Why Bank of America Won't Modify Your Mortgage

As a boy, I always loved the story of David and Goliath. Herewith, a modern-day update to the story. If I were a betting man, I'd take Goliath.

I was opposed to TARP ("Troubled Asset Relief Program") from the moment it was announced. I wasn't fully certain of all the reasons at the time, but something about it just didn't feel right. I've done a lot of reading since that day to try to understand it, and after my last call with Bank of America last week I believe I finally have the answer. There's a valid moral question about whether principal reduction on underwater mortgages should be the latest in a long list of government giveaways, and many are opposed to it. This administration, however, seems more than willing to hand out more candy to borrowers.

In the fall of 2008, when it was first proposed, TARP smacked of financial cronyism. Hank Paulson, former chairman of Goldman Sachs, was Treasury Secretary under President George W. Bush. Along with virtually every other financial institution on Wall Street, Goldman Sachs was among the market makers in dodgy financial instruments with disaster written all over them, despite their gold star ratings. (I learned later many of the market makers were selling the market short from another desk in their houses.) It's what they do -- they play both ends of the market. Nobody complains. It's all perfectly legal. So why should we as free Americans reward them for their risky behavior, I wondered? Those were my initial thoughts.

I wrote a letter to the editor of the Deseret News commending Congress for voting down TARP the first time. I've documented most of my feelings about all that on these pages in the past.

Fundamentally, there was a strong negative bias deeply embedded in my DNA against the philosophical roots of the bailouts for the financial institutions. I've been asked why. Would I have chosen a complete financial worldwide meltdown instead?

Here's my summation argument: By bailing out failing companies, Congress in effect decided to confiscate money (I use the word intentionally) from the productive elements of the U.S. economy, companies and individuals, and then made arbitrary decisions about which failing units to transfer it to. With banks who had ignored the risks and invested in sub-prime mortgage instruments assembled in securitization pools, Congress told us, "They are too big to fail. They must be rescued. Without the bailout there will be a worldwide financial catastrophe by Monday morning."

In the case of the auto industry, the government chose to sustain failed companies with obsolete or unsustainable business models. The unions imposed unsustainable demands, the company executives kept passing the higher costs along to consumers, and they deserved to fail. But by choosing to bail them out, the government prevented the resources of these failed and arcane behemoths of industry from being liquidated in the open market where other better-managed companies could have taken those resources and put them to better use in a thriving concern.

So everyone, including George W. "I'm a free market guy" Bush, held their noses and passed TARP. Congress went along with the dire warnings from Paulson and TARP was hatched. We learned later just how much lobbying money went into the re-election campaigns of those who voted "aye."

Back in the day when I studied Economics, it was a basic fact of life (I was told) that in a healthy free market we must permit failure to occur. (Sounds a lot to me like the arguments in favor and opposed to free agency in the pre-mortal world.) Success will be rewarded, but failure will also be punished by investors who will seek a higher return with commensurate risk elsewhere. It sounds so harsh, doesn't it? Survival of the fittest.

With a bailout, I argued at the time, the incentives are reversed. Failing companies are saved from their risky behavior and resources from the taxpayers are shifted arbitrarily by government, rather than being sorted out by the sometimes brutal efficiencies of the marketplace, where profitability is always rewarded. To this day I cannot understand how the bailouts were supposed to be good for our economy. In a country that I know rejects corporate business collusion, why would we as free Americans ever permit the government to pick and choose the winners and losers, when a free market economy does it so much more efficiently? Shifting those decisions to bureaucrats and politicians seemed exactly what we would want to avoid.

Here's a brief history of what happened in the infamous TARP bank bailout package of 2008, and then some comments about one participant's experience with one of the banks deemed "too big to fail" -- the one that services my mortgage:

Bank of America received $20 billion in the federal bailout from the U.S. government through the Troubled Asset Relief Program (TARP) on January 16, 2009, and also got a guarantee of $118 billion in potential losses at the company. ("US gives Bank of America 20 billion dollars in capital injection," Breitbart.com. 2009-01-15. Retrieved 2010-10-17).

This was in addition to the $25 billion given to them in the Fall of 2008 through TARP. The additional payment was part of a deal with the US government to preserve Bank of America's merger with the troubled investment firm Merrill Lynch. (Giannone, Joseph A. [February 5, 2009]. "U.S. pushed Bank of America to complete Merrill buy: report," Reuters).

