Subprime Obama
Jan 27th, 2008 at 7:53 am by Susie
If Obama is the candidate, we’re going to see one helluva case of buyer’s remorse. The Nation:
Barack Obama’s proposal is tepid by comparison, short on aggressive government involvement and infused with conservative rhetoric about fiscal responsibility. As he has done on domestic issues like healthcare, job creation and energy policy, Obama is staking out a position to the right of not only populist Edwards but Clinton as well.
Edwards’s plan includes a mandatory moratorium on foreclosures, a freeze on rising interest rates for at least seven years, federal subsidies to help homeowners keep up with payments and restructure loans, and explicit measures to rein in predatory lenders and regulate the financial sector. Clinton’s plan is weaker–a voluntary moratorium, a shorter freeze, less commitment to new regulations–but she has promised $30 billion in federal aid to help reeling homeowners and communities.
Only Obama has not called for a moratorium and interest-rate freeze. Though he has been a proponent of mortgage fraud legislation in the Senate, he has remained silent on further financial regulations. And much like his broader economic stimulus package, Obama’s foreclosure plan mostly avoids direct government spending in favor of a tax credit for homeowners, which amounts to about $500 on average, beyond which only certain borrowers would be eligible for help from an additional fund.
“One advantage to the tax credit is that there’s no moral hazard involved,” one of Obama’s economic advisers explains. “There’s no sense in which you’re rewarding someone for taking too big a risk. If you lied about your income in order to get a bigger mortgage, then you’re not qualified. Do you really want to give a subsidy to the guy who wasn’t prudent?” Obama has used similar language on the campaign trail. “Innocent homeowners,” he has promised, those “responsible” borrowers “facing foreclosure through no fault of their own,” would get help restructuring their loans. But no such luck for those “claiming income they didn’t have” or “lying to get mortgages.”
“There’s been less emphasis from the Obama campaign on the really dysfunctional role of the financial industry in the subprime mess,” says Josh Bivens of the Economic Policy Institute. “Edwards and Clinton talk much more about regulation of the financial industry going forward, and to the extent that blame is placed, they tend to place it on the lenders for steering people into loans they couldn’t afford.”
Obama’s disappointing foreclosure plan stems from the centrist politics of his three chief economic advisers and his campaign’s ties to Wall Street institutions opposed to increased financial regulation. David Cutler and Jeffrey Liebman are both Harvard economists who served in the Clinton Administration, and they work on market-oriented solutions to social welfare issues. Cutler advocates improving healthcare through financial incentives; Liebman, the partial privatization of Social Security.
Austan Goolsbee, an economist at the University of Chicago who calls himself a “centrist market economist,” has been most directly involved with crafting Obama’s subprime agenda. In a column last March in the New York Times, Goolsbee disputed whether “subprime lending was the leading cause of foreclosure problems,” touted its benefits for credit-poor minority borrowers and warned that “regulators should be mindful of the potential downside in tightening [the mortgage market] too much.” In October, no less a conservative luminary than George Will devoted a whole column in the Washington Post to saluting Goolsbee’s “nuanced understanding” of traditional Democratic issues like globalization and income inequality and concluded that he “seems to be the sort of fellow–amiable, empirical, and reasonable–you would want at the elbow of a Democratic president, if such there must be.”
Robert Pollin, an economist at the University of Massachussets, believes “these three advisers generally reflect Obama’s very moderate economic program, similar to Clintonism.” Wall Street apparently has come to a similar conclusion. Obama had received nearly $10 million in contributions from the finance, insurance and real estate sector through October, and he’s second among presidential candidates of either party in money raised from commercial banks, trailing only Clinton. Goldman Sachs, which made $6 billion from devalued mortgage securities in the first nine months of 2007, is Obama’s top contributor. When asked if Obama would hold these financial institutions accountable for losses incurred by homeowners and investors, his campaign refused to comment.
