In the beginning:
The 30’s: Redlining- The practice of refusing loans or extending credit to bad areas. It was alleged to have been a racially motivated form of discrimination, as the areas usually marked undesirable or hazardous, were home to minorities. Below is an example of a map from the 1930’s:
The New Deal: Fannie Mae was created in the late 30’s as part of the New Deal. It monopolized the secondary mortgage market for three decades.
1970: Freddie Mac is created to expand the secondary mortage market.
1977: Community Reinvestment Act: President Jimmy Carter signed it into law in 1977, despite opposition from the banking community. It was altered several times in the ensuing years.
- According to a United States Department of the Treasury study of lending trends in 305 U.S. cities between 1993 and 1998 467 billion dollars in mortgage credit flowed from CRA-covered lenders to CRA-eligible borrowers. The number of CRA mortgage loans increased by 39 percent. Other loans increased by only 17 percent.
The 80’s: Garn-St. Germain Depository Institutions Act of 1982 - Sponsored by Fernand Joseph St. Germain(D), Chuck Schumer(D), Steny Hoyer(D) and Jake Garn(R).
This act gave us ARMs.(Adjustable Rate Mortgages) Some now call these “teaser-mortgages” or “teaser loans.” It’s an ARM, and ARM has become the new bad word, so they want to call it something different.
ARMs are a huge factor in the sub-prime meltdown.
This Act is also alledged to have led the way for the Savings and Loan Crisis (S&Ls were deregulated during Jimmy Carter’s administration)
1989: Financial Institutions Reform Recovery and Enforcement Act of 1989 (FIRREA) - An attempt at regulation as well as making Fannie Mae and Freddie Mac support more risky mortgages. Critics maintain it aggravated the S&L crisis.
It also introduced public CRA ratings, which were later used to pressure lenders to increase the amount of sub-prime loans.
1993-95: President Clinton Orders new “regulations” which actually deregulated Fannie Mae and Freddie Mac. CRA mortgage loans increased by almost 40%. Furthermore, new rules went into effect on January 31, 1995, encouraged community groups (e.g. ACORN) to complain when banks were not loaning enough to specified neighborhood, income group, and race; allowing community groups that marketed loans to targeted groups to collect a fee from the banks. Also known as politically correct extortion, as these complaints would hurt the lenders CRA rating, put in place by FIRREA.
1999: Fannie Mae eases restrictions under President Clinton.
2002: The Sarbanes-Oxley Act of 2002: In response to the scandals from Enron, Tyco, Worldcom, etc., Paul Sarbanes(D) and Michael Oxley(R) delivered this Act to President George W. Bush who signed it into law. It is the heaviest regulation since The New Deal. It was passed by a Republican Congress. GSEs like Fannie Mae and Freddie Mac were not covered. President Bush propsed new regulations to the GSEs. They were opposed by Democrats.
Why did Republicans want regulations? Because the GSEs are not typical companies, if they go under, the taxpayer foots the bill.
2003: Fannie Mae, Freddie Mac and Democrats, used Countrywide for sweetheart mortages in exchange for 600 Billion dollars in sub-prime loan deals being pushed their way. Hey look, it’s Jamie Gorelick, Franklin Raines, Chris Dodd, and even James Johnson, the guy that helped Barack Obama select Joe Biden.
Wow! That’s a whole lotta change we can believe in!
Robert Reich, a Democrat, sort of warned us then.
- Now, I’m not suggesting Fannie and Freddie are doing anything they shouldn’t be doing. I’m just saying there’s cause for worry. We’ve been here before. Fannie and Freddie are fighting to avoid stricter oversight, and they have a lot of lobbying muscle in Congress. But they can’t have it both ways. They can’t have the advantages of being subsidized by the public, without being accountable to the public.
2004: Armando Falcon - Brought down Fannie Mae CEO Franklin Raines, who pocketed tens of millions of our tax dollars. The Democrat Party came out in force to defend their slush fund:
President Bush decided to join Democrats and started the “Ownership Society” talking point. It was good in principle, but he caved in on regulating the GSEs.
