Some historical footnotes on the financial crisis

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celticlord2112 -> Some historical footnotes on the financial crisis (10/1/2008 5:43:11 AM)
Quote from Maxine Waters, (D-Ca), during a September 2003 hearing of the House Committee on Financial Services: quote: Mr. Chairman, we do not have a crisis at Freddie Mac, and in particular at Fannie Mae, under the outstanding leadership of Mr. Frank Raines. Everything in the 1992 act has worked just fine. In fact, the GSEs have exceeded their housing goals. What we need to do today is to focus on the regulator, and this must be done in a manner so as not to impede their affordable housing mission, a mission that has seen innovation flourish from desktop underwriting to 100 percent loans. Committee Chairman Michael Oxley's (R-Oh) opening statement for that same hearing: quote: There is a broad agreement that the current regulatory structure for the GSEs is not operating as effectively as it should. The Office of Federal Housing Enterprise Oversight is underfunded, understaffed and unable to fully oversee the operations of these sophisticated enterprises. This was reflected in the surprise management reorganization by Freddie Mac and by Wall Street reports stating that GSE oversight is viewed with skepticism because OFHEO is largely seen as a weak regulator. Quote from Barney Frank (D-Mass), then ranking member now chairman of that committee: quote: Fannie Mae and Freddie Mac do very good work, and they are not endangering the fiscal health of this country. But they do derive benefits from the current set of legal arrangements. I am fully supportive of maintaining that set of legal arrangements as long as in return we get not just help for the housing market in general, which is important, and lowering housing costs in general, as they do, is a good thing, but also a particular use of the great resources that they have and the profits that they make to help us with affordable housing which the market in and of itself will not do. Also, the summary text of S.190, sponsored by Senator Chuck Hagel of Nebraska, and co-sponsored by Senator McCain: quote: Federal Housing Enterprise Regulatory Reform Act of 2005 - Amends the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to establish: (1) in lieu of the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development (HUD), an independent Federal Housing Enterprise Regulatory Agency which shall have authority over the Federal Home Loan Bank Finance Corporation, the Federal Home Loan Banks, the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac); and (2) the Federal Housing Enterprise Board. Sets forth operating, administrative, and regulatory provisions of the Agency, including provisions respecting: (1) assessment authority; (2) authority to limit nonmission-related assets; (3) minimum and critical capital levels; (4) risk-based capital test; (5) capital classifications and undercapitalized enterprises; (6) enforcement actions and penalties; (7) golden parachutes; and (8) reporting. Amends the Federal Home Loan Bank Act to establish the Federal Home Loan Bank Finance Corporation. Transfers the functions of the Office of Finance of the Federal Home Loan Banks to such Corporation. Excludes the Federal Home Loan Banks from certain securities reporting requirements. Abolishes the Federal Housing Finance Board. This bill died in committee. I leave to others to draw their own conclusions from the facts presented here.

UncleNasty -> RE: Some historical footnotes on the financial crisis (10/1/2008 7:50:45 AM)
That is interesting and instructive. However, I always approach financial or monetary issues from a more historical perspective. Our current system dates back to 1913. Any attempts to understand the present, whenever that may be, need to go back to our current systems inception. Anything less than that is like trying to properly dignose an illness that began 5 years ago by only looking at the previous 3 months. This is a link to a very simple speech made by Ed Vieirra several years ago. Vieirra is a Constitutional Atty and probably knows more about our current system than anyone still living. There is, of course, much more to it than this, but for some unitiated this is a good starting place to gain a fundamental understanding of the illegitimacy of the system we are currnetly using. http://www.fame.org/HTM/Edwin%20Vieira%20Speech%20to%20the%20Rotary%20Club%20of%20NY%203-25-03.htm As I'm looking over some other information I'll be attaching a few other links to related monetary sites. M3 to no longer be publicy available. http://www.indybay.org/newsitems/2006/03/23/18102331.php A link to a speech made on the floor by Louis T. McFadden way back in 1933. The site also has links to other information. http://www.federal-reserve.net/ A link to the Grace Commission in 1984. Particularly enlightening is this quote regarding income taxes: "100 percent of what is collected is absorbed solely by interest on the Federal debt and by Federal Government contributions to transfer payments. In other words, all individual income tax revenues are gone before one nickel is spent on the services which taxpayers expect from their Government." Here is a link to part of the Grace Commission Report http://www.uhuh.com/taxstuff/gracecom.htm Uncle Nasty

