Showing posts with label risky. Show all posts
Showing posts with label risky. Show all posts

Saturday, August 18, 2012

Romney wants his risky pick to play it safe

GLEN ALLEN, Va. (AP) — Mitt Romney wants running mate Paul Ryan to play it safe.

Ryan, the nation's most controversial budget architect, is often described as the intellectual leader of the House Republican caucus. But Romney's presidential campaign headquarters in Boston seems, for now, to prefer that the 42-year-old father of three talks about camping and milking cows instead of the fiscal proposals that made him a conservative hero.

Ryan, who wrote a plan to overhaul Medicare as chairman of the House Budget Committee, did not use the word "Medicare" with voters over the first four days as the vice presidential candidate. When he finally touched on the health care insurance program for seniors, he did so only in broad strokes after Romney himself first outlined the campaign's talking points.

"We will not duck the tough issues," Ryan said Friday in Virginia. "We will lead."

But Ryan has been directed to avoid taking questions from reporters who travel with him, and to agree only to a few carefully selected interviews. He is known for sketching budget graphs on napkins to explain his ideas, but this past week it was Romney who used a white board during a news conference to help detail his own plan — one he says is virtually identical to Ryan's.

"I'm joining the Romney ticket," Ryan told an Ohio television station this week. "It's not the other way around. So I'm supporting the Mitt Romney plan."

Some of the Republican Party's most passionate voters see it a different way. Reluctant to support Romney during the GOP primary, they favor Ryan and his ideas more than the former Massachusetts governor who will head the party's ticket.

Romney hopes that Ryan's conservative credentials and his boyish enthusiasm will help him solidify support from the base of his party and close the "likability gap" with President Barack Obama, who remains relatively popular in spite of the nation's struggling economy.

Yet Romney does not want Ryan's plans to overshadow his own candidacy. Advisers suggest that Ryan's role will change over time. He is eager to do more, and a week after his selection became official, there are already signs that he's beginning to play a more active role.

The congressman planned to visit a retirement village in Florida on Saturday, where he was expected to help reassure nervous seniors that his plans are designed to save Medicare, not end it. Still, Romney's campaign managers want him to proceed with caution.

Romney's team remembers well the problems caused by running mates who may have been trusted prematurely to play a prominent role in a presidential race — Alaska Gov. Sarah Palin in 2008 and Sen. Dan Quayle in 1988, among them.

The Republican presidential campaign has gone to great lengths to remind voters that Romney's way rules.

Before Ryan first addressed Medicare in Ohio this week, large signs were placed in front of and behind the podium reading, "The Romney Plan." After spending his first two days campaigning with Romney, Ryan will be at his side again in the week ahead for at least one campaign appearance.

The candidates, labeled as "America's Comeback Team" in Romney's campaign signs, are set to appear together in New Hampshire's largest city on Monday. It is expected to be first of what may be many joint appearances in the coming days.

When they are together, the gregarious Ryan helps Romney shed his sometimes wooden image, and they seem to draw larger crowds together than Romney does on his own.

Just don't expect Ryan to start charting his Medicare plans on stage. His proposal to turn the guaranteed health care program for people 65 and over into a voucher-like system creates significant political challenges for the Romney-Ryan ticket — and for Republicans across the country. Many seniors don't fully understand the proposal, and Obama's re-election campaign is aggressively condemning the plan as something that would "end Medicare as we know it."

That's largely why Romney is easing Ryan into the debate. While Ryan explained his complicated plans at length during dozens of Medicare town hall-style meetings before becoming Romney's running mate, those kinds of meetings probably are over because they're considered too politically dangerous to continue.

Instead, Ryan is being encouraged to discuss his young children, his working-class background and his love of the outdoors as the American people get to know him.

"Let's play stump the running mate later. Right now I want to enjoy the fair," Ryan said when asked about Medicare at the Iowa State Fair.

"We do cow-milking contests in Wisconsin," he continued. "I usually lose to a 17-year-old woman who grew up on a dairy farm, who's wearing like a sash and tiara."

Despite the cautious approach, Romney's advisers are expecting Ryan to stumble at times early on as his record faces unprecedented scrutiny. Already, some concerns have popped up.

He reversed course on Thursday and acknowledged lobbying the government for stimulus money after twice denying he had done so. The admission came only after the release of letters, with his signature, asking for millions of the program's dollars on behalf of two companies in his home state.

And while he has tried to avoid diving into the specifics of his Medicare plan, a reporter pushed him to explain an apparent contradiction during an impromptu lunch meeting in Ohio.

In the interview, Ryan said he never would have included a $700 billion Medicare cut in his budget if Obama hadn't done it first.

"He put those cuts there," Ryan said of the president. "We would never have done it in the first place."

The defense represented a deviation from the Romney campaign's talking points and overshadowed what was supposed to be a made-for-TV stop at local hotdog restaurant.


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Saturday, September 3, 2011

Feds sue big banks over sales of risky investments (AP)

By PALLAVI GOGOI and EILEEN AJ CONNELLY, AP Business Writers Pallavi Gogoi And Eileen Aj Connelly, Ap Business Writers – Fri Sep 2, 8:00 pm ET

NEW YORK – The government on Friday sued 17 financial firms, including the largest U.S. banks, for selling Fannie Mae and Freddie Mac billions of dollars worth of mortgage-backed securities that turned toxic when the housing market collapsed.

Among those targeted by the lawsuits were Bank of America Corp., Citigroup Inc., JP Morgan Chase & Co., and Goldman Sachs Group Inc. Large European banks including The Royal Bank of Scotland, Barclays Bank and Credit Suisse were also sued.

