Skip to comments.'Crony' Capitalism Is Root Cause Of Fannie And Freddie Troubles
Posted on 09/22/2008 6:05:29 PM PDT by Kaslin
In the past couple of weeks, as the financial crisis has intensified, a new talking point has emerged from the Democrats in Congress: This is all a "crisis of capitalism," in socialist financier George Soros' phrase, and a failure to regulate our markets sufficiently.
Well, those critics may be right it is a crisis of capitalism. A crisis of politically driven crony capitalism, to be precise.
Indeed, Democrats have so effectively mastered crony capitalism as a governing strategy that they've convinced many in the media and the public that they had nothing whatsoever to do with our current financial woes.
Barack Obama has repeatedly blasted "Bush-McCain" economic policies as the cause, as if the two were joined at the hip.
Funny, because over the past 8 years, those who tried to fix Fannie Mae and Freddie Mac the trigger for today's widespread global financial meltdown were stymied repeatedly by congressional Democrats.
This wasn't an accident. Though some key Republicans deserve blame as well, it was a concerted Democratic effort that made reform of Fannie and Freddie impossible.
The reason for this is simple: Fannie and Freddie became massive providers both of reliable votes among grateful low-income homeowners, and of massive giving to the Democratic Party by grateful investment bankers, both at the two government-sponsored enterprises and on Wall Street.
The result: A huge taxpayer rescue that at last estimate is approaching $700 billion but may go even higher.
It all started, innocently enough, in 1994 with President Clinton's rewrite of the Carter-era Community Reinvestment Act.
Ostensibly intended to help deserving minority families afford homes a noble idea it instead led to a reckless surge in mortgage lending that has pushed our financial system to the brink of chaos.
(Excerpt) Read more at ibdeditorials.com ...
Where are the calls for an investigation from our congress critters?
The New Media is finally learning how to voice this issue with punch.
I think that’s supposed to be Obama communism and socialism
As of now, 799 stocks cannot be shorted. Stocks that I own are not in that group and continued down today, all the while the ones which were bailed out rallied again, even though they have junk oon their books. And the best part? I am paying for it.
It is beyond crony capitaism.....it is rewarding failure.
Wow.. somebofy gets it..
Never confuse capitalism with criminality. Socialists/collectivists/criminals in government (and yes sometimes business...and yes on the street) are the root cause of every problem.
sorry, should read “free market capotalism”
can’t stand “brilliant” liberals. they have relatives and friends in the policy-making business and they make money on inside information and then call themselves brilliant and elite. really can’t stand them. they’ve distorted everything and turned the whole system inside out for their own economic well-being. (bunch of low-life scu&bags.)
Amazing what you can say when you have absolutely no moral inhibition against lying your a&& off.
They need to be doing the perp walk.
Funny, because over the past 8 years, those who tried to fix Fannie Mae and Freddie Mac — the trigger for today's widespread global financial meltdown — were stymied repeatedly by congressional Democrats.
This wasn't an accident. Though some key Republicans deserve blame as well, it was a concerted Democratic effort that made reform of Fannie and Freddie impossible."
Bush pushed for the subprime mortgages just as hard as anyone else.
Prior to HERA, the Secretary of HUD was the mission regulator for the GSEs, with oversight authority to ensure that both GSEs complied with the public purposes set forth in their charters. HUD had general regulatory authority for oversight responsibilities, which included establishing housing goals; monitoring and enforcing compliance with housing goals; new program approval; collecting loan-level data from the GSEs on their mortgage purchase activities; making available to the public a database on non-proprietary GSE loan purchase data; and ensuring GSE compliance with fair lending requirements.From here.
But by 2004, when HUD next revised the goals, Freddie and Fannie's purchases of subprime-backed securities had risen tenfold. Foreclosure rates also were rising.
That year, President Bush's HUD ratcheted up the main affordable-housing goal over the next four years, from 50 percent to 56 percent. John C. Weicher, then an assistant HUD secretary, said the institutions lagged behind even the private market and "must do more."
Bush increased the percentage of sub prime lending required from Fannie and Freddie "each (Clinton and Bush) trying to lay claim to a record percentage of homeowners" here)
There is no question that the problems were created by HUD. Oh, by the way the HUD Secretaries under Bush? Mel Martinez and Alphonso Jackson. Both Bush cronies.
