A RESPONSE TO THE ARTICLE 'HOW FANNIE MAE & THE CLINTON ADMINISTRATION STARTED THE SUBPRIME MESS'
I don't mean to be the contrarian here, but I guess I will assume that role in this email regardless. I think that this situation is way too broad, and way too complex to pin on one single contributing factor, administration, government, or economy. Many things have changed and gone right or wrong over the past few years. Remember this as well, the economy we were touting 18 months ago was largely, largely supported and fueled by the mortgages, whether prime or subprime, the derivitives of those morgages, whether AAA rated or not, and by the massive amounts of cash and equity generated by people rich and poor who had ownership in a home.
I think we can honeslty agree that 18 months ago, we were not concerned about mortgages, loans, or finances as the economy continued to roll along in bullish strength as more and more outside, international investors poured trillions of dollars we sent overseas back to our country to buy bonds and other investments that were based on the mortgages, and double mortgages, and equity loans we have been taking out for the past 30 years.
Everything was working well.
But ironically, what brought friction into the markets was higher costs of energy, oil especially. As these costs went up, people and businesses had less to spend, especially those who had subprime mortgages. That meant defaults would rise, and inevitably they did. Because commodities went higher, the dollar continued to decline, making the problem continue this cycle of rising energy and food prices, and lower currency value. As currency declined, those countries that sent the money back to buy asset derivitives and bonds lost their incentive to do so, tightening up the credit markets. This caused banks to become more concerned about defaulted loans, because by this point many of them were so over-leveraged. But no one stepped in to stop the train from derailing, and commodities continued to climb in price, and the dollar continued its deline, all almost unnoticed to the general public.
Until it was too late, and here we are fretting about our economy.
I'm not sure I agree with blaming the Clinton Administration, who had at the helm of the Fed headed by a Republican, Alan Greenspan, making these kinds of recommendations on mortgages and derivitives. I think on paper, the idea seems to work to me. It seems to be the same train of thought that Republicans use to denounce raising taxes, or that many corporations use to increase revenue, and thereby profits. Theoretically, since the economy of the US is largely valued by the amount of assets that are held in mortgages, by increasing the amount of mortgages, you increase the wealth of the economy. This is similar to a distribution company increasing their profitable stockpiles (assets) in increasing bulk amounts and decreasing bulk prices in order to generate more profit. Accusations of buying votes aside, the amount of corporate and government profit from increased mortgages likely far outwieghed the amount of taxes that were needed, and thus we had surplus years toward the end of the century and into the beginning, which gave the government the ability to decrease taxes. For all of us who received those increased tax benefits over the past 10 years, lets consider how many trillions of dollars the government has, well, spent on us for lack of a better term.
And now we have the chance to be part of a 700 billion dollar BUYBACK (I hate to call it a bail out because it really isn't one now with the changes congress made). Corporations have used the buyback scheme for centuries to buy their own stock to bouy it up when their stock value falls, on Wall Street this is called "putting stock into treasury". They then sell the stock back later when the price is higher for a profit. Is this not what we are doing now? Buying "bad" stocks in the economy (as I said before, the biggest indicator of economic weath is the value of the mortgages within it, which is a similie to how a corporation's value is largely based on the share value of its outstanding shares), literally putting them into treasury, in hopes that they will regain their desired value at some point in the future.
Again, does that not look exaclty like a corporate buyback?
To continue that line of thought, sometimes corporation's stocks continue to decline in value, even as they buy back stocks to put into treasury. So what do they do with those bad stocks? They keep them in treasury, where the stockholders can vote to dissolve them. Isn't this what the government will do with the mortgages that do not return to value? They've said they would. When a company does this it becomes a stockholder loss and is reported against the earnings of the company, and all become responsible.
Also, we need to remember that the Fed has the responsibility to be our J.P. Morgan of the 20th and 21st century. That is why they were set up. The Fed has to ask the Treasury to print bills to expend. The Treasury has to have Congress's authorization to increase the amount of money. None of this is new, it has been done before. Our economy has increased in value and wealth, so it will take larger amounts of wealth to protect it from collapse.
