Sunday, May 9

Real Financial Reform vs the Wingnut Freddie/Fannie Myth - Updated!

While Democrats are attempting to have a serious debate and put together a good comprehensive Financial Reform Package that will pay for the Funeral Services of Failing Banks (which the Right calls a "Perpetual Bailout"), address "Too Big to Fail" and re-establish Glass-Steagal, Republicans and Tea Partiers are obsessing on one thing...

What about Freddie and Fannie?

It all started with this Tweet
@GOPWhip The Democrats' Dirty Little Secret #tcot #teaparty #rs #ocra #gop #obama

Which in turn linked to this Video

My Response of "Another Pack of Lies..." led to a fiery exchange with one of the Conservative Faithful, which for me at least proved enlightening if also sad...

Stomping out this myth could be as bad as dealing with Birthers and Deathers.

The core of the Cantor Video's claim is that Democrats have Shielded Fannie & Freddie from reform comes not that surprisingly from the Murdock Street Journal...

Now that nearly all the TARP funds used to bail out Wall Street banks have been repaid, the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac stand out as the source of the greatest taxpayer losses.

Last Christmas Eve, Treasury removed the $400 billion cap on what the government might be required to invest in these two GSEs in the future, and this may tell the real story about the cost to taxpayers. In typical Washington fashion, everyone has amnesia about how this disaster occurred.

The story is all too familiar. Politicians in positions of authority today had an opportunity to prevent this fiasco but did nothing. Now—in the name of the taxpayers—they want more power, but they have never been called to account for their earlier failings.

The backstory here, as told by the Murdockian is essentially that way back in 2005 the Democrats used the 60-Vote requirement to block the implementation of greater government regulations and restrictions on Fannie & Freddie - and this party-line vote helped create the eventual housing bubble collapse and the Great Recession of 2008. Get a gander a this...

These authorities were necessary to control the GSEs' risk-taking, but opposition by Fannie and Freddie—then the most politically powerful firms in the country—had consistently prevented reform.

Why was there no action in the full Senate? As most Americans know today, it takes 60 votes to cut off debate in the Senate, and the Republicans had only 55. To close debate and proceed to the enactment of the committee-passed bill, the Republicans needed five Democrats to vote with them. But in a 45 member Democratic caucus that included Barack Obama and the current Senate Banking Chairman Christopher Dodd (D., Conn.), these votes could not be found.

See, the problem here is all in the Democrats lap. They didn't rein in Fannie & Freddie then, and they aren't doing it now. Interesting that the WSJ thinks that the problem was a lack of federal regulation and "too much risk taking" by these lenders - too bad that their entire thrust is aimed in the wrong direction.

As shown by the Columbia Journalism Review.

My only quibble with the gusher of stories this morning on the government’s takeover on Fannie Mae and Freddie Mac is my usual one—ahistoricism.

Reading all this, one gets the impression that those politically protected mortgage buyers and fee machines caused the global credit crisis.

They didn’t.

The fact is: Wall Street sank Freddie and Fannie, not the other way around.

This Credit Suisse report (from March 2007 and eerily prescient) reminds us that the government sponsored entities’ share of the overall new mortgage market had fallen to 42 percent by the end of 2006 before shooting up to 76 percent at the end of 2007 (on their way toward 90 percent now) as the market collapsed.

And that’s the overall market. As Paul Krugman points out, a “subprime borrower is basically someone whose credit wasn’t good enough to qualify for a Fannie- or Freddie-backed mortgage”. The subprime market&the really toxic stuff—was always dominated by Wall Street and Wall Street-backed lenders.

Doing quick research on my own I found that only 25% of the toxic sub-prime mortgages that nearly brought down the world economy were held by CRA (Community Reinvestment Act) Banks - and again as Krugman states that doesn't even include either Freddie Mae or Fannie Mac.

Furthermore, while Fannie and Freddie are problematic institutions, they aren’t responsible for the mess we’re in.

But here’s the thing: Fannie and Freddie had nothing to do with the explosion of high-risk lending a few years ago, an explosion that dwarfed the S.& L. fiasco. In fact, Fannie and Freddie, after growing rapidly in the 1990s, largely faded from the scene during the height of the housing bubble.

