The Financial Crisis - it's the Bushwackos fault

[lupi]

Monday, May 31, 1999
Minorities? Home Ownership Booms Under Clinton but Still Lags Whites?
By Ronald BrownsteinMay 31, 1999 in print edition A-5

It?s one of the hidden success stories of the Clinton era. In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded.

The number of African Americans owning their own home is now increasing nearly three times as fast as the number of whites; the number of Latino homeowners is growing nearly five times as fast as that of whites.
These numbers are dramatic enough to deserve more detail. When President Clinton took office in 1993, 42% of African Americans and 39% of Latinos owned their own home. By this spring, those figures had jumped to 46.9% of blacks and 46.2% of Latinos.

That?s a lot of new picket fences. Since 1994, when the numbers really took off, the number of black and Latino homeowners has increased by 2 million. In all, the minority homeownership rate is on track to increase more in the 1990s than in any decade this century except the 1940s, when minorities joined in the wartime surge out of the Depression.

This trend is good news on many fronts. Homeownership stabilizes neighborhoods and even families. Housing scholar William C. Apgar, now an assistant secretary of Housing and Urban Development, says that research shows homeowners are more likely than renters to participate in their community. The children of homeowners even tend to perform better in school. Most significantly, increased homeownership allows minority families, who have accumulated far less wealth than whites, to amass assets and transmit them to future generations.

What explains the surge? The answer starts with the economy. Historically low rates of minority unemployment have created a larger pool of qualified buyers. And the lowest interest rates in years have made homes more affordable for white and minority buyers alike.

But the economy isn?t the whole story. As HUD Secretary Andrew Cuomo says: ?There have been points in the past when the economy has done well but minority homeownership has not increased proportionally.? Case in point: Despite generally good times in the 1980s, homeownership among blacks and Latinos actually declined slightly, while rising slightly among whites.

All of this suggests that Clinton?s efforts to increase minority access to loans and capital also have spurred this decade?s gains. Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat ?redlining? by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws. The bottom line: Between 1993 and 1997, home loans grew by 72% to blacks and by 45% to Latinos, far faster than the total growth rate.

Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac?the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more.
In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains. It has aimed extensive advertising campaigns at minorities that explain how to buy a home and opened three dozen local offices to encourage lenders to serve these markets. Most importantly, Fannie Mae has agreed to buy more loans with very low down payments?or with mortgage payments that represent an unusually high percentage of a buyer?s income. That?s made banks willing to lend to lower-income families they once might have rejected.

But for all that progress, the black and Latino homeownership rates, at about 46%, still significantly trail the white rate, which is nearing 73%. Much of that difference represents structural social disparities?in education levels, wealth and the percentage of single-parent families?that will only change slowly. Still, Apgar says, HUD?s analysis suggests there are enough qualified buyers to move the minority homeownership rate into the mid-50% range.

The market itself will probably produce some of that progress. For many builders and lenders, serving minority buyers is now less a social obligation than a business opportunity. Because blacks and Latinos, as groups, are younger than whites, many experts believe they will continue to lead the housing market for years.

But with discrimination in the banking system not yet eradicated, maintaining the momentum of the 1990s will also require a continuing nudge from Washington. One key is to defend the Community Reinvestment Act, which the Senate shortsightedly voted to retrench recently. Clinton has threatened a veto if the House concurs.

The top priority may be to ask more of Fannie Mae and Freddie Mac. The two companies are now required to devote 42% of their portfolios to loans for low- and moderate-income borrowers; HUD, which has the authority to set the targets, is poised to propose an increase this summer. Although Fannie Mae actually has exceeded its target since 1994, it is resisting any hike. It argues that a higher target would only produce more loan defaults by pressuring banks to accept unsafe borrowers. HUD says Fannie Mae is resisting more low-income loans because they are less profitable.

Barry Zigas, who heads Fannie Mae?s low-income efforts, is undoubtedly correct when he argues, ?There is obviously a limit beyond which [we] can?t push [the banks] to produce.? But with the housing market still sizzling, minority unemployment down and Fannie Mae enjoying record profits (over $3.4 billion last year), it doesn?t appear that the limit has been reached.