I have learned since my first class in US History that the cause of the Great Depression was inaction. The thing that perpetuated it was flawed policies of price-fixing and increased taxation, and the thing that ended it was reinvestment, retooling, and construction of all kinds to prepare our country for war.
We are looking down a similar tunnel. We have already had the issue of inaction, do we really want to follow the same pattern, needing a war to end it?
Although I don't think our inaction was as far along as it was in 1929, we cannot let it continue, and I think the government is taking steps that are necessary (not necessarily right, but necessary). We at least did not have the monsterous banking machine as depicted in the Grapes of Wrath devouring peoples assets and forcing them off their land in droves. And as long as the policies don't fail, and the prices remain unfixed, I think we can avoid the things of the past, and move along as we did in the 60s with moderate growth and a slower-but-stable economy, and in a few years be primed for further economic expansion.
I have learned from History how the Great Depression could have been avoided, and now we are seeing that knowledge put to action. Let's not lose faith in the good, smart, and loyal government officials we have elected. They have found ways to triumph over the naysayers before, and they will do it again.
Tijs Limburg
I think we can honeslty agree that 18 months ago, we were not concerned about mortgages, loans, or finances as the economy continued to roll along in bullish strength as more and more outside, international investors poured trillions of dollars we sent overseas back to our country to buy bonds and other investments that were based on the mortgages, and double mortgages, and equity loans we have been taking out for the past 30 years.
Everything was working well.
But ironically, what brought friction into the markets was higher costs of energy, oil especially. As these costs went up, people and businesses had less to spend, especially those who had subprime mortgages. That meant defaults would rise, and inevitably they did. Because commodities went higher, the dollar continued to decline, making the problem continue this cycle of rising energy and food prices, and lower currency value. As currency declined, those countries that sent the money back to buy asset derivitives and bonds lost their incentive to do so, tightening up the credit markets. This caused banks to become more concerned about defaulted loans, because by this point many of them were so over-leveraged. But no one stepped in to stop the train from derailing, and commodities continued to climb in price, and the dollar continued its deline, all almost unnoticed to the general public.
Until it was too late, and here we are fretting about our economy.
I'm not sure I agree with blaming the Clinton Administration, who had at the helm of the Fed headed by a Republican, Alan Greenspan, making these kinds of recommendations on mortgages and derivitives. I think on paper, the idea seems to work to me. It seems to be the same train of thought that Republicans use to denounce raising taxes, or that many corporations use to increase revenue, and thereby profits. Theoretically, since the economy of the US is largely valued by the amount of assets that are held in mortgages, by increasing the amount of mortgages, you increase the wealth of the economy. This is similar to a distribution company increasing their profitable stockpiles (assets) in increasing bulk amounts and decreasing bulk prices in order to generate more profit. Accusations of buying votes aside, the amount of corporate and government profit from increased mortgages likely far outwieghed the amount of taxes that were needed, and thus we had surplus years toward the end of the century and into the beginning, which gave the government the ability to decrease taxes. For all of us who received those increased tax benefits over the past 10 years, lets consider how many trillions of dollars the government has, well, spent on us for lack of a better term.
And now we have the chance to be part of a 700 billion dollar BUYBACK (I hate to call it a bail out because it really isn't one now with the changes congress made). Corporations have used the buyback scheme for centuries to buy their own stock to bouy it up when their stock value falls, on Wall Street this is called "putting stock into treasury". They then sell the stock back later when the price is higher for a profit. Is this not what we are doing now? Buying "bad" stocks in the economy (as I said before, the biggest indicator of economic weath is the value of the mortgages within it, which is a similie to how a corporation's value is largely based on the share value of its outstanding shares), literally putting them into treasury, in hopes that they will regain their desired value at some point in the future.
Again, does that not look exaclty like a corporate buyback?
To continue that line of thought, sometimes corporation's stocks continue to decline in value, even as they buy back stocks to put into treasury. So what do they do with those bad stocks? They keep them in treasury, where the stockholders can vote to dissolve them. Isn't this what the government will do with the mortgages that do not return to value? They've said they would. When a company does this it becomes a stockholder loss and is reported against the earnings of the company, and all become responsible.
