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Revisiting the Real Cause of the 2008 Financial Crash

The following was posted on Saturday, September 13, 2014 by Jim Hoft at theGatewaypundit.com.

Guest Post: By Joe Hoft

Obama and FDR

(Salon)

Most people outside the financial industry don’t really understand how grim things were in 2008 when the major banks around the world began to collapse. Almost overnight the liquidity in the markets froze as money was hard to obtain and companies around the world began hoarding money they did have. The markets were in turmoil and the entire financial system, built on trust, was facing collapse. As is typical in today’s major media, the real social culprits were ignored and the capitalists were blamed as the cause of the upheaval. But was this accurate?

As noted in my new book, Falling Eagle – Rising Tigers, in the United States massive change has occurred over the past century moving the country more and more towards a social state. When the Great Depression came to the US in the 1930’s, President Franklin Roosevelt used it as a vehicle to push for social change. Social change in the US has not gone so well. Some changes have taken a long time before culminating in financial disaster. The 2008 financial crisis is an excellent example of this.

In his book The Big Short, Michael Lewis explained in great detail the factors that led to the financial collapse in 2008. Individuals with poor credit histories were provided ‘teaser’ loans by financial institutions. These loans had low interest rates or required little or no support for the borrower’s ability to repay the loan. The loans were then bundled and sold to investors. Complex financial instruments were created to insure these investments and the rating agencies classified these instruments as high quality without fully appreciating what they were rating. When the borrowers were not able to repay their loans, the whole system crashed.

Per Charles Rowley and Nathanael Smith, in their book, Economic Contractions in the United States: A Failure of Government, the root cause of the US housing market crisis in 2008 really began in the 1930’s with the creation of a wide range of social institutions. The Federal Housing Administration (FHA), which guaranteed bank’s mortgage risks and the Federal National Mortgage Association (FNMA), which effectively insured mortgages by purchasing mortgages from lenders, both products of the 1930’s, shifted risks from the lenders to the US taxpayers. Then in 1977 the Community Reinvestment Act (CRA) was signed into law under President Jimmy Carter. This law was designed to promote home ownership for minorities by prohibiting banks from refusing mortgages in poor areas due to the loan’s high risk. In addition, mortgage lenders were required under the 1975 Home Mortgage Disclosure Act (HMDA) to provide data about who they lent to. Then in 1991, HMDA rules were tightened and included specific demands for racial equality in the institution’s lending.

Per Rowley and Smith, in 1992, the Federal Reserve Bank of Boston published a manual advising that a mortgage applicant’s lack of credit history should not be viewed negatively in a loan assessment, that the borrowers should be allowed to deploy loans and gifts as deposits, and that unemployment benefits were valid income sources for lending decisions. The manual reminded banks that failure to meet CRA regulations violated equal opportunity laws and exposed them to actual damages plus punitive damages of $500,000.

“So the great housing bubble-party began. With credit-worthiness no longer relevant, the volume of sub-prime loans exploded.” This ultimately climaxed in 2008 with the sub-prime crisis that sent shock waves around the world and financial markets in turmoil.

Another “time bomb” ticking as a result of social programs in the United States is related to the colossal amount of debt which the US is amassing. In October 2013 the federal debt load in the US surpassed $17 trillion for the first time in its history. This amount may only be a part of the story. No government in world history has ever accumulated the amount of debt that the US has in recent years. In the US, conservatives on the right want to solve the debt problem by cutting government programs, or cutting spending, or both, whilst those on the left propose tax increases. Many Americans want neither option, but clearly, something has to be done. The current spending causing the annual deficits that lead to the ever increasing growth in the US debt is untenable, and as you read Falling Eagle – Rising Tigers you will realize that the situation is desperate and must quickly change.

See www.joehoft.com for information about the author and how to order your own copy of Falling Eagle – Rising Tigers.

 

Why Does the IRS Have Retention Standards That More Lax Than Standards for Taxpayers?

