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Hannity baselessly blamed Democrats, CRA for financial crisis

On the November 24 edition of Fox News' Hannity & Colmes, co-host Sean Hannity claimed that federal regulations are responsible for the current economic crisis, baselessly asserting that "[t]he federal government and the Democrats ... forced these banks, through the Community Reinvestment Act, to make these risky loans," adding, "The risky loans started the subprime mortgage crisis, which impacted all these financial institutions, which needed government bailouts." As Media Matters for America has documented, the assertion that the financial crisis was caused by banks lending irresponsibly to comply with the Community Reinvestment Act (CRA) is widely discredited. According to housing experts, the vast majority of subprime loans were made by independent lenders not covered by the CRA, which applies only to depository institutions, such as banks and savings and loan associations. During the broadcast, Hannity asserted of new regulations that might attach to efforts to solve the economic crisis: "[I]f we're going to go into this era of government regulation, let's just stand back and see how we got here. The federal government and the Democrats, they forced these banks, through the Community Reinvestment Act, to make these risky loans," leading to the need for government bailouts of financial institutions. Hannity concluded: "In other words, government caused that problem." In fact, legal and financial experts on housing issues dispute Hannity's conclusion. A study released earlier this year by a law firm specializing in CRA compliance estimated that in the 15 most populous metropolitan areas, 84.3 percent of subprime loans in 2006 were made by financial institutions not governed by the CRA. Moreover, Janet Yellen, president and CEO of the Federal Reserve Bank of San Francisco, stated in a March 2008 speech that "studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households" [emphasis added]. And University of Michigan law professor Michael Barr testified before the House Financial Services Committee in February, saying: "More than half of subprime loans were made by independent mortgage companies not subject to comprehensive federal supervision; another 30 percent of such originations were made by affiliates of banks or thrifts, which are not subject to routine examination or supervision, and the remaining 20 percent were made by banks and thrifts." From the November 24 edition of Fox News' Hannity & Colmes: HANNITY: Hey, Dick, let me -- let me raise this question with you here. First of all, the left and a lot of Obama supporters are very resentful at the high numbers of Clinton operatives that are now in the camp. That's issue No. 1. You've got the problem of Bill's ethics. That's question No. 2. You've got all these leaks. The Obama people seem to be resentful that it's coming as soon as the Clinton speculation began here. And then on top of it here, you know, I think it reveals their real inexperience. And they disagree on Iran, Iraq, Afghanistan, Pakistan, and on Russia. These are big issues. DICK MORRIS (Fox News political analyst): Put it simply, Sean -- put it simply, Sean, Hillary Clinton was going to be the Democratic nominee for president until Barack Obama challenged her. The basis of his challenge was that he didn't agree with her foreign policy. Now he just appointed her to run foreign policy. If that isn't cynical, I don't know what is. HANNITY: All right. So could we put that together, then, with the economic plan? I mean, his entire campaign on economics was he was going to tax the rich. "Read my lips, I'm going to raise taxes on the rich." He's backed off that. So how do we interpret this, that he said anything to get elected? MORRIS: Yeah, I think that's true, and I think he's adjusting to economic realities, but let me just do an overview with this thing, because the events move so quickly. The era of the free-market consensus began in 1989 and ended in 2008. And we're now into a new era where the consensus will be at least government regulation and perhaps government management, and that's the era Obama is in. He won't raise taxes on the rich, because he doesn't have to. He's allowed to have a deficit as large as he wants. HANNITY: But Dick, well, let's examine this a little bit -- MORRIS: A trillion-dollar deficit. No economic discipline, no fiscal discipline. And he'll pass his entire liberal agenda under a new tag, calling it the stimulus package. HANNITY: All right, but if we're gonna go into this era of government regulation, let's just stand back and see how we got here. The federal government and the Democrats, they forced these banks, through the Community Reinvestment Act, to make these risky loans. The risky loans started the subprime mortgage crisis -- MORRIS: Right. HANNITY: -- which impacted all these financial institutions, which needed government bailouts. In other words, government caused that problem. Government trade policy, energy policy, CAFE economy standards, safety standards, they caused the problems in Detroit. So now we're going to double down on the very root cause of our economic decline -- MORRIS: But Sean -- HANNITY: -- by including government more? MORRIS: Yeah, that's exactly what we're going to do. And it's wrong in the way that you articulate it, but let's be honest about the long-term nature of this problem. Fifteen years ago, the total debt owed by everybody in the world to everybody in the world was equal to the global gross domestic product. They were the same number. Now it's four times as much. That extra debt is like heroin that we've been taking, and our whole economy has been based on it. And we're going cold turkey now to get out of the debt. If we don't, we'll never cure this problem. HANNITY: But I'll tell you -- MORRIS: What the fiscal stimulus package is, is methadone to ease the pain. HANNITY: A hundred and seventy-five billion was his original proposal. Now they're up to $700 billion, and if you read, you know, Bloomberg today -- and I'll get into this when we get back -- $7 trillion we're going to be on the hook for. We can't afford this. But more with Dick Morris after the break.

