April 2009 Archives

April 30th, 2009

The guidelines for this carnival.

As always, I arranged the entries that met guidelines into three levels, based upon originality, usefulness to the consumer, and how much thought and effort and research went into an entry.

STRONGLY RECOMMENDED

Jay Thompson beat me to writing this article! He submits Making an Offer on a Home. It's not all about the Benjamin's.... If you're thinking about buying or selling, please go read his article. It wins this carnival's Host's Choice Award

Your host presents Shopping For The Best Loan In The New Lending Environment

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RECOMMENDED

Real Estate Options 101 - For the Unemployed. There are a lot of mistakes here, and things that may not apply in your state, but it's still worthwhile reading overall. Just don't take it as gospel without independent confirmation.

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MET GUIDELINES

Red-Tag 50% Sale on Homes, Going On Now. Strange; I know this writer knows better than to try and time the market. People who bought at the peak did not overpay just because houses around them are now cheaper. That was the price then. This is the price now. Wait a bit and prices will be different.

Are real estate prices stickier in Central America? Well, yes. They don't have the financing opportunities we do. Nowhere else does. Check the interest rates and down payment requirements in Mexico or Europe sometime.

Property and Casualty Insurance - What You Should Know. Nothing really wrong with this article, simply not much useful information. A little bit more research would have gone a long way.

Solar Energy Tax Credit: Will You Install Solar Panels?

Owning Versus Renting is correct as far as it goes, but it needs a lot more work to be a recommended article. Nor would I recommend his choice of finding a provider.

Top 50 Real Estate Blogs

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SPAM AND OTHER RIDICULOUS SUBMISSIONS

An illiterate named Ralph Jean-Paul submitted a post about self-discipline that did not so much as mention real estate. Ralph Jean-Paul needs the self discipline of learning to do things right. Ralph Jean-Paul needs the self discipline not to submit to carnivals in violation of guidelines. Ralph Jean-Paul needs to stop sending out spam in hopes of getting a link from a real website.

That and two people whom I won't publicly name who submitted twelve and eight articles respectively - all plagiarized.

For those who might object to the treatment their submission received, the relevant information has been in the guidelines since before submissions were being accepted for this carnival. Having been told to read the guidelines, you willingly submitted these posts. Live with it.


Consumer Focused Carnival of Real Estate will return in one month on May 30, 2009, here at Searchlight Crusade, unless someone else wants to host. Deadline for submissions will be Midnight May 28th.


Come back Thursday morning for the Consumer Focused Carnival of Real Estate

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For those who missed my article on Home Valuation Code of Conduct (the new appraisal standards), or just decided not to believe me, here's a video explaining a lot of the practical points once again. They don't get everything, but they do manage to paint a basic picture of the most common issues we are facing.

HVCC is here. Even if you were applying for a loan today (April 28th), the lenders have already implemented it. I've been insisting upon every loan HVCC compliant for a couple weeks now. Even if you got a signed dated loan application done before May 1st, it is entirely common that lenders insist upon another application at a later point and use that as the origination date. What happens if you've done a non-HVCC compliant appraisal? The answer is that you're going to pay for another appraisal.

The video is aimed at agents, but the general public can get some good information out of it. Here's some important information about it I've already discovered: Lots of agents are in denial about this. Most of them are going to lose multiple transactions before they figure it out. Make sure your agent isn't one of them.

HVCC is a foetid rotting cow carcass full of its own excrement, the moral equivalent of a royal monopoly from the middle ages. It doesn't help lenders, it doesn't help buyers, it doesn't help sellers, It doesn't help owners trying to refinance, it doesn't help agents, it doesn't help loan officers and it doesn't even help appraisers. Indeed, it harms all of these. Nonetheless, we have to comply until such time as the outrage causes politicians to repeal it or do something that's actually better. I'd advise being ready for a long wait, because the appraisal management companies (who it does help by distorting the appraisal process and adding the Appraisal Management Company layer/bottleneck to the process) have some heavy duty influence.

I just got this email:

Dear NAMB Member,

IMMEDIATE ACTION REQUIRED! Today the House Financial Services Committee will
hold a mark-up session on H.R. 1728 to decide which provisions will be
included in the bill. Please contact your Congressmen and urge them to
support the Childers/Miller Amendment (which imposes a 12-month moratorium
on the Home Valuation Code of Conduct ["HVCC"]). Click here
to find your Congressman's contact
information.

In addition, please stress the importance of Title I, Section 103 that was
carefully drafted and negotiated as part of HR 1728. This Section does its
part to ban incentivized compensation from all distribution channels while
still protecting mortgage brokers' ability to earn a living. It offers true
consumer protection.

You must act NOW! Below are talking points to assist in your conversations.
Preserve your ability to make a living by urging your Congressmen to vote
for the Childers/Miller Amendment in H.R. 1728!

_____

Talking Points:

I. Support the Childers/Miller Amendment
A) Imposes a 12 month moratorium on the HVCC.
B) Additional information about the HVCC is available here
.

II. Title I, Section 103: YSP
A) Protects small business.
B) Bans incentivized compensation from all distribution channels.
C) Provides true consumer protection: protection from incentive-driven
practices while still allowing competition in the market.
D) Consumers want zero-point or no cost loans. In order to make a living and
compete with larger banks, brokers must be able to earn indirect
compensation as part of the rate or financed into the mortgage amount.

I don't blindly parrot anyone's talking points, but they're mostly right.

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The Politics of Liberal Amnesia

Or maybe the speaker missed what former CIA Director (and Bill Clinton appointee) George Tenet writes in his memoir, "At the Center of the Storm," about the CIA interrogation of 9/11 mastermind Khalid Sheikh Mohammed:

"I believe none of these successes [in foiling terrorist plots] would have happened if we had had to treat KSM like a white-collar criminal -- read him his Miranda rights and get him a lawyer who surely would have insisted his client simply shut up. In his initial interrogation by CIA officers, KSM was defiant. 'I'll talk to you guys,' he said, 'after I get to New York and see my lawyer.' Apparently he thought he would be immediately shipped to the United States and indicted in the Southern District of New York. Had that happened, I am confident that we would have obtained none of the information he had in his head about imminent threats to the American people."

Sometimes the necessary steps are in conflict with the desire to see ourselves as "nice people," or "the good guys." This isn't a novel; it certainly isn't a Hollywood movie. The end has not been predetermined by a scriptwriter, and there are no certain choices. One of the few certainties is that if we let our need to be seen as "the good guys" control us too much, innocent people will die. Perhaps a lot of innocent people - perhaps our own families. And that is one thing real "good guys" do not do - sit around wringing their hands because in order to prevent a great evil they must perpetrate a smaller one.

I'm not involved in the day-to day decision-making of what is still a War on Terror, no matter what the current administration's lawyers are calling it this week. I have never been directly involved with anything similar. But I have been following the decisions, their rationale, and their results for thirty years now. The decisions that we are making to act like lawyers determined to uphold the law, rather than fighters determined to win a war, are going to get lots of Americants killed. Perhaps they will even cause us to lose. And that is emphatically not a good thing.

"Scooter" Pelosi

Richard Fernandez has been there

I fear that one day, perhaps soon, and perhaps under Barack Obama's Presidency, that an attack on US soil will be made which will dwarf 9/11 both in destructiveness and brutality. And I predict that when it happens, many of the people who are now baying for the prosecution of Bush era officials will be demanding that they be protected -- at all costs. They demand protection not because they are morally inferior, intellectually infirm or ideologically corrupted, but because survival is the first rule of life. Anybody who has gone through a hospital ward and heard the patients, request and then demand their pain medication knows that to the question "how far can you go?", there is no easy answer. Nobody really knows the meaning of "last and desperate" until he's been there.

"How far are we willing to go?" isn't an easy question, and any attempts to treat it as one are doomed to failure, because there will be a successful attack we could have averted by going further. I might agree, both now and then, that going further will be something we shouldn't have done. But most people don't - won't - stop and think rationally when something punches them emotionally. The mood in the country today is very different than it was seven and a half years ago before the Bush Administration had kept us safe against subsequent attacks for seven years. Run a search engine for some random articles from September 12th, 2001 on for the next six months. That's likely to be the mood the country will be in after the next successful attack - the survivors anyway. Actually, it will probably be stronger.

It's a cheap and tawdry trick to, with the current perception of safety, project an unalloyed "The US doesn't do any of that ever because we're the good guys." Explode one suitcase size "dirty nuke" in New York Harbor or San Francisco Bay or any of a long list of other candidates, and that stance will become a political non-starter. Until we allow ourselves to forget again that the real world has people with differing agendas who won't hesitate a single microsecond to commit mass murder if it furthers their cause even slightly.

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Arlen Spector switches parties

Specter, 79 and seeking a sixth term in 2010, conceded bluntly that his chances of winning a Pennsylvania Republican primary next year were bleak in a party grown increasingly conservative

and

Tuesday's switch was not Specter's first.

He was a Democrat until 1965, when he ran successfully on the Republican ticket for district attorney in Philadelphia.

His career moves and votes paint a very coherent picture. Arlen Specter acts as he does not out of any inborn conscience. If he did, I'd respect him. He acts as he does to advance his political career (if you want to take issue with this, name me at least one time in his Senate career he stood up to be counted in a way that was likely to cost him votes). He votes to maintain his political career. He will do anything to get 50% plus one of available votes and stay in office one more term.

But let me ask: What is the value of electing a weathervane?

Leaders don't act in a certain way because that's the way 50% plus one want them to act. They persuade 50% plus one of the people that theirs is the correct course of action. Arlen Specter is not a leader. He simply pretended to be something he wasn't for as long as it was an advantage, until it become politically untenable. He's neither a centrist nor a moderate - what he is is a political whore (and I feel like I'm insulting whores with that remark). Quite frankly, a committed leftist would be better for the country and for Pennsylvania - and I say this as someone who doesn't like leftists very much. Here's hoping Specter gets beaten badly next year - either by a Democrat in the primaries, or by a Republican in the general.

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The growing opacity of the Obama administration

Darn right they were because, you know, they were catching corrupt union officials. Can't have that. So "unfair and burdensome" - something that tax payers are never able to plead about the gigantic and undecipherable tax code - now takes priority over transparent and accountable.

Political payoff, plain and simple.

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Steve Forbes: The Looming Fight for 17% of the U.S. Economy

Rationing. Bureaucracy. Driving doctors and other health care providers out of business. How we're supposed to get more, better, and cheaper health care out of the government running it is something nobody rational can figure out, and Mr. Forbes shows the insanity.

He's got good ideas too.

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The Truth About Cars and Trucks . And the UAW

Chrysler was bailed out directly with government loan guarantees; the Big Three all benefited from Reagan era "voluntary" quotas on Japanese imports to prop up domestic car prices. But these were temporary fixes. For more than 40 years, a 25% tariff has kept out foreign-built pickup trucks even as a studied loophole was created in fuel-economy regulations to let the Big Three develop a lucrative, protected niche in the "passenger truck" business.

This became the long-running unwritten deal. This was Washington's real auto policy.

For three decades, the Big Three were able to survive precisely because they skimped on quality and features in the money-losing sedans they were required under Congress's fuel economy rules to build in high-cost UAW factories. In return, Washington compensated them with the hothouse, politically protected opportunity to profit from pickups and SUVs.



Carnival of Personal Finance

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The Cost of Media Bias

Andrew Breitbart has more.

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The Government Becomes a Loan Shark

When I first heard rumblings in the Wall Street Journal and elsewhere that the government would not allow big banks to repay their TARP loans, I thought it was either a genuine misunderstanding or an unfair partisan canard against the Obama administration. But the stories continue in the press and Tim Geithner has not done what he needs to do to kill this story: publicly announce that almost any bank that wants to pay back the TARP can bring a "check" to him personally.

It used to be that when you borrowed money from the mob, you could almost never get free. Once the mob got its hooks into you, you found that they owned you.

Now instead of the mob, it's the federal government that won't let you free, even if you want to pay off your loan with interest.

