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Ex-Countrywide Exec Blows The Lid Off The Systemic Fraud At The Company



Eileen Foster, a former senior executive at Countrywide Financial, told CBS's "60 Minutes" Steve Kroft that mortgage fraud was a way of business.

"From what I saw, the types of things I saw, it was — it appeared systemic. It, it wasn't just one individual or two or three individuals, it was branches of individuals, it was regions of individuals," she told Kroft.

Foster, an ex-senior vice president at the mortgage lender tasked with monitoring and investigating possible fraud, said she found evidence of widespread mortgage fraud during an investigation in Boston.

"All of the — the recycle bins, whenever we looked through those they were full of, you know, signatures that had been cut off of one document and put onto another and then photocopied, you know, or faxed and then the — you know, the creation thrown — thrown in the recycle bin," she said.

What's more is she told "60 Minutes" that Countrywide employees had a financial incentive to make these risky loans.

"The loan officers received bonuses, commissions. They were compensated regardless of the quality of the loan. There's no incentive for quality. The incentive was to fund the loan. And that's — that's gonna drive that type of behavior."

In 2008, Bank of America agreed to acquire Countrywide for basically scrap change. Foster received a promotion at BofA.

Shortly after, the mortgage lender was being investigated for possible fraud and she was going to have to speak with government regulators. However, she was ousted by the company before she could answer regulators' questions.

The whistleblower recently received nearly $1 million in compensation for wrongful termination from BofA, "60 Minutes" reported.

If Foster's allegations are true, it could be a major bombshell, especially her account of what happened in the Boston Countrywide offices.

That's because last week, Massachusetts's Attorney General Martha Coakley announced she is suing Bank of America, JPMorgan, Wells Fargo, Citigroup and Ally Financial for their role in the foreclosure mess.


Read more: http://www.businessinsider.com/countrywide-mortgag e-fraud-60-minutes-2011-12#ixzz1fi5Eqb67

Good thing we deregulated fraud and holder is prosecuting.

Yeah Holder sucks.

Obama said nothing illegal happened.

What a goddamned joke.


Remember Jerry, i was the first guy on here with

Stop the looting and start prosecuting.

Posted 2011-10-08 12:39
by Karl Denninger
in Editorial

So Obama Said....
 

the other day that "What Wall Street did was immoral, but it wasn't illegal" in response to a question about why nobody had gone to jail.

Really Mr. President?  None of the following is illegal?

Laundering drug money.  Wachovia admitted to doing it in court.  They got a "deferred prosecution agreement" and not only did nobody go to jail nobody other than a few bloggers like myself raised hell about it until days before that agreement expired.  Then, magically, it got news coverage.  This is a clear black-letter felony; where are the handcuffs?

The former chief risk officer for Citifinancial testified under oath before the FCIC that the company knowingly sold loans on to investors that did not meet their quality guidelines and published claims. In fact, he testified that by 2007 80 percent of those loans were defective. This is functionally identical to selling you a car and rolling back the odometer, peddling tainted medicine or selling melamine-laced baby formula.  There is nothing complicated about this and there is under-oath testimony establishing that it was not an accident or an "error in judgment" as it continued for more than a year after it became known and was the subject of internal memos to corporate officers.  This is not my conjecture or analysis, it is factual sworn testimony before a government body.  Where are the damned handcuffs?

Ponzi Schemes generally.  Those are all illegal.  They locked Charlie up for it (the originator of the name, natch) and more recently Bernie Madoff went to prison.  Ok, Mr. President, how about all the stock analysts, the market callers, and pension fund managers along with the real estate industry that have been pumping 8, 10 or 11% annualized returns for the last three decades?  These claims are all pyramid schemes and thus by the very definition of such a scheme are illegal.  An 8% "annual return" for 45 years, the average working man's period of effort (20 to 65) produces a return of nearly 32 times the original amount invested.  The 9% growth rate of medical cost over the last year (close to the premium increases over the last decade in annualized terms) for the person of age 50 that the government claims "will not see their Medicare harmed" has the annual cost of their medical insurance (assuming no increase due to age or greater risk) go from $5,000 a year to $100,000 by the time they're 85!  The claims of Realtors that home prices would go up 10% "for the indefinite future" turns a $150,000 house into a $4.21 million house in 35 years.  None of this was ever going to actually happen, and it still won't.  Why did Charles Ponzi and Bernie Madoff go to prison when your administration, every member of Congress, those on Wall Street and otherwise in the "finance and investment" business community have not for the exact same offense?

Jefferson County Alabama jailed several politicians and others for bribery and other crimes related to the infamous "sewer bond" nonsense.  Why have no bankers gone to prison?  It takes two people to commit bribery and similar offenses - someone who offers a bribe, and someone who accepts a bribe.  One party went to prison while the other did not.  No crimes in this case among the banksters?  Pull the other one Mr. President; the damage here remains in that the water bills of these residents remains at ridiculously elevated levels as the financial harm done to the county was not forcibly returned from those banksters.

Perjury is a felony in most circumstances.  Banksters admitted to more than 100,000 instances of it by withdrawing perjured ("robosigned") affidavits. Just as with the testimony under oath in the case of Citifinancial, just as in the Wachovia admission of drug money laundering, in this case the violation of the law is clear.  Perjury can only be cured at "no penalty" up until it is clear that the defective statement or filing will be discovered; once you're "caught" you cannot avoid liability by withdrawing the filing.  Whether someone was paying their mortgage or not is immaterial as to whether filing a false affidavit is a criminal matter -- it is.  Again, where are the damned handcuffs?

Sarbanes-Oxley criminalized false accounting statements.  There have been multiple bank failures by public companies that filed balance sheets under penalty of criminal prosecution were they to be false just weeks before they blew up -- balance sheets that showed perfectly-healthy institutions.  The FDIC has documented dozens of bank failures, privately-held and publicly-traded, where those balance sheets were proved factually false, as the losses have been 20, 30, 40% or even more just a few weeks later.   It is beyond comprehension that the assets in question could have actually lost 30 or 40% of their value within that period of time.  The only rational explanation is that these financial statements were a work of fiction.  Sarbanes-Oxley makes this a criminal matter.  Again, where are the handcuffs?
I and many other bloggers and "alternative media outlets" have spent four years documenting these outrages and showing through simple mathematical analysis that the claims made by these charlatans, including yourself Mr. President, are mathematically impossible.  That's the definition of a pyramid scheme.  They're illegal because they cannot, mathematically, work.  It is therefore illegal to hawk them to the public because they are by definition abusive; they will ultimately result in those who believe in them losing their money.

Your claim, Mr. President, that these acts were "morally repugnant but not illegal" is a lie.  The simple fact of the matter is that your administration is intentionally refusing to enforce long-standing law and by doing so you and your administration have lent official support to an organized effort to defraud and rob the American public.


http://market-ticker.org/post=195649

Remember Jerry, i was the first guy on here with

Stop the looting and start prosecuting.


You did say that. I don't think that if the republicans were in charge that they would prosecute either. This sham is why their is an occupy wall street movement.

Unprovable assertion.

You know it's true. They let it happen on their watch. Bushco cut back on regulators. They want that Wall Street money, too.

Fraud is not a regulation. It is illegal.

Geithner was the head regulator.


Shall I post the vid in which frank et al argued against stricter regulation Fannie and Freddie?


Clinton signed the repeal of glass steagall.


Give up the nonsense.

Obama and holder have done nothing, they are in charge.

A A A | Email | Print | Share

May 12, 2011
Blame Washington, D.C., Not Wall Street
By Investor's Business Daily
Subprime Scandal: The left is unhappy that no high-profile bankers have gone to jail in the financial crisis. But the real culprits were - and still are - in Washington. They've gotten off scot-free.

A growing chorus is complaining that federal prosecutors have dragged their feet in the aftermath of the mortgage mess. Despite a raft of referrals against financial giants alleging securities fraud and "predatory lending," no senior bank executives have been charged or imprisoned.

The media elite demand to know why it is that almost three years after the meltdown, Goldman Sachs CEO Lloyd Blankfein, ex-AIG CEO Hank Greenberg and other Wall Street honchos aren't rotting behind bars.


The New York Times, for one, is directing its venom at Wall Street enforcers and regulators like Timothy Geithner and Andrew Cuomo. The paper says the former New York Fed chief and New York attorney general cut a deal in 2008 to go easy on Wall Street firms to focus on "stabilizing world financial markets."

But what they did or didn't do to investigate the mess is not the issue. The real controversy is why they weren't investigated for their own role in the mess. Geithner and Cuomo no doubt worried that if they leaned too hard on bankers, their own guilt in the crisis would be exposed in court showdowns.

Before the crisis hit, Geithner was well aware of the risk building in the system. Yet he sat on his hands. The New York Fed had more oversight responsibilities for more institutions that failed or came under stress than any other agency. Yet the Financial Crisis Inquiry Commission, chaired by ex-California State Treasurer Phil Angelides, never investigated Geithner's office.

