Lawmakers slam Fannie Mae, Freddie Mac CEOs over pay and bonuses

 

The chief executives of Fannie Mae and Freddie Mac faced bipartisan outrage Wednesday over multimillion-dollar salaries and large bonuses at the seized housing finance giants, which still owe the government a combined $150 billion in the largest financial crisis bailout.

"Should you profit while the taxpayer is paying the bill?" asked Rep. Darrell Issa (R-Vista), chairman of the House Oversight and Government Reform Committee.

He summoned Fannie Mae CEO Michael Williams and Freddie Mac CEO Charles "Ed" Haldeman Jr. to testify before his committee. The hearing came a day after another House panel voted overwhelmingly to suspend large executive compensation packages at the two companies and align their salaries with that of government employees.

The total compensation for the top six executives at Fannie and Freddie for 2009 and 2010 was $35.4 million, with Williams and Haldeman receiving about half of that. Each of them could take home as much as $6 million apiece in salary and bonuses in 2011.

Rep. Carolyn Maloney (D-N.Y.) said taxpayers were upset because Fannie and Freddie continue to lose money and require additional bailout money.

"It’s hard for them to understand how executives get $6 million in pay for a failing entity," she said.

The salary and compensation were defended by Williams, Haldeman and Edward DeMarco, the latter of whom is the acting director of the Federal Housing Finance Agency, which has overseen Fannie and Freddie since they were put in a government conservatorship in 2008 because they were on the brink of failure.

The three said executive compensation has been dramatically reduced since the companies were seized but that it remained important to attract and keep skilled people to manage the firms' combined $5 trillion in mortgage-backed securities to prevent further taxpayer losses and additional damage to the housing market.

"I understand the outrage," Haldeman said. "We have significantly reduced executive compensation and overall spending at Freddie Mac, but we have tried to do it in a way that does not risk disrupting the functioning of the company."

DeMarco, who earns $239,555 a year as the independent government regulator of Fannie and Freddie, said that the top executives who caused the problems at Fannie and Freddie before 2008 are no longer there and  that it was difficult to find qualified people to help run the companies.

"Others may believe that this sort of talent is easily and quickly hired at compensation far below that of
 competing private firms, but I do not," DeMarco said.

But that didn't satisfy some lawmakers, who said Fannie and Freddie should be able to find people who do not need to make six-figure salaries.

Rep. Trey Gowdy (R-S.C.) said that there have been complaints for years about the pay of federal judges compared with that in the private sector and that those jobs are still coveted by lawyers.

"I find it bitterly ironic that the total compensation for the United States Supreme Court justices is less than [what] either of these two men made," Gowdy said.

RELATED:

Fannie Mae loss widens, asks taxpayers for $7.8 billion

Obama administration ramps up mortgage refinancing effort

Fannie Mae and Freddie Mac replacements still uncertain, Treasury says

-- Jim Puzzanghera in Washington

Photo: Fannie Mae Chief Executive Michael Williams and Freddie Mac Chief Executive Charles "Ed" Haldeman Jr. take the oath before testifying before the House Oversight and Government Reform Committee on  Wednesday. Credit: Getty Images

Federal Housing Administration could require bailout, audit finds

There is a nearly 50% chance that the Federal Housing Administration will require a taxpayer bailout as the struggling housing market continues to eat away at the cash reserves of the agency, which insured about one in seven residential mortgages issued this year, according to a government audit released Tuesday.

The reserves, which are not supposed to be below 2% of projected losses, continued to fall this year, dropping to 0.24% from the already seriously low level of 0.5% last year, the report said. The drop was caused by the FHA's cash reserves falling by $2.1 billion, to just $2.6 billion.

But under the report's baseline projection for housing prices, which assumes they will drop 5.6% in 2011 before rebounding next year to 1.3% growth, the FHA would not need a bailout, the report said. In fact, the reserve fund would return to its mandated 2% level by 2014, slightly earlier than projected last year.

"It would take very significant declines in home prices in 2012 to create a situation in which the current portfolio would require any kind of additional support," said acting FHA Commissioner Carol Galante. She said the agency's reserve fund continues to be "actuarially sound."

But the report by an independent actuary found that if home prices continue to decline next year, the FHA probably would need a bailout. The size of the bailout would depend on how much housing prices drop.

If the FHA needs taxpayer money to keep it afloat, it does not have to seek approval from Congress or the White House. The agency has existing authority to tap the U.S. Treasury for funds.

The FHA, which was created during the Great Depression to help revive a devastated housing market, has never required taxpayer assistance. It has been playing a major role in the housing market since the subprime housing bubble burst, and most of the losses come from loans it guaranteed that were made before early 2009.

With its reserves dwindling because of losses on insurance for those loans, the FHA took steps in late 2009 to improve its finances. Those steps included requiring higher premiums and better credit scores from borrowers. Those moves have helped buffer the agency against the continued slide in housing prices, and the high average credit score of 700 for borrowers whose loans were insured last year set a record for the FHA, Galante said.

