Truth In Lending

IBD Editorials ^ | July 10, 2009

[Kaslin]

Behind The Meltdown: Many Americans are unaware of the causes of the greatest economic calamity of our lifetime. A new congressional report details how government politicized housing, wrecking the economy.

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Rep. Darrell Issa of California, ranking Republican on the House Oversight and Government Reform Committee, has released a report that every American should read.

The analysis details how powerful Democrats in Congress insisted that government-subsidized housing be geared to serve the purposes of social justice at the expense of sound lending.

Here are some highlights of Issa's blow-by-blow account:

• With an implicit subsidy to American homeowners in the form of reduced mortgage rates, Fannie Mae and its sister government sponsored enterprise, Freddie Mac, squeezed out their competition and cornered the secondary mortgage market. They took advantage of a $2.25 billion line of credit from the U.S. Treasury.

• Congress, by statute, allowed them to operate with much lower capital requirements than private-sector competitors. They "used their congressionally-granted advantages to leverage themselves in excess of 70-to-1."

• The two GSEs were the only publicly traded corporations exempt from SEC oversight. All their securities carried an implicit AAA rating regardless of the quality of the mortgages.

• The Department of Housing and Urban Development set quotas for GSE investment in affordable housing.

[Kaslin]

Ping

[DB]

Yep.

But somehow it was all Bush’s fault for lack of “regulation”...

Never mind that it was heavily regulated. It is just that the regulations required them to make high risk loans with government backing...

No sane lender lending their own money would do such a thing...

[stephenjohnbanker]

Tweedledee(DODD) and Tweedledum(Frank)

[bareford101]

I agree....... throw the exploding ball back to Dodd and Frank..... crooks, both them.... I only hope the real truth comes out about their criminal activities.

[maica]

If one tenth as many people who “know” that Dan Quayle can’t spell, knew what our government did to destroy the stability the mortgage system in our country, we would all benefit.

Even as clearly as IBD writes editorials, this information is just too complex for the average non-interested American.

I wish we had a bit of StateRunMedia’s influence, so we could drive home the message:

Making laws that allowed people to get mortgages for more money than they could repay was BAD for the borrowers. Backing the laws up with taxpayer money was BAD for banks. Suing banks that wanted to give sound loans was BAD for depositors and investors, and ultimately borrowers, again.