Financial Housing Market-Led Crisis....Caused by Liberal Policies? Ron Paul agrees...

[SentinelMind]

"Government-sponsored enterprises Fannie Mae and Freddie Mac were able to obtain a monopoly position in the mortgage market, especially the mortgage-backed securities market, because of the advantages bestowed upon them by the federal government.

Laws passed by Congress such as the Community Reinvestment Act required banks to make loans to previously underserved segments of their communities, thus forcing banks to lend to people who normally would be rejected as bad credit risks."

US Congressman Ron Paul - TX

Ron Paul argues that decades of government intervention in the housing market has caused the financial crisis that we are now experiencing.

What laws is Ron Paul referring to? Does his argument hold water?

To determine if this is so,we must first take a trip through US history.

For decades, many liberal grassroots organizations have charged that banks and other financial institutions have unfairly discriminated against at various communities and neighborhoods in excluding them from receiving loans and credit. These activists had an ear in Washington DC, and liberal Democrats have historically proposed federal legislation aimed at artificially inflating the supply of mortgage loans available at a pace higher than the market would dictate, placing them in the hands of those who had a high risk of defaulting on those loans.

Liberals have always sought to make various economic priveleges, such as a mortgage loan or socialized medicine, into government sanctioned right for all Americans. What is the economic side-effect of this misguided generosity, coercing financial institutions to give credit to those who have a background on being unable to pay back these loans?

Exhibit A: Fannie Mae

In 1938, as a part of the New Deal, President FDR created Fannie Mae as a government sponsored enterprise in order to create a steady and consistent supply of mortgage loans. Fannie Mae, and then Freddie Mac, had authority to produce loan and loan guarantees. Due to their unique relationship with government, Fannie Mae held a virtual monopoly on the secondary mortgage loan market for several decades. Fannie Mae operates by buying mortgage loans from banks and selling them at a lower interest rate, keeping the debt, speculating on the belief that mortgage loans would always rise in value enough to cover the debt through increasing demand for home ownership in the United States.

http://www.fanniemae.com/aboutfm/index.jhtml?p=About+Fannie+Mae

Exhibit B: The Community Reinvestment Act

In 1977, President Jimmy Carter signed the Community Reinvestment Act, which was passed by a majority Democratic Congress. The Act prohibited the act of redlining, a practice where banks would exclude various low-income neighborhoods from recieving access to their credit products. All banks were statutorily required to provide credit throughout their entire market of the geographic regions that they operated.

http://www.answers.com/topic/community-reinvestment-act

Exhibit C: Strengthening the Community Reinvestment Act

During first year as President, Clinton made a push to strengthen the CRA and passed reforms that gave regulatory firms an objective to coerce banks to increase the supply of mortgage loans throughout low-income communities. After approval by the Democratic Congress, his reforms were effective at start of 1995, before Republicans rose to their majority control of House and Senate. Between 1993 to 1998, the number of CRA loans increased over 30% and allowed for the distribution of over 467 billion dollars of CRA credit to mortgage loan owners.

http://www.treas.gov/press/releases/ls564.htm


These reforms allowed public securization of CRA loans containing subprime mortgages. The first firm to invest in these loans was Bear Stearns, which was recently maligned by the subprime mortgage crisis and had to be bought out to avoid bankruptcy.

http://www.wachovia.com/inside/page/textonly/0,,134_307^306,00.html

Exhibit D: Stonewalling investigation into Fannie Mae and Freddie Mac.

Can you guess who said the following in 2003?

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis...The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Spoiler

US Congressman, in 2003 ranking Democratic leader of and now in 2008 the Chairman of the Committee of the Financial Services Barney Frank

Barney Frank opposed many of the reforms proposed by US President Bush during his first term to investigate and oversee Fannie Mae and Freddie Mac for fraud and financial instability as they amassed trillions of dollars of mortgage loans under the premise that it would threaten the government's ability to negotiate affordable housing. The reforms eventually passed with bipartisan support, but with pieces taken out that would have threatened Fannie Mae's authority to continue authorizing loan guaratnees.

