What do you know, a different point of viewweb page
Whose policies led to the credit crisis?
Ed Morrissey
The credit crisis and the lack of oversight over government-subsidized lenders like Fannie Mae and Freddie Mac occurred on the watch of George Bush, and many blame his economic team for their lack of oversight in the collapse. Barack Obama has made this point one of his major campaign themes, arguing that John McCain would provide more of the same failures that Bush did. However, what many do not recall is that Bush wanted to tighten oversight with a new regulatory board for Fannie Mae, Freddie Mac, and other government recipients for the express purpose of addressing bad loan practices ? and Democrats blocked it.
The New York Times reported this five years ago:
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.
The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac ? which together have issued more than $1.5 trillion in outstanding debt ? is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
This should have been a no-brainer, right? With hindsight, we can see that the Bush administration had accurately diagnosed the problem in the lending market and had a plan to address it. Fannie Mae and Freddie Mac reluctantly supported the plan. However, Democrats objected:
Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.
?These two entities ? Fannie Mae and Freddie Mac ? are not facing any kind of financial crisis,? said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ?The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.?
Representative Melvin L. Watt, Democrat of North Carolina, agreed.
?I don?t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,? Mr. Watt said.
Sounds a little like the Democratic denial of problems in Social Security, doesn?t it? Nothing to see here, no crisis on the horizon. Everybody just move along, now. The Democrats had forced lenders to assume more risk at lower interest rates in the 1990s, as IBD points out today, and they didn?t want to countenance an end to their populist policies:
But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street?s most revered institutions.
Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.
The untold story in this whole national crisis is that President Clinton put on steroids the Community Redevelopment Act, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but ?predatory.?
Yes, the market was fueled by greed and overleveraging in the secondary market for subprimes, vis-a-vis mortgaged-backed securities traded on Wall Street. But the seed was planted in the ?90s by Clinton and his social engineers. They were the political catalyst behind this slow-motion financial train wreck.
And it was the Clinton administration that mismanaged the quasi-governmental agencies that over the decades have come to manage the real estate market in America.
It was the Bush administration that wanted to rein in the madness in the credit markets, and the Democrats who wanted to extend the Clinton policies that created the crisis we have now. After the fit hit the shan, as Michelle says, these same Democrats want to shift blame back to the administration that wanted to increase oversight and curtail risk in lending practices while reducing patronage at the giant GSEs.
The Bush administration isn?t blameless in letting this get out of hand, but clearly the origins of the disaster and the efforts to keep bad policies in place fall on the Democrats in this case.
What do you know, a different point of viewweb page
When are you going to undersatnd Americans don't care what you think?
<font size="2" face="Verdana, Helvetica, sans-serif">Five years ago, Republicans controlled both Congress AND the Presidency.The New York Times reported this five years ago:
That was easy.
You know, there's nothing wrong with subprime debt - if it's managed correctly.
THE PROBLEM is that in recent years underwriting standards went out the door. The banking industry vociferously argued that they could and should be able to monitor their own risk - without government regulation...this is straight capitalism right out of the Republican playbook.
The Bush Administration obliged.
Subprime loans by their very nature have higher defaults...but it wasn't until Wall Street got creative with CDO and such and could sell off the risk and keep that risk off the bank's balance sheet did the banks really let their underwriting standards decline.
If a subprime loan defaults, it will do so in the first two years - primarily because the "homeowner" has no skin in the game. They have no equity in their home.
Loans with a vintage of 2005 and 2006 - and even 2007, remarkably - saw a huge surge in defaults.
It was letting the banks have exactly what they want and the brokerage firms have exactly what they wanted that lead to the mess we have today.
Trying to pin this on the Clinton administration is really funny.
Oh, and if anyone wants to take me on with this particular topic, bring it on. After the last two days I've had at work dealing with the aftermath of this shit...
<font size="2" face="Verdana, Helvetica, sans-serif">Sorry mate your gonna have to translateOriginally posted by travelinman:
When are you going to undersatnd Americans don't care what you think?
Skip that get it now.
When will YOU get it, I dont care
I neglected to mention that the Fed's policy of easy money during this decade also encouraged people to load up the debt on their balance sheets and buy up real estate.
Collateralized debt obligations effectively deregulated the home loan market, by packaging loans and selling them to investors all around the world. Since banks no longer owned the mortgages themselves, they figured it was easier to hide bad loans by pooling them with others and selling them to unsuspecting investors.
CDOs were sold as the highest quality securities when in fact they were pools of junk hidden behind bond insurance that wasn't able to back the losses.
Instead investors got a a bunch of no doc loans, high loan to value loans, reverse amortization mortgages, fraudulent loans from brokerages who didn't care who came in the door, just as long as they got their fee.
The "economic prosperity" of this decade was bogus.
People don't realize just how scary this situation is...and it all happened under a Republican President's watch.
Remember, McCain overwhelmingly approved of Bush's policies and admits that he doesn't understand economics.
Yeah...vote for McCain.
<font color="#CC6600" size="1">[ September 17, 2008 06:11 PM: Message edited by: The Big Sexy ]</font>
trav, read Barney Frank's very long letter to the editor in today's Wall Street Journal. It pretty much details and refutes most of what's in that article.
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