Paul Newman

R.I.P.

1925 - 2008

It’s a Swindle Folks!

Just how many times can the Bush Administration cry Wolf to grab extraordinary power? And just how many times will the Dems fall for it? Well, it is starting to look like we may be at the end of that road and that many a Repub is joining in.

This Financial Patriot Act emergency push through is starting to have its skin peeled back. It is comforting to see that even our Congresscritters are asking questions that any thinking person would ask. So, thanks to all those that called in and either provided questions or expressed their outrage, in a polite way of course.

Now on Friday I started to think that this bailout was just another Bush Administration Swindle because it had all the hallmarks of say, Iraq (a truly big Swindle) and the lead up to it, etc. This Crisis is being sold as a Worldwide Financial Meltdown, just as Iraq was sold as being a Worldwide Threat with its WMD. Well, it seems that the rest of the World isn’t buying it this time. When Europe and Japan tell the U.S. you are on your own I am thinking they don’t see the threat of this Worldwide Crisis. As Prof. Krugman has said, “It is the Trust Problem.”

Now if we are to believe Hank Paulson, and that is a risky thing given that his nickname at Goldman Sachs use to be “Mr. Risky,” both he and Prof. Bernanke have been working on this for over a year. So, for over a year they have known about this? So, then why is it a Crisis now? And so, we should want these poor crisis management types to dictate what we need to do now? And if they have been “working” this crisis for over a year why can’t they answer even the simplest of questions?

It is a Swindle folks, pure and simple.

Apparently I am not the only one who has seen this movie before. It is time to SLOW DOWN FOLKS and ask questions and look at the evidence before running off to find out there are no WMD. Other than the Credit Default Swaps (see AIG), that is.

Now I don’t want anyone to think that I am saying that Our Economy isn’t totally fucked up, it is. But, that was part of this Administration’s plan all along. What I am saying is that this particular Administration Swindle is to pay off the Swindlers.

Oh, and Warren Buffett is betting against Paulson, et. al., but what does the Oracle know?

Update: Dave Johnson over at Seeing the Forest has a take on this plan that is quite humorous and suggests that my aluminum foil hat isn’t on as tightly as I thought.

The Financial Onion

Until someone starts to systematically peel back the onion skin layers on the Mortgage Backed Securities (MBS) and those Securitized Investment Vehicles (SIV) there should be no deal. How can the Government decide how much to pay for the “assets” of these “banks” until they know the value of those “assets?” It has been several years now since this debacle started to unwind. To date I haven’t seen any discussion on how the tranches are being evaluated. All I keep hearing is that “No One Knows Their Value.” What have these Masters of the Universe been doing for all this time? Shouldn’t they be looking and seeing what the value of each piece of the tranche is and if not why not? If we could do it with Fannie Mae on ledger cards, back in the day, certainly in the days of sophisticated computer programs it can be done now?

Why isn’t this being done and talked about or are they afraid of what they might find? Are they hiding something? I think that my aluminum foil hat is getting too tight.

Here is Krugman on the “Plan”:

Perhaps what we are witnessing is what Naomi Klein identifies as Disaster Capitalism.

Keep in mind that all of this was warned against. I think this is just the start of a very scary journey in the States. Electing McCain and his economic adviser Phil Gramm who is the father of the Commodities Deregulation Act is only going to make the ride bumpier.

But what do I know?

So, What Have We Learned this Week?

Well, Socialized Medicine, as in Medicare, i.e. Universal Health Care, for Everyone, is too expensive when it costs billions to provide an actual service to taxpayers. Socialized Risk for Private Investment Bankers and the entire Financial System, is too Big to fail and not too expensive when it costs trillions and doesn’t provide a service but extracts actual money from taxpayers. You have to love the Republican answer as to who is too Big to Fail and who needs to be protected from the Free Market!

Apparently that Free-Market Deregulation philosophy works really well or not as the case may be. Karl Marx where are you when we really need you to explain this conundrum?

