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    excon's Avatar
    excon Posts: 21,482, Reputation: 2992
    Uber Member

    Oct 10, 2008, 10:01 AM
    Market & Political Clarity

    Sub prime mortgages and the roles of Fannie Mae and Freddie Mack, are getting a lot of press - even around here. But THEY'RE NOT the problem. On their own, they would have caused a dent in our economy, but they would NOT have caused the meltdown we're seeing now.

    The problem is "credit default swaps". These are, in effect, insurance policies, but if they were called that, REGULATIONS would have kicked in requiring the insurers to have substantial capital to BACK THEM UP.

    But, they didn't want to call them that, because they didn't want regulation. That, in and of itself, isn't bad. Who wants regulation? So, the bankers did what bankers do, and proceeded to make money. They began to trade these default swaps and the market is believed to be in the trillions. Nobody minded, cause EVERYBODY was making money. I say believed, because it's an UNREGULATED market. Nobody knows.

    But SOMEBODY should have minded, and that was the regulators. They were asleep at the switch.

    These devices (credit default swaps) weren't inherited by the Bush administration. They were CREATED under his watch. But, the regulators paid NO attention. Nobody minded, cause EVERYBODY was making money.

    Then the bubble burst, and nobody wants the swaps. Since nobody wants them, there is NO market for them, so nobody knows how much their worth, if anything. So, nobody is selling them and the market is frozen. THAT is what is causing the rest of the markets to collapse - not sub prime mortgages.

    The responsibility for this debacle lies directly with the dufus in chief. After all, these were HIS regulators. Their LACK of attention is understandable when you consider that the overarching philosophy of the dufus in chief, is that government regulation IS the problem. The buck stops at the dufus's door. That's just so.

    Is John McCain a DE regulator? He certainly was before he wasn't.

    Neilcathy67's Avatar
    Neilcathy67 Posts: 47, Reputation: 3
    Junior Member

    Oct 10, 2008, 10:39 AM

    Your correct, but in our society no one fixes something that is not broken, they wait for it to break. Most brokers, like myself, were enticed by lenders by giving away free trips etc if you signed up sub prime mortgage apps. Many fell into that hole, but they were only part of the problem. The Lenders were making millions on these loans, countrywide's across the nation were signing up deals with homeowners who could not afford a normal payments, only subprime payments. Real estate people were selling houses based on these sub prime payments and enticing more customers by saying they could qualify for a mortgage on sub prime mortgage. So on and so on right down the line. From the Real Estate people to Mortgage brokers to the Countrywide's they sold the crap out these loans to make the almighty buck. No one ever questioned "What if I can't make the payment ?" Now the worm has turned and the whole country will suffer for the greed of these people. Millions will lose their homes, jobs and life savings. Congress will now try to solve it, but it's a bandage on a dam that has burst. I believe that heads will roll in the future. Many people will end up in jail and the industry will be strickly regulated forever, but the country may never recover to the point where we were before the sh-t hit the fan. I guarantee you there will be ten of thousands cases of mortgage fraud and many banks will fail, mortgage companies go under and our whole system be altered because of these loans, that never should have been issued.
    excon's Avatar
    excon Posts: 21,482, Reputation: 2992
    Uber Member

    Oct 10, 2008, 10:44 AM
    Hello Niel:

    Couldn't agree more. Here's your greenie: *

    speechlesstx's Avatar
    speechlesstx Posts: 1,111, Reputation: 284
    Ultra Member

    Oct 10, 2008, 10:44 AM
    Still laying all the blame on Bush and not on the likes of Barney Frank and the Community Reinvestment Act?

    A top White House economist called yesterday for stronger regulation of Fannie Mae, Freddie Mac and other government-sponsored housing financiers, saying that "even a small mistake" in managing their risks "could have ripple effects throughout the financial system."

    N. Gregory Mankiw, chairman of the Council of Economic Advisers, told a group of state bank supervisors that the companies are so large and complex "that it is hard even for the companies themselves to keep track of their own situations." He was joining the administration's push for legislation that appears to have stalled in Congress.

    Rep. Barney Frank (D-Mass.), the ranking Democrat on the House Financial Services Committee, said the administration's position is driven by concerns about the financial safety and soundness of the companies "to the exclusion of concern about housing." Committee members were ready to support legislation that would give the Treasury Department oversight of Fannie and Freddie, as the administration has sought, Frank said, not power over the companies' housing activities, which are regulated by the Department of Housing and Urban Development.

