Great video regarding climate change (December 2016) The speech was given last year but is well worth listening to again. It is Nobel laureate Ivar Giaever’s speech at the Nobel Laureates meeting in July 2015. Mr. Giaever challenges many of the assumptions made by climate change activists. Video
Christiane Amanpour – a good example of misguided media (November 2016). Ms. Amanpour, who represents herself as a journalist (not a political pundit or advocate), recently said: “I believe in being truthful, not neutral.” I would argue that the role of a journalist is to neutrally present all sides of an issue and let the public decide where the truth lies. The best way for a news source, such as CNN, to help the public find the truth is to hire journalists of various
Do noncitizens vote (illegally) in U.S. elections? Yes, and in all likelihood, by massive numbers (November 2016). Most political pundits claim there is little evidence of illegal voting in U.S. elections, but a closer examination shows that this is not the case. When you hear that there is minimal illegal voting a trick is being played on you. In almost every case, the status quo defenders count only the illegal voting that culminates in a fraud conviction. However, getting a fraud conviction is difficult. First, the illegal voting has to be detected, and this is very hard to do in systems requiring little voter identification and documentation. And even if potential illegal voting is detected, it won’t result in a fraud conviction unless the prosecutor can prove that the action was intentional, and not the result of confusion.
One form of illegal voting is that done by noncitizens, and that form of illegal voting has been estimated. In an article written in the Washington post, two political scientists describe the results of their analysis of data compiled by the Cooperative Congressional Election Study (CCES). Based on surveys of 828 noncitizens in 2008 and 2010, they found that more than 14 percent of the noncitizens admitted to being registered voters, and some admitted to actually voting. Based on the survey results, the researchers estimated that about 6.4 percent of all noncitizens illegally voted in the 2008 election, and 2.2 percent voted in the 2010 election. The political scientists further stated that the voting by noncitizens was probably enough to given Al Franken (Senator from Minnesota) his senate seat (the one that gave Democrats a pivotal 60th vote needed to overcome filibusters) and noncitizen illegal voting may have given President Obama his 2008 victory in North Carolina (where he won by just 5.1 percent of the vote). Based on their research, it is likely that hundreds of thousands of noncitizens illegally vote in every election. See Could non-citizens decide the November election?
“Black Lives Matter” – a movement based upon faulty statistics (November 2016) I have no desire to denigrate the black community; however, we must be truthful if we are to evaluate the assertions of the “Black Lives Matter” movement and of justice reform advocates. These groups commonly assert that blacks are targeted by police, and sent to prison, at rates greater than indicated by the percentage of blacks in the general population. However, these are not logical assertions because our police do not randomly interact with various segments of the population. Rather, the police are much more likely to interact where the crime is – and sadly, that is in the black community.
FBI statistics for 2015 show a shocking and disgraceful crime rate within the U.S. black population. On a per capita basis, the black arrest rate for murder is about 5 times greater than the murder arrest rate for whites. (anywhere from 4 to 6 times depending on assumptions about the percentages of whites and blacks in the general population). Some will argue that white murderers are not vigorously pursued and arrested by the police (perhaps due to “white privilege”). However, this seems unlikely. Murder is a very high-profile crime. When there is a homicide, the press, family members, and the general public put a great deal of pressure on police to make an arrest. It is unlikely that a “pass” is given to an alleged killer simply because he is white. Further, many of the major city police forces are racially diverse. In some cases, minority policemen and women outnumber white officers. Should we assume that minority police officers ignore the murders committed by whites?
With regard to other types of crime (other than murder) arrest rates vary, and in many cases there is a smaller differential between the arrest rates of blacks and whites. However, it appears that blacks are significantly more likely than whites to commit most types of crime. This should not be a surprise. Blacks are more likely than whites to be young, poor, and less educated. In addition, they are far more likely to have been raised in broken homes. All of these factors tend to correlate with high crime rates.
In conclusion, we must not make broad assertions based on simplistic assumptions. Many people in the black community are extremely upset because they are being told that judicial prejudice is a fact. However, the available statistics simply do not support this “fact.” More intensive analysis is needed. FBI 2015 arrests by race and ethnicity
Regarding Iran nuke negotiations, ABCNEWS survey misleads (April 2015) On March 30, 2015 ABCNews published an article starting with these words: “Americans by a 2-1 margin favor an agreement with Iran over its nuclear development program…” Those words could cause someone to believe that the people surveyed favor the specific negotiations being conducted by President Obama and Secretary of State Kerry. But, the actual question used in the survey was not focused specifically on the Obama negotiations. Rather, the question was general, hypothetical and aspirational. The survey asked: “would you support or oppose an agreement in which the United States and other countries would lift major economic sanctions against Iran, in exchange for Iran restricting its nuclear program in a way that makes it harder for it to produce nuclear weapons?” (emphasis added). That would be a result that most people could be expected to support. The problem is, no one seems to know what kind of deal is actually being negotiated, or how effective it would be. Indeed, it is not clear that the Obama Administration knows what deal, if any, will materialize. I suggest that surveys be conducted AFTER we know the basic terms of any proposed deal with Iran. Read the ABCNews article.
