A Bit of History of Gov't Regulation and Federal Programs such as Fannie Mae

[one...two...tree 2,762]

(This is the guy O'Reilly should be shouting at...)

Reagan's Socialism for the Rich.

Under President Reagan in the 80s, the economic problems of the prior decade were blamed on the economic regulations that attempted to keep the market functional and honest since the New Deal, rather than upon US dependance upon foreign oil, an essential commodity with a price set by a cartel.

Rather than seeking to free the US from enslavement to foreign oil, Reagan oversaw the removal of regulatory oversight, allowing market professionals to rapidly syphon wealth from the market. This created new wealth and prosperity for the well connected, while creating exaggerated economic risk that would end up being thrown upon taxpayers.

Reagan Era deregulation particularly manipulated the S&L industry, which was now backed up by full Federal insurance on deposits while being free from the regulatory oversight on regular banks.

Rather than being free market economics that trickled down to the poor, Reagan-era deregulation set up a socialist elite system where members of the elite class got a free, insured ride to profit from high risk investments while the rest of the nation was expected to suffer the brunt of the high risk revolution without complaint and only gain any benefit from their labor that might trickle down out of the excess of profits from high above.

The S&L Deregulation Scandal.

Charles Keating of the Lincoln S&L of California took the lead in making increasingly risky investments in junk bonds and real estate investments, where the risk of failure was socialized by Federal insurance in case of default, but where the potential for profits were unrestricted by the regulations that controlled the banking industry. This "socialism for the rich through deregulation" plan was pushed forward by Senator Phil Gramm, a Democrat turned Republican under Reagan.

When regulators at the Federal Home Loan Bank Board began to push for new rules to limit risky S&L investments being made under Federal insurance, Keating called for support from five Senators who he had bathed in campaign contributions and perks, and insisted they stop regulators from controlling his ability to make windfall profits with zero risk.

As the S&L profiteering on Federally insured, high risk investments began to fall out of control, an investigation into the "Keating 5" Senators began in the late 80s. Details weren't revealed to taxpayers and voters until Reagan's successor, President George H W Bush, was elected. Then the S&Ls collapsed, leaving the Federal government to pay for the damages.

Keating went to jail and the political careers of all but two of the Keating 5 Senators ended: John Glenn and John McCain were merely criticized in the investigation for using bad judgement; the rest were charged with interfering with federal oversight of Keating's S&L activities.

Energy and Banking Deregulation Scandals.

The impact of the government paying out $150 billion to prop up depositors of the 747 failed S&Ls resulted in budget deficits and a drag on the economy that caused the 1990 recession. It also disgraced President Bush and ushered in the Clinton administration, which subsequently presided over the longest peacetime expansion of US history. In the Senate however, Gramm continued his efforts to deregulate banking and energy under "reform" laws that stripped away Depression Era regulations.

The Commodity Futures Modernization Act of 2000 ("the Enron loophole") deregulated the energy industry, giving the elite the ability to profiteer in energy markets isolated from risk or accountability, just like the S&Ls in the 80s. Artful deregulation laws resulted "special purpose entities" being used to create accounting fallacies that made energy companies such as Enron appear to have profits that didn't really exist, while its accountants hit its debt. Enron's fraud-based failure wiped out billions in investor wealth and helped contribute to the dotcom recession.

Under President George W Bush, Gramm's efforts to deregulate banking continued to have impacts on the mortgage industry.

The Secondary Mortgage Industry.

Fannie Mae, an entity set up during the New Deal to create liquidity in the mortgage market, had been spun off in 1968 to become a private corporation. Freddie Mac was created two years later by Congress to end Fannie Mae's monopoly over the secondary mortgage market by creating competition.

Both functioned to hold mortgages made by banks, allowing the bank to service the mortgage through those entities while handing it off to the Fannie Mae and Freddie Mac in exchange for new capital that could be used to grant additional mortgages. While the mortgages handled by both are explicitly not Federally insured, it is in the interests of the US government to prevent a full collapse of the two companies that hold roughly half of the nation's $12 trillion in mortgages.

This month, the Federal government took over both under conservatorship, which dismissed their CEOs and board members and installed new directors. The two entities also distributed new shares of common stock to the government. In order to pay for this massive expansion of Federal government into the secondary mortgage industry, the government's debt ceiling was increased to $10.7 trillion. Taxpayers could end up with tens of billions in liabilities to cover, equivalent to a few months' of spending on the Iraq war.

http://www.roughlydrafted.com/2008/09/20/t...die-mac-attack/

[symbiosis 0]

(This is the guy O'Reilly should be shouting at...)

