Partially from a commentary on PoliticUsUSA.comSo many people are turning a blind eye to the fact that the Democrats, especially Bill Clinton, Barney Frank and Christopher Dodd, are responsible for the present state of our economy.
1977: President Jimmy Carter (D) 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 show that CRA has not helped decrease crime nor significantly improved so-called poor communities.
1992: Representative Jim Leach (R- Iowa) warned of the danger that Fannie Mae and Freddie Mac were changing from being agencies of the public at large to money machines for the principals and the very few who held stock in the agencies.
1993: President Bill Clinton's administration 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. Both were also growing into entities handing out favors, jobs and contributions to political allies. This potent mix led inevitably to corruption -- and now the collapse of Freddie Mac and Fannie Mae.
1994: Despite warnings, Bill Clinton unveiled his National Home Ownership Strategy, which broadened the CRA in ways Congress never intended.
1995: President Bill Clinton ordered Robert Rubin's Treasury Department to rewrite the rules of home finance. Robert Rubin's group reworked rules, forcing banks to satisfy quotas for sub-prime and minority loans in order to receive a satisfactory CRA rating. The rating was key to expansion or mergers for banks. Loans began to be made on the basis of ethnicity -- specifically minority loans were approved almost carte blanche.
1997 - 1999: Bill Clinton , bypassing the newly Republican led Congress, enlisted Andrew Cuomo (then Secretary of Housing and Urban Development) to assist in allowing Fannie Mae and Freddie Mac to get into the sub-prime market in a BIG way. Led by Representative Barney Frank (D) and Senator Chris Dodd (D), Congress doubled-down on the risk by easing capital limits and allowing the agencies to hold just 2.5% of capital to back their investments vs. 10% holdings for normal banks. Since Fannie Mae and Freddie Mac could borrow at lower rates than commercial banks, their enterprises' boomed!
With incentives in place, banks poured billions of dollars of loans into poor communities, often "no documentation", "no income verification" -- requiring no money down and no verification of income.
Worse still was the cronyism: 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 subsidies of as much as $182 billion. Some analysts say that much of those billions went to the priviliged shareholders and not to poor communities.
1999: New Treasury Secretary, Lawrence Summers, became alarmed at Fannie Mae and Freddie Mac's excesses. Congress held hearings the following year, but nothing was done because Fannie and Freddie had donated millions to key Congressmen and radical groups (such as ACORN), 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: Treasury Secretary Summers sent Undersecretary Gary Gensler to Congress seeking an end to the "special status" afford by the CRA and Clinton's expansion of it. Democrats raised a ruckus, as did Fannie and Freddie, headed by a politically connected CEO. "We think that the statements evidence a contempt for the nation's housing and mortgage markets," Freddie spokesperson Sharon McHale said. That was the last chance, during the Clinton era, for reform.
2001: Republicans tried repeatedly to bring fiscal sanity to Fannie and Freddie, but Democrats blocked any attempt at reform. Rep. Barney Frank and Sen. Chris Dodd, who ran key banking committees and were huge beneficiaries of campaign contributions from the mortgage giants, were especially critical of any reforms.
2003: President George Bush proposed 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 discovering a scheme by Fannie and Freddie to overstate earnings by $10.6 billion to boost their bonuses, the Democrats killed reform.
2005: Federal Reserve chairman Alan Greenspan warned Congress: "We are placing the total financial system at substantial risk". Senator John McCain, along with two others, 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, the overall financial system and the economy as a whole". Senator Harry Reid (D) accused the GOP of trying to "cripple the ability of Fannie and Freddie to carry out their mission of expanding home ownership". The bill went nowhere.
2007: Fannie and Freddie own or guarantee over half of the twelve trillion dollar US mortgage market. The mortgage giants, whose executive suites were top-heavy with former Democratic officials, had been working with Wall Street to repackage the bad loans and sell them to investors. As the housing market fell in 2007, sub-prime mortgage portfolios suffered major losses. The crisis was on, though it was fifteen years in the making.
