The Bush Administration Turned a blind eye on shady Subprime loans

[devineone]

It's too bad what happened to Eliot Spitzer.  Wall Street couldn't stand him because he fought against a lot of corruption that occurred there.  It's too bad that he brought about his own downfall.  This article was published in the Washington Post shortly before be resigned as Governor of NY.   Hmmmm.  If only he had kept himself clean, he would have been in the position to really stand up and support Obama and speak out against the corruption that he knew was going on especially now that the sh*t has hit the fan.  Now he has to lay low.  Isn't it remarkable that this article ran in Feb and hardly made a blip in the news?  His subsequent resignation and the fall out behind that all but took over national headlines.  Now a mere 7 months later, this article is resonating.
 
However interestingly enough, the validity of Spitzer's article was debated by many as OCC contends that states had ample regulatory power over banks governed by state banking rules.  National banks had only 10% of subprime lending practices originating with them in 2006 and they were strictly monitored by OCC.  Most shady lending practices were done through state run banks and states should have taken stricter steps to regulate their lending rules.

Whatever... pointing fingers back and forth, we've got a 700 billion dollar bill coming down the pipeline that even babies will have to pay, and the people who made the most money off this lending debacle are not paying nearly enough! Some heads need to be rolling behind this expensive bill!!  This mess has made me so angry!   Why should I have to foot the bill for rich white folks greed!

http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html
Predatory Lenders' Partner in Crime
How the Bush Administration Stopped the States From Stepping In to Help Consumers
By Eliot Spitzer
Thursday, February 14, 2008; Page A25

Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers' ability to repay, making loans with deceptive "teaser" rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.

Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.

Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.

What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.

Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.

Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). http://www.occ.treas.gov/aboutocc.htm
The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.

In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.

Throughout our battles with the OCC and the banks, the mantra of the banks and their defenders was that efforts to curb predatory lending would deny access to credit to the very consumers the states were trying to protect. But the curbs we sought on predatory and unfair lending would have in no way jeopardized access to the legitimate credit market for appropriately priced loans. Instead, they would have stopped the scourge of predatory lending practices that have resulted in countless thousands of consumers losing their homes and put our economy in a precarious position.

When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.

[devineone]

Just like Bush used the tragedy of Sept. 11th to start an illegal war in Iraq when we were supposed to be looking for Bin Laden in Afghanistan or where ever the heck he was hiding, the wheelers and dealers will look at this crisis on Wall street to further push their own agenda for more deregulation.  I heard on the news this morning, that one Senator from NC was talking about doing away with Sarbanes-Oxley, the Whistle blower protection act that makes it a federal crime to punish someone for reporting corporate corruption.  This came after the fall out from Enron.  I have to hand it to them, they've got balls. 
Check out this article if you're inclined. http://www.naomiklein.org/shock-doctrine

[cool breeze]

It's too bad what happened to Eliot Spitzer.

That guy had the world on a string and he let some sex..I repeat sex, bring about his downfall..One of the stupidest moves ever..

I don't feel sorry for him--he has a wife..Ain't no need to go using a high class call-girl service while making the taxpayers foot the bill..Go home to your wife..

Or better yet..If you're gonna use a call girl service how about don't leave a paper trail, hmmm? I just thank god he wasn't black..

That guy wanted to get caught..Guys like Spitzer haven't figured it out that the cozy little relationship political figures had with the press is over--at least when it comes to sexual scandals..

The press back then lived vicariously through the politicians they were covering..They were sidekicks and fanboys wanting to run with the in crowd..A married politican is boinking a flight attendant? *Wink wink, nudge, nudge*...Boys will be boys..

The press today still are fanboys, but they have to meet the demands of this "Sex Sells" marketplace, where the average Joe will tell you he is more concerned about where a candidate likes to get his freak on as opposed to where the candidate stands on the real issues..

[DianaPrince]

Hey CB,
Who turned you on to that article? If the AGs from all 50 states were trying to get a heads up on this mess and the Bush admin blocked them, how come I haven't heard any of the major networks talk about it?

Like it or not, we will all pay for this...one way or another...either we get a tax bill or depreciation of our assets and higher interest rates on credit from here one.   

Btw, in a less hypocritical society, prostitution would be legal bt consenting adults and men like spitzer would be able to engage legally.  His wife looked like she might have been OK with Spitzer taking his mess to a pro rather than to her.
Since I love conspiracy theories....I'm thinking that maybe  someone from the Chaney...ah, I men Bush admin was responsible for outing Spitzer to get him off the case.

