So we continue to prop up the housing market, probably because it provides the only positive economic news lately. Is this good for the long-term economy? I dunno, I guess it depends on how talented you are at pretending:

The Obama administration pledged Thursday to provide unlimited financial assistance to mortgage giants Fannie Mae and Freddie Mac, an eleventh-hour move that allows the government to exceed the current $400 billion cap on emergency aid without seeking permission from a bailout-weary Congress.

The Christmas Eve announcement by the Treasury Department means that it can continue to run the companies, which were seized last year, as arms of the government for the rest of President Obama's current term.

But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009.

The compensation packages, including up to $6 million each to Fannie Mae and Freddie Mac's chief executives, come amid an ongoing public debate about lavish payments to executives at banks and other financial firms that have received taxpayer aid. But while many firms on Wall Street have repaid the assistance, there is no prospect that Fannie Mae and Freddie Mac will do so.

The administration faced a congressionally mandated deadline of Dec. 31 to increase the amount of aid it could provide to Fannie Mae and Freddie Mac, which together have already received $111 billion in assistance.

Treasury said Thursday that its decision did not mean the firms would need $200 billion or more apiece, but that it instead was seeking to assure markets that the government would stand behind the companies. In a statement, Treasury said the move "should leave no uncertainty about the Treasury's commitment to support these firms as they continue to play a vital role in the housing market during this current crisis."

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Without one Republican vote, the House passed a deeply flawed bill that attempts to control the excesses of the financial services industry - while also letting them escalate many of the same crazy practices that led to this crisis. The Republicans, of course, thought the bill was too stringent.

The good news is that authorization for the Consumer Financial Protection Agency is included, and now the fight moves to the Senate:

Dec. 11 (Bloomberg) -- The U.S. House voted to tighten rules for derivatives and create powers to break apart healthy financial firms that threaten the economy in legislation passed today over objections of Wall Street and Republicans.

Lawmakers voted 223-202 to set up a Consumer Financial Protection Agency, expand oversight of hedge funds and build a $150 billion industry fund the government would use to take apart failed systemically risky firms. The House failed to add language letting bankruptcy judges reset mortgage terms, known as a “cram-down.” The focus now shifts to the Senate, where lawmakers lack a schedule for action on a bill.

“We are sending a clear message to Wall Street: The party is over,” House Speaker Nancy Pelosi said at a news conference after the vote.

The measure is central to lawmakers’ effort to end rescues of firms deemed too big to fail, which led to bailouts of New York-based American International Group Inc. and Citigroup Inc. The banking industry and the nation’s biggest business lobby fought to scale back the legislation. Republicans called the bill a permanent government bailout and 27 Democrats joined to vote against the measure.

“The free market, particularly when it’s in an innovative phase, works best with a fairly defined set of rules, and that’s what we’ve done,” House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat who offered the legislation, said today at the news conference.

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December 10, 2009 C-SPAN

Elizabeth Warren is one of the few public figures who understands and acknowledges the enormous economic stress placed on the middle class, and actually cares what happens to them:

While the middle class has been caught in an economic vise, the financial industry that was supposed to serve them has prospered at their expense. Consumer banking -- selling debt to middle class families -- has been a gold mine. Boring banking has given way to creative banking, and the industry has generated tens of billions of dollars annually in fees made possible by deceptive and dangerous terms buried in the fine print of opaque, incomprehensible, and largely unregulated contracts.

And when various forms of this creative banking triggered economic crisis, the banks went to Washington for a handout. All the while, top executives kept their jobs and retained their bonuses. Even though the tax dollars that supported the bailout came largely from middle class families -- from people already working hard to make ends meet -- the beneficiaries of those tax dollars are now lobbying Congress to preserve the rules that had let those huge banks feast off the middle class.

Pundits talk about "populist rage" as a way to trivialize the anger and fear coursing through the middle class. But they have it wrong. Families understand with crystalline clarity that the rules they have played by are not the same rules that govern Wall Street. They understand that no American family is "too big to fail." They recognize that business models have shifted and that big banks are pulling out all the stops to squeeze families and boost revenues. They understand that their economic security is under assault and that leaving consumer debt effectively unregulated does not work.

