There is proof who was responsible and why. Smoking-Gun Document Ties Policy To Housing Crisis http://news.investors.com/Article.aspx?id=589858&p=1 Smoking-Gun Document Ties Policy To Housing Crisis By PAUL SPERRY, FOR INVESTOR'S BUSINESS DAILY President Obama says the Occupy Wall Street protests show a "broad-based frustration" among Americans with the financial sector, which continues to kick against regulatory reforms three years after the financial crisis. "You're seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on the abusive practices that got us into this in the first place," he complained earlier this month. But what if government encouraged, even invented, those "abusive practices"? Rewind to 1994. That year, the federal government declared war on an enemy the racist lender who officials claimed was to blame for differences in homeownership rate, and launched what would prove the costliest social crusade in U.S. history. At President Clinton's direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties. Bubble? Regulators Blew It The threat was codified in a 20-page "Policy Statement on Discrimination in Lending" and entered into the Federal Register on April 15, 1994, by the Interagency Task Force on Fair Lending. Clinton set up the little-known body to coordinate an unprecedented crackdown on alleged bank redlining. The edict completely overlooked by the Financial Crisis Inquiry Commission and the mainstream media was signed by then-HUD Secretary Henry Cisneros, Attorney General Janet Reno, Comptroller of the Currency Eugene Ludwig and Federal Reserve Chairman Alan Greenspan, along with the heads of six other financial regulatory agencies. "The agencies will not tolerate lending discrimination in any form," the document warned financial institutions. Ludwig at the time stated the ruling would be used by the agen cies as a fair-lending enforcement "tool," and would apply to "all lenders" including banks and thrifts, credit unions, mortgage brokers and finance companies. The unusual full-court press was predicated on a Boston Fed study showing mortgage lenders rejecting blacks and Hispanics in greater proportion than whites. The author of the 1992 study, hired by the Clinton White House, claimed it was racial "discrimination." But it was simply good underwriting. It took private analysts, as well as at least one FDIC economist, little time to determine the Boston Fed study was terminally flawed. In addition to finding embarrassing mistakes in the data, they concluded that more relevant measures of a borrower's credit history such as past delinquencies and whether the borrower met lenders credit standards explained the gap in lending between whites and blacks, who on average had poorer credit and higher defaults. The study did not take into account a host of other relevant data factoring into denials, including applicants' net worth, debt burden and employment record. Other variables, such as the size of down payments and the amount of the loans sought to the value of the property being bought, also were left out of the analysis. It also failed to consider whether the borrower submitted information that could not be verified, the presence of a cosigner and even the loan amount. When these missing data were factored in, it became clear that the rejection rates were based on legitimate business decisions, not racism. Still, the study was used to support a wholesale abandonment of traditional underwriting standards the root cause of the mortgage crisis. For the first time, Washington's bank regulators put racial lending at the top of their checklist. Banks that failed to throw open their lending windows to credit-poor minorities were denied expansion plans by the Fed in an era of frenzied financial mergers and acquisitions. HUD threatened to deny them access to Fannie Mae and Freddie Mac, which it controlled. And the Justice Department sued them for lending discrimination and branded them as racists in the press. "HUD is authorized to direct Fannie Mae and Freddie Mac to undertake various remedial actions, including suspension, probation, reprimand or settlement, against lenders found to have engaged in discriminatory lending practices," the official policy statement warned. The regulatory missive, which had the effect of law, advised lenders to bend "customary" underwriting standards for minority homebuyers with poor credit. "Applying different lending standards to applicants who are members of a protected class is permissible," it said. "In addition, providing different treatment to applicants to address past discrimination would be permissible." To that end, lenders were directed to "make changes in marketing strategy or loan products to better serve minority segments of the market." They were also advised to "change commission structures" to encourage brokers and loan officers to "lend in minority and low-income