SubPrime Loans: 71% Were Government Not Wall Street

The subprime mortgage meltdown was a result of government forcing mortgage companies to make unworthy loans to unworthy people. Everyone knows it. Democrats ignore it. Today we learn that 71% of those unworthy loans were made by Fannie Mae, Freddie Mac, FHA, HUD and CRA. CRA is the Community Reinvestment Act, originating under the Clinton administration and run by Reps. Barney Frank (D-Mass) and Maxine Waters (D-CA). See an important UPDATE below, with video added.

Say Anything Blog:

The politicians decided to make housing an entitlement, so they lowered lending standards and subsidized loans to people who shouldn’t have gotten loans. They built a house of cards, and ultimately it collapsed.

People who are upset by that ought not be protesting on Wall Street but ought to be protesting in front of the US Capitol and on Pennsylvania Avenue.

If you bought a home you could not afford, and under normal circumstances, could not qualify for without government intervention, and you are “occupying” Wall Street, you are unbelievably stupid!

If you bought a home you could not afford because the house was vastly over-priced, BECAUSE the CRA birthed a huge market for homes, and a huge markets for unworthy buyers, but you bought the overpriced home anyway and you are now “underwater” with that house, you are unbelievably stupid whether you are occupying Wall Street, or not.

…based on the number of toxic loans in the system in 2008, the government was responsible for not just a simple majority, but more than two-thirds. It’s quantifiable — 71% to be exact (see chart). And the remaining 29% of private-label junk was mostly attributable to Countrywide Financial, which was under the heel of HUD and its “fair-lending” edicts.

Republicans, WAKE-UP and talk about this relentlessly for the next year. Good grief! Dig out those 16 17 times the Bush administration went to Congress to ask them to please, please do something about the CRA and Fannie and Freddie. SEE UPDATE BELOW (Bush’s efforts are reprinted there). That info was, once-upon-a-time, found on and I had it linked here at Maggie’s Notebook but the link disappeared on about January 20th, 2009. No surprise.

UPDATE 10-23-11: A reader (thank you) left a link to Jim Hoft at Gateway Pundit, who linked as I did in Tracking the Mess of Fannie and Freddie, but also captured details. See them below (borrowed from Gateway Pundit).

The [Bush] White House released this list of attempts by President Bush to reform Freddie Mae and Freddie Mac since he took office in 2001. Unfortunately, Congress did not act on the president’s warnings:

** 2001

April: The Administration’s FY02 budget declares that the size of Fannie Mae and Freddie Mac is “a potential problem,” because “financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity.”

** 2002

May: The President calls for the disclosure and corporate governance principles contained in his 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac. (OMB Prompt Letter to OFHEO, 5/29/02)

** 2003

January: Freddie Mac announces it has to restate financial results for the previous three years.

February: The Office of Federal Housing Enterprise Oversight (OFHEO) releases a report explaining that “although investors perceive an implicit Federal guarantee of [GSE] obligations,” “the government has provided no explicit legal backing for them.” As a consequence, unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market. (“Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO,” OFHEO Report, 2/4/03)

September: Fannie Mae discloses SEC investigation and acknowledges OFHEO’s review found earnings manipulations.

September: Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend that Congress enact “legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises” and set prudent and appropriate minimum capital adequacy requirements.

October: Fannie Mae discloses $1.2 billion accounting error.

November: Council of the Economic Advisers (CEA) Chairman Greg Mankiw explains that any “legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk.” To reduce the potential for systemic instability, the regulator would have “broad authority to set both risk-based and minimum capital standards” and “receivership powers necessary to wind down the affairs of a troubled GSE.” (N. Gregory Mankiw, Remarks At The Conference Of State Bank Supervisors State Banking Summit And Leadership, 11/6/03)

** 2004

February: The President’s FY05 Budget again highlights the risk posed by the explosive growth of the GSEs and their low levels of required capital, and called for creation of a new, world-class regulator: “The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore…should be replaced with a new strengthened regulator.” (2005 Budget Analytic Perspectives, pg. 83)

February: CEA Chairman Mankiw cautions Congress to “not take [the financial market’s] strength for granted.” Again, the call from the Administration was to reduce this risk by “ensuring that the housing GSEs are overseen by an effective regulator.” (N. Gregory Mankiw, Op-Ed, “Keeping Fannie And Freddie’s House In Order,” Financial Times, 2/24/04)

June: Deputy Secretary of Treasury Samuel Bodman spotlights the risk posed by the GSEs and called for reform, saying “We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System.” (Samuel Bodman, House Financial Services Subcommittee on Oversight and Investigations Testimony, 6/16/04)

** 2005

April: Treasury Secretary John Snow repeats his call for GSE reform, saying “Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America… Half-measures will only exacerbate the risks to our financial system.” (Secretary John W. Snow, “Testimony Before The U.S. House Financial Services Committee,” 4/13/05)

** 2007

July: Two Bear Stearns hedge funds invested in mortgage securities collapse.

August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying “first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options.” (President George W. Bush, Press Conference, The White House, 8/9/07)

September: RealtyTrac announces foreclosure filings up 243,000 in August – up 115 percent from the year before.

September: Single-family existing home sales decreases 7.5 percent from the previous month – the lowest level in nine years. Median sale price of existing homes fell six percent from the year before.

