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.

What Does This Mean For America’s Future?

The Washington Examiner reported today that the rate of homeownership in America has declined steadily since 2006.

The article includes the following graph:

HomeownershipThe article explains:

The only age group that saw a rising homeownership rate over the past year was 35-44-year-olds, with younger and older people turning more to renting.

So let’s take a look at this from a broader perspective. Part of the decline is due to the housing bubble. However, we need to look at the impact of homeownership on our society and how the decline in homeownership will impact us in the future.

Homeowners are invested in their houses and in their neighborhoods. Generally speaking they take pride in both and will endeavor to keep both their homes and neighborhoods clean and crime-free. Under most circumstances, a home will increase in value, providing a basic investment for people who may not be able to invest in other assets. The increase in renters means an increase in landlords, people who own the rental property. It seems to me that the increase in landlords and renters is an indication that the middle class is being squeezed out economically. I understand that in many parts of the country housing is extremely expensive, but there are also areas of the country where jobs are available and housing is reasonably priced. I fear that the decrease in homeownership represents a moving away from the idea of owning something, taking care of something, and having an asset in the future. It may be a reflection of our instant gratification society rather than an economic indicator. It also may be a reflection of the American culture versus the culture of the large number of immigrants currently coming to America from different countries. Private property rights are one of the backbones of our freedoms–other countries may not have those rights. In order to keep our middle class strong economically and help keep our neighborhoods crime-free, we need to encourage all Americans, whether they were born here or just arrived from another country, to own homes and take care of them.

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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