What Led to our economic vulnerability? As usual, a bubble.
Bill Clinton: “The responsibility that the Democrats have may rest more with resisting any efforts by Republicans in the Congress or by me when I was president to put some standards and tighten up a little on Fannie Mae and Freddie Mac.”
[In other words, Bill Clinton had a plan to prevent this mess. McCain and Bush also had plans.]
I decided to go ahead and do some serious research on the economic meltdown history. First off, Fannie / Freddie are government run corporations [or to be blunt — socialist programs]. Fannie was first formed in 1938 by FDR and his New Deal program. Fannie Mae giant GSE (Government Sponsored Enterprise), which had been “privatized” and listed on the New York Stock Exchange.
In 1999, Bill Clinton [with the help of a Republican dominant congress] wanted to help poor people get house loans, a noble intention but dangerous. Fannie / Freddie bought bad debts, thus encouraging banks and credit card companies to take risks. It was an unnatural market pressure. When you can sell your bad gambles off, why not take more risks? It’s a no-brainer.
Here’s another reason I say this was a socialist program — the president appoints Fannie Mae’s leadership. For example, Bill Clinton appointed Franklin Raines [1999 to 2004].
During a 2003 hearing, here is what one congress critter had to say:
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Mr. Chairman, we do not have a crisis at Freddie Mac, and in particular at Fannie Mae, under the outstanding leadership of Mr. Frank Raines. Everything in the 1992 act has worked just fine. In fact, the GSEs have exceeded their housing goals. What we need to do today is to focus on the regulator, and this must be done in a manner so as not to impede their affordable housing mission, a mission that has seen innovation flourish from desktop underwriting to 100 percent loans.
— Congresswoman Maxine Waters in a September, 2003, hearing of the House Committee on Financial Services.
Waters seemed particularly proud to say “since the inception of goals from 1993 to 2002, loans to African-Americans increased 219 percent and loans to Hispanics increased 244 percent, while loans to non-minorities increased 62 percent. Additionally, in 2001, 43.1 percent of Fannie Mae’s single-family business served low-and moderate-income borrowers…” She then said “the GSEs are working” and reiterated her opposition to more oversight.
[As an aside, I once saw the esteemed congresswoman pick her nose on live satellite TV (Weyrich’s NET). I would think that would trump Palin’s ‘Hand-Gate’.]
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Representative Barney Frank [the Banking Queen] said, “I think it is clear that Fannie Mae and Freddie Mac are sufficiently secure so they are in no great danger… Fannie Mae and Freddie Mac do very good work, and they are not endangering the fiscal health of this country.”
[When he’s not letting his boyfriend run a whore house in his apartment. Names of the sodomized prostitutes are kept anonymous, probably because his boyfriend liked to visit schools.]
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BTW, they and many other congress critters were opposed to warnings and solutions proposed by both the Clinton Administration and the Bush Administration. The Bush Administration only suggested a wimpy bandaid — more oversight. In truth, Fannie/Freddie were puppets of government programs, and they could only attract investors through deception. It was treated like a ‘pump and dump’ junk stock. In the long run, no amount of oversight could have fixed the root problem: lenders can’t profit from high risk low interest loans, DUH! But that got in the way of minorities getting loans [many of whom were illegal aliens who can turn invisible and take up a new identity when their credit rating is shot].
Bush’s suggestion of more oversight would have been unnecessary if the market were allowed to work things out itself.
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During the hearing Rep. Gregory Meeks said “I am just pissed off at OFHEO because if it wasn’t for you I don’t think we’d have to be here in the first place.”
The head of OFHEO, the under-funded regulator of Fannie and Freddie, did not take that lying down: “Congressman, OFHEO did not improperly apply accounting rules; Freddie Mac did. OFHEO did not try to manage earnings improperly; Freddie Mac did. So this isn’t about the agency’s engagement in improper conduct, it is about Freddie Mac.” [Only underfunded because the government imposed cock-eyed loan purchasing proceedures. If the banks had been left alone, housing would have been as smooth as it was since the 50s.]
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Senator Christopher Dodd, the largest recipient of campaign contributions from Fannie and Freddie in the past decade, also turned a blind eye to the risks posed by the GSE’s.
The Washington Post (no friend to the Bush administration), offered this: “Sen. Christopher Dodd, the Democratic chairman of the Senate Banking Committee, has the gall to ask in a Bloomberg Television interview: I have a lot of questions about where was the administration over the last eight years’” before explaining that “Dodd — who along with Democratic Sens. John Kerry, Barack Obama and Hillary Clinton were the top four recipients of Fannie and Freddie campaign contributions from 1988 to 2008 — actively opposed such measures and further weakened existing regulation.”
