Part of the problem

[SuperScout]

Two Barack Obama advisers, Franklin Raines and James Johnson, received preferential home loans as industry favors, apparently in deference to their executive positions heading Fannie Mae. Raines and Johnson, as "friends of Angelo Mozilo," the chief executive of Countrywide Financial Corp. – the now bankrupt high-flying loan originator in the sub-prime mortgage debacle – were funneled millions of dollars for personal home loans. Mozilo himself made exceptions from Countrywide policy to provide the two Fannie Mae CEO's "sweetheart deals."

Obama's outspoken criticism of Mozilo's exceptionally high compensation is again under attack as hypocritical in view of the preferential loans to Raines and Johnson and the degree to which Countrywide's failed sub-prime loans contributed to the government takeover of Fannie Mae and Freddie Mac and last week's mortgage-related crisis on Wall Street.

Countrywide was acquired by Bank of America in January in an emergency rescue purchase involving a $4 billion stock deal. As WND reported, Johnson earned $21 million in just his last year at Fannie Mae, where he served as CEO from 1991 to 1998. Raines earned $90 million in his five years as Fannie Mae CEO, from 1999 to 2004.

WND also reported Raines and two other top Fannie Mae executives agreed to pay $24.7 million, including a $2 million fine, to settle a civil lawsuit filed in December 2006 that accused them of manipulating Fannie Mae earnings, allowing executives to pocket hundreds of millions in bonuses.

As part of the settlement, Raines was also forced to give up Fannie Mae stock options valued at $15.6 million. Johnson was appointed to head Obama's vice-presidential selection committee, but he was forced to step down when a controversy surfaced in June concerning alleged millions in questionable real estate loans he had received on favorable terms from Countrywide. A Washington Post profile published July 17 said Raines was then playing a role advising the Obama presidential campaign on mortgage and housing policy.

The story of the alleged conflict of interest involving the Countrywide loans to Raines and Johnson broke in a Wall Street Journal story published June 7. Authors Glenn R. Simpson and James R. Hagerty noted that customers who got their Countrywide loans through being "friends" of Countrywide chief executive Angelo Mozilo included Raines and Franklin, "two former CEO's of Fannie Mae, the biggest buyer of Countrywide's mortgages." A follow-up Wall Street Journal article that led to the resignation of Johnson from heading Obama's vice presidential selection committee noted he received more than $5 million in loans from Countrywide that were arranged outside the company's normal underwriting process. According to the article, Johnson received loans from Countrywide on six properties between 1998 and 2007, some at lower-than-average interest rates.

The article noted that perhaps the most unusual of Johnson's loans was one for more than $1.5 million for a real-estate project in Big Timber. Records showed Johnson's "total income" at the time was $55,834 a month, while his "total obligations" were $97,708.97 a month, for a total debt ratio of 175 percent. Don't you wish you could get such a 'sweetheart' deal?

According to the Journal, Countrywide handled this as a house construction loan and bent the rules by waiving additional down payments. Other rules were waived, including a requirement that Countrywide borrowers have no more than four currently financed properties at a time. Raines was also a repeat customer at Countrywide while he was Fannie Mae chief executive, receiving four home loans between 1999 and 2003, totaling nearly $4 million. One of the properties included Raines' home, called Beechwoods, a 98-year-old seven-bedroom stucco colonial with a pool, a movie theater and a shared tennis court, overlooking a national park. Josh Gerstein, writing in the New York Sun, noted that on the campaign trail, Obama had criticized Countrywide's executives, charging, "These are the people who are responsible for infecting the economy and helping to create a home foreclosure crisis. Two million people may end up losing their homes."

WND has also reported a review of Federal Election Commission records back to 1989 reveals Obama in his three complete years in the Senate is the second largest recipient of Freddie Mac and Fannie Mae campaign contributions, behind only Sen. Christopher Dodd, D-Conn., the powerful chairman of the Senate banking committee. Dodd was first elected to the Senate in 1980. From 1989 to 2008, Dodd received $165,400 in Fannie Mae and Freddie Mac campaign contributions, including contributions from PACs and individuals, followed by Obama, who received $126,349 in such contributions since being elected to the Senate in 2004.

[darrels joy]

Just the Facts: The Administration's Unheeded Warnings About the Systemic Risk Posed by the GSEs

White House News

Setting the Record Straight
In Focus: Economy
For many years the President and his Administration have not only warned of the systemic consequences of financial turmoil at a housing government-sponsored enterprise (GSE) but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties. President Bush publicly called for GSE reform 17 times in 2008 alone before Congress acted. Unfortunately, these warnings went unheeded, as the President's repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems.

2001
April: The Administration's FY02 budget declares that the size of Fannie Mae and Freddie Mac is "a potential problem," because "financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity."