Since then, members of the U.S. Congress have expressed considerable concern about how this money has been spent, especially since some of the recipients have been accused of misusing the bailout money. (Ellis, David [February 11, 2009]. "Bank CEOs flogged in Washington," CNNMoney.com. Retrieved March 31, 201).

Then CEO, Ken Lewis, was quoted as claiming "We are still lending, and we are lending far more because of the TARP program." Members of the US House of Representatives, however, were skeptical and quoted many anecdotes about loan applicants (particularly small business owners) being denied loans and credit card holders facing stiffer terms on the debt in their card accounts.

According to a March 15, 2009, article in The New York Times, Bank of America received an additional $5.2 billion in government bailout money, channeled through American International Group. (Walsh, Mary Williams [March 15, 2009], "A.I.G. Lists Firms It Paid With Taxpayer Money," The New York Times. Retrieved March 31, 2009).

As a result of its federal bailout and management problems, The Wall Street Journal reported that the Bank of America was operating under a secret "memorandum of understanding" (MOU) from the U.S. government that requires it to "overhaul its board and address perceived problems with risk and liquidity management." With the federal action, the institution has taken several steps, including arranging for six of its directors to resign and forming a Regulatory Impact Office. Bank of America faces several deadlines in July and August and if not met, could face harsher penalties by federal regulators. Bank of America did not respond to The Wall Street Journal story. ("US Regulators to B of A: Obey or Else," The Wall Street Journal, July 16, 2009).

On December 2, 2009, Bank of America announced it would repay the entire US $45 billion it received in TARP and exit the program, using $26.2 billion of excess liquidity along with $18.6 billion to be gained in "common equivalent securities" (Tier 1 capital). The bank announced it had completed the repayment on December 9. Bank of America Ken Lewis said during the announcement, "We appreciate the critical role that the U.S. government played last fall in helping to stabilize financial markets, and we are pleased to be able to fully repay the investment, with interest... As America's largest bank, we have a responsibility to make good on the taxpayers' investment, and our record shows that we have been able to fulfill that commitment while continuing to lend." (Bank of America to Repay Entire $45 Billion in TARP to U.S. Taxpayers, PR Newswire, December 2, 2009; "Bank of America Completes US TARP Repayment." 12-10-2009. Retrieved December 12, 2009).

Now to one man's story about trying to deal with the beast. First, there are no real live people working in Utah for the Bank of America with whom a mortgagor (borrower) can speak. All communication with Bank of America is done via mail or telephone. I have personally had to deal with them at three different physical locations and multiple phone numbers.

My mortgage was originated in 1997. After two and a half years of unsuccessfully attempting to modify my mortgage for a lower interest rate, I finally wrote a letter expressing my frustrations as follows:


November 10, 2010

Bank of America Home Loans Servicing, LP
390 Interlocken Crescent, Ste 350
Broomfield, CO 80021

Bank of America Home Loans Servicing, LP
PO Box 650070
Dallas, TX 75265-0070

Office of the Attorney General, Mark Shurtleff
Utah State Capitol Complex
350 North State Street Suite 230
SLC UT 84114-2320

REF:  Bank of America Mortgage Loan #xxxx

Gentlemen:
I received a telephone call from Bank of America this week informing me, “Your request for a loan modification has been declined.”  Further, I was informed I would be contacted next by a “negotiator” who would share with me my “options” within the next 30-45 days.  Now I’m wondering who the “negotiator” will be representing, and what will be “negotiated.”

Attached (click to enlarge), please find a letter dated March 30, 2010, in direct contradiction to the phone call, stating “You qualify for a permanent modification of your home loan under the Home Affordable Modification Program.”  I was told “we will be sending it to you soon.  Please be on the lookout for a package in the mail and return the Agreement to us by the requested date so that we can finalize your loan modification.”  That was SEVEN months ago!  The mailbox is still empty.

I am hoping what we have here is a case of the left hand not knowing what the right hand is doing.  The question before me now is which Bank of America do I believe?  My approval letter came from the first address listed above.  I have been making my payments to the second address listed above.

The person with whom I spoke most recently indicated I had passed “three stages of approval,” but somehow for reasons not adequately explained as she read from a prepared script that I had failed some test in the “fourth stage” of the approval process.  Until that phone call, I was unaware about anything regarding “stages of approval.”

