W himself was admonishing people back in ‘04 to mortgage more houses.
Some guy I heard on talk said we need to be 55% mortgaged, especially since sending our manufacturing offshore. People who lease are obviously more mobile and able to take advantage of new or different employment opportunities instead of being tied down to a house.
“Reckless Endangerment” sounds like a must read for me.
A New York Times columnist wrote this book? Man, all the homolibs must be gnashing their teeth in that newsroom!
Gretchen better watch her back.
What is really, really sad is how few people care. :(
These people don’t care what happens from now one. They already got their money from the tax payers. Follow the money, it will lead you to the thieves.
People like this have no souls. They must think they are immortal.
Although Johnson left Fannie Mae years before his handiwork helped produce the 2008 bonfire of wealth, he may be more responsible for the debacle and its still-mounting devastations — of families, endowments, etc. — than any other individual. If so, he may be more culpable for the peacetime destruction of more wealth than any individual in history.
Democrat operative, James Johnson
The amendment (s) in the CRAct from Clinton destroyed our economy with the help from other commiecrats.
It’s like government has a negative magic wand - wave it and anything will turn to excrement.
BTTT!
BUMP
Mark Levin Show,
Mark summed up the underriding events that led to the sub-prime mortgage crisis and decimated the financial sector quoting from his book Liberty and Tyranny. He explains how government policy set the stage for the inevitable collapse and how even now the left attempts to use the collapse as an excuse to assume even greater authority over the free market which they, of course, blame. This is a must-read for anyone unaware of exactly how the government sowed the seeds of the housing boom and bust:
“How did we get where we are today? Here’s a little history lesson which I’ve written about and talked about in Liberty and Tyranny. Is it because of a lack of regulations or a lack of government? You be the judge.
The statist is constantly manipulating public sentiment in a steady effort to disestablish the free market as he pushes the nation down tyranny’s road. […] He has built an enormous maze of government agencies and programs which grow from year to year and which intervene in and interfere with the free market. And when the statist central planners create economic perversions that are seriously detrimental to the public, he blames the free market and insists on seizing additional authority to correct the failures created at his own direction. Consider the four basic events that led to the housing bust in 2008 which spread to the financial markets and beyond. […]
Event #1.
In 1977 Congress passed the Community Reinvestment Act (CRA) to address alleged discrimination by banks in making loans to poor people and minorities in inner-cities. They called it ‘red-lining’. The act provided that banks have ‘an affirmative obligation’ to meet the credit needs of the communities in which they are chartered. In 1989 Congress amended the Home Mortgage Disclosure Act requiring banks to collect racial data on mortgage applications. University of Texas economics professor Stan Libowitz has written that:
‘Minority mortgage applications were rejected more frequently than other applications but the overwhelming reason wasn’t racial discrimination but simply that minorities tend to have weaker finances.’
Libowitz also condemns a 1992 study conducted by the Boston Federal Reserve Bank that alleged systemic discrimination. He said that study was tremendously flawed:
‘A colleague and I show that the data it had used contained thousands of egregious typos such as loans with negative interest rates. Our study found no evidence of discrimination. But the study became the standard in which government policy was based.’
In 1995 the Clinton administration’s Treasury Department issued regulations tracking loans by neighborhoods, income groups and races to rate the performance of banks. The ratings were used by regulators to determine whether the government would approve bank mergers, acquisitions and new branches.
By the way, does it sound like an unfettered mortgage market to you so far? No, the government’s all over this business; and for all the wrong reasons!
The regulations also encouraged statist-aligned groups such as ACORN and the Neighborhood Assistance Cooperation of America to file petitions with regulators (or threaten to) to slow or even prevent banks from conducting their business by challenging the extent to which banks were issuing these loans.
By the way, one of the lawyers for ACORN who did this…Barrack Obama.
