IF TRUE, IT’S TREASON – CBO Director Douglas Elmendorf and the Impact of the Foreclosure Crisis


During the fall of 2010, Lan T. Pham, PhD was a “senior staffer financial economist” at the Congressional Budget Office.  She was fired after less than three months on the job.


In February she tried to go public with details about her experience working for Mr. Douglas Elmendorf, first by releasing the story to the Wall Street Journal. But when the WSJ’s story, quite predictably in my mind, treated her like a disgruntled ex-employee, she decided she had to do more.  So, a few days ago, Dr. Pham first approached Zerohedge.com, and then made public a letter she had written to Senator Grassley, ranking member of the Senate Judiciary Committee, on February 23 of this year.


Janet Tavakoli, President of Tavakoli Structured Finance in Chicago… and a hero of mine, by the way… picked up the letter and ran a piece about it on her HuffPo blog, referring to it as “Today’s Most Important Finance Story.”  Tavakoli is brilliant when it comes to all things structured finance, like mortgage-backed securities and derivatives.  I read a book she published a few years ago, titled: Dear Mr. Buffett,” which led me to read others she had written like: Structured Finance and Collateralized Debt Obligations,” which is where I learned enough to write many of the articles posted on Mandelman Matters over the last three plus years.  (And yes, I realize that makes me sound like a nerd with no life.)


Janet’s HuffPo piece and the Zerohedge story covered what Dr. Pham described in her letter to Senator Grassley in a balanced, perhaps slightly careful way, in my view, primarily covering how the CBO had treated her as related to the “robo-signing scandal,” which had broken in the mainstream media during September of 2010.


Dr. Pham wrote about the implications of robo-signing, MERS, of a potentially broken chain of title, how all of that might impact investors and homeowners… and she did so in-sync with something that might have been written by Georgetown Law Professor Adam Levitin.  In response, according to Dr. Pham, CBO’s leadership responded as follows…


The emerging foreclosure fraud problems in September 2010 were due to “media sensationalism,” and “the kind of event of the moment where we should be adding skepticism,” and “not just repeating the hype in the press,” and discussing it, “lacks judgment about what is important.”


I’m not going to spend any time on this aspect of her story, even though I know some of my readers just can’t seem to get enough “securitization failure,” and “robo-signing fraud and forgery,” and “MERS stole my home,” back story.  And I’m not going to devote any time to those aspects of Dr. Pham’s story for three reasons that I want to make clear.


For one thing, it’s reached the point that you can catch a story about fraudulent documents embedded in recorder of deeds offices pretty much every night on either Rachel Maddow or Dylan Ratigan’s shows on MSNBC.  In fact I just saw that Jeff Thigpen, the Recorder of Deeds from North Carolina was just on Rachel’s show last night.

(I did a podcast with Jeff covering everything said on that show and more last December, and you can catch it HERE, if you haven’t listened already… he’s a great guy and explains things very clearly and with that southern style of sarcasm that always makes me smile.)


The second reason I’m not addressing those aspects of Dr. Pham’s experience at CBO, is that I’m not even sure that I think the CBO was all that wrong to suppress her desire to voice an opinion on the impact of robo-signing and the related subject matter in her role as a financial economist at the CBO.  For the most part, that’s because of the timing, the story only broke in mainstream media in September of 2010, and it was more than a year later before the “settlement” was announced… but besides that… even today, I’m not sure that anyone could credibly quantify any sort of financial risk related to those inadequacies, or illegalities, that seem to permeate the foreclosure process.


And third on my list of reasons for ignoring those aspects of Dr. Pham’s story is that I’m still not at all sure that the courts care all that much that the assignment of Deed of Trust was signed by Mickey Mouse, or even that the law views homeowners as having been damaged by such an occurrence.


I also know that as I say that, just last night attorney April Charney had a court stop her client’s foreclosure in Florida because the judge ruled that the person signing the “verification” either lacked sufficient knowledge or perhaps wasn’t even authorized to do so under Florida law – it looks like 1.110 (b), but don’t quote me.  (You can find a copy of the judge’s order HERE on Matt Weidner’s blog.)


