Gov forced banks to consider poor borrowers and to relax standards, creating subprime loans and to give incentive for banks to assume the risks, Freddie and Fannie will buy the mortgage notes. That is the liberal gov policy stupidity. However liar loans were never sanctioned by the CRA or gov. Banks figured that if they push through tons of mortgage applications, earn the points and fees up front and then dump all of it onto Freddie and Fannie within six months, the money earned from such scheme was better then other competing investments. Ironically the full time civil service in Freddie and Fannie warned the politically appointed officers that this was happening and a financial meltdown can occur with the taxpayers stuck holding the bag. The political heads of the agencies did not care, the Federal Reserve in cahoots with bankers did not care, the US Treasury warned by the FBI in 2004 about finding liar loans among white collar crime investigation did not care and the bankers took advantage of this fed regulator and FM/FM negligence with a gusto. Liar loans mortgage notes flooded the market, pension funds and etc in the world, while the buyer did not suspect the AAA rated portfolio was actually junk/high risk. Now bankers, and many freepers claim that banks were victims and the gov was the sole villian in this mess. EXCUSE ME!!!!!????? Occupy Wall Street and Wall Street Bankers deserve each other. When the enemy of the US are at each others throat, sit back and let them kill each other. Remember bankers were the first to demonize the Tea Party because we wanted small gov and that means the end to corporate welfare and bailouts. Now bankers have a vicious attacker at their throats, and conservatives/TP should not risk our lives defending the bankers who were more then willing to crush our throats if they had a chance to place their boot on it.
“Gov forced banks to consider poor borrowers and to relax standards, creating subprime loans and to give incentive for banks to assume the risks, Freddie and Fannie will buy the mortgage notes. That is the liberal gov policy stupidity.
However liar loans were never sanctioned by the CRA or gov. Banks figured that if they push through tons of mortgage applications, earn the points and fees up front and then dump all of it onto Freddie and Fannie within six months, the money earned from such scheme was better then other competing investments.
Ironically the full time civil service in Freddie and Fannie warned the politically appointed officers that this was happening and a financial meltdown can occur with the taxpayers stuck holding the bag.
The political heads of the agencies did not care, the Federal Reserve in cahoots with bankers did not care, the US Treasury warned by the FBI in 2004 about finding liar loans among white collar crime investigation did not care and the bankers took advantage of this fed regulator and FM/FM negligence with a gusto.
Liar loans mortgage notes flooded the market, pension funds and etc in the world, while the buyer did not suspect the AAA rated portfolio was actually junk/high risk.
Now bankers, and many freepers claim that banks were victims and the gov was the sole villian in this mess. EXCUSE ME!!!!!?????
Occupy Wall Street and Wall Street Bankers deserve each other.
When the enemy of the US are at each others throat, sit back and let them kill each other. Remember bankers were the first to demonize the Tea Party because we wanted small gov and that means the end to corporate welfare and bailouts.
Now bankers have a vicious attacker at their throats, and conservatives/TP should not risk our lives defending the bankers who were more then willing to crush our throats if they had a chance to place their boot on it.”
Exactly right, the bankers BOUGHT those politicians and made a deal with the socialist/commies and the devil. They made their bed with them, not conservatives. I say let the lefties have their way with those bankers who have helped to destroy this country for obscene profits. There was a reason Christ threw out the money changers at the Temple.
Somewhere along the line the old maximum ratios of 28% of pay for the house/36% for all outstanding debt payments disappeared. I remember even having to bring in my recent college diploma to my loan officer because some underwriter at the bank was worried about it for some reason.
Banks are not blameless by any means in this, neither are Republicans by a long shot, but there is no doubt that the primary root causes of this entire mess are:
1.) Liberals in all branches of government and society
2.) Fannie Mae
3.) James Johnson
4.) Derivatives (securitized loans sold as investments)
Liberals implemented this mess beginning with Fannie Mae back in the 30’s. Even though it chugged along under the radar for decades, it was used primarily in a limited type of market, where they provided a mechanism (right or wrong) to allow certain types of more marginal lenders to get loans, which Fannie Mae would purchase from the lender and assume the risk. But it wasn’t a monstrosity, just another government program, most people had only a vague understanding of what it was.
Beginning with the Community Reinvestment act in 1977, liberals in and out of government began pushing legislation under the rubrik of “fairness” to make it easier for unqualified people to get mortgages.
Every step along the way, anyone who threw even the slightest speedbump or raised the most innocuous objection was vilified, branded as a racist and characterized as being against working people.
When James Johnson took over Fannie Mae, this type of activity became codified as policy.