Understanding the difference between religious freedom and bigotry (Joe Fried, April 2015) It is ironic that some gay people and their supporters, who should value the concept of tolerance more than anyone else, are themselves, very intolerant. Or, at best they are confused when it comes to distinguishing individual freedom from bigotry. The recent Indiana law will probably have zero impact on gays – with one exception: marriage ceremonies. There is a reason that deeply religious people might not want to cater gay weddings or participate in other ways: The marriage ceremony was, historically speaking, always religious and always focused on a man and a woman. The marriage ceremony was and is one of the most important of religious ceremonies. If there is to be religious freedom (as guaranteed by the Constitution) then sincere religious people must be allowed some choice in this regard. I say this as a citizen who is not religious, but who respects the Constitution – all of it. I also say this as one who has been a defender of gay rights all of his life.
I do not believe that the Indiana law, or any of the similar laws in other states, permits a business to deny services or sales to individuals solely because they are gay. Being gay can never, in itself, be justification for a denial of basic rights. Rather, it is the ceremonial aspects of marriage, and its historical and religious roots, that can be grounds for a denial of sales or services. I am glad that the Indiana legislature plans to clarify this matter.
The war on seniors is part of the war on the middle class (April 2015) When the U.S. Federal Reserve distorts the market rate of interest over an extended period of time, and lowers the rate, it amounts to a theft from those who save. Many if not most of those savers are middle class and elderly, so we could call this government action a war on the elderly and a war on the middle class. For well over TEN YEARS the Federal Reserve has kept interest rates near zero by printing money (“quantitative easing”) and by lending at ultra low rates. This is done in the name of the economy but one suspects that it is also done to help politicians in their forthcoming elections. Economic considerations notwithstanding, we should be asking ourselves about the morality of using the big hand of the government to shift billions in wealth from savers to debtors. Read about 6 ways Fed policy hurts seniors. Read Bernanke’s recent response to criticism.
More evidence that Nazism was socialism (Joe Fried, April 2015) In September I posted a short article describing a presentation by George Reisman regarding the connection between Nazism and socialism. (See below.) Reisman, who is a professor of Economics at Pepperdine School of Business, notes that, beginning in the 1930s, the Nazis acquired control of all major aspects of the German economy, even though technical ownership of industries was mostly left in private hands. Because they controlled the economy, the Nazis were, in fact, socialists. This should not be a remarkable revelation since the Nazis called themselves Socialists, publicly and loudly advocated socialist philosophy, and repeatedly condemned capitalism.
However, there is confusion about this matter for at least two reasons. First, academics in the U.S. (and most of the world) are politically on the left side of politics. Many professors are themselves socialists and, I suspect, they would rather have the Nazis (or any brutal regime) pegged as “right-wingers,” conservatives, or capitalists than as socialists. Secondly, the Nazis hated Marxists and, as a result, some people assume (wrongly) that Nazis hated socialism in general. Nothing could be further from the truth.
In The Devil’s Disciples: Hitler’s Inner Circle ( 2005, pg. 142), Anthony Read explains that Joseph Goebbels, the Nazi propagandist, admired socialism and hated capitalism:
‘In the final analysis,’ he [Goebbels] wrote in his diary later that year, ‘it would be better for us to go down with Bolshevism than live in eternal slavery under capitalism.’ He took the ‘Socialism’ in National Socialism very seriously and felt enormous sympathy for the people of Russia and their struggles, claiming that Lenin understood them better than the tsars ever had. In an open letter to ‘My Friend of the Left’ he listed the many areas of agreement with the Communists in their shared ‘fight for freedom’ against the hated bourgeoisie.
The hatred of capitalism is expressed throughout Nazi literature. For example, in “Those Dammed Nazis,” (1932, as published in the Calvin College German Propaganda Archives), Goebbels wrote:
Maintaining a rotten economic system has nothing to do with nationalism, which is an affirmation of the Fatherland. I can love Germany and hate capitalism. Not only can I, I must. Only an annihilation of a system of exploitation [i.e., the annihilation of capitalism] carries with it the core of the rebirth of our people (emphasis added).
In other Nazi propaganda there are references to “Jewish profiteers and big capitalists…,’ and numerous references to Jewish businessmen and bankers who allegedly cheated poor and middleclass German citizens. To the Nazi, the capitalist notion of allowing individual businesses to make major economic decisions was unfair to its citizenry and “the misuse of its [the Fatherland’s] resources…” (“Those Damned Nazis”)
Were the Nazis sincere in their avocations on behalf of the poor and middleclass? I suspect they were about as sincere as other socialists, such as Joseph Stalin, Mao Zedong, Pol Pot, or the Kim Sung family of tyrants in North Korea. In many cases the words of socialists are more appealing than their actions.