Obama PicPosted by Jim Hoft on Saturday, June 21, 2014, 9:00 PM at www.thegatewaypundit.com

Guest post by J. Hoft

As noted by Ed Morrissey at the website The Week the IRS contacted Congress late last Friday to claim that a hard drive failure on Louis Lerner’s computer wiped out two years of Lerner email data in precisely the time frame that investigators were interested in. Not only that, but the IRS then claimed it recycled its backup tapes so that it only had six months of server backups available.

There is no way that an individual in a lead position at the IRS could lose emails by their computer crashing. For the current IRS Commissioner to say so is either a lie or he is extremely incompetent on too many levels to count.

Here’s a list of the more obvious questions leading to this being a fabrication –

Why the delay in telling Congress of the lost emails? As Morrissey notes “First, despite having demanded these records from the IRS for over a year, the agency waited until now (and in a Friday afternoon document dump, no less) to inform Congress of the supposed loss of emails. That makes it look very suspicious, and put together with Lerner’s refusal to testify, even more so.”

What are emails doing saved on an individual’s computer? This is not standard practice in the corporate world and certainly not with the IRS. Ask any IT novice and they can tell you that emails are stored on email servers which are distinct pieces of hardware, separate from an individual’s computer or laptop. These servers are then backed up on a regular basis (e.g. daily, weekly, monthly, quarterly and annually). Emails at most companies can be retrieved for as far back as 10 years or more and the government surely has standards to retain emails for a number of years. As Morrissey notes: “While people send and receive emails via client programs on their computers, the messages go through databases on servers, which is where records are stored and duplicated for backup. A local hard-drive failure would have nothing to do with that record retention in a professional IT environment. The data would still reside on the servers and could be easily reconstituted from the backup. In fact, IRS Commissioner John Koskinen testified in March that the data existed on the agency’s servers, and not the local hard drives.”

What is the IRS’s email retention policy? Congress should ask the IRS what its retention policy is, and why has it not been adhered to, assuming the IRS acts as other government and corporate entities do in regards to retention of emails. Many regulators require companies to maintain information for 7 years or more. Does the IRS adhere to government standards and requirements? As Morrissey notes, the federal government has strict expectations for publicly held corporations and under the Sarbanes-Oxley regulations, corporations are specifically required to retain email data for five years, and destroying emails like the ones claimed lost by the IRS would be a crime punishable by 20 years in prison. In addition, the IRS’s own manual made it clear that the storage of email was important enough to have permanent backups of their data. “IRS offices will not store the official recordkeeping copy of email messages that are federal records ONLY on the electronic mail system,” and even went so far as to require hard copies “for record-keeping purposes.” The manual reference is clear, per regulation 1.10.3.2.3 (07-08-2011), the Federal Records Act applies to email records just as it does to records you create using other media.

Does the IRS only keep emails for the past 6 months for all employees or only those whose emails have been requested by Congress? Again, if the IRS is only keeping 6 months of emails, then it is out of compliance with federal laws and its own policies.

Why does the IRS have retention standards that differ from taxpayers? As Morrissey notes, “the IRS is the one agency that demands everyone else keep spotless records for seven years or more on their returns. Now we find out that they’re only keeping their own documentation for six months? For a nation founded on the rule of law and equality under it, this retention for thee but not for we will likely offend a lot more people than extra scrutiny for conservative tax-exempt applicants did, and the lame dog ate my homework excuse will offend the rest.”

Does the IRS have a contingency plan to recover lost data? All corporations today have contingency plans in place in the case of lost data. Losing the head of the department’s emails would surely be an event that would ignite specific actions by IT personnel to recover the data. Were these procedures performed when the data was lost? If they were, and the data is still lost, what is wrong with the contingency plans and have these gaps been addressed? The National Institute of Standards and Technology (NIST) Computer Security Division Computer Security Resource Center site lists government publications related to computer security systems: One publication numbered 800-34 which is titled Contingency Planning Guide for Federal Information Systems.

