The Democrats issue new Lending Regulations to address the Financial Crisis they Created

Posted by PITHOCRATES - January 13th, 2013

Week in Review

The subprime mortgage crisis is still a political football.  The Democrats are using the crisis to further regulate the financial markets.  Giving us the convoluted Dodd-Frank Wall Street Reform and Consumer Protection Act.  Financial reform.  For apparently there was no financial oversight of the financial markets up until now.  Despite Barney Frank being the Chairman of the House Financial Services Committee (2007-2011).  And Chris Dodd being the Chairman of the Senate Committee on Banking, Housing, and Urban Affairs (2007-2011).  Both of who were responsible for the oversight of Fannie Mae and Freddie Mac.  The GSEs at the center of the subprime mortgage crisis (see Mortgage lender rules released by Daniel Wagner, Associated Press, posted 1/10/2013 on The Washington Times).

In the wake of the national housing collapse that helped bring on the Great Recession, federal regulators for the first time are laying out rules aimed at ensuring that borrowers can afford to pay their mortgages.

The long-anticipated rules being unveiled Thursday by the Consumer Financial Protection Bureau impose a range of obligations and restrictions on lenders, including bans on the risky “interest-only” and “no documentation” loans that helped inflate the housing bubble…

CFPB Director Richard Cordray, in remarks prepared for an event Thursday, called the rules “the true essence of responsible lending…”

Mr. Cordray noted that in the years leading up to the 2008 financial crisis, consumers could easily obtain mortgages that they could not afford to repay.

So, prior to the Great Recession and the 2008 financial crisis we did not have responsible lending.  Which resulted in consumers obtaining mortgages they could not afford to repay.  Why?  Why were people getting mortgages they had no chance of repaying?  Who was responsible for that?  Well, as it turns out it was President Clinton.  Whose administration overhauled the Community Reinvestment Act (see New Study Finds CRA ‘Clearly’ Did Lead To Risky Lending by Paul Sperry posted 12/20/2012 on Investors.com)

Democrats and the media insist the Community Reinvestment Act, the anti-redlining law beefed up by President Clinton, had nothing to do with the subprime mortgage crisis and recession.

But a new study by the respected National Bureau of Economic Research finds, “Yes, it did. We find that adherence to that act led to riskier lending by banks.”

Added NBER: “There is a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam. Moreover, the effects are larger for loans made within CRA tracts,” or predominantly low-income and minority areas.

To satisfy CRA examiners, “flexible” lending by large banks rose an average 5% and those loans defaulted about 15% more often, the 43-page study found…

The strongest link between CRA lending and defaults took place in the runup to the crisis — 2004 to 2006 — when banks rapidly sold CRA mortgages for securitization by Fannie Mae and Freddie Mac and Wall Street.

CRA regulations are at the core of Fannie’s and Freddie’s so-called affordable housing mission. In the early 1990s, a Democrat Congress gave HUD the authority to set and enforce (through fines) CRA-grade loan quotas at Fannie and Freddie.

It passed a law requiring the government-backed agencies to “assist insured depository institutions to meet their obligations under the (CRA).” The goal was to help banks meet lending quotas by buying their CRA loans.

But they had to loosen underwriting standards to do it. And that’s what they did…

From 2001-2007, Fannie and Freddie bought roughly half of all CRA home loans, most carrying subprime features…

Housing analysts say the CRA is the central thread running through the subprime scandal — from banks and subprime lenders to Fannie and Freddie to even Wall Street firms that took most of the heat for the crisis…

While the 1977 law was passed 30 years before the crisis, it underwent a major overhaul just 10 years earlier. Starting in 1995, banks were measured on their use of innovative and flexible” lending standards, which included reduced down payments and credit requirements.

Banks that didn’t meet Clinton’s tough new numerical lending targets were denied merger plans, among other penalties. CRA shakedown groups like Acorn held hostage the merger plans of banks like Citibank and Washington Mutual until they pledged more loans to credit-poor minorities (see chart).

A Democrat Congress gave HUD the authority to set and enforce (through fines) CRA-grade loan quotas at Fannie and Freddie?  And Democrats say that Community Reinvestment Act had nothing to do with the 2008 financial crisis?  Funny.  Based on the historical record the Democrat Congress that forced lenders to loosen underwriting standards to meet those quotas are solely responsible for setting into motion the events that led to the 2008 financial crisis.  Not Wall Street.  Not the banks.  It was the Democrat Congress that empowered HUD to destroy good lending practices.  And they bear the responsibility for the 2008 financial crisis.  And the Great Recession.

