Bush 2002 Speech , page 2

Originally posted by Cowgirlstraitup7
Thank you for posting this! I am afraid though, that it might get buried as it's dead of the night here in the U.S. I will check back often hoping this gets seen by the masses!

Dare I say, we have found our culprit to the housing crisis?

I wouldn't dare say that if I were you.

You could say you've identified ONE of the thousands of greedy, lying, power grabing politician bastards responsible for this mess. It's a long line that goes all the way back to FDR.

Freddie, Fannie, And The Finger Of BlameBy: Norman Poltenson

09/26/08 12:01 PM
Merriam-Webster defines "blame" thus: "to find fault with or to hold responsible."

Our nation's capital is busy pointing the finger of blame while simultaneously trying to figure out how to rescue the U.S. market from a meltdown. The primary culprits seem to be Wall Street fat cats driven by greed, mortgage lenders, brokers, and government agencies with oversight responsibility. Excluded from the blame game are the home buyers who signed the mortgages; they apparently bear no responsibility for stupid decisions. And of course, our elected officials, who are now being called upon to fix the problem, are also largely escaping blame.

At the end of last week (Sept. 15-19) - which began with the bankruptcy of Lehman Brothers, moved to an $85 billion rescue plan for behemoth American International Group, and ended with the government's current $700 billion plan to grease the marketplace - Treasury Secretary Henry Paulson blamed "lax lending practices earlier this decade and irresponsible borrowing." Paulson also went on to cite "the inability to determine the worth [of toxic, mortgage-backed securities, which] has fostered uncertainty about mortgage assets and even about the institutions that own them." His voice was one of the few focused on solving the problem rather than on assessing blame.

Before Congress and the White House try another Hail-Mary solution, it would be helpful to shine a light on the politics of "affordable housing" that are the core the problem.

Seventy years ago, the Roosevelt administration founded a government agency to provide liquidity for the mortgage market. The Federal National Mortgage Association (Fannie Mae), and its smaller twin, the Federal Home Loan Corporation (Freddie Mac), were chartered as government agencies to fulfill the American dream of home-ownership. The two agencies bought loans from mortgage originators, repackaged the loans as mortgage-backed securities, and either sold them with an implicit guarantee that the interest and principal would be paid if the original borrower defaulted or they held the mortgages in their own portfolio.

While making more money available for mortgages, the agency also transferred the risk from the original lender, who made a profit on the transaction whether or not the loans were ever repaid.

In 1968, Lyndon Johnson converted Fannie Mae into a private corporation, giving it the special status of a government-sponsored enterprise (GSE). He sold the stock to investors to help pay for the war in Vietnam and to clean up the government's balance sheet.

In 1977, Congress passed the Community Reinvestment Act (CRA), ostensibly to prohibit "redlining" by banks in low-income neighborhoods. Under the act, banks were encouraged to approve loans, once considered risky, to minorities and to "community groups." The banking community complied as long as it could pass the risk on to Fannie Mae. During the 1990s, the Clinton administration reinterpreted CRA to force banks to prove they weren't red-lining by approving loans once considered risky.

In 1998, Franklin Raines was appointed head of Fannie Mae. During his six years at the helm, Raines made it a top priority to ease the process of granting mortgages to those with poor credit, few assets, and little or no money for a down payment. With Fannie and Freddie as the prime customers for mortgages, it's not surprising that Wall Street dumped "securitized subprime loans."

Warning flags were clearly flying in September 2004 when the Office of Federal Housing Oversight released a report alleging widespread accounting errors by Fannie Mae. The report also indicated a shifting of losses so senior executives would be eligible for large bonuses. Despite Congressional momentum to create regulatory oversight of Fannie and Freddie to preclude making risky investments, legislation was squashed in 2005 because of politics, in part because the new officers at Fannie and Freddie promised Congress that the GSEs would continue to be the champions of affordable housing.

The house of cards created by Fannie and Freddie began to tumble last summer when home prices declined. The depreciation of home prices led to growing losses by the GSEs. By the end of August 2008, Fannie and Freddie stock shares had plummeted 90 percent. On Sept. 7, the Federal Housing Finance Agency placed Freddie and Fannie under its conservatorship.

Today, the same politicians who promote the dream of home-ownership and who stymied intervention to preclude excessive risk-taking are busy pointing fingers of blame at everyone but themselves. They are also the politicians called upon to fix the problem. It's hard to be optimistic that Washington will actually solve the problem until it accepts blame for the politicization it has created in the mortgage markets.

Unless sanity in lending practices supersedes the politics of affordable housing, we may paper over the mortgage problem, but we won't solve it.

By STEVEN A. HOLMESPublished: September 30, 1999In 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 (and current Obama advisor). ''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.''

Sorry about the large quotes, but these items appeared in an online publication that requires paid membership.