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So the John McCain is suspending campaign activities for the moment so he can do his job as United States Senator and work on the current financial crisis and bailout vote.  I saw this on Drudge and didn’t really believe it… then I saw it at Michelle Malkin’s site and the AP, and it kind of sunk in.  McCain is also asking the debate commission to postpone Friday’s debate so they can focus on the bailout bill and have a “leadership” meeting (including President Bush and Barack Obama) to try and work out the details and a path forward.

I can hear the liberals now, claiming McCain is scared or not ready, or throwing a Hail Mary to save his Presidential hopes.

Sorry, I don’t buy it.  Disagree with Senator McCain as I often to, I don’t think this bold action is a political calculation.  Its got a 50/50 shot of killing any chance he has in the election, especially with a hugely biased media framing the story.  But unlike some politicians, I believe John McCain sees his duty as Senator as a solemn promise to work on behalf of the country and not his own self interests.  Just as he would rather lose an election than a war, I believe he would rather lose an election than fail the American people at this trying time.

If you paid attention to the talking heads, it was a foregone conclusion that neither McCain nor Obama would show up for the “bailout vote” as its better to leave the political hot potato alone that get in the middle.  But John McCain is not only going to vote, he’s asking for the ball.  When the game is on the line and you are down by one, you give the ball to the team leader who wants it and isn’t afraid to take the last shot.  John McCain wants to take the shot.

Its a stark contrast from someone who votes present 130 times or has a tendency to skip contentious votes.  But now Obama can’t sit idly by.  Will he take the opportunity to lead as well or will he look for someway to pass the ball?

Time will tell, and the election is likely on the line.  But at least John McCain is putting Country First.

>>John McCain’s Statement

UPDATE: Video

UPDATE: Harry Reid can’t help but play politics and continue being an embarassment. After yesterday trying to get McCain to support the bailout and take leadership in the issue:

“We need, now, the Republicans to start producing some votes for us. We need the Republican nominee for president to let us know where he stands and what we should do.”

Reid is now telling John McCain to stay away.

But yesterday, Reid demanded that the White House made sure the legislation had John McCain’s backing, and Reid floated this bogus piece of news clearly intended to force McCain’s hand: “I got some good news in the last hour or so … it appears that Sen. McCain is going to come out for this.” McCain flatly denied that he had endorsed the plan.

So Harry Reid says that it’s essential that John McCain backs legislation designed to avert the greatest economic meltdown since the Great Depression. And when McCain says the highly problematic legislation, in its current form, is not good enough, Reid tells McCain to stay away from Capitol Hill. Who’s playing politics with economic crisis?

It’s not just Franklin Raines advising Barack Obama, another failed Fannie Mae CEO not only advises Barack Obama but also was on his VP Selection Committee and has raised hundreds of thousands for the campaign.

How can Barack Obama be part of the solution when he is being advised by and taking money from part of the problem?

We said earlier the “talking point of the week” for Obama surrogates was to paint anyone who disagrees with “The One” as racist. Apparently Time Magazine is part of the fold, and their “lead political reporter” is now on the attack over McCain’s ad linking Franklin Raines of Fannie Mae to Barack Obama.

FACT: Fannie Mae & Freddie Mac contributed over $126,000 to Barack Obama, making him second only behind Democrat Christopher Dodd, chairman of the Senate Banking Committee (who is supposed to oversee Fannie, Freddie and the mortgage market).

FACT: Franklin Raines, appointed by Bill Clinton, was CEO of Fannie Mae from January 1999 to December 2004.

FACT: Franklin Raines earned tens of millions of dollars during his time running Fannie Mae, yet investigators cited Raines and other officials in fraud and accounting problems.

FACT: Franklin Raines was ousted from Fannie Mae at the end of 2004 after accounting problems and other management issues forced the company to restate earnings by 9 BILLION DOLLARS.