All signs point toward a high-velocity collision this summer between two strong-willed protagonists: HUD?s Cuomo and Fannie Mae CEO Franklin D. Raines, the first African American to hold the post. Better they reach a reasonable agreement that provides more fuel for the extraordinary boom transforming millions of minority families from renters into owners.

Hmm, absolutely none of this sounds like what people are now painting as the fundamental causes of the problems we are now facing.

 

[jpeyton]

Blaming it on Clinton; now there's an argument that'll win you an election! :laugh:

 

[bl4ckfl4g]

I don't really care whose fault it is right now.

 

[Genx87]

Look if this is one of the causes of this meltdown it needs to be addressed. Partisan politics on this issue need to be overlooked imo. We cant have the govt regulating the banks give more risky loans then turn around and complain the banks failed because they were risky.

 

[SP33Demon]

Just more partisan finger pointing. Nothing to see here folks.

 

[Blain]

The problem stems from cheap money after 9/11 to keep things going.
Interest rates too low for too long. :roll:

 

[Genx87]

Originally posted by: SP33Demon
Just more partisan finger pointing. Nothing to see here folks.

You know instead of casting stones in your glass house. Why dont you tell us what you think of this part of the article.

The top priority may be to ask more of Fannie Mae and Freddie Mac. The two companies are now required to devote 42% of their portfolios to loans for low- and moderate-income borrowers; HUD, which has the authority to set the targets, is poised to propose an increase this summer. Although Fannie Mae actually has exceeded its target since 1994, it is resisting any hike. It argues that a higher target would only produce more loan defaults by pressuring banks to accept unsafe borrowers. HUD says Fannie Mae is resisting more low-income loans because they are less profitable.

Is this a problem or not considering these two failed because of risky loans. And please remember the article was written in 1999, not today.

 

[Cuda1447]

Originally posted by: Genx87
Look if this is one of the causes of this meltdown it needs to be addressed. Partisan politics on this issue need to be overlooked imo. We cant have the govt regulating the banks give more risky loans then turn around and complain the banks failed because they were risky.

I agree that we need to find the cause of the problem. I think its fairly obvious that everyone in Washington is to blame though. The President doesn't have absolute power, there are a couple hundred other people that have a say in things. Everyone of them dropped the ball on this. Now we just need to find out where specifically, how to fix it and how to avoid it again in the future.

 

[SP33Demon]

Originally posted by: Genx87

Originally posted by: SP33Demon
Just more partisan finger pointing. Nothing to see here folks.

You know instead of casting stones in your glass house. Why dont you tell us what you think of this part of the article.

The top priority may be to ask more of Fannie Mae and Freddie Mac. The two companies are now required to devote 42% of their portfolios to loans for low- and moderate-income borrowers; HUD, which has the authority to set the targets, is poised to propose an increase this summer. Although Fannie Mae actually has exceeded its target since 1994, it is resisting any hike. It argues that a higher target would only produce more loan defaults by pressuring banks to accept unsafe borrowers. HUD says Fannie Mae is resisting more low-income loans because they are less profitable.

Is this a problem or not considering these two failed because of risky loans.

I'm not saying I disagree, we all know WHY they (among many others) failed. As a Lib, I don't think regulation was ever the answer, not then, not now. I wasn't a fan of this BS legislation in the first place. But all in all, this thread just amounts to partisan finger pointing which is stupid. How to fix the mess without borrowing hundreds of billions is what we should be discussing.

 

[BeauJangles]

Quick! Time to play the blame game!!!

Why don't we resolve this crisis as best we can, and then have a real investigation into who might have been responsible rather than letting partisan hacks try to lay the blame at the feet of their enemies?

 

[Genx87]

Originally posted by: SP33Demon

Originally posted by: Genx87

Originally posted by: SP33Demon
Just more partisan finger pointing. Nothing to see here folks.

You know instead of casting stones in your glass house. Why dont you tell us what you think of this part of the article.

The top priority may be to ask more of Fannie Mae and Freddie Mac. The two companies are now required to devote 42% of their portfolios to loans for low- and moderate-income borrowers; HUD, which has the authority to set the targets, is poised to propose an increase this summer. Although Fannie Mae actually has exceeded its target since 1994, it is resisting any hike. It argues that a higher target would only produce more loan defaults by pressuring banks to accept unsafe borrowers. HUD says Fannie Mae is resisting more low-income loans because they are less profitable.

