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Location: Arlington, Virginia, United States

Friday, October 10, 2008

The Nutshell Has Roots

In the recent post(s) "In A Nutshell," the cause of the financial breakdown and the central culprits were revealed:

1) The causus causata of the snowballed meltdown has been identified: The subprime lending corruption at Fannie & Freddie.

(2) A look at the timeline makes clear that the practice of sub-prime lending began in the Clinton era and was called to the carpet in 2004 when it started getting out of hand and raised red flags to number crunchers. The Republican-backed snooping was beaten back by Democrats like Barney Frank, Reid, and others.

(3) The "community organizing" that Barack has on the top of his resume' for "experience" refers to his activities with ACORN--which worked hand-in-hand with Franklin Raines at Fannie.

(4) Raines is now "economic advisor" to Obama.

Furthermore, Senator Obama blames "Republican deregulation" for the breakdown. That's demonstrably false. There's been no "deregulation" in the financial sector that Barack can point to. Nada. Zip.

When additional regulation was sought for Fannie Mae specifically (by Republicans--like McCain himself-- who recognized a potential S&L redux), it was Democrats like Dodd and Frank who bullied and blocked it.

Fannie Mae, as mentioned, worked hand-in-hand with the group ACORN to get sub-prime loans out to indigents, and packaged those very loans and unloaded them for big bucks that were enjoyed by Fannie Mae executives like Raines, Mudd, and Wilkinson, who then gave large contributions to the Obama campaigns.

Meanwhile, the group ACORN is all over the news now for serial voter fraud.

Recall also that Barack was the lawyer and trainer for ACORN, which is the "community organizing" outfit he refers to for his "experience."

HELLO?!?!?

10 Comments:

Blogger FJ said...

A lifetime spent in the service of interests dedicated to defrauding the American people... that's BHO.

5:38 AM  
Blogger nanc said...

you've got more nutshells than a squirrel in winter!

10:27 AM  
Anonymous Anonymous said...

Another error - You refer to Obama's community work - That was when he worked for the charity wings of a Catholic church and a Lutheran church in South Side.

Obama, as a lawyer, did argue a case for Acorn. That's the bulk of his Acorn work.

He won the Acorn case.

6:08 PM  
Blogger John said...

He did more than that. He was a "trainer," too.

11:28 PM  
Anonymous Anonymous said...

Wow...there are so many Palin gates that you can't keep up. Troopergate, emailgate, lunatic religiongate, separatist, anti-America gate etc etc and now it appears she got her house built the same way Ted got his built...through corruption.

Has there ever been a more corrupt politician in the VP slot.

Spiro Agnew looks like a boy scout compared to this weird, fanatic, greed factory.

Oh, lotsa luck with that pathetic Dems caused the meltdown thing...how's that selling for you? lol

11:16 AM  
Blogger FJ said...

Democratic presidential candidate Barack Obama is the first national candidate ever to hire ACORN, a controversial non-profit accused of voter fraud across the country, for get out the vote activities.

Obama’s campaign paid $800,000 to a subsidiary of the liberally-leaning non-profit Association of Community Organizers for Reform called Citizens Services Incorporated campaign to increase voter turnout.

This information, however, was not properly disclosed to the Federal Election Commission. The Obama campaign said it hired CSI to do “polling, advance work and staging events” according to reports submitted to the FEC during the Democratic primary.

The FEC said the Obama campaign needed to disclose ACORN was engaging in get out the vote activities last August. At the time the Obama campaign called the mistake a “clerical error.”

To date, ACORN has been accused of voter fraud in 15 states this election cycle.

Obama has close ties to the organization. Before becoming a member of the Illinois State Senate, Obama represented ACORN in a lawsuit to help push for “Motor Voter” laws to make it easier for low-income persons to vote.

Later, as director of the Woods Fund and Chairman of the Board of Chicago Annenberg Challenge Obama helped steer funds to ACORN through various grants.

Obama sought ACORN’s endorsement in the Democratic primary telling ACORN members, “Even before I was an elected official, when I ran Project Vote voter registration drive in Illinois, ACORN was smack dab in the middle of it, and we appreciate your work.”

“Project Vote” is the name ACORN’s voter registration drives are called. Obama worked for Project Vote for a period of roughly seven months in 1992.

ACORN endorsed Obama for president in February 2008.

11:18 AM  
Anonymous Lies exposed said...

"There has been no deregulation in the financial sector..." !!!!

Is this loser totally ignorant or just a liar?


.......................................................

The Glass-Steagall Act was designed to separate banking from securities activities. In 1999, Congress passed the Gramm-Leach-Bliley Act and in so doing repealed Glass-Steagall the banks which constituted a major deregulation of the banking industry and the newly DEREGULATED institutions immediately strayed into rough waters by looking for fast money from risky investments in securities and derivatives.

As predatory lending mushroomed out of control, the regulators—key among them, the Federal Reserve and the Office of Comptroller of Currency—sat on their hands. The Federal Reserve took exactly three formal actions against subprime lenders from 2002 to 2007. Bloomberg news service found that the Office of Comptroller of the Currency, which has authority over almost 1,800 banks, took three consumer-protection enforcement actions from 2004 to 2006.

The Bush Administration repeatedly preempted and discouraged state regulators and Attorneys General from using state consumer laws to crack down on predatory and sub-prime lending by national banks.

