Paper: Private Sector Loans Triggered Financial Crisis, Not Fannie Or Freddie

McClatchy:

As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.

Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.

Read the whole story: McClatchy

Comments

[RRoadrunner]

When in boubt fuel the fires and blame the victims...­..

[Carolab]

Just like slavery.

[Oldbuck]

The thing that McCain and Palin are attacking about Fannie and Freddie is the Fair Credit Act which says you can't not discriminate against anyone who applies for a loan by race. It does not say you can't turn them down because of their financial ability to pay for loan. It only reinforces that better be the only reason Then McCain like to talk about how much money was contributed to the Obama campaign by Freddie and Fannie what he fail to mention by Federal law Freddie and Fannie can not contribute to any political campaign. The only way they can contribute is personal employee contributions well probably the employee of a lot of companies have contributed more to Obama than to McCain.

[TN]

Obama needs to run an ad explaining in simple terms with graphs who is the culprit and put to bed the swiftboating of democrats by republican media.

[BuckeyeGal]

Second!
Barack or Joe, please get rid of the smoke and mirrors on this issue.
Citing deregulation doesn't clear the confusion.
Break it down for the public in stages.

[Carolab]

It is a complex issue but it could be done. The thing we are seeing here is the same-old same-old pointing the finger in the other direction. The Republicans always do it. The Democrats know the score. The Independents who are smart enough to see that their lives have been destroyed by eight years of Republican rule will know better than to vote for them. The race-baiting tactics of the GOP are designed to inflame tensions and incite problems.

[Amalek]

Well written article. However most republicans cannot get past the talking points of the black people doing this to us, and those who are smart enough to understand the markets simply refuse to accept that Reaganism does not work.

In reality, the greedy financial markets created derivative products that were so complex they did not understand the risk associated with them. A first step in cleaning this up will be to regulate the issuance of derivatives, to go back to the basics, and limit the use of complex financial instruments unless there is a good public policy reason otherwise.

[almoguy]

Derivatives are just the seedbed for out of control parasitic gambling. If the economy was a whale, derivative gamblers would be pilot fish that do nothing for the greater health of the organism, and as we have witnessed in the last year, will kill eventually the host.

[racetoinfinity]

Yes!

[Rapid Ray]

Talk about history repeating itself....

From the Depository Institutions Deregulation and Monetary Control Act of 1980.

SENSE OF THE CONGRESS.-­-It is the sense of the Congress that--
(1) immediate and carefully-­coordinate­d action should be taken by the Congress and the President to arrest the credit crisis referred to in subsection (a) and provide a healthy and efficient marketplace that works for owners, lenders, and investors; and
(2) that efforts should be undertaken to explore measures that--
(A) modernize and simplify the rules that apply to pension investment in real estate to remove unnecessary barriers to pension funds seeking to invest in real estate;
(B) strengthen the secondary market for commercial real estate debt and equity by removing arbitrary obstacles to private forms of credit enhancement;
(C) restore balance to the regulatory environment by considering the impact of risk-based capital standards on commercial, multifamily and single-family real estate; ending mark-to-market, liquidation-based, appraisals; encouraging loan renewals; and, fully communicating the supervisory policy to bank examiners in the field; and
(D) rationalize the tax system for real estate owners and operators by modifying the passive loss rules and encouraging loan restructures.

http://www.fdic.gov/regulations/laws/rules/8000-2900.html

[Rapid Ray]

"And now I'd like to sign into law this remarkable and very far-reaching and basic new bill that will accomplish these benefits for the American people. And my thanks again to all those who've had a part in this effort."

President Jimmy Carter - March 31st, 1980

This bill opened door to mortgage backed securities and risk investments by banks and could very well be the true origin point of the financial meltdown we are experiencing today.

[GrainOSand]

I missed the section that condoned robbery and theft or that told bankers to forego their ballyhooed education, experience, expertise, or common sense and make bad loans to people who had no ascertainable proof of being able to afford the debt they were contractually assuming. I did see a caveat that suggested prudence:

"provide a healthy and efficient marketplace that works for owners, lenders, and investors"

I do not think that the private sector subprime lenders followed this prudent advice, stipulation, or mandate. I think we now realize they were not healthy or efficient in their approach or in any way concerned about the consumer or the larger nation. The article stated plainly who was to blame and your posting only confirms that private sector unregulated greed overrode all else to bring us the current situation.

[infinity]

Yes, and in the nearly 30 year period since there have been 20 years of Republican presidential administrations. If this legislation is the culprit, why didn't Regan, Bush1 and Bush 2 eliminate it? And for most of that time Alan "the Oracle" Greenspan was Fed Reserve chairman, a disciple of Ayn Ryan. During his tenure the deadly sin of avarice (greed) euphemistically became "self-interest" and regulation became the operative dirty word.

[Carolab]

It wasn't until Greenspan and Phil Gramm lobbied to repeal Glass-Steagall that the door opened wide.

[GrainOSand]

...always return to the scene of the crime.

[GrainOSand]

I am glad some in journalism had the good sense to debunk this myth that is meant to demonize versus identify actual root cause. I knew without data the claims were lies as I know that all of the claims of blacks being the only recipients of welfare and Affirmative Action are lies as well. We really need to get beyond looking at issues of povery through a lens of color and start looking at it through a lens of empathy and desire to eradicate, but I guess that will not gain any traction until a newspaper or a journalist or some other "credible" source suggests that we do so. Anyway, I am glad for this article, because I can simply link it every time I encounter some deluded soul trumpeting the myth and the lie of this economic crisis.