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Japan slides into recession as exports hit by global slowdown

Japan today felt the full force of the global slowdown as its economy slid into recession for the first time in seven years amid weak exports and falling corporate investment.The world's second-biggest economy contracted 0.1% in the July-September quarter, the government said today. The figures were worse than expected; economists had predicted Japan would narrowly avert recession with growth of 0.1%.Despite that, the Nikkei gained 0.7%, or 60 points, to close at 8522. Earlier in the day the index gained almost 3% after a slightly weaker yen lifted exporters. The dollar later slipped against the yen, wiping out most of the day's gains.Two consecutive quarters of contraction - the technical definition of recession - means Japan joins the eurozone countries on the list of major economies in recession, with the US expected to confirm soon that it has met the same fate.Today's figures mark the first time that Japan has suffered two consecutive quarters of contraction since 2001.According to government figures, gross domestic product [GDP] contracted at an annualised rate of 0.4%, highlighting its export-led economy's vulnerability to slowdowns in the US and Europe.Officials warned that a killer combination of slow exports and weak business investment at home meant it could be some time before Japan climbs out of its slump."The downtrend in the economy will continue for the time being as global growth slows," said the economy minister, Kaoru Yosano."We need to bear in mind that economic conditions could worsen further as the US and European financial crisis deepens, concerns over economic downturn heighten and foreign exchange markets make big swings."The latest figures come only months after Japan's leaders were praising their economy's fortitude in the face of financial meltdown in the rest of the developed world. Now, however, Japan can no longer claim immunity. The Nikkei stock average has fallen by 25% since the start of October and the yen's rapid appreciation against the dollar has battered earnings among the country's major exporters.Toyota, for example, cut its full-year profit forecast by almost 70%. Other car and electronics makers have issued similarly dismal forecasts.Fears are rising that the Japanese economy will contract again in the third and fourth quarters. The spectre of deflation has also returned as personal consumption, which accounts for 55% of Japan's GDP, threatens to dip following a 0.3% rise last quarter.Economists put that tiny jump down to the long hot summer and demand for wide-screen TVs ahead of the Beijing Olympics. But consumers are expected to dramatically rein in spending as the full extent of the global crisis becomes apparent on this side of the Pacific.Given that the latest figures did not factor in the crisis's full impact on Japan, the slump is expected to continue into next year, when the benefits of government stimulus packages finally kick in.Yosano admitted that Japanese firms were "taking a step back" in terms of capital spending. He added: "As for external demand, we can't expect much from the US, Chinese, European and south-east Asian economies."Business investment - along with exports the driving force behind Japan's recovery from 2002 - fell 1.7% in the three months from July, the biggest drop in more than a year and its third straight quarterly decline.The Bank of Japan, which last month cut its key interest rate from 0.5% to 0.3%, could come under renewed pressure to take rates back to zero, although analysts see little point in doing so now."It's too late for monetary policy to revamp the economy," said Kyohei Morita, chief economist at Barclays Capital Japan. "The economy needs to depend on fiscal policy."Global recessionToyotaJapanEconomicsguardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds

Radley Balko's morning links

Morning links from Radley Balko's The Agitator: ? Washington's $5 Trillion Tab. "We?re now quickly approaching 50 percent of the annual U.S. gross domestic product." ? Lobbyists Swarm the Treasury for Piece of Bailout Pie. "Then there is the National Marine Manufacturers Association, which is asking whether boat financing companies might be eligible for aid to ensure that dealers have access to credit to stock their showrooms with boats ? costs have gone up as the credit markets have calcified." ? Flickr set of NYC in the 1930s. "Was there a better time for style than the art deco era?" ? Color photos of World War I. ? Court Rules Against White House in Missing E-Mails Case. "Judge Henry H. Kennedy, a Clinton appointee, rejected the Bush administration's claim that federal courts lacked the authority to require the White House to recover the e-mails." ? Watch the clock in this time lapse video of a dog who really knows how to enjoy life. ? Mobile treadmill. "The proud creators of SpeedFit are now looking for investors."...

