How did Fannie Mae & Freddie Mac get into this mess?

[M4arc]

Say it isn't so! :eek:

http://mjperry.blogspot.com/2008/09/flashback-to-1990s-origins-of-credit.html

[mayonaise]

Simple answer is very little oversight because of the Community Reinvestment Act http://en.wikipedia.org/wiki/Community_Reinvestment_Act. A Carter Admin program that forces banks to make loans to people who wouldn't be able to without the gov't program. Clinton made it worse during his term.

This may cost McCain the election but the fault really lies with the Democrats blocking the Bush Admin. attempt to regulate Freddie and Fannie a couple of years ago. All this while the leading Dems blame the Republicans for deregulation. Obama received $126K from them in campaign contributions second behind Chris Dodd.

[Lumpy196]

http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260

[Pat.c]

http://www.slideshare.net/guesta9d12e/subprime-primer-277484/

A stick figures guide

[Low Drag]

Simple answer is very little oversight because of the Community Reinvestment Act http://en.wikipedia.org/wiki/Community_Reinvestment_Act. A Carter Admin program that forces banks to make loans to people who wouldn't be able to without the gov't program. Clinton made it worse during his term.

This may cost McCain the election but the fault really lies with the Democrats blocking the Bush Admin. attempt to regulate Freddie and Fannie a couple of years ago. All this while the leading Dems blame the Republicans for deregulation. Obama received $126K from them in campaign contributions second behind Chris Dodd.

Bill Clinton said as much in an interview, except he said the democrats blocked his efforts to reform them.

[M4arc]

But...but...I just heard a Obama commercial that blamed all of this on Bush and McCain...:rolleyes:

[C4IGrant]

But...but...I just heard a Obama commercial that blamed all of this on Bush and McCain...:rolleyes:


Of course you did. :rolleyes:


I would love to run my business into the ground, pay me 100 Million dollars and then have the US tax payers save my butt.


C4

[johnson]

http://www.whitehouse.gov/news/releases/2004/08/20040809-9.html


Expanding Homeownership. The President believes that homeownership is the cornerstone of America's vibrant communities and benefits individual families by building stability and long-term financial security. In June 2002, President Bush issued America's Homeownership Challenge to the real estate and mortgage finance industries to encourage them to join the effort to close the gap that exists between the homeownership rates of minorities and non-minorities. The President also announced the goal of increasing the number of minority homeowners by at least 5.5 million families before the end of the decade. Under his leadership, the overall U.S. homeownership rate in the second quarter of 2004 was at an all time high of 69.2 percent. Minority homeownership set a new record of 51 percent in the second quarter, up 0.2 percentage point from the first quarter and up 2.1 percentage points from a year ago. President Bush's initiative to dismantle the barriers to homeownership includes:

American Dream Downpayment Initiative, which provides down payment assistance to approximately 40,000 low-income families;

Affordable Housing. The President has proposed the Single-Family Affordable

Housing Tax Credit, which would increase the supply of affordable homes;

Helping Families Help Themselves. The President has proposed increasing support for the Self-Help Homeownership Opportunities Program; and

Simplifying Homebuying and Increasing Education. The President and HUD want to empower homebuyers by simplifying the home buying process so consumers can better understand and benefit from cost savings. The President also wants to expand financial education efforts so that families can understand what they need to do to become homeowners.

[mmike87]

Of course you did. :rolleyes:


I would love to run my business into the ground, pay me 100 Million dollars and then have the US tax payers save my butt.


C4

I'd certainly consider that a better use of my money than what they are proposing now! :)

[MisterWilson]

http://www.slideshare.net/guesta9d12e/subprime-primer-277484/

A stick figures guide

That's the best description I've seen of this so far. Bloody brilliant and deserving of it's own thread.

[QuickStrike]

Because of Bush? :p:D

[Master_of_Sparks]

Simple answer is very little oversight because of the Community Reinvestment Act http://en.wikipedia.org/wiki/Community_Reinvestment_Act. A Carter Admin program that forces banks to make loans to people who wouldn't be able to without the gov't program. Clinton made it worse during his term.

This may cost McCain the election but the fault really lies with the Democrats blocking the Bush Admin. attempt to regulate Freddie and Fannie a couple of years ago. All this while the leading Dems blame the Republicans for deregulation. Obama received $126K from them in campaign contributions second behind Chris Dodd.
Dead on.

[MisterWilson]

Holy crap, read this one too. Too funny.

http://www.verb2verbe.com/comics/taleoftwoworlds.aspx

[maximus83]

Simple answer is very little oversight because of the Community Reinvestment Act http://en.wikipedia.org/wiki/Community_Reinvestment_Act. A Carter Admin program that forces banks to make loans to people who wouldn't be able to without the gov't program. Clinton made it worse during his term.

This may cost McCain the election but the fault really lies with the Democrats blocking the Bush Admin. attempt to regulate Freddie and Fannie a couple of years ago. All this while the leading Dems blame the Republicans for deregulation. Obama received $126K from them in campaign contributions second behind Chris Dodd.

Yep. The Community Reinvestment Act, combined with 2 other factors IMHO, has caused the total undermining of our financial system:

1. The immigration disaster, where our cowardly political class has simply given away our country, due to their failure to enforce our borders, and closely related,

2. The "PC revolution," in which politically correct thinking dominates all walks of life to the extent that we cannot admit obvious truths, for example, that loaning lots of money to poor minorities who don't have ID's or income verification might be a bad financial risk.


Because of the idiotic PC revolution in our thinking and politics, because of the presence of many illegals who (understandably, from their point of view) wish to cash in our way of life, and because of the Community Reinvestment Act, which simply LEGALIZES the entire process of using a politically correct justification to make bad loans, we now have this crisis.

[d90king]

All of that stuff played a part but in reality was only a small part.

The sad part of this is that truly a great deal of this could be avoided by simply modifying some of the accounting principles that Banks must follow. Banks have to evaluate assets on a cash or current market basis. If the banks were allowed to carry forward some of the assets at true market value instead of having to write them down to 10 cents on a dollar due to the current market values.

By doing so it would allow them to work out of bad assets overtime ( this is what the US did in the failed savings and loans days and at the end of it the tax payers made money) instead of absorbing all the losses in a very short period of time.

Keep in mind that if a bank takes a 1 billion dollar write down on paper they lose 10 billion in lending power. In addition it greatly inhibits it's ability to borrow on the short term markets and from the Fed.

If banks simply had time to work out of their bad paper over time then much of this could be avoided without costing the tax payers 1 trillion dollars.

The banks saw a opening, took it and ran with it. There is a reason Warren Buffett made 780 million yesterday on his 5 billion dollar Goldman investment.

At the end of the day the markets could have handled this on their own if just given a little relief in the short term.

[Blake]

The sad thing is, the American people are going to bail out multiple companies in the near future, but I don't think I'm going to get any of their stock in my portfolio!:mad: