just a regular guy

9-22-08

So, the meltdown on Wall Street has exposed Fannie Mae, Freddie Mac and the Jimmy Carter Community Reinvestment Act for what they really were. Another Democrat handout to people that wouldn’t otherwise qualify to buy a home and a terrific source of campaign cash and suitcases full of money for the party and their cronies. Oh sure we hear the real problem was actually credit conundrums, stocks swings, derivative deviations, bond bombs, Republican deregulation of banks and investment firms and of course the ubiquitous “it’s all Bush’s fault” from the “never at fault for anything” Democrats.” What is really infuriating to conservatives is this constant drumbeat of lies and redirection from the truth brought by the Democrats and their buddies in the mainstream media. Keep pounding that drum, get some help from the Washington Post, New York Times, msnbc et al and eventually it appears to be reality. Facts be damned.

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In 1977 Carter signed into law 12 U.S.C. 2901 also known as the Community Reinvestment Act (CRA). Personally I like to refer to it as the “Hardcore Socialists Legalized Extortion Racket” (HSLER) which I think is a much better description of what this piece of Democratic “feel good” legislation was really all about. It was designed to force lenders to reinvest earnings in their surrounding communities with less regard for sound business practices and more emphasis on loaning money to those the Democratic government felt were “underserved”, low income folks and minorities. Essentially this became a government mandated, private business funded money pool for those that normally would not have access to the loans due to their un-creditworthiness. The full text of the the “HSLER” can be found here and as you can see the “community activists/organizers” like A.C.O.R.N., not to mention a sea of lawyers, a steady supporter of Democratic politicians, were chomping at the bit to get to work down at their friendly neighborhood banks.

With this legislation in place banks were literally stuck in a catch 22:

“an illogical, unreasonable, or senseless situation: a situation presenting two equally undesirable alternatives: a hidden difficulty or means of entrapment”

If they follow the law they know they will suffer losses due to defaults on loans that never would have granted pre “HSLER”. If they decide they would rather run their businesses in a manner that is responsible and expected from their shareholders they run the risk of government fines and penalties and the inability to expand or seek mergers. That is what this “rating” and “confidential reporting” stuff was all about and there was no way for these lending institutions to get around it. They cannot simply charge higher interest rates on the riskier loans as lobbyists did a great job at getting so called “predatory lending laws” passed through Congress. These burgeoning portfolios of high risk mortgages gave birth to the term “subprime loans.”

Now we know that banks, credit unions and mortgage companies don’t actually hold the mortgage for your home as it wouldn’t be possible to loan out those large sums with just the money deposited or loan repayments from customers. These mortgages are often sold off to Fannie Mae and Freddie Mac, government sponsored enterprises, (GSE) to provide the steady stream of funds needed by the lenders to continue to write home loans. The GSEs then repackage these mortgages as securities and sells them to investors. One of the downsides to this is the originating lender has little reason to care whether or not the borrower fulfills the obligations to pay back the loan since it is just shipped off almost before the ink is dry. Naturally this is a very simplified way of viewing the process because it can get very complicated but these are the basics.

When Bill Clinton was elected president and came into office in 1993 one of the things he became interested in was turbocharging the CRA. He felt the law was not performing as it was intended and thought kicking it in the pants might help stimulate the economy. He figured the time was right to push through his vision of what the CRA should be doing especially for low income and minority folks, read Democrat votes. His proposal was to reduce the amount of paperwork banks were required to submit for compliance with the lending law and for people who were looking to take advantage of the CRA to acquire a loan. In addition he wanted the reporting feature of the act and the civil penalty clauses to have some real teeth to them. What he really wanted was to force the lending institutions to provide many more home loans to minorities and low income borrowers than they were providing. The emphasis certainly was not on whether or not they could afford these loans or had the ability to repay them. The most important factor was skin color.

