Monday, October 13, 2008

The Crash of '08

The ten most dangerous words in the English language are "Hi, I'm from the government, and I'm here to help." - Ronald Reagan

Though I’m reluctant to write about any topic that does not directly pertain to our neighborhood, the market crash demands attention. Whereas greed has always been with us, the latest meltdown has been brought to us by the government. Now, the same bureaucracy that brought down Wall St. is promising to fix the mess they created with more oversight, more regulation, and more spending. Haven’t they done enough?

Though this recipe for disaster has many ingredients, the story begins in 1977 with the Community Reinvestment Act (CRA). Banks had long been accused of redlining - refusing to conduct business or grant loans in certain neighborhoods. The CRA allowed the federal government to consider a bank’s involvement in minority and low-income neighborhoods when reviewing the bank’s application to expand through acquisition, merger, or branching.

Over the years, especially in the 1990’s, the CRA was strengthened to ensure that banks continued lending to low-income neighborhoods. The CRA became especially important after the Glass-Steagall Act was repealed in 1999; the Depression-Era statute had forbidden commercial banks from doing investment banking.

So far, no problem.

The next ingredient came in 2001. Following the dot-com bubble bursting, a minor recession at the end of 2000, and the 9/11 terrorist attacks, the Federal Reserve, fearing deflation, adopted an easy money policy and dropped overnight rates to 1%. In 2002, Ben Bernanke (then a member of the Board of Governors of the Federal Reserve) earned the moniker “Helicopter Ben” by referencing a Milton Friedman idea that the government could fight deflation by dropping bags of money from helicopters.

The Federal Reserve, however, made a mistake in focusing too much on core inflation, the rate of inflation excluding food and commodities. The rising global economy, coupled with increased trade, put downward pressure on prices despite the rise in commodity prices (gold, oil, construction materials, and agricultural products).

2001 was also the year of the Enron collapse. IRS regulations required the use of Mark to Market, evaluating marketable assets by the closing price on the last market day, but many of Enron’s assets were in illiquid markets so they used Mark to Model. Enron inflated profits by exaggerating asset values and hiding billions of dollars in losses through off-book accounting.

Enron’s senior executives were convicted of fraud and its accounting firm, Arthur Andersen, though ultimately acquitted, was shut down. Still, Congress insisted on passing new legislation to prevent another “Enron”, hence the Sarbanes-Oxley law which strengthened accounting standards and imposed severe criminal liabilities for non-compliance. Mark to Market became the rule of the day regardless of market conditions.

The final ingredient for catastrophe was Fannie Mae and Freddie Mac. These government sponsored enterprises (GSEs) were created to establish a secondary market for home mortgages, thereby enabling banks to make more mortgages. Since the GSE’s had an implied government guarantee against default, they were able to borrow more money more cheaply than anybody else. And borrow they did, buying over $1.5 trillion in home mortgage securities.

However, following Enron, Fannie Mae’s and Freddie Mac’s auditors decided to review the books a second time and found them in non-compliance. In 2003, Freddie Mac was found hiding billions in profits to smooth earnings from year to year. In 2004, Fannie Mae was punished for hiding $9 billion in losses. The SEC’s chief accountant, Donald Nicolaisen, told Fannie Mae’s CEO, Franklin Raines, to imagine compliance as the four corners of a page with perfect compliance in the center. “You weren’t even on the page”, he told Raines.

In 2003, the White House, Alan Greenspan, and Congressional Republicans began sounding the alarm that the GSE’s had grown too large, had accumulated too much debt, and were posing a serious risk to the country’s financial system. The GSE’s fought back by championing affordable housing and flooding congressional allies with financial contributions. (During Senator Obama’s short tenure, he was Congress’s largest recipient, taking over $126,000 in campaign contributions. Chris Dodd, Chairman of the Senate Banking Committee that oversees the GSE’s was the all-time largest recipient at $165,000 over a 20-year period.) Fannie and Freddie weren’t allowed to purchase sub-prime loans but they were allowed to pour hundreds of billions of dollars into the securities backed by sup-prime loans. Any check on their purchases would have limited their ability to support affordable housing.

At the same time, Countrywide, the country’s larges originator of sub-prime loans and Fannie Mae’s poster boy who accounted for up to 30% of the loans purchased by Fannie Mae, began its “Friends of Angelo” program, named after the CEO, Angelo Mozilo. Senator Chris Dodd and other senior congressmen were offered a “V.I.P.” program that waved “points, lender fees, and borrowing rules”.

Facing strong democratic opposition and a tough election year, Republicans retreated.

Our cake is now complete. Banks, encouraged by the CRA, began making sub-prime loans. Fannie and Freddie, backed by an implied government guarantee and seeking to justify their government support, bought huge blocks of securities backed by sub-prime loans, thereby encouraging banks to issue even more risky loans. Low interest rates heats up the housing market, encouraging homeowners to use their newfound home equity like a checking account. And an inflexible mark to market rule that no one seems to notice. All we have to do is wait for something to go wrong.

