The "It was the CRA and Fannie 'n Freddie, NOT financial deregulation" lie...post rebuttals here.

[Ken Burch]

I've seen that line from RW posters in newpaper comment boxes for the last two years, and now it looks like the full GOP will using that as their official position on the Crash of 2008. Obviously it's total bullshit, but it's their story and their stickin' with it, as the song goes, so could people please post the links to the best refutations of that meme?

We ALL need the tools at hand to discredit it in any forum we participate in.

Let's make this thread a clearinghouse for the truth.

[mmonk]

1. They couldn't create the bubble.

Bubbles are created by Wall Street and those that are like minded in Congress.

[Ken Burch]

2. thanks for the post.

n/t.

[Kalyke]

3. Thanks to Mother Jones.

http://motherjones.com/mojo/2010/05/dear-gop-fannie-mae-freddie-mac-cause-financial-crisis-subprime-mortgage-gse

* The origination of subprime loans came primarily from non-bank lenders not covered by the ;
* The majority of the underwriting, at least for the first few years of the boom, were by these same non-bank lenders;
* When the big banks began chasing subprime, it was due to the profit motive, not any mandate from the President (a Republican) or the Congress (Republican controlled) or the GSEs they oversaw;
* Prior to 2005, nearly all of these sub-prime loans were bought by Wall Street—NOT Fannie & Freddie;
* In fact, prior to 2005, the GSEs were not permitted to purchase non-conforming mortgages;
* The change in FNM/FRE conforming mortgage purchases in 2005 was not due to any legislation or marching orders from the President (a Republican) or the the Congress (Republican controlled). It was the profit motive that led them to this action.

[Ken Burch]

4. Good one.

Thanks.

[mmonk]

6. Except for deregulation which allowed the banking industry

and brokerage business to become essentially the same.

[rucky]

15. but without the CRA mandate. n/t

[EC]

5. The economy will stay in the dumps as long as these guys

fantasize...

[Atman]

7. How many mortgages did Fannie and Freddie write in Europe and Asia?

How did Fannie and Freddie bring about a GLOBAL financial crisis?

100% BULLSHIT. It's just Wall Street and the Corporatists scapegoating the less fortunate.

[TayTay]

8. Well, there is the audit report for CRA for 2009

that directly takes on the critics who want to shift blame for the fiscal meltdown from greedy speculators to the poor. This is from an independent http://traigerlaw.com/publications/The_community_reinvestment_act_of_1977-not_guilty_1-26-09.pdf">audit report generated in 2009 by Traiger and Hinckley, LLP on the CRA:

Conclusion

Critics of the CRA claim that the law compels banks to downgrade their credit
standards in order to make mortgage loans to unqualified LMI borrowers. We
hypothesized that if this was true, lending data from 2007, a time of tightened
underwriting standards and regulatory emphasis on safety and soundness, would show
significantly diminished lending to LMI borrowers by CRA-subject banks.

Instead, our analysis of 2007 data indicates that the percentage of LMI
applications that were originated by CRA-subject banks remained stable even in the
climate of heightened scrutiny and wariness that prevailed. This finding contradicts the
notion that compliance with the CRA is dependent on imprudent lending. Thus, we
conclude that the CRA cannot be rationally blamed for current problems in the mortgage
market, much less for the U.S. financial crisis.

That CRA-subject banks continue to make mortgage loans to LMI borrowers
while simultaneously strengthening their underwriting standards not only contradicts the
claims of critics who blame the CRA for our present crisis, but also suggests that without
the 32-year-old law, the home mortgage market might be in even worse condition. This
suggestion is reinforced by our 2008 study, which showed CRA-subject banks were
substantially less likely than other lenders to engage in the risky lending practices that
helped fuel the foreclosure crisis. Moreover, a recent Federal Reserve Bank of San
Francisco review of LMI lending found “the CRA, and particularly its emphasis on loans
made within a lender’s assessment area, helped to ensure responsible lending, even
during a period of overall declines in underwriting standards.”

Finally, critics have chosen a particularly inauspicious time to attack the CRA.
We are currently in the midst of a crisis that has Congress and the Executive Branch,
including the Treasury Department and banking regulators, working to stimulate the
economy and free-up credit. Right now, the CRA, a law that has spurred responsible
lending to underserved borrowers, looks like a particularly wise and inspired piece of
legislation. Indeed, policy makers should consider looking to the CRA for guidance on
how the government can spur responsible lending to other qualified borrowers.