2005: S. 190 Federal Housing Enterprise Regulatory Reform Act of 2005: Sponsored by Chuck Hagel with co-sponsors John McCain, Elizabeth Dole and John Sununu, all Republicans. This was an attempt to regulate GSEs Fannie Mae and Freddie Mac. It was defeated by bi-patisan opposition.
2008: GSEs Fannie Mae and Freddie Mac who owned or guaranteed about half of the U.S.’s $12 trillion mortgage market, seized due to mismanagement. Insurance groups like AIG suffered and also began to collapse in the wake of bad financial news and uncertainty.
Countrywide Financial is exposed as a handmaiden of the GSEs and offered sweetheart dealsto Democratic Senators Chris Dodd and Barack Obama.
Here is Robert Reich, former Clinton Secretary of Labor:
- Accounting gimmicks first came to light at Fannie and Freddie in 2003, at which time Fannie’s and Freddie’s former CEOswere sacked. Why, then, did they continue for another five years, even under new CEOs, even after policymakers first learned of them? Three reasons: (1) Top executives and shareholders continued to profit from them so there was no incentive to stop them, (2) everyone involved kept expecting home values to continue to rise — or, when they fell, rise again soon enough — to make up for the accounting shortfalls, and (3) Fannie and Freddie continued to be in bed with Congress and the administration. Democrats and Republicans alike have been complicit in this outrage.
He changes gears into full partisanship here, it is almost laughable. Watch him lie his way through this segment.
Enter Armando Falcon again. He explains how to properly nationalize the GSEs, and then possibly privatize them for real.
Bailout: Under the guise of “stabilizing the market” a massive bailout of 700 Billion dollars is proposed. The first version had 20%, roughly 141 Billion dollars going to ACORN. A revised version was defeated in the House by the Republican minority and 94 Democrats.
The Senate stepped in as of this writing and passed yet another version. This one going from 3 pages to 400+ pages and only getting 39 minutes of debate. At this point it should be obvious that what we don’t need right now, is more government intervention.
It’s how we got here in the first place.
October 2nd, 2008 - 6:15 pm
From Malkin:
“$100 million more in funding for the left-wing housing entitlement thugs and heavily tax-subsidized fraudsters at ACORN. ”
You may wanna alter the percentages and “141 Billion” part.
As for the rest…can’t really respond. It’d require a book and my posts are “long-winded”…so I won’t try. You have your interpretation, there are facts in there, but your conclusion as always is: “them thur libruls done it”. But saddling the S&L crisis on democrats….that was pretty funny.
October 2nd, 2008 - 6:53 pm
“acorn 20% 700 billion”
Go put it in Google.
We don’t need your book, thanks for offering. It keeps us from hitting “delete”
I swear you and DMG are the same guy…
October 3rd, 2008 - 10:19 am
catscratch said:
“them thur libruls done it”. But saddling the S&L crisis on democrats….that was pretty funny.
You are so close, dear sir scratch.
TRN would lay the blame more at the feet of modern liberalism, Norman Thomas style, than Democrats.
http://www.youtube.com/watch?v=A7PYr-M72a0
There were some Repubs involved as was pointed out, and they subscribed to the “compassionate conservatism” of Bush. This is also know as liberalism in disguise.
So, yes indeed, it is soley the fault of GSEs, pandering, and social justice do gooderism gone wrong.
We call it liberalism.
October 3rd, 2008 - 10:26 am
That video was about healthcare. TLDW.
That’s fine, reading your blog is fun because it’s interesting to see the ways you contort to make sure every issue is right-vs-left. Taking a bipartisan cluster**** and finding a way to blame one party over the other is…well, it’s just as stupid on the liberal side when they try to blame it all on McCain’s deregulator history.
And no, DMG is not me, nor am I DMG. I will not eat them Sam I am.
October 3rd, 2008 - 12:15 pm
Modern liberalism is not a party.
Norman Thomas is in the first 20 seconds.
If there were no ARMs, there is no meltdown.