Angelides, a Democratic operative rumored to be Geithner's heir apparent at Treasury, failed to hold a single hearing focusing on the New York Fed. Nor did he order a case study on its role in the crisis - unlike the scores of case studies his investigators conducted putting banks in a bad light.

And he sandwiched Geithner into an unrelated hearing, during which the Treasury secretary managed to avoid any questions about his role as head of the New York Fed. His testimony was confined to the economy and when it might be coming back.

Subscribe to the IBD Editorials Podcast Angelides also let fellow Democrat Cuomo off the hook, though the historical record is clear that Clinton's housing secretary plunged Fannie Mae and Freddie Mac into the dangerous subprime market - while insisting they ease their "rigid" credit requirements.

HUD's own documents show that Cuomo prodded Fannie and Freddie to dominate what had been a risky fringe industry, arguing that they'd find their "goals-qualifying" mortgages there.

Just before leaving office in 2001, Cuomo required that the now-failed mortgage giants for the first time devote fully half their business to loans tailored to minority borrowers with poor credit. His quotas remained in effect through the Bush years.

Cuomo argued that Fannie and Freddie's "expanded presence in the subprime market could be of significant benefit to lower-income families, minorities, and families living in underserved areas." So he directed them to "play a significant role in the subprime market."

Cuomo admitted that "there'll be a higher default rate on those mortgages." But he didn't care, because as he put it, this was "affirmative action" lending - and he wanted more of it. "It will help reduce the huge homeownership gap dividing whites from minorities and suburbs from cities," he said.

Cuomo also pushed Fannie and Freddie to buy subprime securities to earn credits against his drastic affordable-housing goals. They in turn drove Wall Street demand for subprime investment. In 2004, HUD credited Cuomo's policies for "increasing (Fannie and Freddie's) business in the subprime market."

But even before the subprime bubble burst, Fannie and Freddie strained under the tougher mandates, absorbing some $200 million in annual costs just to subsidize the risky political loans HUD freighted them with.

Though a prime suspect in the financial crisis, Cuomo managed to escape scrutiny by the Angelides commission during his successful run for New York governor last year.

Instead of clamoring for indictments against bankers, the media should hold these policymakers accountable for their own hand in the crisis. Bankers simply complied all too well with their reckless social mandates.

 

"Fraud is not a regulation. It is illegal.

Geithner was the head regulator."

Who appointed him?



"Shall I post the vid in which frank et al argued against stricter regulation Fannie and Freddie? "

No need to. Frank admitted that he made a mistake. Still they were in the minority. What did the majority party do about this problem? I'll give you the answer. It was nothing.


Clinton signed the repeal of glass steagall.

Yeah and what was the name of the bill that he signed and who wrote the bill? Do you even know the answer to that one? What party did the authors of that bill belong to?


Obama and holder have done nothing, they are in charge.

That is true but it is also true that the republicans did nothing and let this unfold.

maybe frank threatened a filibuster...you know how much power that holds

Filibuster of what?

<<<Remember Jerry, i was the first guy on here with

Stop the looting and start prosecuting.




no you werent.

>maybe frank threatened a filibuster...you know how much power that holds


Frank was in the House of Reps, where there is no filibuster.

http://www.alternet.org/story/153217/the_absurd_zo mbie_lie_about_the_economy_right-wingers_desperate ly_cling_to_--_and_why_it%27s_totally_wrong?akid=7 940.279257.p0VD59&rd=1&t=8

>>>no you werent.

i was thinking the same thing.

greed.

>>Fraud is not a regulation. It is illegal.

Geithner was the head regulator.

I gotta say I dont think this kind of fraud falls under the Geithner umbrella or even under a govt regulation umbrella.

cutting and pasting signature is just straight up criminal fraud enacted by individuals and should have been reported. while I know the whole world will rally around this whistle blower i think SHE should be in jail as well.

If my boss does something illegal I tell someone even if it means my job yet she stood around collecting incentives and didnt take it to authorities???

thats kinda bullshit in my book.

the blame for the subrime mess falls in the laps of Wall Street, the govt and especially the sub prime borrower

Who's responsible for the mortgage mess?


Investigative journalist says government pressured lenders to make risky loans to low-income, high-risk homebuyers who eventually defaulted.



As the High Desert and the rest of America sort through the debris of the financial crisis, many are still asking: What went wrong?

How were so many faulty loans approved for people who couldn't afford them? And who's really accountable for the mortgage collapse of 2008?

Investigative journalist Paul Sperry outlines his answers in his recent book, "The Great American Bank Robbery."

While many look to the Wall Street banks, Sperry feels the real culprit wasn't greed from the right, but faulty policies on the left.

"Government social engineers - from both the Democrat and the Republican Parties - masterminded a massive bank heist with help from accomplices in the nonprofit sector," Sperry wrote.

In his book, Sperry explains that lenders were pressured by government programs such as the Community Reinvestment Act, a federal law intended to reduce discriminatory lending in low-income neighborhoods. The Department of Housing and Urban Development also set affordable housing goals for Fannie Mae and Freddie Mac, giving them incentives to approve loans for low-income, high-risk buyers.

The consequence, of course, was that many of those buyers couldn't make their payments.

"While Wall Street contributed to the sub-prime feeding frenzy," Sperry allowed, "it simply marketed the sub-prime securities that Washington mandated Fannie and Freddie to securitize and guarantee in order to earn Affordable Housing Goals credits from its mission regulator, HUD."

In fact, Sperry says, Fannie and Freddie guaranteed more bad loans than anyone.

But when the government assembled its Financial Crisis Inquiry Commission to investigate the causes of the crisis, the panel focused heavily on Wall Street banks.

"Wall Street honchos from JP Morgan, Goldman Sachs, Morgan Stanley, and Bank of America landed in the pillories first, instead of Washington executives from Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) and officials from their federal regulator, the U.S. Dept. of Housing and Urban Development, who have far more to answer for," Sperry wrote. "Under pressure from Washington, the congressionally chartered and tax-payer subsidized agencies underwrote $1.8 trillion of the sub-prime and other toxic home loans that nearly KO'd the financial system.”

Sperry's book was published shortly before the Financial Crisis Inquiry Commission's findings were released in January. He warned that the commission was a frame-up: "Commissioners have set up Wall Street bankers to take the fall."

In a recent online interview, Sperry said the commission's report was worse than he feared.

"Not only did the commission whitewash government's role in the crisis, they stonewalled and even censored the one commissioner who tried to investigate that role," Sperry said. "In fact, chairman Angelides and the other Democrats on the panel cut 100 pages of commissioner Wallison's dissent from the final report now in bookstores -- thereby denying Americans a huge chunk of the truth about what actually caused the crisis."

Two dissenting opinions on the commission's findings were issued: one by Republican commissioner Peter J. Wallison, one by the remaining three Republicans on the commission.

Sperry's prescription for avoiding the same mistakes in the future is decisive: "Abolish the two failed government social experiments behind the crisis," he said.

The Community Reinvestment Act and the affordable housing charter regulating Fannie Mae and Freddie Mac have done far more harm than good, Sperry believes.

"These opportunists did minorities no favors by pushing them into mortgages they couldn't afford," Sperry said. "They've been hit hardest by the wave of foreclosures and the recession. This is the real tragedy."

http://www.vvdailypress.com/articles/sperry-27229- wall-street.html





Frank relentlessly defended Fannie Mae and Freddie Mac, the "government sponsored entities" at the center of the housing meltdown. National Review editorialized: "It is as a champion of a different kind of pay-for-play operation, Fannie Mae and Freddie Mac, that the congressman did the most damage to the country." Economist Thomas Sowell wrote last year, "No one contributed more to the policies behind the housing boom and bust, which led to the economic disaster we are now in, than Congressman Barney Frank."

Sowell explains: "His powerful position on the House of Representatives' Committee on Financial Services gave him leverage to force through legislation and policies which pressured banks and other lenders to grant mortgage loans to people who would not qualify under the standards which had long prevailed. ... With the federal regulators leaning on banks to make more loans to people who did not meet traditional qualifications — the 'underserved population' in political Newspeak — and quotas being given to Fannie Mae and Freddie Mac to buy more of these riskier mortgages from the original lenders, critics pointed out the dangers in these pressures to meet arbitrary home ownership goals. But Barney Frank counter-attacked these critics."

Whom did Frank blame when the housing meltdown — and Freddie and Fannie's role in it — became obvious even to Frank? "Right-wing Republicans," he said.




But wait, Barney was sexually involved with a Fannie Mae executive during a time when he was voting on laws affecting the organization. The final cost of the Fannie/Freddie bailouts will run into the hundreds of billions of dollars, and the real damage that the organizations did to the U.S. economy — and the world economy, for that matter — probably is incalculable."

Barney was sexually involved with a Fannie Mae executive during a time when he was voting on laws affecting the organization.

Economist Thomas Sowell wrote last year, "No one contributed more to the policies behind the housing boom and bust, which led to the economic disaster we are now in, than Congressman Barney Frank."



But thanks to the media's love and support, the bullying Congressman Frank gets to leave Congress with his head high instead of what he deserves — the deep and widespread scorn of the American people.