2008: Presidential candidate John McCain has repeatedly called for reforming the behemoths. President Bush urged reform a recorded 17 times. Still the media have repeated Democrats' talking points about this being a "Republican" disaster. A few Republicans are complicit, but Fannie and Freddie were created by Democrats, regulated by Democrats, largely run by Democrats and protected by Democrats. That's why taxpayers are now being asked for $700 billion!
It's clear that the Democratic Party cannot be trusted with our tax dollars. Adding the extreme liberalism of Barack Hussein Obama will NOT turn our economy around -- but only make things MUCH worse. If you truly want to know how bad it can get, cast your vote for Obama. As for me and my house, "NObama - Keep the change!"
1977: President Jimmy Carter (D) 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 show that CRA has not helped decrease crime nor significantly improved so-called poor communities.
1992: Representative Jim Leach (R- Iowa) warned of the danger that Fannie Mae and Freddie Mac were changing from being agencies of the public at large to money machines for the principals and the very few who held stock in the agencies.
1993: President Bill Clinton's administration 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. Both were also growing into entities handing out favors, jobs and contributions to political allies. This potent mix led inevitably to corruption -- and now the collapse of Freddie Mac and Fannie Mae.
1994: Despite warnings, Bill Clinton unveiled his National Home Ownership Strategy, which broadened the CRA in ways Congress never intended.
1995: President Bill Clinton ordered Robert Rubin's Treasury Department to rewrite the rules of home finance. Robert Rubin's group reworked rules, forcing banks to satisfy quotas for sub-prime and minority loans in order to receive a satisfactory CRA rating. The rating was key to expansion or mergers for banks. Loans began to be made on the basis of ethnicity -- specifically minority loans were approved almost carte blanche.
1997 - 1999: Bill Clinton , bypassing the newly Republican led Congress, enlisted Andrew Cuomo (then Secretary of Housing and Urban Development) to assist in allowing Fannie Mae and Freddie Mac to get into the sub-prime market in a BIG way. Led by Representative Barney Frank (D) and Senator Chris Dodd (D), Congress doubled-down on the risk by easing capital limits and allowing the agencies to hold just 2.5% of capital to back their investments vs. 10% holdings for normal banks. Since Fannie Mae and Freddie Mac could borrow at lower rates than commercial banks, their enterprises' boomed!
With incentives in place, banks poured billions of dollars of loans into poor communities, often "no documentation", "no income verification" -- requiring no money down and no verification of income.
Worse still was the cronyism: 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 subsidies of as much as $182 billion. Some analysts say that much of those billions went to the priviliged shareholders and not to poor communities.
1999: New Treasury Secretary, Lawrence Summers, became alarmed at Fannie Mae and Freddie Mac's excesses. Congress held hearings the following year, but nothing was done because Fannie and Freddie had donated millions to key Congressmen and radical groups (such as ACORN), 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: Treasury Secretary Summers sent Undersecretary Gary Gensler to Congress seeking an end to the "special status" afford by the CRA and Clinton's expansion of it. Democrats raised a ruckus, as did Fannie and Freddie, headed by a politically connected CEO. "We think that the statements evidence a contempt for the nation's housing and mortgage markets," Freddie spokesperson Sharon McHale said. That was the last chance, during the Clinton era, for reform.
2001: Republicans tried repeatedly to bring fiscal sanity to Fannie and Freddie, but Democrats blocked any attempt at reform. Rep. Barney Frank and Sen. Chris Dodd, who ran key banking committees and were huge beneficiaries of campaign contributions from the mortgage giants, were especially critical of any reforms.
2003: President George Bush proposed 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 discovering a scheme by Fannie and Freddie to overstate earnings by $10.6 billion to boost their bonuses, the Democrats killed reform.
2005: Federal Reserve chairman Alan Greenspan warned Congress: "We are placing the total financial system at substantial risk". Senator John McCain, along with two others, 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, the overall financial system and the economy as a whole". Senator Harry Reid (D) accused the GOP of trying to "cripple the ability of Fannie and Freddie to carry out their mission of expanding home ownership". The bill went nowhere.
2007: Fannie and Freddie own or guarantee over half of the twelve trillion dollar US mortgage market. The mortgage giants, whose executive suites were top-heavy with former Democratic officials, had been working with Wall Street to repackage the bad loans and sell them to investors. As the housing market fell in 2007, sub-prime mortgage portfolios suffered major losses. The crisis was on, though it was fifteen years in the making.
