September 20, 2008

This Is Why Fred’s and Fan’s Credit Laxness Matters

Filed under: Economy,Taxes & Government — Tom @ 9:26 pm

Following up on the last half of this Friday post:

FICOdelinquencyChances2008

The chart shows, based on experience, the chances of serious delinquency (90 days or more late) for various credit score ranges.

The items I superimposed demonstrate the following:

  • How much additional risk Fannie Mae and Freddie Mac took on, and gave others tacit permission to take on, by lowering the credit score needed to get a conventional mortgage to 630 from 670.
  • On top of took on by that, the even worse risk they took on by lowering the credit score needed to get a conventional mortgage to 590 from 630.

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UPDATE, Sept. 21: To be clear the graph above shows the historical chances of going seriously delinquent in general, including secured and unsecured loans. You would expect the delinquency rate on mortgages to be somewhat lower, but not low enough to affect the lesson behind the chart and what Fan and Fred did to put money in the hands of people who had a too-high percentage of not being able, or willing, to pay it back.

UPDATE, January 7, 2010: This paragraph in the Wall Street Journal referred to at this BizzyBlog post (last item at link) makes the above even worse:

There is more to this ugly situation. New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A.

So they relaxed the standards, and lied about the quality of the loans they were packaging after they relaxed the standards.

More on the unconscionably devolved situation at Fan and Fred is here at my early January 2010 Pajamas Media column (from January 8 or 9, 2010) and BizzyBlog mirror post (will go up on January 10 or 11, 2010).

ALSO: Read this from January 28, 2009.

One State, Two State, Red State, Blue State

If there is to be a recession, it will be blue-state thinking that brought it on.

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Note: This column was originally posted here at Pajamas Media on Thursday morning, and gave rise to the Vast Right-Wing Conspiracy assignment I attended to yesterday.

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Baseball may be the national pastime, but the national obsession, at least among our media and political elite, is declaring that we’re either on the brink of a recession or in one. Never mind the evidence.

Politicians, pundits, and prognosticators galore have gotten into the act, some for several years:

  • Democratic presidential candidate Barack “Talk and Tax the Economy Down” Obama declared that there was “little doubt we’ve moved into recession” in July. Obama is one of the three Democratic architects of our current tax-threatened, oil-starved POR (Pelosi-Obama-Reid) economy.
  • After the first-quarter economy grew a bit, MarketWatch’s Rex Nutting, seemingly disappointed, told us that we could have a recession even if growth never goes negative.
  • As if to trump Nutting, after adjusted second-quarter economic growth came in at an annualized 3.3%, David Wyss, chief economist with Standard & Poor’s, told a CNNMoney.com writer that the recession “started in the fourth quarter of 2007.” The CNN writer himself brazenly added that “several economists say they are certain the United States is in recession, and that no one should be fooled into thinking otherwise by a strong second-quarter GDP report.”
  • Associated Press writers have penned dozens of economic articles with references to an imminent or already-existing recession during 2007 and 2008. Some “downturn” references go back to 2005 and 2006, years in which growth came in at 2.9% and 2.8%, respectively. The all-time topper was AP reporter Jeannine Aversa’s April 5 assertion that “It’s no longer a question of recession or not. Now it’s how deep and how long.”

Trend Macroanalytics Chief Investment Officer Don Luskin had the perfect response to the recession obsession in Sunday’s Washington Post (reproduced at his blog), when he noted that second-quarter growth was “virtually the same as the 3.4 percent average growth rate since — yes — the Great Depression.” He also added, based on a working paper by UCLA economist Edward Leamer, that:

….. anyone who says we’re in a recession, or heading into one — especially the worst one since the Great Depression — is making up his own private definition of “recession.” And probably for his own political purposes.

But for the moment, let’s humor the critics, and allow for the possibility that the economy as a whole has somehow slipped into recession during the current quarter. If so, where have the stumbles occurred?

Certainly not in red states Texas, Florida, or Arizona (though the Grand Canyon State has a Democratic governor, it went solidly for Bush in 2004, and has relatively conservative GOP legislative majorities). As Phil Gramm and Mike Solon noted in their weekend Wall Street Journal column (HT to Alo at Brain Shavings for the heads-up), those states created one-third of all US jobs in the past 10 years, and their per-capita income growth far outpaced the national averages.

Most other red states have until very recently done very well. Some are still doing just fine. For example, the seasonally adjusted July unemployment rates in Utah, North Dakota, South Dakota, Idaho, Nebraska, and Oklahoma averaged well below 4%.

If you’re looking for troubling times, visit the blue states. You’ll find plenty.

Looking for high unemployment?

  • First, go to California (Kerry by 10% in 2004, Democrat-dominated legislature, and might-as-well-be Democratic governor). Its seasonally adjusted August unemployment rate was 7.3%, up from just 5.4% a year ago.
  • Then go east to Michigan, where things have gone from bad to really bad during Democrat Jennifer Granholm’s tenure. Wolverine State July unemployment was 8.5%.
  • Move on to Ohio, which went from pseudo-red under Bob Taft to blue in 2006, with the election of a  Democratic governor, who has been aided and abetted by a mostly complacent GOP legislature. July unemployment: 7.2%.
  • Finally, skip over red state Indiana, which is still holding its own, and you’ll get to Obama’s home state of Illinois, whose Democratic governor, legislature, big-city mayor, and US senators have all played a part in creating the Land of Lincoln’s 7.3% July unemployment rate.

