Skip to comments.A Brief History of the Freddie Mac/Fannie Mae Debacle
Posted on 09/17/2008 9:50:32 AM PDT by fightinJAG
These threads need to be highlighted and all in one place:
Pelosi Orders Wall Street Probe.
Bush Administration Recommended Overhaul of Freddie Mac and Fannie Mae in 2003.
McCain's 2005 Statement on Federal Housing Enterprise Regulatory Reform Act.
When I was young, jobs grown-ups had were doctors, plumbers, lawyers, dentists, stock brokers and so on. I had never heard of Community Organizer until this Presidential season. How does a Community Organizer get paid? How is this work relevant to current financial conditions?
The present subprime financial strains have as its genesis the policies promoted in the Community Reinvestment Act (CRA), compliance with which is a prerequisite for financial institution innovation. The CRA requires the [A]ppropriate Federal financial supervisory agency to assess a financial institutions record of [m]eeting the credit needs of its entire community, including low- and moderate-income neighborhoods 12 U.S.C. § 2903. The supervising agency then, [S]hall prepare a written evaluation of the institutions record of meeting the credit needs of its entire community, including low-and moderate-income neighborhoods. 12 U.S.C. § 2906(a)(1). In this report, it assigns a rating of: outstanding; satisfactory; needs to improve; or substantial noncompliance. 12 U.S.C. 2906(b)(2).
Under the regulatory scheme, the FDIC assesses the CRA performance of a bank based upon lending, investment, and service tests. 12 CFR § 345.24(a)(1). The FDIC evaluates the performance of a bank in predetermined assessment areas. 12 C.F.R. § 345.41. The FDIC takes into account any views expressed by interested parties in considering CRA performance. 12 C.F.R. § 345.29(c).
Alternatively, financial institutions may submit a strategic plan. 12 C.F.R. § 345.27. As part of this submission, [A] bank shall [i]nformally seek suggestions from members of the public in its assessment area(s) covered by the plan while developing the plan. 12 C.F.R. § 345.27(d)(1).
Gramm-Leach-Bliley Financial Services Modernization Act, passed in 1999, makes the CRA ratings assigned by a supervising authority of critical importance to financial institutions. One of the reforms under Gramm-Leach-Bliley is the repeal of the depression era Glass-Steagall Act , which prohibited combining insurance and securities companies. However, under Gramm-Leach-Bliley, regulators may withhold authorization for a financial institution to enter into new lines of business, based upon its CRA ratings.
Thus, multi-billion dollar transactions may rise or fall based upon the input of community organizations. For example, Bruce Marks of the Neighborhood Assistance Corporation of America won loan commitments totaling $3.8 billion from Bank of America, First Union Corporation, and the Fleet Financial Group in one city - Boston.
To move from the abstract to the concrete, we can look to, for example, a Sept. 20, 2004 press release, Citigroup and ACORN Sign Groundbreaking Agreement to Expand Access to Financial Services in Communities Around the Country. There Citibank touted that it and Association of Community Organizations for Reform Now (ACORN) agreed to collaborate on several initiatives, including:
Form an affordable mortgage-lending program between Citigroup and ACORN Housing Corp. (AHC) to develop a specialized mortgage product for all AHCs homeownership centers, and make mortgages available to immigrants who have previously been shut out of credit markets. *** Focus on community development lending to increase affordable housing in areas where the Citibank Community Development and ACORN footprints coincide. Provide borrowers with access to the best combination of loan product, price, service, and attributes. Establish a net-benefit test for real estate secured loans.
We now call real estate secured loans issued in compliance with these programs, Subprime.
Barak Obama has had an intimate and long-term association with ACORN. Acorns Madeleine Talbot first drew Mr. Obama into his alliance with ACORN. Toni Foulkes, a Chicago Acorn leader, has described that it specifically sought out Mr. Obamas representation in a case it filed seeking to force the State of Illinois to comply with motor voter requirements. Mr. Foulkes likewise makes it clear that Mr. Obamas post-law school role organizing Project VOTE in 1992 was undertaken in direct partnership with ACORN. Likewise, Mr. Obamas volunteered his services yearly a key figure in Acorns leadership-training seminars. Furthermore, Obamas service on the boards of Woods Fund and the Joyce Foundation allowed him to help direct tens of millions of dollars in grants to various liberal organizations, including Chicago Acorn, whose endorsement Obama sought and won in his State Senate race.
So, the Community Reinvestment Act seeks input from Community Organizers like ACORN in rating financial institutions on their compliance in issuing subprime loans. Without satisfying Community Organizers, financial institutions cannot escape depression era restrictions on innovation. What is the price of this satisfaction? Today it seems to be the federal bailout of Fannie Mae and Freddie Mac, at the cost of billions of taxpayer dollars.
all these people are clinton appointees who run this thing.
