Extortion is a frequent tactic used by leftists to achieve their destructive ends: the reverends’ Jackson and Sharpton use it to support their high lifestyles and promote the race industry in America. They use their pseudo-official positions to obtain funds and patronage from deep-pocket businesses they accuse of discrimination or racism. Since 2008 our federal government has been packed with shifty people adept at shakedowns of private industries accused of environmental and financial wrongdoing.
An editorial in the Investor’s Business Daily (www.investors.com) recently discussed a financial extortion case:
After 16 banks caved into White House demands to refund billions in losses to Fannie Mae and Freddie Mac, on outlier remains unrepentant. Nomura Holdings refused to succumb to the political shakedown.
The feds demanded $1 billion from the Japanese bank’s U. S. unit. Its people refused and went to court. The litigated issue rests on whether the Government-Sponsored Enterprises (GSEs) knew they were buying risky loans from the bank. Lawyers for the bank argued, this past week, that Freddie Mac and Fannie Mae knew very well about these shaky mortgaged loans and, in fact, took them to meet “‘affordable housing’ quotas of their political masters at HUD.”
Unfortunately for Nomura “the game is rigged,” according to the IBD editorial. The Clinton appointed federal judge, Denise Cote, “has shown extreme prejudice” toward the company. She is expected to rule against it sometime next month. Who are we to believe?
The case against the GSEs is solidly documented by financially knowledgeable insiders including David A. Stockman former Michigan congressman, White House budget director and private equity investor. In his 2013, 700-plus page book, The Great Deformation: The Corruption of Capitalism in America, Stockman exposes the deceptions and damage done to our economy by the Bush and Obama administrations. He gives a dramatic, scathing account of how government operatives colluded to cause and then deflate the housing bubble.
Peter J. Wallison, also a former Washington political insider and a corporate banking lawyer knows a thing or two about what goes on in that corrupt place. He is a former Financial Crisis Inquiry Commission member. In a speech he gave at Hillsdale College in November, 2013 (www.hillsdale.edu) Mr. Wallison explained how “there is compelling evidence that the (2008) financial crisis was the result of the government’s own housing policies.”
Leftist ideological policies, says Wallison, caused the insolvencies of Freddie Mac and Fannie Mae and the financial crisis. But the “political muscle” in Washington comes from the “Government Mortgage Complex”—real estate associations, home builders and banks. These interest groups all want easy money available to fund their profitable industries, while the political class demands social justice. Together they muscle-in on our tax money.
Over the years starting with the Federal Housing Administration (FHA), established by the Roosevelt administration in 1934, mortgaged loans have been insured. But borrowers had to have 20 percent down payment. In the late 1950s Congress lowered the required down payment to 3 percent. A pattern follows these bad policies: loose lending standards leads to a housing bubble followed by a crash in the market. It’s predictable, but our politicians operate with amnesia.
Utopian visions of “affordable housing”—everyone should own a home regardless of whether he could afford it—became a government goal in 1992. Wallison explains how Freddie and Fanny operate: They are shareholder-owned, chartered by Congress and have many government bestowed privileges. They are authorized to purchase loans.
They were able to borrow at low cost and, finally, drove all competition out of the secondary mortgage-loan market. Prior to this all responsible banking people understood that sound underwriting standards—substantial down payments, good credit ratings and low debt-to-income ratios (called “prime” loans)—reduced the risk of delinquencies and defaults. Despite these “discriminatory” practices homeownership was high; at 64 percent between 1964 and 1994.
Community activists pressured Congress to buy the idea that low-income people were being unjustly kept out of the market. A 30 percent goal of loans to these people was mandated. Later the federal Housing and Urban Development (HUD) was given authority to increase the goals until in 2008, 56 percent of all loans were made to these risky borrowers; now referred to as “subprime” loans.
The rest, as they say, is history. Taxpayers and homeowners paid for the irresponsible government policies, and private bankers got the blame; penalized by another “smothering” regulatory intrusion called the Dodd-Frank bill named for two former meddlesome congressmen. And, now, banks must pay into the government extortion racket.
Mr. Wallison observes that Dodd-Frank legislation was “based on a faulty diagnosis of the financial crisis.” He wants us to understand that the financial “crisis” was caused by government rather than by deregulation or insufficient regulation. Of course, these truths won’t be self-evident because the people responsible for the damage will not be held accountable—and Congress will continue to make the same mistakes over again—blaming and threatening the wrong people.