Whom did Frank blame when the housing meltdown — and Freddie and Fannie's role in it — became obvious even to Frank? "Right-wing Republicans," he said.

It was the packaging and repackaging of mortgages that made it attractive to banks. They knew they could loan money to anyone and sell the loan off at a neat profit and they could keep doing that until, well, the economy was wrecked.

The Absurd Zombie Lie About the Economy Right-Wingers Desperately Cling To -- And Why It's Totally Wrong

Home loans didn't bring on the recession; gimmicky financial instruments bloated to 100 times their value are what caused all this pain.


December 4, 2011 |


Wall Street turned a few million home-loans into what Warren Buffet called "economic weapons of mass destruction," cratered the global economy and then, when the bubble burst, turned around and insisted on a massive bailout courtesy of the American tax-payer.

That rightly infuriated most Americans, but it has nonetheless become something of an article of faith among conservatives that Wall Street bears little blame for the Great Recession. The dominant narrative on the right today is that "big government" is ultimately responsible for the crash. In the words of one of Andrew Breitbart's bloggers, Democratic lawmakers like Barney Frank and Chris Dodd “brought down the banking industry by forcing banks to give loans to people who couldn’t afford them.”

That such a ludicrous claim could gain such wide traction is a testament to the intellectual debasement of modern conservative discourse. No bank was ever “forced” – or coerced or incentivized by the government in any way – to make a bad loan.

But the claim falls apart even before one digs into the particulars, for the simple reason that people's mortgages didn't bring down the banking system in the first place.

The entire subprime mortgage market was worth only $1.4 trillion in the fall of 2007, and that includes loans that were up-to-date. As former Goldman Sachs trader Nomi Prins noted in her book, It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street, the federal government could have bought up every single residential mortgage in the country – good, bad and in between – and it would have cost a trillion less than the bailouts.

Short of that, notes Prins, if the crisis were really about people buying McMansions that they couldn't afford, “we could have solved it much more cheaply in a couple of days in late 2008, by simply providing borrowers with additional capital to reduce their loan principals. It would have cost about 3 percent of what the entire bailout wound up costing, with comparatively similar risk.”

What brought down the global economy was as much as $140 trillion worth of financial gimmickery built on top of the mortgage industry. It was the alphabet soup of the credit meltdown – the CDOs, default swaps and other derivitaves that made less than a trillion dollars of foreclosed loans into an economic weapon of mass destruction that would cost the American economy alone $14 trillion in lost wealth.

Deregulation

A fair criticism of the government's role is that it didn't “meddle” in the free market sufficiently to protect borrowers, investors and the public – that $140 trillion house of cards was built in an environment created by decades of deregulation. But that situation is also the fault of Wall Street rather than an indication of the perfidy of "big government." It was bought at great cost by the banking lobby (and as powerful chairs of congressional banking committees, the right's bogeymen, Barney Frank and Chris Dodd, are two of the financial industry's top recipients).

One could argue that the meltdown began with a chance meeting in 1997 in a line for coffee at Bank of America's Chicago headquarters. According to the Financial Times' Gillian Tett, a chance encounter brought together people working in BofA's derivatives group with another team that was packaging mortgages into securities. From that meeting, as Tett wrote, “a new game was born: bankers began to use subprime loans to create these bundles of loan default risk, now called collateralized debt obligations (CDOs) on an explosively large scale.”

Present at that meeting was Robert Reoch, a trader who had come over from JPMorgan. In the mid-1990s, JPMorgan had found itself holding an abundance of loans on its books, which made it difficult to maintain the reserves required by banking regulators. They had come up with the idea of selling some of the risk of those loans off to investors, by bundling them into mortgage-backed securities. This had two consequencs that would eventually lead to the almost universally loathed Wall Street bailouts, a massive drop in employment, the forcelosure crisis and a skyrocketing deficit.

http://www.alternet.org/story/153217/the_absurd_zo mbie_lie_about_the_economy_right-wingers_desperate ly_cling_to_--_and_why_it's_totally_wrong?akid=7940.279257.p0VD59&rd=1&t=8

They knew they could loan money to anyone and sell the loan off at a neat profit and they could keep doing that until, well, the economy was wrecked. >>


so the banks benefit from a wrecked economy?


maybe because the loans were backed by taxpayer money via Freddie and Fannie so the banks had nothing to lose..so why not?

and Freddie and Fannie backed bad loans.. and Fannie was being watched by who?



thats right..
your buddy
big liberal incompetent miserable prick...Barney

Bert, You must have missed these articles.


http://content.usatoday.com/communities/onpolitics /post/2011/12/gingrich-freddie-mac/1

Former House speaker Newt Gingrich highlighted the benefits of Freddie Mac's business model in 2007 -- a position that appears to contradict his assertion that he warned the mortgage company of its "insane" business practices.


In an interview posted in an archived version of Freddie Mac's website, Gingrich discusses the so-called government-supported enterprise model, dubbed GSEs. "While we need to improve the regulations of the GSEs, I would be very cautious about fundamentally changing their role or the model itself," he said.

He went on to praise Freddie Mac's and Fannie Mae's "important contribution" to homeownership.



Asked about his consulting work for the quasi-governmental housing agency at a Nov. 9 presidential debate, Gingrich said he had offered advice as a historian and sharply criticized its approach.

"When they walked in and said to me, we are now making loans to people who have no credit history and have no record of paying back anything, but that's what the government wants us to do, is I said — I said to them at the time: "This is a bubble. This insane. This is impossible,' " Gingrich said during the debate in Michigan.

That's not the tone Gingrich takes in the Freddie Mac interview in which he touts the GSE model.

"There is not much support for the idea of removing the GSE charters from Freddie Mac and Fannie Mae," he said. "And it's clear why. The housing GSEs have made an important contribution to homeownerhip and the housing finance system. We have a much more liquid and stable housing finance system that we would have had without the GSEs."

Gingrich spokesman R.C. Hammond said the Freddie Mac interview, first reported by The Wall Street Journal, demonstrated Gingrich was "advocating for improved regulation."


"As to whether Newt now advocates a more aggressive overhaul of Fannie and Freddie than he previously did, of course he does," Hammond said in an e-mail. "The total collapse of the global financial system has a tendency to make one look at a situation with a fresh set of eyes."

Gingrich, who now sits atop national GOP presidential polls, has faced numerous questions in recent weeks about his consulting work on behalf of Freddie Mac.

http://www.bloomberg.com/news/2011-12-01/freddie-m ac-efficiency-could-put-man-on-mars-gingrich-once- said.html

Newt Gingrich in 2007 extolled the virtues of Freddie Mac (FMCC), saying he would be “very cautious” about changing the way the mortgage-finance company’s public- private business plan operated.

In an interview placed on Freddie Mac’s website, the Republican presidential candidate said the U.S. government- sponsored enterprise, or GSE, could serve as a guide for rebuilding the hurricane-ravaged Gulf of Mexico, improving health care and funding space exploration. For decades, Freddie Mac collected profits while benefiting from an implicit taxpayer guarantee of its debt,

“I’m convinced that, if NASA were a GSE, we probably would be on Mars today,” Gingrich said in the April 24, 2007, web post.

“While we need to improve the regulation of the GSEs, I would be very cautious about fundamentally changing their role or the model itself,” he said. It “marries private enterprise to a public purpose.”

At the time of his comments, Freddie Mac and its larger rival Fannie Mae were under fire from Republicans, who said their government charters allowed them to make profits for shareholders while putting taxpayers at risk. Gingrich, a former U.S. House speaker, has voiced criticism of the companies in recent years.

The companies’ government backing made home loans artificially inexpensive and allowed the companies to squeeze private players out of the mortgage-lending business, their critics said.

Half of Home Loans
In 2008, Fannie Mae and Freddie Mac, which own or guarantee more than half of U.S. home loans, collapsed under the weight of failing subprime loans. They were forced into government conservatorship and have since survived on taxpayer aid, drawing more than $170 billion from a U.S. Treasury Department lifeline.

Gingrich was an adviser to Freddie Mac when the company published his comments. His consulting company, the Gingrich Group, received between $1.6 million and $1.8 million in fees from the mortgage company.

“I recognize that there are times when you need government to help spur private enterprise and economic development,” he said in the 2007 interview, which was previously reported by the blog Verum Serum.

Gingrich’s contract with Freddie Mac ended in 2008. Campaign spokesman R.C. Hammond said it isn’t surprising that Gingrich’s views have changed since 2007.

http://online.wsj.com/article/SB100014240529702040 12004577072502921422584.html

Former House Speaker Newt Gingrich touted the virtues of Freddie Mac's business model in an interview published by the company in April 2007, remarks that contrast with the candidate's recent statements that he had warned the company of impending financial disaster.

