FHA may need bailout for poor loan oversight practices

News from Washington that another giant federal home mortgage agency was collapsing under the weight of ill-advised loans is a surprise only in that U.S. authorities, like their private industry counterparts, still seem incapable of learning from their now legendary mistakes. Some 20 percent of loans guaranteed by the Federal Housing Administration last year and 24 percent of loans from 2007 are in trouble, including default, according to the New York Times. But FHA has continued at a furious pace, four times as fast as last year, guaranteeing more than 6,000 loans worth $1 billion every day with the commercial home loan market nearly frozen, according to testimony today before Congress, the Times said. Congress is looking into concerns that the FHA could need a bailout in the next three years as its reserves fall, similar to what happened to government mortgage giants Fannie Mae and Freddie Mac. The two agencies have already borrowed $96 billion from the U.S. Treasury and may need more, the Times said. FHA Commissioner David Stephens told Congress that his agency would not need a taxpayer bailout, despite the reports. “Let me simply state at the outset that based on current projections, absent any catastrophic home price decline, FHA will not need to ask Congress and the American taxpayer for extraordinary assistance — we will not need a bailout,” Stevens testified. But FHA critics were not mollified, and insisted that a bailout was looming. “It appears destined for a taxpayer bailout in the next 24 to 36 months,” said Edward Pinto, a former Fannie Mae exec, in testimony prepared for the hearing. Pinto, Fannie Mae's chief credit officer from 1987 to 1989, said losses would more than wipe out the agency’s $30 billion cash reserve. FHA loans are commonly packaged together and sold to investors as securities with backing by the U.S. Treasury through the Government National Mortgage Association, also known as Ginnie Mae.

Former UN chief tries to save Kenya settlement

Word that former UN Secretary-General Kofi Annan had arrived in Kenya brought some hope that the troubled coalition government in Nairobi can be saved. Annan arrived Sunday to restart efforts to revive the moribund reform process, which began in 2008 in the violent aftermath of a disputed presidential election in December that brought Kenyan society to the brink of collapse. Kenya's president, Mwai Kibaki, announced that he had won the election after a long-delayed count of the ballots but his main challenger, Orange Democratic Union leader Raila Odinga, charged that the count was fraudulent, sparking massive protests. More than 1,000 people were killed and hundreds of thousands displaced in post-election tribal violence that continued for nearly two months until Annan and the acting African Union chairman, Jakaya Kikwete of Tanzania, arranged a power-sharing deal that allowed Kibaki to remain as head of state and created a new prime minister position for Odinga. That arrangement has held despite a series of disputes. "I have been following events in Kenya very closely, and clearly, the Kenyan people are expecting more from the coalition government,” Annan said after arriving in Nairobi, according to Cable News Network (CNN). “More unity of purpose, more progress on the reform agenda, more concrete action to end impunity and combat corruption," Annan said. "These sentiments are understandable, and I will be urging the coalition government to listen to the voices of the people and do more to push forward the essential reforms." Primary among the disputes are about the pace of reform in Kenya, which has been slow, despite the settlement agreement's commitment to constitutional and police reforms, including prosecution of those responsible for the violence. "Far-reaching reforms such as the ones agreed on during the National Dialogue negotiations last year will necessarily take some time, and a lot of hard work, not only on the part of the government but on the part of all Kenyans,” Annan said. “And yet, with a sense of urgency and national spirit, it can be done and done in a reasonable time.” Annan said he would urge Kibaki and Odinga to pick up the pace of change.

