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Thread: Obama opens another Pandora's Box re economic distress ...

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    Default Obama opens another Pandora's Box re economic distress ...

    ... by attempting to slam McCain, some elements of media are starting to point out an 'inconvenient truth'



    (snip)"The Real Culprits In This Meltdown
    By INVESTOR'S BUSINESS DAILY | Posted Monday, September 15, 2008 4:20 PM PT

    Big Government: Barack Obama and Democrats blame the historic financial turmoil on the market. But if it's dysfunctional, Democrats during the Clinton years are a prime reason for it.

    Obama in a statement yesterday blamed the shocking new round of subprime-related bankruptcies on the free-market system, and specifically the "trickle-down" economics of the Bush administration, which he tried to gig opponent John McCain for wanting to extend.

    But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street's most revered institutions.

    Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.

    The untold story in this whole national crisis is that President Clinton put on steroids the Community Redevelopment Act, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but "predatory."

    Yes, the market was fueled by greed and overleveraging in the secondary market for subprimes, vis-a-vis mortgaged-backed securities traded on Wall Street. But the seed was planted in the '90s by Clinton and his social engineers. They were the political catalyst behind this slow-motion financial train wreck.

    And it was the Clinton administration that mismanaged the quasi-governmental agencies that over the decades have come to manage the real estate market in America.

    As soon as Clinton crony Franklin Delano Raines took the helm in 1999 at Fannie Mae, for example, he used it as his personal piggy bank, looting it for a total of almost $100 million in compensation by the time he left in early 2005 under an ethical cloud.

    Other Clinton cronies, including Janet Reno aide Jamie Gorelick, padded their pockets to the tune of another $75 million.

    Raines was accused of overstating earnings and shifting losses so he and other senior executives could earn big bonuses.

    In the end, Fannie had to pay a record $400 million civil fine for SEC and other violations, while also agreeing as part of a settlement to make changes in its accounting procedures and ways of managing risk.

    But it was too little, too late. Raines had reportedly steered Fannie Mae business to subprime giant Countrywide Financial, which was saved from bankruptcy by Bank of America.

    At the same time, the Clinton administration was pushing Fannie and her brother Freddie Mac to buy more mortgages from low-income households.

    The Clinton-era corruption, combined with unprecedented catering to affordable-housing lobbyists, resulted in today's nationalization of both Fannie and Freddie, a move that is expected to cost taxpayers tens of billions of dollars.

    And the worst is far from over. By the time it is, we'll all be paying for Clinton's social experiment, one that Obama hopes to trump with a whole new round of meddling in the housing and jobs markets. In fact, the social experiment Obama has planned could dwarf both the Great Society and New Deal in size and scope.

    There's a political root cause to this mess that we ignore at our peril. If we blame the wrong culprits, we'll learn the wrong lessons. And taxpayers will be on the hook for even larger bailouts down the road.

    But the government-can-do-no-wrong crowd just doesn't get it. They won't acknowledge the law of unintended consequences from well-meaning, if misguided, acts.

    Obama and Democrats on the Hill think even more regulation and more interference in the market will solve the problem their policies helped cause. For now, unarmed by the historic record, conventional wisdom is buying into their blame-business-first rhetoric and bigger-government solutions.

    While government arguably has a role in helping low-income folks buy a home, Clinton went overboard by strong-arming lenders with tougher and tougher regulations, which only led to lenders taking on hundreds of billions in subprime bilge.

    Market failure? Hardly. Once again, this crisis has government's fingerprints all over it."(snip)

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    Ha! It's poor black people's fault that we're in this mess. Of course! It can't be the rampant deregulation that has gone on and was fully supported by the Republicans.

    That's all I'm going to say.
    "A stupid man's report of what a clever man says is never accurate because he unconsciously translates what he hears into something he can understand." - Bertrand Russell

    "It's just a matter of people having low self esteem and being way too easily offended." -Random Guy on a Internet Forum

    Quote Originally Posted by Katrine View Post
    Ya'll bitches need to calm down. Cerously.
    In other words: Boo-motherfucking-hoo

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    Black, white or hispanic don't matter a bit ... the common thread is that low income people applied for mortgages to become first time homeowners for years, and banks / lenders kept turning down those mortgage applications because they did not meet the bank's 'common sense' creditworthiness and/or equity (down payment) standards. So Clinton's HUD (who was also made FNM's and FRE's regulator by congress in the early 90's) puts out a directive to FNM and FRE that they must lower their existing 'common sense' creditworthiness standards in order to increase the percentage of low income home ownership. Additionally, bank regulators enacted a new Community Service directives to banks ... which forced them to make X percent of their loan portfolio in 'underserved' communities i.e. communities full of people who couldn't meet 'common sense' creditworthiness standards. This isn't a case of deregulation, it is a case of ADDITIONAL regulation which forced FNM, FRE and banks to make mortgage loans that they had previously refused to approve, with stiff new penalties if they did NOT comply and make such risky low income loans !!!


