by
on December 11, 2013
The government just approved a regulation called the
Volcker Rule to curb proprietary trading by banks — even though such trading did not cause the financial crisis, or
lead to massive financial losses by banks and taxpayers the way other, much
riskier practices by banks did (like risky mortgage loans, which the Obama
administration has pressured banks to once again engage in, in the name of fair lending and affordable housing).
Showing posts with label Community Reinvestment Act. Show all posts
Showing posts with label Community Reinvestment Act. Show all posts
Thursday, December 12, 2013
Thursday, November 29, 2012
The Forgotten Bailout
By: Daniel Horowitz Diary November 21st, 2012
When it comes to setting public policy fires, Democrats get away with serial arson. A maladroit opposition party and a complaisant media ensure that the public will never pin the tail of blame on the donkey. Nowhere is this more evident than with interventionist housing policy.
Decade’s worth of government intervention in the housing market almost single-handedly took down the economy. Bill Clinton’s National Homeownership Strategy did to the housing sector what Obamacare will do for the healthcare sector. His administration created entire offices and programs dedicated to forcing banks to underwrite risky mortgages under the dubious goal of universal home ownership. Concurrently, Fannie Mae and Freddie Mac bought up the lion’s share of the subprime mortgage securities and fueled the toxic asset bubble. The bubble popped, bringing down the entire economy with it.
Instead of learning from the deleterious effects of “fair lending” and universal homeownership programs, Obama has juiced up the goals of the Community Reinvestment Act that underwrote risky loans.
So what have we gotten for all the risky loans? We sunk $140 billion into Fannie Mae and Freddie Mac, and now we are on the hook for a $16.3 billion shortfall at the Federal Housing Administration. Taxpayers have not been reimbursed one dime for the housing bailout. Just wait until the Fed commences another few years of blowing up the housing market through MBS purchases; we’ll be back in 2008 in no time!
Amidst all the talk over the fiscal cliff, why is nobody talking about the stolen funds sunk into the dead rat GSEs? Josh Rosner, co-author of the must-read Reckless Endangerment, reminds us all of the forgotten bailout in yesterday’s edition of the New York Times.
Last summer, the United States Treasury decided that, rather than require the G.S.E.’s to pay interest on their debt to taxpayers, it would require any profits generated by Fannie and Freddie to be swept into the Treasury’s coffers. Unfortunately, this has created problems of its own because it has led to the commingling of the still legally private G.S.E. funds with those of the federal government — and it complicates the ultimate recapture of Fannie’s and Freddie’s value. Moreover, as the International Monetary Fund recently warned, the practice adds major risk to the United States balance sheet.
A better approach is possible — but to devise the right plan, lawmakers will have to start giving the issue the attention it deserves.
Well, here is a better solution. Senator McCain and Congressman Hensarling have a bill (S.693/H.R 1182) that will shut down the GSEs, albeit in a gradual way and with the understanding that they currently back 90% of all mortgages. His bill would impose a two-year limit on the current conservatorship and chart a course to complete privatization after 5 years. It would immediately end all affordable housing mandates, force the GSEs to pay back the taxpayer bailout money, cap their maximum portfolio size, reduce their market share and shrink their competitive advantage over private capital.
Housing policy is one of the most banal issues for many casual consumers of news, but it was the catalyst of the Great Recession. The blood of the entire housing and financial meltdown is on the hands of those who subscribe to Obama’s housing policies. It’s time someone demand accountability for the egregious federal intervention in the housing market. Otherwise, we’ll be in the midst of a new housing crisis in a few years.
Cross-posted from The Madison Project
When it comes to setting public policy fires, Democrats get away with serial arson. A maladroit opposition party and a complaisant media ensure that the public will never pin the tail of blame on the donkey. Nowhere is this more evident than with interventionist housing policy. Decade’s worth of government intervention in the housing market almost single-handedly took down the economy. Bill Clinton’s National Home ownership Strategy did to the housing sector what Obamacare will do for the healthcare sector.
His administration created entire offices and programs dedicated to forcing banks to underwrite risky mortgages under the dubious goal of universal home ownership. Concurrently, Fannie Mae and Freddie Mac bought up the lion’s share of the subprime mortgage securities and fueled the toxic asset bubble. The bubble popped, bringing down the entire economy with it. Instead of learning from the deleterious effects of “fair lending” and universal home ownership programs, Obama has juiced up the goals of the Community Reinvestment Act that underwrote risky loans.