2008: Presidential candidate John McCain has repeatedly called for reforming the behemoths. President Bush urged reform a recorded 17 times. Still the media have repeated Democrats' talking points about this being a "Republican" disaster. A few Republicans are complicit, but Fannie and Freddie were created by Democrats, regulated by Democrats, largely run by Democrats and protected by Democrats. That's why taxpayers are now being asked for $700 billion!
It's clear that the Democratic Party cannot be trusted with our tax dollars. Adding the extreme liberalism of Barack Hussein Obama will NOT turn our economy around -- but only make things MUCH worse. If you truly want to know how bad it can get, cast your vote for Obama. As for me and my house, "NObama - Keep the change!"
4 comments:
A few things you did not mention. First Freddie Mac was formed in 1970 under Republican Richard Nixon and it went public in 1988 under Republican Ronald Reagan.
Second, while the Democrats wanted Fannie and Freddie to expand lending in minority areas, so did the Bush administration.
Here are the goals for Fannie and Freddie set by the Department of Housing and Urban Development in 2004. HUD is a Federal Department with its secretary sitting in the Cabinet, and George Bush was president in 2004:
HUD Sets New Goals For Fannie, Freddie
Funds for Lower-Income Buyers to Rise
By David S. Hilzenrath
Washington Post Staff Writer
Tuesday, November 2, 2004; Page E02
Fannie Mae and Freddie Mac will have to increase their funding of mortgages for low- and moderate-income home buyers, under a new rule the Department of Housing and Urban Development announced yesterday.
Under the rule, for example, the goal for low- and moderate-income home buyers would be raised from the current 50 percent to 56 percent in 2008 -- 1 percentage point less than the 57 percent goal HUD proposed in the spring. The goal for loans in so-called underserved areas would increase from the current 36 percent to 39 percent in 2008, instead of the 40 percent that HUD had proposed.
The department lowered the goals slightly because it decided to use a different source of data to measure the market's overall performance, said John C. Weicher, assistant secretary for housing and Federal Housing Commissioner. To meet the new goals, Fannie and Freddie will need to buy over the next four years an estimated 400,000 more qualifying loans than the 10 million loans they otherwise would have bought, Weicher said.
The rule was intended to make the giant government-sponsored companies match or lead the mortgage industry in funding for the target markets, HUD officials said. The department has alleged that, despite their federal charters and government-conferred privileges, Fannie and Freddie have lagged the industry in the percentage of their business devoted to groups such as minority first-time home buyers.
Freddie Mac spokeswoman Sharon McHale said the new goals may be so high that the company will be forced to reduce its funding for other borrowers, potentially "making it harder for workforce families and working families with children to get a mortgage."
Fannie Mae "will be working with HUD and our housing partners to minimize any unintended consequences for housing that may result from the new goals," spokesman Charles Greener said.... (http://www.washingtonpost.com/wp-dyn/articles/A17090-2004Nov1.html)
Then, George Bush was very much involved in pressing to expand homeownership in general and ownership by minority groups in particular.
. Here is George Bush when signing the “American Dream Downpayment Act of 2003.” (Begin quotes)
President Bush Signs American Dream Downpayment Act of 2003
I am here today because we are taking action to bring many thousands of Americans
closer to owning a home. Our government is supporting homeownership because it is
good for America, it is good for our families, it is good for our economy.
One of the biggest hurdles to homeownership is getting money for a down payment.
This administration has recognized that, and so today I'm honored to be here to sign
a law that will help many low-income buyers to overcome that hurdle, and to achieve
an important part of the American Dream.
This administration will constantly strive to promote an ownership society in
America. We want more people owning their own home. It is in our national interest
that more people own their own home. After all, if you own your own home, you have a
vital stake in the future of our country. And this is a good time for the American
homeowner. Today we received a report that showed that new home construction last
month reached its highest level in nearly 20 years.
