The complete and total break down of the mortgage industry. It’s the primary reason you may have lost your home, are underwater with your mortgage, or can’t find a job. It was not Wall Street greed, it was the federal government who tinkered with the rules and screwed it up for everyone.
A Christmas Eve White House decision that nobody will notice. President Obama and his treasury secretary, Timothy Geithner, have elected to increase loss coverage for the Government Sponsored Enterprises (GSE) of Fannie Mae and Freddie Mac from $200 billion to unlimited for the next three years.
Yeah, this will work out just fine. Other than the fact Fannie Mae has no experience renting homes and the owners-turned-tenants will not be able to afford the market rate for the rent. I’m quite certain this is the best thing to do. Not.
It started innocently enough. Karl Rove explains it’s not the Olympic fiasco that is hurting Obama … it’s not even this month’s unemployment rate, it’s Obama’s overall handling of the economy.
Juan steps in it when he accuses Rove and the Bush administration of doing nothing to stop the financial meltdown and that’s when Rove explodes. Let the games begin!
Who says the Republicans in Congress are not doing anything? Even though you could call it old news, members of the GOP House Oversight Committee put together a report in review of the Fannie Mae and Freddie Mac diabolical.
So why is this important? As Michelle Malkin reminds us, Rep. Barney Frank (D-Mass.) wants to proceed down the same path as before. I guess he has not learned anything from history. On July 2 I wrote about Frank using the “profits” from the bail out for his own personal slush fund to fund as-yet unfunded federal housing entitlement programs.
The Hill reports that Republicans are attempting to refocus the blame back onto the governments direct involvement and pressure on the government-sponsored enterprises (GSEs) of Fannie and Freddie.
The report continues the theme of Republicans seeking to pin the housing crisis on Fannie and Freddie, now completely owned by the government. The GOP sees the two mortgage giants as having pumped air into the housing bubble by offering and subsidizing high-risk loans in an effort driven by Democrats and the Clinton administration to increase homeownership, particularly among minorities and low-income households.
To be fair, the Bush administration in my opinion did not do enough to stop all of this from happening, and publicly President George W. Bush was promoting home ownership as well. We’ve covered all of that over and over…
I’ve uploaded the full report – it’s only 26 pages or so – for your convenience. Highlights include…
- Political pressure led to the erosion of responsible lending practices
- Lower down payments led to housing prices that outpaced income growth
- Members of an “affordable housing” coalition shared profits with political allies to help legitimize their business practices
- The Government Sponsored Enterprises led the way into the housing crisis
Nothing that we have not already known is in the report, therefore the only reason for spending the time and money on the thing is to prevent it from happening again. With Frank on the hunt to spend more cash on pet projects, it’s good timing.
Isn’t this how we got into the mortgage mess? Democrats in Congress are asking Fannie Mae and Freddie Mac to relax mortgage standards again.
Thomas Sowell is a very bright man with uncommon common sense. A guest on my show only once (he is very tough to nail down), a free market thinker he does a great job of tracing the root cause of the current financial crisis, an even if you are one to believe that “greedy bankers” caused the collapse by eagerly plunging into the sub-prime market, you need to know who encouraged the “greed” and enabled these bankers and mortgage brokers to make loans that in years past would never have been considered. As usual Thomas Sowell touches on the very erosion of America’s soul: a willingness to compromise values and principals in the name of the “greater society”. The results as you will read, were disastrous.
What was lacking in the housing market, they say, was government regulation of the market’s “greed.” That makes great moral melodrama, but it turns the facts upside down.
It was precisely government intervention which turned a thriving industry into a basket case.
An economist specializing in financial markets gave a glimpse of the history of housing markets when he said: “Lending money to American homebuyers had been one of the least risky and most profitable businesses a bank could engage in for nearly a century.” That was what the market was like before the government intervened. Like many government interventions, it began small and later grew.
Take the time to read the entire article. It is short. It is the truth and is an example where the best intentions of governments can go so awry.
I’m fully on board with blaming Democrat lawmakers in Washington for contributing to the mortgage crisis that started with Freddie Mac and Fannie Mae. Republicans introduced legislation that would more closely regulate the government sponsored entities (GSEs). Democrats – including Barney Frank (D-Mass.) – blocked that legislation, all but calling those asking for the changes racist.
Fox News and bloggers brought those stories to light, and now the Associated Press has written a story targeting former Republican lawmakers and staffers who were hired in 2006 by the GSEs to help keep Congress off their back. I’m willing to hear the evidence from 2006, but remember that the damage was already done by this time.
As I walked through the living room just now, I heard talk of a 4.5 percent fixed rate mortgage on Fox News. Financial industry lobbyists are knocking on Hank Paulson’s door at the Treasury Department with a plan in hand to lower interest rates to help “stabilize” the housing market. Will everyone be able to refinance their mortgages at 4.5 percent?
Just who is Obama’s new chief of staff? I’ve been a bit behind this week in reading due to other commitments, but this afternoon was when I first heard about Obama’s pick.
Guess who served on the board of Freddie Mac in 2000 and 2001?