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How Clinton Era rule rewrite made subprime crisis inevitable.

Discussion in 'Politics' started by NickNuke, Sep 25, 2008.

  1. NickNuke Full Member

    How A Clinton-Era Rule Rewrite Made Subprime Crisis Inevitable
    BY TERRY JONES

    INVESTOR'S BUSINESS DAILY

    Posted 9/24/2008

    One of the most frequently asked questions about the subprime market meltdown and housing crisis is: How did the government get so deeply involved in the housing market?

    The answer is: President Clinton wanted it that way.

    Fannie Mae (FNM) and Freddie Mac, (FRE) even into the early 1990s, weren't the juggernauts they'd later be.

    While President Carter in 1977 signed the Community Reinvestment Act, which pushed Fannie and Freddie to aggressively lend to minority communities, it was Clinton who supercharged the process. After entering office in 1993, he extensively rewrote Fannie's and Freddie's rules.

    In so doing, he turned the two quasi-private, mortgage-funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democratic voting blocs and handed 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, in 1994 Clinton unveiled his National Homeownership Strategy, which broadened the CRA in ways Congress never intended.

    Addressing the National Association of Realtors that year, Clinton bluntly told the group that "more Americans should own their own homes." He meant it.

    Clinton saw homeownership as a way to open the door for blacks and other minorities to enter the middle class.

    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.

    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.

    Fannie and Freddie became home to out-of-work politicians, mostly Clinton Democrats. An informal survey of their top officials shows a roughly 2-to-1 dominance of Democrats over Republicans.

    Then there were the campaign donations. From 1989 to 2008, some 384 politicians got their tip jars 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.

    Did it work? Well, if measured by the goal of putting more poor people into homes, the answer would have to be yes.

    From 1995 to 2005, a Harvard study shows, minorities made up 49% of the 12.5 million new homeowners.

    The problem is that many of those loans have now gone bad, and minority homeownership rates are shrinking fast.

    Fannie and Freddie, with their massive loan portfolios stuffed with securitized mortgage-backed paper created from subprime loans, are a failed legacy of the Clinton era.
  2. liberal_loosh Full Member

    There IS no crisis. The fundamentals of the economy are strong. Quit listening to the lying liberal media. Now I see what Phil Graham meant about a nation of whiners. You are the #1 whiner.
  3. NickNuke Full Member

    Hard to accept the truth. Your boy, Obama, will continue this insane legacy of the left.
  4. NickNuke Full Member

    And watch. Lending standards are back to where they should be.

    The rabble rousers will start again any day. "Banks are racist!!" "They are not lending to the minority communities!!"

    And start this shit all over again.
  5. NC-Stern-Mark Full Member

    The Dems own the entire fannie/freddie mess.

    Social engineering at it's finest.
  6. NickNuke Full Member

    They don't want to hear this. They just want to blame Republican policies, when it is Liberal policies that fuck us in the ass everytime.

    And then they bitch and moan when it needs to be mopped up.

    It's their mental disorder of "immediate entitlement" at any cost.
  7. NC-Stern-Mark Full Member

    Some of these youngins have no fucking idea how tough it was to get a mortgage at one time. After the dems were through fiddling with expanding home ownership, you could get a mortgage at Wal-Mart.

    It used to be 20% down along with very rigid debt to income ratios.


    EVERYTHING was verified, including where and how you got your down-payment.
  8. NC-Stern-Mark Full Member


    :yesshake:
  9. NickNuke Full Member

    I consulted for a community bank and watched the level of CRA loans, and how they had to put compiance rules in to show how much they were lending to minority communities.

    They were terrified of being branded "racist", so, they took the risks, all in the name of "progressiveness".

    Look at the mess we have now.

    Hopefully, this "bailout" plan will be somewhat profitable for the U.S. They are saying that probably 70% of the loan portfolios will continue to perform, so, in essence if the gov't can get these at 70 cents or less on the dollar, it should be a push or profitable.

    But the basic moron on this site just continues to scream "It's a Wall Street bailout plan, man". What a bunch of idiots.
  10. NC-Stern-Mark Full Member

    I'm not for the bail-out. I want to see it all come crashing down.

    The sooner the better.
  11. NickNuke Full Member

    I bought my house in '95. I had to put at least 10% down to avoid PMI. LTV on the home at a very low appraisal. Also, had to conform to a 28% or lower loan/income ratio.