FACT: Franklin Raines was sued for his role in the Fannie Mae scandal and in a settlement agreed to pay $24.7 Million.

FACT: This problems with Fannie Mae are part of what led to the eventual collapse of Fannie, Freddie and the mortgage market in general.  Fannie and Freddie are in some way responsible for more than half of all mortgages in this country, so when they have problems the entire mortgage market feels it.  Problems caused in part by outright fraud, mis-stated earnings, veiled profits, and a policy of buying new debt while not paying down the old.

FACT:  Due to collapse of Fannie and Freddie, in no small part related to the excellent management of Franklin Raines, the American taxpayer bailed them out at a tune of $200 BILLION.

FACT: The Washington Post reported that Barack Obama was being advised by Franklin Raines in July of this year.  There is no record of Barack Obama disputing that report at the time.

FACT: John McCain released the following ad yesterday, citing the Washington Post article and spectulating about the judgment of a candidate who would seek advice from Franklin Raines who is partly responsible for the pain and economic problems the American taxpayer is facing today.  And who, at the very least, was responsible for Billions in Fraud and had to pay Millions in a settlement because of that fraud.  And even after the fraud, Barack Obama was accepting over $126,000 from the company.

FACT: Now, all of the sudden, Barack Obama is disavowing that he ever received advice from Franklin Raines.  A charge he didn’t bother to make when the Washington Post reported on that advice in July.

FACT: The Times political report (not opinion columnist, reporter) calls the ad racist.

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How about some “Straight Talk” (I hope Senator McCain won’t mind)?  Just because Franklin Raines is black, and the ad rightfully links the two of them, does not make the ad racist.  Equality means people are equally accountable, regardless of color.  So Barack Obama doesn’t get a pass on having the POOR JUDGMENT to seek, advice from fraudster and mis-manager Franklin Raines because he too is black.  That iss absolutely an absurd charge, and the Times and their “lead political reporter” owe their readers and John McCain and apology.

Barack Obama cited “judgment” as he major qualification to be President.  The very judgment that led him to seek advice from a guy who was responsible for $6 - $9 Billion in fraud that the American taxpayer is now paying for (and then some).  The very judgment that kept him quiet while Chris Dodd was obstructing John McCain’s efforts to reform Fannie and Freddie in 2005.  The very judgment that allowed him to accept over $126,000 in contributions from Fannie and Freddie.  The very judgment that allowed him to sit in a church for 20 years while his pastor blamed the U.S. Government for the AIDS virus.  The very judgment that he used whingen vot 4 times against protections for infants that were born alive, preferring to let them die in soiled utility rooms without any medical care.  The very judgment that he used when working with and accepting contributions from unrepentant American terrorist Bill Ayers.  The very judgment that let him get a sweetheart real estate deal with slumlord Tony Rezko, who has now been convicted on corruption charges.  The very judgment that allowed him to seek earmarks for the hospital where his wife worked and another one for a fundraiser.

Shall I continue?

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The ad was fair.  The ad was correct.  The ad was not racist.  The question is once again Barack Obama’s judgment, of which there is none.  And because Obama and the leftist lemmings can’t defend his judgment, the return to making racial smears against his opponent. You’ve seen it all week.

Who advises Barack Obama and economic and housing issues?  Franklin Raines, the same guy who got paid $25 Million dollars to run Fannie Mae into the ground.  Instead of looking for solutions to the housing and economic crisis, Barack Obama gets his advice from one of the guys who created the problem.

Change?  I think not.

Barack Obama can talk about change, but he is part of the problem, not the solution.  Barack Obama has received over $126,000 in campaign contributions from Fannie Mae and Freddie Mac (you know the giant corporations involved in the housing crisis that our tax dollars just bought).  So much for change.   Sounds like old Washington to me. The only person to rake in more money from Fannie and Freddie is Christopher Dodd, another Democrat and the Chariman of the committee that had oversight over Fannie and Freddie.