    I would also point out that lack of FNM and FRE regulation was NOT the result of Republicans !!!

    (snip)"The credit crisis and the lack of oversight over government-subsidized lenders like Fannie Mae and Freddie Mac occurred on the watch of George Bush, and many blame his economic team for their lack of oversight in the collapse. Barack Obama has made this point one of his major campaign themes, arguing that John McCain would provide more of the same failures that Bush did. However, what many do not recall is that Bush wanted to tighten oversight with a new regulatory board for Fannie Mae, Freddie Mac, and other government recipients for the express purpose of addressing bad loan practices — and Democrats blocked it."(snip)

    (snip)"The New York Times reported this five years ago:

    The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

    The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

    The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.


    This should have been a no-brainer, right? With hindsight, we can see that the Bush administration had accurately diagnosed the problem in the lending market and had a plan to address it. Fannie Mae and Freddie Mac reluctantly supported the plan. However, Democrats objected (emphases mine):

    Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

    ”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
    Representative Melvin L. Watt, Democrat of North Carolina, agreed.

    ”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.


    Sounds a little like the Democratic denial of problems in Social Security, doesn’t it? Nothing to see here, no crisis on the horizon. Everybody just move along, now. The Democrats had forced lenders to assume more risk at lower interest rates in the 1990s, as IBD points out today, and they didn’t want to countenance an end to their populist policies:

    But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street’s most revered institutions.

    Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.

    The untold story in this whole national crisis is that President Clinton put on steroids the Community Redevelopment Act, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but “predatory.”

    Yes, the market was fueled by greed and overleveraging in the secondary market for subprimes, vis-a-vis mortgaged-backed securities traded on Wall Street. But the seed was planted in the ’90s by Clinton and his social engineers. They were the political catalyst behind this slow-motion financial train wreck.

    And it was the Clinton administration that mismanaged the quasi-governmental agencies that over the decades have come to manage the real estate market in America.


    It was the Bush administration that wanted to rein in the madness in the credit markets, and the Democrats who wanted to extend the Clinton policies that created the crisis we have now. After the fit hit the shan, as Michelle says, these same Democrats want to shift blame back to the administration that wanted to increase oversight and curtail risk in lending practices while reducing patronage at the giant GSEs."(snip)

    from

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    No, you gotta take credit for this mess Mel, republicans where in control of the congress and yes clinton did sign it.

    but by your logic it has to be congresses fault......deregulation was pushed by republicans, even though you claim your a libertarian......

    you really really need to stop flip-flopping and admit when your side has erred.

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    It doesn't matter who did it. Just that we recognize that what happened happened and come to understand why it happened.

    Giving money to people who can't pay it back is a stupid move that only government could come up with.

    Especially a government that has a printing press in their basement and no sense of reality backlash like us common folk do when it comes to spending spending spending and then forcing others to use their own money in the way the government deems fit.

    The government telling you how to spend your own fucking money - and people still think this is not a fascist or communist country.

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    well the subject is GOING to become a topic for mainstream media discussion now, as Nancy Pelosi officially raises the issue ....



    (snip)"

    House Speaker Nancy Pelosi has ordered a broad, swift investigation of Wall Street and will demand testimony from Bush administration officials and captains of finance, congressional officials said.

    House Democrats plan to aggressively look at the administration’s role in the meltdown over the weekend and to explore further regulation and government structures that would be taken up under the new president.

    Republican aides accused Democrats of trying to shift blame with a series of “show trials,” but acknowledged that key officials will wind up cooperating.

    The hearings will take place over the next few weeks, the officials said. Treasury Secretary Henry Paulson, who regularly appears on Capitol Hill, will be called to testify as part of the investigation."(snip)

    (snip)"Separately, Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, plans a forward-looking hearing with economists on Wednesday to “begin a conversation about where we go with the capital markets,” a House aide said.