[devineone]

Since I love conspiracy theories....I'm thinking that maybe  someone from the Chaney...ah, I men Bush admin was responsible for outing Spitzer to get him off the case.

Now Ms DP whatever gave you the idea that the Cheney I mean Bush admin would use their office to "out" someone, I mean do you have any evidence that they would overstep the bounds of their office to out someone C'mon...Oh yeah, the Valerie Plame case.   The covert CIA operative who was outed when her husband Ambassador Wilson discovered that Bush lied about "yellow cake and that whole WOMD mess.  That's right I see now. If something worked once, why not do it again right... 

[Ndgo]

Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders.

Mortages are just ONE area where "financial" companies were deregulated and allowed to run amok. Banks have been raping consumers for years... and they are still allowed to continue and increase in those areas. The fee structure, hiding sliding interest rates, draconian penalties for late payments... all this stuff has been going on for years... while the banks reaped so much money in profits, they had to think of creative ways to legally digest it all. And that's another thing... just because something is legal... doesn't make it ethical or even right.

Remember Reagonimics and the deregulatin of the banking industry... which segwayed into the  savings & loan crisis. Remember that and how consumers had to bail THEM out... deregulation eliminated the distinction between commercial and savings banks, causing a huge growth of S&Ls that made all sorts of non home-related loans. S&L banks became huge profit centers, giving out credit cards all willy nilly and making highly speculative investments, and loaning more money than was smart. AND then the Reagan program phased out federal requirements that set maximum interest rates on saving accounts, eliminating the advantage held by saving banks. All banks, not just commercial entities, could offer checking accounts, and any depository institution could borrow from the Federal Reserve Bank. Now THAT bailout cost us roughly the same...  $600 billion dollars... so why are they crying now... And we didn't get any of that money back... sounds familiar .... consumers got stuck with properties that weren’t worth the mortgage amount while many S&Ls were allowed to go bankrupt and just wipe the debt away..... but far off in the horizon... we did see was a new thing rolling down the deregulation pipeline... I tell you... these criminals NEVER pay and they never give up the cash either...

Yep, and remember how all of a sudden, people were being flooded with pre-approved credit cards from unheard of banks ALL residing in Delaware and South Dakota? The credit card industry is NEXT... same players, same game...

[devineone]

Mortages are just ONE area where "financial" companies were deregulated and allowed to run amok. Banks have been raping consumers for years... and they are still allowed to continue and increase in those areas... they had to think of creative ways to legally digest it all. And that's another thing... just because something is legal... doesn't make it ethical or even right.

Good point Ndgo, that's why when I hear arguments such as "last I checked it was legal to do this or that", I just roll my eyes. Yeah, that's why we have amendments to laws because laws can be fallible.

[cool breeze]

Has anyone noticed that just like the last time in the 80's, it's the same bunch of cronies, ie "Republicans" that always seem to be pushing the country toward bankruptcy..Yet they talk all that bs about the "tax and spend  liberal democrats" and how they wanna take all your money away..Meanwhile, they're the ones robbing the country blind, but don't hate player, hate the game right? 

Me? I blame white folks..They're the ones that are continuously stuck on stupid..The few white folks that the republicans help have no need for anyone--white, black, Eskimo unless they are RICH..But you can't get the "average Joe" or the soccer moms to get their heads out of their azzes to see that..No, what they fear most is that one day their little daughter is gonna bring home gasp.. a Negro..

lol..If that's white people's biggest fear, how come they haven't realized that their kids always do the exact opposite of what the parents tell them? In other words, if they stopped giving a rat's azz about what color man their little girl might be boinking, their daughters wouldn't be so dayum "curious" and wanna find out if all the stories they've heard about black men are true..

It's a lost cause anyway..I'm from the south, I've seen and heard white people tell their daughters that they don't want them hanging with blacks PERIOD..What happens when the authority figures aren't around? What happens when the pressure to conform to the so-called majority's opinion isn't there? We all know what happens: If a white woman wants to get buck wild, she gets buck wild..

White people just can't handle the truth..It's not that black men are hypersexual beasts that are always panting after their pure, innocent daughters..It's that the majority of white women possess the two qualities that make them the easiest women on the planet: They are submissive and they are freaks..

