The Left says that the problem is that we deregulated finance (never mind that we didn’t actually do that) and that “greed” caused bankers to trick tens of millions of Americans into taking out mortgage loans that they couldn’t really afford, with the result that wicked banksters such as Dick Fuld managed to cleverly . . . lose themselves billions of dollars. It’s a dumb story. -Kevin D. Williamson 
The run-up to the 2008 financial meltdown and the accompanying recession was driven by the Community Reinvestment Act, which was eventually toughened to the point of effectively compelling banks to make trillions of dollars in mortgage loans to objectively unqualified buyers. -Ed Driscoll
Fannie and Freddie (and federal housing policy, generally) helped create the mortgage backed securities and secondary mortgage markets that collapsed in 2008 because of the loss of confidence in the subprime mortgage market – which was also pushed along by the federal government. Fannie even had a mortgage program it ran with Countrywide called “Fast and Easy.” That’s not the name of a pawnshop, but a government-backed mortgage program! -Ben Shapiro
Democrat, Liberal, Incompetence, Obama, Financial, Debt
New mortgage rules issued last week by the administration will have the effect of forcing lenders to approve prime loans to borrowers who would normally only qualify for subprime loans carrying higher interest rates and fees to cover the added risk of default. Banks are already under renewed pressure from federal prosecutors and regulators to make home loans to low-income borrowers with blemished credit as part of the administration's stepped-up enforcement of anti-redlining laws.
Government, Incompetence, Financial, Oops
A new and extensive analysis of 2.4 million loans insured by the Federal Housing Administration in recent years shows a pattern of risky lending that could generate $20 billion in losses and harm thousands of the nation’s most vulnerable borrowers. By ignoring risks in loans it insured in 2009 and 2010, the study concludes, the F.H.A. is imperiling both borrowers and taxpayers who stand behind the agency.
Democrat, Liberal, Obama, Financial, Corruption
Former ACORN employee and whistleblower Anita Moncrief said ACORN is far from dead and is still “colluding” and “working with” the President Barack Obama's Department of Justice. Moncrief appeared with Conservative commentator David Webb in a one-hour special about the “District of Corruption” movie on FOX News’ “Hannity.” She specifically discussed how community organizing groups on the left put pressure on institutions like banks to get them to relent to their “equal outcomes” agenda.
Democrat, Liberal, Incompetence, Obama, Financial, Economy
President Barack Obama was a pioneering contributor to the national subprime real estate bubble, and roughly half of the 186 African-American clients in his landmark 1995 mortgage discrimination lawsuit against Citibank have since gone bankrupt or received foreclosure notices. As few as 19 of those 186 clients still own homes with clean credit ratings, following a decade in which Obama and other progressives pushed banks to provide mortgages to poor African Americans.
And as Politico noted when the House Oversight Committee report was issued, the “Friends of Angelo” program was far more damaging than a waste of taxpayer funds in the form of a quid pro quo mortgage industry bailout. The program also helped to kick off the entire financial crisis by playing a “critical part” in blocking efforts to reform the mortgage lending industry, including the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Countrywide also gave sweetheart deals to top officials at those GSEs, who were the biggest buyers of Countrywide’s dubious mortgage loan products. - Tom Fitton
Government, Incompetence, Corruption
Countrywide Financial Corp. gave discount loans to former and current members of the U.S. Congress and executives at government-sponsored Fannie Mae (FNMA) as it lobbied to scuttle legislation that would have diminished its sale of sub-prime mortgages, according to a report by a Republican-led House oversight panel. The report released today caps a three-year probe and many of the findings have been disclosed as the U.S. House Oversight and Investigations Committee conducted its investigation.
Government, Incompetence, Financial, Economy, Corruption
WASHINGTON (AP) — The former Countrywide Financial Corp., whose subprime loans helped start the nation's foreclosure crisis, made hundreds of discount loans to buy influence with members of Congress, congressional staff, top government officials and executives of troubled mortgage giant Fannie Mae, according to a House report. The report, obtained by The Associated Press, said the discounts - from January 1996 to June 2008 - were not only aimed at gaining influence for the company but to help Fannie Mae. Countrywide's business depended largely on Fannie, which at the time was trying to fend off more government regulation but eventually had to come under government control.
