Michelle Malkin » Rest of the story: Obama’s discount home loan

Rest of the story: Obama’s discount home loan

By Michelle Malkin • February 19, 2009 12:37 PM

From Judicial Watch’s Jill Farrell (background links/info here):

The Federal Election Commission (FEC) notified Judicial Watch this week that it has “closed the file” on our complaint against Senator Barack Obama for allegedly accepting a below market rate mortgage loan in 2005 not available to the general consumer. In its factual and legal analysis, however, the FEC does confirm that Obama obtained a discounted loan but said no laws were violated.

So, to sum: Yes Barack Obama did receive a special below-market loan the rest of us couldn’t get. And a big “no” to the idea that he ought to be held accountable for it. Upset? So are we.

Here’s a bit of the back story.

According to Judicial Watch’s original FEC complaint, filed July 8, 2008, Obama reportedly received a home loan of $1.32 million at a rate of 5.625 percent, although the average going rate on that day according to two different surveys was between 5.93 and 6 percent. Unlike what was reportedly available for the general consumer, this special below market “super super jumbo” loan, was secured without an origination fee or discount points.

According to The Washington Post, which first raised questions about Obama’s mortgage, the favorable interest rate would save Barack Obama $300 a month, which over the life of the 30-year loan, would be at least $108,000. Judicial Watch contends these preferential loan terms constitute an illegal corporate campaign contribution to Obama.

As Judicial Watch noted in its complaint, Northern Trust has supported Barack Obama’s political campaigns for elected office since 1990. Moreover, Northern Trust Vice President John O’Connell essentially admitted the company provided Obama preferential loan terms because of his position in the U.S. Senate. (Obama was a senator at the time.) “‘A person’s occupation and salary are two factors; I would expect those are two things we would take into consideration,’ O’Connell told The Washington Post [emphasis added]. “This was a business proposition for us.”

Now, the FEC’s legal analysis dismissed O’Connell’s admission. The FEC based its decision to exonerate Obama largely on the fact that Northern Trust claims it provided preferential terms to other “similarly situated borrowers” in addition to the Obama. Northern Trust’s new explanation was that 8 of 14 of similarly situated borrowers (including Obama) received a mortgage loan discount.

Who are these unnamed “similarly situated” borrowers? Are they also elected officials? We don’t know because neither Northern Trust nor the FEC have been forthcoming with any details.

Needless to say, as I told the press this week, for the FEC to base its decision to excuse Obama on the fact that a few other unnamed borrowers also received sweetheart mortgages seems irresponsible. Look no further than the Countrywide which doled out corrupt to numerous public officials to see the massive hole in that logic.

The fact is Northern Trust’s president admitted Obama received the loan, in part, based on his position. This is improper and almost certainly constitutes an illegal campaign contribution (or gift). In our view, the FEC’s response is inadequate and it certainly does not serve the public’s interest.

Posted in: Subprime crisis

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#101

On February 19th, 2009 at 4:32 pm, txvet2 said:

Oh, I thought you might be European and rolling your rrrr’s.
#102

On February 19th, 2009 at 4:32 pm, chapoutier said:

Only a lawyer could claim a client that never paid his bills could be his “best client.”

No. Only an attorney that has to make so many billable hours a year and is probably not an equity partner.
#104

On February 19th, 2009 at 4:39 pm, WarEagle82 said:

Oh, yeah, they were almost always equity partners. Several of the worst ones were named partners on the letterhead. Strange breed indeed.

On February 19th, 2009 at 4:32 pm, chapoutier said:

Only a lawyer could claim a client that never paid his bills could be his “best client.”

No. Only an attorney that has to make so many billable hours a year and is probably not an equity partner.
#105

On February 19th, 2009 at 4:42 pm, chapoutier said:

All right. Then they are dumb.
#106

On February 19th, 2009 at 5:03 pm, wayiwalk said:

Anyone who sticks up for any politician that gets a sweetheart deal like that has got their eyes closed and their brain turned off.

Heck – if you get a below market rate loan from a family member, much less a bank – the IRS wants you to report it as income.

This is stealing from other taxpayers, essentially. It’s why the IRS goes after people who don’t report income.

Another example of the two-tiered system in the US. There’s the very rich bankers who play for the pull for favorable rules and decisions from politicians, and the politicians who play that game on the other side.

This doesn’t pass the fairness check in any way shape or form.
#107

On February 19th, 2009 at 5:04 pm, wayiwalk said:

Note in the prior post – by loan – I’m talking about a home mortgage loan.
#108

On February 19th, 2009 at 5:05 pm, WarEagle82 said:

Well, then, RICH LEFTISTS are uncharitable and cheap. But they seem to love making conservatives pay for THEIR pet projects with tax dollars when they wouldn’t use their own money to fund these idiotic ideas.