As commodity prices kept rising, the fed began to slowly raise its rates. Despite prevailing wisdom on Wall St. that higher interest rates would end the housing boom, few analysts predicted a housing bust because of the low unemployment rate. Unfortunately, they discounted the types of home loans being taken. Many of the loans were non-amortizing low-deposit, adjustable rate mortgages with teaser rates. (The teaser rates had two purposes – to entice borrowers into larger mortgages and to meet Fannie/Freddie standards which only used six month projections.) In other words, not only would many homeowners be facing sharply higher mortgage payments but they would also be “underwater” since their homes were worth less than the mortgages. In fact, nearly one-third of Countrywide’s loans were negative-amortization loans, meaning the initial payments weren’t even covering the interest on the loan.

Sure enough, default rates shot upward but, even at today’s 6% default rate, the defaults should have been well within the financial industry’s capability, especially considering the mortgages are backed by homes and notes. The problem wasn’t in the default rate but in the industry’s inability to price the mortgage-backed securities.

Pools of home mortgages would be packaged into securities. Those securities would then be sliced a thousand ways. One security covered the interest payments. Another covered the principal. Then the securities were ranked according to who got paid first in the event of default. Then they were priced according to risk.

Bamm! The financial industry couldn’t price risk. First, FICO scores were no longer reliable predictors because default rates were more closely aligned to the equity in the house as even borrowers with good credit histories began to default. Then, certain areas such as Las Vegas and Miami saw housing prices plummet far faster than other areas, but the securities were bundled according to borrower’s credit risk, not the risk in falling housing prices. Then politicians jumped into the fray. Some sheriffs declared they wouldn’t foreclose on homes during the current crisis. Senator Hillary Clinton called for a rate freeze on adjustable rate mortgages.

Lastly, some banks were having difficulty foreclosing because mortgage filings with the county weren’t up to date. Securities are traded at the click of a button but only the recorded holder of a mortgage can foreclose on a house.

Suddenly, mortgage-backed securities, especially sub-prime mortgages, were “toxic”. Nobody wanted them and the market dried up.

Remember the Mark to Market rule? Well, how do you price a security in an illiquid market? Answer is same as you do for a liquid market – based on the price of the last sale.

To illustrate the problem, imagine a local homeowner has a gambling problem. One day, some large fellows with no necks explain to him that he only has a week to settle his debts or he may encounter complications. The homeowner is forced to sell his house at distressed prices, far below market value.

Unfortunately, under Mark to Market rules, the bank is forced to value all properties based upon the latest sale. They immediately contact a local developer and inform him that, based upon a recent sale, they’ve had to reappraise his property for far less and the developer needs to pay down his debt or they’ll foreclose. That developer becomes a distressed seller and the trend continues.

Same story in the mortgage backed securities market. Between the housing market crisis, unreliable risk predictors, and potential government intervention, the mortgage backed securities market dried up. But there’s always somebody in need of cash and they were forced to sell their securities at reduced prices. The moment they did, every company had to mark down the values of their own securities. Suddenly, they no longer had sufficient capital to support their leveraged investments and they were forced to liquidate more of their holdings at further reduced prices.

Once the dust began to settle, financial companies such as Merril Lynch and AIG had marked down their securities by nearly 80%. According to Fitch Ratings, as many as 45% of adjusted rate mortgages (ARMs) could default but the paper is backed by real property. Even assuming you only get back 50% of the mortgage value from foreclosing on the house, that still only translates into a 22.5% loss. Why then are companies being forced to writedown 80% of the value?

If these securities are such great bargains, why aren’t other companies taking advantage? Because most financial companies make their money by using highly leveraged positions. Imagine you buy these securities at a great buy and then some other company sells them for less, forcing you to mark down the securities. The paper loss could render you undercapitalized and force you to liquidate other holdings. Nobody wants to risk being placed in that position.

Mark to market accounting has resulted in the deaths or takeovers of Fannie Mae, Freddie Mac, Bear Sterns, Merril Lynch, Lehman Brothers, AIG, IndyMac, Wachovia, Washington Mutual, Countrywide, and New Century Financial. Many of these companies deserved to die for creating outrageous mortgage instruments and not providing sufficient warning to borrowers but the massive wreckage across Wall St. is unwarranted.

In summary, we have an unbridled Fannie Mae and Freddie Mac earning private profits by assuming public risk. They create a market for sub-prime loans by purchasing their securities. Financial companies begin offering unconventional and risky loans that many borrowers didn’t even understand, all in the name of affordable housing. When interest rates ultimately rise, housing prices drop and mortgage defaults increase to alarming levels. The securities market dries up and financial companies are forced to revalue their assets according to an accounting rule that has no rational basis in an illiquid market.

