A non-partisan study commissioned by the New York Federal Reserve Bank sheds new light on the home mortgage catastrophe that cratered the economy and spawned a government bailout of the banking industry.
Although the study has attracted scant media attention, the blockbuster report casts serious doubt on conventional wisdom about the cause of the housing market collapse.
Until the Fed released its data December 5, it was widely acknowledged both in the media and in Washington that Wall Street's shenanigans were largely responsible for the worst financial crisis in 80 years. While bankers are certainly not blameless, the report fingers housing speculators as the chief culprit.
The exhaustive study ordered by the New York Fed is entitled, "Flip This House: Investor Speculation and the Housing Bubble." Using unique data, the authors of the report found that speculators played a "previously unrecognized, but very important role" in the destruction of the housing market.
In analyzing volumes of data, the report documented how investors helped push up real estate prices during the period from 2004 through 2006. When prices plummeted in 2006, millions of mortgage holders defaulted, contributing to the steep downward trend in prices and property values.
Real estate speculation is not a new phenomenon. However, the difference this time was that policies in Washington encouraged lax lending standards that fueled the growth of sub-prime mortgages. This enabled even credit-challenged borrowers to load up on risky debt.
The report spells out how speculators acquired properties with little or no down payment with the purpose of selling quickly to reap a capital gain. This practice, called "flipping," was aided and abetted by mortgage companies that parcelled out loans without traditional due diligence.
These unscrupulous speculators began acquiring multiple homes in a mad race to maximize their profits. The New York Fed's study shows that 35 percent of borrowers who purchased new homes in 2006 owned two or more properties.
In the four states with the worst default rates, speculation was rampant. The Fed data reveals that 45 percent of borrowers who purchased homes in Arizona, California, Florida and Nevada in 2007 owned two or more homes.
Looking back decades, the study found that the share of housing sales by multiple property owners has never been as high as it was during the period from 2006 to 2007. This helps explain why defaults soared when borrowers saddled with expensive debt were unable to quickly unload their homes.
This speculative buying spree also contributed heavily to spiraling housing prices by reducing the available inventory of properties. In addition, excessive borrowing helped drive up interest rates for all prospective home buyers, including those with no interest in flipping their investment.
While some have conceded speculation contributed to the housing mess, it was seen as only a minor cause. Wall Street shouldered most of the blame because it repackaged the mortgages and sold the assets to investors. However, if the underlying mortgages had been solid, there would have been no housing crisis and no need for a bailout.
That fact has been lost on the Obama Administration and the media. They prefer to lay the blame at the feet of Wall Street because it plays better with voters, while turning a blind eye to the role of greedy individual investors who gamed the system.
That's the reason the mainstream media has ignored the New York Fed study. The findings get in the way of the media's narrative to make Wall Street the scapegoat for wrecking the economy.
Sunday, December 18, 2011
Monday, December 12, 2011
Biden Stricken With Hoof-and-Mouth Disease
Vice President Joe Biden, whose feet are permanently implanted in his mouth, recently unleashed a crass accusation that even the normally supportive Washington Post felt compelled to label "absurd." Of course, absurdity is Biden's middle name so his utterances only polish his reputation as a buffoon.
Speaking to a group of union thugs, Big Mouth Joe railed against Republican opposition to the president's misnamed American Jobs Act. The vice president claimed the bill's defeat has led to police layoffs and as a result "murder rates are up, robberies are up, rapes are up."
What really ticked off the vice president was that local and state governments are slicing jobs as tax receipts have declined because of the economy. In deciphering the cutbacks, Biden equated fewer police with higher crime. As usual, his assessment was more hot air than cold hard facts.
According to the Department of Justice, violent crime is down 47 percent since 1992. Property crime has tumbled 75 percent. These reductions have been achieved despite the fact that the ranks of police officers have been thinned.
To hear Biden tell it, you would also think police departments have been stripped bare. Actually, police forces have lost less than one percent of their manpower since 2000. The tiny decline follows steady growth in police officers which included a nine percent increase in a single year (2000).
Biden gets piqued over any suggestion of cutbacks in state and local government workers, most of whom are represented by Democrat Party lapdog unions. Yet taxpayers in states and local municipalities are having to bankroll ever expanding government payrolls.
