Fanniegate: Gamechanger For The GOP?


Democrats, watch out.

The Republican Party and especially its Tea Party wing have just acquired a new weapon of mass destruction — and it has nothing to do with any of Congressman Wiener’s rogue body parts.  If they deploy this weapon effectively in the next election cycle — a big if — then they have the biggest opportunity to move the country rightward since Ronald Reagan took the oath of office back in 1981.

The Tea Party WMD stockpile is currently stored in book form: Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon. By Gretchen Morgenson, one of America’s best business journalists who is currently at The New York Times, and noted financial analyst Joshua Rosner, Reckless Endangerment gives the best available account of how the growing chaos in the mortgage and personal finance markets and the rampant bundling of dubious loans into exotically toxic securities plunged the world, and millions of American families, into the gravest financial crisis since World War Two. It is gripping reading as well, and its explanations are clear enough that readers without any background in finance will have no trouble following the plot.  The villains?  An unholy alliance between Wall Street, the Democratic establishment, community organizing groups like ACORN and La Raza, and politicians like Barney Frank, Nancy Pelosi and Henry Cisneros.  (Frank got a cushy job for a lover, Pelosi got a job and layoff protection for a son, Cisneros apparently got a license to mint money bilking Mexican-Americans of their life savings in cheesy housing developments.)

If the GOP can make this narrative mainstream, and put this picture into the heads of voters nationwide, the Democrats are toast.  The party will have to reinvent itself (or as often happens in American politics, be rescued by equally stupid Republican missteps) before it can flourish.

If Morgenstern and Rosner are to be believed, the American dream didn’t die of old age; it was murdered and most of the fingerprints on the corpse come from Democratic insiders.  Democratic power brokers stoked the housing bubble and turned a blind eye to the increasingly rampant corruption and incompetence at Fannie Mae and the associated predatory lenders who sheltered under its umbrella; core Democratic ideas may well be at fault.

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The way I see it we don’t have republicans any more.  They have seen the liberal shark feeding frenzy and see how fat they are getting and they have joined in the frenzy.  The political idea now is to bite off as much as they can as fast as they can.

Keep in mind that almost all political programs that were supposed to help the PEOPLE, wound up helping the politicians.  They have gobbled up Social Security, they siphon off the foreign aid money, they use the different welfare programs to get votes, and they allow themselves to have all kinds of expenses paid for by WE THE PEOPLE.  The republicans could have ended the feeding frenzy when they were in office, but they CHOSE not to.  They and the democrats have merged together and have become republicrats.

When you go hunting for certain game you are not allowed to shoot the female.  There is enough of a difference between the two that it is easy to tell them apart.  If politicians were game, you would have a hard time telling them apart, and sometimes it would be impossible.

Curt, it all stems back to the Community Reinvestment Act signed by Carter. No one really paid any attention to that little piece of legislation until Bubba Clinton took control of the helm, but Clinton did and understood the power that came from it. Banks were then required to grant mortgage loans based not on the standard lending practices that has served the mortgage industry, keeping it sound for so long, but on demographics. If a bank was in an area that was 20% of any minority, then 20% of those loans had to be to minorities.

All this was based on a report by the Boston Fed that said low income minorities were being “redlined” and denied loans. There was a huge outcry by the ususal players (Al Sharpton/Jesse Jackson) demanding that the fed “punish” these banks accused of redlining, and that the federal government take action. Consequently, the government gave the ability to groups like La Raza and ACORN to “pre” approve home mortgage loans and those groups were paid for processing the loan, while banks, like Citibank, were required to fund the loan. Banks that did not participate were listed in the local papers as not complying with the new rules of lending, in an actual attempt to damage the bank’s reputation.

New lending rules came along like NINJA (no income, no job, no asssets) loans, no money down, low introductory interest rates that lasted 2-3 years, interest only for 2-3 years loans, and credit score requirements were thrown out the window. Even closing costs were rolled into the note. First time buyers were rarely denied a loan.

Let me give you an example from my own extended family: a couple wanted to buy a home but their credit was rotten, their debt ratio too high and they had no down payment. They found a home for $114,000.00 they wanted in a new subdivision. They were approved to buy the home as first time buyers, Fannie holding the note (as required). No money down, closing costs rolled into the note, a 2% interest rate for the first two years after which would increase to 5%. Interest and escrow rolled into payment. All was well for the first two years until……….
their interest rate increased, their property value has increased by 10% each year (for a total of $23,920 increased taxable value) so that the property now had a taxable value of $137,920.00. Their taxes and insurance escrow payments increased because the insurance was based on taxable value.

With the increase in interest rate, and the increases in taxes and insurance payments into an escrow account, their payments went from around $1,100/mo to over $1,500/month. In just over two years, their house payment had increased over 35%. By then they had new car payments (keeping up with the Jones), and new furniture payments, and payments to a home improvement store for the materials they used to build their patio, buy fancy grills and lawn furniture as well as a new baby. The whole family was telling them to slow down, but they didn’t listen since they were managing to make all the payments until BAM! the husband lost his job. Within six months they were in bankruptcy.

Everything that made their bad decisions possible were based on the report from the Boston Fed that molded lending practices. Only by then two university professors had tore the Boston Fed report apart and showed that is was based on data that had been twisted to give a intended result, i.e. discrimination in the lending market. The professors showed that in EVERY case where a minority was denied a mortgage loan, it was not because of the color of their skin, but on their credit rating, their debt ratio and their inability to repay a loan. But it was too late, hundreds of thousands, nay, millions, of loans had been granted using the new CRA rules to people who had no hope of ever paying those loans back simply due to increased cost in interest, taxes and insurance.

With the easing of credit, a housing boom was created. New housing builds were record numbers. Demand became greater than supply and drove housing values sky high. But even at elevated prices that were false, the demand, due to the ease of getting a mortgage, continue to outpace supply. Housing values continued to rise to false levels. It was a house of cards, doomed to fall. All based on one report from the Boston Fed that was designed to show discrimination.

It was a case of social engineering through finance, with Franklin Raines at the held of the GSEs. Of course, Raines made out like a fat cat in a good garbage can, was under investigation (that went nowhere, after all, Raines is a Democrat) and now lives very comfortably on the $90 million he bilked from the American taxpayer by cooking Fannie’s books.

It makes me sick when I read thinks like this and how politicians have truly lost their way. Both parties have forgotten what we have elected them to do for us it is all about them. They all make sure that their families are taken care of and the hell with ours…I truly believe that we need term limits……..


The Republican leadership reminds me of Fred Kinnan in Atlas Shrugged. While they understand the destruction the policies of the government are encouraging, they go along for the ride to ensure that they “get theirs” before it all comes crashing down around them. They are willing enablers, even if they know they are doing wrong at the time.

@johngalt: #4

That’s why I call today’s politicians republicrats.

old Bill oriely tried just that. he got furious on TV. He made the statement that “I will get to the bottom of this! Americans need to know!’ This was a while back, but then Oriely ran into reality, no Ratpublicans would pick up the Barney Franks and I forgot the other crooks names and like most important issues it just fell by the wayside as Oriley cried how he could not understand how this could happen and no-one do anything. Why? Who knows? Hopw many ratpublicans were in on the deal too? If there was any. No ratpubilcian had the guts to take that problem on. Maybe if it will be different if we get one of the newcomers running for president who is not part of the political game. I really hope so. Its almost as if they all have some serious dirt to hide and all made a pact not to go after each other except for the usual blustering and yells of indignation. Maybe thats why congress has the lowest poll rating ever. Until it bottoms out at o%.