More on the sub-prime mess and where it came from

TinCan's picture

This is from an e-mail from a friend. Can't vouch for accuracy, but enlightening.

Interesting how this comes out now!! And Bush was to blame for all the problems???

This video shows that George Bush tried to warn Congress starting in 2001 that this economic crisis was coming, if something was not done. But Congress refused to listen, along with Barney Franks. This video says it all.

The liberal AMERICAN media did not want this video on You Tube, so they had Time Warner threaten a law suit (proprietary rights) if it was not taken off.

This link is of the same video but is routed through Canada.

Good old Barney and Chuck

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Cyclist's picture
Submitted by Cyclist on Wed, 12/17/2008 - 4:32pm.

Some inside details are become public regarding the collapse of both Freddie and Fannie.

Here are just a few of the details:

Internal Freddie Mac documents show that senior executives at the company were warned years ago that they were offering mortgages that could pose dangers to the firm, hurt borrowers and generate more risky loans throughout the industry.

At Fannie Mae, top executives were told it was necessary to develop "underground" efforts to buy subprime mortgages because of competitive pressures, although there were growing risks and borrowers often didn't understand the terms of the loans, documents show.

Fannie and Freddie's distress has its roots in the new, risky mortgages the companies bought and guaranteed in increasing numbers, largely from 2004 through 2007. These new products included home loans made to people with blemished credit histories, called subprime loans, and mortgages made without verification of income, assets or employment, often called Alt-A.

But the documents show how top executives at both companies were told that the new subprime and Alt-A loans were dangerous both to the companies and to the borrowers they were charted by Congress to help.

..others expressed concern about another type of mortgage Freddie was buying, where neither income nor assets were stated on the loan application. Andrukonis said these were popular with Hispanic borrowers, but the delinquency rates of 8 to 13 percent were much higher than on conventional loans.

People familiar with the matter said Freddie was being pushed by advocacy groups to come up with new loan products to offer to low-income and minority borrowers.

Washington Post Story
Caution - The Surgeon General has determined that constant blogging is an addiction that can cause a sedentary life style.

Submitted by skyspy on Wed, 12/17/2008 - 12:14am.

Most of the people who can read have followed the paper trail to the guilty.

Robert W. Morgan's picture
Submitted by Robert W. Morgan on Wed, 12/17/2008 - 6:40am.

Harold Husock's take on the Community Reinvestment Act appears on the editorial page of today's AJC if you want a brief and factual overview. He even has some interesting %'s which could be researched for those of you who must know every detail.

Read it quick before Jeffc jumps in with his made up %'s and pathetic defense of the clueless Dems who were in charge then (70's and 90's) and are certainly in charge now - when they will be tasked with cleaning up their own mess while remaining politically correct and socially responsible.

Yea, I know. That's impossible.

Submitted by bowser on Thu, 12/18/2008 - 9:16am.

You guys can boil this down to a single piece of legislation or a couple of wayward liberal congressmen if it makes you feel good, but you're fooling yourselves.

Yes, political pressure to expand lending to po' folks played a role, but probably the key factor was the explosion in loan securitization, enabled by lax oversight and private sector "innovations" such as alt-a loans and credit default swaps, abetted by bogus debt-rating practices and undercapitalization. The biggest part of this explosion was in 2004 to 2007 when the Bush admin and Greenspan bet the farm on easy money and leveraged consumer spending as the foundation of a post 9/11 economic "recovery."

There was an absolute feeding frenzy in the mortgage, real estate and homebuilding industries. The only goal was getting more people into mortgages, since making money depended on sales, not soundness. And nobody except a few conservative banks (Suntrust, BB&T etc.) wanted to be left behind by sticking too hard to "traditional" lending practices.

Plus, the explosive and irrational rise in home prices meant that creative lending was the only way to keep the boom going. Think about it: with middle class wages stagnant -- as they have been for the past 20 years now -- how many young families could afford a 220k "starter home" under the old 20% down model??

Fannie Mae and Freddie Mac are convenient whipping boys, but remember this: Fannie and Freddie operated as businesses, with publicly traded stock and huge executive bonuses awarded on short-term results. As their own executives have testified, they didn't chase the subprime trend just because of political mandates, they also chased it to meet financial goals demanded by their shareholder-owners, and so that they wouldn't be left out of the party.

For my money, the best video on this whole mess is still the one by a British comedy team that Tin Can posted a couple weeks ago. Find it here:

JeffC's picture
Submitted by JeffC on Wed, 12/17/2008 - 11:55am.

Yes, read Harold Husock's take on the CRA, “By 2005, HUD required that 45 percent of all the loans bought by Fannie Mae and Freddie Mac be loans to borrowers with low and moderate incomes. HUD required further that Fannie and Freddie buy 32 percent of the loans in their portfolios from people in central cities and other underserved areas and that 22 percent of the loans they buy be to “very low-income families or families living in low-income neighborhoods.”

“By 2005, HUD required…” Who was running HUD in 2005? You cite statistics and still seem unable to grasp their meaning. There was no law imposed on the Bush administration mandating this requirement.