Only the Oligarchy gets Socialism. The Serfs on the other hand get to pay for the excess of their Overlords and the Free-Market System of Capitalism.

In some worlds this is seen as fair. Whose world is that? Vladimir Putin would be proud!

Is this the Shock Doctrine at work?

The Price for Silence?

The big CEO “Golden Parachutes” that they receive and which we think are indecent are apparently just the cost of doing business. Business, that is often replete with secrets and possible fraud. So, I wonder, because I am wearing my aluminum foil hat right now, do these obscene packages actually buy something from these departed Masters of the Universe?

It isn’t as if we don’t all know that the Mortgage/Financial Debacle wasn’t replete with fraud, etc., and that there wasn’t any oversight by our Republican Congress and Regulators as to what these companies were doing while making their billions.

Blackwater/Halliburton anyone?

I am not saying, I am just saying.

Your New Job

Point of View

Everyone views the world through their own lens, or as they say Point of View (POV). That is one of the reasons that I don’t believe in objectivity. I do believe that there are such things as “facts.” And I do believe that everyone is entitled to their own opinion, but I don’t believe that you are entitled to your own “facts.” That said, most folks regard or disregard “facts” based on their own POV.

So having made that statement, I think the Senator Obama is viewing the American Electorate through his own POV. This is a big mistake. I think that he needs to get around and about more. Due to my involvement with horseracing I meet with many different types of folks who make-up the American Electorate. Obama does nuance, the American Electorate that I come in contact with does not do nuance. The American Electorate does vote its prejudice over its interests however. So if the Good Senator thinks that because he is on the right side of the issues and is Post-Racial, and that that will win the day he is totally wrong.

Didn’t we have this experiment in 2000 and it hasn’t worked out that well. Then in 2004 the American Electorate elected an abject failure when the evidence was overwhelming that he and his administration were an abject failure. But you know the other guy was so “French.”

Now, I don’t know how the Senator can get over this other than to define the Republican Senator as more of the same that we have been suffering from the Republican Bush Administration for the last eight years and the Republican Congress since 1995.

McCain is part of the Republican Problem not part of the solution. If Obama’s campaign can’t make the Republican Economic and Financial Meltdown an albatross around John McCain’s neck and scare the bejesus out of the American Electorate then we need to start having a test for voting. Well, actually the Republicans would love that (being anti-suffrage that is), so I guess we need to dumb down the rhetoric to sound bites that even a ten year old can get ala Goebbels/Rove.

How we deal with the race issue and independents is above my pay-grade as they say. As for Palin she is nothing more than a diversion, you know that bright shiny thing that distracts the MSM from the real issues. So, if voting your interests according to the issues isn’t your thing how do we get you to acknowledge your interests and get you to vote for yourself interest through the lens of your own POV?

History shows that it is clear that nuance ain’t going to do it.

Palin for President?

Works for me!

Meredith Whitney

Many of the Cassandras such as Roubini and Whitney were ignored and disparaged. Now all of a sudden they are everywhere on the tube. One of those was Meredith Whitney of Oppenheimer.

Like Roubini she was paying attention and everyone ignored her.

Oy!

Without comment!

Lehman Bros. Going Down: Bailout?

Well it isn’t exactly surprising. So who is next Washington Mutual?

Thursday, September 11, 2008

WaPo: Treasury and Fed Assisting in Sale of Lehman

by CalculatedRisk

From the WaPo: U.S. Government Assisting in Sale of Lehman Brothers (hat tip Maven)

The Treasury Department and the Federal Reserve are helping Lehman Brothers put itself up for sale. The details are not finalized, but sources familiar with the matter say the purchase is expected to be completed and announced this weekend before Asian markets open Monday morning.

Another working weekend for Paulson.

This post from earlier post from CalculatedRisk was just a rumor. Some rumors appear to be more spot on than others.

Another question is what kind of bailout and federal taxpayer inoculation will be necessary to the “Let’s Make a Deal” ramifications of Mr. Paulson’s latest venture in Non-Capitalism and the Non-Free-Market.