Families are ready for change. According to polls, large majorities of Americans have welcomed the Obama Administration's proposal for a new Consumer Financial Protection Agency (CFPA). The CFPA would be answerable to consumers -- not to banks and not to Wall Street. The agency would have the power to end tricks-and-traps pricing and to start leveling the playing field so that consumers have the tools they need to compare prices and manage their money. The response of the big banks has been to swing into action against the Agency, fighting with all their lobbying might to keep business-as-usual. They are pulling out all the stops to kill the agency before it is born. And if those practices crush millions more families, who cares -- so long as the profits stay high and the bonuses keep coming.

America today has plenty of rich and super-rich. But it has far more families who did all the right things, but who still have no real security. Going to college and finding a good job no longer guarantee economic safety. Paying for a child's education and setting aside enough for a decent retirement have become distant dreams. Tens of millions of once-secure middle class families now live paycheck to paycheck, watching as their debts pile up and worrying about whether a pink slip or a bad diagnosis will send them hurtling over an economic cliff.

America without a strong middle class? Unthinkable, but the once-solid foundation is shaking.

Here's a feel-good story for your Thanksgiving day. Finally, a victory for the little guy:

A Long Island couple is home free after an outraged judge gave them an amazing Thanksgiving present -- canceling their debt to ruthless bankers trying to toss them out on the street.

Suffolk Judge Jeffrey Spinner wiped out $525,000 in mortgage payments demanded by a California bank, blasting its "harsh, repugnant, shocking and repulsive" acts.

The bombshell decision leaves Diane Yano-Horoski and her husband, Greg Horoski, owing absolutely no money on their ranch house in East Patchogue.

Spinner pulled no punches as he smacked down the bankers at OneWest -- who took an $814.2 million federal bailout but have a record of coldbloodedly foreclosing on any homeowner owing money.

The Horoski's probably would have been able to make their mortgage payments, had it not been for our current health care system:

Yano-Horoski, a college professor of English and cognitive reason, and Horoski, who sells collectible dolls online, bought their 3,400-square-foot, one-level house 15 years ago for less than $200,000.

It eventually ended up being either owned or serviced by IndyMac, and the bank sued the couple in July 2005 when they began having trouble making payments because of Horoski's health problems. Read on...

This story really encapsulates the sad state of affairs in America and sets an interesting precedent. Of course, OneWest will appeal the decision, but don't be surprised to see lawyers across the country cite this case. It's about time someone spoke loudly and clearly on behalf of the people!

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(November 3, 1979 - by the end of the day it looked like this)

Saturday November 3, 1979 was supposed to be, by all intents and purposes a slow news day. South Korea had just buried its assassinated President Park Chung Hee, the 1980 Presidential race was getting started, the body of Mamie Eisenhower, former First Lady arrived in Kansas for burial and the coming week would mull Congress giving Chrysler a much needed bailout to stave off bankruptcy.

By the afternoon it got different. Five people were shot dead and at least eight were wounded during an Anti-KKK rally in Greensboro North Carolina, as carloads of whites opened fire on an otherwise peaceful demonstration. Twelve acknowledged Klan members would later be arrested. Protesters overran the U.S. Embassy in Tehran, signaling what would become a 444 day odyssey of hostages and attempted negotiations.

It goes to prove how quickly things can change, from seemingly nowhere.

But on the morning of the 3rd, when this CBS World News Roundup was broadcast, it was just another quiet weekend.

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Today Blue America is hosting an old friend here at Crooks and Liars, Representative Paul Hodes. Paul first came onto our radar in 2006 was he was campaigning-- successfully, as it turned out-- against entrenched incumbent Charlie Bass in New Hampshire. Blue America endorsed him and has been gratified to see him consistently standing up for working families in the House of Representatives. He was one of the Democrats who put his foot down and refused to vote for the Wall Street bailout, TARP. He believes, firmly, that the government has to watch out for Main Street and for American consumers by reigning in the excesses of Wall Street. "I voted against the Wall Street bailout because I didn’t believe we should bail out the big banks while middle class families are hurting across America. I'm working-- fighting-- for tougher regulations on credit card companies, mortgage lenders, and big Wall Street banks so Wall Street’s greed will never be able to hurt middle class families again." When AIG's irresponsibility, unregulated avarice and gambler's instincts got them in trouble and they came looking for money from the government, it was Rep. Hodes who pointed out that to American taxpayers AIG "stands for arrogance, incompetence and greed."