    Frank plans “oversight of what happened this weekend with the Treasury and Federal Reserve,” and will look at “how bad the capital markets are, and what may be needed.”

    “The markets are not self-correcting,” the aide said. “If they continue to not self-correct over the next several months, is there a federal response? There might be more federal intervention that’s needed. We’ll proceed cautiously, and that would be next year."

    Both chairmen are acting at the direction of Pelosi, who told them to figure out what happened and demonstrate that they are on top of the situation, the officials said.

    Pelosi said Tuesday on MSNBC that she expects a “restructuring” of the mortgage giants Fannie Mae and Freddie Mac “in the next Congress with a new president.”

    “Are they quasi-governmental organizations, are they quasi-nongovernmental organizations? Should they just be share hold private institutions?” she said. “We have to examine that. And I've asked the chairmen — Chairman Frank and the Chairman Waxman, the chairman of our Oversight and Reform Committee, to take a look at both of those"(snip)

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    Quote Originally Posted by Melonie View Post
    well the subject is GOING to become a topic for mainstream media discussion now, as Nancy Pelosi officially raises the issue ....

    http://www.politico.com/news/stories/0908/13514.html

    (snip)"

    House Speaker Nancy Pelosi has ordered a broad, swift investigation of Wall Street and will demand testimony from Bush administration officials and captains of finance, congressional officials said.

    House Democrats plan to aggressively look at the administration’s role in the meltdown over the weekend and to explore further regulation and government structures that would be taken up under the new president.

    Republican aides accused Democrats of trying to shift blame with a series of “show trials,” but acknowledged that key officials will wind up cooperating.

    The hearings will take place over the next few weeks, the officials said. Treasury Secretary Henry Paulson, who regularly appears on Capitol Hill, will be called to testify as part of the investigation."(snip)

    (snip)"Separately, Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, plans a forward-looking hearing with economists on Wednesday to “begin a conversation about where we go with the capital markets,” a House aide said.

    Frank plans “oversight of what happened this weekend with the Treasury and Federal Reserve,” and will look at “how bad the capital markets are, and what may be needed.”

    “The markets are not self-correcting,” the aide said. “If they continue to not self-correct over the next several months, is there a federal response? There might be more federal intervention that’s needed. We’ll proceed cautiously, and that would be next year."

    Both chairmen are acting at the direction of Pelosi, who told them to figure out what happened and demonstrate that they are on top of the situation, the officials said.

    Pelosi said Tuesday on MSNBC that she expects a “restructuring” of the mortgage giants Fannie Mae and Freddie Mac “in the next Congress with a new president.”

    “Are they quasi-governmental organizations, are they quasi-nongovernmental organizations? Should they just be share hold private institutions?” she said. “We have to examine that. And I've asked the chairmen — Chairman Frank and the Chairman Waxman, the chairman of our Oversight and Reform Committee, to take a look at both of those"(snip)
    Barney and Nancy want hearings on this ? Are they serious ? Barney ought to be one of the chief witnesses. So should Raines and Gorelick. it actually represents one of the few, mayhbe the only chance for the Bush Administration to say : "We told you so ! ". McCain also gets to say it because in 2005 he co-sponsored a major reform bill that would have increased regulation and oversight of both Fannie and Freddie.

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    Quote Originally Posted by Miss_Luscious View Post
    Ha! It's poor black people's fault that we're in this mess. Of course! It can't be the rampant deregulation that has gone on and was fully supported by the Republicans.

    That's all I'm going to say.
    There WAS reverse red-lining whereby lenders were REQUIRED to have a certain
    % of their loans come from minority and low-income areas. Many of these loans were "no money down" with ridiculous introductory interest rates and many were for MORE than the appraised value of the house. Sometimes as much as 125% !

    As Melonie pointed out , it was the Clintonistas that pushed the making of sub-prime mortgages and DIRECTLY profited therefrom. While some Republicans like Phil Gramm pushed for deregulation; it was DEMOCRATS like Dodd, Schumer and Barney Frank who blocked any effort to reform Fannie and Freddie.

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    Obama on the subject of our current economic distress.

    Obviously no teleprompter used either Just a very smart man with great speaking abilities talking about the most important issue in this election.
    I am not interested in endless arguments or debate. I visit message boards to interact and share with likeminded people.

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    Quote Originally Posted by Zia_Abq View Post
    Obama on the subject of our current economic distress.