neighborhoods" a practice Countrywide Financial, the poster boy of the subprime scandal, perfected. The government now condemns the practice it once encouraged as "predatory." FDIC warned banks that even unintentional discrimination was against the law, and that they should be proactive in making "multicultural" loans. "An ounce of prevention is worth a pound of cure," the agency said in a separate advisory. Confronted with the combined force of 10 federal regulators, lenders naturally toed the line, and were soon aggressively marketing subprime mortgages in urban areas. The marching orders threw such a scare into the industry that the American Bankers Association issued a "fair-lending tool kit" to every member. The Mortgage Bankers Association of America signed a "fair-lending" contract with HUD. So did Countrywide. HUD also pushed Fannie and Freddie, which in effect set industry underwriting standards, to buy subprime mortgages, freeing lenders to originate even more high-risk loans. "Lenders should ensure that their loan processors and underwriters are aware of the provisions of the secondary market guidelines that provide various alternative and flexible means by which applicants may demonstrate their ability and willingness to repay their loans," the policy statement decreed. "Fannie Mae and Freddie Mac not infrequently purchase mortgages exceeding the suggested ratios" of monthly housing expense to income (28%) and total obligations to income (36%). It warned lenders who rejected minority applicants with high debt ratios and low credit scores to "be prepared" to prove to federal regulators and prosecutors they weren't racist. "The Department of Justice is authorized to use the full range of its enforcement authority." It took a little more than a decade for the negative effects of the assault on prudent lending to be felt. By 2006, the shaky subprime mortgages began to default. In 2008, the bubble exploded. Clinton's task force survived the Bush administration, during which it produced fair-lending brochures in Spanish for immigrant home-loan applicants. And it's still alive today. Obama is building on the fair-lending infrastructure Clinton put in place. As IBD first reported, Attorney General Eric Holder has launched a witch hunt vs. "racist" banks. "It's a more aggressive fair-lending enforcement approach now," said Washington lawyer Andrew Sandler of Buckley Sandler LLP in a recent interview. "It is well beyond anything we saw during the Clinton administration." Tom Perez, assistant attorney general for civil rights, recently testified that his division "continues to participate in the federal Interagency Fair Lending Task Force." And he and the task force are working with the newly created Consumer Financial Protection Bureau to "enhance fair-lending enforcement." The fair-lending task force's original policy paper undercuts the notion the financial crisis was all about banker "greed," though it certainly played a role after the fact. Rather, it offers compelling evidence that the crisis evolved chiefly from government mandates and threats to increase lending to applicants who could not afford them.
It started with FDR, but then Carter lowered the bar, then naughty Bad Boy Bill, who enjoys fine cigars with a certain flavour, lowered it to the floor. McCain should have done his economic homework. Too bad he wasn't aware, or perhaps he was and his strategists didn't want to open the can of worms. But I do hope Herman, Mitt, or even Rick jump on this, because Obama's regime must be fully aware of this since Attorney General Holder is investigating banks, etc., about "racism". The anointed and his czars are trying to shift the egregious threat by government agencies to banks and mortgage brokers from 1994 to now.
Boy this ********** meme is making the rounds. It's been rebutted on the current affairs forum. Explain how barring redlining -- which is discrimination against qualifed borrows -- forced any bank to make any loan to an unqualified borrow. A totally ass-backward conservative meme. By the way, it wasn't first-time buyer loans that caused the crisis in any case. It was subprime refis, packaged into CDSs, and distributed as toxic waste throughout the credit system. So you can't even get your deceptive narrative straight. http://www.slate.com/articles/business/moneybox/2008/10/subprime_suspects.2.html
Do you know who was the first bunch to do CDS and MBS? Fannie and Freddie. Oops bet you didn't see that one coming. In fact they had a total of $3.4 trillion of those on their books at time of bankruptcy. They had a total of $1.4 trillion unsecured debt. This means Fannie and Freddie were loaning recklessly as well.
A wonderful irrelevancy with respect to the OP. Subprime caused the problem, not banning redlining. Democrats tried to regulate subprime lending and CDSs, but guess what, conservatives blocked all such efforts.
