To see what Newt Gingrich recently said about amnesty for illegal immigrants, and ponder it carefully “in context” I searched for the transcript of that portion of the November 22, 2011 National Security Debate. I found the snippet of the CNN transcript and a video-clip of Gingrich’s statement published on a website called The Voice of Deseret. You might find Gingrich’s complete quote interesting: http://voice-of-deseret.blogspot.com/2011/11/newt-gingrich-touts-amnesty-for-illegal.html .
After reading and pondering, I wondered: How far off is the implementation of ‘the path to amnesty’ portion of the Gingrich’s ‘comprehensive immigration reform’ program?
If the processes for the path to amnesty begin only after we have controlled the U.S.’s borders (stopped illegal immigration and brought the legal immigration process under control) Gingrich’s suggestion doesn’t seem so radical. However, I believe it’s safe to say those first conditions - controlling our borders, stopping illegal immigration and bringing the legal immigration process under control - seem a long way off.
The whole issue raises a few questions: Is it necessary for the U.S. to notify illegal boarder crossers that if they enter the U.S. illegally after a certain (past or future) date they absolutely will not qualify for any program for amnesty for illegal immigrants. For such notification, is there a legally required notification process? Would such notification be done in English?
Note: All of the media reports, and transcripts of Gingrich’s statement which I’ve read improperly identify the Krieble Foundation [ http://www.krieble.org/Websites/krieble/Images/files/Red%20Card%20Solution%20White%20Paper.pdf ] as the Creeble Foundation.
The other day I was reading an article which mentioned an organization called FM Watch.1 Out of curiosity, I did a key-words-search on: FM Watch. I discovered FM Watch was founded by private mortgage industry interests in the late 1990’s. Apparently, FM Watch was created with defined purpose of focusing attention on anti-competitive and risky mortgage lending practices employed by the Government Sponsored Enterprises, Fannie Mae and Freddie Mac.2 And, it seems FM Watch even anticipated that, if unchecked, the behavior of these Government Sponsored Enterprises would evolve even further into more risky and stronger anti-competitive behavior.3
While I was reading about FM Watch I saw a reference and a hyperlink to a video presentation called “A Crisis of Credit Visualized” it was claimed to be a very good video presentation describing the circumstances involved in the real estate bubble and the mortgage crises. Out of curiosity I went to the link and watched the video presentation. I thought you might also find the presentation interesting.4
I thought “A Crisis of Credit Visualized” was a good presentation of the basic processes in mortgage lending, mortgage securitization and mortgage financing. However, with the exception of the comment about the role of Greenspan era U.S. Federal Reserve interest rate policy, it lacks any discussion about the role of federal housing policy and the Government Sponsored Enterprises (Fannie Mae and Freddie Mac) in the creation and the extension of the housing bubble.
Furthermore, the presentation fails to specifically explain how government subsidized cheap money financing and government subsidized mortgage insurance increased demand and pushed home prices to levels that exceeded borrowers’ ability to repay what they borrowed (to finance their home purchases).
And, the presentation fails to emphasize that, after the bubble peaked, as riskier borrowers defaulted on their mortgages and those homes went on the market, the excess supply of houses and downward cascading home prices caused home values to drop to the point that well qualified borrowers, who could afford their mortgages, began to question the economic wisdom of continuing to pay down their mortgage. These qualified buyers’ decisions not to continue to pay their mortgage contributed further to the excess supply of homes which contributed to the further deterioration of home prices.5
In the viewer comments on “A Crisis of Credit Visualized” I found a comment mentioning the lack of information about how federal housing policy and the behavior of the Government Sponsored Enterprises contributed to the crises of credit. The commenter provided a link to another video titled, Burning Down the House: What Caused Our Economic Crisis?6 I believe that, by watching both “A Crisis of Credit Visualized” and “Burning Down The House: What Caused Our Economic Crisis” one can gain a very clear understanding of the major forces which caused the U.S. economic crisis.