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Bank fires Man 50 Years after his Crime of Stealing a Dime’s Worth of Stuff

Posted by PITHOCRATES - September 1st, 2012

Week in Review

It’s tough working for a bank these days (see Wells Fargo Fires Iowa Worker for Minor 1963 Crime by The Associated Press posted 8/28/2012 on Yahoo! Finance).

Wells Fargo Home Mortgage (WFC) has fired a Des Moines worker over a 1963 incident at a Laundromat involving a fake dime in the wake of new employment guidelines.

Wow.  Guess the Democrats are right about banks.  They’re just a bunch of evil, heartless bastards.  This was a crime intended to steal $0.10 of stuff almost 50 years ago.  As far as crimes go this one sounds more like a kid doing something stupid than a criminal acting with malice aforethought.  Yet these evil, heatless bastards fired the guy.  I’d like to hear their excuse for such an incomprehensible act.

Big banks have been firing low-level employees like Eggers since new federal banking employment guidelines were enacted in May 2011 and new mortgage employment guidelines took hold in February, the newspaper said. The tougher standards are meant to clear out executives and mid-level bank employees guilty of transactional crimes — such as identity theft and money laundering — but are being applied across the board because of possible fines for noncompliance.

Banks have fired thousands of workers nationally, said Natasha Buchanan, an attorney in Santa Ana, Calif., who has helped some of the workers regain their eligibility to be employed.

“Banks are afraid of the FDIC and the penalties they could face,” Buchanan said.

The regulatory rules forbid the employment of anyone convicted of a crime involving dishonesty, breach of trust or money laundering. Before the guidelines were changed, banks widely interpreted the rules to exclude minor traffic offenses and misdemeanors.

Oh.  It’s not the banks that are the evil, heartless bastards.  It’s our government.  Funny how they fire a man for trying to steal $0.10 approximately 50 years ago but Barney Frank and Chris Dodd get off scot-free after their part in facilitating the subprime mortgage crisis.  These men were responsible for the oversight of Fannie Mae and Freddie Mac.  And they said everything was fine even though Fannie and Freddie were buying all those toxic subprime mortgages and unloading them on unsuspecting investors.

Steal a dime’s worth of stuff 50 years ago lose your job.  Cause a worldwide financial meltdown bordering on a depression you go on your way whistling a happy tune.  Keeping your full retirement benefits.  Funny how that works.  Proving once again what Ronald Reagan said.  Government is not the answer to our problems.  Government is the problem.

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Barney Frank caused or allowed the Subprime Mortgage Crisis

Posted by PITHOCRATES - December 3rd, 2011

Week in Review

The worst financial crisis since the Great Depression happened under Barney Frank’s watch.  As did one of the worst housing bubbles.  And what exactly were Barney Frank’s responsibilities during these crises (see Barney Frank’s retirement: What it means for House Financial Services panel by Felicia Sonmez posted 11/28/2011 on The Washington Post)?

The news that Rep. Barney Frank will retire at the end of his term in 2012 sets off an internal scramble among Democrats to succeed the longtime Massachusetts lawmaker as the ranking member on the Financial Services Committee.

Since 2003, Frank has served as the top Democrat on the powerful 61-member panel, the second-largest of the House’s 20 standing committees. (Armed Services is the largest, with 62 members.) The committee has broad oversight over the banking, housing, insurance and securities sectors as well as over federal monetary policy and international finance.

Oh.  He was responsible for the Congressional oversight for the banking, housing (as in Fannie Mae and Freddie Mac), insurance and securities sectors.  Big responsibility.  And he did a piss-poor job.  As demonstrated by the reckless mortgage lending of the banking industry facilitated by Fannie and Freddie that caused the housing bubble that led to the subprime mortgage crisis.  Wow.  Rarely can we trace so much destruction back to one man.  And his punishment for ruining the American economy and so many people’s retirement?  Not a thing.  In fact, the guy who was so bad at financial oversight co-wrote the Dodd-Frank financial regulation legislation for better oversight.  Unbelievable.

Someone can climb over your fence with a ladder, put it up to the deck of your above the ground pool, ignore the ‘do not dive’ sign and dive into the shallow end of the pool.  And if this trespasser beaks his neck guess who gets in trouble?  The pool owner.  Because he didn’t secure that ‘attractive nuisance’ enough to prevent that accident from happening.  But Barney gets off scot-free.  How fair is this?  Not very.  But that’s life.  In the U.S. House of Representatives.

