Oct 10 2008

As World Markets Collapse America Can Look Back To The Clinton Years For Why

Published by at 10:10 am under 2008 Elections,All General Discussions

McCain wants to change DC, Obama wants to change America!

Rash ideas can destroy something built over decades of careful steps. The Clinton ‘golden years’ ended with the dot.com bubble he created bursting and wiping out a lot of wealth, bringing on a small recession George Bush had to deal with when he took office. But another disaster was planted in the Clinton years, and has only bore its fruit this year, with the collapse of financial markets thanks to the rush to make a sea of bad loans, all in the name of ‘affirmative action':

H/T Ed Morrissey. One has to wonder how much of this disaster was rash liberal ideas run amok, and whether any of it was a dastardly hidden time bomb meant to destroy the capitalistic system the socialists hate so much. How is it all the liberals still have their money – and the reigns of power? Are Obama’s associates who once ran Freddie Mac and Fannie Mae still worth millions and millions? I do believe they are.

And they made those millions (and the the thousands they sent to Obama’s campaign coffers) off the sweat and toil of the American worker and families as they scrimped to make their mortgage payment each month. Now, when you right that check to money lenders in Obama’s temple, you know what you paid for.

Update: Note Obama admits the ideas was to SPREAD RISK across the globe – not just across the nation. He admits this poison pill of liberal rashness was intended to help the poor, but he also admits IT MESSED THINGS UP across the globe! They spread the cancer of shaky financial investments, and everyone is now losing their savings and retirement due to this risky, rash scheme hatched across two Democrat administrations.

If there is any better indication of Obama’s bad judgement, liberal bad judgement, and why we don’t want liberals running the White House, Senate and Congress, this weeks stock market crash is the prime example. What would a 3rd liberal democrat administration do to us???

Update: If McCain and the GOP want to salvage this election now is the time to tar the dems with this crisis. They cannot wait anymore, they cannot be diverted anymore. 

McCain wants to change DC, Obama wants to change America!

8 responses so far

8 Responses to “As World Markets Collapse America Can Look Back To The Clinton Years For Why”

  1. sbd says:

    Anatomy of a Train Wreck
    Causes of the Mortgage Meltdown
    Stan J. Liebowitz
    October 3, 2008

    The last defense of banks trying to defend themselves against charges of engaging in biased mortgage lending appeared to fall when the Federal Reserve Bank of Boston (Boston Fed) conducted an apparently careful statistical analysis in 1992, which purported to demonstrate that even after controlling for important variables associated with creditworthiness, minorities were found to be denied mortgages at higher rates than whites.

    In fact, the study was based on such horribly mangled data that the study’s authors apparently never bothered to examine them. Every later article of which I am aware accepted that the data were badly mangled, even those authored by individuals who ultimately agreed with the conclusions of the Boston Fed study.

    The authors of the Boston Fed study, however, stuck to their guns even in the face of overwhelming evidence that the data used in their study was riddled with errors. Ex post, this was a wise decision for them, even if a less than honorable one.

    The winds were behind the sails of the study. Most politicians jumped to support the study. “This study is definitive,” and “it changes the landscape,” said a spokeswoman for the Office of the Comptroller of the Currency. “This comports completely with common sense,” and “I don’t think you need a lot more studies like this,” said Richard F. Syron, president of the Boston Fed (and former head of Freddie Mac). One of the study’s authors, Alicia Munnell, said, without any apparent concern for academic modesty, “The study eliminates all the other possible factors that could be influencing [mortgage] decisions.” When important functionaries make quotes like these, you know that the fix is in and that scientific enquiry is out.