I was at the funeral for a state trooper, I was still a cop, but I was looking to get out of law enforcement..A white guy that used to work with me here in Columbia named Mc Neil was also there, but he had moved to Rock Hill SC with his wife and their three kids..Two teen aged daughters and the son was a toddler..We always used to get into it because he was pissed that I wasn't afraid to tell him or any other white person for that matter, to their faces that racial unity would be possible but it wasn't because black people were dragging their feet..White people are the ones that are holding up racial unity..

That cat would get redder than a lobster and he would tell me that I should do as Dr King said and Dr King would be ashamed to hear how I was talking and I would ask him where are the white ministers that agree with Dr King? Billy Graham ain't never, Pat Robertson ain't never, Jerry Fallwell ain't never..The white ministers with high national visibility ain't never called for, ain't never asked for people to judged by the content of their character and not skin color like Dr King did..White ministers are down with the status quo..

And we would go back and forth--people would hate to see us in a room together..

So, after the funeral services we stop by the widow's house to further pay our respect to the brother that was killed and who rolls up on me but McNeil..He was waving some papers at me, "Here! Read this!", he said.."Now tell me that it's white people's fault, smart guy."

Dude didn't even say hi or nuthin'--just plain rude..

The papers were the credit card purchases his daughters had made for some college cats that were attending South Carolina State University,a black university in SC..His daughters and three of their friends would drive almost two hours to Orangeburg SC on the weekend, get their freak on with the brothers at SC State, buy the brothers stuff like Fubu and Jordans with his credit cards and then drive back to Rock Hill..

Here was the proof that he was right and I was wrong..It wasn't that his daughters and their homegirls were FREAKS, it was the brothers--those darn black guys that were at fault..Now, I know some brothers got more game than you can shake a stick at, but come on..Your kids and their friends drive over two hundred miles roundtrip to get their freak on and it's the brothers fault? Ain't no teenage females that are living in my house taking no "Road trips" anyway..Hell to the no..

I was about to rip into him, but the young brother that caught a ride with me, David, grabbed me before I could..He was like, " Good seeing you man, but me and Cool gotta run!! Later!"

When we got inside my car we laughed our heads off..To this day, I know some people thought we were out of our minds..

[cool breeze]

Oh and by the way.. I have nothing against Republicans.. The fact that Nixon was a lying crook; Ford an idiot; Reagan was an idiot and a fake; Bush Senior a sell out social climbing liar and Bush II a crook, an idiot, a fake, a liar and a wino has nothing to do with them being Republicans..

Please continue to vote for a party filled with men of such obvious quality..

[devineone]

No, what they fear most is that one day their little daughter is gonna bring home gasp.. a Negro..

lol..If that's white people's biggest fear, how come they haven't realized that their kids always do the exact opposite of what the parents tell them? In other words, if they stopped giving a rat's azz about what color man their little girl might be boinking, their daughters wouldn't be so dayum "curious" and wanna find out if all the stories they've heard about black men are true..

It's a lost cause anyway..I'm from the south, I've seen and heard white people tell their daughters that they don't want them hanging with blacks PERIOD..
White people just can't handle the truth

Very insightful CB.
Being from the south as well I agree with a lot of your observations but would like to also add from a woman's perspective not just having lived in the south but also in the north (and out west for a minute), that I think the fallacy of attactiveness in white women is overstated.  Another biggest fear that white men won't admit to is that women of color are beautiful and desirable and in many instances even more so than the beauty standard white woman.  Just look at how "they" are taking attributes that used to be "ridiculed' on the black woman and now they are celebrated on the white woman.
The full lips, the full rounded buttocks, darker skin (white women don't like pasty white skin and I've often heard them complain "I'm too white").  Look at the women they uphold for certain attributes, Jessica Biel, Angelina Jolie just to name two white women who are lauded one for having a rounded full butt and the other for full lips These attributes are appreciated on white women however most black women are born with these features and they aren't praised. Why?  Because in our American society a black woman cannot be seen to outshine a white woman in beauty standards.