And another question: how can PIMCO’s El-Erian’s conclusion that consolidation of the banks to just a few is a good thing? Doesn’t this mean that they will all be “Too Big to Fail?” And how exactly is that a good thing?

Update: No Bailout, Lehman is filing for Bankruptcy Protection. And Merrill is looking to find a buyer. That will leave Goldman Sachs and Morgan Stanley still standing. The big question is still AIG!

Gutter Politics, Indeed!

Here is an email I received from one of my most beloved friends. I know that she won’t mind my passing on her rant and the video (by the great Mr. Greenwald) that accompanied it.

I'm sending you all this email because the attached youtube video speaks of
"gutter politics."

I think that the Republicans and their media experts are exactly that:
experts. They have had years of experience and access to the mediums that
control groups and individuals. The tactics they use to manipulate whole
populations are being used upon the American people to keep them thinking
about things other than the issues. If you don't believe me, take a look at
how media shape Americans into overweight, unhealthy people. We would like
to believe that we, as individuals, resist the constant barrage of
commercial advertising (brainwashing). We would like to believe that it is
everyone else that gets pulled into the consumerism--from diet soda, to
SUVs, but even if you, as an individual, don't, the statistics prove that
our nation is one of slow-moving, non-motivated, obese, people (and
children) with cardiac and other health problems who are in debt. And, they,
my friends, are the American voters. Some of them are our friends and
family.

Main stream media focuses upon sound bites that "pull our chains," "push our
buttons". They are incendiary, and they are INTENDED to be. They pull our
focus away from important issues and suddenly we are annoyed with our
friends and family because they agree with or are distracted by a well-put
phrase that in some way may speak of a truth or a feeling.

Once someone told me that the way the British controlled so many places in
the world was that they found out which groups hated each other and found
ways to set them against each other--meanwhile they exploited both sides.

No one is perfect. None of our leaders fit the bill to be leaders. Many are
tainted by greed and corruption.

Our best efforts, at this time, however, I believe, are to continue to
expose these clever manipulations. These are our real enemies. The ones who
control the media and who control the candidates and their ad campaigns.
Why, you could sit in front of your TV and watch the ads and get angrier and
angrier about how much lying is going on. And that is right where they want
you---sitting in front of that TV, contained, not meeting with groups,
picketing, marching, talking in your community or being effective.

One day Palin nearly calls herself a bitch with lipstick, the next day, in
another context, Obama is accused of attacking her because he uses a similar
phrase. I don't think this is coincidence. I think Palin has been presented
in a specific way to piss off a lot of people, make people afraid, and at
the same time act like a leader superficially in a way that any exposure to
the truth becomes an attack which is then turned around and viciously
attacked. We're not dealing with responsible statesmen and women. We're
dealing with vicious, power-hungry mind sets that see only black and white,
right and wrong. No different from the first expression of this mind set in
2001: "You're either with us or you're with the terrorists." This leaves no
room for thinking, questioning, evaluating. It is an underhanded demand for
complete obedience.

We have seen in our lifetimes, nations who have come to independence without
a war. This comes about by being human and respecting other humans,
connecting as humans, speaking, communicating and standing firm for what we
believe in while exercising diplomacy and negotiation. It can be done. Why
feed into the vicious, anger-making. We know what they are trying to do.
That arms us and gives us a chance to not react, but to find another way to
be to expose them for what they are.

Watch carefully at what is going on here. Don't get pulled into the media's
manipulating. It will exhaust you and make you unable to see the real
villians. When we're exhausted from their "gutter" tactics and
mud-wrestling, they will rob us of our money and our freedom. They are
experts. They know what they are doing. We have to find ways to out-smart them.

The problem is that so many of the electorate fall for this shit. And they are truly clueless much like the Republican “Hockey Mom” is about the “Bush Doctrine.” The question for me is: why is this acceptable? And why does the MSM repeat these lies and distortions repeatedly and without calling them lies?