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Barney Frank can’t win Reelection because of Redistricting so he Retires

Posted by PITHOCRATES - December 3rd, 2011

Week in Review

Barney Frank shared something with Nancy Pelosi.  They had congressional districts that were so full of liberals that neither ever had to campaign for reelection.   Which says a lot considering barely 20% of the populace is liberal.  So you know they had some favorable district lines.  But, alas, for poor Barney the slam dunk is over.  The new district lines adds so many conservatives that it almost is representative of the population.  Which is approximately 40% conservative, 20% liberal and about 40% moderate and independents.  And without a stacked deck, there is no way Barney Frank can win an election (see Barney Frank, Top Liberal, Won’t Seek Re-election by ABBY GOODNOUGH posted 11/28/2011 on The New York Times).

Earlier in the day, Mr. Frank announced at a news conference that he had decided to retire at the end of next year after his Massachusetts district was recently redrawn and it became clear that he would have to fight harder than he wanted for re-election.

Even before this redistricting things were already looking down for Frank.  The architect of the subprime mortgage crisis (he and Chris Dodd were responsible for the Congressional oversight of Fannie Mae and Freddie Mac) had to fight last election.  For one of the first times in his life.  And he didn’t like it.  This time around would have been worse.  And he knew it.  He’d lose.  So he decided not to run.  For it’s one thing not having majority power.  Which is no fun.  But it’s a whole other thing to have to fight and scratch your way to the minority power.  Go through all of that for what?  Just to have someone tell you can’t do whatever the hell you want?  No sir.  This congressman will just take his toys and go home.

Now, Mr. Frank said, the notion that wrangling between Democrats and Republicans is “a competition between people of good will with different views on public policy” has vanished. For that, he blames Newt Gingrich, the former House speaker and current Republican presidential candidate with whom he has a tense history.

“Newt’s the single biggest factor in bringing about this change,” Mr. Frank said. “He got to Congress in ’78 and said, ‘We the Republicans are not going to be able to take over unless we demonize the Democrats.’ ”

You see, this is why no one likes Barney Frank.  He’s such an arrogant liar.  Demonize Democrats?  Who was that taking Newt Gingrich out of context, saying that he wanted to take seniors’ Medicare away so they could whither on the vine and die?  That was the Democrats.  Demonizing Newt Gingrich.  And the Republicans.

Bipartisan is a one-way street for Democrats.  When they’re in power there’s no need for bipartisan cooperation.  Because they’ll rule as they please despite any Republican opposition.  Because they won.  And elections have consequences.  But once they fall from majority power how they cry that Republicans aren’t playing nice.  By not letting the Democrats still set the agenda.

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2010 Midterm Election: The Good, the Bad and the Ugly

Posted by PITHOCRATES - November 3rd, 2010

Big Cities, Big Union and Big Government

If you look at a map of the House election results (provided by The Washington Post), you can see the two Americas.  What you see is a red map with small dabs of blue.  And where are those blue areas?  The Big Cities, the big colleges, the big unions and the big urban concentrations of poor and minorities.  And, of course, the liberal elite in and around the Big Cities.  In other words, where you find Big Union (manufacturing, trade unions, school teachers and government employees) and Big Government.  And it’s the dynamic between Big Union and Big Government that empower the liberal elite.   Big Union provides campaign money and foot soldiers for Big Government.  And Big Government rewards Big Union by favoring their small minority over the majority of Americans.  It’s a throwback to before our Founding when kings and nobles ruled nations.  Political power is devolving into fewer and fewer hands. Into those little dabs of blue.

To get a perspective of how bad and how oppressive this ruling minority elite has gotten, consider two races.  Two people nationally despised won their reelections.  Barney Frank, who is largely responsible for giving us the subprime mortgage crisis, won in liberal Massachusetts.  And Nancy Pelosi, who forced her liberal agenda on the American people against their wishes, won by a whopping 80% in San Francisco.  This is what the Founding Fathers meant when they spoke of the tyranny of the minority.  These two have caused great harm to the American people.  Yet they represent such a sliver of minority thought in this nation.  They could not win a national vote.  Yet they can destroy a nation by winning their local vote.