The reason that is so is because there is renewed confidence in our economy. Low
interest rates help. They have made owning a home more affordable, for those who
refinance and for those who buy a home for the first time. Rising home values have
added more than $2.5 trillion to the assets of the American family since the start
of 2001.
The rate of homeownership in America now stands a record high of 68.4 percent. Yet there is room for improvement. The rate of homeownership amongst minorities is below 50 percent. And that's not right, and this country needs to do something about it. We need to -- (applause.) We need to close the minority homeownership gap in America so more citizens have the satisfaction and mobility that comes from owning your own home, from owning a piece of the future of America.
Last year I set a goal to add 5.5 million new minority homeowners in America by the end of the decade. That is an attainable goal; that is an essential goal. And we're making progress toward that goal. In the past 18 months, more than 1 million minority families have become homeowners. (Applause.) And there's more that we can do to achieve the goal. The law I sign today will help us build on this progress in a very practical way.
Many people are able to afford a monthly mortgage payment, but are unable to make the down payment. So this legislation will authorize $200 million per year in down payment assistance to at least 40,000 low-income families. These funds will help American families achieve their goals, and at the same time, strengthen our communities.
end quote
Finally, while the sub-prime mess was a large part of what caused the current financial crisis, it was not all the causes. Let's remember that investment banks took on sub-prime paper and hid it off of their balance sheets, where it could not be found by investors. Who is responsible for not stopping this? The SEC.
Then there is the $50 or so trillion (yes TRILLION) in credit default swaps, which are not regulated, and were the main cause of AIG going belly up, and which are sending shock waves through the international financial system.
Then there was the very high rates of leverage that banks used when buying sub-prime paper. Who failed to regulate? Again, the Fed.
I thoroughly researched the causes of the subprime crisis and was surprised at the paper trail that I found. Although the crisis has its roots in 1999, it was really the policies that were put in place between 2001 and 2006 that caused this crisis. I reviewed White House, HUD, and Fannie Mae and Freddie Mac press releases and fact statements as well as many Acts that were passed during that time period. If you read down through this, I cite to and quote many of the important documents as well as include links to many of the documents at the end.
Republican Phil Gramm was the sponsor of the 1999 Gramm-Leach-Bliley Act which removed depression-era Glass-Steagall Act requiring a separation between banking, investment, insurance, and brokerage activities. Bush considered appointing Gramm as the Secretary of Treasury and now Gramm is considered as McCain’s frontrunner for the post. Gramm’s and the Republican Congress’ Act was the first key piece of de-regulation that put into place this economic crisis.
How did the repeal of this Act have a role in the current crisis? The Act allowed, for the first time since the Great Depression, banks to deal in securities which allowed them to purchase mortgage-backed securities. If not for the Gramm-Leach-Bliley Act being passed by the Republican Congress, banks could not have dealt in mortgage-backed securities.
Did Clinton have a role in this deregulation? Clinton did initially threaten to veto this Act, but eventually signed it into law. At that time, the Republicans had the majority in Congress, it was a Republican-authored Bill, and the Republicans had enough votes to override a veto by Clinton.
Nonetheless, the Gramm-Leach-Bliley Act was only the first step that was taken to create this mess. In addition to the Gramm-Leach-Bliley Act, the Republican Administration and Congress furthered this mess between 2001 and 2006. In order to stimulate the economy, stave off a recession, and feed the market's huge demand for more mortgage-backed securities, Bush aggressively pushed the lending industry to make massive amounts of mortgage loans. To do so, he called for the most massive increase minority and low income homeownership in our history as part of his "Ownership Society" plan.
In 2001/2002, Bush created "America's Home Ownership Challenge" in which he challenged the private lending sector as well as Fannie Mae and Freddie Mac to make more than 5.5 million new minority and low income mortgage loans. To meet his challenge to the private lending industry, 24 of our largest banking and lending companies pledged to make 1.1 trillion dollars in low income and minority loans. You can find all of the official documents in the White House Press Releases if you use "America's Home Ownership Challenge" as your search term in the White House archives.
Bush aggressively pushed the private lending industry to make over 1.1 trillion in low income and minority lows and to "create more creative" loan products to do it. He pushed them to "loosen credit standards" and pushed them to make the most risky loan products available to the riskiest buyers. Then, he turned to Fannie Mae and Freddie Mac and threatened to not rewrite their regulatory charters.