2002
May: The President calls for the disclosure and corporate governance principles contained in his 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac. (OMB Prompt Letter to OFHEO, 5/29/02)

2003
January: Freddie Mac announces it has to restate financial results for the previous three years.
February: The Office of Federal Housing Enterprise Oversight (OFHEO) releases a report explaining that "although investors perceive an implicit Federal guarantee of [GSE] obligations," "the government has provided no explicit legal backing for them." As a consequence, unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market. ("Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO," OFHEO Report, 2/4/03)
September: Fannie Mae discloses SEC investigation and acknowledges OFHEO's review found earnings manipulations.
September: Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend that Congress enact "legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises" and set prudent and appropriate minimum capital adequacy requirements.
October: Fannie Mae discloses $1.2 billion accounting error.
November: Council of the Economic Advisers (CEA) Chairman Greg Mankiw explains that any "legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk." To reduce the potential for systemic instability, the regulator would have "broad authority to set both risk-based and minimum capital standards" and "receivership powers necessary to wind down the affairs of a troubled GSE." (N. Gregory Mankiw, Remarks At The Conference Of State Bank Supervisors State Banking Summit And Leadership, 11/6/03)

2004
February: The President's FY05 Budget again highlights the risk posed by the explosive growth of the GSEs and their low levels of required capital, and called for creation of a new, world-class regulator: "The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore…should be replaced with a new strengthened regulator." (2005 Budget Analytic Perspectives, pg. 83)
February: CEA Chairman Mankiw cautions Congress to "not take [the financial market's] strength for granted." Again, the call from the Administration was to reduce this risk by "ensuring that the housing GSEs are overseen by an effective regulator." (N. Gregory Mankiw, Op-Ed, "Keeping Fannie And Freddie's House In Order," Financial Times, 2/24/04)
June: Deputy Secretary of Treasury Samuel Bodman spotlights the risk posed by the GSEs and called for reform, saying "We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System." (Samuel Bodman, House Financial Services Subcommittee on Oversight and Investigations Testimony, 6/16/04)

2005
April: Treasury Secretary John Snow repeats his call for GSE reform, saying "Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America… Half-measures will only exacerbate the risks to our financial system." (Secretary John W. Snow, "Testimony Before The U.S. House Financial Services Committee," 4/13/05)

2007
July: Two Bear Stearns hedge funds invested in mortgage securities collapse.
August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying "first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options." (President George W. Bush, Press Conference, The White House, 8/9/07)
September: RealtyTrac announces foreclosure filings up 243,000 in August – up 115 percent from the year before.
September: Single-family existing home sales decreases 7.5 percent from the previous month – the lowest level in nine years. Median sale price of existing homes fell six percent from the year before.
December: President Bush again warns Congress of the need to pass legislation reforming GSEs, saying "These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I've called on Congress to pass legislation that strengthens independent regulation of the GSEs – and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon." (President George W. Bush, Discusses Housing, The White House, 12/6/07)

2008
January: Bank of America announces it will buy Countrywide.
January: Citigroup announces mortgage portfolio lost $18.1 billion in value.
February: Assistant Secretary David Nason reiterates the urgency of reforms, says "A new regulatory structure for the housing GSEs is essential if these entities are to continue to perform their public mission successfully." (David Nason, Testimony On Reforming GSE Regulation, Senate Committee On Banking, Housing And Urban Affairs, 2/7/08)
March: Bear Stearns announces it will sell itself to JPMorgan Chase.
March: President Bush calls on Congress to take action and "move forward with reforms on Fannie Mae and Freddie Mac. They need to continue to modernize the FHA, as well as allow State housing agencies to issue tax-free bonds to homeowners to refinance their mortgages." (President George W. Bush, Remarks To The Economic Club Of New York, New York, NY, 3/14/08)
April: President Bush urges Congress to pass the much needed legislation and "modernize Fannie Mae and Freddie Mac. [There are] constructive things Congress can do that will encourage the housing market to correct quickly by … helping people stay in their homes." (President George W. Bush, Meeting With Cabinet, the White House, 4/14/08)
May: President Bush issues several pleas to Congress to pass legislation reforming Fannie Mae and Freddie Mac before the situation deteriorates further.