But it’s not all bad.  If you look at the map, you see a lot of red in once dominate blue areas.  New England is not completely blue anymore.  New York State isn’t as blue as New York City.  Pennsylvania, Ohio, Indiana, Illinois and Michigan are red outside of the Big Cities.  Chicago, in fact, is a small pocket of blue adrift in a sea of red.  And in Washington, Oregon and California, if you move in from the Big Money coast, you see mostly red.  More importantly, if you click on the governors tab in the map, you see change, too.  New York and California are blue, yes, but there’s more red than blue overall on that map.  Which gives one hope that the republic the Founding Fathers gave us is not yet dead.  It will be hard to gerrymander those congressional districts around the Big Cities to give such little, elitist, local voices a large national voice anymore.

It’s the Economy, Stupid.  Was, and still is.

So, outside of the blue Big Cities, what do we know?  Well, the exit polling told us what we already knew.  It’s the economy, stupid.  We’ve lost too many jobs.  And that’s what we want.  Jobs (see Exit poll: Economy the big dog for worried voters by Connie Cass, Associated Press, posted on Yahoo!

About a third of voters said their household suffered a job loss in the past two years.

And as we lost our jobs, we lost our homes (see Homeownership at lowest level in a decade by Alan Zibel, AP Real Estate Writer, posted on Yahoo! News). 

The nation’s homeownership rate is at the lowest level in more than a decade, hampered by a rise in foreclosures and weak demand for housing.

And while we lose our jobs and our homes, what is the president doing?  Going on vacation to an exclusive 5-star resort.  And it’s going to cost the American taxpayer a pretty penny (see US to spend $200 mn a day on Obama’s Mumbai visit posted by Press Trust of India. 

The US would be spending a whopping $200 million (Rs. 900 crore approx) per day on President Barack Obama’s visit to the city.

Does the royal family feel our pain?

Not only do they govern against our will, but they flaunt it in our faces.  We struggle because of the likes of Barack Obama, Barney Frank and Nancy Pelosi.  We lose our jobs and our homes (which is ironic considering we’re in this mess to begin with because of Washington’s policy to provide affordable housing to those who could not afford to buy a house).  And what does the ‘royal’ family do?  Go on vacation that will cost the taxpayers millions of dollars per day.  I guess they can’t feel our pain.  Or that they just don’t care.  So think back to last summer when you spent your family vacation in your backyard because money was tight.  And that team Obama will probably raise your taxes come January 1 to be ‘responsible’ to pay for their irresponsible spending.  Take solace in the fact that at least he could live large on your dime.  Even if you had to spend summer ‘staycation’ in your backyard.

As we proceed from the 2010 midterm elections, do not forget the dynamic between Big Government and Big Union.  It won’t be easy, but they’ll continue to try to help fund those under-funded union pension plans.  And they will point to the Republicans as obstructionists.  That they need to compromise.  Put partisanship behind us.  Especially now.  Since they lost the House of Representatives, the Left can’t be partisan anymore.  Like they have been the last two years.

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Big Government Business as Usual – Corruption and Failure

Posted by PITHOCRATES - October 23rd, 2010

With Representation We Don’t Need Violent Revolution to Change Our Government

Republican congressional candidate (Dallas’ 30th Congressional District) Stephen Broden is talking crazy talk.  Which is a real shame.  Among the things he has said include this (see Republican congressional candidate says violent overthrow of government is ‘on the table’ from The Dallas Morning News by Melanie Mason):

“If the government is not producing the results or has become destructive to the ends of our liberties, we have a right to get rid of that government and to get rid of it by any means necessary,” Broden said, adding the nation was founded on a violent revolt against Britain’s King George III.

While it is true that we did use violent revolution to get rid of the government of Great Britain, that was then.  This is now.  We have something our Founding Fathers didn’t.  Representation.

If we can’t vote a government out of office, we sure don’t want to overthrow it by violent revolution.  If you think we lack unity now, just wait until you throw violence into the mix.  Think of the 4 long years of the American Civil War that killed more Americans than all other of America’s wars combined.  Think of the French Revolution and how even Robespierre, the architect of The Reign of Terror, was trundled off to the guillotine.  Think about America’s 8-year Revolutionary War in the south where it devolved into a bloody civil war between Loyalist and Patriot, neighbor against neighbor, brother against brother.  This is how violent overthrows of government go.  No, we don’t want this.  Especially when we have the right to vote.

The problem we have is an educational one.  If we understood our history, if we understood economic fundamentals, there would be no frustration and talks of violent overthrow.  There would be no need.  We would already have won at the ballot box.

