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Tuesday, February 17, 2009

Kapact's Rant: We Know What's Best, Even When We're Wrong

I'm talking this week about the wisdom of government making snap decisions, the most glaring and life-changing of which is the trillion-dollar rushed-through-congress, unexamined, unstudied, don't-read-it-just-sign-it bailout bill. There is no question that we need jobs, and creating them by fixing our infrastructure seems like a good idea. There is also no question that we still need a middle-class tax break. But being a student of American history, I have to say that I have trouble finding an instance where a hastily conceived and rammed-down-our-throats massive government program ever really provided a sustainable solution to an entrenched and serious problem. Here's a good example of liberal reporting on one such knee-jerk, over-the-top government solution to a "problem", taken from the New York Times website.

Published: September 30, 1999

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.''

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

While I was never a fan of Bill Clinton, I will admit to appreciating the fact that he studies relentlessly. He does his homework. While he has the morals of an alley cat, he is without a doubt a very clever, hard-working person. He has a big, usually out-of-control mouth, but he also has a high IQ. But he blew it big that time. His short-sighted pandering to low-income voters (in an attempt, no doubt, to buy the election for Al Gore), stuffed this country but good, and now Obama has sold us a trillion dollar bottle of snake oil/magic elixir to cure the problem that Bush is supposed to have caused. Bush sure as heck let it grow, but Clinton started it.

It's the same kind of shoved-down-our-throats solution to the on-again, off-again, depends-on-who-you-ask issue of climate change. And you note we don't hear 'global warming' nearly as much, since 2008 was globally the coolest year in more than a decade. No, it's 'climate change' now. Just like 'liberal' is now 'progressive'. Folks, call it what you want, a cr@p sandwich by any other name would smell as bad. I even heard local meteorologist Kevin Janison say that global warming didn't actually refer to the temperature, but to weather instabilitty. I guess that depends on what the meaning of the word "warming" is. Come on Kevin, get with the times. It isn't global warming, it's climate change. I'll just say something about meteorologists. Discounting what I think about Weather Channel Chief Stormtrooper Heidi Cullen, I find it interesting that these supposed experts think nothing of repeatedly getting it wrong on a daily basis, explaining that it's just a forecast, and things can always change. But they still call themselves experts and think that they can tell us what's going to happen thirty years from now. Forgive me Heidi and Kevin, but if you can't say what's going to happen three days from now, how can you say with authority what will happen a year from now, much less thirty years from now. I don't have a problem with cleaning the air and/or getting off of fossil fuels. We need to do both. I don't even mind an honest debate on climate change. What I have a problem with is, again, a decision made by a few elite liberal stormtroopers who use their jackboots to crush the necks of anyone who dares to debate the issue. Not even disagree, but just debate. Dissent is healthy, even when liberals are making the decision.

Mark my words, we will be told in the next four years that questioning the decrees of the Obama administration is unpatriotic. Big Brother just got bigger. They're from the government and they're here to help. And may God have mercy on your soul.

Now here are my weekly reminders of who got us in our current mess:

The housing meltdown which is at the heart of our crisis started in earnest in 1992 when Mister Clinton had the great idea to sell houses to low-income voters who couldn't afford them. No question that both sides ignored the problem but got rich off the over-inflated bubble, but it started under Bill Clinton. The records are there. Here are a few links that show just what I'm talking about:

From The New York Times in 1999: Fannie Mae Eases Credit To Aid Mortgage Lending ( "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..."

From the New York Post: Alarms and Denial (

Bloomberg Financial News: "How the Democrats Created the Financial Crisis" (

YouTube: Democrats in their own words (

YouTube: Burning Down the House (

YouTube: Obama Ranks Second In Freddie/Fannie Contributions (

And my weekly comments on P'resident Obama:

First and foremost, this economic crisis has roots in the Clinton administration. Clinton ordered that home loans be given to families that could not pay them. Granted, Bush should have seen the meltdown coming, but it's a time bomb that Bill Clinton planted under the house. It's up to President Obama to set the tone and the course to rebuild our house. We all share responsibility for doing the hard work, but the President is the boss. The buck stops in the Oval Office. And speaking of the Oval Office, I have to admit that I have liked a fair amount of what I've seen of our new President. Words are cheap, and politicians are good at saying things people want to hear. At the same time, we need this presidency to be successful, and he can't succeed without our support. So while I'll be quick to point out everything that I see him do wrong, I'll also try my hardest to point out everything that I see him do right. I saw him talking to Matt Lauer just before the Superbowl, and he looked, unlike candidate Obama, like a man with humor and compassion and an appreciation for the humanity of the people that make up this country. He was funny and self-deprecating and seemingly unscripted. That man will have my support for as long as he occupies the White House. When he stops being that man, I'll stop supporting him.

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