According to this publication, Federal Information Processing Standards (FIPS) are developed by NIST in accordance with Federal Information Security Management Act (FISMA). FIPS are approved by the Secretary of Commerce and are compulsory and binding for federal agencies. Since FISMA requires that federal agencies comply with these standards, agencies may not waive their use. Congress needs to determine if the IRS complies with government regulations regarding contingency plans. If not, then the IRS is not in compliance with government regulations noted in publication 800-34. If the IRS does have a contingency plan, did the IRS adhere to the plan when the computers of employees whose emails have been requested by Congress crashed? If not, why not? If so, what failed?

Why did the most recent external auditor’s report of the financial processes and internal controls in place by the IRS not mention any IRS noncompliance with government regulations in regards to data retention or business continuity practices? The US Government’s General Accountability Office (GAO), in accordance with the authority granted by the Chief Financial Officers Act of 1990, annually audits IRS’s financial statements to determine whether (1) the financial statements are fairly presented and (2) whether IRS management maintained effective internal controls over financial reporting. The GAO also tests the IRS’s compliance with selected provisions of applicable laws, regulations, contracts, and grant agreements. The latest audit performed by the GAO for the fiscal years ending in 2012 and 2013 had no mention of the IRS being out of compliance with data retention or disaster recovery statutes. There was mention of material weaknesses in internal controls over unpaid tax assessments, but no mention of data retention or disaster recovery noncompliance

Have any internal audits or quality control reviews been conducted of the data security or contingency plans at the IRS, and if so, has there been any mention of the IRS’s noncompliance with government regulations in regards to retention or business continuity practices? Internal audit or quality control reviews performed by the IRS entity itself or by other regulatory bodies of processes related to retention or business continuity practices at the IRS could be damming to the current alibi of the IRS in regards to the lost emails. These reports may even discuss the policies in place at the IRS for these areas which might conflict with the current story.

Why are not more IRS personnel standing up? I’ve met good and sharp people that worked for the IRS when sitting for the CPA examination and it is puzzling why more of them are not standing up and choosing to share the truth about this obvious scandal with Congress.

 

What is Barack Obama’s Middle East Policy?

Posted by Jim Hoft on Monday, June 16, 2014, 7:57 AM at www.thegatewaypundit.com

Guest post by J. Hoft

Iraq
Sunni Muslims march in Iraq.

Iraq is falling to ISIS but so far Obama has denied the current Iraqi government any support. Why would Obama not act to support an ally – especially after the blood sacrifice of so many Americans ? Obama is not gun shy, as his go it alone policy with Libya demonstrated. He was more than willing to fight alongside Al Qaeda in the war in Syria. What exactly is his policy?

As first reported by the GWP in August 2013, Obama’s policy in the Middle East has been one of alignment with the Sunni Muslim branch. Obama’s current actions add credence to the theory. There are multiple examples of this as pointed out by the GWP:

  1. Obama was on the same side as Al Qaeda in Libya when bombing Gaddafi and his forces. In prior posts GWP showed Al Qaeda flying their flag after Gaddafi’s murder.
  2. Obama also sided with the terrorist organization, the Muslim Brotherhood in Egypt, even providing them with $1.5 billion in aid, and then taking it away after they were overthrown.
  3. GWP reported from theIndependent, that if Obama had attacked Syrian leader Assad’s army, the Obama Administration and Al Qaeda would be on the same side.
  4. When Obama was contemplating plans in Syria, per the Washington Post, Obama was also open to a conflict with Iran.
  5. In September 2013, when Obama was unable to obtain the American public’s or American allies’ support to send US soldiers to Syria, the Washington Examiner and other publications reported that Obama waived a provision of federal law designed to prevent the supply of arms to terrorist groups to clear the way for the U.S. to provide military assistance to “vetted” opposition groups fighting Syrian dictator Bashar Assad.
  6. Now that Iraq is in trouble, Obama gives a speech and goes golfing.

The Muslim Sunni and Shia sects have been at war for over 1300 years, since Mohammad’s death. Iran, Syria’s Assad, Hezbollah and the current Iraqi government, are from the Shia sect. The rest of the Muslim world, including Al Qaeda, the Muslim Brotherhood, the Taliban, and ISIS, the terrorist group currently murdering people in Iraq, are all Sunni sects. Obama won’t send troops to Iraq because the Iraqi government is led by Shia. Sunnis kill Shia. Obama may claim that he doesn’t want to send troops to Iraq because Bush was wrong in sending US troops there in the first place, but that doesn’t explain why he is eager to send US troops and/or support to Al Qaeda in Libya and Syria and to the Muslim Brotherhood in Egypt.

