What caused the subprime mortgage meltdown?

UPDATE: Oct. 8, 2008:

One of the funniest and most politically searing comedy sketches in years has vanished from the Web site of NBC’s Saturday Night Live. Visitor comments asking about its disappearance are also being scrubbed from the Web site. The sketch — a harsh indictment of the housing meltdown that led to last week’s bailout bill — was clearly too much truth for someone to handle.

The seven-minute sketch featured a mock news conference of Democratic Congressional leaders on the bailout bill, during which Nancy Pelosi and Barney Frank inadvertently acknowledge that it was Congress that blocked reform and effective oversight of mortgage giants Fannie Mae and Freddie Mac.

Then SNL comic Kristen Wiig, playing Speaker Pelosi, introduces a parade of “victims” of the housing crisis. These “real Americans” include two jobless deadbeats who bought houses with no down-payment and a preppy couple who can’t flip the dozen time-share condos they bought as a speculative investment.

They were followed by actors portraying the real-life couple of Herbert and Marion Sandler. They explained how they built a mortgage company that specialized in subprime mortgages, which they sold to Wachovia Bank for $24.2 billion in 2006 — one of the worst acquisitions by any company ever. It helped precipitate the collapse of Wachovia last week.

The Sandlers were hustled off the stage by “Speaker Pelosi” after they said they couldn’t understand why they were invited to a news conference of “victims” since they had done so well out of the housing crisis.

They were followed by financier George Soros, identified as “Owner, Democratic Party.” The actor portraying Mr. Soros informs the group that the $700 billion bailout package “basically belongs to me” and that he has decided to short the U.S. dollar. That will trigger a devaluation “either Tuesday or Wednesday. I haven’t decided which yet. It will depend on how I feel.”

The brutally wicked sketch must have caused tremors in left-wing circles. The Sandlers and Mr. Soros have all been prime financial backers of independent political groups that have secured huge influence in the Democratic Party and helped fuel the rise of Barack Obama.

The Sandlers, for example, were major donors to the left-wing radio network Air America as well as the liberal housing lobby ACORN, a major player in pressuring banks into making more subprime mortgages. They also donated $2.5 million to MoveOn.org, the liberal group that insulted General David Petraeus as “General Betray Us” last year. Mr. Soros contributed a like amount. In turn, Eli Pariser, the head of MoveOn.org, was quite candid after the 2004 election about the influence this left-wing cabal hoped to exercise: “Now it’s our party: we bought it, we own it, and we are going to take it back.”

No doubt the Sandlers and Mr. Soros were displeased with the Saturday Night Live sketch. Herbert Sandler told the Associated Press that its portrayal of him as a predatory lender was “crap.” “We are being unfairly tarred. People have been telling us to speak out for some time, but we didn’t think it was appropriate. That was clearly a mistake.”

I suspect that some of the people the Sandlers have spoken to — or complained to — are the corporate overseers of NBC. That may explain why the bailout sketch has been airbrushed from the network’s Web site and will likely never be shown again.

That’s a shame, because rarely has political satire been more timely, pointed and, in many respects, so truthful.

— The WSJ Online.

 

 

The mainstream media was able to keep a lid on it for 30 years. Thanks to individuals in radio, FOX News and now a strong online communications source, we get a detailed picture of the redistribution of wealth that has gone on in America. It started under the cloak of the Fairness Doctrine and Jimmy Carter’s presidency with the Democrat Party controlling Congress, (like they do today).

This is from Artur Davis, a Democrat:

The current market crash was set in motion when Jimmy Carter and the democratic majority Congress passed the Community Reinvestment Act. The act actually gave INCENTIVES to low income borrowers to get home mortgages they couldn’t afford. In 1995 Bill Clinton revised the Community Reinvestment Act forcing banks to approve subprime mortgages even though it might result in defaulting on the loan, because borrowers couldn’t afford to keep up with the payments. The risk of defaulting on those loans was huge, but it was okay after Clinton’s revisions because he made it law that the government would back up the loans, like a co-signer. Banks then were FORCED to give out $1 Trillion in new SUBPRIME loans. Does that number sound familiar? It should. That is the exact amount being proposed to bailout the banks and financial markets today.