Bergdahl charged with desertion: What a great exchange that was! (March 2015) Now that Bo Bergdahl has been charged with desertion, his release in exchange for the release of 5 senior Taliban leaders seems like a very bad deal – worse than we thought. The Bergdahl exchange, which was made in clear violation of law, should lead to even greater scrutiny of the secretive negotiations being held between the Obama Administration and Iran.
The Republicans won the immigration debate, but did anyone notice? (Joe Fried, March 2015) For over 5 years the basic argument between Republicans and the Obama Administration amounted to this: Republicans argued that border security had to be strengthened before considering the status of illegal immigrants residing in the United States. President Obama criticized the Republican position because, in his view, border security was already very strong. Indeed, he stated or implied that the Republicans were simply using border security as an excuse for inaction. In one well-publicized speech (El Paso, May 10, 2011) the President said:
All the stuff they asked for, we’ve done…But even though we’ve answered these concerns, I’ve got to say I suspect there are still going to be some who are trying to move the goal posts on us one more time…You know, they said we needed to triple the Border Patrol. Or now they’re going to say we need to quadruple the Border Patrol. Or they’ll want a higher fence. Maybe they’ll need a moat. (Audience laughs) Maybe they want alligators in the moat. (Audience laughs) They’ll never be satisfied. And I understand that. That’s politics.
In the summer of 2014 it became very clear that President Obama was completely wrong about border security. Homeland Security stated that, from October 2013 through summer of 2014, 52,000 unaccompanied children and 39,000 more adults with children were apprehended, after crossing the border (CBS News). Most of these children were placed in U.S. homes, and not returned to their country of origin (Pew Research Center). One can only imagine how many children made it across the border without being apprehended. And these figures don’t include the adults (without children) who crossed the border. If thousands of unaccompanied minor children (and many others) can successfully cross the U.S. border, the Republicans arguing for increased border security have been proven correct.
U.S. debt now tops $123 trillion! The link below will take you to real time clocks that indicate United States debt and unfunded liabilities. Here are some of the figures as of late March 2015: National “official” total debt (using the improper cash-basis accounting used by the federal government) stands at $18.168 trillion. The true total debt (using generally accepted accounting principles) is over $123 trillion. Why the difference? The government does not bother to add in its obligations for Medicare, Social Security, the Prescription Drug Program, and other healthcare costs. Here is the link.
The U.S. has 6.5 million people who are aged 112 years or more! (March 2015) That is the number of people for whom the Social Security Administration has no record of death. However, there are only 42 people – world wide – known to be that old. It is likely that the Social Security numbers of many of these people are being used for nefarious purposes – such as illegal voting, identify theft, Social Security fraud, welfare fraud, and illegal immigration. Read more.
The Big Lie: 5.6% Unemployment (February 3, 2015) Jim Clifton, CEO of Gallup, explains why the official unemployment figures are a “lie” (his term). As he explains, millions of unemployed Americans are not counted. If you gave up looking for a job during the last 4 weeks you are not considered to be unemployed. If you worked as little as an hour (“to mow [a] lawn”) you are not unemployed. And if you want a full-time 40-hours-per-week job but can only find a 10-hour-per-week job, you are not treated as unemployed. These deceptive statistics should not be reported, as they can only mislead the public. The REAL unemployment rate, as of December 2014, was 11.2%. That figure can be found in Table A15 on the Bureau of Labor Statistics Website (http://www.bls.gov/news.release/empsit.t15.htm). Mr. Clifton’s article can be read here: The Big Lie: 5.6% Unemployment. In 2012 I wrote on this subject, and my comments are found below at this location: Manipulated
Voter ID laws are essential (posted September, 2014) In April 2014, North Carolina’s Elections Director, Kim Strach, released a very disturbing report after cross-checking NC voter records with records of 28 other states. As reported by the Charlotte Observer, “the check found 765 voters whose first and last names, dates of birth and last four digits of their Social Security numbers matched exactly with a voter registered in another state and who voted in both states in 2012. The results also identified 35,750 voters with matching names and dates of birth who voted in North Carolina and another state that year.” This alarming report should not be construed as proof of voter fraud or even voter mistakes. However, each case should be carefully reviewed. That is exactly what the North Carolina Elections Board said it would do. However, a follow-up report has not yet been issued. We look forward eagerly to finding out whether illegal votes have been cast. Read the initial report in the Charlotte Observer.