One policy is becoming clear – Obama’s support for the Muslim Sunni sect. Maybe he gained this affinity for the Sunnis in his youth in Indonesia (a predominantly Sunni Muslim country). Regardless, with Iraq burning, this cannot be overlooked.

See original post at http://www.thegatewaypundit.com/2014/06/what-is-barack-obamas-middle-east-policy/

 

Census Report Day 3: Democrats Are the Party of High School Dropouts

The Census Studies–

The following was posted on Friday, May 30th, 2014 by Jim Hoft at Progressives Today.  Jim and I worked on this together.

Census Report Day 3: Democrats Are the Party of High School Dropouts

The Census Studies–

Congress

Background:

In late March 2014 the Associated Press (AP) reported that eight of ten US House of Representative Districts with the highest annual mean incomes were districts held by Democrats.

This was somewhat surprising as the media constantly labels Republicans “the party of the rich.” The article went on to list the top ten Congressional Districts predominantly on the East and West Coasts and led by several well known and very liberal Democrats like Nancy Pelosi, Henry Waxman and Jerry Nadler.

In response to this article, we decided to review the most recent Census data ourselves and see what other items of interest might be found hidden in this data.

Progressives Today first collected the 2012 US census data housed at the government census site. We also obtained a list of Congressional Representatives and their party affiliation from the US Congressional website for the 113th Congress voted into office starting in 2012 and combined these files into one massive spreadsheet to obtain relationships.

Earlier this week Progressives Today reported:
** 36 of the poorest 39 districts in the US are Democrat districts

** The Middle Class – Working Class districts in the US are represented by Republicans by a two-to-one ratio

** The shameful results of the Black Congressional Caucus districts – Their constituents are black, poor, have low incomes, and rely on the government for their health care. They rent rather than own, are high school dropouts and are unemployed.

Today we have this tidbit on the education level of Republican versus Democrat districts.
– Just as with income levels, the Democrat Party represents the extremes in education levels. Democrats tend to be high school dropouts or post graduate students. Republicans tend to be individuals with a high school education and individuals with some college experience but have not attained a degree – typical working class Americans.

Education – Of the sixteen education related categories, two categories are highly correlated with Republican led districts and two categories are highly correlated with Democratic led districts. Republican led districts correlate highly with individuals who have attained a high school degree or equivalent (31%) and individuals who have had some college but have not attained a degree (27%). Democratic led districts on the other hand correlate highly with individuals who are enrolled in college or graduate school (31%) and individuals with less than a 9th grade education (30%).

By Joe Hoft and Jim Hoft

** Check out http://www.progressivestoday.com/census-report-day-3-democratic-districts-highly-correlate-with-high-school-dropouts/ for original post.

 

Census Report Day 2: The Shameful Results of the Congressional Black Caucus

The Census Studies–

The following was posted on Thursday, May 29th, 2014 by Jim Hoft at Progressives Today.  Jim and I worked on this together.

Census Report Day 2: The Shameful Results of the Congressional Black Caucus

Background:

In late March 2014 the Associated Press (AP) reported that eight of ten US House of Representative Districts with the highest annual mean incomes were districts held by Democrats.

This was somewhat surprising as the media constantly labels Republicans “the party of the rich.” The article went on to list the top ten Congressional Districts predominantly on the East and West Coasts and led by several well known and very liberal Democrats like Nancy Pelosi, Henry Waxman and Jerry Nadler.

In response to this article, we decided to review the most recent Census data ourselves and see what other items of interest might be found hidden in this data.

Progressives Today first collected the 2012 US census data housed at the government census site. We also obtained a list of Congressional Representatives and their party affiliation from the US Congressional website for the 113th Congress voted into office starting in 2012 and combined these files into one massive spreadsheet to obtain relationships.

