A growing 'amnesia' of the Economic Crisis

[ShaklesOfBigGov]

More and more I'm finding the left rebutting the efforts of President Obama to stabilize the economy, by siting blame for this whole economic mess on President Bush and the Republicans. HOWEVER, the evidence I've seen shows an economic meltdown could have been avoided ... had the ideological views and self interests of certain members of Congress not gotten in the way. For those unfamiliar with what actually went on in Congress, I've included a "smaller" timeline of events as well and a source (to get an even MORE detailed view of what actually went on that led to this whole economic crisis).

Was President Bush solely to blame for the economic mess we are experiencing? I'm finding that there is a growing case of amnesia towards the events that led up to this crippling recession, perhaps it's just a lack of knowledge. This "blame Republicans" appears to be just rooted in opinions by those who share an overall hatred of the right, as they just happen to be the party that stands in the way of further government entitlement programs that the left loves so much.

September 1999

With pressure from the Clinton Administration, Fannie Mae eased credit requirements on loans it would purchase from lenders, making it easier for banks to lend to borrowers unqualified for conventional loans. Raines explained that "there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market," reported the New York Times.

With this action, Fannie Mae put itself at substantial risk in the event of an economic downturn. "From the perspective of many people, including me, this is another thrift industry growing up around us," warned Peter Wallison. "If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry." The danger was known.


March 2000

Rep. Richard Baker (R-Louisiana) proposed a bill to reform Fannie and Freddie's oversight in a House Subcommittee on Capital Markets.

Rep. Frank (D-Massachusetts) dismissed the idea, saying concerns about the two were "overblown" and that there was "no federal liability there whatsoever."


June 2000

Rep. Marge Roukema (R-New Jersey): "very few banks or S&Ls could, even in this day and age, even now, meet the stress-testing requirements which Fannie and Freddie are required to meet."

Rep. Carolyn Maloney (D-New York) regarding the Treasury Department line of credit: "It is really symbolic, it is obsolete, it has never been used." "Would you explain why it would be important to repeal something that seems to be of little use?"

Smith: "as long as the pipeline is there, it is like it is very expandable. . . . It is only $2 billion today. It could be $200 billion tomorrow."

Because of Democrat obfuscation, Smith's "tomorrow" arrived in 2008 when Treasury Secretary Henry Paulson put Fannie and Freddie into conservatorship.


February 2003

OFHEO reports that "although investors perceive an implicit Federal guarantee of [GSE] obligations . . . the government has provided no explicit legal backing for them," warning that unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market, according to a White House release.


June 2003

Freddie Mac reported it had understated its profits by $6.9 billion. OFHEO director Armando Falcon Jr. requested that the White House audit Fannie Mae.


July 2003

Sens. Chuck Hagel (R-Nebraska), Elizabeth Dole (R-North Carolina) and John Sununu (R-New Hampshire) introduced legislation to address Regulation of Fannie Mae and Freddie Mac. The bill was blocked by Democrats.


September 2003

In an interview with Ron Insana for CNN Money, Rep. Baker warned, "I have concerns that if appropriate resources aren't allocated for internal risk management, the consequences will be far more severe than just a real estate slowdown. The losses would fall quickly through the capital these companies have and down to shareholders and taxpayers. These companies have some of the lowest capital margins of any financial institution in the nation, yet, at the same time, they are two of the largest. The concern is that if something doesn't work out the way they predict, the American taxpayer could be called on to pay off the debt in some sort of bailout."

Rep. Barney Frank (D-Massachusetts): "These two entities - Fannie Mae and Freddie Mac - are not facing any kind of financial crisis. . . . The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."


October 2003

Fannie Mae discloses $1.2 billion accounting error.


November 2003

Council of the Economic Advisers Chairman Greg Mankiw warned, "The enormous size of the mortgage-backed securities market means that any problems at the GSEs matter for the financial system as a whole. This risk is a systemic issue also because the debt obligations of the housing GSEs are widely held by other financial institutions. The importance of GSE debt in the portfolios of other financial entities means that even a small mistake in GSE risk management could have ripple effects throughout the financial system," from a White House release.


February 2004

Mankiw cautions Congress to "not take [the financial market's] strength for granted." Again, the call from the Administration was to reduce this risk by "ensuring that the housing GSEs are overseen by an effective regulator," says a White House release.

OFHEO reported that Fannie Mae and CEO Raines had manipulated its accounting to overstate its profits. Congress and the Bush administration sought strong new regulation and authority to put the GSEs under conservatorship if necessary. As the Washington Post reports, Fannie Mae and Freddie Mac responded by orchestrating a major campaign "by traditional allies including real estate agents, home builders and mortgage lenders. Fannie Mae ran radio and television ads ahead of a key Senate committee meeting, depicting a Latino couple who fretted that if the bill passed, mortgage rates would go up." Again, GSE pressure prevailed.


October 2004

In a subcommittee testimony, Democrats vehemently reject regulation of Fannie Mae in the face of dire warning of a Fannie Mae oversight report. A few of them, Black Caucus members in particular, are very angry at the OFHEO Director as they attempt to defend Fannie Mae and protect their CRA extortion racket.