Barney Frank Steals from Us in a Roundabout Way

That said, one can understand people’s frustrations.  Because some politicians are just so blatant in their corruption.  Take Barney Frank (please).  He is one of the architects of the subprime mortgage crisis, TARP, bailouts and author of new financial regulation to prevent people like him from raping and pillaging the American people again.  And he’s Wall Street’s bitch (see Barney Frank rakes in $40G from bailed out banks by Dave Wedge writing in the Boston Herald).

Frank vowed in February 2009 that he wouldn’t accept campaign donations from banks that received money under the $700 billion Troubled Asset Relief Program (TARP) or political action committees tied to such institutions.

But Frank has hauled in thousands from top execs at Bank of America, Citizens Bank, Wainwright Bank, JP Morgan Chase and other institutions that received billions in TARP money.

It was Barney Frank’s push for affordable housing and his lack of oversight of Fannie Mae and Freddie Mac that gave us the subprime mortgage crisis.  But he protects Fannie Mae and Freddie Mac still.  And during the debate over the new finance regulation, he unloaded vitriol of the highest degree on Wall Street, blaming them for all our woes.  And here he is, taking money from the same people he attacked.  And bailed out.  How coincidental.  Do they come more corrupt?

The Chevy Volt is Yet Another Big Government Failure

And speaking of bailouts, how about that Government Motors?  The Obama administration attacked GM for making the wrong kind of cars.  And what were they selling?  Trucks and SUVs.  Which is what the people want.  But the Left hates trucks and SUVs so Obama took over this car company to build the ‘right’ kind of car.  And what did they come up with?  Not much (see Volt Fraud At Government Motors in an Investor’s Business Daily editorial).

It turns out that this electric car is rather silly.  You have to pay people to buy it.  It has a limited range.  And very average mileage.

The gasoline engine has been found to be more than a range-extender for the battery. Volt engineers are now admitting that when the vehicle’s lithium-ion battery pack runs down and at speeds near or above 70 mph, the Volt’s gasoline engine will directly drive the front wheels along with the electric motors. That’s not charging the battery — that’s driving the car.

So it’s not an all-electric car, but rather a pricey $41,000 hybrid that requires a taxpayer-funded $7,500 subsidy to get car shoppers to look at it. But gee, even despite the false advertising about the powertrain, isn’t a car that gets 230 miles per gallon of gas worth it?

We heard GM’s then-CEO Fritz Henderson claim the Volt would get 230 miles per gallon in city conditions. Popular Mechanics found the Volt to get about 37.5 mpg in city driving, and Motor Trend reports: “Without any plugging in, (a weeklong trip to Grandma’s house) should return fuel economy in the high 30s to low 40s.”

Again, further reason for all that frustration over government.  Henderson was the government’s man after Obama forced out Rick Wagoner.  And, surprise surprise, he lied.  Big Government poured millions of our tax dollars into this electric lemon.  But why?  We could have bought the same thing from Toyota for a heck of a lot less. 

Politics – The Art of Corruption

The moral of this lesson?  The only thing government is really good at is corruption.  And to be honest, we really don’t need any more of that.  So let’s just vote this election season.  And have a peaceful change of power.  The American way. 

If John Adams could peacefully hand over power to Thomas Jefferson, the people in Dallas’ 30th Congressional District have little to worry about Stephen Broden.  Let’s not forget that there were those on the Left who said George W. Bush would legalize rape and put all gay people into one state.  Well, he didn’t.  People say stupid things during the heat of an election.  We need to look past the crazy to their philosophical basis.  And whether or not we want Barney Frank to be the chairman of the House Financial Services Committee any longer.  For if there is one thing we’ve learned, you don’t want the fox guarding the hen house.  Not anymore.

We don’t need Barney Frank practicing his art anymore.  Or anyone else in Big Government.  The art of corruption had its run.  We need a new show in Washington.  Something new.  Something different.  Here’s a thought.  How about something honest?

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The Anatomy of a Subprime Mortgage Crisis

Posted by PITHOCRATES - October 17th, 2010

Old Time Politics – Buying Votes

There’s a lot of lying going on about the subprime mortgage crisis.  How it happened.  Who was responsible for it.  Was it the banks and their predatory lending?  That’s who Barney Frank blames.  Well, them and Republicans.  Or was it some more of that irrational exuberance that led to a real estate bubble?  It created a dot-com bubble in the 1990s.  Which in turn caused a recession.  Was it just a little history repeating itself?  Perhaps they both played a part.  But if they did, they were minor supporting roles.  They weren’t the star of the crisis.  For neither could have done anything had it not been for their enabler.