The interview was featured on Freddie Mac's website for several months in 2007 when he was a paid consultant to the company and Freddie Mac was struggling to address mounting financial problems as the housing boom was turning to bust.

http://www.washingtonpost.com/blogs/fact-checker/p ost/newt-gingrich-and-freddie-mac-is-he-being-misl eading/2011/11/16/gIQAiAvNSN_blog.html

The Facts
Gingrich’s initial claim during the CNBC debate that he gave “advice as a historian” now turns out to be too cute by half. After all, Gingrich’s PhD dissertation in history was “Belgian Education Policy in the Congo: 1945–1960.” We’re not sure what value such historical insights would have that would be worth so much money to the executives of Freddie Mac.

After the debate, the Gingrich campaign put out a statement titled: “The Truth About Newt’s Relationship with Freddie Mac.” Here is the full statement:

Speaker Gingrich’s consulting firm, The Gingrich Group, was retained in 2006 by Freddie Mac. To be clear, Speaker Gingrich did no lobbying of any kind, nor did his firm. This was expressly written into the Gingrich Group contracts. Instead, the Gingrich Group was hired to offer strategic advice to Freddie Mac on a number of issues.
Speaker Gingrich has always believed that America should have programs to help low income people acquire the ability to buy homes. However, as a conservative, he also believed they have to be within a context of learning how to budget and save which makes it possible for the poor to afford what they were purchasing.
Therefore, on numerous occasions in meetings with Freddie Mac, Speaker Gingrich advised that a business model that involved lending money to people with bad credit and no money down was unsustainable and a bubble, and that it was dangerous to buy securities made up of these mortgages.
The Gingrich Group also offered advice on how Freddie Mac could lower their health costs. One piece of advice offered was that Freddie Mac had the resources to adopt a Travelocity model website for prescription drugs that would inform their employees of lower cost drug alternatives.
In addition, Freddie Mac was interested in advice on how to reach out to more conservatives. The Gingrich Group stressed that Freddie Mac must be open to reform of their lending practices but that by stressing the historical success of public-private partnerships in achieving public goods at a minimum of taxpayer money and bureaucracy.
We think this statement actually buried the news in the last paragraph: “Freddie Mac was interested in advice on how to reach out to more conservatives.” While Gingrich takes great pains to stress he was never registered as a lobbyist, he clearly appears to have provided advice on how to influence the thinking of conservative members of Congress. Note also that the “historian” claim had been dropped.

Indeed, Bloomberg News reported on Wednesday that Gingrich’s “primary contact inside the organization was Mitchell Delk, Freddie Mac’s chief lobbyist, and he was paid a self- renewing, monthly retainer of $25,000 to $30,000 between May 1999 until 2002, according to three people familiar with aspects of the business agreement.” Delk told Bloomberg that he took one of Gingrich’s ideas and even pitched it to the George W. Bush White House.

“None of the former Freddie Mac officials who spoke on condition of anonymity said Gingrich raised the issue of the housing bubble or was critical of Freddie Mac’s business model,” Bloomberg also reported. (A Gingrich spokesman has disputed this.)

In any case, the Gingrich campaign’s statement, by focusing on the 2006 contract, conveniently left out the fact that Gingrich had been on a Freddie Mac retainer since 1999.

It also is worth noting that during the 2008 campaign, Gingrich said that then-candidate Barack Obama should return campaign contributions from the executives of Freddie Mac and Fannie Mae. Apparently, enriching your personal bank account is a different matter.

By Wednesday, Gingrich’s explanation had evolved again. “I offered strategic advice over a long period of time,” Gingrich told reporters in Iowa, in effect admitting that the relationship predated 2006. (See video clip below.) “I was speaker of the House and a strategic adviser. I was approached to give strategic advice.”

One reporter asked, “ Do you think you were sort of being bought to just be there and be a friendly voice?” Gingrich shot back: “No, I don’t think that any more than your institution is being bought by the people who advertise in it.”

We’re not sure what that analogy means. Clearly, advertisements are placed in newspapers because of the wide reach that they have among potential shoppers. Is Gingrich suggesting he was hired because of his contacts and influence among his former peers? After all, he certainly didn’t need to be a registered lobbyist to help Freddie Mac fend off demands for reform. He just had to bump into the right people around town, talking up the success of Freddie Mac’s business model.



The Pinocchio Test
Clearly, this story has legs, and Gingrich will need to reveal more about his activities for Freddie Mac to end the controversy. His answer during the debate was clearly misleading and is now open to dispute. We will monitor closely to see whether his claim of being only a long-time “strategic adviser” holds up to scrutiny.

Whom did Frank blame when the housing meltdown — and Freddie and Fannie's role in it — became obvious even to Frank? "Right-wing Republicans," he said.



Economist Thomas Sowell wrote last year, "No one contributed more to the policies behind the housing boom and bust, which led to the economic disaster we are now in, than Congressman Barney Frank."

I thought you said it was Bill Clinton?

Economist Thomas Sowell wrote last year, "No one contributed more to the policies behind the housing boom and bust, which led to the economic disaster we are now in, than Congressman Barney Frank."

Did he provide any facts to back up his statement?

so the banks benefit from a wrecked economy?

No ol' Dense One, the people working for the bank that were getting big bonus money did. Does a pig know when to stop eating?

Following the enactment of the Financial Services Modernization Act of 1999, national banks desired to pursue an aggressive merger and acquisition strategy. A national bank faced a dilemma. Should the bank make a large number of sub-prime loans which it was certain would generate substantial losses, or should it settle for a low CRA rating and watch its competitors snap up lucrative acquisition targets.These changes in CRA regulations engineered by the Clinton Administration metamorphosed the relatively benign CRA of 1977 into a virulent form that became a critical component in the subsequent destruction of the home mortgage loan industry.


Fannie Mae provided a profitable solution. From 1993-2000, Presidentl Clinton replaced several Fannie Mae key executives and half of its board of directors. The new board revised the executive compensation plan to encourage management to strive to reach aggressive earnings targets that were based primarily upon the number of mortgages it bought. In 1996, HUD set a goal for Fannie Mae and Freddie Mac that at least 42 percent of the mortgages they purchase must be issued to borrowers whose household income was below the median in their area. This target was increased to 50 percent in 2000.



Therefore, to earn the maximum possible bonus, the executives had to buy a massive number of sub-prime loans for Fannie Mae’s portfolio. The national banks were able to write sub-prime mortgages (thereby earning a high CRA rating) then sell these mortgages at a profit to Fannie Mae, which had an insatiable appetite to buy these risky loans. Between 1994 and 2004, Fannie Mae improperly reported $10.6 billion of earnings. Franklin Raines, the Clinton-appointed CEO of Fannie Mae and the prior director of the Office of Management and Budget in the Clinton Administration, received over $90 million in total compensation. Jamie Gorelick, a lawyer in the Clinton Administration with no mortgage industry expertise, received over $26 million following her appointment by Clinton in 1997.


According to a 2004 report issued by the Office of Federal Housing Enterprise Oversight, Fannie Mae manipulated earnings during every calendar quarter to ensure that executives received the maximum possible bonus in each and every year from 1994 through 2004. In 2000, Clinton named Rahm Emanuel, President Obama’s future White House Chief of Staff, to the board of Freddie Mac.



Early in his presidency, George Bush pointed with pride to the increase in home ownership in the poor communities. However, when Freddie Mac changed auditors in 2002, the new auditor discovered major violations in its method of reporting earnings. After Freddie management admitted a $5 billion misstatement of earnings, President Bush in September 2003, sent Congress a sweeping regulatory reform proposal intended to rein in the reckless business practices at both Fannie Mae and Freddie Mac.



This was the first of 17 separate times that President Bush urged Congress to strengthen regulations. After Bush (in 2003) had convinced Fannie Mae to raise the minimum down payment requirement from 3 percent to 10 percent, Barney Frank, ranking Democrat of the House Financial Services Committee, successfully convinced Fannie to lower the down payment to 5 percent effective December 1, 2004.


Read more: http://www.thesunnews.com/2011/10/30/2473245/lead- letter-stronger-moves-by.html#ixzz1e5B5w33M


I lay the primary fault for this failure to reform the regulation of Fannie Mae in a timely fashion at the feet of George Bush. The Democrats were only doing what comes naturally to them. The Bush Administration and Alan Greenspan, the Chairman of the Federal Reserve, clearly saw the perilous situation that was building in the home mortgage market. In 2004, Bush should have requested a joint session of Congress to present his case directly to the American people. Had Bush done so, I believe the financial crisis of 2008 may have been averted. Historians may consider the consequences that ensued from the failure of Bush to convince the Democrats to pass legislation to reform Fannie Mae to be the enduring legacy of the Bush Presidency.

These changes in CRA regulations engineered by the Clinton Administration metamorphosed the relatively benign CRA of 1977 into a virulent form that became a critical component in the subsequent destruction of the home mortgage loan industry.


Early in his presidency, George Bush pointed with pride to the increase in home ownership in the poor communities. However, when Freddie Mac changed auditors in 2002, the new auditor discovered major violations in its method of reporting earnings. After Freddie management admitted a $5 billion misstatement of earnings, President Bush in September 2003, sent Congress a sweeping regulatory reform proposal intended to rein in the reckless business practices at both Fannie Mae and Freddie Mac.