Wall Street Gains On Better Than Expected GDP Data (AHN)

(AHN) - U.S. markets traded positive on Thursday after the government reported third quarter gross domestic product (GDP) fell by 0.3 percent, less than the 0.5 percent economists had estimated. - Thu, 30 Oct 2008 17:20:39 GMT

General Motors asks Bush for $10bn to merge with Chrysler

The boss of the US's biggest carmaker, General Motors, is personally lobbying the Bush administration for aid of up to $10bn (£6.3bn) to prop up a merger with Chrysler.Political and economic pressure is mounting on the US treasury to step in to avert the possibility of a bankruptcy of one of Detroit's leading carmakers, which could jeopardise hundreds of thousands of jobs. As its woes worsen, GM scaled back financing deals on offer in seven European countries yesterday.GM's chief executive, Rick Wagoner, has been in Washington to meet officials about a handout. A GM spokeswoman said: "We're in contact with a variety of government officials in light of the extraordinarily difficult economic conditions."GM's brands include Cadillac, Chevrolet, Saab and Vauxhall. As sales evaporate, analysts believe the loss-making company is burning through $1bn each month and that it could run out of money next year. In a fresh retrenchment, GM's finance arm announced it would no longer offer any financing deals on motor sales in countries including Spain, Portugal, Greece and Norway, while the rest of Europe will see a "more conservative" pricing policy.Members of Congress from Michigan are urging the US treasury to act, arguing that the industry is strategically crucial to the US economy. GM wants funds to support integration with Chrysler in a deal viewed as a way to avert the failure of one or other company.Several scenarios are under discussion. GM could issue preferred stock to the government in return for capital. Alternatively, the carmaker may be allowed to tap into the $700bn bail-out fund set up by the treasury to buy distressed assets from struggling banks.A third option is for the US department of energy to accelerate a $5bn low-interest loan originally conceived as part of a $25bn package to help the motor industry move towards greener fuel standards.The ratings agency Moody's cut General Motors' credit worthiness deeper into junk territory on Monday, citing "weakening business conditions and rapidly depleting liquidity."Under the mooted merger, Chrysler's private equity parent company, Cerberus Capital, could swap Chrysler for ownership of GM's finance arm, GMAC.Not all experts believe this idea is promising. "Merging two companies has generally not been successful in the auto industry, particularly involving large companies," said Efraim Levy, an equities analyst at Standard & Poor's in New York. "To do so at a time of such turmoil compounds the difficulty."Any government aid is likely to require a pledge from GM that it would restrict the number of job losses caused by a tie-up with Chrysler.All of Detroit's big three manufacturers - GM, Ford and Chrysler - have been caught by a collapse in demand for large sports-utility vehicles and pick-up trucks. Once the mainstay of the US motor industry, these have fallen out of fashion because of the soaring price of petrol.The manufacturers employ 355,000 people directly but support an estimated 4.5m further jobs in industries from steel to plastics, electronics and computer chips. The non-profit Centre for Automotive Research in Michigan has estimated that a failure of Ford or GM could take a toll of 2% on the gross domestic product and would jeopardise as many as 2m jobs.In a joint letter to the treasury secretary, Henry Paulson, and the Federal Reserve chairman, Ben Bernanke, politicians from Michigan pleaded for action."What America drives, drives America," said Dale Kildee, a Democratic congressman. "It is imperative that the federal government do whatever it can to alleviate this situation."In another sign of weakening confidence in the industry, the billionaire casinos magnate Kirk Kerkorian has cut his shareholding in Ford, which peaked at 6.5%, to 4.89%, at a likely loss of hundreds of millions of dollars.General MotorsMergers and acquisitionsAutomotive industryUS economyUnited StatesMotoringguardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds

It's official: the economy is shrinking

The Bank of England was under intense pressure last night to cut interest rates after new figures showed the economy had contracted for the first time in 16 years as it heads into recession.The news hammered the FTSE 100 index, which lost as much as 9% of its value at one point, wiping £90bn off the value of leading shares. It also clobbered the pound, which suffered its biggest fall against the dollar since 1992, to below $1.53 - a six-year low. As recently as July, the pound would buy $2, but it has been falling rapidly on evidence that the economy is slumping. The pound also hit a record low against the euro yesterday of just under 82p.Official data showed gross domestic product contracted by 0.5% in the July to September period - a much bigger amount than expected, the first fall since early 1992 and the biggest drop since the fourth quarter of 1990."It's a big shock that the decline is so large. It is truly dire," said Philip Shaw, chief economist at Investec.Barring a miraculous bounce in the current quarter, the economy will fulfil the technical definition of a recession - two quarters of contraction. Economists expect at least four more quarters of shrinkage in a row, which would be as bad as the recessions of the early 1990s or early 1980s.Alistair Darling, the chancellor, said he was confident the British economy would get through this "difficult period" and reaffirmed the government's commitment to help individuals and businesses."I've lived through the recessions this country saw in the 1970s, 80s and 90s," he said. "The difference is this time we are determined to do everything we can, and as soon as we can, to help people so that if they lose their jobs they can get back into work, that if businesses get into difficulty we do our level best to help them."His words followed an acknowledgment from Gordon Brown and the Bank of England's governor, Mervyn King, this week that recession was inevitable as a result of the global credit crisis and collapsing house prices.George Osborne, shadow chancellor, dubbed it "a defining moment in the record of Gordon Brown" and said millions of British families were "in for a very difficult time in the months ahead".He added: "This is the day that we can all see that the central claims he made over 10 years - that he had abolished boom and bust and therefore didn't need to set aside money for a rainy day - have been shown to be completely false."The data from the Office for National Statistics showed that the fall in national output was widespread, with only agriculture and government services still growing. Statisticians said the biggest falls were in areas such as financial services and in manufacturing and construction.The Liberal Democrat leader, Nick Clegg, warned the UK was "on the edge of a new winter of discontent".He said: "These growth figures show that the credit crunch is hitting the real economy and harder and faster than was first feared."Charles Bean, the Bank's deputy governor, warned that the economic slump was still in its early stages as a result of "possibly the largest financial crisis of its kind in human history". He added, though, that he hoped the worst of the crisis was past. But yesterday's figures largely related to the period before the collapse of investment bank Lehman Brothers in mid-September that led to the financial maelstrom of the past few weeks.Economists said the current quarter and all of 2009 could see falling output and urged the Bank of England's monetary policy committee (MPC) to add to this month's half-point rate cut which took the bank rate down to 4.5%."My comment to traders was 'dive, dive, dive'," said Brian Hilliard, economist at Société Générale in London."It's a very emphatic entry into recession which underlines the need for very dramatic interest rate cuts which we think the Bank of England will deliver."Speculation is growing in the City that the MPC could deliver its biggest ever cut in the interest rate at its next meeting on November 6, reducing it by one percentage point to 3.5%, or that it could hold an emergency meeting next week to cut the rate, such is the gravity of the situation.The TUC's general secretary, Brendan Barber, said: "Urgent action should start with a cut in interest rates by the Bank to below 3%. The newly unemployed should be given more help by reversing cuts in Jobcentre Plus staff, increasing statutory redundancy pay and lifting the amount of redundancy pay that can be taken tax-free."RecessionCredit crunchMarket turmoilInterest ratesBank of EnglandEconomic policySharesguardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds

Recession looms as economy shrinks sharply

The British economy shrank by far more than expected in the third quarter of the year which, barring a miraculous bounce in the current three months, means it is in recession for the first time since the early 1990s.Official data showed gross domestic product contracted by a much-bigger-than-expected 0.5% in the July to September period, the first fall since early 1992 and the biggest drop since the fourth quarter of 1990."It's a big shock that the decline is so large. It is truly dire," said Philip Shaw, chief economist at Investec.The decline was broad based with manufacturing and private sector services showing declines while only agriculture and government services showed an increase in output.The pound slumped on the foreign exchanges on the news, dropping to below $1.55 and to nearly 81p to the euro. The FTSE 100 extended early losses to be down 270 points at around 3,822.49, down more than 6% on the day.Indications were tha Wall Street will open sharpy lower, perhaps as much as 500 points, when trading begins this afternoon. "My comment to traders was 'dive, dive, dive'," said Brian Hilliard, economist at Société Générale in London. "It's a very emphatic entry into recession which underlines the need for very dramatic interest rate cuts which we think the Bank of England will deliver."James Knightley at ING Financial Markets said: "GDP has plunged far more than expected. So much for Gordon Brown's 'no more boom and bust'."He said he thought there could be at least four quarters of contraction, which would make this recession similar to those of the early 1990s and 1980s.Neville Hill at Credit Suisse agreed: "This is clear evidence that the economy is in recession. Recessions tend to last more than the technical two quarters, so there's likely to be more of this to come."He said it was now possible that the Bank of England's monetary policy committee would cut rates by more than the half a percent expected in the City.That would take the MPC into uncharted territory - it has never moved rates more than half a percent in one direction or the other. It cut rates by half a percent last month in concert with other central banks around the world.Economic growth (GDP)Recessionguardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds

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