Monday, April 27, 2009

Senator Feinstein fly’s under the radar while the radical Barbara Boxer gets the attention

California has two Democrat Senators. One of them, the elevationally challenged Barbara Boxer, is an unmitigated socialist and espouses strict doctrinaire Democrat policies regardless the effect on the country. Boxer is a shrill (like Hillary Clinton) critic of anything resembling opposition to her causes, which are many and include whatever the radical left fringe wants.

The other California Senator, Diane Feinstein, benefits from having Boxer as the other senator from California. Whereas Boxer is shrill, Feinstein is soft spoken; whereas Boxer is a loud vocal proponent of socialism, Feinstein who likely shares the same views is not as prominently vocal – being content to let Boxer be the lightening rod for critics. However, although Feinstein projects a different image in contrast to Boxer, she is no less doctrinaire in her support of radical left goals.

There is one difference between Boxer and Feinstein that is overlooked and casts her in an unfavorable light, perhaps worse than Boxer – Feinstein can be said to be corrupt, and there is no evidence that this can be said of Boxer.

When the new Congress convened in 2009, Senator Dianne Feinstein introduced legislation to give $25 billion in taxpayer money to a government agency that had just awarded her husband's real estate firm a lucrative contract to sell foreclosed properties at compensation rates higher than the industry norms.

Feinstein's intervention on behalf of the Federal Deposit Insurance Corporation was unusual because Feinstein is not a member of the Senate Committee on Banking, Housing and Urban Affairs which has jurisdiction over FDIC. Moreover, the FDIC is supposed to operate from money it raises from bank-paid insurance payments and not with federal money.

An investigation by The Washington Times shows that Senator Diane Feinstein first offered to help the FDIC obtain money for its effort to stem the rise of home foreclosures on October 30th. Her letter was sent very shortly before the agency determined that CB Richard Ellis Group (CBRE) - the commercial real estate firm that her husband Richard Blum heads as board chairman - had won the competitive bidding for a contract to sell foreclosed properties that FDIC had inherited from failed banks.

About the same time of the contract award, Feinstein’s husband, Richard Blum's private investment firm reported to the Securities and Exchange Commission that it and related affiliates had purchased more than 10 million new shares in CBRE. The shares were purchased for the going price of $3.77; CBRE's stock closed not long after at $5.14.

Spokesmen for the FDIC, Senator Feinstein and her husband Richard Blum's firm told the newspaper that there was no connection between the legislation and the contract signed Nov ember 13th, and that the couple didn't even know about CBRE's business with FDIC until after it was awarded.

What would one expect them to say; “yes, we are crooks?”

The senate has something called “ethics rules” which are strictly applied to Republicans but ignored for Democrats regardless which party has control of the senate. This is because Republicans like to portray themselves as fair and impartial on the matter of ethics and the Democrats just don’t give a damn. For those interested, the Senate ethics Rules state members must avoid conflicts of interest as well as "even the appearance of a conflict of interest." A fair question is whether Feinstein violated the latter provision by creating the appearance that she was rewarding the agency that had just hired her husband's firm (if not also the former).

"This clearly gives the appearance of a conflict of interest," said Kent Cooper, a former federal regulator who specializes in government ethics and disclosures. "To maintain the people's trust in government, it is incumbent on a legislator to take the extra steps necessary to ensure that when she introduces any legislation that it does not cause people to question her motives or the business activities of her spouse."

Mrs. Feinstein and Mr. Blum, a wealthy investment banker, is a power couple in both Washington and California; they even sat behind President Obama during his inauguration in January. Diane Feinstein also is mentioned by Democrats as a possible candidate for California governor.

The Blum firm is known for its commercial real estate services and will be paid a monthly maintenance fees for each foreclosed property it handles, as well as commissions and incentives. The total compensation can range from 8 percent of the sales price on many residential properties to 30 percent for properties worth $25,000 or less. Experts say most real estate agents earn no more than 6 percent on residential, even on foreclosed properties, and CBRE doesn't have as much experience in foreclosure sales as other firms.

"From everything I know about it, it is a very sweet deal and went to somebody who is less than qualified in dealing with foreclosed residential properties. Their expertise is in commercial real estate," said Cynthia Kenner, a Colorado real estate agent who specializes in selling bank-owned residential properties and last year helped sell more than 600 foreclosed properties.

"There are companies that are more experienced in selling such properties than CB Richard Ellis," she added.

Of course the FDIC said politics was not involved in its decision, noting that CBRE (Blum’s firm) was "deemed to be technically qualified and their fee structure fair and reasonable." That means the competition did not mandate the contract go to the lowest bidder necessarily, officials said.

Feinstein spokesman Gil Duran said there was no conflict of interest between Mr. Blum's firm getting the contract and the senator's legislation. He said she introduced the legislation because it would help prevent home mortgage foreclosures at a time when many Californians were in danger of losing their homes.

"She was not aware of the contract before she introduced the legislation," Mr. Duran said. "There is no evidence of any relationship or conflict between this foreclosure relief bill and the contract. Senator Feinstein complies with the rules and guidelines of the Ethics Committee."

Mr. Blum declined through a spokesman to comment.

CBRE spokesman Robert McGrath said the firm had $5 billion in revenues last year and was "well positioned" to help the FDIC as the nation's largest commercial real estate services company. Its pricing was at market rates after a highly competitive bid process, he said. [This is not true because market rates were 6%, not 8 to 30% given to CBRE.]

"We believe the FDIC will realize significant value from all the work we perform on their behalf," he said. [So will Feinstein’s husband.]