[Amazing that Obama, a latecomer, caught up with them so quickly.]
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Fannie and Freddie even threatened to harm “racist” banks which didn’t loan money to (unqualified) minorities, the leadership of the GSEs was clearly just as afraid of being called racist by minority (by race, not political party) members of Congress. In a 2005 video of the swearing-in ceremony of the (with an applauding Michelle Obama prominently featured), Fannie Mae interim CEO Daniel Mudd, cozies up to the CBC: “I humbly ask you to help us and help me… If there areas where we could do better, we’d like to hear it from our friends, and I’d be so bold as to say our family, first.” Mudd was clearly afraid of the Congressional Black Caucus. Why did he fawn all over them? Because the banking reform was a political payoff to black poverty pimps and also for illegal aliens.
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John McCain was one of just 4 sponsors of a 2005 measure to rein in these financial Frankensteins. McCain offered support of the bill with this statement: “If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.”
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Even those who cared about our nation’s future had to tread lightly or be accused of being racist.
Here’s a google link to verify:
Topping the list is an LA Times headline:
Minorities’ Home Ownership Booms Under Clinton but Still Lags ...May 31, 1999 ... Clinton has threatened a veto if the House concurs. The top priority may be to ask more of Fannie Mae and Freddie Mac. ...
http://articles.latimes.com/1999/may/31/news/mn-42807
Note the emphasis of the word ‘minorities’.
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More of the record on Fannie Mae and Freddie Mac | Stubborn FactsSep 30, 2008 ... Beyond the fact that the Republican “clamp down” on Democrats was ... were in fact bought or guaranteed by Fannie or Freddie. ... If you want to trot out the old “GOP is racist” crap you and your ..... these were based on Miller’s successful 1999 effort when he was state senator in North carolina. ...
stubbornfacts.us/corruption/more_of_the_record_on_fannie_mae_and_freddie_mac - 72k
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[A total of 11,900 pages on that google link]
But here’s where the murkiness starts to clear up — what happens later, Clinton’s appointment of Raines [1999 to 2004].
Fannie, Freddie ignored warning signs - Dec. 9, 2008 Dec 9, 2008 ... Fannie and Freddie, publicly traded but federally backed companies, ... Raines, the chief executive of Fannie Mae from 1999 to 2004, ...
money.cnn.com/2008/12/09/news/economy/fannie_freddie_hearing/index.htm - 65k
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TheHill.com - How Fannie, Freddie sankOct 2, 2008
... former Clinton White House budget chief who ran Fannie from 1999 to 2004. ... And we know that Fannie and Freddie, with significant support on the Hill, ... these were the people who came after Franklin Raines — became more ... I should have heeded the concerns raised by their regulator in 2004. ...
thehill.com/byron-york/how-fannie-freddie-sank-2008-10-02.html - 51k
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Economic Meltdown History [in depth]:
Wikipedia — [left leaning research site]
http://en.wikipedia.org/wiki/Fannie_Mae
The Federal National Mortgage Association (FNMA) (NYSE: FNM), commonly known as Fannie Mae, is a stockholder-owned corporation chartered by Congress in 1968 as a government sponsored enterprise (GSE), but founded in 1938 during the Great Depression. The corporation’s purpose is to purchase and securitize mortgages in order to ensure that funds are consistently available to the institutions that lend money to home buyers.[2]
[snip]
In 1970, the government created the Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, to compete with Fannie Mae and, thus, facilitate a more robust and efficient secondary mortgage market. Since the creation of the GSEs, there has been debate surrounding their role in the mortgage market, their relationship with the government, and whether or not they are indeed necessary. This debate gained relevance due to the collapse of the U.S. housing market and subprime mortgage crisis that began in 2007. Despite this debate, Fannie Mae, as well as Ginnie Mae and later Freddie Mac, has played an integral part in the development of what was the most successful mortgage market in the world which has allowed U.S. citizens to benefit from one of the highest home ownership percentages in the world.
