Capitalism

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Capitalism Has Not Failed, Government Policies; Over and Wrong Regulation Have Failed Capitalism.  DVM (stated decades ago)    Below is an example of this:

The following articles are from www.nytimes.com—note the date (President Bush was not in office).  This all started with the Carter Administration and was beefed up with the Clinton Administration.

“Fannie Mae Eases Credit To Aid Mortgage Lending”

By STEVEN A. HOLMES     Published: September 30, 1999 New York Times

WASHINGTON, Sept. 29— In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.'' 

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''  And the article goes on...

“New Agency Proposed to Oversee Freddie Mac and Fannie Mae”

 

By STEPHEN LABATON     Published: September 11, 2003 New York Times (some paragraphs have been cut)

 

WASHINGTON, Sept. 10— The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

 

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

 

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

 

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

 

''There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,'' Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan.

 

Mr. Snow said that Congress should eliminate the power of the president to appoint directors to the companies, a sign that the administration is less concerned about the perks of patronage than it is about the potential political problems associated with any new difficulties arising at the companies.

 

The administration's proposal, which was endorsed in large part today by Fannie Mae and Freddie Mac, would not repeal the significant government subsidies granted to the two companies. And it does not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enables them to issue debt at significantly lower rates than their competitors. Nor would it remove the companies' exemptions from taxes and antifraud provisions of federal securities laws.

 

''The current regulator does not have the tools, or the mandate, to adequately regulate these enterprises,'' Mr. Oxley said at the hearing. ''We have seen in recent months that mismanagement and questionable accounting practices went largely unnoticed by the Office of Federal Housing Enterprise Oversight,'' the independent agency that now regulates the companies.

 

Reflecting the changing political climate, both Fannie Mae and its leading rivals applauded the administration's package. The support from Fannie Mae came after a round of discussions between it and the administration and assurances from the Treasury that it would not seek to change the company's mission.

 

After those assurances, Franklin D. Raines, Fannie Mae's chief executive, endorsed the shift of regulatory oversight to the Treasury Department, as well as other elements of the plan.

 

Freddie Mac, whose accounting is under investigation by the Securities and Exchange Commission and a United States attorney in Virginia, issued a statement calling the administration plan a ''responsible proposal.''

 

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

 

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.  ''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.

 

[My POINT:  Do you believe the Democrats blaming of President Bush for the financial crisis is right?  Your answer should be no, because this a no-brainer with the articles by the NYT (who are in bed with Democrats).  Looking back, you can see that the Bush administration had accurately diagnosed the problem in the lending market and had a plan to address it.  Fannie Mae and Freddie Mac reluctantly supported the plan.  However, Democrats objected: See the above two paragraphs in red.

 

This is the same Democratic denial of the financial problems in Social Security.  “Nothing to see here, no crisis on the horizonEverybody just move along, move along.”  The Democrats had forced lenders to assume more risk at lower interest rates in the 1990s.  As Investor Business Daily pointed out and they didn’t want to countenance an end to their populist policies:

 

But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street’s most revered institutions.

 

Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.

 

The untold story in this whole national crisis is that President Clinton put the Community Redevelopment Act on steroids,  a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but “predatory.”

 

In my opinion that is based on fact, President Bush is not at fault for the housing/financial crisis, but he should have kept pushing the coming financial crisis and got his recommendations of significant regulatory overhaul in the housing finance industry passed.

 

Please, if you’re in doubt of these articles - do your research.  Go to the NYT website.  Search the library.  As always, do your research.  Watch the videos.]

 

Finger-Pointing in Financial Crisis Is Directed at Bush

By MARK LANDLER and SHERYL GAY STOLBERG     Published: September 19, 2008 New York Times

WASHINGTON — For his entire presidency, George W. Bush has tried to avoid the fate of his father, brought low by a feeble economy. Now, as the financial crisis radiates far beyond Wall Street, Mr. Bush faces an even grimmer prospect: being blamed, at least in part, for an economic breakdown.

“There will be ample opportunity to debate the origins of this problem,” Mr. Bush said in the Rose Garden on Friday. “Now is the time to solve it.”  But, in Washington, on Wall Street and on the presidential campaign trail, the debate has already begun.  Senator Barack Obama, the Democratic presidential nominee, denounces what he calls the Bush administration’s “failed philosophy.”  There is more to read at the New York Times website.

[My POINT:  In the 1999 article (NYT):  Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

In the 2008 article (NYT):  Now, as the financial crisis radiates far beyond Wall Street, Mr. Bush faces an even grimmer prospect: being blamed, at least in part, for an economic breakdown.

Why blame President Bush?  He tried in 2003 and mentioned in the years after that the system needs changes and regulations to prevent a housing market crash.  What caused the economic downturn?  The subprime mortgage market defaults were increasing.  The snow ball then rolled down the hill.]  

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