Rep. Maxine Waters (D-California): "Through nearly a dozen hearings where, frankly, we were trying to fix something that wasn't broke."

Rep. Maxine Waters (D-California): "Mr. Chairman, we do not have a crisis at Freddie Mac, and particularly at Fannie Mae, under the outstanding leadership of Mr. Frank Raines."

Rep. Ed Royce (R-California): "In addition to our important oversight role in this committee, I hope that we will move swiftly to create a new regulatory structure for Fannie Mae, for Freddie Mac, and the federal home loan banks."

Rep. Lacy Clay (D-Missouri): "This hearing is about the political lynching of Franklin Raines."

Rep. Ed Royce (R-California): "There is a very simple solution. Congress must create a new regulator with powers at least equal to those of other financial regulators, such as the OCC or Federal Reserve."

Rep. Barney Frank (D-Massachusetts): "Uh, I, this, you, you, you seem to me saying, ‘Well, these are in areas which could raise safety and soundness problems.' I don't see anything in your report that raises safety and soundness problems."

Rep. Maxine Waters (D-California): "Under the outstanding leadership of Mr. Frank Raines, everything in the 1992 Act has worked just fine. In fact, the GSEs have exceeded their housing goals. What we need to do today is to focus on the regulator, and this must be done in a manner so as not to impede their affordable housing mission, a mission that has seen innovation flourish from desktop underwriting to 100% loans."

Rep. Don Manzullo (R-Illinois): "Mr. Raines, 1.1 million bonus and a $526,000 salary. Jamie Gorelick, $779,000 bonus on a salary of 567,000. This is, what you state on page eleven is nothing less than staggering."

Rep. Don Manzullo (R-Illinois): "The 1998 earnings per share number turned out to be $3.23 and 9 mills, a result that Fannie Mae met the EPS maximum payout goal right down to the penny."

Rep. Don Manzullo (R-Illinois): "Fannie Mae understood the rules and simply chose not to follow them that if Fannie Mae had followed the practices, there wouldn't have been a bonus that year."

"The bill prohibited the GSEs from holding portfolios, and gave their regulator prudential authority (such as setting capital requirements) roughly equivalent to a bank regulator. In light of the current financial crisis, this bill was probably the most important piece of financial regulation before Congress in 2005 and 2006," reports the Wall Street Journal.

Greenspan testified that the size of GSE portfolios "poses a risk to the global financial system. It would be difficult, if not impossible, to bail out the lenders [GSEs] . . . should one get into financial trouble." He added, "If we fail to strengthen GSE regulation, we increase the possibility of insolvency and crisis . . . We put at risk our ability to preserve safe and sound financial markets in the United States, a key ingredient of support for homeownership."

Greenspan warned that if the GSEs "continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road . . . We are placing the total financial system of the future at a substantial risk."

Bloomberg writes, "If that bill had become law, then the world today would be different. . . . But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter. That such a reckless political stand could have been taken by the Democrats was obscene even then."



April 2007

In "A Nightmare Grows Darker," the New York Times writes that the "democratization of credit" is "turning the American dream of homeownership into a nightmare for many borrowers." The "newfangled mortgage loans" called "affordability loans" "represent 60 percent of foreclosures."


2007-2008

The housing bubble began to burst, bad mortgages began to default, and finally the Fannie Mae and Freddie Mac portfolios were revealed to be what they were, in collapse. And the testimony is evident as to why. As Wallison noted, "Fannie and Freddie were, I would say, the poster children for corporate welfare."


Archived-Articles: Why the Mortgage Crisis Happened

 

[zeke]

You know what shady? Saying the same thing over and over like you right wing whackos tend to do, does not change any facts.

Did Fannie and Freddie play a part. Absolutley. But the alt A program that they came out with was not the culprit. Their purchasing sub prime loans chasing big returns was a huge mistake.

Matter of fact, do you even know the difference between A paper, alt A paper and sub prime loans?
If you think you do, it might be funny to hear it.

Were politicians stupid about what was going on. Absolutley. Dems in particular. Rethugs were just devious and underhanded about what they were doing.

And do you know what CRA means. And how it mattered. And what it was intended to do?

And finally, what was the name of that legislation that Rethugs worked years to get overturned. And what was the purpose of that legislation and what happened after that legislation was repealed? You know, that legilation that Bill Clinton signed. Fool that he was for doing it.

If you can answer any of those questions accurately, maybe we should talk.

I wrote mortgage loans for 20 years. And what you want to believe happened and what really happened is not the same thing.

And Franklin Raines should have gone to jail. Along with a lot of other heads of banks, brokerages and hedge fund managers.

How come you aren't calling out the heads of the banks? Or Countrywide? Bear Sterns? Chase?
You probably think they did nothing wrong.

And did you know that there were a group of regional banks whose leadership didn't play the games that the big boys did. And you know what. They didn't lose a dime on their mortgage operations. They were true bankers and understood risk management. And they still sold loans to Fannie and Freddie. Loans that didn't default. How could that be?

