Discussion:
Private sector loans, Subprime lending not Fannie or Freddie, triggered crisis: Federal Reserve Data shows
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Thomas Jigme Wheat
2011-06-13 18:06:42 UTC
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McClatchy Washington Bureau
Print This Article
Posted on Sun, Oct. 12, 2008

Private sector loans, not Fannie or Freddie, triggered crisis
David Goldstein and Kevin G. Hall | McClatchy Newspapers
last updated: November 24, 2010 01:49:33 PM

WASHINGTON — 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.

Federal housing data reveal that the charges aren't true, and that the
private sector, not the government or government-backed companies, was
behind the soaring subprime lending at the core of the crisis.

Subprime lending offered high-cost loans to the weakest borrowers
during the housing boom that lasted from 2001 to 2007. Subprime
lending was at its height from 2004 to 2006.

Federal Reserve Board data show that:

•More than 84 percent of the subprime mortgages in 2006 were issued by
private lending institutions.


•Private firms made nearly 83 percent of the subprime loans to low-
and moderate-income borrowers that year.


•Only one of the top 25 subprime lenders in 2006 was directly subject
to the housing law that's being lambasted by conservative critics.

The "turmoil in financial markets clearly was triggered by a dramatic
weakening of underwriting standards for U.S. subprime mortgages,
beginning in late 2004 and extending into 2007," the President's
Working Group on Financial Markets reported Friday.

Conservative critics claim that the Clinton administration pushed
Fannie Mae and Freddie Mac to make home ownership more available to
riskier borrowers with little concern for their ability to pay the
mortgages.

"I don't remember a clarion call that said Fannie and Freddie are a
disaster. Loaning to minorities and risky folks is a disaster," said
Neil Cavuto of Fox News.

Fannie, the Federal National Mortgage Association, and Freddie, the
Federal Home Loan Mortgage Corp., don't lend money, to minorities or
anyone else, however. They purchase loans from the private lenders who
actually underwrite the loans.

It's a process called securitization, and by passing on the loans,
banks have more capital on hand so they can lend even more.

This much is true. In an effort to promote affordable home ownership
for minorities and rural whites, the Department of Housing and Urban
Development set targets for Fannie and Freddie in 1992 to purchase low-
income loans for sale into the secondary market that eventually
reached this number: 52 percent of loans given to low-to moderate-
income families.

To be sure, encouraging lower-income Americans to become homeowners
gave unsophisticated borrowers and unscrupulous lenders and mortgage
brokers more chances to turn dreams of homeownership in nightmares.

But these loans, and those to low- and moderate-income families
represent a small portion of overall lending. And at the height of the
housing boom in 2005 and 2006, Republicans and their party's standard
bearer, President Bush, didn't criticize any sort of lending,
frequently boasting that they were presiding over the highest-ever
rates of U.S. homeownership.

Between 2004 and 2006, when subprime lending was exploding, Fannie and
Freddie went from holding a high of 48 percent of the subprime loans
that were sold into the secondary market to holding about 24 percent,
according to data from Inside Mortgage Finance, a specialty
publication. One reason is that Fannie and Freddie were subject to
tougher standards than many of the unregulated players in the private
sector who weakened lending standards, most of whom have gone bankrupt
or are now in deep trouble.

During those same explosive three years, private investment banks —
not Fannie and Freddie — dominated the mortgage loans that were
packaged and sold into the secondary mortgage market. In 2005 and
2006, the private sector securitized almost two thirds of all U.S.
mortgages, supplanting Fannie and Freddie, according to a number of
specialty publications that track this data.

In 1999, the year many critics charge that the Clinton administration
pressured Fannie and Freddie, the private sector sold into the
secondary market just 18 percent of all mortgages.

Fueled by low interest rates and cheap credit, home prices between
2001 and 2007 galloped beyond anything ever seen, and that fueled
demand for mortgage-backed securities, the technical term for
mortgages that are sold to a company, usually an investment bank,
which then pools and sells them into the secondary mortgage market.

About 70 percent of all U.S. mortgages are in this secondary mortgage
market, according to the Federal Reserve.

Conservative critics also blame the subprime lending mess on the
Community Reinvestment Act, a 31-year-old law aimed at freeing credit
for underserved neighborhoods.

Congress created the CRA in 1977 to reverse years of redlining and
other restrictive banking practices that locked the poor, and
especially minorities, out of homeownership and the tax breaks and
wealth creation it affords. The CRA requires federally regulated and
insured financial institutions to show that they're lending and
investing in their communities.

Conservative columnist Charles Krauthammer wrote recently that while
the goal of the CRA was admirable, "it led to tremendous pressure on
Fannie Mae and Freddie Mac — who in turn pressured banks and other
lenders — to extend mortgages to people who were borrowing over their
heads. That's called subprime lending. It lies at the root of our
current calamity."

Fannie and Freddie, however, didn't pressure lenders to sell them more
loans; they struggled to keep pace with their private sector
competitors. In fact, their regulator, the Office of Federal Housing
Enterprise Oversight, imposed new restrictions in 2006 that led to
Fannie and Freddie losing even more market share in the booming
subprime market.

What's more, only commercial banks and thrifts must follow CRA rules.
The investment banks don't, nor did the now-bankrupt non-bank lenders
such as New Century Financial Corp. and Ameriquest that underwrote
most of the subprime loans.

These private non-bank lenders enjoyed a regulatory gap, allowing them
to be regulated by 50 different state banking supervisors instead of
the federal government. And mortgage brokers, who also weren't subject
to federal regulation or the CRA, originated most of the subprime
loans.

