Linda Ketner, Liberal Democrat, on the Economy and Deregulation: Part II

One of Linda Ketner’s recent ads during the campaign is to rail against the Republicans for deregulation. In her ad she states that eight years ago the Republicans passed into law legislation that overturned laws from the 1930’s which were designed to protect Americans from Wall Street … or something pretty close to that.

I don’t know what she’s referring to that was passed eight years ago … but in 1999 President Clinton signed into law the Gramm-Leach-Bliley Act which overturned the Glass-Steagall Act of 1933.

According to an article on MoneyNews.com, MoneyNews – Clinton: Deregulation Not to Blame for Crisis, the Glass-Steagall Act, among other things, separated commercial and investment banking.  Former President Bill Clinton stated in an interview with Business Week that the legislation he signed didn’t completely deregulate the banking industry. In fact he said in answer to a question about this,

“No, because it wasn’t a complete deregulation at all. We still have
heavy regulations and insurance on bank deposits, requirements on banks
for capital and for disclosure.”

Former President Clinton went on to add,

“I thought at the time that it might lead to more stable investments
and a reduced pressure on Wall Street to produce quarterly profits that
were always bigger than the previous quarter,”

and,

“I have really thought about this a lot. I don’t see that signing that
bill had anything to do with the current crisis. Indeed, one of the
things that has helped stabilize the current situation as much as it
has is the purchase of Merrill Lynch by Bank of America, which was much
smoother than it would have been if I hadn’t signed that bill.”

Maybe Ms. Ketner needs to check her dates … or she was talking about something else, but … this sounds suspiciously like what she was referring to. She was talking about deregulation and the current financial crisis, wasn’t she? Well, so was former President Clinton on Oct. 1, 2008.

I suppose Ms. Ketner is more of an expert on the economy than President Clinton. After all, she has been advocating low interest loans in South Carolina since 1991 of the type that got Fannie Mae and Freddie Mac into trouble in the first place.

I also thought it was noteworthy that such great Democratic minds as Senators Chuck Schumer, Chris Dodd,  Dick Durbin, Tom Daschle, John Edwards, John Kerry and Joe Biden all also voted for this bill. That quite a list of current Democratic economic and financial experts as well as presidential and vice-presidential hopefuls. And don’t forget about former Democratic President Bill Clinton.

But then, Ms. Ketner knows more about the economy than any of them. After all, she grew up in a town of 500, taught high school and college, runs a business and is a member of a struggling middle class family …right? I wonder if she taught History … or Economics … a lot of dates to remember, facts to get straight ( or make politically correct ) and theory to understand.

Linda Ketner is the Democratic candidate for the South Carolina First Congressional District.

Ms. Ketner, you need to take this issue up with Bill Clinton, because he says what you’re saying “just ain’t so”.

Ms. Ketner needs to come up for air and check her facts.

Linda Ketner, A Different Kind of Democrat? Part I

Being a resident of South Carolina’s First Congressional District, I am curious whether Linda Ketner is actually a different kind of Democrat. Is she actually going to bring change or is she just going to be another rubber stamp for Nancy Pelosi and Barney Frank?

So, I decided to start out by reading her biography which she seems to be so proud of. I can see why she is running on the Democratic ticket.

Much of her efforts seem to be related to housing issues which on a national scale are the basis of our current financial crisis. Anyone who has missed the fact that the disintegration of the housing market was caused by Fannie Mae and Freddie Mac operating in an essentially unregulated manner, falsifying their accounting books to provide their senior management with increased bonuses and either encouraging or coercing lending institutions to write risky home loans and then being the agents to pass these high risk loans into the investment sector which in turn caused numerous commercial and investment banks to fail when the portfolios put together by Fannie Mae and Freddie Mac were deemed to be either worthless or of an indeterminate value …, well, anyone who has missed that has been either in suspended animation, hibernating or lost in space for the past 11 months.

To quote Ms. Ketner’s bio, Biography | Linda Ketner For Congress, “Linda formed South Carolina Citizens for Housing in 1991… . Some of Linda’s leadership positions include: Chair of the Mayor’s Council On Homelessness and Affordable Housing, Chair of the S.C. Housing Trust Fund, Founder of South Carolina Citizens For Housing, Founder of Charleston Affordable Housing and South Carolina Equality Coalition.”