We now both know the fates of both of these companies.

As we can see, history is on Ron Paul's side....decades of government intervention into housing market under premise that government should make everyone have "fair" access to loans,...placed credit into the hands of people who couldn't afford it. These securities based on defaulting loans permeated throughout our financial market and created a crisis where we now sit debating whether we should be bailing out corporation with 700 billion dollars of taxpayer funds...or risk a possible stock market crash, recession, or even depression.

 

[The Senator]

Yes, because it's not like the conservatives haven't been in control of both Congress or the Executive Branch for six of the past eight years. It's not like they could have done anything to put an end to these "liberal policies," right?

 

[SentinelMind]

You're right, President Bush and Republicans had opportunity to fight many of these disastrous liberal policies, such as Community Reinvestment Act to ban on oil drilling or fixing social security but didn't want to risk momentary political capital and popularity polls to do so. The GOP's problem was that they've caved into Democrats too much on fiscal matters and only put up a fight with them on social and military issues. Doesn't negate the fact these liberal policies, started by Democrats, strongly contributed to all these financial crisis that we're in.

 

[ShadowBoxing]

You're right, President Bush and Republicans had opportunity to fight many of these disastrous liberal policies, such as Community Reinvestment Act to ban on oil drilling or fixing social security but didn't want to risk momentary political capital and popularity polls to do so. The GOP's problem was that they've caved into Democrats too much on fiscal matters and only put up a fight with them on social and military issues. Doesn't negate the fact these liberal policies, started by Democrats, strongly contributed to all these financial crisis that we're in.

Yeah, that's totally their problem

 

[The Senator]

You're right, President Bush and Republicans had opportunity to fight many of these disastrous liberal policies, such as Community Reinvestment Act to ban on oil drilling or fixing social security but didn't want to risk momentary political capital and popularity polls to do so. The GOP's problem was that they've caved into Democrats too much on fiscal matters and only put up a fight with them on social and military issues. Doesn't negate the fact these liberal policies, started by Democrats, strongly contributed to all these financial crisis that we're in.

And here you go, claiming that the GOP caved into Democrats and that is a fundamental reason why they didn't revoke these policies.

I find it hard to believe that a party which had at least a 30-seat advantage in the House of Representatives and a 4-6 seat advantage in the Senate simply had no choice but to "cave in" to the Democrats.

Perhaps the problem is, the Republicans were too focused on the current economic outlook than the future outlook, and therefore didn't take enough time to actually THINK about where we would be in 2008.

And, of course, the GOP's own spending problems probably had something to do with it. A $3 trillion budget didn't just magically appear from the sky. Maybe if we weren't spending so much money on a war we never should have waged in the first place, in addition to a brand-new, multi-billion dollar federal agency (DHS), pulling $700 billion out of our asses to bail out these lenders and shareholders would be economically feasible.

Perhaps if the Republican president and his Congress didn't run up our deficit by a couple hundred percentage points since 2001, we also wouldn't have this problem?

I'm not placing sole blame on the GOP... but to point at the "liberals" and basically claim that it is entirely their fault is baseless.

 

[SentinelMind]

Yeah, that's totally their problem

How is it not? President Bush caved in any attempt to reform social security when he had control in his own party in Congress, didn't even bother presenting legislation for a vote and pushed it off to next session, never to be re-opened. Bush has increased domestic spending on many social programs, increased size of many federal agencies...worked with Democrats to produce tax-payer rebate checks ...and is now proposing tax-payer bail-out for corporations. Bush didn't veto any spending legislation in his first term. The first veto he's ever given was stem cell research. Bush is hardly a fiscally conservative, but he is definitely social conservative and has a neoconservative foriegn policy. But arguing that Bush is not a fiscal conservative, isn't a reason to just elect an even bigger fiscal liberal.

