Wednesday, October 29, 2008

Obama and Biden Will Not Change the Culture of Corruption in Washington

Senator Barack Obama stands for change. If you missed it the first time, change, change, change! The mantra of his campaign is that he will bring needed change to Washington

The public wants change in the economy, change in the Presidency, and change in politics as normal.

The most critical change should be in the culture of Washington, the culture of corruption, the culture that brings us scandal after scandal, disaster after disaster, Fannie Mae and Freddie Mac. Unless we change the culture of Washington, the more things seem to change, the more they will remain the same.

There will be no change because Obama and Biden are of the corrupt class of political favoritism.

Corruption is an equal opportunity, non-partisan vice. Incumbent parties have more opportunity for corruption, and hence are likely to fall prey to it, and then get the onus when caught.

The Republicans, as the majority party from 2000-2006, certainly have their share of corrupt bums: Jack Abramoff, Randy “Duke” Cunningham, Robert Nye, readily come to mind, with others under investigation. Ted Stevens was just convicted as I write this post.

Let us not neglect the Democrats, who gave us the two bankrupt and corrupt mortgage lenders.

Senator Obama’s Record

While still in the Illinois Senate, Senator Obama received a sweetheart deal on a Chicago house, saving $300,000 on the asking price, courtesy of Tony Rezko, a principal fundraiser and cog of the Chicago machine, and now a convicted felon.

Obama’s campaigns received large contributions from Rezko such that earlier this year his Campaign Committee donated $150,000 to charity in campaign contributions linked to the felon.

Senator Obama never once in his years in Chicago politics took on the political machine. Not one line on his CV suggests “reformer.”

When Illinois Senator Obama was elected to the US Senate in 2004, the University of Chicago Medical School promoted his wife from Executive Director for Community Affairs to Vice President for Community and External Affairs and nearly tripled her salary from $121,910 in 2004 to $316,962 in 2005.

Her husband, now the United States Senator, returned the favor by earmarking $1 million in 2006 for a new hospital pavilion at the University of Chicago Hospital.

To be fair to the Senator, he earmarked sums, often larger than $1 million, to the University of Illinois, Illinois State University, Chicago State University, Northwestern Memorial Hospital, Loyola, City Colleges of Chicago, and Southern Illinois.

Indeed, he was so generous with taxpayers’ money that in less than four years, he delivered almost $1 billion in earmarks throughout Illinois. He was on pace to quickly catch up to the kings of pork, Senators Ted Stevens of Alaska and Robert Byrd of West Virginia.

From 1998-2008 the largest receiver of campaign contributions from Fannie Mae and Freddie Mac was Senator Chris Dodd of Connecticut with $165,400. The third largest recipient was Senator John Kerry of Massachusetts with $111,000.

The second largest, having only been in the Senate for less than 4 years, was Senator Barack Obama with $126,349.

Freddie Mac doled out $10.2 million in campaign contributions to politicians, Fannie Mae $9.4 million, and AIG $9.7 million.

Senator Obama drank deeply from the Washington trough.

Senator Joe Biden

Biden’s son, Hunter, graduated from law school, and immediately received a 5 year consulting contract from MBNA, the large Wilmington, Delaware credit card company, since acquired by the Bank of America. The contract was rumored to be for $100,000 annually. Hunter was promoted to Senior Vice President of MBNA in 1998, and later left the company.

Senator Biden, against the wishes of his Democratic colleagues, fought hard in Congress for an anti-consumer bill pushed by the credit card industry. The Bill was enacted in 2005.

We know, because the Senator keeps reminding us, that he is for the little guy. Not though when it comes to carrying the water for the credit card industry. The late MBNA has been one of the largest campaign contributors to the Senator, giving $214,050. Bank of America has carried on the tradition of donating heavily to Joe.

SimmonsCooper is a Madison County, Illinois law firm specializing in asbestos litigation. Madison County was a toxic hell hole for defendants until tort reform essentially shut it down a few years ago.

The firm then moved much of its caseload to the suddenly friendly State of Delaware. Biden’s other son, Beau, handled many of the cases in Delaware. Beau has since been elected Attorney General of Delaware, funded in part by $35,000 in campaign contributions by SimmonsCooper.

The firm also invested $1 million in the purchase of a hedge fund by Hunter Biden and Joe Biden’s brother, James.

The Illinois law firm has contributed $196,050 to Biden’s campaigns since 2003. It also spent over $6.5 million in Washington lobbying expenses.

Biden has successfully repaid SimmonsCooper’s largess by blocking adoption of an asbestos reform bill.

Friends of Angelo

Angelo Mozillo was the Chair of Countrywide, the largest mortgage issuer in the United States. Countrywide was also the biggest supplier of mortgages to Fannie Mae.

As it went under a few months ago and was acquired by the ubiquitous Bank of America, we discovered that Angelo had his friends, who received special consideration from Countrywide on mortgages. The list was bipartisan, but Democratic names mostly spring to the top.

Senator Chris Dodd is the Chair of the Senate Banking Committee. Countrywide shaved points off his mortgage on a D.C. townhouse and Haddam, Connecticut residence. The bank also waived those miscellaneous “garbage” transaction fees that often add up to thousands of dollars.

The Bush Administration tried to impose toughened standards on Fannie and Freddie in 2004. Dodd blocked reforms, stating the mortgage market is “one of the great success stories of all time.” .

Senator Kent Conrad of North Dakota, Chair of the Senate Budget Committee, had points waived on the purchase of an 8 unit apartment building, when Countrywide would not normally issue mortgages for more than 4 units, and on beachfront property, a million dollar home, in Delaware.