RELATED:

U.S. to lower the size of mortgage it will guarantee

Obama administration boosts aid for unemployed homeowners

FHA may be setting up repeat of housing bubble, lawmakers worry

-- Jim Puzzanghera in Washington

Photo: A house for sale in Glendale in September. Credit: Getty Images

California state housing agency reverses on foreclosures

A state-run housing agency at least temporarily has suspended the practice of foreclosing on a small number of borrowers who rented out their homes.

The office of Senate President Pro Tem Darrell Steinberg (D-Sacramento) on Friday announced that the California Housing Finance Agency had agreed to his request to halt the foreclosures, even though the homeowners had not fallen behind on their monthly payments.

Earlier this week, Senate investigators issued a report that said the agency, known as CalHFA, initiated or threatened foreclosures on about 200 borrowers because they were no longer living in the homes as required by state regulations and interpretations of federal tax law.

The borrowers, who owed more on their properties than their market values, moved out for a variety of personal reasons but did not want to sell the homes at losses.

"The agency is making the right decision during difficult economic times," said Steinberg. "Struggling families, who are working to do the right thing in meeting their obligations, shouldn't be saddled with an extra, unnecessary burden."

The agency said it finances $4.2-billion worth of low-interest mortgages through the sale of tax-free bonds. U.S. Internal Revenue Service Rules specifically prohibit that the money from the sale of bonds be lent to home buyers who do not live in the properties.

Nevertheless, the agency in a letter to Steinberg and Senate Housing Committee Chairman Mark DeSaulnier (D-Concord) said it asked its board of directors to revisit the issue of owner-occupancy at its January board meeting. In the meantime, it is temporarily ceasing foreclosure proceedings  against "those who may be renting out their residence while staying current on their payments."

DeSaulnier said he is asking the agency to make the change permanent. "CalHFA serves predominately low-income, first-time home buyers," he said. These Californians should not fear foreclosure when they are doing everything right."

RELATED:

A realistic fix for mortgage crisis 

Obama's housing rescue plan: Up from underwater

State agency foreclosing on borrowers who rent out their homes

-- Marc Lifsher

Photo: A foreclosed Glendale home in September. Credit: Kevork Djansezian / Getty Images

Obama wants faster commercialization of research breakthroughs

President Obama on Friday directed federal research labs to move quicker to commercialize their breakthroughs in hopes of creating more private-sector jobs.

The move was one of two steps designed to spur business hiring. The Obama administration also said it would create an online site called BusinessUSA to help connect companies with federal services to help export goods and services to other countries.

The White House cited three companies that received federal research grants -- wireless chip maker Qualcomm Inc., antivirus software firm Symantec Corp. and robot manufacturer iRobot Corp. -- as examples of commercial successes helped along by the government.

Obama directed all federal agencies with research facilities to streamline and accelerate the processes they use to issue small-business research and development grants and collaborations with universities and private companies. The administration also will give agencies more flexibility to partner with private industry, such as through regional innovation clusters.

BusinessUSA will be a "centralized, one-stop online platform" to help businesses get information on various federal programs without wasting time wading through the bureaucracy. The site will be created within 90 days, the White House said.

RELATED:

White House hopes Obama's latest slogan catches on

Obama administration announces desert 'solar energy zones'

Obama has been 'relentlessly focused' on jobs, Geithner says

-- Jim Puzzanghera in Washington

Photo: Colin Angle, chief executive of iRobot Corp., holds the Roomba 780 vacuum cleaner robot at a news conference in Tokyo in September. Credit: Bloomberg.

Wall Street: Stocks up on European plan

Gold: Trading now at $1,723 an ounce, unchanged from Wednesday. Dow Jones industrial average: Trading now at 12,095.29, up 1.9% from Wednesday.

European optimism. The European debt deal announced last night, along with some good economic data, is helping to send stocks up this morning.

Gimme shelter. As winter approaches in New York, the Occupy Wall Street protesters are said by CNBC to be looking for an inside space that will allow them to escape the cold.

Sad second act. The former head of Goldman Sachs and governor of New Jersey, Jon Corzine, made it his mission after leaving the governor's mansion to help a small brokerage firm rise -- instead the firm appears now to be close to implosion. 

Rolling Stone rant. Rolling Stone brings you the latest anti-Wall Street screed from the man who called Goldman Sachs the "vampire squid."

The SEC and the financial crisis. A ProPublica columnist says that the latest financial-crisis case -- this one against Citi -- suggests that the Securities and Exchange Commission appears to be deciding which cases to pursue based on who wrote the most imprudent emails.

-- Nathaniel Popper in New York
Twitter.com/nathanielpopper

Photo credit: Stan Honda / Getty Images

Economy grows at 2.5% in third quarter, easing recession fears

The economy grew at an annual rate of 2.5% in the three months ending Sept. 30, the government reported, easing fears that the nation would fall into a second recession but still too slow a pace to cut significantly into the high unemployment rate.

"We're inching our way forward," said Diane Swonk, chief economist at Mesirow Financial.

The new data from the Commerce Department on Thursday showed slow but steady improvement in the economy throughout 2011. The third-quarter data was in line with economists' projections.

Consumer spending, particularly on automobiles, helped boost growth. Personal consumption increased by 2.4%, compared with just a 0.7% increase in the second quarter.