Black women were made out to be the jezebels to the black man's mandingo and they too have also carried the taint of being sexually promiscious.  This came from white men going to African tribes and writing their own interpretation of African tribal life without understanding what was going on and they carried these judgements and interpretations back to their countries.
http://www.ferris.edu/jimcrow/jezebel/
I have many stories of my both my grandmothers telling me how they had to be at home before dark and how they had to watch out for each other because white men in the south during their time (and some even now), would think nothing of sexually assaulting a black woman as if it were their right and the woman should just deal with it because they are all jezebels and loose women anyway.   
I remember once when we were little kids and the gas man (we had a propane tank) came to fill our gas tank, my older sister was watching us and we were all outside playing.  My mother was home cooking (as best as she could) in the kitchen.  My sister was 12 years old at the time, and the gas man walked over to the swing set and started talking to my sister, he reached out and put his hand on her shoulder and she moved away.  The next thing he heard was a rifle go off (My mom was crazy shooting near the propane tank)!  She came charging out of that house with that rifle aimed at that man.  She said "the next shot is going to make sure you can't make no babies".
 
That man got in his truck so fast and we were all standing there staring wondering what the heck?  I remember thinking "I'd better not tell her I didn't do my chores yet while she's holding that rifle.    My mom told my sister not to ever let a white man put his hand on her!  Her reaction was so strong, that now when I think on it, I wonder if something happened when she was younger. 
White men in the south are Almost ALL ways panting in behind black women, I don't know if it is a left over slave master mentality thing or what but it's true and each time I go home to visit, I see it.  They could be in the grocery store, and if a black woman walks by, they'll get whip lash looking back at her, or they'll do it covertly if they're with their wives but they do it.They do it up north and out west too but there are so many ethnicities there, it's not just mainly black and white.

So it's funny how white women are lauded as being the beauty standard that every man wants out front while black women are the ones that are lusted after.

[philnation]

Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders.

Mortages are just ONE area where "financial" companies were deregulated and allowed to run amok. Banks have been raping consumers for years... and they are still allowed to continue and increase in those areas. The fee structure, hiding sliding interest rates, draconian penalties for late payments... all this stuff has been going on for years... while the banks reaped so much money in profits, they had to think of creative ways to legally digest it all.

Absolutely.  That's why so many nowadays view banking as a necessary evil, instead of something remotely pleasant.  We get nickeled-and-dimed at every turn, which for me is what makes the airlines doing that even more infuriating.  (And it's why I refuse to fly American, United, US Airways or Continental unless it's on someone else's dime and I have no say in the choice, and I've e-mailed all four airlines to tell them that.)

Now that they've passed this bailout, I'd like to see them do a lot of what Laura Rowley (who's fast becoming one of my favorite finance columnists) talks about in her latest column.  It's high time some consumer-friendly measures came into play after years of going against consumers.  They keep telling us that consumers drive this economy; if that's the case, why is the current environment so hostile to them?

[Legacy]

Actually, it would be unfair to pin this on the executive branch when the legislative branch is responsible for deregulation. Also, it's amazing how we call it "predatory lending" when loans are given to "underserved" communities but the facts are that the reason this was done was to prevent "redlining".

We can't have it both ways. You can't claim that it's "racism" when blacks/latinos or other "underserved groups" get denied loans moreso than whites yet when the laws are changed to address this, you call it predatory lending. We really need to understand how we got where we are regarding this crisis.

The dems in the house pushed this. However, since we're talking about the congress, it had to have significant republican support so there's enough blame to go around. The creation of Fannie Mae & Freddic Mac by the congress essentially privatized profits & socialized risks. Sowell is an economist unlike most people who are writing about the sub-prime lending crisis..

July 22, 2008 / 19 Tamuz 5768

Bankrupt ‘exploiters’

http://jewishworldreview.com/cols/sowell072208.php3

  In one of those front-page editorials disguised as "news" stories, the New York Times blames "the lucrative lending practices" of banks and other financial institutions for helping create the current financial crisis of millions of borrowers and of the financial system in general.


It must take either a willful determination to believe whatever they want to believe or a cynical desire to propagandize their readers for the New York Times to call "lucrative" the lending practices that have caused many lenders to lose millions of dollars, some to lose billions and some to go bankrupt themselves.


Blaming the lenders is the party line of Congressional Democrats as well. What we need is more government regulation of lenders, they say, to protect the innocent borrowers from "predatory" lending practices.


Before going further down that road, it may be useful to look back at what got us into this mess in the first place.

It was not that many years ago when there was moral outrage ringing throughout the media because lenders were reluctant to lend in certain neighborhoods and because banks did not approve mortgage loan applications from blacks as often as they approved mortgage loan applications from whites.


All this was an opening salvo in a campaign to get Congress to pass laws forcing lenders to lend to people they would not otherwise lend to and in places where they would not otherwise put their money.