justgemmie -> RE: Some historical footnotes on the financial crisis (10/1/2008 7:54:38 AM)
Just another article found while perusing ~~ An epic financial crises long time in the making. Note the publication date: September 30, 1999. Let the chips fall where they may. By STEVEN A. HOLMES Published: September 30, 1999 In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders. The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring. Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. *''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements, ''* said Franklin D. Raines, Fannie Mae's chairman and chief executive officer . ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Dauntless65 -> RE: Some historical footnotes on the financial crisis (10/1/2008 3:49:33 PM)
............from an e-mail that I received...............Enjoy!!! Subject: FW: How the crisis happened Written by Jerry Teasley of Pine Mountain , GA former Banker Most of my friends know, I have tried to stop thinking, but I can't help it in the wake of all the recent economic news. My banking career started in 1970 and ended in 1993, but I still keep close ties to the industry. During my banking years I did learn one or two things along the way. The problem with our economy today is from a liberal thinking congress, senators, and presidents, as well as greed and dishonesty. When you put these together it spells disaster in any area of our life. Ask any banker (just walk in and ask one that has been there for 15 or 20 years) and they will tell you these are the FACTS: * Under Jimmy Carter we received the Community Reinvestment act. This law says banks have to make loans in low income areas and it has forced many lending institutions to seek to make loans to people in areas that lenders would not normally go because of the risk and low property values. (Sub Prime Loans). This was in 1977. In 1980 president Carter and a Democratic controlled congress passed the Depository Institutions Deregulation and Monetary Control Act-- The law also removed the power of the Federal Reserve Board of Governors under the Glass-Steagall Act and Regulation to set the interest rates of savings accounts. A Sad fact is we are all still feeling the effects of his policies and decisions 30 years later. <http://en.wikipedia.org/wiki/Glass-Steagall_Act <http://en.wikipedia.org/wiki/Regulation_Q * Then in 1995, Bill Clinton, (in between interns) made changes to the Community Reinvestment Act, that forced an increase in the number of loans to these people and the aggregate dollar amounts loaned.-- Larger loans to people with less income in areas where the collateral value would go down instead of up. ( Clinton should have had his mind on the long range effects of this instead of Monica and a good cigar.) This was in response to pressure from 'community organizer.' Can you think of a former Community organizer running for president? Hint - he's a Democrat * In 1999 Mr. Clinton signed to repeal the Glass-Steagall act which had protected taxpayers since the Great Depression. * In 2003 President Bush tried to propose a change in regulatory control over Freddie Mac and Fannie Mae and place both companies under the control of the Department of the Treasury, but was voted down by the liberal democrats led by Barney Frank. Remember the name Barney Frank, he is one of Obama's top two economic advisors the other is Jim Johnson who was the head of Freddie Mac and walked away with $24,000,000. * Now, Mr. Obama and his liberal cronies are spinning the facts so you will believe that all our financial problems are because of Bush's failed economic policy. However, OBAMA'S two MOST TRUSTED ECONOMIC ADVISERS TO HIS CAMPAIGN are the very people that were in control of Freddie Mac- Jim Johnson $24,000,000 and Fannie Mae - Franklin Raines $90,000,000 in 6 years). In addition, since 1989 their have been several politicians who have received campaign donations and kick backs from these two failed institutions. The #1 recipient is Senator Chris Dodd-D RI and the runner up is none other than Senator Barrack Obama who received the second largest amount of donations (over $500,000) which is phenomenal because he has only been in the Senate for 3 years. When Enron went belly up, we demanded Senate hearings and investigations. Why aren't the Democrats demanding the same with these companies? But, oh yeah, I forgot. It is Bush's fault! (Yeah, Right, Sure it is). Just ask a Banker. I am Jerry Teasley, banker, and I approved this email.