Fannie and Freddie provided backing for the majority of the subprime. This is fact. Democrats never tried to regulate subprime. Sept 30th 1999 Sept 11th 2003 You've been caught lying.
More like trolling. I've been impressed with his trolling abilities. Unfortunately, the thread about him today was closed for... trolling.
Democrats tried to regulated CDSs, which was the vector of the subprime loans, but Phil Graham slipped in a rider to the 2000 budget specifically exempting CDSs from regulationi. Graham of course is a banker shill and lobbiest now. You've been caught lying. As to subprime mortgage brokers, Fannie and Freddie were never similarly situated as subprime brokers. Subprime brokers usually sold their loans within two months and didn't care about borrower qualifications. They wrapped them into CDSs and sold them (thanks to the GOP). Fannie and Freddie didn't sell their loans. So now you've been caught lying. Keep posting those memes! They've been exposed ten times over. By the way I'm glad you've abandoned your OP and the claim that the ban on redlining "forced banks" to make unqualified loan. It really made you look bad to repeat that loser. This will help you sort it out: http://www.alternet.org/economy/101...wall_street_for_the_financial_crisis_/?page=3
Sorry, but I don't know who you're talking about. BTW, sorry your thread was closed for trolling. You did a fine job trolling. It was a great effort on your part.
It's OK. Now you're trolling this thread, which deserves it. Meanwhile another ********** meme totally debunked. I love you guys!
LOL... dude you seriously have no clue the history of subprime. It starts way back in 1982 and Democratic Congress. Read up on the Alternative Mortgage Transactions Parity Act then come talk to me. Fannie and Freddie in 1995 was given tax incentives (by Clinton and Congress) to buy MBS from Investment firms. In 1996 HUD set a policy that Fannie and Freddie had to a portfolio of 42/68. 42% of all their mortgages had to given to people who's income was below the median income. By 2005 it was 52% of all Fannie and Freddie loans. Read about it here But just so you know... I am not the OP on this topic. I don't lie about the issues. Both sides of the political spectrum are guilty but it was Government that started the ball rolling not private banks. This is and will always be a fact despite how many times you insist the sky is green and the grass is blue.
Dude, none of this supports your position. The facts are these: 1. Subprime, not first time buyer loans, were the main cause of the crisis -- so your OP is false on its face. 2. Subprime was bad enough, but when mixed with securitization, it resulted in toxic assets infecting the entire credit system. Who deregulated CDSs (or rather prevented regulation). Conservative republicans. Indeed, we even have a face to this madness -- Phil Graham who drafted a special bill (penned by his banker masters) to exempt CDSs from regulation as insurance instruments, which is what CDSs clearly are. 3. There have always been mortgage defaults. Big deal? Banks that overstocked bad mortgages were bought out by more cautious banks under our FDIC system. An efficient way to deal with that. But because conservative lunatics deregulated CDSs everybody in the credit system was stuck holding the bag, and that was the problem. So enough of your discredited rightwing memes. You've been outted.
Subprime is part of the first time buy loans program ran by Fannie and Freddie. Again know the facts. The question of Regulation or no Regulation in the CDS market was decided by Bill Clinton's economic staff. The Commodity Futures Modernization Act of 2000 was signed by Bill Clinton and was modeled after the PWG (President's Working Group Report). I would point you to Larry Summers (yeah that guy Obama picked as one of his main Economic gurus), Robert Rubin and Arthur Levitt as a way for you to do some research. Or you can watch the PBS's The Warning Brooksley Born was the only one in the Clinton Admin arguing for regulation. LOL.. Yes there has always been defaults on mortgages. But never was there a situation in which housing prices grew by 10% to 25% per year. Just so you know the CDS market was never deregulated. It was the OTC market that was never brought under regulation at the advice of Clinton's Economics team and Alan Greenspan. Until you actually know the difference, you will never know what the truth is. As you keep thinking it something that was "unregulated" which blew up. It was actually something that was NEVER regulated.
