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Fannie and Freddie didn't have much to do with the housing crisis. Much of that came from the loans that were not backed by Fannie or Freddie. The crazy arm products, the stated income loans, the no doc loans, the super insane option arm, negative amortization loans (which surged between 2003-2006). The hands off, no government intervention, let the banks and business's do whatever the hell they want played a much bigger role in the downturn in the economy than Fannie and Freddie.
Much of the crazy loan programs that created much of the problems were not the Freddie and Fannie loans and didn't really exist until 2003 or so.
Who do you think backed those loans? Who do you think set policy to allow that sort of lending? It was all government backed predatory lending.
Who do you think backed those loans? Who do you think set policy to allow that sort of lending? It was all government backed predatory lending.
The banks did it themselves because of the lack of regulation, they saw a chance to make a quick buck without looking into or caring about the potential repercussions down the road. Most of these loans were not government backed.
The banks did it themselves because of the lack of regulation, they saw a chance to make a quick buck without looking into or caring about the potential repercussions down the road. Most of these loans were not government backed.
You need to study up on Fannie and Freddie and what went on in the nineties under Clinton before you try to discuss this with me. Most of the loans that defaulted were backed by Fannie and Freddie and the lending was done with the governments encouragement.
In 1995, the Clinton Administration changed the law governing GSEs’ mission — the Community Reinvestment Act (CRA) — to encourage more lending in poor neighborhoods. Previously, the CRA directed government to monitor banks’ lending practices to make sure they did not violate fair lending rules in poor neighborhoods. With the 1995 change, the government published each bank’s lending activity and started giving bank ratings based primarily upon the amount of lending it performed in poor neighborhoods. These changes empowered community organizations, such as ACORN, to pressure banks to increase lending activities in poorer neighborhoods — which involved reducing mortgage loan standards — or face backlash from those organizations’ private and political associates. For instance, if Chase made 100 mortgages in a poor Chicago district, and Countrywide 150, the government would likely give Chase a lower CRA rating, and community organizers could pressure politicians to make it more difficult for Chase to get licensed to do full ranges of business in new areas of the country. Low CRA ratings could also disadvantage Chase with regard to government lending programs and make it more difficult for Chase to participate in mergers and acquisitions. Through Fannie Mae, the government controlled banks’ mortgage lending activity rates. As long as Fannie was willing to buy these mortgages, banks had no problem lowering their standards if necessary, making the loans and selling them off to Fannie Mae. Banks could even buy the mortgages back from Fannie Mae, with Fannie’s payment guarantee, thereby eliminating the credit risk (as long as Fannie was government backed). Now, if the US federal government is behind Fannie – and the government has a perfect credit record – there is really little worry for banks, so they might as well make all the mortgages Fannie Mae is willing to buy, and purchase all the guaranteed debt Fannie puts up for sale. However, to the extent investors ever believed Fannie was just like any other company — without the US government guaranteeing its debts, at least in bulk — well that would be a different story. The risks involved would go from theoretically near zero, to well, who knows… Throughout the Congressional debate on GSE regulations in 2003-2005, senior Congressional Democrats repeatedly inferred — even directly stated on at least one public occasion — the US federal government would bail Fannie Mae out if required.
In written law, the US government only 100% guarantees Ginnie Mae. The other major two GSEs, Fannie Mae and Freddie Mac, exist in more of a grey area. Nothing explicitly states the federal government is 100% behind them, but it has always been implied. That is why statements of top government officials in the run up to the bubble are so very important, as are actions like the US President personally appointing Fannie’s CEO and directors.
From 1993-1999, the Clinton Administration replaced many of Fannie Mae’s key executives, including the CEO, the CEO’s number two, and nearly half the board of directiors. As a government sponsored enterprise (GSE), the President had the authority to make those appointments. The board, which increasingly consisted of Presidential appointments, then worked with the new CEO to change Fannie Mae executives’ salary structures in order to incentivize them to reach higher mortgage targets. More specifically, the board promised senior executive millions in bonuses each year as long as Fannie reported certain earnings figures. Just a quick reminder… Fannie’s ability to reach earnings targets is directly related to the number of mortgages it buys, as long as those mortgages do not default or as long as Fannie executives do not recognize negative changes in the payment flow.
Between 1994 and 2004, Fannie executives improperly reported $10.6 billion of earnings. Franklin Raines, the Clinton-appointed CEO, received over $90 million. Jamie Gorelick — a top Clinton Administration lawyer whom he appointed in 1997 to be Fannie Mae vice chairman despite having no formal financial experience – received over $26 million. Just by way of reference, in 2002, 21 senior Fannie Mae executives received over $1 million each.
