An Inconvenient Truth (NY Times Column insists Fannie & Freddie DID NOT cause the mortgage crisis)

New York Times ^ | 12/20/2011 | Joe Nocera

[SeekAndFind]

There is so much about Fannie Mae and Freddie Mac that we should be angry about.

In their heyday, these strange hybrids — part corporation, part government agency — were the biggest bullies in Washington, quick to bludgeon critics who dared suggest that their dual missions of maximizing profits while making homeownership affordable for low- and moderate-income Americans were incompatible. They steamrolled their regulator and pushed back at any suggestion that their capital was inadequate.

For years, they essentially wrote most of the legislation that affected them, which they larded with loopholes. In the mid-2000s, they had giant accounting scandals. Eventually, their quest for profits led them to make a belated, disastrous foray into subprime mortgages, which ended with their collapse, and which has cost taxpayers about $150 billion. Tragically, Fannie and Freddie could have led a housing recovery — if they hadn’t become crippled wards of the state instead.

Yet these real sins have been largely overlooked in favor of imagined ones. Over at the conservative American Enterprise Institute, two resident scholars, Peter Wallison and Edward Pinto, have concocted what has since become a Republican meme: namely, that Fannie Mae and Freddie Mac were ground zero for the entire crisis, leading the private sector off the cliff with their affordable housing mandates and massive subprime holdings.

The truth is the opposite: Fannie and Freddie got into subprime mortgages, with great trepidation, only in 2005 and 2006, and only because they were losing so much market share to Wall Street. Among other things, the Wallison-Pinto case relies on inflated data — Pinto classifies just about anything that is not a 30-year-fixed mortgage as “subprime.” The reality is that Fannie and Freddie followed the private sector off the cliff instead of the other way around.

[skeeter]

Truth, inconvenient and otherwise, and the NYT are mutually exclusive.

[Tzimisce]

These people are running your country

Have a nice day.

[dirtboy]

Yeah, this explains the billions in bailouts for Fannie and Freddie. Not.

[lacrew]

There was a woman on Rush’s show a few weeks ago, who had been in the mortgage industry. She said the exact opposite of what this article states.

[1rudeboy]

Darn. I can imagine the nervous sweat on this writer’s upper lip, and a single tear streaming down his cheek.

[McBuff]

Let me quess instead of wasting my time reading a NY slimes article. . .This guy never mentions the Clinton administration putting the gun to the heads of the banks via Janet Reno. THAT’S WHAT STARTED THE BALL ROLLING! The evil Dems decided to use the Community Redevelopment Act as a devise to provide housing for illegals and other traditional Dem constituents. It was a criminal ruse to change voting blocks, neighborhood by neighborhood (and thereby empower the Dems).

[who_would_fardels_bear]

"There was a woman on Rush’s show a few weeks ago, who had been in the mortgage industry."

So obviously she was reporting from a completely unbiased perspective.

/sarc

[Fee]

FMFM made the mistake of buying all mortgage notes to cut down the risk for private banks to do subprime loans (IMHO a dumb program to begin with). When these loans were sold to the aftermarket they were clearly marked risky and documented for the investor to price. If Wall Street banks did not flood the market with liar loans, the US may have survived the mortgage meltdown because majority of the mortgage failures in the first two years involved subprime loans. Afterwards the majority of the cost eventually involved jumbo liar loans. Biggest damage was the liar loans which lacked documentation and were rated AAA. That fatal blow was invented by the greedy unethical bankers on Wall Street. These toxic assets were sold as AAA paper to pension funds, foreign investors and hedge funds. Note the gov CRA program never gave mortgage bankers license to do liar loans. Wall Street bankers should be prosecuted and put in jail. Better, their actions sabotage the US economy during the War on Terror. As far as I am concern, that is treason, and many bankers should be hanged.

[Paradox]

Every part of the banking and mortgage industry “caused” this. Vipers sleeping with Jackals.

[SuziQ]

Fannie and Freddie got into subprime mortgages, with great trepidation, only in 2005 and 2006, and only because they were losing so much market share to Wall Street...

How was it then, that President Bush was pushing in 2003 for reform of the Fannie and Freddie practices, which were encouraging lenders to grant mortgage loans to clearly UNQUALIFIED applicants? Was President Bush THAT prescient that he was warning against a situation that had not yet occurred?

[LomanBill]

 

 

" Uhhhh, that's not ours either! "

---Weiner, Obama, Perry, Pelosi, Frank, Pritzker and Associates, LLLP.