Editor's Note: This now appears here, and its now ten years later, and I've published this in full since the RedState site original addresses for their articles seem to stop working, and I don't want to lose the information. Also you may wish to read my commentary entitled; Sub-Prime Pest Control, which deals with this issue later in the article. The patterns are the same even though the headline is different.
Wednesday, November 28, 2012
The Fannie Mae ‘Wind Down’ That Isn’t
The mortgage assets they own are declining, but the overall value of mortgages on their balance sheet has remained about the same.
At the height of the presidential election campaign, the Treasury Department issued a press release called “Further Steps to Expedite Wind Down of Fannie Mae and Freddie Mac.” It highlighted a new policy to scale back the pair’s mortgage-investment portfolio at a rate of 15% per year, as opposed to their stated 10% rate. Reports from the Securities and Exchange Commission, however, suggest that these two government-sponsored enterprises—currently under federal conservatorship—may not be shrinking much at all. The Treasury announcement, coming near the fourth anniversary of the September 2008 government takeover of the mortgage behemoths, was made during an election campaign with a heavy focus on the health of the economy. The impression it left was that the most expensive of the 2008 bailouts was not much of an issue, as the transition back to stability in the mortgage market is well under way. We’ve since learned that the mortgage market is still troubled…To Read More….
Thursday, September 13, 2012
The Brass Standard
By Thomas Sowell
Politics takes a lot of brass. And Bill Clinton is a master politician. His rousing speech at the Democrats' convention told the delegates that Republicans "want to go back to the same old policies that got us into trouble in the first place." That is world class brass. Bill Clinton's own administration, more than any other, promoted an unsustainable housing boom, which eventually and inevitably led to a housing bust that brought down the whole American economy. Behind all the complex financial processes that reached to Wall Street and beyond, there is one fundamental fact: many people stopped making their mortgage payments.
Why did that happen? Because mortgage loans were made to people who did not meet the long-established qualification standards for getting a mortgage loan. And why did that happen? Because the Clinton administration threatened lawsuits against lenders who did not approve mortgage loans to minority applicants as often as to white applicants.......To Read More
My Take – You may wish to view the article I wrote some time back called, Sub-Prime Pest Control, which actually deals with this issue of the Community Reinvestment Act and red lining.
Well....this is a wrap until Saturday. I won't be posting anything tomorrow....I have a son getting married. Best wishes to one and all. Rich
###
Politics takes a lot of brass. And Bill Clinton is a master politician. His rousing speech at the Democrats' convention told the delegates that Republicans "want to go back to the same old policies that got us into trouble in the first place." That is world class brass. Bill Clinton's own administration, more than any other, promoted an unsustainable housing boom, which eventually and inevitably led to a housing bust that brought down the whole American economy. Behind all the complex financial processes that reached to Wall Street and beyond, there is one fundamental fact: many people stopped making their mortgage payments.
Why did that happen? Because mortgage loans were made to people who did not meet the long-established qualification standards for getting a mortgage loan. And why did that happen? Because the Clinton administration threatened lawsuits against lenders who did not approve mortgage loans to minority applicants as often as to white applicants.......To Read More
My Take – You may wish to view the article I wrote some time back called, Sub-Prime Pest Control, which actually deals with this issue of the Community Reinvestment Act and red lining.
Well....this is a wrap until Saturday. I won't be posting anything tomorrow....I have a son getting married. Best wishes to one and all. Rich
###
Tuesday, February 7, 2012
Zone of Reality: CRA Meltdown
By Rich Kozlovich
While reading this please keep in mind that these two agencies were merely the structural framework that made the meltdown happen. The real culprit was the Community Reinvestment Act. Without that there wouldn’t have been such a huge drive to finance so many people who were completely incapable of paying the mortgage. I would also like to point out that the CRA made speculators huge amounts of money because it kept forcing the price of housing farther up than it ever would have gotten otherwise. All of this greed was a natural reaction to a system devoid of common sense imposed by legislation that was insane. I would also like to point out that both Clinton and Bush raised the percentage of these CRA (bad) loans until the banks were required to put out bad loans to the tune of over 50%.
I have a question. Can anyone name one government employee; one government economist or one government agency that predicted that Microsoft would become a soft ware giant that would make the owner one of the richest people in the world? Government doesn't do business well.