 

[freedombecki]

More and more I'm finding the left rebutting the efforts of President Obama to stabilize the economy, by siting blame for this whole economic mess on President Bush and the Republicans. HOWEVER, the evidence I've seen shows an economic meltdown could have been avoided ... had the ideological views and self interests of certain members of Congress not gotten in the way. For those unfamiliar with what actually went on in Congress, I've included a "smaller" timeline of events as well and a source (to get an even MORE detailed view of what actually went on that led to this whole economic crisis).

Was President Bush solely to blame for the economic mess we are experiencing? I'm finding that there is a growing case of amnesia towards the events that led up to this crippling recession, perhaps it's just a lack of knowledge. This "blame Republicans" appears to be just rooted in opinions by those who share an overall hatred of the right, as they just happen to be the party that stands in the way of further government entitlement programs that the left loves so much.

September 1999

With pressure from the Clinton Administration, Fannie Mae eased credit requirements on loans it would purchase from lenders, making it easier for banks to lend to borrowers unqualified for conventional loans. Raines explained that "there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market," reported the New York Times.

With this action, Fannie Mae put itself at substantial risk in the event of an economic downturn. "From the perspective of many people, including me, this is another thrift industry growing up around us," warned Peter Wallison. "If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry." The danger was known.

March 2000

Rep. Richard Baker (R-Louisiana) proposed a bill to reform Fannie and Freddie's oversight in a House Subcommittee on Capital Markets.

Rep. Frank (D-Massachusetts) dismissed the idea, saying concerns about the two were "overblown" and that there was "no federal liability there whatsoever."

June 2000

Rep. Marge Roukema (R-New Jersey): "very few banks or S&Ls could, even in this day and age, even now, meet the stress-testing requirements which Fannie and Freddie are required to meet."

Rep. Carolyn Maloney (D-New York) regarding the Treasury Department line of credit: "It is really symbolic, it is obsolete, it has never been used." "Would you explain why it would be important to repeal something that seems to be of little use?"

Smith: "as long as the pipeline is there, it is like it is very expandable. . . . It is only $2 billion today. It could be $200 billion tomorrow."

Because of Democrat obfuscation, Smith's "tomorrow" arrived in 2008 when Treasury Secretary Henry Paulson put Fannie and Freddie into conservatorship.

February 2003

OFHEO reports that "although investors perceive an implicit Federal guarantee of [GSE] obligations . . . the government has provided no explicit legal backing for them," warning that unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market, according to a White House release.

June 2003

Freddie Mac reported it had understated its profits by $6.9 billion. OFHEO director Armando Falcon Jr. requested that the White House audit Fannie Mae.

July 2003

Sens. Chuck Hagel (R-Nebraska), Elizabeth Dole (R-North Carolina) and John Sununu (R-New Hampshire) introduced legislation to address Regulation of Fannie Mae and Freddie Mac. The bill was blocked by Democrats.


September 2003

In an interview with Ron Insana for CNN Money, Rep. Baker warned, "I have concerns that if appropriate resources aren't allocated for internal risk management, the consequences will be far more severe than just a real estate slowdown. The losses would fall quickly through the capital these companies have and down to shareholders and taxpayers. These companies have some of the lowest capital margins of any financial institution in the nation, yet, at the same time, they are two of the largest. The concern is that if something doesn't work out the way they predict, the American taxpayer could be called on to pay off the debt in some sort of bailout."

Rep. Barney Frank (D-Massachusetts): "These two entities - Fannie Mae and Freddie Mac - are not facing any kind of financial crisis. . . . The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."


October 2003

Fannie Mae discloses $1.2 billion accounting error.


November 2003

Council of the Economic Advisers Chairman Greg Mankiw warned, "The enormous size of the mortgage-backed securities market means that any problems at the GSEs matter for the financial system as a whole. This risk is a systemic issue also because the debt obligations of the housing GSEs are widely held by other financial institutions. The importance of GSE debt in the portfolios of other financial entities means that even a small mistake in GSE risk management could have ripple effects throughout the financial system," from a White House release.


February 2004

Mankiw cautions Congress to "not take [the financial market's] strength for granted." Again, the call from the Administration was to reduce this risk by "ensuring that the housing GSEs are overseen by an effective regulator," says a White House release.

OFHEO reported that Fannie Mae and CEO Raines had manipulated its accounting to overstate its profits. Congress and the Bush administration sought strong new regulation and authority to put the GSEs under conservatorship if necessary. As the Washington Post reports, Fannie Mae and Freddie Mac responded by orchestrating a major campaign "by traditional allies including real estate agents, home builders and mortgage lenders. Fannie Mae ran radio and television ads ahead of a key Senate committee meeting, depicting a Latino couple who fretted that if the bill passed, mortgage rates would go up." Again, GSE pressure prevailed.

October 2004

In a subcommittee testimony, Democrats vehemently reject regulation of Fannie Mae in the face of dire warning of a Fannie Mae oversight report. A few of them, Black Caucus members in particular, are very angry at the OFHEO Director as they attempt to defend Fannie Mae and protect their CRA extortion racket.

Rep. Maxine Waters (D-California): "Through nearly a dozen hearings where, frankly, we were trying to fix something that wasn't broke."