I have made my trial payments of $xxx per month without fail since the first agreement dated July 3, 2009, after being told there was a “three month” trial period.  If this final stage development in the result of underwriting that was done over a year ago, you undoubtedly are making a decision that should be updated with fresh financial data which I would be happy to supply.  My income is still a fraction of what it once was, but I assure you it is sufficient today to more than qualify under a modification if reviewed and updated.  Fifteen months (two birthdays) have come and gone since the underwriting was originally done.  I’ve made the trial payments faithfully as agreed.  The whole drawn out process has now been in play for FIFTEEN MONTHS!

Your communications to me have now put me in an “awkward position,” to be stating it as simply as I can.  I have acted in good faith.  However, Bank of America has done the opposite, it appears, unless there is a simple explanation you can offer besides another phone call from someone reading a script.

When sharing my dilemma and my frustration this week with a good friend who is also a mortgage broker here in Utah, I was advised to take my case to the Attorney General of Utah, Mark Shurtleff, because in his words, “Bank of America has become the poster child for how not to handle foreclosure procedures.”  I have also copied Shurtleff’s office on this letter.

I am writing to inform you that until I hear back from you (is ten days enough time?) I will proceed as advised and bring action against Bank of America through my legal counsel, who is also copied on this letter for specific performance by Bank of America under the letter dated March 30, 2010 (see attached) upon which I have relied.  You can’t treat your customers this way.

Sadly, instead of resolving my loan with a modification to assist me in keeping my home, I am left to hope I am wrong in the assumption I am being victimized.  I still believe we can resolve the matter amicably.  However, I assure you I will not become another mortgage foreclosure statistic under these specious circumstances without some clarification I hope will be forthcoming.

I have relied upon your representations under the “Making Home Affordable” program.  I will herewith resist any and all efforts, legally or otherwise, from your office unless or until you make good on a modification offer as originally represented.

Thanks for your immediate attention to this matter.

Sincerely yours,

David B. Goates

Another five months elapsed before I heard from them again. Instead of a real person calling me back, I received yet another form letter advising me my note was in default (and has been for two and half years since this process began), and that I had three options: 1) a short sale for which I would not be held liable for the shortfall if I cooperated; 2) a deed in lieu of foreclosure, also helping me avoid liability for the shortfall; or 3) a rental contract if I wanted to continue living in the home after surrendering the deed, also escaping liability for the shortfall. I wrote back and indicated I wanted to stay in my home and that I would begin making the full payments once again, which I have been doing recently. However, the note is still in default technically and the issue is now compounded because the shortfall has increased as the effects of the negative amortization have increased the outstanding balance.

Nowhere in the communication was there a reference to any specific point I raised in my letter. Days later I received a call from a "customer service representative," who once again read from a script and suggested that I apply online for yet another modification application, stating, "The program has been improved and updated."

So I did as suggested and called the department given to me to remain proactive. Rather than discuss a new modification agreement, however, I was given to a collector whose first question was, "When do you intend to make a payment to bring the account current?" I explained why I was calling, was transferred to another representative, then to another who took down my financial information, and concluded by saying, "Based upon the information you have given me today, I am sorry to inform you that you do not qualify for a mortgage modification at this time, Mr. Goates." I asked for the specific reason(s) why I did not qualify. I was put on hold for five minutes, then the line went dead.

I have decided to tell the story publicly now. There remains little hope of reaching a resolution with anyone at Bank of America. And why, you ask?

My mortgage was originated by a little mortgage loan broker, then it was sold in the secondary market and scooped up by Countrywide, who was acquired by BoA, who is merely the servicer of the mortgage. Because my mortgage is owned now by Fannie Mae as part of a larger securitized mortgage pool that was eventually sold to investors, it is virtually guaranteed that the loss on my mortgage will be covered by Fannie Mae via the bailout money available under TARP. 

The banks too big to fail were saved, but the public relations message of wanting to keep borrowers in their home is little more than a scam. There is virtually no incentive for a bank to work with a borrower. They come out whole by systematically removing all their delinquent borrowers from their homes, bidding their total mortgage balance at sale, then cleaning their books and collecting their reimbursement check from the government. 

Despite a warning shot across the bow of Bank of America's ship last week from Utah Deputy Attorney General John Swallow, warning BoA they were not in compliance with Utah statutes by failing to provide local personnel to be available for face to face meetings with residents of Utah, there is little doubt in my mind that BoA, the country's largest bank will find a way to comply and foreclosures will proceed.

Because of our elected representatives in both houses of Congress in Washington D.C., who picked the winners and losers in their infinite wisdom, why would any bank today choose to work with a borrower if the government is waiting in the wings with an open checkbook to cover their losses?