The result is a worldwide financial crisis, a trillion dollar bailout, and more unwanted government intervention. No matter how often government creates a crisis, the public turns to the government for the solution. The answer is less government, not more.
To end the crisis, I’d suggest the following steps:

  1. Shut down Fannie Mae and Freddie Mac. The companies are no longer needed and the federal government can’t be trusted to run them.
  2. Establish triggers for declaring an illiquid market. During illiquid markets, companies can value their assets according to Mark to Maturity rather than Mark to Market.
  3. Grant securities backed by mortgages for primary residences the same tax exempt status as municipal bonds. Mortgage rates would drop, home prices would rise, and the refinancing spree would revitalize the banking industry.
  4. Restrain executive pay. All senior executives should have their compensation packages approved by a shareholder vote. If the owners want to overpay their CEO, that’s their business, but compensation packages shouldn’t be determined by a board handpicked by the CEO.
  5. Modify Regulation Z – Borrowers should be provided worst-case-scenarios over a 10 year period for all non-commercial loans.
Aside from the idea for tax-exempt securities, the above ideas have already been proposed by folk far more knowledgeable and influential than me. My goal is to simply refute the idea that our government is being run by uber-geniuses, that the market failed because there was insufficient government oversight, and that the answer is more government.

We don’t need monster bailouts, needless government interference, or market manipulation. Changing a few simple rules and protecting the integrity of the marketplace is all the government needs to do. >>> Read more!

57 comments:

Mim Song said...

Unworthy, Aberdeener. We come here to read local news & views, not cut-and-paste rightwing claptrap. Read the McClatchy article refuting all this scary talk: http://www.mcclatchydc.com/251/story/53802.html. In short, few subprime loans were made by lenders covered by CRA; all experts agree that lax underwriting standards and overleveraging has caused the current crisis.

Moreover, your blame-the-government line is about as tired and phony as it can be. It's the financial industry that lobbied the Bush administration to relax the rules that caused the problem; they have now turned around and blamed the government for doing what they asked for!

Finally -- and here's where I'm really surprised at you, Aberdeener -- the government *is* here to help you, as long as you remain vigilant. Governments serve special interests when they're the only ones who show up. I thought your blog was all about the necessity of vigilance and showing up. Reagan's words, like everything else about him, were directed at a lazy, resentful post-Republic audience -- shame on you for perpetuating that nonsense.

Aberdeener said...

Mim Song,

As always, thanks for your comment as well as the link. I read the article but I find it to be inaccurate.

Here's a quote from Wikipedia that includes supporting documentation:

"As of November 2007 Fannie Mae held a total of $55.9 billion of subprime securities and $324.7 billion of Alt-A securities in their portfolios.[91] As of the 2008Q2 Freddie Mac had $190 billion in Alt-A mortgages. Together they have more than half of the $1 trillion of Alt-A mortgages.[92]"

Aside from affordable housing, can you think of any other legitimate reason for Fannie and Freddie to purchase over half a trillion dollars in Alt-A securities?

Nor does the article mention Mark to Market.

I stand by my position that government bears much of the blame for the wreckage on Wall St.

smrstrauss said...

Those of us who have received mortgages with the participation of Fannie or Freddie (and there are MILLIONS of us) resent what you say. Without those two institutions, many of us would not be owning our homes. And, we are voters!

It was not Fannie or Freddie’s fault that the value of homes have collapsed since the bubble. That was the fault of overbuilding, and the bubble itself was largely caused by speculation. And Fannie and Freddie had nothing to do with credit default swaps, auction rate securities (which chopped down the value of several money market funds), the high rate of leverage of banks (sometimes 33-to-1), bank and investment bank assets held in “off balance sheet” companies, Etc. Who caused all that? The SEC’s “voluntary” regulation program, the Fed’s inability to discover 33-to-1 leverage, the administration’s lack of interest in regulating derivatives.

So you say that Fannie and Freddie were supporters of Democrats? Well, the American Bankers Association gave 59% of the 24.24 million it contributed over the period 1990-early 2008 to Republicans, according to OpenSecrets.com.

Someday, the Republicans will want to win votes in the African-American community and among other minority groups. Well, this is not the way to do that. You are inferring that the ability to pay back loans among minority groups is lower than the population as a whole. Hard workers resent this!

Moreover, by far most of the sub-prime loans were made and owned by commercial mortgage companies and commercial banks (more than 80%!). Fannie and Freddie owned some, not because they wanted to help out minorities, but because they (like Wachovia, Washington Mutual, Etc) thought that sub-prime investments would be profitable investments. This was a business motive, a capitalist motive if you will, not caused by a desire to help the poor. In fact, there is no way of knowing whether sub-prime mortgage paper is composed mainly of minority mortgages, or loans on second homes, or real estate speculation.

This article shows the extent of real estate speculation, which was mainly funded by commercial mortgage brokers!

Yep, those loans sure did:

The Wall Street Journal February 6, 2008

Speculators May Have Accelerated Housing Downturn:Rising Number of Defaults
Also Could Complicate Effort to Help Homeowners
By RUTH SIMON and MICHAEL CORKERY February 6, 2008; Page B8

As lenders pore over their defaulted mortgages, they are learning that the number of people who bought homes as investments is much greater than previously believed. Such borrowers turn up frequently in analyses of loans that defaulted within months after origination.

In many cases, these speculators lied on loan applications, saying they intended to live in the homes in order to obtain more favorable loan terms or failed to provide the requested information. Roughly 20% of mortgage fraud involved "occupancy fraud," or borrowers falsely claiming they intended to live in a property, according to an analysis by BasePoint Analytics, a provider of
fraud-detection solutions in Carlsbad, Calif.

