Conservative Harvard student challenges Barney Frank on the financial crisis

[MaggieMae]

...he began as a very left-wing radical in his undergraduate years, such that he though that Bill Clinton was too right-wing...As a result of many meeting in Dem circles where attacks on the right substituted for answers to questions, he moved from the darkside and became a Republican.

I find limited credibility in someone that has changed from a "very left-wing radical" to a conservative Republican in a matter of a few years.

It means that either one or the other or both of that individuals political positions are not genuine.

Well...frankly...my college experience was to go with the political preference of whomever I was dating at the time.

 

[WillowTree]

It has been announced that FM and FM employees will be receiving very large "retention" bonus' this year. Now AIG got their ass kicked for that. Anyone in the Democratic party shouting that FM and FM should have their asses kicked? What? I can't hear you.. I can't hear you.. Hello?? End of fucking story on Bawney!

If I did a lot of leg work getting F&F operational again, I would hope to get a bonus. If I were the secretary to one of the top tier people, I would also expect a big fat bonus, which are intended for 7,500 employees as incentive to stay on the job.[/QUOTE]




and as we all know that was the case with the AIG farce. first the dimocwats voted a bonus in the stimulus bill then they decided to kick AIG ass and then they levied a 90% tax on the bonus.. now what about FM and FM? you won't hear a thing outta of the dimocwats mouth. KNow why? Cause they and the CRA and the FM and the FM brought this economy to it's knee. anybody but an ostrich can see that.

 

[PoliticalChic]

No.

1. Whose opinions are these, and why are they more trustworthy to believe tha Republican Oxely's account of a bill to regulate Fannie/Freddie that was actually passed by the House in 2005 with bi-partisan support including Frank's?

2. And most importantly, please explain how Frank, as a member of a then minority party of the House of Representative, was able to supposedly "stand as a bloc" against changes, presumably sought by the Republicans, who controlled majorities in the House of Representatives, Senate, and White House.

You use the name Oxely as though he were the burning bush.

I don't know who he is and why this one opinion outweighs those of the many whose work is reported in the Boston Globe, WSJ, NYTimes, Baltimore Business Journal, Investors Business Daily, American Spectator, ect.

Oxley is a Republican elected to the House in 1981, and Chairman of the Committee on Financial Services during this time. You've heard of Sarbanes-Oxely? The bill passed to provide oversight of public companies to prevent fraud after Enron? That's him.

Yes, I'll tend to credit his personal observations of facts as to what happened of this Republican over the op-ed pieces in conservative magazines, especially when the latter don't make any sense.

And I wish you would recall that when you posted the same response on an earlier thread, my response stated that President Bush, a politician, and not a Conservative one at that, didn't show the courage to confront the Dems when they threatened to call him a 'racist' if he tried to block risky GSE loans and reform the system.

Why would he need courage to back a bill that was bipartisan and also supported by the Democrats??? Why and how would the Dems threaten to call him a racists if he supported a bill they supported.

Please provide a cite that Bush "gave the one fingered salute" to this bill because he was afraid of being labelled a racist by the Dems who supported the bill.

2. And most importantly, please explain how Frank, as a member of a then minority party of the House of Representative, was able to supposedly "stand as a bloc" against changes, presumably sought by the Republicans, who controlled majorities in the House of Representatives, Senate, and White House

"These efforts were defeated because President Bush blocked further consideration of the legislation. In the words of Mr. Oxley, no flaming liberal, the Bush administration gave his efforts 'the one-finger salute."
http://www.bushwatch.com/

... When house and senate republicans objected they were call racists. .... Former US Treasury Secretary Paul O"Neill in an interview has called the Paulson plan "crazy. ...
Bush Administration Weakened Lending Rules Before Crash - 195k -

 

[PoliticalChic]

I like your posts, and you are fairly even handed, and well written, but show the leftie slant when you refuse to acknowledge the financial perspectives of IBD, WSJ, and the rest, and call them right wing. They are legitimate and respected journal in the field.