    Obviously no teleprompter used either Just a very smart man with great speaking abilities talking about the most important issue in this election.


    http://www.youtube.com/watch?v=HlZt5iN96iM
    And his rhetoric and REALITY bear no relation to each other whatsoever. Government meddling in the mortgage market created this whole mess. Fannie Mae drove the mortgage market. Private banks without a Federal charter and without any government guarantees tried to compete driving up home prices. When interest rates went up, the yield curve flattened and home prices stabilized.
    Private banks stopped lending to bad risks and home prices fell. That's just plain history. People were literally borrowing $250,000 on a house appraised at $200,000 with no money down i.e. NO EQUITY of THEIR OWN. Some were just plain speculators using "OPM" hoping to flip these houses for a quick profit. As soon as prices started going DOWN they were stuck with houses no one wanted to buy and they started defaulting.

    Normally in a typical foreclosure; there is a forced sale, the mortgage is paid off and whatever is left over, if anything , goes to the borrower. BUT with the sub-prime housing bubble there was NEGATIVE EQUITY. Houses with 2, 3 , 400 thousand dollars and more in outstanding mortgage ( thanks to PELOSI who pushed for lifting the income and price limits on Fannie and Freddie loans ) could only be sold for a fraction of their former appraised value. Witness all the cherry picking and bottom fishing going on now. First class homes and condos in South Florida were selling a month ago for as low as 40% what they sold for less than
    two years ago. Same thing to a lesser degree in Vegas and So Cal; not so much in NYC.

    To compound the irony, from today's N.Y. Times- the very architects and accomplices of the current mess - Larry Summers ( Clinton's Treasury Sec.); Alan Greenspan; Barney Frnak; Harry Reid; Nancy Pelosi; Steny Hoyer; Chris Dodd and Barney Frank were proposing and/or discussing yet another new Federal Agency to "BUY troubled assets" from ailing banks. I don't know if Kafka , Swift, Voltaire or Vonnegut could make this stuff up on their best days. Federal agencies; Federal regs and Federal meddling got us into this mess and these dimwits want MORE Federal involvement ?????

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    Quote Originally Posted by Zia_Abq View Post
    Obama on the subject of our current economic distress.

    Obviously no teleprompter used either Just a very smart man with great speaking abilities talking about the most important issue in this election.


    http://www.youtube.com/watch?v=HlZt5iN96iM
    It gets better. Obama has said he wants to see a "return for all the money we've invested in Iraq". Well maybe he ought to have a chat with his fellow Dem Senators ? From tne most recent House Oversight hearing on Iraq the question came up as to why American companies are not getting a bigger piece of Iraq's oil business. A few months ago Iraq awarded contracts to several large oil companies including Total and Exxon Mobil multi-billion dollar contracts to rebuild its oil industry infrastructure. Senators Chuck Schumer, John Kerry and Claire McCaskill sent Condi Rice a letter seeking to put the contracts on hold unless and until Iraq came up with a suitable "Carbon Plan" so it would do its part to fight global warming. Rather than be kept waiting, Iraq cancelled the contracts with the American oil companies and signed a contract with the Chinese. You won't find it in the mainstream press. It was reported in The Weekly Standard and confirmed by The Congressional Record.
    Joseph Heller NEVER wrote stuff this good.

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    again an old adage comes to mind ... 'It's what you DON'T know that can hurt you most'

    In regard to NY's 'beloved' Charlie Rangel, all I can say is that with this latest round of unreported real estate income, 'fraudulent' approved applications for FOUR subsidized (rent-controlled) NYC apartments etc. he should be thanking his stars that he is a democrat ! If a republican member of congress had been outed for similar charges, congress would be appointing a special prosecutor !

    And in regard to Barney Frank ...


    I don't know if Kafka , Swift, Voltaire or Vonnegut could make this stuff up on their best days. Federal agencies; Federal regs and Federal meddling got us into this mess and these dimwits want MORE Federal involvement ?????
    unfortunately, most American voters think this stuff IS fictional ! Fortunately, more and more 'maverick' media outlets are reporting the facts.
    Last edited by Melonie; 09-17-2008 at 04:22 PM.

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    Quote Originally Posted by Melonie View Post
    again an old adage comes to mind ... 'It's what you DON'T know that can hurt you most'

    In regard to NY's 'beloved' Charlie Rangel, all I can say is that with this latest round of unreported real estate income, 'fraudulent' approved applications for FOUR subsidized (rent-controlled) NYC apartments etc. he should be thanking his stars that he is a democrat ! If a republican member of congress had been outed for similar charges, congress would be appointing a special prosecutor !

