While many pundits are pointing to corporate greed and a lack of government regulation as the cause for the American mortgage and financial crisis, some analysts are saying it wasn't too little government intervention that cased the mortgage meltdown, but too much, in the form of activists compelling the government to pressure Freddie Mac and Fannie Mae into unsound though politically correct lending practices.

"Home mortgages have been a political piņata for many decades," writes Stan J. Liebowitz, economics professor at the University of Texas at Dallas, in a chapter of his forthcoming book, Housing America: Building out of a Crisis.

Liebowitz puts forward an explanation that he admits is "not consistent with the nasty-subprime-lender hypothesis currently considered to be the cause of the mortgage meltdown."

In a nutshell, Liebowitz contends that the federal government over the last 20 years pushed the mortgage industry so hard to get minority homeownership up, that it undermined the country's financial foundation to achieve its goal.

"In an attempt to increase homeownership, particularly by minorities and the less affluent, an attack on underwriting standards was undertaken by virtually every branch of the government since the early 1990s," Liebowitz writes. "The decline in mortgage underwriting standards was universally praised as 'innovation' in mortgage lending by regulators, academic specialists, (government-sponsored enterprises) and housing activists."

He continues, "Although a seemingly noble goal, the tool chosen to achieve this goal was one that endangered the entire mortgage enterprise."

"As homeownership rates increased there was self-congratulation all around," Liebowitz writes. "The community of regulators, academic specialists, and housing activists all reveled in the increase in homeownership."

An article in the Los Angeles Times from the late '90s praised the sudden surge in homeownership among minorities, calling it "one of the hidden success stories of the Clinton era."

John Lott, a senior research scientist at the University of Maryland, however, claimed in a Fox News article yesterday that the success came at a great price.

According to Lott, the Federal Reserve Bank of Boston produced a manual in the early '90s that warned mortgage lenders to no longer deny urban and lower-income minority applicants on such "outdated" criteria as credit history, down payment or employment income.

Furthermore, claims Lott, Fannie Mae and Freddie Mac encouraged and praised lenders like Countrywide and Bear Stearns for adopting the slackened policies toward minority applicants.

"Given these lending practices mandated by the Fed and encouraged by Fannie Mae and Freddie Mac," writes Lott, "the resulting financial problems for financial institutions such as Countrywide and Bear Stearns are not too surprising."

Liebowitz' contention that lenders were under pressure to loosen their standards for racial and political goals was confirmed years ago by the companies at the heart of today's crisis: Fannie Mae and Freddie Mac.

A New York Times article from Sept. 1999 states that Fannie Mae had been under increasing pressure from the Clinton administration to expand mortgage loans among low- and moderate-income people and that the corporation loosened its lending requirements to comply.

An ominous paragraph of the article reads, "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 1980s."

Liebowitz likewise predicted in a 1998 paper the risk of sacrificing sound financial policy for social activism.

"After the warm fuzzy glow of 'flexible underwriting standards' has worn off," Liebowitz wrote, "we may discover that they are nothing more than standards that led to bad loans. It will be ironic and unfortunate if minority applicants wind up paying a very heavy price for a misguided policy based on a badly mangled idea."

And though some have speculated that lenders in the '90s dove into sub-prime mortgages in an effort to gouge new markets, the president and chief operating officer of Freddie Mac in 1999, David Glenn, confessed his company was pushed by a federal agenda.

"The mortgage industry intends to pursue minorities with greater intensity as federal regulators turn up the heat to increase home ownership," Glenn said in his remarks at the annual convention of the Mortgage Banker Association of America.

"The federal government in the meantime has increased pressure on lenders to seek out minorities, as well as low-income groups and borrowers with poor credit histories," Glenn said. "Fannie Mae recently reached an agreement with the U.S. Department of Housing and Urban Development to commit half its business to low- and moderate-income borrowers. That means half the mortgages bought by Fannie Mae would be from those income brackets."

In that same year, Freddie Mac warned of the logical pitfalls of pursuing loans on the basis of skin color and not credit history.

The Washington Post reported that the company conducted a study in which it was found that far more black people have bad credit than white people, even when both have the same incomes. In fact, the study showed a higher percentage of African Americans with incomes of $65,000 to $75,000 had bad credit than white Americans with incomes of below $25,000.

Such data demonstrated that when federal regulators demanded parity between racial groups in lending, the only way to achieve a quota would be to begin making intentionally bad lending decisions.

The study, however, came under brutal attack in the U.S. Congress and was ridiculed with charges of racism.

