Island Dog

Join Date 06/2003

+1051

Bush Tried to Overhaul Housing Finance Industry

Democrats Opposed

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I found this article today, and please take note of the date.

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders. The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring. Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

Very interesting, right?

Now let's look at a bill that Bush and republicans tried to pass back in 2003.

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.

Wow, sounds like it might have helped....

But democrats said....

''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.''

And they (democrats) eventually killed the proposal. This is what you will see with an Obama administration.

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well, this seems to tell a tale here... brings a new light to what is not said in the generaol media...

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This is one of those "lets blame the Republicans cause people will never research and find out it was us" kinda situation.

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And they (democrats) eventually killed the proposal

The republicans controlled congress back then. You have to look at the whole history of this to see the back and forth of various bills that have been proposed. Both parties share part of the blame as far as legislation(or lack thereof) is concerned.

As far as the Clinton Admin pilot program you have to dig much deeper into the issue to see where all the blame lies. 24 banks in 15 markets is not what has caused todays real estate problem to manifest into what it is today.

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Once again you have now idea what you are taliking about.

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Once again you have now idea what you are taliking about

It is you that is clueless... The CRA mortgages offered are fixed rate. Not the predatory adjustable rate explosive mortgages that were and still are being offered by mortgage companies.

Why is it that the CRA banks in the 15 CRA areas have lower foreclosure rates than those made by the non-CRA lenders and mortgage companies in the same areas?

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Now let's look at a bill that Bush and republicans tried to pass back in 2003.

You should take the time to actually read and understand it.....It would have completely isolated Fannie and Freddie from the primary market.....Lead to them having even fewer actual mortgages in their portfolio so they would have been a bigger problem to the taxpayer when they were put into conservatorship.

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It would have completely isolated Fannie and Freddie from the primary market.....Lead to them having even fewer actual mortgages in their portfolio so they would have been a bigger problem to the taxpayer when they were put into conservatorship.

So what you are saying is that both are failing and it would be better for them to be on the hook with more liability instead of less liability. Like sticking the taxpayer with one dollar is worse than sticking the taxpayer with one hundred dollars.

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So what you are saying is that both are failing and it would be better for them to be on the hook with more liability instead of less liability

No go read the bill that didn't pass. It mainly just moves oversight from one Govt agency to another. It also has several flaws in its regulatory provisions. It did not even properly address the main problem pointed out by the Fed and Treasury Dept. at that time: To reduce the size of its portfolios. If you look at the bill it actually sets initial limits that would have allowed the GSE's to grow the size of their portfolios before it was put into conservatorship.

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If you look at the bill it actually sets initial limits that would have allowed the GSA's to grow the size of their portfolios before it was put into conservatorship.

Your lack of understanding is shining through once again. First there are no GSA’s there is only one GSA. Unless Congress re-writes its charter there is a little fact that gets in the way of your ignorance. The GSA is forbidden to own or hold any private property longer than 180 days without putting it up for auction. So if property is foreclosed upon then the GSA must sell it to the highest bidder after 6 months. I think this is why the Congress wants to create a new agency to handle the mortgage crisis one that can hold those properties longer. The President was going to get rid of them as fast as possible if they fell under the control of the GSA. Have you ever been to a GSA auction? The last one I went to was at the Kennedy Space Center, where there is a regional office of the GSA, I watched a nearly new Rolls Royce sold for 9,000 because that was the highest bid. It did have a few bullet holes in the trunk but other than that and the blood stains some lucky guy drove away with a 240 grand car for 9 grand, what makes you think that if the GSA had a million homes nation wide they would not be selling for a dollar a piece? There is one catch, once you have bought the property at their auction you are on the hook to the bank for any unpaid mortgage. This will mean we would not need to take a trillion dollars of tax payer money to buy up the bad mortgages and people that can afford them can buy them.

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First there are no GSA’s there is only one GSA

GSE's

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Ah! A typeO, my mistake. Yes, they can hold property for a long time, the Feds can't but they can, my issue is why do we want to create another Fanny and or Freddy? Getting butt raped twice was not enough?