Also, we need to remember that the Fed has the responsibility to be our J.P. Morgan of the 20th and 21st century. That is why they were set up. The Fed has to ask the Treasury to print bills to expend. The Treasury has to have Congress's authorization to increase the amount of money. None of this is new, it has been done before. Our economy has increased in value and wealth, so it will take larger amounts of wealth to protect it from collapse.
I have learned since my first class in US History that the cause of the Great Depression was inaction. The thing that perpetuated it was flawed policies of price-fixing and increased taxation, and the thing that ended it was reinvestment, retooling, and construction of all kinds to prepare our country for war.
We are looking down a similar tunnel. We have already had the issue of inaction, do we really want to follow the same pattern, needing a war to end it?
Although I don't think our inaction was as far along as it was in 1929, we cannot let it continue, and I think the government is taking steps that are necessary (not necessarily right, but necessary). We at least did not have the monsterous banking machine as depicted in the Grapes of Wrath devouring peoples assets and forcing them off their land in droves. And as long as the policies don't fail, and the prices remain unfixed, I think we can avoid the things of the past, and move along as we did in the 60s with moderate growth and a slower-but-stable economy, and in a few years be primed for further economic expansion.
I have learned from History how the Great Depression could have been avoided, and now we are seeing that knowledge put to action. Let's not lose faith in the good, smart, and loyal government officials we have elected. They have found ways to triumph over the naysayers before, and they will do it again.
Tijs Limburg
On Mon, Oct 6, 2008 at 6:00 PM, Nevin Limburg <Nevin.Limburg@wvc-ut.gov> wrote:
Bruce and Eric, you are BOTH SO RIGHT ON!
NEVIN
"Eric Limburg">> www.DICKMORRIS.COM <http://www.dickmorris.com/>This is sickening! And exactly what the article said almost 10 years ago is
what is in fact happening now. This cancer has now spread beyond Freddie
and Fannie and has infected many financial institutions (not relieving them
of any responsibility mind you). The Clinton administration pushed this and
the Bush administration did nothing to stop it. I blame Clinton and his
"Kronies" more but Bush has had his head so far up Osama Bin Laden's butt
that the important issues here at home get pushed to the side until it is
too late (don't get me wrong, I am glad I don't have terrorists at my
door). Now McCain blows his campaign chances up by suspending his campaign,
going to Washington and supporting a bail out that isn't working. Our
government is truly broken by its leadership. Reminds me of President
Packer's talk on Sunday and the example of the Mormons and current
administration of the time. No one can get their heads screwed on straight
so the almost "perfect" government system founded by God himself fails
because of greed and corruption of men. And all we can do is be
patriotic citizens with the Constitution and Declaration of Independence in
one hand and our "quads" in the other just as those saints of 1849 and hope
that one day the United States and its leaders will become humble enough
again to support and follow the God of this land that created them.
Sometimes all we will have left to hold on to are our faith and
testimonies. This may be one of those time but it is exactly those that
will get us through these times. Notice none of the general
authorities gave a dooms-day speech. They gave us faith building lessons
and strengthened our testimonies through teaching by the Spirit. It still
brings tears to my eyes and sorrow to my heart however to see our government
fail in this way. Maybe we know now how Joseph Smith, Brigham Young, and
the early saints felt, even on that day of celebration in July, 1849.
On Mon, Oct 6, 2008 at 4:09 PM, Bruce Gundersen
> I'm afraid that unless there is some major episode revolving around
> national security, McCain is going to have a very rough road. People think
> it is all the fault of George Bush and don't want to listen to the facts.
> That is why Obama is polling well, people don't want the facts.
>
> Bruce
>
> On Mon, Oct 6, 2008 at 4:00 PM, Nevin Limburg
>
>> So why in Heaven's name isn't the main stream press (friends of Dick
>> Morris?) reminding the American people about this---that a democrat
>> President liberal started this whole mess we are in? Why? How long do we
>> the American people have to listen and be advised by the liberal main stream
>> media who go soft on the liberals? Does anyone have an answer to this?