A dissenting view from Robert Reich:
http://robertreich.blogspot.com/2008/01/we-need-stimulus-now-but-what-kind.html
I’m an Edwards supporter, but after Nevada and South Carolina, isn’t time to begin the discussion about what to do next? Support Obama? Support Clinton? Opt out? I’ve had reservations about Obama since I read his book last year - his policies felt like Clinton-lite. And I can’t disagree with the Krugman/Nation Left take on Obama. But between Obama and Clinton, what? Are their economic policies really that far apart? Are their economic policies all that matters? I co-organized several events against the war. I stood in the brutal, freezing cold in NYC on Feb 15, 2003, penned in by cops. However the Clintons portray Hillary and Obama on the war, I know what I know. She was part of the problem - for a long, long time. How does that factor in? And what of Team Clinton’s tactics of the last two weeks? Is this what we really want? What about Bill and NAFTA, the Telecommunications Act, his sending military helicopters to Mexico to be used against the Zapatistas, or his support of Fujimori?
I don’t mind asking hard questions about Obama. I have many of my own. But I don’t want to go back. So, what are we left with?
Heh. It’s either him or Billary.
The banks own them both.
Daughter of Billary is a hedge fund manager.
Voting for Edwards in the primary.
Voting Dem in the General.
I think, dirty fighter and all, Clinton is (or Clintons are) probably the lesser of the two minor evils. (As opposed to the GOP major evil). The Clintons have already amassed their wealth & influence, so Clinton II will be about cementing a legacy and saying F-U to the GOP. I’m afraid 1st term senator is going to be running after the shiny and will be putty in the lobbyists hands.
Got plutocrats?
…
Bush, Clinton, Bush, Clinton: Only idiots would vote for such a succession.
Bankruptcy Bill of 2005: Obama voted no; Billary voted present.
Any questions?
The Clintons have already amassed their wealth & influence
Well, that’s never really been an impediment to people wanting more.
Just sitting back and waiting for a Dem to be nominated seems too passive to me. There’s also the question of which one would have a better chance in the general election. I’m not one who believes the Democrats are simply going to waltz into the White House. I’ve seen too many terribly run Dem campaigns in the past to believe they won’t find a way to screw things up again.
Look at the numbers of voters coming out in the primaries. Would those numbers be just as high if it were only Clinton and Edwards? I don’t think so. I think people are genuinely inspired by Obama. Hell, I have problems with Obama, and I still find myself inspired at times, no matter how much, intellectually, I can argue with others against him. The Anyone But Bush thing didn’t work in 2004; I don’t know why we expect to work any better in 2008. If people aren’t excited about the candidate, some of them aren’t going to turn out.
And there are also the Independents to consider. A lot of them don’t have very good feelings about the Clintons, whereas Obama seems able to attract them.
What a quandary. Would like to know what’s going on with Edwards. He seemed like a man on a mission last night. I’m just not sure what the mission is at this point.
The more I see and here of Obama the more I feel like I’m listening to an ad from the DLC. His policy statements are weak or non-existant. He and his supporters seem to be the Dem version of Bush. All reasoned examination points to him being the wrong choice, but he says such nice shit. A cult of personality. “I’m gonna ‘change Washington.’ I’m gonna stop the ‘devisiveness.’ To me it’s just code for, “I may be a Dem, but I’m gonna make all you corporations feel right at home.” Is it just me? I hear Obama talk and I think Lieberman.
Obama, he’s uniter, not a divider. hee-hee.
I should really review my comments before they get posted but here is how it really should be read:
While I am concerned about Obama not doing more to resolve the mortgage crisis but I also think that some of the proposals such as a moratorium on foreclosures for a year, an interest-rate freeze seem more likely to do more harm than good.
the thought of putting Clinton in office is the most ludacrist thought ever.
Obama’s Pritzker/Superior Bank S&L Scandal Link?