The WSJ was a respected periodical, even if known for conservative slant. What would you expect from a paper that caters to the "masters of the universe".

But in 2007 it was purchased by Rupert Murdoch. It has been sad to see it slide into the same partisan pap that characterizes Murdoch "news" outlets.

I don't know if you read the WSJ or NYTimes regularly, but the glaring difference between the two is that the Journal doesn't allow its editorial perspective to color its news reporting.

 

[PoliticalChic]

So for 70 years these GSEs operated just fine accomplishing their mission without causing any financial meltdown, but after 70 years its their fault that the system crashed in 2008?

I thought you wanted to know the cause of the crisis?

Mostly I want to know how it can be claimed that Frank is responsible for blocking reform legislation when until Jan 2007 he was in a minority position in the House of Representative, which, like the Senate and WH, were controlled by the Republicans.

But my point above goes to how GSEs are the blame for the current crisis when they've been around for 70 years and worked fine.

The 70 year period began with the GSE's and the timeline includes the various incarnations including and up to Frank and Dodd blocking regulation.
"It was Fannie Mae and Freddie Mac, the two so-called Government Sponsored Enterprises (GSEs), that lay behind the crisis. After regulatory changes made to the Community Reinvestment Act by President Clinton in 1995, Fannie and Freddie went into hyper-drive, channeling literally trillions of dollars into the housing markets, using leverage and implicit taxpayers' guarantees.
President Bush pushed for what the New York Times then called "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago."… led by Frank, Democrats stood as a bloc against any changes."
IBDeditorials.com: Editorials, Political Cartoons, and Polls from Investor's Business Daily -- Let The Inquisition Start With Frank

 

[DiveCon]

Based on that transcript Barney dismantled that kid's obviously disengenuous rhetorical question.

First, if you saw the interview on 'Greta,' this student described a journey on which you should have embarked by now: he began as a very left-wing radical in his undergraduate years, such that he though that Bill Clinton was too right-wing.

As a result of many meeting in Dem circles where attacks on the right substituted for answers to questions, he moved from the darkside and became a Republican.

As to the bigger question, the student's point, that the crisis should be laid at the steps of CRA, GSE's, Clinton, Dodd, Frank, has been documented by Baltimore Business Journal, IBD, The Hill, USNews, BostonGlobe, American Spectator, WSJ, among others.

On the other side we have apologists for the Democrats, self-styled experts, and you.

Apologising for the Dems?

Not hardly.

Merely commenting that the kid got his ass handed to him by a man with superior intelligence.

and you would be wrong
the kids got Franks to show what an idiot HE(franks) is

 

[xotoxi]

...he began as a very left-wing radical in his undergraduate years, such that he though that Bill Clinton was too right-wing...As a result of many meeting in Dem circles where attacks on the right substituted for answers to questions, he moved from the darkside and became a Republican.

I find limited credibility in someone that has changed from a "very left-wing radical" to a conservative Republican in a matter of a few years.

It means that either one or the other or both of that individuals political positions are not genuine.

Means no such thing.

Folks get divorced, too.

Small shifts are one thing, like from moderate liberal to moderate conservative. Or large shifts over a long period of time.

But from a "left-wing radical"? I have my doubts as to how radical he was.

And the divorce argument doesn't fly because marriage is complicated by LUST.

 

[MaggieMae]

The "crisis" should be laid at the base of liberal philosophy, which is based on being "good" to folks, giving things away, instant gratification.

Political pressure as represented by the CRA (Democrat) and going back to the GSE's (Democrat) and thouroughly endorsed and amplified by Clinton, Cuomo, Dodd and Frank (Democrats all) with the collusion of financial institutions who were allowed to profit in risky ways, are the cause.

Litmus test: would there be a mortgage meltdown (beyond a normal business recession) if there had been no CRA, Fannie or Freddie?

I can see it's pointless to argue with someone who has such serious tunnel vision. Facts just get in your way.