• "Americans are concerned about making their mortgage payments and keeping their homes. Yet Congress has failed to pass legislation I have repeatedly requested to modernize the Federal Housing Administration that will help more families stay in their homes, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance sub-prime loans." (President George W. Bush, Radio Address, 5/3/08)
• "[T]he government ought to be helping creditworthy people stay in their homes. And one way we can do that – and Congress is making progress on this – is the reform of Fannie Mae and Freddie Mac. That reform will come with a strong, independent regulator." (President George W. Bush, Meeting With The Secretary Of The Treasury, the White House, 5/19/08)
• "Congress needs to pass legislation to modernize the Federal Housing Administration, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance subprime loans." (President George W. Bush, Radio Address, 5/31/08)

June: As foreclosure rates continued to rise in the first quarter, the President once again asks Congress to take the necessary measures to address this challenge, saying "we need to pass legislation to reform Fannie Mae and Freddie Mac." (President George W. Bush, Remarks At Swearing In Ceremony For Secretary Of Housing And Urban Development, Washington, D.C., 6/6/08)
July: Congress heeds the President's call for action and passes reform of Fannie Mae and Freddie Mac as it becomes clear that the institutions are failing.
http://www.whitehouse.gov/news/relea...080919-15.html

[SuperScout]

Beautiful time-line, and spot on!! While Da Dims fiddled and dawdled, the country economic structure was about to burst into flame, aided and abetted by the hot air coming out of the US Congress.

[Gimpy]

Originally Posted by SuperScout

Beautiful time-line, and spot on!! While Da Dims fiddled and dawdled, the country economic structure was about to burst into flame, aided and abetted by the hot air coming out of the US Congress.

Your "math" skills are obviously lacking not only in accuracy, but objectivity as well Mah Deah SuperFella.

If GEE-W (and you or anyone else) has a "squawk" with Congress, how can you sit there and place all the "blame" on the "Dems" when he (Bush) had a REPUBLICAN MAJORITY CONGRESS for SIX (6) of the last eight years??

Why couldn't the Repubs have listened to him for those first six years and got this mess FIXED before the Dems took over Congress?

Those who live in glass houses need to be careful when throwing "stones", don't ya s'pose?

Just asking.

Gimp

[SuperScout]

It actaully started out earlier than you think:

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.

[SuperScout]

It actually started out earlier than you think:

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.

[reconeil]

Never mind that: "Why couldn't the Repubs...for first 6 years and got this mess FIXED"?
That was then and NOW IS NOW,...plus about last 2 YEARS of Democrat TOTAL CONTROL
over (plus Chairing) all Financial Oversight, Regulatory and/or: "Watch Dog" committees,
commisions & many regulating agencies?

Granted, there's enough bipartisan blame warranted to go around, since President Bush has
been raising concern repeatedly about such grandiose financial melt-downs, for last 7 or so
years. Still, realistically one must blame the quite cavalierly inept Democrat Majority (and
NOW TOTAL CONTROLLERS) of the entire U.S. Congress and/or: "America's Purse String",...
more so than anyone else.

Those high payed (actually over-paid since rarely do anything worthwhile: "For The People")
pretty-much all sat around with fingers up their butts FOR 2 YEARS, while just watching &
doing nothing about one of the (if not the?) worst ever of all Financial Collapses in History,...
merely so: "Recapture The White House AT ANY COST to America" Obama & Clique could
sanctimoniously ride in on their white horses,...and save The Day.

Hopefully such a Party ploy won't work anymore or voters will stop being duped by partaking
of that deceiving, mind-clouding or doped Kool-Aid, that mostly Duplicitous Democrats are well
known for daily & quite echoingly dispensing adnauseam (plus bull).

Neil

[Seascamp]

A lot of ugly ingredients went into this pitiful pie and some of the key ‘uglies’ include hyper inflated housing costs, a lot of ‘lost recipes’ on building a quality structure, gimmick-funky mortgages, ravenous mortgage brokers, greedy financial executives, abandonment of success oriented loan applicant screening, really crappy building materials coming out of the mills, on and on.
This humpty dumpty had to go splat sooner or later and as long as two years ago I advised some youngsters that asked, to back away from a new home purchase as in don’t even think about it right now. My advise then as now, see what you can qualify for in terms of a fixed rate mortgage, forget the gimmicks.

And if built in Northern Nevada in the last four years, it is likely to be sub standard in terms of materials and workmanship. Some border running Julio slamming pneumatic nails into green lumber at warp speed, don’t cut it. That structure is going to move around like a hot doxie during fleet week and that is exactly what occurs and is occurring.

Big hint, if the lumber squirts when struck by a pneumatic nail gun, don’t use it in a load bearing wall or floor or rafter. But I wouldn’t expect those crews to give a fig one way or another so ya get what ya get.

Scamp

[darrels joy]

I've told several people new to the area (Air Force) that it would not be a good idea to buy a house here that was built in the last 5 years but they don't want to buy an "old" house.

In addition to lumber, there is a problem with electrical. We stayed for a time at a new extended stay near the base. The grounding of the buildings was so bad that circuits blew, bulbs burned out, etc.

Brand new slums were built. Cheap house, single car garage. driveway too short to park second car, narrow streets with no parking.

[SuperScout]

All the more reason to look to www.txeaglesnest.com and let me help you build a superbly constructed home, with truly 'green' material, that will be stronger than conventional, stick-built technology.