A few years later, when Greg Mankiw, chairman of President Bush's Council of Economic Advisers, voiced a warning about weakened underwriting standards, Congress rebuffed him as well.

The Wall Street Journal quoted Congressman Barney Frank, D-Mass., in 2003 as criticizing Greg Mankiw "because he is worried about the tiny little matter of safety and soundness rather than 'concern about housing.'"

Frank, chairman of the House Financial Services Committee, rejected a Bush administration and Congressional Republican plan for regulating the mortgage industry in 2003, saying, "These two entities Fannie Mae and Freddie Mac are not facing any kind of financial crisis." According to a New York Times article, Frank added, "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageId=75717

"Guess again who's to blame for U.S. mortgage meltdown?"

I will say you and me, why? Well let's see, the executives who decided to completely ignore the basics of risk management were compensated, for the most part, solely on short term profits. Who did that? Why the compensation committee of board of directors for the company, well who does the board report to? Well the board reports to shareholders, so who are those shareholders and why weren't they paying attention? Well a large chunk of those shares are owned by mutual funds, like your 401k or RRSP. So let me ask you, when is the last time you looked at anything more than the financial performance of a fund you were in? When was the last time you looked at the top ten holdings and then went and read the quarterly reports of them to determine whether they were being managed to your liking? Well then you and I are to blame after all...aren't we?

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"There are no masses of people, only ways of looking at people as masses."

Obviously, whitie is going to blame the black dudes no matter what.

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You are fooked!

By a big fat black and white bear

"Obviously, whitie is going to blame the black dudes no matter what."

You bet Panda, it all those inner city Blacks with their phoney poverty to get tax breaks and welfare (with their millions sequestered away in Caymans)...I knew if I hung out here long enough we'd eventually agree.

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"There are no masses of people, only ways of looking at people as masses."

This is old news, everybody in the industry knows about it and it's not even under dispute. Of course, one of the reasons it's not under dispute is that it can't be discussed. But it's got a name. The Diversity Recession.

F.uck an eye for an eye. You take my eye, and I will kill you, and all those you care about. That is our policy.

"But it's got a name. The Diversity Recession"

Why the Diversity Recession?

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"There are no masses of people, only ways of looking at people as masses."

"Why the Diversity Recession?"

Because the recession was caused by the government interfering in business by forcing lenders to give loans to ethnic minorities who could not afford to repay the risky loans. They declared bankrupcy, the banks lost there money, and now we have this problem with the economy.

Quote: Because the recession was caused by the government interfering in business by forcing lenders to give loans to ethnic minorities who could not afford to repay the risky loans. They declared bankrupcy, the banks lost there money, and now we have this problem with the economy.

The banks weren't forced to lend to low income minorities, Fannie mae and Freddie mac made some lucrative packages that banks loved more than anyone else. They would lend money under FHA guidlines and then they would resell that mortgage to investment banks who chopped up the mortgages and sold them off as mortgage-backed securities to clients. The banks no social security, no down payment required policies was to orginate as many mortgages as possible to sell off as packaged mortgage-backed securities/derivatives. In fact the investment banks had so much demand for mortgage-securities that they setup their own mortgage orgination departments.

Then Wall Street got super greedy and started to buy short-term mortgage-backed derivatives on their own accounts through thier proprietary trading desk arms. Then to make it even more riskier, they put huge bets on the housing sector, losing billions to the ones who betted against the housing sector. Consumers were at fault, but the Banks,hedge funds and Wall Street are vast majority at fault and right behind them is the government. Also all those minority/low income policies the government supposedly "forced" on the Banks was coming from all those major lobbyist for Freddie Mac, Fannie Mae and the major Banks themselves.

Obviously its the Bush government fault that this happen, but Bush supporters refused to see it.



For Liberty

Thanks D...you saved me a lot of typing. Sad really, it's like blaming a rape victim if they wear revealing clothing.

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"There are no masses of people, only ways of looking at people as masses."

If the US banks were better regulated this would not have happened. Same in the UK, the FSA didn't do their job properly, I highly doubt they would intervene if a near same situation happened if I am quite honest.

Great this time no one mentions Jews more

Time has changed

greenspan was a jew. somebody did blamed him.

lol...blame the poor people.

The collapse happened at the level between lending institutions, not between the lenders and the people at the bottom. They didn't **** up because poor people couldn't pay the higher rates, they ****ed up because they found loopholes to make a "profit" when the poor couldn't pay. They were banking on it. Only the "profit" was just funny money and now we're all paying.