Another study, by Fitch Ratings, looked at 45 subprime loans that defaulted within the first 12 months even though the borrowers had good credit scores. In two-thirds of the cases, borrowers said they intended to live in the property but never moved in. Some home builders have come to similar conclusions: They now believe that as many as one in four home buyers in some markets were
investors during the boom, up from their earlier estimates of one in 10 buyers. The high number of hidden speculators helps explain some of the problems roiling the housing and mortgage markets.

The loans backing these speculator purchases turned out to be riskier than ratings agencies and
investors who bought mortgage-backed securities once thought. Investors tend to be more likely than borrowers who live in the homes to walk away from their purchases when home prices fall. "We couldn't understand what was driving so many borrowers to default so early in the life of their
mortgage," said Glenn Costello, a managing director at Fitch. Much of the occupancy fraud was concentrated in markets such as Florida, Nevada and Arizona, where prices were appreciating by double-digit percentages annually, said Kevin Kanouff, president of Denver-based Clayton Fixed-Income
Services, a unit of Clayton Holdings Inc. that reviews about seven million loans a month on behalf of investors. In Las Vegas, as many as 60% of the foreclosures last year involved non-owner-occupied homes, according to Applied Analysis, a real-estate-research firm.

And all this lead to the “securitization” of sup-prime paper, its rating by bond agencies at AAA (when it was usually DDD), the credit default swaps used to guarantee the debt, the off-balance sheet entries. And none of this paper, known as derivatives, was regulated or even statistics kept about it. The Democrats called repeatedly for the regulation of commercial mortgage companies!

No, it was the Republicans who caused the financial crisis.

Aberdeener said...

SMR Strauss,

I'm sorry I don't have time at the moment to respond to your comment but I will try to respond to each of your points Wednesday night.

I agree with you that we need to understand what happened and prevent a future recurrence.

Once again, I urge people to look at Mark to Market since that appears to be the biggest culprit of the current crisis.

Anonymous said...

Here is a hint. GREEED HAPPENED.

GREED HAPPENED AGAIN.

We all must remember one thing. The stock market is not much more than legalized gambling.

Anonymous said...

All you people seem to be very intelligent! So can any one tell me how to get help with a mortgage that has gone to 12%? Is that what the 700 billion was voted for? To help all of us that is facing foreclosure?

Anonymous said...

Aberdeener, it looks like you have several MSNBC loyalists reading your blogs. Remember how blue, and how blind the people in this state are. Don't dare put any blame on anyone, other then big bad Bush. (You know, You been Bushed) Don't worry the Messiah, and friends will soon be able to fix everthing. And for the next 100years they can still blame Bush for everything that doesn't go well for them.

Anonymous said...

NO ACCOUNTABILITY.

NO ONE WANTS TO BE ACCOUNTABLE.

EVERYONE HAS LIVED LIFE IN THE FAST LANE. BIG CARS, BIG HOUSES AND BIG LIES.

NOW THE REALITY FOR OUR SOCIETY HAS SLAPPED US ALL IN THE FACE. AND SOMEHOW WE ARE SURPRISED THAT IT HAS HAPPENED.

WE CAUSED THIS, WE ALLOWED THIS AND WE WILL PAY THE PRICE.

HISTORY ALWAYS REPEATS ITSELF!

Harry Halliburton said...

Greedy people made loans to people who could not afford to pay them back.

Franklin Raines, Fannie Mae C.E.O. from 1999 to 2004 had been budget director in the Clinton White House. He “creatively managed” books at Fannie to increase his compensation. He made $90 million over his tenure. He made compensation dependent on the number of mortgages Fannie would underwrite. Not bad for running a quasi-governmental agency. I am surprised he hasn’t ended up in NJ yet.

Yes, I know the talking points. This crisis is all because of Bush, Cheney, Iraq, rich people and Halliburton

Don’t worry be happy! When Barack Obama gets to be your next president after ACORN helps him steal the election, we can look forward to the following.

There will be peace around the world immediately, because President Obama will tell our enemies that war is not nice.

Wall Street will be bailed out and everyone will get free healthcare that won’t cost us a dime!

All illegal aliens will have a driver’s license and be able to vote!

There will be tax refunds for everyone, even if you don’t pay taxes.

He will get rid of those nasty right wing radio talk shows by using the “fairness doctrine”.

We will stop those evil banks from kicking people out of their homes, and reduce those mortgages because everyone has the “right to own a home”.

Keep drinking that kool-aid. Barack’s numbers don’t add up. There is NO WAY he can do what he says without MASSIVE tax increases. I am confident that he does have is a plan to curtail freedom and move our country even closer to socialism. Hard work will be punished while irresponsibility will be rewarded.

Welcome to Amerika !

Anonymous said...

I agree with mim song - keep this local! This crisis has multiple reasons, including de-regulation and the absolute failure of the Bush Economic Doctrine -- oh yeah, there isn't one.

We need a new game plan, not blind loyalty to market forces and the pro-greed party.

Keep this blog local.

Anonymous said...