Democrat, Liberal, Government, Incompetence, Financial, Brilliance, Oops, Economy
“I hope by next year we’ll have abolished Fannie and Freddie,” he said. Remarkable. And he went on to say that “it was a great mistake to push lower-income people into housing they couldn’t afford and couldn’t really handle once they had it.” He then added, “I had been too sanguine about Fannie and Freddie.”
Democrat, Liberal
"I hope by next year we'll have abolished Fannie and Freddie ... it was a great mistake to push lower-income people into housing they couldn't afford and couldn't really handle once they had it."
Fannie and Freddie scooped up Countrywide loans and pooled them and others into mortgage-backed securities that were sold with an implicit taxpayer guarantee that eventually became explicit. The taxpayer guarantee allowed — indeed, encouraged — the lenders to be reckless, creating a moral hazard. In 2008, this set-up helped bring down the whole house of cards built by subprime mortgages. -John Fund
Democrat, Liberal, Government, Incompetence, Financial
The issue that day in 2003 was whether mortgage backers Fannie Mae and Freddie Mac were fiscally strong. Frank declared with his trademark confidence that they were, accusing critics and regulators of exaggerating threats to Fannie’s and Freddie’s financial integrity. And, the Massachusetts Democrat maintained, “even if there were problems, the federal government doesn’t bail them out.’’ Now, it’s clear he was wrong on both points — and that his words have become a political liability as he fights a determined challenger to win a 16th term representing the Fourth Congressional District.
Democrat, Liberal, Government, Incompetence, Financial, Corruption
Frank’s assistance in helping Moses land the job was first reported in a new book about the fiscal meltdown by Pulitzer Prize-winning New York Times [NYT] reporter Gretchen Morgensen. In an interview Tuesday on WBUR’s “Fresh Air,” Morgensen said Frank “was very aggressive and really tough on those who were testifying in Congress about reining in Fannie Mae and Freddie Mac” during hearings after Moses was hired. She said Fannie Mae “rolled out the red carpet” for Moses as part of a strategy to curry favor with Frank and other members of the Financial Services Committee.
Government, Incompetence, Financial
Daniel Mudd, the former chief executive officer of Fannie Mae, and Richard Syron, ex-CEO of Freddie Mac, were sued by the U.S. Securities and Exchange Commission for understating by hundreds of billions of dollars the subprime loans held by the firms.
Democrat, Liberal, Government, Incompetence, Financial, Brilliance, Oops, Economy
President Obama signed off on $42 million in bonuses for the top twelve Fannie and Freddie executives, including $6 million apiece for the two CEOs.
In the academic world, mealy-mouthed delivery of even powerful conclusions is the norm, so it's refreshing to see authors Sumit Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru answer the title's question, "Did the Community Reinvestment Act (CRA) Lead to Risky Lending?," with the clear, "Yes, it did. ... We find that adherence to the act led to riskier lending by banks." -J.D. Tuccille, Reason Magazine
Government, Incompetence, Financial, Scandal
The Securities and Exchange Commission is moving toward charging former and current Fannie Mae and Freddie Mac executives with violations related to the financial crisis, setting up a clash with the housing regulator that oversees the companies, according to sources familiar with the matter.
The SEC, responsible for enforcing securities laws, is alleging that at least four senior executives failed to provide necessary information to investors about the companies’ mortgage holdings as the U.S. housing market collapsed.
Government, Incompetence
Reporting from Washington —
Taxpayer losses from the government seizure of failed housing finance giants Fannie Mae and Freddie Mac could reach nearly $400 billion, but likely won't top that level as some had feared, the firms' federal regulator said Wednesday.
Government, Incompetence, Financial, Economy
"It was not the banks that created the mortgage crisis. It was, plain and simple, Congress," said Bloomberg, himself a former executive of a financial information company.
Liberal, Government, Incompetence, Financial, Narrative, Oops
But what if government encouraged, even invented, those "abusive practices"? Rewind to 1994. That year, the federal government declared war on an enemy — the racist lender — who officials claimed was to blame for differences in homeownership rate, and launched what would prove the costliest social crusade in U.S. history. At President Clinton's direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties.