My Top Quote from 1974

Every year, Fred Shapiro puts out his "Top Ten Quotes of the Year."  This year, he created a new list, and gives his reason for his top pick:

Fred Shapiro, Yale University

"People resented the fact that [Hayward] was wanting to get back to his yacht races and other aspects of his normal life when those little problems were dwarfed by the magnitude of what people on the Gulf Coast were dealing with," Shapiro said.

Here's the whole top 10 list (courtesy of the AP):

1. (TIE) "I'm not a witch." Christine O'Donnell, television advertisement, Oct. 4.

1. (TIE) "I'd like my life back." Tony Hayward, comment to reporters, May 30.

3. "If you touch my junk, I'm gonna have you arrested." airline passenger John Tyner, speaking to Transportation Security Administration worker at San Diego International Airport, Nov. 13.

4. "Don't retreat. Instead - reload!" Sarah Palin, Tweet, March 23.

5. "Chi! Chi! Chi! Le! Le! Le! Los mineros de Chile!" Chant at Chilean mine rescue, Oct. 13.

6. "I hope that's not where we're going, but you know, if this Congress keeps going the way it is, people are really looking toward those Second Amendment remedies [it's about guns]. They're saying: My goodness, what can we do to turn this country around?" Sharron Angle, radio interview in January.

7. "We have to pass the [health care] bill so you can find out what is in it." Nancy Pelosi, speech to National Association of Counties, March 9.  [Jimmy Carter must LOVE this woman!]

8. "I'm going to take my talents to South Beach." LeBron James, television broadcast, July 8.

9. "You're telling me that the separation of church and state is found in the First Amendment?" Christine O'Donnell, Delaware senatorial debate, Oct. 19.  (The Associated Press reported the quote: "So you're telling me that the separation of church and state, the phrase 'separation of church and state,' is in the First Amendment?")

10. "They should never have put me with that woman. ... She was just a sort of bigoted woman who said she used to be Labour." Gordon Brown, commenting about a voter he met while campaigning during the British general election, April 28.


Piggybacking on Shapiro, local Deseret News columnist Lee Benson added his own list of Top Ten Quotes with a Utah flavor.

* * *

It seems the standards of public discourse have slipped substantially if all that is required to make Shapiro's Top Ten List of Quotes these days is to say something so totally dumb and stupid it makes people laugh out loud.  Case in point:  Tied at Number One, Christine O'Donnell said a lot of stupid things in her unsuccessful Senate bid this year, including "I'm not a witch," after admitting she had once "dabbled" in witchcraft earlier in her life.

LeBron James, pretending anyone out there really cared all that much, declared he was taking his talents to South Beach.  It has to be right up there on the top ten list of ego indulgence ever foisted on America.

It started me thinking, what's my favorite quote as I thought back on the 2010 topsy-turvy year in politics?  There are so many who have given up hope in politics and politicians in general.  The country is mired in debt that is escalating now at a quicker pace than revenue (taxes) coming into the Treasury.  It's a dismal time for some, reminiscent of the "malaise" Jimmy Carter once described in a pivotal speech that eventually toppled his miserable presidency. 

It now seems there are many who have been transported back to that time in their minds, if not their stated opinion, of where we are in America.

President Ronald Reagan

Then along came Ronald Reagan, who would have none of it.  At the end of 1974, then Governor Reagan of California gave one of his most famous speeches, known as his "City upon a Hill" speech.  Reagan, of course, went on to beat Carter in the 1980 presidential election and touched off a period of economic recovery, national optimism, and sustained prosperity.   I've already quoted Reagan when he gave his famous farewell address in which again he used the image of the "city on the hill."  So it appears Reagan had a "bookend vision" for America when he commenced his bid to be President as early as 1974, spanning the years he served as President until January, 1989. 


Strange, how Carter was advocating back then for a government-run health care solution, and Reagan was opposed.  "There you go again," he said as Carter rattled off his government program wish list.  It would take 30 years, but finally the "progressives" in government imposed their will on health care and now it is the law of the land at a time when America can least afford another trillion dollar entitlement program.

I make no pretensions about government being able to solve all our social problems, even as laudable and desirable as it may seem to provide health care for everyone.  In fact, I would assert with Ronald Reagan that a bloated government with a voracious appetite for tax dollars has become the problem, exactly as Reagan predicted it would.

So as we come mercifully to the end of the 111th Congress, the end of 2010, the year marking the re-awakening of the American citizenry now aroused over the tyrannical treatment it has been subjected to, it is well to hearken back to another time, another year, when the infusion of optimism was as needed then as it is today.

