part10
Learning The
Right Lessons
Washington must
reexamine its politically expedient but irresponsible approach to
encouraging
higher levels of homeownership based on imprudently small down
payments and too little emphasis on borrowers’ creditworthiness and
ability to repay their loans. Unfortunately, very few elected
officials would be comfortable echoing Yale University economist and
housing expert Robert Shiller, who writes: “[T]he subprime housing
dilemma in the United States points up the problems with
over-promoting homeownership. Homeownership, for all its advantages,
is not the ideal housing arrangement for all people in all
circumstances.”93 However, failing to learn the mistakes of our
overleveraged binge on mortgage debt will almost certainly doom the
country to repeating the same mistakes again and again.
Lopez,
Mark Hugo, Gretchen Livingston and Rakesh Kochhar, Pew Hispanic
Center, “Hispanics and the Economic Downturn: Housing Woes and
Remittance Cuts,” Jan. 8, 2009, pg i.
Shiller,
Robert J., The Subprime Solution, Princeton, NJ: Princeton University
Press, 2008, pg. 6.
U.S.
Department of the Treasury, “Monthly Treasury Statement of Receipts
and Outlays of the United States Government,” Apr. 30,
2009,accessed at http://fms.treas.gov/mts/mts0409.pdf.
Board
of Governors of the Federal Reserve System, “Factors Affecting
Reserve Balances of Depository Institutions and Condition Statement
of Federal Reserve Banks,” May 20, 2009, accessed at,
http://www.federalreserve.gov/releases/h41/Current/h41.pdf.
Morgenson,
Gretchen and Charles Duhigg, “Mortgage Giant Overstated the Size of
Its Capital Base,” The New York Times, Sept. 7, 2008.
See
note 59, supra.
Pinto,
Edward, presentation to the American Enterprise Institute, “How
Serious Is the Mortgage Problem That Will Confront President Obama?”
Jan. 16, 2009.
Freddie
Mac, document produced to the Committee, Bates FMAC0013675.
Freddie
Mac, document produced to the Committee, Bates FMAC0013676.
Freddie
Mac, document produced to the Committee, Bates FMAC0013757.
See
note 72, supra.
Jickling,
Mark, Congressional Research Service, “Fannie Mae and Freddie Mac
in Conservatorship,”
Sept.
15, 2008, pg. 1.
83
Congressional
Research Service, “Housing and Economic Recovery Act of 2008,”
Dec. 5, 2008, pg. 1.
Freddie
Mac, document produced to the Committee, Bates FMAC0013756.
Fannie
Mae, document produced to the Committee, Bates FM-COGR_00177162 –
FM-
COGR_0177172.
Freddie
Mac, document produced to the Committee, Bates FMAC0013672.
Freddie
Mac, document produced to the Committee, Bates FMAC0013739.
Freddie
Mac, document produced to the Committee, Bates FMAC0013673.
Freddie
Mac, document produced to the Committee, Bates
FMAC0013801-FMAC0013802.
Schmidt,
Susan and Maurice Tamman, “Housing Push for Hispanics Spawns Wave
of Foreclosures,” The Wall Street Journal, Jan. 5, 2009.
Mudd
Daniel, speech, Jan. 4, 2005, accessed at
rtsp://video.c-span.org/project/c04/c04010405_cbc.rm
.
See
note 12, supra
Paige,
Leslie, Citizens Against Government Waste, “GSE Reform in Critical
Stage,” May 1, 2004,
accessed
at http://www.cagw.org/site/News2?page=NewsArticle&id=7769.
Office
of Federal Housing Enterprise Oversight, Press release, “Fannie Mae
Façade,” May 23, 2006,
accessed
at http://www.ofheo.gov/media/pdf/fnmserelease.pdf.
Fannie
Mae, document produced to the Committee, Bates FM-COMP-COGR-00009.
Freddie
Mac document produced to the Committee.
House
Financial Services Committee hearing, Sep. 25, 2003.
Office
of Federal Housing Enterprise Oversight, “Report of the Special
Examination of Freddie Mac,” Dec. 2003, pg. vi, accessed at
http://www.ofheo.gov/media/pdf/specialreport122003.pdf.
Jickling,
Mark, Congressional Research Service, “Accounting Problems at
Fannie Mae,”Dec. 7, 2006.
Secter,
Bob and Andrew Zajac, “Rahm Emanuel’s Profitable Stint at
Mortgage Giant,” The Chicago Tribune, Mar. 26, 2009.
