My Boyne City Gazette Guest Commentary on Freddie, Fannie and Barney;

Feeding at the trough

  Greedy bankers and Wall St. traders are blamed for being the cause of the current collapse of America’s real estate market and the resulting recession.  An abbreviated, somewhat simplistic, but factual review of the past is helpful.  This time it is not presented by a liberal press, Barney Frank, or our President.

 President Carter accused mortgage lenders of racism and “redlining” – urban blacks being denied mortgages simply because of their race.  Congress consequently passed the Community Reinvestment Act (CRA), a progressive law wherein regulators could punish banks who failed to give mortgages to those in distressed neighborhoods.  Fannie Mae and Freddie Mac, government- chartered mortgage firms, encouraged banks to make loans to those who would never be able to repay them, saying that a “lack of credit history should not be seen as a negative factor”, encouraging acceptance of welfare payments and unemployment benefits as valid income sources.  Fannie and Freddie then bought those questionable mortgages, then sold them to Wall St., as Franklin Raines of Fannie Mae declared them to be “no risk”.  While Raines was CEO of Fannie he overstated earnings by $10.6 billion, while taking $90 million in salary.

 Both President Clinton and President George Bush enabled Freddie and Fannie, and then President Bush asked for their tighter regulation during the time that Senator Barney Frank (D) had jurisdiction over the two entities. Treasury Secretary John Snow proposed placing the companies under Treasury oversight with strict controls over risk and capital reserves, eliminating the power of the President to appoint directors to the companies.  Frank repeatedly declared that “the two companies were not facing any financial crisis – that the Bush Administration was more concerned about financial safety than about housing”.  He added that “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

  Community organizers forced these subprime mortgages by protesting at banks, by camping at bank owners’ homes, and by filing racism lawsuits. Leftist groups including ACORN intimidated banks to pay them up to $9.5 billion dollars for “services rendered” in the prevention of costly lawsuits. Our great divider and former ACORN organizer and ACORN attorney Barack Obama recently told CEOs of the world’s most powerful financial institutions, “My administration is the only thing between you and the pitchforks.”  In this context “pitchforks” mean the threats, intimidation and coercion of the President, ACORN and union activists such as those deployed to Wisconsin, and the condemnation of an adoring media.   An angry mob has forever been the tool for bringing “fundamental change” to any society; a vehicle for manipulating crowds; a method canceling out the rule of law; and a way to bring a society to its knees, making it ripe for more government control. 

  The price is now being paid by us all.  Some, who should never have qualified to have a mortgage in the first place, lost their homes, causing too many homes to be on the market, creating a drop in home values.  Government intervention into the real estate market helped cause the financial collapse of our country.  In our private lives we know that if and when we outspend our incomes, buy what we cannot afford, and pretend to be something we are not, the day will come when we will suffer the consequences.

So now Barney Frank, who allowed this to happen in an effort to “be fair”, is laying the blame for our financial collapse on President George Bush, who in his view showed a “lack of regulation.”  Our government has now taken control of Freddie and Fannie, costing taxpayers many billions.  To this day, Frank opposes limits on the amount of money they can risk on mortgage-backed securities, and he blames the Wall St. meltdown on "bad decisions that were made by people in the private sector," adding that the country is in dire straits today "thanks to a conservative philosophy that says the market knows best".  A market not manipulated by government generally does know best.

  Banks, Fannie and Freddie, and Wall Street were following the mandates of government.  The poor, encouraged by government, took out ill-advised home mortgages. Frank’s outrage is itself an outrage.  

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Business Week reveals, with amazing timing: Community activists in St. Louis became concerned a couple of years ago that local banks weren't offering credit to the city's poor and African American residents. So they formed a group called the St. Louis Equal Housing and Community Reinvestment Alliance and began writing complaint letters to federal regulators.
Apparently, someone in Washington took notice. The Federal Reserve has cited one of the group's targets, Midwest BankCentre, a small bank that has been operating in St. Louis's predominantly white, middle-class suburbs for over a century, for failing to issue home mortgages or open branches in disadvantaged areas. Although executives at the bank say they don't discriminate, Midwest BankCentre's latest annual report says it is in the process of negotiating a settlement with the U.S. Justice Dept. over its lending practices.
Lawyers and bank consultants say regulators and the Obama Administration are scrutinizing financial institutions for a practice that last drew attention before the rise of subprime lending: redlining. http://www.businessweek.com/magazine/content/11_20/b4228031594062.htm
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