Posted on 09/30/2008 9:46:43 AM PDT by TheNewPatriot
Root Cause Crisis of politically driven crony capitalism
The way it’s presented, Democrats have the media and public convinced they had nothing to do with it.
Over the past eight years, those who have tried to fix Fannie and Freddie (the epicenter of the current meltdown) were stymied repeatedly by Congressional Democrats. Don’t get me wrong, some key Republicans deserve some blame as well, but the majority stake holders in this meltdown are Democrats. If you want to know how we got here, read on. Also, I am not taking credit for this research, I am just passing it along so everyone I can reach can understand how this happened and who should be held accountable.
The reason: Fannie and Freddie became massive providers of reliable votes from low-income homeowners and massive givers to the Democratic Party by investment bankers and Fannie and Freddie.
Where All This Lunacy Began
It started in 1977 during the Carter presidency. Carter and the Democrats brought us the Community Reinvestment Act (CRA). The main idea, eliminate the practice of redlining by lending institutions. The definition of redlining is banks setting up shop in low income areas, taking their deposits, then lending the funds to rich areas while starving the poor and minorities communities of housing and capital.
The CRA came just years after other major civil rights acts that were passed. But now, blacks felt frozen out of home ownership. So, like most all good intentions without thought, we have bad results. This led to the housing boom, supported by shoddy loan practices, a subsequent bust, and the financial mess we have now.
Between 1977 and the early 1990s
The CRA forced banks and savings institutions to make loans to poor and often uncreditworthy minorities.
Banks were required to keep records of their minority lending practices. If they didn’t pass muster, they were refused to expand, merge with other banks, or boost lending in new markets.
There wasn’t much policing required then by government, they let radical community groups like ACORN and NACA syphone billions of dollars from banks and let them lend money in poor communities.
These groups booked thousands in fees for every loan and required recipients to become active in radical causes – today’s community organizing or shakedown artists. Can you say Barrack Obama.
Clinton Rewrites Rules Making The Subprime Crisis Inevitable
How did the government get so deeply involved in the housing market?
Answer: President Clinton wanted it that way.
After entering office in 93, he extensively rewrote Fannie and Freddie’s rules.
As a result, he turned two quasi-private mortgage funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democratic voting blocs and handed favors, jobs, and money to political allies. This led to corruption and their ultimate current day collapse.
Led by top Democrats, including Representative Barney Frank in the House and Senator Chris Dodd in the Senate, Congress not only did nothing about the growing risks at Fannie and Freddie, it in essence doubled down on their risks.
The Democrat-led Congress of the early 1990s eased capital limits on the two mortgage lending giants, letting them use enormous leverage — 2.5% of assets at Fannie and Freddie, vs. 10% for banks — to expand lending to low-income, minority communities.
Despite warnings of trouble at Fannie and Freddie, in 1994 Clinton unveiled his National Homeownership Strategy, which broadened the CRA in ways Congress never intended.
Congress Eases Lending Rules
In 1994, the Democratic Congress again moved, passing the Community Reinvestment Act — an update of the original 1977 law.
For the first time, homeowners that previously didn't qualify — either because they couldn't put any money down or had bad credit — were made eligible for government-backed loans.
The housing boom was on.
Still, even after the GOP won control of Congress in 1995, Democrats in both houses worked with President Clinton as Fannie and Freddie's enablers.
Clinton, bypassing Republicans in Congress, had HUD rewrite the rules for Fannie and Freddie to let them get involved in the subprime market for the first time.
Robert Rubin's Treasury got involved too, reworking its own rules to crack down on banks that didn't make enough loans to distressed, minority neighborhoods.
Loans started being made on the basis of race, and often little else.
By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market — a staggering exposure.
Undersecretary Gary Gensler went to Congress in 2000 seeking an end to the companies' special status — especially the "implicit" federal guarantee of their now-$5.4 trillion loan portfolio — and more power for regulators to boost the companies' capital requirements.
Democrats raised a ruckus. So did Fannie and Freddie, which were both headed by politically well-connected CEOs who knew how to strategically reward — and punish — those who crossed them. "We think that the statements evidence a contempt for the nation's housing and mortgage markets," Freddie Mac spokeswoman Sharon McHale said at the time, summing up the sentiment in Congress. It was the last chance during the Clinton era for anything like real reform.