Nazism was socialism (posted September 21, 2014) One of the great frauds perpetrated on the historical record has to do with the misidentification of Nazism as capitalism. In a thoughtful and thorough presentation, George Reisman, PH.D and professor of Economics at Pepperdine School of Business and Management, makes two important assertions: First, Nazism was socialism – just as its name (National Socialist German Workers’ Party) states. Understandably, communists and socialists have always wanted to disown the Nazi party – particularly after the horrors of World War II. With their sympathetic allies in academia, they have argued that Nazism was a form of capitalism because it left most ownership is private hands. But as stated by Reisman, “…the means of production existed in name only under the Nazis and … the actual substance of ownership of the means of production resided in the German government.” Nazi control was accomplished, initially, via wage and price controls. Later, the German government issued decrees regarding all aspects of the economy: “what is produced, in what quantity, by what methods, and to whom it is distributed…”. Reisman’s second major assertion is that socialism inevitably leads to totalitarianism. In an elegant outline, Reisman notes that wage and price controls inevitably lead to shortages which, in turn, lead to a “black market” – something which is secretive and very hard to control. In response to the black market, the government must impose severe penalties, and must make both buyer and several fearful of being caught. Before long, undercover agents are used, and people who are caught are punished severely as examples to others. When that happens, totalitarianism is just around the corner. Read Reisman’s presentation at the Ludwig von Mises Institute website.
The global warming “consensus” (posted September 2014) Global warming may be a very serious problem but those who are concerned about it do not help their cause by making false and hyperbolic claims. By now everyone should know that the “science is (not) settled.” There have been too many climate events that defy easy explanation. For example, why has the earth’s surface temperature held steady for for the last 17 plus years? And why is the Antarctica ice mass the largest in recorded history? Inconvenient facts such as these may be clearly explained – eventually. But so far, scientists are struggling with the answers. Another claim, perhaps the central one made by global warming Paul Reveres, is that 97% of all scientists agree that the earth is warming, mankind is the cause, and the result could be catastrophic. However, a study of this so-called consensus, made by a Canadian group, found that only “1.2% or 13 scientists out of 1,117 agreed with the Intergovernmental Panel on Climate Change (IPCC) view that human activity is the main cause of global warming since 1950.” See article in “American Thinker.”
Educational Differences between Self-Identified Democrats and Republicans – by Joe Fried, December 8, 2013 A chapter in my 2008 book, Democrats and Republicans – Rhetoric and Reality, is devoted to educational differences between self-identified members of the two major United States political parties. At the time it was written a massive amount of statistical evidence showed that Republicans:
- were more likely to answer political questions correctly
- appeared to have much more “apparent intelligence” to National Election Studies interviewers
- had more average years of education
- were more likely to have, at the least, a high school diploma
- were more likely to have, at the least, a 4-year college degree
When it came to post-graduate degrees, however, the Republican advantage was already slipping. Surveys by the National Election Studies (up to the year 2004) showed that Republican men were still slightly more likely to have post-graduate degrees; however, Republican and Democratic women were virtually tied. Surveys of the General Social Survey were more favorable to Democrats, showing a post-graduate tie among men and a statistically significant lead among Democratic women. Clearly, the educational gap between Democrats and Republicans was evaporating – particularly with respect to post-graduate studies. That’s where it stood, based upon the surveys available when I wrote my book. So, how do Democrats and Republicans now compare with respect to education? To answer this question I reviewed more recent surveys of the National Election Studies (NES), the General Social Survey (GSS), and others. Here is what I found. (continues on separate page)
Please! Stop spreading the gender pay gap lie! (Joe Fried – March 2014) Admittedly this is an election year, so we expect politicians and their media allies to stretch the truth. However, this lie about a 23 percent pay gap between men and women is the gender equivalent of race baiting, and it is odious. Over the years there has been much research on this subject – much of it scholarly work that is well-supported. In a nutshell, here is the problem with the 23 percent pay gap canard: It is calculated by subtracting the average pay of all “full time” women workers from the average pay of all “full time” male workers. This calculation does not consider the types of work performed, the hours worked (“full time” men work substantially longer than “full time” women), the educational achievements, the years of experience, the hazards of the work, the work environment – nothing! A newly-hired hamburger flipper at McDonald’s, working 35 hours per week, is not distinguished from a world-renowned heart surgeon who works 60 hours per week. When these factors are considered, the pay gap all but disappears. If there is a pay gap we can’t say for sure who is on top and who is on the bottom. Ultimately, it would come down to how much value we assign to work dangers, work pollutants, physical work vs. desk work, etc. Determining the “correct” pay rates would be a challenge – even for people experienced in such matters (such as the leaders of Cuba or North Korea). Get the picture? For a little more insight I have provided links to a couple of articles that address this subject. CBS Money Watch Daily Beast article
