Posts Tagged ‘Melvin Watt’

How ‘Failed Policies’ Of Democrats Were Responsible For Financial Crisis

October 1, 2008

Why should anyone blame Democrats for the housing finance crisis?  Because they laid virtually all the landmines that would eventually explode in the first place, and then they wouldn’t allow Republicans to reform or even regulate the impending disaster before it occurred, that’s why.

From the New York Times in September 30, 1999:

“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.” . . .

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.” . . .

The LA Times writes on May 31, 1999 that:

It’s one of the hidden success stories of the Clinton era. In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded. The number of African Americans owning their own home is now increasing nearly three times as fast as the number of whites; the number of Latino homeowners is growing nearly five times as fast as that of whites….

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.

Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac–the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more. . . . .

Another article in the New York TImes from September 11, 2003:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. . . .

This reform – and another in 2005/06 – were blocked by Democrats who threatened to filibuster the bill in the Senate.

In that 2003 New York Times article, we find the extent of Republicans’ concerns, and of Democrats’ intransigence:

Fannie Mae, which was previously known as the Federal National Mortgage Association, and Freddie Mac, which was the Federal Home Loan Mortgage Corporation, have been criticized by rivals for exerting too much influence over their regulators.

The regulator has not only been outmanned, it has been outlobbied,” said Representative Richard H. Baker, the Louisiana Republican who has proposed legislation similar to the administration proposal and who leads a subcommittee that oversees the companies. ”Being underfunded does not explain how a glowing report of Freddie’s operations was released only hours before the managerial upheaval that followed. This is not world-class regulatory work.”

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

Democrats such as Watt and Maxine Waters played the race card to label any effort to prevent poor and black families from buying homes they couldn’t afford as racist.

But when the fecal matter hit the rotary oscillator as a direct result of Democrats’ policies, Nancy Pelosi trots and says:

“The — what we have now is a manmade disaster, a disaster that sprang — comes from the Bush failed policies, the failure of the Bush administrations to steward our economy in a responsible way.”

I am telling you, if you vote for Democrats in November, you will be putting the very people who caused this disaster in power, and you will be entrusting the people who created a crisis in charge of averting the very crisis they caused.  By putting these irresponsible demagogues in charge of our economy during one of the most vulnerable periods in our nations’ history, you will in effect be saying, “I want the Great Depression.  I want my children to suffer.”

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Financial Crisis: Obama Democrats Have Red Ink All Over Them

September 22, 2008

Whether Franklin Raines is an Obama adviser or not is a rather entertaining question.  He sure seemed to be one until not very long ago:

Raines was an Obama adviser on July 16, when The Washington Post reported:

“In the four years since he stepped down as Fannie Mae’s chief executive under the shadow of a $6.3 billion accounting scandal, Franklin D. Raines has been quietly constructing a new life for himself. He has shaved eight points off his golf handicap, taken a corner office in Steve Case’s D.C. conglomeration of finance, entertainment and health-care companies and more recently, taken calls from Barack Obama’s presidential campaign seeking his advice on mortgage and housing policy matters.”

And Raines was still an Obama adviser on August 28, when The Washington Post said:

In the current crisis, their biggest backers have been Democrats such as Senate Banking Committee Chairman Christopher J. Dodd (Conn.) and House Financial Services Committee Chairman Barney Frank (Mass.). Two members of Mr. Obama’s political circle, James A. Johnson and Franklin D. Raines, are former chief executives of Fannie Mae.

In fact, Raines was still an Obama adviser as of September 18, when a Baltimore Sun blogger cited a Wikipedia article as follows:

“Franklin Delano Raines (born January 14, 1949 in Seattle, Washington) is the former chairman and chief executive officer of Fannie Mae who served as White House budget director under President Bill Clinton. He is currently employed by Barack Obama’s Presidential Campaign as an economic adviser.”

But that last sentence has been scrubbed from Wikipedia within the last two days, and all of a sudden Franklin Raines somehow isn’t an Obama adviser anymore.  It’s almost like when Barack Obama said of Jeremiah Wright, “I can no more disown him than I can disown the black community. I can no more disown him than I can my white grandmother — a woman who helped raise me…”, until, you know, he denounced him.