    And in regard to Barney Frank ... http://online.wsj.com/article/SB1221...googlenews_wsj




    unfortunately, most American voters think this stuff IS fictional ! Fortunately, more and more 'maverick' media outlets are reporting the facts.
    There is certainly one Federal Agency that totally and completely failed to its job and that is the SEC. Chris Cox is a total hear no; see no; speak no evil asshole who ought to be summarily FIRED. Unfortunately Bush does not believe in either competence or accountability.

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    Quote Originally Posted by Melonie View Post
    again an old adage comes to mind ... 'It's what you DON'T know that can hurt you most'

    In regard to NY's 'beloved' Charlie Rangel, all I can say is that with this latest round of unreported real estate income, 'fraudulent' approved applications for FOUR subsidized (rent-controlled) NYC apartments etc. he should be thanking his stars that he is a democrat ! If a republican member of congress had been outed for similar charges, congress would be appointing a special prosecutor !

    And in regard to Barney Frank ... http://online.wsj.com/article/SB1221...googlenews_wsj




    unfortunately, most American voters think this stuff IS fictional ! Fortunately, more and more 'maverick' media outlets are reporting the facts.
    And now good old Charlie has been caught in a black- letter violation of congressional rules on parking of all things. It's in today's N.Y. Post.

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    well, the issue is starting to get some media play now ...

    (snip)"Wall Street Morality Tale [Victor Davis Hanson]

    I think McCain, so far better than Obama, is trying to put the meltdown in human terms as analysts, economists and financiers are sorting out the financial mess. This week and next the campaign boils down to whether the voters believe the Obama generic message that Republican free-market philosophies fostered a culture of excess and proverbial "Wall Street greed," or McCain's more specific responses that many of the necessary regulatory firebreaks were removed by the Clinton administration, and not reinstated by the Bush administration — and that many of the compliant Democratic senatorial class, Obama himself among them, were well rewarded in turn with donations from hedge-funders and speculators.

    That said, McCain, as a Republican free-market advocate who will be tarred for the mess, has the burden of getting out in front and grounding his message in specific human terms that explains why this is so bad, and the ethical story of who got hurt and why.

    What we are seeing is that billions, no trillions, of speculation debt is being called in, and those who must pay for it in the end are mostly retirees who will get almost nothing in interest on their passbook and T-bill accounts at precisely the time they retire and are vulnerable, on the working and professional classes who contribute each month to their retirement 401K mutual funds and have seen tens of thousands wiped away in a few days, and are told they are lucky to have anything at all in those accounts, and those who must borrow for college, housing, and transportation and will find it hard to get a loan, in an Orwellian banking market in which interest paid out by banks—themselves cash strapped from bad investments— to depositors declines while interest charged to borrowers increases. The common theme is the hard-working American who tried to save is being punished by those who used his set-asides to unduly enrich themselves, aided by revolving-door politicians who now wanted cash donations from, and later good jobs on, Wall Street.

    Who then were the beneficiaries? Many in the management and investor class that earlier saw the dangers of what they were doing, and so partially cashed out to the tune of hundreds of billions of dollars the last few years, little worried about the reputation of Wall Street after losing someone else's money, housing speculators and the unqualified borrower who simply walked away from unsound debt, arguing the home was overpriced anyway and why keep paying for something not worth the value of the debt?, and lending agencies and investment firms who made a killing on crass speculation the last 6-7 years, and, when the game was up, got the government to bail them and keep them afloat.

    Like it or not, the current mess is morality tale, and the candidate who can best convey that without crass demagoguing, will best handle the issue. "(snip)

    from

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    http://www.huffingtonpost.com/hale-s..._b_127599.html

    There's a meme going around the right wing blogs. Deregulation has nothing to do with the current problems in the market. The real culprit is the Community Reinvestment Act signed into law by President Carter in 1977. Nothing could be further from the truth as a reading of the facts of the matter reveal.

    Let's look at a root cause of this garbage. John Hawkins at Right Wing News has a classic analysis :

    Those corporations? The government set up the system that encouraged them to make bad loans and they're only worsening things by buying them out. They've set up a situation where the companies were rewarded for making foolish loans and now the same companies are being rewarded for not being able to pay their bills with a bailout.


