saying, if the ratings truly were incorrect, then the default rates should be more like those of lower rated securties. Do you disagree?
Obviously, fear of default can drive a price down, but if the bond pays out at par, there are no losses, and perhaps the fear of default was irrational and not the rating. Over the last few months, the prices of these securities have come roaring back.
I don’t know the default rate off the top of my head, though I don’t believe that any AAA rated MBS that were part of the BC Aggregate Bond Index (which is like the S&P 500 of the bond world) have defaulted. I can probably get to the number, I am just not going to spend the time if you don’t agree that it is valid metric.
First I doubt that any of the AAA MBS securities will totally default. Even if all the mortgages go into foreclose, some of the principal will be recovered eventually by sell the house. Some of the principal may be lost, but not all of it.
AIG and others were also selling CDSs to insure some of these AAA MBS. Perhaps those CDS will make good on the principal losses for people who bought the AAA MBS. Of course AIG is basically bankrupt, so it is the US tax payers making good on those CDS.
This Vanity Fair article on AIG is interesting. It is largely sourced to some AIGFP insiders trying to explain what happened, so it should be taken with a grain of salt. One interesting thing in this article is that near the end of 2005 one AIGFP executive looked into the MBS AIG was issuing CDS for. He discovered the mortgages in these pools were 95% subprime mortgages. He asked other AIGFP executives what percentages of the pools they thought were subprime. He got answers in the 10-20% range. AIGFP at the end of 2005 really had no idea how risky the MBS they were insuring with CDSs actually were.
After this discovery, AIGFP went to talk to all of the big Wall Street banks to ask them how a MBS based on 95% subprime mortgages could be a AAA security. The argument was simply that it was unlikely for housing prices to fall at the same time all over the country. The AIGFP executives were shocked at how little thought or analysis the Wall Street banks had given to the safety of these MBS. At the end of 2005 AIG stopped writing CDS on MBS securities because they decided they were simply too dangerous to insure.
In 2006 and 2007 the big Wall Street banks kept right on generating MBS, and they apparently insured them by writing there own CDS. This may be a big part of the reason Merrill Lynch, Lehman Brothers, and Bear Stearns all failed, and the other big banks needed bailouts.
To the extent the AAA MBS are paying off principal because it was insured with CDS, it is largely the Federal Government bailing out those MBS.
… when you die.
“It’s not a tax on gasoline. It’s a tax on selling petroleum products for use in vehicles on public roads. That’s not a gas tax.”
“It’s not a tax on income. It’s a tax on certain earnings that accrue as part of an employee employer relationship. That’s not an income tax.”
Seriously, what is the target for your ramblings? Men who suffered closed head injuries as boys?
One anecdote from Vanity Fair doesn’t do a whole lot to back up your claims.
Do you know the definition of the word default? I don’t think you do. A credit goes into technical default as soon as one payment is missed. Just because some amount of principal is collected after the sale of the collateral doesn’t mean that it didn’t default. Also, if a security defaults, it doesn’t matter if it is insured or not. A default is a default. To say that a security is not in default because a CDS was purchased to insure it, is to say your home actually didn’t burn down after a fire because you had fire insurance.
So, your attempt at insinuating that if AAA rated MBS are not in default, it is only because the Fed Government is bailing them out via CDS is completely incorrect.
1995: Community Reinvestment Act revised; a bank’s CRA rating could now be affected by complaints, affecting merger approvals, ability to open new branches; some banks joined partnerships with community groups (like ACRON) to distribute mortgage money to low-income borrowers previously considered noncreditworthy, or purchased special “CRA mortgage-backed securities,” packages of disproportionately nonprime loans certified as meeting CRA criteria and securitized by Freddie Mac.
1993: Department of Housing and Urban Development began bringing legal actions against mortgage bankers that declined a higher percentage of minority applicants than white applicants.
1996: HUD required Fannie Mae & Freddi Mac to make 12% of all mortgages be subprime. Fannie Mae and Freddie Mac had to borrow huge sums in wholesale financial markets which saw the organizations as backed by the U.S Government
2000: HUD sets a minimum of 12% subprime loans with a 20% target
2001: <10% subprime mortgages, FHA reduces down payment to 3% (vice 20%)
2003: Predsiental adminstration tried to change oversight of Fannie & Freddi, were rebuffed (with some outrageous name calling) by Congress
2005: HUD changes Fannie Mae & Freddi Mac subprime targets to 22%
2006: 34% subprime for new mortgages, 23% overall
Fannie & Freddi borrowed huge sums of money, made big profits, and other companies followed suit. Short term interest got cheaper than long term (Fed policy) that encouraged new innovative ways to get peopl into mortgages that they couldn't afford, like ARMs. I've seen numbers that range from 30% to 50% of bad mortages were "securitized" by Fannie & Freddi.
This is not a complete timeline and does not inlcude smoe pretty important historical facts, but there was a pretty clear and unambiguous intent of the Fed Gov to encourage people to buy houses when they did not have credit ratings for which the tradiational private lender market would not extend credit. It clearly worked. It also very unambigously generated private industry participation because there was money in it (hence the cries of "greed" and "speculation") and because law required it.
If the markets had not been influenced by Fed Gov policy to make subprime loans, subprime loans would not have caused the collapse of the finanical institutions supporting the housing market.
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