Financing Fannie and Freddie’s Failures
Back in August 2008 then-Treasury Secretary Paulson pulled a team together to work on resolving the deeply insolvent Fannie and Freddie. As recounted in the Andrew Ross Sorkin book, "Too Big to Fail", Robert Scully of Morgan Stanley laid out a blunt question: “Do you want to kick the can down the road?” Secretary Paulson was emphatic: “No. I want to address the issue. I don’t want to leave the problem unsolved.” Although it took guts for Paulson in combination with the Federal Housing Finance Agency to take control of Fannie and Freddie and place them in conservatorship, the problem of the two mortgage behemoths is by no means ‘solved.’ In taking control, Paulson highlighted the “flawed business model” underlying the pair............So have Fannie and Freddie begun to downsize or unwind from their flawed business model? The SEC Form 10-K and 10-Q that they must file indicate that the answer is an unequivocal no. Fannie’s filing reveals its mortgage credit and guaranty book of business are both up since 2008 standing at over $3 trillion. Freddie’s filing reveals a mortgage portfolio that has hovered in the neighborhood of $2.2 trillion.
Fannie, Freddie, and the Aftermath of the Financial Crisis
What should be done? Some policymakers have called for fiddling with Fannie’s and Freddie’s governance and operations, but a much better alternative would be to put them into receivership and wind them down. The FHFA has had the authority to do this since 2008. Moreover, there is a historical basis for believing that this could be done effectively: in the late 1980s and early 1990s, the Resolution Trust Corporation succeeded in placing hundreds of insolvent savings and loans into receivership and transitioning them to private ownership. Putting Fannie and Freddie into receivership would allow them to be broken up into smaller companies and transferred back to private hands. Critics argue that doing this would jeopardize the recovery of the housing market, but as McKinley notes, these are the same critics who mistakenly claimed that placing Fannie and Freddie into conservatorship would devastate the housing market. “Given its track record, we have to stop listening to that discredited crowd,” McKinley concludes.
FINANCING FAILURE: A Century of Bailouts
The nation’s federal financial regulators and the politicians claim to have saved the American economy. In truth they have done everything within their power to expand their own influence—often far out of view from the public and media. Instead of openly explaining their actions, the bailout agencies have attempted to prevent the public from reviewing their decision-making, often at tremendous cost to taxpayers. McKinley’s painstakingly researched and clear-headed analysis of bailouts and government intervention shows that the American public has accepted too many official pronouncements at face value, and that reining in the federal regulators is a necessary step toward truly promoting the safety and soundness of the financial system.
While reading this please keep in mind that these two agencies were merely the structural framework that made the meltdown happen. The real culprit was the Community Reinvestment Act. Without that there wouldn’t have been such a huge drive to finance so many people who were completely incapable of paying the mortgage. I would also like to point out that the CRA made speculators huge amounts of money because it kept forcing the price of housing farther up than it ever would have gotten otherwise. All of this greed was a natural reaction to a system devoid of common sense imposed by legislation that was insane. I would also like to point out that both Clinton and Bush raised the percentage of these CRA (bad) loans until the banks were required to put out bad loans to the tune of over 50%.
I have a question. Can anyone name one government employee; one government economist or one government agency that predicted that Microsoft would become a soft ware giant that would make the owner one of the richest people in the world? Government doesn't do business well.
Financing Fannie and Freddie’s Failures
Back in August 2008 then-Treasury Secretary Paulson pulled a team together to work on resolving the deeply insolvent Fannie and Freddie. As recounted in the Andrew Ross Sorkin book, "Too Big to Fail", Robert Scully of Morgan Stanley laid out a blunt question: “Do you want to kick the can down the road?” Secretary Paulson was emphatic: “No. I want to address the issue. I don’t want to leave the problem unsolved.” Although it took guts for Paulson in combination with the Federal Housing Finance Agency to take control of Fannie and Freddie and place them in conservatorship, the problem of the two mortgage behemoths is by no means ‘solved.’ In taking control, Paulson highlighted the “flawed business model” underlying the pair............So have Fannie and Freddie begun to downsize or unwind from their flawed business model? The SEC Form 10-K and 10-Q that they must file indicate that the answer is an unequivocal no. Fannie’s filing reveals its mortgage credit and guaranty book of business are both up since 2008 standing at over $3 trillion. Freddie’s filing reveals a mortgage portfolio that has hovered in the neighborhood of $2.2 trillion.
