Wednesday, November 2, 2011

Anit-American Conservative Shift Blame for Recession on Poor and Middle-Class Americans

Private lenders held most sub prime loans

Wealthy homeowners have stopped paying mortgages at greater rate                                         

Myths and Facts about the Financial Crisis

The conservative spin machine went into overdrive after the financial crisis exploded the claim that unregulated markets always work best. Talking points fed to sympathetic columnists and reporters told an alternate, racially tinged tale: poor people were to blame. In the mythos they created, the Community Reinvestment Act forced banks to “loosen underwriting standards” and to lend to the poor and those with poor credit, forcing Fannie Mae and Freddie Mac, the “800 pound gorilla in the room,” to careen down the path of bad loans, dragging other lenders with them. Incredibly, conservatives blame insufficient regulation of Fannie and Freddie, and cite the Clinton administration as the architect of the mortgage industry’s collapse.

Of course, none of this stands up to scrutiny. Here’s a guide to the most widely spun myths:

Myth #1: De-regulation had nothing to do with this crisis

The Facts
Conservative de-regulation left Wall Street with no cop on the beat. Bush’s conservative appointees rolled back regulation and oversight of banks, insurers, lenders, and credit raters. - The explosion in subprime loans after 2000 were made by unregulated mortgage companies, and the vast majority of them were issued to higher income borrowers, not low- to moderate-income borrowers. - The Gramm-Leach-Bliley Act of 1999 (GLBA) dismantled Depression-era law that had prohibited bank holding companies from owning other financial companies such as investment, commercial banking, and insurance companies. GLBA ignited a wave of mergers and hampered government regulators charged with preventing conflicts of interest and risky financial behavior.

Myth #2: Private lenders were pressured into giving out risky loans

The Facts
Private lenders—not the government-backed Fannie and Freddie—issued the vast majority of subprime loans, and to low- and moderate-income borrowers in particular. Fannie and Freddie did not guarantee and securitize large quantities of subprime loans. - In fact, Fannie Mae actually lost market share because it chose not to “participate in large amounts of these non-traditional mortgages in 2004 and 2005” because it “determined that the pricing offered for these mortgages often was insufficient compensation for the additional credit risk associated with these mortgages.” As economist Dean Baker stated, “Fannie and Freddie got into subprime junk and helped fuel the housing bubble, but they were trailing the irrational exuberance of the private sector….In short, while Fannie and Freddie were completely irresponsible in their lending practices, the claim that they were responsible for the financial disaster is absurd on its face—kind of like the claim that the earth is flat.” - In testimony before the House Committee on Oversight and Government Reform, Lehman Brothers CEO Richard Fuld acknowledged that Fannie and Freddie’s role in Lehman’s demise was “de minimis,” or so small that it does not matter.

Why are conservatives acting like mad dogs in a fevered attempt to blame government, or Clinton or anyone but Wall Street for the housing meltdown and subsequent recession. Because the private sector is never to be held responsible for anything according to conservative dogma. The private banks just cannot make mistakes in Republicans fantasy world.

More here - Did the Poor Cause the Crisis?

Did Liberals Cause the Sub-Prime Crisis? - Conservatives blame the housing crisis on a 1977 law that helps-low income people get mortgages. It's a useful story for them, but it isn't true.

Rich Defaulting on Mortgages At Highest Rate