Say you were a journalist and/or someone who could or might be picked to be the Vice President of the U.S.A. by a responsible nominee for President, don’t you think it would behoove you to be at least slightly interested in current events and the politics of the U.S. Government for the last eight years? Now I realize that the average American might not know what the “Bush Doctrine” is, but the putative VP, and possibly President, should care enough about our standing and position in the world to understand it! Does she not understand the Iraq War where her son has been deployed to? This is irresponsible as a mother and a citizen.

I am not saying, I am just saying!

Chris Matthews Gets It!

This is a late post and update on the convention situation. So, without any attribution, other than your total trust in what I say and my ability to recall anything (or something, as the case may be,) I made this note the other day after watching Hardball. And I have to say, I was blown away by the obvious insight of the talking head who usually isn’t all that insightful. According to Chris Matthews what was evident from the two conventions was the overarching philosophy of the two parties. The Dems are the party of “We’re In This Together” (WITT) and the GOP is the party of “You’re On Your Own” (YOYO) and that is the difference that was even evident to Matthews in what he witnessed in his coverage of the two conventions. I was frankly shocked that he was even aware of these two contrasting world views and political philosophies.

What is so infuriating about this obvious difference in the two party’s philosophy is why the lauded middle-class of the U.S. Electorate would vote against their own interests. Because the GOP YOYO’s when they say “You’re On Your Own,” the really mean it! You don’t count and you never will count in their equation.

And just because I love him, here is an interesting interview at the RNC with Thomas Frank the author of What is the Matter With Kansas? and Wrecking Crew:

Lord, he is so young and so smart. It gives me faith in the future.

Another U.S. Credibility Problem?

So, it appears that the U.S. Military has a little credibility problem in Afghanistan. Of course this is not shocking considering who they listened to so as to verify the initial U.S. “cover-up” investigation of the killing of Afghani civilians in the attack to kill or capture a head of the Taliban.

This was pointed out by Froomkin:

Afghanistan Watch

James Gerstenzang writes in the Los Angeles Times: "Amid rising anger over civilian deaths in Afghanistan, President Bush says he is sending more forces to fight there, but cautions 'there will be times' when U.S. strikes result in the loss of innocent life. . . .

"Tension over civilian casualties in Afghanistan flared after an Aug. 22 U.S. strike in the western province of Herat in which Afghan and United Nations officials said 90 civilians died. U.S. military officials had concluded that 35 militants and up to seven civilians were killed.

"However, the military is sending a senior officer to review new evidence after videos surfaced showing dead children and grieving Afghans. . . .

"Bush is addressing the issue in the face of growing criticism, including from Afghan President Hamid Karzai, a close ally.

"'Regrettably, there will be times when our pursuit of the enemy will result in accidental civilian deaths,' Bush says in his prepared speech, without mentioning the Aug. 22 strike. 'This has been the case throughout the history of warfare, yet our nation mourns every innocent life lost.'

Candace Rondeaux and Karen DeYoung write in The Washington Post: "The U.S. decision to again probe the Aug. 21 attack in Azizabad, near the western city of Herat, came at the urging of Gen. David D. McKiernan, the top NATO commander in Afghanistan. McKiernan said he was prompted by 'emerging evidence' that threw into question the finding of a U.S. investigation that five to seven civilians died. McKiernan had earlier said he concurred with that finding....

"Military officials said the new evidence included a cellphone video showing dozens of civilian bodies, including those of numerous children, prepared for burial in Azizabad after the attack. McKiernan was shown the video Friday by Kai Eide, the chief U.N. representative in Afghanistan."

Tom Coghlan writes in the Times of London: "The Pentagon's original investigation concluded last week that US forces used close air support after coming under heavy fire during a mission to seize a Taleban commander named Mullah Sadiq. They allege that he died in the operation.

"The US military said that its findings were corroborated by an independent journalist embedded with the US force. He was named as the Fox News correspondent Oliver North, who came to prominence in the 1980s Iran-Contra affair, when he was an army colonel."

