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The Associated Press reported on another treasure trove of Washington corruption in an article that was published on July 5, 2012. However, before discussing that new wave of corruption, let's review some of the other major corruption and cronyism instances that have occurred over just the past few year: * Solyndra - a California solar panel company that went bankrupt and took over half a billion dollars worth of taxpayer wealth with it but made numerous Obama and Democratic Party supporters are wealthier. - Fisker Motors - a FINNISH auto maker that has received over half a billion dollars worth of AMERICAN taxpayer support to produce a luxury electric car that most America taxpayers will never be able to afford and who will also likely see no return on their half a billion dollar investment. However, numerous Obama and Democratic Party supporters are wealthier. - Tesla Motors - at least this was an American auto maker who got free taxpayer money, money that the taxpayers will never see again. However, numerous Obama and Democratic Party supporters are wealthier. - Numerous Nevada Solar Companies - Senate Majority leader Harry Reid, from the great state of Nevada, has made sure that he and other Democratic politicians were well financed in their election campaigns from the many companies and people who received taxpayer wealth to build up their alternative energy companies in the southwest. But the corruption does not end with alternative energy companies. Consider some straight greed plays by several of our national politicians over the past couple of years: - Consider the shenanigans of Congresswoman Ginny Brown-Waite. According to an article that was written by John Frank for the June 30, 2009 St. Petersburg Times, one day before the House of Representatives approved a massive bank bailout plan in October, 2008, the Congresswoman bought stock in Citigroup, one of the major banks that received a significant portion of the bank bailout funding. About two weeks later, on the day Treasurer Henry Paulson announced he would invest $250 billion of taxpayer money in nine major banks, the Congresswoman bought stock in Bank of America, one of those nine banks. Coincidence or corruption? - On November 11, 2011, Money News reported on accusations that about dozen lawmakers and their senior aides bragged about how much money they had earned in the stock market based on insider trading-like information that they knew ahead of the general public because of their government positions. The article included the following details •The insider trading dollar amounts ranged from a few thousand dollars to six figures. •Much of the insider trading involved companies that were likely to be brought before Congress for investigations, an act that usually resulted in a negative impact on a company's stock price. By shorting a stock ahead of that information being public, Congressional figures could and did make outsized profits. •The huge profits were being made by people that had no serious background or past history of success in picking winners and losers in the stock market. Coincidence or corruption? I think most honest Americans would conclude that all of these incidents are examples of political class corruption, immorality, insider trading, and greed. - According to a "60 Minutes" report from late, 2011, almost everyone in the country is subject to insider trading laws and compliance. This includes ordinary Americans, anyone serving in the executive branch of the Federal government (e.g. the President, the Vice President, etc.), and Federal judges. The only people excluded from having to comply are...members of Congress, the same people who wrote and passed the laws on insider trading that exclude themselves from being prosecuted for such actions. Just when you think you have heard every conceivable sin, shortcoming, and outright immorality from our politicians, you come across this travesty. They have cleared the decks for themselves to make grand sums of money in the stock market by using insider government trading information. Examples from "60 Minutes" included the following: •John Boehner, currently the Speaker of the House, made a serious investment in health care insurance stocks shortly before he led the legislative effort to defeat a key component in Obama's original health care reform bill, a component that would have depressed health care stock prices if not defeated. With the component's defeat, health care insurance stocks rose and made money for Mr. Boehner. Coincidence or corruption? •Several years ago, then Speaker of the House Dennis Hasert, made some land acquisitions in Ohio. He then worked to adjust Federal highway projects so that a new Federally-financed highway would run close to his newly purchased land, significantly increasing the land's value when he sold it. Coincidence or corruption? •Congressman Spencer Bachus also seemed to do pretty well with insider information. The "60 Minutes" story was apparently inspired by a recently published book, "Throw Them All Out," written by Hoover Institute fellow Peter Schweizer. According to Schweizer, Bachus and Nancy Pelosi got secret briefings from Fed Chairman Ben Bernanke and Treasury Secretary Hank Paulson, who basically told the legislators that it was "a matter of days before there is a meltdown in the global financial system.” Bachus went out shortly thereafter and invested about $7,000 