The government-sponsored corporations created to increase the liquidity of mortgage markets, so more capital would be available for mortgage loans, are supposed to lead the market in reaching underserved populations. While these corporations have increased their commitments to these efforts, they lag behind private lenders in this regard, according to government studies. The Administration will revisit the regulatory goals for these corporations’ purchases of affordable housing loans, which are set to expire in 2003. The federal government should demand more and should hold such publicly-chartered corporations accountable for better performance.
(From Bush’s Press Release entitled “A Home of Your Own EXPANDING OPPORTUNITIES FOR ALL AMERICANS, PRESIDENT GEORGE W. BUSH JUNE 2002” regarding his “America’s Homeownership Challenge).
The Bush Administration issued the following press release hailing its successes in pushing the private lending industry and Fannie Mae and Freddie Mac into making more low income and minority loans:
Under President Bush's leadership, overall U.S. homeownership in the second quarter of 2004 reached an all-time high of 69.2 percent. Single-family housing affordability is at its highest level in 30 years, and minority homeownership set a new record-high of 51 percent in the second quarter.
The President has called on Congress to work with him on additional steps to promote homeownership in America. He has set bold goals for homeownership, including his challenge to the Nation to create 5.5 million new minority homeowners by the end of the decade - and he has now set an additional goal of 7 million new affordable homes.
(White House Press Release – “Increasing Affordable Housing & Expanding Homeownership).
Through the Republican Congress in 2003 and the Bush Administration's work through HUD and the FHA, the Bush Administration forced Fannie Mae and Freddie Mac to, for the first time, make available riskier loan products to minority and low income buyers.
The Federal Housing Administration Mortgage Program. In 2002, the President issued America’s Homeownership Challenge to increase first-time minority homeowners by 5.5 million through 2010. The Federal Housing Administration (FHA) mortgage program is an important tool for reaching that goal. In 2006, 31 percent of those using FHA mortgages were minorities purchasing their first home. The 2008 Budget continues Administration efforts to modernize FHA by improving its ability to reach traditionally underserved homebuyers (aka those who do not normally qualify for loans), such as low- and moderate-income families, individuals with blemished credit, and families who have little savings for a down payment.
(From Bush Administration’s White House Press Release entitled, “Focusing on the Nation’s Priorities – Meeting America’s Housing Needs”).
The Bush Administration through HUD, also required Fannie and Freddie to give a higher percentage of their loans to loan-income and minorities that otherwise would not qualify for the loans.
That's why I've challenged the industry leaders all across the country to get after it for this goal, to stay focused, to make sure that we achieve a more secure America, by achieving the goal of 5.5 million new minority home owners. I call it America's home ownership challenge.
And let me talk about some of the progress which we have made to date, as an example for others to follow. First of all, government sponsored corporations that help create our mortgage system -- I introduced two of the leaders here today -- they call those people Fannie May and Freddie Mac, as well as the federal home loan banks, will increase their commitment to minority markets by more than $440 billion. (Applause.) I want to thank Leland and Franklin for that commitment. It's a commitment that conforms to their charters, as well, and also conforms to their hearts.
(From White House Speech archives – “President calls for Expanding Opportunities to Homeowners” at St. Paul AME Church in Atlanta, Georgia).
Franklin Raines, the head of Fannie Mae at the time, also responded to Bush’s “Challenge” in a letter, stating:
June 13, 2002
President George W. Bush
The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500
Dear Mr. President:
As America’s largest source of private capital for affordable housing, Fannie Mae applauds your call for “broader homeownership, especially for minorities.” We accept your challenge to the private sector to join in partnership to address America’s housing needs. And we are proud to step up to your challenge by launching an even greater commitment of private capital and creative strategies to expand minority homeownership. * * * (the full letter can be found online).
Then, the following press release was sent out:
Fannie Mae Chairman and CEO, Franklin D. Raines today joined President Bush and U.S. Department of Housing and Urban Development (HUD) Secretary Mel Martinez, and other industry leaders and non-profit organizations, for a housing summit to promote the Administration's proposal to expand minority homeownership.