The Boston Globe’s Donovan Slack writes about one of the enablers backpedaling on his previous rosy statements about the two companies at ground zero of the crisis (see Stance on Fannie and Freddie dogs Frank on boston.com).  Fannie Mae.  And Freddie Mac.  Frank is running for reelection.  And his words are coming back to haunt him.

America is a center-right nation.  To counter that, the Left courts a coalition of special interests and single-issue voters.  Federal workers, teachers, unions, gays & lesbians, pro-choice feminists, environmentalists, socialists, minorities, etc.  Each taken by themselves is a very small percentage of the voting population.  But taken together it’s a sizeable percentage.  Then add in one more very important Democrat constituency.  The poor.  Now with all of these firmly in the Democrat’s camp, it’s just a matter of getting enough of the moderate and independent vote to win an election.  Of course, this is a moot point if they DON’T lock in the Democrat base.  And they do this by giving away as much free stuff and favorable legislation as possible. 

Give Me Your Tired, Your Poor, Your Huddled Masses Yearning for a House They Can’t Afford

The key to locking in the base is, of course, the poor.  There are a lot of them.  So the Left courts them.  Engages in class warfare.  They paint the Republicans as rich fat-cats who want to take their welfare, social security, food stamps, etc., away from them.  That they want to keep them in slums or throw them onto the street.  In contrast, they, the Democrats, want to provide for them.  To help them.  And they give them a lot of things.  To earn their gratitude.  And their votes at the election booth.  And the grandest of all the things given to them?  Affordable housing.

Poor people don’t have a lot of money.  That’s pretty straight forward but it needs to be said.  Because people who don’t have a lot of money can’t afford to buy a house.  Again, that’s pretty straight forward.  But it needs to be said.  Now, when these people apply for a mortgage and get denied, why do you think they got denied?  Here’s a hint.  Re-read this paragraph.  They get denied because they don’t have a lot of money.  You see, if you don’t have a lot of money, you can’t buy expensive things.  Again, straight forward.  But it needs to be said.  Again.  And often.

Now, what do you think a politician thinks the reason was for these poor people getting their mortgage applications denied?  Red-lining.  Racism.  Classism.  Unfairism.  (Yeah, that isn’t a word.  But it works.)  A large percentage of those denied mortgages are from the inner city poor.  And because of previous white-flight, that inner-city poor also happens to be primarily minority.  Hence the charges of racism.  And that’s just gold to a political party who needs poor minorities to vote for them.

The Siren Song of Affordable Housing

Now Barney Frank is running for reelection.  His Republican challenger is using Frank’s own words in his campaign.   And they’re causing some damage.  For Frank sat on the House’s Financial Services Committee (the oversight committee for Fannie Mae and Freddie Mac) throughout the time the crisis built.  And now he’s answering some very uncomfortable questions (this and all quotes are from Stance on Fannie and Freddie dogs Frank).

Frank, in his most detailed explanation to date about his actions, said in an interview he missed the warning signs because he was wearing ideological blinders. He said he had worried that Republican lawmakers and the Bush administration were going after Fannie and Freddie for their own ideological reasons and would curtail the lenders’ mission of providing affordable housing.

Ideology trumped responsibility.  The Left cries foul when the Right doesn’t reach across the aisle, but the Left never reaches out when they have power.  It’s us against them.  Pure partisanship.  Even when there’s great danger brewing.  It’s their interests first.  Then the country’s.  So he protected Freddie and Fannie.  And enabled them to cause greater harm.

Freddie and Fannie are in the secondary mortgage market.  They don’t write mortgages.  They guarantee them (so banks are more willing to take risks with less credit-worthy people).  And they buy these risky mortgages from the banks.  This further reduces a bank’s risk in approving very risky loans to people who are not credit-worthy.  Which is what the Democrats want.  More affordable housing for people who can’t afford to buy houses.  Frank’s committee sets the rules Freddie and Fannie must follow to keep them from approving mortgages that are crazy-stupid.  But that’s exactly what they encouraged.  Subprime loans.  Adjustable Rate Mortgages (ARMs).  Interest only mortgages.  No documentation approvals.  Any bank that didn’t have enough of these mortgages on their books (i.e., risky loans to poor people who couldn’t afford to buy houses) was in trouble.  The federal government would investigate them for red-lining, racism, classism, etc.