Much of that increase, as well as other economic activity, was consumers and businesses catching up after the extremely slow growth of early this year, caused in part by the supply-chain disruptions of the Japanese earthquake and tsunami, Swonk said.

But even trying to make up for the slow growth in early 2011, the "re-acceleration" of the economy in the third quarter was not at breakneck speed, Swonk said.

"Given the weakness we saw earlier in the year, this is catch-up with not a lot of catch-up," she said. "Two steps forward with one step back."

Kathy Bostjancic, director for macroeconomic analysis at the Conference Board, called the third-quarter growth "an unsustainable spurt." She noted the group's closely watched index of consumer confidence plunged this month to levels not seen since the recession ended in 2009.

"Continued woes in the housing market are overshadowed by consumer concern over the anemic labor market, as highlighted by the decline in consumer sentiment back to 2008-09 levels," Bostjancic said in a statement. "Sustained economic growth above 2.0 percent is simply unlikely."

Still, the threat of a double-dip recession is on hold for now, although the economy is "still muddling along, not cruising along," Swonk said.

Fears of a second recession were stoked when the economy barely grew in the first three months of the year, expanding at an annual rate of just 0.4%. A recession is two consecutive quarters of economic contraction.

Things were looking only slightly better in the summer, when the government estimated that the economy grew at an anemic 1% rate in the second quarter.

That reading in August, combined with continued poor job creation and the historic downgrade of the U.S. credit rating by Standard & Poor's after the bitter debt-ceiling debate, led economists to warn the nation was in danger of slipping into a second recession a little more than two years after the last one ended.

But last month the government revised second-quarter economic growth up to 1.3%. And increased consumer spending and other data began pointing away from another downturn.

RELATED:

EU announces new steps to tackle debt crisis

U.S. data point away from another recession

Downward revision of GDP growth a strong signal of stalled recovery

-- Jim Puzzanghera in Washington

Photo: A bicyclist waits at an intersection between competing gas stations and multiple posted gas prices, in Seattle. The economy grew slightly faster in the spring than previously estimated. Credit: Associated Press

Obama administration touts refinancing program as economic boost

Obama administration officials touted an overhaul of a program to allow more underwater homeowners to refinance as a boost to the broader economy, although they were unable to project how many people the initiative would help.

"Today’s announcement is a very significant step in moving more families who have met their responsibilities into a position to refinance at significant savings," Gene Sperling, the top White House economic adviser, told reporters Monday.

Sperling and Housing and Urban Development Secretary Shaun Donovan noted that with mortgage interest rates at record lows, a homeowner can save an average of about $2,500 a year by refinancing. The additional money in the hands of a consumer would help stimulate the economy, which in turn would help stabilize the housing market.

"It's the equivalent of a substantial tax cut for these families," Donovan said.

The independent Federal Housing Finance Agency on Monday announced major changes to the administration's 2½-year-old Home Affordable Refinancing Program, which has helped 894,000 homeowners refinance.

The most significant change is to expand eligibility to more people who owe more on their homes than it is worth. The FHFA will remove a limit that prevented participation in the program by borrowers who owed more than 125% of the value of their homes.

Borrowers would have to be up-to-date on their mortgages, with no late payments in the previous six months and no more than one late payment in the last 12 months. Only people with loans owned by seized housing finance giants Fannie Mae and Freddie Mac are eligible, and those loans must have been sold to the firms by May 31, 2009.

The administration officials stressed that the expansion of the HARP program was only one step in dealing with the struggling real estate market, but one that could be taken without requiring the partisan-gridlocked Congress to pass legislation.

White House Communications Director Dan Pfeiffer said President Obama was trying to find ways to help the economy that do not depend on Congress, which has balked at passing his new jobs package. Administration officials are calling the push for such executive action "We can't wait."

Obama will highlight the refinancing rules during an appearance Monday in Nevada, which is one of the state's hardest hit by the foreclosure crisis, along with California and Florida.

"When Congress won't act, this president will," Pfeiffer said.

Sperling said the administration was trying to find the right combination of programs to reverse the foreclosure crisis.

"The president is committed to attacking the housing crisis on all fronts," Sperling said. "This significant effort on refinancing … is an important part of that arsenal but it’s only one part."

RELATED:

Home-loan refinancing to get easier

Obama administration ramps up mortgage effort 

Plan would allow refinancing of some underwater mortgages

— Jim Puzzanghera in Washington

 Photo: Housing and Urban Development Secretary Shaun Donovan. Credit: Bloomberg

 

 

 

Hubert Humphrey III to head new consumer office for seniors

The Obama administration has tapped former Minnesota Atty. Gen. Hubert H. "Skip" Humphrey III to head a new office in the Consumer Financial Protection Bureau focused on issues affecting older Americans.

Humphrey, 69, the son of former Vice President and U.S. Sen. Hubert H. Humphrey Jr., is the second person with a well-known name to be appointed to a top position at the new agency. The head of the Office of Servicemember Affairs is Holly Petraeus, the wife of former Army Gen. David Petraeus, who now serves as director of the Central Intelligence Agency.

