Smoking-Gun Document Ties Policy To Housing Crisis

[UltimateHoboW/Shotgun]

http://news.investors.com/Article/589858/201110310805/Housing-Crisis-Obama-Clinton-Subprime.htm

Bubble? Regulators Blew It

The threat was codified in a 20-page "Policy Statement on Discrimination in Lending" and entered into the Federal Register on April 15, 1994, by the Interagency Task Force on Fair Lending. Clinton set up the little-known body to coordinate an unprecedented crackdown on alleged bank redlining.

The edict — completely overlooked by the Financial Crisis Inquiry Commission and the mainstream media — was signed by then-HUD Secretary Henry Cisneros, Attorney General Janet Reno, Comptroller of the Currency Eugene Ludwig and Federal Reserve Chairman Alan Greenspan, along with the heads of six other financial regulatory agencies.

"The agencies will not tolerate lending discrimination in any form," the document warned financial institutions.



http://www.investors.com/image/WEBhud1101.jpg.cms

[pricejj]

Wow...thank you. The jumps in HUD affordable housing goals correlate to the housing price bubble...perfectly. From inception of the edict in 1994, the increase up to 38% in 1996, and the increase up to 52% in 2001. Perfect example showing government intervention in a private industry causing escalation in cost.

[Tombstone RJ]

Yep. Lending money to people who can't afford it is a huge risk, especially for people who live pay check to pay check. When the economy tanks and people are out of work then there's no way they can pay their mortgage.

The housing bubble is directly tied to the Clinton administration.

[pricejj]

Yep. Lending money to people who can't afford it is a huge risk, especially for people who live pay check to pay check. When the economy tanks and people are out of work then there's no way they can pay their mortgage.

The housing bubble is directly tied to the Clinton administration.

...not only that, but it shows that government intervention drives the costs out of control for everyone (housing, healthcare, education, farm subsidies, etc.).

9 of 10 new mortgage loans are government funded (3.5% down FHA), not to mention the mortgage interest deduction, which artificially keeps costs elevated.

Excessive government intervention (Socialism) produces escalating costs, which result in poverty, debt, deficit spending, and eventual economic collapse.

[L.A. BRONCOS FAN]

^

This BS was debunked a LONG time ago...

Private sector loans, not Fannie or Freddie, triggered crisis


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."


http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html

[Spider]

^

This BS was debunked a LONG time ago...

Private sector loans, not Fannie or Freddie, triggered crisis



LMAO since when has the truth or facts mattered to these buttheads ?
if they have proved one thing over and over , they are divorced from reality .....

[L.A. BRONCOS FAN]

LMAO since when has the truth or facts mattered to these buttheads ?
if they have proved one thing over and over , they are divorced from reality .....

Yep.

Their zeal to prop up Junior's legacy has blinded them to even the most indisputable facts.

[cutthemdown]

Most things aren't the fault of one event or policy change. Chances are there is truth in both of those articles.

[Garcia Bronco]

Bottom line, banks nor the government should be authorizing tax dollars or private dollars to people that cannot pay back the loans without serious scrutiny. Having worked in many banks at all levels in operations, I can tell you that red lining is an unexceptable practice and counter productive to collecting lending revenues. And really, the realtor is more of a risk of that behavior.

[Spider]

Most things aren't the fault of one event or policy change. Chances are there is truth in both of those articles.

let me put it like this , If that state of California , said you know , Truckers shouldnt have a speed limit , let em go as fast as they want , So I I slap the pig in the big hole and get me some gone , I run over a 4 wheeler , is it the states fault for relaxng the speed limit , or mine for operating in a unsafe manner ? Same way with these banks , just cause regulations were loosened , dont mean they can do what they want ........

[El Minion]

Demand for debt backing was so great that the banks insisted on more than doubling a ski and golf resort project described below. But don't let facts ruin the good story that HUD and minorities are the real culprits for the financial meltdown.

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It's no secret that the middle class and the poor have been taking a financial beating since the 2008 meltdown, the deep recession of 2008-2009, and the less than satisfying recovery that began in mid-2009. But while plenty of rich folks on Wall Street were bailed out of poor decisions, a decent chunk of the one percent suffered a fall as well. Yes, plenty of the wealthy suffered the indignity of repossessed jets and yachts, laying off entire household staffs, and seven-figure declines in wealth.