Harry Haliburton - get real -- McBush has done more to curtail freedoms than any past administration -- do you really want the government listening in on your phone calls without court approval. The right wing has gone off the deep end. McCain/Palin are the ones to be scared of.

Anonymous said...

As for the person with a 12% mortgage loan, you should have been asking for intelligent advice prior to taking the loan. Here is a question, if you were given good advice and told you could not afford the house you were buying, would you have taken that advice? Ask yourself that question, and answer yourself honestly. This is the problem people that live a more modest lifestyle have with this whole mess. We will suffer the consequences of both, the careless lenders, and the reckless buyers.

Anonymous said...

Have you idiots learned nothing? Whether it be Dem or Rep, Inde or green they alL SUCK.

That is all.

Nov 4 we lose again no matter what.

Unfortunately this year Aberdeen does not have an election to oust our local scumbags. So another year of Kauff and Crew.

F all of the from every party.

Anonymous said...

Using 'Wikipedia' as a source, now there is a concern.

Anonymous said...

The choices you have are better than the choices some don't have. On November 4th we will elect a president to replace the worst president in this country's history, Next year we will replace the most corrupt mayor in Aberdeen's history.

KennyCB said...

I concur on the worst Mayor. The best thing for Aberdeen and the first step to get rid of the whole crew is to oust that low life, rat bastard, scum sucking, holier than though scumbag Norman Kauff.

Then all is right with the world and the rest will run for cover. You see independent thought is foreign to them all. Without Norm they are just dazed and confused.

Norman Kauff is the key.

Norman goes and the rest will fold like a deck of cards.

Right Norm?

By the way anyone think they might clean the graffiti down on the roller blade park. I would like to take my kids down there but with it looking like Trenton invaded I will not. Imagine I live by something the town will not keep an eye on it. I spoke to my neighbor and she told me it was nice years ago, but her exact words were *they do not care about the beach*.

Obviously.

Anonymous said...

Harry,
Welcome to the Socialist Republic of America. Its three weeks away and Accorn is hard at work. For all who gave the ultimate sacrifice for our right to vote it is now being polluted. The annointed one will save all.

Anonymous said...

It is cool and hip to blame Bush for everything. Who knows? It seems to me that the DEMS won everything in the last election for Congress and Pelosi and her clan has done nothing worth mentioning. Now we are about to witness the greatest human in the world become our president..... the media and his followers have so ordained him that.

Keep it local? Sure. How many people have bought in this town and now cannot hope to leave because they owe more than their houses are worth? Who is this town will lose money when they try to escape high taxes and town council corruption? I honestly would like to buy on the other side of town and cannot because I will never be able to sell my house without taking a blood bath. Prices driven up by those corps who gave LOANS TO THOSE WHO WOULD HAVE OTHER WISE NEVER GOTTEN THEM. Who stood up to Congress and begged to keep the CRA and its rules going? DEMS and the almighty Obama.

That is OK. Vote for Obama. We will see taxes raised, not by Aberdeen by him. DIRECT OBAMA QUOTE when asked why he would raise taxes " I am not trying to take your wealth, just trying to make sure everyone has their share of the wealth."
Dems in office = poor foreign affairs at the most crucial time in American history. Who do think the Taliban and Iran and even Russia want to see win? Big Bad Barrack.

Manitoba, Canada here I come.

Anonymous said...

Dems weak on foreign affairs? Obama is not the erratic geezer that keeps on insisting that we fight the wrong war and ignore diplomacy. Oh, but that's ok, McBush's sidekick can see Russia from her backyard. The Straight Talk Express has lost its wheels and the "mavericks" have lost their way.

Keep this blog local. Our common enemy is corruption in Aberdeen and Monmouth County - regardless of party. Our crooks here are dems; but, plenty of republicans have also gone to jail.

There are plenty of blogs, blue and red, for us to read without reading it on here. Our target is lurking in the shadows of Aberdeen town hall, playing with the rats.

Anonymous said...

Erratic Geezer! Thats the respect you give this man! I don't care what party you belong to, McCain is one of the most decent men in Washington DC. Competing with one of the most questionable men in Washington DC. That's just called no respect! So you join your protesting friends who prolonged the war, empowered our enemies, and costed us more American Blood.
You join them and vote for this well polished machine. Patriotism, principles, respect, decency, and honor are obviously of no importance to the people you find yourself in common with.

EssieDrIndy said...

I have to agree. Lets stay local. BUT! There is certainly enough to discuss and highlight with our local idiots to stay away from the BS that is the national scene.

I am an Independent voter and have made my choice many months ago. For good for bad for worse I will cast my vote for John M.

Experience counts for me and Obama's experience falls far short on many levels. It is a simple decision for me just on experience alone.

For some it will be black and white which fails on so many levels, in my opinion. I for one only want someone who has been there and done that.

I also cringe at the idiots who seem to be the tens of thousands of SUPPOSED POLITICAL EXPERTS who cast their message every single day on radio and television. One example would be the so pompous James J. Carville. This idiot has started to spew his divisive message when he stated "If Obama does not win their will be an uprising". Did he say that when Obama was up against Hillary? No of course not. He saved that one for the black and white issue closer to election. Do not vote out of guilt or some perceived or suggested liberalism.

