Posted on 06/10/2011 11:56:11 PM PDT by Libloather
Report: "Reckless Endangerment"
June 10, 2011
BEGIN TRANSCRIPT
RUSH: Last night I promised that I would begin reading on my own a book, and I did: "Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon." It's by Gretchen Morgenson and Joshua Rosner (he might pronounce it Rose-ner), and Gretchen is a business writer for the New York Times. I have to confess, before I knew anything of the book or knew anything of the contents of the book, simply because she was at the New York Times I figured it was going to have an obviously left-wing slant to it. I read a review of the book to you yesterday by Walter Russell Mead, well-known historian, that was sent around by the noted Democrat pollster Pat Caddell. The review of Mr. Reid's was this book is a "weapon of mass destruction" for Republican presidential candidates and operatives.
Because it is a credible indictment of the Democrat Party, Democrat leaders and the Democrat Party's alliance with Wall Street leaders in creating -- by virtue of policy -- the entire crisis that has led to the present state of the economy, that it can be laid at the feet of Democrats exclusively. Now, in terms of its origins -- origins, by the way, which go back to 1992 and Bill Clinton. Now, in the ensuing years, there have been Republicans that have come along and have allowed such things as subprime crisis and all to go on. There were other Republicans that tried to regulate against it and stop it. So it's not entirely laid at the feet of Democrats, but its origins are. It's a devastating book. I've now started hunting and pecking my way through it.
I solidly read through Chapter 4 and then in the interests of time and economy (and my book report for today) started scanning other parts of the book, and it's amazing. It is everything that our instincts told us about this crisis, from subprime to the "social justice" nature of extending loans for houses to people who had no way of paying them back, done on purpose as a matter of policy to secure votes and to also create revenue streams for most-favored participants. The names are legion and they are mentioned throughout this book, and you know them all -- except maybe for one: James Johnson. James Johnson is the villain. This book answers the question: "What happened to our economy?" The American people know that they've been robbed.
This book tells you who robbed you, and it was an alliance (that's ongoing, by the way) of the Democrat Party and liberal oriented members of Wall Street, usually the upper echelons. I highlighted a couple of things. This is page 4: Fueled by dubious industry practices supported by many in Congress and unchecked by most of the regulators charged with oversight of the lending process, the home ownership drive helped to plunge the nation into the worst economic crisis since the Great Depression. This truly was an unprecedented partnership. But what few have recognized is how the partners in the Clinton program embraced a corrupt corporate model that was also created to promote home ownership."
This traces the current crisis all the way back to Bill Clinton personally, not some members of his administration (although they are included) but him personally. The first words in the book are a quote from Bill Clinton about the need for home ownership to be spread far and wide, that it would rebound the economy, that it would give a greater sense of community. But whether people can afford homes or not, they need to be in them. It details and explains the subprime crisis, how it came about, what it is and how people made money from it. It explains the derivatives. It explains the packaging (or the pooling, if you will) of mortgages. It traces the first such evidence of this in the private sector. Now, Fannie Mae is target number one along with Clinton and the Democrats. Barney Frank, Chris Dodd.
Everything that you thought you knew about this is documented fact in this book: "Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon." One of the questions that a lot of people have had: "How in the world does anybody make money lending money to people that can't pay it back?" How does anybody make money doing that? That's the question that the average layman will have when having this whole thing explained. "Okay, so we're going to go out and loan money to a bunch of people who have no business getting it?" In fact, folks, this will anger you like little has. The lending rules that were tossed aside, that were relaxed? The one rule that used to be you had to be no more than 25 percent of your income devoted to your housing, they threw that out.
It became 36 percent. At some point, they threw it all out. Credit checks were thrown away. Nobody had to prove anything! In fact, one of the things that was a tool that was used to determine whether somebody was to be given a mortgage was to try to predict their future. What kind of earning power were they likely to have based on computer modeling and statistics, not based on anything relevant to those individuals and the way they had lived up to that point. It details how government forced lenders to make loans to people who had no way of paying them back under threat of investigation by Janet Reno. Exactly what we thought was happening is documented in this book to have happened.
So you make a bunch of loans to people that can't pay them back, you know that going in, and how in the world do you make money? You lie to other people. You pool those subprime mortgages into what's called a security. You put 130 million mortgages together, $130 million worth of mortgages together in a pool in the security -- you pool them -- and you sell that to an investor on the basis that the income stream from all of those mortgages in one security is going to be a goldmine. The income stream being people making their monthly payments. You fudge all that. You're not truthful about who is in this pool and how unlikely they are to pay, but you sell this great future revenue stream on the come. Investors go out and buy it, and at each stage investors learn they bought a bill of goods.
So each stage of investors tries to come up with a product designed to make their investment whole and pass the loss on down, and finally they reach the end of the line and they couldn't find any other dupes to buy these pools of mortgages known as "mortgage backed securities" and what have you. It is all blamed, specifically, on liberal Democrat policies, social policy. "In March of 1994, James Johnson announced Fannie Mae's Trillion Dollar Commitment, a program that earmarked $1 trillion to be spent on affordable housing between 1994 and 2000." Now "affordable housing," as Barney Frank has told us -- and as we now know, affordable housing -- is simply another way of defining loaning money to people that can't pay it back, all on the premise it's unfair that some should live in a house and some don't.
