“The narrative that it was Wall Street, the banks and other private sector mortgage lenders that caused the 2008 financial crisis is objectively false…

…It was our own, mostly well-intended government’s guarantee (of mortgages and deposits), aggressive housing programs, bank (and rating agency) regulation, and monetary policies that distorted the marketplace. Even pre-crisis, banking and mortgage lending were the most regulated activities in America and yet the government’s (and liberals) narrative is that the “greedy and reckless” private financial sector caused the crisis? That narrative defies any logic or sense. (See key 2014 and 2015 postings below, where I and others, including Nobel Laureate economists argue with FACTS against this government, liberal and mainstream media narrative.)”, Mike Perry, former Chairman and CEO, IndyMac Bank

September 16, 2015 – Statement 902: “…it is the Fed’s artificially low interest rates that set up the economy for the 2008 crisis, not to mention previous crises. In 2000 the stock market, bloated by earlier Fed rate cuts, started falling when the tech bubble burst. Markets bottomed out in 2002, as the Fed slashed rates. Although people hailed then-chairman Alan Greenspan as “the Maestro” for providing a so-called soft landing, in hindsight he simply replaced the dot-com bubble with a housing bubble…

May 12, 2015 – Statement 720: “The (Baltimore) neighborhood was also designated a “homeownership zone” by the feds, who spent $30 million to saddle people with arguably the last thing they needed, a mortgage that tied them down to a community without jobs and decent schools…

April 22, 2015 – Statement 707: “The problem is that, in the early stages, government economic planning and affirmative action lending look appealing. More homes are built and more people purchase homes that they otherwise would not have qualified for. Home prices soar and borrowing against the inflated prices is something the government and regulations encourage…

April 22, 2015 – Statement 706: “Manipulating the money supply and interest rates rejects all the principles of the free market, and so it cannot be said that too free a market caused this mess (the 2008 financial crisis). The market was not free at all. It was manipulated and distorted…

April 16, 2015 – Statement 696: “In a famous speech to the American Economic Association in January 2010, then Federal Reserve Chairman Ben Bernanke postulated that the Fed had no significant impact on the housing bubble or on the increase in financial leverage and that monetary policy was too blunt a tool to be used to smooth asset cycles. After emphasizing for years that low rates have the ability to boost asset prices, under what criteria can the Fed insist that it had no influence on the boom preceding the financial crisis?…

April 13, 2015 – Statement 686: “Clearly, the SEC’s current securities fraud (disclosure) cases against the CEO’s and CFO’s of Fannie and Freddie, provide strong evidence to support your point about the non-disclosure of NTM’s (nontraditional mortgages) pre-crisis. I had no idea that by June 2008 that roughly 57% of all mortgages in the U.S. were NTM’s and I sure didn’t have any idea that Fannie, Freddie, FHA, and VA owned, insured, or guaranteed 76% of these NTMs (via whole loans or securities)…

April 10, 2015 – Statement 683: “Fannie and Freddie did not fully disclose their exposure to NTM (nontraditional mortgages) until after they had been taken over by a government conservator in 2008. Before the crisis, analysts, regulators, academic commentators, rating agencies and the Federal Reserve (did not understand) the scope of the NTM problem, believing it was much smaller, and that the number of traditional prime mortgages outstanding was much larger, than in fact they were…

April 10, 2015 – Statement 681: “On June 24, 2004, seventy-six House Democrats, led by Nancy Pelosi (D-Calif.) and Barney Frank (D-Mass.), delivered the necessary support through a letter to President Bush, showing how much their support was linked to the affordable-housing goals. “We write as members of the House of Representatives who continually press the GSEs to do more in affordable housing,” the letter began…

April 10, 2015 – Statement 680: “Under direction of its chair, James Johnson, Fannie Mae had seen the political value of lending to low-income borrowers. In 1991, even before the enactment of the GSE Act, Fannie had made a $10 billion pledge of support for low-income housing, adapting a vehicle for reduced underwriting standards…

April 10, 2015 – Statement 679: “In June 2008, just before the crisis fully gripped the nation, there would be a moment of recognition that HUD’s policies were at fault, when the fact that many families would lose their homes was connected to the affordable-housing goals…

April 10, 2015 – Statement 678: “Before the adoption of the Federal Housing Enterprises Financial Safety and Soundness Act (the GSE Act) in 1992 and the imposition of the affordable-housing goals, the GSEs followed conservative underwriting practices. Mortgage defaults were usually well under 1 percent, and the homeownership rate in the United States hovered around 64 percent, where it had been for almost thirty years…

April 8, 2015 – Statement 676: “It is telling that Congress adopted the (Dodd-Frank) act in July 2010, six months BEFORE the FCIC’s report was issued, a clear demonstration that the Democratic Congress knew well in advance exactly what this well-controlled commission would say.”, Peter J. Wallison, “Hidden in Plain Sight, Chapter 3: The Financial Crisis Inquiry Commission and Other Explanations for the Crisis”

