David Brat Gets It Right About The Subprime Crisis

The Beltway hates it when Tea Party pols speak the truth. So when David Brat blamed the recession on Washington, it of course set up an intellectual firing squad to stop him. But it's shooting the same old blanks.

In upsetting House Majority Leader Eric Cantor in Virginia's GOP primary, Brat never wavered from his position that government caused the financial crisis and has stunted the recovery with more of the same bad policies. And he's not backing away from it, despite media bashing.

Here's how the economics professor turned politician explained it in a post-victory interview:

"The American people want to take the country back, and what motivated the race for me was after the financial circumstance, we had Fannie (Mae) and Freddie (Mac) collapse. I thought surely our political leaders, we're on our knees economically, we'll learn some lessons and get it right, and they didn't. We're still roughly in the same mess."

Brat added, "I don't think a lot of folks in D.C. understand what free markets are, so that's the most important piece. Fannie and Freddie made two-thirds of all subprime mortgages. That is not a free-market institution. That entity ... caused the housing collapse. So we need to take free markets seriously."

Bravo. Finally, someone with eyes wide open may be joining a legislative body that for too long has had its eyes closed shut over one of the most important issues of our time.

MASSIVE SUB-PRIME MORTGAGE FRAUD ON CAPITOL HILL---TAXPAYERS GET SOCKED A 2009 Wall Street Journal investigative reported that the subprime mortgage borrowing spree that wreaked havoc on the US economy revealed----according to the Federal Financial Institutions Examination Council---financial schemes by low-income housing groups, Hispanic lawmakers on Capitol Hill, including a congressional Hispanic housing initiative, subprime mortgage lenders and brokers, colluded in fraudulent schemes to increase homeownership among Latinos using falsified applications, and other tricks of the trade.

The massive mortgage fraud ended in disaster for which no one has been held responsible. Taxpayers got saddled with billions of dollars in bailout bills.

These subprime activities were not simply the mortgage market at work. They were fueled by avarice, greed, stupidity--all enabled by Congressmen and other groups which leave a trail at the door of then-Cong Joe Baca (D-Cali). The subprime mortgage bank fraud network was spearheaded by then-Cong Joe Baca (D-Calif 43rd), in his powerful position as chairman of the Congressional Hispanic Caucus. Baca's district ranks No.5 among all US Congressional districts in percentage of home loans tailored to sub-prime borrowers.

Baca used tax resources, the legislative power of his office and his leadership position in the Congressional Hispanic Caucus to calculatedly launch a housing initiative called "HOGAR"-- Spanish for home. Then-Cong Baca calculatedly hyped the fact that the national Latino homeownership rate was 47%, compared with 68% for the overall population.

HOGAR was coached to call the figure "alarming," and to say "a concerted effort was required to ensure that by the end of the decade Latinos will share equally in the American Dream of home ownership." HOGAR and then-Cong Baca conned the public, failing to note that most of the "dreamers" were illegals, citizens of Third World countries who had violated US borders.

Predictably, HOGAR colluded w/ co-conspirators which included:

(a) shaky mortgage companies that ran into big trouble;

(b) Fannie Mae and Freddie Mac, both now under federal control after billions in taxpayer bailouts;

(c) Countrywide Financial Corp., sold to Bank of America Corp;

(d) Washington Mutual Inc., taken over by the US government and sold to J.P. Morgan Chase & Co.; and,

(e) New Century Financial Corp. and Ameriquest Mortgage Corp, both now defunct, killed by defaulted subprime Latino mortgages.

HOGAR's ties to Countrywide and the subprime mortgage industry were substantial. Bribery and self-dealing were rampant: Companies that donated $150,000 to then-Cong Baca got the right to have their own research fellow who would conduct fraudulent studies, which were cunningly used by industry lobbyists to pump fraudulent lending. Bribery and extortion in the form of $100,000 annual donations to then-Cong Baca, for which HOGAR provided phony news releases from then-Cong Baca's Hispanic Caucus promoting a lender's commercial products to the Latino market,

The most shocking example of bribery well-substantitated by Hogar's literature..... HOGAR announced it worked with Freddie Mac on a self-serving two-year examination of Latino homeownership in 63 congressional districts. The "study" found Hispanic ownership on the rise thanks to "new flexible mortgage loan products" that the industry was adopting at the urging of Cong Baca's collusive coterie.

