WARNING: The following post is pedantic, but if you perservere, you will learn some stuff you may not have known
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What each of us needs to understand is this:
The "American Dream" has been twisted to mean Home Ownership.
The "American Dream" is really freedom to conduct one's life without undue interference from government.
Democrats and liberal Republicans, using the twisted meaning of the "American Dream" decided that poor people should be able to own homes.
They passed laws requiring that banks lend money to people who were only marginally likely to be able to pay them back.
Fannie Mae and Freddie Mac were charged with guaranteeing that poor people could have a part in the twisted version of the "American Dream."
Fannie Mae and Freddie Mac backed these risky loans, thinking that if they got in trouble, the feds would bail them out.
Trouble came in the form of rising housing prices, rising gas prices and then falling housing prices when the supply of houses became gluttonous.
Trouble was compounded by Adjustable Rate Mortgages (ARMs) which adjusted upwards (as they nearly always do).
Trouble was double compounded when poor, unethical and illegal management got thrown in the mix.
Suddenly...BOOM! Everything came crashing down.
And here we are, with Congress trying to bail out the culprits, just as the culprits figured they would.
And we get stuck with the bill.
That's sort of a summary.
Below are 100 facts and factoids, each of which is googleable and each of whose (which's?) original documents can be checked out.
Read them if you can take the time...it's slow going, but worth it.
The Economic Crisis
01. A lot of bad mortgages
02. The housing foreclosure crisis
03. Community Reinvestment Act Passed by the Democrats and Jimmy Carter
04. It included incentives to help low-income borrowers get a home
05. In 1995 the Clinton administration changes the rules, expanding the scope of the act.
06. Democrats added massive new provisions
07. Lenders that did not mitigate loan risk used the new subprime authorization.
08. The government forced banks to issue $1 trillion in new "subprime" loans
09. Required that deposit taking financial institutions offer equal access to lending for everybody.
10. Winter of 2000: Trillion dollar bank shakedown bodes ill for cities…scheme against the nations banks.
11. Subprime mortgage securities were issued
12. Bear Stearns was the first to do it
13. Fannie Mae added fuel to the fire
14. Fannie Mae purchased $2 billion of "My Community Mortgage" loans to customize affordable products for low and moderate income borrowers.
