Community Reinvestment Act

[Crotalus]

I am sick of the Republicans getting bashed for this economy when everything that happened was caused by a law enacted by Carter, rammed down the bank's throats by Clinton, and remedial action prevented by the Democrats during Bush.

The Community Reinvestment Act forced banks to give loans to people that were completely unqualified to pay back the loan. The law was supposed to correct _Redlining_. This is the supposed bank practice of denying loans to people that lived in poorer communities. The banks would be prevented from making a lot of acquisitions and other business unless they could show that 40 something percent of their loans were to underprivileged people. The banks invented "liars loans" where people made completely false applications to get the loans. Everyone knew the loans were toxic, so government controlled Fanny Mae bought the loans and had them guaranteed by an insurance company and sold them all over the world. When the loans failed the insurance company quickly went bankrupt leaving all of us holding the empty bag. Congress rigged it so the Fannie Mae people got rich while this was happening.

The biggest loan maker was Country Wide that made lots of cheap loans to Congressmen. Many that were never repaid.

Iceland bought so many bad derivatives that their economy is in collapse, but you never hear about it.

[Crotalus]

The three who brought down Wall Street.

Here's a quick look into the three former Fannie Mae executives who
brought down Wall Street.


Franklin Raines - was a Chairman and Chief Executive Officer at Fannie Mae.
Raines was forced to retire from his position with Fannie Mae when
auditing discovered severe irregularities in Fannie Mae's accounting
activities. Raines left with a "golden parachute valued at $240 Million in
benefits. The Government filed suit against Raines when the depth of the
accounting scandal became clear.


Tim Howard- was the Chief Financial Officer of Fannie Mae. Howard "was a
strong internal proponent of using accounting strategies that would ensure
a "stable pattern of earnings" at Fannie. Investigations by federal
regulators and the company's board of directors since concluded that
management did manipulate 1998 earnings to trigger bonuses. Raines and
Howard resigned under pressure in late 2004. Howard's Golden Parachute was
estimated at $20 Million!


Jim Johnson - A former executive at Lehman Brothers and who was later
forced from his position as Fannie Mae CEO. Investigators found that
Fannie Mae had hidden a substantial amount of Johnson's 1998 compensation
from the public, reporting that it was between $6 million and $7 million
when it fact it was $21 million." Johnson is currently under investigation
for taking illegal loans from Countrywide while serving as CEO of Fannie
Mae.
Johnson's Golden Parachute was estimated at $28 Million.

[Crotalus]

WHERE ARE THEY NOW?

FRANKLIN RAINES?
Raines works for the Obama Campaign as his Chief Economic Advisor.

TIM HOWARD?
Howard is a Chief Economic Advisor to Obama under Franklin Raines.

JIM JOHNSON?
Johnson was hired as a Senior Obama Finance Advisor and was selected to
run Obama's Vice Presidential Search Committee.

Kinda makes you sick to your stomach.

Our government seems to be rotten to the core !

[gugi]

Our government seems to be rotten to the core !

No, just the democrats, the republicans are the ones trying to fix everything that's wrong, but they can only fight the good fight and can't really win by controlling just one chamber of congress.
It is an election year though, time to test how the great democracy system works.

[Tsunami]

Oyvey!!! I figure I will put in my 2 cents before this thread goes nasty. I used to believe in my government. In a government that worked for the people by the people. What you see now in government is the fruit coming to bear from the moral decline beginning in the 60s. The government has through action or inaction created a vast populace capable of holding menial jobs but without the smarts to think for themselves. Frank Zappa called these "Functional Idiots". The Goverment has taken God out of their moral compass and guess what? It ain't for the best. I'm no bible thumper but I am spiritual. I am a Freemason and have scruples. I won't screw my fellow man over and have a strong moral conviction. When you believe in nothing there is nothing to keep you in check. It has gone beyond Democrat or Republican. The president is nothing but a bus driver. He can only stay on the course laid out for him. I must admit that the John Birch Society had it right all along. The only way to turn this around is to do what the Founding Fathers recommended. When the Goverment fails to serve its people it is the duty and obligation to overthrow such Goverment. Remember this... The tree of Liberty must have from time to time its roots refreshed by the blood of patriots and tyrants.
Nuff said