 

[ShadowBoxing]

How is it not? President Bush caved in any attempt to reform social security when he had control in his own party in Congress, didn't even bother presenting legislation for a vote and pushed it off to next session, never to be re-opened. Bush has increased domestic spending on many social programs, increased size of many federal agencies...worked with Democrats to produce tax-payer rebate checks ...and is now proposing tax-payer bail-out for corporations. Bush didn't veto any spending legislation in his first term. The first veto he's ever given was stem cell research and definition of tortute. Bush is harldy a fiscally conservative. But arguing that Bush is not a fiscal conservative, isn't a reason to just elect an even bigger fiscal liberal.

You can't lay that on the feet of the Democrats though. Of course things Democrats do may affect us adversely in the future, just as things Republicans do (like over funding the military) may be bane's on our country as time goes by. However, I think we can agree, at least, that some of those ideas actually were good when they were first conceived by their respective creators. You'd have to look at those programs, when they were created by Democrats, and whether they were helpful then. What you've described is a President, and an overwhelmingly Republican congress (for the first 6 years) that did nothing. The buck stops with them. They didn't 'cave in' to Democratic pressure, anymore than you'd use that as an excuse for 9/11. It was a monumental failure, on the part of a Republican President not to use his Presidency to set and change policy.

 

[JLBats]

Oh, well, if Ron Paul agrees...

 

[The Overlord]

You're right, President Bush and Republicans had opportunity to fight many of these disastrous liberal policies, such as Community Reinvestment Act to ban on oil drilling or fixing social security but didn't want to risk momentary political capital and popularity polls to do so. The GOP's problem was that they've caved into Democrats too much on fiscal matters and only put up a fight with them on social and military issues. Doesn't negate the fact these liberal policies, started by Democrats, strongly contributed to all these financial crisis that we're in.

Yep, its the evil homosexual liberals, they forced President Bush to cave in, with their control of nothing in 2000-2006.

Yep, conservatives, they never pass up a chance to pass the buck.

 

[SentinelMind]

Yep, its the evil homosexual liberals, they forced President Bush to cave in, with their control of nothing in 2000-2006.

Yep, conservatives, they never pass up a chance to pass the buck.

You know, its only YOU who likes talking about homosexual liberals, for whatever reason. So you have nothing to offer to contradict those facts I listed. That's good to know.

 

[SentinelMind]

You can't lay that on the feet of the Democrats though. Of course things Democrats do may affect us adversely in the future, just as things Republicans do (like over funding the military) may be bane's on our country as time goes by. However, I think we can agree, at least, that some of those ideas actually were good when they were first conceived by their respective creators. You'd have to look at those programs, when they were created by Democrats, and whether they were helpful then. What you've described is a President, and an overwhelmingly Republican congress (for the first 6 years) that did nothing. The buck stops with them. They didn't 'cave in' to Democratic pressure, anymore than you'd use that as an excuse for 9/11. It was a monumental failure, on the part of a Republican President not to use his Presidency to set and change policy.

I don't agree that CRA, or Clinton's attempts to strengthen it, for instance was a good piece of legislation. Many economists predicted the impact that legislation would have on our economy. Many of these iniatives are based on ideology that government must assure everyone the same economic privelege as a right and that people can't be left to own devices to solve their own predicament.

I do agree Bush did not do much to tackle many of those issues.....he seems only willing to tackle a conflict when it blows up into a media sensation. Issues like oil drill ban and this bail out didn't resonate with public until after 2006, when Democrats took power in Congress. Now we're on brink of financial crisis.

All I'm arguing is that, even despite Bush's willingness to lead on those issues, the solutoin to those issues involve conservative legislation...drilling for oil, allowing people to opt out of social security, repealing CRA and these other federal mandates on banks, cutting federal programs.....solutions to those issues require initiative from a responsible, practical conservative. Putting more liberal bailouts and federal welfare programs are not going to solve these problems.

 

[The Overlord]

You know, its only YOU who likes talking about homosexual liberals, for whatever reason. So you have nothing to offer to contradict those facts I listed. That's good to know.

Its called a joke, you know sarcasm, get a sense of humor!

And you didn't answer my question, how did the dems force Bush to cave when they had almost no power from 2000-2006, with magic or was Bush just really weak willed?

 

[ShadowBoxing]

Drilling for oil is not solution to anything, unless you don't mind putting off solving the problem to 2020.