James Johnson saw the company as the cash cow it was for the bureaucrats who ran it, and implemented a strategy that was on the job 24x7 with eyes and ears everywhere. He created Fannie Mae branches in a huge number of cities across America (I think it was between 50 and 100) staffed by like-minded people who served as the canary in the coal mine for any push back. They had armies of powerful lobbyists with lots of important connections.
If any legislator, bank or agency even breathed a trace of opposition or conveyed any interest in rolling back or limiting what was going on at Fannie Mae, they were attacked immediately, unhesitatingly and with the full force of the liberal machine (which is what it was) often within an hour of making a statement or phone call.
In tandem with this iron fist, they would sweeten the pot for legislators to oppose, waffle or simply not vote on various proposals (at all levels of government) by making campaign donations, a lot of them.
There were very few politicians who could withstand both ends, which shows how corrupt they have become, or how effective a smear campaign can be. It is another manifestation of the liberal approach of “You don’t want this because you are against the working man/children/insert race here...”
Even Speaker of the House Gingrich, who was supposed to be for small government and against entities like Fannie Mae, even got up on the podium with James Johnson in 1995 to sing the praises of Fannie Mae and their fulfillment of their manifest to provide mortgage access for minorities and such.
Nobody wants to be branded a racist, and even some people viewed as strong and principled didn’t want to fight that battle.
James Johnson turned Fannie Mae into a fully functioning cash machine for Democrats in full view of everyone. A part of the book I read this morning described how, when a piece of proposed legislation came out that would tie the hands of Fannie Mae in even a small instance, it was countered by a massive email and letter campaign. It turned out that in one focal area, the Fannie Mae office had purchased a list of constituents in an area, made up letters with their names as constituents, and emailed and mailed them to the legislators. When it was discovered (the first nine constiuents who were called about the letters denied ever writing them, knowing anything about them or even agreeing with what they said) Johnson was called in front of a committee where the legislator for those constituents demanded a signed apology be mailed directly to each of his constituents in his district. Johnson not only did not agree to do this, but even caught red handed, came out aggressively and said he would do no such thing, but would send letters to those constituents asking them if they wanted a representative who was against providing the dream of home ownership for minorities (or some wording like that)
Just amazing arrogance, but that is how he ran it, because he was making scads of money there.
He lobbied congress relentlessly to change rules that allowed even more dangerous and shady practices, at each point along the way providing assurances (and getting the rating houses in bed with him to back him up) that these changes would have no deleterious effect.
A good example was a paper in 2002 (Johnson was no longer there, I think it was Raines by then) published by Joseph Stiglitz and Peter Orszag (who would, amazingly after publishing this piece of crap in 2002 become the HEAD of the OMB under Obama!) This paper dealt with risk management at Fannie Mae and Freddie Mac (who had much lower capital cushions than did other financial institutions) and concluded...get this...that the risk of some catastrophic incident or sequence of events requiring a bail-out by the government was between 500,000:1 and 3,000,000:1!!!!!!!!!! Geez, you think they could have made the range any broader??????
Anyway, they concluded that the cost of providing an EXPLICIT government guarantee on $1 Trillion in debt (that was Fannie Mae’s target...a trillion dollars for people who couldn’t afford loans!) was only $2 Million.
Amazing. This dimwit who put out this paper to buttress an effort by liberal dipsticks to throw more gasoline on the fire in 2002 was actually appointed to the HEAD of the Office of Management and Budget under Obama!
And the securitization and bundling of loans allowed this crisis to not only metastisize throughout the entire US economy, but the world economy as well.
Bankers and Wall Street are complicit because, due to changes put in place by liberals, they no longer had to perform that nasty, time consuming and contentious underwriting task to find out who was safe to lend to. Now, they used automated tools that would let a dead cat buy a $250K house, and simply sold those loans to Fannie Mae or other entities who could now tie them all up in nice bundles to sell to investors.
Fannie Mae and the liberals made damn sure the rules were written in such a way that nobody could look inside those bundles before they purchased them to see the nature of the loans, which were all bad.
Wall Street and Bankers, doing what comes naturally to people who encounter a spigot with money flowing out of it, took advantage of it and put their mouths under it.
Gingrich, Bush and other Republicans, went along with it so as not to be villified, and went out of their way to assist. Why go halfway, right? They are complicit as well for not standing up, even though I do give some credit to the Bush administration for trying back in 2003-2004 to bring this issue to light. The OFHEO official in front of Barney Frank and the Banking Committee was essentially raped in public, and that was that.
It was like a perpetual motion money making machine...everyone wins and gets rich.
Not.