Good for McKiernan. It is good to see someone in the Military Command who when presented with actual evidence is willing to re-evaluate the “Military Cover-Up.” However, does the name Gen. Antonio Taguba and Abu Ghraib ring a bell?

I am not saying, I am just saying!

Robert Reich, When I Love Him, I Really Love Him!

Now I don’t always agree with him but his opinions are hard to dismiss. So, here he is on the totally predictable Fannie Mae and Freddie Mac (see my post) situation.

Sunday, September 07, 2008

Fannie and Freddie, as Predicted

A reprise of what I wrote August 25: Any day now -- perhaps any hour -- the plug will be pulled on Fannie Mae and Freddie Mac, and a massive government bailout will ensue. Together, they'll become the largest government-owned entities in American history, and, once again, taxpayers will pay the bill, which could come to $25 billion or more.

One question is how did we ever get to this? The Savings and Loan Bailout of the late 1980s should have taught us that when government guarantees the downside of risks and private investors reap the upside gains, there's hell to pay. The risks Fannie and Freddie took on weren't officially guaranteed by the government -- that is, by you and me -- but investors assumed they were. And so did Fannie's and Freddie's executives, who reaped a bonanza with bonuses in the tens of millions each year.

Apologists will say that Fannie and Freddie exist to make housing loans to low-income Americans, so it was inevitable that the two giants would get caught in the quagmire of the housing burst. But the fact is, Fannie and Freddie -- and the executives who ran them and still run them -- have been out to maximize profits. Period. Just the same as every other mortgage and investment bank. High-risk sub-prime loans offered a higher rate of return, so Fannie and Freddie went into them big time. And because of the implicit government guarantee, Fannie and Freddie could take on even more risks and make even more money. Until now.

It's another case of socialized capitalism, folks. The largest, yet. Along with making lots of money for investors and their executives, Fannie and Freddie corrupted our political process. They blocked any attempt to reign in the risks. Their lobbyists were and are the most sophisticated and among the most ubiquitous in Washington.

What to do now? Hope that, like the S&L fiasco, taxpayers can get back a fair portion of our dollars. But unlike the S&L fiasco, this time we should make sure we bury socialized capitalism for good.

Now the thing that makes me crazy is that back in the day when I was involved in banking with all this Fannie Mae and Freddie Mac stuff we had ledger cards which laid out the actual borrower, address of the property, mortgage amount, interest rate and mortgage status. So how is it that in this day of computers that we can’t figure out this information on each and every mortgage in each and every tranche of this debacle so as to figure out which loans are okay and which are in trouble? You know, so we could actually figure out the mark-to-market value of the tranche? It seems clear to me that if we could use individual typed ledger cards back in the day to figure this out we should be able to, using computer records, have a record of this today. I am shocked that the Masters of the Universe are so “Stupid” that they are unable to do this really simple analysis.

This said, in the last few years I have had to deal with many accountants who couldn’t do any forensic analysis if their lives depended on it. It appears that computerization has dumbed-down and crippled our professionals.

May be we should go back to the old paper and typed ledger card days? Not to mention the days when the entity that made the mortgage held the mortgage and risk. I know that I am so Old School.

JMHO!

Yes, Colonel: Everything is Now for Sale!

As you all know I love the Col., W. Pat Lang, so here is his latest and it is so poignant. As President Bush said after 9-11, “Go shopping.” Apparently there are no limits to the commercialism and consumerism of our culture.

The Big Red One - A Sears Property

"From Cantigny, France, and the Argonne Forest to North Africa, Normandy, Vietnam’s Iron Triangle and Iraq —and now hauteconcept.com?

Foreign battles aren’t new for the 1st Infantry Division, but this firefight is from another world, a clash between the New Army and Old over plans to commercialize the 1st Division’s historic “Big Red One” insignia in a sportswear line at Sears.

