Barney!

Facts don’t stop the Republic noise machine. FNMA, FHLMC, CLinton, and ACORN will still be blamed.

Digg it right here!

Hey looseheadprop,
Thanks for the effort. Can’t help but take this personally; he’s my congressman. And I’ve grown to love him.

The viciousness of these times scares me.
Thanks to all at FDL.

Republicans are incapable of taking the blame for their own actions. Just like Children.

You mean the Republicans are lying again? Who could have predicted that a bunch of mortgage brokers would sell millions of rip-off mortgages under a deregulated “free market” in order to generate fees? That would be like terrists using airplanes. Unthinkable!

They claim to be the adults and the know-nothings of the rightwing beleive them.

i think this means that freddie and fannie did not cause the crisis. same goes for the poor and / or non-white borrowers that the rightwingnuts seem to want to blame.

but i’m going to argue that congress in the ’90s and the clinton administration created most of the regulatory legislation that permitted the bush administration policies to create the current crisis.

haven’t seen frank’s fingerprints on any of it, but then again haven’t investigated what role he did or did not have.

New truth-determining algorithm:

1. Receive any statement at all from McPalin campaign (excepting candidate appearance announcements).

2. Restate as the exact opposite of the campaign’s statement.

3. The negated restatement will be true.

This is what really fries my oysters (BTW-totally OT- next weekend is Oyster Fest in Beautiful Oyster Bay, Long island–home of Teddy Roosevelt, best fried oysters in the world done by the senior citizens center)

The melt down was not caused by Dems in Cong forcing lenders to write crappy loans.It was caused by mortagage companies and mortgage brokers not be subject to the same regulations and oversight as real banks.

“The fundamentals of this economy are sound.” J. McCain

Aye yup

Hey as the true believers they are the beneficiaries of a signing statement on the ten commandments!

okay i’m reading hmmmm’s comment as if it were new instructions to posting a comment…my tummy rumbles and i snap out of it. the truth-determining algorithm is like a pharted infrared photo of lightening. shaZAM!

anyhow, thank you LHP for describing what a lhp is and does, and for extra points, could you describe to my weary decrepit old eyes (reading the company’s cell/pager monthly statement is a chore like never before) what your little old avatar is? i just can’t tell. even stranger, it makes me laugh, so it better be good.

Thanks LHP.
Barney has been getting a rash of shit around here.
He doesn’t deserve it.
Barney is the smartest guy I know…

um. i think that real banks were involved too – via their siv’s?

don’t mean to distract from lhp’s central message – the republicans are scapegoating and they have no basis for who or what they are blaming.

Thanks ALOT for this LHP. Some of you may know that I’ve been bitching about the lack of pushback on this for a week and a half. Hope the TV peoples make these points and Barack himself at the debate. If he doesn’t I’, gonna be screamin’ at the TV.

Thanks again. Excellent post.

…..and you guys can make that happen.

not t’ be ignernt or anything…. but how??

Did I hear correctly that Barney is not going to run again?

if you click on m name, it willtake you to my profile which explains what an LHP does.

The avatar is a tired female rugby player sitting on the beach near my house. I think you can blow up the pix on the profile page.

The real problem caused by the Clintons, Schumer and Frank et. al was deregulation permitting the investment banks to be “banks” repackaging the subprimes as various and sundry bank products which were issued by, for example, Lehman Brothers, at crazy leverages. The problem is, bottom line, that the so called Democratic Party under the Clintons was a big money friendly advance team for Wall Street. Not that Wall Steet should not have friends, Wall Street should. But real friends would not permit Wall Street to drive drunk and ruin our economy. But the Clintons, then and now, were never our real friends, were they?

The Shrill Nobel Laureate agrees that Fannie and Freddie are more victims than victimizers. From his July 14 column:

“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.

So whatever bad incentives the implicit federal guarantee creates have been offset by the fact that Fannie and Freddie were and are tightly regulated with regard to the risks they can take. You could say that the Fannie-Freddie experience shows that regulation works.”

http://www.nytimes.com/2008/07…..ref=slogin

I wonder if Krugman gets tired of being right, or does he just look at his Nobel Citationa and it feels better?

there was onlyone bank on the list of top 25 sub prime lenders that was subject to the anti redlining law

I’ve heard so much about Barney Frank being to blame, I’ve got to think that Oxy-Head-Rush Limpballs is telling them thus.