Ms. Ketner’s efforts, since 1991, have been right in line with the major Democratic supporters of Fannie Mae and Freddie Mac. My question is,  “Was she competing with Fannie Mae and Freddie Mac … or colluding with them?” Also, have her efforts had anything to do with ACORN, an organization some consider a radical left wing operation which, among other things deals with housing issues a as well as other activities like its union affiliates and voter registration efforts which have led to a number of its operatives receiving felony convictions for voter fraud?

It seems that Ms. Ketner, like all of the rest of the Democrats, wants to blame the Republicans for deregulating Wall Street and, in some delusional, mystical or magical way, to try to insinuate that all of the current financial crisis is not related to corruption and fraud in Fannie Mae and Freddie Mac and the Democrats’ efforts to block increased  or basically any regulation of those two out of control institutions but to some undefined deregulation on Wall Street which has nothing to do with what happened at Fannie Mae and Freddie Mac. In fact, early in his first administration, even President Clinton tried to reign in these two corrupt giants but was blocked by his own party.  Did you just see Ms. Ketner pull a quarter out of your ear?

The Republicans contribution to this entire mess was the failure of SEC chairman Chris Cox, a Bush appointee, to adequately oversee the functions of the SEC which basically ignored what was going on even though it knew about it as reported in a recent Inspector General’s report and, then Chairman Cox failed to exercise a power he had to change the “mark to market rule”. He was finally reminded of this authority last week by the Senate and has subsequently acted … after 11 months … hopefully not too late.

To the contrary, President Bush, since 2001, has been trying unsuccessfully to increase the regulation on Fannie Mae and Freddie Mac and has been opposed and obstructed every step of the way by such prominent Democrats as Barney Frank, Chris Dodd and Chuck Schumer. President Bush sent Treasury Secretary John Snow to Congress with warnings about irregular accounting practices and increasing risks of continuing the high risk policies of Fannie Mae and Freddie Mac. He sent Alan Greenspan who warned of the potential of a financial crisis if the practices of Fannie Mae and Freddi mac continued to go unchecked. They were ridiculed by Democrats like Barnie Franks, Maxine Waters and Chris Dodd. John McCain warned of a pending financial crisis two years ago as the Republicans tried to get a bill passed to increase regulation on these two entities which was voted down by the Democrats.

Think about it? If there were Republicans actually responsible for this crisis, don’t you think there would be several hundred special investigations going on right now with the current Democratic majority And, with the Democrats maintaining a majority in Congress, do you think that there is going to be any sort of investigation or commission to study the crisis? Barack Obama has already said that notion, an investigation or commission, which has been suggested by John McCain was “ridiculous”.  I imagine he does think the idea of investigating the cause of the current financial crisis is ridiculous. What could John McCain be thinking? No sane Democrat would want that.

Now everyone will argue that the Republicans have controlled Congress for six of the past eight years. Actually, some will argue that the Republicans have controlled Congress for the past eight years. I’ve actually heard that one frequently. Based on that, I understand why the Democrats think they can win. There’s nothing like appealing to and feeding on people’s ignorance. Ms. Ketner knows that it takes a majority of 60 in the Senate to override the possibility of a filibuster. The Republicans have never had more than 55 members in the Senate in the past eight years … or past twelve years.  The Democrats last had that kind of majority in the 1960’s. Without a majority of 60, the minority party can, in effect, veto any bill it doesn’t want passed. That’s why the Democrats are trying real hard to get 60 Senate seats. Simple majority rules in the House … not so in the Senate. The Founding Fathers were very smart … although many Democrats would resentfully disagree.

But, somehow, the Republicans are responsible for the current meltdown of the housing markets and the resultant financial crisis. Even though you can hear and see the words coming from the Democratic Congressmens’ and Senators’ mouths on video tapes of the events, the Democrats …. like Ms. Ketner … are in complete denial of the obvious truth. President Bush can justifiably be held responsible for a lot of things … but this isn’t one of them. The evidence is in plain view for anyone to see.

Now, all of these things that Linda Ketner has done, … well, they’re very admirable. There’s nothing wrong with trying to get people affordable housing and trying to help people own homes … unless and until it starts hurting other people. Can anyone deny that the current financial crisis has the capability of hurting a lot of people.

Now … I don’t know if the things that Linda Ketner has been doing for the past 17 years has anything to do with the meltdown of Fannie Mae and Freddie Mac, but … it all sounds an awful lot like a lot of what many of the rest of the Democrats like Barney Frank, Chris Dodd and Chuck Schumer have been up to for a long time.

