Government Causes The Problem

Nowadays, government nor anyone else, doesn't want to talk about it. Do a google news search for "ADDI 2003" and see how many news stories are in the news about this abomination that caused the current mortgage crisis. None, nada, zip, nothing. I wonder why? ADDI stands for American Dream Down payment Initiative of 2003, some dream huh?

Signed into law on December 16, 2003, ADDI was created by Congress to help home buyers with down payment and closing cost assistance. The goal of ADDI is to increase home ownership rates, especially among lower income and minority households, and to revitalize and stabilize communities. From the law description, here:

ADDI aims to increase the home ownership rate, especially among lower income and minority households, and to revitalize and stabilize communities. ADDI will help first-time home buyers with the biggest hurdle to home ownership: down payment and closing costs. The program was created to assist low-income first-time home buyers in purchasing single-family homes by providing funds for down payment, closing costs, and rehabilitation carried out in conjunction with the assisted home purchase.

In other words, let people own homes who can't meet normal mortgage qualifications, because we want to make it easy for people.

When you give people an expensive home with low variable mortgage rate payments, you get home buyers who couldn't normally afford to feed an extra piss ant with their salary, buying houses. You also get the implosion that is now the current situation in the housing market. Yes the 'hot market' attracted speculators, just like last time, and when the implosion came the speculators were last high and dry. About every third house in my area is vacant.

This happened before ... history repeats:

It's called the Savings and Loan crisis of 1982. Jimmy Carter left office in January 1981, a year in which 3,300 out of 3,800 S&Ls lost money -- Due mostly to the disaster that Jimmy Carter made of the US economy, things were in dismal shape. By 1982 the fix was believed to be deregulation. In 1982, the combined tangible net capital of this industry was $4 billion. Although the deregulation of S&Ls gave them many of the capabilities of banks, it did not bring them under the same regulations as banks. First, thrifts could choose to be under either a state or a federal charter. Immediately after deregulation of the federally chartered thrifts, the state-chartered thrifts rushed to become federally chartered, because of the advantages associated with a federal charter. In response, states (notably, California and Texas) changed their regulations so they would be similar to the federal regulations. States changed their regulations because state regulators were paid by the thrifts they regulated, a really convenient nest wouldn't you say?

And then there was the real estate market. After years of suffering under the Carter years, it came alive and by 1982 it was boiling over. Cash was available to finance anything so they did. In an effort to take advantage of the real estate boom and high interest rates of the late 1970s and early 1980s, many S&Ls lent far more money than was prudent, and to risky ventures which many S&Ls were not qualified to assess. Hence was born the Resolution Trust Corporation, to try and fix the problem, mainly by liquidating assets, mainly real estate, of failed S&Ls.

Now we are back where we started, the government created a huge problem with ADDI 2003, allowing scores of people to buy houses who had no business doing so, nor did they have the capability to pay off the mortgages. Someone will pay, who do you think that some will be.

Those of you who missed out with Jimmy Carter are going to get a chance to live the reruns next year. Nearly all the crap being proposed by Democrats today has tried and tested by Jimmy Carter and deemed a dismal failure. Carter was especially good with middle east policy, he set up the mullahs with the state of Iran and the whole of the Islamic terror went worldwide in his time. He was a nice guy, nuclear engineer he used to tell us, so he knew energy we were told -- He let our hostages stay in Iranian prisons for 444 days, until a new President took office. Then the hostages were released the same day.

This time the mullahs will likely have nukes to play with.

Suggest you get your finances in order. History is not a continuum, it's a loop.

Rap You Can Dig It

I want my free gas, and while you are atr it, where's my mortgage payment?

Burning Down The House: What Caused Our Economic Crisis?

UPDATE: Bumped from times gone by, because Barney's Fwank is now attacking Republicans and capitalism as the cause of the mortgage crisis. Everybody knows it's giving loans to people who could not pay that is at the root cause. It starts with Jimmy Carter's Community Reinvestment Act CRA of 1977. That Investment, liberal style.

The root cause of the crisis is the housing foreclosure crisis, and what caused that, loans to unqualified individuals, loans made by the Government Sponsored Enterprises(GSE) Fannie MAe and Freddie Mac. Yes, the federal government forced home mortgage loans to be made to people who had no means to pay them back, that's what a sub-prime mortgage is. People who had no stake in America, people who were here illegally. As interest rates climbed, gas prices rose, food prices rose, the party ended.

And what forced the demands for unqualified loans, Pres Jimmy Carter's Community Reinvestment Act (CRA) of 1977. Who was the enforcer of the CRA, that would be people like Barack Obama, your helpful Community Organizer from the voter fraud group ACORN.