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SMOOTHSEAS POSTS:

And they (democrats) eventually killed the proposal

The republicans controlled congress back then. You have to look at the whole history of this to see the back and forth of various bills that have been proposed. Both parties share part of the blame as far as legislation(or lack thereof) is concerned.

Not true...both parties don't share the blame. The Republicans tried to pass the one McCain co-sponosred in 2005. "Federal Housing Enterprise Regulatory Reform Act." It would have provided regulation and oversight of Freddie and Fannie. Sure the Republicans controlled congress, but it didn't pass becasue the Dems blocked it. We now know that some of them, like Chriss Dodd were recipients of "sweetheart" loans from companies that back F and F.

The Republicans had only a simple majority and a simple majority is not in "control" because neither party has the 60-votes required to break a filibuster. The Democrats, especially Schumer and Dodd blocked it by never allowing it to be brought to the floor for a vote...they're on record as claiming that F and F are just fine. It boiled down to the fact that the Dems didn't want to be on record as voting against it. It came up again in 2006, but at that point the Dems were in control of both Houses of Congress.

This is the way Obama operates too. He votes present to avoid being on record.

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"Federal Housing Enterprise Regulatory Reform Act."

It was never brought to the floor. The republicans killed it.

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It was never brought to the floor. The republicans killed it.

prove that statement

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S. 190 [109th]: Federal Housing Enterprise Regulatory Reform Act of 2005

Last Action: Committee on Banking, Housing, and Urban Affairs. Ordered to be reported with an amendment in the nature of a substitute favorably.

Status: Dead

"Ordered to be reported with an amendment in the nature of a substitute favorably" describes what happened to the bill but the exact details are hard to determine.

Basically, the bill couldn't move forward to full consideration by the Senate or House until the committee reported a favorable substitute, meaning revised, bill to the full body. Typically the committee members will tack on, reword, or, in some cases, completely change the bill.

As the committee never ordered the chairman to report the bill to the full Senate, it is likely not enough members could come to a consensus on the substitute.

The details of what went on or how the bill was changed are about as likely to be found as hen's teeth.

As Bush and Greenspan did not like this bill, it is unknown how much pressure they exerted (at least from Bush; not sure how much pull Greenspan had if any) and if that may have played a part in this bill ultimately dying in committee.

What is not in doubt is that, regardless of not being able to come up with an agreeable solution, generally Republicans and OFHEO at the time felt something needed to be done about the GSEs impending fallout, while Democrats tended to say there were no problems with the GSEs and were more concerned with minorities losing access to loans they would not have been able to get without the current loosening of restrictions on credit and with the creative financing being used to get them into homes.

If the GSE regulators were forced to scrutinize the worthiness of those packages coming through them, it would have had an negative impact on the lenders who were used to cranking out those mortgages without regard to worthiness since 'the Government will back them; We're covered and besides, We're making a ton of money!'. And that negative impact would have dried up a lot of the home loans to some of those same minorities the Democrats were trying to protect (those with borderline credit and/or low or non-existant ability to pay).

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Ouch!

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The problem was the lobbies. The banks didn't want HUD/FHA to be making subprime fixed rate loans available because they were making tons offering all kinds of subprime crap loans(ARM NINJA NODOC) through their mortgage subsidiaries and passing off the bad paper to the GSA's. The reason Greenspan didn't like the bill was because it would have made things worse. He testified to such in a committe hearing that is probably archived on the CSpan website. The bill was written with the help of the bank lobby. This is the problem with congress. Some of them actually have good intentions but they don't know enough about the issue and they let lobbyists write legislation. Thats probably one of my biggest problems with McCain. He really has no clue on economic issues so he surrounds himself with lobbyists because they have convinced him that they are brilliant and on the side of the public.