So, my question is, “How much have Linda Ketner’s efforts been tied to risky loans handled through Fannie Mae and Freddie Mac which are the cause of the meltdown of the housing market?

I’d like her to answer that.

No. I’d like someone else to look into that … some entity that doesn’t have a vested interest in winning a political campaign. It’s not that I don’t trust you Ms. Ketner. But, in my opinion, you have a knack for either stretching the truth or completely ignoring it and you haven’t been completely candid in your assessment of what and who has been wrong for the past seven or eight years. If you do consider yourself candid, then I question your ability to accurately assess a financial situation … or anything else.

Bail out, Investment or Moot Point?

This afternoon the House of Representatives has finally passed it’s version of the finance bill which has been commonly referred to as a “bail out” bill committing the American taxpayers to $700 billion in financial guarantees for commercial and investment banking firms trading on Wall Street.

My personal view of the bill is that it wasn’t necessarily a bail out for Wall Street firms and wasn’t and isn’t going to cost $700 billion. Even though commercial and investment banking firms found themselves holding mortgage derivatives or paper which they couldn’t sell leaving the assets with values impossible to determine by current accounting practices enforced by the SEC, I never felt that the assets were “worthless” as Ron Paul and others have stated previously. They would only be worthless if the mortgages were written for property that didn’t exist.

As I mentioned in a previous article, Was John McCain Right About Wanting to Fire SEC Chairman Cox? « Earl says … on 9/24/2008, the commercial and investment banks have been hamstrung by an accounting rule imposed by the SEC which was forcing them to value assets at fire sale prices which, in a rapidly downward spiraling market, made it virtually impossible to determine portfolio values according to those accounting rules.

Unfortunately, this could have been prevented by SEC chairman, Chris Cox, since he had the authority to amend the rules at his own discretion … but didn’t. This was only one of the many blunders committed by the SEC under his chairmanship as pointed out by an Inspector General’s report earlier this week.

Even though the Senate voted on this rule change earlier this week, it was only a reaffirmation of the regulatory power that the SEC chairman already had as noted in the following article by the Wall Street Journal, Momentum Gathers to Ease Mark-to-Market Accounting Rule – WSJ.com, where the authors noted that

” …A proposal contained in the revised financial-rescue bill the Senate considered Wednesday reaffirms the Securities and Exchange Commission’s existing authority to suspend “mark-to-market” accounting.”

And the British publication, The Telegraph, noted in its article,Financial crisis: SEC cheers finance companies with mark-to-market ruling – Telegraph:

The Securities and Exchange Commission brought some much needed cheer to the US financial sector after issuing accounting guidelines that could help curb the billions of dollars of writedowns reported by the country’s leading banks.

It seems that it is entirely possible that much if not all of the financial turmoil which has occurred over the past 11 months might have been avoided with some insightful judgement and knowledgeable action.

If changing the accounting rules are a good idea now, why shouldn’t it have been a good idea 11 months ago?

It seems that a lot of awfully smart people might have missed the boat on this one.

How does this effect the $700 billion “bail out”? Was it necessary?

My opinion is that it was necessary to restore some level of confidence in the market. I doubt that most people would have bought the notion that a simple change in an accounting rule would have saved the day many months ago and would only believe that some draconian measure by the government would suffice.

Now the government will buy some property which will have some added value in the future which should turn a profit for the taxpayer. That is, unless some Congressmen don’t take the money and throw it away somewhere else. And, I doubt that very much of the $700 billion will actually have to be used. It should simply be considered as a line of credit to make purchases and not a full blown loan which is already gone out the door.

Since Wells Fargo and Citigroup are now actively haggling over Wachovia, there is an indication that all is not lost and there are some good buys in all of this mess.

So, is the “bail out” actually a moot point?

From a psychological standpoint … no. From a practical standpoint … maybe.


“Earl Says … ” Blog is Featured on WordPress’ 10/2/2008 “Blogs about: Harvard Law School”

Well, I did mention Harvard Law School once in that particular blog. It was actually a rail against the New York Times specifically … and lawyers in general with a reference to Senator Obama and his alma mater.

New York Times Slaps Down McCain Op Ed is the featured article on Harvard Law School — Blogs, Pictures, and more on WordPress on 10/2/2008.
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