03 October 2008

Wait... I thought Congress fixed it?

Wow, with Congress spending $800 BILLION (at the very least, I gaurantee you it will be more) of OUR money on *fixing* the financial market's mess, you would have thought Wall Street would have responded by going up today, eh?

At some point, enough is enough. When the vast majority of the American people are able to shut down the website and phone lines of Congress letting them know of our displeasure with the bailout bill and Congress STILL votes to do so, when does enough become enough?

Utterly ridiculous.

01 October 2008

The research story you won't see

New York Times
Fannie Mae Eases Credit To Aid Mortgage Lending
Published: September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University 's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

In a cursory search of current news stories on the Freddie Mac/Fannie Mae "crises" on the Time's own website, I found a couple recent stories. Strangely enough, even though they easily could have conducted some research into their own archives, not a single word about the Clinton administration's role was mentioned.

29 September 2008

State of Fear

The Dow Jones industrial average lost 777 points Monday, its biggest single-day fall ever, easily beating the 684 points it lost on the first day of trading after the Sept. 11, 2001, terrorist attacks.
That's right - the WORST ever!! Except for one little point. As of today, it's not.

In October 2002, the NASDAQ dropped to as low as 1,108.49 - a 78.4% decline from its all-time high of 5,132.52, the level it had established in March 2000.
To put some perspective on it, the Dow dropped 6.9% today.

On October 19, 1987, the stock market crashed. The Dow dropped 508 points or 22.6% in a single trading day. This was a drop of 36.7% from its high on August 25, 1987.
Again, the market dropped less than 7% today...

One of the books I would suggest that everyone reads is Crichton's State of Fear. He does a fabulous job of explaining how our media manipulates the news to create a constant state of panic and fear. Exactly what we're seeing today. Are the financial markets hurting? Clearly. But the worst ever? Not quite.

Shocked, I am!

The House of Representitives actually did the right thing today and voted down the ridiculous bailout bill.

They must have been hearing volumes of mail from their constituents that the thought of the government taking over the mortgage industry was not a good idea. At all.

I firmly believe that if this ridiculous bill were voted on this time last year it would have passed. But only a little more than a month out from the election? That's much too close for comfort for those running for re-election.

I think this could very well be a foreshadowing of the election. Nancy Pelosi couldn't even get all of her Democrats on board. Obama couldn't lead. Bush continues to serve out his (very) lame duck term.

As of the writing of this post, you STILL can't get onto Congress' website. We, the people, have virtually overwhelmed the Congress critters and for once, they did the right thing.