On February 19th, 2009 at 4:17 pm, chapoutier said:
WarEagle, there is a difference between uncharitable and cheap.
#109

On February 19th, 2009 at 5:13 pm, Ulthwithian said:

chap: Embroiled again?

Ah well. What I can say about this is that almost all professional codes of ethics require not only lack of unethical behavior but also the lack of _appearance_ of such.

Therefore, President Obama should take more steps than the average citizen if he wishes to avoid calls of unethical treatment.

As people have shown here, knowing the average rate doesn’t help so much as the variability of that rate. It’s quite easy, if the SD is known, to construct the confidence interval for this. In fact, I can backtrack from this.

If you assume that interest rates on loans are normally distributed (which is being gracious to President Obama), then to find out whether or not there is an outlier at a 95% confidence level would be…

x-bar – x = 1.645s (one-tailed test)

0.305/1.645 = s

s = 0.185

Therefore, if the standard deviation of the distribution is less than 0.185, there is an issue, statistically speaking. (Note: This assumes that the SD can be known. SEM can be used to approximate SD.)

Now, if the data is skewed right, you could use a Beta distribution to model the distribution, but this increases the critical SD.
#110

On February 19th, 2009 at 5:27 pm, corkie said:

On February 19th, 2009 at 4:30 pm, WarEagle82 said:

Only a lawyer could claim a client that never paid his bills could be his “best client.”

Never? Or hadn’t paid, yet? Sometimes it makes sense to give a customer some extra leeway.

It seems as if it was being handled correctly. The partner managing the relationship should continue to advocate for the client while communicating the pressure to discontinue work.

This way, the client doesn’t feel dumped or threatened yet also feels pressure to pay.

How did it turn out? Did you ever collect? Were there future billings that were collected?

The REAL question is why any firm would need software to reveal that they hadn’t been paid over $1m in fees?
#111

On February 19th, 2009 at 5:32 pm, shooter said:

What do you wanna bet obama and bitter half are in line for a mortgage bailout, a piece of the gov’t buy down!
Ya know he did take a pay cut. We better keep an eye on the obamas.
#112

On February 19th, 2009 at 6:38 pm, chapoutier said:

On February 19th, 2009 at 5:13 pm, Ulthwithian said:

Uh…yeah…what you said.
#114

On February 19th, 2009 at 9:14 pm, Republicanvet said:

As Judicial Watch noted in its complaint, Northern Trust has supported Barack Obama’s political campaigns for elected office since 1990. Moreover, Northern Trust Vice President John O’Connell essentially admitted the company provided Obama preferential loan terms because of his position in the U.S. Senate. (Obama was a senator at the time.) “‘A person’s occupation and salary are two factors; I would expect those are two things we would take into consideration,’ O’Connell told The Washington Post [emphasis added]. “This was a business proposition for us.”

So a Joe-the_Plumber type, because of his occupation, would have to pay a higher rate because of what he does?

Or have to wait to buy a home because he can’t afford the high rates because of favoritism?

Where are the whiners complaining about predatory lenders that force the unconnected to pay higher rates or who only qualify for subprime loans?

Good ol Urkel. Looking out for the little guy.
#115

On February 19th, 2009 at 10:45 pm, hitcharide said:

I don’t understand why they gave obummer a loan in the first place. Isn’t the messiah supposed to receive GIFTS? Do not anger a jealous obama/messiah lest ye be cast into the lake of burning mortgages!
#116

On February 19th, 2009 at 11:26 pm, nostradamslives said:

OBAMA has gotten EVERYTHING in his life…handed to him.
Of course a “goverment oversight agency” would not find “Obama guilty” of…anything because then the general public will SEE that “behind the curtain, and the smoke/mirrors” is a SMALL man pulling strings/handles just like in the Wizard of Oz. Except in this case it is the HANDLERS of Obama and the MONEY CHANGERS like Soros (admitted Nazi helper during the War).
Pathetic yet not surprising (sadly).
Jeffrey Schrembs, American Citizen
#118

On February 20th, 2009 at 12:08 pm, vickisoup said:

I know two people, unrelated to one another, who cake-walked through Chapter 13 bankruptcy this month. CAKE-walked. Both had used their homes like an ATM machine, draining every penny of equity nearly the minute it was earned. Each was able to completely discharge their HELOC’s as well as their combined $175k in other unsecured consumer debt. Together they will average a 75% windfall for their hangnail’s worth of pain, saddling the taxpayers with the fallout. Both are now worried….worried that, by ridding themselves of that pesky HELOC, their home loans may no longer be higher than their homes’ values so that they may be inelligible for the newest bailout.
Shame on them both. Shame on them both. I hate to repeat myself, but SHAME ON THEM BOTH.
They will not be receiving Christmas cards from me this year, and I am having a very hard time hiding my resentment. Welcome to Obama’s America, where relationships are destroyed, babies are killed, and Acorn thugs break into homes they don’t own.
And today marks only one month of this administration.