Could the crisis at Fannie Mae-Freddie Mac and the subprime meltdown have been avoided?
The answer is yes.
It was as early as 1992, alarm bells were going off on the threat Fannie and Freddie posed to our financial system and our economy. Intervention at any point could have staved off today's crisis. But Democrats in Congress stood in the way.
As the president recently said, Democrats have been "resisting any efforts by Republicans in the Congress or by me . . . to put some standards and tighten up a little on Fannie Mae and Freddie Mac." No, it wasn't President Bush who said that; it was President Clinton, Democrat, speaking just last week.
This is interesting, because it was his administration's relentless focus on multiculturalism that led to looser lending standards and regulatory pressure on banks to make mortgage loans to shaky borrowers.
Democrats Blocked Reform
Just as Republicans got blamed for Enron, WorldCom and other early-2000s scandals that were actually due to the anything-goes Clinton era, the media are now blaming them for the mortgage meltdown.
But Republicans tried repeatedly to bring fiscal sanity to Fannie and Freddie. Democrats opposed them, especially Senator Chris Dodd and Representative Barney Frank, who now run Congress' key banking panels.
The Facts about this are crystal clear and history supports them.
Even after regulators in 2003 uncovered a scheme by Fannie and Freddie executives to overstate earnings by $10.6 billion to boost bonuses, the Democrats killed reform.
"Fannie Mae and Freddie Mac are not facing any kind of financial crisis," said Rep. Frank, then-ranking Democrat on the Financial Services Committee.
North Carolina Democrat Melvin Watt accused the White House of "weakening the bargaining power of poorer families and their ability to get affordable housing." In 2005, then-Fed Chairman Alan Greenspan told Congress: "We are placing the total financial system of the future at substantial risk."
McCain Urged Changes
That year, Sen. John McCain, one of three sponsors of a Fannie-Freddie reform bill, said: "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."
Sen. Harry Reid — now Majority Leader — accused the GOP of trying to "cripple the ability of Fannie Mae and Freddie Mac to carry out their mission of expanding homeownership." The bill went nowhere.
This year, the media have repeated Democrats' talking points about this being a "Republican" disaster. Well, McCain has repeatedly called for reforming the mortgage giants. The White House has repeatedly warned Congress. This year alone, Bush urged reform 17 times. Some GOP members are complicit. But Fannie and Freddie were created by Democrats, regulated by Democrats, largely run by Democrats and protected by Democrats. That's why taxpayers are now being asked for $700 billion.
While there are critics pointing to the repeal of the Glass-Steagall Act as the cause of this, there is some justification to do that, however, the first public securitization of CRA loans started in 1997 by Bear Stearns (first in, first out) two years before the repeal. While the repeal probably accelerated the overleveraging, it doesn’t serve as the beginning of mandatory neglect of fiduciary responsibility by lending institutions imposed by the government (Democrats as the majority with some Republicans participating).
The cause is globalism. Every one of the items listed has as its root cause the goal of globalizing our government, including Carter’s CRA. It is a manifestation of the UN’s human settlement/habitation programs. Every illegal alien from Mexico who bought a house here can thank a UN ‘treaty’ for the genesis of the programs that allowed him to purchase the house, tied in with the transnational bankers greed at getting their hands on Mexico as a market for their products. Just see the Security and Prosperity Partnership documents on the web for the details.
If you look just a little bit in today’s news you will also see there is a ‘global’ call for a global financial system to be run by China Japan and the EU. The G7 met at the Financial Stability Forum yesterday. Today the Prime Ministers of Canada and Britain, and the President of France and the EU are calling to implement a global financial system.
It’s so ludicrous, our congress. They made a big show yesterday of being in control, and faking that the people’s will won. Today the news is that the Fed released $630 billion to the global banks, and that the G7 pseudo world government is going to make it official and become THE government especially over our economy. You may wonder, why did Paulson and Bernanke even ASK congress for the $700 million? They just do what they want, when they want. They don’t need no stinkin’ constitution, or a flippin’ republic to get in their way.
Funny...I don’t see a mention of Phil”buncha whiners”Gramm and the Gramm-Leach repeal of Glass-Stegal of ‘33 in 1999
anywhere in your timeline.
Don’t you think that merits a mention?
Along this topic...
http://www.youtube.com/watch?v=NU6fuFrdCJY
Great tutorial for those who haven’t lived through it all and review for those of us who did.
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