“Talk to conservatives about the financial crisis and you enter an alternative, bizarro universe in which government bureaucrats, not greedy bankers, caused the meltdown. It’s a universe in which government-sponsored lending agencies triggered the crisis, even though private lenders actually made the vast majority of subprime loans. It’s a universe in which regulators coerced bankers into making loans to unqualified borrowers, even though only one of the top 25 subprime lenders was subject to the regulations in question.”

He’s right. Were Fannie and Freddie too big, and too overexposed? Yes. So were all the big players in the downstream mortgage markets, including the private ones. But were Fannie and Freddie the underlying cause? Under any honest assessment, certainly not.

The real estate bubble was fueled by loose lending standards, and those standards did not originate with Fannie and Freddie. No government bureaucrats were commanding sketchy mortgage originators to make low-quality subprime loans. Those loans were made because of a failure of regulation, not an overabundance of it.

Having Fannie and Freddie as a backstop, guaranteeing the value of mortgages purchased in the secondary market, did have a huge impact on the residential real estate bubble. And they are vulnerable to fair criticism for setting the standards too low for mortgages they were willing to purchase. But being willing to purchase mortgages in the secondary market does not mean they were forcing the loans to be made in the primary market. That’s the basic disconnect underlying the error in the typical conservative talking points which seek to blame this crisis on Clinton and Frank, rather than on Bush, Greenspan, and (most notably) the authors of Gramm-Leach-Bliley.

You Tube; it was taken off.
This link is of the same video, but is routed through
Canada . Everyone in America needs to see this before it is
yanked off the Internet again!

http://www.youtube.com/watch?v=cMnSp4qEXNM&NR=1

Most of the mortgages are owned by Fannie Mae and Freddie Mac (that means you and me). Can the banks modify loans without the investor approval?

And another thing, who is tracking if the program is really being used by homeonwers under water with their values? Is income being verified on these loans?

So what will be gained? Extend and pretend? I do not think we’re doing people a favor with these fantasy games.

But I’d sure like to be wrong.

Correct me, please.

Repeal the Community Reinvestment Act (CRA)

Two Crises (Savings & Loans Debacle of the late 1970′s to 1980′s and Sub-prime Mortgage Crisis of the 1990′s to 2000′s) have shown that this piece of liberal progressive legislation of socialism (oil) does not mix well with capitalism (water).

The redlining that Jimmy Carter and his congress put in and has been motivated with the likes of the corrupt ACORN and bully pen SEIU needs to be removed by the People of the U.S.

Given the fact that there is no free lunch, taxpayers pick up the tab along with investors who have purchased mortgage securities backed by these mortgages.

Why do you assume this is true? The only cramdown proposals I’ve read about would be quite straightforward — they’d allow bankruptcy judges to reduce the principal and/or interest on mortgages, which is something they can already do for pretty much all other kinds of debt. And that’s it. The only clear losers* in this sort of thing would be the banks (RMBS investors get basically wiped out by foreclosures anyway — they only make money if homeowners continue to make payments). That’s why the banking lobby hates the idea so much.

If you’ve seen somebody proposing a cramdown rule in which the government pays the banks for the write-down on the back end, I’m all ears. I sure haven’t heard that myself, though. As long as the cramdown happens in bankruptcy court, the taxpayer could care less.

*yeah, I know the arguments that doing this would drive up borrowing costs. I’m just not convinced that they would drive them up by enough to outweigh the benefits.