Partly that’s because regulators, responding to accounting scandals at the companies, placed temporary restraints on both Fannie and Freddie that curtailed their lending just as housing prices were really taking off. Also, they didn’t do any subprime lending, because they can’t: the definition of a subprime loan is precisely a loan that doesn’t meet the requirement, imposed by law, that Fannie and Freddie buy only mortgages issued to borrowers who made substantial down payments and carefully documented their income.

See that, Freddie and Fannie are off the hook. No, they aren't perfect but the regulations needed were already in place for them, without additions, and managed to keep them from going over the cliff while the rest of Wall Street was turning into a Lemming Waterfall.

But that's not how one boisterous Conservo-tweeter saw it. (As I recreate our exchange)

@Conservativeind It's absolutely the TRUTH. And Fannie & Freddie AREN'T part of the Financial reform bill. #Dems are LIARS

@Vyan1 They weren't the problem, still aren't @Conservativeind

@Conservativeind @Vyan1 Yes they were and yes they are you have absolutely NO idea what you are talking about. #ignorancemustbebliss

@Conservativeind @Vyan1 They were VERY much involved. They gave the kiss of death to the banks by buying up risky mortgages for ppl who shld NOT have had

@Vyan1 So did Countrywide. Problem was hand-grenade mortgages, not ppl whose loan exploded @Conservativeind They gave the kiss of death to banks

@Vyan1 Fannie & Freddie weren't responsible for Credit Default Swaps, Dark Pool Derivatives or SubPrime TimeBomb Loans that Tanked @Conservativeind

@Conservativeind @Vyan1 Oh no they were all responsible but you don't understand. Banks DIDN'T give crappy loans b4 CRA & Fannie/Freddie promises

@Vyan1 Nobody Made them give Bad Loans, except Short Sellers who made $$$ from it - Still Not Fannie, Not Freddie @Conservativeind

@Conservativeind @Vyan1 Okay before the CRA and Fannie/Freddie push (who we CONTINUE to bail out), banks didn't give BAD loans

@Vyan1 Banks authorized Loans, insurance (AIG) Guaranteed them - WS Planned for them to Fail, and this is All Borrowers Fault? Not @Conservativeind

@Conservativeind @Vyan1 Again... you need to do some research. It is clear you listen to talking points rather than fact finding.

Yeah, ok, I'm a "Talking Point Machine" never mind the Nobel Prize Winning Economist who provided me with those points, um - facts, because I actually bothered to look them up during our discussion.

And I've written about this subject before, when Rick Santelli decided to blowout his fatuous fact-challenged gasbag. and whine "President Obama - Are you Listening?" I also wrote an Open Letter to the Tea Party which pointed out that source of the financial mess we found ourselves in was clearly bi-partisan and began during the Clinton Administration's mistaken push for Banking Deregulation, including the tragic repeal of Glass-Steagal which prevented the co-mingling of regular Banks with Investment Banks. 38 Senate Democrats Voted for that Bill, with only Byron Dorgan opposing it from the Dem side, so it's not like Democratic hands are clean on this.

The incentive to push out Hand-Grenade Loans onto the public didn't come from the CRA, it came from the fact that deregulation allowed mortgages to be marketized into derivatives, then short sold meaning that they became more profitable the more they failed.

Her point was essentially that the effort (via the CRA) to attempt to get poorer people loans - was the source of the problem and the mistake. Some people just don't deserve a loan, and further if they decided to get a loan they can't handle - even though as I tweeted, the Bank has to Approve Them and later insurance companies would guarantee that loan - that if they tripped over some fine print that jacked up the interest rate and pushed the monthly payment completely out of wack - it was essentially Their own Damn Fault.

They Should have Known Better.

