Okay. And here's how:
| ---------------------------------------------------- DEMOCRATS NOT TO BLAME? NONSENSE ! About Nancy Pelosi. She says the Democrats share absolutely none of the blame for the current financial goings-on. She's wrong. In fact, she's lying because she knows her statement to be untrue ... here's your primer: 1. Almost all of the financial problems we see today are based on bad mortgage lending. That would be lending money to people to buy homes who didn't qualify for a loan. 2. The Democrats, under Clinton, strengthened a government-created monster called the "Community Reinvestment Act." This law was then used by "activists" and "community organizers" (like Obama?) to coerce lending institutions to make these bad loans ... millions of them. 3. Now we see what happens when political "wisdom" supplants good loan underwriting. When private financial institutions are virtually forced to make loans to people with a bad credit and job history ... this is what you get. Enjoy it. The Democrats have offered us a candidate who is very anti-private sector. Obama believes that America is great because of government and those who, like him, deride the profit motive. ... -- Neal Boortz at http://boortz.com/nuze/200809/09192008.html
The Financial Sector Meltdown "The reasons for [the financial sector problems] are not obscured. There are several of them. "One of them is that the Federal Reserve under Alan Greenspan kept the punch bowl open for a long time with [unusually low] loan interest rates after 9-11, which led to a wild borrowing spree on Wall Street and Main Street. "Secondly, for two decades you've had Republicans and Democrats in the Presidency and also in Congress who pushed to expand lending for housing for people who hadn't had it before, particularly African-Americans who'd been denied it because of discrimination and racism, and encouraged sub-prime loans which, in the end, collapsed in a fury and in a wave. "And thirdly, what we had was a kind of advance in computers in which people derived these esoteric instruments of debt, which was understood, not as a way to cheat and hide, but as a way to spread the risk of mortgages. But ultimately, because it was [so] obscure, it had the opposite effect of spreading the liability in a way that people aren't even sure how much they own. "The reason Lehman collapsed is because it looked at its books and doesn't understand how much of a liability it has, and a run starts on it, and it can't answer. "Both are appealing mindlessly to populism [blaming Republicans or Wall Street instead of the politicians who started the whole mess when, for years and years, so many of those politicians had the government coerce the financial sector into selling all those risky mortgages]." -- Charles Krauthammer on Special Report with Brit Hume, Sept. 18, 2008
Fannie Mae Eases Credit To Aid Mortgage Lending [to minorities and uncreditworthy] By Steven A. Holmes, The New York Times, September 30, 1999 at http://tinyurl.com/4clng5 In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders. The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring. Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
New Agency Proposed to Oversee Freddie Mac and Fannie Mae By Stephen Labaton, New York Times, September 11, 2003 at http://tinyurl.com/6lp5qu The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry. The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios. The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates. ... ''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.'' Representative Melvin L. Watt, Democrat of North Carolina, agreed. [The DEMOCRATS killed the plan by stopping all action on it.]
When the Bush administration tried to rein in Freddie and Fannie from continuing to engage in risky practices, guess who stepped in to block their efforts? Democratic senators Chris Dodd, John Kerry, Hillary Clinton, and -- are you ready? -- Barack Obama. Meanwhile, guess who were the top four recipients of campaign contributions from Fannie and Freddie between 1988 and 2008? Senators Chris Dodd, John Kerry, Hillary Clinton, and -- still ready? -- Barack Obama. A coincidence, I tell you -- just a coincidence. More mere coincidences: Franklin Raines -- a former Carter- and Clinton-administration official and former head of Fannie Mae, now under investigation for cooking its books -- had a lot of powerful people in Congress beholden to his agency. Here is a list of his campaign-contribution recipients. Meanwhile, Democratic honcho Jim Johnson, another former Fannie Mae CEO, has been an economic adviser to and major fundraiser for Barack Obama, and even ran his vice-presidential search committee until growing scandals over his Fannie management forced him to step down in July. -- Robert Bidinotto, here: http://bidinotto.journalspace.com/?entryid=783
On May 25, 2006, Sen. John McCain spoke forcefully on behalf of the Federal Housing Enterprise Regulatory Reform Act of 2005. He said on the floor of the Senate: "Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal. "The Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac. " The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform. "For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay. "I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole. "I urge my colleagues to support swift action on this GSE reform legislation." It died at the hands of the DEMOCRATS --
Democrats and some Republicans opposed reform in part because Fannie and Freddie were very good at greasing palms. Fannie has spent $170 million on lobbying since 1998 and $19.3 million on political contributions since 1990. The principal recipient of Fannie Mae's largesse was a Democrat, Sen. Chris Dodd (D, CT), chairman of the Senate Banking Committee. No. 2 was another Democrat, Sen. Barack Obama (D, IL). Mr. Dodd was also the second largest recipient in the Senate of contributions from Countrywide's political action committee and its employees, and the recipient of a home loan from Countrywide at well below market rates. The No. 1 senator on Countrywide's list? Barack Obama. Check it out here: http://tinyurl.com/4h9955 OBVIOUSLY, DEMOCRATS DESERVE A GREAT DEAL, IF NOT ALL, OF THE BLAME.
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Glad handing pols trying to make banks give stuff to their constituents, check. That'll go away when fishes fly and the seas run dry.
Bankers with dollar sign eyes salivating over a 1% higher interest rate from a likely deadbeat, check. That'll go away when water is dry and air heavy.
Speculator borrowers playing heads I win and tails you lose with anyone fool enough to lend them money to gamble with, check. We can stop that by repealing gravity.
Monetary authorities reacting to recession and war and declining markets with low rate easy money trying to get things moving again, succeeding, and leaving the punch-bowl out for too long, check. Because that has never happened before and is sure to never happen again, right?
Financial whiz kids inventing new ways to bet and rejiggering them to find every nook and cranny in investor preferences to sell the same pizza for twice as much using more slices and a snazzier logo on the box, check. Pay a million energetic power freaks each a million dollars a year for profits any way any how, and then ask where moderation and sobriety went.
Distracted savers chasing the last quarter's performance or believing anything written in a glossy enough brochure with a staggering enough number written in the "past performance" column, and salesmen peddling it on commission, check. We'll get rid of that by making the average human salesperson into a sleepy accounting geek and your average soccer mom with 30 minutes a week for finances into Warren Buffett.
Cycles are normal. Everyone's to blame, and it doesn't matter who is anyway, we are all in the same boat. Any screw up big enough will hit everyone there is. Grow up. Freedom means free to make mistakes.
Great explanation bump and bookmark.
Congressman Billybob
The Declaration, the Constitution, parts of the Federalist, and America's Owner's Manual, here.
1) 80% of subprime loans were made by lenders (such as Countrywide) which were essentially unregulated, inculding requirements to comply with minority lending targets.
2) Even in the case of the 20% of loans made by regulated lenders, it leaves out a whole bunch of other bad actors, for example the bond rating houses that should have informed investors of the actual risk, the people who misrepresented and sold the securitized results, and so on – and in the next few years we will be reading many, many account of such misbehavior as a result of both criminal prosecutions and civil suits.
Given the way the entire process was structured, and the enormous profits to be made short-term by participants, human nature pretty much guaranteed that in a poorly regulated envirmoment there would be abuse every step of the way. This was pretty much a classic case of market failure - and the banksters bought both the Democrat and Republican parties to make it happen