“Read it quick before Jeffc jumps in with his made up %'s and pathetic defense…” My made up statistics come from Forbes, the Wall Street Journal, OMB and Bloomberg; sources that I cite with links. Yours seem to come from the fevered imagination of Rush, Sean, and Laura Ingram completely without attribution.

You have repeatedly misrepresented the CRA here: Well, that would be The Community Reinvestment Act of 1978

And I have repeatedly asked you to cite a single part of any law that backs up your assertions that the CRA required banks to make loans to unqualified applicants. You have not and cannot do it because it does not exist. Saying “CRA, CRA” over and over is meaningless. NO part of the CRA imposes this requirement.

I’d be easy to refute. JUST SHOW ME THE LAW.

Submitted by Davids mom on Wed, 12/17/2008 - 8:58am.

It's interesting to follow the 'thinking' of those who continue to play the blame game - instead of trying to figure out what they can do to restore America to it's proper position of leadership and world respect. Think I'll write a paper on the 'loyal few' to the Bush years. This group has little to do with party politics - but stick to pushing an ideology that is too far right to even be seen as workable in the American landscape. The Republicans and Democrats (moderates of both parties) are trying to unite in order to bring America back to adhering to the words in our Constitution. You are evidently an intellectual - have you read the Constitution lately?

The Wedge's picture
Submitted by The Wedge on Wed, 12/17/2008 - 9:46am.

"The Republicans and Democrats (moderates of both parties) are trying to unite in order to bring America back to adhering to the words in our Constitution. You are evidently an intellectual - have you read the Constitution lately?"

I have no quarrel over most of your post until this part. Most of the governmental actions and expansion of power of the past 60 years has come outside of constitutional authority. Both parties have created a strong and increasingly tyrannical federal government. We are 1 or 2 states anyway from opening a new Constituional Convention so that the encroachment of the central government will be put to writing and posterity, not just in court precedent.

JeffC's picture
Submitted by JeffC on Wed, 12/17/2008 - 2:52pm.

Lord help us! Kiss the Bill of Rights goodbye.

Submitted by Davids mom on Wed, 12/17/2008 - 12:13pm.

We are 1 or 2 states anyway from opening a new Constituional Convention

. . .and the old south will rise again. I don't think we have a quarrel at all - just different views on how to bring our country back to manifesting the words of our Constitution.

The Wedge's picture
Submitted by The Wedge on Wed, 12/17/2008 - 1:19pm.

Actually I had a ancestor that marched with the Army of the Cumberland. I do not believe that this is a kooky thing. See this news article:
This is what the news article states: "A constitutional convention has not been called in the United States since the late 18th Century. Once two thirds of the states have requested such a convention, Congress would appoint members to the convention. If Ohio passes H. J. R. No. 8, only one more state would be required to call the convention.

Among those states that have applied for a constitutional convention are: Alaska, Arizona, Arkansas, Delaware, Colorado, Georgia, Idaho, Iowa, Kansas, Maryland, Mississippi, Missouri, Nebraska, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah and Wyoming."

I do not think it is a partisan paper. I have seen this increasingly over the weeks. I also do not know which states have been left off of this list. Feel free to debunk if you can. I have not been able to yet.

yardman5508's picture
Submitted by yardman5508 on Wed, 12/17/2008 - 4:00pm.

i have read the article you cited from the Philadelphia Bulletin and I have to agree with you...apparently there have been a number of states that have requested a Constitutional Convention. Also, a number of states have rescinded their voters, though the legal validity of those rescissions (is that actually a word?) have been questioned. It is interesting that the American Policy Center (ACP) has come out against the vote in Ohio. While for limited government, the APC sees the process of calling a Constitutional Convention fraught with danger, as does Jeffc and most political scientists. The Ohio vote has been postponed until January and it will be VERY interesting to see how the various sides line up on this issue. Keep the faith.

hutch866's picture
Submitted by hutch866 on Wed, 12/17/2008 - 5:06pm.

My Yankee friend, what say we go knock the little white ball around some.

I yam what I yam....Popeye

yardman5508's picture
Submitted by yardman5508 on Wed, 12/17/2008 - 7:02pm.

that sounds like a great holiday plan...let me know your schedule and we will try to coordinate. I have not played in weeks, but am always up for good conversation, riding in the cart, a few brewskies and cussin' at the golf gods. Keep the faith

Democracy is not a spectator sport

Submitted by USArmybrat on Wed, 12/17/2008 - 10:52am.

There are few patriots left in Washington, in either party. The American people are ignoring the ever-strengthening of this federal government to their children's peril. They remain so ignorant in this area but fill their brains with useless trivia about T.V. shows, rap artists, hollywood stars, and ballplayer stats. Just to name a few. I can only imagine the disbelief and outrage that our Founding Fathers would experience if they could see us today.

Submitted by MacTheKnife on Wed, 12/17/2008 - 9:50am.

Best of luck educating those who cannot accept that they might occasionally be in error.

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