Former Texas Senator and current UBS executive Phil Gramm—would-be President John McCain’s Treasury Secretary-in-waiting—pushed through the Commodities Futures Modernization Act of 2000, which deregulated the derivatives market. With help from his wife, Wendy, the former head of the Commodity Futures Trading Commission who went on to the Enron board of directors, Gramm removed the controls on Wall Street so it could innovate all sorts of exotic financial instruments. Instruments far riskier than advertised, and now at the core of the financial meltdown.

Then, the SEC, through its “consolidated supervised entities” program, decided that voluntary regulation would work for the investment banking sector. Not surprisingly, this was a scheme cooked up by Wall Street itself. The investment banks were permitted to double, triple and go 20 times (and more) down on their bets by using lots of borrowed money. They made minimal disclosures to the SEC about what they were doing, and the SEC didn’t bother to review those disclosures adequately. Too bad for the investment banks—and the rest of us—they made lots of bad bets. The SEC has now closed the voluntary program, though now there aren’t any major investment banks left (the two remaining ones have converted themselves into conventional banks).

6:27 PM  
Blogger John said...

I repeat:

When additional regulation was sought for Fannie Mae specifically (by Republicans--like McCain himself-- who recognized a potential S&L redux), it was Democrats like Dodd and Frank who bullied and blocked it.

Fannie Mae, as mentioned, worked hand-in-hand with the group ACORN to get sub-prime loans out to indigents, and packaged those very loans and unloaded them for big bucks that were enjoyed by Fannie Mae executives like Raines, Mudd, and Wilkinson, who then gave large contributions to the Obama campaigns.

7:01 PM  
Blogger John said...

"Wow...there are so many Palin gates that you can't keep up. Troopergate, emailgate, lunatic religiongate, separatist, anti-America gate etc etc and now it appears she got her house built the same way Ted got his built...through corruption."

Right. How's that selling for you (outside your cult)?

"Oh, lotsa luck with that pathetic Dems caused the meltdown thing...how's that selling for you? lol"

Better than your imbecilic "gates."

And "emailgate?" Last I checked, the little shit who did that is in pretty big trouble. If he was in another country, he'd be caned.

7:09 PM  
Anonymous caught again said...

Private sector loans, not Fannie or Freddie, triggered crisis
David Goldstein and Kevin G. Hall | McClatchy Newspapers
October 12, 2008

WASHINGTON — As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.

Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.

Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height vrom 2004 to 2006.

Federal Reserve Board data show that:

_ More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

_ Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

_ Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets reported Friday.

Conservative critics claim that the Clinton administration pushed Fannie Mae and Freddie Mac to make home ownership more available to riskier borrowers with little concern for their ability to pay the mortgages.

"I don't remember a clarion call that said Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster," said Neil Cavuto of Fox News.

Fannie, the Federal National Mortgage Association, and Freddie, the Federal Home Loan Mortgage Corp., don't lend money, to minorities or anyone else, however. They purchase loans from the private lenders who actually underwrite the loans.

It's a process called securitization, and by passing on the loans, banks have more capital on hand so they can lend even more.

This much is true. In an effort to promote affordable home ownership for minorities and rural whites, the Department of Housing and Urban Development set targets for Fannie and Freddie in 1992 to purchase low-income loans for sale into the secondary market that eventually reached this number: 52 percent of loans given to low-to moderate-income families.

To be sure, encouraging lower-income Americans to become homeowners gave unsophisticated borrowers and unscrupulous lenders and mortgage brokers more chances to turn dreams of homeownership in nightmares.

But these loans, and those to low- and moderate-income families represent a small portion of overall lending. And at the height of the housing boom in 2005 and 2006, Republicans and their party's standard bearer, President Bush, didn't criticize any sort of lending, frequently boasting that they were presiding over the highest-ever rates of U.S. homeownership.

Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.

During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.

In 1999, the year many critics charge that the Clinton administration pressured Fannie and Freddie, the private sector sold into the secondary market just 18 percent of all mortgages.

Fueled by low interest rates and cheap credit, home prices between 2001 and 2007 galloped beyond anything ever seen, and that fueled demand for mortgage-backed securities, the technical term for mortgages that are sold to a company, usually an investment bank, which then pools and sells them into the secondary mortgage market.

About 70 percent of all U.S. mortgages are in this secondary mortgage market, according to the Federal Reserve.

Conservative critics also blame the subprime lending mess on the Community Reinvestment Act, a 31-year-old law aimed at freeing credit for underserved neighborhoods.

Congress created the CRA in 1977 to reverse years of redlining and other restrictive banking practices that locked the poor, and especially minorities, out of homeownership and the tax breaks and wealth creation it affords. The CRA requires federally regulated and insured financial institutions to show that they're lending and investing in their communities.

Conservative columnist Charles Krauthammer wrote recently that while the goal of the CRA was admirable, "it led to tremendous pressure on Fannie Mae and Freddie Mac — who in turn pressured banks and other lenders — to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity."

Fannie and Freddie, however, didn't pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market.

What's more, only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.

These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.

In a speech last March, Janet Yellen, the president of the Federal Reserve Bank of San Francisco, debunked the notion that the push for affordable housing created today's problems.

"Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans," she said. "The CRA has increased the volume of responsible lending to low- and moderate-income households."

In a book on the sub-prime lending collapse published in June 2007, the late Federal Reserve Governor Ed Gramlich wrote that only one-third of all CRA loans had interest rates high enough to be considered sub-prime and that to the pleasant surprise of commercial banks there were low default rates. Banks that participated in CRA lending had found, he wrote, "that this new lending is good business."

(e-mail: khall )at)mcclatchydc.com)

McClatchy Newspapers 2008

6:52 PM  

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