Reagan's Socialism for the Rich.

Under President Reagan in the 80s, the economic problems of the prior decade were blamed on the economic regulations that attempted to keep the market functional and honest since the New Deal, rather than upon US dependance upon foreign oil, an essential commodity with a price set by a cartel.

Rather than seeking to free the US from enslavement to foreign oil, Reagan oversaw the removal of regulatory oversight, allowing market professionals to rapidly syphon wealth from the market. This created new wealth and prosperity for the well connected, while creating exaggerated economic risk that would end up being thrown upon taxpayers.

Reagan Era deregulation particularly manipulated the S&L industry, which was now backed up by full Federal insurance on deposits while being free from the regulatory oversight on regular banks.

Rather than being free market economics that trickled down to the poor, Reagan-era deregulation set up a socialist elite system where members of the elite class got a free, insured ride to profit from high risk investments while the rest of the nation was expected to suffer the brunt of the high risk revolution without complaint and only gain any benefit from their labor that might trickle down out of the excess of profits from high above.

The S&L Deregulation Scandal.

Charles Keating of the Lincoln S&L of California took the lead in making increasingly risky investments in junk bonds and real estate investments, where the risk of failure was socialized by Federal insurance in case of default, but where the potential for profits were unrestricted by the regulations that controlled the banking industry. This "socialism for the rich through deregulation" plan was pushed forward by Senator Phil Gramm, a Democrat turned Republican under Reagan.

When regulators at the Federal Home Loan Bank Board began to push for new rules to limit risky S&L investments being made under Federal insurance, Keating called for support from five Senators who he had bathed in campaign contributions and perks, and insisted they stop regulators from controlling his ability to make windfall profits with zero risk.

As the S&L profiteering on Federally insured, high risk investments began to fall out of control, an investigation into the "Keating 5" Senators began in the late 80s. Details weren't revealed to taxpayers and voters until Reagan's successor, President George H W Bush, was elected. Then the S&Ls collapsed, leaving the Federal government to pay for the damages.

Keating went to jail and the political careers of all but two of the Keating 5 Senators ended: John Glenn and John McCain were merely criticized in the investigation for using bad judgement; the rest were charged with interfering with federal oversight of Keating's S&L activities.

Energy and Banking Deregulation Scandals.

The impact of the government paying out $150 billion to prop up depositors of the 747 failed S&Ls resulted in budget deficits and a drag on the economy that caused the 1990 recession. It also disgraced President Bush and ushered in the Clinton administration, which subsequently presided over the longest peacetime expansion of US history. In the Senate however, Gramm continued his efforts to deregulate banking and energy under "reform" laws that stripped away Depression Era regulations.

The Commodity Futures Modernization Act of 2000 ("the Enron loophole") deregulated the energy industry, giving the elite the ability to profiteer in energy markets isolated from risk or accountability, just like the S&Ls in the 80s. Artful deregulation laws resulted "special purpose entities" being used to create accounting fallacies that made energy companies such as Enron appear to have profits that didn't really exist, while its accountants hit its debt. Enron's fraud-based failure wiped out billions in investor wealth and helped contribute to the dotcom recession.

Under President George W Bush, Gramm's efforts to deregulate banking continued to have impacts on the mortgage industry.

The Secondary Mortgage Industry.

Fannie Mae, an entity set up during the New Deal to create liquidity in the mortgage market, had been spun off in 1968 to become a private corporation. Freddie Mac was created two years later by Congress to end Fannie Mae's monopoly over the secondary mortgage market by creating competition.

Both functioned to hold mortgages made by banks, allowing the bank to service the mortgage through those entities while handing it off to the Fannie Mae and Freddie Mac in exchange for new capital that could be used to grant additional mortgages. While the mortgages handled by both are explicitly not Federally insured, it is in the interests of the US government to prevent a full collapse of the two companies that hold roughly half of the nation's $12 trillion in mortgages.

This month, the Federal government took over both under conservatorship, which dismissed their CEOs and board members and installed new directors. The two entities also distributed new shares of common stock to the government. In order to pay for this massive expansion of Federal government into the secondary mortgage industry, the government's debt ceiling was increased to $10.7 trillion. Taxpayers could end up with tens of billions in liabilities to cover, equivalent to a few months' of spending on the Iraq war.

http://www.roughlydrafted.com/2008/09/20/t...die-mac-attack/

Yep. And have we forgotten the Savings & Loan bailout. Problem at same source.