pahunkboy -> RE: Some historical footnotes on the financial crisis (10/1/2008 4:01:40 PM)
yes but how did we go from some bad mortgages to bad eveything. MUNI in Alabama going bad

Mercnbeth -> RE: Some historical footnotes on the financial crisis (10/1/2008 4:25:28 PM)
quote: ORIGINAL: pahunkboy yes but how did we go from some bad mortgages to bad everything. MUNI in Alabama going bad PA hunk, When bureaucratic budgets are created they are based upon 'best case' scenarios. Whether public transportation, cities, or entire states. For instance, the CA budget is out of whack because they committed everything from union contracts to entitlement programs based upon an ongoing 'boom' economy. When businesses and people don't make the money, expected tax revenues aren't met and there is a 'crisis'. This time around there is a bit of a snowball effect from the mortgage crisis. Along with falling revenues from income/sales tax there is also a huge amount of people getting there homes re-assessed for property taxes. Some homes have decreased in value nearly 50% in some areas. The expected tax revenue being proportionally reduced. What's NEVER considered is cutting some of the many entitlement programs which went into effect during budget surplus. Why is that? Why is it that when there is a deficient the FIRST thing on the agenda is raising taxes? At least for now, that idea is tempered by the fact that many are on the edge of personal/business failure and additionally taxing those able to pay may just stop them from trying to maintain a business at all.

juliaoceania -> RE: Some historical footnotes on the financial crisis (10/1/2008 4:25:29 PM)
It always entertains me to read email bombs on forums... you got it in your inbox so it must be true. One would have to put all those comments in context to fully understand them... so I will ask you, did you read all of the links you posted, the entire record?

cloudboy -> RE: Some historical footnotes on the financial crisis (10/1/2008 4:55:36 PM)
Celtic Lord never looks at the executive branch of Government. As Republicans, he gives them a 100% free pass. That will change in 2009. Then he will be more than ready to point out executive malfeasance. Next, the housing bubble really hadn't developed in 2003. Everyone's antennae should have gone up in 2005. AT my wife's firm, an analyst there spotted these crazy mortgage instruments in 2006, and the firm got rid of all such holdings.

cloudboy -> RE: Some historical footnotes on the financial crisis (10/1/2008 5:01:30 PM)
It seems to me that any analysis of the financial meltdown should come from a reputable news source.

Aynne88 -> RE: Some historical footnotes on the financial crisis (10/1/2008 5:08:15 PM)
[8\|]Hmmm, No kidding cloudboy, I haven't seen Jerry Teasley on C-SPAN lately or hanging out with Bernanke. Seriously dude.

