Muscatine

hiroad:  While the mortgage crisis convulsing Wall Street has its share of private-sector culprits -- many of whom have been learning lately just how pitiless the private sector's discipline can be -- they weren't the ones who "got us into this mess."   Mortgage lenders didn't wake up one fine day deciding to junk long-held standards of creditworthiness in order to make ill-advised loans to unqualified borrowers. It would be closer to the truth to say they woke up to find the government twisting their arms and demanding that they do so - or else.

The roots of this crisis go back to the Carter administration. That was when government officials, egged on by left-wing activists, began accusing mortgage lenders of racism and "redlining" because urban blacks were being denied mortgages at a higher rate than suburban whites.

The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to "meet the credit needs" of "low-income, minority, and distressed neighborhoods." Lenders responded by loosening their underwriting standards and making increasingly shoddy loans. The two government-chartered mortgage finance firms, Fannie Mae and Freddie Mac, encouraged this "subprime" lending by authorizing ever more "flexible" criteria by which high-risk borrowers could be qualified for home loans, and then buying up the questionable mortgages that ensued.

All this was justified as a means of increasing homeownership among minorities and the poor. Affirmative-action policies trumped sound business practices. A manual issued by the Federal Reserve Bank of Boston advised mortgage lenders to disregard financial common sense. "Lack of credit history should not be seen as a negative factor," the Fed's guidelines instructed. Lenders were directed to accept welfare payments and unemployment benefits as "valid income sources" to qualify for a mortgage. Failure to comply could mean a lawsuit.

As long as housing prices kept rising, the illusion that all this was good public policy could be sustained. But it didn't take a financial whiz to recognize that a day of reckoning would come.  What does it mean when  banks start making many more loans to minorities?  Most likely, that they are knowingly approving risky loans in order to get the feds and the activists off their backs . . . When the wave of foreclosures rolls through the inner city, which of today's self-congratulating bankers, politicians, and regulators take the credit?"

Barney Frank doesn't. But his fingerprints are all over this fiasco. Time and time again, Frank insisted that Fannie Mae and Freddie Mac were in good shape. Five years ago, for example, when the Bush administration proposed much tighter regulation of the two companies, Frank was adamant that "these two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis." When the White House warned of "systemic risk for our financial system" unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing.

Thanks Barney

Good Morning High R.!

Research against research pays off! What a windy cold day this is huh? But looking to Thursday, they say MUCH WARMERRRRRR.

Okay, I'll concede to those specific issues with Freddie and Fannie, and the acts involved go even further back than Carter actually. HUD and Urban renewal factors have always been an element within our housing/financing issues,(us vs Them) as it were. But Dodd and Frank hardly started this "meltdown" The regulatory factors depletion and unchecked trading are the major reasons this has happened. I'll give you that Freddie and Fannie certainly play a serious rollpushed by Clinton, Frank and Dodd, but hardly an excuse to write off Billions in minimally secured loans to a meager 14% of qualified failing borrowers. Yes, you are right, these hapless fools certainly played a roll, but even the regulatory commissions wouldn't force a lender into writing a loan they knew wasn't returnable. That's just ludicrous. The lenders still had descretionary strength and common sense to guide them regardless of race issues, Dodd and Frank. Equality was primary focus behind that legislation. The deregulation of mortgage packaging, keeping the private sector from the corporate field is where the entire slope began to avalanche and once the cross dealing began, another deregulating move came into the mix that dropped all the barriers. That isn't to say that Freddie and Fannie were not led into deep waters by Dodd and Frank's hustle, but Gramm did it in a big way. That was where we lost ALL control and allowed the two banking entities to cross swords and dump those billions down the drain. So I have to agree and yet disagree, you got half the picture at least. Frank and Dodd? YUP, They should swing from the noose too. But letting the big bad wolf(Gramm) off the hook is a terrible injustice.

God Bless.

I just want to know why our new president can't seem to find anybody for his cabinet that isn't a tax cheat. 

HEY D. MAX!!

Good to see you're waxing with everyone still. How have you been sir?

As for Obama? I don't know what the man was thinking. He's chosen a couple poor examples of integrity to be sure, though some pretty fine ones too, but that's the $64,000 question to be sure. I wasn't surprised either that those "campaign promises list" has shrunken dramatically, though no new president can be blindfolded, fairly,  pin the tail  well- in the first few weeks or even months. I only pray that he and the rest of us don't have to deal with what George Bush had to deal with as president his first year. Things are bad enough already without that. I know that there are some looking back at those blighted associations as senator, and now as president we find he's a little less culpable for that, but man-O- man, tax evaders are just that, especially after a four year pass? Then get a defense as lame as "I forgot"? I don't care that these men may have FINALLY paid their obligation, penalties etc.---and still stand endorsed by BIG "O"? And, even if Obama still has confidence in them, why in the name of good common sense did congress offer any confirmation? Just too sad at this point in the mix of our problematic history. Not a great way to start out one's legacy I suspect. I have not been close to the "set" much this past week or so, thus have missed much of the hubub and was surprised by the turn. It whales me at times how quickly our leaders can stumble or even tumble. It did give me a little of that same old feeling I had after watching nearly every Commander since the forty's make such errors in the name of know-how and capability. Just makes us wonder how low that skill can take them. Bush had been afflicted no less than many others in that way and none have let that get by. And after this? well it's just not a great way to get started- in spite of our need of "The Best."

I think I'll shut off the tube, go back to my kitchen for a couple months, or nestle back into the quilts and watch some old Grant, Gable, Barrymore, and Ward Bond films, and come out like "Punxsatawney Phil?" to see what political shadows have been cast then. As a centrist, it doesn't please me at all to see things in DC start out this way Max. Lord I just detest that we actually started to feel this nation was ready to redirect and heal again. I'm too old to wait out another chapter of unfaithfulness, corruption and deceit. I pray this is just a glitch and all will be well anyway. I'm just worn out this evening.  So very pleased to chat with you again Max!

God Bless.