The more mortgages Freddie and Fannie bought, the more cash banks had to make more risky loans.  They then dumped these risky loans onto Wall Street.  You see, before the day of subprime loans, ARMs, interest only mortgages and no documentation approvals, mortgages were very safe loans.  But these subprime loans weren’t.  But they looked safe when Wall Street sold them.  I mean, buyers didn’t see the mortgage applications.  They had no idea what a credit risk these people were.  They just knew mortgages were traditionally safe investments.  So they just bought them.  And Freddie and Fannie made it all possible.

Known as government-sponsored enterprises, they didn’t provide mortgages themselves, but rather bought loans from banks and mortgage brokers, freeing up cash so the lenders could make more loans. Fannie and Freddie held or bundled the loans and sold them to investors as mortgage-backed securities.

Investors bought these very ‘profitable’ securities.  This demand just fueled the crisis in waiting.  Because Freddie and Fannie could dump these on Wall Street, they wrote more and more risky loans.  This made everyone happy.  Everyone was making money.  And more people who couldn’t afford to buy houses were buying houses.  And this was, after all, Freddie and Fannie’s mission.  Affordable housing.

In an effort to increase homeownership, the Clinton administration in the late 1990s and the Bush administration in the 2000s pushed Fannie and Freddie to meet growing quotas for buying affordable home loans. Those pushes, combined with a drive for more profits at the enterprises, drove Fannie and Freddie to take on more risk and more debt. They backed subprime and other risky loans, including mortgages for borrowers without proof of steady income.

Even the Republicans got on the band wagon.  New homes sales drive the economy (because of the stuff people have to buy to put into those houses that they can’t afford).  And you make points with the poor and the minorities.  There was just no down side in affordable housing.  Or was there?

But the director of the federal office responsible for overseeing Fannie and Freddie, Armando Falcon, began noticing their expanding portfolios and increasing reliance on risky investments. In early 2003, Falcon warned Congress in a 118-page report of the companies’ potential for a catastrophic failure that could jeopardize the economy.

Okay.  Five years before the crash someone was taking notice.  And he warned Congress.  Thank god someone was looking out for America’s best interests.

But Frank and other Democrats still opposed tighter regulation, Frank most notably in his public statements saying there was nothing wrong with Fannie and Freddie. He and other House Democrats also sent a letter to President George W. Bush in June 2004, saying the proposed crackdown could “weaken affordable housing performance . . . by emphasizing only safety and soundness.’’

Frank and the Democrats were saying that it was more important to put people who couldn’t afford houses into houses than it was to provide oversight.

So he initially supported a Republican measure in 2005 that would have imposed stricter standards on the lenders. But he voted against it in the full chamber because it did not include funding for affordable housing, he said. The bill passed the House.

Frank came around.  He supported a Republican measure to provide stricter oversight.  But he changed his mind.  Once again, affordable housing was more important than the oversight he was supposed to provide.  Then, in the summer of 2008, Treasury Secretary Henry Paulson warned Frank again.  Now Frank chaired the House’s Financial Services Committee.  Now, more than ever, it was his responsibility to reign in Freddie and Fannie.  To provide the oversight that was his committee’s responsibility.  But he still didn’t.  Like Nero, he fiddled as the crisis burned out of control.

In July 2008, then-Treasury Secretary Henry Paulson called Frank and told him the government would need to spend “billions of taxpayer dollars to backstop the institutions from catastrophic failure,’’ according to Paulson’s recent book. Frank, despite that conversation, appeared on national television two days later and said the companies were “fundamentally sound, not in danger of going under.’’

A few months later, Freddie and Fannie would cause the worst recession since the Great Depression.  On Frank’s watch.  And he kept denying that there was any problem until the very end.

Lots of Blame to Go Around – On the Left Side of the Aisle

Barney Frank is not the sole cause of the subprime mortgage crisis.  He was just one of the leading players.  Ultimately, it was an ideology.  Affordable housing.  Putting people into houses who couldn’t afford to buy houses.  This is what caused the worst recession since the Great Depression.  And, yes, the Bush administration did partake in the affordable housing mania.  But if you want to assign real responsibility, ask yourself this question.  Which party do you think of when it comes to affordable housing for the poor and minorities?

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LESSONS LEARNED #9: “Liberal politicians have more fun because their licentious behavior is more readily forgiven.” -Old Pithy

Posted by PITHOCRATES - April 15th, 2010

THOSE WHO LIVE in glass houses shouldn’t through stones.  And as far as the Democrats are concerned, the Republicans live in glass houses.  Especially those associated with the Religious Right.  They don’t like these people.  At all.

