A Clinton Rewrite And The Birth Of The Subprime Crisis; Fannie Mae and Freddie Mac in the early 1990s, weren't the quasi-government monster they'd later be.
In 1977 President Carter signed the Community Reinvestment Act, which led Fannie and Freddie to aggressively lend to minority communities. Even though it was Clinton who really pushed the process. After becoming President in 1993, he began rewriting Fannie's and Freddie's rules.In so doing, he turned the two mortgage-funding firms into a competitively unfair, quasi-private, government backed monopoly that dispensed cash to markets a few percentage points cheaper and made loans to large Democratic voting blocs, gave out 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 Greenspan and others, in 1994 Clinton unveiled his National Home ownership Strategy or the "chicken in every pot" program, which broadened the CRA in ways Congress never intended and in which the chickens have come home to roost - pardon the pun!
Addressing the National Association of Realtors that year, Clinton bluntly told the group that "more Americans should own their own homes."
Clinton saw home ownership as a way to open the door for blacks and other minorities to enter the middle class. Which gave birth to grassroots socialist activist groups such as A.C.O.R.N. and empowered people such as Barak Obama.
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 - there's those chickens again!
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.
The Clinton administration budget director Franklin Raines sat in the CEO chair. Under Raines' leadership, Fannie overstated earnings by a stunning $10.6 billion, all the while paying Raines and his senior management team massive bonuses.Raines pulled in some $90 million between 1998 and 2003, the majority from bonuses. And when OFHEO began to ask uncomfortable questions, Raines actively lobbied Congress to cut its funding. In April, Raines agreed to disburse $24 million for his role in the accounting "errors."
Fannie and Freddie became home to out-of-work politicians, mostly Clinton Democrats . Daniel H. Mudd, the departing head of Fannie Mae, stands to collect $9.3 million in severance pay, retirement benefits and deferred compensation, provided his dismissal is deemed to be “without cause,” according to an analysis by the consulting firm James F. Reda & Associates. Mr. Mudd has already taken home $12.4 million in cash compensation and stock option gains since becoming chief executive in 2004, according to an analysis by Equilar, an executive pay research firm.
Richard F. Syron, the departing chief executive of Freddie Mac, could receive an exit package of at least $14.1 million, largely because of a clause added to his employment contract in mid-July as his company’s troubles deepened. He has taken home $17.1 million in pay and stock option gains since becoming chief executive in 2003. It's also interesting that Senator Barney Frank, back in 2003 (I just saw the video on FOX NEWS) stated that Freddie and Fannie were in good fiscal order when he had to know they were in deep. Many, according to FOX NEWS emails coming in right now, are calling for B.Franks head on a platter! Now that Fannie Mae is at the epicenter of a financial meltdown that threatens the U.S. economy, some are raising new questions about Frank's relationship with Herb Moses, who was Fannie’s assistant director for product initiatives. Moses worked at the government-sponsored enterprise from 1991 to 1998, while Frank was on the House Banking Committee, which had jurisdiction over Fannie.
Dan Gainor, vice president of the Business & Media Institute. "He was voting on Fannie Mae at a time when he was involved with a Fannie Mae executive. How is that not germane?
"C’mon, he writes housing and banking laws and his boyfriend is a top exec at a firm that stands to gain from those laws?" the aide told FOX News. "No media ever takes note? Imagine what would happen if Frank’s political affiliation was R instead of D? Imagine what the media would say if [GOP former] Chairman [Mike] Oxley’s wife or [GOP presidential nominee John] McCain’s wife was a top exec at Fannie for a decade while they wrote the nation’s housing and banking laws."
Then there were the campaign donations. From 1989 to 2008, some 384 politicians like Barak Obama who was the second largest recipient of contributions who got their campaign accounts 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 such as A.C.O.R.N.(accused of voter registration fraud and a "low income, no down payment, no doc/liar loan mortgage debacle. It's unbelievably that they, A.C.O.R.N., are listed by the Democratic Senate to get 20% off the top of the $700 billion "bailout" money for more of their shenanigans) - isn't this where the subprime mess originated ?
If measured by the goal of putting more poor people into homes, which many, because of the "Flip This House" phenomena on television that showcased people buying with short term (ARM's)loans, slapping some paint on, and putting it back up for sale before the teaser rate bumped higher thereby reaping huge rewards, then the answer would have to be yes even though, now, they are all going back to the banks as defaults and the mortgages themselves mixed in with good loans have been sold off to banks which is why the banks won't transact with one another because they don't know how much of the toxic loans are in the packages. Congress and the Administration are falling all over themselves in failed deal making to figure out how to bail out Wall Street and the banks to get things moving again - it ain't pretty!
From 1995 to 2005, a Harvard study shows, minorities made up 49% or one half of the 12.5 million new homeowners.
The problem is that many of those loans have now gone bad, and minority home ownership rates are shrinking fast and the economy, globally, are in fear of collapse threatening retirement plans and savings worldwide.