But when Barack Obama denounces something, all mention of it as being in any way associated with him somehow gets purged – even if that relationship lasted 23 years.  Now when it comes to the McCain denunciation of Franklin Raines as an Obama adviser, The Washington Post faults McCain for relying on…the Washington Post.

McCain spokesman Brian Rogers noted that Obama didn’t contradict the claim when it first appeared in the Post (MORE THAN TWO MONTHS AGO!!!).  But that doesn’t seem to matter.  What matters is that Franklin Raines is black, and therefore McCain is a racist for connecting Obama and Raines.  Apparently, the card deck of Barack Obama, “new politician” of “hope” and “change,” contains a whole bunch of race cards.

But, try as he might to distance himself from his erstwhile adviser, what Barack Obama CAN’T do is deny that Franklin Raines is a DEMOCRAT.  A Democrat who dredges up all sorts of bad mojo for Democrats as they try to frantically scrub their hands of all the red ink and all the corruption that took place during Franklin Raines’ tenure at Fannie Mae.

It reminds us of the October 7, 2004 Los Angeles Times story that appeared titled, “Ex-Fannie Mae Accountant Says CEO Knew of Concerns“:

The former Fannie Mae accountant who raised questions about the mortgage giant’s bookkeeping said Wednesday that he took his concerns directly to Chief Executive Franklin Raines in 2002 and asked him to investigate.

The disclosure by Roger Barnes, who left Fannie Mae in October 2003, came as Raines and Chief Financial Officer Timothy Howard defended the company’s accounting and told Congress that regulators’ allegations of earnings manipulation represented an interpretation of complex rules.

At a House subcommittee hearing, Raines and Howard testified under oath in their first public appearance since news surfaced Sept. 22 about the allegations and a Securities and Exchange Commission inquiry into government-sponsored Fannie Mae. Lawmakers questioned them closely about an instance in 1998 in which accounting rules were said to have been deliberately violated so that top executives could collect full bonuses.

This is a very serious allegation, and I deny that it occurred,” Raines testified.

The thing is, it DID occur, and much worse.  And it was discovered that Raines had manipulated accounting practices so that senior executives could make millions in bonuses:

WASHINGTON (AP) — Employees at mortgage giant Fannie Mae manipulated accounting so that executives could collect millions in bonuses as senior management deceived investors and stonewalled regulators at a company whose prestigious image was phony, a federal agency charged Tuesday.

The blistering report by the Office of Federal Housing Enterprise Oversight, the product of an extensive three-year investigation, was issued as the government-sponsored company struggles to emerge from an $11 billion accounting scandal.

Earlier, a person familiar with the situation said that Fannie Mae was being fined between $300 million and $500 million for the alleged manipulation of accounting to facilitate executives’ bonuses, in a settlement with the housing oversight agency.

“The image of Fannie Mae as one of the lowest-risk and ‘best in class’ institutions was a facade,” James B. Lockhart, the acting director of OFHEO, said in a statement as the report was released. “Our examination found an environment where the ends justified the means. Senior management manipulated accounting, reaped maximum, undeserved bonuses, and prevented the rest of the world from knowing.”

The report also faulted Fannie Mae’s board of directors for failing to exercise its oversight responsibilities and failing to discover “a wide variety of unsafe and unsound practices” at the largest buyer and guarantor of home mortgages in the country.

The OFHEO review, involving nearly 8 million pages of documents, details what the agency calls an arrogant and unethical corporate culture. From 1998 to mid-2004, the smooth growth in profits and precisely-hit earnings targets each quarter reported by Fannie Mae were “illusions” deliberately created by senior management using faulty accounting, the report says.

The accounting manipulation tied to executives’ bonuses occurred from 1998 to 2004, according to the report, a much longer period than was previously known.

Lest any not know it, Franklin Raines was a Clinton appointee.

A Wikipedia article (we’ll see how soon it takes to purge it!) talking about the Clinton years is extremely informative in the current ruinous aftermath:

The Clinton Administration’s regulatory revisions [1] 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. [2] The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent. [3] [4]

Bill Clinton walks off the stage as the conquering hero in the mythical narrative of the liberal media, but IT WAS THESE VERY LOANS BY THESE VERY LENDERS THAT RESULTED IN THE DISASTER WE ARE NOW SUFFERING.

