Wednesday, October 1, 2008

How is Obama Connected to our Current Mortgage Crisis?

I've heard a lot of talk about censorship on Youtube of conservative videos. I just saw this one and it is incredible. I recommend that everyone confirm the facts on their own. I've gotten about halfway through factchecking and I'm satisfied. Sure it generalizes a bit, but the bottom line is that Obama is not the answer. McCain and Bush are less to blame for the mortgage problems than Obama and the democrats. See for yourself.

A few facts that stand out:

Banks have contributed more to Obama than to McCain- of course they play both sides, but the amount given to Obama far outweighs what McCain has received.

Jimmy Carter passed the Community Reinvestment Act which basically expanded lending practices to lower income folks. And if lending institutions were not giving enough of these loans to low income/minority borrowers, then they were essentially cut off or limited in their ability to do business. So basically the law forced this sort of lending. Sounds good on paper.

  • But then the S&L Meltdown led to the passing (by Republican George HW Bush) of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, or as is commonly known- FIRREA (cha cha cha)
  • At around the same time, democratic representative Phil Gramm authored legislation (passed into law) which increased subprime loans. Crowd favorite Bill Clinton then enacted new rules the allowed lower income people to get loans. This created the "subprime" mortgage and forced all banks to start offering them. And with those subprime mortgages came subprime mortgage securities.
  • The hated one (George W. Bush) then attempted to change this law in 2005 because he saw that it was in fact a major cause for the housing market problems. But democrats opposed it and killed the proposed legislation. After all, it's the corporations that run Washington, and when the huge machine that is housing is "succeeding" then you look like an ass for trying to slow it down or stop it.
  • A study in the pre-Bush era showed that predatory lending was taking advantage of gullible borrowers who were then going into foreclosure.

The further fallout of this act then led to a lowering and lowering of standards and the creation of more creative loans so that Fannie Mae could have more "product" to sell to investors. "Interest only", "no-doc", "option ARM". Heard of those? They were created so that more loans could be insured by the government sponsored Fannie Mae.

But as interest rates rose and inflation rose, and these loans started defaulting, the banks realized that the party was over and they stopped offering these loans. And with those borrowers now unable to refinance with a more affordable loan, more defaults resulted, and then depreciated home values, and then less people able to refinance, so more defaults. And so on.

Prior to the CRA, home values increased with inflation. But especially after Clinton's 1995 move, home values started going up way faster than inflation- that's right, starting in about 1996- before Bush was in office. And that's when speculators started coming in and buying "investment homes"- of course oftentimes lying about the true purpose of these homes. Trust me, as an Appraiser I've seen plenty of "owner occupied" loans where it was obvious that it wasn't true. But I was told that the home was owner occupied. It's not my job to check a person's ID when I appraise their home. I could have suspected all day long, but that did nothing to solve the problem- nor would it have.

Bush tried in 2003 to help regulate and stop this potential cycle, but democrats and the companies involved argued that it would limit their ability to lend to lower income people... The machine was "working" so Bush gave up.

And John McCain also tried to introduce legislation that would regulate Fannie and Freddie- and it too was blocked by the democrats.

Have you heard of Obama's trusted adviser James Johnson, who led his search for a vice presidential candidate? Johnson was president of Fannie Mae during the CRA expansion. He was most recently on the board of directors of Goldman Sachs- which gave Obama over $600,000. Johnson received "special" loans from Countrywide. He had to remove himself from the campaign when the Obama camp learned that he received those loans- from the company that would benefit from bailout legislation.

Have you heard of Franklin Raines? He was also a former president of Fannie Mae but was forced to retire under an investigative cloud over accounting standards and has been charged with a whole slew of crimes. Now I've read all over the place that he is/was Obama's adviser. But I believe that's merely sensationalism that is unfounded. But, he's worth mentioning here. He also received about $4 million in special Countrywide loans. He was also in the Carter administration when the CRA was first created! In June of 2008, the Washington Post reported that Obama's office had sought housing/mortgage platform advice from Raines. Three months later, McCain put out an ad touting that Obama and Raines are in cahoots. Only then- three months later, did the Obama camp officially refute the June 2008 article... oh and by the way, Raines received a $25 million dollar Fanniechute. Exactly the sort of thing that Obama is campaigning against. Why would the Obama camp refute this relationship only after negative press was brought out about it?

And did you know that between 1989 and 2008 Obama received $126k in campaign contributions from Freddie Mac? And I don't think Obama was in office that entire time- perhaps only about 4 years of that 20 year period. But during the same 20 year span, McCain only received $25k. And I think that McCain was serving our country during that entire span. I think that translates to about $31,500 per year to Obama and $1250 per year for McCain. Now why would Freddie give so much more to Obama than McCain? Or better put, why would Freddie give so much less to the man who wanted to impose restrictions on their business?

Moving on, did you know that Obama's law firm represented many lower class black people in Chicago? Sounds good. But he allegedly sued banks for not giving enough loans to low income people...

On an aside not worthy of its own post, did you know that the speaker of the house- Nancy Pelosi has the audacity to say that democrats have nothing to do with our current economic crisis? If you've read this post so far and confirmed any of the facts, maybe you would see her one word answer as flat out comical. Is she saying that republicans are 100% responsible for this? One would think...

So to summarize, Barack Obama's party and his own history shows that he is a major part of the economic problem in general, and the mortgage situation specifically. Yet he continues to blame the Bush administration for our failed economic situation. He categorizes McCain as one who offers the same solution as Bush.

How dare he. I'm pissed at that hypocrite.

I'm sure there are other bloggers who are more articulate than me, but my point here is that everyone needs to know this information about Obama. And if they still love the guy, then that's fine. But so little has been made of this that it's a disservice not to be educated so as to elect the best candidate to lead our country on this front and all others. Please do your own due dilligence. Get educated on your own. Don't believe the headlines and Keith Olberman and Chris Matthews and Bill Maher. Find out these things on your own.

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