It's about getting and keeping control. In other words, power. The Obama administration has done more in 100 days to perpetuate their own hold on power than the Bush Administration did in eight years with the War on Terror, or whatever the Obama administration is calling their attempts to control terrorists with lawyers this week.

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Obama's asking his cabinet for $100 Million in savings. Instapundit illustrates how much difference that would make.

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Green jobs: The next sub-prime mortgage?

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Where's the Backbone?

Well, not exactly. Look at the fate of various proposals in the Obama budget, and the question that arises is not Walter Mondale's famous "Where's the beef?" It's "Where's the backbone?"
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The President Ties His Own Hands on Terror

Disclosure of the techniques is likely to be met by faux outrage, and is perfectly packaged for media consumption. It will also incur the utter contempt of our enemies. Somehow, it seems unlikely that the people who beheaded Nicholas Berg and Daniel Pearl, and have tortured and slain other American captives, are likely to be shamed into giving up violence by the news that the U.S. will no longer interrupt the sleep cycle of captured terrorists even to help elicit intelligence that could save the lives of its citizens.

Which brings us to the next of the justifications for disclosing and thus abandoning these measures: that they don't work anyway, and that those who are subjected to them will simply make up information in order to end their ordeal. This ignorant view of how interrogations are conducted is belied by both experience and common sense. If coercive interrogation had been administered to obtain confessions, one might understand the argument. Khalid Sheikh Mohammed (KSM), who organized the Sept. 11, 2001 attacks, among others, and who has boasted of having beheaded Daniel Pearl, could eventually have felt pressed to provide a false confession. But confessions aren't the point. Intelligence is. Interrogation is conducted by using such obvious approaches as asking questions whose correct answers are already known and only when truthful information is provided proceeding to what may not be known. Moreover, intelligence can be verified, correlated and used to get information from other detainees, and has been; none of this information is used in isolation.

Obama is thinking like a lawyer; he needs to think like the leader of a country who is responsible for the welfare of its inhabitants.

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The Sting in Four Parts

For those who don't recognize the reference, it's both a confidence game conclusion and a movie about a con.

Undaunted, Obama offered his New Foundation speech as the complete, contextual, canonical text for the domestic revolution he aims to enact. It had everything we have come to expect from Obama:

The Whopper: The boast that he had "identified $2 trillion in deficit reductions over the next decade." It takes audacity to repeat this after it had been so widely exposed as transparently phony. Most of this $2 trillion is conjured up by refraining from spending $180 billion a year for 10 more years of surges in Iraq. Hell, why not make the "deficit reductions" $10 trillion -- the extra $8 trillion coming from refraining from repeating the $787 billion stimulus package annually through 2019.

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A World Of Trouble For Obama

Now comes the interesting part: when it starts to become evident that Bush did not create rogue states, terrorist movements, Middle Eastern blood feuds or Russian belligerence -- and that shake-ups in U.S. diplomacy, however enlightened, might not have much impact on them.

The Illusions of Obama's Idealism Abroad

The damage has been limited to theatrics. But as Kennedy learned, weak theatrics can induce aggression. And Obama is accumulating some weak theatrics.
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Medical care: words versus realities

The bottom line is medical care. But the rhetoric and the talking points are about insurance. Many people who could afford health insurance do not choose to have it because they know that medical care will be available at the nearest emergency room, whether they have insurance or not.

Read the whole thing.

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Tea Party Economics

Some analysts have made the case that Americans are not overtaxed (at the federal level) and that therefore the protests were not justified. But this misses the point. Government spending is exploding, with the Congressional Budget Office projecting $9.3 trillion in deficits over the next 10 years. People know that this spending represents future taxes.

Here is an interesting set of facts. If the government increased the top tax rate from the current rate of 35% to 100% (yes, that's right 100%), it would only collect an extra $400 billion this year. In other words, confiscating all the income that is currently taxed at 35% would not raise enough revenue to cover any of the annual deficits projected in the next 10 years. There is no way that tax hikes on the rich alone can pay for proposed spending in the current budget.

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Misconceptions About the Interrogation Memos

As a former federal prosecutor, I know a good case from a bad one. I know a case based on solid evidence and even-handed application of the law versus one based on scoring political points. Mr. Obama and his attorney general, Eric Holder, have professed their desire to take politics out of the Justice Department, to restore integrity to a department that they believe had gone astray under Mr. Bush. Their recent actions, however, speak otherwise.

Do we really want to criminalize policy differences? What happens when the next Republican Administration wants to use this precedent to charge Democratic Obama Administration officials with crimes? Perhaps to avoid that, might the Obama Administration wield all possible power (legal or not) to avoid a Republican successor? Might not all future administrations try to avoid an opposing party successor, by any means possible (Once again, legal or not)? How then, would we differ from the Mexico of 1929-2000, where the appointed PRI candidate always won the elections? Did this period do any good for the government or culture of Mexico? (I assure you, the answer is no).

Damnation of Memory

President Obama would not a want a putative President Palin to begin hearings on who ordered the targeted executions of two suspected Somali pirates, taken out in the middle of protracted negotiations. He would not wish a President Sanford one day to indict those Obama officials who approved the assassination-by-Predator-missile of suspected terrorists and their families in Pakistan -- without habeas corpus, Miranda rights, or avenues of appeal. He would not enjoy a future President Giuliani's bringing indictments of Obama officials over the NSA's exceeding its allotted e-mail intercepts, or the CIA's conducting overseas renditions of suspected terrorists without providing them the benefits of U.S. law.

Two ways to avoid that: Avoid prosecuting the Bush Administration for political differences, or avoid handing over power. There really isn't a third because the precedent Obama would establish by prosecuting them would require the continuance of complete Democratic domination of government in order to avoid future prosecution by the next Republican administration.

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Can You Believe this chutzpah? Telling us he's a deficit fighter after wasting $1.6 Trillion dollars in less than 100 days, and setting up more federal deficit in the remainder of his term than all of his predecessors combined in their full terms. And that includes the previous record holder for fiscal irresponsibility, George W. Bush.

Did I say $1.6 Trillion? More like $3 Trillion for the expansion of TARP alone. Much of that number is already known to be vulnerable to shenanigans, about which Obama and Geithner are doing basically zip.

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They said if I voted for a Republican in 2008, I'd wind up with an autocratic administration determined to wipe out civil rights -- and they were right! The Obama administration has argued for the end of the Michigan v Jackson ruling that requires police to provide an attorney for a suspect once one has been requested.

The Michigan vs Jackson ruling in 1986 established that, if a defendants have a lawyer or have asked for one to be present, police may not interview them until the lawyer is present.

Any such questioning cannot be used in court even if the suspect agrees to waive his right to a lawyer because he would have made that decision without legal counsel, said the Supreme Court.

However, in a current case that seeks to change the law, the US Justice Department argues that the existing rule is unnecessary and outdated.

The sixth amendment of the US constitution protects the right of criminal suspects to be "represented by counsel", but the Obama regime argues that this merely means to "protect the adversary process" in a criminal trial.

The Justice Department, in a brief signed by Elena Kagan, the solicitor general, said the 1986 decision "serves no real purpose" and offers only "meagre benefits".

Hot Air concludes with the right question:

Wasn't Barack Obama supposed to be a Constitutional scholar? Was that in the "How To Dismantle" school of thought?

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Hilarious! Capitalist pranks "free hugs" hippie


Yes, it sounds like a scam to me, too. But it's real.

This isn't to say that there are scammers out there promising the same thing. But there is a legitimate program that accomplishes this. Actually, there are no fewer than six such legitimate programs - three from Fannie Mae, three from Freddie Mac, all sourced in the Help For Homeowners Program. I don't think it's going to help a large number of people, but I'm going to talk about it in order to help the ones it does help separate fact from fiction.

There are technical differences in the programs, governing the relationship of your current loan servicer and the loan originator you apply for the refinance with. But the programs are essentially similar, and use the same rate structure. Which of these three programs you apply for makes no difference to whether a consumer qualifies, or the rate cost tradeoffs offered by a particular mortgage originator. What's that they say about a difference that makes no difference?

It doesn't really matter who you choose to refinance with, or which of the three programs you end up with - the rate structure is the same. So if you do qualify, shop normally for the best loan for you. You don't get any discounts or preferences by going through the same loan servicer you currently have - but the deals that are being offered are very different from originator to originator. Yes, different programs, but same underlying rate structure and your loan ends up being owned by the same people. The only difference is the tradeoff between rate and cost that a given provider offers. In short, if someone offers you a better deal and is willing to stand behind their quotes with something real, there is no rational reason not to do business with them. Ask prospective loan providers all the same questions and see which one is the best.

No matter which of these programs you apply for, they have the following restrictions in common

First, your loan must be currently held by Fannie Mae or Freddie Mac or underwritten to Fannie/Freddie Standards. This means you have to have qualified by their standards originally - these programs will not help or refinance people who got subprime loans! They will ask privacy act questions (Freddie Mac more so than Fannie Mae), so I'm including these links for convenience - use them at your own risk.

Does Fannie Mae Own Your Loan?

Does Freddie Mac Own Your Loan?

Alternatively, you can run a search for the two websites through the search engine of your choice, and find these exact pages through the main webpage of the respective government corporation. They're each one click from the main webpage, although the correct Fannie link is a bit more difficult to spot than the Freddie one.

Second, the original application can have contained no misrepresentations or fraud. This restriction essentially eliminates folks who qualified via stated income procedures. If you could have documented the income to qualify, why didn't you? In every case, it would have gotten you a better rate or a lower cost for that rate. The reason people got stated income loans is that they couldn't.

Third, you must qualify normally for the refinance with one exception. Debt to Income Ratio has to be satisfied normally and, practically speaking, the automated underwriting program has to accept your loan. The only requirement that has been relaxed is Loan to Value Ratio. This isn't a charity program; it's loss mitigation for Fannie and Freddie. They're not just throwing taxpayer money at a problem - these programs are intended to keep them from losing money by enabling people who would qualify for a new loan if values hadn't receded so much and keeping them in their home rather than going through the foreclosure process and saturating the market and causing still more waves of this. A thoroughly intelligent business alternative for the lenders - much the same reason the lenders finally got serious about loan modification last summer. But individual banks couldn't offer refinancing programs of this nature unless they wanted to become portfolio lenders, which most of them don't and can't. It had to be the underlying investors that offered these programs, something Wall Street is loath to do but Fannie and Freddie can be instructed to do by the federal government.

Fourth, there are potentially issues with loan subordination. Lots of folks got a first mortgage for 80% of the value of their home through Fannie or Freddie, with a balance of up to 20% of the value on the property through a second mortgage. Alternatively, if they did put the full twenty percent down, they got an equity loan in order to take cash out at some later time. If you have a second mortgage and refinance your current first, the second mortgage automatically slides up to first secured position, and your new loan would take second place. That's not acceptable to Fannie or Freddie, and for good reason. So if you do have a second mortgage, the holder of that second mortgage must to agree to subordinate to your new loan in order to be acceptable to Fannie or Freddie. Fannie and Freddie are not allowed to pay off second mortgages under these programs - that's not a risk they have currently taken; they're not going to throw even more money at the program and take more risk. As I said, this isn't charity, this is loss mitigation. Some second mortgage holders may not agree to subordinate. There is nothing that can be done to force them. All you can do is explain why it is in their best interest and hope they see reason. Some second mortgage holders may demand conditions upon their subordination and you must satisfy those conditions to get them to agree to subordinate. One condition that I would expect to get is that the balance on the first mortgage not increase, which means you have to pay closing costs out of pocket if you do have a second mortgage - no rolling them into the balance of your new mortgage.

I need to take a moment here to explicitly state: the 105% maximum loan to value ratio applies to the first mortgage only. It's fine under these programs if there's a second that sends the comprehensive loan to value ratio (or CLTV) above 105% - so long as the holder of that second mortgage agrees to subordinate.