Artur Davis admits the democrats were at fault. The republicans, especially John McCain, warned in 2004 that tax payers would be stuck with the bill if something wasn’t done to correct the accounting fraud, and bad loans stemming from the Community Reinvestment Act. Republicans also warned in 2004 that Fannie Mae and Freddie Mac were at the center of the problem, and both agaencies were owned by the Federal government, so they had the power to stop the train before it crashed the stock market today. Democrats got angry, as seen the video above, and said there was no problem, so they blocked any effort to reform the lending practices, and now we have the stock market, and mortgage market crash that could cause another 1929 depression. The bailout will cost tax payers more than $4,000 each. Thank you democrat party for creating the worst financial disaster in our country’s history. To make things worse, Barack Obama says he’ll raise taxes if he is elected.

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Recent Fannie Mae and Freddie Mac executives on Obama’s payroll — Senator Chris Dodd oversees Freddie and Fannie and has received hundreds of thousands in contributions from them. Barney Frank’s lover was a director on Fannie

UPDATE: Oct. 2, 2008

Unqualified home buyers were not the only ones who benefited from Massachusetts Rep. Barney Frank’s efforts to deregulate Fannie Mae throughout the 1990s.

So did Frank’s partner, a Fannie Mae executive at the forefront of the agency’s push to relax lending restrictions.

Enron executives are in prison over much less. In fact far more money was lost to investors after Mr. Frank, trumpeted the great management of Freddie Mack and Fannie May.

We thank Bill O’Reilly for bringing up Barney Frank’s role. Fortunately, we still have a free press in this country. Wait until ’09, if Obama wins he and Nancy Pelosi promise to invoke the “Fairness Doctrine.”

Now that Fannie Mae is at the epicenter of a financial meltdown that threatens the U.S. economy, some are raising new questions about Frank’s relationship with Herb Moses, who was Fannie’s assistant director for product initiatives. Moses worked at the government-sponsored enterprise from 1991 to 1998, while Frank was on the House Banking Committee, which had jurisdiction over Fannie.

Both Frank and Moses assured the Wall Street Journal in 1992 that they took pains to avoid any conflicts of interest. Critics, however, remain skeptical.

“It’s absolutely a conflict,” said Dan Gainor, vice president of the Business & Media Institute. “He was voting on Fannie Mae at a time when he was involved with a Fannie Mae executive. How is that not germane?

“If this had been his ex-wife and he was Republican, I would bet every penny I have – or at least what’s not in the stock market – that this would be considered germane,” added Gainor, a T. Boone Pickens Fellow. “But everybody wants to avoid it because he’s gay. It’s the quintessential double standard.”

Did you read about this in the New York Times, Washington Post or San Francisco Chronicle?

UPDATE: 9/25/08

Countrywide Financial, the biggest U.S. mortgage lender, made large, previously undisclosed home loans to two additional executives of Fannie Mae, the government-chartered firm at the center of the U.S. credit crisis.

This is what Lindsey Graham said on Greta’s show: “And this deal that’s on the table now is not a very good deal. Twenty percent of the money that should go to retire debt that will be created to solve this problem winds up in a housing organization called ACORN that is an absolute ill-run enterprise, and I can’t believe we would take money away from debt retirement to put it in a housing program that doesn’t work.”

Imagine what $140,000,000 can do to for ACORN and the Democrat party?

The FBI is investigating Freddie, Fannie, and AGI.
One of Countrywide’s previously undisclosed customers at Fannie was Jamie Gorelick, an influential Democratic Party figure whose $960,000 mortgage refinancing in 2003 was handled through a program reserved for influential figures and friends of Countrywide’s chief executive at the time, Angelo Mozilo. Ms. Gorelick was Fannie Mae’s vice chairman at the time. [Former Deputy Attorney General Jamie Gorelick, listening to testimony on Capitol Hill in April, got a Countrywide refinancing while at Fannie Mae.] Associated Press

Former Deputy Attorney General Jamie Gorelick, listening to testimony on Capitol Hill in April, got a Countrywide refinancing while at Fannie Mae.

Another Countrywide client was recently ousted Fannie Mae Chief Executive Daniel Mudd, though it isn’t clear whether he received special treatment on two $3 million mortgage refinancings he made when he was the company’s chief operating officer.