to short the stock market. When the stock market did start to collapse, he was able to cash in the investment for almost twice what he originally put out just a few days before. He also shorted General Electric four times after Paulsen told him GE bond sales were having problems. Were all of these coincidences or corruption? - However, the most despicable part of the "60 Minutes" report concerned Nancy Pelosi. Ms. Pelosi, former Speaker of the House, and her husband had access to at least eight IPO offerings over the past few years. As most of you know, we ordinary Americans rarely get in on a ground floor, the most lucrative financial time, in any IPO offerings. The most troubling and potentially corrupt IPO was for the Visa IPO back in 2008. Ms. Pelosi purchased 5,000 IPO shares on the first day of the Visa offering at $44 a share. She sold it within days when the price had reached $64 a share, a profit of about $100,000. What makes this so very troubling is prior to the Visa IPO offering there was a legislative effort within the House of Representatives to impose credit card fee limits on companies such as Visa. Obviously, if such legislation passed, it would certainly put a damper on Visa's stock price, and would depress the earnings and gains of anyone who invested in the Visa IPO. That legislation was mysteriously never able to see the light of day prior to the IPO date. The legislation eventually did become law but the driver and leader in the legislation was the Senate, not the House, and passage happened well after people like then- Speaker of the House Pelosi had made their substantial gains off of the IPO offering. Coincidence or corruption? Okay, the above is just a sampling to show how far reaching and how deep Washington corruption and cronyism goes in a wide variety of ways. One would have hoped that our politicians would have put as much effort into governing and leading the country as they did to their self-enrichment schemes. Maybe if the did we would not be facing a $16 TRILLION national debt, failing public schools, a lost war on drugs, etc. But let's get back to the recent uncovering of corruption as laid out in the July 5, 2012 AP report. It is difficult to understand how nobody in Washington saw the housing bubble and resultant Great Recession coming. It was the biggest and worst economic calamity since the Great Depression. Nobody in the political class or Federal government (SEC, FDIC, Federal Reserve, Treasury Department, Fannie Mae, Freddie Mac, Senate committees, House of Representatives committes) saw what was happening and acted to avoid the collapse of the housing market and the resultant havoc in the financial and banking industries? Well, consider what the AP found out about what was going on at the time and who was benefiting from the corruption within the housing/banking/mortgage industry: - According to a House of representatives investigation, Countrywide Financial Corp., once a major, major mortgage company, whose subprime loans helped start the nation's housing crisis, made hundreds of discount loans to members of Congress, congressional staff, top government officials and executives of troubled mortgage giant Fannie Mae in order to buy influence and clout over these insiders. - The report named six current and former members of Congress who received these so-call VIP discount loans along with the names of former top executive branch officials and three chief executives of Fannie Mae who also got special treatment. - A quote from the article summed up the corruption quite nicely: "Documents and testimony obtained by the committee show the VIP loan program was a tool used by Countrywide to build goodwill with lawmakers and other individuals positioned to benefit the company. In the years that led up to the 2007 housing market decline, Countrywide VIPs were positioned to affect dozens of pieces of legislation that would have reformed Fannie" [and its sister entity, Freddie Mac]. - Amazingly, no one has ever been arrested for such blatant misbehavior although the House report did conclude that the participants "may have skirted the Federal bribery statute by keeping conversations about discounts and other forms of preferential treatment internal. Rather than making quid pro quo arrangements with lawmakers and staff, Countrywide used the VIP loan program to cast a wide net of influence." - The company became so ingrained into Congressional personnel and processes that the company became a "trusted adviser" to Congress on housing and mortgage matters and was actually consulted when the House Financial Services Committee and Senate Banking Committee considered reform of Fannie and Freddie and unfair lending practices. Talk about letting the wolves guard the hen house. - The House report said Fannie Mae had up to six dozen lobbyists working on Financial Services Committee members when it considered legislation to overhaul the company from 2000 to 2005. Four reform bills were introduced in the House during the period, and none made it out of the committee. Think about the insanity of this arrangement. One Federal government organization, Fannie Mae, spending big bucks and hiring a multitude of lobbyists to lobby another Federal government organization, a Congressional committee. - Without any reform measure being passed and enacted, Fannie, Freddie, and Countrywide eventually collapsed when the housing market collapsed, requiring the government (i.e. the American