Like Holly Petraeus, who had been active on financial issues facing members of the military for years, Humphrey III has a long history in his own right of working on consumer protection. He was Minnesota attorney general for 16 years and served 10 years in the state Senate. Since 2008, he has been an AARP board member.

"Skip is a great leader. He's a great consumer protector," said Raj Date, the Obama administration adviser heading the consumer bureau until the Senate confirms a director. "He knows that consumer education is a critical complement to tough enforcement measures."

When Congress created the consumer bureau -- the centerpiece of the financial reform law enacted last year -- it mandated that the agency look at financial issues affecting specific populations, including older Americans.

Since the financial crisis, senior citizens have become targets of scams, in part because of the estimated $3 trillion in equity of the homes they own. Consumers Union reported last year that older Americans were particularly vulnerable to being misled on reverse mortgages and called for more government oversight.

Humphrey said that he will focus on increased education to help senior citizens deal with the "confusing and complicated financial services marketplace."

"For most seniors, our retirement savings -- if we have any -- and our homes are all we have," he told reporters on a conference call Wednesday. "If we want to keep a good standard of living and enjoy our retirement years, we need to hang on to these assets."

Seniors lose an estimated $3 billion a year to financial scams, Humphrey said.

In a blog post on the Consumer Financial Protection Bureau website, Humphrey alluded to his father's commitment to public service in talking about how he would run the new office.

"I grew up in a household where it wasn’t enough to just have a point of view," he wrote. "My parents taught me that if I had a problem, I needed to do something about it. Here at the Office of Older Americans, we’ll be embracing this do-something attitude from day one."

 RELATED:

Consumer Financial Protection Bureau to open without a director

Consumer bureau nominee Richard Cordray backed by 37 state AGs

Reverse mortgages pose a growing threat for senior citizens, Consumers Union says

-- Jim Puzzanghera

Photo: Hubert Humphrey III. Credit: AARP

Consumer bureau nominee Richard Cordray backed by 37 state AGs

 

Attorneys general from 37 states and U.S. territories urged senators to confirm the nomination of their former colleague, Richard Cordray, to be the first director of the federal Consumer Financial Protection Bureau.

The nomination of Cordray, Ohio's attorney general from 2009 to 2011, has been stalled in the Senate because of Republican demands for major changes in the structure of the agency. But the attorneys general -- including eight Republicans -- urged senators to vote for Cordray because he is "both brilliant and balanced."

"Some of us may disagree with aspects of the Dodd-Frank legislation," they wrote in a letter Tuesday on the letterhead of the National Assn. of Attorneys General. "But we are united in our belief that Mr. Cordray is very well qualified to carry out the responsibilities of this position."

One of the Republicans who signed the letter, Utah Atty. Gen. Mark Shurtleff, said it was important to get a director confirmed who could start working with states on mortgages and other key issues.

"We need Rich Cordray in there," Shurtleff told reporters on a conference call organized by the White House. "He knows us, knows how to work with us."

The Senate Banking Committee approved Cordray's nomination this month on a 12-10 party line vote. This spring, nearly all Senate Republicans -- enough to keep the nomination from moving forward -- publicly vowed to block any nominee to head the agency unless the Obama administration agreed to water down its power by making some key changes.

For example, the Republicans want to replace the agency's single director with a five-member, bipartisan commission and subject its annual budget to the appropriations process.

Republicans have said they have no particular problem with Cordray, but simply want the consumer bureau to be more accountable.

Brian Deese, deputy director of the White House National Economic Council, told reporters that the letter showed Cordray was highly qualified and that Senate Republicans should stop blocking his confirmation to a job that is crucial to the financial reform law enacted last year.

"The creation of a single agency that could look out for consumers was unique and significant, but in order to make good on the promise of that legislation and that idea we need to put a confirmed director in place," Deese said. "There just simply is no reason why we shouldn’t move forward."

RELATED:

Obama's pick for consumer agency doesn't end controversy

Obama urges Senate to OK Richard Cordray as financial watchdog

Senate Republicans vow to block any appointee to head consumer protection bureau

-- Jim Puzzanghera

Photo: Richard Cordray at his Senate confirmation hearing in September. Credit: Getty Images

Wall Street: Stocks and gold up again

Gold: Trading now at $1,681 an ounce, up 1.2% from Tuesday. Dow Jones industrial average: Trading now at 11,522.26, up 0.9% from Tuesday.

Another up day. Stocks opened higher yet again as fear about the European financial crisis ebbs.

Fighting Volcker. Banks had been lobbying regulators hard before the release of a draft of the Volcker rule -- one of the most important pieces of the financial reform legislation -- and now that the draft is out, they will continue their lobbying effort.

Psychic help. As bankers try to figure out how to deal with tough economic conditions, at least some of them are turning to psychics for guidance. 

-- Nathaniel Popper in New York
Twitter.com/nathanielpopper

Photo credit: Stan Honda / Getty Images

Senate committee approves Richard Cordray to head consumer agency

The Senate Banking Committee approved the nomination of former Ohio Atty. Gen. Richard Cordray to be the first director of the new Consumer Financial Protection Bureau, but his confirmation faces a solid Republican roadblock.

That was evident in Thursday's vote. All 10 Republicans on the committee voted against Cordray's nomination, which passed with the support of the panel's 12 Democrats.

