Well a smarter person would just provide a link to the law that they are so adamant exist rather than arguing and degrading the person who doubts you. I think that we all agree that Government intervention is a HUGE part of what got us into this mess, but I seriously think you are talking out of your ass if you think that it is against the law for banks to turn down people for loans. The Government inticed banks to make loans, but they didn't force them, just like no one forced people to take out loans they couldn't afford . Heather
Well..... I got some bad news for you Heather and Matt, and a little advice before you read this.
First... I just got the time to look this info up, so read it and weep. And I suggest that next time you call someone out as 'not too smart' or 'talking out their ass' you ass-u-me more care. It will keep you both from sounding like a jack-ass.
I don't think it is good policy for you to run your mouth, be ignorant of the facts at the same time, and be in a position of Authority.
Second... I hope this is simple enough language for you to understand because I won't go thru it again for you or anyone else. I figure it is above 6th grade level, but hey, I'll give it a shot. There were links provided throughout these websites but I didn't keep them. Look them up on your own.
Third... this bit of advice...
If you want to run with the Wolves, you can't pee with the Puppies. So Heather, after you get done reading this, you'll know what an ass sounds like, and it just might be you.
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“I want [Freddie Mac and Fannie Mae] to help with affordable housing, to help low-income families get loans and to help clean up this subprime mess. Otherwise, why should they exist?” - Rep. Barney Frank.
The Subprime Panic of ’08 and its $1 trillion (and rising!) price tag is too big to blame on any one man. But if we had to, it would be Newton’s own Rep. Barney Frank.
So what happened? The answer is actually quite simple: Freddie and Fannie happened. And they couldn’t have without the ferocious support of Barney Frank.
Freddie and Fannie were supposed to be safe suppliers of mortgage money for relatively low-risk loans. If you could qualify for a loan, F&F would make sure the banks had access to the money to make that loan, cheap money because it was backed by the American taxpayers.
But liberals like Barney Frank wanted more. They wanted the low cost of low-risk loans to be extended to higher-risk borrowers with lower incomes, fewer assets or less-solid credit.
Barney Frank and friends used the regulations of the Community Reinvestment Act to threaten lenders into making these loans. And banks, trying to meet Frank’s demands, expanded riskier lending schemes like subprime mortgages.
That’s when Freddie and Fannie stepped in. As Kevin Hassett of the American Enterprise Institute put it: “They fueled Wall Street’s efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools.”
Lenders asked themselves, why should I care how shaky these borrowers are or risky the loans if a government-backed body is going to buy them up anyway?
The loans were made, the housing market bubbled, contributions from F&F flowed to Democrats like Chris Dodd and Barack Obama, and everyone was happy. Until they weren’t.
Without Freddie and Fannie’s reckless expansion, the housing bubble doesn’t happen. Without the implied promise behind F&F’s money, investment banks don’t dive into the derivatives market.
Instead, we did it Frank’s way.
Not only has Frank spent his career stopping any real reform of Fannie and Freddie, he repeatedly insisted they weren’t backed by the taxpayers. “There is no federal liability whatsoever,” Frank said in 2000.
We had to bail them out with $200 billion in our tax dollars.
Alan Greenspan, John McCain and others warned that F&F were taking on too much risk, but Frank dismissed these “overblown” fears as ideological attacks against his favorite cash cow. Even after Franklin Raines and Joe Johnson were caught red-handed mismanaging these institutions, Frank still insisted “we are not facing any kind of crisis.”
Just how deep in the Fannie/Freddie tank was he? As The Wall Street Journal reports: “Mr. Frank was publicly arguing for an increase in the size of their combined $1.4 trillion portfolios right up to the day they were bailed out. Even now . . . he opposes Treasury’s planned reduction in the size of the portfolios starting in 2010.”
Our markets have collapsed, we’re paying through the nose, and Barney Frank is still fighting to keep Fannie and Freddie on the dole. Why? Because in his mind, the point of Fannie/Freddie is taxpayer-subsidized housing for low-income borrowers - no matter how bad their credit or how high the cost. Otherwise,” he asks, “why should they exist?”
And what about us, the responsible borrowers and hard-working taxpayers stuck with the trillion-dollar tab? In Barney’s world, that’s the only reason we exist. He spends. We pay.
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The Root Cause* According to Senator Chris Dodd (D. CT) the “root cause” of the problem is “the housing foreclosure crisis.”