President Bush tried to reform Fannie Mae, Freddie Mac, and the entire housing finance industry before it was too late:

New Agency Proposed to Oversee Freddie Mac and Fannie Mae

By STEPHEN LABATON
Published: September 11, 2003

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

But his effort to reform the housing finance industry by reforming Fannie Mae and Freddie Mac was blockedBY DEMOCRATS.

The same New York Times article cited above, dated September 11, 2003 (yet another 9/11 that Democrats caused, and Republicans took the blame for ) ends with these words:

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

Barney Frank – the same liberal doofus who said that Fannie Mae and Freddie Mac were fine and not facing any kind of financial crisis – is still around, and still in charge of the Financial Services Committee.

Mel Watts, the race-card playing liberal who opposed reform of Fannie Mae and Freddie Mac on the grounds that it would prevent poor blacks from getting home loans, is also still around.

And though Barack Obama may be able to distance himself from Franklin Raines – however falsely – he can’t distance himself from another prominent “adviser” – Jim Johnson.  Johnson was briefly appointed to head Obama’s vice presidential selection committee until it was discovered that he had benefited from sweetheart Countrywide loans.  And Johnson was another Fannie Mae CEO who was Franklin Raines’ predecessor at Fannie Mae.  He joins a long list of Clinton Democrats who “served” at Fannie Mae and Freddie Mac and walked away with millions.  Jim Johnson also sits on the board at Goldman Sachs, a company that was also massively invested in subprime loans but managed to sell them short and preserve itself.

And Obama is personally up to his eyeballs in the housing finance collapse in other ways, as well.  Obama is second on the list of Fannie Mae and Freddie Mac campaign money recipients only after fellow Democrat Chris Dodd; and he is second on the list of Lehman Bros’ campaign money recipients only after fellow Democrat Hillary Clinton.  Is it any wonder he would appoint Penny Pritzker – who was at the very epicenter of what would come to be the biggest financial scandal in American history, and who paid a $460 million fine to bribe her way out of jail – as his national campaign finance chair.  He also named Joe Biden as his Vice Presidential nominee, in spite of the fact that Biden championed the very bill that many experts and at least two studies attribute to creating the mess that caused hundreds of thousands of Americans to lose their homes and precipitated much of the ensuing financial market meltdown.

Now allow me to provide the contrast between Obama – who is tied by both party and by big money contributions to his political career – with John McCain.  The previously quoted Washington Post says:

This is not an easy one for the Illinois senator because of the companies’ close ties to his party. To be sure, both Republican and Democratic politicos have held well-paid positions in the two firms or have partaken of the tens of millions that they spend on lobbying. But a few Republicans, such as Mr. McCain and Sen. Richard C. Shelby (Ala.), who has been chairman and ranking Republican on the Senate Banking Committee, have taken them on over the years, warning about their use of an implicit government guarantee to pursue private profits. Meanwhile, Democrats were not only politically but intellectually committed to the companies, seeing them as innovative public-private institutions that have been a boon to home ownership. In the current crisis, their biggest backers have been Democrats such as Senate Banking Committee Chairman Christopher J. Dodd (Conn.) and House Financial Services Committee Chairman Barney Frank (Mass.). Two members of Mr. Obama’s political circle, James A. Johnson and Franklin D. Raines, are former chief executives of Fannie Mae.

John McCain fought hard to pass regulations that would control Fannie Mae and Freddie Mac back in May 25, 2006.  But again the measure was killed by Democratic opposition.  Hot Air takes up McCain’s efforts and who killed them:

In this speech, McCain managed to predict the entire collapse that has forced the government to eat Fannie Mae and Freddie Mac, along with Bear Stearns and AIG.  He hammers the falsification of financial records to benefit executives, including Franklin Raines and Jim Johnson, both of whom have worked as advisers to Barack Obama this year.  McCain also noted the power of their lobbying efforts to forestall oversight over their business practices.  He finishes with the warning that proved all too prescient over the past few days and weeks.

John McCain fought in vain to prevent the collapse of the housing finance market, and would have succeeded had it not been for utterly determined Democratic opposition.  Barack Obama, for his part, led the lists of campaign contribution recipients from both Fannie and Freddie and from disgraced and belly-up Lehman Bros.

There are only 43 days left in this election.  That is not very long for the American people to realize that they are being lied to by the very people and the very party that caused the disaster that has so angered the electorate.