Is this a problem or not considering these two failed because of risky loans.

I'm not saying I disagree, we all know WHY they (among many others) failed. As a Lib, I don't think regulation was ever the answer, not then, not now. I wasn't a fan of this BS legislation in the first place. But all in all, this thread just amounts to partisan finger pointing which is stupid. How to fix the mess without borrowing hundreds of billions is what we should be discussing.

Well if you can get past the inflammatory title the article brings us insight into how this thing may have been rolling nearly a decade ago. I feel knowing the reasons behind why it happened are as important as knowing how we are going to fix it. Because quite frankly if we dont know what broke it, how can we fix it?

I think we are stuck on the line for an amount between 1 and 1trillion.

 

[SP33Demon]

Originally posted by: Genx87
Well if you can get past the inflammatory title the article brings us insight into how this thing may have been rolling nearly a decade ago. I feel knowing the reasons behind why it happened are as important as knowing how we are going to fix it. Because quite frankly if we dont know what broke it, how can we fix it?

I think we are stuck on the line for an amount between 1 and 1trillion.

Yeah, it's looking like 3-10 trillion by the time this is done IF the BS bailout package is approved (and it probably will be which will snowball a fcktonne of other packages). What they should be doing is borrowing from foreign lenders and letting this thing play out without more government intervention, but printing money is so much easier since we're the military head of the world and everyone fears us!

 

[PELarson]

Yup... Clinton mad the banks create loan packages that repaid little to no principle and had rates that would sky rocket and to people with insufficient down payments for the size house they purchased.

NEXT!!!!!!!!

 

[mshan]

60% shocked of all these toxic loans are apparently localized to two states, California and Florida (I am not sure if that 60% statistic also included Arizona, though).

Alot are probably also vintage 2006 and beyond (low 2 - 3 year teaser rate, no doc, pick a payment, negative amortization type loans) in slums like Miami, San Diego, San Francisco, and the suburbs of Phoenix...

It's not "sub-prime", it's overextended borrower, irrespective of whether they were rich or poor or whatever.

And the subprime foreclosure peak already occurred, but we've still got a really nasty Alt-A peak projected to occur next year.

 

[lupi]

Originally posted by: BeauJangles
Quick! Time to play the blame game!!!

Need a refill for your glass?

Why don't we resolve this crisis as best we can,

And other than waving a big stack of money at it, exactly how do we do that without examing possible causes such as those described in this article?

and then have a real investigation into who might have been responsible rather than letting partisan hacks try to lay the blame at the feet of their enemies?

You mean like what consistently happens on Obamatech P&N forums?

 

[Mani]

You know the republicans are grasping for straws when they even blame the housing crisis on Clinton and black people.

 

[heyheybooboo]

The lame Loopy & GenX arguments Fail because the sub-prime and Alt-A debt, the unregulated CMOs and default swaps, and the hedge fund fancy deriviatives shorting all of these securities have exploded in the last 5 years.

Please try again.

 

[Moonbeam]

In the 5000 years since Egypt a peace loving race of humans could have built a world filled with temples, palaces and gardens fit for kings and queens for the 5 billion people living on the planet and they would all be communally owned. But because of fear, I want MY OWN home. So I slave away at my life for what could have been built a thousand times better a thousand years ago.

 

[CoachB]

I agree that we need to find the cause of the problem. I think its fairly obvious that everyone in Washington is to blame though. The President doesn't have absolute power, there are a couple hundred other people that have a say in things. Everyone of them dropped the ball on this. Now we just need to find out where specifically, how to fix it and how to avoid it again in the future.

Cuda hit the nail on the head. The people in Washington (of all persuasions) are our nations "Leaders". This is where they have lead us. Time to clean house, change the way our leaders are developed/promoted, and eliminate the lobbyist/special interest influence.

The majority of the people in Washington have absolutely NOTHING in common with you and I. When was the last time you saw a politico suffering, going hungry, facing foreclosure on one of their homes, trying to get health care, trying to save for retirement????

