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

[BlackLantern]

Ron Paul just needs to stop.....

 

[lazur]

As long as liberals and/or conservatives keep pushing a government agenda that means solving every person's problems in this country, this country will always fail economically. It is not the government's job to provide health care to everyone. It's not the government's job to bail out failing corporations.

Our country was not intended to be 'ruled' by a government that 'takes complete care of its people.' Our government was deliberately LIMITED in power over the people. But the more 'security' people clamor for, the more people expect the government to insure every person's success whether deserved or not, and the worse things will get.

We are not a socialist country, nor are we a democracy. We are SUPPOSED to be a representative republic government that ensures basic protections to people. Beyond those basic protections, responsibility rests in the states, and to each state's people.

What I'm tired of from liberals is this idea that taxes should be used as punishment, or as a means of redistributing wealth. I'm tired of this mentality from the left that the only purpose of government is to give its people more stuff. It's ridiculous and it's a very, very dangerous road. What I'm tired of from the right is this mentality that decisions on social issues rest solely with the government (ie banning gay marriage).

There is a middle ground. We live in the greatest country on the planet and as American people we solve our OWN problems for ourselves and we work to help others solve their own problems - we do not rely on the government to solve all of our problems for us. Until we realize that, this country doomed to a short existence.

 

[Arc-Light]

"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.

Hmmm i could swear i see a trend here.....hmmmmmm