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Why we're paying about a trillion dollars to bail out Wall Street's finest

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September 24, 2008 – Comments (3) | RELATED TICKERS: FNMA , FMCC

As the L.A. Times reported in 1999,

It's one of the hidden success stories of the (President) Clinton era. In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded. The number of African Americans owning their own home is now increasing nearly three times as fast as the number of whites; the number of Latino homeowners is growing nearly five times as fast as that of whites.

That's a lot of new picket fences. Since 1994, when the numbers really took off, the number of black and Latino homeowners has increased by 2 million. In all, the minority homeownership rate is on track to increase more in the 1990s than in any decade this century except the 1940s, when minorities joined in the wartime surge out of the Depression.

In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains. It has aimed extensive advertising campaigns at minorities that explain how to buy a home and opened three dozen local offices to encourage lenders to serve these markets. Most importantly, Fannie Mae has agreed to buy more loans with very low down payments--or with mortgage payments that represent an unusually high percentage of a buyer's income. That's made banks willing to lend to lower-income families they once might have rejected.

(Found in the L.A. Times archive here.) 

Thank you, Clinton and the 103rd Congress!

3 Comments – Post Your Own

#1) On September 24, 2008 at 11:29 PM, devoish (97.62) wrote:

That is an interesting abstract from the complete article which includes these three paragraphs:

"What explains the surge? The answer starts with the economy. Historically low rates of minority unemployment have created a larger pool of qualified buyers. And the lowest interest rates in years have made homes more affordable for white and minority buyers alike.

But the economy isn’t the whole story. As HUD Secretary Andrew Cuomo says: “There have been points in the past when the economy has done well but minority homeownership has not increased proportionally.” Case in point: Despite generally good times in the 1980s, homeownership among blacks and Latinos actually declined slightly, while rising slightly among whites.

All of this suggests that Clinton’s efforts to increase minority access to loans and capital also have spurred this decade’s gains. Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat “redlining” by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws. The bottom line: Between 1993 and 1997, home loans grew by 72% to blacks and by 45% to Latinos, far faster than the total growth rate".

I believe the problems really began when the 2003 Republican administration cracked things wide open with this encouragement to get invoved in "exotic mortgages", called The American Dream Downpayment Act the type that are all coming back. Not the 1992-2000 mortgages.

Although I am sure a case will be made that todays economic problems are the fault of some unborn Democratic Presidential Contender from the future when the time comes.

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#2) On September 24, 2008 at 11:58 PM, FleaBagger (28.78) wrote:

You can't be against redlining and for sound lending practices. Redlining is sound lending practice.

Obviously, Bush shares some of the blame, but that's for being too much like Clinton and other democrats, not too little.

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#3) On September 25, 2008 at 9:40 AM, devoish (97.62) wrote:

Wrong. 

I can certainly be for a gov't policy designed to help overcome the unAmerican racist bias that existed in mortgage lending in the late eightys and early ninetys while still being against a 2003 Republican policy that encouraged GSE's to buy loans destined to fail miserably and turn "The American Dream Downpayment Act" into the financial disaster that exists today.

I can also be against "The Clean Air Act" in spite of its pretty name because it decided against Federally mandated standards in the hope that energy companys would just suddenly decide to spend money to add pollution controls out of the goodness in their hearts and against their corporate mandate to maximize profits. This so we can all enjoy heart disease, emphysema, asthma and the myriad of other air pollution caused problems we are seeing in our healthcare bill and not in our electric bill.

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