I'm going to assume that answering my "litmus test" question honestly would have puctured your argument, and required admission that it is a philosophical problem more than a financial one.

Answer: YES.
McClatchy Washington Bureau
Posted on Sun, Oct. 12, 2008

Private sector loans, not Fannie or Freddie, triggered crisis
David Goldstein and Kevin G. Hall | McClatchy Newspapers
last updated: October 27, 2008 03:12:24 PM

WASHINGTON — As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.

Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.

Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.

Federal Reserve Board data show that:

More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.


Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets reported Friday.

Conservative critics claim that the Clinton administration pushed Fannie Mae and Freddie Mac to make home ownership more available to riskier borrowers with little concern for their ability to pay the mortgages.

"I don't remember a clarion call that said Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster," said Neil Cavuto of Fox News.

Fannie, the Federal National Mortgage Association, and Freddie, the Federal Home Loan Mortgage Corp., don't lend money, to minorities or anyone else, however. They purchase loans from the private lenders who actually underwrite the loans.

It's a process called securitization, and by passing on the loans, banks have more capital on hand so they can lend even more.

This much is true. In an effort to promote affordable home ownership for minorities and rural whites, the Department of Housing and Urban Development set targets for Fannie and Freddie in 1992 to purchase low-income loans for sale into the secondary market that eventually reached this number: 52 percent of loans given to low-to moderate-income families.

To be sure, encouraging lower-income Americans to become homeowners gave unsophisticated borrowers and unscrupulous lenders and mortgage brokers more chances to turn dreams of homeownership in nightmares.

But these loans, and those to low- and moderate-income families represent a small portion of overall lending. And at the height of the housing boom in 2005 and 2006, Republicans and their party's standard bearer, President Bush, didn't criticize any sort of lending, frequently boasting that they were presiding over the highest-ever rates of U.S. homeownership.

Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.

During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.

In 1999, the year many critics charge that the Clinton administration pressured Fannie and Freddie, the private sector sold into the secondary market just 18 percent of all mortgages.

Fueled by low interest rates and cheap credit, home prices between 2001 and 2007 galloped beyond anything ever seen, and that fueled demand for mortgage-backed securities, the technical term for mortgages that are sold to a company, usually an investment bank, which then pools and sells them into the secondary mortgage market.

About 70 percent of all U.S. mortgages are in this secondary mortgage market, according to the Federal Reserve.

Conservative critics also blame the subprime lending mess on the Community Reinvestment Act, a 31-year-old law aimed at freeing credit for underserved neighborhoods.

Congress created the CRA in 1977 to reverse years of redlining and other restrictive banking practices that locked the poor, and especially minorities, out of homeownership and the tax breaks and wealth creation it affords. The CRA requires federally regulated and insured financial institutions to show that they're lending and investing in their communities.

Conservative columnist Charles Krauthammer wrote recently that while the goal of the CRA was admirable, "it led to tremendous pressure on Fannie Mae and Freddie Mac — who in turn pressured banks and other lenders — to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity."

Fannie and Freddie, however, didn't pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market.

What's more, only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.

These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.

In a speech last March, Janet Yellen, the president of the Federal Reserve Bank of San Francisco, debunked the notion that the push for affordable housing created today's problems.

"Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans," she said. "The CRA has increased the volume of responsible lending to low- and moderate-income households."

In a book on the sub-prime lending collapse published in June 2007, the late Federal Reserve Governor Ed Gramlich wrote that only one-third of all CRA loans had interest rates high enough to be considered sub-prime and that to the pleasant surprise of commercial banks there were low default rates. Banks that participated in CRA lending had found, he wrote, "that this new lending is good business."

McClatchy Newspapers 2008
[article NOT copywrited]

 

[Skull Pilot]

Conservative Harvard student

 

[PoliticalChic]

[/COLOR]
I can see it's pointless to argue with someone who has such serious tunnel vision. Facts just get in your way.

I'm going to assume that answering my "litmus test" question honestly would have puctured your argument, and required admission that it is a philosophical problem more than a financial one.

