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Thread: Flashback 2004: Republicans call for regulation of Fannie Mae; Dems say no

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    Elite Member tkdgirl's Avatar
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    Default Flashback 2004: Republicans call for regulation of Fannie Mae; Dems say no

    Eyeblast.tv - Flashback: Democrats Defended Fannie, Freddie

    And when is Barney Frank going to be drawn and quartered for his failure here? What about corruption charges for becoming romantically involved with a Fannie Mae exec?

    A government big enough to give you everything you want,
    is strong enough to take everything you have. ~Thomas Jefferson

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    Elite Member tkdgirl's Avatar
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    Default Missouri Governor responds to Obama's Gestapo Tactics of Supressing Free Speech

    WTF! Oops! Sorry

    A government big enough to give you everything you want,
    is strong enough to take everything you have. ~Thomas Jefferson

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    Elite Member Grimmlok's Avatar
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    *yawn*

    When the Bush administration took office in 2001, most home borrowers got conventional ("prime") loans or they could not buy. Subprime lending was still a relatively small part of the total mortgage market. But a combination of a hands-off regulatory approach to the mortgage industry, a low interest-rate environment maintained by the Greenspan Federal Reserve, a president cheering on an "ownership society", and Wall Street firms rushing in to pool together prime and subprime loans and challenge the dominance of the existing Fannie Mae and Freddie Mac home mortgage securitization system, set the stage for an explosion of higher risk lending.

    Mortgage companies capitalized on pent up housing demand among many moderate income and minority borrowers. The subprime lending market soared, becoming nearly half of all new mortgage loans by 2006, and fueling huge bonuses among Wall Street investment firms like Bear Stearns.

    But as has become apparent, these subprime loans were almost designed to go into default in massive numbers. Interest rates on adjustable mortgages spiked as low teaser rates rolled over and borrowers could not refinance their way out of trouble. Foreclosures started to come in waves in late 2006 and early 2007, so widespread and prevalent that the housing appreciation bubble burst, prices dropped sharply in dozens of states, and the epidemic spread.

    When prices drop in a neighborhood, they don't just fall on homes with subprime loans. Everyone gets hit hard. For the first time since the Great Depression, American home values nationally fell nearly 20% since their peak, and in some places much more. Plunging prices trigger more foreclosures. The infection is still spreading even today. Even for those staying out of foreclosure, home equity has been wiped out -- and with it the equity to pay for a college education, or a new car, or to fall back on when medical bills come due.

    Now, as even Wikipedia will tell you, "the term 'subprime' refers to loans that do not meet Fannie Mae or Freddie Mac guidelines." So how can Republicans point to Fannie and Freddie to lay blame when asked about the current housing crisis? Only to change the subject and point away from the inevitable outcome of pervasive underregulation.

    The shoddy, even predatory mortgage lending that led first to the sub-prime meltdown, then to the national foreclosure crisis and loss of trillions of dollars in home value, was brought to American families primarily by private investment companies, not government sponsored ones.

    There were plenty of laws and regulatory tools on the books which might have prevented this, if the current administration had wanted to use them. Just this past July 14th, the Federal reserve finally cracked down on "unfair, abusive or deceptive home mortgage lending practices and restricts certain other mortgage practices." Under the Home Ownership and Equity Protection Act of 1994, they finally prohibited practices which they had allowed for years, like making a loan without verifying a borrowers' ability to repay from income and assets apart from the home's value, or charging exorbitant prepayment fees.

    Of course, many of the same Republicans today blaming it all on Fannie and Freddie stood by, or even applauded, when in 2002 the Fed rejected most of these same protections urged by many consumer groups. For example, a coalition of advocacy groups in 2001 implored the Fed to use the power of HOEPA to protect borrowers, pointing out that "access to predatory lending is not a benefit to consumers. Destructive credit is worse than no credit at all. This is evident in light of the increase in foreclosures, the disintegration of many low income and minority neighborhoods, and the erosion of the tax base of cities due to foreclosures."

    Other regulators, and the Republican Congressional oversight committees charged with looking over their shoulders, sat on their hands as new and risky products were rolled out. Wall Street stampeded into the home lending market with pools of mortgage-backed securities that ratings agencies stamped blessed as AAA. The SEC did nothing to police the spread of risk.

    When the Senate held oversight hearings on ratings agencies in 2006, well into the era of massive subprime securitization, Senator Sununu among others was for holding off greater oversight with statements such as " I don't see the problem as being one of a lack of regulation or need for additional regulation in the area of particular business practices as much as it is a question of a lack of competition, and I think that competition is lacking in part because there are a number of barriers to entry and one of the most significant barriers to entry are regulatory, and they're the barriers that have been created by -- unintended but have been created by some of the existing regulations and we need to look carefully at those."

    To be sure, for years there has been much to criticize about Fannie Mae and Freddie Mac -- issues with transparency, misstated earnings, aggressive lobbying, and more fundamental questions about whether the public was getting full benefit in how they carried out their mission in exchange for an implicit governmental guarantee -- and commentators across the political spectrum have raised such questions. But laying the blame at their doorstep for today's boom and bust turmoil that is devastating hundreds of previously stable communities around the country, and spreading instability worldwide through the global financial markets?

    Then again, if just mentioning their names change the subject away from the Republican record of "deregulate here, deregulate now", maybe Fannie and Freddie can't be all bad.

    David M. Abromowitz: When In Doubt, Yell "Fannie Mae"
    I am from the American CIA and I have a radio in my head. I am going to kill you.

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    Elite Member tkdgirl's Avatar
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    Yawn is right. Republicans wanted regulation. Dems said Fannie Mae was fine. Typical.

    A government big enough to give you everything you want,
    is strong enough to take everything you have. ~Thomas Jefferson

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    Elite Member Grimmlok's Avatar
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    yeah, that's exactly not what my article said at all.
    I am from the American CIA and I have a radio in my head. I am going to kill you.

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    Predatory Lenders' Partner in Crime
    How the Bush Administration Stopped the States From Stepping In to Help Consumers

    By Eliot Spitzer
    Thursday, February 14, 2008; Page A25

    Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers' ability to repay, making loans with deceptive "teaser" rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.



    Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.

    Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.

    What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.

    Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.

    Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.

    In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

    But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.

    Throughout our battles with the OCC and the banks, the mantra of the banks and their defenders was that efforts to curb predatory lending would deny access to credit to the very consumers the states were trying to protect. But the curbs we sought on predatory and unfair lending would have in no way jeopardized access to the legitimate credit market for appropriately priced loans. Instead, they would have stopped the scourge of predatory lending practices that have resulted in countless thousands of consumers losing their homes and put our economy in a precarious position.

    When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.

    The writer is governor of New York.
    Eliot Spitzer - Predatory Lenders' Partner in Crime - washingtonpost.com
    That is an interesting twist- especially in light of recent events, I wonder if that is why he was really pushed out.

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    Dem. Byron Dorgan on the banking situation:

    Press Release | Byron L. Dorgan — United States Senator, North Dakota

    His warning back in 1999:

    The Randi Rhodes Show - Radio, only smarter...

    http://www.c-spanarchives.org/librar...art=&clipStop=

    More on Glass-Steagal:

    William Kaufman: Shattering the Glass-Steagall Act

    So this isn't something that can be completely pinned on either Dems or Repubs.
    Last edited by dragonlady; September 28th, 2008 at 06:59 PM.
    My rape kit brings all the girls to the yard, and I'm like, where's your credit card?
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    Cause to get this there's a hefty charge!

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