* * *
Fannie Mae's ten-point plan to help advance the Bush Administration's homeownership proposals was included in the Blueprint for the American Dream document released by HUD today.
The Blueprint for the American Dream that we unveiled today is the response to the `homeownership challenge' President Bush issued in June to increase minority homeownership," said HUD Secretary Mel Martinez. "Our partners, representing every segment of the affordable housing industry, are committed to working together to achieve the President's goal of adding 5.5 million new minority homeowners by the end of the decade."
In his February State of the Union address President Bush called for "broader homeownership, especially among minorities." In June, President Bush challenged both the public and private sector to be a partner in his crusade to create 5.5 million new minority homeowners by the end of the decade.
Fannie Mae responded by committing $700 billion in home financing to 4.6 million minority households through 2009. This increases by 66 percent the specific pledge Fannie Mae made in 2000 to minority families through it's American Dream Commitment plan to provide $420 billion for three million minority families.
(quotes from Fannie Mae and Freddie Mac in Business Wire “President Bush’s Nationwide Effort to Increase Minority Homeownership” – October 15, 2002).
Fannie Mae responding to Bush’s aggressive push by committing $700 billion for low income and minority loans, a 66 percent increase in its previous pledge made in 2000.
In 2003, the following article was on Washington Business Wire:
WASHINGTON--(BUSINESS WIRE)--March 18, 2003--On the third anniversary of its "American Dream Commitment(R)," Fannie Mae and its lender partners already have fulfilled over half of its ten-year pledge to provide $2 trillion in home financing for 18 million historically underserved families, Fannie Mae Chairman and CEO Franklin D. Raines announced today.
To date, Fannie Mae has provided more than $1.3 trillion for nearly 12 million targeted families, completing two-thirds of the American Dream Commitment in about 30 percent of the time, and leading the market in serving minorities and the nation's affordable housing needs.
Joining with representatives from 11 leading mortgage lenders and Fannie Mae partners, Raines applauded the mortgage finance industry for its extraordinary efforts to reach and serve "emerging markets" of historically underserved families and communities, deliver Fannie Mae's $2 trillion in targeted capital, and extend the benefits of the nation's housing boom.
Lender partners participating in today's announcement include: Bank of America; Bank One Corporation; Charter One Bank; Countrywide Financial Corporation; Doral Financial Corporation; First Horizon Home Loan Corporation; Fleet Boston Bank; Huntington Mortgage Company; Irwin Mortgage; J.P. Morgan Chase & Co.; and Standard Mortgage Corporation.
"Together, America's top lenders and Fannie Mae have made terrific progress in bringing the nation's housing boom to overlooked Americans and addressing the gaps in housing opportunity," Raines said. "Fannie Mae applauds our lender partners for helping us surpass the halfway mark in our $2 trillion commitment to underserved families so quickly. Together, we lead the market in serving Americans of color and modest means."
The Administration and Republican Congress also passed the “American Dream Downpayment Act of 2003” to allow low income and minorities with blemished credit and no ability to come up with a downpayment to have the government cover their downpayment and closing costs. The Act gave 161.5 million dollars in taxpayer money to cover the downpayment and closing costs of minorities and low income individuals that would not be able to afford a downpayment and/or had “blemished credit.”
On December 16, 2003, President Bush signed into law the American Dream Downpayment Act of 2003, which will help approximately 40,000 families a year with their down payment and closing costs, and further strengthen America’s housing market. This legislation complements the President’s aggressive housing agenda announced in 2002 to dismantle the barriers to homeownership.
(From White House Press Release “American Dream Downpayment Act of 2003 – Expanding Homeownership Opportunities for All).
Bush also pushed and passed a "Zero-down Payment" initiative.
BUSH ADMINISTRATION ANNOUNCES NEW HUD "ZERO DOWN PAYMENT" MORTGAGE Initiative Aimed at Removing Major Barrier to Homeownership
LAS VEGAS - As part of President Bush's ongoing effort to help American families achieve the dream of homeownership, Federal Housing Commissioner John C. Weicher today announced that HUD is proposing to offer a "zero down payment" mortgage, the most significant initiative by the Federal Housing Administration in over a decade. This action would help remove the greatest barrier facing first-time homebuyers - the lack of funds for a down payment on a mortgage.
