Michelle Obama appeared on a Washington D.C. radio station saying we are seeing a “huge recovery,” which her husband is responsible for. “Not only is the record huge, it’s so huge that all of his opponents should sit down and shut up….” Her husband was in the U.S. Senate from January 2005 through November 2008. During Obama’s time in the Senate, the warning bells were tolling with a loud rumble that mortgage giants, Fannie Mae and Freddie Mac were were in trouble and that trouble would spread far beyond the housing market and into general financial markets. And it did. And Democrats blamed banks (Wall Street). A huge deception – okay, a huge lie. Now that the words “subprime” mortgages are not on the minds of the American people, it’s beginning all over again – a whole new era of the Community Reinvestment Act (CRA), unchanged – perhaps worse, and Michelle Obama’s husband is bringing it to you if…you are Black or Hispanic. Whites need not apply.
Yes, believe it or not, the federal government is now startinganother initiative to force banks to lend to low-credit-rated blacks and Hispanics — not just anybody but specifically blacks and Hispanics — and is threatening — and already imposing — huge punitive fines if they don’t. Moreover, this time they’re going even further. They’re going to take over the credit rating agenciesand force them to change their standards to accommodate blacks and Hispanics so that nobody will have any idea who is a bad credit risk and who is not. In so many words, the government is about impose its will on the whole home-lending market and force another round of bad loans so that the banks are going to be looted once again so that even the federal government may not be able to bail them out this time. Read the warning here.
I could forgive MO for supporting him if she wasn’t such a loud mouth about it and so obnoxiously rude.
The Fannie Mae, Freddie Mac trouble was complying with Bill Clinton’s Community Reinvestment Act (CRA), the sole cause of the economic crisis in all sectors. It forced lenders to approve mortgages to those who had little credit, poor credit, non-existant credit, no downpayment and no job or job history. The idea was that every American had the right to own a house whether they could afford it or not. Quite a different animal from “a chicken in every pot.” Barack Obama as Senator fully supported the CRA.
The housing market boomed as these mortgages brought a demand for more homes. The demand created inflated housing prices. With credit not a concern, people bought homes they never dreamed they could own and sellers sold at prices they never dreamed their property could be worth.
President Bill Clinton, Senator Chris Dodd and Rep. Barney Frank essentially blackmailed lenders with lawsuits, promises to restrict any expansion into other areas or new branches – make the loans or suffer the wrath Democrats in the House and Senate:
…the Clinton administration threatened lawsuits against lenders who did not approve mortgage loans to minority applicants as often as to white applicants.
In other words, racial quotas replaced credit qualifications. A failure to have racial statistics on mortgage approvals that fit the government’s preconceptions was equated with discrimination. Source: Thomas Sowell
By 2003, Freddie and Fannie were bundling and selling their no-equity loans and insuring the risk with taxpayer monies. Most of the mortgages had adjustable rates (meaning interest rates would go up in the future), which compensated for risky loans. Did the ‘not-credit-worthy’ borrowers worry that when the rate could/would adjust up, it might affect their wallet? No. Most had little if anything invested in their homes so there was little to lose. But the homes were bigger, required furnishings and all the trappings of living a lifestyle you can’t afford. Some homeowners weren’t fond of working or a living. For whatever reasons, household debt was increasing rapidly.
This also began the era of house flippers. Your neighbors abandon their homes, foreclosure signs are in every other yard, and your home is now worth far less than it was before the CRA crisis and is valued below the amount you owe.
Across the nation, annual average unemployment rates during that period were:
Bush Tenure: 2001 – 4.7%, 2002 – 5.8%, 2003 – 6.0%, 2003 – 6%, 2004 – 5.5%, 2005 – 5.1%, 2006 – 4.6%, 2007 – 4.6%, 2008 – 5.8%
Obama Presidency: 2009 – 9.3%, 2010 – 9.6%, 2011 – 8.9% Source for both Bush and Obama – Bureau of Labor Statistics
Let’s start in 1995 and attorney and community organizer Barack Obama’s discrimination lawsuit against Citibank for failing to lend to risky home seekers. …186 clients claiming discrimination in home mortgages. Nineteen of the 186 still own a home and have a good credit rating – 19 of 186! Some of his clients are speaking out and their message: there should be a regulation against giving loans to people who can’t afford them!
Begin documentation in May 1999, “Black and Latino homeownership surges – the number of African American…nearly three times as fast as whites:” The LA Times – Ronald Brownstein:
These numbers are dramatic enough to deserve more detail. When President Clinton took office in 1993, 42% of African Americans and 39% of Latinos owned their own home. By this spring, those figures had jumped to 46.9% of blacks and 46.2% of Latinos.
All of this suggests that Clinton’s efforts to increase minority access to loans and capital also have spurred this decade’s gains. Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat “redlining” by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws.
The bottom line: Between 1993 and 1997, home loans grew by 72% to blacks and by 45% to Latinos, far faster than the total growth rate.
In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains.
It has aimed extensive advertising campaigns at minorities that explain how to buy a home and opened three dozen local offices to encourage lenders to serve these markets. Most importantly, Fannie Mae has agreed to buy more loans with very low down payments–or with mortgage payments that represent an unusually high percentage of a buyer’s income. That’s made banks willing to lend to lower-income families they once might have rejected.
