Bush promoted home ownership despite poor credit

iVillage Member
Registered: 07-11-2006
Bush promoted home ownership despite poor credit
67
Mon, 11-28-2011 - 8:08pm

From that well-known biased source: The business section of the Wall Street Journal

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iVillage Member
Registered: 09-30-2011
Wed, 11-30-2011 - 4:56pm

Our opinions diverge when it comes to the financial crisis and its causes. I do not believe that GSEs or legislation such as the CRA that attempted to change housing laws has much of a role at all in the ultimate meltdown.

It's a falicious argument for your economist to only look at the loans covered specifically by CRA-covered lenders when determining culpability for the collapse.

iVillage Member
Registered: 09-30-2011
Wed, 11-30-2011 - 4:59pm
Previous attempts for GSE reform

The GSE business model faces inherent conflicts due its combination of government mission and private ownership. According to the American Enterprise Institute, a conservative think-tank: "The government mission required them to keep mortgage interest rates low and to increase their support for affordable housing. Their shareholder ownership, however, required them to fight increases in their capital requirements and regulation that would raise their costs and reduce their risk-taking and profitability. But there were two other parties—Congress and the taxpayers—that also had a stake in the choices that Fannie and Freddie made. Congress got some benefits in the form of political support from the GSEs' ability to hold down mortgage rates, but it garnered even more political benefits from GSE support for affordable housing."[15]

In 2003, the Bush Administration sought to create a new agency, replacing the Office of Federal Housing Enterprise Oversight, to oversee Fannie Mae and Freddie Mac. In 1992 in the wake of the Savings and Loan crisis, and over concern similar lending problems would develop, the Office of Federal Housing Enterprise Oversight was created as part of the Department of Housing and Urban Development.[16] While Senate and House leaders voiced their intention to bring about the needed legislation, no reform bills materialized. A Senate reform bill introduced by Senator John Corzine (D-NJ) (S.1656) never made it out of the 21-member (10D/11R) Senate Banking, Housing, and Urban Affairs Committee.[17] At the time members of the 108th congress expressed faith in the solvency of Fannie and Freddie. Congressman Barney Frank (D-MA), for example, described them as "not facing any kind of financial crisis." [18]

In 2005, the Federal Housing Enterprise Regulatory Reform Act, sponsored by Senator Chuck Hagel (R-NE) and co-sponsored by Senators Elizabeth Dole (R-NC), John McCain (R-AZ) and John Sununu (R-NH)[1], would have increased government oversight of loans given by Fannie Mae and Freddie Mac. Like the 2003 bill, it also died in the Senate Banking, Housing, and Urban Affairs Committee, this time in the 109th Congress. A full and accurate record of the congressional attempts to regulate the housing GSEs is given in the Congressional record prepared in 2005.[19][20]

Gerald P. O'Driscoll, the former vice president of the Federal Reserve Bank of Dallas, stated that Fannie Mae and Freddie Mac had become classic examples of crony capitalism. Government backing let Fannie and Freddie dominate the mortgage-underwriting. They returned some of the profits to the politicians, sometimes directly, as campaign funds, and sometimes as "contributions to favored constituents." [21]

http://en.wikipedia.org/wiki/Federal_takeover_of_Fannie_Mae_and_Freddie_Mac

iVillage Member
Registered: 07-11-2006
Wed, 11-30-2011 - 10:12pm

What is salient is that Republicans foresaw the danger

I'm thinking you missed the video that I posted about FOX sounding the alarm? The Republicans did not see the danger - they "stayed the course" until it was too late.

It looks like Bernanke changed his opinion sometime after your quote:

Bernanke: The CRA Was Not "At The Root Of, Or Otherwise Contributed In Any Substantive Way To, The Current Mortgage Difficulties."

iVillage Member
Registered: 11-20-2011
Wed, 11-30-2011 - 11:13pm

nisupulla wrote:

"The Republicans made no effort to thwart the crisis because they did not see it coming!"

You have mentioned that several times however, when I presented you with video evidence from c-span back in 2004 that they indeed DID see this coming and were wanting more regulations for Fannie Mae and Freddie Mac only to have the democrats deny there was a problem and even get angry that their time was being wasted...you have completely ignored that.

I am curious as to why?

iVillage Member
Registered: 07-11-2006
Thu, 12-01-2011 - 7:39am

iVillage Member
Registered: 07-11-2006
Thu, 12-01-2011 - 7:42am

The two are part of the same problem as Fannie and Freddie backed a great number of the subprime loans.

Relatively speaking, in terms of the crisis Fannie and Freddie did NOT have great numbers of subprime loans.

iVillage Member
Registered: 07-11-2006
Thu, 12-01-2011 - 7:45am

iVillage Member
Registered: 07-11-2006
Thu, 12-01-2011 - 7:49am

This article, again, addresses GSE regulations. It is a red herring.

If Republicans were truly opposed to subprime lending, there has to be some evidence somewhere of their concerns about subprime lending.

I contend that there is no evidence to support the idea that Republicans were opposed to private banks providing

iVillage Member
Registered: 07-11-2006
Thu, 12-01-2011 - 3:19pm

As I have said before, Bush was opposed to GSEs. He was not opposed to poor lending decisions:

The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents......

In 2005, faced with ominous signs the housing market was in jeopardy, bank regulators proposed new guidelines for banks writing risky loans. Today, in the midst of the worst housing recession in a generation, the proposal reads like a list of what-ifs:

  • Regulators told bankers exotic mortgages were often inappropriate for buyers with bad credit.
  • Banks would have been required to increase efforts to verify that buyers actually had jobs and could afford houses.
  • Regulators proposed a cap on risky mortgages so a string of defaults wouldn’t be crippling.
  • Banks that bundled and sold mortgages were told to be sure investors knew exactly what they were buying.
  • Regulators urged banks to help buyers make responsible decisions and clearly advise them that interest rates might skyrocket and huge payments might be due sooner than expected.

Those proposals all were stripped from the final rules.

iVillage Member
Registered: 09-30-2011
Fri, 12-02-2011 - 2:59am

What is salient is that Republicans foresaw the danger

I'm thinking you missed the video that I posted about FOX sounding the alarm? The Republicans did not see the danger - they "stayed the course" until it was too late.

I'm thinking you missed all of the videos and cites that showed how Republicans tried impose regulations and how the Democrats blocked them claiming, even as the car was over the cliff, that things were "fine."

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