For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay. I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. 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. -John McCain (R), May 25, 2006
Democrat, Editorial, Government, Incompetence, Financial, Narrative
But based on the number of toxic loans in the system in 2008, the government was responsible for not just a simple majority, but more than two-thirds. It's quantifiable — 71% to be exact (see chart). And the remaining 29% of private-label junk was mostly attributable to Countrywide Financial, which was under the heel of HUD and its "fair-lending" edicts. iF4qQkBD7CRi
Democrat, Editorial, Liberal, Government, Incompetence, Financial
Democratic power brokers stoked the housing bubble and turned a blind eye to the increasingly rampant corruption and incompetence at Fannie Mae and the associated predatory lenders who sheltered under its umbrella; core Democratic ideas may well be at fault.
Democrat, Liberal, Government, Incompetence, Scandal
Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam
Democrat, Liberal, Government, Incompetence, Obama
The banking industry said borrowers weren't sending back their paperwork. They also have accused the Obama administration of initially pressuring them to sign up borrowers without insisting first on proof of their income.
Democrats and the media insist the Community Reinvestment Act, the anti-redlining law beefed up by President Clinton, had nothing to do with the subprime mortgage crisis and recession. But a new study by the respected National Bureau of Economic Research finds, "Yes, it did. We find that adherence to that act led to riskier lending by banks." Added NBER: "There is a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam. Moreover, the effects are larger for loans made within CRA tracts," or predominantly low-income and minority areas.
Liberal, Government, Incompetence, Financial, Narrative
It’s bad enough that Fan and Fred lowered the loan approval thresholds. Pinto’s point is that for 15 years, they doubled down by “routinely” misclassifying approved loans, effectively telling the capital markets and the public that these loans weren’t as risky as they really were.
Democrat, Government, Incompetence, Scandal
Countrywide was the biggest supplier of loans to Fannie during the mania; in 2004, it sold 26 percent of the loans Fannie bought. Three years later, it was selling 28 percent. What Countrywide got out of the relationship was clear — a buyer for its dubious loans.
But what was in it for Fannie?
An internal Fannie document from 2004 obtained by The New York Times sheds light on this question. A “Customer Engagement Plan” for Countrywide, it shows how assiduously Fannie pursued Mr. Mozilo and 14 of his lieutenants to make sure the company continued to shovel loans its way.
Government, Incompetence
Since the government took over Fannie Mae and Freddie Mac, taxpayers have spent more than $160 million defending the mortgage finance companies and their former top executives in civil lawsuits accusing them of fraud.
Government, Incompetence, Financial
"This process of figuring out the government's role is going to involve some hard choices," says Alyssa Katz, author of Our Lot: How Real Estate Came to Own Us. "The moment you start changing the nature of what is guaranteed by the government, what is subsidized, you start to change the alignment of winners and losers. ... We took for granted that anyone could get a mortgage." Using guarantees and tax breaks, the government pushed homeownership past 69% in 2004. Then it all came crashing down.
"We want your CRA loans because they help us meet our housing goals," Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking conference in 2000, just after HUD hiked the mortgage giant's affordable housing quotas to 50% and pressed it to buy more CRA-eligible loans to help meet those new targets. "We will buy them from your portfolios or package them into securities." She described "CRA-friendly products" as mortgages with less than "3% down" and "flexible underwriting."
Editorial, Government, Incompetence, Financial, Oops
Aug 5 2010: If you want to know why us libertarian types are skeptical of the government's ability to prevent housing market bubbles, well, I give you Exhibit 9,824: the government's new $1000 down housing program. No, really. The government has apparently decided, in its infinite wisdom, that what the American economy really needs is more homebuyers with no equity. -Megan McArdle
Editorial, Government, Incompetence, Financial
You are familiar by now with the role of the Federal Reserve in stimulating the housing boom; the role of Fannie Mae and Freddie Mac in encouraging low-equity mortgages; and the role of the Community Reinvestment Act in mandating loans to "subprime" borrowers, meaning those who were poor credit risks. So you may think that the government caused the financial crisis. But you don't know the half of it. And neither does the government.