    The Democrats, being socialists at heart -- are trying to blame deregulation for this. That's pure, unadulterated horsecrap. In fact, Thomas Sowell, who has probably forgotten more about economics than most of the members of Congress have ever known, pointed out the Congressional link back in August of last year,

    He links to an article by Thomas Sowell which claimed the Community Reinvestment Act was to blame.

    The Community Reinvestment Act lets politicians pressure lenders to lend to people they might not lend to otherwise -- and the same politicians are quick to cry "exploitation" when the interest charged to high-risk borrowers reflects that risk.

    There are two huge problems with this analysis. The first one alone should dismiss this claim as a farce. The CRA was signed into law in 1977 -- almost 30 years ago. So, what do you think the possibilities of a law passed 30 years ago causing the lending problems now? That's one heck of a law to have that kind of effect.

    But wait -- Clinton changed the law That was the real problem No it wasn't, regarding those changes:

    In the mid-1990s, new CRA regulations and a wave of mergers led to a flurry of CRA activity, but, as noted by the New America Foundation's Ellen Seidman (and by Harvard's Joint Center), that activity largely came to an end by 2001.

    But here's the real kicker. The Community Reinvestment Act only applies to banks and thrifts:

    The Community Reinvestment Act (or CRA, Pub.L. 95-128, title VIII, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal law that requires banks and thrifts to offer credit throughout their entire market area and prohibits them from targeting only wealthier neighborhoods with their services, a practice known as redlining. The purpose of the CRA is to provide credit, including home ownership opportunities to underserved populations and commercial loans to small businesses.

    The vast majority of the subprime loans over the last 8 years did not originate from banks or thrifts:

    Second, it is hard to blame CRA for the mortgage meltdown when CRA doesn't even apply to most of the loans that are behind it. As the University of Michigan's Michael Barr points out, half of sub-prime loans came from those mortgage companies beyond the reach of CRA. A further 25 to 30 percent came from bank subsidiaries and affiliates, which come under CRA to varying degrees but not as fully as banks themselves. (With affiliates, banks can choose whether to count the loans.) Perhaps one in four sub-prime loans were made by the institutions fully governed by CRA.

    In other words, the CRA isn't even an issue. But that won't stop the the likes of Rush and his progeny from saying it over and over again until all sorts of people believe it.

    While we're on the topic -- the CRA had nothing to do with the problems at Fannie Mae and Freddie Mac either:

    Note, too, that Fannie and Freddie have nonpareil lobbying operations and formidable political strength, owing to their hefty donations and penchant for hiring former political operatives. Besides, the agencies claim they've landed in their current predicament through no fault of their own. As Freddie Mac Chairman and CEO Richard Syron recently put it, the GSEs have been hit by a 100-year storm in the housing market, accentuated by some higher-risk mortgages that they were forced to buy to meet government affordable-housing targets.


    The latter contention is more than disingenuous. A substantial portion of Fannie's and Freddie's credit losses comes from $337 billion and $237 billion, respectively, of Alt-A mortgages that the agencies imprudently bought or guaranteed in recent years to boost their market share. These are mortgages for which little or no attempt was made to verify the borrowers' income or net worth. The principal balances were much higher than those of mortgages typically made to low-income borrowers. In short, Alt-A mortgages were a hallmark of real-estate speculation in the ex-urbs of Las Vegas or Los Angeles, not predatory lending to low-income folks in the inner cities.

    A simple Google search with help from Wikipedia would have revealed how clueless the CRA caused this mess claim is. But that's not the point. The entire financial system is under tremendous stress on the Republican's watch. It's their policies that are under the microscope right now. And they just don't look that good. So now the political game is to shift the blame to Democrats. And who better then to blame then ... Jimmy Carter.

  17. #17
    Banned Melonie's Avatar
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    Default Re: Obama opens another Pandora's Box re economic distress ...

    ^^^ what changed during the Clinton years was ...

    - a change in regulatory oversight of Freddie and Fannie, which effectively placed these GSE's under the oversight of the US congress ( can you say conflict of interest)

    - a change in mainstream media policy, such that financial institutions that did not make significant numbers of mortgage loans in formerly 'red-lined' areas were publicly accused of racism (as well as fined by bank regulators privately)

    - the amounts of money flowing out of Freddie and Fannie in the form of political campaign contributions grew astronomically

    of course the 'opposing' view to your Huffington Post blog is as follows ...