Thomas Sowell is always a good read.

Among the Congressional “leaders” invited to the White House to devise a bailout “solution” are the very people who have for years created the risks that have now come home to roost.

Five years ago, Barney Frank vouched for the “soundness” of Fannie Mae and Freddie Mac, and said “I do not see” any “possibility of serious financial losses to the treasury.”

Moreover, he said that the federal government has “probably done too little rather than too much to push them to meet the goals of affordable housing.”

Earlier this year, Senator Christopher Dodd praised Fannie Mae and Freddie Mac for “riding to the rescue” when other financial institutions were cutting back on mortgage loans. He too said that they “need to do more” to help subprime borrowers get better loans.

In other words, Congressman Frank and Senator Dodd wanted the government to push financial institutions to lend to people they would not lend to otherwise, because of the risk of default.

And that folks, is the root of the current financial crisis. So what is to be done. We have a data point:

Here is a short video of one of the hearings in 2004 where the Fannie Mae and Freddie Mac regulator was explaing that Fannie and Freddie were going out of control with bad paper. Demcorats in their own words.

What a Communist says about sub-prime mortgags

Ben Bernanke, Please Send Me Some Green!

Special tribute to those who thought the bailout was not going to work.

Evidence Of The Cause

Thank you ACORN, now we know that Community Organizer is just an Orwellian term for thugs who are trying to steal the elections and force banks to give loans to people who can't pay, doing it by any means possible or with any tactics necessary.





ACORN has received over $760 million in fees for forcing banks to make risky home loans. Loans with no income, no assets, no down payments, interest only, no citizenship checks, if you have a pulse you get a home loan.

Naming Names

Well, sort of ...

Link:

How The Market Really Works

Comedians seem to know it all.

O'Rielly Beats Up Barney Frank

WSJ Calls Out The Democrats Who Caused The Financial Meltdown

No folks, this is not a bipartisan scandal, and no it's not Bush's fault. This giant turd sandwich belongs wholly to the Democrats, the liberals, and it represents a vivid display of why liberalism does not work.

What They Said About Fan and Fred

House Financial Services Committee hearing, Sept. 10, 2003:

Rep. Barney Frank (D., Mass.): I worry, frankly, that there's a tension here. The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios. . . .
[What They Said] AP

Clockwise from top left: Sen. Thomas Carper, Rep. Barney Frank, Sen. Robert Bennett, Rep. Maxine Waters, Sen. Chris Dodd and Sen. Charles Schumer.

Rep. Maxine Waters (D., Calif.), speaking to Housing and Urban Development Secretary Mel Martinez:

Secretary Martinez, if it ain't broke, why do you want to fix it? Have the GSEs [government-sponsored enterprises] ever missed their housing goals?
* * *

House Financial Services Committee hearing, Sept. 25, 2003:

Rep. Frank: I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing. . . .
* * *

House Financial Services Committee hearing, Sept. 25, 2003:

Rep. Gregory Meeks, (D., N.Y.): . . . I am just pissed off at Ofheo [Office of Federal Housing Enterprise Oversight] because if it wasn't for you I don't think that we would be here in the first place.
[nowides]
Fannie Mayhem: A History

A compendium of The Wall Street Journal's recent editorial coverage of Fannie and Freddie.

And Freddie Mac, who on its own, you know, came out front and indicated it is wrong, and now the problem that we have and that we are faced with is maybe some individuals who wanted to do away with GSEs in the first place, you have given them an excuse to try to have this forum so that we can talk about it and maybe change the direction and the mission of what the GSEs had, which they have done a tremendous job. . .

Ofheo Director Armando Falcon Jr.: Congressman, Ofheo did not improperly apply accounting rules; Freddie Mac did. Ofheo did not try to manage earnings improperly; Freddie Mac did. So this isn't about the agency's engagement in improper conduct, it is about Freddie Mac. Let me just correct the record on that. . . . I have been asking for these additional authorities for four years now. I have been asking for additional resources, the independent appropriations assessment powers.

This is not a matter of the agency engaging in any misconduct. . . .

Rep. Waters: However, I have sat through nearly a dozen hearings where, frankly, we were trying to fix something that wasn't broke. Housing is the economic engine of our economy, and in no community does this engine need to work more than in mine. With last week's hurricane and the drain on the economy from the war in Iraq, we should do no harm to these GSEs. We should be enhancing regulation, not making fundamental change.

Mr. Chairman, we do not have a crisis at Freddie Mac, and in particular at Fannie Mae, under the outstanding leadership of Mr. Frank Raines. Everything in the 1992 act has worked just fine. In fact, the GSEs have exceeded their housing goals. . . .

