Posted on 09/23/2008 8:48:37 AM PDT by xzins
Welfare is the culprit at the heart of the economic flim-flam that has the stock market reeling.
In its various forms, welfare has long been recognized as harmful to the individual, the society, and the nation. In all its forms, welfare makes thoughtful Americans shake their heads and fear for the Republic.
Corporate Welfare, Public Welfare, and now "Mortgage Welfare" are all based on the idea that the government should give your money to others so those others can do better than they have been doing. Companies who aren't competing well against their competitors get checks from the government, and someplace in their inner board it dawns on them that they don't have to make those tough decisions, fight for those extra yards of progress, or admit that the game is up.
Public welfare for individual citizens destroys the initiative to struggle and get ahead. After all, it's easier to sit on the porch shooting the breeze than it is to work one's way up in the world of industry, business, or service.
"Mortgage Welfare" is a close relative of public welfare. It is based on the ridiculous notion that "everyone deserves a house whether they can pay for it or not." Therefore, some bleeding heart politician demands the law be changed to force banks into loaning money to people who don't have enough income to pay for their house loan. In other words, the bank is forced by law to ignore what banks should not ignore. They are forced to ignore whether a borrower can repay the loan. They are forced to overlook that the person has no job or has a minimal job. They are forced to overlook the credit history of the borrower. They are forced to ignore the actual income of the borrower.
That is why the "Wall Street Crisis" is not a crisis in the traditional sense of the word. It wasn't some accident. It's a welfare flim-flam perpetrated on the American taxpayer by a gang of liberal bleeding heart welfare pimp politicians. They thought they could keep "Mortgage Welfare" secret, but it blew up in their faces.
Fannie Mae and Freddie Mac were BY LAW handing out loans to people who couldn't afford them.
Who collected all those loan fees, charges, and incentives? It wasn't just CEOs walking away with unearned wealth. Check out the sidekicks of major welfare-loving politicians who walked away with millions and tens of millions of dollars.
Welfare has bit us again, and will drive up the federal budget again. Mortgage welfare – stand up against it one more time and the politicians who have made it possible. Allowing welfare loving politicians to be a part of the solution to the mortgage welfare meltdown is insane. They are among the worst of the culprits.
All this sounds good to me, if I got it right. Lets see, will this soon apply if I lose money at the track, or at the tables in Las Vegas and I’m down to nothing, the Government will reimburse me for my loses? AMERIKA, WHAT A COUNTRY!!
Try fascism. Read the damn bill. It's open ended. No checks and balances. No oversight.
Got it right. We are in this mess because too many people have ignored the commandment “thou shall not covet they neighbor’s goods”. That’s what all these failing mortgages are. People wanting a house that was not theirs and they could not afford. Then the bailout is more coveting of the taxpayers’ money.
I like it, bbd.
No longer do you need Gamblers Anonymous where you work your way out of your problem.
Instead, we’ll have Gambler Welfare. A special office will open in each casino for the poor. The government will give them cheese and chips. (A new scheme to get rid of that cheese. :>)
What law ‘forced’ banks to give out the loans you speak of?
The Community Reinvestment Act passed in 1977 and modified in 1995.
Reno urges banks to market services to minority areas. (Janet Reno)
Article from:
Jet
Article date:
September 12, 1994
More results for:
jent reno red linning | Copyright informationCOPYRIGHT 1994 Johnson Publishing Co. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
Following a landmark lending discrimination settlement, U.S. Attorney General Janet Reno recently issued a stern warning to all banks which practice red-lining—you’re breaking the law and face possible litigation.
Reno’s warning came on the heels of a recent settlement of an unprecedented lending-bias case against Chevy Chase Federal Savings Bank, a suburban Washington, D.C., bank that was accused of bias in marketing services to predominantly Black and minority areas.
It was revealed that until recently, Chevy Chase had no branches located in predominantly Black neighborhoods.
As part of the settlement, Chevy Chase and its B.F. Saul Mortgage unit agreed to ...