In 2010, states and local governments employed an astonishing 16.6 million full-time and 4.8 million part-time workers. That eclipses the payrolls of all the Fortune 500 companies combined. These numbers are courtesy of U.S. Census Bureau's Annual Survey of Public Employment and Payroll.
Despite Biden's assertion about reductions in the size of government, his facts are only half-right. Twenty-two states and the District of Columbia have more state and local government jobs today than they did when the recession began.
For example, growth continues unabated in Wyoming, where the rolls of government workers have surged 14.75 percent since 2007. The District of Columbia increased its government jobs by 6.66 percent during the same period. Texas cranked up government employment by 4.37 percent.
While the nation's economy has wallowed in the depths of economic doldrums, states and local municipalities have been flush with cash from the federal government. Federal aid to state and local governments totalled nearly $700 billion in 2010.
This flow of big bucks from taxpayers has allowed states and local governments to keep adding employees even in the face of private sector downsizing. Since 1960, federal subsidies to state and local governments have risen a mind-numbing 1,173 percent.
All that money has led to an unhealthy dependency on the federal government, which helps insulate states and cities from economic downturns and falling tax receipts. It also removes any incentive to trim payrolls when federal taxpayers pick up the tab.
In addition, the gusher of tax dollars has encouraged a proliferation of local governments, including cities, townships, counties, special districts and school districts. The end result is more government than citizens can afford.
Figures from the Census Bureau document there are now 90,740 state and local government entities in the United States. Local governments employ 12.2 million people. The majority work in education, hospitals and police departments.
Paying for all those government employees means increased taxes and fees. But that doesn't faze Vice President Biden. He is already on record as favoring higher taxes to pay for even bigger government.
Poor Joe. The vice president doesn't understand taxpayers want less government and more truth. If only he could keep his feet in his shoes instead of his mouth.
Speaking to a group of union thugs, Big Mouth Joe railed against Republican opposition to the president's misnamed American Jobs Act. The vice president claimed the bill's defeat has led to police layoffs and as a result "murder rates are up, robberies are up, rapes are up."
What really ticked off the vice president was that local and state governments are slicing jobs as tax receipts have declined because of the economy. In deciphering the cutbacks, Biden equated fewer police with higher crime. As usual, his assessment was more hot air than cold hard facts.
According to the Department of Justice, violent crime is down 47 percent since 1992. Property crime has tumbled 75 percent. These reductions have been achieved despite the fact that the ranks of police officers have been thinned.
To hear Biden tell it, you would also think police departments have been stripped bare. Actually, police forces have lost less than one percent of their manpower since 2000. The tiny decline follows steady growth in police officers which included a nine percent increase in a single year (2000).
Biden gets piqued over any suggestion of cutbacks in state and local government workers, most of whom are represented by Democrat Party lapdog unions. Yet taxpayers in states and local municipalities are having to bankroll ever expanding government payrolls.
In 2010, states and local governments employed an astonishing 16.6 million full-time and 4.8 million part-time workers. That eclipses the payrolls of all the Fortune 500 companies combined. These numbers are courtesy of U.S. Census Bureau's Annual Survey of Public Employment and Payroll.
Despite Biden's assertion about reductions in the size of government, his facts are only half-right. Twenty-two states and the District of Columbia have more state and local government jobs today than they did when the recession began.
For example, growth continues unabated in Wyoming, where the rolls of government workers have surged 14.75 percent since 2007. The District of Columbia increased its government jobs by 6.66 percent during the same period. Texas cranked up government employment by 4.37 percent.
While the nation's economy has wallowed in the depths of economic doldrums, states and local municipalities have been flush with cash from the federal government. Federal aid to state and local governments totalled nearly $700 billion in 2010.
This flow of big bucks from taxpayers has allowed states and local governments to keep adding employees even in the face of private sector downsizing. Since 1960, federal subsidies to state and local governments have risen a mind-numbing 1,173 percent.
All that money has led to an unhealthy dependency on the federal government, which helps insulate states and cities from economic downturns and falling tax receipts. It also removes any incentive to trim payrolls when federal taxpayers pick up the tab.
In addition, the gusher of tax dollars has encouraged a proliferation of local governments, including cities, townships, counties, special districts and school districts. The end result is more government than citizens can afford.
