Subject: HOW WE GOT INTO THIS MESS
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1977: Pres. Jimmy Carter signs the Community Reinvestment Act (CRA) into Law. The law pressured financial institutions to extend home loans to those who would otherwise not qualify. The Premise: Home ownership would improve poor and crime-ridden
communities and neighborhoods in terms of crime, investment, jobs, etc.
RESULTS: Statistics bear out that it did not help.
How did the government get so deeply involved in the housing market?
Answer: Bill Clinton wanted it that way.
1992: Republican representative Jim Leach (IO) warned of the danger that
Fannie and Freddie were changing from being agencies of the public at large to
money machines for the principals and the stockholding few.
1993: Clinton extensively rewrote Fannie Mae and Freddie Mac's rules,
turning the quasi-private mortgage-funding firms into semi-nationalized monopolies dispensing cash and loans to large Democratic voting blocks and handing favors, jobs, and contributions to political allies. This potent mix led
inevitably to corruption and now to the collapse of Freddie and Fannie.
1994: Despite warnings, Clinton unveiled his National Home-Ownership
Strategy which broadened the Community Reinvestment Act (CRA)
in ways congress had never intended.
1995: When Congress about to change from a Democrat majority to Republican, Clinton ordered Robert Rubin's Treasury Dept to rewrite the rules.
Robt. Rubin's Treasury reworked rules, forcing banks to satisfy quotas
for sub-prime and minority loans in order to get a satisfactory CRA rating.
The rating was key to expansion or mergers for banks.
Loans began to be made on the basis of race and little else.
1997 - 1999: Clinton, bypassing Republicans, enlisted Andrew Cuomo,
then Secretary of Housing and Urban Development,
allowing Freddie and Fannie to get into the sub-prime market in a BIG way.
Led by Rep.Barney Frank and Sen. Chris Dodd, congress doubled down
on the risk by easing capital limits and allowing them to hold
just 2.5% of capital to back their investments vs.10% for banks.
Since Freddie and Fannie could borrow at lower rates than banks,
their enterprises boomed. With incentives in place,
banks poured billions in loans into poor communities,
often "no doc", "no income", requiring no money down
and no verification of income. Worse still was the cronyism:
Fannie and Freddie became home to out-of work-politicians,
mostly Clinton Democrats. 384 politicians got big
campaign donations from Fannie and Freddie.
Over $200 million had been spent on lobbying and political activities.
During the 1990's Fannie and Freddie enjoyed a subsidy of as much
as $182 Billion, most of it going to principals and shareholders,
not to poor borrowers, as claimed.
Did it work? Minorities made up 49% of the 12.5 million new homeowners,
but many of those loans have gone bad and
the minority homeownership rates are shrinking fast.
1999: New Treasury Secretary, Lawrence Summers,
became alarmed at Fannie and Freddie's excesses.
Congress held hearings the ensuing year but nothing was
done because Fannie and Freddie had donated millions to
key congressmen and radical groups, ensuring no meaningful changes
would take place.
"We manage our political risk with the same intensity
that we manage our credit and interest rate risks,"
Fannie CEO Franklin Raines, a former Clinton official
and current Barack Obama advisor, bragged to investors in 1999.
2000: Secretary Summers sent Undersecretary Gary Gensler
to Congress seeking an end to the "special status".
Democrats raised a ruckus as did Fannie and Freddie,
headed by politically connected CEO's who knew how to reward
and punish. "We think that the statements evidence a contempt for the nation's
housing and mortgage markets" Freddie spokesperson Sharon McHale said.
It was the last chance during the Clinton era for reform.
2001: Republicans try repeatedly to bring fiscal sanity to Fannie and Freddie
but Democrats blocked any attempt at reform; especially Rep. Barney Frank
and Sen. Chris Dodd who now run key banking committees and were huge
beneficiaries of campaign contributions from the mortgage giants.
2003: Bush proposes what the NY Times called "the most significant
regulatory overhaul in the housing finance industry since
the savings and loan crisis a decade ago".
Even after having discovered a scheme by Fannie and Freddie to
overstate earnings by $10.6 billion (in order to boost their bonuses),
the Democrats killed the attempt to reform.
2005: Then Fed chairman Alan Greenspan warned Congress: "We are placing
the total financial system at substantial risk". (His warning proved to be true.)
With two others, Sen.McCain co-sponsored a Fannie/Freddie reform bill and said,
"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,
to the overall financial system and to the economy as a whole".
Sen. Harry Reid accused the GOP of trying to "cripple the ability of Fannie
and Freddie to carry out their mission of expanding homeownership"
The bill went nowhere.
2007: By this time Fannie and Freddie owned or guaranteed over HALF of the
$12 trillion US mortgage market. These mortgage giants, whose executive suites
were top-heavy with former Democratic officials, had been working with Wall St.
to repackage the bad loans and sell them to investors.
As the housing market fell in '07, subprime mortgage portfolios suffered
major losses. The crisis, which took 15 years in the making, was on.
2008: McCain had repeatedly called for reforming the behemoths,
Bush had urged reform 17 times.
Still the media have continued to repeat the Democrats' talking points
about this being a "Republican" disaster.
True that a few Republicans are complicit, but the long and the short of it is that
Fannie and Freddie were:&nbs p;
Created by Democrats, regulated by Democrats,
largely run by Democrats, and protected by Democrats.
And now taxpayers are being asked for $700 billion!!
For whom? For Wall Street? For Mortgage insurance companies?
For poor home owners? Or to protect culpable government officials?
If you doubt any of this, just click the links below and
listen to your lawmakers own words. They are self-condemning!
ACORN is one of the principle beneficiaries of Fannie/
Freddie's slush funds. Both funds are currently under
indictment or investigation in many states.
Barack Obama served as their legal counsel, defending their
activities for several years.
Feel free to share this with everyone you know.
Send it. Print it. Talk about it. America needs to know!!!
Below is the link to the IDB editorial that the author of the above article
used to develop the chronological dates leading to where we are today.
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