In order to keep the ball rolling with the economy the administration’s monetary policies, including manipulating the interest rates, essentially created the housing bubble of the late ’90s early 2000s and the wild run up in the inflated real estate “values”, especially in California, we are all so painfully aware of these days. Lending institutions were now between a large rock and an even larger hard place. They must comply with the CRA yet fewer and fewer people were able to qualify for anything close to a conventional loan. There was only one way to stuff these otherwise unqualified borrowers into a home loan and that was to come up with these crazy adjustable rate mortgages that start out at a very low interest rate but jump up to much larger rates in a relatively short period of time. The whole premise of this lending plan was that home values were going to continuing rising rapidly with the borrower using the equity to refinance the loan before the interest rate rose and the monthly payments doubled. Unfortunately the real estate market began to tumble with values dropping rapidly and borrowers were staring at a mortgage that was more than their home was worth.

Another major part of this mess seems to get very little coverage for some reason. Several major banking institutions including Bank of America, Wells Fargo and Citibank were actively seeking to lend money to illegal immigrants (no politically correct stuff here folks) just as fast as they could. No social security numbers needed, just step right up folks. Get your credit cards and home loans with hardly any questions asked!

Wells Fargo began a pilot program last year in Los Angeles and Orange counties to offer home mortgages to immigrants who have lived in the United States for at least two years. The customers are allowed to identify themselves using taxpayer numbers issued by the Internal Revenue Service instead of Social Security numbers. That’s the same type of identification number an immigrant can use to obtain a credit card under Bank of America’s pilot program.

“We are also looking at the possibility of offering unsecured credit cards to customers who may not have Social Security numbers,” Wells Fargo spokeswoman Mary Trigg said.

William P. Cook, former general counsel of the U.S. Immigration and Naturalization Service, said the bank’s program was neither illegal nor problematic.

“It’s sad that such a forward-thinking move is being mischaracterized as if it were an improper activity,” said Cook, who is now in private practice.

While I don’t have any hard numbers yet (and I’m sure they will get buried deeply in paperwork anyway) I’m positive this innovative way at approaching business by these banks has at least some significant part of the problems we are dealing with right now. Writing a home mortgage for someone here illegally with the strong possibility of them getting deported some day, great move geniuses. Anything to fluff up those numbers and satisfy that pesky CRA right?

Good old Fannie Mae and Freddie Mac have certainly had their share of newsworthy issues over the years haven’t they? Through a series of accounting procedures that hid massive losses and other shenanigans the top managers were able to “earn” millions of dollars in bonuses year after year. This scam has been known for years yet the practices just kept on rolling along. Why…and how? Let’s see what Barney Frank the chairman of the Financial Services Committee, had to say to the New York Times, hardly a megaphone for the Republican party, back in September of 2003:

“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.

“I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said. ( a shell game indeed Mr. Watt, performed in house to keep anyone from truly knowing what was going on.)

Please note the opening paragraphs of the article:

“The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.”

It seems pretty clear that the Bush folks and John McCain were right on the ball to me and the Democrats were working awfully hard to keep any true reform from taking place ….are ya following me camera guy?

Of course the Democrats did not want any oversight of Fannie and Freddie and there is a pretty simple reason for it. It turns out the two mortgage giants are quite the cash cow for Democrats in office and for those looking to find a safe place to bilk millions from the program like former White House budget director under President Bill Clinton and Barack Obama adviser Franklin Raines and Obama’s former vice presidential research adviser Jim Johnson, both former CEOs of Fannie Mae. Obama was recently forced to disassociate himself from these two because of their backgrounds when word got out he had them on staff. People in this country scared to death that they are going to have everything they own wiped out and these two guys walk away with sacks of cash, they outta be locked up.

Looky here. Fannie Mae and the rest of the “family”, the Congressional Black Caucus. (Once again Google owned youtube has removed a video which clearly shows the Democrats in a bad light using this bullshit “terms of use” excuse.)

So how deep is Barney Frank in this Fannie-Freddie fiasco? Lisp deep and he ain’t gonna give them up easily.

“Asked about Treasury’s modest bailout condition that the companies reduce the size of their high-risk mortgage-backed securities (MBS) portfolios starting in 2010, Mr. Frank was quoted on Monday as saying, “Good luck on that,” and that it would never happen.”

