Originally posted by TerrierJack
This just shows how misinformed you are. Fannie and Freddie were NOT allowed to make sub-prime mortgages. They collapsed not because of the mortgages that they made but because of investments they made with their profits in bundled securities that were backed by other lender's subprime mortgages. You voted for Bush twice because you were so badly inform ...[text shortened]... e conservative he is. You were rolled. And you're paws up waiting for it again - an easy mark.
And why did they make such investments? In 1992 the Department of Housing and Urban Development pressured Fannie and Freddie into purchasing these securities for the conflicting purposes of diversifying the risk and making even more money available to banks to make risky loans. Congress also passed the Federal and Housing Enterprises Financial Safety and Soundness Act eventually mandating that these companies buy 45% of all loans from people of low and moderate incomes. And in 1995 the Treasury Dpartment established the Community Development Financial INstitutions Fund, which provided banks with tax dollars to encourage even more risky loans. Of course what got the ball rolling was not only the creation of Fannie and Freddie to be used by the government as they please, it was also the CRA act of 1977 that addressed alleged discrimination by banks in making loans to poor people and minorities in the inner cities. The act provided that banks have an affirmative obligation to meet the credit needs of communities in which they are chartered. In 1995 the Clinton administrations Treasury Department issued relugations tracking loans by neighborhoods, income groups, and races to rate the performance of banks. The ratings were used by regulators to determine whether the government would apporve bank mergers, acquisitions, and new branches. The regulations also encouraged groups like ACORN to file petitions with regulators or threaten to slow or even prevent banks from conducting business by challenging the extent to which banks were issuing these loans. With the all powerful leverage over banks, some groups were able to legally extort banks to make huge pools of money available to these groups, money they in turn used to make loans. The banks and community groups issued loans to low income individuals who often had bad credit or insufficient income. And these loans, which became known as sub-prime loans, made available 100% financing, did not always require the use of credit scores, and were even made without documenting income. Therefore, the government insisted that banks, particularly those that wanted to expand, abandon traditional underwriting standars. One estimate puts the figure of CRA-eligible loans at $4.5 trillion.
BTW, the banking industry is good for the TARP money to be payed back to the tax payers with interest. However, Fannie and Freddie, on the other hand, will cost tax payers an additional $6 trillion.