After days of questioning, the Army confirmed Monday the arrangement was first reached in June 2007 on the advice of an outside licensing agency, The Beanstalk Group in New York, but the full scope of the royalties to be earned has yet to be disclosed."

politico.com

---------------------------------------------------------------

What collection of soulless swine did this?

Pease tell me it was not anyone who ever wore the US Army's uniform. Unfortunately, it may have been. In recent years I have been depressed to hear senior officers babble about business science, systems analysis, weapons design and the social sciences to the exclusion of all else.

Semiotics is a "science" that is concerned with symbols. The thinly disguised Walmart managers in the military like to talk about semiotics. The 1st Division's shoulder patch is a symbol. It has meaning for those who have worn it. It may still have some meaning for the family survivors of those who wore it.

I used to listen to the voices of the First Division's "grunts" as they passed in the red dust of Vietnam bearing their burden, their clothing soaked with sweat in the miserable heat. "It don't mean nothin'," they would often mutter. "It don't mean nothin'."

There is a recruiting commercial on television now that depicts a young man who has recently joined the Army. He is a farm boy. He is a fine looking soldier. His farmer parents are in the commercial. His father wears a cap on the front of which is sewn the First Division's shoulder patch. It is dirty. It is faded but it is there because this division was the Army's premier unit for many years.

The organizational men and women in the Pentagon today care little for such sentiment. They think that "divisions" are an outmoded form. Why not sell the symbols of the past? Indeed. Why not?

"It don't mean nothin'." Pl

When supporting our troops becomes supporting our corporate interests so obviously it becomes clear what we have become.

And, it is not a pretty picture.

Freddie F**cked Up!

Well I am shocked!

Here is the awful truth if we are to believe Pravda on the East River.

September 7, 2008

Mortgage Giant Overstated the Size of Its Capital Base

By GRETCHEN MORGENSON and CHARLES DUHIGG

The government’s planned takeover of Fannie Mae and Freddie Mac, expected to be announced on Sunday, came together after advisers poring over the companies’ books for the Treasury Department concluded that Freddie’s accounting methods had overstated its capital cushion, according to regulatory officials briefed on the matter.

The proposal to place both companies, which own or back $5.3 trillion in mortgages, into a government-run conservatorship also grew out of deep concern among foreign investors that the companies’ debt might not be repaid. Falling home prices, which are expected to lead to more defaults among the mortgages held or guaranteed by Fannie and Freddie, contributed to the urgency, regulators said.

Investors who own the companies’ common and preferred stock will suffer. Holders of debt, including many foreign central banks, are expected to receive government backing. Top executives of both companies will be pushed out, according to those briefed on the plan.

The cost of the government’s intervention could rise into tens of billions of dollars and will probably be among the most expensive rescues ever financed by taxpayers.

Both presidential nominees expressed support for the government’s plans. Senator Barack Obama, Democrat of Illinois, said as he campaigned in Indiana that not acting could place the housing market in further distress.

Senator John McCain’s running mate, Gov. Sarah Palin, said at a rally in Colorado Springs that Fannie Mae and Freddie Mac have become too big and too expensive .

The takeover comes on the heels of a rescue of the investment bank Bear Stearns, which was sold to JPMorgan Chase in a deal backed by taxpayers. Already, the housing crisis has cost investors and consumers hundreds of billions of dollars.

The big question now is whether the federal government’s move to take over Fannie and Freddie will restore investor confidence in the nation’s credit markets, help stabilize the stock market and keep loans flowing to creditworthy borrowers.

Fannie and Freddie, by buying mortgages, provide banks and other financial institutions with fresh money to make new loans, a vital lubricant for the housing and credit markets.

Under the plan, the Treasury Department itself will begin buying mortgage securities, providing crucial market support.

As a result of the government’s intervention, the cost of borrowing for Fannie Mae and Freddie Mac should decline, because the government will be insuring their debts. Equally important, because the government is backing the companies, they will continue to buy and sell home loans.

But the plan will probably do little to stop home prices from falling further. And foreclosures are almost certain to rise.