Again in June 2003, the favorite of the Beltway press corps assured the public that “there is no federal guarantee” of Fan and Fred obligations.

A month later, Freddie Mac’s multibillion-dollar accounting scandal broke into the open. But Mr. Frank was sanguine. “I do not think we are facing any kind of a crisis,” he said at the time.

Three months later he repeated the claim that Fannie and Freddie posed no “threat to the Treasury.” Even suggesting that heresy, he added, could become “a self-fulfilling prophecy.”

“Nah. Nothin’ here folks, just move along and leave us alone please”, seems to be Frank’s message, “Chris Dodd (the number one recipient of campaign cash from Fan and Fred ) and I have it all under control.” You see Frank felt that these companies were his and Dodd’s to play around with knowing full well if they went belly up the taxpayers would be forced to swoop in via the Bush administration and clean up the mess. All the while the Democrats hope and depend on the frighteningly short memory of the American people and the ever so malleable press to spin the needle around and blame the Republicans who just stand there and take the beating like the wimps they have always been.

Frank continues:

“In January of last year, Mr. Frank also noted one reason he liked Fannie and Freddie so much: They were subject to his political direction. Contrasting Fan and Fred with private-sector mortgage financiers, he noted, “I can ask Fannie Mae and Freddie Mac to show forbearance” in a housing crisis. That is to say, because Fannie and Freddie are political creatures, Mr. Frank believed they would do his bidding.

And this is exactly what Mr. Frank attempted to prove when the housing market started to go south. He encouraged the companies to guarantee more “affordable” mortgages, thus abetting their disastrous plunge into subprime and Alt-A loans. He also pushed for, and got, an increase in the conforming-loan limits to allow Fan and Fred to securitize and guarantee larger mortgages. And he pressured regulators to ease up on their capital requirements — which now means taxpayers will have to make up that capital shortfall.”

There it is in black and white. Fannie and Freddie are simply there for Frank to push his liberal agenda “in a housing crisis” when he knew full well that he couldn’t pull the same stunts with conventional mortgage lenders. But we aren’t done with Barney just yet. There just so happens to be another big reason for Frank resisting any caps or limits on the portfolios carried by Fannie and Freddie.

“But the biggest payoff for Mr. Frank is the “affordable housing” trust fund he managed to push through as one political price for the recent Fannie reform bill. This fund siphons off a portion of Fannie and Freddie profits — as much as $500 million a year each — to a fund that politicians can then disburse to their favorite special interests.

This is also why Mr. Frank won’t tolerate cutting the companies’ MBS portfolios. He knows those portfolios (bought with debt borrowed at taxpayer-subsidized rates) were a main source of Fannie’s profits before the housing crash, and he figures that once this crisis passes they can do it again. And this time, his fund will get part of the loot.”

So, why is this so important? Read the last two sentences again then take a look at the recently passed “Comprehensive American Energy Security and Consumer Protection Act”-H.R. 6899 [EH], you know the one that the Nancy Pelosi controlled House wrote behind closed doors with no Republican input allowed? The bill introduced at 9:45 in the evening and forced to a vote the next day with little discussion and NO amendments allowed? Yes, that one. Well among all of the NON-energy related garbage this phony “energy bill” contained was this:

“SEC. 607. DUTY TO SERVE UNDERSERVED

MARKETS FOR ENERGY-EFFICIENT AND LOCATION-EFFICIENT MORTGAGES.

Section 1335 of Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4565), as amended by the Federal Housing Finance Regulatory Reform Act of 2008 (Public Law 110-289; 122 Stat. 2654), is amended–

(1) in subsection (a)(1), by adding at the end the following new subparagraph:

`(D) MARKETS FOR ENERGY-EFFICIENT AND LOCATION-EFFICIENT MORTGAGES-

`(i) DUTY- Subject to clause (ii), the enterprise shall develop loan products and flexible underwriting guidelines to facilitate a secondary market for energy-efficient and location-efficient mortgages on housing for very low-, low-, and moderate income families, and for second and junior mortgages made for purposes of energy efficiency or renewable energy improvements, or both.