taxpayer to step in) to steady the situation, at a cost of $183 billion as of January 1, 2012. - This cost figure will continue to rise since no one in Washington is still not working on a solution to Fannie and Freddie. FYI, that $183 billion comes out to a cost of about $1,600 for every U.S. household, that is the current and rising cost of corruption, just in this little part of Washington corruption central. One has to wonder about how much economically better we would be now and how much smaller the Great Recession would have been if companies like Counrywide were not negatively influencing or blocking Congressional action to fix the housing bubble. The political class members that jumped on this discount bandwagon include the following people: - Former Senate Banking Committee Chairman Christopher Dodd, D-Conn. - Senate Budget Committee Chairman Kent Conrad, D-N.D. - Mary Jane Collipriest, who was communications director for former Sen. - Robert Bennett, R-Utah, then a member of the Banking Committee. The report said Dodd referred Collipriest to Countrywide's VIP unit. Dodd, when commenting on his own loans, has said he was unaware of the discount program, which we know is probably false, given the finding noted below. - Rep. Howard "Buck" McKeon, R-Calif., chairman of the House Armed Services Committee. - Rep. Edolphus Towns, D-N.Y., former chairman of the Oversight Committee. Towns issued the first subpoena to Bank of America for Countrywide documents, and current Chairman Darrell Issa, R-Calif., subpoenaed more documents. The committee said that in responding to the Towns subpoena, Bank of America left out documents related to Towns' loan. - Rep. Elton Gallegly, R-Calif. - Top staff members of the House Financial Services Committee. - A staff member of Rep. Ruben Hinojosa, D-Texas, a member of the Financial Services Committee. - Former Rep. Tom Campbell, R-Calif. - Former Housing and Urban Development Secretaries Alphonso Jackson and Henry Cisneros; and former Health and Human Services Secretary Donna Shalala. The VIP unit processed Cisneros' loan after he joined Fannie's board of directors - Former Fannie Mae heads James Johnson, Daniel Mudd and Franklin Raines. Countrywide took a loss on Mudd's loan. Fannie employees were the most frequent recipients of VIP loans. Johnson received a discount after Mozilo waived problems with his credit rating. Note: One hero did emerge from this fiasco: Rep. Pete Sessions, R-Texas, was an exception. He told the VIP unit not to give him a discount, and he did not receive one. The House report found that all of the above people who leveraged their government job and the American taxpayer fully knew they were getting a special deal because of their positions since: "The documents produced by the bank [Countrywide] show that VIP borrowers received paperwork from Countrywide that clearly identified the VIP unit as the point of contact." No excuse due to ignorance is available to these people who traded their integrity for personal enrichment. Disgraceful. Maybe if these people were doing their jobs honestly without undue outside influence and monetary reward, we would not have record high unemployment rates, millions of homes in foreclosure, tepid economic growth, and hundreds of billions of dollars in wasted taxpayer wealth. The graph above shows there is no excuse for not knowing what was going on. The fact that reforming the housing and mortgage market failed numerous times is certainly an indication that some people knew there was a problem but could not overcome the Countrywide money distribution and dozens of Fannie Mae lobbyists. No one was able to upset the gravy train of cheap VIP mortgages. The greatest sins: - No one was prosecuted for hoisting this economic disaster on the American public. - No one in Congress was censured for hoisting this economic disaster on the American public. - No one was thrown out of Congress for hoisting this economic disaster on the American public. - No one has a plan to allow the American taxpayer to get out from under the continuing burden of Fannie and Freddie. Obviously, the taxpayer and American citizens are almost more than likely to end up on the short end of this corruption stick. Thus, at least two steps need to be implemented: 1) The first step would require every one in Congress, including their staffs, to sign off on a shared values pledge every year, in which integrity would be a major component of that pledge. At least if everyone in Congress, including that ignoble list of people above, had to read about integrity and put their signature to a pledge to remain within integrity, we might have a better chance of sidelining the corruption. 2) The second step would implement term limits for every Federal politician. If Countrywide and others like it knew that every politician would be in office for a limited amount of time, they might be less likely to hand out corruption favors so easily. Countrywide, for example, might not want to be saddled with discounted, less than optimal 30 year mortgages if the people they can influence with the carrot of lower mortgage payments will only be around for a few years. This is one situation where derailing a train might be a good thing.
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cronyism, corruption, fisker, solyndra, political class, nevada, harry reid, ciuntrywide, great recession, wasteful spending,
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