How did this worldwide economic crisis begin and who is responsible for it?

In 1996, a bipartisan Congressional Bill, H.R. 3019 was promoted and approved by President Bill Clinton to make changes to the 1977 Community Reinvestment Act signed into law by President Jimmy Carter.

H.R. 3019 allowed Freddie Mac and Fannie Mae, originally formed by the government to facilitate mortgage loans to homeowners, to accept mortgages from poor, low-income home buyers. The new requirement lowered the previous 25% down payment to zero down. In 1999, the requirements for approval of a mortgage by Freddie Mac and Fannie Mae were reduced even further to allow home buyers to obtain adjustable rate mortgages (ARMs) based on the Federal Fund interest rate. There were some further changes as a result to the Gramm-Leach-Bliley Act, a deregulation of the financial services industry.

As President Bush took office in 2001, the economy began to enter into a recession. With the terrorist attack on September 11, 2001, the federal government lowered the Federal Fund interest rate to fight off the recession in 2001-2002. The lowered interest rates made more people accessible to the low cost adjustable rate mortgages spurring many people to purchase homes. Through supply and demand with low interest rates, the real estate boom began with home prices soaring in value.

In April 2001, the Bush administration warned that Freddie and Fannie were too large and over leveraged and their failure “could cause strong repercussions in financial markets”.

By September 2003, Republicans began to question Democrats about oversight needed for Freddie and Frannie. The issue was opposed by Congressional Democrats.

‘‘These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.

Representative Melvin L. Watt, Democrat of North Carolina, agreed. ”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,”

As the economy recovered into 2003 -2004, interest rates began to go up to combat inflation. As interest rates go up, adjustable mortgage rates also adjusted, which caused mortgage payment to go up on adjustable rate loans. As these loans became expensive, many people began to sell their homes with home prices topping out to their peak in 2004.

In 2005, the Senate Banking Committee, then chaired by Republican Richard Shelby, tried to rein in the two organizations by passing some strong new regulations.

Democrat Senator Chris Dodd of Connecticut successfully threatened a filibuster. Barney Frank continued to defend Fannie and Freddie as “fundamentally sound” and labled the president’s proposals as “insane”. Senator Thomas Carper of Delaware stated “If it ain’t broke, don’t fix it.” Maxine Waters of California accused Republicans of being racially motivated and Gregory Meeks of New York stated “I am just @#$%&! off.”

All the Republicans voted for it. All the Democrats, including the current chairman, Senator Chris Dodd, voted against it. Both he and Frank blocked the Housing Reform Act, which would have forced oversight and audits of Fannie Mae and Freddie Mac. Since Democrats blocked it, those new regulations never got consideration by the full Senate and the bill proposing new regulations died.

Why would Democrats block the reform? Follow the money. Dodd and Barack Obama were the number one and number two recipient of campaign donations from Fannie Mae. Franklin Raines, the former CEO of Fannie Mae, then became a Democrat Operative for the party after he received 90 million in salary and bonuses at Fannie Mae, where the financial records were manipulated to meet earning targets so he could get his bonuses at the expense of the people. Meanwhile, Barney Frank received more than $40,000 in campaign donations while he was involved in a homosexual relationship with a Fannie Mae executive.

Meanwhile by 2005, too many homes were on the market. The supply and demand of too many homes caused home values to fall. With the inability to sell their home, many home owners began to refinance. However, as home values continued to decline, many home owners could not refinance their home as they owed more on their home than it was worth. Many of those home owners began to walk away from their homes which avelanched into a huge economic crisis as banks were left to cover the costs of loans therefore forcing them to declare bankruptcy.

Many states, county governments and cities will be forced to declare bankruptcy with defaults on munipal bond and a lack of revenue from assumed property taxes. With the economic slow down, people have lost their jobs and more people are watching how much they spend as we sink into what may be bigger than the Great Depression of the 1930’s

Yet, the Democrats successfully politicized this as the Republican’s fault. On October 14, 2008, Senator Hillary Clinton said, ” It breaks my heart to see the U.S. in an economic crisis eight years after Democrats left the nation in sound fiscal shape.” Wow! What a cover up. Many people may blame President Bush just because he was president during this time; but this economic storm began to brew long before he even became president.

- freedom4truth

Related Posts:

• Who Caused this Economic Crisis?
• Just noticed the comments from Barney Frank re; Fannie and Freddie…..
• Did you not hear Barney Frank’s testimony regarding Freddie Mac and Fannie Mae just before they imploded?
• Fannie and Freddie’s Huge Christmas Bonus
• The donkey Democrats caused this mess in the first place, led by Clinton and Obama.

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