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Sep 26 08 2:18 PM
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Sep 26 08 2:36 PM
Sep 29 08 8:39 PM
Sep 30 08 5:12 AM
Several days ago, Neil Cavuto, host of Fox News' Your World, proclaimed, "Loaning to minorities and risky folks is a
On WorldNetDaily, a compendium of loopy half-truths, pundit Drew Zahn declared that "when federal regulators demanded parity between racial groups in
lending, the only way to achieve a quota would be to begin making intentionally bad lending decisions."
The conservative National Review Online trotted out a favorite whipping boy, the Community Reinvestment Act, claiming that the
legislation was the result of "racially inflammatory campaigns" that forced banks to "make mortgages available to people without much in the
way of income, assets or credit."
Why would anyone inject skin color into a debate over credit?
There is certainly no evidence to support this claptrap. Federal regulators have never "demanded parity between racial groups in lending." Not
Sep 30 08 6:02 AM
Sep 30 08 6:45 AM
Sep 30 08 9:10 AM
In the aftermath of this financial catastrophe, as we sort out causes and assign blame, with experts offering various solutions -- More regulation! Less
complex financial instruments! -- let's not lose sight of the most fundamental component of finance. No credit-default swap, no exotic derivative, can be
structured without stipulating the monetary unit of account in which its value is calculated. Money is the medium of exchange -- the measure, the standard,
the store of value -- which defines the very substance of the economic contract between buyer and seller. It is the basic element, the atom of financial
Sep 30 08 10:34 AM
That's especially worrisome because normally, LIBOR is just slightly above the Federal Reserve's target fed funds rates, an interbank lending rate.
Now, it is more than 4 percentage points above the target rate of 2 percent. That has troubling implications for other lending rates tied to LIBOR,
including homeowners' adjustable rate mortgages.
Financial contracts tied to Libor amount to more than $300 trillion - or $45,000 for every person in the world.
Sep 30 08 10:42 AM
Prices of single-family homes were down a record 16.3% in July from a year earlier, extending declines that have plagued the housing market for two years,
according to the Standard & Poor's/Case-Shiller Home Price Indexes.
Sep 30 08 11:20 AM
Sep 30 08 11:30 AM
Sep 30 08 8:35 PM
By TERRY JONES
INVESTOR'S BUSINESS DAILY | Posted Wednesday, September 24, 2008 4:30 PM PT
One of the most frequently asked questions about the subprime market meltdown and housing
crisis is: How did the government get so deeply involved in the housing market?
The answer is: President Clinton wanted it that way.
Fannie Mae and Freddie Mac, even into the early 1990s, weren't the juggernauts they'd later be.
While President Carter in 1977 signed the Community Reinvestment Act, which pushed Fannie and Freddie to aggressively lend to minority
communities, it was Clinton who supercharged the process. After entering office in 1993, he extensively rewrote Fannie's and Freddie's
In so doing, he turned the two quasi-private, mortgage-funding firms into a semi-nationalized monopoly that dispensed cash to markets, made
loans to large Democratic voting blocs and handed favors, jobs and money to political allies. This potent mix led inevitably to corruption and the
Despite warnings of trouble at Fannie and Freddie, in 1994 Clinton unveiled his National Homeownership Strategy, which broadened the
CRA in ways Congress never intended.
Addressing the National Association of Realtors that year, Clinton bluntly told the group that "more Americans should own their own
homes." He meant it.
Clinton saw homeownership as a way to open the door for blacks and other minorities to enter the middle class.
Though well-intended, the problem was that Congress was about to change hands, from the Democrats to the Republicans. Rather than submit
legislation that the GOP-led Congress was almost sure to reject, Clinton ordered Robert Rubin's Treasury Department to rewrite the rules in
The rewrite, as City Journal noted back in 2000, "made getting a satisfactory CRA rating harder."
Banks were given strict new numerical quotas and measures for the level of "diversity" in their loan portfolios. Getting a good CRA rating was key for a bank that wanted to expand or merge with another.