Just a week ago, Treasury officials were still considering a wide variety of options for Fannie Mae and Freddie Mac, ranging from doing nothing to taking over the companies completely, according to people with knowledge of those discussions.

The Treasury secretary, Henry M. Paulson Jr., who won authority from Congress last month to use taxpayer money to bolster the companies, always maintained that he hoped never to use that power. But, as the companies’ stocks continued to languish and their borrowing costs rose, some within the Treasury Department began urging Mr. Paulson to intervene quickly.

Then, last week, advisers from Morgan Stanley hired by the Treasury Department to scrutinize the companies came to a troubling conclusion: Freddie Mac’s capital position was worse than initially imagined, according to people briefed on those findings. The company had made decisions that, while not necessarily in violation of accounting rules, had the effect of overstating the companies’ capital resources and financial stability.

Indeed, one person briefed on the company’s finances said Freddie Mac had made accounting decisions that pushed losses into the future and postponed a capital shortfall until the fourth quarter of this year, which would not need to be disclosed until early 2009. Fannie Mae has used similar methods, but to a lesser degree, according to other people who have been briefed.

Representatives of both companies did not return calls or declined to comment. But officials who have been briefed on the plans said late Saturday that the companies had agreed to the takeover.

On Friday, executives from Fannie Mae and Freddie Mac were ordered to appear in the offices of their regulator, James B. Lockhart, in separate meetings. They were told that regulators were exercising their authority to place Fannie Mae and Freddie Mac in conservatorship, which would allow for uninterrupted operation of the companies but would put them under the control of Mr. Lockhart.

The details of those plans continued to be worked out on Saturday, when the Federal Reserve chairman, Ben S. Bernanke, met with Mr. Paulson, Mr. Lockhart and key company executives in Washington.

While Freddie Mac’s accounting woes make it easier for regulators to force the company into conservatorship, there was more resistance from Fannie Mae, according to people familiar with the discussions. Once the government took action against Freddie Mac, however, confidence in Fannie Mae would certainly waver. Given Fannie Mae’s declining financial condition, the company has few options but to concede to the government’s demands.

Accusations of questionable accounting are not new for either company. Earlier this decade, both companies paid large fines and ousted their top executives after accounting scandals.

Freddie Mac’s current chief executive and chairman, Richard F. Syron, joined the company in 2003 after the former managers revealed that they had manipulated earnings by almost $5 billion. The next year, Fannie Mae’s chief executive, Daniel H. Mudd, was promoted to the top spot after that company was accused of accounting errors totaling $6.3 billion.

The accounting issues that brought so much urgency to the bailout appear to center on Freddie Mac’s capital cushion, the assets that regulators require them to keep on hand to cover losses.

The methods used to bolster that cushion have caused serious concerns among the companies’ regulator, outside auditors and some investors. For example, while Freddie Mac’s portfolio contains many securities backed by subprime loans, made to the riskiest borrowers, and alt-A loans, one step up on the risk ladder, the company has not written down the value of many of those loans to reflect current market prices.

Executives have said that they intend to hold the loans to maturity, meaning they will be worth more, and they need not write down their value. But other financial institutions have written down similar securities, to comply with “mark-to-market” accounting rules. Freddie Mac holds roughly twice as many of those securities as Fannie Mae.

Freddie Mac and Fannie Mae have also inflated their financial positions by relying on deferred-tax assets — credits accumulated over the years that can be used to offset future profits. Fannie maintains that its worth is increased by $36 billion through such credits, and Freddie argues that it has a $28 billion benefit.

But such credits have no value unless the companies generate profits. They have failed to do so over the last four quarters and seem increasingly unlikely to the next year. Moreover, even when the companies had soaring profits, such credits often could not be used. That is because the companies were already able to offset taxes with other credits for affordable housing.

Most financial institutions are not allowed to count such credits as assets. The credits cannot be sold and would disappear in a receivership. Removing those credits from assets would probably push both companies’ capital below the regulatory requirements.

