Federal Government Was Culprit in Housing and Economic Crisis, Says Congressional Report

CNS News ^ | 7/8/09 | Fred Lucas

[mylife]

Fannie Mae and Freddie Mac were the chief culprits in the housing crisis because they encouraged people who could not afford payments to borrow money, according to a congressional report released Tuesday.

The claims in the report have long been advanced by conservatives, who argue that the Community Reinvestment Act and other federal programs fed the housing bubble that burst in 2007 and led to the economic downfall in 2008.

But the report explains in detail how Fannie and Freddie -- government sponsored enterprises (GSE) that were not subject to the same oversight as other publicly traded firms -- “privatized their profits but socialized their risks.”

[mylife]

Long report that pins it all on liberal government market manipulation.

[mylife]

Here is the full Report

[Terpfen]

Your boy Issa was sure quick to change his tune:

“That is the perfect smoking gun that tells how Barney Frank [D-Mass.], the Clinton administration and others would do it in those days,” Rep. Darrell Issa (R-Calif.), the ranking member on the House Oversight and Government Affairs Committee, said Tuesday in a speech at the Heritage Foundation.

“The seeds of the meltdown began with the well-intentioned goal that everyone have a home even if they can’t afford it,” he said. “It led to one of the biggest ponzi schemes ever.”

So, whose fault was it again?

[reasonisfaith]

This report needs to be widely publicized.

Democrats ruined the housing market and Republicans went along with their liberal scheme.

Conservative economic policy is the only solution to fix the mess we’re in.

[mylife]

My boy Issa?

[mylife]

That’s why I posted it here.

[Terpfen]

Note that the reply was not directed towards you, but to fiscon1.

For the relevance of replying towards fiscon1, read this thread.

[DJ Frisat]

Is this April 1st? The Onion? A forgery?

How in the Sam Scratch did this report ever see the light of day? With the House firmly in the hands of the Dems, I'm amazed that anything this damning could be written.

To be sure, it underplays the effects of the CRA, and it does its best to push some of the blame on Bush, but the central point seems to be that Fanny & Freddie, under the stellar stewardship of Dem luminaries such as Jim Johnson, Franklin Raines and Jamie Gorelick, pointed the car straight at the ditch and pushed the gas pedal to the floor.

And all while we had Frank & Waters saying 'No, no, no -- nothing wrong, nothing to see here!'

[JosephSmithNAW]

Thanks for this mylife. A valuable report in understanding the current Real estate crisis.

[raybbr]

So, whose fault was it again?

Everyone at the federal level, including Bush. Have you read his proposals that become policy about using taxpayer dollars to provide down payment assistance to the very people who got these loans? Have you read his speeches about home ownership and how his priorities were to put minorities in homes?

Please stop pretending that Bush actually tried to do something. If he had wanted to he wouldn't have directed Fannie and Freddie to INCREASE the purchasing of these mortgages.

Bush is not totally to blame but he certainly participated in the debacle.

If he really wanted to address these problems he would have used his pitiful bully pulpit and got them done. He had GOP control of Congress for four years. And, if you are going to tell me about the dems filibuster then you have to blame the GOP leadership in the Senate for not having the balls to stop them. Or actually make them stand up and filibuster.

[WellyP]

Send Frank and Dodd to JAIL!

[jch10]

I do remember Pres. Bush’s words concerning home ownership. It concerned me at the time.

Any attempts to stop,or even slow this down would have been met with cries of RACISM! Still, GWB and the Repubs should have made an effort to keep those unable to qualify for home loans from being automatically given money they could not re-pay.

This cradle to grave business is killing prosperity but it gets votes.

The CBC and the other Dems would rather this country fail.

[freekitty]

I wonder if Barney and Chris are ready to enter their Bernie Madoff plan? Also that Jamie woman should get 200 years. These people really should be punished.

[WellyP]

“...The Politicization of Mortgage Lending
As publicly traded corporations, the GSEs faced the obligation of all corporations – to
maximize the value of shareholders’ equity. This meant seeking out profitable
opportunities to invest in housing and, to the maximum extent possible, pushing the
envelope of innovation in mortgage finance to compete for market share. However,
unlike any other publicly traded corporation, Fannie Mae and Freddie Mac also answered
in a very direct way to the federal government and elected officials in a manner
reminiscent of the “crony capitalism” of countries such as Russia or China, which
preserve a large state-owned enterprise sector. Fannie and Freddie answered to the
Department of Housing and Urban Development (“HUD”), which set quotas for GSE
investment in affordable housing, as well as to Congress and the White House, which
sought to use them as vehicles to advance the politically popular goal of increasing the
national homeownership rate. This was done directly through legislation and regulation
6 The “Big Three” are Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings.
6
which mandated affordable housing lending and indirectly through political pressure
from politicians and advocacy groups. This created incentives for Fannie and Freddie to
curry political favor with Congress and necessitated a massive lobbying effort which
GSE executives termed “political risk management.” As the New York Times
summarized it:
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...”