Democrat, Government, Financial, Scandal
Friends of Angelo:
Countrywide’s Systematic
and Successful Effort to Buy
Influence and Block Reform
Democrat, Financial, Scandal
In June, Condé Nast Portfolio disclosed the names of five V.I.P.-loan recipients: Senators Christopher Dodd and Kent Conrad, former cabinet members Alphonso Jackson and Donna Shalala, and former United Nations Ambassador Richard Holbrooke. The Wall Street Journal reported that James Johnson and Franklin Raines, both former C.E.O.’s of government-sponsored mortgage buyer Fannie Mae, received favorable rates.
"All of us participated in the destructive behavior -- government, lenders, borrowers, the media, rating agencies," said Warren Buffett. "At the core of the folly was the almost universal belief that the value of houses was bound to increase."
Democrat, Liberal, Government, Incompetence
Video: causes of our current economic crisis...
Democrat, Government, Incompetence, Regulation
The White House called for tighter regulation 17 times.
Government, Incompetence, Financial
There are as many starting points for the mortgage meltdown as there are fears about how far it has yet to go, but one decisive point of departure is the final years of the Clinton administration, when a kid from Queens without any real banking or real-estate experience was the only man in Washington with the power to regulate the giants of home finance, the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), better known as Fannie Mae and Freddie Mac.
Democrat, Government, Incompetence, Scandal
Countrywide Financial Corp.'s controversial "VIP" mortgage program made 153 loans to employees of Fannie Mae, the giant federally backed financial institution that helped fuel Countrywide's growth, according to a letter released Tuesday by Rep. Darrell Issa.
Another 20 such VIP loans, which often provided mortgages on terms more favorable than those available to the general public, went to employees of Freddie Mac, another big government-backed buyer of mortgage loans, the Issa letter said.
Twice, Bush tried to rein in Fannie Mae and Freddie Mac, and twice Democrats (Obama included) moved in to stop him. Especially culpable were Barney Frank and Chris Dodd. Dodd claimed that the institutions were "fundamentally strong," and Frank said he wanted to "roll the dice a little bit more in his situation" rather than impose stricter regulation on Fannie and Freddie. He did roll those dice, and they came up snake eyes at the end of the Bush years. The same could have just as easily happened in the Gore or Kerry administrations, had they existed, and it would not have been due to their policies, either. It was due to bad sense, bad judgment, greed and a lot of misguided good will. --Noemie Emery
Democrat, Liberal, Government, Incompetence, Financial, Oops, Economy
Rep. Frank: Let me ask [George] Gould and [Franklin] Raines on behalf of Freddie Mac and Fannie Mae, do you feel that over the past years you have been substantially under-regulated? Mr. Raines? Mr. Raines: No, sir. Mr. Frank: Mr. Gould? Mr. Gould: No, sir. Mr. Frank: OK. Then I am not entirely sure why we are here. . . .
Democrat, Liberal, Government, Incompetence, Financial, Oops, Economy
I worry, frankly, that there's a tension here. The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios.
Democrat, Liberal, Incompetence, Financial, Funny, Brilliance, Oops, Economy
''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.'' Representative Melvin L. Watt, Democrat of North Carolina, agreed.
Government, Incompetence, Financial, Oops
''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''
"If they don't come up with loan modifications and keep people in their homes that they've worked so hard for, we're going to tax them out of business." -Maxine Waters
Government, Incompetence
Barack Obama held the Bush administration responsible yesterday for what he calls “the most serious financial crisis since the Great Depression.” Obama is hopelessly wrong on the facts. One need look no further than The Washington Examiner and The Washington Post to see that the roots
Government, Incompetence, Financial, Oops
The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
Democrat, Government, Incompetence, Financial, Oops, Economy
For many years the President and his Administration have not only warned of the systemic consequences of financial turmoil at a housing government-sponsored enterprise (GSE) but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties. President Bush publicly called for GSE reform 17 times in 2008 alone before Congress acted. Unfortunately, these warnings went unheeded, as the President’s repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems.
Liberal, Brilliance, Oops, Economy
To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble. -Paul Krugman