Posted on 06/12/2010 8:35:29 PM PDT by combat_boots
Sheila Bair, the chairwoman of the Federal Deposit Insurance Corporation, began her week with a bit of honest heresy, the kind that only she, among all the bank regulators, seems willing to utter in the wake of the financial crisis.
Deep in a speech she delivered Monday before the Housing Association of Nonprofit Developers — a speech that got surprisingly little attention — Ms. Bair listed her three main recommendations to “put the mortgage industry on a sounder footing.” The first two were the usual suspects: better consumer education and protection, and a reformed securitization market. Her third proposal, however, was a shocker, taking dead aim at one of the most sacrosanct tenets of American politics: the lofty goal of homeownership.
(Excerpt) Read more at businessinsider.com ...
I’ve asked the mods to change the title, as I got ahead of myself. It’s “Let’s Be Honest: The Real Problem With Our Financial System Is The American Dream”
Apologies to the forum
She tossed in Fannie Mae and Freddie Mac, the two “G.S.E.’s” (government-sponsored entities) whose role as a guarantor and securitizer of mortgages greatly expanded the ability of mortgage originators to make loans to home buyers — and which are now, of course, in federal conservatorship, with taxpayers holding the bag for their gargantuan losses.
She also pointed out that during the bubble, when anyone with a pulse could get a mortgage, the percentage of Americans owning homes rose to an unprecedented 69 percent, a number that was greeted with bipartisan hurrahs, but which turned out to be “unsustainable,” Ms. Bair said.
She concluded: “Sustainable homeownership is a worthy national goal. But it should not be pursued to excess when there are other, equally worthy solutions that help meet the needs of people for whom homeownership may not be the right answer.” Like, you know, renting.
But, but, but the Obamunists promised us a workers’ paradise. I had no idea their idea of hope and change was for all of us to live in caves, burn wood for light and heat, eat bugs and weeds for food, use tree sap and dried flower for medicine, and bow to the great Chief for all of our guidance.
The problem is that the American Dream has been subverted
by a Socialist nightmare, and don’t think for a minute
that it happened by accident.
The American people need to wakeup before it’s too late,
remember who is responsible, and as our illustrious
maximum leader says, “know whose ass to kick”.
There’s nothing wrong with the American ideal of home ownership. What’s wrong is the American ideal of working hard to earn it was scrapped.
Government forced banks to loan to millions of people that should never have been allowed to buy a home!!
We just went to visit friends in a very fancy neighborhood ($1.5 million and up or so). My wife jokingly said “Oh - that ones for sale! Let’s buy it!” One of my kids said “I don’t think we could afford it.”
I said “We don’t have to. We just need to get a loan for it. And I’m sure we could. And it would be at low mortgage rates right now too!”
My wife says “But I can’t even imagine what the monthly payment would be”.
I then told my kids that that right there is one of the main reasons (if not THE reason) for our economy so lousy right now.
One child said “Yeah - Obama”. The other one, at the same time said “The Liberals”. I told them that this started before Obama was elected but it was his type of thinking, and ACORN’s type of thinking that got us into this mess. Along with many others - even George W. Bush, that raised the level of owning a home as THE American Dream that all else was forgotten. Including how to pay for that dream.
Which soon will be a nightmare. (Instead of just the scary dream that it is now.)
The American Dream isn’t the problem.
The willingness to earn it without demanding someone else pay the bill is.
Ms. Bair is of course incorrect. At this point, the one and only thing that will truly help the Mortgage industry get on a “sounder footing” is to force mark to market values, and let those whose books are truly full of holes use bankruptcy procedures, and clear the deadwood. That will be a start. Another great thing would be a move to again set a fixed amount for down payment, say 20 or 30%, as a condition of the mortgage. I’m admittedly an idiot about finances, although I am learning, thanks wholly to Karl Denninger. It’s nothing grandiose. Just have the banks and mortgage companies express exactly what their paper’s worth. If there’s fallout, accept it. Beats the heck out of the current house of cards.
