Gasparino’s “Sell Out” – Who Created the Subprime Market – Clinton, Cisneros, Cuomo and Frank

Sell-Out ^ | 2009 | Charles Gasparino

[Titus-Maximus]

EXCERPT

Page 110:

Ramping up the pressure was the 1992 study by the Federal Reserve Bank of Boston that had concluded there was widespread racism and income discrimination in the mortgage- lending process; in other words, people were being denied mortgages based purely on their race and income level, even if they had the means to repay tortgages. The study purported to prove statistically that many minorities might have had bad credit scores, but they also held jobs and were being denied mortgages even though they had the ability to repay them.

The Study argues that the traditional ways of weighing creditworthiness-credit scores and loan-to-value ratios were discriminatory, and it became a rallying cry for housing advocates, including some members of Congress, such as Barney Frank, the chairman of the House Finance Committee; Maxine Waters, the California congresswoman who made home ownership for minorities one of her key crusades; and a senator from Connecticut, Christopher Dodd…..

…the Clinton administration viewed the study and the controversy it sparked as political dynamite and immediately began to address its concerns through an expansive housing policy. The Community Reinvestment Act, which traced bank lending practices in poor and minority neighborhoods, would be enforced to its fullest. The Federal Housing Administration ramped up its insuring of home loans going to the poor, making mortgages more affordable. Cisneros banded together with regulators at the Treasury Department and Federal Deposit Insurance Corporation to prod – the banks would say “force”- them to cut transaction fees and down payment costs to make mortgages more affordable.

Even more, the GSEs, Fannie Mae and Freddie Mac, would be force to use their massive and growing financial clout to guarantee and buy loans from banks that served minority and other lower-income home owners.

In 1995, Cisneros began his major effort to influence Fannie and Freddie to dedicate more of their resources to providing mortgages for low income families. His new measure directed the GSE’s to set aside 42 of all their mortgage guarantees to serve what the government classified as low-to moderate-income borrowers.

When Andrew Cuomo succeeded Cisneros as HUD secretary in 1997, he increase that number to 50 percent and began to pressure the GSE’s to buy up mortgages of people classified as “very low income.”

If this move was an important step toward the democratization of the housing market, it was also an important step toward the expansion of risk in the financial markets. For the first time, it opened the GSE’s to the part of the housing market that dealt with so-called subprime borrowers.

[Titus-Maximus]

I find it funny the Michael Lewis, whose bestseller "The Big Short" does not even reference Freddie and Fannie except in one sentence in the back of the book. What an oversight! But check his politics, the spike was ideologically motivated. Charles is much more to the center and speaks the truth.

About that Fed study on race - it was eventually discredited as evidence of racial bias, since the loan portfolio holding the cherry-picked minority loans should have performed much better than the non-minority loans - but this was not the case, they were the same on the major performance metrics. The whole ACORN assault on bankers was based on a lie - that nearly brought down the economy - thank you Clinton-Frank-Waters-Cisneros and Cuomo!

[Carley]

And Alan Greenspan encouraging people to take advantage of the balloon rates on mortgages.

Now he’s on TV insisting the tax cuts should go. That they do NOT pay for themselves.

Kind of along the same lines as Pelousy insisting O created more jobs in a year and a half than Bush did in eight years.

They live in an alternate universe and want us to join them in la-la-land.

NO THANKS

[LomanBill]

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

http://www.pbs.org/wgbh/pages/frontline/warning/view/

 

[JerseyHighlander]

Penny Pritzker and the Pritzker family bank in Chicago have to included in this list.

[SuziQ]

"The whole ACORN assault on bankers was based on a lie..."

And to top it off, they mau-maued Congress. I remember when an ACORN rent-a mob stormed a Congressional Committee hearing yelling and screaming about racism in mortgage lending. After that, Pres. Bush couldn't get the reforms of Fannie and Freddie for which he was advocating, because the Democrats on the Committee voted as a bloc against them, and they were joined by a couple of RINO useful idiots who didn't want bad things said about them by the MSM.

[Para-Ord.45]

bm

[taildragger]

The same Penny Pritzker that has Sarah Palin dis-invited to a Pro-Israel anti Wackmadinajob Rallye in NYC?

How where they involved?

[Ann Archy]

She’s a CROOK!