[Kantian Pragmatist]

So a law passed in 1977 and some vague stuff about Clinton and Obama is the reason the financial system collapsed in 2007, 30 years later? Makes about as much sense as anything else conservatives come up with. I'm sure it had nothing to do with Ray-gun's better than 50% tax cut for folks who make their money mainly from investing instead of working, or Bush AND Clinton's giving tax incentives for off-shoring jobs, or undermining organized labor resulting in flat or depressed wages for the last 30 years, or pushing complicated, predatory credit on the middle-class and poor. I'm sure it wasn't a culmination of the much more recent repeal of the Glass-Stegal Act, which prevented banks from mixing the FDIC money with money they gambled with in the markets.

Nobody's innocent in this depression, not Democrats and not Republicans, because this depression isn't just about a bunch of bad debt, debt that the poor and middle class, for the most part, are still on the hook for. This depression is about fraud, deep, institutional, fraud. The kind of fraud that occurs when you give people a free reign and don't check on them from time to time to make sure they're being honest, that they're selling what they say they're selling, and that they're getting what they're selling in ways that are honest and fair. Because if you don't check and enforce that kind of stuff you get conmen in the market, and when you're dealing in complex investments and long-ish terms for those investments, and everybody's acting like everybody else's goods in the market are perfectly legit, that fraud builds up until it reaches critical mass and nobody trusts anybody's goods, which is what happened in 2007.

Neither Democrats nor Republicans did the kind of policing that was necessary to prevent this buildup of fraud, and Republicans have just as much, if not more complicity in this because they held the highest office and at least one branch of the Legislative for the majority of the last 30 years. To say nothing of their cheerleading for lessening the policing of investment markets and executive compensation. Both side's bread is buttered by the very wealthy, but the Republicans have made deregulation and "letting the market work" the mantra of their platform. Lack of effective rules defining fair and honest practices in banking, combined with a lack of effective police enforcing those rules, partly because of a form of soft corruption and partly because of a lack of effective policing power, were the direct causes of the crash, and when it comes to corruption, both parties stink to high heaven.

[LX_Emergency]

It might be silly of me and a little naive.....

but the only people I really blame are the ones who loaned money they weren't able to pay back......and the parents of those people who never taught them how to handle money.

The fact that all this was enable by government just means that the same goes for the people in power.

[TURNMASTER]

You have all made good points and at some level are correct. There is a lot of blame to pass around and some of it is ours for letting this continue to the point we are at now.

Jeff

[decraew]

WHERE ARE THEY NOW?

FRANKLIN RAINES?
Raines works for the Obama Campaign as his Chief Economic Advisor.

TIM HOWARD?
Howard is a Chief Economic Advisor to Obama under Franklin Raines.

JIM JOHNSON?
Johnson was hired as a Senior Obama Finance Advisor and was selected to
run Obama's Vice Presidential Search Committee.

Kinda makes you sick to your stomach.

Our government seems to be rotten to the core !

Well, yes I agree. Those naughty democrats.
But luckily there's still the GOP, with noooooo ties to the finance industry whatsoever.

That being said, both democrats and republicans are to blame for the financial crisis, because both parties supported financial deregulation. Said deregulation and greed by Goldman Sachs & the like are for me to blame.

@LX: I don't wholly agree with your blaming only those people borrowing too much. But don't forget that it's part of the US culture to live on credit. On average they don't save as much as in the eg the Netherlands or Belgium. I don't agree with it but that's the way it seems to be. I know that in practice the crisis started with the CDOs (can someone please explain to me how you can repackage correlated risks and then claim that by combining them the risk is reduced ?) but it could have been another financial product. As I said above: deregulation and greed.

Oh, an interesting read: The Great American Bubble Machine | Politics News | Rolling Stone

[LX_Emergency]

Oh I know it's in general more complex. But it all comes down to: "Don't spend it if you can't afford it"

Governments get into trouble because they spend more than they have, companies get into trouble because of this and people get into trouble because of this.