
"Big Government: Barack Obama and Democrats blame the historic financial turmoil on the market. But if it's dysfunctional, Democrats during the Clinton years are a prime reason for it."
The Real Culprits In This MeltdownObama in a statement yesterday blamed the shocking new round of subprime-related bankruptcies on the free-market system, and specifically the "trickle-down" economics of the Bush administration, which he tried to gig opponent John McCain for wanting to extend.
But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street's most revered institutions.
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 Redevelopment 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.
Youhouuuuuuuuuu…
Tu es où martin81 ?
Ma réflexion pourrait être dans un des deux derniers posts… Je suis tout à fait d’accord que si les règles pour obtenir du crédit était plus sévères, on ne serait pas dans le pétrin présentement.
Mais, finalement, je me prends à espérer que l’accession à la propriété ne viendra pas à avoir mauvaise presse dans certains endroits.
Tiens un autre qui spinne et accuse Clinton, pourtant…
From 1938 to 1968, the secondary mortgage market in the United States was monopolized by the Federal National Mortgage Association (Fannie Mae), which was a government agency during that period. In 1968, to help balance the federal budget, part of Fannie Mae was converted to a private corporation. To provide competition in the secondary mortgage market, and to end Fannie Mae’s monopoly, Congress chartered Freddie Mac as a private corporation.
Je me demande ce que le verbiage de Clopp est supposé prouvé.
Surtout que Fannie et Freddie n’ont jamais été des corporation privé mais des GSE: government sponsored enterprises.
Bon, il faut expliquer, alors expliquons.
GSE means that, although the two companies are privately owned and operated by shareholders, they are protected financially by the support of the Federal Government. These government protections include access to a line of credit through the U.S. Treasury, exemption from state and local income taxes and exemption from SEC oversight.
P.S. Mon propos n’est pas de défendre la politique ayant mené à la création des ces entités. Mais d’indiquer qu’il ne sert à rien de blamer Clinton pour leurs déconvenus. Le problème est largement au delà de ça. Le bla bla politique sur ce sujet n’est que politicallerie oiseuse.
Bref mon point est que blamer Clinton pour cette crise financière est faire preuve d’un raccourci qui n’a aucun sens.
Mais bon, je parle dans le désert, ici les politiques des démocrates sont « evils » celle des républicains sont « fair » et le marché est « god ».
Désolé ne pas avoir cette lecture du monde.
Non!!! Sans blague! Antagoniste est un site de droite qui fait la promotion des Républicains? Qui l’aurait cru!!!! (À part peut-être le monde qui savent lire). Dit donc mon Clopp, si t’aime pas les valeurs d’antagoniste, qu’est-ce que tu fais ici à nous faire ch…ier? Est-ce que je vais vous écoeurés sur vos blogues de gauche, moi?
tiens pour vous amuser à comprendre un peu plus comment une idée généreuse et pas trop mauvaise (aider le crédit), coupler avec l’idée d’une croissance infinie et l’imagination des financiers, résulte à la crise financière.
ici
La réalité est certes plus complexe que celle expliqué dans cette BD mais elle au moins le mérite de vulgariser un peu plus cette crise que le seul Clinton-Democrats bashing que l’on peut lire ici. En plus c’est facile à lire et drôle.
Conclusion, ces 2 entreprise ne fonctionnait pas dans un libre-marché mais dans un marché régulé par l’état.
Clinton a créer les subprimes avec le CRA.
Rigoler, j’aime beaucoup votre humour!
Le marché est régulé par l’État.
So what? en lisant ceci tu verras que tout n’est pas aussi limpide que tu sembles le penser. Les CRA ont finalement peu à voir avec la crise.
The Clinton Administration’s regulatory revisions with an effective starting date of January 31, 1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans. Part of the increase in home loans was due to increased efficiency and the genesis of lenders, like Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans. The revisions allowed the securitization of CRA loans containing subprime mortgages. The first public securitization of CRA loans started in 1997 by Bear Stearns. The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent.
Pis?
Tu lis pas les liens que je te donnes à lire? C’est plate, tu aurais appris que…
ici
pour l’intégrale du texte.
Ce que tu ne comprends pas c’est que le CRA visait TOUTES les institutions financières.
Encore une fois je vais t’apprendre quelque chose…
The Community Reinvestment Act (or CRA, Pub.L. 95-128, title VIII, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal law that requires banks and thrifts to offer credit throughout their entire market area and prohibits them from targeting only wealthier neighborhoods with their services, a practice known as « redlining. »
T’as bien raison Tom.
En blâmant la crise sur l’avarice et la corruption, voulant limoger le chef de la SEC et proposant des commissions d’enquête et une nouvelle agence pour gérer la crise, McCain est un choix « immensément supérieur ».
Votre partisanerie politique est bien comique à lire mais vous aveugle complètement à la nature du problème.
Une commmission sera essentiel pour exposer l’avarice et la corruption des politiciens qui sont la cause de la situation actuel.
Il a proposé quoi Obama au juste ? Il faut parti de ceux qui ont été acheté par des lobbys pour fermer les yeux sur la situiation.
Votre partisanerie politique est bien comique à lire mais vous aveugle complètement à la nature du problème.