Finally, there are PMI issues. It isn't necessarily that there is no PMI. What is the case is that Fannie and Freddie will allow your current PMI status to continue. What this means is that if you're not paying PMI currently, your new loan will not have a new PMI requirement imposed. If you are paying PMI currently, the current PMI provider must agree to continue the status quo (mostly they will; insurance companies aren't idiots and they're mostly not constrained by regulations that didn't forsee this situation). For example, let's say your loan was originally funded as a ninety percent loan to value purchase money loan. Such a loan would have had PMI in some form, either regular or lender paid. If your value went up at some point and your PMI requirement was removed due to a loan to value ratio that was below eighty percent, there will be no PMI on your refinanced loan. If your PMI is still in effect, it would need to be carried over from the existing loan to the new loan, but it would not be increased if the current situation was less favorable than the original situation. Normally, if you were now in a ninety-five or one hundred percent or even above 100% loan to value situation (as many people whose values have declined would be), the risk to the PMI provider would increase, and therefore they would charge more money in order to undertake that risk. That is not the case with these special programs. The PMI providers are already on the hook for these losses; again, this is a way that might mean they don't have to lose that money. If they're smart, they will accept the risk of transferring the existing PMI to the new loan. As I said earlier, these are insurance companies, not securitized lenders or investors subject to Federal Reserve and SEC rules. Mostly, they are smart, and therefore willing and able to accept the change. They may impose conditions of their own, like the balance not increasing by more than a certain amount, but mostly they are likely to accept the risk.

Finally, to re-emphasize, if there is currently no PMI on your loan, there will be no PMI required on the new loans under these programs, even though Fannie and Freddie and every other lender in the country would normally require PMI with a first mortgage with over an eighty percent loan to value ratio. The reason why this would normally be so has to do with Federal Reserve regulations - but with the Federal Government basically owning Fannie and Freddie now, and the Federal Reserve having its own reasons for wanting to help clean up this mess, regulations can get modified or exceptions.

One other word of caution: The better your credit score, the better your payment record, the better your loan to value ratio, the better the loan you can expect to receive. Someone with a 780 credit score and an eighty-two percent loan to value ratio can expect a better loan (lower rate/cost tradeoff) than someone with a 620 credit score and a 104% loan to value ratio. Those who have been more responsible will get something better than those who have been less responsible. But these loans do actually stand a decent chance of helping someone who needs it, providing they're in the group that's been targeted by the program

As I said, I don't really expect these programs to help a large percentage of the people in trouble, but even a small percentage of many millions is tens to hundreds of thousands, and I am certainly not opposed to these programs helping those people they can help. These programs are not charity; they have been put into place with a rational, ruthless eye towards Fannie and Freddie not losing money they would otherwise lose if they hadn't undertaken these programs. If they will potentially help you, start contacting loan originators and asking about Fannie and Freddie's new 105% loan refinancing programs. Even I'm not certain about all of the various program names (I only care about the ones I can do - but as I said at the beginning of the article, which of these programs you apply for is irrelevant to the consumer - only Fannie and Freddie really care about the differences between their three programs each, because the rate structures are the same, the qualifications are the same, etcetera. Doesn't matter whether you apply through your current loan servicer, another lender, a broker, or a correspondent - shop for the best deal and the best loan for you and your situation). Loan originators will know what you're talking about, and applications are now being accepted for these programs.

Caveat Emptor

Disclaimer: Yes, I will be doing these loans under the programs aimed at broker and correspondent originators.


UPDATE (7/6/2009): This program has been successful for those it covers, to the point where Fannie Mae and Freddie Mac are going to expand the maximum Loan to Value Ratio to 125% within the next month. I think that will have much more effect upon the market, and make far more people eligible.

Article UPDATED here


We were ready for a strong turn in the market, but the strength of what we've gotten in the last six weeks is amazing. It has been, if anything, worse that a few years ago.

What caused it? People with money are scared to leave it anywhere else. The expectation is that inflation will become a large factor in the next several years, so you don't want dollar denominated investments such as bank accounts and bonds just sitting there. With real estate, you have a tangible asset where they can't just go out and print more, diluting your value. The stock market has seen major declines and most people don't think they're over - especially once the inflationary spending of the new administration gets into the system. People are looking for a safe place to put the money where it won't be worth less (or worthless) tomorrow. Even if real estate declines a bit more, there's the limited supply that exists to redeem basic value.

As I said when explaining how the bubble got so big, when you suddenly dump a lot of cash into a market, prices shoot up. And boy how prices have shot up. I was in a model match for a house I was buyer's agent for at just over $330k 12 months ago. There's a bidding war that's gone over $500,000 for the one that just went Pending. Another property, larger and with a view that goes all the way to Mt. Soledad, got an all cash offer for $50,000 over asking price - no bidding war, just jump straight to the nukes. And these are just the East County properties - sedate, older east county, which has always had good value compared to everything else. I closed on two properties in Chula Vista earlier in the year, and there's practically a bidding orgy going on there now. Model matches are going for almost twenty percent higher than those two properties - and that's with a two month difference. I haven't been working north of Clairemont, but what I've heard says that coastal North County is hotter than anything else.

I think we've graduated to a full-on seller's market, so much so that I'd be telling tell people to hold off on buying if I thought it was going to be any better later on. I am telling people that you really need a sharp agent in this kind of market to prevent overpaying. If you have any kind of a decent situation and desire to sell, it may be time to seriously consider it. For the last three years, I've been telling people "Hold off on selling if you can. There are too many distress sales, and not enough buyers" That has emphatically changed. I still think that, considered in isolation, you'll get more for your property if you hold off a while, but no longer so much so as formerly. If you have other considerations, like needing to leave town for a job, selling so you can buy something elsewhere is likely to be better than alternatives.

Six weeks ago we had just over 12000 active listings in San Diego MLS. Today we've dropped to 11,400, with 866 having gone pending in the last 7 days. That's basically a 13 week supply, but 1840 of the actives list are short sales with an accepted offers denoted properly - and I've talked before about how many short sales aren't denoted properly. Assuming short sales take ten weeks on average, that's a nine week supply. Perhaps about where we were last time I wrote one of these articles, but with a difference: Anything priced even vaguely in the right neighborhood is seeing multiple offers if not bidding wars. The attractive properties, priced correctly, that everyone wants are all going "Pending" within about a week, having seen multiple strong offers. They don't have to be beautiful modern properties, either - so long as they are basically okay, they're seeing action and lots of it. If you're not seeing multiple offers, the only real explanation is that your listing agent didn't do his job - he let you price it waaayyy too high. If you're in that situation, fire your agent today and find someone competent.

If you're a buyer, there are alternative strategies to pursue if you don't want to overpay. The easiest is to have a good buyer's agent to help you - but no buyer has the kind of leverage we had just a few short months ago. Making up your mind that you're going to start with a old and unattractive but basically solid property and be the one to upgrade it. Kind of like the flippers (or actually, fixers) we had five or six years ago, except you're buying it for yourself rather than with intent to sell. I'm not certain the current market is ready to support pure flippers yet, but it is getting close.

The one note of caution I must sound is that you've got to pay particularly close attention to the current paranoid lending standards and new appraisal standards. Not all offers are created equal. Lenders loan on the lesser of purchase price or appraised value. This means that, for instance, a VA loan based offer with $50,000 in down payment has the option of making it happen when the appraisal comes in $40k below the purchase price. A 20% down payment conventional loan does not - unless they have even more cash available to them. An all cash offer beats everything, of course.

If you're a seller, having an agent who doesn't understand current lending standards and negotiate in full cognizance of their limitations is a recipe for having the transaction fall through, and having to start over again trying to get people interested even though your property may have sixty days or more on the market. If you're a buyer, it means placing your Good Faith Deposit at risk (or more precisely, at more of a risk than it needs to be). I'm seeing properties sit in escrow with agents who should know better, in denial over the fact that this transaction is not going to happen because the necessary loan isn't going to fund. The time is long past when agents - whether they're on the listing side or buyer's side - need to know loans every bit as well as loan officers, to avoid wasting client money and client time. There may be no way to tell ahead of time that the loan definitely will fund, but there are all kinds of red flags that tell you it won't if you pay attention.

In short, this market has suddenly become very lucrative for sellers, but everyone - buyer or seller - needs to be extremely careful about negotiating contracts that have some room to continue if something happens to the appraisal, because there's no longer the ability to get around an appraisal that comes in low. Either you're going to renegotiate that contract, the buyers are going to come up with more cash, or you're spinning your wheels because the loan isn't happening, and the transaction isn't happening without that loan.

To close this article, if you'd like to discuss your particular situation with an top of the line agent who knows the San Diego market, contact me.

Caveat Emptor


It shouldn't be any surprise to anyone with the headlines of the last two years that shopping for a mortgage loan has radically changed just in the last couple of months. Indeed, a lot of the changes seem directly aimed at what were the best lending practices just a few months ago - ways to force loan providers to change away from those best business practices.

I'm going to say this more than once in this essay: There are now significant costs for failed loans, costs that brokers and correspondents are now going to be forced to pay. This means that one way or another, consumers are going to be forced to pay them. There are two groups that can be required to pay them: People whose loan succeeds and is funded, or people whose loan fails and is not funded. Individual broker policy is going to determine which group of that broker's loan applicants pays for the costs of failed loans: The ones whose loan succeeds, or the ones whose loan fails. To determine which sort of broker you'd rather apply with, ask yourself "Do I want my loan to succeed?" If so, apply with a broker whose policy requires the failed loans applications to pay for the failed loans. If you don't want your loan to succeed I must ask, "Why are you applying?"

I need to do some political background and warmup in order to make sense later on. I need to tell you what has changed in the background, why it has changed, and what this means for the consumer. I did warn NAMB (the mortgage brokers association) that brokers were going to be used as the scapegoat for everything. It was the only way the bankers could avoid criminal indictment, public outrage, and the mob and pitchfork crowd known as Congress. President Obama, who is on one hand inciting the mob with pitchforks while on the other hand pretending to be the banker's friend, was one of those Senators at the heart of the reasons for the meltdown. You have only to examine the public record of the period from 2003 to the time everything started unraveling to find out who tried to reform the system in time to avert catastrophe and who stood in the way of reform. Old principle: The best way to avoid being the target of political lynchings for a disaster is to lead them yourself.

Not that lenders need a political reason to come after brokers and correspondents. It's a classic love-hate relationship. Lenders hate brokers in general, without whom their margins and profits on mortgage loans would be much higher, but they love the profits from the individual loans brought to them specifically by those same brokers. To give you an analogy from a time before the internet, once upon a time airlines used to regularly get together every year to try and set the prices for summer vacation fares higher than market, so they all would make a lot more money per ticket if they hung together as an industry. However, every year, the airlines as individuals would decide they wanted all the money in profits they would get from lowering their individual airlines ticket prices to attract people away from the competition. It was comical in a way, watching the same show year after year, with the same outcome. The airlines tried to get the federal government involved so that they could give their price-fixing the authority of law, but even Jimmy Carter was too smart for that - in fact it was he who deregulated the airlines rate and fare structure completely, resulting in an explosion of air travel as air travel suddenly became a lot more affordable. Lenders relationship to brokers is a lot like that. Sure, brokers bring them a lot of money and profit - but if there was some way to completely eliminate brokers, they would make a lot more money.

The difference between that situation and this is that the lenders and those who want to help them do away with brokers have gotten a lot more intelligent in the last thirty years. Instead of trying to accomplish their goals directly, they are raising the costs of doing business as a broker to make it harder for brokers to compete, and they have enlisted to aid of the government to that end. The government, in return for bribes known as "campaign contributions" has been only too happy to help, under the guise of "protecting consumers" which in fact, has been the exact opposite of protecting the consumers. It's as if they were designing changes to harm lenders and brokers who work in a way most aligned with consumer interests.

Let me go back to the dim and far off times of an entire year ago. Effectively Shopping for A Real Estate Mortgage Loan was trivial: Get quotes, sign up with the one who was willing to guarantee their quote in writing for the best tradeoff between rate and cost. I could lock a loan based upon a verbal representation that you wanted it, and do the application and everything else afterwards. If you were concerned about whether the originator you signed up with intended to honor their guarantee, you could get a backup provider. This was pretty darned easy for a loan officer to set themselves up in compliance with. There was a good alignment between the way that the market worked and the needs and desires of the average consumer. No need for a deposit, no need to commit yourself to a single lender who could well be lying and it was extremely easy to provide good transparent loans and actually deliver the exact loan - rate and cost - of what got the consumer to sign up because I could lock that loan when right when that consumer said they wanted it.

