Republicans and the Housing Bubble

If Christ were here now there is one thing he would not be – a Christian. ~ Mark Twain

One of the easiest and simplest tactics for the republican party to employ when all else fails is to play the blame game. They play this game with an excellent degree of deliverance, skill and acumen.  The game is played even in the face of the complete collapse of the GOP’s ideology.

Of course such game playing undermines and lessen the correcting of failed policy which was created by deluded ideology.  The game playing also affords the offenders with the capability of existing in a bubble which further distance them from reality.

Contrary to the beliefs of the anti-social and right wing propaganda, “sub-prime” loans were not just designed to help only minorities and poor people get their first homes.  Nor can the bursting of the home mortgage loan bubble be laid at the feet of aiding minorities in getting homes through Fannie and Freddie.

The first thing to understand is what a  sub-prime loan is:  A type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans. Quite often, subprime borrowers are often turned away from traditional lenders because of their low credit ratings or other factors that suggest that they have a reasonable chance of defaulting on the debt repayment. The housing bubble bursting is directly caused by a practice that was loosely regulated and lawlessness that allowed predators to be bred.  There was no transparency, rules or ethnics being employed by any of the parties involved.

There are plenty of culprits, like lenders who peddled easy credit, consumers who took on mortgages they could not afford and Wall Street chieftains who loaded up on mortgage-backed securities without regard to the risk.

But the story of how we got here is partly one of Mr. Bush’s own making, according to a review of his tenure that included interviews with dozens of current and former administration officials.

The  sub-prime loans benefited home-improvement contractors as well.  It gave them a way to sell their home inventories at super inflated prices. Sub-prime loans were especially rampant in states like California, Nevada and Florida.

Predatory loans sometimes involve a conspiracy between loan agents and unscrupulous home-improvement contractors, as well as appraisers who inflate the value of a house so that families will borrow more than the houses are really worth.

Predatory mortgages often include last-minute, hidden second mortgages. Using bait-and-switch tactics, predatory lenders tout low interest rates in ads targeting the elderly and residents of low-income, working-class, and minority neighborhoods, without explaining the actual interest rates or that adjustable-rate mortgages mean that the rates will increase.

Borrowers are enticed with deals that require them to pay little or nothing down. The unscrupulous lenders approve borrowers for loans even if they’ve recently been bankrupt or don’t have sufficient income to keep up the payments. These lenders don’t document an applicant’s ability to pay back a loan. They often just accept the borrower’s word about his income and expenses.

The scam worked more efficiently through the support of the Federal chairman, Alan Greenspan, the President, Bush, Fox News and any other idiot financial reporter on TV that was selling the support of the loans, that were being handed out like free popcorn, as an excellent deal.

The loans were structured very simply. The receiver of the loan needed very little money to put down on the their new home or, in some cases, received the down payment from the government.

Concerned that down payments were a barrier, Mr. Bush persuaded Congress to spend up to $200 million a year to help first-time buyers with down payments and closing costs.

The president also leaned on mortgage brokers and lenders to devise their own innovations. “Corporate America,” he said, “has a responsibility to work to make America a compassionate place.”

And corporate America, eyeing a lucrative market, delivered in ways Mr. Bush might not have expected, with a proliferation of too-good-to-be-true teaser rates and interest-only loans that were sold to investors in a loosely regulated environment.

Loan payments were initially set at a low rate which stayed stable for a few years. There you had home owners making low payments for very expensive property. The bursting of the bubble was when the demand for the higher interest rate kicked in (adjustable-rate mortgage, ARMs).  In some cases the increase of ARMs was as high as 30% for some home owners.  The simply fact that sub-prime loans were loosely regulated aided the total collapses of mortgages that could no longer be afforded by people’s who’s income stayed stangnant and saw no growth even as the ARMs kept rising.

He [Bush] pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent — and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards.

In the beginning this was seen as a win for all parties involved. The new home owner got a home, the home builders got paid lavish premiums for their inventory, real estate companies and loan brokers got rich from the sales, Wall Street banks that packaged and repackaged the scam loans sold them throughout the world and made hundreds of billions of dollars. Even president Bush (the psychopath) benefited from the illusion that the economy through home ownership was good and that belief gave him the luxury to believe that he could afford his illegal war with Iraq without even raising taxes.  Sub-prime loans did not begin with President Bush’s administration:

… by the early 1980s, the lending industry used its political clout to push back against government regulation. In 1980, Congress adopted the Depository Institutions Deregulatory and Monetary Control Act, which eliminated interest-rate caps and made sub-prime lending more feasible for lenders. The S&Ls balked at constraints on their ability to compete with conventional banks engaged in commercial lending. They got Congress — Democrats and Republicans alike — to change the rules, allowing S&Ls to begin a decade-long orgy of real estate speculation, mismanagement, and fraud. The poster child for this era was Charles Keating, who used his political connections and donations to turn a small Arizona S&L into a major real estate speculator, snaring five Senators (the so-called “Keating Five,” including John McCain) into his web of corruption.

but Bush was certainly a sleep at the wheel when it came to overseeing the banking industry since it played into his ideology of freemarket and less government regulation, which as we all know is the republican way.

As for Mr. Bush’s banking regulators, they once brandished a chain saw over a 9,000-page pile of regulations as they promised to ease burdens on the industry. When states tried to use consumer protection laws to crack down on predatory lending, the comptroller of the currency blocked the effort, asserting that states had no authority over national banks.

The administration won that fight at the Supreme Court. But Roy Cooper, North Carolina’s attorney general, said, “They took 50 sheriffs off the beat at a time when lending was becoming the Wild West.”

Now the chickens have come home to roost. On the surface very little sympathy should be afforded to those home buyers that were willing to buy homes that far exceed there normal yearly incomes. Yet, those people were victims of a scam that was being systematically employed throughout our country.

The hardest hit are the innocent borrowers of sub-prime loans. Many of them are working- and middle-class families who fell victim to the country’s economic squeeze, a hardship not of their own doing but a symptom of the Bush years. They faced layoffs, stagnant wages, and rising costs of home heating, gasoline, utilities, food, and child care. For those without health insurance, one serious medical problem wiped out their savings. At a time when soaring housing prices were out of whack with the rest of the economy, sub-prime loans were the only way they could purchase a home. But when they could no longer keep up their mortgage payments, they had no safety net. They began skipping their monthly mortgage payments, especially after the adjustable-rate mortgages kicked in with higher interest rates, as high as a 30 percent spike for some borrowers.

The ironic part is that this was the exact same type of scam that Bush Sr. ran in the 1980s via the Savings and Loans real estate fraud bubble. Bush Sr. used that scam to pay for the Contra war (no telling how many billions he and his fellow crooks siphoned off on the side). It is something to also note that both father and Son used the same Federal Chairman, Alan Greenspan who in effect was in charge of banking.

The problems occurred in the Savings and Loan industry as they relate to theft because the industry was deregulated under the Reagan/Bush administration and restrictions were eased on the industry so much that abuse and misuse of funds became easy, rampant, and went unchecked.

There are several ways in which the Bush family plays into the Savings and Loan scandal, which involves not only many members of the Bush family but also many other politicians that are still in office and still part of the Bush Jr. administration today.  Jeb Bush, George Bush Sr., and his son Neil Bush have all been implicated in the Savings and Loan Scandal, which cost American tax payers over $1.4 TRILLION dollars