Which man has experience on a broad level? Change is good but the world issues and our economy are more precarious then ever. 143 days as a Senator does not experience to be President of the United States make.

We need change may be a good and politically correct slogan. But it is not the reality for a world in turmoil.

Anonymous said...

Ok, McCain is a War Hero, patriotic, former maverick - but he is empty of ideas and his picking of Palin gives legitimate pause to question his judgement. The rest of this country seems to have figured this out. You, on the other hand, should give our next president more respect.

Anonymous said...

You seem to think the election is already over! Im glad you feel that confident about the polls!

Anonymous said...

Regarding some of the comments on the blog:

It should focus on local issues, but I am compelled to refute some of the leftist talking points that have been posted:

To person who said we have the less freedom under McBush. If you look at history you will find that Abraham Lincoln suspended Habeas Corpus in Maryland and other border states in 1861. He was challenged by the circuit court of Maryland and ignored them. Congress followed in 1863 and suspended Habeas Corpus all over the country for another two years.

Many of FDR’s programs were found to be unconstitutional by the Supreme Court. He was so annoyed by it he even tried to add justices to the court! Fortunately, even the Democrats at the time were unwilling to support something that radical. FDR also gave FBI director Hoover a free hand to violate the rights of citizens for decades.

We should not engage in diplomacy with terrorists and terrorist states period. The publicity only empowers them and weakens the United States. We should focus more of our effort on building coalitions against these states and must absolutely never allow them to obtain nuclear weapons.

About Barrack Obama, his tactics and education as a Community Organizer.

If you are interested in finding out about Saul Alinsky do a search on his book “Rules for Radicals”.

http://www.americanthinker.com/2008/01/obamas_alinsky_jujitsu.html

Barack Obama had just graduated from Columbia and was looking for a job. Some white leftists were looking for someone who could recruit in a black neighborhood in the south side of Chicago.

Obama answered a help-wanted ad for a position as a community organizer for the Developing Communities Project (DCP) of the Calumet Community Religious Conference (CCRC) in Chicago. Obama was 24 years old, unmarried, very accustomed to a vagabond existence, and according to his memoir, searching for a genuine African-American community.

Both the CCRC and the DCP were built on the Alinsky model of community agitation, wherein paid organizers learned how to "rub raw the sores of discontent," in Alinsky's words.

One of Obama's early mentors in the Alinsky method was Mike Kruglik, who had this to say to Ryan Lizza of The New Republic, about Obama:

"He was a natural, the undisputed master of agitation, who could engage a room full of recruiting targets in a rapid-fire Socratic dialogue, nudging them to admit that they were not living up to their own standards. As with the panhandler, he could be aggressive and confrontational. With probing, sometimes personal questions, he would pinpoint the source of pain in their lives, tearing down their egos just enough before dangling a carrot of hope that they could make things better."
The agitator's job, according to Alinsky, is first to bring folks to the "realization" that they are indeed miserable, that their misery is the fault of unresponsive governments or greedy corporations, then help them to bond together to demand what they deserve, and to make such an almighty stink that the dastardly governments and corporations will see imminent "self-interest" in granting whatever it is that will cause the harassment to cease.

In these methods, euphemistically labeled "community organizing," Obama had a four-year education, which he often says was the best education he ever got anywhere.

Anonymous said...

I'm just hopeful that the majority of this country is taking this election seriously and not just voting for the old guy that calls himself a maverick. The so-called maverick who would trust this country's future to an unqualified sidekick that has abused her power as governor and gives lip service to family values.

In my book a family values candidate does not endorse teen pregnancy or neglectful parents of a son who cut the brakes on a school bus. How can you support the guy who would put that person a heart beat away from the presidency?

Anonymous said...

A vote for McCain is a vote for Sarah Palin. Palin of the misuse of her office. Palin of the attempt to ban books from a public library (a VP who doesn't respect the FIRST AMENDMENT?). Palin who got her house for free. Palin, who would take a woman's right to make decisions about her own body away from her. Palin who believes there should be NO sex education in public schools (look where that got her!). Palin who thinks the world is only 6,000 years old. Palin who thinks global warming is just God hugging us a little closer (thank you Tina Fey). Palin who has no right for personal rights, the environment or the US Constitution.

McCain might be a war hero and a decent man - he's also old and sickly. I'll vote for Obama and the Dems before I vote for that fundamentalist wacko Sarah Palin.

Anonymous said...

Sorry, that should have read "...no respect for personal rights..."

Anonymous said...

As this is the Aberdeeners blog, he has the right to talk about anything he wants to talk about.

How does anyone get off telling him what he should/should not post on his own, personal blog?

If he wants to post about cats with funny captions, that's his business. Just don't read the posts that you aren't interested in!

Anonymous said...

Who's the WACKO here? There is no hope for some!

Anonymous said...

Racism according to Barack Obama.

"The point I was making was not that my grandmother harbors any racial animosity," he said. "But she is a typical white person. If she sees somebody on the street that she doesn't know. . .there's a reaction in her that doesn't go away and it comes out in the wrong way."