Answer: YES.
McClatchy Washington Bureau
Posted on Sun, Oct. 12, 2008

Private sector loans, not Fannie or Freddie, triggered crisis
David Goldstein and Kevin G. Hall | McClatchy Newspapers
last updated: October 27, 2008 03:12:24 PM

WASHINGTON — As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.

Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.

Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.

Federal Reserve Board data show that:

More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.


Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets reported Friday.

Conservative critics claim that the Clinton administration pushed Fannie Mae and Freddie Mac to make home ownership more available to riskier borrowers with little concern for their ability to pay the mortgages.

"I don't remember a clarion call that said Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster," said Neil Cavuto of Fox News.

Fannie, the Federal National Mortgage Association, and Freddie, the Federal Home Loan Mortgage Corp., don't lend money, to minorities or anyone else, however. They purchase loans from the private lenders who actually underwrite the loans.

It's a process called securitization, and by passing on the loans, banks have more capital on hand so they can lend even more.

This much is true. In an effort to promote affordable home ownership for minorities and rural whites, the Department of Housing and Urban Development set targets for Fannie and Freddie in 1992 to purchase low-income loans for sale into the secondary market that eventually reached this number: 52 percent of loans given to low-to moderate-income families.

To be sure, encouraging lower-income Americans to become homeowners gave unsophisticated borrowers and unscrupulous lenders and mortgage brokers more chances to turn dreams of homeownership in nightmares.

But these loans, and those to low- and moderate-income families represent a small portion of overall lending. And at the height of the housing boom in 2005 and 2006, Republicans and their party's standard bearer, President Bush, didn't criticize any sort of lending, frequently boasting that they were presiding over the highest-ever rates of U.S. homeownership.

Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.

During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.

In 1999, the year many critics charge that the Clinton administration pressured Fannie and Freddie, the private sector sold into the secondary market just 18 percent of all mortgages.

Fueled by low interest rates and cheap credit, home prices between 2001 and 2007 galloped beyond anything ever seen, and that fueled demand for mortgage-backed securities, the technical term for mortgages that are sold to a company, usually an investment bank, which then pools and sells them into the secondary mortgage market.

About 70 percent of all U.S. mortgages are in this secondary mortgage market, according to the Federal Reserve.

Conservative critics also blame the subprime lending mess on the Community Reinvestment Act, a 31-year-old law aimed at freeing credit for underserved neighborhoods.

Congress created the CRA in 1977 to reverse years of redlining and other restrictive banking practices that locked the poor, and especially minorities, out of homeownership and the tax breaks and wealth creation it affords. The CRA requires federally regulated and insured financial institutions to show that they're lending and investing in their communities.

Conservative columnist Charles Krauthammer wrote recently that while the goal of the CRA was admirable, "it led to tremendous pressure on Fannie Mae and Freddie Mac — who in turn pressured banks and other lenders — to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity."

Fannie and Freddie, however, didn't pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market.

What's more, only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.

These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.

In a speech last March, Janet Yellen, the president of the Federal Reserve Bank of San Francisco, debunked the notion that the push for affordable housing created today's problems.

"Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans," she said. "The CRA has increased the volume of responsible lending to low- and moderate-income households."

In a book on the sub-prime lending collapse published in June 2007, the late Federal Reserve Governor Ed Gramlich wrote that only one-third of all CRA loans had interest rates high enough to be considered sub-prime and that to the pleasant surprise of commercial banks there were low default rates. Banks that participated in CRA lending had found, he wrote, "that this new lending is good business."

McClatchy Newspapers 2008
[article NOT copywrited]

Community Reinvestment Act nudged banks to give mortgages to people who should have not gotten them.
Yet the FDIC has turned up the heat on Petrucelli's bank, giving it an apparently rare "needs to improve rating," for not making more risky loans under the Community Reinvestment Act.
Yes, the Community Reinvestment Act Really Did Help Cause the Housing Crisis - Capital Commerce (usnews.com)

 

[DiveCon]

http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf


This study finds that the subprime loans were actually smaller at the CRA institutions.