Fannie, Freddie, and the Aftermath of the Financial Crisis
What should be done? Some policymakers have called for fiddling with Fannie’s and Freddie’s governance and operations, but a much better alternative would be to put them into receivership and wind them down. The FHFA has had the authority to do this since 2008. Moreover, there is a historical basis for believing that this could be done effectively: in the late 1980s and early 1990s, the Resolution Trust Corporation succeeded in placing hundreds of insolvent savings and loans into receivership and transitioning them to private ownership. Putting Fannie and Freddie into receivership would allow them to be broken up into smaller companies and transferred back to private hands. Critics argue that doing this would jeopardize the recovery of the housing market, but as McKinley notes, these are the same critics who mistakenly claimed that placing Fannie and Freddie into conservatorship would devastate the housing market. “Given its track record, we have to stop listening to that discredited crowd,” McKinley concludes.
FINANCING FAILURE: A Century of Bailouts
The nation’s federal financial regulators and the politicians claim to have saved the American economy. In truth they have done everything within their power to expand their own influence—often far out of view from the public and media. Instead of openly explaining their actions, the bailout agencies have attempted to prevent the public from reviewing their decision-making, often at tremendous cost to taxpayers. McKinley’s painstakingly researched and clear-headed analysis of bailouts and government intervention shows that the American public has accepted too many official pronouncements at face value, and that reining in the federal regulators is a necessary step toward truly promoting the safety and soundness of the financial system.
Thursday, February 2, 2012
Zone of Reality: CRA Meltdown
By Rich Kozlovich
Over the last two years I keep being amazed at how this story is being twisted. No matter how hard you try you just can't get people to openly exclaim that this economic crisis is a direct result of the sub-prime mortgage crisis. The sub-prime mortgage crisis is a direct result of the Community Reinvestment Act. In a article I wrote some time back I noted the following about this Sub-Prime Mortgage Crisis!
So why couldn't anyone change? The Community Reinvestment Act was imposed by the government and those who attempted to step in to fix it were rebuffed. By whom? Below is part of that answer!
Over the last two years I keep being amazed at how this story is being twisted. No matter how hard you try you just can't get people to openly exclaim that this economic crisis is a direct result of the sub-prime mortgage crisis. The sub-prime mortgage crisis is a direct result of the Community Reinvestment Act. In a article I wrote some time back I noted the following about this Sub-Prime Mortgage Crisis!
In 1977 the media discovered the word “redlining” and they used it like a whip. Redlining was supposed to be a racist action by the banks who wanted to prevent poor people and minorities, primarily black, from owning houses. Sounds insane doesn’t it? It is! Especially when a study came out showing that there was no redlining, that in fact these people were denied these loans because they were bad credit risks.Jack Cashill wrote; "Now, they could pat themselves on the head for helping make the home-owning class "look more like America" and still get a smart return on their investment. With housing prices on the rise, private investment groups actively began to buy and bundle non-traditional loans and sell them to investors on the private market. As the demand surged in key areas, and fresh capital flooded the market, lenders came up with innovative new ways to attract sub-prime borrowers, most notably the interest-only, adjustable-rate mortgage (IO ARM)."
Yet redlining is what they had everyone believing, so in 1977 Congress, under the Carter administration, demanded that lending institutions pay attention to the “credit need” of the community and not on their ability to repay the loan and passing the Community Reinvestment Act of 1977. Under this act the banks would be graded on how many of these bad loans they gave out. If they did business in this manner they received a high score. The score was directly proportionate to how easy it was to do a merger or an acquisition or even open a new branch and as I understand it…their ability to borrow money from the government. All of which the government controlled! Under this act if some community activists, like the group ACORN, didn’t like the way you did business could cause all sorts of problems.
Stan J. Liebowitz, economics professor at the University of Texas at Dallas writes; "Home mortgages have been a political piñata for many decades. Greedy lenders aren’t the real reason for this mess. “In a nutshell, Liebowitz contends that the federal government over the last 20 years pushed the mortgage industry so hard to get minority homeownership up, that it undermined the country's financial foundation to achieve its goal."
Everyone was happy; everyone basked in the blaze of self congratulations. All of these bad loans were now declared to be “innovation lending” and they were praised by the regulators, academics and activists and because so much pressure was put on the lending institutions in the 90’s by the Clinton administration homeownership among minorities surged. The media called this “one of the hidden success stories” of that administration. At one point the Federal Reserve Bank of Boston is supposed to have “produced a manual in the early '90s that warned mortgage lenders were to no longer deny urban and lower-income minority applicants on such "outdated" criteria as credit history, down payment or employment income.”
It was a real catch-22. If they continued giving out these bad loans, they would go out of business. If they didn’t comply there were real financial penalties and if they raised interested rates they were accused of “predatory lending”.I expanded on this subject in an article entitled, Methodologies! What are they? noting that;
Unfortunately this was undermining an entire economic system and the inevitable happened.