(c’est facile de faire des phrases creuses tellement vide de sens que l’autre parti dans débat peut les reprendre intégralement).
Just the Facts: The Administration's Unheeded Warnings About the Systemic Risk Posed by the GSEs
For many years the President and his Administration have not only warned of the systemic consequences of financial turmoil at a housing government-sponsored enterprise (GSE) but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties. President Bush publicly called for GSE reform 17 times in 2008 alone before Congress acted. Unfortunately, these warnings went unheeded, as the President's repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems.
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.
Durant l’administration Clinton, Fannie Mae et Freddie Mac étaient sous la gouverne du Dept of Housing and Urban Development.
Durant l’administration Clinton, le CRA a été renforcé pour forcer les banques d’arrêter leur soi-disant discrimination envers certaines ethnies sous peine de sanctions. Fannie et Freddie avaient ordre de racheter autant d’hypothèques subprime qu’ils pouvaient pour satisfaire les cibles du HUD pour l’accession à la propriété. Bref, ils ont « socialisé » le marché hypothécaire.
Question: Est-ce que les règles interdisant la discrimination ethnique ont fait en sorte que les minorités ont, à « faibles revenus égaux », obtenus plus facilement du crédit que les Blancs?
Question intéressante.
Ça me rapelle le logement social au Québec. On prend l’argent de mes taxes pour payer à des gens moins riches que moi un appartement que je n’aurais même pas les moyens d’avoir…
N’est-ce pas Rick Davis, directeur de la campagne de McCain, qui a reçu deux millions de dollars par Fannie Mae et Freddie Mac?
C’est McCain que le boss de Fannie Mea a dit qu’il considérait comme de sa famille ?
C’est McCain qui a fait bloquer une loi qui aurait diminuer les pouvoirs de Fannie ?
Bien sur que non, ce sont les démocrates qui ont fait ça.
Je pense que ça vaut la peine que je répète ce texte:
How the Democrats Created the Financial Crisis
The financial crisis of the past year has provided a number of surprising twists and turns, and from Bear Stearns Cos. to American International Group Inc., ambiguity has been a big part of the story.
Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex.
But really, it isn't. Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally.
Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street's efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves.
In the times that Fannie and Freddie couldn't make the market, they became the market. Over the years, it added up to an enormous obligation. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home.
The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them.
Turning Point
Take away Fannie and Freddie, or regulate them more wisely, and it's hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.
It is easy to identify the historical turning point that marked the beginning of the end.
Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission's chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie's position on the relevant accounting issue was not even « on the page'' of allowable interpretations.
Then legislative momentum emerged for an attempt to create a « world-class regulator'' that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.
Greenspan's Warning
The clear gravity of the situation pushed the legislation forward. Some might say the current mess couldn't be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie « continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. « We are placing the total financial system of the future at a substantial risk.''
What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.
Different World
If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.
But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.
That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: « It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.''
Mounds of Materials
Now that the collapse has occurred, the roadblock built by Senate Democrats in 2005 is unforgivable. Many who opposed the bill doubtlessly did so for honorable reasons. Fannie and Freddie provided mounds of materials defending their practices. Perhaps some found their propaganda convincing.
But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.
Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.
Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.
There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear.
Oh, and there is one little footnote to the story that's worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.
Les faits que souligne l’auteur sont vrais. Cependant les conséquences de ces faits ne sont qu’une opinion, qu’une vision de la réalité. Et cet auteur est plutôt reconnu pour ses analyses baclés et sa vision approchant celle d’une marmotte.
D’ailleurs tu oublies de mentionner que l’auteur de l’article est « an adviser to Republican Senator John McCain of Arizona in the 2008 presidential election » et n’a pas beaucoup de crédibilité parmi les économistes.
N’a t-il pas écrit un livre en 1999 qui prédisait la monté du Dow Jones 36,000. Dow Jones qui a fait du surplace depuis l’arrivé de Bush incidemment.
Bref, ta source est plus que suspecte dans ses analyses, elle est carrément hors champ.
Désolé, ton article n’est pas convaincant du tout. En tout cas pas pour moi. Je cherche à comprendre, c’est juste plate que tu ne cherches qu’à blâmer les politiciens. En passant, il semble le Canada avec la SCHL est à peu près à l’abri d’une situation semblable.
Dire que prêter de l’argent à des gens insolvables c’est une simple opinion ?
J’espère que tu blagues.
Au Canada on n’a jamais eu de politiciens assez stupide pour demander à la SCHL d’assurer les hypothèques de gens insolvables.
Tiens, es-tu train de dire que les démocrates ont exigés aux banques de prêter aux insolvables? C’est mal connaître la culture américaine de croire une pareille chose.
Je crois pour ma part que les démocrates ont cherché à faire l’équivalent américain du SCHL. La rapacité et la bêtise des financiers ont fait capotés cette noble intention.
Un petit rappel ici. Les banques exigent un dépôt de 20% lors de l’achat d’une maison. La SCHL exigent un dépôt de 5%.
Au Canada près de 95% des acheteurs d’une prmière maison font appel à la SCHL, qui offrent des conditions d’accès plus aborbables que les banques, et ce sans aucun problème. La SCHL fait des profits.
Faut croire que le « socialisme canadien » a du bon.