The following is from Investor’s Business Daily:
http://www.ibdeditorials.com/IBDArticles.aspx?id=306632135350949
The Carter-era Community Reinvestment Act forced banks to lend to uncreditworthy borrowers, mostly in minority areas.
Age-old standards of banking prudence got thrown out the window. In their place came harsh new regulations requiring banks not only to lend to uncreditworthy borrowers, but to do so on the basis of race.
These well-intended rules were supercharged in the early 1990s by President Clinton. Despite warnings from GOP members of Congress in 1992, Clinton pushed extensive changes to the rules requiring lenders to make questionable loans.
Lenders who refused would find themselves castigated publicly as racists. As noted this week in an IBD editorial, no fewer than four federal bank regulators scrutinized financial firms’ books to make sure they were in compliance.
Failure to comply meant your bank might not be allowed to expand lending, add new branches or merge with other companies. Banks were given a so-called “CRA rating” that graded how diverse their lending portfolio was.
It was economic hardball.
“We have to use every means at our disposal to end discrimination and to end it as quickly as possible,” Clinton’s comptroller of the currency, Eugene Ludwig, told the Senate Banking Committee in 1993.
And they meant it.
In the name of diversity, banks began making huge numbers of loans that they previously would not have. They opened branches in poor areas to lift their CRA ratings.
Meanwhile, Congress gave Fannie and Freddie the go-ahead to finance it all by buying loans from banks, then repackaging and securitizing them for resale on the open market.
That’s how the contagion began.
With those changes, the subprime market took off. From a mere $35 billion in loans in 1994, it soared to $1 trillion by 2008.
Wall Street eagerly sold the new mortgage-backed securities. Not only were they pooled investments, mixing good and bad, but they were backed with the implicit guarantee of government.
Precisely.
McCain up a little bit in Ohio.
Ohioans don’t like welfare a whole lot.
1.) CRA basically strong-armed banks to lend to high-risk individuals with questionable or downright bad credit histories.
2.) Fannie Mae, Freddie Mac, and other private or quasi-governmental entities packaged these risky loans into mortgage-backed securities.
and 3.) The credit ratings on these CMOs, CDOs, and what not were very high, encouraging investors, pension funds, and other institutional investors to invest in these securities.
Here's how I see it. Had CRA not been legislated, loans would have been written for individuals with good credit and responsible with his or her debt obligations. Securities backed by loans written to low risk debtors would have decent returns with an occasional hiccup due to a default... I don't think the MBS industry as a whole is corrupt, in fact, it is a wonderful fixed-income investment plan. Unfortunately, feel good policies (like the CRA) led to the extension of credit to less than responsible individuals... which in turn led to fast and loose credit ratings and an MBS industry that fell flat on it's face..... Not to mention Greenspan's credit expanding interest rates of 7 years ago.
There is enough blame to go around. CRA basically fueled the fire in the mid-90s and through the 2000s... low interest rates was like pouring gas on the fire... Fannie Mae and Freddie Mac would be the subject of an entirely new post, but they are not without their own set of problems; those beasts have Dem fingerprints all over it.
As I understand it, mortgage loan rates don’t necessarily go down when the fed rate goes down, and they don’t necessarily go up when the fed rate goes up. The fed rate is a factor, but the fed lowers rates for a variety of reasons. The initial fed rate reduction, iirc, was in response to the recession that Pres. Bush inherited from Clinton. When 9/11 threatened to derail finance and the air industry, and the economy in general, Greenspan continued to reduce the fed rate.
We were on the brink of a precipice at that point, too.
Some say that low bond price = high mortgage prices
High bond prices = low mortgage rates.
Bond prices haven’t been paying well for a while now, and mortgage rates have gone up. Higher rates at ARM refinance time = distressed mortgage holders = more bankruptcies.
Since this mortgage fiasco has killed stocks, one would expect bond prices to rise and interest rates to go down again if inflation and the fed don’t go wacko.
Who benefits when bond prices rise? Follow the money...who are the sellers of bonds?
But, what if inflation is wacko? The only one I can think of benefitting at that point would be holders of huge debt not having an inflation adjustment.
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