Nearly all Senate Republicans -- enough to mount a successful filibuster -- have vowed to block the confirmation of any nominee to head the agency unless its powers are watered down.

Testifying before the committee after its vote, Treasury Secretary Timothy F. Geithner urged Republicans to reconsider Cordray's nomination.

"I think you’re going to find he’s an exceptionally talented, thoughtful leader [with] an excellent record," Geithner said.

"I know some of you have said there’s no person you’d confirm for this job, ever, without some fundamental changes to this bureau," he continued. "I’d just remind you that if the Senate fails to confirm a director, we will leave a vast array of non-bank financial institutions ... outside the scope of consumer protection, which is exactly the same mistake that left us so vulnerable to the financial crisis."

Under the financial reform law that created the new agency, it cannot exercise some of its powers without a Senate-confirmed director. For example, the agency won't get new authority over other largely unregulated sectors of the financial services industry, including mortgage brokers, payday lenders and private issuers of student loans.

But Republicans, nearly all of whom voted against the Dodd-Frank financial reform law, want major changes in the agency's structure. Among them are replacing the director position with a bipartisan commission, subjecting the bureau's funding to annual congressional review and allowing other financial regulators to block the agency's actions more easily.

“My colleagues and I stand by our pledge that no nominee to head the CFPB will be confirmed by the U.S. Senate -– regardless of party affiliation -– without basic changes to the bureau’s structure," Sen. Jerry Moran (R-Kan.) said in a written statement before the vote.

The U.S. Chamber of Commerce, one of the most outspoken opponents of the new agency, said it was disappointed that the committee approved Cordray's nomination "without taking seriously the calls for reforms."

“It is neither good public policy nor common sense to suggest no changes to a structure that allows a single, irremovable individual to dictate terms or even ban consumer financial products, have access to more than half a billion dollars in funding per year outside the budget process, and make decisions that could undermine safety and soundness of financial institutions," said David Hirschmann, president of the group's Center for Capital Markets Competitiveness.

But liberal and consumer groups continue to press for Cordray to be confirmed so the agency can start exercising all of its powers.

"Without Cordray as the sheriff on the beat on Wall Street, Republicans are just giving big banks a green light for more reckless behavior with our money," said Tom McMahon, executive director of Americans United for Change.

RELATED:

Obama's pick for consumer agency doesn't end controversy

Bank fees prompt call for more disclosure on checking accounts

Richard Cordray vows accountability if confirmed to head agency

Senate Republicans vow to block any appointee to head consumer protection bureau

-- Jim Puzzanghera

Photo: Richard Cordray, the nominee to head the Consumer Financial Protection Bureau. Credit: Getty Images.

Reagan was the real father of the Buffett Rule, liberal groups say

 

Years before President Obama's call for millionaires to pay the same tax rate as middle-class earners -- a principle he's dubbed the Buffett rule -- another president made the same argument.

Conservative icon Ronald Reagan.

Think Progress, a liberal blog, released an online video Monday juxtaposing comments by then-President Reagan about some wealthy people not paying their "fair share" with Obama's recent statements along the same lines. Obama's proposal is named after billionaire investor Warren Buffett, who has argued that "extraordinary tax breaks" allow him to pay a lower rate than anybody in his office.

The group noted the irony of Obama being slammed by Republicans as inciting class warfare for an idea that Reagan championed when pushing for the 1986 overhaul of the tax code.

In a 1985 speech at an Atlanta high school, Reagan complained about tax loopholes for the wealthy.

"We’re going to close the unproductive tax loopholes that have allowed some of the truly wealthy to avoid paying their fair share," Reagan said. "In theory, some of those loopholes were understandable, but in practice they sometimes made it possible for millionaires to pay nothing, while a bus driver was paying 10% of his salary, and that’s crazy."

Reagan then asked the crowd, "Do you think the millionaire ought to pay more in taxes than the bus driver or less?" The crowd roared "More!" in response, causing Reagan to flash a broad smile.

Comments like that led the liberal Center for American Progress, which is affiliated with Think Progress, to declare Reagan the true "father of the Buffett rule." They also cited another 1985 speech by Reagan in which he conjured up the same image of secretaries paying less than their bosses that Buffett has used to argue that taxes should be raised on the very wealthy.

Reagan told an Illinois crowd about a letter he received from a business executive "earning in six figures."

"He wrote me in support of the tax plan because he said, 'I am legally able to take advantage of the present tax code -- nothing dishonest, doing what the law prescribes -- and wind up paying ... a smaller tax than my secretary pays.' '' Reagan said.

He didn't name the executive, so it's not known if it was Buffett.

RELATED:

Tax on millionaires gets hostile GOP reception

Obama to propose millionaire's tax to cut the deficit

Did Warren Buffett really disagree with Obama's tax plan?

 -- Jim Puzzanghera

 

 

Wall Street: Bad quarter ends with stocks and gold falling

Gold: Trading now at $1,615 an ounce, down 0.1% from Thursday. Dow Jones industrial average: Trading now at 11,064.89, down 0.8% from Thursday.