Golden,
Dan, “Angelo’s Fannie Pack,” Conde Nast Portfolio, Jul. 17,
2008.
House
Oversight and Government Reform Committee Republican Staff, “Friends
of Angelo: Countrywide’s Systematic and Successful Effort to Buy
Influence and Block Reform,” Mar. 19, 2009.
See
note 31, supra.
Pinto,
Edward, information provided to the Committee on Oversight and
Government Reform, based on an analysis of securities filings and
mortgage market data.
Senator
Charles Schumer, press release, Nov. 20, 2006, accessed at
http://schumer.senate.gov/SchumerWebsite/pressroom/record.cfm?id=266131
.
See
note 36, supra.
See
note 12, supra.
Sammon
Bill, “Lawmaker Accused of Fannie Mae Conflict of Interest,” Fox
News, Oct. 3, 2008,
accessed
at http://www.foxnews.com/story/0,2933,432501,00.html.
See
note 34, supra. Ibid.
Gigot,
Paul A., “The Fannie Mae Gang,” The Wall Street Journal, Jul. 23,
2008.
Murray,
Matthew, “A $90 Million Package Gets Lambasted Again,” Roll Call,
Dec. 10, 2008.
See
note 44, supra.
Yost,
Pete, “Freddie Mac Lobbyist Staged 50 GOP Fund-Raisers as Congress
Let Legislation Die,” The Associated Press, Jul. 18, 2003.
Common
Cause, “Ask Yourself Why…They Didn’t See This Coming,” Sept.
24, 2008, in note 27, supra.
Open
Secrets, “Update: Fannie Mae and Freddie Mac Invest in Lawmakers,”
accessed at
http://www.opensecrets.org/news/2008/09/update-fannie-mae-and-freddie.html.
Federal
Election Commission, Press release, “Federal Home Loan Mortgage
Corporation (“Freddie Mac”) Pays Largest Fine in FEC History,”
Apr. 18, 2006, accessed at
http://www.fec.gov/press/press2006/20060418mur.html.
Congressional
Budget Office, “Assessing the Public Costs and Benefits of Fannie
Mae and Freddie Mac,” May 1996, pg. xiv, accessed at
http://www.cbo.gov/ftpdocs/0xx/doc13/Fanfred.pdf.
See also, Passmore, Wayne, Board of Governors of the Federal Reserve,
“The GSE Implicit Subsidy and the Value of Government Ambiguity,”
2005, pg. 3, accessed at
http://www.federalreserve.gov/Pubs/feds/2005/200505/200505pap.pdf.
Data
from Standard & Poor’s and Moody’s, accessed at
www.mortgagedaily.com.
See
note 13, supra, pg. 8.
See
www.opensecrets.org. Vaida,
Bara, “Battling Fannie and Freddie,” National Journal, Oct. 18,
2008, pgs. 46-47.
See
note 7, supra. Morse, Neil, “Looking for New Customers,” Mortgage
Banking, Dec. 1, 2004, in note 13, supra.
Simpson,
Glenn R., “Countrywide Made Home Loans to Gorelick, Mudd,” The
Wall Street Journal, Sept. 25, 2008.
Muolo,
Paul and Matthew Padilla, Chain of Blame, New York: John Wiley &
Sons, 2008, pg. 112.
Freddie
Mac, document produced to the Committee, Bates
FMAC0013683-FMAC0013692.
See
note 23, supra, pg. 5. 35
Ullmann,
Owen, “Crony Capitalism: American Style,” The International
Economy, Jul/Aug 1999.
Office
of Federal Housing Enterprise Oversight, “Report of the Special
Examination of Fannie Mae,” May 2006, pg. 58, accessed at
http://www.ofheo.gov/media/pdf/FNMSPECIALEXAM.PDF.
LaPerriere,
Andrew, “Housing Bubble Trouble: Have we been living beyond our
means?” The Weekly Standard, Apr. 10, 2006.
Johnson,
Glen, “Frank Says GOP Housing Attacks Racially Motivated,”
Associated Press, Oct. 6, 2008.
According
to http://www.Investopedia.com
, “automated underwriting” is “a computer-generated loan
underwriting decision. Using completed loan application information,
an automated underwriting system retrieves relevant data, such as a
borrower’s credit history, and arrives at a logic-based loan
decision. Automated underwriting engines can provide
near-instantaneous loan approval or denial decisions; therefore,
implementing automated underwriting systems can save a considerable
amount of time, as manual underwriting can take as long as 60 days to
complete. In addition to the time savings, automated underwriting is
preferred because it is based on algorithms, eliminating human bias.