The vast majority were written under banks not covered by the act.


Boom goes that leg of the conheads argument.

yeah, truely an unbiased source there

Traiger & Hinckley LLP, founded in 2000, is dedicated to offering premium quality legal services and timely, personal attention to our clients' needs. Based in New York City, our client base ranges from multinational financial institutions to individuals seeking skilled and knowledgeable representation. We have considerable experience counseling financial services entities throughout the United States on all facets of fair lending and Community Reinvestment Act compliance.

they BENEFIT from the CRA

 

[PoliticalChic]

Conservative Harvard student

What cha laughing 'bout?

I'm an Ivy League Conservative.

And my best buddy was the only ROTC in his grad class at Yale: entered Armored Cav the same day he graduated.

So There.

 

[Iriemon]

I thought you wanted to know the cause of the crisis?

Mostly I want to know how it can be claimed that Frank is responsible for blocking reform legislation when until Jan 2007 he was in a minority position in the House of Representative, which, like the Senate and WH, were controlled by the Republicans.

But my point above goes to how GSEs are the blame for the current crisis when they've been around for 70 years and worked fine.

The 70 year period began with the GSE's and the timeline includes the various incarnations including and up to Frank and Dodd blocking regulation.

"It was Fannie Mae and Freddie Mac, the two so-called Government Sponsored Enterprises (GSEs), that lay behind the crisis. After regulatory changes made to the Community Reinvestment Act by President Clinton in 1995, Fannie and Freddie went into hyper-drive, channeling literally trillions of dollars into the housing markets, using leverage and implicit taxpayers' guarantees.
President Bush pushed for what the New York Times then called "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago."… led by Frank, Democrats stood as a bloc against any changes."
IBDeditorials.com: Editorials, Political Cartoons, and Polls from Investor's Business Daily -- Let The Inquisition Start With Frank

Didn't you already cite this editorial?

I'll repeat as well, since you've not responded to this basic question raised by the assertion of the article you repeatedly have cited:

2. And most importantly, please explain how Frank, as a member of a then minority party of the House of Representative, was able to supposedly "stand as a bloc" against changes, presumably sought by the Republicans, who controlled majorities in the House of Representatives, Senate, and White House.

Even better, let's see the bill Bush sponsored that went for a vote in the HOR, so we can see how Frank and the minority Democratic party were able to block it.

 

[PoliticalChic]

I find limited credibility in someone that has changed from a "very left-wing radical" to a conservative Republican in a matter of a few years.

It means that either one or the other or both of that individuals political positions are not genuine.

Means no such thing.

Folks get divorced, too.

Small shifts are one thing, like from moderate liberal to moderate conservative. Or large shifts over a long period of time.

But from a "left-wing radical"? I have my doubts as to how radical he was.

And the divorce argument doesn't fly because marriage is complicated by LUST.

Actually he said he was a left-wing Democrat.

Winston Churchill:“If you're not a liberal at twenty you have no heart, if you're not a conservative at forty you have no brain.”

 

[DiveCon]

...he began as a very left-wing radical in his undergraduate years, such that he though that Bill Clinton was too right-wing...As a result of many meeting in Dem circles where attacks on the right substituted for answers to questions, he moved from the darkside and became a Republican.

I find limited credibility in someone that has changed from a "very left-wing radical" to a conservative Republican in a matter of a few years.

It means that either one or the other or both of that individuals political positions are not genuine.

Well...frankly...my college experience was to go with the political preference of whomever I was dating at the time.

 

[DiveCon]

[/COLOR]
I can see it's pointless to argue with someone who has such serious tunnel vision. Facts just get in your way.

I'm going to assume that answering my "litmus test" question honestly would have puctured your argument, and required admission that it is a philosophical problem more than a financial one.