1. Freddie’s Friend Newt By Holman w. Jenkins Jr. Wall Street Journal Opinion/Editorial page November 19, 2011.
2. Is FM Watch a Crusader With an Agenda? By Louis Sichelman – RealtyTimes, pub. 7/5/1999
3. New Alliance Confronts FM Watch, Champions Existing Housing Finance System By Broderick Perkins RealtyTimes, pub.10/5/2000
4. The Crisis of Credit Visualized A video presentation by Jonathon Jarvis published on Vimeo - 3 years ago
5. Many mortgage borrowers think of the home as an investment they will use in later years to fund children’s education, or their own retirement. If these home borrowers begin to believe the investment will end-up being a loss, or can’t be refinanced, their attitude toward continuing to make their mortgage payment changes - significantly. See, Underwater Home: What You Should Do if You Owe More Than Your Home Is Worth? By Professor Brent T. White - pub. 10/15/2010 and/or key-words-search “Strategic Default”.
6. Burning Down The House: What Caused Our Economic Crisis YouTube by TheMouthPeace pub. Sept. 30, 2008
Dodd-Frank Act - Credit Risk Retention ProvisionThe U. S. Securities and Exchange Commission and five other federal agencies have solicited public comment on a proposed regulation which would require entities securitizing debt to retain a portion of each securitization. The expressed intent of this “credit risk retention regulation” is to cause those packaging debt into securities to be more sensitive to the quality of the total package of each of their securitizations (a la eating your own cooking).I’ve been reading the public comments, on this proposed regulation, as they have been posted on the Securities & Exchange Commission website. Yesterday, I read a very good comment letter written by Charles Lehmann (dated April 26). I thought you also might find Mr. Lehmann’s letter interesting. (Link to comment letters on proposed rule file s-7-14-11 http://www.sec.gov/comments/s7-14-11/s71411.shtml )On a slightly different note, over the past few weeks I’ve been watching the archived hearing testimony from the Financial Crisis Inquiry Commission (FCIC) and various congressional committees which claim to be attempting to find the causes of the housing bubble and the ensuing financial crisis. It’s become obvious to me that the FCIC and The U.S. Congress are far too political to reveal the true causes of the housing bubble and the financial crisis. While reading Mr. Lehmann’s comment letter I became curious about one of the footnotes on the letter. The footnote referenced a video presentation by John Allison, former Chairman and CEO of BB&T Corporation.I watched the video of Mr. Allison’s presentation and was thoroughly impressed with his grasp of the subject and the detail of his explanation. If you have any interest in The U.S. Financial Crisis: Causes and Consequences I suggest you watch the video. (You may want to skip the introductory comments which take six minutes and twenty nine seconds).
1 For a comprehensive explanation of the factors that contributed to the most recent financial crisis, see John Allison, Former Chairman and CEO, BB&T Corporation, Address at the 2011 Federalist Society Annual Student Symposium: The U.S. Financial Crisis: Causes and Consequences (Feb. 26, 2011). Available at:
The Scandal Too Few Are Discussing
You might be aware that in the United States we have what are called Nationally Recognized Statistical Rating Organizations (NRSRO’s). Under this system a small number of credit rating agencies (Moody’s, Standard & Poors and Fitch) were approved as raters of the credit risk of debt instruments. Institutional purchasers of debt, like insurance companies, banks, and general fiduciaries, are required by law to use these organizations’ ratings as a guide to their purchases. In general, such investors are required by law to only purchase debt instruments which are rated by the NRSRO’s as “investment grade”. Other’s investing in debt also rely on the NSRO’s ratings as a indication of the risk profile of their investments. [See, Nationally Recognized Statistical Rating Organizations Wikipedia entry at: http://en.wikipedia.org/wiki/Nationally_Recognized_Statistical_Rating_Organization ].
Recently, I became curious about Financial Crisis Inquiry Commission (FCIC) hearing testimony and Congressional hearing testimony on the subject of the NRSRO’s role in the housing bubble and the ensuing financial crisis. Fortunately, C-SPAN maintains a video library of such hearings, and in the video library I was able to find and watch some interesting questions and answers on the role of the NRSRO’s in the housing bubble and financial crisis.
The full hearings are a bit long, but I was able to copy a couple exchanges which I thought were interesting and characteristic of each of the two hearings from which they came. I’ve posted my brief video-clip copies on youtube. I thought you might find the video-clips interesting. The URL’s below are hyperlinked to the hearings
Too Little, Too Late (compare the dates Mr. Raymond McDaniel mentions to your bubble timeline):
The Role of The Rating Agencies (pursuing market share?):
Recently, I was watching a June 2, 2010 hearing conducted by the Financial Crisis Inquiry Commission (FCIC) which has been published in the C-SPAN video library.