Freddie Mac maintains and markets a large automated underwriting
engine known as Loan Prospector, and Fannie Mae has an
automated
underwriting engine known as Desktop Underwriter.”
Wallison,
Peter J., American Enterprise Institute, “Cause and Effect:
Government Policies and the Financial Crisis,” pgs. 3-4, Nov. 2008.
Barth,
James R., Tong Li, Triphon Phumiwasana, and Glenn Yago, “Surprise:
Subprime Mortgage Products Are Not The Problem!” The Milken
Institute, Dec. 2007, pg. 1, accessed at
http://www.milkeninstitute.org/pdf/Subprime-Mortgage-Products.pdf.
According
to http://www.Investopedia.com
, “leverage” is, “the amount of debt used to finance a
firm's assets. A firm with significantly more debt than equity is
considered to be highly leveraged. Leverage is most commonly used in
real estate transactions through the use of mortgages to purchase a
home.”
Leonnig,
Carol D., “How HUD Mortgage Policy Fed the Crisis,” The
Washington Post, Jun. 10, 2008.
Alarkon,
Walter, “Clinton Rejects Blame for Financial Crisis,” The Hill,
Sept. 9, 2008, accessed at
http://thehill.com/leading-the-news/clinton-rejects-blame-for-financial-crisis-2008-09-25.html.
Ibid,
pgs. 54-57.
CRA
volume data accessed at http://www.ffiec.gov/craadweb/national.aspx
, total subprime mortgage originations accessed at
www.mortgagedaily.com.
U.S.
Department of Housing and Urban Development, The National
Homeownership Strategy: Partners in the American Dream, May 1995,
pgs. 4-4, 4-5, 4-10.
Stiglitz,
Joseph E., Jonathan M. Orszag and Peter R. Orszag, “Implications of
the New Fannie Mae and Freddie Mac Risk-based Capital Standard,”
Fannie Mae Papers, Mar. 2002.
U.S.
Department of the Treasury, “Monthly Treasury Statement of Receipts
and Outlays of the United States Government,” Apr. 30, 2009,
accessed at http://fms.treas.gov/mts/mts0409.pdf.
See
also, Board of Governors of the Federal Reserve System, “Factors
Affecting Reserve Balances of Depository Institutions and Condition
Statement of Federal Reserve Banks,” May 14, 2009, accessed at
http://www.federalreserve.gov/releases/h41/Current/h41.pdf.
Hossain,
AKM Rezaul, “The Past, Present and Future of Community Reinvestment
Act (CRA): A Historical Perspective,” Oct. 2004, pg. 13.
“Federal
National Mortgage Association Charter Act,” accessed at
http://www.fhfa.gov/GetFile.aspx?FileID=29
.
Roner,
Valencia, “Fannie Mae’s Trillion-Dollar Giveaway,” Black
Enterprise, Nov. 1, 1994.
McLean,
Bethany, “Fannie Mae’s Last Stand,” Vanity Fair, Feb. 2009.
Wallison,
Peter J. and Charles W. Calomiris, American Enterprise Institute,
“The Last Trillion-Dollar Commitment,” Sept. 2008, pg. 3. See
note 12, supra.
Fannie
Mae’s original Holmes, Steven A., “Fannie Mae Eases Credit to Aid
Mortgage Lending,” The New York Times, Sep. 29, 1999, pg. C2.
Liebowitz,
Stan J., “Anatomy of a Train Wreck: Causes of the Mortgage
Meltdown,” Independent Policy Report, Oct. 3, 2008, accessed at
http://www.independent.org/pdf/policy_reports/2008-10-03-trainwreck.pdf.
It
was not until scandals in 2003 and 2004 Public Law 102-550, Sec.
1362.
Kling,
Arnold, testimony before the House Oversight and Government Reform
Committee, Dec. 9, 2008.
Pinto,
Edward, testimony before the House Oversight and Government Reform
Committee, Dec. 9, 2008.
Office
of the Comptroller of the Currency, “Interpretive Letter #964,”
May 2003, accessed at
http://www.occ.treas.gov/interp/may03/int964.pdf.
Public
Law 102-550, Title XIII.