>> Will I have to spend the rest of my time on Earth, about 20 years, with
>> this crap?
>>
>> Nevin
>>
>> >>> "Limburg, Garth" <
>>
>>
>>
>>
>> ________________________________
>>
>> From: Dick Morris Reports [mailto:subscribers@dickmorris.com]
>> Sent: Monday, October 06, 2008 12:00 PM
>> To: Limburg, Garth
>> Subject: HOW FANNIE MAE & THE CLINTON ADMINISTRATION STARTED THE
>> SUBPRIME MESS
>>
>>
>>
>> Dear Subscriber,
>>
>> A friend recently sent me this article published in the NY Times on
>> September 30, 1999. Yes, 1999. The column is about how Fannie Mae was
>> going to start easing credit requirements for subprime lenders under
>> pressure from the Clinton Administration. Thought you would like to see
>> it.
>>
>> Thanks,
>>
>> Dick
>>
>> FANNIE MAE EASES CREDIT TO AID MORTGAGE LENDING
>>
>> By STEVEN A. HOLMES
>>
>> Published in the New York Times on September 30, 1999.
>>
>> Printer-Friendly Version
>> <http://rs1.netatlantic.com/t/121816/7907599/2545/0/?u=aHR0cDovL3d3dy52b
>> 3RlLmNvbS9tbXBfcHJpbnRlcmZyaWVuZGx5LnBocD9pZD0xMTM3&x=06cc98ba>
>>
>> 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.
>>
>> The REAL "skeletons" in Obama's closet!
>> <http://rs1.netatlantic.com/t/121816/7907599/1958/0/?u=aHR0cHM6Ly9tZW1iZ
>> XJzLmh1bWFuZXZlbnRzb25saW5lLmNvbS9vcmRlci5waHA%2fb2ZmZXI9MTMwNA%3d%3d&x=
>> 8bd72283>
>>
>> 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.
>>
>> The REAL "skeletons" in Obama's closet!
>> <http://rs1.netatlantic.com/t/121816/7907599/1958/0/?u=aHR0cHM6Ly9tZW1iZ
>> XJzLmh1bWFuZXZlbnRzb25saW5lLmNvbS9vcmRlci5waHA%2fb2ZmZXI9MTMwNA%3d%3d&x=
>> 8bd72283>
>>
>> Go to DickMorris.com
>> <http://rs1.netatlantic.com/t/121816/7907599/1957/0/?u=aHR0cDovL3d3dy5ka
>> WNrbW9ycmlzLmNvbS8%3d&x=d3b548cd> to read all of Dick's columns!
>>
>> ________________________________________________________________________
>> _______________________________________________
>>
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>> GET THESE COLUMNS E-MAILED TO THEM FOR FREE BY SUBSCRIBING AT>> WNrbW9ycmlzLmNvbS8%3d&x=d3b548cd> !
>>
>> THANK YOU!
>>
>> ***COPYRIGHT EILEEN MCGANN AND DICK MORRIS 2008. REPRINTS WITH
>> PERMISSION ONLY***
>>
>>
>>
>> <http://rs1.netatlantic.com/db/121816/7907599/1.gif>
>>
>> To unsubscribe, send a blank email to
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>> m
>>
>>
>>
>>
>
>
> --
> Bruce Gundersen
>
>
--
Eric Limburg
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Tijs Limburg
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Get eXcited!
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Blogs:
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The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
Tijs Limburg
Chairman and CTO of DMX - Digital Media eXceleron, Inc.
Get eXcited!
www.dmxed.com
Blogs:
http://phystrings.blogspot.com/
http://getoutofthedark.blogspot.com/
The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
--
Tijs Limburg
Chairman and CTO of DMX - Digital Media eXceleron, Inc.
Get eXcited!
www.dmxed.com
Blogs:
http://phystrings.blogspot.com/
http://getoutofthedark.blogspot.com/
The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