Just before Mr. Clinton curiously appointed Jamie Gorelick to the lucrative Fannie Mae post in 1997, she had authored a very significant and controversial legal document that came into sharp focus on 9-11. Her policy, which became known as the “Gorelick Wall” established barriers that prevented federal anti-terrorist criminal investigators from accessing various federal records and databases…one of the top causes for the 9-11 intelligence failure. And Jamie Gorelick’s curious appointments did not stop with Fannie Mae… Democrats selected her to serve on the 9-11 Commission; the official government investigation into what happened from an intelligence standpoint, and why. She was in the perfect spot to head off the “Gorelick Wall” from being a cause celeb in the 9-11 Commission’s final report.
The only way to change the structure put in place in before 2000 would have been to forcibly replace the board of directors and senior management…but for that, the President would need hard evidence that justified cause. As far as Washington insiders publicly knew, all Fannie Mae was doing was helping poor people buy homes and, in the process, boosting economic activity. Who could argue with that? Certainly not any nationally-elected politician.
That evidence finally came in 2004, despite fierce Democrat party efforts to prevent it and their systematic attacks on people who tried to bring it to light. Even after the evidence was in clear public view, Democrats continued to resist any changes to the regulatory structure that would have slowed GSEs mortgage lending activity.
Read the whole article and you will understand that George Bush had little to do with the housing crisis. By the time it was brought to light the improper accounting of Fannie and Freddie, it was too late and the Democrats and enough Republicans in Congress did not want to address it.
The banks did it themselves because of the lack of regulation, they saw a chance to make a quick buck without looking into or caring about the potential repercussions down the road. Most of these loans were not government backed.
Wow...you clearly do not have an understanding of our the mortgage market work.
You need to study up on Fannie and Freddie and what went on in the nineties under Clinton before you try to discuss this with me. Most of the loans that defaulted were backed by Fannie and Freddie and the lending was done with the governments encouragement.
In 1995, the Clinton Administration changed the law governing GSEs’ mission — the Community Reinvestment Act (CRA) — to encourage more lending in poor neighborhoods. Previously, the CRA directed government to monitor banks’ lending practices to make sure they did not violate fair lending rules in poor neighborhoods. With the 1995 change, the government published each bank’s lending activity and started giving bank ratings based primarily upon the amount of lending it performed in poor neighborhoods. These changes empowered community organizations, such as ACORN, to pressure banks to increase lending activities in poorer neighborhoods — which involved reducing mortgage loan standards — or face backlash from those organizations’ private and political associates. For instance, if Chase made 100 mortgages in a poor Chicago district, and Countrywide 150, the government would likely give Chase a lower CRA rating, and community organizers could pressure politicians to make it more difficult for Chase to get licensed to do full ranges of business in new areas of the country. Low CRA ratings could also disadvantage Chase with regard to government lending programs and make it more difficult for Chase to participate in mergers and acquisitions. Through Fannie Mae, the government controlled banks’ mortgage lending activity rates. As long as Fannie was willing to buy these mortgages, banks had no problem lowering their standards if necessary, making the loans and selling them off to Fannie Mae. Banks could even buy the mortgages back from Fannie Mae, with Fannie’s payment guarantee, thereby eliminating the credit risk (as long as Fannie was government backed). Now, if the US federal government is behind Fannie – and the government has a perfect credit record – there is really little worry for banks, so they might as well make all the mortgages Fannie Mae is willing to buy, and purchase all the guaranteed debt Fannie puts up for sale. However, to the extent investors ever believed Fannie was just like any other company — without the US government guaranteeing its debts, at least in bulk — well that would be a different story. The risks involved would go from theoretically near zero, to well, who knows… Throughout the Congressional debate on GSE regulations in 2003-2005, senior Congressional Democrats repeatedly inferred — even directly stated on at least one public occasion — the US federal government would bail Fannie Mae out if required.
In written law, the US government only 100% guarantees Ginnie Mae. The other major two GSEs, Fannie Mae and Freddie Mac, exist in more of a grey area. Nothing explicitly states the federal government is 100% behind them, but it has always been implied. That is why statements of top government officials in the run up to the bubble are so very important, as are actions like the US President personally appointing Fannie’s CEO and directors.
From 1993-1999, the Clinton Administration replaced many of Fannie Mae’s key executives, including the CEO, the CEO’s number two, and nearly half the board of directiors. As a government sponsored enterprise (GSE), the President had the authority to make those appointments. The board, which increasingly consisted of Presidential appointments, then worked with the new CEO to change Fannie Mae executives’ salary structures in order to incentivize them to reach higher mortgage targets. More specifically, the board promised senior executive millions in bonuses each year as long as Fannie reported certain earnings figures. Just a quick reminder… Fannie’s ability to reach earnings targets is directly related to the number of mortgages it buys, as long as those mortgages do not default or as long as Fannie executives do not recognize negative changes in the payment flow.