|Why Krugman is wrong about the Community Reinvestment Act by Joe Fried, January 2011. In November 2009, NY Times columnist Paul Krugman wrote: “…there was no federal act driving banks to lend money for office parks and shopping malls; Fannie and Freddie weren’t in the CRE loan business; yet 55 percent — 55 percent! — of commercial mortgages that will come due before 2014 are underwater.” At first blush this sounds damning to those who believe U.S. affordable housing policies, such as the Community Reinvestment Act, were mostly responsible for the financial crisis that commenced by 2007. But Krugman was writing at least 2 years after the crisis ensued, and his brief article did not describe the state of commercial loans before the crisis. Now we have research suggesting that commercial loans and the related underwriting standards were doing pretty well – thank you – until after the financial system blew up. After researching commercial loan default rates and underwriting standards, Anthony Sanders (George Mason University) and Xudong An (San Diego State University) wrote:Comparing to loans in the residential market, conduit CMBS loans have comparable default rate (sic) with prime conventional FRMs [fixed rate mortgages] but remarkably lower default rate (sic) than those of subprime FRMs and subprime ARMS [adjustable rate mortgages]. …We find limited evidence that substantial deterioration in CMBS loan underwriting occurred prior to the crisis.This research blows a gaping hole in the misleading bit of information tossed out by Krugman. How could commercial loans be a cause of the crisis if their underwriting standards were high and the default rates were low until after the crisis ensued? Krugman’s NY Times column is here. The new research is found here.|
Congress should give the President authority to adjust sequestration cuts (February 2013) If sequestration cuts will be as damaging as the President claims, he should ask Congress to give the Administration authority to transfer funds from less critical federal accounts to more critical federal accounts. According to conservative pundit Charles Krauthammer President Obama is unlikely to do this because “…he is looking for a fight, and not a solution.” Read more at cnsnews.com. =============================================================================
BOOK REVIEW: Bad History, Worse Policy: How a False Narrative about the Financial Crisis Led to the Dodd-Frank Act Author: Peter J. Wallison (To be released in March 2013 by the American Enterprise Institute) Peter J. Wallison is a prolific writer and a lucid thinker on matters involving banking, insurance, and government regulation. In his latest work, Bad History, Worse Policy: How a False Narrative about the Financial Crisis Led to the Dodd-Frank Act, Wallison begins with a careful and persuasive analysis of the financial crisis of 2007/08 and its causes. He then reviews the provisions of the partially-implemented Dodd-Frank Act and the reasons this massive Act must be reformed, if not eliminated. This compilation of 30 essays, written between 2004 and 2012, is a must-read book for anyone interested in a thoughtful analysis of the causes of the financial crisis and the flawed legislation that has arisen from it. Continues on separate page. =============================================================================
Hillary Clinton: a very confused Secretary of State On January 23, 2013, Secretary of State Hillary Clinton met with House and Senate legislators to discuss the September 2012 terror attack that had led to the death of Ambassador Christopher Stevens and 3 other Americans. In her testimony Ms. Clinton took “full responsibility” for security failures that led to the attack, yet, on every specific point she seemed to defend her personal actions. In other words, she took full responsibility while taking none at all. For example, she acknowledged that her office had received an “urgent” cable from Ambassador Stevens (on August 16th), asking for improved security. However, during the next 26 days (ending with the attack on September 11th) no one in Ms. Clinton’s office even looked at this urgent cable. Clinton should have admitted that her office communications were not properly managed. Instead, she put forth a ridiculous defense: “1.43 million cables come to my office.” Maybe so, but I doubt that a million cables come directly from Ambassadors, are marked urgent, and involve imminent threats to human life. What if that cable was describing an imminent attack on the scale of the original 911 attack? Would the Secretary offer that same defense? Perhaps Clinton’s most troubling testimony was her now famous exchange with Rep. Ron Johnson, Republican of Wisconsin. When he asked her about the Administration’s misleading references to video protests (vs. a planned terror attack), Ms. Clinton indignantly stated: With all due respect, the fact is, we had four dead Americans. Was it because of a protest? Or was it because of guys out for a walk one night and [who] decided they would go kill some Americans? What difference at this point does it make? In her very next breath Clinton contradicted herself by saying: It is our job to figure out what happened… Well, Madam Secretary, how do we figure out what happened if we don’t first figure out why it happened? This incoherent sequence of comments should cast doubt about Clinton’s fitness to hold any high office. -Joe Fried (1/28/13)
Governors, Obama, and Senate take two months to get Hurricane Sandy bill to GOP-controlled House. Then blame delays on GOP — a weekend later! Given the near universal condemnation of John Boehner and House Republicans (by Democrats, some east coast Republicans, and most “journalists”), you might think that the Grand Old Party caused a major delay in providing relief to storm victims. However, the Democratic-controlled Senate did not pass and aid bill until Friday, December 28, 2012. Just one holiday weekend later, Governor Chris Christie started venting his rage at fellow Republicans, whom he blamed (entirely) for the delay. As one might expect, the mainstream press was eager to join Christie, but it is odd that no one seemed upset with delays prior to the GOP House getting the bill from the Senate. On Friday, January 4, 2013, the House approved a partial aid package of about $9 billion, with a promise to consider an additional $51 billion in aid on January 15th. We are glad the House is taking this additional time to carefully study the bill and to make sure it is not pork-laden.