    Mankiw said "the appearance of greater oversight without the reality would be a step in the wrong direction."
    No kidding, apparently Frank was more concerned about housing than reforms the president pushed for than an economic meltdown. How many Democrats told us nothing was wrong with Fannie and Freddie? How many had sweetheart deals with Countrywide and as Ed Morrissey puts it, "sold out the American taxpayer for a few thousand dollars and a boatload of campaign contributions, and then blocked the kind of reform that would have prevented this collapse?"
    Choux's Avatar
    Choux Posts: 3,047, Reputation: 376
    Ultra Member

    Oct 10, 2008, 01:21 PM

    There is a lot of blame to go around in the financial, real estate, and political community.

    It's all about greed, commissions, fees, easy money and screwing with financial products and lack of ethics in these industries and in politics.

    Some people like to scapegoat middle class people who were pushed into shakey mortgages so the real estate person could make a large *commission, mortgages were sold so brokers could make a *commission, complicated investment vehicles were constructed so they could be sold and the brokers could make a *commission.

    Republican deregulation and Republican benign neglect of all the money markets in the name of "free markets" led us to the brink of collapse of the world economy. The **rich and powerful** can't be left to their own devices for this is the result of greed and money lust. We are still not out of the woods. Still on shakey island reef.

    Add STUPIDITY. Lots of stupid people like Bush and Congressional members--very stupid people.

    John McCain? He was bought and paid for by the rich and powerful branch of the REpublican Party... see how he has changed many positions he used to hold.
    He is the third Bush term if elected... Mr Deregulation. :)

    Funny how America works now...

    Socialism for the rich(govt rescues them)!
    Free Enterprise for the middle class!
    speechlesstx's Avatar
    speechlesstx Posts: 1,111, Reputation: 284
    Ultra Member

    Oct 10, 2008, 02:52 PM
    All I can do is shake my head at the knee-jerk reactions toward Bush and the Republicans by you people ignoring the role of the left in this...

    Planting Seeds of Disaster
    ACORN, Barack Obama, and the Democratic party.

    By Stanley Kurtz

    ‘You’ve got only a couple thousand bucks in the bank. Your job pays you dog-food wages. Your credit history has been bent, stapled, and mutilated. You declared bankruptcy in 1989. Don’t despair: You can still buy a house.” So began an April 1995 article in the Chicago Sun-Times that went on to direct prospective home-buyers fitting this profile to a group of far-left “community organizers” called ACORN, for assistance. In retrospect, of course, encouraging customers like this to buy homes seems little short of madness.

    Militant ACORN
    At the time, however, that 1995 Chicago newspaper article represented something of a triumph for Barack Obama. That same year, as a director at Chicago’s Woods Fund, Obama was successfully pushing for a major expansion of assistance to ACORN, and sending still more money ACORN’s way from his post as board chair of the Chicago Annenberg Challenge. Through both funding and personal-leadership training, Obama supported ACORN. And ACORN, far more than we’ve recognized up to now, had a major role in precipitating the subprime crisis.

    I’ve already told the story of Obama’s close ties to ACORN leader Madeline Talbott, who personally led Chicago ACORN’s campaign to intimidate banks into making high-risk loans to low-credit customers. Using provisions of a 1977 law called the Community Reinvestment Act (CRA), Chicago ACORN was able to delay and halt the efforts of banks to merge or expand until they had agreed to lower their credit standards — and to fill ACORN’s coffers to finance “counseling” operations like the one touted in that Sun-Times article. This much we’ve known. Yet these local, CRA-based pressure-campaigns fit into a broader, more disturbing, and still under-appreciated national picture. Far more than we’ve recognized, ACORN’s local, CRA-enabled pressure tactics served to entangle the financial system as a whole in the subprime mess. ACORN was no side-show. On the contrary, using CRA and ties to sympathetic congressional Democrats, ACORN succeeded in drawing Fannie Mae and Freddie Mac into the very policies that led to the current disaster.

    In one of the first book-length scholarly studies of ACORN, Organizing Urban America, Rutgers University political scientist Heidi Swarts describes this group, so dear to Barack Obama, as “oppositional outlaws.” Swarts, a strong supporter of ACORN, has no qualms about stating that its members think of themselves as “militants unafraid to confront the powers that be.” “This identity as a uniquely militant organization,” says Swarts, “is reinforced by contentious action.” ACORN protesters will break into private offices, show up at a banker’s home to intimidate his family, or pour protesters into bank lobbies to scare away customers, all in an effort to force a lowering of credit standards for poor and minority customers. According to Swarts, long-term ACORN organizers “tend to see the organization as a solitary vanguard of principled leftists...the only truly radical community organization.”