So my favorite quote of 2010 isn't from 2010 after all.  It comes from 1974, but it is worth repeating and setting the tone for the 112th Congress to be sworn in next week, and for all of us to reconsider as we embark on 2011.  Note unapologetic references to God in Reagan's speech, and compare and contrast with quotes from 2010 that were considered noteworthy, not a single reference to God among them:

You can call it mysticism if you want to, but I have always believed that there was some divine plan that placed this great continent between two oceans to be sought out by those who were possessed of an abiding love of freedom and a special kind of courage.

This was true of those who pioneered the great wilderness in the beginning of this country, as it is also true of those later immigrants who were willing to leave the land of their birth and come to a land where even the language was unknown to them. Call it chauvinistic, but our heritage does not set us apart. Some years ago a writer, who happened to be an avid student of history, told me a story about that day in the little hall in Philadelphia where honorable men, hard-pressed by a King who was flouting the very law they were willing to obey, debated whether they should take the fateful step of declaring their independence from that king. I was told by this man that the story could be found in the writings of Jefferson. I confess, I never researched or made an effort to verify it. Perhaps it is only legend. But story, or legend, he described the atmosphere, the strain, the debate, and that as men for the first time faced the consequences of such an irretrievable act, the walls resounded with the dread word of treason and its price — the gallows and the headman’s axe. As the day wore on the issue hung in the balance, and then, according to the story, a man rose in the small gallery. He was not a young man and was obviously calling on all the energy he could muster. Citing the grievances that had brought them to this moment he said, "Sign that parchment. They may turn every tree into a gallows, every home into a grave and yet the words of that parchment can never die. For the mechanic in his workshop, they will be words of hope, to the slave in the mines — freedom." And he added, "If my hands were freezing in death, I would sign that parchment with my last ounce of strength. Sign, sign if the next moment the noose is around your neck, sign even if the hall is ringing with the sound of headman’s axe, for that parchment will be the textbook of freedom, the bible of the rights of man forever." And then it is said he fell back exhausted. But 56 delegates, swept by his eloquence, signed the Declaration of Independence, a document destined to be as immortal as any work of man can be. And according to the story, when they turned to thank him for his timely oratory, he could not be found nor were there any who knew who he was or how he had come in or gone out through the locked and guarded doors.

Well, as I say, whether story or legend, the signing of the document that day in Independence Hall was miracle enough. Fifty-six men, a little band so unique — we have never seen their like since — pledged their lives, their fortunes and their sacred honor. Sixteen gave their lives, most gave their fortunes and all of them preserved their sacred honor. What manner of men were they? Certainly they were not an unwashed, revolutionary rebel, nor were then adventurers in a heroic mood. Twenty-four were lawyers and jurists, 11 were merchants and tradesmen, nine were farmers. They were men who would achieve security but valued freedom more.

And what price did they pay? John Hart was driven from the side of his desperately ill wife. After more than a year of living almost as an animal in the forest and in caves, he returned to find his wife had died and his children had vanished. He never saw them again, his property was destroyed and he died of a broken heart — but with no regret, only pride in the part he had played that day in Independence Hall. Carter Braxton of Virginia lost all his ships — they were sold to pay his debts. He died in rags. So it was with Ellery, Clymer, Hall, Walton, Gwinnett, Rutledge, Morris, Livingston, and Middleton. Nelson, learning that Cornwallis was using his home for a headquarters, personally begged Washington to fire on him and destroy his home — he died bankrupt. It has never been reported that any of these men ever expressed bitterness or renounced their action as not worth the price. Fifty-six rank-and-file, ordinary citizens had founded a nation that grew from sea to shining sea, five million farms, quiet villages, cities that never sleep — all done without an area re-development plan, urban renewal or a rural legal assistance program. . .

Standing on the tiny deck of the Arabella in 1630 off the Massachusetts coast, John Winthrop said, "We will be as a city upon a hill. The eyes of all people are upon us, so that if we deal falsely with our God in this work we have undertaken and so cause Him to withdraw His present help from us, we shall be made a story and a byword throughout the world." Well, we have not dealt falsely with our God, even if He is temporarily suspended from the classroom. . .

We cannot escape our destiny, nor should we try to do so. The leadership of the free world was thrust upon us two centuries ago in that little hall of Philadelphia. In the days following World War II, when the economic strength and power of America was all that stood between the world and the return to the dark ages, Pope Pius XII said, "The American people have a great genius for splendid and unselfish actions. Into the hands of America God has placed the destinies of an afflicted mankind."