|New Study by Edward Pinto: Current FHA policies are leading to blight and failure (December 2012)A comprehensive study of FHA loans issued post-crisis (2009 and 2010) concludes that FHA underwriting policies are setting up home owners for failure. The study, conducted by Edward Pinto, Fellow at the American Enterprise Institute, found that about 40 percent of FHA’s recent loans have at least one subprime loan attribute, and are likely to have excessively high foreclosure rates. The high foreclosure rates associated with these loans “result in increased blight and crime and the larger community suffers from a reduced tax base and higher costs for providing municipal services.” Five specific FHA reforms are identified. Read the study’s Executive Summary, below.Executive SummaryThe Federal Housing Administration’s (FHA’s) mission is to be a targeted provider of mortgage credit for low- and moderate-income Americans and first-time home buyers, leading to homeownership success and neighborhood stability. But is the FHA achieving this mission?This paper reports on a comprehensive study that shows the FHA is engaging in practices resulting in a high proportion of low- and moderate-income families losing their homes. Based an analysis of the FHA’s FY 2009 and 2010 books of business, the FHA’s lending practices are inconsistent with its mission and represent a disservice to American working-class families and communities.The findings of this study indicate:|
- An estimated 40 percent of the FHA’s business consists of loans with either one or two subprime attributes—a FICO score below 660 or a debt ratio greater than or equal to 50 percent (based on loans insured during FY 2012). The FHA’s underwriting policies encourage low- and moderate-income families with low credit scores or high debt burdens to make risky financing decisions—combining a low credit score and/or a high debt ratio with a 30-year loan term and a low down payment. A substantial portion of these loans have an expected failure rate exceeding 10 percent.
- Across the country, 9,000 zip codes with a median family income below the metro area median have projected foreclosure rates equal to or greater than 10 percent. These zips have an average projected foreclosure rate of 15 percent and account for 44 percent of all FHA loans in the low- and moderate-income zips. The study found the direct and indirect costs associated with a foreclosure rate greater than 10 percent, particularly in working-class communities, are unacceptably high. Risk layering, combined with high FHA loan volumes, has a substantial impact on these communities. The resulting reduced or declining home values impact FHA and non-FHA low- and moderate-income families diligently making their payments. These families may be denied the opportunity to build equity, provide security for their family, and have the down payment for their next home as their family grows. Foreclosures also result in increased blight and crime and the larger community suffers from a reduced tax base and higher costs for providing municipal services.
The study identified specific reforms to focus the FHA on responsible lending and return it to its traditional mission:
Step 1: Do not knowingly insure a loan with a projected claim termination rate greater than 10 percent, assuming no house price appreciation or depreciation.
Step 2: Target an average 5 percent projected claim termination rate, assuming no house price appreciation or depreciation.
Step 3: Stop guaranteeing lower-risk loans and high-dollar-balance borrowers, as this allows for cross-subsidization of those loans with excessive risk. This will also let the FHA step back from markets that can be served by the private sector and allow it to concentrate on home buyers who truly need help.
Step 4: Price for risk, since not doing so deprives the borrower of the price information needed to understand the true risk of the loan. Until this is done, the FHA should disclose to the borrower his or her expected claim rate, assuming no house price appreciation or depreciation.
Step 5: Implement underwriting that results in the extension of responsible mortgage credit, bybalancing down payment, loan term, FICO score, and debt-to-income ratio to achieve meaningful equity.
The full paper can be found on the AEI Website
Who Really Drove the Economy into the Ditch? (December 2012) Joe Fried’s new book is out, and it is already creating a stir. The book, which is called Who Really Drove the Economy into the Ditch?, was just published by Algora Publishing, and is available from the publisher or from Amazon or Barnes and Noble. In a conversational tone, the book provides an overview of the financial crisis of 2007/08, and the factors leading up to it. It covers many important topics that have been almost completely ignored in other analyses. These factors include Fannie Mae’s and Freddie Mac’s automated underwriting and valuation systems, and the detrimental impact of those systems on lending standards. It analyzes the degrading of loan standards caused by state and local downpayment “gifting” and “silent second” programs. It also reveals new cheating by Fannie and Freddie with respect to their delinquency stats. Ed Pinto, a Former Fannie Mae executive and current Fellow at the American Enterprise Institute, stated that this book: …materially adds to the body of research into the role of government affordable housing policy in the mortgage crisis. Peter Wallison, Co-chair of the Financial Reform Task Force of 2009 and former counsel to President Reagan, stated: Joe Fried tells the story in a straightforward style – so clear you will wonder why you haven’t heard these facts before.