Goodbye to a bad quarter. As the worst quarter for stocks since the financial crisis comes to a close, investors are showing some pessimism today.

Investors turn on Obama. President Obama's favorability ratings among investors have plummeted in recent months, though he can take consolation in approval among investors for his plan to tax those earning $1 million-plus a year. 

DJ + S&P. The two kings of the stock index world -- Standard & Poor's and Dow Jones -- are talking about joining forces.

-- Nathaniel Popper in New York
Twitter.com/nathanielpopper

Photo credit: Stan Honda / Getty Images

German media mock U.S. advice on debt crisis

The Obama administration’s unsolicited advice to Europe on its government-debt debacle isn’t playing well in Germany, which will end up bankrolling any solution to the crisis.

The popular response, in a nutshell: Mind your own business, Amerika.

President Obama scolded Europe on Monday, saying its inability to contain the crisis was “scaring the world.” He continued to hold European policymakers’ feet to the fire on Wednesday, saying “we haven’t seen them deal with their banking system and their financial system as effectively as they needed to.”

Over the weekend, Treasury Secretary Timothy Geither called on policymakers to “create a firewall against further contagion,” and supposedly has urged the European Union to commit trillions more euros to its bailout fund for member states and their banks -- a move that German Finance Minister Wolfgang Schaeuble called “stupid.”

Spiegel Online on Wednesday published a collection of German media commentaries firing back at the  U.S.  Most biting was this one from the financial daily Handelsblatt:

Barack Obama governs a country where, despite billions in state aid, the economy is stagnating, companies refuse to invest despite calls for patriotism, and which gets embroiled in one political trench war after another … Now this country is dispensing advice, suggestions and finger-pointing.

These are suggestions that have already failed to work in the U.S..: Money is supposed to save Europe -- quickly and in the largest quantities possible. U.S. Secretary of Treasury Timothy Geithner has been trying for more than two-and-a-half years to suffocate his crisis with money. But aside from the lack of success, the collateral damage is immense. It manifests itself in a loss of government credibility, a loss of trust in the currency and the paralysis of any sort of dynamism -- because the crushing debt mountain is robbing the famously optimistic Americans of their confidence.

The fact that Barack Obama, who is a brilliant thinker, knows full well that things are much more complicated in reality does not help. Indeed, it does the opposite. In the desperate battle for his re-election he'd rather construct myths, such as claiming that the Europeans alone are responsible for the American mess. Not only is this fundamentally wrong, but -- coming as it does from a friend -- it's downright pitiful and sad.

-- Tom Petruno

Photo: German Finance Minister Wolfgang Schaeuble. Credit: Joshua Roberts / Bloomberg  News

California treasurer: Put renewable-energy tax exemption on hold

The head of a California panel that hands out sales tax exemptions to renewable-energy manufacturing companies wants to suspend the program in the wake of the Solyndra scandal.

State Treasurer Bill Lockyer said he will ask fellow members of the California Alternative Energy and Advanced Transportation Financing Authority at a meeting Tuesday to not approve any new applications for exemptions from paying California sales tax. The exemptions are aimed at encouraging the purchase of equipment used to make solar panels and other energy-saving projects.

The program was authorized last year by the Legislature when it passed SB 71 by Sen. Alex Padilla (D-Pacoima).

A decision on the request is not likely to be made before late October, a spokesman for Lockyer said.

"SB 71 created a tax exemption for businesses that requires a level of transparency and public accountability rarely, if ever, seen in California or anywhere else," said Lockyer in a statement released by his office. "But every government program can be improved."

He added that "in light of recent events"-- the potential loss of a $535-million federal loan guarantee to Solyndra, a bankrupt Fremont solar panel manufacturer -- "we owe it to the taxpayers to see if there is more we can do to make sure we don't give their money to companies headed for a fall or companies that take California's money and run to other states to create jobs."

Lockyer's authority had approved $37 million worth of sales tax exemptions for Solyndra, but the company only used $25.1 million to buy equipment before it closed.

The authority approved 32 sales tax exemption applications, valued at $104 million, of which $31.4 million was used, the treasurer's office said.

RELATED:

Solyndra's collapse is a tale of too much dazzle

Solyndra executives invoke rights, refuse to answer lawmakers

Obama fundraiser linked to program that aided Solyndra

-- Marc Lifsher in Sacramento

Photo: President Obama talks with Solyndra Chief Executive Chris Grommet during a visit to the company's factory in Fremont on May 26, 2010. Credit: Alex Brandon / Associated Press

Lawmakers want to question Solyndra investors about its collapse

Two House Democrats said Monday that they want to question investors in controversial solar panel manufacturer Solyndra Inc. about the company's failure.

Reps. Henry Waxman (D-Beverly Hills) and Diana DeGette (D-Colo.) wrote to the chairman of the House Energy and Commerce investigative subcommittee and asked that executives from two of Solyndra's largest private investors, Argonaut Private Equity and Madrone Capital Partners, be called to testify at a Friday hearing on the Fremont company or at a future one.

Solyndra Chief Executive Brian Harrison and Chief Financial Officer W.G. Stover Jr. are expected to testify Friday about the failure of the company, which received a $535-million loan guarantee from the Department of Energy in 2009 as part of the Obama administration's economic stimulus plan.