Let me go over what has changed, which is two big things, each with multiple consequences for the loan originator who acts in accordance with consumer interests. The first is that lenders have acquired permission from regulators to discriminate against brokers with respect to loan fall out. Oh, they don't call it that - but that doesn't alter the fact that it is discrimination. The fig leaf being used to conceal - not very effectively - this discrimination is the secondary loan market. The lenders themselves don't hold the loan, but rather sell them to Fannie Mae, Freddie Mac, and Wall Street investment firms - whether directly or not. So when you lock a loan with a given lender, that lender is ordering the money from the secondary market so that they will have it when it's time to loan it to you. What happens when you don't actually get the loan? Well, the bank still ordered it, and Wall Street still supplied it and expects to get paid.

However, there has always been and still is a certain "slop" built into those contracts, with costs paid only when the "slop allowance" was exceeded. The lenders and Wall Street both know damned well that not every dollar ordered is going to be used in a funded loan, which is one thing they pay actuaries a lot of money for, and the actuarial estimates are usually almost frighteningly close on their "money ordering" contracts. The banks, however, are turning around and charging the brokers and correspondents for basically the full marginal cost for every single loan that doesn't fund, while allowing their "in house" loan officers to free ride, making uncharged use of the "slop allowance" built into the contract. This discrimination essentially transfers all of the costs for locked but undelivered loans onto brokers and their clients. It is costing consumers large amounts of money, but the regulators are permitting them to do it. Nor do the lenders penalize in any way their own loan officers who fail to achieve the same level of response they require out of brokers and correspondents. I've said for a long time that the best and the worst loan officers all work for brokers. That is changing - the only way for a bad loan officer to survive is to become a direct lender employee, working in a bank branch.

This means that if you lock a loan with a broker or correspondent, they're going to be forced to pay the lender they locked that with a fee if you don't carry through. So in order to protect our real customers - the ones that end up with a funded loan that actually gets the brokerage paid - brokers and correspondent lenders are having to be very careful with which loans they actually lock. Let me be very plain about how far reaching this is: What matters is that there is a lock without a funded loan. It does not matter why. It doesn't matter that the consumer decided they just didn't want it, that someone else had a better rate (or said they did), that the consumer could not in fact qualify for the loan at all, that the appraisal came in too low to fund the loan, that the lender rejected the consumer's application for an unforseeable reason, or any other excuse. What matters is that there was a lock but not a loan. This has the effects of raising a broker's costs - which means they have to raise prices to compensate, or make certain it isn't our actual clients who end up with a funded loan who pay those costs. This, in turn means that the way to success for a broker or correspondent is going to be putting the costs for failed loans upon the people whose loans fail. Failure to do that means that the people whose loans succeed are going to be pay for the people whose loans fail. Not to mention that the loan officer who has more than a low percentage of loans fail is going to be facing higher costs for all of their new loans, because the lenders are going to be requiring a higher premium to do business with them.

In short, you can pick a low-cost loan provider, OR you can pick a loan provider where there's no risk and no cost if your loan falls apart. There will be no loan providers where both options exist - those places in denial of these changes are going out of business as I write this. The costs for failed loans exist, and someone has to pay them. It can either be the people whose loans fail, or it can be the ones whose loans succeed. Ask yourself if you want your loan to succeed or if you want your loan to fail to tell you which sort of broker you should be looking to apply with.

The second major change impacting lending practices is the Home Valuation Code of Conduct (hence HVCC), and the genesis of this is even more shadowy than that of the changes due to fall-out. I don't like it, but neither I nor anyone else in the lending business has the option of ignoring it. It is the new law of the land, having to do with the way that appraisals are handled. First, there isn't going to be any more developing a relationship between a good loan officer and appraiser with the idea of protecting the clients. It's not going to stop the bad loan officers or appraisers from doing everything they have done in the past, but it will stop the good stuff. Instead of ordering an appraisal through a specific appraiser, loan officers now have to order through appraisal management companies. This means I no longer have the ability to stop using bad appraisers - the ones who waste client money, the ones who produce substandard appraisals the underwriters reject, the ones who take so long to produce the report that I have to extend the rate lock because of their delay.

Second, the loan officer who orders the appraisal is now obligated to pay for it, which means that loan officer has a choice of either getting money in advance, or of charging successfully funded loan clients enough to pay for all of the appraisals of unsuccessful loan applicants as well as their own appraisals. The loan officer is prohibited from having the client write the check directly to the appraiser. Finally, most lenders as well as Fannie Mae and Freddie Mac are now requiring that the appraisal be written in the name of the actual lender instead of the broker. This means that despite the fact that I must pay the appraiser for the appraisal, the actual lender owns that appraisal, and if I want to change the lender for some reason, I have to get that lender to release it. Not likely. Even if the lender rejected the loan, getting them to release the appraisal is just about impossible. This means I have to pay for another appraisal if I want to try again with another lender, which really means the consumer has to pay for another appraisal as well, and there's no guarantee the second appraisal is going to be good even if the first one was. The appraisers are happy about this feature, as are the lenders. Consumers, not so much. It's not good business, and it's not good government. It is, however, what we're now stuck with.

So what does this all mean to consumers?

First, it means that those loan providers who really do provide low cost loans are going to have to get enough money from consumers to cover the cost of the appraisal before they order it. We should all be adults here, which means we should understand that if the loan provider doesn't do this, when your loan funds you are going to be paying not only the costs for your own appraisal, but a higher margin to cover those appraisals that did not result in funded loans. Make your choices of loan provider accordingly.

Second, it means that low cost loan providers can no longer guarantee to lock their best rate/cost tradeoffs immediately. I'm sorry, but if I lock every loan on a verbal indication that you want it, too many of them are going to fall out, which means I'm going to be liable for not only the appraisal costs of those loans that fail, but all of the costs that the lenders I lock with will charge me for failing to deliver that loan. Furthermore, if I have a high fall out ratio, the lenders will charge me extra to lock the loan and possibly even refuse to do business with me at all. This means I wouldn't be able to offer low cost loans - in fact, I'd be lucky to do much better than the lenders themselves. All of this is real money, and neither I nor anyone else can stay in business without paying those costs somehow. Since your loan officer has stayed in business thus far, you can safely assume they've got a plan in place for paying those costs. If you don't understand what it is (in other words, through being asked to pay some money up front for the appraisal, and waiting to lock until there is a reasonable assurance that loan is actually going to fund), then if your loan funds, you are going to be paying an extra margin for all of that loan provider's loans that don't fund, in addition to the specific costs of your own loan. In other words, by insisting upon no risk to yourself - no risk of losing the appraisal money, no risk of not getting the rate you're quoted - you will waste an awful lot of money if your loan actually funds. And lenders are permitted to lie to get you to sign up, same as always. Even after the new rules for the Good Faith Estimate go into effect in January 2010, it's not going to be that much harder to lie to consumers at loan sign up.

Third, it means you're going to have to be very careful about Questions you ask your loan provider. Be very through, and insist upon specific answers. Beware of misdirections like "we honor our commitments" because nothing you get at loan sign up is in any way, shape, or form a commitment. What I'm having to talk about now is "What I could guarantee to deliver if I could lock your loan right now", because unfortunately, neither I nor any other loan officer can any longer lock loans until reasonably assured they will fund. Those loan officers who do lock everything early are going to be providing much higher cost loans, and that is for the very short period of time until lenders refuse to do business with them due to unpaid fall-out fees.

It's a situation of the sort made famous by Catch 22. Loan officers can protect the interests of the loans that fund, or the loans that don't fund - but protecting the interests of the loans that fund means you get a lot fewer loan applications, and scare off a lot of uninformed borrowers who haven't considered the consequences of their choices.

This is precisely the situation that lenders want to foster with regards to brokers and correspondents - because the average loan consumer isn't informed, hasn't considered the consequences of their choices, and is very hesitant to write a check for that appraisal upfront when they're not certain they're going to get a funded loan. It is nonetheless the intelligent thing to do, and failing to do so is going to cost you a lot of extra money.

"Might as well go back to the lender's themselves!" you say. Let's do something I don't usually do: Mention names and specific examples. Let's consider a $400,000 purchase money loan on a $500,000 property for someone with a absolute dead average median FICO score of 720, primary single family detached residence in San Diego California with a 60 day lock. All loan quotes are current as of writing this, but are going to change before publication Monday:

Citi: 5.125 with one eighth of a point discount plus their normal origination which they won't detail online.

Ditech is quoting 4.625% for 2.1 points - but they're not telling you how long the lock is for. I'm not seeing if that includes origination, so even though I believe that the answer to whether it includes origination is really "No", I'll act as if it's "yes"

Chase was 5.375 for one point discount, 4.875% for two.

Union Bank quoted me a lot of different loans, none of which are competitive (6% with one point on a fifteen year fixed rate loan - and fifteen year rates are lower than a thirty year loan everywhere else right now)

I couldn't get Bank of America to quote online.

GMAC wouldn't actually quote either - referring me to a phone number.

Same story with Flagstar

Wells Fargo wants me to sign up for rate alerts, but they won't give me an actual quote either

By comparison, I've got 5.125% for not only no discount, but no origination either. I make my normal money per loan off the secondary market premium with no borrower cost. If you're willing to pay origination but no discount, the rate is 4.75%. On a sixty day lock, which I've never needed in my life - but that's the shortest some of the lenders are willing to tell us about, so let's play fair. To nail down the difference in pricing absolutely, I've got 4.625% for 1.25 total points discount plus origination. So the closest any of the direct lenders can possibly come to what I really can offer at the same rate is at least 85 basis points more expensive, and I'm not certain a couple of them aren't quoting to a credit score twenty to forty points higher than I am. To put this into dollar terms, 85% of a point is about $3400 in this case. Nor were the credit unions any better on their rates than the major lenders. You want to just waste an absolute minimum of $3400 by applying with a direct lender because that's easy, be my guest, but that's the minimum difference it could possibly be on this direct comparison. In reality, you're likely talking $7500 to $10,000 difference in costs for the same rate.

Why is it so much? Brokers are more efficient. Nobody expects me to have a beautifully landscaped building, plush carpet, beautiful furniture, a well-paid receptionist, etcetera. I make money when I fund loans. Bank employees make money whether they're funding loans or not. Get the idea?

No matter how much more efficient brokers are though, things have gotten a lot tougher for brokers of late, and consumers are now have to take a lot of the risks that lenders and brokers and correspondents (oh my!) were formerly assuming on their behalf. But the best and cheapest place to get a loan delivered to quoted specifications is still find a good broker. Getting a good loan is going to become a lot more a matter of developing a good relationship with that broker. This isn't to say "Don't shop around,", this is saying, "Shop effectively" because the game with phone quotes or email quotes that most consumers are playing that they think is getting them great loans is in fact, costing them an awful lot of money as opposed to what they could be getting by slowing down and having a real conversation with prospective loan providers. I don't often make $3400 (the minimum difference from the actual example above) for a day's work, which equates to a yearly gross of $680,000 for a day spent shopping your loan effectively. Someone making $680,000 per year doesn't need a loan for a $500,000 property, so I suspect the time it takes to slow down and have the full conversation will pay for itself for you, too.

As I said at the beginning of this article, the changes in the market in the last year are such that they are almost calculated to drive the low cost loan provider with consumer driven practices of a year ago out of the business. I'm not happy about any of these changes, but I have two choices: Do what is necessary to change, or leave the business. It won't help me or consumers to leave the business. All it would do is leave me broke and competing for limited employment opportunities while the consumers I would otherwise serve are left at the mercy of less ethical higher cost providers.

Now more than ever before, the sign of a good low cost loan provider is one who doesn't ask their serious loan applicants who really want a loan to pay for the costs of the unserious jokers who are just shopping ad nauseum for the sort of loan officer that's going out of business as we speak. As I said, these extra costs exist. They have to get paid somehow. You can choose a loan provider who makes the failed loans pay their own costs, or you can choose a loan officer who makes the successful loans pay for the costs of the failed loans. Everybody else is going to be out of business. And all of the consumers that kid themselves otherwise are wasting thousands, if not tens of thousands of dollars.