Regulators are also said to be scrutinizing whether the companies were trying to manage earnings by waiting to add to their reserves. Both companies have gradually increased their reserves for loan losses — Fannie’s reserves today stand at $8.9 billion, and Freddie’s at $5.8 billion.

Other companies, like private mortgage insurers, have been quicker to identify large losses and have set aside much greater amounts. Fannie and Freddie have dribbled out bad news with each quarterly announcement, suggesting they may be trying to manage this process.

Finally, regulators are concerned that the companies may have mischaracterized their financial health by relaxing their accounting policies on losses, according to people familiar with the review. For years, both companies have effectively recognized losses whenever payments on a loan are 90 days past due. But, in recent months, the companies said they would wait until payments were two years late. As a result, tens of thousands of loans have not been marked down in value.

The companies have injected their own capital into pools of securities containing these loans, arguing that their new policies are helping more borrowers.

Under conservative accounting methods, changing these policies would not have any impact on the companies’ books. However, people briefed on the accounting inquiry said that Freddie Mac may have delayed losses with the change.

“We have just had to nationalize the two largest financial institutions in the world because of policy makers’ inaction,” said Josh Rosner, an analyst at Graham Fisher, an independent research firm in New York, and a longtime critic of the government-sponsored enterprises. “Since 2003, when these companies’ accounting came under question, policy makers have done nothing.”

Now I love Gretchen though she is often not the best with facts though her overall picture is usually prescient. That said she isn’t the only voice on this government bailout. The Washington Post reports the same. Not that this comes as news (see my post of August 27^th).

Yes taxpayers, we are going to pay for GOP deregulation and the Wall Street Masters of the Universe miscalculation and malfeasance. Okay a billion here and several billion there and the next thing you know we are talking real money. But that is the Elite’s way of doing things isn’t it! It is called the socialization of Rich Risk!

So how exactly is the cost of living going for all of us regular, not rich folks, going? Any socialization there? Not so much, aye!

To all the McCain supporters and his Party’s Elite who are fond of Phil Gramm I want to know what are they going to do to “Change” the situation they have brought to this Country’s Financial and Economic situation?

Just Not Muslim Enough?

Apparently the Rove, Republican, U.S. Attorney isn’t interested in charging the “alleged” Obama assassins (see my post) of being assassins.

David Neiwert, thank God, is on the case.

Jon Stewart on GOP Charges of Sexism

McCain: Feminist?

With his pick of Gov. Palin one wonders how he could have answered this question and not addressed the misogyny of the question. Especially now that he thinks that every question about Gov. Palin is rife with misogyny and/or sexism.

I don’t know of anyone who has referred to her as a Bitch. But, I guess it all comes down to whose ox is being gored!

I would be shocked if women fall for this ploy. I have more respect for the intelligence of the average woman than the McCain Campaign. I hope that I am right!

Palin-Troopergate

They report and you decide:

This is McCain’s version of ethics, honorable civil servants and good government. Not to mention what he thinks of the V.P. position which is one heart-beat away from the Presidency.

McCain-Palin is just another part of the Wrecking Crew.

Obama’s Acceptance Speech

For those of you who missed what Patrick Buchanan called the Finest Convention Speech ever here it is:

This is History in the Making Folks.

Please be a part of it. Our Country needs you!

P.S. I am late to this because of a prior obligation. That said, I still had to post it no matter how late.

Buchanan Loves Barack’s Speech!

And as a Presidential speech writer he should know!

He is right. I have seen them all since 1964 and it is the FINEST that I have ever seen or heard. For Buchanan to admit it, all I can say is: WOW!

Celebrating and Dancing for America and Barack!

Live from Mile High Stadium it’s Stevie Wonder, 85,000 Americans, the MSNBC Dancing Pundits, and the Blues Brother Pat Buchanan.

This is the best Convention I have ever seen.

Let’s hope it is “Signed, Sealed, Delivered.”