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.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

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.

www.PITHOCRATES.com

Share

Tags: , , , , , , ,

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.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , ,

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.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,