March 9, 2015 – Statement 649: “As always, government bank regulators’ capital and liquidity rules heavily influence bank investment decisions. Pre-crisis, very low Basel risk-based capital requirements for non-prime mortgages and private MBS lead banks to invest in these assets. The recent changes noted (in the article below) are causing the world’s banks to invest in their sovereign government’s bonds. In our case, U.S. Treasuries…

February 4, 2015 – Statement 599: “I hope next year we’ll have abolished Fannie and Freddie…it was a great mistake to push lower-income people into housing they couldn’t afford and couldn’t really handle once they had it. I had been to sanguine about Fannie and Freddie.”, Barney Frank (D-Mass.), former chair of the House Financial Services Committee (In an interview with Larry Kudlow on CNBC, August 2010)

February 4, 2015 – Statement 598: “…although the private securitization system challenged Fannie and Freddie during these years, the NTMs (nontraditional mortgages) securitized by the private sector were only 24 percent of the NTMs outstanding in 2008, showing that the PMBS (private mortgage-backed securities) and the financial institutions that held them were not the major source of the bubble or the crisis.”, Peter J. Wallison

January 29, 2015 – Statement 584: “In these pages I argue that, but for the housing policies of the U.S. Government during the Clinton and George W. Bush administrations, there would not have been a financial crisis in 2008. Moreover, because of the government’s extraordinary role in bringing on the crisis, it is invalid to treat it as an inherent part of a capitalist or free market system, or to use it as a pretext for greater government control of the financial system…

January 28, 2015 – Statement 583: “Academic economists generally agree that the mortgage meltdown during the recent financial crisis was in large part a consequence of government “affordable housing” policies…

January 6, 2015 – Statement 561: “To meet the ever-increasing goals (government affordable housing), Fannie and Freddie had to reduce their underwriting standards. In fact, that was explicitly HUD’s purpose, as this statement by the department – one among many – makes clear:

October 23, 2014 – Statement 447: “Today’s rule-making takes the untenable (government) housing policy that injected irrational exuberance into mortgage lending and, as a result, caused a catastrophic financial crisis and chisels that failed policy into the stone tablets of the code of federal regulations.”, SEC Commissioner Daniel Gallagher

September 15, 2014 – Statement 363: 2002-Government: “YOU MUST PUT MORE MINORITIES AND LMI (Low-to-Moderate Income Borrowers) IN HOMES!”

September 12, 2014 – Statement 361: “The FHFA hopes that increasing demand for low-income mortgages from Fannie and Freddie will spur lenders to make more of these loans. That is certainly the way things worked before the financial crisis, when lenders could be counted upon to quickly adapt their lending practices to satisfy the appetites of the mortgage giants…

July 29, 2014 – Statement 299: “The unusual price pattern, with prices rising at an increasing rate, was already well entrenched before the widespread adoption of alternative mortgage products…such as adjustable rate mortgages, interest-only mortgages, negative equity mortgages…

July 29, 2014 – Statement 298: “For more than sixty years, Federal Reserve intervention in the market for Treasury securities has been used as the principle monetary policy instrument in the United States. We show that these interventions, which alter short-term interest rates, had their primary impact on residential mortgage lending until the Great Recession…

July 29, 2014 – Statement 297: “What May Have Sustained and Continued the Housing Bubble (2002-2006)?”

July 29, 2014 – Statement 296: “What May Have Triggered the Housing Bubble (1997-2001)?”

June 27, 2014 – Statement 246: “From 2003 to 2005, however, the Fed kept interest rates lower than such a rules-based approach would imply. This contributed mightily to the housing bubble and the risk-taking search for yield…

June 2, 2014 – Statement 211: “…a key harm resulting from many programs is “government-promoted moral hazard,” in which public policies encourage people to engage in risky behavior, often causing immense collateral damage. The federal government’s promotion of home-ownership via Fannie Mae (ticker: FNMA) and Freddie Mac (FMCC), essentially government agencies, helped bring “catastrophic damage to the larger economy”…

May 14, 2014 – Statement 188: “Hey, I have an idea! Let’s have the government encourage expanding lending to riskier borrowers. That way we can sell more houses, real estate agents can make their commissions, and when things go south, we’ll blame the lenders! Didn’t we try all that about ten years ago?…

March 10, 2014 – Statement 149: “Aggressive (U.S. government) housing programs have not always helped the poor and middle class. The median net worth of American adults is now one of the lowest among developed nations—less than $45,000, according to the Credit Suisse Global Wealth Databook. That compares with approximately $220,000 in Australia, $142,000 in France and $54,000 in Greece.”, Michael Milken, WSJ, March 6, 2014

Posted on November 5, 2015, in Postings. Bookmark the permalink. Leave a comment.

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