The Left likes to bring the fun in.  The Right tries to keep it out.  Since the sixties, the Left has been liberalizing their behavior.  Drugs and free love came from the sixties.  And the uptight, sexually repressed Right has been dogging them ever since.  The Right will point at the rise in crime rates and venereal diseases this liberalization gave us.  The Left will then say something derogatory about Ronald Reagan and call your mother a whore.

So there’s a little animosity between the Left and the Right.  The Left doesn’t like moral crusaders.  The Right doesn’t like Sodom and Gomorrah.  And when someone on the Right is caught doing something they say the Left shouldn’t be doing, look out.  It’s payback time.  And payback is a bitch.  Especially if you dwell in a glass house.

BARNEY FRANK ADMITTED to paying a male prostitute for sex.  He later hired this man as a personal assistant.  While Frank was away, his assistant may have used Frank’s apartment to see clients while plying his trade. 

Frank wrote letters to his assistant’s parole board (he had a record).  He fixed some parking tickets, too.   The House reprimanded him for that.  But he remained in office.  There were those who tried to censure him and expel him from the House.  That didn’t happen.  Ethics-wise, it just wasn’t that big of a deal.  I mean, paying for sex.  Who hasn’t done that?  And fixing a parking ticket or two.  In Washington?  Come on.  It’s Washington.

One Republican was especially earnest in trying to remove Frank from office.  Larry Craig. 

FAST FORWARD A couple of decades.  Larry Craig was in an airport men’s room.   There had been complaints about gay men using the public toilets to hook up with each other to have sex.  This is not something you necessarily want to be around when you take your son into the men’s room.  Hence the complaints.  So there Craig was, apparently using the signals to initiate a hook-up.  And the guy on the next toilet turns out to be a cop.

Now, instead of compassion for a man struggling with his sexuality (if in fact he was trying to engage in homosexual behavior), there was no love shown to Craig.  Even within his own party.  They gave him a choice.  Either resign.  Or resign.  Which he did.  Then he changed his mind.  He finished his term but didn’t run for reelection.  His political career was over.  Lewd behavior with a consenting adult (albeit in an inappropriate place) is apparently worse than buying sex from a prostitute.  And worse than fixing tickets.  At least, as far as Congress is concerned.

Instead of embracing him for letting loose and exploring his sexuality, the Left pilloried him.  Called him a hypocrite.  Didn’t care about the turmoil of emotions he was feeling.  Gay or not he was a bad man.  They remembered his role in the Barney Frank affair.  And it was time for a little payback.

BARNEY FRANK ENTERED into a relationship with Herb Moses.  It lasted approximately from 1987 until 1998.  This is interesting.  Do you know where Moses worked from 1991 until 1998?  I’ll give you a hint.  Think subprime mortgage crisis.

Moses was an executive at Fannie Mae.  Guess what he did there.  He worked on programs to help credit-challenged people buy new homes.  Now guess what Barney Frank was doing during this time.  He worked on the House Banking Committee.   It was his committee’s job to keep Fannie Mae (and Freddie Mac) from doing anything stupid.  But he didn’t.  Frank pushed to loosen regulations.  In fact, he fought against Republican attempts to strengthen regulations on Fannie and Freddie.

Now, we can’t be certain what was happening between Frank and Moses.  But we do know this.  During their relationship, Fannie Mae prospered.  They did this by growth.  Much of that growth came from the subprime mortgage business.  Despite high default percentages, Congress allowed Fannie and Freddie to buy riskier mortgages.  The Frank-Moses relationship ended in 1998, a few months AFTER Moses left Fannie Mae.  The cause of the financial meltdown in 2008 resulted from all those high-risk subprime loans that Frank and Moses made possible in the previous decade.

Some would say it would be reckless and irresponsible to draw any conclusions from this.  Others would say, “What are you?  Blind?”

FEW DISPUTE THAT Fannie and Freddie caused the financial crash.  But few blamed Frank.  And Frank blamed Republicans.  And Wall Street.  No one questioned Frank’s actions on the House Banking Committee.  No one questioned the very obvious conflict of interest between the legislator writing the law and the Fannie Mae executive profiting from the law.  No ethics investigation.  Why?

That’s easy.  Just ask yourself this.  What do you think would have happened if Larry Craig had played the role of Barney Frank?

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