Penny Pritzker is the National Finance Chair of 2008 Democratic Party presidential candidate Barack Obama’s campaign. Yet according to the Encyclopedia Judaica, the Obama campaign’s national finance chair “served as chairman of the Superior Bank from 1989 to 1994, but the savings and loan institution collapsed” in July 2001.
Created at the end of 1988 as the successor bank to the failed Lyons Savings Bank, the Oakbrook Terrace/Hinsdale, Illinois-based Superior Bank was 50 percent owned by Chicago’s billionaire Pritzker family. Yet, according to an Oct. 16, 2001 statement before the U.S. Senate Committee on Banking, Housing and Urban Affairs by Ely & Company Inc. President Bert Ely, the Pritzker family’s Superior Bank “started life with enormous tax benefits and a substantial amount of FSLIC-guaranteed assets under a FSLIC Assistance agreement.” In a Dec. 2002 article (“Tremors In The Empire”) that appeared in Chicago Magazine, Shane Tritsch noted, for instance, that for investing $42.5 million in the failed Lyons Savings Bank before it was reopened as Superior Bank, the Pritzkers and their business partner received an estimated $645 million in federal tax credits and loan guarantees; and “by one estimate, it would have cost the government $200 million less simply to shut Lyons down.”
But according to Ely’s Oct. 16, 2001 statement, “Superior’s trick, or business plan” under Penny Prtizker’s chairmanship was apparently “to concentrate on subprimelending, principally on home motrgages, but for a while in subprime auto lending, too,” after the Pritzkers’ bank acquired its wholesale mortgage organization division, Alliance Funding, in December 1992.
With a business loss estimate of between $350 million and $1 billion, the 2001 failure of the Pritzkers’ Superior Bank represented the largest U.S.-insured deposition institution to fall between 1992 and 2001. But according to a Feb. 7, 2002 report of FDIC Inspector General Gaston Gianni Jr., “the failure of Superior Bank was directly attributable to the Bank’s Board of Directors and executives ignoring sound risk management principles.”
Coincidentally, the Obama presidential campaign’s National Finance Chair was a member of the Superior Bank’s board of directors which apparently ignored sound risk management principles. As the Aug. 7, 2001 issue of the New York Times observed:
“The Prtizkers controlled half the board seats. Penny Pritzker…was on the board, and Glen Miller, a top financial officer in the Pritzker organization, was chairman of the audit committee…Penny Pritzker…was designated…to watch over the Superior investment.”
Business Week magazine also noted in a Sept. 10, 2001 article (‘The Pritzkers’ Empire Trembles”) that “as of July [2001],” Penny Pritzker “was still a director of the thrift’s holding company, Coast-to-Coast Financial Corp….”
The Superior Bank board of directors on which the Obama presidential campaign National Finance Chair sat “paid dividends and other financial benefits without regard to the deteriorating financial and operating condition of Superior,” according to FDIC Inspector General Gianni’s Feb. 7, 2002 report. As Ely & Company Inc. President’s Ely’s Oct. 16, 2001 statement observed:
“Superior paid $188 million in dividends in the 1989-1999 period, which gave Superior’s stockholders an 18.1 percent pretax cash return on their initial investment of $42.5 million in Superior.”
Before Superior Bank’s 2001 collapse, stockholders like the Pritzker family members also “may have reaped additional profits from the substantial tax benefits the Federal Government gifted to them” when they acquired the failed Lyons Savings Bank in 1988 and created the successor Superior Bank, according to Ely’s Oct. 16, 2001 statement. Between 1992 and 1998, for instance, Superior Bank claimed a Federal tax credit of $10.6 million and only began to pay a meaningful amount of Federal income tax in 1999.
To avoid being punished for the failure of Superior Bank, the Pritzker family agreed to pay the FDIC $460 million. Yet even with this settlement, the failure of the Superior Bank due its board’s apparent mismanagement will cost the federal thrift insurance agency (and U.S. taxpayers) about $440 million.