[one...two...tree 2,762]

Yep. And have we forgotten the Savings & Loan bailout. Problem at same source.

The current crisis just may end up being the nail in McCain's political coffin. I've been reading a lot of Right Wing blogs and many of them keep repeating that they were 'never against government regulation' but it was always a dispute over how much and what kind of regulation. I think it's just typical scapegoat tactics by the Right Wingers instead of owning up to the failed philosophy of laissez-faire economics. They're reason for wanting to do away with regulations was because the Guvmint could not be trusted, is incompetent, and would only stifle the market. Now they're pointing the finger at Congressmen Barney Frank as their latest scapegoat and suggesting that Fannie Mae and Freddie Mac failed because of his incompetence. They're so full of sh!t it's astounding.

Edited October 3, 2008 by Jabberwocky

[Pinocchio Liberal 268]

Thats hillarious. How far you gotta go back to find a republican to blame. July 2008, Barney Frank chair of finance committe said freddie and fannie is solid.

Freddie and fannie are NOT goverment programs!

[one...two...tree 2,762]

Thats hillarious. How far you gotta go back to find a republican to blame. July 2008, Barney Frank chair of finance committe said freddie and fannie is solid.

Freddie and fannie are NOT goverment programs!

Fannie Mae began as a Federal program - hence why it's an acronym for Federal National Mortgage Association.

....

Fannie Mae was founded as a government agency in 1938 as part of Franklin Delano Roosevelt's New Deal to provide liquidity to the mortgage market. For the next thirty years, Fannie Mae held a virtual monopoly on the secondary mortgage market in the United States.

In 1968, to remove the activity of Fannie Mae from the annual balance sheet of the federal budget, it was converted into a private corporation.^[6] Fannie Mae ceased to be the guarantor of government-issued mortgages, and that responsibility was transferred to the new Government National Mortgage Association (Ginnie Mae). In 1995, Fannie Mae began receiving affordable housing credit for buying subprime securities. In 1999, Fannie Mae, the nation's biggest underwriter of home mortgages, was under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In 2000, due to a re-assessment of the housing market by HUD, anti-predatory lending rules were put into place that disallowed risky, high-cost loans from being credited toward affordable housing goals. In 2004, these rules were dropped and high-risk loans were again counted toward affordable housing goals.^[7]

....

The mortgage crisis from late 2007

Following their mission to meet federal Housing and Urban Development (HUD) housing goals (HUD government goals), GSE's such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks) have strived to improve home ownership of low and middle income families, underserved areas, and generally through special affordable methods such as "the ability to obtain a 30-year fixed-rate mortgage with a low down payment... and the continuous availability of mortgage credit under a wide range of economic conditions." (HUD 2002 Annual Housing Activites Report) Then in 2007, the subprime mortgage crisis began. An increasing number of borrowers, often with poor credit that were were unable to pay their mortgages - particularly with adjustable rate mortgages (ARM), caused a precipitous increase in home foreclosures. As a result, home prices declined as increasing foreclosures added to the already large inventory of homes and stricter lending standards made it more and more difficult for borrowers to get mortgages. This depreciation in home prices led to growing losses for the GSEs, which back the majority of US mortgages. In July of 2008, the government attempted to ease market fears by reiterating their view that "Fannie Mae and Freddie Mac play a central role in the US housing finance system". The Treasury Department and the Federal Reserve took steps to bolster confidence in the corporations, including granting both corporations access to Federal Reserve low-interest loans (at similar rates as commercial banks) and removing the prohibition on the Treasury Department to purchase the GSEs' stock. Despite these efforts, by August 2008, shares of both Fannie Mae and Freddie Mac had tumbled more than 90% from their one-year prior levels.

....

To suggest that Barney Frank or anyone specifically as the scapegoat is pure bull sh!t. Deregulation created this mess and the Republican Party has been the champion of deregulation since Reagan took office. The revelance of that is that such issues like the S&L crisis in the 80's were a direct result of that laissez-faire economic policy. Fannie Mae and Freddie Mac didn't cause this crisis....it was the result of deregulation which allowed for predatory lending.

[Pinocchio Liberal 268]

Partisanship aside, there are dirty hands on both sides! its time to clean it up! Bill Oreilly is an american just like all of us and is very pissed like we all should be.

He did whats needed to be done a long time ago,callin these idiot politicians out on theyre bullsh!t.