What I don’t know is what happens next for April’s client, or any other homeowner in similar situation, as a result of such a ruling.  In this case it’s US Bank, so does US Bank just fix the problem and re-file, and if so, how long might that take… a couple months… six months… or am I to believe that it’s something that can’t be fixed… because I’m going to need to see some cases where that’s the case.


Last thing I’ll say about this for the moment is that I hear from various homeowners, or others from around the country every single day, telling me something about fraudulent transfers, forged signatures, or some other alleged impropriety having to do with the title or its recording, but I never receive anything tangible in terms of outcome for homeowners.


And frankly, I’m a little tired of vague and incomplete accounts of what I suspect are often pyrrhic victories, if they’re victories at all.  I know some foreclosure defense lawyers have told me that the goal is to delay and thereby wear down the servicer who ultimately submits by throwing in a loan modification, but like I said… I’m going to need more details than that before I can communicate to homeowners that such strategies are effective in the prevention of foreclosures. Capicse?


Here’s why I agree with Jan Tavakoli that Dr. Pham’s story is the day’s MOST IMPORTANT FINANCE STORY.  In fact, I think it’s even more important than that… like, maybe it’s the most important finance-economics-politics story in my lifetime, how’s that.


To understand what I’m about to say, you have to first understand what the CBO is all about, which will only take a minute or two, so stay with me… please.


The Congressional Budget and Impoundment Control Act, which was signed into law by President Nixon in 1974, created the CBO, and its primary mandate is to provide Congress with “objective and nonpartisan analysis to aid in economic and budgetary decisions on a wide array of programs covered by the federal budget.”


That means that the CBO is there to shape and support our government’s decisions related to SPENDING our money… regardless of whether Democrat or Republican.  It’s counterpart is the Joint Committee on Taxation, which provides Congress with estimates of the revenues that will be available to Congress, the Treasury Department, and for the Executive branch, which are then used to calculate our federal budget.


The CBO is required to submit to the budget committees in the House of Representatives and the Senate, detailed reports about fiscal policy with baseline projections of the federal budget, which is done annually in the Economic and Budget Outlook, and again in a mid-year update.  And it shouldn’t be difficult to imagine that in order to conduct this type of detailed analysis for a country of our size and complexity, the CBO needs experts in different areas of study, including…


  • Budget Analysis
  • Financial Analysis
  • Health and Human Services
  • Macroeconomic Analysis
  • Management, Business, and Information Services
  • Microeconomic Studies
  • National Security
  • Tax Analysis


So, the Joint Committee on Taxation tells us the amounts we can expect to come in, and the CBO delivers data and analysis on what we should expect to go out for all federal spending, and since we never have anywhere near enough to balance the federal budget, the CBO’s work is also used to calculate the amount of our deficit… and therefore the amount of our national debt.


And the amount of our national debt, you should realize, is what tells the rest of the world how risky it is to lend us money, which is done when investors from all over the world buy the bonds that are issued by our Treasury Department.


Each year, CBO analysts produce, I don’t know… hundreds of reports… maybe thousands, and the one most recognized is titled: “An Analysis of the President’s Budgetary Proposals,” which is made available for the next fiscal year, and argued about while the cameras are rolling, but not so much once they’re not.  You can even buy a copy at the Government Printing Office… then turn on C-Span and yell along at home.  Fun!


(In case you’ve never perused our Government’s Bookstore, HERE’S A LINK.  It’s not Disneyland or anything, but it’s worth a visit.)


(If you want more info on the CBO, here’s a link to a FACT SHEET they offer.  Honestly, I haven’t read it, so if it says something a little differently that I just did, don’t freak out… I’m right, or close enough… LOL.  In case you didn’t know, I taught 5th and 6th grade U.S. History and Social Studies a couple years back, and raised a daughter besides, so I’m like a walking D.C. tour guide… but without the umbrella and boxed lunch.)