Rep. Frank: Let me ask [George] Gould and [Franklin] Raines on behalf of Freddie Mac and Fannie Mae, do you feel that over the past years you have been substantially under-regulated?

Mr. Raines?

Mr. Raines: No, sir.

Mr. Frank: Mr. Gould?

Mr. Gould: No, sir. . . .

Mr. Frank: OK. Then I am not entirely sure why we are here. . . .

Rep. Frank: I believe there has been more alarm raised about potential unsafety and unsoundness than, in fact, exists.
* * *

Senate Banking Committee, Oct. 16, 2003:

Sen. Charles Schumer (D., N.Y.): And my worry is that we're using the recent safety and soundness concerns, particularly with Freddie, and with a poor regulator, as a straw man to curtail Fannie and Freddie's mission. And I don't think there is any doubt that there are some in the administration who don't believe in Fannie and Freddie altogether, say let the private sector do it. That would be sort of an ideological position.

Mr. Raines: But more importantly, banks are in a far more risky business than we are.
* * *

Senate Banking Committee, Feb. 24-25, 2004:

Sen. Thomas Carper (D., Del.): What is the wrong that we're trying to right here? What is the potential harm that we're trying to avert?

Federal Reserve Chairman Alan Greenspan: Well, I think that that is a very good question, senator.

What we're trying to avert is we have in our financial system right now two very large and growing financial institutions which are very effective and are essentially capable of gaining market shares in a very major market to a large extent as a consequence of what is perceived to be a subsidy that prevents the markets from adjusting appropriately, prevents competition and the normal adjustment processes that we see on a day-by-day basis from functioning in a way that creates stability. . . . And so what we have is a structure here in which a very rapidly growing organization, holding assets and financing them by subsidized debt, is growing in a manner which really does not in and of itself contribute to either home ownership or necessarily liquidity or other aspects of the financial markets. . . .

Sen. Richard Shelby (R., Ala.): [T]he federal government has [an] ambiguous relationship with the GSEs. And how do we actually get rid of that ambiguity is a complicated, tricky thing. I don't know how we do it.

I mean, you've alluded to it a little bit, but how do we define the relationship? It's important, is it not?

Mr. Greenspan: Yes. Of all the issues that have been discussed today, I think that is the most difficult one. Because you cannot have, in a rational government or a rational society, two fundamentally different views as to what will happen under a certain event. Because it invites crisis, and it invites instability. . .

Sen. Christopher Dodd (D., Conn.): I, just briefly will say, Mr. Chairman, obviously, like most of us here, this is one of the great success stories of all time. And we don't want to lose sight of that and [what] has been pointed out by all of our witnesses here, obviously, the 70% of Americans who own their own homes today, in no small measure, due because of the work that's been done here. And that shouldn't be lost in this debate and discussion. . . .
* * *

Senate Banking Committee, April 6, 2005:

Sen. Schumer: I'll lay my marker down right now, Mr. Chairman. I think Fannie and Freddie need some changes, but I don't think they need dramatic restructuring in terms of their mission, in terms of their role in the secondary mortgage market, et cetera. Change some of the accounting and regulatory issues, yes, but don't undo Fannie and Freddie.
* * *

Senate Banking Committee, June 15, 2006:

Sen. Robert Bennett (R., Utah): I think we do need a strong regulator. I think we do need a piece of legislation. But I think we do need also to be careful that we don't overreact.

I know the press, particularly, keeps saying this is another Enron, which it clearly is not. Fannie Mae has taken its lumps. Fannie Mae is paying a very large fine. Fannie Mae is under a very, very strong microscope, which it needs to be. . . . So let's not do nothing, and at the same time, let's not overreact. . .

Sen. Jack Reed (D., R.I.): I think a lot of people are being opportunistic, . . . throwing out the baby with the bathwater, saying, "Let's dramatically restructure Fannie and Freddie," when that is not what's called for as a result of what's happened here. . . .

Sen. Chuck Hagel (R., Neb.): Mr. Chairman, what we're dealing with is an astounding failure of management and board responsibility, driven clearly by self interest and greed. And when we reference this issue in the context of -- the best we can say is, "It's no Enron." Now, that's a hell of a high standard.

Most of these quotes comes from Congressional hearings, here is the link to one such hearing. Listen and you will hear the liberals trying to sweep the looming problem under the rug, and hide from view the disaster in the making.

Newt's Plan

Newt is making more sense than Obama and McCain.

Why Communism Failed

Front and center, the fellow most responsible for causing the financial crisis, Rep Barney Frank. Looking like a stuffed toadie.

But, notice the smiles on the faces of those that caused the meltdown. Fannie MAe and Freddie Mac, the government sponsored enterprises (GSEs) are a group of financial services corporations created by the United States Congress. These GSEs are at the heart of the problem.

