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Fannie and Freddie’s Role

Feb 12th, 2012
by Fl appraiser.
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Fannie, Freddie Suits Negate Dodd-Frank

By PAUL SPERRY Posted 02/10/2012 06:33 PM ET

New evidence Fannie Mae and Freddie Mac hid their subprime exposure from Wall Street delegitimizes both the diagnosis of the crisis and its prescription — the Dodd-Frank Act.

First the diagnosis.

After the crisis, President Obama joined Senate Majority Leader Harry Reid and then-House Speaker Nancy Pelosi in framing Wall Street while exonerating Washington-based Fannie and Freddie and the affordable-housing charter that has governed the agencies’ mortgage underwriting since the early 1990s.

To officially certify their false narrative, the Democrat troika appointed a commission to “investigate” the root causes of the crisis. The Financial Crisis Inquiry Commission (FCIC) concluded that — surprise! — Fannie and Freddie played only a “marginal” role in the mess.

But recently filed SEC lawsuits against Fannie and Freddie for massive fraud contradict that finding.

They offer a mountain of evidence that the government-sponsored mortgage giants played a leading role in the crisis.

Instead of $600 billion in subprime and other risky mortgages, Fannie and Freddie held or guaranteed $1.6 trillion. That means they failed to disclose a whopping $1 trillion in risk to investors.

The new total is close to the $1.8 trillion estimated by former Fannie chief credit officer Ed Pinto and cited on these pages the past couple of years. The SEC complaints completely discredit the findings of the FCIC, which rejected Pinto’s data and validated the phony numbers.

When at the start of the investigation the evidence fell into FCIC Chairman Phil Angelides’ lap, he “began a concerted effort to suppress it,” according to FCIC Commissioner Peter Wallison. Here’s what happened:

• After Pinto in March 2010 provided commission staff with a 70-page memo containing Pinto’s data, Angelides refused to set up a meeting between the commission and Pinto.

• After Wallison asked that Pinto be given a chance to testify in an open hearing, Angelides declined to let the American public hear his testimony.

• Instead, Angelides in August 2010 circulated a staff memo to all the commissioners challenging Pinto’s data as “flawed,” then refused to give Pinto a chance to respond.

• After Wallison pressed the issue, Angelides tried to discredit the data in the media by having a leftist think tank founded by Angelides’ partner, John Podesta, put out a report smearing Pinto. (The report by the Center for American Progress’ David Min has now been rendered a howlingly bad piece of scholarship.)

• After a fed-up Wallison included Pinto’s research in a 100-page dissent from the FCIC’s majority report last year, Angelides censored it almost in its entirety from the copy of the report he made available for purchase in bookstores.

The Hidden Truth

Feb 12th, 2012
by Fl appraiser.
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Audacity Of Dishonesty Hijacks Truth In Lending

Subprime Scandal: Announcing a massive $26 billion mortgage deal with “abusive” banks, the president blamed everybody for record foreclosures except the party most culpable: government.

Speaking Thursday from the White House, Obama scolded “irresponsible” and “reckless” lenders, who “sold homes to people who couldn’t afford them.”

He also cited buyers who bought homes bigger than their budgets, and Wall Street bankers who packaged the shaky mortgages and traded them for “profit.”

“It was wrong,” he asserted. And now the nation’s “biggest banks will be required to right these wrongs.”

Obama acts as if the private sector bears all the responsibility for the mortgage mess. But he and his attorney general know it’s merely a scapegoat for the reckless government housing policies they and their ilk drafted and enforced in the run-up to the crisis.

Starting in the mid-1990s — in a historic first — it became federal regulatory policy to force all U.S. lenders to scrap traditional lending standards for home loans on the grounds they were “racially discriminatory.”

President Clinton fretted that blacks and other minorities could not qualify for mortgages at nearly the same rates as whites and Asians. So Clinton codified more “flexible” underwriting standards in a “Policy Statement on Discrimination in Lending,” and entered it into the Federal Register.

At the same time, he set up a little-known federal body made up of 10 regulatory agencies — the Interagency Task Force on Fair Lending — to enforce the looser standards. It threatened lenders to either ease credit for low-income borrowers or face investigations for lending discrimination and suffer the related bad publicity. It also threatened to deny them expansion plans and access to Fannie Mae and Freddie Mac.

“The agencies will not tolerate lending discrimination in any form,” the 20-page document warned financial institutions. The task force enforced these policies throughout the Bush administration.

According to Peter Ferrara, senior fellow at the Carleson Center for Public Policy:

“This overregulation reached the point of forcing lenders to discount bad credit history, no credit history, no savings, lack of steady employment, a high ratio of mortgage obligations to income, undocumented income, and inability to finance down payment and closing costs, while counting unemployment benefits and even welfare as income in qualifying for a mortgage.

“This” he said, “turned into government-sanctioned looting of the banks.”

The Justice Department — along with HUD, which regulated Fannie and Freddie — proved the most aggressive members of the fair-lending task force. Eric Holder, then acting as deputy AG, ordered lenders to actually “target” African-Americans for home mortgages they couldn’t otherwise afford. Obama cheered Holder on as an inner-city community organizer who also pressured banks to ease credit for home borrowers.

In other words, the same two officials now leading the charge to punish “abusive” lenders had egged them on before the crisis.