Rep. Maxine Waters (D-California): "Mr. Chairman, we do not have a crisis at Freddie Mac, and particularly at Fannie Mae, under the outstanding leadership of Mr. Frank Raines."

Rep. Ed Royce (R-California): "In addition to our important oversight role in this committee, I hope that we will move swiftly to create a new regulatory structure for Fannie Mae, for Freddie Mac, and the federal home loan banks."

Rep. Lacy Clay (D-Missouri): "This hearing is about the political lynching of Franklin Raines."

Rep. Ed Royce (R-California): "There is a very simple solution. Congress must create a new regulator with powers at least equal to those of other financial regulators, such as the OCC or Federal Reserve."

Rep. Barney Frank (D-Massachusetts): "Uh, I, this, you, you, you seem to me saying, ‘Well, these are in areas which could raise safety and soundness problems.' I don't see anything in your report that raises safety and soundness problems."

Rep. Maxine Waters (D-California): "Under the outstanding leadership of Mr. Frank Raines, everything in the 1992 Act has worked just fine. In fact, the GSEs have exceeded their housing goals. What we need to do today is to focus on the regulator, and this must be done in a manner so as not to impede their affordable housing mission, a mission that has seen innovation flourish from desktop underwriting to 100% loans."

Rep. Don Manzullo (R-Illinois): "Mr. Raines, 1.1 million bonus and a $526,000 salary. Jamie Gorelick, $779,000 bonus on a salary of 567,000. This is, what you state on page eleven is nothing less than staggering."

Rep. Don Manzullo (R-Illinois): "The 1998 earnings per share number turned out to be $3.23 and 9 mills, a result that Fannie Mae met the EPS maximum payout goal right down to the penny."

Rep. Don Manzullo (R-Illinois): "Fannie Mae understood the rules and simply chose not to follow them that if Fannie Mae had followed the practices, there wouldn't have been a bonus that year."

"The bill prohibited the GSEs from holding portfolios, and gave their regulator prudential authority (such as setting capital requirements) roughly equivalent to a bank regulator. In light of the current financial crisis, this bill was probably the most important piece of financial regulation before Congress in 2005 and 2006," reports the Wall Street Journal.

Greenspan testified that the size of GSE portfolios "poses a risk to the global financial system. It would be difficult, if not impossible, to bail out the lenders [GSEs] . . . should one get into financial trouble." He added, "If we fail to strengthen GSE regulation, we increase the possibility of insolvency and crisis . . . We put at risk our ability to preserve safe and sound financial markets in the United States, a key ingredient of support for homeownership."

Greenspan warned that if the GSEs "continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road . . . We are placing the total financial system of the future at a substantial risk."

Bloomberg writes, "If that bill had become law, then the world today would be different. . . . But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter. That such a reckless political stand could have been taken by the Democrats was obscene even then."

April 2007

In "A Nightmare Grows Darker," the New York Times writes that the "democratization of credit" is "turning the American dream of homeownership into a nightmare for many borrowers." The "newfangled mortgage loans" called "affordability loans" "represent 60 percent of foreclosures."

2007-2008

The housing bubble began to burst, bad mortgages began to default, and finally the Fannie Mae and Freddie Mac portfolios were revealed to be what they were, in collapse. And the testimony is evident as to why. As Wallison noted, "Fannie and Freddie were, I would say, the poster children for corporate welfare."

Archived-Articles: Why the Mortgage Crisis Happened

That's quite a litany of why things happened the way they did.

Was President Bush solely to blame for the economic mess we are experiencing? I'm finding that there is a growing case of amnesia towards the events that led up to this crippling recession, perhaps it's just a lack of knowledge. This "blame Republicans" appears to be just rooted in opinions by those who share an overall hatred of the right, as they just happen to be the party that stands in the way of further government entitlement programs that the left loves so much.

There is a lot of anger in the financial community because President Bush signed a lot of spending acts that Congress shoved through under Nancy Pelosi's reign of spending after the American public looked the other way as one instance after another of voter fraud was uncovered, but nothing was ever done to rectify it as Republicans like Norm Coleman was ousted by failed and out-of-work Democrat Hollywood pundit Al Pundit's unscrupulous recount after Senator Coleman won the election. The Democrats "found" several hundred votes to change the outcome of the election of Coleman's win to a Republican defeat. These lying liars and cheats stole the Senate, and who knows how much money passed under the table to destabilize the American people's real vote. The apparatchik Press did its part to destroy the Republican-held Senate's control over spending, and look at the mess we have now under the same kind of election that followed none of the pollsters who followed standard polling procedures to predict a Romney win.

As a consequence, a person who didn't deserve to be elected even once was "selected" twice by George Soros, the most corrupt businessman in the history of the world who tried to destroy Great Britain, then moved on to destroy the American people.

With us out of the way, there's nothing to stop his control of the world except that he is over 80 years old and plans on an extended life to enjoy himself at America's expense, of course.

/opinion

 

[freedombecki]

Shakles of Big Govt, I'm not comfortable with this administration's failure to accept responsibility for its overspending, a press that paints good guys as bad guys, a public that sleeps through Congressional spending binges, and people believing silk-tongued lies pumped out by a President who thinks faking it will work, as in printing more money than we will ever have.

