Private sector loans, not Fannie or Freddie, triggered crisis

[downhill]

WASHINGTON — As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.

Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.

Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.

Federal Reserve Board data show that:

* More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

* Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

* Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.





Read more of this most interesting article -here-

[Humboldt]

*Waits for JC to chime in*

[BroncoSport]

Not that it really matters, but I thought I read somewhere that although the private sector banks "made" the loans that the shaky loans were immediately bought up by Fannie and Freddie as promised. ie the mandate was made to push the loans to the lower credit folks and amounts beyond their means and that everything would be ok because of the backing of Fannie and Freddie. Has anyone else heard this?

I am so pissed about this taxpayer bailout.

I spent about 20 minutes and no $$$ and came up with a 3 step solution that doesn’t cost the tax payer diddley.

1) ALL loans such as subprime, 100%, interest only are now illegal and punishable by a steep prison sentence

2) ALL amounts of the CEO's of these lending institutions given to them within the last 10 years are immediately seized and distributed according to step three

3) ALL defunct banks are allowed to either close or be bought up by more solvent banks. After which the employees that lose their jobs because of the greed and incompetence of the CEO shall receive severance in the amount of 5 years current salary. It’s not their fault. Any other monies left over will be used to prosecute the CEO's at NO TAX PAYER EXPENSE.

I pay my mortgage payments. I bought what I could afford and I put a nice down payment down. I shouldn’t have to have my tax money bail out this problem.