NY Times Sept 30, 1999 'shocker'! Guess who mucked up Fannie Mae?

[TSB]

Our Senate Banking Comitee.  Need I say more?

[Hazcat]

No pic, TSB.

[Rastus]

Our Senate Banking Comitee.  Need I say more?

I think I'm going to be sick.

[Fatman]

More info...

The Government Did It
Yaron Brook 07.18.08, 11:30 AM ET

The financial peril of Fannie Mae and Freddie Mac--the government-sponsored, government-regulated mortgage giants regarded as instrumental in solving the nation's mortgage market problems--has one benefit. It should help expose the lie that today's financial problems are the result of an insufficiently regulated market.

For too long, the refrain has gone, Congress and the administration have been asleep at the wheel when they should have been steering the economy by expanding government control over the housing and financial markets. Economist Paul Krugman slams the administration's "free-market ideology"; he urges Bush to "reverse course now" and "seek expanded regulation."

All this overlooks a crucial fact: There has been no free market in housing or finance. Government has long exercised massive control over the housing and financial markets--including its creation of Fannie Mae and Freddie Mac (which have now amassed $5 trillion in liabilities)--leading to many of the problems being blamed on the free market today.

Consider the low lending standards that were a significant component of the mortgage crisis. Lenders made millions of loans to borrowers who, under normal market conditions, weren't able to pay them off. These decisions have cost lenders, especially leading financial institutions, tens of billions of dollars.

It is popular to take low lending standards as proof that the free market has failed, that the system that is supposed to reward productive behavior and punish unproductive behavior has failed to do so. Yet this claim ignores that for years irrational lending standards have been forced on lenders by the federal Community Reinvestment Act (CRA) and rewarded (at taxpayers' expense) by multiple government bodies.

The CRA forces banks to make loans in poor communities, loans that banks may otherwise reject as financially unsound. Under the CRA, banks must convince a set of bureaucracies that they are not engaging in discrimination, a charge that the act encourages any CRA-recognized community group to bring forward. Otherwise, any merger or expansion the banks attempt will likely be denied. But what counts as discrimination?

According to one enforcement agency, "discrimination exists when a lender's underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants." Note that these "arbitrary or outdated criteria" include most of the essentials of responsible lending: income level, income verification, credit history and savings history--the very factors lenders are now being criticized for ignoring.

The government has promoted bad loans not just through the stick of the CRA but through the carrot of Fannie Mae and Freddie Mac, which purchase, securitize and guarantee loans made by lenders and whose debt is itself implicitly guaranteed by the federal government. This setup created an easy, artificial profit opportunity for lenders to wrap up bundles of subprime loans and sell them to a government-backed buyer whose primary mandate was to "promote homeownership," not to apply sound lending standards.

Of course, lenders not only sold billions of dollars in suspect loans to Fannie Mae and Freddie Mac, contributing to their present debacle, they also retained some subprime loans themselves and sold others to Wall Street--leading to the huge banking losses we have been witnessing for months. Is this, then, a free market failure? Again, no.

In a free market, lending large amounts of money to low-income, low-credit borrowers with no down payment would quickly prove disastrous. But the Federal Reserve Board's inflationary policy of artificially low interest rates made investing in subprime loans extraordinarily profitable. Subprime borrowers who would normally not be able to pay off their expensive houses could do so, thanks to payments that plummeted along with Fed rates. And the inflationary housing boom meant homeowners rarely defaulted; so long as housing prices went up, even the worst-credit borrowers could always sell or refinance.

Thus, Fed policy turned dubious investments into fabulous successes. Bankers who made the deals lured investors and were showered with bonuses. Concerns about the possibility of mass defaults and foreclosures were assuaged by an administration whose president declared: "We want everybody in America to own their own home."

Further promoting a sense of security, every major financial institution in America--both commercial banks and investment banks--was implicitly protected by the quasi-official policy of "too big to fail." The "too big to fail" doctrine holds that, when they risk insolvency, large financial institutions (like Countrywide or Bear Stearns) must be bailed out through a network of government bodies including the Federal Deposit Insurance Corporation, the Federal Home Loan Banks and the Federal Reserve.

All of these government factors contributed to creating a situation in which millions of people were buying homes they could not afford, in which the participants experienced the illusion of prosperity, in which billions upon billions of dollars were going into bad investments. Eventually the bubble burst; the rest is history.

Given that our government was behind the wheel, influencing every aspect of the mortgage crisis, it is absurd to call today's situation the result of insufficient regulation.

We do not need more regulation or economic "steering"--laws or bureaucrats dictating to financiers and investors the kind of innovation they may or may not engage in. If that were the solution to economic problems, then Hugo Chavez would preside over the world's healthiest economy in Venezuela. What we need to do is remove the government's power to coerce, bribe, reward and bail out irrational decisions. The unfree market has failed. It's time for a truly free market.

[TSB]

Our Senate Banking Comitee.  Need I say more?

Left to Right....Rhode Island, Massachusetts, Connecticut and New York.  Rather telling I would suggest...

[Sponsor]

[Teresa Heilevang]

The Huckster Speaks.........

I’m including my thoughts on the “bailout bill,” and I believe you will find them of interest.   
 
Frankly, I’m disappointed and disgusted with my own Republican party as I watch them attempt to strong-arm a bailout of some of America’s biggest corporations by asking the taxpayers to suck up the staggering results of the hubris, greed, and arrogance of those who sought to make a quick buck by throwing the dice. They lost, but want the rest of us to cover their bets so they won’t be effected in their lavish lifestyles as they figure out how to spend their tens of millions and in some cases, hundreds of millions in bonuses and compensation which was their reward for not only sinking their companies, but basically doing the same to the entire American economy.
 