Overspending has run wild. Several of our conservatives who has good information on economic issues have pointed this out.

Overspending is not just a little pebble of error. It's the blatant use of big government to steal American people's assets for their agendas and nobody else's.

And they're prospering huge businesses rather than relying on many people to run decent businesses and spreading their wealth locally. With money concentrated in big population areas, the Congress has figured out a sure-fire way to enrich themselves personally with enough money to live abroad forever to the demise of the American public who will have to deal with the tsunami they leave behind when they retire, hoping to leave enough laws in place to get at age-wizened citizens who know what they did through withholding of health care services on account of their age.

 

[Truthmatters]

Timing and Temporary Exemption
As adopted, Regulation R provides banks with a transitional exemption until the first day of their first fiscal year commencing after Sept. 30, 2008. This will give banks time to make any necessary changes in their systems and compliance programs and should ensure that banks have time to come into compliance with the Exchange Act provisions relating to the broker definition. This exemptive rule will become effective on the date that the Commission's current order expires, Sept. 28, 2007.




why did they hold back the broker rules on the banks that was WRITTEN into the laws of this country?

 

[Truthmatters]

SEC Votes for Final Rules Defining How Banks Can Be Securities Brokers
Eight Years After Passage of the Gramm-Leach-Bliley Act, Key Provisions Will Now Be Implemented
FOR IMMEDIATE RELEASE
2007-190
Washington, D.C., Sept. 19, 2007 - Ending eight years of stalled negotiations and impasse, the Commission today voted to adopt, jointly with the Board of Governors of the Federal Reserve System (Board), new rules that will finally implement the bank broker provisions of the Gramm-Leach-Bliley Act of 1999. The Board will consider these final rules at its Sept. 24, 2007 meeting. The Commission and the Board consulted with and sought the concurrence of the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Office of Thrift Supervision.



they did this so the banks goit EVERYTHING they wanted about gramm leach bliely act of 1999 and none of the regulations they didnt like.

It caused them to have so much leaveway they Gamed the securities they were selling by lying to their customers about what was in them.


They made money by writting sub prime and then made money by Horking it off in other people with lies.

 

[Truthmatters]

You may want to remain stupoid about what happened but by doing so you just damage your party further

 

[Truthmatters]

Bad info in means


bad decisions out

 

[ShaklesOfBigGov]

There is a lot of anger in the financial community because President Bush signed a lot of spending acts that Congress shoved through under Nancy Pelosi's reign of spending after the American public looked the other way as one instance after another of voter fraud was uncovered, but nothing was ever done to rectify it as Republicans like Norm Coleman was ousted by failed and out-of-work Democrat Hollywood pundit Al Pundit's unscrupulous recount after Senator Coleman won the election. The Democrats "found" several hundred votes to change the outcome of the election of Coleman's win to a Republican defeat. These lying liars and cheats stole the Senate, and who knows how much money passed under the table to destabilize the American people's real vote. The apparatchik Press did its part to destroy the Republican-held Senate's control over spending, and look at the mess we have now under the same kind of election that followed none of the pollsters who followed standard polling procedures to predict a Romney win.

As a consequence, a person who didn't deserve to be elected even once was "selected" twice by George Soros, the most corrupt businessman in the history of the world who tried to destroy Great Britain, then moved on to destroy the American people.

With us out of the way, there's nothing to stop his control of the world except that he is over 80 years old and plans on an extended life to enjoy himself at America's expense, of course.

/opinion

I don't approve of our government wasting so much money, then justifying it under the label of "good intentions". It is this belief we need a bigger form of government controlling our lives, creating more government programs that become to big to fail (so we pump in more taxpayer dollars while looking the other way), the lack over accepting oversight, that is a huge factor behind the mess we are in. This drum beat by the left of Blame Bush, has no factual basis based on the facts. The democrats have their hands filthy with involvement in this economic mess.

 

[Truthmatters]

hey dummy those TOO BIG TOO FAIL idiots were private industry allowed to get so BIG that their duplicity would kill the country when they got caught cheating.



jesus you will conflate anything

 

[Truthmatters]

Now OP deal with the FACTS about the Bush SEC cheating our country out of implimenting the laws we decide on?

 

[Sallow]

You know what shady? Saying the same thing over and over like you right wing whackos tend to do, does not change any facts.

Did Fannie and Freddie play a part. Absolutley. But the alt A program that they came out with was not the culprit. Their purchasing sub prime loans chasing big returns was a huge mistake.

Matter of fact, do you even know the difference between A paper, alt A paper and sub prime loans?
If you think you do, it might be funny to hear it.

Were politicians stupid about what was going on. Absolutley. Dems in particular. Rethugs were just devious and underhanded about what they were doing.

And do you know what CRA means. And how it mattered. And what it was intended to do?

And finally, what was the name of that legislation that Rethugs worked years to get overturned. And what was the purpose of that legislation and what happened after that legislation was repealed? You know, that legilation that Bill Clinton signed. Fool that he was for doing it.

If you can answer any of those questions accurately, maybe we should talk.