Between 1994 and 2004, Fannie executives improperly reported $10.6 billion of earnings. Franklin Raines, the Clinton-appointed CEO, received over $90 million. Jamie Gorelick — a top Clinton Administration lawyer whom he appointed in 1997 to be Fannie Mae vice chairman despite having no formal financial experience – received over $26 million. Just by way of reference, in 2002, 21 senior Fannie Mae executives received over $1 million each.
Just before Mr. Clinton curiously appointed Jamie Gorelick to the lucrative Fannie Mae post in 1997, she had authored a very significant and controversial legal document that came into sharp focus on 9-11. Her policy, which became known as the “Gorelick Wall” established barriers that prevented federal anti-terrorist criminal investigators from accessing various federal records and databases…one of the top causes for the 9-11 intelligence failure. And Jamie Gorelick’s curious appointments did not stop with Fannie Mae… Democrats selected her to serve on the 9-11 Commission; the official government investigation into what happened from an intelligence standpoint, and why. She was in the perfect spot to head off the “Gorelick Wall” from being a cause celeb in the 9-11 Commission’s final report.
The only way to change the structure put in place in before 2000 would have been to forcibly replace the board of directors and senior management…but for that, the President would need hard evidence that justified cause. As far as Washington insiders publicly knew, all Fannie Mae was doing was helping poor people buy homes and, in the process, boosting economic activity. Who could argue with that? Certainly not any nationally-elected politician.
That evidence finally came in 2004, despite fierce Democrat party efforts to prevent it and their systematic attacks on people who tried to bring it to light. Even after the evidence was in clear public view, Democrats continued to resist any changes to the regulatory structure that would have slowed GSEs mortgage lending activity.
Read the whole article and you will understand that George Bush had little to do with the housing crisis. By the time it was brought to light the improper accounting of Fannie and Freddie, it was too late and the Democrats and enough Republicans in Congress did not want to address it.
So something from the heritage foundation?? Of course they are going to try to blame it on something that helps lower income folks, because they hate that sort of thing.
These crazy loan programs did not come out of the Community Reinvestment Act. They didn't even exist until 7-8 years after it was passed. The MTA loans being a major culprit, certainly didn't come out of the Community Investment Act nor were they backed by Fannie and Freddie.
The govt backed loans have actually increased over the last couple years compared to the 2003-2007 time period, a big reason is that the banks aren't giving out these crazy loans anymore and instead focusing on govt backed loans that don't have all the craziness.
Wow...you clearly do not have an understanding of our the mortgage market work.
Considering the fact that I work in it I do. The problems in the Mortgage market weren't from the Fannie and Freddie backed loans, it came out of the loans that were done without being government backed. The no doc garbage, the crazy option arms, neg am loans, etc. That whole market took off around 2003 and 04.
Considering the fact that I work in it I do. The problems in the Mortgage market weren't from the Fannie and Freddie backed loans, it came out of the loans that were done without being government backed. The no doc garbage, the crazy option arms, neg am loans, etc. That whole market took off around 2003 and 04.
You cannot work in the mortgage industry or haven't for very long if you clearly do not understand who backs over half the mortgages in this country and have for many years now.
I can cite other sources that will explain the housing bubble the exact same way also. It's pretty common knowledge, you cannot change the facts...it's documented.
Considering the fact that I work in it I do. The problems in the Mortgage market weren't from the Fannie and Freddie backed loans, it came out of the loans that were done without being government backed. The no doc garbage, the crazy option arms, neg am loans, etc. That whole market took off around 2003 and 04.
Those were the loans Freddie and Fannie backed and the lending practices encouraged by The Community Reinvestment Act in the nineties.
So something from the heritage foundation?? Of course they are going to try to blame it on something that helps lower income folks, because they hate that sort of thing.
These crazy loan programs did not come out of the Community Reinvestment Act. They didn't even exist until 7-8 years after it was passed. The MTA loans being a major culprit, certainly didn't come out of the Community Investment Act nor were they backed by Fannie and Freddie.
The govt backed loans have actually increased over the last couple years compared to the 2003-2007 time period, a big reason is that the banks aren't giving out these crazy loans anymore and instead focusing on govt backed loans that don't have all the craziness.
And the Obama that ran for president is not the Obama who became president either.
It's called politics.
Good comeback!
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