Fannie Mae provided a profitable solution. From 1993-2000, Presidentl Clinton replaced several Fannie Mae key executives and half of its board of directors. The new board revised the executive compensation plan to encourage management to strive to reach aggressive earnings targets that were based primarily upon the number of mortgages it bought. In 1996, HUD set a goal for Fannie Mae and Freddie Mac that at least 42 percent of the mortgages they purchase must be issued to borrowers whose household income was below the median in their area. This target was increased to 50 percent in 2000.





Therefore, to earn the maximum possible bonus, the executives had to buy a massive number of sub-prime loans for Fannie Mae’s portfolio. The national banks were able to write sub-prime mortgages (thereby earning a high CRA rating) then sell these mortgages at a profit to Fannie Mae, which had an insatiable appetite to buy these risky loans. Between 1994 and 2004, Fannie Mae improperly reported $10.6 billion of earnings. Franklin Raines, the Clinton-appointed CEO of Fannie Mae and the prior director of the Office of Management and Budget in the Clinton Administration, received over $90 million in total compensation. Jamie Gorelick, a lawyer in the Clinton Administration with no mortgage industry expertise, received over $26 million following her appointment by Clinton in 1997.



OCCUPY FREDDIE AND FANNIE


Between 1994 and 2004, Fannie Mae improperly reported $10.6 billion of earnings. Franklin Raines, the Clinton-appointed CEO of Fannie Mae and the prior director of the Office of Management and Budget in the Clinton Administration, received over $90 million in total compensation. Jamie Gorelick, a lawyer in the Clinton Administration with no mortgage industry expertise, received over $26 million following her appointment by Clinton in 1997.

Former Lehman Brothers CEO Dick Fuld was under oath Monday when he was grilled on Capitol Hill about his role in the current financial meltdown. But if Members really want to understand the credit mania, they should also call Chris Dodd.


The Connecticut Senator has been out front denouncing the "companies that form the foundation of our financial markets," for "their insatiable appetite for risk." He has also decried "reckless, careless and sometimes unscrupulous actors in the mortgage lending industry" and he has proclaimed that "American taxpayers deserve to know how we arrived at this moment." To that end, we propose he take the stand -- under oath.

Former Countrywide Financial loan officer Robert Feinberg says Mr. Dodd knowingly saved thousands of dollars on his refinancing of two properties in 2003 as part of a special program the California mortgage company had for the influential. He also says he has internal company documents that prove Mr. Dodd knew he was getting preferential treatment as a friend of Angelo Mozilo, Countrywide's then-CEO.

That a "Friends of Angelo" program existed is not in dispute. It was crucial to the boom that Countrywide enjoyed before its fortunes turned. While most of the company was aggressively lending to risky borrowers and off-loading those mortgages in bulk to Fannie Mae and Freddie Mac, Mr. Feinberg's department was charged with making sure those who could influence Fannie and Freddie's appetite for risk were sufficiently buttered up. As a Banking Committee bigshot, Mr. Dodd was perfectly placed to be buttered.



In response to the charge that he knew he was getting favors, Mr. Dodd at first issued a strong denial: "This suggestion is outrageous and contrary to my entire career in public service. When my wife and I refinanced our loans in 2003, we did not seek or expect any favorable treatment. Just like millions of other Americans, we shopped around and received competitive rates." Less than a week later he acknowledged he was part of Countrywide's VIP program but claimed he thought it was "more of a courtesy."



so who would any person want to write new financial law?

Chris Dodd and Barney Frank..who else.

the two scumbag incometent crooks who are smack dab in the middle and the cause of the whole mess..

Frank Dodd Bill

what a joke


Friends of Angelo -


http://online.wsj.com/article/SB122360116724221681.html

Dodd Frank Bill

^^ His name's not Bill.

Maxine Waters: “We do not have a crisis at Freddie Mac and particularly Fannie Mae under the outstanding leadership of Frank Raines”




Waters made that clueless comment during a hearing in 2004 and yes, that’s the same Frank Raines who cooked the books so that he could receive huge bonuses and who is an advisor to the Obama campaign. Here’s a video of the Democrats praising Freddie and Fannie and claiming there’s nothing wrong and the Republicans calling for more regulations:




It’s clear that the Republicans wanted oversight but the Democrats did not. Why in the world would we want the Democrats involved in cleaning up the mess that they created? Why should we trust anything they do now? They looked the other way when the irregularities were uncovered and blocked legislation that would have given the government more oversight of Freddie and Fannie and now we have to pay billions of dollars to fix their mess! And yet Franks and Waters will be re-elected yet again because their constituents are clueless to the mess they’ve made of our economy.

Read more: http://blog.beliefnet.com/reformedchicksblabbing/2008/09/maxine-waters-we-do-not-have-a.html#ixzz1fnLgvF99



Maxine, Barney, Fannie, Freddie & TARP Hanky-Panky




The ranking Democrat who stands to inherit Barney Franks's position on the powerful House Financial Services Committee is none other than hyper-lefty Rep. Maxine Waters, D-Calif. Waters is currently under an ethics investigation for not disclosing her financial interest in a community bank for which she successfully obtained a bailout. After accusing, without evidence, oil companies of price fixing, she threatened to "socialize" them — or, as she explained to the oil execs, "Basically, taking over and the government running all of your companies."

On second thought, maybe Frank wasn't so bad.

Bert, if you rtruly believe that Freddy and Fannie caused the financial meltdown then you are dumber than I thought.
Did you ever hear of the Gramm-Leach-Bliley act?

Is that the one bill Clinton signed?

how about the community reinvestment act?

Is that the one bill Clinton signed?


yes. That is the one he signed. Do you know who the guys were that came up with that bill?

how about the community reinvestment act?

what about it? Is this the bill from the 1970's that the right is trying to pin the collapse on?

Lenders were pressured by government programs such as the Community Reinvestment Act, a federal law intended to reduce discriminatory lending in low-income neighborhoods.

Under Bill Clinton the CRA imposed penalties through a "score system" to insure banks made low income loans with penalities in place to punish banks who refused to participate.

The Department of Housing and Urban Development also set affordable housing goals for Fannie Mae and Freddie Mac, giving them incentives to approve loans for low-income, high-risk buyers.


what don't you understand..?

Carter started the problem
Clinton made it worse

Barney Frank, Maxine Waters and Chris Dodd stood by while it was happening..

is that too confusing for you?


liberal policy created the problem

liberal incompetents and crooks allowed it to happen..

George Bush was also part of the problem by mistakingly thinking everybody should own a home..


Freddie and Fannie backed the bad loans with taxpayer money right under that weird looking nose of the incompetent Barney Frank..

You keep forgetting Newt..

>>>Carter started the problem
Clinton made it worse


The subprime housing bubble started in 2004, with almost all the loans made by non-CRA lenders other than Fannie & Freddie, who were legally prohibited from buying subprime until they changed the rules in 2006 - under a Republican Congress - in order to keep market share.

The housing bubble was also an international phenonenon.

Of course, if facts are orthoganal to your life, carry on.

Keep it down you goddamn commie retail teacher muslim socialist.

you forgot clueless.

The chart above was only through 2008.
This one is through September 2011...you can see prices appearing to level out at around the mid-2003 levels:



http://www.calculatedriskblog.com/2011/11/case-shiller-home-prices-decline-in.html

Is anybody really stupid enough to claim that Carter's 1977 CRA and Fannie & Freddie - in existence since the 30's - caused the 2004-09 housing bubble and subsequent collapse?

Shit, it probably makes more sense to just blame it on Obama.

Following the enactment of the Financial Services Modernization Act of 1999, national banks desired to pursue an aggressive merger and acquisition strategy. A national bank faced a dilemma. Should the bank make a large number of sub-prime loans which it was certain would generate substantial losses, or should it settle for a low CRA rating and watch its competitors snap up lucrative acquisition targets. These changes in CRA regulations engineered by the Clinton Administration metamorphosed the relatively benign CRA of 1977 into a virulent form that became a critical component in the subsequent destruction of the home mortgage loan industry.
Fannie Mae provided a profitable solution. From 1993-2000, Presidentl Clinton replaced several Fannie Mae key executives and half of its board of directors. The new board revised the executive compensation plan to encourage management to strive to reach aggressive earnings targets that were based primarily upon the number of mortgages it bought. In 1996, HUD set a goal for Fannie Mae and Freddie Mac that at least 42 percent of the mortgages they purchase must be issued to borrowers whose household income was below the median in their area. This target was increased to 50 percent in 2000.


These changes in CRA regulations engineered by the Clinton Administration metamorphosed the relatively benign CRA of 1977 into a virulent form that became a critical component in the subsequent destruction of the home mortgage loan industry


In 1996, HUD set a goal for Fannie Mae and Freddie Mac that at least 42 percent of the mortgages they purchase must be issued to borrowers whose household income was below the median in their area. This target was increased to 50 percent in 2000.