    My colleague, Ted Day, and I only decided to investigate the Boston Fed study because we knew that no single study, particularly a first study, should ever be considered definitive and that something smelled funny about the whole endeavor. Nevertheless, we were shocked at the poor quality of the data created by the Boston Fed. The Boston Fed collected data on approximately three thousand mortgages. Data problems were obvious to anyone who bothered to examine the numbers. Here is a quick summary of the data problems: (a) the loan data that Boston Fed created had information that implied, if it were to be believed, that hundreds of loans had interest rates that were much too high or much too low (about fifty loans had negative interest rates according to the data); (b) over five hundred applications could not be matched to the original HMDA data upon which the Boston Fed data was supposedly based; (c) forty-four loans were supposedly rejected by the lender but then sold in the secondary market, which is impossible; (d) two separate measures of income differed by more than 50 percent for over fifty observations; (e) over five hundred loans that should have needed mortgage insurance to be approved were approved even though there was no record of mortgage insurance; and (f ) several mortgages were supposedly approved to individuals with a net worth in the negative millions of dollars.

    When we attempted to conduct a statistical analysis removing the impact of these obvious data errors, we found that the evidence of discrimination vanished. Without discrimination there would be no reason to try to “fix” the mortgage market. Nevertheless, our work largely evaporated down the memory hole as government regulators got busy putting the results of the Boston Fed study to use in creating policy. That policy, simply put, was to weaken underwriting standards. What happened next is nicely summed up in an enthusiastic Fannie Mae report authored by some leading academics (Listokin et al., 2002):

    Attempts to eliminate discrimination involve strengthened enforcement of existing laws . . . There have also been efforts to expand the availability of more affordable and flexible mortgages. The Community Reinvestment Act (CRA) provides a major incentive . . . Fannie Mae and Freddie Mac . . . have also been called upon to broaden access to mortgage credit and home ownership. The 1992 Federal Housing Enterprises Financial Safety and Soundness Act (FHEFSSA) mandated that the GSEs increase their acquisition of primary-market loans made to lower income borrowers . . . Spurred in part by the FHEFSSA mandate, Fannie Mae announced a trillion-dollar commitment.

    The result has been a wider variety of innovative mortgage products. The GSEs have introduced a new generation of affordable, flexible, and targeted mortgages, thereby fundamentally altering the terms upon which mortgage credit was offered in the United States from the 1960s through the 1980s. Moreover, these secondary market innovations have proceeded in tandem with shifts in the primary markets: depository institutions, spurred by the threat of CRA challenges and the lure of significant profit potential in underserved markets, have pioneered flexible mortgage products. For years, depositories held these products in portfolios when their underwriting guidelines exceeded benchmarks set by the GSEs. Current shifts in government policy, GSE acquisition criteria, and the primary market have fostered greater integration of capital and lending markets.

    These changes in lending herald what we refer to as mortgage innovation. (My emphasis) One man’s innovation can be another man’s poison, in this case a poison that infected the entire industry. What you will not find, if you read the housing literature from 1990 until 2006, is any fear that perhaps these weaker lending standards that every government agency involved with housing tried to advance, that congress tried to advance, that the presidency tried to advance, that the GSEs tried to advance—and with which the penitent banks initially went along and eventually enthusiastically supported—might lead to high defaults, particularly if housing prices should stop rising.

    2. Relaxed Lending Standards— Everyone’s Doin’ It

    Within a few months of the appearance of the Boston Fed study, a new manual appeared from the Boston Fed. It was in the nature of a “Nondiscriminatory Mortgage Lending for Dummies”3 booklet. The president of the Boston Fed wrote in the foreword:

    The Federal Reserve Bank of Boston wants to be helpful to lenders as they work to close the mortgage gap [higher rejection rate for minorities]. For this publication, we have gathered recommendations on “best practice” from lending institutions and consumer groups. With their help, we have developed a comprehensive program for lenders who seek to ensure that all loan applicants are treated fairly and to expand their markets to reach a more diverse customer base.

    Early in the document, the Boston Fed gracefully reminds its readers of a few possible consequences of not paying attention:

    Did You Know? Failure to comply with the Equal Credit Opportunity Act or Regulation B can subject a financial institution to civil liability for actual and punitive damages in individual or class actions. Liability for punitive damages can be as much as $10,000 in individual actions and the lesser of $500,000 or 1 percent of the creditor’s net worth in class actions.

    Read the entire Independant Policy Report.