It’s especially disconcerting to see the very people who pilloried me during the Presidential campaign for being a “populist” and not “understanding Wall Street” to now line up like thirsty dogs at the Washington, D. C. water dish, otherwise known as Congress, and plead for help. I thought these guys were the smartest people in America! I thought that taxpayers like you and I were similar to the people at the U. N. who have no translator speaking into their headset - that we just needed to trust those that I called the power bunch in the “Wall Street to Washington axis of power.”
 
The idea of a government bailout in which we’d entrust $700 billion to one man without Congressional oversight or accountability is absurd. My party or not, that is insanity and I believe unconstitutional.
 
Will there be far-reaching consequences without some intervention? Probably, but we honestly don’t know since we’ve really never seen this level of greed and stupidity all rolled into one massive move. But may I suggest that letting “Uncle Sugar” step in and bail out the billionaires who made the mess will be far worse and will start a long line of companies and individuals who will demand the same of the government---which last time I checked means that they will be demanding it out of YOU and ME. This is not money that Congress is risking from THEIR pockets or future, but ours. Many if not most of us have already experienced lost value on our homes, retirement accounts, and pensions. Now they’d like for us to assume some further risks so they won’t have to.
 
What happened to the “free market” idea? Is that only our view when we WIN and when we LOSE, we ask the government to come in and take away the pain?

If you are a small business owner, is this the way it works at your place? When you have a bad month, a bad year, or face having to close, can you go up to Congress and get them to write YOU a fat check to take away your risk?
 
Some of what contributed to this disaster is too much government in the form of Sarbanes/Oxley. Some is due to the tax structure that created the hunger for companies to “game” the system. Some is the common sense that was ignored like loaning money to people who can’t pay it back.

Wall Street has become Las Vegas east, but at least in Vegas, people KNOW they are gambling and they don’t expect the government to cover their losses at the tables. In Wall Street, they do. And the American taxpayer burdens the responsibility.

If Congress wants to do something, here are some suggestions:

1. Eliminate ALL capital gains taxes and taxes on savings and dividends right now. Free up the capital and encourage investment. This is the kind of economic stimulus the Fair Tax would bring and if Congress is going to lose money, let them lose it with lower taxes, not with public dollar bailouts of private market mistakes.

2. Repeal Sarbanes/Oxley. It has failed. It was supposed  to prevent this. It didn’t. Kill it.

3.  Demand that the executives who steered their ships into the ground be forced to pay back the losses of their companies. Of course, they can’t, so let them work and give back to the government and they can live like the people they put on the streets or kept there. It makes no sense to put them in jail—that’s just more they will cost you and me. I’d rather them go out and earn money—just not get to keep so much of it this time. I’m not talking about limiting CEO salaries---just those of the people who now are up in Washington begging for help because they ruined their companies.

Attempts by Democrats and Republicans to blame each other is nonsense. They are both guilty and ought to own up and admit it. They all lived off big campaign contributions and the swill of the lobbyists who strong armed them into permission to steal. Enough of blame. Fix it!

This would be a start. If we don’t hold these guys responsible, we are all finished.... Mike Huckabee

[Fatman]

OMG. I gave both the NY Times article and the more recent article posted above explaining how we arrived where we are today to a neighbor this morning. Saw him again this afternoon, all he had to say was, 'the NY Times is a Republican newspaper. It's all propaganda to make McCain and the Republicans look good."  He also said this whole mess happened now because Wall Street wants Obama to lose.

Damn the facts, it's those wascawie Wepubwicans!  And the NY Times leans Republican? What the hell does this guy consider left leaning?

I weep for this country. 

[Hazcat]

OMG. I gave both the NY Times article and the more recent article posted above explaining how we arrived where we are today to a neighbor this morning. Saw him again this afternoon, all he had to say was, 'the NY Times is a Republican newspaper. It's all propaganda to make McCain and the Republicans look good."  He also said this whole mess happened now because Wall Street wants Obama to lose.

Damn the facts, it's those wascawie Wepubwicans!  And the NY Times leans Republican? What the hell does this guy consider left leaning?

I weep for this country. 

Fatman,

The government indoctrination centers have been pumping out brain dead little robots for 20-30 years now.  There are very few thinking people left and very few of the brain dead can be awakened (less each year).  How else could the dim party continue to exist?  They are even twisted enough to believe 1984 was about the conservative party's' goals when in truth it is EXACTLY what the lefties and elitists are steering this country to.

Think about it.  Who wants to make 'thought crimes' (hate crimes)?  Who wants to censor free speech (fairness doctrine)?

SCARY, but sadly true.

[TSB]

Saw him again this afternoon, all he had to say was, 'the NY Times is a Republican newspaper. It's all propaganda to make McCain and the Republicans look good."  He also said this whole mess happened now because Wall Street wants Obama to lose.

NEWS FLASH!!!!

Liberals don't believe in FACTS!!!!!!!   They" FEEL", kind of like a blind man with a white stick!

[TSB]

“Nineteen Eighty-Four (also titled 1984),by George Orwell (the pen name of Eric Arthur Blair), is a 1949 English novel about life under a futuristic totalitarian regime in the year 1984.  It tells the story of Winston Smith, a functionary at the Ministry of Truth, whose work consists of editing historical accounts to fit the government's policies.  The book has major significance for its vision of an all-knowing government which uses pervasive and constant surveillance of the populace, insidious and blatant propaganda, and brutal control over its citizens.  The book had a substantial impact both in literature and on the perception of public surveillance, inspiring such terms as 'Big Brother' and 'Orwellian'.”

Sound familiar?