The government should not be setting the down payment requirements (or setting any other lending requirements). Nor should government be guaranteeing the loans. The market should determine the loan requirements. If the lender wants to make risky loans, have at it. It is their money to lose as long as the government doesn’t step in to bail them out.
Fannie and Freddie guaranteeing loans is a large part of what made all this possible. It is easy to make risky loans when it isn’t your money you are risking.
Not the problem!
The problem is when they allowed a person to buy a home with less than 20% down and payments that couldn’t exceed 30% of net income including taxes and insurance.
That was the criteria when I bought my 2400sq/ft. home in Glendale California in 1966.
We lived in a rented home for 7 years after we got married in order for me to save the down payment and have an additional 6 months earning in savings in the bank.
We saved $8,000 in those seven years on my earnings of $3.50/hr and $3.75/hr when we bought the house and put down $7,000 on the $32,000 purchase price in 66.
You’re right.
America is just too big a place for big dreams.
/sarc
My parents saved enough durring the depression to build their 2,600 sq.ft. home in Silverlake, Los Angeles in 1936 with a $5,000 loan on it and also saved enough to start the business without borrowed money in 1936.
As they did, they taught me that other than a mortgage on my 1st home if you haven’t got the money to pay for it you don’t need it.
I’ve lived by that rule for my 72 years and have not only my home but 2 condos, that I paid cash for, paid cash for my airplane that cost 3 times what my home did and have never borrowed one cent other than my mortgage on our 1st home.
We also ran the business for 57 years and never borrowed one cent to run it.
I look at all the things that have happened since the mid-Seventies, spearheaded the whole time by liberal Democrats.
The Community Reinvestment Act.
The Home Mortgage Disclosure Act.
The Federal Housing Enterprises Financial Safety and Soundness Act (boy, does THAT ever sound like something right out of "Atlas Shrugged") which mandated Fannie Mae and Freddie Mac to securitize (purchase) these sub-prime loans to the tune of requiring them to buy 45% of all these types of loans.
Additionally, these organizations were populated primarily by people deeply invested politically in the Democrat party, and they cooked the books (Franklin Delano Raines, Jaime Gorelick) to force bonuses to kick in where they made tens of millions of dollars PERSONALLY from them.
The introduction by the Clinton Treasury department of ACORN and NAC (Neighborhood Assistance Corporation) into the process where they were allowed to shake down and intimidate banks and financial institutions much the same way the Rainbow Coalition does with business, further forcing them to abandon the normal banking practices to lend money to people who should have never got loans. Refusal on their part would have allowed groups like ACORN to intervene with the government to prevent and block banks from expanding business, build more branches or merge with other banks by withholding approval at the behest of those groups like ACORN and NAC.
People like Barney Frank and Christopher Dodd virulently demonizing the people who were trying to warn everyone there was a storm brewing, even rebuffing the Bush White House that was trying to change processes that were out of control.
So, in light of all of this, one has to wonder: How much of this were people like Cloward and Piven (and others like minded) involved in? Was this process started many years ago as part of the Cloward-Piven strategy to fundamentally change this country by destroying it as it exists?
I had been aware of the Cloward-Piven Strategy for years, but had never given it much thought, as it was two old radicals from the Sixties that wrote it as a white paper. Old stuff, dead or desiccated people, right?
Until I saw this photo:
So they weren't out of the game. They have been in it the whole time. This all is looking less like an accident to me.
As Denninger has also said, if this happens, inconvenient people will take a beating. And inconvenient people are not in the habit of taking beatings that their hired Senators can foist off on the taxpayers, instead.
The home ownership racket was a response to decaids
of government failures and billions lost on gov rental rackets. I guess we are after the trillions failed BUSH/RINO Home Ownership Society failure, after the LBJ era great Society rental failure, going back.
Rinse, later, bend over, repeat.
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