Rep. Frank: Abolish Fannie Mae, Freddie Mac

[Destino]

So we go round and round and we are both probably saying the same thing. Ultimately the "demand" was created by the ability to get an unlimited supply of cheap money.

If you guys are going to boil this down to supply and demand you should remember that there are two sets of it at play in real estate. Supply of houses and demand for those houses is ONE of them. The other that played a role just as great was the supply of mortgages and the demand for more of those mortgages.

These were packaged and sold and when there were no more to sell they got creative. When you've lent money to every qualified borrower in the country what do you do if you still need to lend more money?

[chipwhich]

Why don't we try this, you tell me what caused it and state your case that the government was to blame. So far all you've done is pat yourself on the back, show a complete failure to understand what actually happened, and failed to make a case the government was behind it.

Maybe you haven't read any of my posts? Who controls the interest rates and money? Unicorns?

While we are talking Unicorns and the fairy tales of monetary policy. Why doesn't the fed go ahead and drop the rate to 0 or for that fact, give away money at below 0 percent?

Why doesn't the Fed bump interest rates today by a point, how about 2 points?

You could drive interest rates for borrowers lower, and create another brief bubble.

Or you could really fix the housing market and drive rates higher and bring prices further into reality.

What are the ramifications of playing with rates? To discuss unicorns?

[twa]

In a capitalist economy where corporations are people and are as involved in policy making as the law makers themselves... what is the mechanism for curbing profit? What exists to motivate human beings at a time of tremendous gain to reduce those gains?

Risk..the perception of which was negated to a degree by govt policy on lending.

Lower down payments and creative financing removes the common sense barriers that prevent many foolish choices....and not just homes:evilg:

Helped along by the perception the values would only increase.

[Destino]

Watch both of these videos:

Part 1:

Part 2:

They are easy enough to understand and they will increase your understanding of how this got out of control.

TWA, risk is a good point. The problem is that risk in the housing situation isn't as simple as down payment and government. Risk moves in housing from party to party. It's not all on the borrower and in a down market the risk is mostly on the lender not on the homeowner.

[twa]

.

TWA, risk is a good point. The problem is that risk in the housing situation isn't as simple as down payment and government. Risk moves in housing from party to party. It's not all on the borrower and in a down market the risk is mostly on the lender not on the homeowner.

And what did the govt do for the lenders?

Payouts @ 100% for many and opportunistic bailouts for others,while attempting to keep the market price artificially inflated....Which benefits who?:evilg:

http://www.mcclatchydc.com/100/story/77791.html

Changing the equation of housing from homes to investments is one of the greatest scams ever:saber:

[Thiebear]

If the guard looks the other way, is he any better than the inmates trying sell drugs inside the prison?

Franks was the guard and he was not only looking the other way.

He was dating one of the inmates.

And protecting them at ALL costs...

I remember stating several times you don't allow the people that make the mess, clean the mess.

Because THIS is exactly what you get and deserve.

[Hubbs]

Was that number large enough to form a majority in either party? I'd wager it wasn't. People this is capitalism, I find it absolutely incredible to see so many arguing in favor of the government stepping in and literally SLOWING DOWN a booming sector of the economy. I'd bet that such a move would cost a lot of politicians their jobs.

I honestly don't understand your continued insistence that the federal backing of trillions in mortgages wasn't a large chunk of the fuel that caused this fire.

Do you think the change in leverage limits for major banks was a mistake, or was it just the government not "slowing down" a booming sector in the economy?

What about repealing Glass-Steagal? Mistake, or "not slowing down"?

Can we bring the Fed into this? Interest rates during the first half of the decade?

You've seen my posts for long enough to know my general views by now. I'm a freakin' libertarian, and I'm saying that the government jumped into the deep end of market activities. Odds are that I'm not some sort of day-trader-on-crack, believing that I alone can time these markets properly and guide everyone to happiness and success and apple pie. In fact, the odds are that I don't want the government "investing" trillions of our dollars in booms or busts, and it never will unless it's given the legal power to do so.

[Destino]

I honestly don't understand your continued insistence that the federal backing of trillions in mortgages wasn't a large chunk of the fuel that caused this fire.

