Whose policies led to the credit crisis?

[cwo_ghwebb]

The credit crisis and the lack of oversight over government-subsidized lenders like Fannie Mae and Freddie Mac occurred on the watch of George Bush, and many blame his economic team for their lack of oversight in the collapse. Barack Obama has made this point one of his major campaign themes, arguing that John McCain would provide more of the same failures that Bush did. However, what many do not recall is that Bush wanted to tighten oversight with a new regulatory board for Fannie Mae, Freddie Mac, and other government recipients for the express purpose of addressing bad loan practices — and Democrats blocked it.


The New York Times reported this five years ago:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.


Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.


The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.


The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.



Whose policies led to the credit crisis?

Do we really want to regress to the failed financial policies of the Democrats?


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[ImnoMensa]

One of the things that caused the failures was that minorities didnt qualify for loans.

So: what did we do ?? we qualified everyone.

The liberals can blame it on themselves, thats where the blame lies.

 

[bcp]

One of the things that caused the failures was that minorities didnt qualify for loans.

So: what did we do ?? we qualified everyone.

The liberals can blame it on themselves, thats where the blame lies.

this is true, and the major cause of the problem.
minorities were being denied loans at a higher rate than non minorities, so during the Clinton admin there were investigations into the despairity of the lending institutions. It was discovered that (as we already knew) the minorities were twice to three times as likely to not qualify.
naturally, as with all studies of this type, the reason was not a major concern.
so, the banks in an attempt to end the racist loan process were forced to find a way to loan 500 or 600k to a family that did not earn the income for that purchase.
the way it was done was to give them a loan with an interest only payment for the first 5 0r 10 years, then, the full payment of principal and interest would be due each month there after.
it was assumed that the loan holder would be making more money by that time, and the full payment would be well within his/her means.

sounded good on paper. Remember, one of Clintons bragging points about his administration was how many more people owned homes under his watch.

Now here is what happened.
the housing market slumps a little near the end of the interest only term, they cant sell for what they owe.
they did not maintain pay increases sufficient to cover the full payment.
since they only paid interest, there was no equity to fall back on to re-negotiate their loan.
so, they cant make the payments, they cant sell because they dont have the capital to pay off the upside down portion of the home, and the dont have equity to negotiate with the bank.

they get forclosed on.
Bush, gets blamed because it came about on his watch.

sooner or later the libs are going to have to understand that not every disparity between the races can be called racism.