    3 years later, that was all gone. What the fuck happened. '97 was the starting point.

    This caused the housing boom, not the other way around. All of a sudden, there were millions of "qualified buyers" on the market.
  12. NickNuke Full Member

    Trust me, you don't. Any type of funding (car, college, home) will be next to impossible to get. This will cause a gigantic ripple.

    Jobs will be lost; Businesses will go under because of the lack of credit available.
  13. NickNuke Full Member

    Add an Obama presidency, and we will be completely and utterly fucked. Just more failed policies that caused this in the first place.
  14. liberal_loosh Full Member

    Quit hating America and listening to the liberal media.
    The economy is strong, and we are winning the WOT. We are winning, but we have not won yet. Our troops will NOT fail. President Obama will lead them to victory. Quit doubting the American soldiers. Quit doubting the American workers. USA is strong now and USA will become even stronger.
  15. Bigus Dickus Full Member

    I agree..lets not elect Clinton..fuck'em!!!!

    Ohh..wait..he isn't running for office is he?
  16. NickNuke Full Member

    You suck dick, don't you?
    • This user has been removed from public view.
  17. NickNuke Full Member

    Of course there are whites with subprime loans. I don't anyone disputes the fact that there are poor, ignorant white people who also have no concept in what they can afford. The same policy that comprimised lending standards made this available to everyone.

    I agree with you on McCain. He's a fucking liberal, but Obama will be a complete disaster. He'll throw gasoline on the fire, while McCain will just pull out his small, Irish pecker and piss on it. ;)
  18. Steakfor2for1 Full Member

    Good read, it is a shame that most of the American Public will blame this on Wall Street, when truly it was caused by a Socialist Program.
  19. liberal_loosh Full Member

    There are many brave gay soldiers fighting in Iraq for your freedom to say that to me.
    The soldiers do not care about gay or straight. The soldiers care about defeating the enemy.
    Our troops will defeat the enemy, whether you support them or not. You can hate, but I will be proudly waving the flag at the victory parade. USA!
  20. PattiRN Full Member

    THANK YOU for pointing this out.... it seems these pathetic loser Dems want to point fingers and blame Republicans now that the whole house of cards is crashing down all around us....when in reality, CLINTON in his infinite wisdom of "every 'Merican should be able to own a house" is the REAL reason for this whole fucked up mess. All the fingerpointers need to do is google Barney Frank or Chuck Schumer/congressional hearing soundbites from 2002-2007 re: Fannie/Freddie and the ramifications that they COULD hold with all this subprime crap......they are ON RECORD saying it's not a problem, it's all good...... it's UNbelievable. But you won't see that on the mainstream media....godforbid.....seeing the truth out there for the average dumbass to see.

    So, while fiscally responsible citizens such as my husband and I were paying our credit cards in full each month, and paying for our mortgage every month on time (imagine that) and owning our cars...... dumb-fucks who felt entitled to live our lifestyle, knowing full well that they couldn't afford it - and didn't care. And now, we're supposed to bail them out?! It's bullshit. Utter bull shit.
  21. NickNuke Full Member

    You're right, but I still ain't picking up anything in front of you.
  22. Greengoblin Full Member

    It's just easier to blame everything on Bush, rather than actually thinking about the roots of the problem.
  23. TedJ Full Member

    You are correct: McCain was part of the problem during the Clinton years and is more liberal than conservative.

    Only if the American voters had a choice of none of the above because McCain/Pallin suck as choices and so does Obama/Biden.

    Being a resident of Illinois, Obama has a do nothing record while in Congress. His only accomplishment has been kissing ass and not pissing people off.

    It's probably a time for a 3rd political party to shake up things with the democrats and republicans. Because quite frankly, I dont see things changing no matter who gets elected.
  24. NickNuke Full Member

    We need this bailout, though. We should not/cannot bail out BORROWERS. In essence, the government is BUYING these loans from banks, so that banks can get them off their books and resume (hopefully) HEALTHY lending practices.

    Without this, credit will dry up faster than a crack addict's lips. That will have long term affects on our economy and cause a massive ripple that will AFFECT EVERYONE. In the long view, this "bailout" (it's really not a bailout) will help both Wall Street and Main Street (I hate this fucking term)

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