HOGAR conned lenders into even more lenient down-payment and underwriting standards. As the subprime debacle unfolded, HOGAR declined repeated requests for comment despite the economic havoc their activities precipitated. The fraudulent mortgage schemes demonstrated the criminal activities of border violators with multiple identities---perhaps violent, terrorist-connected foreigners---colluding and conspiring to defraud private companies and public entities. And mortgage racketeering enterprises which employed sub rosa finance and business practices to carry out deceptions and frauds.

The alleged ring of swindlers---a Congresman, individuals with multiple identities, banks, insurance companies, mortgage brokers--might be charged with cheating the US govt, taxpayers and bank share holders out of hundreds of millions of dollars via an elaborate web of mortgage and bank frauds. The mortgage "Dreamers" used multiple phony identities, fraudulent Social Security numbers (purchased from identity forgers) in order to obtain govt-subsidized benefits. L/E will find that individuals with multiple identities obtained fraudulent mortgages then flipped the houses at ever-higher prices to family member who then absconded to foreign countries, sticking banks (and taxpayers) with hundreds of millions in fraudulent mortgages.

BACKGROUND A Wall Street Journal investigative report related that, according to the Federal Financial Institutions Examination Council examination of the borrowing spree, uncovered financial schemes by low-income housing groups, Hispanic lawmakers, a congressional Hispanic housing initiative, mortgage lenders and brokers, all colluding in fraduent schemes to increase homeownership among Latinos with forged documents which enabled massive fraud.

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Baca and the separatist tax-funded "Hispanic Congressional Caucus" has been close-mouthed about its role in financing, and, earmarking the blood-thirsty America-hating La Raza. Race-pimping "La Raza" was given tax dollars...... and Congressional earmarks...... to finance its so-called "mortgage activities." La Raza's "strategic partnerships” with Wachovia and Bank of America forced the falsification of mortgage-applications. The dumbing down of mortgage requirements and documentation standards caused taxpayers to be socked w/ billions of dollars in bailouts...and decimated the US economy.

La Raza aided and abetted risky federal and private-home loans to latinos over the last decathanks to the lending industry’s version of “don’t ask, don’t tell.”

Plus----in addition to pocketing millions of federal tax dollars, La Raza also collected a $1 million Democratic earmark that funded “community-development” projects. Analysts report that much of it went to "mortgage counseling."

All of the official documents need to be scrutinized for fraud and falsification (a felony); as well, the Bank Secrecy Act needs to be mobilized to uncover the whereabouts of tax dollars and whether money laundering and tax-financed terrorism took place.

Bill Clinton and Franklin Raines....Clinton's appointee to Fannie Mae.

GENESIS OF THE SUB-PRIME BILKING OF TAXPAYERS
Clinton appointee, Fannie Mae CEO Franklin Raines, Pens a Letter to Shareholders
Excerpted from Raines 2003 Fannie Mae Annual Report

Excerpt ...Ten years ago the typical conforming mortgage required a down payment of 10-20%, and low-down payment mortgages were considered too risky. But then we helped to standardize the 3-5% down payment loan, brought it to global capital markets, and made it available to lenders and communities nationwide. Now low-down payment loans are commonplace. And we just adopted a new variance in our underwriting standards that will make the $500 down payment loan widely available as well...

In 1994, we pledged to provide $1 trillion in capital to ten million underserved families by the end of 2000. Thanks to our housing and industry partners, we met that goal early.

Then in 2000, we launched our American Dream Commitment, a pledge to provide $2 trillion in capital to 18 million underserved families by the year 2010, including $400 billion targeted specifically for minority families (later raised to $700 billion in response to President Bush’s Minority Homeownership Initiative). After four of the strongest years in housing and mortgage finance history, we’ve already surpassed the top-line goals of this commitment. But our work is far from complete.

So in January 2004, we announced our Expanded American Dream Commitment and pledged significant new resources to tackle America’s toughest housing challenges. Our new commitment has three main goals.

First, we will expand access to homeownership for six million first-time home buyers in the next ten years, including 1.8 million minority first-time home buyers.We also will help raise the national minority homeownership rate from 49 percent to 55 percent, with the ultimate goal of closing it entirely.

Second, we will help new and long-term homeowners stay in their homes through a series of initiatives, and commit $15 billion to preserve affordable rental housing and $1.5 billion to support the revitalization of public housing communities.

Third, we will increase the supply of affordable housing and support community development activities in at least 1,000 neighborhoods across the country through our American Communities Fund, and through targeted investments like Low-Income Housing Tax Credits that help finance affordable rental housing.

