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24HourForums.com > The Top 10 Supported Forums > 24's Political Matters > How did we get to this sub prime mess?? |
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Millennium Original500© Member
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How A Clinton-Era Rule Rewrite Made Subprime Crisis Inevitable By TERRY JONES INVESTOR'S BUSINESS DAILY | Posted Wednesday, September 24, 2008 4:30 PM PT One of the most frequently asked questions about the subprime market meltdown and housing crisis is: How did the government get so deeply involved in the housing market? The answer is: President Clinton wanted it that way. Fannie Mae and Freddie Mac, even into the early 1990s, weren't the juggernauts they'd later be. While President Carter in 1977 signed the Community Reinvestment Act, which pushed Fannie and Freddie to aggressively lend to minority communities, it was Clinton who supercharged the process. After entering office in 1993, he extensively rewrote Fannie's and Freddie's rules. In so doing, he turned the two quasi-private, mortgage-funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democratic voting blocs and handed favors, jobs and money to political allies. This potent mix led inevitably to corruption and the Fannie-Freddie collapse. Despite warnings of trouble at Fannie and Freddie, in 1994 Clinton unveiled his National Homeownership Strategy, which broadened the CRA in ways Congress never intended. Addressing the National Association of Realtors that year, Clinton bluntly told the group that "more Americans should own their own homes." He meant it. Clinton saw homeownership as a way to open the door for blacks and other minorities to enter the middle class. Though well-intended, the problem was that Congress was about to change hands, from the Democrats to the Republicans. Rather than submit legislation that the GOP-led Congress was almost sure to reject, Clinton ordered Robert Rubin's Treasury Department to rewrite the rules in 1995. The rewrite, as City Journal noted back in 2000, "made getting a satisfactory CRA rating harder." Banks were given strict new numerical quotas and measures for the level of "diversity" in their loan portfolios. Getting a good CRA rating was key for a bank that wanted to expand or merge with another. Loans started being made on the basis of race, and often little else. "Bank examiners would use federal home-loan data, broken down by neighborhood, income group and race, to rate banks on performance," wrote Howard Husock, a scholar at the Manhattan Institute. But those rules weren't enough. Clinton got the Department of Housing and Urban Development to double-team the issue. That would later prove disastrous. Clinton's HUD secretary, Andrew Cuomo, "made a series of decisions between 1997 and 2001 that gave birth to the country's current crisis," the liberal Village Voice noted. Among those decisions were changes that let Fannie and Freddie get into subprime loan markets in a big way. Other rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. 10% for banks. Since they could borrow at lower rates than banks due to implicit government guarantees for their debt, the government-sponsored enterprises boomed. With incentives in place, banks poured billions of dollars of loans into poor communities, often "no doc" and "no income" loans that required no money down and no verification of income. By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market — a staggering exposure. Worse still was the cronyism. Fannie and Freddie became home to out-of-work politicians, mostly Clinton Democrats. An informal survey of their top officials shows a roughly 2-to-1 dominance of Democrats over Republicans. Then there were the campaign donations. From 1989 to 2008, some 384 politicians got their tip jars filled by Fannie and Freddie. Over that time, the two GSEs spent $200 million on lobbying and political activities. Their charitable foundations dropped millions more on think tanks and radical community groups. Did it work? Well, if measured by the goal of putting more poor people into homes, the answer would have to be yes. From 1995 to 2005, a Harvard study shows, minorities made up 49% of the 12.5 million new homeowners. The problem is that many of those loans have now gone bad, and minority homeownership rates are shrinking fast. Fannie and Freddie, with their massive loan portfolios stuffed with securitized mortgage-backed paper created from subprime loans, are a failed legacy of the Clinton era.
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24HourNut Administrator  Body pillows rock!
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I don't blame politicians - I blame the snaky lenders and financial institutions, and irresponsible consumers. The part I do blame politicians for is the lack of enforcement of the current laws. For example, a friend of mine works for NASDAQ regulatory, and it is clear that the fines are a mere slap on the hand for big manipulation and corrupt practices. She says this activity always ramps up when the market is bad and it is predictable, but a broker may get a $5,000 fine even though they made a few million off an inappropriate scam or practice.
 The best human beings start good new topics and vote on the better posts. |
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Millennium Original500© Member
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I don't blame politicians ?????.....I blame all of them...the ones that set the ball in motion to the ones that ran with it later...
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Millennium Original500© Member
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Good article in the NY Times on this too...It looks like the main stream media is finally getting more involved.. Last edited on 03:32 pm by Millennium |
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sirlamre Pioneer100© Member Official Forum Troublemaker
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24HourNut wrote: I don't blame politicians - I blame the snaky lenders and financial institutions, and irresponsible consumers. The part I do blame politicians for is the lack of enforcement of the current laws. For example, a friend of mine works for NASDAQ regulatory, and it is clear that the fines are a mere slap on the hand for big manipulation and corrupt practices. She says this activity always ramps up when the market is bad and it is predictable, but a broker may get a $5,000 fine even though they made a few million off an inappropriate scam or practice. I have ALWAYS maintained that the fines for things should be a PERCENTAGE. There's no point in assessing a $5,000 against someone who just dropped half of that as a TIP in a restuarant for a big party. Or in assessing $120,000 in fines against a corporation who just made $3.4 MILLION in clean clear profits on some deal or another. it is SO much still worth it to those people at that level of fines.
Turn thou unto God and say: O my Sovereign Lord! I am but a vassal of Thine, and Thou art, in truth, the King of kings. I have lifted my suppliant hands unto the heaven of Thy grace and Thy bounties. |
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24HourNut Administrator Body pillows rock!
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Exactly, Sirlamre. My friend was basically saying she finds it ridiculous to charge these guys their big boat gas money for the weekend when they just made a cool half million against the rules AND the average guy suffering somewhere for it - even directly.
The best human beings start good new topics and vote on the better posts. |
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24HourForums.com > The Top 10 Supported Forums > 24's Political Matters > How did we get to this sub prime mess?? | ||||||||||||||||||||||||||||||||||||||||
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