I wrote mortgage loans for 20 years. And what you want to believe happened and what really happened is not the same thing.

And Franklin Raines should have gone to jail. Along with a lot of other heads of banks, brokerages and hedge fund managers.

How come you aren't calling out the heads of the banks? Or Countrywide? Bear Sterns? Chase?
You probably think they did nothing wrong.

And did you know that there were a group of regional banks whose leadership didn't play the games that the big boys did. And you know what. They didn't lose a dime on their mortgage operations. They were true bankers and understood risk management. And they still sold loans to Fannie and Freddie. Loans that didn't default. How could that be?

Or Goldman Sachs? Or AIG? Or Lehman? Or just about every house on the street?

They were financing many of these loans made by unscrupulous predatory loan agencies who basically lied on their dime to fool people into taking out loans they couldn't afford or didn't understand.

 

[Sallow]

Shakles of Big Govt, I'm not comfortable with this administration's failure to accept responsibility for its overspending, a press that paints good guys as bad guys, a public that sleeps through Congressional spending binges, and people believing silk-tongued lies pumped out by a President who thinks faking it will work, as in printing more money than we will ever have.

Overspending has run wild. Several of our conservatives who has good information on economic issues have pointed this out.

Overspending is not just a little pebble of error. It's the blatant use of big government to steal American people's assets for their agendas and nobody else's.

And they're prospering huge businesses rather than relying on many people to run decent businesses and spreading their wealth locally. With money concentrated in big population areas, the Congress has figured out a sure-fire way to enrich themselves personally with enough money to live abroad forever to the demise of the American public who will have to deal with the tsunami they leave behind when they retire, hoping to leave enough laws in place to get at age-wizened citizens who know what they did through withholding of health care services on account of their age.

Overspending on what?

 

[Soggy in NOLA]

You may want to remain stupoid about what happened but by doing so you just damage your party further

Speaking of stupoid and TM steps right in it...

 

[Truthmatters]

And then stuffed them into mortgage securities and LIED about what was in them to sell them off at a huge profit

 

[Truthmatters]

You may want to remain stupoid about what happened but by doing so you just damage your party further

Speaking of stupoid and TM steps right in it...

a fucking typo.

yeah that will save your doomed party

 

[ShaklesOfBigGov]

You know what shady? Saying the same thing over and over like you right wing whackos tend to do, does not change any facts.

Did Fannie and Freddie play a part. Absolutley. But the alt A program that they came out with was not the culprit. Their purchasing sub prime loans chasing big returns was a huge mistake.

Matter of fact, do you even know the difference between A paper, alt A paper and sub prime loans?
If you think you do, it might be funny to hear it.

Were politicians stupid about what was going on. Absolutley. Dems in particular. Rethugs were just devious and underhanded about what they were doing.

And do you know what CRA means. And how it mattered. And what it was intended to do?

And finally, what was the name of that legislation that Rethugs worked years to get overturned. And what was the purpose of that legislation and what happened after that legislation was repealed? You know, that legilation that Bill Clinton signed. Fool that he was for doing it.

If you can answer any of those questions accurately, maybe we should talk.

I wrote mortgage loans for 20 years. And what you want to believe happened and what really happened is not the same thing.

And Franklin Raines should have gone to jail. Along with a lot of other heads of banks, brokerages and hedge fund managers.

How come you aren't calling out the heads of the banks? Or Countrywide? Bear Sterns? Chase?
You probably think they did nothing wrong.

And did you know that there were a group of regional banks whose leadership didn't play the games that the big boys did. And you know what. They didn't lose a dime on their mortgage operations. They were true bankers and understood risk management. And they still sold loans to Fannie and Freddie. Loans that didn't default. How could that be?

Yes I spoke on the subject of the CRA, the Congressional testimony is only one piece of the puzzle. This was to nullify any attempt to say this economic problem is the result of simply the Republicans and President Bush, simply untrue and unfounded. The CRA included a set of regulations, passed under President Clinton, that forced banks to lend out to poor lower income families that would otherwise not be able to obtain a home. Issues like credit background checks, employment history (those areas banks would normally use as a standard for loan approval) was overlooked - as it was more important (for political reasons) that people obtain a home than could afford one. I could provide some links that support this new government regulation of "bank policy" if you like?

 

[ShaklesOfBigGov]

And then stuffed them into mortgage securities and LIED about what was in them to sell them off at a huge profit

Yes huge bonuses were discovered and handed out. After the bailout, Obama and the Democrats want to blame corporate CEOs for obtaining bonuses, yet they looked the other way with Fannie Mae and Freddie Mac - defending Mr. Raines. Why?

Rep. Don Manzullo (R-Illinois): "Mr. Raines, 1.1 million bonus and a $526,000 salary. Jamie Gorelick, $779,000 bonus on a salary of 567,000. This is, what you state on page eleven is nothing less than staggering."

Rep. Don Manzullo (R-Illinois): "The 1998 earnings per share number turned out to be $3.23 and 9 mills, a result that Fannie Mae met the EPS maximum payout goal right down to the penny."

Rep. Don Manzullo (R-Illinois): "Fannie Mae understood the rules and simply chose not to follow them that if Fannie Mae had followed the practices, there wouldn't have been a bonus that year."