In the hearing Warren Buffett provided testimony and answered questions of FCIC commissioners. One of the commissioners, Heather Murren,* asked Mr. Buffett a question about the business model of the Nationally Recognized Statistical Rating Organizations (NRSRO’s) and if, in his opinion, the structure of the NRSRO’s business model might have influenced their ratings.
As someone who is personally interested in independently produced investment research, institutional ‘third party’ agency brokerage, and institutional soft dollar commissions - used as payment for independent research - I found Mrs. Murren’s follow-up (to Mr. Buffett’s answer) very interesting. Her follow-up:
I would hate to differ with you. If you look at, for example, equity research, there are a number of boutique shops that are specifically known for the quality of their research. And, they do not engage in investment banking activities, so they don’t have as much of a stake in the origination process. And, to me, there’s some parallel between this area of research and some others. So, I guess my question really is, if you change the way people get paid, do you end-up getting a different outcome? So, that was really the nature of where I was headed with this.
* In April 2002, Mrs. Murren retired as a managing director, Global Securities Research and Economics, of Merrill Lynch where she was group head for the Global Consumer Products Equity Research effort. Also noteworthy, Mrs. Murren is married to James Murren, who before becoming the CEO of the MGM Grand, Inc., was a managing director and director of U.S. Equity Research at Deutsche Bank. Both Heather Murren and James Murren are Chartered Financial Analysts. (Heather Murren and James Murren both have biographical information published at Wikipedia).
I’m wondering if the Murren’s activities working for large full-service investment banking brokerage firms, which produce proprietary investment research, may have influenced Heather Murren’s positive comments about the quality of independently produced research produced by some independent investment research boutiques.If you would like to watch a video-clip of the portion of the FCIC hearing with Ms. Murren’s comment you can do so by following this hyperlink:
From the article, Hubris Headed For a Fall published in the Washington Post January 20, 2011 by George F. Will:
Moynihan noted a danger to his party in the tendency for the "stagnant services" to become government services: "The Democratic Party is identified with this very public sector in which relative costs are rising. By contrast, the Republican Party is identified with the private sector where relative costs are declining." The public sector's involuntary tendency to become, regarding productivity, a concentration of stagnation is a reason for government to become more circumspect than it has been about the voluntary acquisition of vast new responsibilities, such as micromanagement of health care's 17 percent of the economy.
From a 1/19/2011 Wall Street Journal Opinion Editorial article titled, Health Care Repeal Won't Add to the Deficit:
The history of federal entitlements is one of inexorable growth. Once erected, more and more people get added to the programs. The ACA will be no different. Spending will soar, and the tax hikes and spending "offsets" that were cobbled together to get the bill passed will either wither away or vanish altogether.
Repeal isn't a budget buster; keeping the ACA is. Assertions to the contrary are, well, audacious.
Mr. Holtz-Eakin is president of the American Action Forum and a former director of CBO. Mr. Antos is Wilson Taylor Scholar at the American Enterprise Institute and a former assistant director at CBO. Mr. Capretta is a fellow at the Ethics and Public Policy Center and a former associate director at the Office of Management and Budget.
From the Wall Street Journal article "Fed Felt Hamstrung By 2005 Bubble":
Janet Yellen, then the San Francisco Fed president and now the Fed vice chairman, said at the June 2005 meeting that newer financing options, such as interest-only mortgages, were widely viewed as "feeding a kind of unsustainable bubble." But she suggested that higher prices themselves were "curtailing effective demand for housing at this point and that house appreciation probably is poised to slow. So the increasing use of creative financing could be a sign of the final gasps of house-price appreciation at the pace we've seen and an indication that a slowing is at hand."
Aside from reviewing complex models for home prices and the economy, one central-bank economist, David Stockton, even presented officials later that year with a piece of anecdotal evidence that "almost surely suggests that the end is near in this sector."
Mr. Stockton had been channel-surfing and came across a new television series "Flip That House," he told central bankers in the Fed's boardroom, drawing laughter.
"As far as I could tell, the gist of the show was that with some spackling, a few strategically placed azaleas, and access to a bank, you too could tap into the great real estate wealth machine," he said. "It was enough to put even the most ardent believer in market efficiency into existential crisis."