Figures from the Census Bureau document there are now 90,740 state and local government entities in the United States. Local governments employ 12.2 million people. The majority work in education, hospitals and police departments.
Paying for all those government employees means increased taxes and fees. But that doesn't faze Vice President Biden. He is already on record as favoring higher taxes to pay for even bigger government.
Poor Joe. The vice president doesn't understand taxpayers want less government and more truth. If only he could keep his feet in his shoes instead of his mouth.
Monday, December 5, 2011
Washington Whine Leads To Drunken Spending
Liberals' favorite whine, harvested from the vineyard of intentional deceit, goes like this: attempts to rein in the federal budget will harm the poor, seniors and children. They view any reduction in spending as anathema because they believe the government should solve all the nation's ills.
Yet there exists a mountain of evidence that the bloated federal budget could be reduced by billions of dollars with virtually no impact on sacrosanct social programs. Waste, fraud, duplication, swollen government payrolls and pork barrel projects are bleeding taxpayers and draining the budget.
No one in Congress or the executive branch can claim ignorance. The independent Government Accountability Office (GAO) has been sounding the alarm bells for years. Their warnings have fallen on deaf ears as Congress has ignored the calls for reform while shoveling more money into flawed programs.
In fact, the government watchdog agency is now required under a new statute to identify duplication in federal programs, agencies, offices and initiatives. Its first annual report issued in March, the GAO found 34 major examples of overlapping services provided by various agencies.
In one case, the GAO discovered that the federal government administers 47 different employment and job training programs at an annual cost to taxpayers of about $18 billion. Despite the duplication and inefficiency, Congress unflinchingly continues to stuff money into every one of the programs.
Eliminating overlapping services represents a major opportunity for slicing the federal budget, but there are a whole litany of other financial sins the government commits annually. Here are just a few areas where the feds are bungling away billions of taxpayer dollars.
1. The Washington bureaucracy is replete with examples of waste. For instance, the Internal Revenue Service flushes billions down the toilet every year. A recent audit by the Treasury Department's Inspector General showed that the IRS made payments of $4.2 billion last year to illegal aliens who paid no federal income taxes. Unfortunately, this is not an isolated case. The IRS also delivered $112 million in refunds to prisoners who filed fraudulent returns. By its own estimate, the IRS has admitted it wastes about $10 billion a year. The IRS is not the only violator. Every year the GAO issues reports exposing bureaucratic waste in a myriad of federal programs.
2. In a country founded on limited government, the federal bureaucracy is the largest employer in the United States. The fed payroll includes more than 2.1 million civilians, which excludes the Post Office. The executive branch of the government, which consists of the office of the president, 15 cabinet departments and 70 independent agencies, accounts for 97 percent of all federal civilian workers. In addition, there are 945 federal advisory committees and commissions stretching across 52 government agencies, employing thousands of people. The feds have continued to fatten payrolls while most Americans businesses downsize. Since 2007, the executive branch has grown 14.8 percent while 6.5 million private sector jobs have disappeared during that timeframe.
3. Pork Barrel Projects are rampant, despite repeated promises to eliminate funding for programs designed to ingratiate lawmakers to their constituents. In fiscal 2010, the Citizens Against Government Waste organization identified 9,129 pork projects that cost taxpayers $16.5 billion. Examples include such doozies as handing out $615,000 so the University of California at Santa Cruz could digitize memorabilia from rock band Grateful Dead and supplying $443,340 to the National Institute of Health for a study of the habits of male prostitutes in Vietnam.
4. Fraud permeates every government agency, sapping taxpayer funds and adding to costs. Over the last decade, entitlement programs have been a favorite target, including these examples from past years: Medicare's overpayments to providers once totaled $12.1 billion. The Food Stamp Program was bilked out of $1.3 billion. The Department of Housing and Urban Development forked over $3.3 billion in payments as a result of fraud and errors. The Department of Agriculture recently was unable to account for $5 billion in receipts and expenditures. Read enough? The bureaucracy is simply too big to manage and there are no incentives to reduce fraud when taxpayer funding allows the government to act irresponsibly without penalty.
Weary taxpayers have every right to demand that Washington clean up this mess before asking for one penny more in taxes from its citizens. Not only do the feds need to end waste, duplication, fraud and pork barrel spending, but the enormous size of government must be addressed.