OT a bit, but imagine my surprise opening up my local newspaper today and found this

East Bay’s Rachel Maddow is cable’s new talk-show titan
By Chuck Barney
Contra Costa Times
Article Last Updated: 10/14/2008 06:25:39 AM PDT

Don’t we still have spotlight?

where did you hear that? it’s news to me

I would take this country under the Clinton Admin over what we’ve had for the last 8 years in a hot second. I don’t know anyone who wouldn’t.

I always say that Bill Clinton was the best Republican President we ever had.

East Bay? I did not know that.

At the top of the commnet thread, there is a “spotlight” button that will allow you to email this post to your favorite MSM outlet.

so, the ruins of the housing bubble are not Barney’s Rubble.

I want to say I heard him say it a few months ago on a talk show, he cited it as being the reason he was going to introduce the marijuana decriminalization bill and he said he didn’t care if anyone didn’t like it, that he was going to retire from politics soon anyway.
Don’t quote me on that, I have a serious case of CRS but I remember it kind of shocked me.

That’s my Bedrock belief.

CNN is going to be doing something on ACORN after the break

Barney sucks.

As do almost all members of congress.

end of message

thanks. i never noticed that. double DUH

Amazing how the trolls come up for air every once in a while, fouling the air and the water.

She is great. I suppose to balance that, MSNBC has the dreary, pro-Republic, David Gregory on the air.

i don’t understand what that has to do with the current financial crisis? in way over my head though.

do you have any specifics on frank’s role?

No H/T looseheadprop? I posted the “not really’ link in my diary on Oct.12;
and this in the Oct.3 diary:
A history of Fannie and Freddie and the same ‘players’ who pushed the bailout legislation:
http://www.thebulletin.us/site…..#038;rfi=8

I agree about trolls.

They are just awful.

They live under bridges and challenge billy goats.

Please, please. Keep up your good work. You are part of a community.

God help us if some intruder says something that ruffles the community’s feathers.

although several DINO’s may be to blame…

since ike.

I will take Obama over the Clintons any day and I cannot justify the damage done by the Clintons by condemming the damage done by the Bushes.

One of McC’s campaign people said today that they had no idea how to pay for McC’s financial plan. Now that’s straight talk. :)

I blame the Western Investment Lending & Mortgage Act, aka W.I.L.M.A.!

Since they don’t plan to pay for the plan, they’re not looking to figure out how to pay for it. Cheney let us know one of the guiding principle for Republics: Reagan proved that deficits don’t matter.

Reagan proved that Fiscal Conservatism was a ruse. Funny that most people think he was a conservative spender. Not true. Red Ink, Crony Capitalism. Dubya has outdone him, but Dubya can’t nor ever could spin old time yarns.

you have been so far ahead of the curve it’s scary. – please keep it up. *g*

becuase you can’t spell internecine without “nice” (backwards):

Get ready for another round of intra-GOP battles. This time, it’s family. How long before Tucker Bounds gets on t.v. to attack the latest GOPer to let loose on the McCain campaign? It might get a little dicey, because the latest McCain campaign basher is McCain’s brother, Joe:

In a new shot across the bow of Arizona Sen. John McCain’s lagging campaign, the Republican candidate’s younger brother is blasting the campaign’s top management and desperately pleading for a change of course.

AmericaBlog

i would too – in a heartbeat. and i despise clinton.

but bushco has made forced me to recalibrate my scale.

This is evident even to my gardener who barely speaks English. Who do the Rethugs think they are fooling?

See today’s The Unread News,etc’; thanks. Enjoy others that use critical reasoning.

ABC News reporting voter fraud and ACORN. Evil, evil ACORN. Only the last sentence or two about voter suppression. Next up race and voting for Obama. So far no stories on the old hate-filled geezer vote.

awesome diary. will need to return to it to make sure i see all the links. recommended.

The Unread News Commentary and Summary

I remember seeing a graphic at the Times showing that Fannie and Freddie lending greatly increases after about 2000. I think that they were encouraged to lend more by the Bush Administration, but I have never heard about them being heavily involved in subprimes.