  2. Watch this, then get angry…

    Via Ed Morrissey. This video, about nine minutes long, opens with then-HUD Secretary Andrew Cuomo in 1998 explaining how the government was using legal coercion to force a bank to give mortgage loans to low-income and minority borrowers who otherwise…..

  3. conman says:

    AJ,

    So let me get your theory straight. This entire economic crises can be traced back to a 1998 settlement Clinton’s HUD reached with a major bank on a lending discrimination case that involved 15,000 loans. Wow, those must of been some pretty large low-income loans! Despite the fact that Republicans control the White House from 2000-present and both houses of Congress from 1994-2006 (except for the brief period from 2001-2002 in which Democrats took a one vote majority in the Senate when Senator Jeffords swithed to an Independent and caucased with the Democrats), they were completely powerless to do anyhting about it. Are you joking? Is this really the best you can come up with? Everybody but the GOP kool-aid gang will laugh at this ridiculous theory.

    In all seriousness, do hard-core Republicans like yourself hold your political leaders accountable for ANYTHING? Republicans have been largely in control for the past 14 years and had exclusive control from 2000-2006 and you folks are still unwilling to place ANY blame on the Republican leaders in charge for the current economic crises? It is similar to how Republicans to this day blame Clinton for 9-11 even though it happend on Bush’s watch and Bush was warned in a presidential briefing of a potential terrorist attack and did nothing. Or how you dismiss as irrelevant the fact that Bush still hasn’t nabbed Osama Bin Laden after 7 years and Al Qaeda has been allowed to reconstitute and created a new safe haven in Pakistan.

    While I recognize that Democrats view many issues through a partisan lens, it does not appear to be to the same degree. Even diehard Democrats will strongly criticize their party and its leaders on certain positions – such as FISA. All I see from Republicans these days is making up excuses after excuse as to why the Republican party and leaders aren’t responsible for any of our country’s problems despite the fact that they have been in charge.

    I understand this is an election year and we are a divided country along partisan lines, but I’m struck by how little Republicans like yourself (please spare me the “I’m an Independent Conservative” even though my blog reads like a Bush/McCain campaign website) care about holding their party leaders accountable for anything. The Republican party used to pride itself on being the party of principle and accountability. Now all they care about is winning elections at all costs. I can’t imagine how ashamed some of the modern day Republican leaders who helped shape the party, such as Goldwater, Reagan, Buckley, would be of the current GOP if they were alive today.

  4. missy1 says:

    So when we are talking Republican control, what did they control? Did they have a 60 vote majority in the Senate to block a filibuster? Noooo. It was the same problem then that the dems are whining about now, it’s their excuse for not stopping the war, not getting most of their 06 campaign promises passed, and you fell for it.

    The democrats blocked the senate bill, period.

    The rest of your rant is nothing but spent talking points.

  5. sherman50 says:

    “So let me get your theory straight. This entire economic crises can be traced back to a 1998 settlement Clinton’s HUD reached with a major bank on a lending discrimination case that involved 15,000 loans.”

    Nobody is saying that you moron. It’s just that it is indicative of the recklessness of the Left and how they created this situation.

  6. conman says:

    Missy,

    First of all, your suggestion that the GOP was powerless to do anything because they didn’t have a 60 vote majority is a joke. They got plenty of legislation through that Democrats opposed during their time in power – they just didn’t care about this issue. I think it is as laughable as the Democrats current complaint that they can’t get anything done without 60 seats. You see, those lame arguments don’t work on people like me who are actually able and willing to criticize their own party.

    You allege that the Democrats stopped the Senate bill – provide some proof. Just because you may have read it on a conservative blog doesn’t mean its true.

  7. missy1 says:

    Prior to the 06 election they were buying the Dems off through earmarks to get legislation through, they got the blame for spending, the dems got Congress.

    With the two Freddies it was a different story, dem members were personally rewarded, it wasn’t going to their district, the cash went to their war chests. It was the democrats that blocked regulation by threatening to filibuster and a party line vote. If you haven’t read the information or watched the damning videos, than maybe you should get back to us when you’re up to speed.