The practice of not lending in some neighborhoods was demonized as "redlining" and the fact that minority applicants were approved for mortgages only 72 percent of the time, while whites were approved 89 percent, was called "overwhelming" evidence of discrimination by the Washington Post.


Some people are more easily overwhelmed than others, especially when they find statistics that seem to fit their preconceptions. But if we do what politicians and the media seldom bother to do— stop and think— an entirely different picture emerges.


In our own personal lives, common sense leads us to avoid some neighborhoods. If you want to call that "redlining," so be it. But places where it is dangerous to go are often also places where it is dangerous to send your money.


As for racial differences in mortgage loan application approval rates, that does not tell you much if you are comparing apples and oranges. Income, credit history and net worth are just some of the things that are very different from one group to another.


More important, in the same ways that blacks differ from whites, whites differ from Asian Americans. The fact that whites are turned down for conventional mortgage loans, and resort to subprime loans, more often than Asian Americans do is seldom reported in "news" stories about lending practices, even though such data are readily available.


Shocking as it may be to some, lenders are in the business of making money, and they don't much care whose money it is, so long as they get paid.


Politicians, on the other hand, are in the business of getting votes, and they don't much care whose votes it is— or what they have to say or do in order to get those votes.


It was government intervention in the financial markets, which is now supposed to save the situation, that created the problem in the first place.


Laws and regulations pressured lending institutions to lend to people that they were not lending to, given the economic realities. The Community Reinvestment Act forced them to lend in places where they did not want to send their money, and where neither they nor the politicians wanted to walk.


Now that this whole situation has blown up in everybody's face, the government intervention that brought on this disaster in is supposed to save the day.


Politics is largely the process of taking credit and putting the blame on others— regardless of what the facts may be. Politicians get away with this to the extent that we gullibly accept their words and look to them as political messiahs.

[Legacy]

Sept. 30, 2008 / 30 Elul 5768

Bailout politics

By Thomas Sowell

http://www.jewishworldreview.com/cols/sowell093008.php3

  Nothing could more painfully demonstrate what is wrong with Congress than the current financial crisis.


Among the Congressional "leaders" invited to the White House to devise a bailout "solution" are the very people who have for years created the risks that have now come home to roost.


Five years ago, Barney Frank vouched for the "soundness" of Fannie Mae and Freddie Mac, and said "I do not see" any "possibility of serious financial losses to the treasury."


Moreover, he said that the federal government has "probably done too little rather than too much to push them to meet the goals of affordable housing."


 Earlier this year, Senator Christopher Dodd praised Fannie Mae and Freddie Mac for "riding to the rescue" when other financial institutions were cutting back on mortgage loans. He too said that they "need to do more" to help subprime borrowers get better loans.


In other words, Congressman Frank and Senator Dodd wanted the government to push financial institutions to lend to people they would not lend to otherwise, because of the risk of default.


The idea that politicians can assess risks better than people who have spent their whole careers assessing risks should have been so obviously absurd that no one would take it seriously.


But the magic words "affordable housing" and the ugly word "redlining" led to politicians directing where loans and investments should go, with such things as the Community Reinvestment Act and various other coercions and threats.


The roots of this problem go back many years, but since the crisis to which all this led happened on George W. Bush's watch, that is enough for those who think in terms of talking points, without wanting to be confused by the facts.


In reality, President Bush tried unsuccessfully, years ago, to get Congress to create some regulatory agency to oversee Fannie Mae and Freddie Mac.


N. Gregory Mankiw, his Chairman of the Council of Economic Advisers, warned in February 2004 that expecting a government bailout if things go wrong "creates an incentive for a company to take on risk and enjoy the associated increase in return."


Since risky investments usually pay more than safer investments, the incentive is for a government-supported enterprise to take bigger risks, since they get more profit if the risks pay off and the taxpayers get stuck with the losses if not.


The government does not guarantee Fannie Mae or Freddie Mac, but the widespread assumption has been that the government would step in with a bailout to prevent chaos in financial markets.


Alan Greenspan, then head of the Federal Reserve System, made the same point in testifying before Congress in February 2004. He said: "The Federal Reserve is concerned" that Fannie Mae and Freddie Mac were using this implicit reliance on a government bailout in a crisis to take more risks, in order to "multiply the profitability of subsidized debt."


Chairman Greenspan added his voice to those urging Congress to create a "regulator with authority on a par with that of banking regulators" to reduce the riskiness of Fannie Mae and Freddie Mac, a riskiness ultimately borne by the taxpayers.