Answer: YES.
McClatchy Washington Bureau
Posted on Sun, Oct. 12, 2008

Private sector loans, not Fannie or Freddie, triggered crisis
David Goldstein and Kevin G. Hall | McClatchy Newspapers
last updated: October 27, 2008 03:12:24 PM

WASHINGTON — As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.

Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.

Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.

Federal Reserve Board data show that:

More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.


Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets reported Friday.

Conservative critics claim that the Clinton administration pushed Fannie Mae and Freddie Mac to make home ownership more available to riskier borrowers with little concern for their ability to pay the mortgages.

"I don't remember a clarion call that said Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster," said Neil Cavuto of Fox News.

Fannie, the Federal National Mortgage Association, and Freddie, the Federal Home Loan Mortgage Corp., don't lend money, to minorities or anyone else, however. They purchase loans from the private lenders who actually underwrite the loans.

It's a process called securitization, and by passing on the loans, banks have more capital on hand so they can lend even more.

This much is true. In an effort to promote affordable home ownership for minorities and rural whites, the Department of Housing and Urban Development set targets for Fannie and Freddie in 1992 to purchase low-income loans for sale into the secondary market that eventually reached this number: 52 percent of loans given to low-to moderate-income families.

To be sure, encouraging lower-income Americans to become homeowners gave unsophisticated borrowers and unscrupulous lenders and mortgage brokers more chances to turn dreams of homeownership in nightmares.

But these loans, and those to low- and moderate-income families represent a small portion of overall lending. And at the height of the housing boom in 2005 and 2006, Republicans and their party's standard bearer, President Bush, didn't criticize any sort of lending, frequently boasting that they were presiding over the highest-ever rates of U.S. homeownership.

Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.

During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.

In 1999, the year many critics charge that the Clinton administration pressured Fannie and Freddie, the private sector sold into the secondary market just 18 percent of all mortgages.

Fueled by low interest rates and cheap credit, home prices between 2001 and 2007 galloped beyond anything ever seen, and that fueled demand for mortgage-backed securities, the technical term for mortgages that are sold to a company, usually an investment bank, which then pools and sells them into the secondary mortgage market.

About 70 percent of all U.S. mortgages are in this secondary mortgage market, according to the Federal Reserve.

Conservative critics also blame the subprime lending mess on the Community Reinvestment Act, a 31-year-old law aimed at freeing credit for underserved neighborhoods.

Congress created the CRA in 1977 to reverse years of redlining and other restrictive banking practices that locked the poor, and especially minorities, out of homeownership and the tax breaks and wealth creation it affords. The CRA requires federally regulated and insured financial institutions to show that they're lending and investing in their communities.

Conservative columnist Charles Krauthammer wrote recently that while the goal of the CRA was admirable, "it led to tremendous pressure on Fannie Mae and Freddie Mac — who in turn pressured banks and other lenders — to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity."

Fannie and Freddie, however, didn't pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market.

What's more, only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.

These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.

In a speech last March, Janet Yellen, the president of the Federal Reserve Bank of San Francisco, debunked the notion that the push for affordable housing created today's problems.

"Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans," she said. "The CRA has increased the volume of responsible lending to low- and moderate-income households."

In a book on the sub-prime lending collapse published in June 2007, the late Federal Reserve Governor Ed Gramlich wrote that only one-third of all CRA loans had interest rates high enough to be considered sub-prime and that to the pleasant surprise of commercial banks there were low default rates. Banks that participated in CRA lending had found, he wrote, "that this new lending is good business."

McClatchy Newspapers 2008
[article NOT copywrited]

wait a cotton pickin minute, you bitch about bias from the WSJ, and then use McClatchy as a source?
are you fucking serious?

 

[PoliticalChic]

Mostly I want to know how it can be claimed that Frank is responsible for blocking reform legislation when until Jan 2007 he was in a minority position in the House of Representative, which, like the Senate and WH, were controlled by the Republicans.

But my point above goes to how GSEs are the blame for the current crisis when they've been around for 70 years and worked fine.