Caveat Emptor

Article UPDATED here


I'm still playing catch up from four days doped up in bed. I'm working on an article about how changes in lender policy are effecting consumers and what the best practices under the changed circumstances will be. If I can finish it, it will be up Monday.

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Disgraceful: Afghan women pelted with stones during rape law protest

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Glenn Reynolds on the Tax Day Tea Parties

There's good news and bad news in this phenomenon for establishment politicians. The good news for Republicans is that, while the Republican Party flounders in its response to the Obama presidency and its programs, millions of Americans are getting organized on their own. The bad news is that those Americans, despite their opposition to President Obama's policies, aren't especially friendly to the GOP. When Republican National Committee Chairman Michael Steele asked to speak at the Chicago tea party, his request was politely refused by the organizers: "With regards to stage time, we respectfully must inform Chairman Steele that RNC officials are welcome to participate in the rally itself, but we prefer to limit stage time to those who are not elected officials, both in Government as well as political parties. This is an opportunity for Americans to speak, and elected officials to listen, not the other way around."

I'd say that the time has probably passed for the Republicans to lead the tax revolt, and having missed the opportunity, will become targets themselves.

Bill Whittle

These men signed a document knowing that was their death sentence, should their ramshackle collection of farmers and brewers and smiths fail to prevail against the most powerful military force the world had ever seen. A death sentence. They did that, not because they craved money, or social position, or political power - as with all revolutions before or since. Most of them had that in abundance. This was a risk they took not to gain everything, but to lose it.

They did it because they believed that men should be free: free from the petty tyrannies of other people telling you what to do for your own good. They risked their lives, their fortunes and their sacred honor for you. If we cannot take two hours out of work to repay that debt, then we deserve everything that is coming to us.

Ed Morrissey

At some point, we have to start paying these bills, and when we do, it will hammer the middle class.

That's what drives the Tea Parties -- not taxes today, but all of the spending that will eventually require crushing taxes to resolve. The Obama administration plans a spending spree unlike anything outside of world wars in our history, and wants to sell a fantasy that only the rich have to pay for it. It's ridiculous on its face. The amounts are staggeringly high, and even 100% confiscation wouldn't begin to cover it.

Actually, the Obama administration campaigned upon the fantasy that "the rich" would be forced to pay for it all. People making $250,000 per year or more can't pay for all of it - there simply aren't enough such people. In fact, these people (less than 1% of the population) already pay more than 40% of all income taxes. But people who were intent upon having others pay for all of the goodies they wanted from the government didn't care that the math did not support Obama's campaign promises.

Furthermore, there are places on earth - quite pleasant places as long as you're wealthy - where the people the administration wants to tax to pay for the populist goodies can keep 90% plus of what they make. In most cases, there is no reason whatsoever that the profitable moneymaker cannot relocate to those places. What do you think is going to happen once these highly productive people make that move?

Here's a little historical context: The fascist state anti-Jewish policies caused Albert Einstein, Johann Van Neumann, Enrico Fermi, and a host of other brilliant central and eastern european Jews to emigrate. What development did these men all have a hand in? Answer: If the fascists had not frightened off these comparatively few brilliant men, men who didn't make the same mistakes the scientists left behind in central europe did make, Germany would have developed the Atom Bomb sometime around 1942. So when everything looks darkest, England still just holding on, Rommel and Montgomery fighting in North Africa and the Germans in control of most of european Russia, Allied cities start vanishing under mushroom clouds and major allied troop concentrations are obliterated by one bomb each. Prognosis for the allies and for the world?

The men and women the Obama Administration will economically persecute out of the country under the his campaign promises will make no less of a difference to the future of the world than the Jewish refugees of the 1930s.

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When Fascism Comes To America

It's here. People so afraid of the arguments that others will make that they prevent those others from speaking.

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Federal agency warns of radicals on right

Q and O gives the warning its due deconstruction.

Me, I think I'm seeing the beginning of the next Emmanuel Goldstein campaign.

The document itself is here

Having been in a profession where I occasionally was required to read and apply law enforcement directives, this thing stands out as shoddy work. Yes, there are right wing crazies out there - but this is so vague as to enable the targeting of whomever the authorities want to target.

The report uses debunked reports as its basis

As Michelle Malkin notes, in the past, these documents identified specifically named groups and had said specifically named groups not been exactly what was alleged, they had recourse in the press, in the courts, etcetera. But without naming specific groups, DHS keeps from being held responsible. They also do not name specific activities, but rather a host of things that sound a lot more like political dissent and disagreement.

There's no hackneyed left-wing stereotype of conservatives left behind in this DHS intelligence and analysis assessment. I asked both DHS spokespeople to tell me who, specifically, the report was accusing of "rightwing extremist chatter" and which "antigovernment" groups are being monitored as "extremists." They say they'll get back to me.

I have here in my hand a list of 205...

Here's the report of Left-Wing groups for comparison. Fewer specifically named groups than I recall from similar documents, but still a model of precision compared to the previous document, and they name specific terrorist strategies and things to beware of.

Hot Air:

In other words, it does not treat all animal-rights criticisms as indications of terrorist thought. It fails to paint all opponents of free trade as potential national-security threats. Global warming activism does not get treated in this instance as federalism does in the execrable DHS report on conservatives and libertarians. In other words, in this report, the DHS actually focuses on threats, not becoming the Thought Police.

This report differs from the latest in another key way. Instead of rambling on about how organizing for political change represents a threat to the US, this report focuses on the nature of potential attacks. Their choices are interesting in and of themselves. Instead of remarking on potentially violent threats from these groups, which have used violence in anti-globalization protests around the world, torching car dealerships for environmental causes, and destroying laboratories to free research animals, DHS mainly focuses on the threat of cyber attack from these groups. In fact, that's practically all it discusses, along with a specific list of targets that require protection, including the now-defunct Wachovia Bank.

DHS sees no potential for violence in groups with proven track records of violent terrorism? Cyber attack is really the greatest threat we can see from Recreate 68, ELF, and ALF? Really?

Even some die-hard liberals are demanding an explanation.

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Watch this:

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Staged Military Photo Ops: Then and Now

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Snakes on a plane. For real. Baby pythons escape during flight in Australia

Glad they weren't something poisonous. But it's like a bad movie attacking in real life.

A word of explanation and apology: I have been sick as the proverbial dog since the night of Good Friday. I had been completely exhausted, and when I took a chill it hit me hard. The reprints this week weren't planned; I just haven't had any choice, being doped up on Theraflu and similar medications. I'm hoping it's starting to recede, if so I will try and do something new for tomorrow since I certainly can't go out looking at properties or much else that is constructive.

The below is mostly from before I got sick.

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Spam level *declines*... to 97 percent of all email

The title says it all.

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Fundamental Dishonesty

First, he strongly intimated that because only 1 percent of children were able to "escape" (and boy, that's some admission) from D.C.public schools through this program, it was not worth saving.

So, you may ask, why not allow the 1 percent to turn into 2 percent or 10 percent instead of scrapping the program? After all, only moments later, Duncan claimed that there was no magic reform bullet and that it would take a multitude of innovations to fix education

If you think that the Secretary of Education wasn't given marching orders on this subject by Obama, well, perhaps you need to wait until you're a little older before you vote.

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Obama and the Reawakening of Corporatism

In 1970, General Motors was the largest and most profitable company in America. Today, of course, GM is neither. Instead, in 2009 America's largest company is Wal-Mart, which was still only a regional, privately-held retailer in 1970. Wal-Mart's rapid rise is not unique, however. Among the 100 largest firms today, a number--including FedEx, Microsoft, Cisco, and Home Depot--didn't even exist in 1970. So profoundly has the landscape changed that 80 percent of the Fortune 100 companies today are different from 1970.

Read it. Major corporations appreciate the moat Obama is building for them, protecting them from competition. They've already got the resources to deal with complex regulations, and control over the market (or enough of it) to raise prices to compensate. Who does this business environment disadvantage? The entrepreneurs who have been our major source of economic gains.

Victor Davis Hanson: The Politics of Blame

The Obama administration, remember, signed the Democratic-sponsored bill to authorize new bailouts for Wall Street firms and mega-bonuses for their executives. And during the Clinton administration, Treasury Secretaries Robert Rubin and Larry Summers - who both later made millions on Wall Street - succeeded in freeing investment banks from federal regulations that eventually led to their reckless gambling with trillions in sub-prime mortgage debt.

The quasi-government-run Fannie Mae and Freddie Mac mortgage agencies - staffed with ex-Clinton administration cronies - were at Ground Zero of the financial meltdown. Liberals in Congress like Sen. Chris Dodd and Rep. Barney Frank were among the largest recipients of Wall Street money. In the 2008 presidential campaign, most of the big investor money went to Democratic candidate Obama.

Billionaire investors like Warren Buffet and George Soros proved to be among Obama's staunchest supporters. Health and Human Services Cabinet-nominee Tom Daschle had to bow out because he skipped paying income taxes on free corporate limousine service. Democrats are clearly no longer the party of dirt farmers in bib overalls and sweaty dockworkers.

Is this starting to paint a coherent picture for you? There's a reason major, already established corporations make their campaign contributions to the Democrats, despite the Democrats being anti-business. These corporations can afford regulatory costs, they can afford lawyers, they can afford the campaign contributions for special favors. They will just raise prices to compensate. It's the new business that can't afford those. This effectively gives the established corporations a monopoly (or an effective monopoly) over the market.

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Obama Has Been a Divider, Not a Uniter

But Obama was supposed to be the antidote to the poison of partisanship. During the presidential campaign, chief strategist David Axelrod told Brownstein, "If there's an enhanced Democratic majority, I think that he's going ... to urge a special sense of responsibility to try and forge coalitions around these answers, not because we won't be able to force our will in many cases, but because, ultimately, effective governance requires it in the long term."

That makes last week's votes on the budget resolutions a landmark of ineffective governance. Not a single Republican in the House or Senate supported the bill, largely because the Democratic majority forced its will. Republicans were flattened, not consulted. Democratic leaders talk of enacting controversial elements of the budget through the reconciliation process -- which would require 51 Senate votes, not the normal 60, for passage. Only in Washington would the word "reconciliation" refer to a form of partisan warfare.

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Women's Rights as a Measure of Civilization

In a society where might makes right, where the rule of brute force has been thoroughly unleashed, women are always the first victims. Even the poorest and meanest man, the guy on the lowest rung who is oppressed by others above him who are bigger and stronger-even he can find one person he is still able to dominate and oppress: a woman, whether it is his mother, his wife, or his daughter. And he will oppress her-if the oppression of others by force is the accepted norm of the society he lives in. For examples, look to the Muslim world with its "honor" killings, arranged marriages, sexual segregation, and special restrictions on the travel and attire of women.

He can't resist throwing stones at the political right, but he does acknowledge that it's the right who has been the champion of women's rights of late.

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N. Korea shows need for missile defense

But at least the Soviet Union was run by rational, clear-minded men. North Korea and Iran are in the grips of regimes controlled, in Pyongyang, by a paranoid egomaniac who starves his people and isolates his nation, and, in Tehran, by religious fanatics who harbor millennial, apocalyptical fantasies.

Yes, the possibility of a rogue state turning an atom bomb over to terrorists may be a greater threat than intercontinental ballistic missiles. But North Korea and Iran want rockets for a reason. Even if they didn't launch an ICBM, the mere capability and threat to do so would give these dictators enormous power -- unless they knew a defense system could knock down their warheads.

Let me ask you this: Suppose there were a missile headed for your city. Wouldn't you want a missile defense system operational, with at least a chance to prevent a trillion dollar disaster potentially killing millions?

The other alternative is to watch it hit and clean up afterwards. Yeah, we can nuke the perpetrator into radioactive glass, but that doesn't make the damage done to us any less.

That missile is going to happen - probably more than once. It's only a matter of time. The question is whether we will be ready when it does.