[dadw5boys]

The Journalist only reported this after hundreds of us complained about the lies !!!!!

We have been calling and posting all over the net !

Fannie and Freddie only had 4% in bad loans before the Fed forced them to assmue the bad loans from failing banks and investment banks.

[GrainOSand]

We (the people) are the new journalism and that means the free press is becoming free again.

[gevan]

I thought it was triggered by the deflation in the prices of thousands of independently owned homes.

[Amalek]

Yes, but that was because the houses were overpriced because of the excess of easy credit fueled by the use of deriviatives and other financial instruments. People bought houses for more than they were worth because the mortgage bankers were happy to lend money to any fool. The mortgage bankers were not on the hook because it wasn't their money, and the bank didn't care because it just sold the mortgage to an investment banker, who didn't care because he just cut it up into a hundred pieces and sold parts to everyone else, but somewhere along the line no-one asked whether the guy was going to make the payments.

[Bongborg]

And the actual lenders weren't on the hook because FM & FM bought the loans from them. Check the banks that made the actual loans. I bet a Republican loan officer can be found behind every loan desk, with Republican operating officers in every office. Think they were happy to pass all the risk to someone else while reaping the profit? Republicans? C'mon!

[JenMI]

Great article..

[racetoinfinity]

Once again, right wing propogada is shown to be b.s. Why so muchof the country is in thrall to Faux Noise and why all the talk radio (most of it) is right wing hysterical hot air can only be attriubted to the fact that too many people in this country are stupid. Wise up, suckers - you are being played!

[ImVotingforThatOne]

I have to admit that I don't know much about this cause I'm not an economist, but the crash on Wall Street is being blamed on Fannie and Freddie, right? Well, if the government bought Fannie and Freddie before the crash, then how can the crash be attributed to Fannie and Freddie? Wouldn't the crash then, in fact, point to some other entity?

Again, I admit that I don't know much about how the stock market works and stuff. This whole thing is very confusing to me.

[dfortruth]

How do we know this is not another one of Bush-McCain's lies? It just maybe their way of trying to throw the election to McCain. They will claim there will not be enough money for Obama to do what he promised. They tell us it is because of the dems and Obama, deruglating and giving loans to black and low income people.

But this could very well be Bush-McCain and their rich pals on wall Street playing with the stackk market. After all Pulson knows very well how to do that, and knows each person to contact to make this happen. Do you really believe that if the rich men on Wall St. was loosing their money from the stock market they would be going to the spa. No they would be jumping from a window.

All they would have to do is sell off the right stock, until the market get low, investor began to fear. When the price of the stock is low enough then they buy it back. They are rich enough to do that.
When a bank is about to go down, Bush stpes in loan them the money.. The media helps to spread the fear.

Sounds like the same weapons of mass destructions, fear they spread which cause war and may lives. It call gaming the system. You know what they say: when the president ssneeze Wall street shuts down.

[Amalek]

If I were Bush I would want to throw this election to Obama. If McCain should win, he will follow the Bush policies through and Bush will take the blame in the likely event that it completely falls apart. If Obama wins, and it completely falls apart anyway as it likely will, at least he can blame it on the democratic party.

This may not be the election anyone wants to win.

[Carolab]

If McCain wins, say goodbye to your elections.

[Bettysdad]

I see more foreclosure signs in good neighborhoods than bad.

[KillTheMessenger]

What do you call "a good neighborhood"?

[Carolab]

You know perfectly well what Bettysdad means.

[nomadicexpat]

hmm maybe better kept n'hoods with less crime, better schools and no bars on the windows??

and it's in those neighbourhoods that will suffer most. the root cause of the housing mess (not the current banking crisis of trust) is speculation .. speculation happened in south beach, not south central

[Buddysingh]

The Republicans under this present adminstration are the biggest cowards and blame shifters. In fact this is a culture within the Republican party - not to accept any blame for anything. They were in the Congress for 12 years and this administration has been there for 8 years -systematically raping and pillaging this country's laws. There is no harm in encouraging housing for the very poor too. Thats the American dream. The American Dream is not only for the rich folks. However, check and balances which the Republicans dont like is the BIGGEST problem. They will never have the cojones to stand up and accept their fault. Clinton and everyone else is to be balmed for everything that went wrong. The American people must wake up and throw this bums out for good and bring in some sane accountable govt systems in place. Religion, right wing ideology is the other extreme of Socialism. Responsible, logical and helping the poor to rise above the poverty level should be the duty of every Govt party. Anybody else, who does anything different should be shown the door.

[cordyc]

This whole talk radio attack was racist from the start. Blame poor people, blame community organizers, yada, yada.

The truth is Fannie and Freddie did not cause the current crisis. In fact, on Thursday they auctioned off the insurance contracts (derivatives). They sold for 98 cents on the dollar, unlike Lehman's contracts that Mr. Free Market bought on Friday at auction for less the 9 cents on the dollar. Hmmm.

McCain supporters are ignorant fools at best and down right liars more often trying to insight hatred amongst the joe6packs. I really think it is very sad that real conservatives no longer have a voice.

[FogBelter]

The Right is trying to save their miserable failure of Chicago School Economic Theory. Trickle down is being flushed and all the Cavutos and Krauthammers have left to prevent the world from recognizing that Friedman was a fraud and everything the Right and the NeoCons have stood for since 1980 has led to the collapse of the World Economy is a last ditch, pathetic attempt at race baiting.

But it is an effort in vain, for the Right has been exposed.