It helps when people pay their bills too.
October 3rd, 2008 - 12:49 pm
But you said yourself in another post you took an ARM. Yes, you pay your mortgage as you also said, but where was your philosophical objection then? You were all too willing to accept such a thing when it benefited you personally. If renting is the right call for everyone else, why not you? Aren’t you staring the gift horse in the mouth a bit here?
October 3rd, 2008 - 3:17 pm
I will indulge this bit of personal info so you understand my take. After that, you can have the last word if you like. I am not looking to defeat you here, the history of this is the history, and a philosophy was at fault, not a single political party.
“You were all too willing to accept such a thing when it benefited you personally.”
I took advantage of the opportunity to buy a house with no money down. Then I negotiated OUT of the ARM. I did it right, I paid my bills and then got a new fixed rate loan.
If you don’t want to do the hard work, it’s nobody’s fault but your own. If you don’t lie on the app, you can get a higher interest loan.
Now, people like me who did not default, are punished so Great Society types can hold onto their favorite voting bloc, the working class & poor.
Now as home values decline, I have about 60,000 in equity, which I built with my own hands, to ride on before we sell at a loss. They will decline here, because Wachovia is gone and the new owner, be it Wells or Citi, will cut a few thousand $80,000 dollar and up jobs. They will not get a job at Starbucks, they will move to the next city that pays well. This means they will sell their homes short, so a few thousand homes in a small city selling short will lower the market values.
Why? Because Chuck Schumer, Steney Hoyer, Fernand St, Germain and Jake Garn wanted ARMs. President Reagan made it clear ARMs were only compatible with low interest rates. Paul Volker didn’t agree, so we had the S&L crisis, a microcosm of today, just as today is a microcosm of tomorrow, because there are many more defaults to come.
Liberals are all too willing to support progressive taxes, yet liberals do not surrender their entire paycheck for their beloved government programs.
The left could give 70% themselves and lead by example, but they won’t. They are all too willing to take advantage of low tax rates.
October 3rd, 2008 - 4:16 pm
Not looking to have the last word. I was just curious as to how you arrived at your point of view given that you have said you benefited from being able to get an ARM in the past. You explained yourself well…I don’t agree with where you place the blame for all of this, but the maxim of “don’t borrow what you can’t pay back” always should have applied. But that’s just half of it anyway…without mortgage-backed securities tanking it probably wouldn’t have worked out this way. That’s why regulation was and is very important.
October 3rd, 2008 - 9:53 pm
Rude, trust me I’m not catscratch. But I’m not insulted at the comparison. You should be happy that catscratch and I take the time to say hello to our right-wing online friend everyday. If we hated you we’d ignore you.
So show us some love Rude. We keep this site fun. Or would you rather have a bunch of sycophants on here say “yeah man, I’m with you!”. That would be boring.
October 3rd, 2008 - 11:32 pm
Actually, sycophants are fine.
The love is shown, if it wasn’t the above comments would be in the recycle bin, where they would not be lonely.
October 4th, 2008 - 10:57 pm
Yeah, I know, you seem to toss mine quite often these days.
October 5th, 2008 - 12:06 am
Waahhh! Here ya go wittle buddy.
October 5th, 2008 - 12:09 am
Rude you are too kind. Thanks. I thought that “This probably won’t get printed” would tip you over the edge. By the way you never answered my question about what you think about Wells “San Francisco Fabulous” Fargo bailing out Wachovia.
October 5th, 2008 - 12:22 am
Really? I thought you were joking, a whole “left coast is saving the south” kind of thing.
Charlotte is on it’s knees to Christ, even the Muslims and Atheists, that Wells will get it. Citi is part of a gov seizure, the kind of crap (gov in the real estate) that started this. Wells is taking a risk, which means they will be responsible with their own money.
October 5th, 2008 - 12:43 am
Well I do hope Wells Fargo makes the buy. One I think it’s the right thing to do, and two I’ll be able to make gay San Franciso jokes about Charlotte for sometime!!
But seriously, fingers are crossed for you guys.