Can unemployment figures be manipulated by the Bureau of Labor statistics? (October 8, 2012) On October 5, 2012 the Bureau of Labor statistics (BLS) released the employment statistics for September, and some critics accused the Obama Administration of manipulating the statistics to get the unemployment rate below the psychologically important 8.0 floor. I have seen no evidence whatever supporting such claims. However, it is entirely possible for employees within the BLS, on their own initiative, to skew the unemployment rate up or down. For this reason, a public airing of BLS survey and statistical methods should be made. Transparency is needed. The BLS conducts a telephone survey of 60,000 people and, like every survey, the persistence of the questioner and the way questions are asked can greatly affect the results. Basically, the BLS puts everyone into one of 3 categories: employed, unemployed, and out-of-the-workforce. For most of the Obama presidency the BLS has been shifting people out of the unemployed catgegory and into the out-of-the-workforce category. How? If the interviewer decides that the unemployed person did not make a strong enough “specific” effort to get employed during the 4 weeks prior to the interview, that person is no longer considered unemployed. He is out-of-the-workforce. Of course, there is subjectivity with regard to the definition of “specific” effort. Is it enough to be looking in the newspaper or on the Internet for a job, or to be asking friends about job possibilities? Or is a formal job application required? And, what constitutes a formal application? It is entirely possible that an interviewer with an agenda could lead the interviewee one way or the other. Last month (September 2012) something different happened. Many formally “unemployed” people became “employed” on the basis of part-time employment. This must have been exceedingly light part-time work because, for every one of the 114,000 jobs created 7.5 people became “employed.” According to the BLS almost any amount of work during the interview week would be enough to take someone out of the unemployed category. Knowing this, an aggressive interviewer could prod someone to disclose a relatively trivial odd job such as baby sitting, loading a friend’s pickup truck, or raking leaves. We don’t know the ideological leanings of BLS interviewers, middle managers, statisticians, and economists; however, several surveys have shown that most government workers are Democrats. We also know that, without the many adjustments made by BLS during the last 4 years, the unemployment rate would be 11 percent – not 7.8 percent. For this reason, an independent review of BLS methods should be undertaken.
President Clinton dissembles during his Obama convention speech (September 7, 2012) On Wednesday night, President Clinton said Candidates Romney and Ryan lied when they “attacked the president for allegedly robbing Medicare of $716 billion.” However, a Washington Post fact checker says that Clinton is the one who is not telling the truth. In addition, Clinton was disingenuous when he said, “I didn’t know whether to laugh or cry because that $716 billion is exactly, to the dollar, the same amount of Medicare savings that [Ryan] has in his own budget.” Well… yeah! Once something becomes the law of the land (as is the case with Obamacare) it has to be factored into budgets – by both Democrats and Republicans. However, Clinton implied that Ryan was endorsing the cuts, and that is not the case. Indeed, Mitt Romney has stated that, if elected, he will work to eliminate those cuts. See Washington Post article. Mitt Romney’s welfare ad is misleading, but the Obama Administration changes do seem to weaken the welfare work requirement (August 8, 2012) A thoughtful article in the Daily Caller takes Romney to task for exaggerations. However, it also argues that the welfare work requirement has been weakened. This is worth reading. See Daily Caller.
A lack of jobs is a factor in the recent surge in disability claims (July 17, 2012) There are several reasons for the recent surge in disability claims, one of which is an economy that has not produced enough jobs. Read more.
Bloomberg: It’s Time to Fix Fannie and Freddie “More than 90 percent of new mortgages are owned or guaranteed by Fannie, Freddie or the FHA. Private capital is almost nonexistant. As long as Fannie and Freddie have an outsized presence, plus an endless stream of taxpayer subsidies, the private sector will stay on the sidelines.” Read more.
Fannie and Freddie executives hit with civil fraud charges (December 2011) Per AP: “In a lawsuit filed in New York, the Securities and Exchange Commission brought civil fraud charges against six former executives at the two firms, including former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron.” The executives concealed the extent of their subprime purchases, according to Robert Khuzami, SEC’s enforcement director. Read more.
Washington Examiner: Fannie and Freddie played larger role in crisis than first reported (May 2011) Michael Cembalest, the Chief Investment Officer of JP Morgan Private Bank recently revised his 2009 account of what caused the financial crisis. He wrote: “US Agencies played a larger role in the housing crisis than we first reported. In January 2009, I wrote that the housing crisis was mostly a consequence of the private sector … However, over the last 2 years, analysts have dissected the housing crisis in greater detail. What emerges … is something quite different: government agencies now look to have guaranteed, originated or underwritten 60% of all ‘non-traditional’ mortgages, which total $4.6 trillion in June 2008. What’s more, this research asserts that housing policies instituted in the early 1990s were explicitly designed to require US Agencies to make much riskier loans, with the ultimate goal of pushing private sector banks to adopt the same standards.” Read more.