I felt this line was coming and tried to pre-empt it with this:

@Conservativeind @Vyan1 So you are saying ppl who took out the loans are not supposed to be held RESPONSIBLE for their own actions? Sorry that's ridiculous

@Vyan1 Idea they shouldn't give loans to "poor stupid" people (who were getting shafted by Banks) is just typical, heartless GOP @Conservativeind

Here's where we really see the center of Conservatism IMO, to them "Freedom" means I Don't Want to be held Response for THOSE PEOPLE...

Rather than this crisis being the result of Banks deliberately selling mortgages designed to Fail, like building a house with anti-personel mines in the foundation (or Lead paint on the toys, or Anti-freze in the toothpaste, or mines that blowup, and oil rigs that crash and burn) - Conservatives would rather blame the victim of this trickery and deceit, instead of the people who did the tricking.

You should've known that skirt was too short - when you got Raped!

@Conservativeind @Vyan1 They should give loans to ppl who can afford to PAY them back. That's called COMMON SENSE. And I'm not GOP

And I thought that's what "You're Approved" ment...

@Vyan1 Blame Victims, Not people who set mortgage trap, snared & skinned 'em and left their bleached bones dangling in the Sun? @Conservativeind

@Conservativeind @Vyan1 Getting a mortgage is a major thing. If you aren't responsible enough to understand what it means, maybe you shouldn't get one.

@Conservativeind @Vyan1 I agree that mortgage brokers etc many were scum.. but ultimately it's the ppl who took the mortgages out who are responsible

@Vyan1 On what planet have Wall Street, the Banks & Investment Firms shown they give a shit about anything but making MORE $$$?? @Conservativeind

@Conservativeind @Vyan1 It's not their jobs to care. It's their jobs to make $$. What don't you understand about that?

@Vyan1 Yes, it IS. Functioning in Economy also means being Good Corporate Citizen, not a Scam Artist! @Conservativeind It's not their jobs to care

@Vyan1 Simply because you CAN rip people off, doesn't mean you should Drug Dealers only Priority is making $$ too That your Ideal? @Conservativeind

@Conservativeind @Vyan1 Being a good 'corp. citizen' is different than being a scam artist. I agree on the scam artist part. No one should be that way.

@Vyan1 Sure it is. But Yeah, they DID and they Will keep doing it @Conservativeind That's illegal. I don't believe business should rip ppl off

@Conservativeind @Vyan1 That's illegal. I don't believe business should rip ppl off but you hold the person being ripped off NOT accountable at all?

Do I hold the person being ripped off - Not Accountable?

Frankly, NO I don't. I don't think you should be a gullible doormat, but if someone has robbed you, tricked you, lied to you and scammed you - no it's really not your fault, it's theirs, even if they use legal loopholes to get away with it on a technicality.

I admit, that I went a little off at this point:

@Vyan1 If you leave your door open, is it your fault you got robbed - or the fault of the guy came in & TOOK YOUR SHIT? @Conservativeind

@Vyan1 An open door is not an invitation for someone else to commit a crime against you - it's ridiculous to make perp innocent @Conservativeind

@Vyan1 Reverses reality and make you responsible people you don't control @Conservativeind Not invitation but irresponsible for leaving it open.

@Vyan1 Yeah, they were - the truth was deliberately HIDDEN from them in legal-speak, Trap Set @Conservativeind Ppl not scammed. They didn't READ.

@Vyan1 Close they door, they get a Lock-pick, Alarm the Door they use Window - When are they responsible for their actions? @Conservativeind

@Vya1 Those are Luxuries if you can afford them, not every can @Conservativeind That's why they have real estate lawyers & professionals.

@Vyan1 Written in a way that's deliberately incomprehensible - is a Trick! @Conservativeind has to be written in loan ppl didn't pay attention.