 

 

Follow the....

http://www.campaignmoney.com/finance.asp?type=in&cycle=08&criteria=pritzker&fname=penny

 

Billionaire business mogul Penny Pritzker is a member of one of America’s richest families and was the Finance Chair for the presidential campaign of Barack Obama.  It was Pritzker that led the prolific, and illegal, fundraising that helped power Barack Obama’s presidential campaign.  She was the chair of Chicago-based Superior Bank’s board for five years.  Pritzker was into subprime lending before it became all the rage starting in around 2000.  Prtizker's chairmanship was to concentrate on sub prime lending, principally on home mortgages, but for a while in subprime auto lending, too, after the Pritzkers' bank acquired its wholesale mortgage organization division, Alliance Funding, in December 1992. Back then they called it "predatory lending." Superior Bank went belly up in 2001 with over $1 billion in insured and uninsured deposits; 1,406 depositors lost much of their life savings.  This collapse came amid harsh criticism of how Superior’s owners promoted sub-prime home mortgages. On Nov. 1 [2002] the Federal Deposit Insurance Corp. pointed the finger at Ernst & Young, Superior’s auditor, in a fraud suit filed in federal court here.  But that action came two months after a group of Superior depositors accused the bank’s owners and directors, including two members of the Pritzker family, of racketeering....

[snip]

...Pritzker is chairman of Classic Residence by Hyatt, luxury senior living communities in 11 states; chairman of The Parking Spot, which owns and operates off-airport parking facilities in nine cities; chairman of the credit data company TransUnion and chairman of Pritzker Realty.  She also sits on the board of Global Hyatt and plays a role in numerous non-profit groups, including serving as chairman of the Olympic village portion of Chicago’s bid to win the 2016 Summer Games. 

 

http://www.theobamafile.com/_associates/PennyPritzker.htm

 

 

 

Nudge nudge nudge...

 

[ROCKLOBSTER]

An Inconvenient Truth (NY Times Column insists Fannie & Freddie DID NOT cause the mortgage crisis)

Actually the "Community Investment Act" under Carter started it.

The Boston Fed issuing a letter demanding all banks issue undocumented loans poured gasoline on the fire.

And Fan/Fred just provided the dynamite.

[ROCKLOBSTER]

Every part of the banking and mortgage industry “caused” this. Vipers sleeping with Jackals.

That's crap! And the government can wear this whole steaming pile.

A free market self-regulating industry with no socialist-interference would never have issued those loans.

[RnMomof7]

People who’s jobs are in China or India can not commute..so they can not pay their mortgages.. not to complicated.. That is what started the morgage crisis

[InterceptPoint]

Actually I was told on good authority by my totally crazy sister-in-law that the mortgage crisis was caused by Newt Gingrich. A lifetime Dem who planned to vote for Newt (he has the experience to get us out of the Obama mess) but is going to vote for Romney now that she understands what Newt has done to the country.

Go figure.

[Paradox]

A free market self-regulating industry with no socialist-interference would never have issued those loans.

Whose saying otherwise? But the fact is, it wasn't free market, and they were all in it together, taking advantage.

[ALPAPilot]

Can anyone at the NYTs write? 30 year loan and good credit score does not make it prime.

[ROCKLOBSTER]

Whose saying otherwise?

You did.

Every part of the banking and mortgage industry “caused” this.

I don't see anything about the government, nor "public/private partnerships" in that comment.

Besides, I'll bet there were plenty of independent lenders and credit unions who wanted nothing to do with it.

[Neoliberalnot]

Only a fraudulent “journalist” from the NY slimes would make such an outrageous claim.

[SeekAndFind]

RE: Actually I was told on good authority by my totally crazy sister-in-law that the mortgage crisis was caused by Newt Gingrich

She probably watched MSNBC and their repeated propaganda that Newt’s $1.6 Million consultancy fee from Freddie Mac caused the mortgage crisis.

[Paradox]

I see the issue, by “banking and mortgage industry”, I was including Fannie, Freddie, and the Government. I was not clear.

[douginthearmy]

"The truth is the opposite" - NYT

Pretty much sums up this and every other article.

[ridesthemiles]

When exactly did Fannie Mae & Freddie Mac get organized & started?

I cannot remember them from when I bought my first house in 1966.

[detective]

The author of this article, Joe Nocera, is a lifelong journalist with a BA in Journalism. He has never held any job other than in the MSM and has no education in any other field. His career consists of repeating Democrat Party talking points and attacking successful people.

He was a big supporter of the government forcing banks to make loans to people who could not pay them back and was a big supporter of sub-prime mortgages to encourage home ownership among the poor and minorities.

He never criticized Fannie or Freddie until after everything fell apart.

Now he is pushing Democrat Party propaganda to deny what really happened and create a series of lies to protect his liberal friends. That is all he is doing. There is no truth to his writings it is just disinformation.

[detective]

“Every part of the banking and mortgage industry “caused” this. Vipers sleeping with Jackals.”

Then why did the mortgage and banking industry go for decades not making loans to unqualified buyers and began in the late 1990’s because of pressure from the government and the threat of lawsuits? As the situation got worse the Bush Administration tried to shut it down. Barney Frank and the Democrats fought to keep it going and prevent any oversight of Freddie and Fannie.

Freddie and Fannie have lost hundreds of billions of dollars, all paid for by the taxpayers.

[Paradox]

To clarify, I am blaming the whole lot, including fanny and freddy.

[DPMD]

Of course he doesn’t believe the Freddie/Fannie version. Liberals entirely reject the notion of intelligent design.