While Dodd and Obama took money from Fannie Mae and Freddie Mac, John McCain was speaking about their problems and trying to fix them, and he predicted that they would go down at the expense of the American taxpayer in 2005:

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

In fact, McCain cosponsored a bill to prevent some of the problems that have happened lately.  He saw the writing on the wall in 2005 and tried to do something about it.  Too busy counting their campaign contributions from Fannie and Freddie, the Democrats wouldn’t have anything to do with it.  Chris Dodd wouldn’t even let the bill out of committee.

Did Barack Obama take any leadership on this issue?  Nope.  I guess too much money was coming his way.  Politics of change?  Hardly.

Want to hear the voice of real change?  Listen to John McCain and the differences could not be more clear.  Barack Obama talks about it, but John McCain and Sarah Palin can actually get it done.

H/T: The Other McCain

Many of us in the business (at least the people I associate with) don’t like the Pick-A-Payment Mortgage plan, where every month borrowers get to choose from paying their loan at something like 1-1.5% (considerably below the interest rate), interest only, or based on a 15yr or 30yr amortization. Any guess what most borrowers choose?

The theory behind the loan is sound, and if you understand the loan, it gives you greater control of your finances and how to manage your debt. The problem is, most people who worked inside selling these loans didn’t quite understand… and that left many loan officer’s scratching their heads on how to explain it. If the LO doesn’t know how to explain it properly, how is the customer to understand? Furthermore, they got away with marketing these things as “If you are paying more than 1% on your mortgage you are paying to much,” or “Your mortgage payments as low as 1%!”. Of course neither of those are entirely accurate statements as the interest still accrued at a slightly higher than normal prevailing interest rate. But those statements aren’t entirely untrue either, and that’s how brokers, corespondents, and Wachovia itself sold the product.

So, unlike most of the other wholesale mortgage closings we have seen over the last 12 months, Wachovia leaving the wholesale business isn’t much of a surprise. In fact, this is the only one I could have even predicted, and honestly I’m surprised it didn’t come sooner. But don’t think its the mortgage broker who caused their 8.9 billion dollar loss. That’s a red herring, designed to focus the blame on others outside the company so you don’t focus on those within. It was Wachovia, not the mortgage broker, who chose to focus on Pick-A-Payment mortgage loans, who just until a few months ago, after everything had gone to hell, was still marketing the program (with huge potential negative-amortization possibilities) to brokers and their own customers. And it was Wachovia, not the mortgage broker, who made the bonehead decision to buy World Mortgage and others (including a subprime company or two) at the peak of the housing bubble to begin with. Of all people, shouldn’t bankers know you don’t buy something at the top… you wait to buy at the bottom so you can ride the curve to positive gains? I guess that’s where the real people on the ground are smarter than those in their glass skyscrapers surrounded by yes men with phony MBAs. But we’re the ones getting the blame for their 8.9 billion dollar loss. Yeah right.

The thing that sucks about this whole mortgage crisis, and the constriction in the industry, is how it will hurt consumers and our economy in the long run. The mortgage broker industry sprung up because there was a very large segment of the population not being served by their traditional brick-and-mortar bank. Whether it was the 9-5 hours, the fact that their deposits were elsewhere, the color of their skin, or a blemish on their credit… the banks didn’t or couldn’t help most Americans and another industry was formed. An industry that often offered better service, faster closings, and cheaper rates with less fees (keep in mind you can’t see most of the fees on a bank loan because the law doesn’t make them disclose them… but trust me, compare Good Faith to Good Faith and take into consideration what the Fannie Mae / Freddie Mac rates are for the day and you’ll find out that the bank’s usually charge more, they just get to play a little magic with the numbers).