    ACORN’s Inside Strategy
    Yet ACORN’s entirely deserved reputation for militance is balanced by its less-well-known “inside strategy.” ACORN has long employed Washington-based lobbyists who understand very well how the legislative game is played. ACORN’s national lobbyists may encourage and benefit from the militant tactics of their base, but in the halls of congress they play the game with smooth sophistication. The untold story of ACORN’s central role in the financial meltdown is about the one-two punch to the banking system administered by this outside/inside strategy.

    Critics of the notion that CRA had a major impact on the subprime crisis ask how a law passed in 1977 could have caused a crisis in 2008? The answer has a lot to do with ACORN — and the critical years of 1990-1995. While the 1977 Community Reinvestment Act did call on banks to increase lending in poor and minority neighborhoods, its exact requirements were vague, and therefore open to a good deal of regulatory interpretation. Banks merger or expansion plans were rarely held up under CRA until the late 1980s, when ACORN perfected its technique of filing CRA complaints in tandem with the sort of intimidation tactics perfected by that original “community organizer” (and Obama idol), Saul Alinsky.

    At first, ACORN’s anti-bank actions were relatively few in number. However, under a provision of the 1989 savings and loan bailout pushed by liberal Democratic legislators, like Massachusetts Congressman Joseph P. Kennedy, lenders were required to compile public records of mortgage applicants by race, gender, and income. Although the statistics produced by these studies were presented in highly misleading ways, groups like ACORN were able to use them to embarrass banks into lowering credit standards. At the same time, a wave of banking mergers in the early 1990's provided an opening for ACORN to use CRA to force lending changes. Any merger could be blocked under CRA, and once ACORN began systematically filing protests over minority lending, a formerly toothless set of regulations began to bite.

    ACORN’s efforts to undermine credit standards in the late 1980s taught it a valuable lesson. However much pressure ACORN put on banks to lower credit standards, tough requirements in the “secondary market” run by Fannie Mae and Freddie Mac served as a barrier to change. Fannie Mae and Freddie Mac buy up mortgages en masse, bundle them, and sell them to investors on the world market. Back then, Fannie and Freddie refused to buy loans that failed to meet high credit standards. If, for example, a local bank buckled to ACORN pressure and agreed to offer poor or minority applicants a 5-percent down-payment rate, instead of the normal 10-20 percent, Fannie and Freddie would refuse to buy up those mortgages. That would leave all the risk of these shaky loans with the local bank. So again and again, local banks would tell ACORN that, because of standards imposed by Fannie and Freddie, they could lower their credit standards by only a little.

    So the eighties taught ACORN that a high-pressure, Alinskyite outside strategy wouldn’t be enough. Their Washington lobbyists would have to bring inside pressure on the government to undercut credit standards at Fannie Mae and Freddie Mac. Only then would local banks consider making loans available to customers with bad credit histories, low wages, virtually nothing in the bank, and even bankruptcies on record.

    Democrats and ACORN
    As early as 1987, ACORN began pressuring Fannie and Freddie to review their standards, with modest results. By 1989, ACORN had lured Fannie Mae into the first of many “pilot projects” designed to help local banks lower credit standards. But it was all small potatoes until the serious pressure began in early 1991. At that point, Democratic Senator Allan Dixon convened a Senate subcommittee hearing at which an ACORN representative gave key testimony. It’s probably not a coincidence that Dixon, like Obama, was an Illinois Democrat, since Chicago has long been a stronghold of ACORN influence.

    Dixon gave credibility to ACORN’s accusations of loan bias, although these claims of racism were disputed by Missouri Republican, Christopher Bond. ACORN’s spokesman strenuously complained that his organization’s efforts to relax local credit standards were being blocked by requirements set by the secondary market. Dixon responded by pressing Fannie and Freddie to do more to relax those standards — and by promising to introduce legislation that would ensure it. At this early stage, Fannie and Freddie walked a fine line between promising to do more, while protesting any wholesale reduction of credit requirements.

    By July of 1991, ACORN’s legislative campaign began to bear fruit. As the Chicago Tribune put it, “Housing activists have been pushing hard to improve housing for the poor by extracting greater financial support from the country’s two highly profitable secondary mortgage-market companies. Thanks to the help of sympathetic lawmakers, it appeared...that they may succeed.” The Tribune went on to explain that House Democrat Henry Gonzales had announced that Fannie and Freddie had agreed to commit $3.5 billion to low-income housing in 1992 and 1993, in addition to a just-announced $10 billion “affordable housing loan program” by Fannie Mae. The article emphasizes ACORN pressure and notes that Fannie and Freddie had been fighting against the plan as recently as a week before agreement was reached. Fannie and Freddie gave in only to stave off even more restrictive legislation floated by congressional Democrats.