These changes in CRA regulations engineered by the Clinton Administration metamorphosed the relatively benign CRA of 1977 into a virulent form that became a critical component in the subsequent destruction of the home mortgage loan industry


the Clinton Administration metamorphosed the relatively benign CRA of 1977 into a virulent form that became a critical component in the subsequent destruction of the home mortgage loan industry



Clinton Administration



In 1996, HUD set a goal for Fannie Mae and Freddie Mac that at least 42 percent of the mortgages they purchase must be issued to borrowers whose household income was below the median in their area. This target was increased to 50 percent in 2000.


Clinton Administration

Clinton Administration metamorphosed the relatively benign CRA of 1977 into a virulent form that became a critical component in the subsequent destruction of the home mortgage loan industry ..

Bert, Tap your heels together three times and say "There's no one like Newt Gingrich". It will turn all this same bullshit you post over and over into the truth.

At least one "person"* is stupid enough to blame the interantional housing bubble on CRA, I guess.

*I'm not sure Bertron could pass a Turing test.


http://www.businessweek.com/investing/insights/blo g/archives/2008/09/community_reinv.html

Bert, who won the battle of Valley Forge the Americans or the British?

It is not a law from 1977 (Jimmy Carter) that created the problem but rather what Mr. Clinton did to it in the 90's that caused the problem.

Please read the following article from the year 2000 "The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities" by Howard Husock It appears that Mr Husocks vision has come true! Also there are related CRA articles talking about Coutrywide earmarking over $600 billion in sub prime loans in 2003!! Also add the following article from 1993 "Clinton Plan Would Soften Banking Rules" By JOHN H. CUSHMAN JR.,
Published: March 10, 1993

Now I would suggest you do a little more research, before you post your nonsense.

Let me get this straight. The CRA forces banks to lend to subprime borrowers and it had nothing to do with the subprime crisis?



hope and fairness

futhermore..

Freddie and Fannie were paying their loan officers on a commision basis. So we have loan officers who are approving loans with little to no qualifying criteria as per orders from the federal government..no problem. The house of cards was going to collaspe and they knew it and the key was to approve as many loans as possible before it did collaspe.



and during this ..where is Barney?

Barney is having sex with Herb Moses..

In the 1990's, Barney Frank’s efforts to deregulate Fannie Mae may have been a serious conflict of interest because his lover, Herb Moses, was an executive for Fannie Mae at the time Frank's was on the House Banking Committee, which had jurisdiction over Fannie Mae.






Unqualified home buyers were not the only ones who benefitted from Massachusetts Rep. Barney Frank’s efforts to deregulate Fannie Mae throughout the 1990s.

So did Frank’s partner, a Fannie Mae executive at the forefront of the agency’s push to relax lending restrictions.

>>>>>Freddie and Fannie were paying their loan officers on a commision basis.....



Fannie and Freddie didn't make loans.
Therefore, they had no loan officers.

Don't you think it would be good to learn something about a subject before you spout off on it?

Therefore, they had no loan officers. >>




Fannie and Freddie caused such horrific losses because they were private institutions run by officers who obtained a “sure thing” – great wealth through booking high yield in the near term without establishing meaningful loss reserves. OFHEO and the SEC had blocked Fannie and Freddie’s prior accounting scam (abusive hedge accounting) and limited Fannie and Freddie’s growth. Fannie and Freddie’s officers’ optimal remaining strategy, given OFHEO’s imposition of a constraint on growth, was to maximize reported short-term accounting income by purchasing very high (nominal) yield mortgage paper and not provide adequate loss reserves. Liar’s loans offered the best nominal yield (many subprime loans are also liar’s loans). Fannie and Freddie’s officers profited through the quintessentially private sector method of looting a corporation – executive compensation based on short-term, fictional, reported income followed by catastrophic losses and insolvency.

http://neweconomicperspectives.blogspot./2011/01/f annie-and-freddies-managers-bought.html



officers or not..

employees whose job it was to review the loans being offered ...they operated on commission

bert, the link doesn't work (that final "l" may have been left off your link) & i'm no financial guru, but i believe the officers referred to are like ceo, cfo, coo, etc. i could be wrong.

financial guru, but i believe the officers referred to are like ceo, cfo, coo, etc. i could be wrong.>>

you are 100% correct.

being Fannie and Freddie bought loans and did not provide loans I used the wrong term by describing the employees whose job it was to review these loans as "Loan Officers".

I am not sure what these employees job title was/is but "Loan Officer" is not the proper title.

sorry for that.

You are not sure of very much at all, Bert but you continue to post in spite of that.
Get a clue, Dude.

^^Following the enactment of the Financial Services Modernization Act of 1999, national banks desired to pursue an aggressive merger and acquisition strategy. A national bank faced a dilemma. Should the bank make a large number of sub-prime loans which it was certain would generate substantial losses, or should it settle for a low CRA rating and watch its competitors snap up lucrative acquisition targets. These changes in CRA regulations engineered by the Clinton Administration metamorphosed the relatively benign CRA of 1977 into a virulent form that became a critical component in the subsequent destruction of the home mortgage loan industry.


Fraud and Folly: The Untold Story of General Electric's Subprime Debacle

The industrial giant jumped into the subprime business in 2004, lending blue-chip respectability to the market for risky home loans.

The following story was first published by The Center for Public Integrity.

For General Electric Co., hawking subprime mortgages was a long way from making light bulbs and jet engines.

That didn't stop the industrial giant from jumping into the subprime business in 2004, lending blue-chip respectability to the market for risky home loans by paying roughly half a billion dollars to buy California-based WMC Mortgage Corp.

What GE got in the bargain, former WMC employees say, was a place where erstwhile shoe salesmen, ex-strippers and even a former porn actress could sign on as sales reps and make big money pushing home loans. WMC's top salespeople earned a million dollars a year or more and lived fast, swigging $1,000 bottles of Cristal and wheeling around in $100,000 Ferraris and Bentleys.

In pursuit of these riches and perks, several ex-employees claim, many WMC sales staffers embraced fraud as a tool for pushing through loans that borrowers couldn’t afford.

Dave Riedel, a former compliance manager at WMC, says sales reps intent on putting up big numbers used falsified paperwork, bogus income documentation and other tricks to get loans approved and sold off to Wall Street investors.

One WMC official, Riedel claims, went so far as to declare: “Fraud pays.”

From:
http://www.alternet.org/story/153679/fraud_and_fol ly%3A_the_untold_story_of_general_electric%27s_sub prime_debacle?page=1

Bert, How did the CRA cause this?

Neither GE or WMC were banks. They did not fall under the purview of the CRA.

Neither was countrywide you dolt

Neither was aig.


You lack the basic facts.



Dave Riedel, a former compliance manager at WMC, says sales reps intent on putting up big numbers used falsified paperwork, bogus income documentation and other tricks to get loans approved and sold off to Wall Street investors.

One WMC official, Riedel claims, went so far as to declare: “Fraud pays.”

I turn you down for a date and now you're back to the insults. Boo hoo.

Bert spent this entire post blaming the housing mess on the Community Reinvestment Act which requires banks to offer mortgage loans in any neighborhood where they do business. As you pointed out neither Countrywide or AIG are banks. I pointed out that GE and WMC are also not banks. With so many bad loans given out by non-bank financial institutions; which are not subject to the CRA regulations; how was the entire mortgage mess caused by the Community Reinvestment Act.

Cra effected Fannie and Freddie

As they fell under the regulations


Which then caused demand for subprime loans.

Pretty simple chain to follow.

Are we playing 6 degrees of Kevin Bacon?

>>>Cra effected Fannie and Freddie
As they fell under the regulations
Which then caused demand for subprime loans.
Pretty simple chain to follow.


That might be the stupidest post on this subject ever seen in this folder.

I'll just point out one glaring idiocy:
Fannie and Freddie did not make loans, and therefore were not subject to CRA.

Bliar, You lack the basic facts you Dolt.

[edit]Legislative changes 1992
Although minor amendments were made directly to the Community Reinvestment Act concerning the consideration of minority and female owned institutions & partnerships during evaluations first established in 1991, other portions of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 indirectly affected the CRA practices at the time in requiring Fannie Mae and Freddie Mac, the two government sponsored enterprises that purchase and securitize mortgages, to devote a percentage of their lending to support affordable housing.[4]



Clowns

Cute cite, but the fact that Fannie & freddie do not make loans leaves Wiki a little less than authoritative on this subject.

Lending = "making loans".