Phoenix woman upstairs

Hey Neuro I DUGG your DIGG!!

Got A NEW PC YET????

You’re comparing apples and oranges. IMO someone who is responsible for possibly more than a million people dead and untold damage to a country who was NO threat to us, not to mention what they’ve done to our civil liberties etc.(see Hugh’s list)doesn’t even come close to the disdain you might have for a personality. My .2

ot, but related to SIVs. any accountants here who can tell me the history of QSPE treatment in FAS 140? it looks to me like there have been attempts through the years (including this year) to remove it… and if that’s correct, i wonder why it didn’t go anywhere (was there pressure on the accounting community from gov, industry or other?).

clinton caused a lot of deaths too. he rarely used bombs though.

it’s not about personality.

Not on the scale of bush. I’m not trying to declare Clinton a saint but he’s no bush, not even close.

probably not, but certainly in the hundreds of thousands.

but like i said in my comment @54 – in a heart beat.

“The fundamentals of this economy are sound.” J. McCain

Mommy: Now Johnny, you know that’s not true. Tell me, who broke the economy?
Johnny POW: It wasn’t me. It was that one.
Mommy: Now Johnny, you know it isn’t polite to say that. Tell the truth.
Johnny POW: I don’t wanna. You can’t make me. Nyyyyyaaaa nyyyyaaaaaa!

Seriously though, I think Senator McCain was broken during the Vietnam war and it has become very clear, via various events and speeches, that he just isn’t fit to be given great power. Aside from his politics he just doesn’t seem to be capable of envisioning a way forward and of creating a plan he can consistently follow. He’s still a POW in some ways and we can’t afford that at this time.

I suggest he coast to the end, be gracious, try to regain some composure, declare some kind of victory and return to the Senate to serve his state with such honor as he can muster.

Further rallies with anger, hate and threats of violence do not reflect the person he wants to be and they’re not good for America. He should put America First and end that kind of talk at the rallies.

You cannot justify the Clintons by declaring they are not as bad as the Bushes.

Deregulation did in fact lead to the problem, not minority borrowing or the CRA, or any other right wing canard offered to blame everyone but the Republican free market philosophy. 20 years ago with community non-interstate banking, and no par plus payment to mortgage brokers, most mortgages originated with your local bank or S&L who had a loan officer that would hand (non-computer non-FICO score) qualify a potential mortgagor based on income verification through tax returns, W-2s and loan to value ratio. Purchases had to be 90% LTV, often with mortgage guarantee insurance, and refis had to be 75% loan to value ratios or they were not eligible for 2nd market purchase or guarantee by FANNIE/FREDDIE. These were called qualifying loans. Mortgage brokers were not paid par plus payments. There were no non-regulated non-deposit banks competing with FANNIE/FREDDI before 1999. If the local bank or S&L loan officer closed too many loans that went into default he was fired. If the bank or S&L had too many loans that defaulted (a default rate of 1% or more was considered insolvent and subject the institution to take over – think S&L crisis in the 80s – the default rate now is a little over 2%) FSLIC would take over the bank or S&L. Everyone had an incentive to create both a profitable and a performing loan because they were the same. During this time, mortgage brokers were a niche, somewhat exotic business.