With such powerful leverage over banks some groups were able, in effect, to legally extort banks to make huge pools of money available to the groups; money they in turn used to make loans. The banks and community groups issued loans to low income individuals who often had bad credit or insufficient income. These loans, which become known as ‘sub-prime loans’, made available 100% financing, did not always require the use of credit scores and were even made without documenting income; by government regulation and litigation from the left. Therefore the government insisted that banks, particularly those who wanted to expand, abandon traditional underwriting standards. One estimate puts the figure of CRA-eligible loans at 4.5 trillion dollars in sub-prime toxic loans based on government policy.
Oh, that unfettered free market! [spoken with sarcastic tone]
Event #2 (of four events).
In 1992 the Department of Housing and Urban Development (HUD)…
Who was the secretary then? Andrew Cuomo the popular Democrat in New York.
…HUD pressured two government-chartered corporations known as Freddie Mac and Fannie Mae to purchase (or securitize, if you will) large bundles of these loans for conflicting purposes of diversifying the risk and making even more money available to banks for risky loans.
Andrew Cuomo’s fingerprints are all over this. Does anybody seek to hold him accountable? Nobody.
Congress also passed the Federal Housing Enterprises Financial Safety and Soundness Act eventually mandating that these companies buy (that is, Freddie Mac and Fannie Mae) 45% of all loans from people of low and moderate incomes. Consequently, a second market was created for these loans by Fannie Mae and Freddie Mac. And in 1995 the Treasury Department established the Community Development Financial Institutions Fund which provided banks with the tax dollars (you’re money) to encourage even more risky loans.
Gee, does this sound like an unfettered free market to you?
For the statist, however, this still was not enough. Top congressional Democrats including Representative Barney Frank, Senator Chris Dodd and, yes, Senator Charles Schumer among others repeatedly ignored warnings of pending disaster insisting that they were overstated and opposed efforts to force Freddie Mac and Fannie Mae to comply with the usual business and oversight practices (say like SEC reporting). And the top executives of these corporations, most of whom had worked in or with Democrat administrations, resisted reform while they were actively ‘cooking the books’ in order to reward themselves with tens of millions of dollars in bonuses.
Gee, that unfettered free market again!
Event #3.
[…] A byproduct of this government intervention and social engineering was a financial instrument called the derivative which turned the sub-prime mortgage market into a ticking time-bomb that would magnify the housing bust by orders of magnitude. A derivative is, in essence, a contract where one party sells the risk associated with the mortgage to another party in exchange for payments to that company based on the value of the mortgage. In other words, it’s a bet. It’s a bet that the mortgage will last or will go under; you bet on one side or the other. In some cases investors who did not even make the loans would bet on whether the loans would subject to default. Although imprecise, perhaps derivatives in this context can best be understood as a form of insurance. Now, derivatives allowed commercial and investment banks, individual companies and private investors to further spread and ultimately multiply the risk associated with these mortgages. Certain financial and insurance institutions invested heavily in derivatives such as American International Group (or AIG).
You might say ‘hey, what are they doing?’ What do you mean ‘what are they doing?’ These mortgages are the creation, directly, of federal liberal policy.
Event #4.
The Federal Reserve Board’s role in the housing boom and bust cannot be understated. The Pacific Research Institute’s Robert Murphy explains that the Federal Reserve slashed interest rates while this was going on; slashed them repeatedly starting in January 2001 from 6.5% percent until they reached a low of 1% in June 2003. When the easy money policy became too inflationary for comfort, the Fed under Alan Greenspan and then new chairman Ben Bernanke, at the end, began a steady process of raising interest rates back up from 1% in June 2004 to 5.25% in June 2006. Therefore, when the Federal Reserve ended its role as steward of the monetary system and instead used interest rates to artificially and inappropriately manipulate the housing market, it interfered with the normal market conditions and contributed to destabilizing the economy.
Ladies and gentlemen, the Treasury Department, HUD, Congress, the Community Redevelopment Act, other laws passed by Congress, the Federal Reserve…none of these are private sector entities. All of them combined to create the economic situation we are confronting today and the housing bust we are confronting today. And so when the President of the United States says ‘Wall Street did this! Bankers did this! You and I did this! Everybody did it but the government and the answer is more government, more programs, more Barney Frank and Chris Dodd, he is a liar. But then again, what would you expect from Obama; he is a serial liar.”