In a speech last March, Janet Yellen, the president of the Federal
Reserve Bank of San Francisco, debunked the notion that the push for
affordable housing created today's problems.

"Most of the loans made by depository institutions examined under the
CRA have not been higher-priced loans," she said. "The CRA has
increased the volume of responsible lending to low- and moderate-
income households."

In a book on the sub-prime lending collapse published in June 2007,
the late Federal Reserve Governor Ed Gramlich wrote that only one-
third of all CRA loans had interest rates high enough to be considered
sub-prime and that to the pleasant surprise of commercial banks there
were low default rates. Banks that participated in CRA lending had
found, he wrote, "that this new lending is good business."

McClatchy Newspapers 2008
thomaswheat1975
DCI
2011-06-16 04:52:21 UTC
Permalink
Post by Thomas Jigme Wheat
McClatchy Washington Bureau
 Print This Article
Posted on Sun, Oct. 12, 2008
Private sector loans, not Fannie or Freddie, triggered crisis
David Goldstein and Kevin G. Hall | McClatchy Newspapers
last updated: November 24, 2010 01:49:33 PM
WASHINGTON — 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.
Federal housing data reveal that the charges aren't true, and that the
private sector, not the government or government-backed companies, was
behind the soaring subprime lending at the core of the crisis.
Subprime lending offered high-cost loans to the weakest borrowers
during the housing boom that lasted from 2001 to 2007. Subprime
lending was at its height from 2004 to 2006.
•More than 84 percent of the subprime mortgages in 2006 were issued by
private lending institutions.
•Private firms made nearly 83 percent of the subprime loans to low-
and moderate-income borrowers that year.
•Only one of the top 25 subprime lenders in 2006 was directly subject
to the housing law that's being lambasted by conservative critics.
The "turmoil in financial markets clearly was triggered by a dramatic
weakening of underwriting standards for U.S. subprime mortgages,
beginning in late 2004 and extending into 2007," the President's
Working Group on Financial Markets reported Friday.
Conservative critics claim that the Clinton administration pushed
Fannie Mae and Freddie Mac to make home ownership more available to
riskier borrowers with little concern for their ability to pay the
mortgages.
Cut -
Post by Thomas Jigme Wheat
McClatchy Newspapers 2008
thomaswheat1975
It's all about the totality of the era of poor judgement in all
sectors of money management.

DCI
Thomas Jigme Wheat
2011-06-16 06:56:51 UTC
Permalink
article archived here:

http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html

-excerpt-

Subprime lending offered high-cost loans to the weakest borrowers
during the housing boom that lasted from 2001 to 2007. Subprime
lending was at its height from 2004 to 2006.

Federal Reserve Board data show that:

•More than 84 percent of the subprime mortgages in 2006 were issued by
private lending institutions.


•Private firms made nearly 83 percent of the subprime loans to low-
and moderate-income borrowers that year.


•Only one of the top 25 subprime lenders in 2006 was directly subject
to the housing law that's being lambasted by conservative critics.

The "turmoil in financial markets clearly was triggered by a dramatic
weakening of underwriting standards for U.S. subprime mortgages,
beginning in late 2004 and extending into 2007.



Read more: http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#ixzz1PQ512MBN

discussion archived here:

http://groups.google.com/group/alt.politics.usa.republican/browse_thread/thread/5e7d90fdac8230e8/dc8113c5670da4c6?q=thomaswheat1975+mcclatchey
Post by DCI
Post by Thomas Jigme Wheat
McClatchy Washington Bureau
 Print This Article
Posted on Sun, Oct. 12, 2008
Private sector loans, not Fannie or Freddie, triggered crisis
David Goldstein and Kevin G. Hall | McClatchy Newspapers
last updated: November 24, 2010 01:49:33 PM
WASHINGTON — 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.
Federal housing data reveal that the charges aren't true, and that the
private sector, not the government or government-backed companies, was
behind the soaring subprime lending at the core of the crisis.
Subprime lending offered high-cost loans to the weakest borrowers
during the housing boom that lasted from 2001 to 2007. Subprime
lending was at its height from 2004 to 2006.
•More than 84 percent of the subprime mortgages in 2006 were issued by
private lending institutions.
•Private firms made nearly 83 percent of the subprime loans to low-
and moderate-income borrowers that year.
•Only one of the top 25 subprime lenders in 2006 was directly subject
to the housing law that's being lambasted by conservative critics.
The "turmoil in financial markets clearly was triggered by a dramatic
weakening of underwriting standards for U.S. subprime mortgages,
beginning in late 2004 and extending into 2007," the President's
Working Group on Financial Markets reported Friday.
Conservative critics claim that the Clinton administration pushed
Fannie Mae and Freddie Mac to make home ownership more available to
riskier borrowers with little concern for their ability to pay the
mortgages.
Cut -
Post by Thomas Jigme Wheat
McClatchy Newspapers 2008
thomaswheat1975
It's all about the totality of the era of poor judgement in all
sectors of money management.
DCI- Hide quoted text -
- Show quoted text -
Tom Jigme Wheat
2011-06-17 22:17:19 UTC
Permalink
What I find appalling about the financial real estate crisis of 2008
that we are still in, is how racially skewed conservative opinion is
towards the role that Fannie Mae lending to minorites, Caused the
collapse of the market. The fact is Wall Street banks recieved more
than 500 percent more bailout funds then Fannie Mae recieved, and
Conservative bigots overlook this and target Fannie Mae as being the
cause of the collapse, when the fact is over 80 percent of all
subprime lending (loans to People with less than perfect credit
scores) directly responsible for banks and other lenders assuming
toxic assets, (defaulted mortgage loans) were issued by private
lenders and not Fannie Mae. What got Fannie Mae in trouble was a few
of its executives got greedy, and began buying billions of dollars in
collateralized debt obligations from companies like CountryWide, now
owned by Bank of America, even though CountryWide knowingly falsified
income earnings amounts of borrowers to the account managers in order
to increase the borrowers loan amount and their own commissions on the
loan. (pg. 192) They, offered these fraudulent contracts to low and
middle income people, white or minority race alike.

