Posted on 10/03/2008 2:15:46 AM PDT by woofie
Housing prices would never have risen so high without multiple Washington mistakes. Many believe that wild greed and market failure led us into this sorry mess. According to that narrative, investors in search of higher yields bought novel securities that bundled loans made to high-risk borrowers. Banks issued these loans because they could sell them to hungry investors. It was a giant Ponzi scheme that only worked as long as housing prices were on the rise. But housing prices were the result of a speculative mania. Once the bubble burst, too many borrowers had negative equity, and the system collapsed.
Part of this story is true. The fall in housing prices did lead to a sudden increase in defaults that reduced the value of mortgage-backed securities. What's missing is the role politicians and policy makers played in creating artificially high housing prices, and artificially reducing the danger of extremely risky assets.
Beginning in 1992, Congress pushed Fannie Mae and Freddie Mac to increase their purchases of mortgages going to low and moderate income borrowers. For 1996, the Department of Housing and Urban Development (HUD) gave Fannie and Freddie an explicit target -- 42% of their mortgage financing had to go to borrowers with income below the median in their area. The target increased to 50% in 2000 and 52% in 2005.
For 1996, HUD required that 12% of all mortgage purchases by Fannie and Freddie be "special affordable" loans, typically to borrowers with income less than 60% of their area's median income. That number was increased to 20% in 2000 and 22% in 2005. The 2008 goal was to be 28%. Between 2000 and 2005, Fannie and Freddie met those goals every year, funding hundreds of billions of dollars worth of loans, many of them subprime and adjustable-rate loans, ...
(Excerpt) Read more at online.wsj.com ...
Palin and McCaine need to repeat this every chance they get
It will take a generation, maybe more, to re-educate people about what this country is supposed to be, and what our government is supposed to be doing.
It will take a complete collapse and a depression to drive the idea into people's skulls that we can't just keep kicking our financial responsibilities down the road.
I wish McCain would jump on the dem’s complicity in the housing failure. Perhaps he doesn’t want to blame the clintons who seem to be sitting out this race.
http://www.youtube.com/watch?v=bijtBkKQwY8
Barney the Frank on Oreilly. Bill beats the %#*@ out of him.
Very true. Flood the market with easy money, and of course you're going to create a demand that the seller is going to capitalize on by increasing the price. But the value remains the same, and suddenly it's come back to bite us. The whole thing was a classic bubble.
Just watched the clip. While I think Frank was in this up to his ears and bears a great deal of responsibility for the problem, I also thought BOR was out of line in “discussing” it.
I’d like to see someone who will let the Democrats say their piece, and THEN rebut them line by line and refuse to back down. Don’t do it while they are talking. Give them their say and then shred them. Just yelling and bullying will not win points except with those who are already highly biased. You need to win with the undecideds and those people will be turned off by the yelling and bullying. I work with a leftwing guy who uses the same bullying tactics and when he gets going I just tune him out. It’s no prettier and no more effective on the right.
bump
bump again
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