It is because of initiatives like our Trillion Dollar Commitment and our American Dream Commitment that we have exceeded our HUD affordable housing goals for ten consecutive years. (End Raines excerpt.) (NOTE Raines is a Clinton appointee)

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NOTE: Raines was fired for being a crook---Raines cooked theF/M books to get bonuses. But he walked away a multi-millionaire---extorting millions from taxpayers for pensions, bonuses, lifetime healthcare, donations to his fave charites....etc, etc, and so on, and so forth, ad infinitum ad nauseaum.

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POLS READY TO CASH-IN BIGTIME: Last year, Obama said it’s time to ‘turn the page’ on Fannie and Freddie
MarketWatch | 7/24/13 | MarketWatch / FR Posted by illiac

Obama's speech on the US economy spelled out the beginning of the end for federally-controlled mortgage buyers Fannie Mae and Freddie Mac. “We’ll work with both parties to turn the page on Fannie and Freddie, and build a housing finance system that’s rock-solid for future generations,” Obama said, according to a copy of his prepared remarks

The House Financial Services Committee approved a bill on Tuesday that would get rid of the firms in five years, to be replaced by a National Mortgage Market Utility to help securitize mortgages.(Excerpt) Read more at blogs.marketwatch.com

ADDENDUM---what Obama left out of his remarks Wall Street Journal report on page A15---article entitled “Treasury’s Fannie Mae Heist“.

WSJ: The Federal government is seizing the substantial profits of the government-chartered mortgage firms, Fannie Mae and Freddie Mac, taking for itself the property and potential gains of private investors the government induced to help prop up these companies. This conduct is intolerable.” A scathing article follows--a must read.

Who else bears the responsibility? The FedGov held a gun to bankers heads and said, “You make the loans or we’ll sue you for discrimination, and worse.”

The banks said, “What you are asking us to do is not only illegal, we can’t really do it without putting it to a vote of the shareholders, since all those bad loans are going to start piling up and destroying the value of their investments. Bond holders aren’t going to like it either.”

FedGov: “Figure it out, but get it done.”

Banks: “We have. We are going to roll the loans into securities and sell them to parties willing to bear the risk. Just know, that five minutes after we do that and sell the first tranche, we are going to run out of good loans to use in those securities.”

FedGov: “Sounds good. Let me worry about that. Godspeed.” (Off camera - “Get Warren Buffett on the phone.”)

Banks: (On the TV touting HELOCS) “If you can fog a mirror, you can own that beach house you’ve always wanted on your illegal alien strawberry picker’s salary!!”

Government was the ENTIRE problem here. All of it. Without the notion of making ‘home ownership a human right’ in America, we’d have been fine.

We’d have also been fine if Uncle Warren had simply graded those dog$hit MBS’s backed by ‘Jose’s Beach House Dream’ mortgages as the CCC rated abortions they actually were instead of the AAA rated stuff that CALPERS was legally allowed to buy. There would have been a market for the CCC rated stuff, same as their was for Junk Bonds.

The only difference is that AIG would not have sold the insurance on that crap that it did at the rates that it did. The other thing that would not have happened is that the market, at a certain point, realizing that there was a fortune to be made in making sure all these MBSs actually defaulted, wouldn’t have pressured the banks to call the crap mortgages backing those securities and causing the CDO’s and CDS’s to trigger. (To the tune of $64T worldwide, and we still haven’t unwound all of that).

The other thing that wouldn’t have happened is the suspension of only certain parts of the rule of law, like the one that allowed big banks and fair-haired children of the FedGov to ‘Extend and Pretend’ on their real estate holdings. ‘Extend’ the terms of their mortgage contracts and ‘Pretend’ that the artificially high valuation of their dog$hit, cratered real estate in order to stave off a massive commercial real estate crash on top of the massive residential real estate crash.

Only the middle class got hurt in the crash. The middle class and small business. I remember the day the credit market froze solid. I got a call from my brother that told me he tried to buy the equipment and parts for an HVAC job he was doing and was told his credit - all of it on all cards - was gone.

I was thinking he was the victim of ID theft when my business partner walked into my office and told me that our three lines of credit had just been converted to conventional loans involuntarily and we had no more LOCs.

So, yeah, I think the FedGov was 100 percent responsible for it. If they’d have left the banks alone, none of it would have happened. Everything they touch turns to $hit.

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