Fannie and Freddie, with their massive loan portfolios stuffed with securitized mortgage-backed paper created from subprime loans are choking the credit markets to a complete halt and are a failed legacy of the Clinton era. Link
In 1977 President Carter signed the Community Reinvestment Act, which led Fannie and Freddie to aggressively lend to minority communities. Even though it was Clinton who really pushed the process. After becoming President in 1993, he began rewriting Fannie's and Freddie's rules.In so doing, he turned the two mortgage-funding firms into a competitively unfair, quasi-private, government backed monopoly that dispensed cash to markets a few percentage points cheaper and made loans to large Democratic voting blocs, gave out 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 Greenspan and others, in 1994 Clinton unveiled his National Home ownership Strategy or the "chicken in every pot" program, which broadened the CRA in ways Congress never intended and in which the chickens have come home to roost - pardon the pun!
Addressing the National Association of Realtors that year, Clinton bluntly told the group that "more Americans should own their own homes."
Clinton saw home ownership as a way to open the door for blacks and other minorities to enter the middle class. Which gave birth to grassroots socialist activist groups such as A.C.O.R.N. and empowered people such as Barak Obama.
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 - there's those chickens again!
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.
The Clinton administration budget director Franklin Raines sat in the CEO chair. Under Raines' leadership, Fannie overstated earnings by a stunning $10.6 billion, all the while paying Raines and his senior management team massive bonuses.Raines pulled in some $90 million between 1998 and 2003, the majority from bonuses. And when OFHEO began to ask uncomfortable questions, Raines actively lobbied Congress to cut its funding. In April, Raines agreed to disburse $24 million for his role in the accounting "errors."
Fannie and Freddie became home to out-of-work politicians, mostly Clinton Democrats . Daniel H. Mudd, the departing head of Fannie Mae, stands to collect $9.3 million in severance pay, retirement benefits and deferred compensation, provided his dismissal is deemed to be “without cause,” according to an analysis by the consulting firm James F. Reda & Associates. Mr. Mudd has already taken home $12.4 million in cash compensation and stock option gains since becoming chief executive in 2004, according to an analysis by Equilar, an executive pay research firm.
Richard F. Syron, the departing chief executive of Freddie Mac, could receive an exit package of at least $14.1 million, largely because of a clause added to his employment contract in mid-July as his company’s troubles deepened. He has taken home $17.1 million in pay and stock option gains since becoming chief executive in 2003. It's also interesting that Senator Barney Frank, back in 2003 (I just saw the video on FOX NEWS) stated that Freddie and Fannie were in good fiscal order when he had to know they were in deep. Many, according to FOX NEWS emails coming in right now, are calling for B.Franks head on a platter! Now that Fannie Mae is at the epicenter of a financial meltdown that threatens the U.S. economy, some are raising new questions about Frank's relationship with Herb Moses, who was Fannie’s assistant director for product initiatives. Moses worked at the government-sponsored enterprise from 1991 to 1998, while Frank was on the House Banking Committee, which had jurisdiction over Fannie.
Dan Gainor, vice president of the Business & Media Institute. "He was voting on Fannie Mae at a time when he was involved with a Fannie Mae executive. How is that not germane?
"C’mon, he writes housing and banking laws and his boyfriend is a top exec at a firm that stands to gain from those laws?" the aide told FOX News. "No media ever takes note? Imagine what would happen if Frank’s political affiliation was R instead of D? Imagine what the media would say if [GOP former] Chairman [Mike] Oxley’s wife or [GOP presidential nominee John] McCain’s wife was a top exec at Fannie for a decade while they wrote the nation’s housing and banking laws."
Then there were the campaign donations. From 1989 to 2008, some 384 politicians like Barak Obama who was the second largest recipient of contributions who got their campaign accounts 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 such as A.C.O.R.N.(accused of voter registration fraud and a "low income, no down payment, no doc/liar loan mortgage debacle. It's unbelievably that they, A.C.O.R.N., are listed by the Democratic Senate to get 20% off the top of the $700 billion "bailout" money for more of their shenanigans) - isn't this where the subprime mess originated ?
If measured by the goal of putting more poor people into homes, which many, because of the "Flip This House" phenomena on television that showcased people buying with short term (ARM's)loans, slapping some paint on, and putting it back up for sale before the teaser rate bumped higher thereby reaping huge rewards, then the answer would have to be yes even though, now, they are all going back to the banks as defaults and the mortgages themselves mixed in with good loans have been sold off to banks which is why the banks won't transact with one another because they don't know how much of the toxic loans are in the packages. Congress and the Administration are falling all over themselves in failed deal making to figure out how to bail out Wall Street and the banks to get things moving again - it ain't pretty!
From 1995 to 2005, a Harvard study shows, minorities made up 49% or one half of the 12.5 million new homeowners.
The problem is that many of those loans have now gone bad, and minority home ownership rates are shrinking fast and the economy, globally, are in fear of collapse threatening retirement plans and savings worldwide.
Fannie and Freddie, with their massive loan portfolios stuffed with securitized mortgage-backed paper created from subprime loans are choking the credit markets to a complete halt and are a failed legacy of the Clinton era. Link
posted by Cu'cullen | 7:08 AM
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