These mortgages, over half were zero down Adjustable Rate Mortgages,
in which interest rates skyrocketed later on during the loan cycle.
The contract weere written in incomprehensible legalese that even a
PHD in finance probably wouldnt know what he was signing., So with the
collapse of the market starting in november of 2007, due to
speculators cashing in their default futures options (credit default
swaps), companies invested in these mortgage backed securities, seeing
their bottom line under assualt began laying off millions of workers,
home prices dropped to almost 10 year lows, people suddenly owed more
on their home than it was worth,and with job losses accruing, and high
interest payments required from these ARM loans, of which
CountryWideBofA was the second largest issuer of these "toxic assets"
in the nation, fraudenly screwing millions of people, who had no
choice but to default, and all of these factors caused the collapse of
the housing market.

I got all of this info from a book Iam reading written
by Pulitzer prize winning New York Times reporter Gretchen Morgenson.
The
Book is titled , "Reckless Endangerment,"

http://www.amazon.com/Reckless-Endangerment-Outsized-Corruption-Armageddon/dp/0805091203/

discussion archived here

http://groups.google.com/group/alt.politics.usa/browse_thread/thread/96b8c6e0efc0315d/8fa5c50b560648fb?lnk=raot#8fa5c50b560648fb
 http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-...
-excerpt-
Subprime lending offered high-cost loans to the weakest borrowers
during the housing boom that lasted from 2001 to 2007. Subprime
lending was at its height from 2004 to 2006.
•More than 84 percent of the subprime mortgages in 2006 were issued by
private lending institutions.
•Private firms made nearly 83 percent of the subprime loans to low-
and moderate-income borrowers that year.
•Only one of the top 25 subprime lenders in 2006 was directly subject
to the housing law that's being lambasted by conservative critics.
The "turmoil in financial markets clearly was triggered by a dramatic
weakening of underwriting standards for U.S. subprime mortgages,
beginning in late 2004 and extending into 2007.
Read more:http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-...
http://groups.google.com/group/alt.politics.usa.republican/browse_thr...
Post by DCI
Post by Thomas Jigme Wheat
McClatchy Washington Bureau
 Print This Article
Posted on Sun, Oct. 12, 2008
Private sector loans, not Fannie or Freddie, triggered crisis
David Goldstein and Kevin G. Hall | McClatchy Newspapers
last updated: November 24, 2010 01:49:33 PM
WASHINGTON — 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.
Federal housing data reveal that the charges aren't true, and that the
private sector, not the government or government-backed companies, was
behind the soaring subprime lending at the core of the crisis.
Subprime lending offered high-cost loans to the weakest borrowers
during the housing boom that lasted from 2001 to 2007. Subprime
lending was at its height from 2004 to 2006.
•More than 84 percent of the subprime mortgages in 2006 were issued by
private lending institutions.
•Private firms made nearly 83 percent of the subprime loans to low-
and moderate-income borrowers that year.
•Only one of the top 25 subprime lenders in 2006 was directly subject
to the housing law that's being lambasted by conservative critics.
The "turmoil in financial markets clearly was triggered by a dramatic
weakening of underwriting standards for U.S. subprime mortgages,
beginning in late 2004 and extending into 2007," the President's
Working Group on Financial Markets reported Friday.
Conservative critics claim that the Clinton administration pushed
Fannie Mae and Freddie Mac to make home ownership more available to
riskier borrowers with little concern for their ability to pay the
mortgages.
Cut -
Post by Thomas Jigme Wheat
McClatchy Newspapers 2008
thomaswheat1975
It's all about the totality of the era of poor judgement in all
sectors of money management.
DCI- Hide quoted text -
- Show quoted text -- Hide quoted text -
- Show quoted text -
DCI
2011-06-22 05:30:44 UTC
Permalink
Post by Tom Jigme Wheat
What I find appalling about the financial real estate crisis of 2008
that we are still in, is how racially skewed conservative opinion is
towards the role that Fannie Mae lending to minorites, Caused the
collapse of the market. The fact is Wall Street banks recieved more
than 500 percent more bailout funds then Fannie Mae recieved, and
Conservative bigots overlook this and target Fannie Mae as being the
cause of the collapse, when the fact is over 80 percent of all
subprime lending (loans to People with less than perfect credit
scores) directly responsible for banks and other lenders assuming
toxic assets, (defaulted mortgage loans) were issued by private
lenders and not Fannie Mae. What got Fannie Mae in trouble was a few
of its executives got greedy, and began buying billions of dollars in
collateralized debt obligations from companies like CountryWide, now
owned by Bank of America, even though CountryWide knowingly falsified
income earnings amounts of borrowers to the account managers in order
to increase the borrowers loan amount and their own commissions on the
loan. (pg. 192) They, offered these fraudulent contracts to low and
middle income people, white or minority race alike.
These mortgages, over half were zero down Adjustable Rate Mortgages,
in which interest rates skyrocketed later on during the loan cycle.
The contract weere written in incomprehensible legalese that even a
PHD in finance probably wouldnt know what he was signing., So with the
collapse of the market starting in november of 2007, due to
speculators cashing in their default futures options (credit default
swaps), companies invested in these mortgage backed securities, seeing
their bottom line under assualt began laying off millions of workers,
home prices dropped to almost 10 year lows, people suddenly owed more
on their home than it was worth,and with job losses accruing, and high
interest payments required from these ARM loans, of which
CountryWideBofA was the second largest issuer of these "toxic assets"
in the nation, fraudenly screwing millions of people, who had no
choice but to default, and all of these factors caused the collapse of
the housing market.
 I got all of this info from a book Iam reading written
by Pulitzer prize winning New York Times reporter Gretchen Morgenson.
The
Book is titled , "Reckless Endangerment,"
http://www.amazon.com/Reckless-Endangerment-Outsized-Corruption-Armag...
discussion archived here
http://groups.google.com/group/alt.politics.usa/browse_thread/thread/...
 http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-...
-excerpt-
Subprime lending offered high-cost loans to the weakest borrowers
during the housing boom that lasted from 2001 to 2007. Subprime
lending was at its height from 2004 to 2006.
•More than 84 percent of the subprime mortgages in 2006 were issued by
private lending institutions.
•Private firms made nearly 83 percent of the subprime loans to low-
and moderate-income borrowers that year.
•Only one of the top 25 subprime lenders in 2006 was directly subject
to the housing law that's being lambasted by conservative critics.
The "turmoil in financial markets clearly was triggered by a dramatic
weakening of underwriting standards for U.S. subprime mortgages,
beginning in late 2004 and extending into 2007.
Read more:http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-...
http://groups.google.com/group/alt.politics.usa.republican/browse_thr...
Post by DCI
Post by Thomas Jigme Wheat
McClatchy Washington Bureau
 Print This Article
Posted on Sun, Oct. 12, 2008
Private sector loans, not Fannie or Freddie, triggered crisis
David Goldstein and Kevin G. Hall | McClatchy Newspapers
last updated: November 24, 2010 01:49:33 PM
WASHINGTON — 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.
Federal housing data reveal that the charges aren't true, and that the
private sector, not the government or government-backed companies, was
behind the soaring subprime lending at the core of the crisis.
Subprime lending offered high-cost loans to the weakest borrowers
during the housing boom that lasted from 2001 to 2007. Subprime
lending was at its height from 2004 to 2006.
•More than 84 percent of the subprime mortgages in 2006 were issued by
private lending institutions.
•Private firms made nearly 83 percent of the subprime loans to low-
and moderate-income borrowers that year.
•Only one of the top 25 subprime lenders in 2006 was directly subject
to the housing law that's being lambasted by conservative critics.
The "turmoil in financial markets clearly was triggered by a dramatic
weakening of underwriting standards for U.S. subprime mortgages,
beginning in late 2004 and extending into 2007," the President's
Working Group on Financial Markets reported Friday.
Conservative critics claim that the Clinton administration pushed
Fannie Mae and Freddie Mac to make home ownership more available to
riskier borrowers with little concern for their ability to pay the
mortgages.
Cut -
Post by Thomas Jigme Wheat
McClatchy Newspapers 2008
thomaswheat1975
It's all about the totality of the era of poor judgement in all
sectors of money management.
DCI- Hide quoted text -
- Show quoted text -- Hide quoted text -
- Show quoted text -- Hide quoted text -
- Show quoted text -
At this point in the money/financial games, a budget and finances
takes one thing that out Congress, the President, and Washington D.C.
bureacrats lack: discipline.