The lawsuits were filed by the Federal Housing Finance Agency. It oversees Fannie and Freddie, the two agencies that buy mortgages loans and mortgage securities issued by the lenders.

The total price tag for the mortgage-backed securities sold to Fannie and Freddie by the firms named in the lawsuits: $196 billion.

The government didn't say how much it is seeking in damages. It said it wants to have the securities sales canceled and wants to be compensated for lost principal, interest payments as well as for attorney fees.

The government action is a big blow to the banks, many of which have seen their stock prices fall to levels not seen since the financial crisis in 2008 and 2009. Until now, the stocks have been undermined mostly by unrelated worries about the U.S. and European economies.

It is particularly damaging to Bank of America, which bought Countrywide Financial Corp. in 2008 and Merrill Lynch in 2009. All three are being separately sued by the government for mortgage-backed security sales totaling $57.5 billion.

After Bank of America, JPMorgan Chase was listed in the lawsuits with the second-highest total at $33 billion. Royal Bank of Scotland followed at $30.4 billion.

Bank of America has already paid $12.7 billion this year to settle similar claims. Last month insurer American International Group Inc. sued the bank for more than $10 billion for allegedly selling it faulty mortgage investments.

In a statement Friday, Bank of America rejected the claims in the government's lawsuits.

Fannie and Freddie invested heavily in the mortgage-backed securities even after their regulator said they didn't have the needed risk-management capabilities, the bank said. "Despite this, (Fannie and Freddie) are now seeking to hold other market participants responsible for their losses," it said.

Bank stocks fell sharply on Friday as news of the government's lawsuits emerged. Bank of America tumbled 8.3 percent, JP Morgan Chase fell 4.6 percent, Citigroup lost 5.3 percent, Goldman shed off 4.5 percent and Morgan Stanley's ended down 5.7 percent.

Residential mortgage-backed securities bundled pools of mortgages into complex investments. They collapsed after the real-estate bust and helped fuel the financial crisis in late 2008.

The FHFA said the mortgage-backed securities were sold to Fannie and Freddie based on documents that "contained misstatements and omissions of material facts concerning the quality of the underlying mortgage loans, the creditworthiness of the borrowers, and the practices used to originate such loans."

The FHFA filed a similar lawsuit in July against Swiss bank UBS AG, seeking to recoup more than $900 million in losses from mortgage-backed securities.

Also sued Friday were are Ally Financial Inc., formerly known GMAC LLC, Deutsche Bank AG, First Horizon National Corp., General Electric Co., HSBC North America Holdings Inc., Morgan Stanley, Nomura Holding America Inc., and Societe Generale.

JPMorgan, Goldman, Citigroup and Morgan Stanley declined to comment on the lawsuits. Ally Financial said in a statement said the government's "claims are meritless, and the company intends to defend its position aggressively." A spokeswoman for First Horizon said the bank intends to "vigorously defend" itself.

Ken Thomas, a Miami-based banking consultant and economist, said he expects the banks to settle soon with the government.

"This will be nothing but a distraction to them and the quicker you settle something like this the better," he said.

___

Christina Rexrode contributed to this report.


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Thursday, August 11, 2011

Regulator sues Goldman Sachs over risky mortgages (AP)

LOS ANGELES – The U.S. regulator of credit unions on Tuesday sued Goldman Sachs & Co. for more than $491 million in damages over losses incurred by two failed credit unions that purchased mortgage-backed securities underwritten by the investment bank.

The complaint filed by the National Credit Union Administration in U.S. District Court in Los Angeles is the latest lawsuit brought by the federal regulatory agency against a major bank as it seeks to recover billions in losses related to risky mortgage-backed securities that brought down credit unions in recent years.

Buyers of mortgage-backed securities, mostly banks, pension funds and other big investors, made money from the investments if the underlying debt was paid off. But as U.S. homeowners started falling behind on their mortgages and defaulted in droves in 2007, the securities failed and their buyers lost billions.

In the complaint, which also names as defendants several issuers of mortgage-backed securities, regulators claim that the documents used in offering the securities contained untrue statements or omissions as to how risky the investments were.

As a result, U.S. Central Federal Credit Union in Lenexa, Kan., and Western Corporate Federal Credit Union in San Dimas, Calif., acquired the mortgage-backed securities, believing the risk of loss was minimal, according to the complaint.

However, even though virtually all of the securities had a triple-A rating, they represented a substantial risk of losses, the NCUA claims. And when the investments' market value plummeted, the credit unions — two of the nation's largest — failed.

The NCUA placed the two credit unions into conservatorship in March 2009. In October of 2010, it placed them into involuntary liquidation.

Goldman Sachs declined to comment Tuesday.

The NCUA says it may sue five to 10 other banks in coming weeks. In June, regulators sued JPMorgan Chase & Co. and Royal Bank of Scotland PLC.

Factoring in the latest lawsuit, regulators are seeking to recover nearly $2 billion in damages.

Any recoveries from the lawsuits would reduce the total losses resulting from the failure of Western Corporate, U.S. Central and three other failed corporate credit unions: Southwest Corporate, Members United Corporate and Constitution Corporate, the NCUA said.

Corporate credit unions provide financing and investment services to the much larger population of retail credit unions.

Shares of The Goldman Sachs Group Inc. added 50 cents to $123.30 in aftermarket trading. The shares ended the regular trading session up $5.07, or 4.3 percent, to $122.73.


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