Christian Science Monitor: Not true that no one went to jail for lending illegalities (October 11, 2011) Actually, there were a couple. But, in most cases illegality was not shown. “While the distinction between hubris/stupidity and illegality may not satisfy many, it’s a key component to the financial crisis.” Read More
Finally: Feds approve Louisiana sand berms to fight oil slick (June 2, 2010) After weeks of apparent procrastination, “U.S. Coast Guard Admiral Thad Allen told BP to pay for the five berms approved by the White House, in addition to one he and the Army Corps of Engineers approved last week.” These berms will be artifical sand reefs designed to keep the oil slick away from fragile Louisiana wetlands and wildlife. Read more in Reuters.
National Debt over $13 trillion for first time (June 2, 2010) The Treasury Department reports that the National Debt exceeded $13 trillion as of June 1st, 2010. This amount equals nearly 90 percent of the nation’s Gross Domestic Product, which is the total market value of all goods and services produced by the U.S. in a year. President Obama blamed his predecessor for the huge deficits. Read more.
USAToday: “Is oil spill becoming Obama’s Katrina?” (May 27, 2010)Louisiana residents “want to know why the federal government didn’t act faster to stop the oil from reaching shore, why BP hasn’t been forced to skim more oil from the surface and why their request hasn’t been approved to build new barrier islands to help keep the oil at bay.” Read more. N
YT: Obama administration slow to act on BP oil spill (April 30, 2010) “We now face a huge disaster whose consequences might have been minimized with swifter action.” Read editorial.
CBO: U.S. debt to soar under Obama Administration’s budget (March 5, 2010) The Congressional Budget Office (CBO) announced that the Obama Administration’s proposed budget would add more than $9.7 trillion to the national debt over the next decade, and this is without adding any possible impact from the Administration’s health care initiatives. In addition, “Interest payments on the debt would also skyrocket by $800 billion over the same period.” Read report in Washington Post.
Who earns what? Who pays the taxes? (11/11/08) According to recently-released IRS data, the highest earning 1% of of Americans made about 22% of all 2006 income (reported on tax returns) and paid about 40% of all 2006 federal income tax. Americans with earnings in the lower 50% made about 12.5% of all reportable income and paid about 3% of federal income taxes. Keep in mind that welfare distributions (including food stamps and the Earned Income Tax Credit) were not counted in this analysis, and would substantially increase the percentage of income for people with earnings in the “lower 50%.” Read in Kiplinger’s>> INTERESTING NOTE: During the recent U.S. Presidential election it was claimed that taxpayers with relatively high earnings “got a break” during the 8 years of the Bush Administration. However, it should be noted that the percentage of 2006 taxes paid by the upper 1% of earners (40%) was greater than the percentage paid by the upper 1% during 2000 – the last year of the Clinton administration. (They paid about 37.5%.) In fact, in 2006 the upper 1% of earners paid more than the entire lower 95% of earners. A great analysis of these tax data, and the trends since 1980, are found on “Carpe Diem,” the blog of Dr. Mark J. Perry, Professor of economics and finance at the University of Michigan.
Who is responsible for the crisis on Wall Street? (10/2/08) We all know that Wall Street “greed” is responsible for the recent credit crisis. But, the federal government is also culpable. Specifically:
- The Federal Reserve Bank Chairman, Alan Greenspan, kept interest rates too low after the 911 attack. This overheated the housing market, and encouraged institutional investors to park their assets in the now infamous “mortgage-backed securities” (MSBs). MSBs offered higher interest rates, and seemed safe, but were not because they were laced with subprime mortgages (risky loans to marginally-qualified home buyers). When housing prices declined and these subprime mortgages went into foreclosure, the market for MSBs collapsed.
- Virtually all Congressional Democrats (and some Republicans) fought against regulatory reform of Fannie Mae and Freddie Mac. These quasi-private entities had a large role in the rapid growth of the subprime mortgage market. Fannie and Freddie encouraged the expansion of lending in poor and middle-class neighborhoods, at the expense of prudent lending practices. Irresponsible private lenders eagerly followed suit, and further expanded subprime lending.
- The Bush Administration’s Securities and Exchange Commission (SEC) was lax in regulating Wall Street lending and investment practices. SEC should have warned that many of the MSBs were laced with risky subprime loans, and were not suitable for the investors who bought them. And, SEC should have been more rigorous in enforcing the capital requirements of the investment banks.
An excellent overview of the crisis and its causes has been published on reasononline. See “The Roots of the Crisis,” by Michael Flynn, Director of Government Affairs for the Reason Foundation.