Not 100% accurate, perhaps-it’s really a credit crisis-but close enough for government work, especially from someone who has just happens to chair the
Senate Banking Committee and who, completely coincidentally, has been such a conspicuous beneficiary of preferential mortgages and who, also coincidentally, leads the list of those who have received campaign contributions from Fannie Mae and Freddie Mac.
* But what caused the housing crisis to which Senator Dodd alludes? The housing “bubble.”
* And what caused the housing bubble?
“Sub-prime,” i.e., risky, mortgages; that is, mortgages made to people who, in the normal course of things would have to pay a premium in order to obtain a mortgage (if they could obtain one at all) because:
a) they had bad or non-existent credit
b) their income was insufficient or
c) both.
Packaging the American DreamA home of your own. It’s part of the American dream. Work hard, save up for a down payment, pay your bills on time and, presto, you, too, can buy a home.
For decades the government has done things to help Americans to realize the dream, e.g., graciously allowing citizens to keep some of their own money to help pay for the interest on a mortgage (the official term for this is a “tax deduction,” but I prefer my locution since it emphasizes the fact that it is YOUR MONEY we are talking about).
But what about people who do not work hard (if they work at all)? What about people who have not saved up for a down payment? What about people who do not pay their bills on time (if they pay them at all)? Why shouldn’t they get to live the American dream?
That was the question that led to “The Community Reinvestment Act”
* The original
Community Reinvestment Act was signed into law in 1977 by Jimmy Carter. Its purpose, in a nutshell, was to require banks to provide credit to “under-served populations,” i.e., those with poor credit.
The buzz word was “affordable mortgages ,” e.g., mortgages with low teaser-rates, which required the borrower to put no money down, which required the borrower to pay only the interest for a set number of years, etc.
* In 1995, Bill Clinton’s administration made various changes to the CRA, increasing “access to mortgage credit for inner city and distressed rural communities,” i.e., it provided for the securitization , i.e. public underwriting, of what everyone now calls “sub-prime mortgages.”
Bottom line? It forced banks to issue $1 trillion in sub-prime mortgages.
$1 trillion, i.e., a thousand billion dollars in sub-prime,i.e., risky, mortgages, in order to push this latest example of social engineering.
But wait: how did it force banks to do this? Easy.
Introduce a federal requirement that banks make the loans or face penalties. As Howard Husock, writing in City Journal way back in 2000 observed_the_trillion_dollar mark: “Bank examiners would use federal home-loan data, broken down by neighborhood, income group, and race, to rate banks on performance. There would be no more A’s for effort. Only results-specific loans, specific levels of service-would count.”
Way back in 1994, for example, Barack Obama sued Citibank on behalf of a client who charged that the bank “systematically denied mortgages to African-American applicants and others from minority neighborhoods.”
* In 1997, Bear Stearns-O firm of blessed memory-was the first to get onto the sub-prime gravy train.
* Fannie Mae & Freddy Mac were there near the beginning, too.
Anatomy of a bubbleStep 1. The intoxication: “My house is worth millions!” From 1995 - 2005, the number of sub-prime mortgages skyrocket. So did the house prices.
Step 2. The hangover: “Oh my God, my house isn’t selling. What went wrong?”
Why didn’t someone try to stop it?
Someone did - “The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago,” The New York Times, September 11, 2003.
But someone intervened to stymie the Bush administration. Who? The New York Times reports: Supporters of the companies said efforts to regulate the lenders tightly under those agencies might diminish their ability to finance loans for lower-income families. . . .
“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.”
Why didn’t someone else ring the alarm?
Someone else did. In 2005, John McCain warned_of_mortgage_collapse_in_2005 co-sponsored the “Federal Housing Enterprise Regulatory Reform Act ,” which among other things provided for more oversight of Freddie & Fannie. The bill didn’t pass. Guess who blocked it?
The bill was reintroduced in 2007. But again, no luck. Fannie Mae and Freddie Mac had friends in the Senate:
*
Chris Dodd, Chairman-committee-on-banking-housing-and-urban-affairs a recipient of “sweetheart” loans from a Freddie and Fannie backed company.
* The junior senator from Illinois, i.e., Barack Obama, who turned to Jim Johnson, former head (1991-1998) of Fannie Mae, to help advise him on whom to pick for the vice-presidential slot on his ticket. From 1985 to 1990, incidentally, Johnson was managing director of Lehman Brothers. Remember them?
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