Fannie Mae and Freddie Mac do not deserve to be bailed out, but neither do workers, families and businesses deserve to be put through the economic wringer by a collapse of credit markets, such as occurred during the Great Depression of the 1930s.


Neither do the voters deserve to be deceived on the eve of an election by the notion that this is a failure of free markets that should be replaced by political micro-managing.


If Fannie Mae and Freddie Mac were free market institutions they could not have gotten away with their risky financial practices because no one would have bought their securities without the implicit assumption that the politicians would bail them out.


It would be better if no such government-supported enterprises had been created in the first place and mortgages were in fact left to the free market. This bailout creates the expectation of future bailouts.


Phasing out Fannie Mae and Freddie Mac would make much more sense than letting politicians play politics with them again, with the risk and expense being again loaded onto the taxpayers.

[Ndgo]

We really need to understand how we got where we are regarding this crisis.

Then you've got to go back even further... Home ownership is the key to wealth in this country... The government has ALWAYS had a hand in making the American Dream more realistic for some...And whites passed on those benefits to their children... further elongating an uneven playing field... Go deeper.... these problems are generational... predatory lending practices are nothing new... the difference is THIS time, it caught up with them.


UNCLE SAM LENDS A HAND

Did the Government Racialize Housing and Wealth?

The federal government policies and programs that helped white families achieve the American Dream made it difficult for minorities to buy homes and amass wealth.


1935: Social Security created
When Congress created social security in 1935, it provided a safety net for millions of workers, guaranteeing them an income after retirement. However, the act's provisions excluded agricultural workers and domestic servants, who were predominantly African American, Mexican, and Asian. As low-income workers, minorities had the least opportunity to save, were least likely to have pensions, and were most vulnerable to economic recession, yet they were systematically excluded from the protection and benefits granted to most Americans.

1935: Wagner Act legalizes collective bargaining and labor organizing
Like Social Security, the Wagner Act helped establish an important new right - to unionize. The act's original version prohibited racial discrimination, but the American Federation of Labor fought against it and the final version permitted unions to exclude nonwhites. As a result, nonwhites were not only locked out of higher-paying jobs, they were also denied union protection and benefits: medical care, full employment, and job security. Moreover, they were legally barred from challenging their exclusion. Although the laws changed in the late 1950s, many craft unions remained all white well into the 1970s.

1930s-1940s: Federal housing programs spur suburb growth
Beginning in the 1930s and 1940s, the federal government created programs that subsidized low-cost loans, opening up home ownership to millions of average Americans for the first time. At the same time, government underwriters introduced a national appraisal system, tying property value and loan eligibility to race. Consequently, all-white communities received the highest ratings and benefited from low-cost, government-backed loans, while minority and mixed neighborhoods received the lowest ratings and were denied these loans. Of the $120 billion worth of new housing subsidized by the government between 1934 and 1962, less than 2 percent went to nonwhite families. Nonwhites were locked out of home ownership just as most white Americans were finally getting in.

1948: Restrictive covenants outlawed in Shelley v. Kraemer
Restrictive covenants, which barred homeowners from selling or leasing their homes to nonwhites, were common in many neighborhoods across the U.S. Although they were outlawed by this Supreme Court decision, exclusion continued. Private developers could still refuse to sell homes to nonwhites, and real estate agents steered nonwhite prospective homebuyers away from white neighborhoods. Following government guidelines, lenders continued to base property appraisals on race, denying loans to communities with nonwhites or insisting on higher fees and interest rates to cover their "risk." By systematically devaluing nonwhite neighborhoods and homebuyers, federal intervention helped disguise racial discrimination and enabled many to claim that the resulting segregation was "market driven."

1949: National Housing Act authorizes urban redevelopment
The housing market available to most nonwhites was rental and later, public housing in segregated urban centers. Government-sponsored urban redevelopment programs destroyed more housing than they built. Ninety percent of all housing destroyed by urban renewal was not replaced; two-thirds of those displaced were Black or Latino. As urban renewal projects destroyed taxable properties, the burden for maintaining social services was shifted onto fewer and fewer residents - encouraging white flight and making the poor poorer.