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Game Theory Exposes PPIP As Fraudulent

Suppose someone is willing to fund your gambling problem, and lend you $80 at zero interest. Better still, if you lose the bet you don't have to pay him back. Under that scenario, the same gambler would pay $90 for the bet, giving him an even chance of winning or losing $10.

A Message to the Rich

So let me now send a personal message to The Rich in America...

As an American and a patriot, I implore you - I go to my knees and beg you - LEAVE NOW.

Leave. Just go away. Retire to the Cayman Islands or Bermuda or wherever, but do it now, please, while you still have some love for this country. Close your companies, fire your employees, shutter your factories and offices, sell your property, and take all of that somewhere else... better yet: somewhere scenic but poverty-stricken. Somewhere that could use some wealth creation. Somewhere that people simply are grateful to have a job in the first place. Somewhere where you will be appreciated.

You are not welcome in America any more. Take your wealth and prosperity and inventiveness and hard work and vision and insight and bold risk-taking and joy in seeing growth and wealth creation and just go away - right now, before it's too late. Because if you stay, Joel Berg and Barack Obama and Harry Reid and Nancy Pelosi and Barney Frank and Chris Dodd will continue to come after you for more and more and more and they will not ever stop - not ever - until you are forced to flee. And when that day comes, you will go with not with fond remembrances and a desire to return home, but rather a black heart and hard and bitter memories.

Read the whole thing.

What happens if the wealthiest 1% takes him up on it

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Stevens case closed, case against prosecutors open

A federal judge dismissed the corruption conviction of former Alaska Sen. Ted Stevens on Tuesday and took the rare and serious step of opening a criminal investigation into prosecutors who mishandled the case.

"In nearly 25 years on the bench, I've never seen anything approaching the mishandling and misconduct that I've seen in this case," U.S. District Judge Emmet Sullivan said.

Ted Stevens is still corrupt, but he shouldn't have been subjected to this kind of trial. As close as the election was that he lost only days after his conviction, I don't think anyone should doubt he would have won had his trial been conducted honestly.

Subjects of the probe are Brenda Morris, the lead prosecutor in the Stevens case and the No. 2 official in the Public Integrity Section; Public Integrity prosecutors Nicholas Marsh and Edward Sullivan; Alaska federal prosecutors Joseph Bottini and James Goeke; and William Welch, who did not participate in the trial but who supervises the Public Integrity section.

Has anyone checked their voter registrations? Could it be that there was a political motivation?

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Another in the sad litany of abuses by the Saleh regime in Yemen: Yemeni MP Imprisoned Despite Immunity

It happens here, too. It could happen a lot more if people don't start waking up to the fact that a government with the power to give you everything you want can also take it away.

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Obama said he'd meet the leaders of Iran without preconditions. Problem is, the leaders of Iran want preconditions

While we're on the subject, Iran nuke plan revealed in NYC indictment

John Bolton accused Bush critics within American intelligence of cooking the books in order to gain control of American policy.

Looks like Bolton pretty much got it right. The UN bans a number of materials from being sold to Iran to keep the mullahs from getting the bomb. Among the material sold to Iran through this ring are a special alloy of aluminum chiefly used for long-range missiles, maraging steel rods used in nuclear-bomb casings, and the tungsten copper plate needed for missile guidance. Even better, this ring operated from 2006 to 2008, right at the time when the brilliant minds at Langley tried to convince everyone that Iran had stopped pursuing nuclear weapons years before.

It really does make the "intelligence" in Central Intelligence Agency seem ironic, doesn't it?

Congress should demand hearings into the politicization of the intelligence processes that produced that NIE. Since Democrats benefited the most from the perversion of intel, though, don't hold your breath waiting for it.

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Richard Fernandez nails the only modern change this video needs

Stop Spending Our Future

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Obama, Pitchforks, and a Couple of History Lessons

Community organizers were instrumental in forcing banks to give subprime loans to unqualified minority borrowers by using the "pitchforks" tactics -- protesting in front of the banks, camping on the lawns of the bankers' family houses, intimidating families, and suing in courts. After the bankers were sufficiently roughed up, a community organizer would show up at their office to "negotiate" the bank's surrender in the form of bad loans and money for community organizations that pay community organizers for their "services."
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The Great Repression

Last week, proponents of this repression accounting got their way. They persuaded Congress to use its political will to meddle in the traditionally professional and independent business of setting accounting standards. Setting accounting standards is usually the province of the Financial Accounting Standards Board (FASB), an independent expert body set up to be outside the reach of Congressional influence, precisely to insulate it from the latter's political passions.

But now Congress has pressured FASB into letting assets be reported not according to prevailing economic realities but according to what they would be worth if the economy were growing and asset prices stable or rising. In short, Congress has prescribed repression as a solution to repression. They wish to sustain, not confront, The Great Repression.

This is what is known as a recipe for disaster. Mark to market rules were there for a lot of reasons, primary among which is the ability to con the unsuspecting if you don't follow them.

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Another transparency problem for the Obama administration

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Obama's word play

President Obama had a grand time in Europe. He wowed the press, met the queen, gave some wonderful news conferences and got virtually none of the major policy concessions he wanted. But he did do a lot of talking, for what that's worth.

And for Obama, that's worth a lot. During the campaign, then-Sen. Obama made it clear that he thought words meant a great deal. "Don't tell me words don't matter," Obama proclaimed. " 'I have a dream' -- just words? 'We hold these truths to be self-evident, that all men are created equal' -- just words? 'We have nothing to fear but fear itself' -- just words? Just speeches?"

The issue is that if you can't translate words into actions, you've got a problem. And you can talk forever in stirring, soaring rhetoric that touches the soul of all who hear it, but if people won't do what you need them to as the result of that talk, you have failed.

Right now, Obama's getting a lot of positive press because the press is determined to support him. But when it comes to actual accomplishments, the emperor has no clothes. The American public has two years to figure out the difference between PR and actual accomplishments. Seeing as how increasing numbers are already figuring it out, the prognosis does not look good for Mr. Hope and Change.

Newt Gingrich lays it all out

Even Obama doesn't pay much attention to his own words to his own supporters, and many of those early supporters are most unhappy with him over it. He threw them some red meat words, and they thought he meant it. The actions that one would expect to follow if he did mean it have not materialized. Obama's current position is closer to right than the people he led on like Peter the Hermit, but the point is words versus actions.

PS: Characterizing something as "extremist" or otherwise denigrating it is a way to avoid debate, not a way of being even-handed and rational.

Carnival of Real Estate

Carnival of Personal Finance

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Victor Davis Hanson: President Obama's First 70 Days: It really does all make sense.

In other words, if you believed as President Obama and many of his advisors do, then you would do what Obama and his advisors are now doing.

You want to know what people believe, what their priorities are, what they really want, watch what they do, not what they say.

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Look Who's Politicizing Justice Now

In the course of its usual task of reviewing pending legislation to identify constitutional problems, OLC determined that the D.C. voting rights bill, which would give the District of Columbia a voting member in the House of Representatives, is unconstitutional. The acting head of OLC, David Barron -- a liberal Harvard law professor appointed by Holder -- signed an opinion setting forth OLC's conclusion. That conclusion is no surprise, as it has been the Department of Justice's consistent position, under presidents of both parties, at least as far back as Attorney General Robert F. Kennedy in 1963 and as recently as two years ago.

When Holder, a longtime supporter of the voting rights bill, learned of the OLC determination, he acted to override it. He contacted another of his appointees, deputy solicitor general Neal K. Katyal, to ask whether Katyal's office could, under its usual standards, defend the bill in court. Katyal said it could, and Holder then overruled OLC.

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Making a movie of Atlas Shrugged

With the rise of the group mentality and class warfare, the producers in our world today are castigated and blamed for the current economic downfall. Rand once said, "One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary." That is exactly what we are seeing in today societal and political rhetoric, just look at recent comments by President Barack Obama for affirmation of the misguided and canerous populism consuming America. That the market has failed and it must be regulated to the point of expanding government power to take over businesses.
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Barack Obama fails to win NATO troops he wants for Afghanistan

Gordon Brown was the only one to offer substantial help. He offered to send several hundred extra British soldiers to provide security during the August election, but even that fell short of the thousands of combat troops that the US was hoping to prise from the Prime Minister. Related Links

Just two other allies made firm offers of troops. Belgium offered to send 35 military trainers and Spain offered 12. Mr Obama's host, Nicolas Sarkozy, refused his request.

And this is the war NATO voted to support. Great Britain, whom Obama has done quite a bit to antagonize offers a few hundred troops when he wanted thousands, and the rest of the "alliance" offers a grand total of 47.

As opposed to what these same allies did when George Bush wanted help, a much larger number of troops.

But he's going to "rehabilitate our international reputation". Excuse me while I roll on the floor, laughing. It beats the other alternative.

Obama, Going Along to Get Along

What's striking about Obama's diplomacy, however, has been his willingness to embrace the priorities of European governments, Russia and China while playing down -- or setting aside altogether -- principal American concerns.

As U.S. officials readily acknowledge, strategic arms control is of much greater interest to Russia -- whose nuclear arsenal is rapidly deteriorating -- than it is to the United States. From Washington's perspective, stopping Iran's nuclear program is far more urgent than agreeing on the next incremental reduction in Cold War warheads. Yet Obama essentially consented in his first summit with Russian President Dmitry Medvedev to devote the next four months of U.S.-Russian relations to an intensive effort to complete a new START treaty. No such cooperation on Iran is on the horizon. "I don't think we want to suggest that somehow . . . there's agreement about how to proceed," one U.S. briefer conceded

However, after a certain point, this incompetence can no longer be classified as funny. I think we're going to be crying for a very long time.

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Why they hate Sarah Palin so much

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Obamateurism of the Day

Nick Robinson asks Obama which country is most to blame for the current economic meltdown, especially since every Western government is pointing their finger at the US. For some reason, Obama very clearly didn't anticipate this, and goes deep into "uh" mode for almost three minutes while ducking the question

See video at the link

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A bill to give the President authority to shut down the internet "in the interest of national security"

Section 14 may be a bigger problem. It essentially revokes all privacy safeguards on Internet use for all networks. The Fourth Amendment would go straight out the window with the explicit inclusion of "private sector owned critical infrastructure information systems and networks." While Section 18 limits jurisdiction to federal networks, Section 14 allows the government to go after private networks without search warrants. The section also doesn't limit the jurisdiction to acute attacks, either. That jurisdiction exists at all times.

The big problem isn't that Obama might shut down the Internet. It's that the bill essentially repeals the Fourth Amendment.

I was a lot more willing to give the Bush Administration power than the Obama, simply because the Bush Administration had so many self-declared enemies in the press and media, and nobody willing to sweep any alleged misdeeds under the rug or down the memory hole. With the Obama administration, that's much more for the reason that mass media wants to believe this guy is the messiah, and they will manipulate what is reported to serve that end.

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China: Strong On The Outside, Rotten On The Inside

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Real Culture of Curruption: Rep. Murtha Wants $134M In Earmarks

Four of the earmark requests from Murtha's office are for current or former clients of a lobbying firm, the PMA Group, that is currently under federal investigation for connection to possible "straw" donations to Murtha and other Democratic members of the House.

PMA Group clients include: Advanced Acoustic Concepts ($5 million request), Argon ST ($8 million request), MTS Technologies, Inc. ($5 million request) and Planning Systems Inc. ($2.3 million request).

You can't make stuff like this up. Stuff you make up has to be believable.

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Wall Street Journal: Obama Wants to Control the Banks

I must be naive. I really thought the administration would welcome the return of bank bailout money. Some $340 million in TARP cash flowed back this week from four small banks in Louisiana, New York, Indiana and California. This isn't much when we routinely talk in trillions, but clearly that money has not been wasted or otherwise sunk down Wall Street's black hole. So why no cheering as the cash comes back?

My answer: The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell 'em what to do. Control. Direct. Command.

It is not for nothing that rage has been turned on those wicked financiers. The banks are at the core of the administration's thrust: By managing the money, government can steer the whole economy even more firmly down the left fork in the road.