Here is one:
OBAMA ADVISOR FRANKIN RAINES IGNORED FANNIE MAE ACCOUNTING WARNINGS AS EARLY AS 2002
Long article (from 2005), but a lot of history:
The Fall of Fannie Mae
This is not your ordinary accounting fraud. Yes, there’s the matter of $9 billion in overstated earnings. But the fight over Fannie is a nasty political showdown where everyone has his own agenda. And it’s not over yet.
By BETHANY MCLEAN
January 24, 2005
' First of all, government sponsored corporations that help create our mortgage system -- I introduced two of the leaders here today -- they call those people Fannie May and Freddie Mac, as well as the federal home loan banks, will increase their commitment to minority markets by more than $440 billion. (Applause.) I want to thank Leland and Franklin for that commitment. It's a commitment that conforms to their charters, as well, and also conforms to their hearts. This means they will purchase more loans made by banks after Americans, Hispanics and other minorities, which will encourage homeownership. Freddie Mac will launch 25 initiatives to eliminate homeownership barriers. Under one of these, consumers with poor credit will be able to get a mortgage with an interest rate that automatically goes down after a period of consistent payments. (Applause.) Fannie Mae will establish 100 partnerships with faith-based organizations that will provide home buyer education and help increase homeownership for their congregations. I love the partnership. (Applause.)'
This isn't D vs. R. But US vs. the Gov't.
Bookmarking. Thanks everyone.
It is idiocy to think that simply letting people that have no history of living within their income to be provided a loan for a home, is absurd. When histories are checked ... it will be in the majority to find, the loans made were to people that moved frequently because they couldn't make their rent when due.
No savings, perhaps even applicants and receivers of food stamps and other helps for paying utilities, etc.
This is true of many/most that are driving new, big shiny pick up trucks,etc., They have cell phones (2 or 3 or more in the family), which is great if you can feed and cloth your family. It is a recipe for failure to move those who have not learned to manage their money into a new home. Even a habitat for humanity home.
They do not know how to live within their means. Paid on Friday evening, eating most all meals out at fast food restaurants, drinking beer to reward themselves for all the hard work they did, buy lottery tickets ($50.00 or more) every week or gamble in some other form etc.. Not all... Not all...; but this is true of thousands of the loan participants. They can't come up with the payments. They have nothing invested, but other peoples money. They walk away
And will do it again in some other form. It is a way of thinking. Understandable thinking for illegals coming here with little formal education. They work hard, paid usually in cash,(no taxes) learn how to work the system here, free medical, schooling, emergency room care, shots, churches that will provide aid in many forms. etc. We are the ones to blame for this folly. We accept this as okay. Like the President said awhile back "They have come here for a better way of life. How can we fault that?"
There was a long article with link posted in FR that traced the FANNIE Mae problem back to the days of Clinton’s Sec of Housing, Cuomo.
This was when the Dems wanted everyone in the country to be eligible for a loan to buy a house.
- Clinton administration’s White House Budget Director Franklin Raines ran Fannie Mae Raines and obtained $90,128,761 in compensation from 1998 to 2003. Of this amount, $52,815,708 was derived from components tied to attaining EPS goals. Raines is due more than $1 million annually for life.
- CFO Timothy Howard (D) received $30,155,029 in compensation from 1998 to 2003.
- Jamie Gorelick, Clinton Justice Department official,remember the wall of separation that denied agencies to share intelligence on terrorists, worked for Fannie and received $26,466,834 in compensation from 1998 to 2003.
- Executive Vice President Robert Levin received $26,418,623 in compensation from 1998 to 2003.
- Richard Syron, the CEO of Freddie Mac, is getting $14.1 million.
- Democrat Jim Johnson, recently on Obama’s VP search committee, has hauled in millions from his Fannie Mae CEO job.
Barack Obama: No. 2 on the Fannie/Freddie list of favored politicians.
Obama`s campaign is littered with the like-minded:
- Penny Pritzker, Obama’s national finance chair was, with her family, the half owner of Superior Bank, which was shut down in 2001 by the FDIC after it had lost nearly all of its more than $2 billion of assets on bad loans to high-risk borrowers.
- Valerie Jarrett,Obama advisor, a former political operative for Mayor Richard M. Daley, and the CEO of a housing and development company based in Chicago with ties to Obama going back to his Illinois legislature days.
Ping....I wonder why the MSM isn’t connecting and reporting the dots....
some of us have been trying to put links to all FannieGate posts here:
I read that the troubled former Fannie Mae CEO, Franklin Raines, is one of Obambi’s top economic advisers.
I’ll look for a link for that.
Thanks-—I was just looking for something on the Raines/Obambi connection.
What a great “advisor.”
Man, there has to be a drumbeat started on this one.
Somebody named Dan Mitchell was on Fox tonight yammering about how it was “both” parties that created this debacle.
There’s some truth to that. But it is also true that, more often than not, it is the Rat party whose fingerprints are on the really egregious stunts that lead to crises such as this one.
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