Deregulation led to fragmentation of the industry which gave a financial incentive to everyone in the mortgage origination-to-sale chain to create profitable as opposed to performing loans, which are loans that people pay every month. In 1995 the Republicans in control of Congress changed the RESPA anti-kickback rules for mortgage brokers, thereby allowing lenders to pay brokers a yield spread premium (also called a par plus payment). In a nutshell, this is a payment made by the lender to the broker if the broker originates a loan that is a higher than par rate for that borrower. For example if a broker has an “A” rated borrower based on his loan application, and now his FICO/Fair Isaac score, that qualifies for the lender’s best 6% loan, the lender will pay the broker a premium if the broker can close that “A” borrower into a higher 8% loan. That 8% loan has more value to the lender than a regular “B” borrower’s 8% loan because an “A” borrower, who is less likely to default, is paying an interest rate that a “B” borrower would pay, who is more at risk of default. I and several other consumer lawyers around the country argued that this payment was a kickback for the referral of business, the higher par loan, made illegal under RESPA because the broker does no more work to close the loan at 6% than he does at 8%. The broker is being paid by the lender to refer the lender the higher than par rate loan, which is an illegal kickback for the referral of business. The mortgage industry got Congress to eliminate this anti-kickback rule so that consumers had to prove the overall broker compensation was unreasonable, an impossible task because most states allowed lenders to charge up to 10% of the loan amount for his commission. The non bank lenders led by Countrywide, Ameriquest, Home Eq., etc., saw this as a means to eliminate the overhead and management issues of having an office in every city. Countrywide created a nationwide network of brokers who they would pay yield spread payments for originating higher than par loans. Countrywide would get short term money to fund the loans, which had to be “qualifying loans” (meet minimum underwriting guidelines for credit and loan to value rations) for Fannie and Freddie to buy, then turn around and sell them on the secondary market. The broker would qualify the borrower by giving him an adjustable loan with a 1 year discounted teaser rate and qualify the borrower at the lower monthly payment. So, for a simplified example, an “A” borrower goes to a mortgage broker and says “I need a $100,000.00 loan”. Since he is an “A” borrower he qualifies for 6%, but the broker would search for the lender who would pay him the highest yield spread, usually Countrywide and tell the borrower: “all you can get is a 8% loan, but I can discount that to 4% for the first year.” The broker would also tell the borrower to pay down non-secured debt to make the loan more attractive to the lender i.e. the credit cards and car loan, thus driving up the total principal and their yield spread payment. Now the loan is $125,000.00. At closing Countrywide would draw $125,000.00 on its short term line of credit and fund the loan, paying the broker the yield spread. Countrywide would then sell these qualifying loans in the secondary market. The loan was “teased” to 4% for the 1st year so the borrower qualified under that lower rate. If the borrower questioned the ability to pay the higher rate on adjustment, the broker would tell the borrower “Do not worry about the increase, just come back when the loan increases and I will refi you.”

Even with par plus payments pre-1999, lenders and mortgage brokers still had to qualify borrowers because the non-deposit banks (Merrill, Goldman, etc.) were prohibited from entering into the mortgage business. However, the mortgage brokerage business for consumer home mortgages took off based on the Countrywide par plus model. Countrywide had no local offices so no local overhead, and borrowed short term to fund loans, then sold in the 2nd market within 30/60 days of closing. However, the loans still had to qualify, 90% LTV for purchase and 75% LTV for refis, and FICO scores with proof of income. After 1999, with advent of deregulation and interstate banking, the Countrywides of the world were no longer limited to originating qualifying loans – they could sell to the now deregulated investment banks who now competed with FANNIE and FREDDIE to buy loans. Now you begin to see 100% LTV and non-qualifying “liars loans” based on stated income. Since they were non-qualifying, FANNIE and FREDDIE could not buy them, but Merrill and Goldman and Lehman and all the investment banks ate up as many as could be originated. They even encouraged the brokers and showed them how to “cheat” the now computerized qualifying process so that they could originate and sell more loans.