DCI
s***@yahoo.com
2011-07-01 17:56:44 UTC
Permalink
Causes of the 2008 Financial Crisis: Analysis of NY times reporter,
Gretchen Morgenson's Book, "Reckless Endangerment"

by Thomas J. Wheat rough draft

Common Perception among Americans and rank file neoconservatives
assigns the blame for the 2008 Financial crisis, and collapse of the
real estate market, as being not the result of market dereglation, but
the concept that quasi-public-private companies like Fannie Mae, and
Freddie Mac's irresponsible lending, to low income whites and
minorities was the cause of the problem, and that the ensuing mortgage
defaults by these people precipitated the collapse of the Housing
market. This is a fallaciously overly simplistic argument, and
overlooks the role of international banking committees, like the Basel
Committee's dilution of Tier 1 capital requirements for banks, or the
fact that the 1999, repeal of Glass Steagall banking act, advanced by
Republican Senator Phil Graham of Texas, and passed in the republican
controlled senate, which provided for the mega-mergers of commercial
banks, vertically integrated with investment banks. Something Glass
Steagall disallowed. Furthermore, the neoconservative argument
overlooks the predatory lending practices, and fradulent underwriting
standards of major mortgage lenders, in the subprime lending market
like CountryWide Financial, (Bank of America) and NovaStar Financial's
role in exacerbating the Financial loan default crisis. Furthermore,
the analysis overlooks the duopoly of credit rating agencies, like
Standard and Poors and Fitch Ratings, and their conflicts of interest,
regarding their decisions to be influenced by high commissions fees
for assigning high credit ratings to these popular toxic securities,
without comprehensive analysis of their credit worthiness. Furthermore
the neoconservative argument that blames Fannie Mae and Freddie Mac
for being the sole cause of the crisis, is debunked, because according
to Federal reserve data, over 80 percent of the subprime loans were
issued by private lending institutions, and the top 5 banks received
billions more in individual bailout funds from the tax payer than did
Fannie Mae. However, it should be acknowledged, that if Fannie Mae had
been allowed to go into public receivership there would have been
enough regulatory oversight to prevent Fannie Mae from purchasing
toxic Collaterized debt obligations,(CDO's) from private lending
institutions.