The CBO is not the only federal agency involved in budgeting, there’s also the OMB, or Office of Management and Budget, and the GAO, which stands for General Accounting Office, and there’s the Treasury Department too, which shows up with its own numbers when needed.


But, it’s the CBO that calculates the 35-year baseline projections, which are used so extensively in the budget process. Baseline projections are supposed to show future spending assuming current law, so they’re not supposed to be considered “predictors” of our economy’s most likely future path, but they’re referred to a lot and become the basis for a lot of “GO or NO GO” decisions.


Okay, so I hope everyone sees that the CBO is a big deal in Washington D.C. and really, around the world, since our spending impacts our entire planet… pretty much.  It’s a place that employs so many PhDs I couldn’t even guess how many, and it’s why “PhD” is said to stand for, “Piled Higher and Deeper.”  And it’s REALLY IMPORTANT that it’s one of the few places in Washington D.C. that’s truly non-partisan.


A CRIME to defy all reason…


I don’t know why everyone has focused on the robo-signing and document fraud aspects of Dr. Pham’s allegations, I’m sorry to have to say this, but doing so is only clouding the real issues involved.  So, I’m going to be as clear as possible…


In Dr. Pham’s letter to Senator Grassley, she explained that while working at the CBO during the fall of 2010, she was told not to publish or incorporate any data about the U.S. housing and mortgage markets… NOTHING about the foreclosure crisis… NOTHING that might spoil the CBO’s “forecasts,” of course, that term extremely loosely.


In fact, Pham’s letter states that she was told in no uncertain terms by CBO leadership, or otherwise came to understand that…


  • Statements could not be made that attributed the decline in property tax revenues to foreclosures and the decline in home prices.


  • Foreclosures had no impact on U.S. home prices.


  • The decline in home prices had no impact on U.S. household wealth.


  • “Alternative viewpoints are suppressed or questioned as ‘pessimistic’ by CBO Director Doug Elmendorf.  Economic facts inconvenient to the CBO’s forecasts of economic growth, recovery and other estimates are omitted or suppressed so the desired message may be delivered.”


  • That even though the implications of foreclosures had profound financial and economic consequences that would be of compelling interest to Congress and the public, the CBO sought to SILENCE any such discussion of such risks.


In my mind, this set of statements, which I culled from Pham’s letter to Senator Grassley and from her letter written in response to the WSJ’s disappointing handling of the story, does NOT need any further qualification… I believe Dr. Pham is telling the truth, and so does everyone else that’s linked to Jan Tavakoli’s or Zerohedge’s coverage of the story.  (You’ll find both of Dr. Pham’s letters linked to my Scribd account above.)


Also, according o the WSJ story, which ran on page A6 on February 2nd


“The CBO declined to comment on Ms. Pham’s allegations.  In a December 2010 termination letter, reviewed by the Journal, the CBO said she was unqualified for the job, produced “poorly organized” research and resisted direction from superiors.”


That’s simply not a credible response, if you’re trying to claim that the substance of what she claims happened… didn’t.


And, you see… although admittedly it’s been a few years now, as an economics major at both undergrad and masters program levels, I had quite a few economics professors with doctorates, and I can’t think of any that would make it through the rigorous and competitive hiring process at the CBO, and then just under three months later, be described as “unqualified for the job,” much less as having “produced poorly organized research.”


I mean, how much “research” could she possibly have produced in the first 10 weeks at that sort of job?  And Lan T. Pham is 40 years old.  By forty, you know if you’re organized or not, don’t you?


Besides… I was the CEO of my own consulting firm for almost 20 years, so you can believe me when I tell you that “organizational skills” are the sort of thing that most employers have long since figured out how to test for, or otherwise ascertain during the interview process.  I may miss something when assessing someone’s critical thinking abilities, but I can always figure out whether someone can stay organized… at least for the first three months on a job.


As far as resisting direction from superiors, that much I understand… she thought the foreclosure fraud issues were a big deal, but it wasn’t going to be the focus of the CBO to make such judgments then, or probably now.  So what and who cares?