I've not said the government is blameless. In fact I've said several times that the entire system at every level did something that contributed to the problem. My point however is that this one fact shouldn't be singled out and demonized, it should instead beg the question "why did the government do this?"

Any thoughts as to why?

Certainly it wasn't random. There is a cause and effect relationship here. So who asks the govenment to do this. Why? Who benefits? How do politicians benefit? Those are the mechanisms I want to repair. You can fire the entire Senate and you will do nothing to avoid this happening again.

[DieselPwr44]

I've not said the government is blameless. In fact I've said several times that the entire system at every level did something that contributed to the problem. My point however is that this one fact shouldn't be singled out and demonized, it should instead beg the question "why did the government do this?"

Any thoughts as to why?

Certainly it wasn't random. There is a cause and effect relationship here. So who asks the govenment to do this. Why? Who benefits? How do politicians benefit? Those are the mechanisms I want to repair. You can fire the entire Senate and you will do nothing to avoid this happening again.

It's called the Second Bill of Rights(brainchild of FDR) that alot of politicians foolishly still believe in and want to make happen.

[Prosperity]

Seems queer for such a recommendation to be coming from the guy who helped to screw Fannie & Freddie up in the first place, doesn't it?

:hysterical:

[Fergasun]

Was that number large enough to form a majority in either party? I'd wager it wasn't. People this is capitalism, I find it absolutely incredible to see so many arguing in favor of the government stepping in and literally SLOWING DOWN a booming sector of the economy. I'd bet that such a move would cost a lot of politicians their jobs.

I was explaining, this is what they are talking about doing *now* to forestall another future crises. The *current regulation* encourages the behavior of marking assets on the balance sheet up as the bubble grows which exacerbates the problem. The *proposed regulation* would discourage this type of activity and force financial institutions to increase reserves.

Of course pretty much everyone in Congress had a policy of encouraging home ownership. There's a number of reasons:

1) High home values are a great source of wealth for the nation.

2) High home values are a great revenue source for local government taxes.

3) Most Congressfolk also own homes (multiple homes I bet), there must be some self-interest at play.

I didn't mean to disagree with you as I haven't been paying too close attention to the points made; other than I wanted to point out the regulators themselves have admitted the "pro-cyclical" nature of regulation.

[IHOPSkins]

......have we forgotten that back when Bush was in office that Frank and some other suspects fought against any kind of reform......

Well at least Barney has changed his mind about what we should do going forward.....

Barney Frank: The Poor Should Rent, Not Own

"I think the answer is you separate out the function of providing the equity in general for the mortgage market and doing some subsidy and in my judgment, the subsidy again, as I said before, should be focused on affordable rental housing, not in pushing low income people into owning homes that they can't afford."

Can I get an "Amen!"? If someone cannot afford a house, they should not be encouraged to purchase a house. The logic couldn't be simpler. And yet, over the past decade it was utterly ignored........

http://business.theatlantic.com/2010/02/barney_frank_says_the_poor_should_rent_not_own.php

Good ole Barney

Can't wait for him to take the BLAME he is DUE

I guess he won't be a "Champion" for strong arming lousy loans anymore....lets hope

[Destino]

Well at least Barney has changed his mind about what we should do going forward.....

When did he want the poor to be pushed into buying homes they couldn't afford. They wanted more activity in minority areas because as we all know when people have a stake in their neighborhoods they tend to improve them. The problem was when housing prices started to sky rocket sub prime programs started marketing to everyone and ignored their financial picture.

Should banks operate in minority areas? YES YES 1000 times YES. Should they lend to people that can't afford it? No of course not.

[IHOPSkins]

When did he want the poor to be pushed into buying homes they couldn't afford.........

.......Should they lend to people that can't afford it? No of course not.

When groups like ACORN are involved....can INTIMIDATION be far behind

What the HELL gives ACORN the financial expertise to evaluate loans?

The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods.....

....community groups [like ACORN] can be involved in the CRA evaluation process......