Both Senator Conrad and Dodd claimed they were ignorant of any special favors.

Former Fannie Mae Chief Executive Jim Johnson received over $10 million in preferential loans from Countrywide. Johnson was originally scheduled to head Senator Obama’s Vice Presidential Search Committee, but was dropped when the Countrywide scandals emerged. Johnson earned $21 million in 1998, his last year at Fannie Mae. Johnson had been campaign manager for Walter Mondale’s 1984 Presidential campaign.

Other Friends of Angelo included Donna Shalala and Richard Holbrooke from the Clinton Administration and Alphonso Johnson, who was Secretary of Housing and Urban Development in the Bush Administration.

Friends of Fannie Mae and Freddie Mac

Prominent Democratic politicos received plush jobs with the two bankrupt mortgage companies.

Jamie Gorelick, the former Deputy Attorney General in the Clinton Administration, was appointed Vice Chair of Fannie Mae and served from 1997-2003, earning over $26 million in the six years. Prior to the appointment, she had no training or experience in finance. She received a $960,149 refinancing at 5% interest from Countrywide in 2003, 40 days after Franklin Raines refinanced $982,253 at 5.125%. The prevailing rate at that time was around 6%.

Franklin Raines, White House Budget Director in the Clinton Administration, was Chair of Fannie Mae for 4 years, earning over $50 million. He resigned in December 2004 because of $10.6 billion in “accounting irregularities” under his and Jamie’s reign. He settled the subsequent lawsuit for $3 million, paid for not out of his pocket but by insurance.

The Democrats, led by Chris Dodd and Barney Frank, blocked substantial reforms of Freddie and Fannie.

Franklin received over $3 million in sweetheart loans from Countrywide.

Obama had sought advice from Raines.

Fannie Mae Chief Operating Officer Daniel Mudd was fired when Fannie Mae went under. He refinanced a $2,965,000 mortgage at 4.25% in August 2003, replacing a 6.5% mortgage from Countrywide.

The House Members

Congressman Barney Frank of Massachusetts heads the House Banking Committee. He vigorously, and successfully, opposed measures by President Bush, Senator McCain and even President Clinton to increase regulation of Fannie Mae and Freddie Mac. Herb Moses, Frank’s partner and roommate, was an exec at Fannie Mae from 1991-1998, which raises questions of conflicts of interest on the part of the Congressman, who also received large campaign contributions by the two companies. Barney and Herb broke up in 1998.

Congressman Frank stated in 2003 that he wanted “to roll the dice” on the two companies.

Congressman Charles Rangel, Chairman of the House ways and Means Committee, has a number of ethical issues. The Committee writes the tax laws of the United States.

For the past 20 years Rangel failed to report $75,000 in rental income from a property in the Dominican Republic. He blamed “cultural and language barriers” for the mistake, even though half his district is Hispanic.

The developer also waived the mortgage interest for at least half of the 20 year mortgage.

The Congressman leased 4 apartments in a rent controlled building. New York City and state law limit rent controlled units to only one per person, and in any event, it must be used as the principal place of residence. One of the units was used as his office. The monthly rent for the apartments was $3,864, substantially less than the prevailing market price of $7,465-8,125.

Rangel has received over $700,000 in campaign contributions from real estate developers since the 2004 election cycle.

Congressman Alan Mollohan of West Virginia was elected to congress in 1983. His law firm was losing money at the time. By the end of 2007 he was worth between $6 and $24 million. Indeed, from 2000 to 2004 his worth grew from $565,000 to over $6 million.

We also have the legendary, indicted Congressman William Jefferson of New Orleans, who had $90,000 in cash in a freezer, and was caught on a video camera receiving $100,000 in bribes.

Elsewhere in the Senate

Senate Majority Leader Harry Reid of Nevada was poor, literally dirt poor, when he graduated from college. Now he’s made a lot of money in real estate, including property in Las Vegas that he had not previously reported owning. He paid $750,000 cash for a D.C. condo in 2001. Senator Stevens was convicted for non-disclosures on his ethics statement.

Reid paid $400,000 in 1998 for a parcel of land outside Vegas. It was zoned residential at the time, but after getting it rezoned commercial, he resold it for $1.1 million in 2004.

The Los Angeles Times reported on January 31, 2007 that the Senator paid less than 1/10th of the assessed value on a tract of Arizona land. It had been owned by a pension plan controlled by a long time friend.

The story is often said that the most dangerous place to be in New York is between Senator Charles Schumer and a camera. The Senator has been very quiet lately.

IndyMac Bank failed because of a run on the bank. The run was caused by a letter Senator Schumer released to the press stating IndyMac was in trouble.

The Wall Street Journal reported two weekends ago that a few major donors to the Democratic Senate Campaign Committee, chaired by the Senator, had looked over the books of IndyMac as a possible investment. They decided against investing, but expressed an interest in acquiring individual pieces of IndyMac. In other words, they were acting as vultures willing to cherry pick.

That’s when Senator Schumer released the letter. It may simply have been a coincidence.

The question for the incoming Obama Administration is if the Obama Justice department will pursue Democratic corruption as assiduously as the Bush Administration prosecuted Republican corruption. Reports are that attorneys in the Justice Department have contributed $150,000 to the Obama campaign. That is their right, but it should not cloud their judgment.

We should have a grand jury empanelled to investigate the relationship between the mortgage companies, investors, and legislators, as well as any sweetheart deals between Countrywide, legislators, and the Freddie/Fannie officers.

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