IAEA plans inspection of Iran's formerly secret uranium enrichment facility

News that Iran has actually scheduled a team of experts from the International Atomic Energy Agency to inspect a formerly secret uranium enrichment facility being built near Qom appears to be a clear signal that the Islamic republic has changed course and decided to cooperate with the world community on nuclear proliferation. Iran agreed last week to permit inspectors to tour the underground facility, which previously had been kept secret in violation of IAEA notification requirements, according to the Reuters international news service. "IAEA inspectors will visit Iran's new enrichment facility, under construction in Qom, on 25th of October," said Mohammad ElBaradei, the director of the International Atomic Energy Agency said at a news conference with Ali Akbar Salehi, the head of Iran's nuclear effort. "It is important for us to have comprehensive cooperation over the Qom site. It is important for us to send our inspectors to assure ourselves that this facility is for peaceful purposes." Details of the inspection will be worked out at a meeting on Oct. 19, Reuters said. Western nations believe Iran is covertly developing nuclear weapons and has imposed a series of international trade sanctions against the country to force it to end or curtail its program. Tehran insists its nuclear work is aimed at the peaceful development of nuclear power for electricity, even though Iran's underground oil reserves are among the world's largest. But Iran has not exactly been truthful over the years, probably because of suspicions about the United States, which it regards, along with Israel, as its enemy. So, the disclosure of the secret facility caused an international furor culminating in last week's meeting in Geneva between Iran and the world's six strongest military and economic powers -- the permanent members of the UN Security Council plus Germany. The plant is not expected to be operational for 18 months. The Geneva meeting, at which Iran also agreed to send most of its nuclear material to France and Russia for processing, was the highest-level diplomatic contact between the United States and Iran since the 1979 revolution that overthrew the U.S.-backed Shah and brought religious leaders to power. U.S. President Barack Obama's top adviser on national security, James Jones, said Iran did not appear to be closer to having a nuclear weapon, contradicting a New York Times report on Saturday that a separate IAEA assessment had concluded Iran's program had advanced sufficiently to begin building a nuclear weapon.

Iran appears to be ready for negotiations over its nuclear programs

News that Iran has agreed, at least in principle, to open its secret uranium enrichment plant near Qum to international inspectors and to send abroad most of the uranium it has already enriched raises the intriguing prospect of a significant change in the world order. The agreement could signal a new willingness on Iran's part to cooperate with leading world powers on a host of pending issues, including its suspected quest for nuclear weapons, its support for terrorist groups and its threats to attack Israel. But it also could simply be more obfuscation or prevarication by the Islamic republic, which has already misled Western nations about its nuclear facilities, according to the New York Times. Iran denies it is trying to build nuclear weapons and insists it only wants to develop nuclear power for electricity -- a claim seemingly belied by its vast petroleum reserves. Western nations have threatened to impose additional economic sanctions on Tehran over its nuclear activities, and Iran could simply be trying to prevent that. “We’re not interested in talking for the sake of talking,” U.S. President Barack Obama told reporters in the White House on Thursday, the Times said. “If Iran does not take steps in the near future to live up to its obligations, then the United States will not continue to negotiate indefinitely." U.S. allies France and Britain have agreed to delay imposing additional penalties on Iran until December. Obama said Iran's chief nuclear negotiator, Saeed Jalili, agreed to allow inspectors from the International Atomic Energy Agency to inspect the Qum facility within the next two weeks. The multiparty negotiations near Geneva that led to Thursday's agreement were the highest-level direct contact between Iran and the United States since the 1979 revolution that toppled the U.S.-backed Shah and included a yearlong embassy hostage crisis that was the start of decades of animosity between the two countries.

EPA announcement reminds everyone there's a new sheriff

Word that the U.S. Environmental Protection Agency plans to use regulations to force power plants and factories to lower greenhouse gas emissions if Congress is unable to agree new legislation to combat global warming should remind everyone that things have changed at the top of the U.S. government. Where a year ago the White House might have looked the other way as major industrial companies, many of them big campaign contributors, stalled legislation in Congress or just ignored their legal and moral obligations to protect the environment, new president Barack Obama has authorized the EPA to restrict greenhouse gas emissions through regulation, according to the New York Times. “We are not going to continue with business as usual,” EPA Administration Lisa Jackson, an Obama appointee, said Wednesday in a conference call with reporters. “We have the tools and the technology to move forward today, and we are using them.” New rules proposed by EPA would require the 400 largest power plants, including those being built or undergoing extensive renovations, to prove that they were applying the best technology for reducing emissions, the Times said. The new rules, which Jackson said apply only to facilities that emit more than 25,000 tons of carbon dioxide annually, would affect plants that are responsible for nearly 70 percent of greenhouse gas emissions in the United States. They would not, she said, apply to "every cow and Dunkin' Donuts" in the country, the Times said. The Times also said the proposal was timed to coincide with the introduction of global warming and energy legislation by Democratic senators John Kerry of Massachusets and Barbara Boxer of California, legislation that may prove impossible to pass this year. Obama prefers a legislative approach and is committed to approval of a climate bill this year. But industry groups attacked the EPA proposal, saying it violates the Clean Air Act, and suggesting the regulations could face lengthy court challenges. The U.S. Chamber of Commerce and the National Association of Manufacturers have already threatened to sue, the Times said. Other industry groups are working with Congress on a climate bill that would substitute a so-called cap-and-trade system, under which polluters would buy and sell credits, for the EPA regulations.