1950s-1960s: Economy and housing boom
During the 1950s and 1960s, more and more white homeowners moved to the suburbs. Federal and state tax dollars subsidized the construction and development of municipal services for suburbs, in turn fueling commercial investment. Freeways in major cities connected white suburbs to central business districts, but they were often built through core areas of Black settlement. Many urban Black areas lost their neighborhood shopping districts and successful small businesses as a result. By the 1960s, many businesses began moving jobs from cities to suburbs, further concentrating wealth and needed tax dollars away from urban areas.

1960s: Fair housing laws passed
In the 1960s, the government made several efforts to end housing discrimination, most notably Kennedy's 1962 Executive Order and the 1968 Fair Housing Act. Although these were important, they had little practical impact. Appraisers continued to factor race into their assessments and some practices, such as racial steering and predatory lending, continue to this day. It was not until 1988 that fair housing laws were amended to expand their scope and include important enforcement provisions. In the 1970s, '80s and '90s, housing prices rose dramatically, and white homeowners who benefited from discriminatory federal policies were able to sell their homes at great profit. Meanwhile, minority groups who had been denied federal assistance had homes worth far less or faced an even higher cost of entry into the housing market.


CONCLUSION

Residential segregation didn't happen by accident. The U.S. federal government took many steps to channel resources and opportunities to whites and away from nonwhites, resulting in an enormous wealth gap that persists today.

In 1993, 86% of suburban whites still lived in places with a Black population of less than 1%. The 2000 Census showed that whites are still more likely to be segregated than any other group. Today, 71% of whites own their own home, compared to 44% of African Americans. Black and Latino mortgage applicants are 60% more likely than whites to be turned down for loans.

As housing gets more expensive and wealth gets passed down from generation to generation, the legacy of past discrimination persists, giving whites and nonwhites vastly different life chances.

http://www.pbs.org/race/000_About/002_06_a-godeeper.htm

This current batch of predatory lending practices were dispicable... people were lied to, mislead and misinformed. Had the bankers, mortage brokers  not been so greedy they would have gotten their money AND a decent return on their invest. So many renters pay much more to rent over buying a home and passing on a legacy of home ownership and wealth to their children.  Even with little or no money down, banks could make a killing simply on how mortgages are calculated... (which by the way IS another story) by the time you finish paying off a loan, you've probably have paid 2x over what the home actually costs. That's over a 200% return rate. But that wasn't enough for some greedy banks and financial firms.

[Legacy]

No one ever said that there weren't discriminatory practices in the past. Notice, all the stuff you listed was prior to 1964 when it was LEGAL to discriminate. However, that has nothing to do with the sub-prime loans which were given out recently. None of that stuff you listed is at the root of this financial crisis. And no one is stopping black folx in 2008 from economic opportunity via education or entrepreneurship. You act like there isn't a black middle class who all have good incomes, nice homes, etc. What you're asserting would make sense if NO black people had advanced since the laws have changed but that's clearly not the case.

Therefore, the issue isn't what happened in the 30s thru the 60s to assist whites with home ownership. The issue is from the 1970s to now, what's the difference between the black folx who have achieved middle class status & those who are stuck in poverty once the discriminatory practices of the past were ended? What, government assistance or lending practices? They're all black folx right?


The fact is, if you read the articles, Asians were given loans with higher frequency than whites prior to deregulation. The fact is banks weren't discriminating based on race but based on where they could lend money & make money as a result. If race was the mitigating factor, deregulation wouldn't have made "racist" lending institutions give loans to blacks, latinos, etc.

Also, it's the height of double-speak to say that "race" is why they wouldn't give "underserved communities" loans (redlining) yet once congress basically says, "Hey, we'll absorb all your risks via Fannie Mae & Freddie Mac", then we claim that it's predatory lending to give those same "underserved communities" loans. It's also contradictory to think that any lending institution would be "predatory" yet losing money to the point where they're going out of business? Why would any company do that? They're predators who are lending money to lose money & eventually go bankrupt? Doesn't sound very logical to me... Those are the worst predatory lenders in the history of the world.

It's clear the motives of the lending institutions have nothing to do with race & everything to do with profit. They weren't willing to give out out money for risky home investments initially but when the government said we'd back up those risky investments they gave out a loan to everyone regardless of credit worthiness & this is the result. If you want to blame anyone, blame the congress for interjecting themselves into the free market & essentially promising to back any loan the lending institutions wanted to give out. Those financial institution which decided to hand out money to everyone deserve to fail because of their irresponsible behavior however congress gave them a safety net BEFORE they engaged in those practices & had little to no choice but to bail them out as they said they would.