Who’s Really to Blame for the Banking Meltdown?

[Murrican]

http://originatortimes.com/content/templates/standard.aspx?articleid=3684&zoneid=1

Excellent primer on what happened and who's to blame...

Who’s Really to Blame for the Banking Meltdown?

Wednesday, October 22, 2008 - By Staff Writer, Originator Times

WASHINGTON, DC - Anyone who has picked up a newspaper or turned on the TV over the last few monthswas led to believe that the current housing crisis was caused by greedy wall street types and unscrupulous mortgage lenders, and reckless real estate agents. As industry insiders we all know that although there were some bad apples, byand largemost of our industry was just doing their jobs, getting people into homes using the programs that were readily available.

So then what went wrong and who is really to blame for the meltdown of the country’s banking system?

The process of securitizing mortgages in the United States is the most unique in the world. Fannie Mae and Freddie Mac were established by Congress with a mission to provide liquidity and stability to the U.S. housing and mortgage markets. Fannie Mae was established as a federal agency in 1938, and in 1968 was chartered by Congress as a private shareholder-owned company. In 1970 Freddie Mac was established to provide competition for Fannie Mae. Both of these organizations are commonly referred to as a (GSE) Government Sponsored Enterprise.

It was precisely this GSE status, and the belief by investors that securities sold by the GSEswere backed by the federal government, that both gave the GSEs the ability to raise nearly unlimited capital to be eventually used to loan as mortgages, but it also set a series of events into play that was at the heart of the meltdown.

rest of article is here: http://originatortimes.com/content/templates/standard.aspx?articleid=3684&zoneid=1

[Murrican]

below is from bottom of this article:

http://originatortimes.com/content/templates/standard.aspx?articleid=3684&zoneid=1

Countrywide was not the only company that paid off politicians through campaign donations. According to the GSEs they directly contributed to both Democrats and Republicans. Dodd received the most money of any politician a whopping $133,900 and Dodd is the current chairman of the Senate committee that has direct oversight of the GSEs.

In fact the GSEs strategically donated to lawmakers that are currently sitting on committees that primarily regulate the industry. Fifteen of the top 25 campaign recipients sit on the House Financial Services Committee, the Senate Banking, Housing & Urban Affairs Committee, or the Senate Finance Committee.

The top three recipients all received over $100,000. They are Christopher Dodd (D-CT) $133,900, John Kerry (D-MA) $111,000, and Barack Obama $105,849 (D-IL).

So where are they now?

Franklin Raines (D) – After adding $190 million to his bank account, on July 16,2008, The Washington Post reported that Franklin Raines had "taken calls from Barack Obama's presidential campaign seeking his advice on mortgage and housing policy matters." Neither Raines nor the Obama campaign disputed this reporting until the McCain campaign picked the story up.

James A. Johnson (D) – Originally reported as $6-7 million, Johnson actually added approximately $21 million to his bank account. On May 22, 2007, Democratic Party officials confidentially divulged that Obama had asked Johnson "to lead the process" for selecting Obama's running mate. On June 4, 2008, Obama announced the formation of a three-person committee to vet vice presidential candidates, including Johnson. Johnson announced he would step down from the vice-presidential vetting position on June 11, 2008, in order to avoid being a distraction to Obama's campaign. In addition to personal donations, Johnson is a bundler for the Obama campaign, raising between $200,000 and $500,000. He has also participated in Obama campaign efforts to recruit former Clinton supporters.

Daniel H. Mudd (?) – After being dismissed from Fannie Mae in September of 2008, little is known of his whereabouts. Although the political party of Mudd is unknown, according to records he did donate money to Bush in 2004. The government said that his severance package will not be paid.

Christopher Dodd (D) – Still serving his term as a US Senator from the state of Connecticut and continues his reign as chairman of the Senate Banking, Housing & Urban Affairs Committee, which has direct oversight of the GSEs. He accepted $133,900 from the GSEs. He is up for re-election in 2011.

Barney Frank (D) – Still serving as a member of the House of Representatives from the 4th Congressional District of Massachusetts and continues to serve as chairman of the House Financial Services Committee, which has direct oversight of the GSEs. As late a July of 2008, Frank still claimed the GSEs were financially stable.He is up for re-election this year.

[DoubleEdgeSword]

The perspective of the mortgage banking industry. Hardly unbiased.

[DoubleEdgeSword]

Seven paragraphs, Murrican. We do not post more than seven graphs. All of us can read the rest if we'd like to.

[Murrican]

Arbitrary limits can impose bias, I think you'd agree.

The start of the long article was given 4 paragraphs. In the second post, the key end of the article is 7 regular-size paragraphs and two tiny ones. That's not extremism.

Given that the system limit is 4,000, it seems for such a critically important discussion I'm not even close.

I really think all should read all of it. And, yes, it's an industry publication and full of acronyms, but different perspectives are always useful.

Don'tcha think?

M

[DoubleEdgeSword]

Arbitrary limits can impose bias, I think you'd agree.

The start of the long article was given 4 paragraphs. In the second post, the key end of the article is 7 regular-size paragraphs and two tiny ones. That's not extremism.

Given that the system limit is 4,000, it seems for such a critically important discussion I'm not even close.

I really think all should read all of it. And, yes, it's an industry publication and full of acronyms, but different perspectives are always useful.

Don'tcha think?

M


It's not arbitrary. The adminstrator of the board has set the limits to comply with copyright infringment requirements. That is my understanding.

[Murrican]

Well, arbitrary as in an arbitrary number, not as in generated on a whim.

But copyright does have its uses. And reasonable ones at that.

Point taken.

M