Allowing interstate banking, then Gramm-Leach-Bliley that eliminated the wall between investment banks, deposit banks, and insurance companies, with a boost from the parity statute created a huge pool of money to lend from investment banks – the shadow non-regulated banking industry. The Countrywides of the world did not have to sell the originated mortgages as qualifying loans eligible for purchase by Fannie or Freddie. They could sell to the newly deregulated investment banks with no “qualifying” requirements. This allowed Countrywide to lend money at 100% loan to value to borrowers who could not afford payments, then take this pool of loans, a mixture of “A” “B” “C” and “D” grade borrowers and go to someone like Merrill Lynch and say “I have 1,000 loans average $125,000.00 each with an average 10% yield over 30 years with a present value of $150,000.00 (consisting of 100% LTV loans and very risky borrowers). I will sell you the loans for $140,000.00.” Countrywide would then pay back its credit line and just made $15,000.00 per loan less its yield spread less its costs of money for 1,000 loans, or say $10,000.00 per loan which is $10 million. Meanwhile Countrywide kept the servicing rights for these loans which also generated another income stream for Countrywide. Merrill Lynch before deregulation was prohibited from entering the mortgage business. Gramm’s bill made the investment banks an unregulated lender, with an income stream from Countrywide as the servicing agent. Merrill would then securitize and sell the pool of loans to Bank of America as Trustee (after buying Countrywide and Merrill Lynch, BOA has a vertical monopoly in the mortgage business from Countrywide’s network of brokers, to BOA’s ability to short term fund the broker’s loans, to Countrywide’s mortgage servicing business to Merrill Lynch who would securitize the pool, to BOA who acts as Trustee for the securitized loans), as a non-regulated security. They in essence sold shares of stock in the pool of mortgages. The rating of these pools of loans was privatized, which means that a company like Moody’s was given the rating task. Moody’s had no idea how to rate a pool of loans which had a mix of “A” through “D” loans, all with greater degrees of risk of default because these borrowers were now paying slightly higher interest rates than they would be expected to pay, and would probably not pay when the rates changed. Moody had no idea if the homes, the collateral, were properly appraised and had sufficient equity to cover a default. Moody’s essentially saw a pool of loans with “A” to “D” borrowers with 15%-20% of the pool as “A”, and so rated the pool as AAA which was its highest degree of safety. In other words, Moody’s rated a pool of junk loans as AAA rated securities, which entities like Bank of America, as Trustee for “ABC” asset backed securities bought and sold as great investments. (As I understand it they later divided these pools into tranches or 3 different degrees of safety and sold them accordingly).

No one had a financial incentive to make sure the originator closed a performing loan – a loan that the borrower would pay back, and if not, that the collateral had sufficient equity to pay back the principal. The Broker and Countrywide as originator, only had an incentive to close profitable loans – loans they could sell. They could care less if the borrower made his first mortgage payment. All loans were “sellable” as long as the pool was sold before too many of the loans started to default. They were very likely sold before any default because mortgages are paid in arrears and closing agents collected the 1st fragmented month’s interest at closing. So the first payment was not even due until anywhere from 30 to 60 days after closing – a window in which the mortgages were often sold twice.

There were no underwriting rules because the originators and lenders, Countrywide and Merrill, were unregulated, and did not have to sell to Fannie/Freddie, so the loans were also non-qualifying. The industry then began to originate non-income qualifying loans i.e. stated income. Many people gave the correct income info to the broker, who then submitted an application to the lender with false income information. These loans were justified because of the values of the properties. The brokers would get friendly appraisers to give a high-ball appraisal then submit the loan package. The appraiser would either give the broker a higher appraisal or he would lose that broker’s business. This was the first wave of foreclosures that went through the courts. These sub-prime loans defaulted because they were based on one or all or a combination of these factos: 1) borrowers who qualified for lower (teased, discounted rates, or interest only loans); 2) inflated income by the broker who wanted to close the loan and get paid; 3) high-ball appraisals, 4) and all the borrowers were paying higher interest than they should have paid after their discount expired because of the yield spread.

Around 2001, post-deregulation, the non-deposit banks like Merrill and Lehman and Goldman were buying up all of the non-qualifying mortgages from the Countrywides that sprung up across the country, securitizing them and selling the securities, completely cutting Fannie/Freddie out of this lucrative business. The loans were all non-qualifying because they were more profitable than qualifying loans sold to Fannie/Freddie. No one was selling to Fannie/Freddie because brokers were originating “non-qualifying” loans that Fannie and Freddie could not buy – they were too risky. As quasi public companies, Fannie and Freddie had to drop their qualifying standards via regulatory changes. Fannie and Freddie then had to lower their “qualifying” standards so they could buy these otherwise non-qualifying mortgagees and join the securitized gravy train. If they did not, the now deregulated investment banks would force Fannie/Freddie out of the mortgage business and into bankruptcy. The Republican majorities in the Senate and House along with a Republican president were more than glad to deregulate Fannie and Freddie so they could compete with the unregulated investment banks. So Fannie and Freddie wound up with a lot of these toxic mortgage pools. This is how deregulation caused this mess.

Sorry, I didn’t read your diary, and so, didn’t know you had beat me too it. I can’t keep up with all the content.