15. Subprime mortgages started to grow.
16. 1994: Almost no subprime mortgages/1998-99 billions in subprime mortgages
17. Home Prices Started to Rise
18. Fannie Mae is a "Government Sponsored Enterprise"
19. Fannie Mae guarantees mortgages
20. Then sells them to banks and investors
21. The more mortgages sold, the more money Fannie Mae Makes
22. How do you increase the number of mortgages? You lower the income requirements to get a mortgage
23. As Fannie Mae triet to increase its business, it gave the risk element short shrift.
24. They emphasized ARM (Adjustable Rate Mortgages) and got people in cheaply.
25. The number of ARMs more than doubled between 2003 and 2004.
26. Interest only loans more than six times from 2003 to 2005.
27. The idea was to "give flexibility to lenders by allowing variances that borrowers need to qualify for loans.
28. The banks HAD to issue sub-prime mortgages or pay BIG PENALTIES
29. How do you keep them affordable?
30. Don’t have any money? No problem…we require no money down
31. You only have to pay the interest.
32. We won’t require income verification.
33. Bad credit…No credit…no problem…just sign here
34. In 2004 92% of Fannie Mae’s subprime loans were variable rate mortgages.
35. In 2005 92% were variable rate loans
36. Only 8-9% of their loans were designed to make real money with fixed rate mortgages
37. Fannie Mae tells the banks, "Make the loans…we’ll guarantee them…
38. Home ownership kept rising and Libs thought that was GREAT
39. Prices kept rising, too
40. BIG PROBLEM!
41. Interest rates rose.
42. Adjustable Rate Mortgages went up for poor people who could not afford payments
43. Then gas prices shot up (only somewhat unrelated)
44. Paychecks got squeezed…especially low income paychecks
45. Some borrowers stopped paying their mortgage payments
46. Banks stopped lending, cause they figured they could not get their money back
47. The subprime market collapsed
48. Foreclosures started piling up
49. There were no more buyers
50. Everybody was trying to sell their homes
51. Supply and Demand required that prices start falling
52. Even more borrowers stopped paying their mortgages
53. Fannie Mae could not guarantee these mortgages because they did not have enough cash….their guarantees became worthless
54. But Fannie Mae’s leadership kept overstating their assets.
55. The Regulators spun public to BOOST Fannie Mae and Freddie Mac
56. Banks started to collapse because they had made too many bad loans…banks can’t do that and stay in business
57. Remember: The government required banks to make the bad loans.
58. Government sponsored securities were worthless
59. Jobs began to disappear
60. Here’s why the expansion of the Community Reinvestment Act birthed this problem:
61. Before CRA expansion, Home prices increased with inflation at a normal rate.
62. After CRA, home prices came unhinged and began to soar…much faster than inflation
63. The so-called ‘Housing Bubble" was formed.
64. It didn’t have to happen
65. Someone tried to stop it
66. A new agency was proposed to oversee Freddie Mac and Fannie Mae
67. In 2003 George Bush saw the problem and proposed the solution.
68. The proposal was rejected by the Democrats and liberal Republicans
69. They feared it wold diminish their ability to finance loans for lower-income families.
70. Barney Frank (D-MA) said, "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable houring.
71. Melvin Watt (D-NC) said, "…in the process weakening the bargaining power of poorer families and their ability to get affordable housing."
72. There was a housing price time bomb ticking away.
73. Someone else tried to stop it:
74. In 2005 John McCain warned of impending mortgage collapse
75. He co-sponsored a bill "The Housing Enterprise Regulatory Act of 2005" to regulate Fannie Mae and Freddie Mac
76. Once again the Democrats blocked it.
77. The bill was reintroduced in 2007, but failed
78. Fannie Mae had friends in the Senate
79. Chris Dodd (D-CT) – Sweetheart Loan Recipient; Barack Obama (D-IL) – who chose Jim Johnson, Washington insider and Managing Director of Lehman Brothers…now bankrupt AND CEO OF FANNIE MAE from 1991-1998…while Fannie Mae was handing out unrecoverable low cost mortgage "guarantees."
80. Not only was Jim Johnson CEO of Fannie Mae, he was corrupt, improperly deferred $200 million n expenses, had Fannie Mae under-report his compensation as $7-9 million instead of the actual $21 million
81. He gave Barack Obama the maximum donation of $4,600.00
82. He is now a wealthy private banker
83. He’s on the board of Goldman Sachs…which gave $700,000 to Barack
Obama and bundled another $500,000.00 to Obama
84. Obama gets housing advice from none other than Franklin Raines, Vice Chairman of Fannie Mae! And its CEO from 1999 to 2004!
85. Raines was forced to resign Fannie Mae when irregularities were uncovered.
86. Who got more money from Fannie Mae than anyone else in the Universe, except Chris Dodd?
87. Barack Obama
88. Obama got 49 time more Fannie Mae money than John McCain
89. Meanwhile, many banks were sued for not issuing enough sbprime loans.
Know who sued them?
90. Lawyer, Barack Obama
91. This whole thing was caused by bad government regulation. That made solid banks become predatory lenders…to fulfil a government mandate for "affordable mortgages."
93. Blame is shared by self-interested lawyers greed and stupidity on Wall Street
94. Obama got his wish: Lots of affordable mortgages that were not really affordable ‘cause the people who took them out could not afford to pay them back.
95. In the end, what Barack Obama adopted and encouraged was not hope, it was not change,
96. Obama’s friends caused this
97. Nancy Pelosi (D-CA) says, "Democrats accept no responsibility."
98. But they caused this, and now their leader lectures us about "failed economic policies"
99. And you will elect him to lead the county.
100.Your Bad