The mortgage broker market was capitalism at its best. An untapped void was there, and people like me got involved tapping it. Once the banks began to realize that, they started searching for more ways to take back the pie they assumed was always theirs. From buying non-bank wholesale lenders to getting involved in alternative markets and opening up their own portfolios to loans outside their normal box. They even started being open later hours or Saturdays. And as they were adjusting their business practices to take some of the broker market back, they actively lobbied legislators for protections under the law. That is why banks/lenders don’t have to disclose yield spread premium (the money they make by selling you a higher interest rate) while brokers do. That is why the bank loan officers are not subject to loan officer licensing in North Carolina but everyone else is. That is why they are also not subject to fee caps, some disclosure requirements or even having an attorney present at the closing (as is required in North Carolina). Banks wanted to take the market back.

And they’ve been successful. The problem is, maybe they were too successful. At the same time they wanted a bigger piece of the pie, the pie began to sour. And now they are stuck having grown too late to have earned as many gains as they expected, and holding too much of the bag that they helped to fail.

But unlike the mortgage brokers, the banks will be back. Even though they are taking losses, it still plays into their longterm hands. And when the housing market rebounds (which it will), the only people left due to over-reaching government involvement and constriction in the market… will be the large banks. Who will successfully control the mortgage market once again.

You’ve probably read a lot of posts (this site included) complaining that the weasel Chuck Schumer’s disgraceful actions caused the bank run that led to the failure of IndyMac Bank.  If you want a good illustration of what a bank run is and why the Weasel Chuck Schumer is no different than the evil Old Man Potter, check out this post by Charlie Martin at Pajamas Media.

This morning I was listening to Clark Howard when some Deadbeat called in about his mortgage loan. He currently owes $350,000 on his mortgage but estimates now that his home is only worth $230,000 due to declines in the economy and housing market. So Mr. Deadbeat decided he didn’t want to pay what he originally agreed to and called his Financial Advisor looking for a way out.

The Deadbeat’s Financial Advisor instructed the Deadbeat to stop making his payments. Mind you, the Deadbeat can afford to make his payments, but is choosing not to, trying to game the system to forgive part of his loan balance. Instead of paying the lender for a loan he willingly took, the Deadbeat is putting his payment into a savings account each month, earning interest as his mortgage goes into default.

Why would he do this? Legislation is being batted around Congress that would forgive all but 85% of the current market value for home loans of customers who have found their home value drop. So Mr. Deadbeat with his $350,000 home loan, which he can afford, will get a new loan, guaranteed by the American Taxpayer for $195,500 (85% of the current market value of $230,000) at an FHA rate. That FHA rate will likely be lower than what Mr. Deadbeat originally agreed to pay.

What happens to the rest of his loan balance? He doesn’t have to pay it. The lender will have to write-off the difference… certainly giving them some kind of tax-break but ultimately coming at the expense of their stockholders. They obviously wrote a good loan if Mr. Deadbeat can still afford to make his payments, but they are getting hosed because Mr. Deadbeat on the advice of his Financial Advisor, aided and abetted by Clark Howard, are committing a fraud.

Mr. & Mrs. Taxpayer, welcome to the latest incarnation of welfare, where we are now rewarding able-bodied Americans who have the money, to stop paying their mortgage payments and commit fraud. Their reward for such despicable actions… a new mortgage loan that our tax dollars will guarantee. And if something happens and Mr. Deadbeat decides not to pay this debt as well… it will be our tax dollars once again to bail him out or be lost.

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We bought a TV a year or so ago for $2,000. Financed it at no interest for 24 months. Two generations newer of that same TV is now on sale for $1297. WE STILL OWE MORE THAN THAT. Where is the government to bail me out because the value of my TV is less than I owe?

We bought an SUV about 15 months ago. I can guarantee you its not worth what I still owe on it. But I keep making my payments every month. I took out the loan willingly, bought the vehicle I wanted and promised to pay off that debt. I have a moral duty to live up to that obligation.

What about people who bought stock in auto companies a few years back or internet companies in the late ’90s? Where is their government handout because the value didn’t do what they wanted?