Today's cause is preventing economic collapse. Remember the "tax refund" we got a while back? Wasn't that supposed to rescue the economy? If sending ME money was good then, why not send ME a portion of the 3 TRILLION. I promise to stimulate the economy asap. I've got a 20 year old refrigerator that I would love to replace plus medical bills, fuel bills, etc. I guarantee I can "stimulate" a broad section of the economy!!!.....AND those CEO's who made millions running their companies into ruin will be just fine on their own.

Yes...I'm pissed!!!!

 

[yllus]

Is McCain right about Fannie and Freddie?

John McCain, after feinting in the direction of SEC Chairman Chris Cox, has decided that Fannie Mae and Freddie Mac are to blame for all our nation's ills. This would be convenient because Fannie in particular had a long and lucrative symbiotic relationship with the Democratic Party. But is it true?

Fannie and Freddie were freakish hybrids, private when it suited them (such as on payday) but quasi-public when that was more convenient. If Congress had been willing to give them a real regulator with real power, taxpayers might never have had to bail the companies out. And Fannie and Freddie played a central role in the misguided, decades-long effort by Washington to steer investment into housing (and thus, inevitably if inadvertently, away from more productive uses).

Buuuuuuut, when the mortgage markets began to go absolutely crazy in late 2003, Fannie and Freddie were barely in the picture. Here's a chart I've already run a couple of times (GSEs, short for government-sponsored enterprises, means Fannie, Freddie and Ginnie Mae):

Chart: Who makes the mortgage loans?

And here's the view of an actual industry expert, Tanta of Calculated Risk:

I think we can give Fannie and Freddie their due share of responsibility for the mess we're in, while acknowledging that they were nowhere near the biggest culprits in the recent credit bubble. They may finance most of the home loans in America, but most of the home loans in America aren't the problem; the problem is that very substantial slice of home loans that went outside the Fannie and Freddie box. ... [T]he immovable objects of the conforming loan limits and the charter limitation of taking only loans with a maximum LTV of 80% unless a well-capitalized mortgage insurer took the first loss position, plus all their other regulatory strictures, managed fairly well against the irresistible force of "innovation." If there has ever been an argument for serious regulation of the mortgage markets, the GSEs are it.

And finally, here's the verdict of a trio of real estate scholars who've been cited in this blog before:

[W]e find evidence that the changing credit regime that took place in late 2003, as the GSE?s pulled back from the market for political, regulatory, and market-based reasons, is suggested to be a primary factor reducing the dominance of market fundamentals in affecting house price returns and creating the price-momentum conditions characteristic of a ?bubble?.

So the Congressional crackdown on Fannie Mae and Freddie Mac (which came in the wake of accounting scandals and seemed well-deserved at the time) may have been a proximate cause of the housing bubble. And John McCain says he supported the crackdown. This whole thing is his fault!

No, I don't really believe that last part. But it does play up the absurdity of McCain's charge that it's all Fannie's and Freddie's fault.

Sorry, but the facts don't support your claim.

 

[dahunan]

EIGHT YEARS YOU ASSHOLES KISSED THAT DEVILS ASS... EIGHT.. how can you go back and say it not his neocon administrations fault

 

[Harvey]

Originally posted by: lupi

Topic Title: The Financial Crisis - it's the Bushwackos fault

Congratulations! You finally got their full name right. That may be the first true thing you've ever posted on these forums. :beer: :thumbsup:

Originally posted by: bl4ckfl4g

I don't really care whose fault it is right now.

I do. The deregulation that started under Clinton showed its ugly side early in the Bushwhacko administration with Enron, Tyco, Global Crossing and Adelphia. All of those firms and others used the "creative" accounting services provided by the disgraced Arthur Anderson accounting firm to hide earnings and assets and cover up their failures and losses from their employees, their shareholders and governmental oversight.

The Bushwhacko administration, and John McCain, Phil Graham and the Republican majority in Congress, continued their wholesale dismantling regulation of the financial sector and blatantly abandoned their responsibilities for any remaining oversight, leaving our economy to Wall Street predators.

The resulting current financial disaster was foreseeable and predicted by the many wiser, saner financial authorities. The criminals who caused it should be held to account. The only free rides they should get, now should be for the cost of transporting them to prison and their food and clothing in prison while they're there.