The 70 year period began with the GSE's and the timeline includes the various incarnations including and up to Frank and Dodd blocking regulation.

"It was Fannie Mae and Freddie Mac, the two so-called Government Sponsored Enterprises (GSEs), that lay behind the crisis. After regulatory changes made to the Community Reinvestment Act by President Clinton in 1995, Fannie and Freddie went into hyper-drive, channeling literally trillions of dollars into the housing markets, using leverage and implicit taxpayers' guarantees.
President Bush pushed for what the New York Times then called "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago."… led by Frank, Democrats stood as a bloc against any changes."
IBDeditorials.com: Editorials, Political Cartoons, and Polls from Investor's Business Daily -- Let The Inquisition Start With Frank

Didn't you already cite this editorial?

I'll repeat as well, since you've not responded to this basic question raised by the assertion of the article you repeatedly have cited:

2. And most importantly, please explain how Frank, as a member of a then minority party of the House of Representative, was able to supposedly "stand as a bloc" against changes, presumably sought by the Republicans, who controlled majorities in the House of Representatives, Senate, and White House.

Even better, let's see the bill Bush sponsored that went for a vote in the HOR, so we can see how Frank and the minority Democratic party were able to block it.

So, let's have you be the second on this thread to answer the question: Would there be a mortgage meltdown today is there had been no GSE's, CRA, Clinton, Cuomo, Dodd and Frank?

If you have to agree that if folks had to put down a larger portion of home prices, and the government if did not take a paternal role in 'helping' people to own homes, then there would have been reason to have more stringent control of financial institutions, thus less chance of the trillions of dollars that have been lost...then welcome to the Conservative Party.

And in the 2006 elections, Democrats took a small majority of 51-49 in the senate and 233-202 in the House of Representatives which they held for the two years leading up to the 2008 election.

 

[Skull Pilot]

Conservative Harvard student

What cha laughing 'bout?

I'm an Ivy League Conservative.

And my best buddy was the only ROTC in his grad class at Yale: entered Armored Cav the same day he graduated.

So There.

Well your 'conservative' Harvard pal didn't make a very good showing did he?
Just goes to show you that the Ivy league can taint any mind

 

[PoliticalChic]

Conservative Harvard student

What cha laughing 'bout?

I'm an Ivy League Conservative.

And my best buddy was the only ROTC in his grad class at Yale: entered Armored Cav the same day he graduated.

So There.

Well your 'conservative' Harvard pal didn't make a very good showing did he?
Just goes to show you that the Ivy league can taint any mind

Maybe we didn't watch the same clip.

 

[del]

No.

1. Whose opinions are these, and why are they more trustworthy to believe tha Republican Oxely's account of a bill to regulate Fannie/Freddie that was actually passed by the House in 2005 with bi-partisan support including Frank's?

2. And most importantly, please explain how Frank, as a member of a then minority party of the House of Representative, was able to supposedly "stand as a bloc" against changes, presumably sought by the Republicans, who controlled majorities in the House of Representatives, Senate, and White House.

You use the name Oxely as though he were the burning bush.

I don't know who he is and why this one opinion outweighs those of the many whose work is reported in the Boston Globe, WSJ, NYTimes, Baltimore Business Journal, Investors Business Daily, American Spectator, ect.
And I wish you would recall that when you posted the same response on an earlier thread, my response stated that President Bush, a politician, and not a Conservative one at that, didn't show the courage to confront the Dems when they threatened to call him a 'racist' if he tried to block risky GSE loans and reform the system.

There ya go. I rest my case that you have gullible-itis brought on by tunnel vision. One would think, if you cared to shrug off that label, that you would immediately Google Mr. Oxely and obtain a little further information. But you can't be bothered because anything other than the 4 publications you've chosen as your bible on this subject might give you doubts. And you can't have that.

there's, uh, six publications listed by my count in the area you colorized. an ability to count would seem essential in any discussion of the financial crisis, IMO.

i'll ask mr oxley his opinion when i run into him.