This begins the timeline in the video below: (in all, Republicans went to Congress 17 times asking for reform – see that list below.)
April 2001: Bush ’02 Budget warns that size of Fannie Mae and Freddie Mac is “potential problem” – could cause strong repercussions in financial markets.
2003: White House warning about Fannie and Freddie is upgraded to “systemic risk” that could spread beyond just the housing sector.
Fall 2003: Bush administration pushing Congress hard to create a new federal agency to regulate and supervise Fannie and Freddie – and “the safeness and soundness of their activities.”
Then-Secretary-of-Treasury-Snow was getting a lot of pushback from then-ranking member, eventually chairman of House Financial Services Committee, Democrat Congressman Barney Frank who said Fannie Mae and Freddie Mac are not in crisis. Frank said Federal Government should be doing more to encourage Fannie and Freddie to do more to get low income families into homes. Hear the entire statement in the video below. The legislative safety measure was blocked by Democrats. No changes to the recklessness of Fannie and Freddie power mongers.
February 2005: Fed Chairman Alan Greenspan: Fannie leaders admitted major accounting screwups: “enabling these institutions to increase in size – and they will once the crisis in their judgement passes – we are placing the total financial system of the future at a substantial risk. “
April 2005: Senator Chuck Schumer defended the indefensible: “…I think Fannie and Freddie over the years have done a incredibly good job and are an intrinsic part of making america the best-housed people in the world…if you look over the last 20 or whatever years, they’ve done a very, very good job.
May 2006: Sen. John McCain co-sponsored legislation to strengthen regulations, and gives a speech on the Senate floor: “For years I have been concerned about the reulatory structure that governs Fannie Mae and Freddie Mac…and the seer magnitude of thee companies and the role they play in the housing market…the GSE’s need to be reformed without delay.”
McCain’s legislation made it out of Committee with all Democrats voting against. Republicans didn’t have the votes to pass it. It died. Barack Obama was a Democrat Senator at that time.
End video summary.
2006: A year into Obama’s tenure in Congress people who had never owned a home, and/or had poor work records began defaulting on mortgages as the adjustable rates kicked in. Over the next couple of years, thousands of people simply walked away from their houses and left the neighborhood and lenders to deal with them. By 2008 the Nation was in desperate straits, just as Republicans warned would happen, both in the housing market and across our financial markets as well.
In all that time, Barack Obama did nothing to support the considerable efforts of the GOP to reform and regulate the out-of-control Community Reinvestment Act, Fannie Mae and Freddie Mac.
Congressman Barney Frank (D-Mass) is quoted:
“I do not want the same kind of focus on safety and soundness” regarding Fannie Mae and Freddie Mac as exercised with regard to other government-affiliated agencies, preferring, as he memorably put it, to “roll the dice a little bit.”
I’ve noticed that Michelle’s husband doesn’t mind rolling the dice when it means money in his pocket. His CRA mentor Barney Frank was sexually involved with Herb Moses, a Fannie Mae director for product initiatives.
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.”
January 3rd, 2007: The day the Democrats took over the Senate and the Congress. At the time:
The DOW Jones closed at 12,621.77
The GDP for the previous quarter was 3.5%
The Unemployment rate was 4.6%
George Bush’s Economic policies SET A RECORD of 52 STRAIGHT MONTHS of JOB GROWTH
Remember the day…
January 3rd, 2007 was the day that Barney Frank took over the House Financial Services Committee and Chris Dodd took over the Senate Banking Committee.
Who fought against reform of Fannie and Freddie?
ANSWER: OBAMA and the Democrat Congress: Reps. Barney Franks, Maxine Waters and Senator Chris Dodge blackmailing financial institutions into making the loans.
October 2008: John McCain:
Senator Obama was silent on the regulation of Fannie Mae and Freddie Mac, and his Democratic allies in Congress opposed every effort to rein them in. As recently as September of last year he said that subprime loans had been, quote, “a good idea.” Well, Senator Obama, that “good idea” has now plunged this country into the worst financial crisis since the Great Depression.
August 2009: More from the Wall Street Journal:
Fannie Mae said it will need an additional $10.7 billion from the U.S. Treasury after it posted a $14.8 billion net loss in the second quarter, as rising unemployment led more prime borrowers to default on their loans.
January 2011: We learned that taxpayers paid the legal bills for the defense of Fannie Mae and Freddie Mac – $24.2 Million at that time.
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:
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.”
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)
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)
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)
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)
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)
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 lending. Democrats 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.
Words matter, as Barack as reminded us. “Huge” recovery? I think not. Mrs. Obama conveniently ignores that gas prices have doubled and incomes have dropped for $4,000 and health care costs are up over $2200 per year per family – now. Michelle’s man simply has no economic sense or reasoning. Economic sense is not an attribute modern-day Democrats acquire. The goal is to give things away, and get votes. Michelle is standing by her man and looking ridiculous as she tells us to sit down and shut up.
Click the chart above for source and details.
Timeline of Housing Bubble/Crisis/Meltdown – Economic Crisis (video)