In 1999, Fannie Mae came under pressure from the Clinton administration[citation needed] to expand mortgage loans to low and moderate income borrowers. At the same time, institutions in the primary mortgage market pressed Fannie Mae to ease credit requirements on the mortgages it was willing to purchase, enabling them to make loans to subprime borrowers at interest rates higher than conventional loans. Shareholders also pressured Fannie Mae to maintain its record profits.[9]
In 1999, Fannie Mae came under pressure from the Clinton administration[citation needed] to expand mortgage loans to low and moderate income borrowers. At the same time, institutions in the primary mortgage market pressed Fannie Mae to ease credit requirements on the mortgages it was willing to purchase, enabling them to make loans to subprime borrowers at interest rates higher than conventional loans. Shareholders also pressured Fannie Mae to maintain its record profits.[9]
[snip]
Early warnings
In 1999, The New York Times reported that with the corporation’s move towards the subprime market “Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980s.”[12] Alex Berenson of The New York Times reported in 2003 that Fannie Mae’s risk is much larger than is commonly held.[13] Nassim Taleb wrote in The Black Swan: “The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deem these events ‘unlikely’”.[14]
In 2003, the Bush administration recommended significant regulatory overhaul of Fannie Mae and Freddie Mac. However, the Democrats opposed that proposal, fearing that tighter regulation could sharply reduce financing for low-income housing, both low and high risk. Under immense lobbying pressure from Fannie Mae in association with Congressional Democrats led by Rep. Barney Frank, the Republican controlled Congress did not introduce any legislation aimed at bringing this proposal into law until 2005.
In 2006, the Federal Housing Enterprise Regulatory Reform Act of 2005 (first put forward by Sen. Chuck Hagel)[15] where he pointed out that Fannie Mae’s regulator reported that profits were “illusions deliberately and systematically created by the company’s senior management”.[16] However, this legislation too met with opposition from both Democrats and Republicans. This bill was passed by the House, but was never presented to the Senate for a vote. [17] [My take — filibustered.]
Hard Hitting version [Human Events]
http://www.humanevents.com/article.php?id=28641
On November 12, 1999, President Clinton repealed the Glass-Steagall Act, which for 55 years had prevented banks, the nation’s lenders, to get into the so-called “investment banking” business (stock brokers). With lots of pressure in Congress by the Democratic members of the New York contingent, the Senate and House caved in and trashed a law which had provided stability in both the banking industry and on Wall Street.
What follows next reads like a third-rate screen play.
Banks jumped into the fray, and, encouraged by the Wall Street Democrats, began buying up and merging with Investment Banks, swapping assets, creating new loan “instruments” and weakening both independent systems.
Also in 1999, Clinton appointed Franklin Delano Raines, a Harvard Law School graduate and his Director of the U.S. Office of Management and Budget (OMB), to become the CEO of the obscure but powerful Fannie Mae giant GSE (Government Sponsored Enterprise), which had been “privatized” and listed on the New York Stock Exchange.
Mr. Raines immediately went to work lobbying Congress for less regulation and more “flexibility” in creating the massive dodgy-loan portfolio of under-qualified home loans to fellow minorities which would continue to grow and was encouraged by Barney Frank, another former Democrat & Harvard Law School graduate who now heads up the House Financial Services Committee — which has key oversight over both Fannie Mae and Freddy Mac.
The good results of Mr. Raines’ efforts soon became apparent.
On December 21, 2004, Raines accepted what he described as “early retirement” from his position as Fannie Mae’s CEO while U.S. Securities and Exchange Commission investigators continued to investigate alleged accounting irregularities. The Office of Federal Housing Enterprise Oversight (OFHEO), the regulating body of Fannie Mae, has now accused him of abetting widespread accounting errors, which included the shifting of losses so senior executives, such as himself, could earn large bonuses.
Then, in 2006, the OFHEO filed suit against Raines in order to recover the $50 million in personal payments made to Raines based on Fannie Mae’s overstated earnings which were initially stated to be $9 billion but have since been reduced to under $6.3 billion.
Undeterred, Mr. Raines now works for another Harvard Law School graduate, Mr. Barack Obama’s presidential election campaign — as an advisor on mortgage and housing policy matters.
Meanwhile, continuing pressure by the New York Democratic Congressional caucus encouraged both retail banks and the new mortgage subsidiaries of investment banks to also make home loans to less qualified borrowers (read: low income, poor-credit, deadbeat, and undocumented liars) — if they wanted to continue to be able to benefit from light supervision and aggressive merger and acquisition practices.
By the end of the ‘90s, no less than nine separate, independent, and uncoordinated Federal Regulators had been created by Congress. These agencies included the SEC, CRTC, Controller of the Currency, Treasury, FRB and OFHEO, among others. They would poorly supervise what Clinton had now given birth to: a jungle of speculators, favor-seeking financial lobbyists, and Democrat-dominated Wall Street organizations who duly poured millions of dollars of contributions into Democrat coffers for the Congressional and Presidential elections.
By the time that “Securitization” of home loans (Fannie Mae began to convert its original business of making mortgages to creating packages of home loans that it could sell off as safe investments on Wall Street) began to grow, the Democrat Senators and Representatives cheered the wonders of the new-found ability of America’s financial community to enable the poorest and least-qualified of their voters to finally be able to own their own homes.