Robert Frank, a reporter at the Wall Street Journal who covers the very wealthy, delves into these tales of woe in his new book, High-Beta Rich: How the Manic Wealthy Will Take us to the Next Boom, Bubble, and Bust (http://us.lrd.yahoo.com/_ylt=Avzrdg8VB91d3LQCuPAv6KCh24dG;_ylu=X3oDMTFtZTF uZmJlBG1pdANEYW5Hcm9zcyBQb3N0IEJvZHkEcG9zAzEEc2VjA 01lZGlhQmxvZ0JvZHlBc3NlbWJseQ--;_ylg=X3oDMTM5MjZjanVhBGludGwDdXMEbGFuZwNlbi11cwRw c3RhaWQDZTM3YzhhNzQtYzU4Yi0zM2Q1LTllODgtNGE1OTQwOD IxMjNkBHBzdGNhdANleGNsdXNpdmVzfGRhbmllbGdyb3NzBHB0 A3N0b3J5cGFnZQ--;_ylv=0/SIG=12r2qpvm9/EXP=1321401409/**http%3A//www.amazon.com/High-Beta-Rich-Manic-Wealthy-Bubble/dp/0307589897). Frank interviewed more than 100 people whose net worth once topped $10 million, "to explore how someone can go from $1 billion to zero." But his goal isn't merely to provide a voyeuristic look into the lifestyles of the no-longer rich and famous. As he tells me in the accompanying video, "I wanted to see what we as consumers and investors can learn from them."

One of the big lessons is not to binge on debt. Frank says that, in percentage terms, the very wealthy have taken a larger hit to income in recent years than the poor and the middle class. ("Hold the violins," he notes.) And while that may make sense — wealthy people tend to have more money in the stock market -- it marks a departure from history. "Prior to 1982, the top one percent were a stable line on the income charts," says Frank. "When things were great, they did OK. When things were bad, they didn't do as bad as the rest."

But things have changed. And It has a lot do with debt. The very rich can easily inflate their net worth by borrowing tens and hundreds of millions of dollars to buy assets, only to see it all disappear in a poof of smoke. High-Beta Rich is full of such tales: the former millionaire who now does odd jobs and lives out of a truck, the guy had to stop building a 75,000-square-foot home near Orlando after his time-share business collapsed under a mountain of debt.

One of the best stories revolves around Tim and Edra Blixseth. After making a fortune in the timber industry, the Blixseths decided to go big by building the Yellowstone Club, an ultra-exclusive ski and golf resort where plots went for $3 million an acre. (Members included Bill Gates, and the trails had names like EBIDTA and Lear Jet.) Demand was so strong for debt backing the project that the Blixseths borrowed several hundred million — more than was needed to build the resort. The cash went to support an insanely lavish lifestyle: seven homes, two private jets, and his and hers Rolls-Royces. During the boom, Frank went to visit one of the couple's homes, which was nestled in a private golf course and full of waiters and other staff. When he returned after the Yellowstone Club went bust and the couple got divorced, Frank rang the bell at the front gates. "I got a Verizon message saying it had been disconnected because they hadn't paid their phone bill." After 25 years in a gilded paradise, Edra Blixseth had to learn how to fill her own gas tank.

Of course, the story of these rags-to-riches-to-rages tales are cautionary ones. Most readers will find it difficult to relate to many of the characters in the book. You won't be able to get through this entertaining, well-reported book without shaking your head in disbelief at the arrogance and stupidity of people who had it all -- and then lost most of it because they wanted even more. But Frank warns that we should try to understand them at a human level. Why? The manic behavior of get-richer-quick types has a larger impact — people using leverage to make big statements and take big risks influence the markets in which we all invest, and the economy in which we work.

Interested in a free copy of High-Beta Rich? Send an email to talkyourbook@yahoo.com and we'll enter your name in a drawing for a free copy.

Daniel Gross is economics editor at Yahoo! Finance.

http://finance.yahoo.com/blogs/daniel-gross/rags-riches-back-rags-meet-high-beta-rich-164920730.html

[L.A. BRONCOS FAN]

Most things aren't the fault of one event or policy change. Chances are there is truth in both of those articles.

Had you bothered to read the article, you'd have understood exactly where the fault resided.

[pricejj]

Yep.

Their zeal to prop up Junior's legacy has blinded them to even the most indisputable facts.


I didn't vote for Bush. Government involvement in any private industry escalates costs. Socialism has never succeeded and never will.

...but by all means keep pimping party politics