Rep. Maxine Waters (D-California): "Through nearly a dozen hearings where, frankly, we were trying to fix something that wasn't broke."

Rep. Maxine Waters (D-California): "Mr. Chairman, we do not have a crisis at Freddie Mac, and particularly at Fannie Mae, under the outstanding leadership of Mr. Frank Raines."

Why block any need for oversight before the financial mess of these two giants got worse, to the warnings of several advisors? What was more important to Democrats than the financial stability of Fannie Mae and Freddie Mac?

October 2003

Fannie Mae discloses $1.2 billion accounting error.

 

[freedombecki]

Timing and Temporary Exemption
As adopted, Regulation R provides banks with a transitional exemption until the first day of their first fiscal year commencing after Sept. 30, 2008. This will give banks time to make any necessary changes in their systems and compliance programs and should ensure that banks have time to come into compliance with the Exchange Act provisions relating to the broker definition. This exemptive rule will become effective on the date that the Commission's current order expires, Sept. 28, 2007.

why did they hold back the broker rules on the banks that was WRITTEN into the laws of this country?

You're citing times when Congress, charged by the constitution with spending, was controlled by spendthrift and don't-read-just-pass Nancy Pelosi, DEMOCRAT!

Stop foisting your stale lies, TM.

 

[auditor0007]

More and more I'm finding the left rebutting the efforts of President Obama to stabilize the economy, by siting blame for this whole economic mess on President Bush and the Republicans. HOWEVER, the evidence I've seen shows an economic meltdown could have been avoided ... had the ideological views and self interests of certain members of Congress not gotten in the way. For those unfamiliar with what actually went on in Congress, I've included a "smaller" timeline of events as well and a source (to get an even MORE detailed view of what actually went on that led to this whole economic crisis).

Was President Bush solely to blame for the economic mess we are experiencing? I'm finding that there is a growing case of amnesia towards the events that led up to this crippling recession, perhaps it's just a lack of knowledge. This "blame Republicans" appears to be just rooted in opinions by those who share an overall hatred of the right, as they just happen to be the party that stands in the way of further government entitlement programs that the left loves so much.

September 1999

With pressure from the Clinton Administration, Fannie Mae eased credit requirements on loans it would purchase from lenders, making it easier for banks to lend to borrowers unqualified for conventional loans. Raines explained that "there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market," reported the New York Times.

With this action, Fannie Mae put itself at substantial risk in the event of an economic downturn. "From the perspective of many people, including me, this is another thrift industry growing up around us," warned Peter Wallison. "If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry." The danger was known.


March 2000

Rep. Richard Baker (R-Louisiana) proposed a bill to reform Fannie and Freddie's oversight in a House Subcommittee on Capital Markets.

Rep. Frank (D-Massachusetts) dismissed the idea, saying concerns about the two were "overblown" and that there was "no federal liability there whatsoever."


June 2000

Rep. Marge Roukema (R-New Jersey): "very few banks or S&Ls could, even in this day and age, even now, meet the stress-testing requirements which Fannie and Freddie are required to meet."

Rep. Carolyn Maloney (D-New York) regarding the Treasury Department line of credit: "It is really symbolic, it is obsolete, it has never been used." "Would you explain why it would be important to repeal something that seems to be of little use?"

Smith: "as long as the pipeline is there, it is like it is very expandable. . . . It is only $2 billion today. It could be $200 billion tomorrow."

Because of Democrat obfuscation, Smith's "tomorrow" arrived in 2008 when Treasury Secretary Henry Paulson put Fannie and Freddie into conservatorship.


February 2003

OFHEO reports that "although investors perceive an implicit Federal guarantee of [GSE] obligations . . . the government has provided no explicit legal backing for them," warning that unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market, according to a White House release.


June 2003

Freddie Mac reported it had understated its profits by $6.9 billion. OFHEO director Armando Falcon Jr. requested that the White House audit Fannie Mae.


July 2003

Sens. Chuck Hagel (R-Nebraska), Elizabeth Dole (R-North Carolina) and John Sununu (R-New Hampshire) introduced legislation to address Regulation of Fannie Mae and Freddie Mac. The bill was blocked by Democrats.


September 2003

In an interview with Ron Insana for CNN Money, Rep. Baker warned, "I have concerns that if appropriate resources aren't allocated for internal risk management, the consequences will be far more severe than just a real estate slowdown. The losses would fall quickly through the capital these companies have and down to shareholders and taxpayers. These companies have some of the lowest capital margins of any financial institution in the nation, yet, at the same time, they are two of the largest. The concern is that if something doesn't work out the way they predict, the American taxpayer could be called on to pay off the debt in some sort of bailout."

Rep. Barney Frank (D-Massachusetts): "These two entities - Fannie Mae and Freddie Mac - are not facing any kind of financial crisis. . . . The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."


October 2003

Fannie Mae discloses $1.2 billion accounting error.


