Quote:


Prominent Democrats blocked efforts from Bush, McCain, and others to rein in Freddie and Fannie in the last few years but no one is focusing on that prefering to rail against the wall street types who were at the end of the gravy train here -- not the beginning.

Brian

Quote:
FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005
The United States Senate

May 25, 2006

Section 16

Sen. John McCain [R-AZ]:

Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created" by the company's senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight's report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae's former chief executive officer, OFHEO's report shows that over half of Mr. Raines' compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator's examination of the company's accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

I urge my colleagues to support swift action on this GSE reform legislation.

Quote:

The USA is now over ten Trillion in debt.,and adding over 300 billion a day to this debt.  Could Uncle Sam go bankrupt?.,,is there a possiblity???
.....

Quote:

Posted on Thu, Oct. 9, 2008

Commentary

The Elephant in the Room: Meltdown has many culprits
Sure, Wall Street deserves some of the blame. But so do lots of U.S. borrowers.

By Rick Santorum

Who's to blame?
During the last few weeks, we've seen a bellyful of finger-pointing. But who really caused the financial meltdown?

Greedy Wall Street CEOs are the most popular whipping boys. A Wall Street friend told me that what went on there was nothing short of "collective insanity."

The Federal Reserve's easy-money policy, some regulatory relaxation by the Securities and Exchange Commission, new investment vehicles that made traditional products look so yesteryear, foolish decisions about the quality of these vehicles by the ratings agencies - all played key roles.

Hopping aboard these flashy new vehicles, Wall Street took a ride on a high-leverage roller coaster that seemed only to go up. The firms raced along, accumulating high-yield assets that, in saner times, would have been off-loaded as junk.

Given the heights to which this coaster ascended, the ride down is sure to be scary. But where did this junk come from?

Our current problems stem from the dramatic decline in the value of investments backed by the high-risk mortgages of everyday citizens. These mortgages might involve no money down, interest-only payments, adjustable rates, super-low introductory rates, "stated income" (also known as "liars' loans," as no proof of income was required), and so-called "NINJA" loans - an acronym for "no income, no job, no assets."

Why would lenders take on these high-risk subprime loans? They didn't. Freddie Mac and Fannie Mae did, by agreeing to purchase them from the lenders.

Why would these government-sponsored organizations, with the implicit guarantee of Uncle Sam, back these loans? Politics. Democratic lawmakers conspired with the Democratic operatives who ran Freddie and Fannie in another failed government attempt to help the poor.

As a Senate Banking Committee member, I was lobbied nonstop by Freddie and Fannie executives when, along with John McCain, I tried to toughen regulation of this dangerous practice. Not a single Democrat joined us. Even though we passed the bill out of committee in 2005, it was killed on the Senate floor.

When energy-price spikes fanned inflation and squeezed borrowers, the Fed was forced to raise interest rates, causing payments on adjustable-rate mortgages to soar. The bubble in real estate values began to burst, wiping out whatever equity borrowers had.

None of this financial collapse would have occurred, however, without the participation of one last group of bad actors, a group so powerful that most politicians have avoided railing against it:

American borrowers.

This group includes homeowners who were delinquent on their mortgages - whether the unsophisticated, lured by the unscrupulous with promises of better living, or the savvy, who thought they could make a buck with little risk.

But many others also benefitted from easy-money policy. The truth is we all enjoyed the ride, with record credit-card debt, a negative savings rate, and home-equity loans.

What happened to living within our means, saving whatever we could, deferring gratification, and planning for the future?

We, and I include myself, have gone from "keeping up with the Joneses" to keeping up with the Madisons - Madison Avenue, that is. We have bought the line that "stuff" will make us happy, and that we deserve it, regardless of affordability. That goes for Wall Streeters and their estates in the Hamptons, middle managers and their suburban McMansions, and newlyweds and their starter homes.

I am often asked why, as a senator, I "harped" on cultural issues. The answer is that our beliefs, our choices and our character are not just private matters. They ultimately affect others. If enough people are privately irresponsible, whether financially or otherwise, all Americans suffer. Sometimes the suffering can even be measured in dollars and cents.

We are on our fourth bailout, with a fifth proposed Tuesday by McCain, and the crisis only deepens. Now, both he and his Democratic opponent, Barack Obama, want to shield Americans from the consequences of their behavior by bailing out irresponsible borrowers.

Anyone for a call to pay the piper, combined with an appeal for thrift, modesty, simplicity and sacrifice? Let's hope so.

Quote:

I'd be interested in reading the source of that information

Brian

Quote:

Blaming the CRA

By Alan White

The financial crisis is now being attributed by the Wall Street Journal editors and other right wingers to the Community Reinvestment Act. The CRA requires banks to provide loans and financial services in underserved communities, particularly poor and minority neighborhoods. This blame-the-victim theory does not withstand fact-based analysis.

The blame-the-CRA theory says that the subprime mess was caused by weak-hearted lenders pushed by misguided bureaucrats into making loans to poor people and minorities who can't repay them. Nothing could be further from the truth. First, subprime mortgages that are now defaulting in droves were made mostly by unregulated mortgage bankers with no CRA obligations or oversight. Second, the Alt-A mortgages that are a major part of the crisis were made mostly to middle-and upper-income white borrowers who didn't want to verify income or wanted a bigger loan than a prime lender would offer. Third, loans made by banks to fulfill CRA obligations, even those to very low-income homebuyers, perform quite well. Fourth, the only category of mortgages in which the foreclosure and default rates are not going up is the FHA program, a program that makes loans almost exclusively to low- and moderate-income Americans, many of them African-American and Latino. The bottom line is that it was the design of subprime mortgages, not the selection of borrowers, that caused them to default in massive numbers. Lenders can make sound loans to underserved groups, or they can make overpriced dangerously risky loans.

The only tiny grain of truth in this blame-the-CRA theory is that HUD, under the Bush Administration, agreed to give Fannie Mae and Freddie Mac credit for buying subprime mortgage-backed securities to meet their affordable housing goals. Fannie and Freddie's affordable housing goals are not technically part of the CRA but they are motivated by the same goals. The problem here is not the goal but the means. CRA and consumer advocates consistently opposed counting high-cost, high-risk subprime loans as meeting any bank or GSE's affordable housing goals, but the laissez-faire HUD and OFHEO regulators went along. The same right-wingers now blaming the CRA were praising subprime lending a few years ago as the solution to meet the needs of previously underserved homebuyers. CRA advocates, on the other hand, have never confused subprime lending with community reinvestment.