We are indeed, and we are today, the last best hope of man on earth.

What's Up with Earmarks?

'Tis the season to be focusing on giving.  However, we must differentiate the Congress's tendency to give what it does not have from the gift exchanges associated with the Christmas season.

I got a private e-mail from someone who had read my blog yesterday, asking this question? "So what's the big deal with earmarks, Dave? Isn't that just the way states get their funding?"

The question itself demands an explanation and indicates how far down the slippery slope we have slid. When business as usual in Washington D.C. is business with no Constitutional oversight or even a nod of acknowledgement that there IS a Constitution by which we are governed that separates the defined powers of government carefully by design, you may know we have strayed far from the path the Founders laid out for us as a nation.

An "earmark" in a piece of legislation is a provision in a spending bill that directs approved funds to be spent on specific projects, or that directs specific exemptions from taxes or mandated fees.

They have taken on a personality all their own in recent years, some being designated as "hard earmarks" embedded in the text of Congressional committee reports which have the effect of law, and "soft earmarks" that don't have the effect of law but are acted upon as if they were binding.

Bob Bennett (R-UT) has "distinguished" himself (I use quotes intentionally) as a senator who knew how to "bring home the bacon" (hence the phrase "pork barrel spending") because of his position as a senior member of the Senate Appropriations Committee. He consistently defended the practice of earmarks, and as we saw yesterday in his advocacy of the omnibus bill remains unrepentant and defiant in defense of the practice.

Senator-elect Mike Lee (R-UT)

Back on March 17, 2010, then-Senate candidate Mike Lee (now Senator-elect) dared to raise an important question that went unanswered at the time: "Senator Bennett, why didn't you vote to support legislation banning earmarks for 2010 and 2011?" The Senate voted on the measure (Senator DeMint's Amendment 3454 to H.R. 1586), and Bennett was one of just a handful of Senators to abstain from voting. Lee said at the time, "Earmarks direct taxpayer dollars to specific recipients without review or public hearing. They are often wasteful pet projects and a reckless mismanagement of public funds for programs and projects not authorized by the U.S. Constitution. Though small in sum when compared to the total federal budget, they are an easy way to determine whether a Senator will adhere to the restraints found in the Constitution."

Noting Bennett's glaring absence for the vote, Lee said:


"Earmarks are an unfortunate footprint from where the Republican Party took the wrong path. True small-government conservatives, and even some conscientious Democrats, supported this measure to put a hold on a system that lends itself to abuse. We need an open, honest debate about earmarks, and missing a vote on something that critical is inexcusable. I think it's important for Utah, with its great national reputation for conservatism and thrift, to have representatives who will work to rein in this kind of system, rather than just look the other way."

The fiscally sound amendment had bipartisan support, and Utah's other Senator, Orrin Hatch, voted for it. Deficit spending facilitates the continuing growth of the federal government. Lee continued:

"It is far too tempting to shift the cost of today’s federal expansion to future generations. Until we require Congress to operate under a balanced budget, that expansion will continue. A balanced budget amendment is essential to restoring the original, proper role of the federal government."

Lee's critics continue to brand him as a wild-eyed conservative radical ideologue.  Well, if these are the statements of a radical, I say it's time to bring on the radicals!

The senators and congressmen who routinely insert these earmarks into legislation over which they directly preside as the bill wends its way through committee votes (assuming they observe the constitutionally-mandated practice of all spending bills originating first in the House through committee hearings before being sent to the Senate) often specify amounts of money designated for a favored organization or project in his/her home state or district.

The federal Office of Management and Budget defines earmarks as funds provided by Congress for projects or programs where the congressional direction (in bill or report language) circumvents Executive Branch merit-based or competitive allocation processes, or specifies the location or recipient, or otherwise curtails the ability of the Executive Branch to manage critical aspects of the funds allocation process. This usurpation of the defined privileges of the Executive Branch by the Legislative Branch has led to the routine of massive overspending, soaring national debt and the out-of-control federal deficit. The checks and balances designed into the Constitution have been badly abused.

There have been attempts in recent years to define earmarks in ethics and budget reform legislation, but because the earmarking practice is controversial and the effect would be to curb Congressional power, little has happened to stop the practice.