How the Repeal of The Glass Steagall Banking Act Contributed to the
2008 Financial Crisis

On November 12th 1999 The Republican Controlled Senate passed a Bill,
“The Financial Services Modernization Act of 1999. This legislation
Was sponsored by Republican Senators Phil Grahm of Texas, Jim Leach of
Iowa, and Thomas J. Bliley. Bill Clinton Foolishly signed the Bill
into law. The Bill had the strong support of Sanford I. Weill, who
waqs the CEO of Travelers Group, who saw the new bill proposal as a
way to merge his insurance business with Citibank. The Glass Steagall
Banking Act regulations forbid the mergers between insurance companies
and commercial banks, or commercial banks like Bank of America merging
with investment banks, Goldman Sachs or Merrill Lynch. This
legislation was also influenced by a former New York Federal Reserve
official William C. Dudley, who wrote the article “Rethinking Glass
Steagall.” In his article he wrote about the need for restoring the
Banking system to the pre-Roosevelt era, despite the fact that rampant
speculation and market dergulation under Herbert Hoover caused the
collapse of the American economy in 1929. Former Senator Byron
Dorgon , opposed the recall of Glass Steagall, noting that Congress
was forgetting the lessons learned from the Great Depression.

Glass Steagall's Repeal allowed banks to engage in riskier ventures
that put consumer deposits at risk, with the merger of commercial
banks with investment banks. Customer deposits were at risk because
the banks invested these deposits into risky hedge funds who were
profiting from speculation in the real estate market. Originally the
FDIC IA, 1992 era law required that banks maintain at least 5 percent
of capital to total assets and restricted banks abilities to leverage
assets. (110 )The law grew out of the public out rage over the Savings
and Loan debacle of the `1980's of which George W.Bush's Brother Neal
Bush was involved in the scandal. That fiasco cost the tax payer 500
million dollars in bail out funds to the savings and loan industry.
Essentially the repeal of Glass Steagall, made the top 5 banks even
bigger, and created the “To Big to Fail”concept, meaning that the
government would be forced to bail out these banks when they went
under or risk having the economy crash, since depositors accounts,
annuities, mortgage securities, etc. were now also being traded on an
unregulated multi-trillion dollar derivatives market. Initially these
speculators were able to drive up the price of real estate market, but
when they cashed in their credit default swaps options, real estate
prices plummeted. Although home mortgage default was part of the
problem, however, speculators were rigged the market so that these
people would have no choice but to default, since borrowers now
suddenly owed more on their homes than they were worth.

The Role of Fannie Mae in the crisis

Fannie Mae became saddled with thousands of CDO's (Collaterized Debt
Obligations) of which CountrywideFinancial was its 2nd largest
supplier of these toxic assets, as these loans were bundled into
mortgage backed securities for sale to investors. (48) The fact is
Fannie Mae and Freddie Mac got at most a 150 billion dollar bail out
package, while TARP, provided the additional 550 billion, to banks
like Bank of America, JP Morgan Chase, and Wells Fargo.

.The fact is Wall Street banks recieved billions more in bailout funds
then Fannie Mae recieved, and Conservative bigots overlook this and
target Fannie Mae as being the cause of the collapse, when the fact is
over 80 percent of all subprime lending (loans to People with less
than perfect credit scores) directly responsible for banks and other
lenders assuming toxic assets, (defaulted mortgage loans) were issued
by private lenders and not Fannie Mae.

http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html

http://www.ritholtz.com/blog/2010/12/private-sector-loans-triggered-the-crisis/

“Federal Reserve Board data show that:

More than 84 percent of the subprime mortgages in 2006 were issued by
private lending institutions.

Private firms made nearly 83 percent of the subprime loans to low- and
moderate-income borrowers that year.

Only one of the top 25 subprime lenders in 2006 was directly subject
to the housing law that's being lambasted by conservative critics.”

The fact is 25 percent of all americans fit into the Subprime loan
category. The fact is Investment banks, like Bear Sterns, and Lehman
Brothers were parceling out massive lines of credit to mortgage
lenders while selling the CDO's attached to those loans to investors.

What got Fannie Mae in trouble was a few of its executives got greedy,
and began buying billions of dollars in collaterallized debt
obligations from companies like CountryWide, now owned by Bank of
America, even though CountryWide knowingly falsified income earnings
amounts of borrowers to the account managers in order to increase the
borrowers loan amount and their own commissions on the loan. (pg. 192)
They, offered these fraudulent contracts to low and middle income
people, white or minority race alike.

These mortgages, over half were zero down Adjustable Rate Mortgages,
in which interest rates averaging 12 % skyrocketed later to 18% later
on during the loan cycle. The contracts were written in
incomprehensible legalese that even a PHD in finance probably wouldn't
know what he was signing.,(pg 194) So with the collapse of the market
starting in november of 2007, due to speculators cashing in their
default futures options (credit default swaps), companies invested in
these mortgage backed securities, seeing their bottom line under
assault began laying off millions of workers, home prices dropped to
almost 10 year lows, people suddenly owed more on their home than it
was worth, and with job losses accruing, and high interest payments
required from these ARM loans, of which CountryWideBofA was the second
largest issuer of these "toxic assets" in to Fannie Mae, fraudentally
screwed millions of people, who had no choice but to default, and all
of these factors caused the collapse of the housing market.

The role of Predatory lending and fraudulent underwriting standards
contribution the 2008 financial crisis

From 1994 – 1997 subprime origination grew from 35 billion dollars to
125 billion dollars. (97)This didn’t just extend to mortgages but also
the car loan market, , which by 1996, had grown to 60 billion dollars,
and was projected to grow by 15% in 1999. To protect against losses,
these lenders would charge a subprime loan borrower, 10 – 15 times the
rates that that a prime borrower would receive. Ford and GM were major
players in the car subprime loan market.