Facts below, although they seem like kryptonite to proponents of the big lie:

http://www.federalreserve.gov/newsevents/speech/20081203_analysis.pdf

http://economistsview.typepad.com/economistsview/2008/12/it-wasnt-the-cr.html

http://economistsview.typepad.com/economistsview/2008/09/once-again-it-w.html

http://www.forbes.com/sites/robertlenzner/2011/11/06/ritholtzs-the-big-lie-in-the-big-picture-lays-the-truth-on-the-line/

http://www.ritholtz.com/blog/2011/12/nytimes-takes-on-the-big-lie/

http://www.ritholtz.com/blog/2011/11/preview-the-big-lie/

http://www.cbsnews.com/8301-505123_162-39741513/fannie-freddie-and-the-cra-are-not-responsible-for-the-financial-crisis/

http://www.americanbanker.com/issues/176_167/fed-cra-fannie-freddie-gses-subprime-1041598-1.html

http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html

I'll just quote a little from this last one:

http://www.bloomberg.com/news/2011-01-26/fannie-freddie-subrime-loans-performed-significantly-better-panel-says.html

Fannie Mae and Freddie Mac’s portfolio of subprime loans “performed significantly better” than those packaged into mortgage-backed securities by private issuers, the Financial Crisis Inquiry Commission found in a report.

...

In the study, FCIC staff examined loan performance in 2008 and 2009. They found that that mortgages bought by Fannie Mae and Freddie Mac were more likely than privately purchased loans to require a significant down payment when borrowers had weak credit, and were therefore less likely to go into default.

For instance, GSE mortgages with a down payment of at least 10 percent that were rated Alt-A, a status between prime and subprime, had a serious delinquency rate of 5.7 percent in 2008, compared with a delinquency rate of 15.5 percent among mortgages in private-label securities, the FCIC staff found.

...


from the FCIC:

Keep in mind that Fannie and Freddie were not blameless, but they were also private firms being run for profit, just like the rest of the investment banks.
Fannie and Freddie changed their own rules in 2005-2006 and started to buy subprime loans in order to stop losing market share.
The CRA had nothing to do with that.

The FCIC report is here:

http://fcic.law.stanford.edu/


We conclude widespread failures in financial regulation and supervision
proved devastating to the stability of the nation’s financial markets. The sentries
were not at their posts, in no small part due to the widely accepted faith in the selfcorrecting
nature of the markets and the ability of financial institutions to effectively
police themselves. More than 30 years of deregulation and reliance on self-regulation
by financial institutions, championed by former Federal Reserve chairman Alan
Greenspan and others, supported by successive administrations and Congresses, and
actively pushed by the powerful financial industry at every turn, had stripped away
key safeguards, which could have helped avoid catastrophe. This approach had
opened up gaps in oversight of critical areas with trillions of dollars at risk, such as
the shadow banking system and over-the-counter derivatives markets. In addition,
the government permitted financial firms to pick their preferred regulators in what
became a race to the weakest supervisor.
Yet we do not accept the view that regulators lacked the power to protect the financial
system. They had ample power in many arenas and they chose not to use it.
To give just three examples: the Securities and Exchange Commission could have required
more capital and halted risky practices at the big investment banks. It did not.
The Federal Reserve Bank of New York and other regulators could have clamped
down on Citigroup’s excesses in the run-up to the crisis. They did not. Policy makers
and regulators could have stopped the runaway mortgage securitization train. They
did not. In case after case after case, regulators continued to rate the institutions they
oversaw as safe and sound even in the face of mounting troubles, often downgrading
them just before their collapse. And where regulators lacked authority, they could
have sought it. Too often, they lacked the political will—in a political and ideological
environment that constrained it—as well as the fortitude to critically challenge the
institutions and the entire system they were entrusted to oversee.
Changes in the regulatory system occurred in many instances as financial markets
evolved. But as the report will show, the financial industry itself played a key
role in weakening regulatory constraints on institutions, markets, and products. It
did not surprise the Commission that an industry of such wealth and power would
exert pressure on policy makers and regulators. From  to , the financial
sector expended . billion in reported federal lobbying expenses; individuals and
political action committees in the sector made more than  billion in campaign
contributions. What troubled us was the extent to which the nation was deprived of
the necessary strength and independence of the oversight necessary to safeguard
financial stability.
• We conclude dramatic failures of corporate governance and risk management
at many systemically important financial institutions were a key cause of this crisis.
There was a view that instincts for self-preservation inside major financial firms
would shield them from fatal risk-taking without the need for a steady regulatory
hand, which, the firms argued, would stifle innovation. Too many of these institutions
acted recklessly, taking on too much risk, with too little capital, and with too
much dependence on short-term funding. In many respects, this reflected a fundaxviii
FINANC IAL CR I SI S INQUIRY COMMISSION REPORT
mental change in these institutions, particularly the large investment banks and bank
holding companies, which focused their activities increasingly on risky trading activities
that produced hefty profits. They took on enormous exposures in acquiring and
supporting subprime lenders and creating, packaging, repackaging, and selling trillions
of dollars in mortgage-related securities, including synthetic financial products.
Like Icarus, they never feared flying ever closer to the sun.
Many of these institutions grew aggressively through poorly executed acquisition
and integration strategies that made effective management more challenging. The
CEO of Citigroup told the Commission that a  billion position in highly rated
mortgage securities would “not in any way have excited my attention,” and the cohead
of Citigroup’s investment bank said he spent “a small fraction of ” of his time
on those securities. In this instance, too big to fail meant too big to manage.
Financial institutions and credit rating agencies embraced mathematical models
as reliable predictors of risks, replacing judgment in too many instances. Too often,
risk management became risk justification.
Compensation systems—designed in an environment of cheap money, intense
competition, and light regulation—too often rewarded the quick deal, the short-term
gain—without proper consideration of long-term consequences. Often, those systems
encouraged the big bet—where the payoff on the upside could be huge and the downside
limited. This was the case up and down the line—from the corporate boardroom
to the mortgage broker on the street.
Our examination revealed stunning instances of governance breakdowns and irresponsibility.
You will read, among other things, about AIG senior management’s ignorance
of the terms and risks of the company’s  billion derivatives exposure to
mortgage-related securities; Fannie Mae’s quest for bigger market share, profits, and
bonuses, which led it to ramp up its exposure to risky loans and securities as the housing
market was peaking; and the costly surprise when Merrill Lynch’s top management
realized that the company held  billion in “super-senior” and supposedly
“super-safe” mortgage-related securities that resulted in billions of dollars in losses.
• We conclude a combination of excessive borrowing, risky investments, and lack
of transparency put the financial system on a collision course with crisis. Clearly,
this vulnerability was related to failures of corporate governance and regulation, but
it is significant enough by itself to warrant our attention here.
In the years leading up to the crisis, too many financial institutions, as well as too
many households, borrowed to the hilt, leaving them vulnerable to financial distress
or ruin if the value of their investments declined even modestly. For example, as of
, the five major investment banks—Bear Stearns, Goldman Sachs, Lehman
Brothers, Merrill Lynch, and Morgan Stanley—were operating with extraordinarily
thin capital. By one measure, their leverage ratios were as high as  to , meaning for
every  in assets, there was only  in capital to cover losses. Less than a  drop in
asset values could wipe out a firm. To make matters worse, much of their borrowing
was short-term, in the overnight market—meaning the borrowing had to be renewed
each and every day. For example, at the end of , Bear Stearns had . billion in
CONCLUSIONS OF THE FINANC IAL CR I SI S INQUIRY COMMISSION xix
equity and . billion in liabilities and was borrowing as much as  billion in
the overnight market. It was the equivalent of a small business with , in equity
borrowing . million, with ,& #63043; of that due each and every day. One can’t
really ask “What were they thinking?” when it seems that too many of them were
thinking alike.
And the leverage was often hidden—in derivatives positions, in off-balance-sheet
entities, and through “window dressing” of financial reports available to the investing
public.
The kings of leverage were Fannie Mae and Freddie Mac, the two behemoth government-
sponsored enterprises (GSEs). For example, by the end of , Fannie’s
and Freddie’s combined leverage ratio, including loans they owned and guaranteed,
stood at  to .
But financial firms were not alone in the borrowing spree: from  to , national
mortgage debt almost doubled, and the amount of mortgage debt per household
rose more than  from , to ,& #63043;, even while wages were
essentially stagnant. When the housing downturn hit, heavily indebted financial
firms and families alike were walloped.
The heavy debt taken on by some financial institutions was exacerbated by the
risky assets they were acquiring with that debt. As the mortgage and real estate markets
churned out riskier and riskier loans and securities, many financial institutions
loaded up on them. By the end of , Lehman had amassed  billion in commercial
and residential real estate holdings and securities, which was almost twice
what it held just two years before, and more than four times its total equity. And
again, the risk wasn’t being taken on just by the big financial firms, but by families,
too. Nearly one in  mortgage borrowers in  and  took out “option ARM”
loans, which meant they could choose to make payments so low that their mortgage
balances rose every month.
Within the financial system, the dangers of this debt were magnified because
transparency was not required or desired. Massive, short-term borrowing, combined
with obligations unseen by others in the market, heightened the chances the system
could rapidly unravel. In the early part of the th century, we erected a series of protections—
the Federal Reserve as a lender of last resort, federal deposit insurance, ample
regulations—to provide a bulwark against the panics that had regularly plagued
America’s banking system in the th century. Yet, over the past -plus years, we
permitted the growth of a shadow banking system—opaque and laden with shortterm
debt—that rivaled the size of the traditional banking system. Key components
of the market—for example, the multitrillion-dollar repo lending market, off-balance-
sheet entities, and the use of over-the-counter derivatives—were hidden from
view, without the protections we had constructed to prevent financial meltdowns. We
had a st-century financial system with th-century safeguards.
When the housing and mortgage markets cratered, the lack of transparency, the
extraordinary debt loads, the short-term loans, and the risky assets all came home to
roost. What resulted was panic. We had reaped what we had sown.