It was all Darwinian. One day it’s quiet, then a bang and suddenly people are walking upright and housing is down and things collapse. Nobody did it.

[Liz]

DEMOCRATS/FANNIE/FREDDIE CRIMINAL ENTERPRISE / By Michelle Malkin

Fannie/Freddie are centerpieces of the criminal enterprise called the Democrat Party-—where Dem cronies and collaborators loot the organization, get cushy jobs, bonuses, and the like.

Fannie Mae’s political machine dispensed campaign contributions, gave jobs to friends and relatives of legislators, hired armies of lobbyists (even paying lobbyists not to lobby against it), paid academics who wrote papers validating the home ownership mania, and spread “charitable” contributions to housing advocates across the congressional map.

Fannie Mae serves as an industrial-sized patronage factory — sharing profits with political allies, spreading taxpayer funds to voting blocs——like ethnic groups-——and doling out jobs to left-wing academics, Washington has-beens and back-scratching buddies. Obama insider Fannie Mae exec Jim Johnson got sweetheart loans from shady subprime Countrywide. Pols raked in six-figure salaries as F/F engaged in Enron-sstyle accounting, plunged into debt and helped usher in the subprime housing meltdown through cockamamie lending practices.

Bill Clinton appointed Franklin Raines, Daley and Rahm Emanuel just as the quasi-governmental F/M engaged in rampant book-cooking so that F/M insider could help themselves to massive bonuses. The Chi/Tribune exposed how Emanuel’s “profitable stint” was low-show w/ no work involved. Emanuel was not even assigned to committees, according to company proxy statements.

Immediately upon joining the board, Emanuel and other insiders qualified for $380,000 in stock and options plus a $20,000 annual fee, public records indicate. W/ Wall Street Emanuel there, accounting tricks were used to mislead shareholders about outsize profits F/M reaped from risky investments. The goal was to cook the books to keep fraudulent earnings on the books, to make Freddie Mac look profitable on paper-——AND to fraudulently obtain humongous annual bonuses for political insiders.

---

Freddie and Fannie, the two big quasi-govt mortgage banks that HAVE ALREADY RECEIVED HUGE federal bailouts, had huge lobbying budgets that they used for political contributions to keep regulators off their backs.

So which politicians get Fannie and Freddie political contributions. The top three U.S. Senators getting big Fannie and Freddie political bucks were Democrats and number two was then-Senator Barack Obama who had only been in the Senate little over 2 years, but still managed to grab the number two spot ahead of John Kerry, decades in the senate, and Chris Dodd then-chairman of the powerful Senate Banking Committee.

Fannie and Freddie were creations of the Congressional Democrats and the Clinton White House, designed to make mortgages available to more people, and as it turned out, some many many who couldn’t afford them. Fannie and Freddie have also been places for big Washington democrats to go to work in the semi-private sector and pocket millions.

The Clinton Administration’s White House budget director Franklin Raines was appointed by Clinton to run Fannie........ and collected $50 million dollars. Jamie Gurilli Gorelick (now BP’s attorney), a Clinton Justice Apartment Official, worked for Fannie and took home $26 million dollars in mfg bonuses.

Big Democrat Jim Johnson, recently on Obama’s VP search committee hauled in millions from his Fannie Mae CEO job. Now remember, Obama’s ads and stump speeches attacked McCain and Republican policies for the financial turmoil. It is demonstrably not Republican policy and worse, it appears the man attacking McCain, Senator Obama, was at the head of the line when the piggy’s lined up at the Fannie and Freddie trough for campaign bucks....” - FoxNews, Sept. 2008

The Office of Federal Housing Enterprise Oversight’s report reported that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives.

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 (by cooking the books).

Ex-Fannie CEO Franklin Raines (Clinton appointee) is a parasitic crook of the first order. This thief cooked the FM books precipitating losses of $9BILLION (that we know of) for the single purpose of creating $50 million fraudulent bonuses for himself (and millions for other F/M insiders).

The SEC said Raines broke accounting rules by playing with risky derivatives. The US Government filed suit against Franklin Raines when the depth of the F/M accounting scandal became clear.

READ IT HERE http://housingdoom.com/2006/12/18/fannie-charges/

The Government noted, “The 101 charges reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over twenty accounting principles and misleading the regulator and the public.....explains how they submitted six years of misleading and inaccurate accounting statements and inaccurate capital reports that enabled them to grow Fannie Mae in an unsafe and unsound manner.”

These charges were made in 2006. The Court ordered Raines to return $50 Million Dollars he received in bonuses based on the misstated Fannie Mae profits. (Soon going to trial.)

On top of the $50M he looted from the govt (for cooking the books for which he was fired), Raines also walked away with a tax-paid exit package worth $90 million.

[haroldeveryman]

“Joe Nocera, is a lifelong journalist with a BA in Journalism. He has never held any job other than in the MSM and has no education in any other field.”

In other words, he’s got one foot in Zucotti Park.