Today, he's asked us to let our readers know that he'd like anyone who was considering donating to his campaign during this live blogging session, instead donate to the No on 1 campaign in Maine. Paul isn't a frightened, mealy-mouthed congressman tiptoeing around equality with a "separate but equal" non-solution for marriage rights. You don't hear him talking about domestic partnerships. He favors equal rights under the law for all couples regardless of gender. "The legislation passed in New Hampshire," he reminds us, "will ensure that all Granite Staters have equal rights under the law. And the law is consistent with the spirit of New Hampshire expressed in our state motto ‘Live Free or Die.’ Marriage equality gives equal justice to New Hampshire residents. I will continue to work for those same principles as a US Senator and I am a proud co-sponsor of the repeal of the Defense of Marriage Act."

Please join us in the comments section below and let's talk with Paul about why he's demanding a timeline in Afghanistan and a public option in the health care reform bill-- and anything else you'd like to ask someone who's been serving in the House and wants to move over to the Senate.

Amazing. They don't know why people are angry - and their feelings are hurt. All over the country, people are losing their homes, their life savings and their jobs - and they're upset that the Obama administration is criticizing them over the latest round of million-dollar bonuses.

I think the word I'm groping for here is "narcissists":

WASHINGTON — The Wall Street giants that received a financial lifeline from Washington may have no compunction about paying big bonuses to their dealmakers and traders. But their willingness to deliver “thank you” gifts to President Obama and the Democrats is another question altogether.

Mr. Obama will fly to New York on Tuesday for a lavish Democratic Party fund-raising dinner at the Mandarin Oriental Hotel for about 200 big donors. Each donor is paying the legal maximum of $30,400 and is allowed to take a date. Four of the seven “co-chairs” listed on the invitation work in finance, and Democratic Party organizers say they expect that about a third of the attendees will come from the industry.

But from the financial giants like Goldman Sachs, JPMorgan Chase and Citigroup that received federal bailout money — and whose bankers raised millions of dollars for Mr. Obama’s election — only a half-dozen or fewer are expected to attend (estimated total contribution: $91,200).

Part of the reason, several Democratic fund-raisers and executives said, is a fear of getting caught in the public rage over the perception that Wall Street titans profiting from their government bailout may use their winnings to give back to Washington in return. And the timing of the event, as the industry lobbies against proposals for tighter regulations to address the underlying causes of last year’s meltdown on Wall Street, has only added to the worry over public appearances.

“There are sensitivities there,” said Scott Talbot, a lobbyist for the industry’s Financial Services Roundtable. Political contributions “can make a donor a target,” Mr. Talbot said. Many involved, though, say the low attendance from those Wall Street giants also reflected a broader disenchantment with Mr. Obama over the angry language emanating from the White House over the million-dollar bonuses and anti-regulatory lobbying.

“There is some failure in the finance industry to appreciate the level of public antagonism toward whatever Wall Street symbolizes,” said Orin Kramer, a partner in an investment firm who is a Democratic fund-raiser and one of the event’s chairmen. “But in order to save the capitalist system, the administration has to be responsive to the public mood, and that is a nuance which can get lost on Wall Street.”

Krugman points out (again) that the administration should have nationalized troubled banks. They didn't, and the under-regulated, undisciplined banking industry is hurting everyone else as a result:

Ask the people at Goldman, and they’ll tell you that it’s nobody’s business but their own how much they earn. But as one critic recently put it: “There is no financial institution that exists today that is not the direct or indirect beneficiary of trillions of dollars of taxpayer support for the financial system.” Indeed: Goldman has made a lot of money in its trading operations, but it was only able to stay in that game thanks to policies that put vast amounts of public money at risk, from the bailout of A.I.G. to the guarantees extended to many of Goldman’s bonds.

So who was this thundering bank critic? None other than Lawrence Summers, the Obama administration’s chief economist — and one of the architects of the administration’s bank policy, which up until now has been to go easy on financial institutions and hope that they mend themselves.

Why the change in tone? Administration officials are furious at the way the financial industry, just months after receiving a gigantic taxpayer bailout, is lobbying fiercely against serious reform. But you have to wonder what they expected to happen. They followed a softly, softly policy, providing aid with few strings, back when all of Wall Street was on the ropes; this left them with very little leverage over firms like Goldman that are now, once again, making a lot of money.

But there’s an even bigger problem: while the wheeler-dealer side of the financial industry, a k a trading operations, is highly profitable again, the part of banking that really matters — lending, which fuels investment and job creation — is not. Key banks remain financially weak, and their weakness is hurting the economy as a whole.

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