Looks like you spooked him, Steve.

The kings of leverage were Fannie Mae and Freddie Mac, the two behemoth government-
sponsored enterprises (GSEs). For example, by the end of &#63045;&#63043;&#63043;&#63050;, Fannie’s
and Freddie’s combined leverage ratio, including loans they owned and guaranteed,
stood at &#63050;&#63048; to &#63044;.



From above

Get off your knees chance, people do sleep.

As Ritholz describes Fannie & Freddie, they were just more shitty banks. Yes, they were 75-1 levered, but they had long-term financing (bonds). The banks were levered 50-1 and financed themselves by borrowing overnight.
And again, the banks made the loans, and the really shitty loans were securitized not by the GSEs, but by the banks.

Once the housing market dropped as much as it did, F&F were screwed even if they didn;t buy ANY subprime loans. And, as I mentioned above, they changed their policy in 2005 - a time when the GOP ran DC - in order to protect executive bonuses.

Even you, Marvin, know better than to claim that acts passed in 1977 and 1992, and GSEs that have been around since the 1930s (and privatized in the 1960s)....caused a housing bubble that started around 2003-2004.

Read Ritholz, he's damned good on this subject.
Truth is helpful as we try to avoid future
idiocy. Here's a recent interview: http://youtu.be/iGPWBkFL_h0

Ask yourself what DID change in 2003-2004, a period with:
1) A Republican President;
2) A Republican House;
3) A Republican Senate;
4) A Republican SEC chairman;
5) A Republican Fed Chairman;

Given obvious substantial changes in government policy around 2003-2004, including increased leverage limits for banks, elimination of vast amounts of lending regulatiopn, the lowest interest rates in years, and elimination of meaningful supervision by the SEC and the Fed (yes, I blame Geithner as well as Greenspan), it is ludicrous to blame Carter (CRA), Clinton (a 1992 act) or Barney Frank.

A classic picture from 2003, of bank regulations literally using a chainsaw to deregulate banks: http://economicsofcontempt.blogspot.com/2008/03/cutting-through-red-tape-with-chainsaw.html



***************************************

The housing bubble: http://www.calculatedriskblog.com/2011/06/case-shiller-home-prices-increase-in.html



**************************************

One last point...the housing bubble was global.
How did the CRA cause housing prices in Ireland to bubble?



"
We must distinguish between US legislative policy — and that includes Fannie/Freddie and the CRA — with the monetary policy of the US Federal Reserve, and its impact around the world.

American legislative policies had some impact domestically, but the total result of the CRA was not global, not was the GSE impact Global. Hence, how could FNM/FRE/CRA cause a global housing boom & bust? Answer, it didn’t.

The US Federal Reserve’s monetary policy, on the other hand, did have a global impact. The US has the world’s reserve currency, the biggest economy and the most important central bank. When the Fed took rates down to 1%, it had an ginormous impact on everything priced in debt, dollars or leverage. That includes housing, around the world."


http://www.ritholtz.com/blog/2010/07/global-housing-boom/

More reading on the global bubble:

http://www.economist.com/node/21540231
Interactive charts here:
http://blog.robertsalomon.com/2011/07/08/interactive-global-housing-bubble-chart/
http://www.economist.com/blogs/freeexchange/2011/03/global_house_prices&fsrc=nwl

Mannfred, you keep trying to educate Bliar and Bert with fact based information but it continues to go right over their heads. They'll respond with more opinion based rightwing talking points. They've decided to believe only what they want to believe regardless of the facts. They are Foxbots.

The real culprit wasn't greed from the right, but faulty policies on the left.

"Government social engineers - from both the Democrat and the Republican Parties - masterminded a massive bank heist with help from accomplices in the nonprofit sector," Sperry wrote.

In his book, Sperry explains that lenders were pressured by government programs such as the Community Reinvestment Act, a federal law intended to reduce discriminatory lending in low-income neighborhoods. The Department of Housing and Urban Development also set affordable housing goals for Fannie Mae and Freddie Mac, giving them incentives to approve loans for low-income, high-risk buyers.

The consequence, of course, was that many of those buyers couldn't make their payments.

"While Wall Street contributed to the sub-prime feeding frenzy," Sperry allowed, "it simply marketed the sub-prime securitiesthat Washington mandated Fannie and Freddie to securitize and guarantee in order to earn Affordable Housing Goals credits from its mission regulator, HUD."


In fact, Sperry says, Fannie and Freddie guaranteed more bad loans than anyone.

Thanks for proving my point, Bert.

"While Wall Street contributed to the sub-prime feeding frenzy," Sperry allowed, "it simply marketed the sub-prime securitiesthat Washington mandated Fannie and Freddie to securitize and guarantee in order to earn Affordable Housing Goals credits from its mission regulator, HUD."



So true. Great post.

Oh, I know, Jerry

They are a lost cause...but there are other folks out there, I waste my time occasionally as a public service....just trying to keep things real every so often.


tweedledum & tweedledee apparently think the CRA created a worldwide housing bubble, I suppose....

tweedledum & tweedledee apparently think the CRA created a worldwide housing bubble, I suppose....

They do. It's what the want to believe in spite of the facts and somehow the lack of oversite is all Barney Frank's fault. If they say it enough on Fox and in rightwing blogs then to them it must be true. Advertising works.

The Roots of the Subprime Mortgage Mess Have Clinton All Over Them


In 1994, the administration pushed through some fundamental changes to the Community Reinvestment Act of 1977. The goal of these changes was to make sure that banks were “serving low and moderate income geographies” and making sure that these banks “economically empowered persons of low and moderate income”. Regulators were then given more power to punish banks that did not comply with the new rules These changes led directly, I believe, to the explosion of subprime mortgages and contributed heavily to our current financial debacle.


The second thing that happened is that the Clinton administration made it easier for groups to make complaints against banks for perceived under-performance. That put an immense amount of pressure on banks to cut deals with largely left-wing political groups who them turned that money toward more advocacy and dodgy loans.

Bert, you seem to have either an inability to learn or you just lack the desire.

here's the link to the post that you stole:
http://www.sundriesshack.com/2008/09/21/the-roots- of-the-subprime-mortgage-mess-have-clinton-all-ove r-them/

Here's a response from one of the posters:

The incentive for banks and other lenders to lend subprime was financial. By grouping thousands of mortgages together into mass bundles their value was rendered enigmatic. That is, it became impossible for financial institutions to know their constituency's susceptibility to default. Furthermore, many of them didn't have to worry about that susceptibility. With institutions like AIG insuring these blocks of subprime mortgages lenders were free to lend without repercussion. They simply sought a signature so they could then turn around and immediately replenish their capital by selling their mortgages to securitized pools. Companies were making record profits from lending subprime; That is why a bubble emerged. If the cause were the CRA profits would not have been initially made and a bubble would not have arisen, companies would have just sustained losses. However the opposite happened. A bubble emerged and record profits were reported by financial institutions until that bubble could no longer be sustained and the crisis began. I assume you are a Republican as I am and recommend you read the following article before pointing fingers for political purposes:

http://biz.yahoo.com/nytimes/080422/1194767742185. html?ref=patrick.net

thank you barney

asleep at the wheel

That's the fourth time you posted that same photo in this thread alone.

Use your words.

Or plagiarize someone else's again.

Or plagiarize someone else's again.>>

like Pat Sajak?

do you watch wheel of fortune?

how can you not like Pat Sajak?

you guys are miserable

We would know if it was Pat Sajak because he would write in complete sentences and his paragraphs would be more than a half line long. That's always my first clue that you didn't write.

And no, I don't watch Wheel of Fortune. It stopped being challenging when I was about eleven.

It's Jeopardy for idiots.

And here's a great clip of Ben Stein calling Ron Paul an anti-semite and arguing in his best Ann Coulter style.

http://www.youtube.com/watch?v=pOV0qCW7nBA&feature =related

And no, I don't watch Wheel of Fortune. It stopped being challenging when I was about eleven.>>

im not talking to you

try & follow the bouncing ball

its gregg who seems to have a problem with Pat


for whatever reason?

It's Bert that seems to have a problem with everyone.

for whatever reason?

his best Ann Coulter style. >>

you have a problem with Ann also?





hateful bunch you are

problem with everybody


who do you like?




It's Bert that seems to have a problem with everyone. >>

i like everybody on my list
all 83..
Pat Sajak is okay in my book.
how can you not like the guy?

I don't suffer fools gladly.

Since I know you won't understand that, let me post this explanation.

to suffer fools gladly

1.(idiomatic) To be tolerant of stupidity or incompetence in other people.

http://en.wiktionary.org/wiki/suffer_fools_gladly