Jeff Jacoby notes;“Trapped in a no-win situation entirely of the government's making, lenders could only hope that home prices would continue to rise, staving off the inevitable collapse. But once the housing bubble burst, there was no escape. Mortgage lenders have been bankrupted, thousands of subprime homeowners have been foreclosed on, and countless would-be borrowers can no longer get credit. The financial fallout has hurt investors around the world. And all of it thanks to the government, which was sure it understood the credit industry better than the free market did, and confidently created the conditions that made disaster unavoidable.”
These loans would move from a “mortgage originator” to a “mortgage investor”. “Smaller mortgage originators will often sell their mortgages to large scale originators or aggregators, which pool mortgages together and securitize them into mortgage-backed securities (MBS) through Fannie Mae, Freddie Mac or as private-label securities.” The idea was to make sure that you could create a Triple A rating for that bundle of mortgages. Once they got a Triple A rating they would then sell them all over the world; usually to investors with large amounts of capital but very little understanding of what they were buying. However, this lack of understanding wasn’t exclusive to unsophisticated buyers. Alan Greenspan himself stated in the show that he didn’t understand the complexities of the CDO mortgage market either, and that he just didn’t understand the numbers. (follow the link to the article to follow what a CDO is)
The greed involved permeated all levels of the financial world. Although many knew that this couldn’t go on and some made an effort to make this clear to some of the biggest players in the field they continued to cling to the idea that the mortgage market would appreciate six to eight percentage points every year to infinity. Clearly that was insane.An article entitled, Analysis: Reckless Mortgages Brought Financial Market to Its Knees the author says; Surprisingly, research done by economists a decade ago in 1998, particularly by Professors Ted Day and Stan Liebowitz at the University of Texas at Dallas, predicted the current problems and tried to warn people of a different cause. Starting during the early 1990s, mortgage-underwriting standards have been consistently weakened. Many of the names involved in the forefront of those changes, Freddie Mac and Fannie Mae as well as Countrywide and Bear Stearns, have been the most prominent financial entities to become insolvent."
Alan Greenspan was asked; why didn’t they just get out? He claimed that they knew the dangers but thought they were smart enough to get out when it was the right time. Baloney! Greenspan, the moderator and all the people interviewed left out the reason they didn’t get out. They couldn’t. Once they bought into the Community Reinvestment Act it became a Catch 22 situation; in for a dime in for a dollar, and in forever.
Since they were in so deep and in forever they refused to see anything else except the potential profits for today. The government forced them into this situation and the government was going to back them through Fannie Mae and Freddie Mac, so they went after the short term rewards without any concern for the long term consequences; after all, they were making tons of money and they had no choice. When you dance with the Devil you won’t call the tune, you won’t choose the dance, you won’t lead, you can’t change partners and you may not be allowed to leave the dance.
So why couldn't anyone change? The Community Reinvestment Act was imposed by the government and those who attempted to step in to fix it were rebuffed. By whom? Below is part of that answer!
Saturday, September 20, 2008
Sub-Prime Pest Control
By Rich Kozlovich
For all the years that I have been in pest control I have had to defend what we do, how we do it, and the products we use. Okay, so what? Am I any different than anyone else in pest control? If you had asked me that question 27 years ago I could have emphatically said NO! That was a time when we all came from the same paradigm! Do we today? Well now, that is a different story. Let's talk about that!
Ohio’s pest control industry has had the good fortune of always having had a few good leaders with a clear vision as to what the industry needs. Not just for what is good for them, or for merely what is good in the here and now, but a vision that goes beyond the horizon! The creation of what became the National Pest Management Association is one such example. Ohio’s pest controllers were among the first national leaders that formed what eventually became the National Pest Management Association. This is probably why Ohio pest controllers have been so involved over the years. They were there early and have remained involved through the generations ever since. Another reason is that Ohio pest controllers are passionate about our industry and the issues that face us. As new people came into the industry that passion became infectious to those who are now two, three and four generation pest controllers. People who weren’t around in the early days, but who were no less willing to reached out and carry the standard of their fallen comrades and predecessors.
In 1933 The Society of Exterminators and Fumigators of New York City elected Bill Buettner. They realized the need for a national association. In that same year The Associated Exterminators and Fumigators of the United States with executive offices in the Old Hollenden Hotel in Cleveland Ohio agreed to have a convention in Cleveland to make a very real attempt to form a national association. There clearly wasn’t room for two national associations and in October of that year the associated Ohio group endorsed the New York group and formed what eventually became the National Pest Control Association. Ohio and New York pest controllers brought this industry together because of the vision of a few good men. There is no doubt that Bill Buettner, the first president of the national association, cast a giant shadow, but that was because he was standing on the shoulders of giants who were willing to put the own interests aside for the good of an entire industry.