That's not a fair and decent country that has a circumstance like that. For America to be "fair," to have "social justice" and to be "decent," everybody should have a chance to live in a house! Everybody should have a chance to own their house. That's the American dream. So James Johnson, in 1994, creates the Trillion Dollar Commitment Program that "earmarked a trillion dollars to be spent on affordable housing between 1994 and 2000," the subprimes, essentially, "a program which would reward lenders and give lenders the money to make these mortgages," to make these loans. "The money in the Trillion Dollar Commitment would finance more than ten million homes for low-income families, minorities and new immigrants, families who live in central cities and other underserved communities and people with special housing needs, the company said," meaning Fannie Mae.
"Setting aside these funds meant this: 'Fannie Mae will transform the nation's housing finance system by working with other industry partners to eliminate the barriers to home ownership and promote a ready supply of affordable rental housing.'" Now, at the time Fannie was under investigation. They were always regulated and at this point they were under investigation, and the guy running Fannie Mae -- James Johnson -- is trying to do anything he can to create exemptions for himself and Fannie. The book also lays out that the executives at Fannie, in large part, derived policies that were oriented solely at paying themselves lavishly. It was a giant slush fund scam to individually get rich, to advance liberal social policy. "One trillion dollars, even for a man with plans as big as James Johnson, the figure was audacious, but it had to be as those inside Fannie Mae knew if Johnson was going to secure the protection that Fannie Mae needed from regulators. The plan, former Fannie executives say, was to commit so much money to 'low-income housing for families and communities most in need,' that no one would dare criticize the other activities Fannie Mae engages in."
So you go out of your way to make it possible for the poor to get into homes and whatever else you do is ignored because you're doing the Lord's work.
Social justice.
BREAK TRANSCRIPT
RUSH: By the way, somewhere in the book Reckless Endangerment it's pointed out that James Johnson -- they referred to him as "corporate America's founding father of regulation manipulation," and that's another big part of the story here, that we have so many regulations that somebody knows how to game them can make out like a bandit and never even break a single law and get rich in the process. But this book, folks, explains why we're sitting here today as we are. That subprime business is all of this silly financing and expansion of the housing market? That's it. It's 90% of what's going on and why we're here today. Obama's the other 10% of why we haven't been able to reverse this and take a new tact.
END TRANSCRIPT
I suspect that the majority of politicians do not think much about the future past the next election.
That ‘home ownership for all’ might tank the economy, I believe never occurred to most back in the 1990s.
And you are wildly overestimating their intellectual capabilities and economic knowledge when stating that they “had to know this would all come to no good”.
There were plenty of Republicans who initially thought this was a good idea, too, until the Democrats began using Fannie Mae as an extension of the Democratic Party.
Are there a core group of socialist progressives within the Democratic Party who would use this program to turn it into a Cloward/Piven opportunity and bring the government down?
Yes, without a doubt.
I get so darned mad I could eat nails!
These guys should be in jail for treason!
NOT altogether uncommon. AND while probably not illegal; an unethical practice nonetheless. In the interests of saving money, because it costs $'s every time a filing should be made. Do they take shortcuts? You bet! In any case, who cares who owns the note until the property is disposed of one way or another, really???
But what is even more maddening is that those trusts are tax exempt. Those investors aren’t paying taxes on money that is supposed to be in a trust that isn’t. It is tax evasion. Pure and simple.
What trusts? I don't follow that argument.
Never mind the banks don’t have any skin in this game. They were only conduits of the money. They didn’t lead their OWN money at all. They have no right to foreclose on a home that wasn’t THEIR money that was used.
Loan "servicers", who are rarely the note holders, are responsible for the day to day handling of mortgage loans. They get a "servicing fee" for doing it on behalf of the note holders. It's a contractual arrangement between the note servicers and the note holders, whoever they may be.
It is a horrible awful mess. And honest homeowners who think that they are going to get title when they DO pay off that home loan, will be most upset when that this not the case.
This was almost unheard of until the federally created housing bubble burst. It generated a tidal wave of foreclosure activity that few loan servicers were prepared for. Still in all, I suspect the claims are mostly overblown media hyperbole but having been out of the business for almost 20 years I'm just guessing.
You can bet it occurred to at least the Dim leadership. Bawney fwank and his fellow travelers are unaldurated dirt bags but they aren't stupid.
There were plenty of Republicans who initially thought this was a good idea, too, until the Democrats began using Fannie Mae as an extension of the Democratic Party.
Not sure what you're referring to here. The original CRA under jimmah or when bent willie "expanded" the CRA on his way out the door? I'm not aware of Pubbies being on board with any of it with the exception of "W" paying lip service to the "ownership culture" or somesuch. He, along with several Pubbies tried to rein in the nonsense but the Dims and the MSM hammered them claiming they were trying to kill the "American Dream". Worked pretty well.