Speaking at the National Association of Home Builders' annual convention, Commissioner Weicher indicated that the proposal, part of HUD's Fiscal Year 2005 budget request, would eliminate the statutory requirement of a minimum three percent down payment for FHA-insured single-family mortgages for first-time homebuyers.
"Offering FHA mortgages with no down payment will unlock the door to homeownership for hundreds of thousands of American families, particularly minorities," said HUD's Acting Secretary Alphonso Jackson. "President Bush has pledged to create 5.5 million new minority homeowners this decade, and this historic initiative will help meet this goal."
Preliminary projections indicate that the new FHA mortgage product would generate about 150,000 homebuyers in the first year alone.
"This initiative would not only address a major hurdle to homeownership and allow many renters to afford their own home, it would help these families build wealth and become true stakeholders in their communities," said Commissioner Weicher. "In addition, it would help spur the production of new housing in this country.”
The Administration, through HUD, further forced Fannie Mae and Freddie Mac to offer riskier 3, 5, and 7 year arm loan products to low income and minorities.
BUSH ADMINISTRATION ANNOUNCES NEW ADJUSTABLE-RATE MORTGAGE PRODUCTS TO ENHANCE HOMEBUYING OPPORTUNITIES
40,000 More Families Expected To Benefit From New Offerings
WASHINGTON – The Department of Housing and Urban Development is proposing to enhance homebuying opportunities by expanding its offerings of adjustable-rate mortgage (ARM) products on FHA-insured mortgages. Potential homebuyers would be able to choose mortgages with periods of three, five, seven or ten years, depending on their needs, during which time the interest rate would be fixed. “By offering additional types of FHA-insured ARMs tailored to the financial conditions and desires of the borrowers, we are creating more homeownership opportunities,” said HUD Secretary Mel Martinez today in a speech to America’s Community Bankers. “We estimate that as many as 40,000 families a year will choose these new adjustable-rate mortgages as their way of financing their home purchase.”
(HUD Press Release).
Bush and the Republican Congress forced Fannie Mae and Freddie Mac to make zero-down loans and adjustable rate 3, 5, and 7 year arms available to the riskiest buyers. Fannie Mae and Freddie Mac were forced to effectively finance 103 percent of the mortgage (including closing costs).
The Administration often pointed to the huge increase in housing as one of its greatest successes.
[The Administration has] Helped Americans buy homes, expanding the homeownership rate to nearly 70 percent and the minority homeownership rate to over 51 percent nationwide. With approximately three million minorities owning a home for the first time, the Nation now has the highest minority homeownership rate in its history. Furthermore, the Administration is ahead of schedule in achieving the Presidential goal of adding 5.5 million new minority homeowners by 2010.
(From Bush Administration’s press release entitled “Expanding Home Ownership” under section entitled “Accomplishments”).
It was between 2001-2005 that most of these loans that have gone bad were made. You can find all of the official documents at the White House, HUD, and Fannie Mae and Freddie Mac press release websites. You can also find the head of Fannie Mae's letter (Raines) back to Bush (after Bush threatened to not renew their charter) saying that he would meet his aggressive challenge online.
So why did Bush and the Republican Congress push minority and low income loans? They pushed it for two main reasons. First, the economy was facing a recession and they looked to stimulate economy by stimulating the housing market. In fact, the Administration pointed to the huge increase in housing numbers under his “leadership” to show that he stimulated the economy to keep us out of a recession. Second, there was a huge demand in the securities market for mortgage-backed securities and there were not enough of them to keep up with demand.
Mortgage-backed securities were in such demand because it allowed banks and lenders to turn an illiquid asset - mortgages-- into a liquid asset by bundling the mortgages and selling them as securities. Also, many thought that they were great securities to buy because they were further secured by collateral -- the homes -- and if they debt went bad, the collateral could be sold. They also thought that the mortgage-backed securities bundled from loans made through Fannie and Freddie were government guaranteed because they are quasi-government agencies.
