I remember a couple years ago there was a lot of debate about how Bush is to blame for the housing bubble bust.
There was a outrage that Bush was was trying to "Deregulate" the banks as being preferential treatment to rich people. But it was this deregulation that would have returned banks to the practice of traditional home loans. You know loans made to people that have proved to be credit worthy and had to buy houses within their means to pay for them. Wow what a concept!
But popular opinion won out and the Comunity Reinvestment Act origionally authored by Jimmy Carter and later revitalized by Bill Clinton prevailed. This bill forced banks to make loans to people that could not afford them. Making the taxpayer the risk holder. So rather than the banks and the people that make the loan holding the risk. WE THE TAXPAYER are holding the risk in the amount of BILLIONS with no end in sight. The return favor to the banks doing this at the Governments request in my belief, was a blind eye from the justice department to the unethical practices the banks were to perform.
Freddie and Fannie are asking for more money. With no reform, in another 15 months they most likely will be back for more. Was there not a recent story on the Millions paid in bonuses to the executives of these two institutions.
I have said here several times that there is no instance in American History that a crooked business survived for a length of time without the aid of some Government agency. Without the Taxpayer bailout of banks and car companies, the problems with these companies costing taxpayers trillions of dollars would have naturally been repaired through the bankruptcy and or liquidation process. Bottom line there would be no reward for poor management and crooked practices to "Rich" people.
I found this article on Tea Party Nation for the article and comments here is the link
Sunset Fannie and Freddie Before They Take America Down With Them!
Posted by Dr. Rich Swier on May 8, 2011 at 10:00am
Send Message View Dr. Rich Swier's blog
The Wall Street Journal column by Nick Timiraos titled, "Fannie Mae Falls Back Into The Loss Column" is a serious wakeup call to every taxpayer in America. Nick points out that, " Fannie Mae reported a net loss of $6.5 billion for the first quarter as a weakening housing market dashed hopes that the company had stabilized."
Nick reports that, "Fannie said Friday [May 6th] it would ask the government for a fresh taxpayer infusion of $6.2 billion after paying dividends to the Treasury. The loss follows net income of $73 million during the previous quarter."
Red ink as far as the eye can see.
This comes on top of Michael Cembalest, the Chief Investment Officer of JP Morgan Private Bank, revised his 2009 account of what caused the financial crisis. Under the general heading of “Retractions - the primary catalyst for the US housing crisis” he wrote:
US Agencies played a larger role in the housing crisis than we first reported. In January 2009, I wrote that the housing crisis was mostly a consequence of the private sector… However, over the last 2 years, analysts have dissected the housing crisis in greater detail. What emerges from new research is something quite different: government agencies now look to have guaranteed, originated or underwritten 60% of all “non-traditional” mortgages, which totaled $4.6 trillion in June 2008. What’s more, this research asserts that housing policies instituted in the early 1990s were explicitly designed to require US Agencies to make much riskier loans, with the ultimate goal of pushing private sector banks to adopt the same standards.”
Michael concludes: “As regulators and politicians consider a wide range of actions designed to stabilize the global financial system, some reflection on the role that policy itself played in the collapse would seem like a critical part of the process. It’s not clear that it is.”
My good friend Ed Pinto points out Cembalest’s account cites Peter Wallison's dissent from the majority report of the Financial Crisis Inquiry Commission and Ed's forensic study.
Ed Pinto, fellow at the American Enterprise Institute, co-authored with Peter J. Wallison and Alex J. Pollock, a White Paper titled, "Taking the Government Out of Housing Finance: Principles for Reform...". The White Paper recommends that the U.S. housing finance market of the future should be governed by four basic principles:
Principle I: The housing finance market can and should principally function without any direct government financial support.
Principle II: Ensuring mortgage quality and fostering the accumulation of adequate capital behind housing risk can create a robust housing investment market without a government guarantee.
Principle III: All programs for assisting low-income families to become homeowners should be on-budget and should limit risks to both homeowners and taxpayers.
Principle IV: Fannie Mae and Freddie Mac should be eliminated as government-sponsored enterprises (GSEs) over time.
I agree with Ed, Peter and Alex. Until banks do what they are supposed to do - make loans and take all the risks in making those loans - we the taxpayers will continue to hold more and more bad paper. Today banks simply pass thru the loan and collect their fees. Banks make the loans but immediately sell the loan to you an me (a.k.a. Fannie and Freddie). You and I are taking all the risks while banks make huge profits. Banks have no skin in the game. If the loan goes South it is the American taxpayer that takes the hit, not the bank or even the person who took out the loan.
Time to sunset Fannie and Freddie.
The GSE Bailout Elimination and Taxpayer Protection Act, introduced in both the House (H.R. 1182) and in the Senate (S.693) on March 17, 2011, would stop taxpayer bailouts of Fannie Mae and Freddie Mac.
We need to take back America and end ALL Corporate WELFARE!!!