Solyndra filed for bankruptcy this month, igniting a political controversy because President Obama had touted the company as an example of a successful alternative-energy manufacturer.

Republicans charged at a hearing last week that the Obama administration rushed approval of the loan, putting taxpayer money at risk. They also said that the loan approval might have been influenced by large investments in the company by billionaire George Kaiser.

Kaiser was a major Obama fundraiser in 2008, and Argonaut is an investment fund operated on behalf of the George Kaiser Family Foundation. Kaiser has denied personally investing in Solyndra or talking to White House officials about the loan.

Another Obama fundraiser, Steve Spinner, helped monitor the Energy Department's loan program for renewable energy projects. But administration officials said Spinner did not have a role in selecting applicants for the program and was recused from the Solyndra decision because his wife's law firm represented the company.

"One important question for the committee to examine is whether there were sound reasons to make an investment in Solyndra," Waxman and DeGette wrote to Rep. Cliff Stearns (R-Fla.). "Some sophisticated and experienced private venture capital investors thought the answer was yes, and they invested over $1 billion in Solyndra -– twice the support provided by the federal government."

Stearns' office did not immediately respond to a request for comment.

Waxman and DeGette specifically asked for testimony from Steve Mitchell, Argonaut's managing director, and Jameson McJunkin, Madrone's founder and general partner. Both served on Solyndra's board and could provide "perspective on why Solyndra attracted so much private capital, Solyndra’s representations about its economic prospects, and the external factors that have been affecting the U.S. solar industry."

Madrone is linked to the Walton family, founders of Wal-Mart and large Republican donors. Argonaut invested $271 million in Solyndra, by far the largest private investor, according to the Department of Energy. GKFF Investment Co., also a vehicle of the Kaiser foundation, invested an additional $50 million. Madrone invested $37 million.

 RELATED:

GOP: Solyndra deal was rushed

Solyndra executives back out of congressional hearing

Obama fundraiser linked to loan program that aided Solyndra

-- Jim Puzzanghera

Photo: Solyndra Inc.'s Fremont headquarters. Credit: Associated Press

 

Solyndra: House committee grills officials over failed solar firm

A congressional investigative committee on Wednesday grilled officials from two agencies that backed a $535-million loan package to failed Northern California solar panel manufacturer Solyndra.

Republicans on the House Energy and Commerce Committee's Subcommittee on Oversight and Investigations said they want to know why the Energy Department approved the Solyndra loans in 2009 and then restructured the loan this February despite evidence that the company was struggling financially.

Solyndra, which was hailed by President Obama in 2010 as an innovative company that would use stimulus money to create jobs and lead the economic recovery, laid off most of its 1,100 workers Aug. 31 and announced it would cease operations. The company filed for Chapter 11 bankruptcy Sept. 6.

Two days later, agents with the FBI and Energy Department's inspector general served a search warrant at Solyndra's Fremont headquarters. The company's failure and the criminal investigation have raised questions about the administration's decision to pour billions of dollars into clean-energy programs.

Rep. Cliff Stearns (R-Fla.), the subcommittee's chairman, pressed Energy Department loans director Jonathan Silver on Wednesday to explain how the agency could approve more than half a billion dollars in loans despite questions about the company's financial health.

He also cited internal emails that he said show White House officials appeared to be pressuring Energy Department and the Office of Management and Budget to speed up approval of the Solyndra loans.

"You should have protected the taxpayers and made some forceful actions here," Stearns said.

Democrats say Solyndra scandal touches Republicans, too

The collapse of solar equipment maker and stimulus loan recipient Solyndra is now officially a political hot potato, tossed first into Democratic hands and today batted by the Democrats over to the Republican side.

Solyndra got a $535-million loan as part of the stimulus package in late 2009 and was held up by the Obama administration as a powerful example of the kind of innovative manufacturing that would revive the economy. But in the last few weeks it has suspended operations, laid off 1,100 workers, filed for Chapter 11 bankruptcy and had its offices and executives’ homes raided by the Federal Bureau of Investigation.   

Republicans have speculated that Solyndra got the loan because its biggest investor has ties to George Kaiser, a major fundraiser for President Obama in 2008. The House Energy and Commerce committee is investigating the loan and will hold a hearing Wednesday.

Administration officials will testify, but Solyndra executives begged off at the last minute and will appear at another hearing by the committee next week, the committee said.    

The company said in a statement that the executives were busy with the bankruptcy and were discussing a new hearing date with the committee. 

“Given that it is in the best interest of all creditors, including the U.S. government, to attempt to gain maximum value for the Solyndra assets, either via sale of the whole company or in parts, including its intellectual property, it is in the best interest of all interested parties for them to remain in California to engage with potential purchasers,” the company said.   

Democrats have found enough information in public records of the Energy Department’s loan approval process and from media reports to try to widen the Solyndra scandal to Republicans.    

Although Solyndra’s biggest private investor was a venture capital fund affiliated with Kaiser, its second largest investor was a fund linked to the Walton family, of Wal-Mart renown, a major donor to Republicans. Kaiser has denied he ever spoke to the Obama administration about the Solyndra loan.    