If the banks are forced to keep TARP cash -- which was often forced on them in the first place -- the Obama team can work its will on the financial system to unprecedented degree. That's what's happening right now.

And the difference between this an the fascist/national socialist program that was worked upon Italy and Germany to take complete control of them 70 to 80 years ago is....?

I mean, I'd really like to find a difference that matters economically and legally. So far I'm coming up blank. Help me out here, someone?

The reason I can't find one couldn't possibly be that there aren't any, could it?


I've been answering this question for a long time. Whose interests do we need to be concerned about, in a "If they are harmed, we've got a problem" sort of way? Who has a primary stake in a real estate transaction, and who does not? Whose interests must be served by said transaction? Whose interests are critical, and whose are not. I never really went into an explicit answer. But some nasty emails and deleted comments of late have made an explicit answer important.

For as long as I've been thinking about the question, I've been answering it the same way. Depending upon the transaction, there are two or three parties with a primary stake: The buyer, the seller, and the lender if there is one.

The buyers interests are the most important and the most critical. They are giving up a very large sum of money in order to purchase real estate. Money is liquid; real estate is not. You can do anything with money; real estate, not so much. Therefore, there must be a compelling arguments made why it is in that buyer's interest to part with that much cash in order to buy that property. I've made a fair number of said compelling arguments, but you always have to be able to make it. Every time. If they're getting a loan, you also have to build an argument why it is worth them taking out a loan, which forces them to pay out a given amount of money every month for the next thirty years in most cases. Money that the buyer hasn't earned yet, and in most cases couldn't pay back right now if they had to. You've got to build a compelling argument for why that buyer giving that seller however many thousands of dollars in order to buy that property is in that buyer's best interest. If you're a real estate agent and you can't do this from the ground up, you're in the wrong business.

The seller's interests are also critical. There's got to be a compelling argument made as to why it's a good idea for that seller to agree to sell their property for that price. If not, we should be looking at buying some other property. Real estate may be illiquid, but nobody is creating any more of it. Not the Dutch, not the UAE, not anybody, not really. So why, to paraphrase the immortal words of Roald Dahl, would someone willingly exchange something of which nobody is making more of for something which they're printing more of every day? Again, if you're an agent and you can't do this, you're in the wrong line of work.

The seller's interests and the buyer's interests are different, of course. Without those differences, nobody would ever trade anything to anyone else ever again, and that includes trading for money, or sales as it is usually called. But you've got to be able to make compelling arguments for both sides, and you've got to be right, as real estate transactions are not readily reversible in the general case. There are some exceptions, but you can't usually go back afterwards and say, "Let's call the whole thing off!".

The lender, if there is one, also has a compelling primary interest in a real estate transaction. They are putting up many thousands of dollars of money they have already earned or gotten in some fashion in order so that the seller gets cash from the buyer rather than having to wait thirty years for the last bit to trickle in. In most cases, the lack of a lender will prevent the transaction from happening at all because that seller needs cash in order to pay off their own lender, or cash for the property in order to accomplish their reasons for selling it, not monthly payments trickling it over the next thirty years. Therefore, without the lender, the seller's interests could not be met, and therefore the buyer's interests would not be met. But the lender doesn't have a direct interest in the property investment, only that it can be sold to pay off the debt if the borrower defaults. What they do have an interest in is whether the buyer can pay them back, and, failing that, if they can get their money out of selling the property if the buyer does not.

The seller is usually paying almost everyone who works on the transaction, the buyer's money is the reason why the seller is able to pay everyone, and the lender's money is what is used so the seller can pay everyone. These three parties have legitimate, primary interests in the transaction. If their needs and criteria are not being met, they can call the entire transaction off. As strange as it may be to see a real estate agent writing this, they should call the transaction off if their interests are not being met.

Everyone else is working for a paycheck: Agents, loan officers, escrow, title, appraiser, inspector, notary, ad nauseam. We make our money by being able to help one of the above three "people" consummate the transaction. We are worthy of our pay to the extent we help one or more of those people serve their interests, or serve those interests better. If we can't do that, we shouldn't be part of the transaction. We only make money by serving the interests of the primary stakeholders, and if we're not doing that, we shouldn't make money.

If you cannot agree with this, you and I have nothing further to talk about. I make my money by putting my clients into a situation that's better than it would have been without me. If that's not the way you make money in real estate or any other business you might be in, then you are trying to be a tollbooth, and the dynamics of the market are going to do their best to route around you. In other words, if you cannot show a value to those you serve that is at least as great as the money you make from providing those services, the market evolution is going to put you out of business as soon as it can. This knowledge goes back at least to Frédéric Bastiat, but it's nothing that despots the world over haven't known for millennia, who have been getting increasingly sophisticated about not getting put out of business as the markets have gotten more sophisticated about what adds value and what does not. I have absolutely no sympathy for any argument that concludes you must pay someone because the law says you must. The law, to the extent it relies upon "because I said so!" is an ass.

That doesn't mean there aren't legitimate economic reasons to choose to use a real estate agent, a lender, a notary or whomever. But to the extent the law forces you to use one, the law is a tyrant, engaging in rent-seeking behavior. Healthy economic organisms interpret rent seeking behavior as damage, and seek to route around it. Eventually, they will succeed. It may take a while, but they will succeed.

So now you know why I am always looking at "What is the consumer's interest?" and "How can the consumer benefit?" and "Does this benefit the consumer?" It isn't altruism. It's enlightened self-interest. By providing value for the consumer, even if in the context of specialized knowledge or judgment that consumer may not have, I am showing an economic reason why it is in that consumer's best interest to put money in my pocket. If $1 in my pocket means more than $1 in theirs (and it does), consumers will freely choose to line up at my door for the privilege of paying me. Some consumers may not agree, and that's fine. There's plenty who agree do to keep someone who is so oriented hopping for as long as I am willing and able to work. That's the best income insurance there is or ever will be.

But if you are not so oriented - and I am looking here at any alleged professionals who think in terms of their own benefit, rather than the benefit of consumers - then it's only a matter of time before the market figures out a way to route itself around you. I and others like me are going to be working forever. Those who take the tack that "you pay me because you have to!" are going to find yourselves in declining industries, and no amount of regulation (e.g. this) is going to do anything other than delay the tide until someone figures out how. And acting self-righteously as if you have some kind of "right" to that money as you lobby the government for them to force people to do it your way will only make you more and more contemptible, more and more an object of ridicule.

Caveat Emptor (and especially Caveat Vendor)

Article UPDATED here

Cool! Hidden Planet Discovered in Old Hubble Data

The method was used to find an exoplanet that went undetected in Hubble images taken in 1998 with its Near Infrared Camera and Multi-Object Spectrometer (NICMOS). Astronomers knew of the planet's existence from images taken with the Keck and Gemini North telescopes in 2007 and 2008, long after Hubble snapped its first picture of the system.

Of course, the coolest way to find strange new worlds would be for people to be able to travel to those star systems to look. But I'll take what I can get.

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GM Bankruptcy? Tell Me Another

President Obama rightly says "sacrifices" must be made if GM is to emerge as a viable company. But there's one sacrifice he won't make: his re-election chances, by leaving the fate of the UAW truly up to a bankruptcy judge.

Obama's Losing Bet on Detroit

Truth is, that industry already exists. The Big Three just don't happen to be a part of it. The United States has robust, job-creating, fuel-efficient automakers, in the form of companies like Toyota, Honda and Subaru.

But they don't count in the eyes of this president, presumably because their employees don't belong to the United Auto Workers union. So he apparently couldn't care less how much they resemble what he fantasizes GM and Chrysler will soon become.

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Angela Merkel: Voice of Reason

First the Politicians Come After the Rich...

What's happening in New Jersey is not unique. Just months after a presidential campaign in which Barack Obama argued that he intended to make the wealthy pay their 'fair share' of taxes, politicians across the country are scrambling to balance their budgets by focusing on higher-income earners. But in doing so they are also redefining downward who constitutes the wealthy. Upper-middle and even middle class taxpayers are finding out that when politicians say they are coming after the rich, they don't really mean just the rich.

Budget Debate Shows Washington Politicians in Denial

Yet, instead of having an honest conversation with the American people about the need for restraint we are continuing to indulge in the bad habits of the past. President Obama was elected on pledges to go through the budget line by line, eliminate failing programs and end the abuse of earmarks and no-bid contracts. Congress, however, has little interest in change, unless it comes from the taxpayer's pockets. In this Congress' first ten weeks it has spent more than $2 trillion and funded more than 8,000 earmarks. Congress continues to do the easy work - nothing unites politicians more than the pleasure of spending other people's money - and still refuses to do the hard work of setting priorities and living within our means. With this budget the perfect political moment for fiscal responsibility continues to be a mirage just beyond the horizon of the next election.
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Hate Speech? Nope. Just Common Sense

Blogs, phone calls to talk radio and letters to the editor all ring with the same theme. Anything that is remotely critical of our president or the Democrats in Congress is now being characterized as "hate speech." Liberals have even been emboldened to shout at me across busy floors of public commerce. The political dialogue in this country has taken a nasty turn.

When disagreement becomes a crime, we have lost democracy, and we have lost freedom. It's just a matter of time until the government decides that allowing you to have choices is inconvenient.

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Silence Meets Despair of Afghan Women

That was then. This is now: Afghan President Hamid Karzai has just signed a law that forces women to obey their husbands' sexual demands, keeps women from leaving the house -- even for work or school -- without a husband's permission, automatically grants child custody rights to fathers and grandfathers before mothers, and favors men in inheritance disputes and other legal matters. In short, the law again consigns Afghan women to lives of brutal repression.

President Bush fought for the liberation of Afghan women. President Obama throws them under the bus for political advantage. Which one has done more to help those downtrodden?

This calls for the ChiaObama

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Chicago politics has moved into the White House

"Don't think we're not keeping score, brother." That's what President Barack Obama said to Rep. Peter DeFazio in a closed-door meeting of the House Democratic Caucus last week, according to the Associated Press.

So much for the end of partisanship - unless by the end of partisanship you mean, "Do it our way or suffer the consequences."


It really helps my perspective in a lot of ways to be both a Realtor and a loan officer. Just the other day, I had a loan only client where they were already under contract to buy a property when they contacted me. The basics of the situation was that the property was in a very urban area, built up about the time of World War I, that has seen considerable renewal in the last decade or so. I work there as an agent sometimes, but don't keep constantly informed on all the market activity in the area, so when I do get a buyer or seller client in that area, it does take me a bit of effort to get back up to speed on that micro-market.

Silly me, I trusted that the buyer's agent had done their job, and when I got the loan application, I sent the appraiser out. Yes, a stupid mistake, I know. The buyer's agent was raving about what a fantastic deal it was the whole time the appraiser was working. Then the appraiser e-mails me and said, "Value isn't there. Do you want to proceed?"

Well, beat me like a red-headed step child. I ran the comps, and there just wasn't any doubt. The property was at least 25% over-priced, at least as compared to what the appraisal will support. Keep in mind that lenders will only lend based upon the lower of purchase price or appraisal. This is good basic accounting practice going all the way back to Luca Pacioli, and those who would change this do not understand the underpinnings of our financial system nor do they understand loan underwriting.

So what do I do? First, I apologize to the client for not having run the comps in the first place. Then I explain the situation to him. Having the value fail to come in isn't the end of the world. He has a loan contingency in effect, so he has options.

First, he can just walk away. The loan can't be done on the terms of the purchase contract, giving him grounds to exit the contract without penalty. No harm, no foul. This is a good option to consider.

Second, he can come up with the difference in cash or the equivalent, increasing his down payment so that all the lender has at stake is the same percentage of the appraisal amount. If it was an eighty percent loan on (for example) $200,000 (or $160,000), coming up with more cash can make it a eighty percent loan on $160,000 ($128,000), or higher percentage value loan on the same amount. This usually isn't a good option, but if the property really is worth that much to you, it might possibly be worth considering if you can. Most residential buyers don't have this much extra cash lying around, but if you really would get something out of the deal that really is worth the money you are paying, it is an option worth considering.

