A New Face

The Washington Times reported on Thursday that Kathy Kraninger has been confirmed as the Director of the Consumer Financial Protection Bureau (CFPB) and will serve for the next five years.

The article concludes:

Meanwhile the CFPB is still facing major legal hurdles.

Some federal judges have ruled that by placing so much power — including an independent budget that Congress doesn’t control — in a single director, the CFPB violates the Constitution. But a ruling earlier this year by the full U.S. Circuit Court of Appeals for the District of Columbia upheld the singe-director structure.

Let’s take a look at the inception of the CFPB. The CFPB is the brainchild of Massachusetts Senator Elizabeth Warren. It was passed as part of the Dodd-Frank Act. The Dodd-Frank Act was Congress’ way of dealing with the housing bubble that caused the recession of 2008. However, the congressional solution was aimed at banks and Wall Street. It made no mention of the role that Congress had played in creating the housing crisis and made no effort to take responsibility for their actions or prevent a repeat of the problem.

In 1995 The Community Reinvestment Act (CRA) was changed, allowing Fannie Mae to purchase $2 billion of “My Community Mortgage” Loans, pilot vendors to customize affordable products for low and moderate income borrowers. Some of the things done to make the loans more affordable were low (or no) down payments and variable interest rates. Fannie Mae guarantees mortgages and then sells them to banks and investors. Banks were forced to issue sub-prime mortgages or pay large penalties. As more people took out mortgages, the price of houses rose quickly.  In 2005, 91 percent of Fannie Mae loans were variable rate loans. In 2004, 92 percent of Fannie Mae subprime loans were variable rate loans. Interest rates rose, gas prices increased, and people could not pay their mortgages. The subprime market collapsed, and foreclosures increased rapidly. Banks stopped making mortgage loans.

There were efforts made to stop this train. On September 11, 2003, The New York Times reported:

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

…a new agency would be created within the Treasury Department to assume supervision  on Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The Democrats opposed the reform. Barney Frank, a Democrat from Massachusetts, said that it would mean less affordable housing. Melvin Watt, a Democrat from North Carolina, said that it would limit the ability of poor families to get affordable housing.

In 2005, John McCain warned of a coming mortgage collapse. He sponsored S.190 (109th), Federal Housing Enterprise Regulatory Reform Act of 2005. The Democrats blocked it. It was again brought up and blocked in 2007.

Opensecrets.org lists campaign contributions to politicians. Fannie Mae gave generously to insure that it would not be regulated. Some Democrats and Fannie Mae executives had ‘sweetheart’ loans from mortgage companies that were heavily involved in sub-prime mortgages.

So where am I going with this? The housing bubble was created by bad legislation. Bad legislation continues. In August 2016, The New York Post reported:

The Obama administration is doing its best to give the nation another mortgage meltdown.

As Paul Sperry recently noted in The Post, Team Obama has pushed mortgage lenders to offer home loans to folks with shaky credit, setting up conditions for another housing-market collapse.

Wasn’t the last one bad enough?

Credit scores of approved borrowers, for example, have been trending down, even as their debt levels have grown.

The Federal Housing Administration and government-sponsored “independent” lenders Fannie Mae and Freddie Mac have been demanding lower credit standards — just as the feds did starting under President Bill Clinton, in pursuit of the same “affordable housing” goal.

Some borrowers need only put 3 percent down to get a Fannie Mae loan — even if the downpayment is a gift. Fannie also has started up a new subprime lending program.

The Office of the Comptroller of the Currency recently warned that mortgage underwriting standards have slipped and now reflect “broad trends similar to those experienced from 2005 through 2007, before the most recent financial crisis.”

The Consumer Financial Protection Board (and Dodd-Frank) were not related to the cause of the 2008 recession–the recession was the result of bad laws. Both the CFPB and Dodd-Frank need to go away. They are nothing but a blatant example of government overreach.