TNstepsout -> RE: Some historical footnotes on the financial crisis (10/1/2008 5:19:51 PM)
quote: ORIGINAL: pahunkboy yes but how did we go from some bad mortgages to bad eveything. MUNI in Alabama going bad Bad mortgages= foreclosed homes=more homes for sale Bad mortgages=tighter lending standards=fewer buyers for homes Fewer buyers and more homes=lower property values Lower property Values =less money for counties and cities that saw increased budgets from the influx of new people. More police, fire, postal, roads, repairs, schools etc... Now they have to pay for all this added stuff with less money. Fewer buyers and more homes=NO building industry NO home building industry= no income for home builders (I know of at least FOUR builders that have filed bankruptcy in the Dallas area in the last year) and ALL associated industries ALL Associated industries=Realtors, and Developers, Mortgage companies, banks, Title companies (just got word that a Title co in Texas has filed bankruptcy and all files and checks have been seized by the State for distribution), subcontractors for roofing, concrete, plumbing, electrical, woodworking, landscaping, windows installation, carpet and tile installation, irrigation systems, garage doors, painting, suppliers such as lumber, cabinets, appliances, flooring, lighting, fencing, insulation, heating/cooling etc... And all the companies that supply parts to companies that make the above supplies or equipment. Layoffs and loss of work for ALL Associated industries=less consumer spending Less consumer spending=layoffs and budget cutting in other industries (retail and restaurants are really hurting to name a few) Lower property values = people who bought when values were high cannot sell so they are stuck with their high priced mortgage Tighter lending standards=people with expensive mortgages cannot refinance their homes so they are stuck with their high priced mortgage Lower property values= investors are afraid to lend money because they are worried that the underlying asset will go down further in value. The assets cannot be properly priced. Investors afraid to lend money=Banks can't get money to lend for more loans Banks can't get money for loans=no loans to buy up all those extra houses This is why the Gov is taking such drastic action (or trying to) because we are caught in a vicious downward spiral. Each negative just causes another negative and that in turn exacerbates the preceding problem. In 2007 the problem was still pretty much contained within the housing and associated sectors, but it has now spread to the consumer affected areas. Combine that with the impact on foreign economies, especially the emerging nations that have helped fuel the economic boom of the last 10 years, the rise in oil prices (due to speculation by investors who fled the stock market due to problems in housing and finance) and you have a pretty huge mess.

Musicmystery -> RE: Some historical footnotes on the financial crisis (10/1/2008 5:20:56 PM)
Yeah. And post #1.

MmeGigs -> RE: Some historical footnotes on the financial crisis (10/1/2008 5:48:07 PM)
This all started brewing long before the mortgage crisis. Have we all forgotten Enron, Arthur Andersen, Worldcom, Frank Quattrone? Did you not notice that you don't hear a lot any more about folks retiring early? That starting about 15 years ago we started hearing a lot about folks' retirement savings being wiped out in risky investments by their financial insititutions? We knew back in 2000 and before that Wall Street excesses were scewing people over, but there was no will to do anything about it because the people at the top were making lots of money. For a while the only sector of the retail economy that was growing was luxury goods - all other sectors were declining. That was a warning, but no one paid attention. Wall Street got interested in the mortgage market because they had turned pretty much everything else they'd touched into a pile of barely self-sustaining rubble and needed someplace new to get rich quick. Mortgage brokers started handing out sub-prime mortgages to those for whom such instruments were never intended then they packaged them up (fraudulently?) as low-risk, high-yield securities that were sold and resold for way more than they were worth considering the risky nature of the underlying mortgages. We need regulation of the financial markets a lot more than we need a bailout.

dcnovice -> RE: Some historical footnotes on the financial crisis (10/1/2008 5:57:41 PM)
quote: * In 2003 President Bush tried to propose a change in regulatory control over Freddie Mac and Fannie Mae and place both companies under the control of the Department of the Treasury, but was voted down by the liberal democrats led by Barney Frank. Didn't the Republicans control both houses of Congress in 2003?

LookieNoNookie -> RE: Some historical footnotes on the financial crisis (10/1/2008 6:19:25 PM)
quote: ORIGINAL: Dauntless65 When Enron went belly up, we demanded Senate hearings and investigations. Why aren't the Democrats demanding the same with these companies? Just ask a Banker. Hmmmmmm....could that have something to do with the millions of dollars devoted to Senatorial and House campaign contributions from Fannie and Freddie that continue to this day (given to each and every single one of these folks with no deviation whatsoever)? Naaaaaaaaaaaah.

Musicmystery -> RE: Some historical footnotes on the financial crisis (10/1/2008 6:24:18 PM)
Fannie and Freddie are government creations. They don't donate to political campaigns--or anything else. Unlike Enron.