......Even changing a rating from Outstanding to Satisfactory in one state or one part of the exam can

motivate a bank to increase the number of loans,

investments, and services to low- and moderate-income communities....

http://answers.yahoo.com/question/index?qid=20081204182507AABvnoH

Nice...the EXPERTS at ACORN leaned on Banks to provide more (worse) loans

Some people would call this blackmail, Barney Frank called it progressive

[IHOPSkins]

Book Cooking?.......

The record budget deficits announced by the White House on Monday fail to include the federal government’s share of Fannie Mae and Freddie Mac’s $6.3 trillion in liabilities — though the Director of the Office of Management and Budget once thought it should.

http://dailycaller.com/2010/02/02/record-white-house-budget-deficit-omits-trillions-in-fannie-and-freddie-liabilities/

[Destino]

Nice...the EXPERTS at ACORN leaned on Banks to provide more (worse) loans

Some people would call this blackmail, Barney Frank called it progressive

The funny thing is ACORN's loan program was better than most banks. They had applicants learn financial skills in the class room, put together a budget, and learn about the mortgage products prior to approval. They also offered better rates. Wells Fargo and friends asked if you had a pulse and a job and then fabricated your income to meet the underwriters requirements and approved you. Even if that meant claiming a mcdonald's employee made 100k a year. The loan officers would tell them what to write down in the "income" box based on what was needed for approval. That's called fraud and that major lenders not only allowed it, the sales offices encouraged it. (you can ask your lender if you think I'm lying)

I do agree that ACORN has too much power however and needs to be destroyed.

BTW having worked with advocacy groups in the past and having attended legislative events encouraging moves to increase minority lending... I can tell you what is asked is increased presence and servicing. NOT BAD LOANS. Though I doubt anyone will believe that... but hey maybe someone will be willing to look those groups up and see for themselves. No one is served by bad loans after all (especially the joy that is sub-prime, or was anyway)

[81artmonk]

http://finance.yahoo.com/news/Rep-Frank-Abolish-Fannie-Mae-apf-2556602798.html?x=0

Congress' theme song should be the Elvis classic "I'm A Roustabout":

Build it up, knock it down

Hold it square, roll it around

Throw it in the air, stick it in the ground....

Wasn't Frank telling everyone Freddie and Fannie were fine?

*scratches head*

Yeah I do believe you are correct. He did. I suppose he can lie, and than try to fix them in order to make himself look better.

[Renegade7]

Everyone is at fault for this bubble, but I'm looking at the goverment like "whoah, aren't you supposed to be watching this?". Agencies like the SEC and FDA have become an embarrasment, and it doesn't matter what we do or laws we put in place if we can't or won't enforce them.

On the topic of the thread, stripping Feddie and Fannie down and creating a new system screams of a severe push towards a more socialist nation. Whateva that "system" is, it's going to be part of and owned by the government. If it means we'll be able to better regulate the market and provide the nation another source of income to outweigh the loses from income tax, do it. Unless we have a better idea, we need to start making money again. These deficiets are rediculous.

[Tulane Skins Fan]

Seems queer for such a recommendation to be coming from the guy who helped to screw Fannie & Freddie up in the first place, doesn't it?

Is that a gay joke?

[RabidFan]

Is that a gay joke?

I'm shocked it took this long for someone else to see it that way.

[Wrong Direction]

The housing bubble was a perfect storm of Government screwing with markets, corporate greed, crony capitalism, a lack of personal responsibility and timing.

The bubble occurred because the real price of a house went way down. By that, I mean:

1. Interest rates were historically low - thanks Greenspan, head of a government organization. Mortgage payments went down hundreds of dollars/month for the same price house. So, prices went higher because people could afford more.

2. Huge new tax write-offs passed by a Republican Congress and Democrat president in the late 90's. Yes, the mortgage tax deduction had a huge role in this even though nobody wants to talk about it.

3. Government rules encouraging "risky" loans, which the banks loved. These rules brought more demand into the purchasing pools, driving prices up.

I just wish, in hindsight, that I had bought in 2001 like I originally planned and rented for the last few years. I'm ok, but I too could have and should made out like a bandit in this market. Damn girlfriend - now wife - wanted to rent together prior to purchasing.