    A mere month later, ACORN Housing Corporation president, George Butts made news by complaining to a House Banking subcommittee that ACORN’s efforts to pressure banks using CRA were still being hamstrung by Fannie and Freddie. Butts also demanded still more data on the race, gender, and income of loan applicants. Many news reports over the ensuing months point to ACORN as the key source of pressure on congress for a further reduction of credit standards at Fannie Mae and Freddie Mac. As a result of this pressure, ACORN was eventually permitted to redraft many of Fannie Mae and Freddie Mac’s loan guideline.

    Clinton and ACORN
    ACORN’s progress through 1992 depended on its Democratic allies. Whatever ACORN managed to squeeze out of the George H. W. Bush administration came under congressional pressure. With the advent of the Clinton administration, however, ACORN’s fortunes took a positive turn. Clinton Housing Secretary Henry Cisnersos pledged to meet monthly with ACORN representatives. For ACORN, those meetings bore fruit.

    Another factor working in ACORN’s favor was that its increasing success with local banks turned those banks into allies in the battle with Fannie and Freddie. Precisely because ACORN’s local pressure tactics were working, banks themselves now wanted Fannie and Freddie to loosen their standards still further, so as to buy up still more of the high-risk loans they’d made at ACORN’s insistence. So by the 1993, a grand alliance of ACORN, national Democrats, and local bankers looking for someone to lessen the risks imposed on them by CRA and ACORN were uniting to pressure Fannie and Freddie to loosen credit standards still further.

    At this point, both ACORN and the Clinton administration were working together to impose large numerical targets or “set asides” (really a sort of poor and minority loan quota system) on Fannie and Freddie. ACORN called for at least half of Fannie and Freddie loans to go to low-income customers. At first the Clinton administration offered a set-aside of 30 percent. But eventually ACORN got what it wanted. In early 1994, the Clinton administration floated plans for committing $1 trillion in loans to low- and moderate-income home-buyers, which would amount to about half of Fannie Mae’s business by the end of the decade. Wall Street Analysts attributed Fannie Mae’s willingness to go along with the change to the need to protect itself against still more severe “congressional attack.” News reports also highlighted praise for the change from ACORN’s head lobbyist, Deepak Bhargava.

    This sweeping debasement of credit standards was touted by Fannie Mae’s chairman, chief executive officer, and now prominent Obama adviser James A. Johnson. This is also the period when Fannie Mae ramped up its pilot programs and local partnerships with ACORN, all of which became precedents and models for the pattern of risky subprime mortgages at the root of today’s crisis. During these years, Obama’s Chicago ACORN ally, Madeline Talbott, was at the forefront of participation in those pilot programs, and her activities were consistently supported by Obama through both foundation funding and personal leadership training for her top organizers.

    Finally, in June of 1995, President Clinton, Vice President Gore, and Secretary Cisneros announced the administration’s comprehensive new strategy for raising home-ownership in America to an all-time high. Representatives from ACORN were guests of honor at the ceremony. In his remarks, Clinton emphasized that: “Out homeownership strategy will not cost the taxpayers one extra cent. It will not require legislation.” Clinton meant that informal partnerships between Fannie and Freddie and groups like ACORN would make mortgages available to customers “who have historically been excluded from homeownership.”

    In the end of course, Clinton’s plan cost taxpayers an almost unimaginable amount of money. And it was just around the time of his 1995 announcement that the Chicago papers started encouraging bad-credit customers with “dog-food” wages, little money in the bank, and even histories of bankruptcy to apply for home loans with the help of ACORN. At both the local and national levels, then, ACORN served as the critical catalyst, levering pressure created by the Community Reinvestment Act and pull with Democratic politicians to force Fannie Mae and Freddie Mac into a pattern of high-risk loans.

    Up to now, conventional wisdom on the financial meltdown has relegated ACORN and the CRA to bit parts. The real problem, we’ve been told, lay with Fannie Mae and Freddie Mac. In fact, however, ACORN is at the base of the whole mess. ACORN used CRA and Democratic sympathizers to entangle Fannie and Freddie and the entire financial system in a disastrous disregard of the most basic financial standards. And Barack Obama cut his teeth as an organizer and politician backing up ACORN’s economic madness every step of the way.
    Galveston1's Avatar
    Galveston1 Posts: 362, Reputation: 53
    Full Member

    Oct 10, 2008, 04:55 PM

    Speech, I appreciate the great job that you, Tom, and Elliot do at providing us with documentation. Maybe some who read these posts will learn something, but some people are just not going to admit that their boy Obama is dirty. It makes no sense to me, because they are going to suffer as much as anyone else if he is elected. Go figure!
    excon's Avatar
    excon Posts: 21,482, Reputation: 2992
    Uber Member

    Oct 10, 2008, 05:19 PM
    Hello Gal:

    One mans documentation is another mans spin.


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