Congress is required by the limits specified under Article 1, Section 9 of the Constitution to pass legislation directing all appropriations of money drawn from the U.S. Treasury. This provides Congress with the power to earmark funds it appropriates to be spent on specific named projects. The earmarking process has become a regular part of the process of allocating funds within the Federal government.

However, earmarking differs from the broader appropriations process in which Congress grants a yearly lump sum of money to a Federal agency. These monies are allocated by the agency according to its legal authority and internal budgeting process. With an earmark, Congress directs a specified amount of money from an agency's budget to be spent on a particular project.  That practice must stop to begin restoring budgetary and fiscal sanity.

In the past, members of Congress did not have to identify themselves or the project. If there is any good news here, in more recent years earmarks are at least now associated and can be identified with requesting members in conference reports and members must certify that they and their immediate families have no direct financial interest in the earmark.

Senator Bob Bennett (R-UT)

In March, 2010, the House Appropriations Committee implemented rules to ban earmarks to "for-profit" corporations. According to the The New York Times, approximately 1,000 such earmarks were authorized in the previous year, worth $1.7 billion. (Eric Lichtblau, "New Earmark Rules Have Lobbyists Scrambling", The New York Times, March 11, 2010).

That said, here's my problem with earmarks, and it became a defining issue for me in my support for Mike Lee as he opposed Senator Bennett. The issue is one of accountability -- there is none. The process is not transparent at all, except to look up the name of the member of Congress who is requesting the spending in his home state. Under the present practice, Congressional members can secure hundreds of millions of dollars of funding for a project without subjecting it to debate by their colleagues in the Congress, or to the scrutiny and oversight of the public. Because earmarks are hard to identify, some members are tempted to use them to secretly award their biggest campaign contributors or exchange them for bribes. I make no direct allegations here, just sayin'. . . it could happen.

The secrecy of the earmarking process invites unethical and corrupt behavior, where lobbyists and contractors and well-connected individuals give campaign contributions to legislators in return for federal funding. The abuses could be legion (we'll never know the full extent), but rarely do they rise to the open sunlight of scrutiny in the public arena because the practice is secretive by design.

Generally, the more powerful members of the U.S. Congress get more earmarks. The good-old-boy seniority system is corrupt on its face and must be dismantled to gut this practice of earmarking once and for all. It's a false premise to run on a record of bringing home the bacon, using U.S. taxpayer money to fund state projects.

Members of the Appropriations Committees in the House and Senate (read Bob Bennett) are in the best position to secure earmarks. This was cited throughout the campaign as the reason to vote for Bennett in Utah. They can insert them into spending bills during closed committee meetings, with no public scrutiny. Earmarks are also offered to members to entice them to vote for a bill they otherwise might not vote for. Ask yourself, was earmarking used to round up enough votes for Obamacare a year ago? If you answered, "NO," you are excused.

Advocates who defend this practice like Senator Bennett argue that directing money to particular purposes is a core Constitutional function of Congress. If Congress does not make a specific allocation, the task falls to the Executive Branch. In their minds, there is no guarantee that the allocation made by executive agencies will be superior to Congress's, especially when the opposing party is in power. Presidents and executive officials have historically used the allocation of spending to reward friends and punish enemies.

The process of earmarking has been substantially reformed since the beginning of the 110th Congress. That's the good news -- the trend is positive -- but there is still a long way to go to clean up the practice.

The self-imposed limitation is that member-directed projects cannot exceed 2 percent of the federal budget. That's how you get to 6,631 earmarks totaling $8 Billion in this last omnibus spending bill monstrosity and justify it with a straight face.

Senator Bennett was fond of saying, "You just don't know how things work in Washington, D.C." To which the voters in Utah responded, "Yes, Senator, actually we DO know how things work, and we're seeking to change things."  Out with the old and in with the new.

For me, Mike Lee will be a refreshing and invigorating agent of change.

Bob Bennett: Consistent and Tone Deaf



Boston Harbor, 1773

Two hundred and thirty-seven years ago last night (can it really be just a "coincidence?"), a group of colonists disguised as Indians boarded British merchant ships and dumped an estimated £10,000 worth of tea into Boston Harbor.

John Adams described that moment in our history as the “grandest event which has ever yet happened since the controversy with Britain opened.”  The struggle for independence from Britain would drag on for eight long and frustrating years before the American dream of freedom became reality as the British redcoats succumbed to the ragtag band of patriots and the Revolutionary War finally ended. 