The Economy President Obama Is Leaving To President Trump

On Wednesday, The New York Post posted an article about the current state of the American economy. The article cites claims by the media that President Obama is handing Donald Trump a ‘booming’ economy. The article then asks the question, “If the economy is so all-fired ducky, how come Americans just tossed out the party that’s claiming credit for it?”

The article explains:

The truth is that the Obama years have been among America’s worst for the economy. His eight years will go down in history as the Great Recession, even though for much, even most, of the span, we weren’t technically in a recession.

It just felt that way. And no wonder. Obama’s is the only modern presidency that failed to show a single year of growth above 3 percent, a point Trump stressed during the campaign (and that was conceded even by the website Politifact).

Plus, the Obama economy failed to prosper even though the Federal Reserve had its pedal to the metal. Its quantitative easing, $2 trillion balance-sheet expansion and zero-interest-rate policy all produced zilch.

Except for pumping up Wall Street and producing what Trump calls a “false economy.” The recent declines in the unemployment rate are due less to the uptick in employed persons than to an increasing number of persons leaving the labor force.

In a “true economy,” what people would boast about would be the number of employed persons rising faster than the size of an expanding workforce. In reality, the job participation rate is the lowest in decades, as millions are too discouraged to seek a job.

And the recent record Dow Jones average? It’s pumped up by the Federal Reserve. It’s nowhere near a record if the Dow is calculated in the most traditional measure of value. The gold value of the Dow peaked way back in 1999.

President Obama took office in the midst of the bursting housing bubble. Just for the record, the bubble was not George W. Bush’s fault. The bubble had its roots in the Community Reinvestment Act (CRA), passed by Congress in 1977. The CRA was revised in 1995 under President Clinton. The new provisions forced banks into making subprime loans to borrowers who might not be able to pay them back. The new provisions also allowed subprime mortgages to be traded with securities. Since many subprime loans were underwritten by Fannie Mae or Freddie Mac, agencies closely related to the government, the government eventually had to bail out the banks who made these loans. As the bubble formed, President Bush, and later Senator John McCain pushed legislation to curb the overenthusiastic housing market. In both cases they were stopped by Democrats who had either taken large campaign donations from Fannie Mae or Freddie Mac or had received ‘sweetheart mortgage deals’ from mortgage companies closely associated with the subprime mortgage market. (How is it that Fannie Mae or Freddie Mac can legally make campaign donations?)

Congress and two Presidents caused the housing crisis. I am sure that President Carter and President Clinton meant well when passing or amending of the CRA. However, the housing bubble is a shining example of what happens when the government attempts to interfere with the free market. How many banks would have avoided the subprime mortgage market and held the housing bubble in check if they had not been forced to issue subprime mortgages? The free market works. Government interference in the free market does not work. Hopefully President Trump will allow the principles of the free market to bring the American economy into a growth cycle. A GDP of less than 3 percent is not acceptable.

Improving Your Image On A False Premise

On Friday, Investors.com posted an article about Elizabeth Warren‘s objections to the budget bill because of bank risk.

The article reports:

Warren last week took to her socialist soapbox to try to torpedo the “cromnibus” spending bill. She warned legislators they would be blamed for another financial crisis if they dared to vote for any appropriations legislation that includes anti-Dodd-Frank provisions.

Pontificating from the Senate floor Thursday, Warren railed against Republicans and fellow Democrats alike for adding a provision to the bill to restore to banks the right to use derivatives to hedge risks for customers.

She claimed repeal of the regulation “would let derivatives traders on Wall Street gamble with taxpayer money and get bailed out by the government when their risky bets threaten to blow up our financial system.”

Added Warren: “These are the same banks that nearly broke the economy in 2008 and destroyed millions of jobs. The same banks that got bailed out by taxpayers and are now raking in record profits.

“A vote for this bill is a vote for taxpayer bailouts of Wall Street,” she continued.