November 2003

Council of the Economic Advisers Chairman Greg Mankiw warned, "The enormous size of the mortgage-backed securities market means that any problems at the GSEs matter for the financial system as a whole. This risk is a systemic issue also because the debt obligations of the housing GSEs are widely held by other financial institutions. The importance of GSE debt in the portfolios of other financial entities means that even a small mistake in GSE risk management could have ripple effects throughout the financial system," from a White House release.


February 2004

Mankiw cautions Congress to "not take [the financial market's] strength for granted." Again, the call from the Administration was to reduce this risk by "ensuring that the housing GSEs are overseen by an effective regulator," says a White House release.

OFHEO reported that Fannie Mae and CEO Raines had manipulated its accounting to overstate its profits. Congress and the Bush administration sought strong new regulation and authority to put the GSEs under conservatorship if necessary. As the Washington Post reports, Fannie Mae and Freddie Mac responded by orchestrating a major campaign "by traditional allies including real estate agents, home builders and mortgage lenders. Fannie Mae ran radio and television ads ahead of a key Senate committee meeting, depicting a Latino couple who fretted that if the bill passed, mortgage rates would go up." Again, GSE pressure prevailed.


October 2004

In a subcommittee testimony, Democrats vehemently reject regulation of Fannie Mae in the face of dire warning of a Fannie Mae oversight report. A few of them, Black Caucus members in particular, are very angry at the OFHEO Director as they attempt to defend Fannie Mae and protect their CRA extortion racket.

Rep. Maxine Waters (D-California): "Through nearly a dozen hearings where, frankly, we were trying to fix something that wasn't broke."

Rep. Maxine Waters (D-California): "Mr. Chairman, we do not have a crisis at Freddie Mac, and particularly at Fannie Mae, under the outstanding leadership of Mr. Frank Raines."

Rep. Ed Royce (R-California): "In addition to our important oversight role in this committee, I hope that we will move swiftly to create a new regulatory structure for Fannie Mae, for Freddie Mac, and the federal home loan banks."

Rep. Lacy Clay (D-Missouri): "This hearing is about the political lynching of Franklin Raines."

Rep. Ed Royce (R-California): "There is a very simple solution. Congress must create a new regulator with powers at least equal to those of other financial regulators, such as the OCC or Federal Reserve."

Rep. Barney Frank (D-Massachusetts): "Uh, I, this, you, you, you seem to me saying, ‘Well, these are in areas which could raise safety and soundness problems.' I don't see anything in your report that raises safety and soundness problems."

Rep. Maxine Waters (D-California): "Under the outstanding leadership of Mr. Frank Raines, everything in the 1992 Act has worked just fine. In fact, the GSEs have exceeded their housing goals. What we need to do today is to focus on the regulator, and this must be done in a manner so as not to impede their affordable housing mission, a mission that has seen innovation flourish from desktop underwriting to 100% loans."

Rep. Don Manzullo (R-Illinois): "Mr. Raines, 1.1 million bonus and a $526,000 salary. Jamie Gorelick, $779,000 bonus on a salary of 567,000. This is, what you state on page eleven is nothing less than staggering."

Rep. Don Manzullo (R-Illinois): "The 1998 earnings per share number turned out to be $3.23 and 9 mills, a result that Fannie Mae met the EPS maximum payout goal right down to the penny."

Rep. Don Manzullo (R-Illinois): "Fannie Mae understood the rules and simply chose not to follow them that if Fannie Mae had followed the practices, there wouldn't have been a bonus that year."

"The bill prohibited the GSEs from holding portfolios, and gave their regulator prudential authority (such as setting capital requirements) roughly equivalent to a bank regulator. In light of the current financial crisis, this bill was probably the most important piece of financial regulation before Congress in 2005 and 2006," reports the Wall Street Journal.

Greenspan testified that the size of GSE portfolios "poses a risk to the global financial system. It would be difficult, if not impossible, to bail out the lenders [GSEs] . . . should one get into financial trouble." He added, "If we fail to strengthen GSE regulation, we increase the possibility of insolvency and crisis . . . We put at risk our ability to preserve safe and sound financial markets in the United States, a key ingredient of support for homeownership."

Greenspan warned that if the GSEs "continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road . . . We are placing the total financial system of the future at a substantial risk."

Bloomberg writes, "If that bill had become law, then the world today would be different. . . . But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter. That such a reckless political stand could have been taken by the Democrats was obscene even then."



April 2007

In "A Nightmare Grows Darker," the New York Times writes that the "democratization of credit" is "turning the American dream of homeownership into a nightmare for many borrowers." The "newfangled mortgage loans" called "affordability loans" "represent 60 percent of foreclosures."


2007-2008

The housing bubble began to burst, bad mortgages began to default, and finally the Fannie Mae and Freddie Mac portfolios were revealed to be what they were, in collapse. And the testimony is evident as to why. As Wallison noted, "Fannie and Freddie were, I would say, the poster children for corporate welfare."


Archived-Articles: Why the Mortgage Crisis Happened

Greenspan was the biggest culprit in all of it as he kept interest rates artificially low. Had interest rates been higher, there would not have been so many bad loans to begin with. Of course, we would have been in recession for most of the Bush years. Low interest rates were used as a way to keep the economy rolling, but it came with some unintended consequences.