Yesterday Progressives Today reported:
** 36 of the poorest 39 districts in the US are Democrat districts
** The Middle Class – Working Class districts in the US are represented by Republicans by a two-to-one ratio

Today we are releasing part II of our US Census investigation:
The Failures of the Black Caucus

Caucus
One-third of the Congressional Black Caucus members have been named in an ethics probe during their career.

The Congressional Black Caucus claims to bring positive change to issues of social and economic injustice. But they represent many of the poorest districts in America.

Here is what Progressives Today found on the Black Caucus in America:

Black Caucus districts have a high percentage of people who have public health coverage
· Black Caucus districts correlate highly with those who have public health coverage (25%) while the remaining districts correlate highly with those who have private health insurance (33%).

Black Caucus districts have a high percentage of poor people
· Black Caucus districts correlate highly with those with household incomes less than $10,000 a year (46%) and incomes of $10,000 to $14,999 a year (27%). All of the 14 categories for families whose incomes are less than the poverty level correlate with the Black Caucus districts. Of the fourteen categories, only three are not highly correlated (i.e less than 25%) with the Black Caucus districts.

Black Caucus districts have a high number of high school dropouts
· Of the 16 education categories, the only category that correlates highly with the Black Caucus districts is the category for those with a 9th to 12th grade education and no diploma (29%).

Black Caucus districts have low rent housing
· All of the ten rent categories correlate with Black Caucus districts with three categories correlating highly: rent less than $200 a month (36%); rent between $200 and $299 a month (31%); and, rent between $750 and $999 a month (37%).

Black Caucus districts have fewer home owners
· Of the 45 housing categories, there is a high correlation between houses that are renter occupied with Black Caucus districts (37%) while there is a high correlation between houses that are owner occupied with districts other than Black Caucus districts (35%). Overall there is little in common with home ownership and Black Caucus districts.

Black Caucus districts have a high number of unemployed workers
· Of the 41 job related categories only employment status unemployed (49%), employment status percent unemployed (44%), jobs related to service occupations (25%), and jobs with commutes using public transportation (not taxis) (25%), are highly correlated with Black Caucus districts.

Black Caucus districts have a high percentage of blacks (no surprise)
· Of the 51 categories that relate to race, ancestry and origin, three highly correlate with the Black Caucus member led districts: ancestry – sub-Saharan African (47%), West Indian (36%) and Black or African American (74%). The Black or African American category is also significantly related to the Black Caucus districts.

These results paint a bleak picture for the Congressional Black Caucus led districts. Overall, their constituents are black, poor, have low incomes, and rely on the government for their health care. They rent rather than own, are high school dropouts and are unemployed. Many constituents work in service positions and take public transportation to and from work. Clearly, the Democratic Party has failed these Americans.

** Check out http://www.progressivestoday.com/census-report-day-2-tragic-state-of-the-black-caucus-most-failed-political-group-in-america/ for original post.

 

EXCLUSIVE: Census Data Reveals State of Democrat Party – The Party of Broke People

The following was posted on Wednesday, May 28th, 2014 by Jim Hoft at Progressives Today.  Jim and I worked on this together.

In late March 2014 the Associated Press (AP) reported that eight of ten US House of Representative Districts with the highest annual mean incomes were districts held by Democrats.

This was somewhat surprising as the media constantly labels Republicans “the party of the rich.” The article went on to list the top ten Congressional Districts predominantly on the East and West Coasts and led by several well known and very liberal Democrats like Nancy Pelosi, Henry Waxman and Jerry Nadler.

In response to this article, we decided to review the most recent Census data ourselves and see what other items of interest might be found hidden in this data.

Progressives Today first collected the 2012 US census data housed at the government census site. We also obtained a list of Congressional Representatives and their party affiliation from the US Congressional website for the 113th Congress voted into office starting in 2012 and combined these files into one massive spreadsheet to obtain relationships.

And, what we found was truly shocking.

See complete story at Progressives Today website.

http://www.progressivestoday.com/exclusive-census-data-reveals-state-of-democrat-party-the-party-of-broke-people/