The 1,400 Superior Bank depositors whose savings deposits in excess of $100,000 were uninsured, however, brought a federal civil racketeering suit against Penny Pritzker and other former Superior Bank officials. Not surprisingly, Business Week magazine reported in September 2001 that “the collapsing Superior Bank, a $2.3 billion thrift that” Penny “Pritzker chaired from 1989 to 1994” was “ putting the family business savvy under the klieg lights in Washington and beyond.”
Less than two years after the U.S. Senate’s Committee on Banking, Housing and Urban Affairs held a hearing on “The Failure of Superior Bank,” former Superior Bank Chairman of the Board Prtizker, coincidentally, began to financially back Barack Obama’s 2004 campaign to become a U.S. Senator from Illinois: As David Mendell recalled in his 2007 book Obama: From Promise To Power:
“Obama was confident that he was destined for more than a day job running a foundation or practicing law or languishing in the minority party in the Illinois senate…He invited a group of African-American professionals to the house of Marty Nesbitt, who had served as finance chairman of his congressional campaign. Nesbitt is…vice-president of the Pritzker Realty Group, part of the Pritzker family empire…Nesbitt arranged a weekend gathering to help Obama reach inside the deepest pockets he knew—those of the Pritzker family…
“…Nesbitt knew that if Obama could sell himself to Penny Pritzker, her support would not only reap huge immediate financial dividends but also be a crucial step in the foundation of a fund-raising network.
“So in late summer 2002, Obama, Michelle [Robinson-Obama] and their two daughters drove to Penny Pritzker’s weekend cottage along the lakefront in Michigan about forty-five minutes from Chicago…”
Given the past involvement on the board of a failed savings bank that engaged in financially reckless subprime lending of the 2008 Obama presidential campaign’s National Finance Chair, it’s not surprising that an article in The Nation (2/11/08) by Max Fraser, titled “Subprime Obama,” reported that “only Obama has not called for a moratorium and interest-rate freeze;” and that Josh Bivens of the Economic Policy Institute said that “There’s been less emphasis from the Obama campaign on the really dysfunctional role of the financial industy in the subprime mess.”
Incidentally, former Superior Bank Chairman Penny Pritzker contributed $100,000 to the Democratic National Committee [DNC] in 2000.
OBAMA/ PENNY PRITZKER - FINANCIAL CAMPAIGN MANAGER.
I would like to know why there is a DOUBLE STANDARD with people like the PRITZKER’S. BILLIONAIRE’S - listed in the fortune 500 as one of the wealthiest families in the country. They opened Superior Bank in Oakbrook Terrace, Il. WALK IN BILLIONAIRES - “Bankrupt the Bank” in 2001 - WALK OUT BILLIONAIRES- Causing the largest bank failure in banking history, they ruined 1400 lives of people that were duped in believing you were in” trusting hands” with the PRITZKER name.
These depositor’s are the same people Obama talks about. Those hard working men and women, that he wants to help. Here is your chance Mr. Obama, NOT CHANGE - BUT CHANCE.
THE DEFINITION OF BANKRUPT.
The state or condition of a person - indivdual, partnership, corporation, municipality - who is unable to pay its debts as they are, or become, due.
WHAT WRONG WITH THIS PICTURE.
They walked out of this bank deal with millions to add to their billion’s, and walk over those depositor’s like” BAGS OF TRASH.”
I was there and seen all of this first hand, I stood in that long line and witness people actually crying.
Then the PRITZKER’S get a sweet deal from the FDIC, paying back 460 million only a small part of what actually was owed, getting 15 years to pay this settlement back with no interest.
Costing the Federal Government close to a billion dollars.
Get 25 percent of from their accounting firm Ersnt and Young for their wrong doing, approximately 550 million settlement.
Obama talks about the of subprime mess, and not rewarding people that are big risk takers, that just a few things that took down Superior Bank. He talks about THE CHANGE - want CHANGE, it business as usual. He must be referring to THE CHANGE that happen to women over 50.
SOMETHING SMELLS BAD, IT MUST BE SOMEONE STINKY.
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