    (snip)"“Liberal” economists are overjoyed by the bursting of the housing bubble, for it provides them with what they believe is another “market failure” story. “Most analysts see the sub-prime crisis as a market failure,” Robert Gordon gleefully declared in the April 7 online edition of The American Prospect magazine, edited by Robert Kuttner.

    Gordon does not define what an “analyst” is, and does not cite any survey to support his claim. One suspects that his opinion is based on an informal survey of his like-minded, left-wing friends.

    Gordon is a defender of the federal government’s 1977 Community Reinvestment Act (CRA) under which the Fed and other financial regulators have pressured/extorted banks into making more loans to less-than-creditworthy borrowers than they would normally be willing to risk. As such, Gordon believes in the following propositions:

    1. runaway greed (”market failure”) on the part of lenders is the cause of the subprime crisis;

    2. these same greedy lenders routinely ignore billions of dollars in potential profits in lower-income communities because of their systemic racism, stupidity, or both — hence the need for the CRA; and

    3. no government agency, especially not the Fed, had anything to do with either the creation or bursting of the housing market bubble and the subprime crisis.

    (If you think I’m establishing a straw-man argument, read Gordon’s article for yourself.)

    The first two propositions flatly contradict each other, whereas the third is unequivocally false. Fed policy — which is not even mentioned by Gordon in an article that is ostensibly about the cause of the subprime crisis — is the cause of the boom-and-bust cycle that has caused the housing bubble and its bursting. Not “market failure” but Fed policy.

    Gordon is incensed that a few “analysts,” including myself and Professor Stan Liebowitz of the University of Dallas, have argued that the bursting of the housing bubble has caused the chickens to come home to roost, so to speak, after thirty years of government policy pressuring banks to make tens of billions of dollars in bad loans to people with low (or nonexistent) credit ratings. Neither Liebowitz nor I have argued that every last bad loan out there is a CRA loan, but Gordon implies that we do in a rather feeble attempt to construct a straw-man argument.

    Gordon cites Fed bureaucrat Janet Yellen as the source of a “killer statistic” that absolves the government of all guilt: “Independent mortgage companies” which are not covered by the CRA made many more “high-priced loans” to borrowers with bad credit than did CRA-regulated banks, she says. Well, so what? Even if Yellen is correct, that does not mean that CRA-regulated loans have not caused tens of billions of dollars in defaults.

    Moreover, Yellen and Gordon don’t seem to understand what an “independent mortgage company” is. Many of these companies are like the one in which my next-door neighbor is employed: they are middlemen who arrange mortgage loans for borrowers — including “subprime” borrowers — with banks, including CRA-regulated banks. Some killer statistic.

    By ignoring the role of the Fed in creating the whole housing-market mess, Gordon’s pronouncement that it is entirely a result of “market failure” is laughable on its face. He also flatly denies that CRA lending has had anything to do with why so many uncreditworthy borrowers have defaulted now that the Fed-generated housing bubble has burst. This, too, is an untenable position."(snip)

    from

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    Default Re: Obama opens another Pandora's Box re economic distress ...

    Quote Originally Posted by eagle2 View Post
    http://www.huffingtonpost.com/hale-s..._b_127599.html

    There's a meme going around the right wing blogs. Deregulation has nothing to do with the current problems in the market. The real culprit is the Community Reinvestment Act signed into law by President Carter in 1977. Nothing could be further from the truth as a reading of the facts of the matter reveal.

    Let's look at a root cause of this garbage. John Hawkins at Right Wing News has a classic analysis :

    Those corporations? The government set up the system that encouraged them to make bad loans and they're only worsening things by buying them out. They've set up a situation where the companies were rewarded for making foolish loans and now the same companies are being rewarded for not being able to pay their bills with a bailout.


    The Democrats, being socialists at heart -- are trying to blame deregulation for this. That's pure, unadulterated horsecrap. In fact, Thomas Sowell, who has probably forgotten more about economics than most of the members of Congress have ever known, pointed out the Congressional link back in August of last year,

    He links to an article by Thomas Sowell which claimed the Community Reinvestment Act was to blame.

    The Community Reinvestment Act lets politicians pressure lenders to lend to people they might not lend to otherwise -- and the same politicians are quick to cry "exploitation" when the interest charged to high-risk borrowers reflects that risk.

    There are two huge problems with this analysis. The first one alone should dismiss this claim as a farce. The CRA was signed into law in 1977 -- almost 30 years ago. So, what do you think the possibilities of a law passed 30 years ago causing the lending problems now? That's one heck of a law to have that kind of effect.