Many people believe the Boston Tea Party was just a protest about an unfair tax.  But it was infinitely more than that.  The 1773 Tea Party was a manifestation of the colonists' protest against the process by which the British government taxed them.  It was the methods the British throne was using to govern them that aroused them to action.

Senator Harry Reid (D-NV)

Last night, our forefathers would have been proud.  Another major victory against what can only be described as a tyrannical process was won when Senate Majority Leader Harry Reid (D–NV) was forced to drop his $1.27 trillion, 1,924-page omnibus spending bill.  Orrin Hatch (R-UT) called this bill "dreadful" and opposed it vociferously.  He's gone to school on Bennett's demise, and is already running hard in his all out social media blitz to bid for re-election in 2012.

The problem with Reid’s omnibus spending bill was not just its size, but the process by which it was drafted and forced on the American people.  There was no committee review.  No one was given the chance to read the bill before it came up for a vote.  It was being crammed down at the last minute again. 

The utter collapse of this "dreadful" bill was a complete rejection of that way of doing business in Washington.  It's historic in its implications because it came at the end of the 111th Congress, the lowest rated Congress since Gallup has recorded public opinion. 

Senator John McCain (R–AZ) told National Review:  “I know this is a seminal moment, because for the first time since I’ve been here, we stood up and said ‘enough.’”  Classic quote!!

Lame Duck Senator Bob Bennett (R-UT)

Last night’s victory could not have happened without the modern reincarnation of the Tea Party.  Here's the saddest part of the story for me personally.  Once again, lame duck Senator Bob Bennett (R–UT), who was resoundingly rejected at the nominating convention, lined up on the wrong side of history on his way out the door after eighteen years.  He was working “actively to round up as many as nine potential Republican votes” for the omnibus bill.  He never heard the electorate, and continues to turn a deaf ear right to the bitter end.  "That's my intention," Bennett told The Hill when asked if he would support the package.  Bennett said earmarks in the bill might give some of his GOP colleagues reason to hesitate but wouldn't affect his vote. "It will be tough for some, but not for me," he said.  During his re-election bid he not only refused to oppose the earmark practice, he defended it.  And we all know how that ended at the convention.

The bill was tinselled with over 6,000 earmarks worth $8 billion, a "mere fraction" of the total size of the bill, but come on, they're trying to pull this crap within a month and a half of a stunning repudiation of the "business as usual" way of doing things in Washington D.C.?  Even President Obama described it as a "shellacking."  It appears, the will of the American people will not be denied, even in this lame duck Congress.

To counter Bennett's actions among his Republican colleagues, Senate Minority Leader Mitch McConnell (R–KY) worked in direct opposition to Bennett with those nine Republicans.  Many of them are members of the Senate Appropriations Committee.  McConnell asked them to drop their support for the bill. 

Senator Thad Cochran (R–MS), the ranking member of the Appropriations Committee, had 281 earmarks worth $561 million in the bill.  McConnell himself had 48 earmarks worth $113 million.  It's shameful, but this time they got it right at long last when the chips were down.  I'm encouraged, and I'm the forever optimist.

But the daylight has finally dawned, it appears.  McConnell told National Review afterward: “We decided that we’re not going to pass a 2,000-page bill that nobody has seen since yesterday. That’s not the way to operate and that’s not the message from the November elections.”  May history be made!!

This is fabulous news, America!  It can only be considered a victory!  Not every member of the unpopular 111th Congress has gotten the message of the November elections.  By the time the next election cycle rolls around, watch for the remaining clingers on to the Obama agenda to be gone altogether if this emerging 112th Congress sticks to its knitting and continues to listen to their constituents.

According to Gallup, the American people dislike this 111th Congress more than any other Congress in the history of public opinion data gathering.  Eighty-three percent of Americans disapprove of the way Congress is handling its job, while only 13 percent approve.  It was the faith of Thomas Jefferson that the majority of informed Americans would almost invariably eventually get it right.  That's why he never hesitated to put so much power into the hands of the citizens, and eschewed big government.  He spread power around intentionally for these very reasons, and once again the Founders are exonerated.

That is the worst approval rating in more than 30 years of tracking congressional job performance. 

Last night Speaker Nancy Pelosi’s (D–CA) House also voted to prevent a massive tax hike on the American people.  It now looks like Congress will pass a simple bill that freezes spending through February of next year.

Mercifully, the 111th Congress is toothless at last.  And Senator Bob Bennett, the first harbinger of the electorate's wrath against incumbents in 2010, finally goes with it.

To the bitter end, Senator Bennett remained consistent and tone deaf.