Don't you want to just slap your forehead and exclaim, WOW that's why Communism fails.

Stuck On Stupid

Here is what the moron said:





Would someone explain to me how this is leadership ... This is nothing more than a 7partisan hack, who has no business being in the position she is in. The hysteria is contrived.

Staunch conservative bailout opponent GOP. Rep. Mike Pence weighs in:

U.S. Congressman Mike Pence issued the following statement regarding the failure of the bailout bill today:

“Today Congress took a stand for the American taxpayer and free markets. The American people rejected this corporate bailout and today the People’s House did likewise.

“It is now imperative that Congress come together and develop a response to the crisis facing our financial markets that reflects the American people’s belief in personal responsibility and fiscal discipline.

“There are alternatives to the massive federal bailout that Congress rejected. I look forward to working with my colleagues in both parties to develop a response to this crisis that puts taxpayers first and preserves the essential freedom of the American marketplace.”

Might I say, we add a huge dash of free markets?

Conservative Coburn

Senator Tom Coburn (R-OK), a staunch a conservative, issued this statement before the House bill went down to defeat.

“Taxpayers deserve to know that there is no guarantee this plan will work, but there is a guarantee that we will face a financial catastrophe if we do nothing. If banks continue to fail and stop lending the average American could lose their job, be unable to secure a loan for a car, home or college education, and find their life savings and retirement in jeopardy. Our economy depends on having liquid assets available for credit and lending just as an automobile engine needs oil. If those liquid assets stop flowing, our economy will be seriously damaged and will require far more costly and lengthy repairs.”

“This bill does not represent a new and sudden departure from free market principles as much as it represents an emergency response to congressional actions that have ignored free market principles, and our Constitution, for decades. If anyone in Washington should offer their resignation it should be the members of Congress who peddled the fantasy of free home ownership without risk. No institution in our country is more responsible for the myth or borrowing without consequences than the United States Congress.”

“As much as members of Congress want to find scapegoats, the root of this problem is political greed in Congress. Members of Congress from both parties wanted short-term political credit for promoting home ownership even though they were putting our entire economy at risk by encouraging people to buy homes they couldn’t afford. Then, instead of conducting thorough oversight and correcting obvious problems with unstable entities like Fannie Mae and Freddie Mac, members of Congress chose to ignore the problem and distract themselves with unprecedented amounts of pork-barrel spending.”

“Taxpayers who want to ensure that this doesn’t happen again should send a very clear message to Washington that it’s time for Congress to live within its means and restore the principles of limited government and free markets that made this country great. I will do everything in my power to ensure that this bill does not lead us down a slippery slope of European style socialism and slow economic growth. I will also promise taxpayers that I will do everything in my power to block what I expect will be hundreds of attempts by politicians in Washington to continue business-as-usual borrowing and spending in the next Congress. In a time of crisis, American families have to make hard choices between budget priorities. So should Congress. If politicians want to create new programs they should eliminate duplicative programs or reduce funding for less important programs. The only way we can put this crisis behind us is for Congress to rejoin the real world of budget choices and consequences which, as we have seen in recent days, can be ignored for only so long.”

Some really good points.

A Modest Free Market Proposal

How can the free market fix the problem, it's simple really -- The property that the mortgages are connecting to, does not vanish. It's only the stupid way the Democrats forced banks and mortgage companies to levergae unqualified buyers into the housing market.

There must be something wrong with this crap-a-polosa, for so many Democrats to vote no. Do you think maybe the public isn’t behind another Democratic RTC S&L crash fiasco?

The Community Reinvestment Act of 1977 (CRA) and all it's later tentacles, rules and regulations, should be terminated immediately.

I have a suggestion, lets redo the IRS rules for rental investment back to the way they were before the Tax Reform Act (TRA) of 1986 and the subsequent S&L collapse, and watch those houses fly off the shelves. Remember, mortgages connect to real property — And the TRA reform was designed to take away the tax advantages of owning rental property. Isn’t it odd how the Democrats make these changes with no warning and wonder why things go south.

After Democrats got past this debacle, the Tax Reform Act (TRA) of 1986, they moved on to “poor people can own houses to”. Who needs to work and save for a down payment, have a good enough job to pay the mortgage, when uncle sam will do all that for you — Of course, there is a cost.

Like with all things liberal, there always is a cost.

Oh yeah, forgot to mention, after the 1986 bill when the S&Ls failures were getting bad, on October 19, 1987, the stock market fell by more than 22 percent. In 1989, the Financial Institutions Reform, Recovery and Enforcement Act of 1989 set up the RTC.