But where was she three days earlier, when Fannie and Freddie unveiled new low-income mortgages with just 3% down payments? The move encourages the kind of risky lending that actually caused the crisis, yet she didn’t say a peep.

The taxpayer bailouts of Wall Street go back to the Community Reinvestment Act, passed by Jimmy Carter and revised in 1994 to repeal some restrictions on interstate banking.

The article explains what actually happened:

The “main culprit” in the housing crisis was Fannie and Freddie and their mission regulator, HUD, which was cheered on by affordable-housing zealots in the House like Warren’s pal Barney Frank.

HUD pressured Fannie and Freddie to make high-risk loans to “underserved” borrowers, and to do that they had to lower their underwriting standards to the point where they were buying as many subprime loans as prime. While HUD was enforcing its affordable-housing quotas, down payments plunged along with credit scores.

When the housing price bubble burst, those loans were the first to default. When the music stopped, a whopping 77% of all the bad loans ended up on the books of Fannie and Freddie and other federal agencies — not Wall Street banks.

The evidence of government guilt in the crisis is overwhelming. Yet Warren keeps up the false narrative.

Unfortunately, that false narrative has been used for so long that uninformed voters believe it. Part of what is needed to change the politics of Washington is an educated voter. Until voters learn to look past what the mainstream media is telling them, the government will continue to make reckless decisions that result in taxpayer money being used to correct government mistakes.

Informed Voters Already Knew This, But Here It Is Again

This article appeared in the Examiner in December of 2012, but because of the way the media has reported the events involved, it might be news to some people. Just as an aside, here is the YouTube video that explains this beautifully. I have embedded this because I am concerned that it may disappear:

Back to the Examiner. The headline of the Examiner article is, “New study confirms that economy was destroyed by Democrat politicians.” A bit provocative, but actually very accurate.

The article reports:

A new study from the widely respected National Bureau of Economic Research released this week has confirmed beyond question that the left’s race-baiting attacks on the housing market (the Community Reinvestment Act–enacted under Carter, made shockingly more aggressive under Clinton) is directly responsible for imploding the housing market and destroying the economy.

The study painstakingly sorted through failed home loans that caused the housing market collapse and identified an overwhelming connection between them and CRA mortgages.

The article concludes:

-Even The New York Times admitted that there is “little evidence” of any connection between the “Republican” deregulation measures Obama blames, like the Gramm-Bleach-Liley Act (signed into law by a Democrat), and the collapse of the housing market.

But non-Fox media have spent years deliberately and relentlessly inoculating people against the facts, training them to mindlessly blame Bush for being in charge when Democrat policies destroyed the economy. So here we sit, to this day, still watching Obama excuse and shrug off endless economic failures, illegal government takeovers and utter national bankruptcy with zero accountability.

It is important that voters understand what happened here. When you continue to lend money to people who can’t afford to pay it back, you eventually run into problems getting the money back. The Democrats phony charges of racism hurt black and white people and rich and poor people. Their policies were bad for everyone. Unfortunately, Democrats are again putting pressure on banks to relax their lending standards–running the risk of repeating the whole process. It wasn’t the big banks that caused the problem–it was the government and organizations like ACORN putting pressure on banks to make bad loans. Many of the major players in this scandal made millions and moved on to jobs in the Obama Administration.

Real News From The Library

On Friday, Investor’s Business Daily posted a story about some recent documents released by the Clinton Library. These documents actually tell the correct story about the cause of the 2008 financial crash. I have posted stories about the cause of that crash before that included the YouTube video below:

The video is a few years old, but it is still worth watching if you have not seen it.

The article at Investor’s Business Daily explains the role that the Community Reinvestment Act (CRA)  played in creating the housing bubble. The CRA pressured banks to  make risky home loans.

The article reports:

Clinton’s changes to the CRA let ACORN use the act’s ratings to “target merging firms with less-than-stellar records and to get the banks to agree to greater community investment as a condition of regulatory approval for the merger,” White House aide Ellen Seidman wrote in 1997 to Clinton chief economist Gene Sperling.