The most aggregious examples of predatory lending were through
mortgage lenders issuing ARM Adjustable rate mortgages, with low
teaser rates, only to later on skyrocket to higher intrest rates later
on during the loan cycle. One example of this was the practice by
mortgage lenders to use No income/No asset documentation, in which
underwriters claimed was limited to those with excellent credit
histories, when in fact there were lent to subprime lenders. These
toxic loans were later sold as securities, to Fannie Mae and Freddie
Mac. (192) Robert Gnaizda of the Berkeley non profit Green Lining
Institute, complained about deceptive practices by these mortgage
lenders, especially CountryWide Financial, who was famous for offering
no money down, option ARM mortgages.(194) These mortgages were written
in incomprehensible legalese, and targeted low income whites and
minorities. CountryWide even altered documents regarding borrowers
income just so they could qualify, and so that brokers could get extra
commissions, never mind that the borrower would later be snared in the
trap of default and bad credit history. (195)

In 2005 CountryWide sold 12.7 billion in subprime loans to fannie mae,
all classified as toxic assets. In fact the second largest supplier of
toxic assets to Fannie mae was CountryWide Fiancial. Furthermore two
thirds of all subprime loans underwritten by CountryWide (BofA)had
loan to value ratios of 100 percent, in which borrowers paid no money
down to purchase their home. (195) These accounts involved actual
bribery by CountryWide Brokers, who bribed account managers with
envelopes full of cash, to approve the loan contracts. (196)

Just how profitable the subprime lending market became for CountryWide
compared to Prime A borrowers, was a difference of 5% to 15% profit in
the subprime lending category. Furthermore debt to income ratios of
borrowers could not be documented because of lack of documentation.
(192)Countrywide lend 95% of the purchase price, using inflated
appraisals on the homes, and by 2004 more than one half of
CountryWide’s mortgages were ARM mortgages. This is a dramatic
increase from 2003 when only a third of its loans were ARM loans.(194)

The other most aggregious predatory lender after CountryWide, was
NovaStar Financial. Both specialized in lending to subprime borrowers.
NovaStar was known to approve loans over the phone, and would loan to
anybody, and they also had fraudulent underwriting standards. Also
NovaStar Financial’s loan agreements were full of hidden fees, and
high commission costs that borrowers were forced to pay. They inflated
their numbers and sold these loans on the open market in a formula
know as “burying costs.” The terms of their mortgages, was the common
9% ARM mortgage, , that would later rise to as high as 17% later on
during the loan cycle. More prudent borrowers, who asked for fixed
rate mortgages, were actually given ARM mortgages as well. Regarding
the fraudulent underwriting standards of this company, in 2004, the
mortgage securitization trust assembled by NovaStar Financial, sold to
investors, over one half of the loans that were securitized had no
documentation, or limited documentation of borrowers financial
standing , or had inflated borrower income amounts, in order to
increase loan amounts to these borrowers. NovaStar then sold these
loans to Wall Street firms who pooled them to investors. NovaStar
didn’t care if these loans failed , because generating more loan
volume meant increased fee revenue for the company. Also it should be
noted that the FDIC had no real oversite over these companies, like
NovaStar Financial, and CountryWide (BofA), like they had on
traditional banks.

Currently NovaStar Financial had their stock delisted from the new
York stock exchange, however they are still in the appraiser and
financial services business, that targets low and moderate income
people. (218)

CountryWide and Novastar weren’t the only main groups who engaged in
predatory lending or frudelent underwriting practices. Fremont
Financial? Was also responsible as well. 45% of all subprime loans
were “liar loans,”, no income or asset verification,(283) and there
was much pressure to originate volume, which caused many lenders to
falsify borrowers loan applications. (284) Furthermore by 2005, 40% of
all subprime loans were for amounts exceeding the value of the
property purchased. (285)

The role of Credit Rating Agencies, Standard and Poors, and Fitch
Ratings

Major Credit rating agencies like Standard and Poors, and Fitch
Ratings exacerbated the 2008 Crisis. Take for example Fitch Ratings,
it upgraded Fremont Investment and Loans subprime loan servicer rating
not due to its credit worthiness but on the basis of volume of loans
that Fremont Investment Financial was churning out, which meant for a
healthy commission for Fitch ratings. Fremont Financial wrote
mortgages but also serviced them, i.e., collected payments, tracked
escrow accounts and insurance obligations. Fremont’s volume was so
high that they were servicing more than 100000 loans totaling 19.1
billion, and they were projecting a servicing portfolio of 24 billion
by the end of 2005, which was the peak of the real estate market.(286)
The amount of loans that Fremont churned out meant big fees for credit
rating agencies, and this conflict of interest influenced these
agencies to highly rate subprime mortgage securities.(285) Fitch
ratings based their credit upgrade of Fremont based on trivial issues
like the fact that the company had set up a central database and the
company’s retaining of a few more auditors.