Both of the trade journals that service our industry are here in Cleveland. Pest Management Professional was first known as “The Exterminator’s Log”, and originally founded by one of the real leaders of the industry, Al Cossetta. Mr. Cossetta was born in 1896 in Naples, Italy. He was an immigrant whose impact on our industry is still felt today. Although he wasn’t an Ohioan, he inspired many in Ohio’s pest control industry. In order to fully appreciate what he accomplished you have to read his story. The Exterminators Log was later called “Pests and Their Control” and in 1949 the publication moved to Cleveland, Ohio. That magazine became best known as Pest Control magazine and is now called Pest Management Professional (PMP).
Pest Control Technology (PCT) however was an Ohio creation from day one. Now located in Cleveland, PCT was originally founded in Cincinnati, Ohio by the Scherzinger family and has always been called by that name.
Those in leadership positions in modern pest control have the good fortune of having had such men lead the way, and those currently in leadership roles are now standing on the shoulders of all of the giants who passed before. But are our leaders going to be casting a giant shadow that we can take shelter under, or is it a shadow that we must flee. Will that shadow cool and comfort us, or will that shadow bring dread and devastation?
Have we completely wandered into the fever swamps of “green” pest control? Just because it is the conventional wisdom doesn’t mean it is right! Conventional wisdom may be nothing more that the philosophical flavor of the day and may not last as long as the current ladies fashion. And worse yet, it may leave devastation in its wake. Conventional wisdom has yet to do what traditional wisdom has done, and that is having stood the test of time.
Those who are the strongest drivers of IPM or “green” pest control are anti-pesticide activists, government bureaucrats, along with universities and Ph.D’s, who are now bound at the hip with these people because of grant money. This drive for political correctness in pest control may be compared to a very similar situation. The current mortgage crisis! I know that may sound irrational, but let’s look at what really happened in order to see the similarities.
The Sub-Prime Mortgage Crisis!
In 1977 the media discovered the word “redlining” and they used it like a whip. Redlining was supposed to be a racist action by the banks who wanted to prevent poor people and minorities, primarily black, from owning houses. Sounds insane doesn’t it? It is! Especially when a study came out showing that there was no redlining, that in fact these people were denied these loans because they were bad credit risks.
Yet redlining is what they had everyone believing, so in 1977 Congress, under the Carter administration, demanded that lending institutions pay attention to the “credit need” of the community and not on their ability to repay the loan and passing the Community Reinvestment Act of 1977. Under this act the banks would be graded on how many of these bad loans they gave out. If they did business in this manner they received a high score. The score was directly proportionate to how easy it was to do a merger or an acquisition or even open a new branch and as I understand it…their ability to borrow money from the government. All of which the government controlled! Under this act if some community activists, like the group ACORN, didn’t like the way you did business could cause all sorts of problems.
It was a real catch-22. If they continued giving out these bad loans, they would go out of business. If they didn’t comply there were real financial penalties and if they raised interested rates they were accused of “predatory lending”.
Unfortunately this was undermining an entire economic system and the inevitable happened.
In 1972 the EPA was created as a result of Rachel Carson’s book Silent Spring with all of its flawed science, misrepresented information and predictions that proved ridiculous. Yet everyone believed then, and millions still believe the mother of junk science, and as a result regulators have imposed layer after layer of regulations, putting “community activists” in a position to cause untold trouble.
In pest control we are under attack from the “media” the “community activists”, the “academics” and the “regulators”. We are told we are treating people unfairly because what we are doing is causing terrible health problems in society and in nature, therefore we have to change. We are told that we much adopt IPM or green pest control. We are told that we will be rewarded for abandoning what has worked for what is politically correct. We are told we will be punished if we don’t. Does it sound familiar yet?
We are told that they know best. We have those who are basking in the radiance of self congratulations when they are praised and given awards from government agencies for adopting IPM or for abandoning traditional pest control methods. They call themselves “global problem solvers” and speak with an air of moral self righteousness. Unfortunately this is undermining one of the best public health service systems in the world.
At this point the similarities end. Why? Because the disaster that abandoning pesticides will undoubtedly cause hasn’t struck yet! We haven’t had our equivalent of a “housing bubble burst” yet. However, just as the pressures by government regulators mounted over time, demanding more and more irrational behavior from the lending institutions, the same thing is happening and will continue to happen in pest control. But if we continue with this sub-prime pest control mentality, which we have so cleverly masked by calling it IMP or green pest control, we can surely expect it.