Loans started being made on the basis of race, and often little else.
"Bank examiners would use federal home-loan data, broken down by neighborhood, income group and race, to rate banks on
performance," wrote Howard Husock, a scholar at the Manhattan Institute.
But those rules weren't enough.
Clinton got the Department of Housing and Urban Development to double-team the issue. That would later prove disastrous.
Clinton's HUD secretary, Andrew Cuomo, "made a series of decisions between 1997 and 2001 that gave birth to the country's
current crisis," the liberal Village Voice noted. Among those decisions were changes that let Fannie and Freddie get into subprime loan markets in a big
Other rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs.
10% for banks.
Since they could borrow at lower rates than banks due to implicit government guarantees for their debt, the government-sponsored enterprises
With incentives in place, banks poured billions of dollars of loans into poor communities, often "no doc" and "no income"
loans that required no money down and no verification of income.
By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market - a staggering exposure.
Worse still was the cronyism.
Fannie and Freddie became home to out-of-work politicians, mostly Clinton Democrats. An informal survey of their top officials shows a
roughly 2-to-1 dominance of Democrats over Republicans.
Then there were the campaign donations. From 1989 to 2008, some 384 politicians got their tip jars filled by Fannie and Freddie.
Over that time, the two GSEs spent $200 million on lobbying and political activities. Their charitable foundations dropped millions more on
think tanks and radical community groups.
Did it work? Well, if measured by the goal of putting more poor people into homes, the answer would have to be yes.
From 1995 to 2005, a Harvard study shows, minorities made up 49% of the 12.5 million new homeowners.
The problem is that many of those loans have now gone bad, and minority homeownership rates are shrinking fast.
Fannie and Freddie, with their massive loan portfolios stuffed with securitized mortgage-backed paper created from subprime loans, are a
failed legacy of the Clinton era.
Oct 1 08 5:59 AM
Oct 1 08 6:42 AM
Oct 1 08 6:53 AM
Oct 1 08 7:25 AM
Oct 1 08 8:13 AM
Oct 1 08 8:36 AM
Santa's Little Helper
Oct 1 08 8:38 AM
Oct 1 08 9:15 AM
Yes the truth is somewhere in the middle. The CRA is a good cause and has done a lot of good for millions of people. Before the CRA a lot of companies would
not lend money on a home in certain locations, mostly in lower priced areas with higher minority populations. The truth is that underwriting guidelines
became too aggressive in these areas and spread across the board into other types of applicants, not just minorities. Lenders fought over market share
because of the money to be made both with the initial loan and the subsequent selling of loans. The greed factor came in with the advent of mortgage brokers,
in my opinion, and many lenders started paying commissions to loan officers and loan originators to encourage them to make more loans and regain loss of
loans to the brokers. If one lender had a program that was grabbing a bigger share of the market another lender would counter with an even more questionable
loan program. The more loans you made the more money you made both at the very bottom level of the person who handled the loan process all the way up the
line to upper management. Many top level executives had huge bonuses based simply on growth and market share. The consumer became a target of aggressive
marketing and questionable disclosure of rates, fees, and benefits. The home owner or home buyer became a target. The sub-prime market became one of fighting
over these borrowers, not to benefit the borrower, but to make money. The prime market became one of lending more and more with less fees and less down
payments and more aggressive over-stated value appraisals. Good credit customers became a prime target for 100% equity lines, with little or no hassle or
fees, liar loans, stated income, no income verification and a host of other programs designed to make a loan rather than qualify a borrower, became very
common. I started in the lending business in 1978. At that time there were 3 basic rules to lending. Can they pay (income vs outgo), will they pay (credit
history), and can you make them pay or recover your investment if they do not pay (security). Can they pay went by the wayside with these limited or no
income investigation loans, will they pay went by the wayside in the sub prime market, and can you make them pay went by the wayside with little or no equity
remaining in these homes.
Oct 1 08 11:51 AM
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