Why do we consider our homes any different? There wasn’t an evil mortgage broker convincing this guy to buy more than he could afford. He knowingly bought a house at the time and one can assume to he thought it worth the purchase price at the time. It was certainly worth the value at the time, and even though its not now, he can still afford it. But instead he’s gaining interest on the mortgage payments every month while the Tax Payer and the Mortgage Lender get hosed.

And guess what. When this turns around, the housing market picks back up, and his home once again is worth $350,000 or more… who do you think gets to pocket all of the equity or sell it for a huge gain? That’s right… Mr. Deadbeat, getting rewarded once again for perpetuating a fraud on the Tax Payer and likely making a hefty profit on YOUR investment into his house.

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What happened to integrity? What happened to Personal Responsibility? Where has our country gone that it is commonly accepted to quit fulfilling your obligations so you can negotiate a better deal?

It makes me sick. And sadly this is all too common. We’ve known this was happening for a while, but for it to be talked about openly on a nationally syndicated radio program makes me sick. Clark Howard supposedly helps you “avoid getting ripped off.” But people are getting ripped off. The American Tax Payer is getting ripped off… as is the lender and the people who own its stock.

Shame on you Clark Howard. And as for the Financial Advisor… I can only assume he has a securities license through the Federal Government. If he does, we should seriously look into taking it back.

Unless, as a country, we find some personal responsibility again, I’m afraid we are doomed to fail. And the collapse will be much more severe than the current mortgage crisis.

I called it socialism, Senator Jim Bunning (R-Ky.) agrees:

“[W]hen I picked up my newspaper yesterday, I thought I woke up in France,” Bunning said during the hearing. “But no, it turned out it was socialism here in the United States of America and very well, going well. The Treasury secretary is now asking for a blank check to buy as much Fannie and Freddie debt or equity as he wants. The Fed purchase of Bear Stearns assets was amateur socialism compared to this.”

… “And for this unprecedented intervention in our free markets – what assurances do we get that it will not happen again? Absolutely none,” Bunning added.

Before, the government’s more modest mission was to make more loans available at lower rates. Now it is to make sure the loans that matter most to middle class Americans are made at all.

The new reality is scorned by libertarians and conservatives, who fear intrusions by the state in the market, and by populists and progressives, who rue a society in which education and housing increasingly rest upon the government’s willingness to finance it.

“If you’re a socialist, you should be happy,” said Michael Lind, a fellow at the New America Foundation, a research institute in Washington. “But you should really wonder whether you want people’s ability to pay for housing and college dependent on the motives of people in Washington.”

Emphasis mine. Read the whole thing.

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I believe decades from now, this may be what tarnishes President Bush’s legacy. In retrospect, as long as we don’t allow the “Hate Bush Crowd” to write all of the history books, the Iraq War will likely be looked at as a liberation of a people, the ousting of an evil dictator, and the spread of democracy to create a freer middle east. But just as FDR’s legacy is tied to social programs as much as it is tied to the second World War, this administration’s handling of the mortgage crisis and the greater government backing of mortgage debts will be identified with them as much as the War on Terror.

I can not emphasize any of this enough. This is not good and certainly not temporary. Social Security was supposed to be temporary, as were many of the taxes and other bureaucracies we endure. But once granted power or wealth, no government has ever given it up freely…. and thus starts a more rapid decline into oblivion.

We spent decades teaching people that free markets allow free people… that the best ideas come from capitalism and the innovation it allowed. That democracy and self reliance worked hand in hand and that socialism and communism were iron nooses around a society’s neck. Just as socialist and communist nations have fallen under their own weight, so too can we if we repeat their failings.

The conservatives and libertarians across this great land are not naive fools as they cry foul. They are students of history who understand the nature of our nation’s very foundation. Sadly those who are supposed to serve along with the whining masses do not. A government that gives you everything can take everything away. A people who cannot be self reliant cannot be free. These are scary times indeed… but hey… at least the socialists should be happy.

Fannie, Freddie & The Fed.