U.S. home ownership, averaging around 65% for 50 years, suddenly jumped up to almost 70% — and the housing construction sector took that cue to start building even more houses on spec, knowing that they would soon be bought using doggy loans.
Fixed rate mortgages gave way, under encouragement by the legislators, to so-called variable-rate ARMS and low-initial-entry-cost loans (”sharks”).
In 1998, Senator Chuck Schumer of New York was elected. He now serves on both the Finance, and the Banking, Housing & Urban Affairs Committees, and is the Chairman of the powerful Housing, Transportation and Community Development Sub-committee. He also graduated from Harvard Law School.
After the sub-prime mortgage industry began its meltdown in March 2007, Schumer proposed a bailout by the Federal Government of sub-prime borrowers — ostensively to prevent these poor-credit owners from losing their homes. Financial commentators immediately observed that such a “bailout” would primarily benefit Wall Street bankers and other lenders — who had made large campaign contributions to congressmen. (Schumer’s
nine biggest campaign donors are financial institutions — who had contributed over $2.5 million to his re-election campaign.)
As the recent Indy-Bank collapse occurred, CNBC financial analyst Jerry Bowyer said that “Schumer was responsible for the second largest bank failure in US history.”
The final invention of the new-world-order of funny money was the “Credit Default Swap”, a derivative instrument which resembles an insurance policy but, in fact, can be used to magnify raw speculation profits — and down side risks — and was, ahem, generously exempt from regulation or even transparency.
The conditions had been set for a gigantic credit collapse and subsequent financial world meltdown which is continuing as we write. All from a simple idea to “help the little people” — who would show their appreciation by re-electing the Democrat politicians who were the vocal cheerleaders (and recipients of gobs of doggy-lender re-election campaign funds).
So the pattern becomes clear. Harvard Law School attorneys — noted for their lack of economic knowledge — create an easy-money system which relies on flakey loans provided by fat-cat financial manipulators who are the primary contributors to the re-election campaigns of the legislators — almost exclusively Democrats.
But this makes sense.
Demographers have shown that since the 1940s, the Democratic Party has segued from the party of the working middle class to the party who’s voters look like a double-hump camel: they are either the poor who vote for entitlements or the extremely wealthy millionaires and billionaires who provide the “juice” to buy the allegiance of the first group.
Meanwhile, the Republicans have morphed from the fat-cats (who are all mostly Democrats now — see the Obama campaign donation records at www.fec.gov) to the party of the working and middle class which saw landslide support for an ex-union-leader and Democrat-turned-Republican, Ronald Reagan.
The solution is simple: the Democratic Party in control of the Senate and House needs to get back to its roots and stop being co-opted by the world’s wealthiest — and financially manipulative — Wall Street “titans”.
A return to the values of the small business owner would be a good start: hard work and personal savings, not get-rich-quick (like the Democrat-voting dot.com billionaires). Small business is the real growth engine of the American economy, and these “mom and pop” shops employ the majority of our citizens.
This may be more difficult than it seems, however. Small business owners strongly empathize with people like Gov. Sarah Palin and her fishing-boat husband, not Joe Biden, another attorney who turned professional politician one year out of law school, in 1969.
So what’s next?
The U.S. Government will create a Resolution Trust Company to temporarily take over the perhaps $1 trillion doggy-loan portfolios of the nation’s lenders and free up the grid-locked system to start inter-bank lending again so the free-market economy can continue to grow. This “New RTC” will eventually dispose of its portfolio — hopefully, as before, at a profit for the taxpayer.
A centralized regulator, most likely the Federal Reserve, will subsume most of the other eight regulators. Regulations which worked for decades, like Glass-Steagall, the up-tic sell rule and sound-accounting regulations may be restored.
And maybe, Congress will remove its addiction to the Wall Street money re-election game. Without the latter, of course, we can expect to see another, worse, financial fiasco in the next decade or two.
Since our fiat dollar currency is now only backed by the “faith and credit” of the United States” (there isn’t any politician-proof gold or silver backstopping this fiscal house-of-cards, Kennedy & Nixon killed them off), it’s inevitable. We’ll see.
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Obama’s Stimulus Stimulates Nothing But Votes for Obama
http://www.stoptheaclu.com/2009/07/14/obamas-stimulus-stimulates-nothing-but-votes-for-obama
I’ll continue to quote you guys. Thank you again. FRegards ....
For more research:
111 The Timeline Project / Link List of Economic Meltdown History
http://www.freerepublic.com/focus/f-bloggers/2093845/posts