Are U.S. regulators proposing covering bank failures with accounting tricks?

Could it possibly be true that regulators are proposing to use an accounting trick to replenish the beleaguered FDIC fund that protects bank deposits? That's what it seemed like Tuesday when the Federal Deposit Insurance Corp.'s five-member board voted to require banks to prepay $45 billion in quarterly fees but not require them to account for the money until later, according to the Reuters international news service. The proposal, released for a 30-day public comment period, is intended to help shore up the FDIC's bank failure fund, which is expected to pay out $100 billion through 2013. The fund is expected to be in the red later this year and remain in the red through 2012, Reuters said. Ninety-five banks have failed so far in 2009, compared with 25 last year and three in 2007. The prepayment will enable the banking industry to avoid another emergency assessment like the $5.6 billion fee levied on banks in May, Reuters said. "Everybody has bailout fatigue," said FDIC Chairwoman Sheila Bair, explaining that the prepayment would avoid forcing the agency to use its $500 billion line of credit with the U.S. Treasury. The proposal would require banks to prepay their regular assessments for all of 2010, 2011 and 2012 when they pay their regular assessments for the fourth quarter of 2009 on Dec. 30. Bair said her agency had plenty of money to protect depositors despite the negative balance in the fund. "We have tons of money to protect insured depositors," she said. "This is really about the mechanics of funding." Actually, it sounds some kind of game-playing, precisely the wrong signal to send to nervous depositors all over the country. If adopted, the proposal would be the first time the agency has ever asked banks to prepay regular fees, Reuters said.

Abbas puts gap between Israel and Palestinians on display at United Nations

Friday's speech to the United Nations by Palestinian Authority President Mahmoud Abbas was a clear demonstration of the gap between Palestinian and Israeli political leaders -- following, as it did, Thursday's address by Israel's prime minister, Benjamin Netanyahu. Abbas said Israel was blocking progress toward peace by refusing to comply with Palestinian conditions for reopening peace talks, by refusing to fulfill its obligations under negotiated agreements and by refusing to comply with "hundreds" of U.N. resolutions. "All of these active efforts and initiatives, which have been welcomed and supported by us and by the Arab states, are, however, confronted with Israeli intransigence, which refuses to adhere to the requirements for relaunching the peace process," Abbas said. But Netanyahu said a day earlier that the PA was unwilling even to take the most "elementary" step toward peace of recognizing Israel as a Jewish state. "We asked the Palestinians to finally do what they refused to do for 62 years, say 'yes' to a Jewish state," Netanyahu said. "As simple, as clear, as elementary as that, just as we are asked to recognize a nation-state for the Palestinian people, the Palestinians must be asked to recognize the nation-state of the Jewish people. The Jewish people are not foreign conquerors in the land of Israel. It is the land of our forefathers." The two sides are not even listening to each other -- maybe they do when they're face-to-face at the negotiating table. And, maybe, that explains their reluctance to meet. Any agreement they do reach will likely be of historical proportions and result in region-changing upheaval. Israel will have to give up sovereignty over the homes of 100,000 Israelis on land the Palestinians expect for a state; the Palestinian people will have to give up claims to land they left in 1948 and to Jerusalem. The PA has not even begun to educate its citizens on the realities and responsibilities of peace -- it may not understand them itself. For one thing, the PA does not appear capable of controlling all of the territory that has already been ceded to it. There is a very long way to go -- the current leaders may have to think of the future, not the present, if they truly want to make peace happen. But, remember, Israel, Egypt and Jordan -- formerly bitter enemies -- have reached peace deals that have held together for years.