December: President Bush again warns Congress of the need to pass legislation reforming GSEs, saying “These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I’ve called on Congress to pass legislation that strengthens independent regulation of the GSEs – and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon.” (President George W. Bush, Discusses Housing, The White House, 12/6/07)

** 2008

January: Bank of America announces it will buy Countrywide.

January: Citigroup announces mortgage portfolio lost $18.1 billion in value.

February: Assistant Secretary David Nason reiterates the urgency of reforms, says “A new regulatory structure for the housing GSEs is essential if these entities are to continue to perform their public mission successfully.” (David Nason, Testimony On Reforming GSE Regulation, Senate Committee On Banking, Housing And Urban Affairs, 2/7/08)

March: Bear Stearns announces it will sell itself to JPMorgan Chase.

March: President Bush calls on Congress to take action and “move forward with reforms on Fannie Mae and Freddie Mac. They need to continue to modernize the FHA, as well as allow State housing agencies to issue tax-free bonds to homeowners to refinance their mortgages.” (President George W. Bush, Remarks To The Economic Club Of New York, New York, NY, 3/14/08)

April: President Bush urges Congress to pass the much needed legislation and “modernize Fannie Mae and Freddie Mac. [There are] constructive things Congress can do that will encourage the housing market to correct quickly by … helping people stay in their homes.” (President George W. Bush, Meeting With Cabinet, the White House, 4/14/08)

May: President Bush issues several pleas to Congress to pass legislation reforming Fannie Mae and Freddie Mac before the situation deteriorates further.

“Americans are concerned about making their mortgage payments and keeping their homes. Yet Congress has failed to pass legislation I have repeatedly requested to modernize the Federal Housing Administration that will help more families stay in their homes, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance sub-prime loans.” (President George W. Bush, Radio Address, 5/3/08)

“[T]he government ought to be helping creditworthy people stay in their homes. And one way we can do that – and Congress is making progress on this – is the reform of Fannie Mae and Freddie Mac. That reform will come with a strong, independent regulator.” (President George W. Bush, Meeting With The Secretary Of The Treasury, the White House, 5/19/08)

“Congress needs to pass legislation to modernize the Federal Housing Administration, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance subprime loans.” (President George W. Bush, Radio Address, 5/31/08)

June: As foreclosure rates continued to rise in the first quarter, the President once again asks Congress to take the necessary measures to address this challenge, saying “we need to pass legislation to reform Fannie Mae and Freddie Mac.” (President George W. Bush, Remarks At Swearing In Ceremony For Secretary Of Housing And Urban Development, Washington, D.C., 6/6/08)

July: Congress heeds the President’s call for action and passes reform of Fannie Mae and Freddie Mac as it becomes clear that the institutions are failing.

In 2005– Senator John McCain partnered with three other Senate Republicans to reform the government’s involvement in lendingDemocrats blocked this reform, too.

More… Not only did democrats not act on these warnings but Barack Obama put one of the major Sub-Prime Slime players on his campaign as finance chairperson.

 Linked by the Spartanburg Tea Party – thank you!

Linked by Jimmie Bise at The Sundries Shack – thank you! 

Linked at My Blog – thank you! 

Linked at The Rebel Pundit – thank you!

Posted by Maggie @ Maggie’s Notebook



  • I’d like to know why Barney Frank and Maxine Waters aren’t in jail?

    • sandstone, they’re Democrats. Democrats in Congress don’t go to jail. It’s a House rule.

      I want the GOP to use this over and over. I’ve tweeted everyone I can think of. We’ve known it, but now we have a “chart.” Love those charts.

  • Christy

    The problem was not just sub prime loans. The problem is low interest rates without the savings to justify low interest rates. Don’t get me wrong sub prime made the problem much worse. Low interest rates raise prices and create bubbles. Once interest rates rise we will see a much bigger collapse. By the way sub prime is still going on. All it took was a small rise in interest rates in 2007 to collapse the market. We are much more in debt now. When interest rates rise again many bubbles fueled by low interest rates will burst.

    • Hi Christy, yes I agree. The thing is, it really doesn’t matter what the interest is, if you do not get a loan because you can’t qualify. Even low interest rates should not allow a person with bad credit to buy a home grossly overpriced.

      I do realize that it still goes on. It makes me want to hit something:-) What is wrong with us???
      Thanks for adding to this important conversation.

  • R & D

    The link may have disappeared but I had this from days gone by. Here’s the original from GP.

    It’s sad that with all this info we can’t seem to get out of our own way.

    You can’t win a game if you won’t even acknowledge the other team’s playbook.

    • R & D, yes the info on WhiteHouse.go is gone, BUT Jim linked and printed, while I only linked. Thank you so very much! I was much newer to blogging at that time, and today would know that I have to actually reprint it here.

      I can’t tell you how much I appreciate your taking the time to link to stop by and drop the link here. I have talked about it so much. scoured every record I could think of and wasted a lot of time.

      I blame Republicans on the Hill for not talking about this and so many, many other things. We have a quiver full of arrows but continually fail to use them.

      Again, thanks.

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  • Faith

    Borrowers were the least knowledgeable participants, patsys, to the mortgage originators , bundlers, monetizing , fraudulent bond rating , credit default swappers.

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