@Vyan1 How much smarter/cheaper is it to OutLaw the Trick, than to make everyone Huckster Proof w/Army of Attorneys? @Conservativeind

@Vyan1 You're advocating an ever escalating Cold War of Legalese - Lawyers trying out Trick Each Other, not Dealing Honesty @Conservativeind

@Vyan1 If you want to sell homes to regular people, not attorneys, make contracts regular pple can read, or else don't Sell them @Conservativeind

@Vyan1 If you put Warning Label on Guns, would the people too slow to duck DESERVE to get Shot in Face? No. @Conservativeind

@Vyan1 Warning: This Mortgage may make you Homeless - So Sorry you didn't notice, better luck next time, Sucker! @Conservativeind

@Vyan1 Warning: This Car may start, go forward and NEVER STOP - don't complain we didn't tell you. Toyota! @Conservativeind

@Vyan1 Warning: The Oil Well May Explode, Burn, Sink and Destroy Half Wildlife in Gulf - but you knew that already right? Love BP.@Conservativeind

@Vyan! Warning: Xe Contractors may Torture, Maim & Kill you in your own Country without Legal Recourse or Limit. Too Bad, So Sad. @Conservativeind

Admitted this just got her mad, but sometimes when people are mad - they reveal themselves.

@Conservativeind @Vyan1 You're wrong and your analogies are ridiculous. People don't CHOOSE to get shot but they CHOOSE to BUY A HOUSE.

@Vyan1 Sure, but they can be tricked, and were @Conservativeind You do realize ppl can choose what bank and what kind of mortgage they want right?

@Conservativeind @Vyan1 Obviously you don't believe in personal responsibility. That's the problem w/ libs. They blame EVERYONE else for their own mess.

@Vyan1 I would agree with "Personal Responsibility" argument, but since Lenders were making Mortgages *designed* to Fail. No. @Conservativeind

@Conservativeind @Vyan1 So is it a Pharmacist's fault if a patient doesn't read the warning labels and dies as a result? Probably in your world.

And in the Real World Too - Just ask Merck and their $4.85 Billion Payout over Vioxx.

@Vyan1 CRA didn't make those mortgages impossible to afford, Lenders did @Conservativeind Because ACORN screwed them. ACORN pushed for the CRA.

Yes, that's right she actually blamed ACORN, when they were at trying to get anti-Predatory Lending measures passed, before being assassinated by those bogus O'Keefe Videos.

@Vyan1 Failure was the Design, the Point & the Goal - because they still made money on Failure. If ppl knew, that wouldn't work @Conservativeind

@Conservativeind @Vyan1 Nothing was hidden. Ppl were stupid. It's not my fault and I shouldn't have to PAY for their stupidity.

BINGO! There it is.... right there. I Shouldn't Have to Pay for Them!

Want to understand where conservative anger comes from? That's it! I Shouldn't have to PAY for those ... stupid people... lazy people... poor people... brown people... People who got pregnant. People who got laid off and can't find a job, or people who got ripped off by a shady mortgage deal.

They All should have KNOWN Better!

Fuck 'EM! Let 'em Starve, let the homeless and uninsured crawl into a corner and DIE. Or else Let them Eat Charity Checkup Chickens (tm).

That's what "Personal Responsibility" really means, it's not MY responsibiity to give anyone else shit, even when they need it.

Or more importantly, even when the Country Needs it.

@Vyan1 Not about You, it's about the Country @Conservativeind Ppl were stupid. It's not my fault and I shouldn't have to PAY for their stupidity.

In point of fact, most of the TARP Money has already been repaid - some of it at a profit. Even the Wall Street Journal (See Above) Admits that.

Originally expected to cost the U.S. Government $356 billion, the most recent estimates of the cost, as of April 12, 2010, is down to $89 billion, which is 42% less than the taxpayers' cost of the Savings and loan crisis of the late 1980s.[1]

That means for a $700 Billion program - so far - we've gotten $611 Billion of that back in a year and a half. Look GM even paid back all it's TARP funds Fives years Early.

According to USGovernment the Federal Deficit jumped to approx $1.8 Trillion as George Bush left Office in 2009, which is largely attributed to the Economic Downturn (About 30% of increase), TARP ($29%) and the Stimulus Bill (28%). During Obama's first year that deficit has already been cut by $600 Billion (And gee, I wonder where all that money came from?), while job growth last month is the best it's been in years, and taxes are lower than they've been in almost 60 Years!

Who exactly is supposedly Paying for All the Stupid People?

"Stupid People" who, by the way, are still losing their homes by the tens of thousands every month.