The negative impact is not that it would have dried up loans to minorities....It would have dried up fixed rate mortgages in which the GSE's actually sat on the mortgage and allowed unregulated mortgage companies to fill in the gap with crap mortgages and then pass off bad paper to the GSA's while they still sat on the actual mortgages.

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What it boils down to is that neither party was competent enough to correct the problems that led to the current situation.

The Democrats didn't believe a problem even existed and the Republicans couldn't come up with (much less pass) a plan solve those problems. Now those same brainiacs have just passed a huge bill to 'fix' (wink, wink, nod) this mess. Which leads one to believe that Government really ought to stay out of the private sector; they are such horrible businessmen.

We are so fucked!

Here's a bit of irony. During that time, the Republicans were calling for more regulations and the Democrats were essentially saying let the free market work it out. Ha! Talk about what should be up is down and what should be down is up. I also have it on good authority that Catholic schoolgirls were threatening to throw away their mascara!

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Daiwa

Join Date 07/2001

+351

We are so fucked!

Succint, thy name is Picto.

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The Democrats didn't believe a problem

Not really....Certain people didn't want to create a "panic" about the GSE's in hopes that it would keep the stock price from diving and continue to have new stock/bond offerings if necessary. This includes members of certain committees and the Bush Admin. Look what happened when a letter Shumer wrote to the OTC and FDIC about IndyMac surfaced. It caused a run on that bank and it went under practically overnight.

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Daiwa

Join Date 07/2001

+351

The Congressional Record and video documentation don't much support the notion that the Dems were worried about inadvertently creating a panic, as opposed to believing, with conviction, that there was no problem.

There is something troublesome to me about giving them a pass in such circumstances, on the assumption they were trying to 'help' us, since opacity and paternalism in such matters only end up compounding the problem, a fact for which there is ample recent evidence. The taxpayer should be treated as an adult.

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Trying to prevent anyone from correcting the impending fallout by claiming 'All is well' to 'prevent a panic' really didn't work out so well.

And frankly, I don't buy that as a motive, at least in the Democrats I've seen records of testifying for how well the GSEs were doing. I believe their proclaimed motives (continuing the good work of getting minorities into homes) were their actual motives.

Whether that motive was to be altruistic or merely pandering for votes, is another matter.

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Daiwa

Join Date 07/2001

+351

Trying to prevent anyone from correcting the impending fallout by claiming 'All is well' to 'prevent a panic' really didn't work out so well.

And frankly, I don't buy that as a motive, at least in the Democrats I've seen records of testifying for how well the GSEs were doing.

Exactly. Nail, meet again.

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There is something troublesome to me about giving them a pass in such circumstances

I don't give them a pass. I blame politicians on both sides of the fence for the problem. I think both parties are to blame for taking the US to the point it is at. Unfortunaltely too many people believe it is one or the other without realizing it is both.

Trying to prevent anyone from correcting the impending fallout

It was already to late and as I've said before the bills that were proposed did nothing to correct the problem.They did not add any oversight they simply moved the oversight from one dept to another. In reality it was just renaming a dept. Hard to say that was an attempt to fix the problem when there were already laws on the books that got at the root of the problem and they were not being enforced. Where are the politicians on either side that actually tried to address the problem? That actually tried to stop the banking, credit, and mortgage industries from driving the public into further debt? Where are the politicians on either side of the fence that actually tried to stop the corporations from cooking their books so that they couldn't keep driving the public further into debt? Proposing a bill that does nothing to correct a problem but claiming that it does is not fixing a problem.

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Where are the politicians on either side

As I said,

What it boils down to is that neither party was competent enough to correct the problems that led to the current situation.

There's no doubt it was starting to rain shit several years ago and, in the time frame relevant to this article, at least some Republicans were looking up realizing that wasn't sunshine falling out of the sky (not that they actually did anything to stop it) while the Democrats who testified were singing about what a nice sunny day it was.

Point being, if both parties would have at least recognized the problems, possibly a solution could have been found to avert the situation in which we now find ourselves ... knee deep in shit.

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