Imagine if John McCain talked like this and said typical black, asian, hispanic, or any other group besides white ?

OBAMA change we can't afford !

Anonymous said...

You'll learn to honor and respect our next President. Either would be better compared to G.W.B. -- but Palin really does sour the mix.

My interest locally is de-throning the Kauff cronies. Maybe Palin needs a new friend in Alaska. Wasilla seems to be about Kauff, Sobel, Gumbs, and Drapkin's speed.

Maybe CME can engineer the bridge to nowhere.

Anonymous said...

OK Dems, tell me again how Teddy Kennedy, who was instructmental in the death of Mary Jo Kopeckni gets elected into office year after year? That appears to be the reason he never ran for President. Wasn't he also in the house at Cape Cod when the alleged rape of a girl visiting his nephew took place. Oh let's not forget Bill Clinton, former President and his tryst with Monica Lewinsky at the White House. Let's not forget the land deal in Arkansas. With a lot of money you can buy innocence, just ask OJ.

Now what was that about Pallin?

Aberdeener said...

Wow!

Sorry I've been away for so long but I sure did learn one thing - Democrats, Republicans, and Independents all read this blog.

I agree with those who advise me to keep the blog local though I believe the market crash and the federal government's response warranted an exception.

The point was not to blame Republicans or Democrats (Lord knows there's lots of blame to go around) but rather to 1) warn of a growing government and 2) show that government is often undependable.

The original CRA was a perfectly appropriate response to the likely redlining practices. The original Fannie Mae and Freddie Mac were also reasonable creations to establish a secondary market. And mark to market was a regulation that was always on the books but needed to be reinforced after Enron.

But look what then happened. The CRA became a tool to encourage companies like Countrywide to craft outrageous mortgage instruments like negative amortization loans. The FM twins spent millions of dollars, including direct contributions to some of the most powerful people in Congress to prevent congressional oversight, even though they were operating under a congressional charter. And mark to market forced companies to record hundreds of billions in losses on mortgages that weren't in default.

And let's not forget the Fed's easy money policy that led to the housing bubble that they predicted wouldn't be a problem.

No system is perfect but I believe it is a terrible mistake to use government as the first recourse rather than a last resort.

As for SMR Strauss's comments, the only statement I made regarding minorities was "Banks had long been accused of redlining - refusing to conduct business or grant loans in certain neighborhoods. The CRA allowed the federal government to consider a bank’s involvement in minority and low-income neighborhoods when reviewing the bank’s application to expand through acquisition, merger, or branching."

I don't believe he disagrees with that statement but I can't imagine what else he was referencing.

As for laying the blame by others, the SEC, corporate greed, lax regulation, etc., I agree there's much blame to go around but I believe if you remove the elements I discussed, we would not have had the market crash despite everything else.

Lastly, for the person whose mortgage has risen to 12%, please feel free to email me directly. I refinanced my house in May at 4.75% in a 3-year ARM. So long as your current mortgage isn't greater than the worth of your house, you should be able to refinance. If that's not the case, you may be able to renegotiate with the bank. In any case, I'd be happy to discuss your specific issue and hopefully find a remedy.

I'm thrilled to see that even though we have very different political viewpoints, we're all able to come together and work for a better Aberdeen.

As always, I'm grateful for your comments, your readership, and your love of Aberdeen. Our community is far richer with your input and I hope it will continue.

Anonymous said...

All of you liberals and social engineers make me sick. Due yourselves a favor and read Liberalism is a Mental Disorder by Michale Savage and maybe you'll begin to understand why your minds are so warped. People who accepted these loans knew exactly what they were getting into. What? Did they believe that the mortgage fairy was going to come along and keep their payments level? Balloon mortgages have been around for years. It all comes back to entitlement. Let's get it all now, and blame others when we can't keep it. Home ownership is a privilege, not a right. And now the people who work and pay their taxes have to come along and bail out the crybabies once again. Wanna fix the economy? Get rid of the welfare system. Once the rioting stops and the fires are put out we can begin to rebuild our nation and force people to pull their own weight. Oh, and go take a walk through the streets of Camden one evening and then decide who you are going to vote for as the next president.

Anonymous said...

I am a lifelong Republican who will be voting Democratic this year. No way in God's green earth would I vote for Sarah Palin to be the next president. And that is what a vote for McCain is - that old sick geezer probably won't last a year.

Joe the Plumber said...

Obama's socialist agenda !

Obama & Joe the Plumber -- Good to spread the wealth around

He is a proponent of redistribution of wealth. Watch him talk about it....

I am a lifelong democrat and I will not vote for this smooth speaking "suit".

If he gets elected, don't be shocked when all his campaign promises are lies.

Anonymous said...

McBush proved last night that he is absent of any new ideas to fix what is wrong with our economy - not surprising since he is part of the problem.

McCain is a war hero who made a name for himself by voting independently at times; however, he lost his way in recent years due to his blind ambition. His low point was in picking Palin as his VP candidate - there is just no good way to explain that choice.

The irresponsible attacks, calling him a socialist and worst, on this blog, show nothing but disrespect for our democratic system. Someone even suggested that they would pack up and go to Canada? So much for patriotism.