`(ii) AUTHORITY TO SUSPEND- Notwithstanding any other provision of this section, the Director may suspend the applicability of the requirement under clause (i) with respect to an enterprise, for such period as is necessary, if the Director determines that exigent circumstances exist and such suspension is appropriate to ensure the safety and soundness of the portfolio holdings of the enterprise.’;

(2) by adding at the end the following new subsection:

`(e) Definitions- For purposes of this section, the following definitions shall apply:

`(1) ENERGY-EFFICIENT MORTGAGE- The term `energy efficient mortgage’ means a mortgage loan under which the income of the borrower, for purposes of qualification for such loan, is considered to be increased by not less than $1 for each $1 of savings projected to be realized by the borrower as a result of cost-effective energy saving design, construction or improvements (including use of renewable energy sources, such as solar, geothermal, biomass, and wind, super-insulation, energy-saving windows, insulating glass and film, and radiant barrier) for the home for which the loan is made.

`(2) LOCATION-EFFICIENT MORTGAGE- The term `location efficient mortgage’ means a mortgage loan under which–

`(A) the income of the borrower, for purposes of qualification for such loan, is considered to be increased by not less than $1 for each $1 of savings projected to be realized by the borrower because the location of the home for which loan is made will result in decreased transportation costs for the household of the borrower; or

`(B) the sum of the principal, interest, taxes, and insurance due under the mortgage loan is decreased by not less than $1 for each $1 of savings projected to be realized by the borrower because the location of the home for which loan is made will result in decreased transportation costs for the household of the borrower.’.”

We just had one of the largest financial meltdowns in the history of this country and these liberal creeps are writing language into an energy bill that is is the very reason for these current problems we are having on Wall Street right now!

That’s not all. Looking back to August when the Fan and Fred bailout was signed by president George Bush we find that the Democrats managed to slip in some funding for two of the most radical, left wing groups in this country, La Raza and A.C.O.R.N. The former dedicated to encouraging as much illegal immigration into the U.S. as possible and the latter well known for so called community activist type activities which include belligerent and intimidating behavior towards people forcing them to conform to their demands, not to mention numerous allegations, indictments and convictions for voter fraud by their members and other crooked behavior.

“The housing package signed into law by President Bush extends an unlimited line of credit to troubled mortgage giants Freddie Mac and Fannie Mae and rescues homeowners near or in foreclosure. The measure also increases the federal debt limit by another $800 billion — and sends millions of dollars in aid to La Raza and the Association of Community Organizations for Reform Now, or ACORN.

Representative Michele Bachmann (R-Minnesota), a member of the House Financial Services Committee, says she finds it “unconscionable” that the legislation included funding for the two groups, which serve as political action arms of the Democratic Party.”

At the same time that the American taxpayer was being asked to bail these companies out, Barney Frank, the chairman of the Financial Services Committee, instituted a sort of tax on Freddie and Fannie, and that tax goes into what’s called an affordable housing trust fund,” explains Bachmann. “It’s a really a taxpayer-subsidized housing fund, but that money will go to organizations like La Raza and…ACORN.” Both groups — “particularly ACORN,” says Bachmann — have been found to be involved in “activities where they have perpetrated voter fraud,” she contends.”

Weird how this group ACORN keeps popping up in the news and not in a very flattering way. One would think that their endorsement of Barack Obama for president would be about as welcome as the endorsement he received from Hamas and those pesky Russians.

I sincerely hope but seriously doubt the dopes in the media will take at least 1/10 the amount of time they have spent trying to twist this Walt Monegan non issue up in Alaska into some kind of scandal and take a closer look at what these Democrats are really up to. Perhaps the New York Times and Washington Post could gather their dirt diggers…I mean reporters up there in Alaska and put them on a plane to Chicago where the real scandals are hangin’….with Obama’s handprints all over them.

Tags: Acorn, bailout, banks, Barney Frank, Bill Clinton, Chris Dodd, community reinvestment act, CRA, democrats, Fannie Mae, Freddie Mac, George Bush, Jimmy Carter, La Raza, lending institutions, mortgages, Wall Street