In any event, there was a huge demand for these in the market and not enough supply. To increase supply for mortgage-backed securities, more loans had to be made. The only way to get more loans made was to come up with more creative loan products to get people into homes that otherwise would not qualify. So the Bush Administration and Republican Congress aggressively came up with ways to allow individuals who normally could not get loans to get loans.
The problem was the housing “bubble” started to burst and home values started to fall. At the same time, many of the 3 and 5 year arm loans were set to adjust to higher interest rates. Homeowners went to re-finance, but were unable to re-finance their mortgages because their homes were now were less than what they owed on their mortgages. Their interest rates shot up incredibly high rates, like 15.9%. Homeowners saw their mortgage payments triple and could no longer afford their homes. The cause of the foreclosures in most cases were “creative loan products” with low introductory rates that were scheduled to shoot up or adjustable rates that shot up to unconscionable rates that left individuals unable to pay their very high mortgages as well as the loss in home value that left individuals unable to refinance their mortgages at reasonable fixed rates. Go to the HUD website and research in their archives for "Blueprint for the American Dream" to see their master plan.
Here is a list of some of the White House Press Releases on the subject.
Homeownership Policy Book - Chapter 2
Establish a national goal of at least 5. Challenge the private sector real estate and mortgage finance industries to dramatically increase their ..
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If you are going to make such incredulous claims, you should provide references and foot notes.
First, lets take a look of the the facts:
Community Reinvestment Act (CRA). Republicans have stated that CRA government regulations lead to or even created the subprime mortgage crisis, and serves as an example of why government regulation should be relaxed.
The CRA is not a “mortgage” law. CRA also addresses commercial business loans, and was enacted to help curtail discriminatory lending practices that largely impacted communities with high minority populations. Women in these areas were hit particularly hard as they were unable to access credit, purchase homes, or expand their businesses.
The CRA was enacted in 1977 under the Jimmy Carter administration “to encourage depository institutions to help meet the credit needs [including mortgages and commercial business loans] of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations.”
Lenders (banks and thrifts) who were taking in community deposits in “struggling” areas, were not offering mortgages, credit, or business loans to qualified applicants in those same areas. This practice was known as “Redlining” and created a tremendous disparity in access to cash for consumers who were not affluent and white.
CRA was enacted to encourage federally insured lenders to offer loans to *qualified* applicants in communities where they also take deposits. It requires periodic review of how lenders are performing in communities; it does not demand quotas, it discourages redlining by identifying institutions that still refuse entire geographic areas access to cash.
Here are full list of political lies around this...
http://womeninbusiness.about.com/od/womenspolitics/a/cra-lie-truths.htm
Here is a summary...
Political Lie: President Clinton created the subprime mess by enacting the Community Reinvestment Act (CRA).
Truth: CRA was enacted in 1977, under the Jimmy Carter administration, not under the Clinton administration. The Act was largely intended to identify and discourage "redlining," a discriminatory practice where lenders took money from depositors in certain communities but would offer no credit to the entire population rather than look at depositors individually.
* What Does the CRA Regulate?
* What is the Community Reinvestment Act?
Clinton was responsible for substantial changes in CRA law to encourage business growth. The language was considered controversial at the time so it was written into the new guidelines that CRA be revisited seven years later for performance evaluation. Bush II did revisit the Act and significantly altered it in a 2005 amendment.
During Clinton’s administration, in part because of incentives for business growth and access to capital, the economy not only thrived but more millionaires were created in the four years Clinton was in office than in any other time throughout history. The subprime mortgage problem only began to occur in measurable terms after Bush amended CRA in 2005 dramatically weakening the law.
Political Lie: CRA forces (or encourages) lenders to offer risky loans to people in order to fill quotas.
Truth: CRA has no such provisions, quotas, or across-the-board requirements.
Political Lie: CRA law is what caused the mortgage crisis.
Will we ever really get the true story of who created the mess we now find ourselves in? Both sides want to blame the other because let's face it, who really wants to take responsibility for this? I was reading bits of Plunder by Danny Schechter on the weekend, and so far for my money, he's offered the best take on it that I can actually understand without all the political doublespeak.
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