 

[heyheybooboo]

Originally posted by: yllus
Is McCain right about Fannie and Freddie?

John McCain, after feinting in the direction of SEC Chairman Chris Cox, has decided that Fannie Mae and Freddie Mac are to blame for all our nation's ills. This would be convenient because Fannie in particular had a long and lucrative symbiotic relationship with the Democratic Party. But is it true?

Fannie and Freddie were freakish hybrids, private when it suited them (such as on payday) but quasi-public when that was more convenient. If Congress had been willing to give them a real regulator with real power, taxpayers might never have had to bail the companies out. And Fannie and Freddie played a central role in the misguided, decades-long effort by Washington to steer investment into housing (and thus, inevitably if inadvertently, away from more productive uses).

Buuuuuuut, when the mortgage markets began to go absolutely crazy in late 2003, Fannie and Freddie were barely in the picture. Here's a chart I've already run a couple of times (GSEs, short for government-sponsored enterprises, means Fannie, Freddie and Ginnie Mae):

Chart: Who makes the mortgage loans?

And here's the view of an actual industry expert, Tanta of Calculated Risk:

I think we can give Fannie and Freddie their due share of responsibility for the mess we're in, while acknowledging that they were nowhere near the biggest culprits in the recent credit bubble. They may finance most of the home loans in America, but most of the home loans in America aren't the problem; the problem is that very substantial slice of home loans that went outside the Fannie and Freddie box. ... [T]he immovable objects of the conforming loan limits and the charter limitation of taking only loans with a maximum LTV of 80% unless a well-capitalized mortgage insurer took the first loss position, plus all their other regulatory strictures, managed fairly well against the irresistible force of "innovation." If there has ever been an argument for serious regulation of the mortgage markets, the GSEs are it.

And finally, here's the verdict of a trio of real estate scholars who've been cited in this blog before:

[W]e find evidence that the changing credit regime that took place in late 2003, as the GSE?s pulled back from the market for political, regulatory, and market-based reasons, is suggested to be a primary factor reducing the dominance of market fundamentals in affecting house price returns and creating the price-momentum conditions characteristic of a ?bubble?.

So the Congressional crackdown on Fannie Mae and Freddie Mac (which came in the wake of accounting scandals and seemed well-deserved at the time) may have been a proximate cause of the housing bubble. And John McCain says he supported the crackdown. This whole thing is his fault!

No, I don't really believe that last part. But it does play up the absurdity of McCain's charge that it's all Fannie's and Freddie's fault.

Sorry, but the facts don't support your claim.

so ... what are your facts?











We are waiting .....

 

[alchemize]

Originally posted by: Harvey

Originally posted by: lupi

Topic Title: The Financial Crisis - it's the Bushwackos fault

Congratulations! You finally got their full name right. That may be the first true thing you've ever posted on these forums. :beer: :thumbsup:

Originally posted by: bl4ckfl4g

I don't really care whose fault it is right now.

I do. The deregulation that started under Clinton showed its ugly side early in the Bushwhacko administration with Enron, Tyco, Global Crossing and Adelphia. All of those firms and others used the "creative" accounting services provided by the disgraced Arthur Anderson accounting firm to hide earnings and assets and cover up their failures and losses from their employees, their shareholders and governmental oversight.

The Bushwhacko administration, and John McCain, Phil Graham and the Republican majority in Congress, continued their wholesale dismantling regulation of the financial sector and blatantly abandoned their responsibilities for any remaining oversight, leaving our economy to Wall Street predators.

The resulting current financial disaster was foreseeable and predicted by the many wiser, saner financial authorities. The criminals who caused it should be held to account. The only free rides they should get, now should be for the cost of transporting them to prison and their food and clothing in prison while they're there.

ORly? So what's the excuse for the inaction of the last 2+ years?

"WE WERE DUPED!!!"


I'm sure you'll now post all the legislation that the democrats introduced that the republicans fillibustered, right?

 

[yllus]

Originally posted by: heyheybooboo

Originally posted by: yllus
Is McCain right about Fannie and Freddie?

Sorry, but the facts don't support your claim.

so ... what are your facts?











We are waiting .....

Who, me? And who's waiting? I are confused.