In an interview, Ms. Gorelick said she had no knowledge of receiving special treatment. A financial adviser to Mr. Mudd said he received interest rates in line with the prevailing market.

The Fannie loans — including a series of already reported preferential loans to former Fannie chief executives James Johnson and Franklin Raines — underscore the close connections between Countrywide and Fannie Mae and raise potential conflict-of-interest issues.

UPDATE: 9/24/08

Statement by John McCain, May 25, 2006:

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.

Mac and Mae meltdown. Which Democrats benefited from the quasi-government agencies?

UPDATE: 9/24/2008
Opensecrets.com has looked into the public records of direct contributions from the organizations of Freddie and Fannie, not including the donations from top executives. The FBI is opening major investigations into the actions of the organizations.

Fannie Mae and Freddie Mac Invest in Democrats

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(For an updated chart that includes contributions from Freddie Mac and Fannie Mae’s PACs and employees to ALL lawmakers back to 1989, including to their leadership PACs, go here.) and data The federal government recently announced that it will come to the rescue of Freddie Mac and Fannie Mae, two embattled mortgage buyers that for years have pursued a lobbying strategy to get lawmakers on their side. Both companies have poured money into lobbying and campaign contributions to federal candidates, parties and committees as a general tactic, but they’ve also directed those contributions strategically. In the 2006 election cycle, Fannie Mae was giving 53 percent of its total $1.3 million in contributions to Republicans, who controlled Congress at that time. This cycle, with Democrats in control, they’ve reversed course, giving the party 56 percent of their total $1.1 million in contributions. Similarly, Freddie Mac has given 53 percent of its $555,700 in contributions to Democrats this cycle, compared to the 44 percent it gave during 2006.

Fannie Mae and Freddie Mac have also strategically given more contributions to lawmakers currently sitting on committees that primarily regulate their industry. Fifteen of the 25 lawmakers who have received the most from the two companies combined since the 1990 election sit on either the House Financial Services Committee; the Senate Banking, Housing & Urban Affairs Committee; or the Senate Finance Committee. The others have seats on the powerful Appropriations or Ways & Means committees, are members of the congressional leadership or have run for president. Sen. Chris Dodd (D-Conn.), chairman of the Senate banking committee, has received the most from Fannie and Freddie’s PACs and employees ($133,900 since 1989). Rep. Paul Kanjorski (D-Pa.) has received $65,500. Kanjorski chairs the House Financial Services Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, and Freddie Mac and Fannie Mae are government-sponsored enterprises, or GSEs.
Campaign Contributions, 1989-2008

Top Recipients of Fannie Mae and Freddie Mac

Name

Office

Party/State

Total

1. Dodd, Christopher

S

D-CT

$133,900

2. Kerry, John

S

D-MA

$111,000

3. Obama, Barack

S

D-IL

$105,849

4. Clinton, Hillary

S

D-NY

$75,550

5. Kanjorski, Paul E

H

D-PA

$65,500

This is a story that you won’t read about in the mainstream media. The Clinton administration marching orders to open up home loans to people unqualified, (socialization of home ownership). Today, the Democrats have taken over the U.S. Congress and have a 50/50 chance to take over the White House.
Look into the Barney Frank, Chris Dodd and Barack Obama connection — they have recieved millions of dollars from Fannie Mae and Freddie Mac. Chris Dodd also received a sweet deal from Countrywide. These same people in “public service” are not investigating the corruption. For the past two years, the Democrats have held the majority controlling status of the House and Senate. So they will not turn in their own.

“Freddie and Fannie used huge lobbying budgets and political contributions to keep regulators off their backs.

A group called the Center for Responsive Politics keeps track of which politicians get Fannie and Freddie political contributions. The top three U.S. senators getting big Fannie and Freddie political bucks were Democrats and No. 2 on the list is Sen. Barack Obama.

Fannie and Freddie have been creations of the congressional Democrats and the Clinton White House, designed to make mortgages available to more people and, as it turns out, many people who couldn’t afford them… Now remember: Obama’s ads and stump speeches attack McCain and Republican policies for the current financial turmoil. It is demonstrably not Republican policy and worse, it appears the man attacking McCain — Sen. Obama — was at the head of the line when the piggies lined up at the Fannie and Freddie trough for campaign bucks.