Knowledgeable pest controllers have, with a great deal of work and dedication, traditionally stood against this foolishness with great success. However, in spite of the facts, in spite of the real science, they find themselves standing alone more and more, except for a handful of equally dedicated individuals around the country. It is unfortunate that we have so many in our own ranks who are adopting these philosophies. What happens when there are no more courageous pest controllers who are willing to reach out and grasp a falling standard out of a fallen comrade’s hand? Who will speak up then? More importantly, who will do the “bailing out” when our public health crisis occurs? I am no longer sure who will fix it. I used to think that we would, but I am no longer sure of that. We no longer think alike.
For all the years that I have been in pest control I have had to defend what we do, how we do it, and the products we use. Okay, so what? Am I any different than anyone else in pest control? If you had asked me that question 27 years ago I could have emphatically said NO! That was a time when we all came from the same paradigm! Do we today? Well now, that is a different story. Let's talk about that!
Ohio’s pest control industry has had the good fortune of always having had a few good leaders with a clear vision as to what the industry needs. Not just for what is good for them, or for merely what is good in the here and now, but a vision that goes beyond the horizon! The creation of what became the National Pest Management Association is one such example. Ohio’s pest controllers were among the first national leaders that formed what eventually became the National Pest Management Association. This is probably why Ohio pest controllers have been so involved over the years. They were there early and have remained involved through the generations ever since. Another reason is that Ohio pest controllers are passionate about our industry and the issues that face us. As new people came into the industry that passion became infectious to those who are now two, three and four generation pest controllers. People who weren’t around in the early days, but who were no less willing to reached out and carry the standard of their fallen comrades and predecessors.
In 1933 The Society of Exterminators and Fumigators of New York City elected Bill Buettner. They realized the need for a national association. In that same year The Associated Exterminators and Fumigators of the United States with executive offices in the Old Hollenden Hotel in Cleveland Ohio agreed to have a convention in Cleveland to make a very real attempt to form a national association. There clearly wasn’t room for two national associations and in October of that year the associated Ohio group endorsed the New York group and formed what eventually became the National Pest Control Association. Ohio and New York pest controllers brought this industry together because of the vision of a few good men. There is no doubt that Bill Buettner, the first president of the national association, cast a giant shadow, but that was because he was standing on the shoulders of giants who were willing to put the own interests aside for the good of an entire industry.
Both of the trade journals that service our industry are here in Cleveland. Pest Management Professional was first known as “The Exterminator’s Log”, and originally founded by one of the real leaders of the industry, Al Cossetta. Mr. Cossetta was born in 1896 in Naples, Italy. He was an immigrant whose impact on our industry is still felt today. Although he wasn’t an Ohioan, he inspired many in Ohio’s pest control industry. In order to fully appreciate what he accomplished you have to read his story. The Exterminators Log was later called “Pests and Their Control” and in 1949 the publication moved to Cleveland, Ohio. That magazine became best known as Pest Control magazine and is now called Pest Management Professional (PMP).
Pest Control Technology (PCT) however was an Ohio creation from day one. Now located in Cleveland, PCT was originally founded in Cincinnati, Ohio by the Scherzinger family and has always been called by that name.
Those in leadership positions in modern pest control have the good fortune of having had such men lead the way, and those currently in leadership roles are now standing on the shoulders of all of the giants who passed before. But are our leaders going to be casting a giant shadow that we can take shelter under, or is it a shadow that we must flee. Will that shadow cool and comfort us, or will that shadow bring dread and devastation?
Have we completely wandered into the fever swamps of “green” pest control? Just because it is the conventional wisdom doesn’t mean it is right! Conventional wisdom may be nothing more that the philosophical flavor of the day and may not last as long as the current ladies fashion. And worse yet, it may leave devastation in its wake. Conventional wisdom has yet to do what traditional wisdom has done, and that is having stood the test of time.
Those who are the strongest drivers of IPM or “green” pest control are anti-pesticide activists, government bureaucrats, along with universities and Ph.D’s, who are now bound at the hip with these people because of grant money. This drive for political correctness in pest control may be compared to a very similar situation. The current mortgage crisis! I know that may sound irrational, but let’s look at what really happened in order to see the similarities.
The Sub-Prime Mortgage Crisis!