 

[SentinelMind]

Its called a joke, you know sarcasm, get a sense of humor!

Sorry, it just wasn't funny and was getting old.

And you didn't answer my question, how did the dems force Bush to cave when they had almost no power from 2000-2006, with magic or was Bush just really weak willed?

Bush was weak-willed and wasn't a principled fiscal conservative. That doesn't negate the fact those pieces of legislation, created by liberals, on the premise that everyoen is entitled to a government-sponsored economic privilege are responsible for the financial crisis we're in. They are an economic side-effect of the "good-natured" legislation Democrats helped create.

 

[SentinelMind]

Drilling for oil is not solution to anything, unless you don't mind putting off solving the problem to 2020.

Republicans in Congress in 1996 passed legislation to allow oil drilling in ANWR, but Clinton vetoed it. So we can both place blame at his feet for not allowing us solving the problem for 10 years.

Any solutoin is better than none. Neither candidate is against investing in alternate solutions.....maybe Obama wants to invest another billion more than McCain, who is proposing abillion more than Bush who provided billions more than Clinton. It's all the same, they want to propose billions in alternate energy research. But we have to look at resources we have available to us now. Lift ban on drilling and nuclear reactor production. Let's carry out McCain Lexington Project.

 

[ShadowBoxing]

Republicans in Congress in 1996 passed legislation to allow oil drilling in ANWR, but Clinton vetoed it. So we can both place blame at his feet for not allowing us solving the problem for 10 years.

Good, I knew Clinton did something right. The solution is, like T Boone Pickens suggested, to push alternative energy, and make us independent from oil almost completely. This notion that somehow tapping 3% of the world's oil reserves ten years in the future, and maybe dropping the price by one or two cents, is absurd. It's too much work and too much risk for almost no reward, except to line the pockets of the oil companies. We're much better off, from a financial standpoint, investing in entirely new fuels and energy sources and treating oil as if it were heroine than allowing another oil lobby backed scheme to ****** our progress in the field of energy.

 

[The Overlord]

Sorry, it just wasn't funny and was getting old.

I disagree.

Bush was weak-willed and wasn't a principled fiscal conservative. That doesn't negate the fact those pieces of legislation, created by liberals, on the premise that everyoen is entitled to a government-sponsored economic privilege are responsible for the financial crisis we're in. They are an economic side-effect of the "good-natured" legislation Democrats helped create.

So its the liberals fault Bush do nothing about this from 2000 to 2006, yeah, way to show that conservative belief in personal responsibility.

So liberals caused wall street to engage in a get rich pyramid scheme and personally created the golden parachutes that these execs had to get out when the system collapsed, is that how this law was supposed to work, it supposed to create a pyramid scheme that rips off poor people and helps exes get rich by falsely inflating their performance? Is that how its supposed to work?

 

[SentinelMind]

It seems disingenuous to suggest it will take 10 years for the oil to start pumping when in every time its suggested, envirmentalist lobby is still against it. Obviously length of time for the project isn't the issue.

Neither candidate is against researching alternate energy.....pumping billions of dollars into something won't guarantee a cheap energy resource pay-off. It's more responsible of us to hedge our bets and doing both instead of allowing ourselves to sink into an economic quagmire.

 

[SentinelMind]

I disagree.



So its the liberals fault Bush do nothing about this from 2000 to 2006, yeah, way to show that conservative belief in personal responsibility.

So liberals caused wall street to engage in a get rich pyramid scheme and personally created the golden parachutes that these execs had to get out when the system collapsed, is that how this law was supposed to work, it supposed to create a pyramid scheme that rips off poor people and helps exes get rich by falsely inflating their performance? Is that how its supposed to work?

Well, Democrats created agencies and SGE that produced government guaranteed loans to people with bad credit and passed legislation mandating that banks lend money to people with bad credit. Google the Community Reinvestment Act, how can you NOT say that didn't contribute to our current mess? How can a law that requires you to lend to people with bad credit....not increase the number of defaults on loans that are form basis for many market securities?