Sen. Barack Obama: No. 2 on the Fannie/Freddie list of favored politicians after just two years in the Senate.

Next time you see that ad, you might notice he fails to mention that part of the Fannie and Freddie problem.”

Now let’s look at Franklin Raines, Barack Obama’s campaign manager — previously a Fannie Mae top executive.

This story is serious but it won’t receive any attention from the mainstream media who benefit from a socialist America and Barack Obama as President.

“Fannie Mae and Freddie Mac have also strategically given more contributions to lawmakers currently sitting on committees that primarily regulate their industry. Fifteen of the 25 lawmakers who have received the most from the two companies combined since the 1990 election sit on either the House Financial Services Committee; the Senate Banking, Housing & Urban Affairs Committee; or the Senate Finance Committee. The others have seats on the powerful Appropriations or Ways & Means committees, are members of the congressional leadership or have run for president. Sen. Chris Dodd (D-Conn.), chairman of the Senate banking committee, has received the most from Fannie and Freddie’s PACs and employees ($133,900 since 1989). Rep. Paul Kanjorski (D-Pa.) has received $65,500. Kanjorski chairs the House Financial Services Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, and Freddie Mac and Fannie Mae are government-sponsored enterprises, or GSEs.”

The names of the top four recipients of Campaign contributions from Fannie and Freddie over the last 10 years is also interesting – Christopher Dodd, John Kerry, Barack Obama and Hillary Clinton (all top Democrats for those keeping a scorecard).
About Franklin Raines and James Johnson
James A. Johnson (born December 24, 1943) is a United States Democratic Party political figure. He was the campaign manager for Walter Mondale’s failed 1984 presidential bid and chaired the vice presidential selection committee for the presidential campaign of John Kerry. He was involved in the vice-presidential selection process for the 2008 Democratic presidential nominee Senator Barack Obama.
Johnson began his career as a faculty member at Princeton University, later moving on to the United States Senate as a staff member and to the Dayton-Hudson Corporation (now Target Corp.) as director of public affairs. He was executive assistant to Vice President Walter Mondale during the entire Carter Administration (1977-1981). Later, he founded and headed Public Strategies, a private consulting firm, from 1981 to 1985 before leaving for Lehman Brothers.
From 1991 to 1998, he served as chairman and chief executive officer of the Federal National Mortgage Association (Fannie Mae), the quasi-public organization that guarantees mortgages for millions of American homeowners. Previously, he was vice chairman of Fannie Mae (1990-1991). An Office of Federal Housing Enterprise Oversight report from September 2004 found that, during Johnson’s tenure as CEO, Fannie Mae had improperly deferred $200 million in expenses. This enabled top executives, including Johnson and his successor, Franklin Raines, to receive substantial bonuses that they would have otherwise not earned.
As of 2006, he is a vice chairman of the private banking firm Perseus LLC, a position he has held since 2001. He is also a board member at Goldman Sachs, Gannett Company, Inc., a media holding group, KB Home, a home construction firm, Target Corporation, Temple-Inland, and UnitedHealth Group.
Johnson has also served as chairman of both the Kennedy Center for the Arts (1996-2004) and the Brookings Institution (1994-2003). He is also a member of the American Academy of Arts and Sciences, the American Friends of Bilderberg, the Council on Foreign Relations, and the Trilateral Commission.
On May 22, Democratic Party officials confidentially divulged that Obama had asked Johnson “to lead the process” for selecting Obama’s running mate.On June 4, 2008, Obama announced the formation of a three person committee to vet vice presidential candidates, including Johnson. However, Johnson soon became a source of controversy when it was reported that he had received loans directly from Angelo Mozilo, the CEO of Countrywide Financial, a company implicated in the U.S. subprime mortgage lending crisis. Although he was not accused of any wrongdoing and was initially defended by Obama on the grounds that he was simply an unpaid volunteer, Johnson announced he would step down from the vice-presidential vetting position on June 11, 2008 in order to avoid being a distraction to Obama’s campaign.
On September 19, the McCain/Palin campaign released an ad showing Obama linked him to Johnson.
What does Don Imus have to say about his old pals? They threw him under the train.
Give us your thoughts, my friends.