A little background: “Mr. Blum became chairman of CBRE in 2001 and has played a major role in its corporate business strategies. He led a buyout of the company, first taking it private and then a few years later taking it public again. He runs an investment management firm called Blum Capital Partners, which controls the second largest block of publicly traded CBRE stock - 38 million shares or 14.4 percent.” [WorldNet Daily]

Mr. Blum’s position as chairman of CBRE is not full time. He sets up partnerships through Blum Capital Partners that invests money for its clients and its owners. Blum reported owning more than $3 million in CBRE stock through various partnerships at the end of 2007, according to Mrs. Feinstein's personal financial disclosure statement.

CBRE's initial contract is for three years. The FDIC has the option to extend it for three two-year periods, records show. The contract calls for the real estate firm to be used "as needed."

In March, the FDIC said it had assigned CBRE 507 properties for disposal, valued at $221.7 million. In March, the company already had 23 FDIC properties valued at $11 million under contract to be sold.

Over the past 16 months, 50 banks have failed and more are expected to close. As a result, nobody knows how much CBRE will be able to earn over the life of the FDIC contract.

The FDIC contract came at a good time for CBRE because it was hit hard by the economic downturn. The company saw its revenues and income slide in 2008 and its stock price tumbled from $24.50 in May to below $4 in November. A few days later, CBRE raised $207 million through a stock offering that sold for $3.77 a share. Mr. Blum's investment partnerships bought 10.6 million shares at the market price of $3.77. The stock offering was announced a couple of days before the signing of the FDIC contract.

The FDIC contract with CBRE is on highly favorable terms according to real estate experts who reviewed the terms at the request of The Washington Times.

CBRE is to be paid under a three-tiered system with sliding rates, according to a rate proposal provided to the newspaper under a Freedom of Information Act (FOIA) request. One example: CBRE gets to charge a setup fee of $450 for each residential property and $600 for each commercial property it takes over from the FDIC.

"That is highly unusual," said Ms. Kenner, the Colorado-based foreclosure expert. She said she does not collect a separate setup fee and was expected to do such work as part of her commission.

The FDIC said: "The setup fee is for setting up the assets in the contractor's database and the FDIC database. In the private sector, a similar fee is usually charged as an administrative fee, document preparation fee, or asset handling fee."

According to other information reported by WorldNetDaily, Milt Shaw, senior vice president of LPS Asset Management Solutions, which manages nearly 20,000 foreclosed properties for banks and other clients, said his firm did not charge setup fees. Others in the industry also called the fee unusual. CBRE also gets to collect a monthly administrative management fee of at least $200 for each residential and $1,600 for each commercial property in its inventory. Ms. Kenner and Mr. Shaw said fees for management services often come out of the sales commissions at closing, but the biggest fees for CBRE will come from the sales.

CBRE charges commissions of 8 percent of the sales price on residential and 7 percent on commercial properties worth up to $1 million. It also is entitled to an incentive fee of as much as 2 percent of the sales price for properties it sells within six months. The incentives start at two percent for residential properties worth between $25,001 and $500,000 and for commercial properties worth between $25,001 and $1 million before dropping to 1.5 percent.

Six percent commission is a standard rate for residential property in the private sector, but some experts said many buyers negotiate a lower fee; it is interesting that in the down market CPRE was able to negotiate a higher than normal rate.

Ms. Kenner, who deals in foreclosed residential properties, said she charges 5 percent to 6 percent, depending on the market, adding that she shares the fee with the buyer's agent and often with the asset management company.

Mr. Shaw said incentive fees are not that frequent in the private sector, but when he sees them they are usually smaller than 2 percent and pegged for a specific market.

The FDIC defended the fees, saying they were "intended to incentivize the contractors to sell the assets as quickly as possible for the benefit of the FDIC and to protect the insurance fund."

"The private sector normally does not have an urgency to sell assets quickly and thus do not normally have any incentive to do so," the agency said.

Mr. Shaw disagreed and said his private sector clients - banks and loan servicers - also wanted their properties sold quickly.

Other real estate specialists in the know say this was a very sweet deal for Feinstein’s husband.

Senator Diane Feinstein introduced her bill Jan. 6, seeking $25 billion from the government's bailout fund know as the Troubled Asset Relief Program to help bankroll an FDIC proposal to systematically prevent home mortgage foreclosures by expediting loan workouts and expanding federal loan guarantees.

It’s an interesting ethics question whether Mrs. Feinstein had an obligation to track her husband's business dealings with the government to avoid any appearance of a conflict of interest.

"I find it amazing that they did not know that CB Richard Ellis had gotten the FDIC contract," said Mr. Cooper, the ethics expert and former regulator. "Why wasn't she or a staff person regularly watching for possible conflicts?"

Those familiar with the workings of the Ethics committee as far as Democrat ethics are concerned believe the Senate Ethics Committee will not take any action and will come up with some sort of implausible reason such as Feinstein’s legislation did not directly financially benefit her husband. Apparently for Democrats it is not sufficient that Feinstein’s legislation will indirectly, but substantially, benefit Feinstein and her family.

Robert L. Walker, a former chief Senate Ethics Committee counsel, said the Senate usually relies on the senator to police against improper appearances, but the policy "assumes that a senator and his or her staff will know about and remain alert to investments and other financial ties, including family financial ties, which could be the basis of such appearance concerns."

Senator Feinstein (one of the wealthiest members of Congress) declined to answer detailed questions about the steps she takes to avoid conflicts. Together Feinstein and her husband are worth at least $52.3 million, according to her 2007 personal financial disclosure forms filed with the Senate and analyzed by the nonpartisan Center for Responsive Politics, which monitors money and politics.

Barbara Boxer may be a loud mouth radical extremist but her cohort Diane Feinstein votes the same way and additionally has suspect ethics.


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