The third and usually the best option is to renegotiate the deal. The seller can't make the buyer stay in the contract if there's a loan contingency in effect. In fact, if the appraisal is done correctly, there just isn't a lot of wiggle room for the sellers. Another appraiser is going to come up with a very similar value. Therefore, the seller is not going to get more money out of the deal. They can decide they want to do what is necessary for this deal, or they can flail about for months hoping for another buyer who doesn't need a loan. If the appraisal is done correctly, it is in the seller's interest to renegotiate. Some won't, sitting in Denial, but it's not the constructive alternative. If the appraisal is only going to come in for $160,000, pretending it's a $200,000 property doesn't help the seller any more than over-pricing the property in any other context. Remember, lower of purchase price or appraised value. If the appraisal is only for $160,000, the loan can't be based on an amount higher than $160,000. Whether the listing agent bought the listing or whether there really are aspects of the property unquantifiable in the appraisal, the fact of the matter is that most potential buyers need a loan and are therefore going to be stuck with that appraised value, and can't pay more than it indicates. Even the ones who can usually don't want to.

This isn't to say that appraisers are infallible, don't make mistakes, don't collude with buyers upon occasion, etcetera. Sellers and their agents need to do their own due diligence to find out if that appraisal is accurate or not. But if it is, sitting there in denial of the facts isn't going to help.

What is not a constructive option is to beat up the appraiser or get another one. Assuming the appraisal is well done, the value is going to be close to what any other honest appraisal will come up with. The sales in the neighborhood are what they are. If there are better and higher comps, by all means ask the appraiser to take them into account. But if there aren't better and higher comps, it is neither in the buyer's interest nor the lender's to over-pay for the property. Buyer's agents and loan officers who pressure an appraiser for higher values than are justified, and appraisers who cooperate, are committing FRAUD. I have nothing but contempt for any of them. Especially the buyer's agents, who are violating fiduciary duty on the most basic level.

The appropriate response, on an buyer's agent part, is to renegotiate or advise a client to walk away if the seller won't renegotiate. That's doing your job, serving your client, etcetera. If I can't find comps that persuade the appraiser to change the appraisal upwards, that appraiser has just saved my client a large amount of money they shouldn't have been spending. The appropriate reaction is gratitude, not anger that my deal is falling apart and I'm not going to get a commission check yet. Unfortunately, this is often not the reaction that appraisers and loan officers get in that situation. The most common reaction is trying to find a more compliant appraiser, one who is willing to stretch the truth. Exactly how is that fiduciary duty to pursue a path which results in my client over-paying for the property?

If the property really is worth paying that much money, I shouldn't have any problem explaining to my client why it is worth that much money, appraisal or no. Yes, they've got to come up with more cash, but if the property isn't worth the purchase price, I shouldn't be pursuing a course that results in my client paying that price. Agents who do should be fired. Actually, I think they should lose their license, but consumers firing them is an acceptable minimum.

It is only the loan which enables anyone to pretend otherwise. But a dollar my client pays for via a loan is every bit as much real money as a dollar out of their checking account. Neither a client or an agent should treat $1 in purchase price any different in an "all cash" purchase than they should if the property is bought with a 100% loan, and no money out of the client's pocket. For an agent to do otherwise is a sign of the worst kind of crook in the business. If a property is worth $X, it's worth every penny of it whether or not lenders will lend based upon the full purchase price. It may not be a property which this client can purchase, but it is still worth that money. The appropriate response for a buyer's agent is to attempt to renegotiate, and advise walking away if that is unsuccessful. It is not to violate their fiduciary duty as well as committing FRAUD by getting a bogus appraisal. If the buyer's agent is really determined to do their job correctly, they've just got a little bit more to do than they previously thought.

Unfortunately, it's been a really long time since any of the main institutions of real estate were serious about the client interest part of professional standards. Neither the various Associations of Realtors nor anyone else really gives a rat's. What most of them teach is getting a transaction done, and treating the loan and the appraisal as obstacles to that, rather than protections for clients. There is an enormous inertia of lazy thinking in the real estate profession, and it's been hosing clients for decades. But just because you can manipulate the system to persuade a lender to believe that a property is worth lending $X on doesn't mean the property is worth that purchase price, and lenders are starting to defend their interests, something I'm very happy to see.

It isn't pleasant for a buyer's agent to re-open negotiations. It's still my job when this happens, and if the listing agent is any kind of professional, they're going to respect me for it. Nor is getting angry a constructive response from a listing agent. As a listing agent, I can try and find better comps, I can persuade the buyer why the property really is worth that much money despite the appraisal, or I can do what I almost certainly should have done in the first place: Go back to my selling client and explain why the property is over-priced and why I should sell it for less. A listing agent who can't or won't act appropriately in this situation isn't worth the dog feces stuck to the bottom of their shoe, much less a fat commission check. They are sabotaging their client, and should be treated accordingly.

Do you see what the common element is here, and the common problem? It's agents who didn't do their job right, whether they "bought" the listing by indicating an unrealistic price, or said it was a good bargain when it isn't. Not only did they commit one of those two egregious violations of client interest, when it is rubbed in their face, they are compounding that mistake by refusing to own up to it and deal with the consequences. It's difficult to own up to mistakes, but it's also something a professional has to do. Agents who refuse to do so should find themselves unemployed and penniless. It's too bad that by the time a consumer has discovered this issue, they are already damaged by these malfeasant twits. Unfortunately, it's very hard to get rid of these sort of agents and the inducements really aren't there for other agents who do serve their clients best interest to make the complaints that would, in a perfect world, result in the incompetent ones losing their license. All the more reason why consumers need to do due diligence in the first place and ask the agent the hard questions before they sign on the dotted line.

The guy I talked about at the start of the article? Despite the evidence I furnished of the comparable sales, his agent is either sitting in Denial or FRAUD. There isn't a lot of wiggle room here. They dropped the application with me when I took the position that the appraiser was correct. They couldn't dispute the reasoning, so they went in search of someone who will agree with them despite the evidence. The property still shows as being in escrow. The only way that value is going to come in for a value that allows that transaction to close as written is via a fraudulent appraisal that's going to result in the client paying too much for the property. But evidently, this agent has decided that's where his interests lie. So it does happen. It will happen to you if you're not careful about your choice of agent. The good news is that with lenders defending their interests more strongly now, this kind of agent is going to find themselves increasingly out in the cold when it comes to actually getting the transaction done. And one of the very few good things about the new appraisal standards is that they're going to make that kind of "appraisal shopping" a lot more difficult.

Caveat Emptor

Article UPDATED here

Yes, it is April 1st, but as much as I wish these were all jokes, most of them are not.

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Free the Job Creators

I always take the wisdom of crowds with a large grain of salt, because in all too many instances the crowd doesn't know what they're talking about (look at Obama's election rimshot), but in this case, the wisdom the crowd is spouting is the same as the experts.

Government Gone Wild

But all of this is just a pipe dream. Government spending does not cause a net increase in jobs over the long run; it costs jobs. Every dollar the government spends is either taxed or borrowed from the private sector, which means it "crowds out" private sector job creation. And because government spending is less efficient than private sector spending, the economy actually grows more slowly in the long run as the government gets bigger.

A New Era of Govt-Controlled Business?

The big bankers say they are profitable. And with an upward-sloping Treasury yield curve and some market-to-market accounting reform coming from the Financial Accounting Standards Board (FASB), the outlook for banks should be getting better, not worse. So why is the Treasury jamming more TARP money down bankers' throats, especially after announcing a new plan to use private capital to clean up bank balance sheets and solve the toxic-asset problem?

It kinda sounds like the Treasury doesn't want to let go of its new uber-regulator status.

As for Detroit, the carmakers should have been in bankruptcy months ago. And it is a bankruptcy court that should have fired GM's Wagoner and his board. Along with some serious pain for bondholders, bankruptcy would have broken the high-cost labor contracts with the UAW as well as carmaker contracts with dealers across the country. That's what bankruptcy courts are for. They're part of the free-market capitalist system.

Continuity We Shouldn't Believe In - Moral Hazard and the Geithner Bailout Plan

Ironically, the moral hazard created by the Geithner plan is similar to the incentivizing of risky mortgage investments by the government's backing of Fannie Mae and Freddie Mac, which played a major role in causing the financial crisis in the first place, as economists Peter Wallison and Charles Calomiris describe in this paper. Wallison deserves some credit for warning about this danger back in 2005.
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One reason why you should take the wisdom of crowds with a large grain of salt: Freeman Dyson: The Civil Heretic

Dyson says he doesn't want his legacy to be defined by climate change, but his dissension from the orthodoxy of global warming is significant because of his stature and his devotion to the integrity of science. Dyson has said he believes that the truths of science are so profoundly concealed that the only thing we can really be sure of is that much of what we expect to happen won't come to pass. In "Infinite in All Directions," he writes that nature's laws "make the universe as interesting as possible." This also happens to be a fine description of Dyson's own relationship to science. In the words of Avishai Margalit, a philosopher at the Institute for Advanced Study, "He's a consistent reminder of another possibility." When Dyson joins the public conversation about climate change by expressing concern about the "enormous gaps in our knowledge, the sparseness of our observations and the superficiality of our theories," these reservations come from a place of experience. Whatever else he is, Dyson is the good scientist; he asks the hard questions. He could also be a lonely prophet. Or, as he acknowledges, he could be dead wrong.

This man ranks right up there with the greatest geniuses of all time. Nobody since Leonardo da Vinci has contributed so much to so many areas of science - and it's gotten a lot harder since da Vinci.

Read the whole thing.

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President Obama means well. Iran doesn't.

But misleading analysis easily follows: Europeans and Americans who are adamantly opposed to the use of force (or economy-crushing sanctions) naturally start to see "pragmatists" where they don't exist. Khamenei calls the United States "Satan Incarnate" and President Obama responds with a verse about brotherhood from the Persian Sufi poet Saadi. To respond otherwise would be to act like Bush. (Note to the White House: Revolutionary clerics don't appreciate Sufism, with its ecumenical call for brotherhood. They harass and suppress it.)
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Did the NYT spike an ACORN story to benefit Obama?

Is that what happened here? The Times may claim that they didn't have enough corroboration to run the story. That didn't stop them from running a despicable hit piece on John McCain alleging a sexual affair between the Senator and a lobbyist, one which they eventually had to retract after getting sued by Vicki Iseman. They sent reporters to Wasilla to dig up dirt on Sarah Palin, but somehow neglected to cover her exoneration on ethics charges, as The Bulletin notes.

Unlike with the Iseman non-story, in which the Times used two disgruntled and unnamed former aides, The Bulletin has a public witness testifying under oath about the Paper of Record's political machinations. The Times has given a non-response response. I'd call this a clear loss for the Times, and further proof of its descent into political hackery -- this time covering up corruption in high political circles for its own policy preferences.

Original story here: 'New York Times' Spiked Obama Donor Story

I'd say the thing speaks for itself.

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he EEOC: "The Fox Guarding the Henhouse"

The EEOC has a much worse record of labor and civil-rights violations than most corporations and agencies with a similar-size workforce.

The EEOC was found guilty of systematic, illegal, reverse discrimination (discrimination against white males) in Jurgens v. Thomas, 29 Fair Empl. Prac. Cas. (BNA) 1561, 1982 WL 409 (N.D.Tex.1982). When he was head of the EEOC, Clarence Thomas tried but apparently failed to end the reverse discrimination that went on in the agency.

The EEOC also has had a lot of sexual harassment lawsuits against it (and I am talking about real sexual harassment, not weak claims based on a couple of off-color jokes, the sort of trivial thing the EEOC itself might unsuccessfully sue a private employer over).See, e.g., Spain v. Gallegos, 26 F.3d 439 (3rd Cir.1994).

So much for government being superior to corporate america. Or anyone else.

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Race and the 2008 Election: What the Exit Polls Showed

Those who said race was an important factor voted 55 percent to 44 percent in favor of Obama.

via Instapundit

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Future Present

Our archeologist, while rummaging among the ruins of our fallen civilization, met a ghost from the long dead race of Americans. The wraith boasted much about what we had been as a people.
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This page is an archive of entries from April 2009 listed from newest to oldest.

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