For decidedly Democrat-driven government bailout situations like Freddie Mac and Fannie Mae (referred to as “Barney’s Rubble” in Wednesday’s Wall Street Journal), visit true-blue Metro DC.

To find brokers, bankers, and insurers taking unjustified risks with depositors’ and others’ money, go to the blue-state triumvirate of New York, New Jersey and Connecticut, and its Democrat-heavy investment banking industry.

Within certain states, the red-blue contrast is stark. In Ohio, if you want out-of-control foreclosures and general economic doldrums, visit bluer-than-blue Cleveland, Akron, Canton, Youngstown, Toledo, and Dayton. If you want areas that are largely holding their own, stick with Cincinnati and Columbus, especially the GOP-dominated rings around each city. The same holds for economically-distressed Southeastern Michigan vs. the rest of that state, and Chicagoland vs. most of the rest of Illinois.

So if there is indeed a recession taking place, blame it on the blue states and blue regions, with their high-tax, high-regulation, high-giveaway environments. The lower-tax, more economically free red states, and the red regions within otherwise blue states, are certainly not the culprits.

PDS, Harlem-Style: Rangel Calls Palin ‘Disabled’

Filed under: MSM Biz/Other Bias,Taxes & Government — Tom @ 9:53 am

Rangel091008.jpgIn the Palin Derangement Syndrome parade, this one has to be at or near the front.

It comes courtesy of tax scofflaw, financial-disclosure report fudger, rent-controlled apartment hoarder — Harlem’s one, and only, Charles Rangel (D-NY). When asked Friday why Democrats are so afraid of Sarah Palin and her popularity, he answered:

You got to be kind to the disabled.

It’s on video here at Breitbart (HT Palinmania via Maggie Thurber).

Here’s the related report from CBS2 in New York (note that this is not a transcript of the video report; the full vid has reax from Congressman Peter King of New York, a spokesman for the disabled who points out that FDR was “disabled,” and the McCain campaign):

Already under fire for his tax troubles, Manhattan Congressman Charles Rangel really put his foot in his mouth on Friday.

In a CBS 2 HD exclusive interview, Rep. Rangel called Republican vice presidential candidate Sarah Palin “disabled.”

The question was simple: Why are the Democrats so afraid of Palin and her popularity?

The answer was astonishing.

“You got to be kind to the disabled,” Rangel said.

That’s right. The chairman of the powerful House Ways & Means Committee called Palin disabled — even when CBS 2 HD called him on it.

CBS 2 HD: “You got to be kind to the disabled?”

Rangel: “Yes.”

CBS 2 HD: “She’s disabled?”

Rangel: “There’s no question about it politically. It’s a nightmare to think that a person’s foreign policy is based on their ability to look at Russia from where they live.”

Later Friday, Rangel issued a statement saying “disabled” wasn’t the word he meant to use.

“Governor Palin is an obviously healthy person who in no way fits the description of disabled. I meant to say then, and I am saying now, that she entered the campaign with a disadvantage in the area of foreign policy,” Rangel said in a statement.

“Any inference that my words were in any connected to her son, Trig, who was born with Down syndrome, is a real stretch — and, I would have to think — a way to make political points out of my poor choice of words,” he added.

I don’t recall Rangel expressing any concern 16 years ago when his party’s presidential candidate was widely, and correctly, derided for having no foreign policy experience. In fact, a New York Times reporter wrote of Bill Clinton that “his experience in world affairs is limited to breakfast at the International House of Pancakes.”

Though Drudge has linked to it, I suspect Rangel’s outrage will be ignored by traditional media “because he apologized.” Give. Me. A. Break.

Cross-posted at NewsBusters.org.

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UPDATE: My theory is that Rangel is REALLY worried about his situation, and that the Palin comment is designed to ingratiate him wth the nutroots. It will probably work.

UPDATE 2: This is Number 89 on Charles Martin’s list.

Positivity: Schoolboy hero saves dad engulfed in flames

Filed under: Positivity — Tom @ 6:57 am

From Northamptonshire, UK:

Last Updated: 19 September 2008 9:55 PM

A schoolboy has been hailed a hero after putting out a fire that had engulfed his father.

Alex Taschini acted quickly to douse flames that threatened to spiral out of control after his father, Steve, poured petrol on a bonfire in the back garden of his house in Great Doddington.

The youngster used a garden hose to spray cold water on his father, whose face and head had been set alight after a huge fireball leapt out of the flames in the garden of his village home to the east of Northampton.

He has now been honoured with a bravery award, presented to him by the Northamptonshire Fire and Rescue Service.

Steve Taschini said: “Alex was fantastic, because in the face of what was a dramatic incident he kept very calm.

“He showed maturity to put the flames out so soon, otherwise I would have been in serious trouble.”

Alex’s mother, Lorna, said her son’s actions were even more remarkable due to the fact that he has Asperger’s Syndrome, a form of autism.

His condition affects how a person makes sense of the world, processes information and relates to other people.

She said:”I am particularly proud that he did not panic and was able to stay calm during something like that, which must have been very frightening for him. It was just remarkable really.

“It does not bear thinking about what the consequences could have been if he had not managed to put out the flames.”

Alex, 12 at the time of the incident and now 13, was presented with his bravery award at a ceremony at the Moulton fire station on the edge of Northampton. …..

Go here for the rest of the story.