Fitch ratings published a glowing report on Fremont and upgraded its
rating regarding its corporate debt based on assumptions about
Fremont’s improved financial condition, increased capital and
liquidity. However, Fitch ratings failed to acknowledge amount of
capital that would be required to if Fremont’s loans became “toxic”
due to default, and that this would have made it impossible to sell
these CDO loans to investors. Like the mortgage lenders described in
this paper, Fremont had a lot of “liar loans,” on its books, i.e.,
inflated income amounts, overstated property value, etc.. The fact is
there is a warranty attached to most securities that astute investors
are aware of in which, requires the lender to repurchase the loan from
the investor if it is found to be materially defective. (287) Credit
rating agencies failed to warn investors that there were capital short
falls by lenders in case they needed to repurchase buybacks of “liar
loans,” loans for which borrowers did not have to produce any income
or assets, or those loans in the overall predatory lending class.
(283, 287)However, in 2006 Fremont’s fortunes turned when it was
reported that there profits were down 40% from 2005. However the
credit rating agencies tripled their mortgage securitization volume .
In fact by 2006, 60% of the entire mortgage pool showed material
defects in underwriting, and lenders had no outsized borrower cash
reserves. Furthermore early payment defaults allowed investors in
mortgage backed securities to return loans to the lender and get full
refunds.

If the lender did not have the money, investment banks like Goldman
Sach’s, Bear Sterns and Lehman Brothers, who had provided generous
credit to these agencies would be the ones financially liable to the
investors.

One cant lay the entire blame on the credit agencies, since Investment
banks like Goldman Sach’s sold defective trusts, called Goldman Sachs
Alternative Mortgage Product (GSAMP Trust 2006, which was issued in
April of 2006. The fund was loaded with 54% of “toxic assets” from
Fremont loans. (291)

16 months after issuing the fund the pool had a 40% loss due to
liquidations. By this time thousands were beginning to default due to
liar loans and predatory lending loan terms. The credit rating
agencies did there part by inflating the credit rating of these funds
(293-294)Fremont’s practice of selling ARM mortgages to subprime
borrowers greatly increased the risk that the buyer would default.

So this came to bear, in April of 2008, when Fremont Investment and
Loan, began receiving default notices on over 3 billion dollars of
subprime mortgages it had originated in March of 2007. Fremont did not
have the cash to buy back these loans, and in fact did not have the
minimum of 250 million dollars in net tangible book value. (298)
Fremont’s employees sued the company including James McIntyre,
Fremont’s chairman, who had sold 11 million dollars of his stock
during the summer of 2006. Other Fremont directors had sold their
shares for 5.5 million. Obviously a case of insider trading. (297)
Fremont later went bankrupt in the end of 2008.

Role of International Basel Banking Committee, in the 2008 Financial
Crisis

The Basel Committee named for a city in Switzerland where this
international banking committee meets, consist of central bankers from
each member country, and top bank supervisors from those countries.
The members of this committee hail from France, Germany, Italy, Japan,
Luxembourg, Netherlands, Sweden, Switzerland UK, and the USA. These
bankers proposed common standards for oversight, but participating
countries determined how to implement them and police its
recommendations. (112) The original Basel Accord set up in 1988
appeared to encourage solvent Tier 1 capital requirements. However, In
1996, the Basel Committee, implemented a new rule reducing capital
requirements on assets held by banks in their trading books, versus
those it held in its investment portfolio. (112) “To be considered
well capitalized a bank must have a Tier 1 capital that is at least 6%
of its risk adjusted assets.”(112) This new 1996 ruling allowed banks
to set aside less capital on risky assets they traded than they put
against their buy and hold portfolios. (112)

Role of Regulators

This problem was further exacerbated when in 1996, chairman of the
FED, Alan Greenspan, imposed a new rule allowing USA banks to include
in their calculation of Tier 1 assets, any holdings that they had in
Trust preferred securities (TRUPS). These TRUPS had the
charicteristics of both debt and equity, i.e., debt instruments to be
counted towards the least risky calculation of capital. This
essentially allowed banks to cook their books, and to inflate the
soundness of their financial statements. Essentially FED rules under
Greenspan, allowed for riskier, “Trust preferred Securites,” to be
included in Tier 1 calculations. (112)

------------------------------------------------------------------------------------------------------------

The fact is the lack of market regulation allowed top 1 percent of
income earners to engage in risky speculation, which tanked the
economy. So while they doubled their money under George Bush, while
middle class income declined by 2300 dollars from 2001 - 2007. This
all occured as a result of the Bush Tax cuts, where Billionaires where
getting multi million dollar tax cuts, millionaires getting 100000
dollar tax cuts, while the middle class only got a couple of thousand
dollars of tax cuts. We've had these bush tax cuts since 2001, and
during that period we lost over 5 million manufacturing jobs
outsourced, to china. So there is no proof that low tax rates on ther
rich stimulate the job growth. They just hoard their money, spirit
away to overseas tax shelters, since its their nature to practice tax
avoidance, and the speculative bubble burst because they were engaged
in risky speculative derivatives trading, that artificially shot up
home prices, and then reduced their values by almost one half, due not
to just loan defaults, which themajority, were due to predatory
surging interest ARM mortgages, predatory lending practices, fradulent
underwriting standards, and credit rating agencies, like Fitch
Ratings, and Standard and Poors, giving false ratings since their
commissions were tied to profitability of the mortgage security
industry.