The question is… Mr. Douglas Elmendorf, in your role as Director of the Congressional Budget Office, did you deliberately withhold, mask and knowingly deliver grossly distorted information vital to the current and future economic, political and social wellbeing of the United States of America during the most severe, prolonged and damaging national economic emergency since the 1930s?


Did you lie to Congress, if only by omission, because that would be bad enough.  But, if you intentionally withheld critical information from and delivered misinformation to the President of the United States, Congress, and the citizens of this country during a national crisis, then you are a monster.


And all I can do is pray that you did this alone, because if you didn’t… if your actions were part of a conspiracy intent on seeing this country’s economy so substantively disrupted as to become utterly destroyed, with trillions of dollars in middle class wealth eviscerated and with no hope for its return in my lifetime… and if knowledge of your acts actually involved someone inside the White House…  well then… Dear God, sir… what have you done?


The CBOs calculations are used as the basis for the single largest source of spending the world has ever known, they lead to establishing the amount of our deficit and then our national debt, which is the basis for our international credit standing.  It’s simply inconceivable.


If you, as Dr. Pham describes, have produced numbers that fail to account for the impact of foreclosures on consumer wealth, spending, and property taxes… then those numbers are garbage… the sort you might have just chosen by throwing darts while wearing a blindfold.

When I think of what has been allowed to happen to the lives of hundreds of millions of American citizens… to the elderly… the destitute, to those too young to know… to say nothing of what such suppression of information has done to untold numbers of people around the globe?


When I think of how many times I was asked why our government wasn’t saying what I and others were saying in our countless articles… and I’d reply… “they have to know,” never understanding why such inconceivably poor decisions were being made.


Annually, hearing the news report things like, “The White House or unnamed economists say that the severity of the downturn in housing caught them by surprise,” and I’d think… how could that be… it didn’t catch anyone else involved in following it by surprise?


I guess I can’t know for sure what’s gone on here… I do believe Dr. Pham’s statements, but I don’t know the degree to which forecasts were manipulated with intentional blindness.  I am physically sickened by the idea that anyone could have allowed that to happen.


You’re a graduate of Princeton with an undergraduate degree in economics, a Masters in Economics and then a doctorate in economics, and the last two degrees are from Harvard?  You cannot claim ignorance or feign indifference.


I suppose I’ll never know who was involved or what you’ve done to this nation by manipulating or withholding such information from Congress, from the president, from the American people and from the world.  If you did any of it, you are a traitor to this country.


How is it possible that even as you watched the economic situation worsen significantly, you just turned your back on the tens of millions who today live on food stamps, having lost all hope of employment for years to come?


I don’t know what else to say… I don’t like feeling like I’m being dramatic, but after spending 30 hours reading, researching, thinking and writing… learning about your past…


  • Elmendorf worked on a team that concluded President Bill Clinton’s health-reform package would cost much more than originally thought. This analysis helped cripple the Clinton overhaul.


  • Elmendorf worked under Clinton Treasury Secretary Lawrence Summers.


  • In 2002, Elmendorf moved to the Fed, working under Alan Greenspan.


  • In April 2010, Elmendorf spoke openly against the country’s growing debt level, saying under current plans the deficit is “unsustainable.”


  • Elmendorf was Chief of the macro-economic analysis team at the Federal Reserve Board from 2002 to 2007.


  • After graduating in 1989, he stayed at Harvard for five years, working closely with conservative economics professor Martin Feldstein, the director of the Council of Economic Advisers (CEA) under President Reagan.


  • In 2008, Jason Furman, the director of the Brookings’ group known as the Hamilton Project left to join the Obama campaign and Elmendorf replaced him as director of the Hamilton Project, a forum for economic policy discussion that was created by Clinton Treasury Secretary Robert Rubin – an advocate of free trade and a small deficit.


  • Elmendorf worked two years at Brookings. While there, he spent much of his time opining on the mortgage collapse, and the appropriate response by the government. While he only called for the nationalization of banks as a last resort, Elmendorf did support a bailout of struggling financial institutions.


I really don’t know what else to say… my only thoughts are… resign now… beg forgiveness, and pray for your soul.


Mandelman out.


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