Skip to comments.Government warned of mortgage meltdown
Posted on 12/01/2008 7:55:38 PM PST by abt87
WASHINGTON (AP) -- The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.
"Expect fallout, expect foreclosures, expect horror stories," California mortgage lender Paris Welch wrote to U.S. regulators in January 2006, about one year before the housing implosion cost her a job.
Bowing to aggressive lobbying -- along with assurances from banks that the troubled mortgages were OK -- regulators delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone and the meltdown was under way.
(Excerpt) Read more at money.cnn.com ...
This is through AP. Remember not to believe anything from AP, because they twist everything against republicans.
AP - rewriting history one story at a time.
Its all Bush’s fault!
Truth is that Dems and Reps dropped the ball here, But GWB and McCain actually tried to do something about it before it happened.
Maybe it was all an act to avoid the appearance of impropriety and both party’s are screwing us.
Louis Gohmert(I voted for him) has it best. Lets take the remaining 350 bil bailout and give it to the people as a tax break (give us our money back) Why put us on the line to pay dipshits that drove their company’s into the ground though mismanagement?
Why reward bad behavior?
Don’t Blame Bush For Subprime Mess
By INVESTOR’S BUSINESS DAILY | Posted Monday, December 01, 2008 4:20 PM PT
Housing Crisis: A new report from the Associated Press claims that the mortgage meltdown is due largely to President Bush’s failure to act in 2005. Sounds plausible until you actually look at the facts.
IBD Exclusive Series: What Caused The Loan Crisis? http://www.ibdeditorials.com/series11.aspx
“Under pressure, U.S. eased lending rules,” reads the AP special report’s headline. But “U.S.” is really a misnomer. The news service really means “Bush.”
“The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed,” the report asserts.
The report goes on to catalog what it says are Bush’s crimes. Namely, that his administration bowed to “aggressive lobbying” by banks and delayed doing anything for a year. This, says the AP, is “emblematic of a philosophy that trusted market forces and discounted the need for government intervention in the economy.”
All utterly wrong.
Here at IBD, we’ve done more than a dozen pieces most recently, in yesterday’s paper detailing how rewrites of the Community Reinvestment Act in 1995 under President Clinton, along with major regulatory changes pushed by the White House in the late 1990s, created the boom in subprime lending, the surge in exotic and highly risky mortgage-backed securities, and the housing boom whose government-fed excesses led to inevitable collapse.
Despite this clear record, we’re now besieged by enterprising journalists blaming Republican “deregulation” or the president’s failure to recognize the seriousness of the problem or act. But these claims fall apart, as a partial history of the last decade shows.
Bush’s first budget, written in 2001 seven years ago called runaway subprime lending by the government-sponsored enterprises Fannie Mae and Freddie Mac “a potential problem” and warned of “strong repercussions in financial markets.”
In 2003, Bush’s Treasury secretary, John Snow, proposed what the New York Times called “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.” Did Democrats in Congress welcome it? Hardly.
“I do not think we are facing any kind of a crisis,” declared Rep. Barney Frank, D-Mass., in a response typical of those who viewed Fannie and Freddie as a party patronage machine that the GOP was trying to dismantle. “If it ain’t broke, don’t fix it,” added Sen. Thomas Carper, D-Del.
Unfortunately, it was broke.
In November 2003, just two months after Frank’s remarks, Bush’s top economist, Gregory Mankiw, warned: “The enormous size of the mortgage-backed securities market means that any problems at the GSEs matter for the financial system as a whole.” He too proposed reforms, and they too went nowhere.
In the next two years, a parade of White House officials traipsed to Capitol Hill, calling repeatedly for GSE reform. They were ignored. Even after several multibillion-dollar accounting errors by Fannie and Freddie, Congress put off reforms.
In 2005, Fed chief Alan Greenspan sounded the most serious warning of all: “We are placing the total financial system of the future at a substantial risk” by doing nothing, he said. When a bill later that year emerged from the Senate Banking Committee, it looked like something might finally be done.
Unfortunately, as economist Kevin Hassett of the American Enterprise Institute has noted, “the bill didn’t become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn’t even get the Senate to vote on the matter.”
Had they done so, it’s likely the mortgage meltdown wouldn’t have occurred, or would have been of far less intensity. President Bush and the Republican Congress might be blamed for many things, but this isn’t one of them. It was a Democratic debacle, from start to finish.
NYTs By STEPHEN LABATON Published: September 11, 2003 The Bush administration today recommended the most ignificant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. ... ... Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing. These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." Representative Melvin L. Watt, Democrat of North Carolina, agreed.
Gohmert actually suggests a plan that buts the burden on Gubmints back by penalizing THEM on taxs instead of us.
What a concept
The President supported legislation in 2003 and again in 2005 designed to stem the worst of the problem. He was faced with recalcitrant Democrats, who voted along party lines, and were joined by some liberal Republicans to keep the legislation from even getting out of committee.
The lobbying was directed at CONGRESS, NOT the President.
Another IBD editorial here:
More Leftist disinformation. It’s rampant.