“Are there a core group of socialist progressives within the Democratic Party who would use this program to turn it into a Cloward/Piven opportunity and bring the government down?”
“Yes, without a doubt.”
That is the rest of my comments, which you overlooked.
AND the Republicans, too, were up to their asses in these programs until it became obvious they were doing more harm than good. For most politicians the aim is to get elected, not bring down the government.
By the time Bush and McCain recognized the danger and tried to stop the program, the Democrats had the upper hand and blocked them.
When something looks too good to be true, it requires careful analysis. That wasn’t done by Congress - ever! - and it should have been done.
“This was almost unheard of until the federally created housing bubble burst. “
The draining of the swamp allows the fraud to be exposed.
Fancy that, eh? So, it wasn’t the foreclosure activity that caused this, it was just left sticking out of the murky waters where it couldn’t hide anymore.
Why? Because the money sloshing around hid the fraud. Once that extra slosh disappeared, the fraud was exposed. This wasn’t anything new, just exposed.
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“You bet! In any case, who cares who owns the note until the property is disposed of one way or another, really???”
Pretty caviler attitude there buddy, what makes you think that hard working, honest people appreciate your thieving attitude when you mock us for wanting a clear title for what we are paying for? uh???? Oh, us little people should just lie still while your rape us, is that it? Just shut up and like it, eh? #*$&(*#^%(*@#)(*!!!! to you!@!!
I’m not a party to their stupid contract and they can shove it.
Damn, what don’t you get that people are being robbed, or are your profiting from this???????????????
I am not the only one getting mad out here and your sweep it under the rug attitude stinks.
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“What trusts? I don’t follow that argument.”
If you don’t know about REMIC’s, then don’t comment.
Your aren’t the only one.
The FED rent boys think that we should lie still while they rape us peons.
They are sick, sick, sick thieves, filthy little thieves.
Come on, you know what it is.
All unrecorded at the county.
Call your County Recorder of Deeds and start raising hell.
A feudal age where property rights are totally destroyed?
"Imagine no possessions..." You answered your own question my friend.
Raising hell with the county Recorder of Deeds, hmmm, if that worked we wouldn’t be typing about this at all. The problem is the judges don’t care that the banks aren’t following the rule of law, and give them the benefit of the doubt. Us peons would never get that kind of consideration. No way.
If the real end game IS that property rights are totally destroyed, then maybe not paying on a mortgage IS the answer.
Are you so sure of that that you won’t pay anymore?
Do you think that the rule of law is dead, totally and completely DOA???
Do you?
“I’m not aware of Pubbies being on board with any of it with the exception of “W” paying lip service to the “ownership culture” or somesuch.”
See if you can find Dubya’s “American Dream Downpayment Initiative” speech to HUD. That was his program for providing “free” downpayments to those who otherwise didn’t have a prayer at buying a house. Dubya did much, much more than just ‘pay lip service’. He was every bit as much of a zealot for mass home ownership as was Clinton.
http://www.thechristiansolution.com/doc2010/322_AmericanDream.html
I’ll just chalk your reply up to ignorance and let it go at that. Have a nice day.
Mortgage originators routinely sell their mortgage paper to Fannie and Freddie so that they can free up their money to make new loans. That’s why Fannie and Freddie were created in the first place, to provide a secondary market for selling mortgage paper to investors.
Yes, I do. I'm just sitting here waiting for the consequences to start. How about you?
0bama used the CRA to sue for redress. 1996, I believe, Bank of New York. He’s is thick into the start of the rollout of liar loans.
General overivew.
http://sbvor.blogspot.com/2008/09/1977-community-reinvestment-act-carter.html
Now, he wants to crank it up again, especially given that there are no changes to the regs on it.
http://money.cnn.com/2011/05/12/news/economy/obama_housing/index.htm
In and of itself, not a bad thing. The means and methods for achieving that goal is where things went awry. Something IMHO that should have never involved the feral government in the first place. Anyhow, as early as 2002 "W" was making noises and by 2003 was trying to put a leash on FANNIE AND FREDDIE, FWIW.
Little doubt Jug Ears up to his, uh, ears in the CRA/ACORN extortion racket. At least in South Chicago. More likely throughout the whole ACORN system. I’ve come to understand that the protection racket is SOP in Chicago, and many other inner cities. Jesse and fat al have been excellent role models.
I read all this about Fannie and Freddie and watched a lot of tv that talked about mortgage bundling credit default swaps and Fannie and Freddie. Also the community investment act of 1977 put through for Jimmy Carter so he could build homes for low income after he got thrown out of office!
City Government demands all keys to propreties belonging to Cedar Falls residents”
“The Cedar Falls, Iowa city council voted to take the keys of residents to enter their businesses and some residential properties for the sake of “security.”
http://www.freerepublic.com/focus/f-news/2733669/posts
If the real end game IS that property rights are totally destroyed, then maybe not paying on a mortgage IS the answer.
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