The chief executive of Solyndra, Brian Harrison, is a registered Republican, according to the San Jose Mercury News.    

The Democrats’ main defense against accusations of administration cronyism is that Solyndra applied for the Energy Department loan as part of a program created by the Bush administration. Memos prepared by the Republican and Democratic staffs of the House Energy and Commerce committee said Solyndra first applied for an Energy Department loan in 2006. Its plan to build a factory to manufacture a new kind of solar technology was one of 16 projects chosen from about 140.    

In January 2009, shortly before President Obama took office, Energy officials reviewed the application. They said that “the project appears to have merit” but did not approve the loan, requesting additional information, including an independent market analysis of the company’s long-term prospects, according to the Republican staff memo.

In March 2009, after the analysis was submitted, Energy Department officials reviewed the application again and gave conditional approval. The March 2009 timetable was set under the Bush administration, according to the Energy department.

Officials from the White House Office of Management and Budget reviewed Solyndra’s application in August 2009 and “questioned whether the risk rating assigned to the Solyndra deal was too high” and how “competitive pressures” in the market for solar cells might affect the company’s ability to repay, the Republican memo said.

OMB officials recommended unspecified changes to the deal that the Energy Department approved, and it was completed in September 2009.

RELATED:

Solyndra faces House subcommittee hearings

FBI raids solar panel firm Solyndra after bankruptcy filing

Solar panel firm Solyndra to cease operations

-- Neela Banerjee and Jim Puzzanghera

Photo: An FBI agent carries a box from Solyndra's Fremont, Calif., headquarters last week. Credit: Associated Press.

 

Most say businesses and consumers are over-regulated, poll finds

Nearly three-quarters of voters think businesses and consumers are over-regulated by the government, according to poll results released Monday by the nonpartisan group Public Notice.

The survey also found that two-thirds of respondents said they think that regulations have increased over the last few years and that the regulatory burden has created uncertainty for small and large businesses. The result, according to 70% of the respondents: More jobs will move overseas.

The poll of about 800 likely voters has a margin of error 3.5 percentage points. It comes as lawmakers spar over the need for new regulations, particularly the hundreds of new rules coming from the Dodd-Frank financial-reform law.

Republicans and business groups have hammered the Obama administration for expanding the regulatory burden, saying it is stifling job creation. President Obama has called for agencies to weed out unneeded rules, and dozens have been identified after a broad review this year.

Public Notice is headed by Gretchen Hamel, who was a deputy assistant U.S. trade representative during the George W. Bush administration. The group has focused on the rising federal budget deficit and has been critical of government overspending.

"The American people know what's going on and plaguing this economy.  More spending and unnecessary regulation isn't the solution -– it’s the problem," Hamel said. "Policymakers should listen to the American people, cut the red tape and put in place policies that will finally put us on the road to a true, sustained recovery."

The poll's key finding, that 74% of respondents say they believe that there is too much regulation, included a breakdown by political affiliation. Republicans felt strongest on that point, at 91%, followed by independents at 75% and Democrats at 58%.

RELATED:

White House unveils streamlined business rules

Obama administration moves to cut unneeded regulations

Passage of financial overhaul is only half the battle

-- Jim Puzzanghera

Photo: Banners spelling out "JOBS" hang in front of the headquarters of the U.S. Chamber of Commerce in Washington. Credit: AFP/Getty Images

 

FBI, Energy Department raid offices of solar-panel maker Solyndra

The FBI and the Energy Department's inspector general's office are executing a search warrant at the Fremont, Calif., headquarters of solar panel maker Solyndra. The raid came just two days after the company declared Chapter 11 bankruptcy, a move that raised serious concerns about the Obama administration's granting of a $500-million-plus federal loan guarantee to Solyndra in the fall of 2009.

FBI Public Affairs Specialist Peter D. Lee confirmed that the company's headquarters had been targeted, adding that the raid was still underway late Thursday morning. Lee said he was unable to disclose further details about what the FBI and the Energy Department was hoping to find.

Lee said that the raid documents were under seal.

Solyndra is a manufacturer of solar power systems for rooftop applications on commercial buildings. Earlier this week, the company said in a press release that "global economic and solar industry market conditions" had forced it to suspend its manufacturing operations. The company has laid off its 1,100 full-time and temporary employees.

"Despite strong growth in the first half of 2011 and traction in North America with a number of orders for very large commercial rooftops, Solyndra could not achieve full-scale operations rapidly enough to compete in the near term with the resources of larger foreign manufacturers," the company said.

Solyndra was one of about 40 alternative energy projects funded over the last two years through an Energy Department loan program that helped companies involved with major wind, solar, nuclear and ethanol projects. At the time, the Energy Department said that it expected the combined projects to create about 60,000 jobs.

President Obama had visited Solyndra for a tour of the factor in May 2010, even as outside observers, such as PricewaterhouseCoopers, were already raising doubts about the company's ability to survive.

Solyndra had another Obama connection in that it was backed by Tulsa billionaire George Kaiser, a key supporter of the president.

-- Ronald D. White

Photo: FBI agent guards the Fremont, Calif., offices of Solyndra. Credit: Associated Press