[jtuck004]

9. Hank Paulson, the criminally inept Treasury Secretary...rewrites history, and fabricates causes

Barry Ritholtz, on his blog The Big Picture, and in his book "Bailout Nation" debunked the whole "blame the CRA and GSE's" story.

Matt Taibbi in "Griftopia" mentions some of the first testimoney where it was used as an excuse to deflect blame from the investment banks.

In this excerpt from "The Big Picture Ritholtz contrasts two editorials on the issue. At the end of the article is a sentence

"The data simply is not there." <-- In his blog,here... each word in that sentence links to a different post with data to debunk this.

Fannie Freddie NYT OpEds

There are two OpEds in today’s New York Times regarding the GSEs. One of them is full of insight and intelligence and rationality.

The other is by John Carney.

The insightful column, Say Goodbye to Fannie and Freddie, was written by former St. Louis Fed president Bill Poole.

During the credit bubble and housing boom, the Alan Greenspan led FOMC was terribly irresponsible in their actions and inactions. But there were two voices of reason at the Fed: Ed Gramlich and Bill Poole. Both were unfortunately ignored by the Maestro (as he was then known). Gramlich warned against subprime loans and predatory lending, while Poole was a sharp critic of the GSEs.

This post is here...

Hank Paulson: Blame Crisis on FHA/GSEs

Hank Paulson, the criminally inept Treasury Secretary who shoveled trillions of taxpayer dollars to insolvent banks, facilitated the grand theft of some near $20 billion dollars from AIG by Goldman Sachs (where he was previously CEO), is attempting to change the narrative of the credit crisis and collapse.

...

“A significant root cause of the crisis was the combined weight of government policies promoting homeownership; these are apparent in the housing GSEs, the Federal Housing Administration (FHA), the Federal Home Loan Banks, the federal tax deduction for mortgage interest and various state programs. Homeownership was overstimulated to the point that it was unsustainable and dangerous to the broader economy.”

Let us point out a small problem with Paulson’s rewrite: Throughout the 20th century, interest rates were kept in a realistic range, at least relative to economic growth, by bond traders and the Fed.

At the same time, bank lending standards were based upon historically well founded measures: The borrowers ability to service the debt. Factors that impacted this involved such quaint notions as income, employment history, credit score, other debt obligations, and assets. Further, home loans were based on specific Loan to Value — LTV — meaning that a substantial down payment was actually required. And last, legitimate appraisals were performed at the behest of banks that actually kept these loans on their books for 10 or 20 years — not 30 days.
...

More here...

[TayTay]

10. Also, a rational review of what the CRA does

That looks ahead at the CRA and what it should be doing. It should be extended to cover smaller banks and nonbank financial instutitions. This is why the RightWing wants CRA gone.

http://www.frbsf.org/publications/community/cra/cra_30_years_wealth_building.pdf

[gratuitous]

11. The short answer

Yes, large financial institutions are always getting pushed around and bullied by poor people; it's just not a fair fight at all. What's puzzling to me is that after the smoke cleared from this crash, the poor people all seemed to lose their homes, their investments, and their equity, the banks and lenders pocketed billions in fees, and then swooped in on the distressed properties to buy them for peanuts and re-sell them for market prices.

I'll bet people think twice next time before they try to scam bankers into writing mortgages they can't possibly pay!

[lumberjack_jeff]

12. A law enabling minorities to get 30 year mortgages.

Didn't create a mortgage crisis 33 years later.

[tridim]

13. Fannie was VERY good to me during my foreclosure.

JPM Chase, the criminal servicer of my mortgage was not.

[jtuck004]

14. Great quote

In robert Scheer's book "'The Great American Stickup" he details the tragedy which the removal of regulation and the subsequent financial crisis it allowed, starting with the significant actors in the administrations of Reagan, Clinton, Bush, and President Obama.

As to the subject of the poor and GSE's being of real consequence:

"Later, in the rubble, consumer borrowers would be scapegoated for the crash. This is the same logic as blaming passengers of a discount airline for their deaths if it turned out the plane had been flown by a monkey".

Ironic quote, given that Alan Greenspan was Federal Reserve Chairman during much of that time. If one sees the crisis as a missile fired into the financial security and retirements of 98% of Americans, Reagan and Clinton may have built the engine. But Bush and his crony's, including and especially Greenspan, fueled the rocket, lit it, and aimed it squarely where it would hurt our neighbors, and this country, in the worst way possible.