In 1977 the media discovered the word “redlining” and they used it like a whip. Redlining was supposed to be a racist action by the banks who wanted to prevent poor people and minorities, primarily black, from owning houses. Sounds insane doesn’t it? It is! Especially when a study came out showing that there was no redlining, that in fact these people were denied these loans because they were bad credit risks.
Yet redlining is what they had everyone believing, so in 1977 Congress, under the Carter administration, demanded that lending institutions pay attention to the “credit need” of the community and not on their ability to repay the loan and passing the Community Reinvestment Act of 1977. Under this act the banks would be graded on how many of these bad loans they gave out. If they did business in this manner they received a high score. The score was directly proportionate to how easy it was to do a merger or an acquisition or even open a new branch and as I understand it…their ability to borrow money from the government. All of which the government controlled! Under this act if some community activists, like the group ACORN, didn’t like the way you did business could cause all sorts of problems.
Stan J. Liebowitz, economics professor at the University of Texas at Dallas writes; "Home mortgages have been a political piñata for many decades. Greedy lenders aren’t the real reason for this mess. “In a nutshell, Liebowitz contends that the federal government over the last 20 years pushed the mortgage industry so hard to get minority homeownership up, that it undermined the country's financial foundation to achieve its goal."Everyone was happy; everyone basked in the blaze of self congratulations. All of these bad loans were now declared to be “innovation lending” and they were praised by the regulators, academics and activists and because so much pressure was put on the lending institutions in the 90’s by the Clinton administration homeownership among minorities surged. The media called this “one of the hidden success stories” of that administration. At one point the Federal Reserve Bank of Boston is supposed to have “produced a manual in the early '90s that warned mortgage lenders were to no longer deny urban and lower-income minority applicants on such "outdated" criteria as credit history, down payment or employment income.”
It was a real catch-22. If they continued giving out these bad loans, they would go out of business. If they didn’t comply there were real financial penalties and if they raised interested rates they were accused of “predatory lending”.
Unfortunately this was undermining an entire economic system and the inevitable happened.
Jeff Jacoby notes;“Trapped in a no-win situation entirely of the government's making, lenders could only hope that home prices would continue to rise, staving off the inevitable collapse. But once the housing bubble burst, there was no escape. Mortgage lenders have been bankrupted, thousands of subprime homeowners have been foreclosed on, and countless would-be borrowers can no longer get credit. The financial fallout has hurt investors around the world. And all of it thanks to the government, which was sure it understood the credit industry better than the free market did, and confidently created the conditions that made disaster unavoidable.”The Sub-Prime Pest Control Crisis!
In 1972 the EPA was created as a result of Rachel Carson’s book Silent Spring with all of its flawed science, misrepresented information and predictions that proved ridiculous. Yet everyone believed then, and millions still believe the mother of junk science, and as a result regulators have imposed layer after layer of regulations, putting “community activists” in a position to cause untold trouble.
In pest control we are under attack from the “media” the “community activists”, the “academics” and the “regulators”. We are told we are treating people unfairly because what we are doing is causing terrible health problems in society and in nature, therefore we have to change. We are told that we much adopt IPM or green pest control. We are told that we will be rewarded for abandoning what has worked for what is politically correct. We are told we will be punished if we don’t. Does it sound familiar yet?
We are told that they know best. We have those who are basking in the radiance of self congratulations when they are praised and given awards from government agencies for adopting IPM or for abandoning traditional pest control methods. They call themselves “global problem solvers” and speak with an air of moral self righteousness. Unfortunately this is undermining one of the best public health service systems in the world.
At this point the similarities end. Why? Because the disaster that abandoning pesticides will undoubtedly cause hasn’t struck yet! We haven’t had our equivalent of a “housing bubble burst” yet. However, just as the pressures by government regulators mounted over time, demanding more and more irrational behavior from the lending institutions, the same thing is happening and will continue to happen in pest control. But if we continue with this sub-prime pest control mentality, which we have so cleverly masked by calling it IMP or green pest control, we can surely expect it.
Knowledgeable pest controllers have, with a great deal of work and dedication, traditionally stood against this foolishness with great success. However, in spite of the facts, in spite of the real science, they find themselves standing alone more and more, except for a handful of equally dedicated individuals around the country. It is unfortunate that we have so many in our own ranks who are adopting these philosophies. What happens when there are no more courageous pest controllers who are willing to reach out and grasp a falling standard out of a fallen comrade’s hand? Who will speak up then? More importantly, who will do the “bailing out” when our public health crisis occurs? I am no longer sure who will fix it. I used to think that we would, but I am no longer sure of that. We no longer think alike.
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