    But wait -- Clinton changed the law That was the real problem No it wasn't, regarding those changes:

    In the mid-1990s, new CRA regulations and a wave of mergers led to a flurry of CRA activity, but, as noted by the New America Foundation's Ellen Seidman (and by Harvard's Joint Center), that activity largely came to an end by 2001.

    But here's the real kicker. The Community Reinvestment Act only applies to banks and thrifts:

    The Community Reinvestment Act (or CRA, Pub.L. 95-128, title VIII, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal law that requires banks and thrifts to offer credit throughout their entire market area and prohibits them from targeting only wealthier neighborhoods with their services, a practice known as redlining. The purpose of the CRA is to provide credit, including home ownership opportunities to underserved populations and commercial loans to small businesses.

    The vast majority of the subprime loans over the last 8 years did not originate from banks or thrifts:

    Second, it is hard to blame CRA for the mortgage meltdown when CRA doesn't even apply to most of the loans that are behind it. As the University of Michigan's Michael Barr points out, half of sub-prime loans came from those mortgage companies beyond the reach of CRA. A further 25 to 30 percent came from bank subsidiaries and affiliates, which come under CRA to varying degrees but not as fully as banks themselves. (With affiliates, banks can choose whether to count the loans.) Perhaps one in four sub-prime loans were made by the institutions fully governed by CRA.

    In other words, the CRA isn't even an issue. But that won't stop the the likes of Rush and his progeny from saying it over and over again until all sorts of people believe it.

    While we're on the topic -- the CRA had nothing to do with the problems at Fannie Mae and Freddie Mac either:

    Note, too, that Fannie and Freddie have nonpareil lobbying operations and formidable political strength, owing to their hefty donations and penchant for hiring former political operatives. Besides, the agencies claim they've landed in their current predicament through no fault of their own. As Freddie Mac Chairman and CEO Richard Syron recently put it, the GSEs have been hit by a 100-year storm in the housing market, accentuated by some higher-risk mortgages that they were forced to buy to meet government affordable-housing targets.


    The latter contention is more than disingenuous. A substantial portion of Fannie's and Freddie's credit losses comes from $337 billion and $237 billion, respectively, of Alt-A mortgages that the agencies imprudently bought or guaranteed in recent years to boost their market share. These are mortgages for which little or no attempt was made to verify the borrowers' income or net worth. The principal balances were much higher than those of mortgages typically made to low-income borrowers. In short, Alt-A mortgages were a hallmark of real-estate speculation in the ex-urbs of Las Vegas or Los Angeles, not predatory lending to low-income folks in the inner cities.

    A simple Google search with help from Wikipedia would have revealed how clueless the CRA caused this mess claim is. But that's not the point. The entire financial system is under tremendous stress on the Republican's watch. It's their policies that are under the microscope right now. And they just don't look that good. So now the political game is to shift the blame to Democrats. And who better then to blame then ... Jimmy Carter.
    This is pure unadulterated horse dung.

    Fannie and Freddie were in this up to their necks by creating an artificial market
    for mortgages regardless of their actual market worth. Starting under Johnson and continued under Raines millions in bonuses were isssued based on performance targets being reached i.e. an increase in bonds issued and sold backed by mortgages purchased by both entities.

    As Melonie pointed out, it was the revision of the banking REGS under the CRA that created much of the problem coupled with a lot of "easy money " from the Fed.
    Where do you think all those "no money down" mortgages came from ? Where do you think the incentive came from to issue mortgages without an income check on the borrower ? Who do you think bought a large percentage of those mortgages ? The lenders didn't care because Fannie and Freddie were buying them up.

    Most of all, the "studies" sic. you rely on are worthless because they ignore reality. It didn't take too high a percentage of defaulted loans ( 3%) to put a bank into deep trouble if housing prices were tumbling i.e. there is NO foreclosure market and the banks were typically leveraged i.e lacking a sufficient amount of cash reserves. In other words, a bank would not have to write 25% of its mortgages in "underserved areas" or even 10 % to be asking for trouble if (a) wages lagged behind housing prices which they did (b) food and energy costs shot up which they did and (c) unemployment went up. In fact the ARMs turned aroun d and bit the lenders in the ass HARD.

    And let's not forget the borrowers themselves. Too many people tried to buy houses who had no business doing so. With no money down and no equity stake in the houses, they were effectively renting anyway.

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