“Community groups have come to recognize how terribly powerful CRA has been as a tool for making credit available in previously underserved communities,” Seidman added.

Seidman later boasted that Clinton’s 1995 CRA revisions created not only the subprime mortgage market but also the subprime securities market. Of course, subprime loans and their high default rates ruined minority neighborhoods when the market crashed.

Memos also reveal how Clinton aides held repeal of the Glass-Steagall Act hostage to strengthening the CRA. They gave Republicans deregulation of banking activities in exchange for over-regulating how those banking activities applied to low-income communities.

…In 2000, HUD Secretary Andrew Cuomo lit the fuse on the subprime bomb by requiring Fannie Mae and Freddie Mac to purchase subprime, CRA and other risky mortgages totaling half their portfolios.

A 1993 memo, “Racism in Home Lending,” captured the tone of Clinton’s affordable-housing crusade. It proposed coordinating with the Washington Post and Congressional Black Caucus on bank investigations.

These White House papers are smoking-gun evidence of Clinton’s culpability in creating the subprime bubble. The mainstream media’s silence is deafening.

It is entirely possible that Hillary Clinton will run for President in 2016. The role that the Clintons played in the housing bubble and the economic collapse that followed needs to be discussed during her campaign.

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Regular Readers Of This Blog Know This, But Here It Is Again

I  have periodically posted the YouTube video “Burning Down the House” on this website to remind people what actually caused the housing bubble as opposed to what they were being told caused the housing bubble. There is a reason I am posting it again.

In December 2012, a website called examiner.com posted a story with the headline, “New study confirms economy was destroyed by Democrat policies.” Sounds like the video at YouTube. The study was done by the National Bureau of Economic Research and released the week of December 21, 2012.

The article reports:

-No one was making bad loans to unqualified people until Democrats came along and threatened to drag banks into court and have them fined and branded as racists if they didn’t go along with the left’s Affirmative Action lending policies…all while federally insuring their losses. Even the New York Times warned in the late 1990s that Democrats continuing to force banks into lowering their standards would lead to this exact catastrophe.

Obama himself is even on the record personally helping sue one lender (Citibank) into lowering its lending standards to include people from extremely poor and unstable areas, which even one of the left’s favorite blatantly partisan “fact-checkers,” Snopes, admits (while pretending to ‘set the record straight’).

If we are to remain a free people, we need to understand facts–not spin. The lies that have been told about the financial collapse of 2007 are astounding. Even worse is the fact that the Dodd-Frank legislation passed as a result of the collapse does not come anywhere near addressing the core issue.

The graph below from the National Bureau of Economic Research study shows the impact of the Community Reinvestment Act on mortgage lending:

It is time to change both the Washington culture and the media culture. Unless we do that fairly quickly, we will cease to exist as a free, prosperous nation.

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The Mortgage Settlement

It’s easier for the government to blame the banks than to take responsibility for their own role in the housing meltdown. CNN Money posted an article today about the settlement reached with five of the largest home loan lenders.

The article reports:

Participating banks: The five mortgage servicers that are parties to the settlement — Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500), Wells Fargo (WFC, Fortune 500) and Ally Financial — will pay a total of $5 billion to the states. Some of that money will go to foreclosed homeowners and the rest to the states.

Federal officials say negotiations are underway to expand the settlement to nine other major servicers, which would raise the overall value of the settlement to $30 billion.

I am not in any way connected to a bank (although I do use them), but this makes me totally furious. On September 28, 2008, Jeff Jacoby at Boston.com stated:

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 andFreddie 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.

I commend the effort to make home ownership available to more people; I object to putting pressue on banks to make bad loans. The fact that the government is now going after the banks they put at risk is the height of chutzpah. Going after the lenders they forced to make bad loans is simply another example of the anti-business attitude of the Obama Administration.

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