Marc2b -> RE: Some historical footnotes on the financial crisis (10/1/2008 9:14:54 PM)
From justgemmie’s post: quote: will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. I will never understand how some people manage to actually combine the arrogance with the ignorance to actually believe that you can contravene reality with a law or regulation. "Hmmm... let’s see now... some people can’t afford homes because they are untrustworthy and/or simply to poor to get a loan... they can’t be trusted or won’t be able to pay back the loan... hmmm... that seems unfair! I know! Lets extend them loans any way! We’ve written it down on paper so that’ll make it work! Right?" While we are at it, could we also make a law banning tornados.

rexrgisformidoni -> RE: Some historical footnotes on the financial crisis (10/1/2008 9:40:11 PM)
The CRA was part of this mess. Also the massive deregulation of financial institutions under both parties. Then you throw in this nonsense about people being able to get a mortgage they can't afford just because they are lower to middle class. You throw in banks and investment firms inflating prices on these bundled risky mortages. Anyhow, I am sure I'll get attacked by both sides, but they are both at fault. And so are we for not paying attention and asking these bozo's questions and voting them out. thats all I have to say.

DomKen -> RE: Some historical footnotes on the financial crisis (10/1/2008 10:10:58 PM)
The CRA was passed in 1977. The bank failures began in 2008. Now maybe I don't understand math or high finance, despite having a BS in math and developing financial software for a living, but exactly why, if the CRA was so awful, did it take 31 years for the market to crash over it? Was it some pool of 30+ year mortgages that all defaulted after 30 years of on time payment? Or maybe bigots are making hay over something they long have disliked? Sub prime mortgages being made using deceptive terms to people who should never have qualified for loans in the first place is the problem and for that you can look at HFA and the rest of the now nonexistent sub prime lending industry.

jlf1961 -> RE: Some historical footnotes on the financial crisis (10/2/2008 12:49:16 AM)
I find it strange that everyone looks at just one part of the economy, in this case banks and loan institutions. The economic crisis we face today is not limited to just those two parts of the economy, but the entire economic structure. Banks and Loan Institutions invest money to make more money, those investments are not limited to just home loans, but business loans, industrial investment, community investments (bonds) as well as other investment vehicles. When the housing lenders begin to show excessive strain and pending collapse, you can be assured that the rest of the economy is following closely behind. Historically, the US has had a wartime economy, i.e the economy grows exponentially during wartime. The economic boom during the years of WW1 and WW2 funded the financial markets in the years immediately following the two wars, however, that period has always been short lived, the economic boom that followed WW1 ended with the great depression, and the boom that followed WW2 began to wain in the early sixties. While there was some resurgence in economic growth during the Vietnam conflict, it was short lived, and ended in the early seventies with the first fuel crisis. At present, it would seem that the economy should be booming, considering the amount of material that is being supplied to the troops over seas, but clearly this is not the case. The reasons are many, but examples in a few areas of critical economic areas will show the problems. Starting in the 70's, american steel mills began closing at an alarming rate, unable to meet production or prices of imported steel. During the 80's, 90's up to the present, American firms have been moving production overseas, the reason is the fact that it is easier to pay someone $1 an hour than it is to pay someone $6+ an hour, cutting domestic jobs deeply which in turn impacted the housing industry and the banks. Even with the various 'Economic Recovery' plans that have been a part of every administration since Carter, the impact has been too short lived and too limited. In the broader picture, the world economy has become so interlinked that one country's financial crisis directly impacts everyone else. The present crisis has roots in the economic problems in Japan, Europe, Korea which began in the late 90's and has continued until the present. When you consider that a large amount of American banks and financial institutions have invested heavily overseas, you can see that eventually there had to be a collapse. The problem is that in the modern world, an economic collapse that rivals the great depression could very well cause a complete breakdown of the social structure. People tend to get a bit upset when they cant afford to buy food for the family..... And people wonder why I keep a stockpile of food and ammo at the house....

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