The crisis could possibly have been avoided if Glass Steagall banking
act had not been repealed in 1999, which would not have allowed
investment banks too merge with commercial banks, which by the way was
passed in the republican controlled Congress, and foolishly signed by
Bill Clinton. The fact is after Bush we have the most uneven
distribution of wealth in this country since the start of the great
depression, under republican president Herbert Hoover. The fact is the
top 400 richest people in America, all billionaires, own more wealth
than the bottom 150 million americans..

http://www.amazon.com/Reckless-Endangerment-Outsized-Corruption-Armageddon/dp/0805091203/

News on prosecution of of the major banks for their role in providing
fraudelent mortgage backed securites to investors

Jp Morgan Chase forced to pay 153 million dollars in Securites fraud
case from 2008 financial crisis

http://www.washingtonpost.com/business/economy/jp-morgan-to-pay-1536m-in-fraud-case/2011/06/21/AGZJ5ieH_story.html

Goldman sachs fined 550 million for fraud in 2008 financial crisis

http://www.washingtonpost.com/wp-dyn/content/article/2010/07/15/AR2010071505111.html

Bank of America forced to pay back 8 billion dollars to investors over
defective mortgage securites sold to investors from its subsidary
CountryWide

http://www.nytimes.com/2011/06/29/business/29mortgage.html
Post by Tom Jigme Wheat
What I find appalling about the financial real estate crisis of 2008
that we are still in, is how racially skewed conservative opinion is
towards the role that Fannie Mae lending to minorites, Caused the
collapse of the market. The fact is Wall Street banks recieved more
than 500 percent more bailout funds then Fannie Mae recieved, and
Conservative bigots overlook this and target Fannie Mae as being the
cause of the collapse, when the fact is over 80 percent of all
subprime lending (loans to People with less than perfect credit
scores) directly responsible for banks and other lenders assuming
toxic assets, (defaulted mortgage loans) were issued by private
lenders and not Fannie Mae. What got Fannie Mae in trouble was a few
of its executives got greedy, and began buying billions of dollars in
collateralized debt obligations from companies like CountryWide, now
owned by Bank of America, even though CountryWide knowingly falsified
income earnings amounts of borrowers to the account managers in order
to increase the borrowers loan amount and their own commissions on the
loan. (pg. 192) They, offered these fraudulent contracts to low and
middle income people, white or minority race alike.
These mortgages, over half were zero down Adjustable Rate Mortgages,
in which interest rates skyrocketed later on during the loan cycle.
The contract weere written in incomprehensible legalese that even a
PHD in finance probably wouldnt know what he was signing., So with the
collapse of the market starting in november of 2007, due to
speculators cashing in their default futures options (credit default
swaps), companies invested in these mortgage backed securities, seeing
their bottom line under assualt began laying off millions of workers,
home prices dropped to almost 10 year lows, people suddenly owed more
on their home than it was worth,and with job losses accruing, and high
interest payments required from these ARM loans, of which
CountryWideBofA was the second largest issuer of these "toxic assets"
in the nation, fraudenly screwing millions of people, who had no
choice but to default, and all of these factors caused the collapse of
the housing market.
 I got all of this info from a book Iam reading written
by Pulitzer prize winning New York Times reporter Gretchen Morgenson.
The
Book is titled , "Reckless Endangerment,"
http://www.amazon.com/Reckless-Endangerment-Outsized-Corruption-Armag...
discussion archived here
http://groups.google.com/group/alt.politics.usa/browse_thread/thread/...
 http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-...
-excerpt-
Subprime lending offered high-cost loans to the weakest borrowers
during the housing boom that lasted from 2001 to 2007. Subprime
lending was at its height from 2004 to 2006.
•More than 84 percent of the subprime mortgages in 2006 were issued by
private lending institutions.
•Private firms made nearly 83 percent of the subprime loans to low-
and moderate-income borrowers that year.
•Only one of the top 25 subprime lenders in 2006 was directly subject
to the housing law that's being lambasted by conservative critics.
The "turmoil in financial markets clearly was triggered by a dramatic
weakening of underwriting standards for U.S. subprime mortgages,
beginning in late 2004 and extending into 2007.
Read more:http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-...
http://groups.google.com/group/alt.politics.usa.republican/browse_thr...
Post by DCI
Post by Thomas Jigme Wheat
McClatchy Washington Bureau
 Print This Article
Posted on Sun, Oct. 12, 2008
Private sector loans, not Fannie or Freddie, triggered crisis
David Goldstein and Kevin G. Hall | McClatchy Newspapers
last updated: November 24, 2010 01:49:33 PM
WASHINGTON — 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.
Federal housing data reveal that the charges aren't true, and that the
private sector, not the government or government-backed companies, was
behind the soaring subprime lending at the core of the crisis.
Subprime lending offered high-cost loans to the weakest borrowers
during the housing boom that lasted from 2001 to 2007. Subprime
lending was at its height from 2004 to 2006.
•More than 84 percent of the subprime mortgages in 2006 were issued by
private lending institutions.
•Private firms made nearly 83 percent of the subprime loans to low-
and moderate-income borrowers that year.
•Only one of the top 25 subprime lenders in 2006 was directly subject
to the housing law that's being lambasted by conservative critics.
The "turmoil in financial markets clearly was triggered by a dramatic
weakening of underwriting standards for U.S. subprime mortgages,
beginning in late 2004 and extending into 2007," the President's
Working Group on Financial Markets reported Friday.
Conservative critics claim that the Clinton administration pushed
Fannie Mae and Freddie Mac to make home ownership more available to
riskier borrowers with little concern for their ability to pay the
mortgages.
Cut -
Post by Thomas Jigme Wheat
McClatchy Newspapers 2008
thomaswheat1975
It's all about the totality of the era of poor judgement in all
sectors of money management.
DCI- Hide quoted text -
- Show quoted text -- Hide quoted text -
- Show quoted text -- Hide quoted text -
- Show quoted text -
Tim May
2011-07-02 04:59:11 UTC
Permalink
Post by Thomas Jigme Wheat
http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html
-excerpt-

Subprime
Post by Thomas Jigme Wheat
lending offered high-cost loans to the weakest borrowers
during the housing boom that lasted from 2001 to 2007. Subprime
lending was at its height from 2004 to 2006.
Subprime lending acted as the rodenticide not seen since Zykon B in the
early 1940s. It liquidated an entire class of rodent borrowers.
--
Tim May
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