 

[The Senator]

It seems disingenuous to suggest it will take 10 years for the oil to start pumping when in every time its suggested, envirmentalist lobby is still against it. Obviously length of time for the project isn't the issue.

Neither candidate is against researching alternate energy.....pumping billions of dollars into something won't guarantee a cheap energy resource pay-off. It's more responsible of us to hedge our bets and doing both instead of allowing ourselves to sink into an economic quagmire.

There isn't this little thing we call damaging the "environment" those environmental lobbyists seem to be against, is it? The environment seems to present some interesting questions as to why we cannot afford to drill for oil much longer.

Such as, if we continue to consume a non-renewable resource at the rate we are currently consuming it, will that resource still exist? Especially since the United States reached peak production in 1970, according the standards set forth by the Hubbert Curve? And that the Middle East is likely to reach peak production by 2040-- a year which might get moved up if the ever-so-affordable TATA Nano goes on sale in India and China-- might mean that we can no longer afford to drill for oil?

It seems to me that not drilling is the wise thing to do at this point, both for economical and environmental reasons.

 

[TheComicbookKid]

It seems disingenuous to suggest it will take 10 years for the oil to start pumping when in every time its suggested, envirmentalist lobby is still against it. Obviously length of time for the project isn't the issue.

Neither candidate is against researching alternate energy.....pumping billions of dollars into something won't guarantee a cheap energy resource pay-off. It's more responsible of us to hedge our bets and doing both instead of allowing ourselves to sink into an economic quagmire.

The problem with the "drill, drill" solution is that is based on the idea that America's consumption remains as it is at the present day, but we know the for the economy to grow, we'll need more oil. So simply drilling the heck out of the Earth in any amount of time is stupid.

A diverse array of alternatives fuels are the best bet for a better future. Relying too much on any fuel is stupid and exactly why we are in this situation now.

And nuclear sucks. Where are we gonna put all this stuff in the desert after it has traveled by train(crappy infrastructure) across country?

 

[Handsome Rob]

I wonder how much flack the Republicans would've taken in the media and by the Democrats if they put an end to those "liberal policies"--you know, if they had made it harder for low income people to get mortgage loans to buy houses.

Yes, making things harder for the poor always plays well in the media . . .

They still should have done it, though.

 

[The Overlord]

Well, Democrats created agencies and SGE that produced government guaranteed loans to people with bad credit and passed legislation mandating that banks lend money to people with bad credit. Google the Community Reinvestment Act, how can you NOT say that didn't contribute to our current mess? How can a law that requires you to lend to people with bad credit....not increase the number of defaults on loans that are form basis for many market securities?

You aren't answering my question, where in this law does it say companies are allowed to create a pyrmiad scheme with sub prime mortgages that end up scaming poor people in order to make a quick buck my getting bonuses for their performance level in attempt to bloster the mortgage market through false pretenses, because that's exactly what happended. Where in the law does it say that's a good idea!

These companies failed because thety were too greedy, not too generous.

 

[StorminNorman]

Drilling for oil is not solution to anything, unless you don't mind putting off solving the problem to 2020.

Because we haven't had the creation of Hybrid cars, development of Hydrogen Fuel cells, flex fuel cars - all while having no problems with oil...

Its possible to work towards alternative energy AND have cheaper, abundant oil.

 

[The Overlord]

Back to the topic at hand, I think Ron Paul (and Sentinel Mind) is making a huge leap of logic here. I seriously doubt this law was intended to be used the way Lehman's Bros and others have used it. These firms used this loophole to line their own pockets, heck the FBI is currently investigating the heads of these firms to see if there was fraud or insider trading, but guess evil liberals used their mind control powers to brain wash these execs into doing this.

Bush was in charge for the last 8 years, it was his job to close any loopholes lke this, notice we didn't have a sub prime boom in the 90s when Clineton was in charge.

Now Bush wants to spend a trillion dollars of tax payers money to bail these companies, but i guess that's unimportant, Bush is a republican, when he increases the size of government, its okay or the evil liberals made him do it, either way he bears no real responsibility.