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  1. #11  
    LTC Member Odysseus's Avatar
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    Quote Originally Posted by lacarnut View Post
    As much as it pains me to say so, I don't think we had any choice. I had heard that these two outfits held 3/4 of the mortgages in the country. The overwelming majority of the mortgages that they hold are in good shape and regular payments are being paid on them. Only a small percentage are in bad shape or foreclosure.
    True, but that small percentage would have destabilized Fannie and Freddy, and AIG's collapse would have had catastrophic repercussions, as they are the major insurer of the loans. The real fix is to repeal the Community Reinvestment Act so that banks aren't forced to make loans to bad credit risks and enforce the fraud statutes against the executives who hid billions of dollars in losses from bad loans so that they would qualify for bonuses. Franklin Raines needs to do some serious jail time. He's more of a crook than anyone at Enron.
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  2. #12  
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    Quote Originally Posted by Odysseus View Post
    True, but that small percentage would have destabilized Fannie and Freddy, and AIG's collapse would have had catastrophic repercussions, as they are the major insurer of the loans. The real fix is to repeal the Community Reinvestment Act so that banks aren't forced to make loans to bad credit risks and enforce the fraud statutes against the executives who hid billions of dollars in losses from bad loans so that they would qualify for bonuses. Franklin Raines needs to do some serious jail time. He's more of a crook than anyone at Enron.
    Alan Greenspan deserves a great deal of the credit for the deregulation of commercial banks which allowed them to get into the mortgage business. Paul Volker was against it but was outvoted. Greenspan testified before Congress and said flat out that there was no need for new regulations or oversight. Either he was stupid or in the pocket of the Democrats or the banking institutions. Looks like Cox, Dodd, Obama and others had blinders on also. There were warning signs but no one wanted to listen including the Prez. Bush's mantra of pushing ownership for everone is bull shit. There are many people that can not afford a house, so they should rent plus they can afford the repairs.
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  3. #13  
    CU's Tallest Midget! PoliCon's Avatar
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    Can anyone tell me what percentage of these "bad loans" were made to people who actually live in the houses vs how many went to speculators?
    Stand up for what is right, even if you have to stand alone.
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  4. #14  
    Goldwater
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    Quote Originally Posted by lacarnut View Post
    Alan Greenspan deserves a great deal of the credit for the deregulation of commercial banks which allowed them to get into the mortgage business. Paul Volker was against it but was outvoted. Greenspan testified before Congress and said flat out that there was no need for new regulations or oversight. Either he was stupid or in the pocket of the Democrats or the banking institutions. Looks like Cox, Dodd, Obama and others had blinders on also. There were warning signs but no one wanted to listen including the Prez. Bush's mantra of pushing ownership for everone is bull shit. There are many people that can not afford a house, so they should rent plus they can afford the repairs.
    It wasn't the deregulation, it was the interventions into the market by Greenspan and now Bernanke the lowering of interest rates got people drunk on them leading to now.
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  5. #15  
    LTC Member Odysseus's Avatar
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    Quote Originally Posted by Goldwater View Post
    It wasn't the deregulation, it was the interventions into the market by Greenspan and now Bernanke the lowering of interest rates got people drunk on them leading to now.
    You're both wrong. This was the result of social engineering using the mortgage markets as the tool of choice. From the NY Times, September 30, 1999:

    In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

    The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

    Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. “Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. "Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market."
    Raines later cooked the books to hide over $9 billion in losses in order to qualify for bonuses for himself and his cronies. But, that's not the end of it. From the Times again, this time in 2003:

    2003:

    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.

    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.
    In other words, the Bush administration tried to fix the problem, as even the NY Times reported. But, of course, it ran up against the usual suspects. But in 2005, another attempt was made to fix the problem. Here is the speech from the floor of the senate:

    Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.

    The Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

    The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

    For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.

    I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

    I urge my colleagues to support swift action on this GSE reform legislation
    .
    Guess which senator and 2008 presidential candidate made that speech? Hint: It wasn't Barack Obama.
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  6. #16  
    Goldwater
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    Quote Originally Posted by Odysseus View Post
    You're both wrong. This was the result of social engineering using the mortgage markets as the tool of choice. From the NY Times, September 30, 1999:
    That is part of it too, but my reason is the biggest.
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  7. #17  
    CU's Tallest Midget! PoliCon's Avatar
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    Quote Originally Posted by Goldwater View Post
    It wasn't the deregulation, it was the interventions into the market by Greenspan and now Bernanke the lowering of interest rates got people drunk on them leading to now.
    Their actions did prevent economic corrections in the last half dozen or so instances. The market does need a correction and the longer we put it off - the worse it's going to be. :(
    Stand up for what is right, even if you have to stand alone.
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