Maybe this is why Bush is pushing just as hard as the dems in using your and my money to bail out Fannie and Freddie.
Go to this thread and read the links.
When HUD released the next set of goals in 2004, it reported that after Cuomo's previous edict, there had been a sudden spurt of GSE subprime investment, "partly in response to higher affordable-housing goals set by HUD in 2000." Fannie had gone from $1.2 billion in subprime-mortgage and securities purchases in 2000 to $9.2 billion in 2001 and $15 billion in 2002. Freddie's numbers were murkier, but clearly also on the rise. In 2003 alone, the two bought $81 billion in subprime securitieswhich also count against the goals.
That was during Martinez's tenure.
Martinez's successor, Alphonso Jackson, ended up being just as scandalous by receiving sub rate loans from Countrywide.
The whole department appears to be incestuous. Also, note that Martinez and Jackson are both minorities. Did that play a role in their relaxing the loan requirements for Fannie and Freddie? They were obviously put there to appease the minority factions of the U.S.
The whole HUD is corrupt, in my opinion. It's intent has been corrupted by years of abuse and lack of oversight.
I realize a lot of people are trying to deflect blame from Bush but a lot of this stuff happened on his watch under Martinez and Jackson. While I don't expect Bush to be able to monitor every facet of the U.S. govt., he kept putting cronies in charge. They either abused their standing with him or he was too naive to see what they were doing.
In this case, pushing home ownership, these two cronies were doing what Bush expected; pushing ownership to make his administration look good.
Washington D.C. is corrupt from bottom to top. I no longer have any trust in the U.S. govt. As far as I am concerned they can flush the toiled called Congress and start over.
My biggest fear about Palin is that if elected, she spends four or even eight years under the spell of McCain and succumbs to the endless abuse from the MSM and the devil's spawn called democrats thus turning her into another politician to be castigated. I will pray that doesn't happen.
This is why we need to clean up the District of Corruption.
Our lives depend on it.
Pray for W, McCuda and Our Troops
Democrats are the Root Cause of Fredie and Fannie Troubles.
There, fixed it.
Say it often, Say it loud. It’s the truth.
And call your Congressional reps tomorrow and tell them no bailoit with your money—it’s your Posterity they’re flushing down the grain here.
Your posterior, too.
Is that "Truman Capotalism"?
Upping the amount of sub-prime mortgages that are backed by Fannie and Freddie doesn’t make it cronyism, and it is not the root cause of the chaos. The root cause of the chaos is that mortages were made that should never have been made, and were then packaged up with good loans and sold as investment securities; essentially passing the buck into the entire financial system.
A sub-prime mortage is generally one that has less than 20% down. There’s really nothing wrong with that. In fact, I put 5% down and have one backed by Fannie myself. The difference between what has been going on recently from what happened when I got mine ten years ago is that the lender crawled up my rear with a fine-toothed comb. They wanted to know everything about where my money came from for several years prior and they contacted all my references. From what I hear, people who make 35k/yr, if that, somehow qualified for $1M mortages in recent years, sometimes without even so much as a check of ID. The reason they could do this is because whomever made the loan could package it up and pocket a tidy profit by offloading the risk onto someone else. And it wasn’t just Fannie and Freddie that bought, it was all of them (some more than others, like Bear). That’s why it’s been such a hammer especially on investment banks.
The thing about this is that loans like these were allowed to be made in the first place and to get mixed in with everything else to where no one really knew what they were buying. We put warning lables on nearly everything, but there weren’t any required for this. If there is such a requirement, it clearly wasn’t enforced.
It is rather breathtaking to hear Obama, Barney Frank, Chris Dodd and others pontificate so loudly and self-righteously about problems they themselves engineered and profited from. For they know the media will not ask any relevant questions and the public will not hold them accountable. The Fannie Mae and Freddie Mac corruption/crisis is thousands of times bigger than anything Haliburton might have done, and the mainstream media are completely covering it up. It is like if someone robbed a bank, is caught in the act, and then the robber demands to be handed the key to the bank, and the bank gives the robber the key and transfers ownership to him!