I love this country, even though we've elected some pretty awful presidents, specifics depend on your perspective.

Just vote on Nov. 4

Anonymous said...

McBush, yeah that shows respect. Obama is nothing but an arrogant pretender supported by people who hate America, Ayers, Wright and Farrakhan.

Any army private serving in Iraq or Afghanistan would be a better choice for president.

People call him a socialist because he is one! He wants to redistribute wealth. Educate yourself and look up the definition.

Aberdeener said...

Just out of curiosity, is anybody voting for his candidate or just against the other guy?

Anonymous said...

A lifelong republican that votes for a socialist. Your as a big a phoney as Obama.

Anonymous said...

Just a note to the blogger that wants to move to Canada if Obama wins: There is Socialized Medicine in Canada.

Still going?

Aberdeener said...

Regardless of who wins the election, this will still be the greatest country on Earth.

Anonymous said...

To answer Aberdeener's question:

I am voting for Obama/Biden - They are the most qualified team to lead the country in these tough times.

I am also frightened that a presidential candidate would pick someone as unqualified as Palin as VP.

Obama has distinguished himself during this long election cycle with his ability to rise above the petty politics of personal destruction that has tainted politics in this country for way too long.

This is a great country. McCain is a great American - Just don't think he is the best choice this year.

Anonymous said...

And by the way -

Given the recent votes on the bailout - Bush, McCain, and Obama are all socialists. This country is buying ownership in banks and insurance companies! I don't like it, but by pure definition - we've jumped the free market economy some time ago.

Also - enough of equating Obama with idiots like Farakahn.

He actually is endorsed by the likes of:

Warren Buffet
CEOs of Pepsi,Synmantec,Google,and more
Many Nobel Laureates

In all - business leaders that have endorsed a candidate support Obama by a factor of 5 to 1 over McCain.

So stop the nonsense and vote for whoever you think is best - but stop bashing the other guy.

Anonymous said...

I agree.

Anonymous said...

There has been a frenzy of over developement in this country. The cost of these homes was always beyond the income of the vast majority of people. To make the sale, developers and banks had to get creative. Then they continued their creativity by bundling these worthless mortgages and trading them back and forth in a frenzy of speculation and profit grabbing. Until the chickens came home to roost. If they want to sell real estate to anybody in the future,I'm afraid the prices are going to have to drop drastically, or wages are going to have to increase significantly. There is no other way.

Anonymous said...

Personally? I take comfort in the knowledge that my daughter will probably raise her future children in a nice four bedroom, three bathroom McMansion which she bought for 200,000. Or less! Sounds pretty good to me!

Anonymous said...

As a life long resident of Aberdeen,reading some of the posting I cannot believe the racists overtones. Some of you blame the the Town council for everything. Not the planning or the zoning boards, and as far as the school board how many of you vote? Oh by the way Matawan your own Police Dept was racists, and it cost all of us. As a law inforcement officer if Norman K was the thief you say he should be in jail. Why there is no proof, people get all the facts first. Posting the man is of interest, he was you the common citizen would not have that information.

Anonymous said...

To the person who complained about the roller park in the beach section of town, have you called Town Hall or just complained to the blog, you will get great results doing that. Oh by the way Aberdeen has low crime rate and is a safe place to live.Our Police Dept and the citizens of this town do a great job working together to keep it safe...THANK YOU ABERDEEN PD.

Anonymous said...

MR.WARREN
True or False you posted the terms of Mr Brown agreement with the Twp. As stated in the Matawan Aberdeen Observer. I tried to pull the information from the web address that was given.

Anonymous said...

Kenny CB made that comment about the graffiti on the roller rink. He is a blow hard on this blog who has no idea what is going on arouns town but likes to complain about everything. The roller rink was cleaned many months ago from any graffiti, it goes to show you the last time he was down there. Keep listening to everyone Ken! Take a visit down there yourself and stop listening to that neighbor.

aberdeen2009 said...

The Planning Board and Zoning Board members are appointed by the town council. The Aberdeen PD does a great job in spite of the council. Who has criticized them? I don't understand what the racist comments are from the people who have criticized the council? Since when has criticizing the actions of others become racist?

Anonymous said...

When did the current Council say anything negative about the Aberdeen police dept. It is my inderstanding they work hard together. The Chief and Deputy Chief and the men and woman protect this town very well.Show me the facts.
It is ok to disagree, but on this blog to call them scum bags and one person said he hopes they get struck by lightning. That to me is a threat. Keep to the issues at hand. I would not have chosen any other place to raise my family.

Anonymous said...

To the person who reported 120 homes on County Road wrong again. I stop there the new contruction is a small business. Some of you don't even come to Cliffwood except for Election time.

Anonymous said...

The problem is no one goes and sees anything for themselves. They all go by what someone else tells them. It is handed down from person to person and the story changes everytime someone else tells it.

Aberdeener said...

To the person looking for Brown's termination agreement, here's the link and the accompanying article.

Anonymous said...

To the genius who said there was only a new store construction coming to County Rd. try 250 homes. That is what Norman and his close personal friends have coming your way.