ABC News; Obama Chief of Staff Was Director of Freddie Mac During Scandal

Hussein will ‘change’ the flow of money into Hussein’s bank account.

Ralph, apparently (had you read the article) Rahm did not agree with your assessment. He in fact warned that it was in trouble, but…then he took some $300,000 from em later on, so…maybe you’re right. 😉

When did the collapse start? If you think Sept, then why the people chiming out about problems years ago? Seems the seeds were sown back when Rahm was Director.

I’ll change the “COLLAPSE” to “SCANDAL” for ya.

Stix, the concept that the Community Reinvestment act had anything to do with the financial meltdown is not supported by the fact that not a single Republican made this into a campaign issue. The data prove otherwise:

Of all the sub-prime mortgages, only 1/4 to 1/3 were Fannie/Freddie-backed. Of all the subprime mortgages, only 9% were for owner-occupied first houses (CRA targets). Of all the money which went into sub-prime mortgages, less than 1% could possibly be CRA-related loans.

The financial crisis wasn’t caused by Fannie/Freddie, and it certainly wasn’t caused by the CRA. It’s mathematically impossible to believe that the CRA could have played any role, at all. Fannie/Freddie leadership made the same bad investments as the rest of the completely private financial sector (who made 2/3 to 3/4 of the bad loans and sold off and bought the mortgage-related paper, totally unbacked by Fannie/Freddie. The investment decisions of Fannie/Freddie were motivated by the desire to make profits for their shareholders, just as in the case of the non-government related financial institutions, who were responsible for 2/3 to 3/4 of the total action.

The proximate cause of the crisis was a capital glut, chasing too few investment opportunities, which created a demand for exotic securities.

Again, this is the reason why no politicians tried to make a big issue out of the meltdown, in terms of blaming Fannie, Freddie, and especially the CRA.

– Larry Weisenthal/Huntington Beach

Larry,

No wonder you vote for THE ONE you do not understand that subprime crisis. I will try to find you a convincing article from the best Economists in this world to prove you wrong. I have a couple here but they are all in French. To bad Friedman is dead; he would have explained it perfectly for you. Government’s regulations in economy always screws-up economy… that is the first rule of capitalism.

McCain hardly pointed it out because McCain wants to be the “good guy”. Unfortunately, good guys always lose. Good guys are eternal losers.

Here is the rest of the article above:

… Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.

The untold story in this whole national crisis is that President Clinton put on steroids the Community Reinvestment Act*, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but “predatory.”

Yes, the market was fueled by greed and overleveraging in the secondary market for subprimes, vis-a-vis mortgaged-backed securities traded on Wall Street. But the seed was planted in the ’90s by Clinton and his social engineers. They were the political catalyst behind this slow-motion financial train wreck.

And it was the Clinton administration that mismanaged the quasi-governmental agencies that over the decades have come to manage the real estate market in America.

As soon as Clinton crony Franklin Delano Raines took the helm in 1999 at Fannie Mae, for example, he used it as his personal piggy bank, looting it for a total of almost $100 million in compensation by the time he left in early 2005 under an ethical cloud.

Other Clinton cronies, including Janet Reno aide Jamie Gorelick, padded their pockets to the tune of another $75 million.

Raines was accused of overstating earnings and shifting losses so he and other senior executives could earn big bonuses.

In the end, Fannie had to pay a record $400 million civil fine for SEC and other violations, while also agreeing as part of a settlement to make changes in its accounting procedures and ways of managing risk.

But it was too little, too late. Raines had reportedly steered Fannie Mae business to subprime giant Countrywide Financial, which was saved from bankruptcy by Bank of America.

At the same time, the Clinton administration was pushing Fannie and her brother Freddie Mac to buy more mortgages from low-income households.

The Clinton-era corruption, combined with unprecedented catering to affordable-housing lobbyists, resulted in today’s nationalization of both Fannie and Freddie, a move that is expected to cost taxpayers tens of billions of dollars.

And the worst is far from over. By the time it is, we’ll all be paying for Clinton’s social experiment, one that Obama hopes to trump with a whole new round of meddling in the housing and jobs markets. In fact, the social experiment Obama has planned could dwarf both the Great Society and New Deal in size and scope.

There’s a political root cause to this mess that we ignore at our peril. If we blame the wrong culprits, we’ll learn the wrong lessons. And taxpayers will be on the hook for even larger bailouts down the road.

But the government-can-do-no-wrong crowd just doesn’t get it. They won’t acknowledge the law of unintended consequences from well-meaning, if misguided, acts.

Obama and Democrats on the Hill think even more regulation and more interference in the market will solve the problem their policies helped cause. For now, unarmed by the historic record, conventional wisdom is buying into their blame-business-first rhetoric and bigger-government solutions.

While government arguably has a role in helping low-income folks buy a home, Clinton went overboard by strong-arming lenders with tougher and tougher regulations, which only led to lenders taking on hundreds of billions in subprime bilge.

Market failure? Hardly. Once again, this crisis has government’s fingerprints all over it.