As President Reagan once famously observed, a government agency "is the closest thing to eternal life we will ever see on earth." A nation saddled with $15 trillion in debt can no longer afford to stand by and watch its government grow fatter and more wasteful.
Taxpayers are finally sobering up after suffering the hangover effects of the liberals favorite whine. They don't want more binge spending.
Yet there exists a mountain of evidence that the bloated federal budget could be reduced by billions of dollars with virtually no impact on sacrosanct social programs. Waste, fraud, duplication, swollen government payrolls and pork barrel projects are bleeding taxpayers and draining the budget.
No one in Congress or the executive branch can claim ignorance. The independent Government Accountability Office (GAO) has been sounding the alarm bells for years. Their warnings have fallen on deaf ears as Congress has ignored the calls for reform while shoveling more money into flawed programs.
In fact, the government watchdog agency is now required under a new statute to identify duplication in federal programs, agencies, offices and initiatives. Its first annual report issued in March, the GAO found 34 major examples of overlapping services provided by various agencies.
In one case, the GAO discovered that the federal government administers 47 different employment and job training programs at an annual cost to taxpayers of about $18 billion. Despite the duplication and inefficiency, Congress unflinchingly continues to stuff money into every one of the programs.
Eliminating overlapping services represents a major opportunity for slicing the federal budget, but there are a whole litany of other financial sins the government commits annually. Here are just a few areas where the feds are bungling away billions of taxpayer dollars.
1. The Washington bureaucracy is replete with examples of waste. For instance, the Internal Revenue Service flushes billions down the toilet every year. A recent audit by the Treasury Department's Inspector General showed that the IRS made payments of $4.2 billion last year to illegal aliens who paid no federal income taxes. Unfortunately, this is not an isolated case. The IRS also delivered $112 million in refunds to prisoners who filed fraudulent returns. By its own estimate, the IRS has admitted it wastes about $10 billion a year. The IRS is not the only violator. Every year the GAO issues reports exposing bureaucratic waste in a myriad of federal programs.
2. In a country founded on limited government, the federal bureaucracy is the largest employer in the United States. The fed payroll includes more than 2.1 million civilians, which excludes the Post Office. The executive branch of the government, which consists of the office of the president, 15 cabinet departments and 70 independent agencies, accounts for 97 percent of all federal civilian workers. In addition, there are 945 federal advisory committees and commissions stretching across 52 government agencies, employing thousands of people. The feds have continued to fatten payrolls while most Americans businesses downsize. Since 2007, the executive branch has grown 14.8 percent while 6.5 million private sector jobs have disappeared during that timeframe.
3. Pork Barrel Projects are rampant, despite repeated promises to eliminate funding for programs designed to ingratiate lawmakers to their constituents. In fiscal 2010, the Citizens Against Government Waste organization identified 9,129 pork projects that cost taxpayers $16.5 billion. Examples include such doozies as handing out $615,000 so the University of California at Santa Cruz could digitize memorabilia from rock band Grateful Dead and supplying $443,340 to the National Institute of Health for a study of the habits of male prostitutes in Vietnam.
4. Fraud permeates every government agency, sapping taxpayer funds and adding to costs. Over the last decade, entitlement programs have been a favorite target, including these examples from past years: Medicare's overpayments to providers once totaled $12.1 billion. The Food Stamp Program was bilked out of $1.3 billion. The Department of Housing and Urban Development forked over $3.3 billion in payments as a result of fraud and errors. The Department of Agriculture recently was unable to account for $5 billion in receipts and expenditures. Read enough? The bureaucracy is simply too big to manage and there are no incentives to reduce fraud when taxpayer funding allows the government to act irresponsibly without penalty.
Weary taxpayers have every right to demand that Washington clean up this mess before asking for one penny more in taxes from its citizens. Not only do the feds need to end waste, duplication, fraud and pork barrel spending, but the enormous size of government must be addressed.
As President Reagan once famously observed, a government agency "is the closest thing to eternal life we will ever see on earth." A nation saddled with $15 trillion in debt can no longer afford to stand by and watch its government grow fatter and more wasteful.
Taxpayers are finally sobering up after suffering the hangover effects of the liberals favorite whine. They don't want more binge spending.
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