Never mind basic human compassion for those in an underwater mortgage, what would have happened to the Country if frankly both Bush and Obama hadn't done what the did with the Bailout and Stimulus? Nobody Liked Doing IT, but it had to be done. Just how far would we have sunk otherwise, and could we have dug ourselves out in less than a decade? How much would YOU have to pay then?

But then daring to make this point was apparently going over the line:

8:14 @Conservativeind
@Vyan1 We're just going to have to agree to disagree otherwise we'll just have the same circular convo all night & I hate circular convos

8:26 @Vyan1 Also, Most of TARP has been payed back w/ Interest - So you Don't have to Pay @Conservativeind I shouldn't have to PAY for their stupidity.

8:27 @Vyan1 Thanks for showing you care more abt yourself than the Nation @Conservativeind Ppl were stupid. I shouldn't have to PAY for their stupidity.

8:28 @Conservativeind @Vyan1 Typical lib. You just can't STFU and end on a nice note when I offer to agree to disagree. You have to be an ass. Bu-bye

8:52 @Vyan! "Stupid Ppl" still losing Homes & You Get your Money Back while protecting Wall Street NIce Note? @Conservativeind You just can't STFU

No really I can't STFU - not on an issue like this. You're not the boss of me sweetie, really you aren't. You don't get to dictate when I'm done talking, and I'm still not done yet.

Conservatives like to talk a lot about "The Nation" and "Country First", but time and time again - when the rubber meats the road it becomes most clear all their really believe in, all they really care about - is their own selfish sorry ASS.

The rest of us actually think it matters if the nation - as a whole - has a viable energy grid, a decent functioning education system, affordable health care and a functioning economy with products that don't blow up in your face.

We think it's actually better not just for us, but for YOU Too.

That "Typically Liberal" enough for ya?


Update: Back from Sunday Shopping and on the subject of "Personal Responsibility" it occurs to me that...

1) If some "Stupid People" had bothered to read the report that Bin Laden Determined to Strike Inside the U.S. about 4,000 People wouldn't have had to pay for it.

2) If some "Stupid People" had bothered to pay attention when Bin Laden was Trapped in Tora Bora, Thousands of our soldiers and $Trillions spent hunting for him with Drones in Wazirastan wouldn't have been paid for in Blood and Treasure.

3) If some of those same "Stupid People" had bothered to read the entire Iraq NIE that said that the Niger-Yellowcake Documents were Forgeries, the Energy and State Dept determined that the Aluminum Tubes were wrong type for centrifuges or the report from former Iraq Security Chief Habbush that Saddam Had Destroyed All his WMD Stockpiles way back in 1991 thousands more U.S. Troops an another $Trillion More U.S. Dollars wouldn't have been spent to pay for nothing.

4) If some of those same "Stupid People" had bothered to listen when Scientists at NOAA said The Levies Might be Over-topped, had bothered to review FEMA's Hurricane Pam Simulation or listen to the one member of FEMA who was acually inside New Orleans after Katrina who said "The Situation is Past Critical" even more Blood and Treasure wouldn't have been paid in Lousiana.

5) If some other "Stupid People" didn't keep pushing the completely Psychotic Idea that President Obama Doens't Have a Valid Birth Certificate - it's possible a Security Guard at the Holocaust Museum wouldn't have had to pay for it with his life.

6) If some "Stupid People" like Bernard Goldberg on Fox News didn't keep claiming that Liberals are Destroying the Country five Unitarian Church goers in Knoxville Tennessee wouldn't have paid a tragic price for it.

7) If some "Stupid People" had paid attention when Massey Mining turned their ventilation system fans the wrong way trapping methane gas inside the mine instead of venting out it - 29 miners and their families wouldn't have had to pay for it.

8) If some "Stupid People" hadn't insisted than an Acoustic Switch wasn't really a critical requirement for a 5000 ft drilling platform, tons of wildlife and Fisherman in the Gulf might not be paying for it right now.

Pardon me if I think we should just drop the euphemisms and just call all these "Stupid People" what they really are - Conservatives.

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