In a stunning report (pdf) released yesterday by the House Committee on Oversight and Government Reform, the current financial crisis was traced back to government intervention in the U.S. housing market. Yes, you read that right.
The report issued by the Republican minority didn’t disclose the names of the culprit individuals, but it sure pointed a lot of fingers at organizations, politicians, lobbyists and Fannie Mae/Freddie Mac.
According to the report, government intervention “created ‘affordable’ but dangerous lending policies which encouraged lower down payments, looser underwriting standards and higher leverage. Finally, government intervention created a nexus of vested interests — politicians, lenders and lobbyists — who profited from the ‘affordable’ housing market and acted to kill reforms.”
Rep. Darrel Issa (R-Calif.), the ranking Republican on the committee, released a summary of key findings from the report that included:
• Political pressure led to the erosion of responsible lending practices:
In the early 1990s, Fannie and Freddie began to come under considerable political pressure to lower their underwriting standards, particularly on the size of down payments and the credit quality of borrowers. (p.6)
• Lower down-payments led to housing prices that outpaced income growth: Once government-sponsored efforts to decrease down payments spread to the wider market, home prices became increasingly untethered from any kind of demand limited by borrowers’ ability to pay. Instead, borrowers could just make smaller down payments and take on higher debt, allowing home prices to continue their unrestrained rise. (p. 11)
• Members of an “affordable housing” coalition shared profits with political allies to help legitimize their business practices: Fannie Mae created and used The Fannie Mae Foundation to spread millions of dollars around to politically-connected organizations like the Congressional Hispanic Caucus Institute. It also hired well-known academics to give an aura of academic rigor to policy positions favorable to Fannie Mae. (p.7)
• The Government Sponsored Enterprises led the way into the housing crisis: Fannie Mae and Freddie Mac were leaders in risky mortgage lending. According to an analysis presented to the Committee, between 2002 and 2007, Fannie and Freddie purchased $1.9 trillion of mortgages made to borrowers with credit scores below 660, one of the definitions of “subprime” used by federal banking regulators. This represents over 54% of all such mortgages purchased during those years. (p.24)
“The spin on the financial crisis by those who favored government efforts to erode lending standards is that the housing bubble didn’t cause this recession,” Issa said. “The findings in this report should remind this Congress that ignoring the role of politics and government in causing the housing crisis and the economic collapse while pursing other regulatory reforms will not fix the underlying problem.”
Has anyone told Barney Frank?
Sessions Raises Red Flags over Sotomayor Impartiality
Sen. Jeff Sessions (R-Ala.), ranking Republican on the Senate Judiciary Committee, has uncovered more troubling commentaries by Supreme Court nominee Sonya Sotomayor which raise doubts about her ability to serve as an impartial jurist on the highest court in the land. Sessions raised red flags in a speech from the Senate floor on Tuesday. Some excerpts:
“On a number of occasions, Judge Sotomayor delivered a speech entitled: “Women in the Judiciary,” in which she emphasizes that she accepts the proposition that a judge’s personal experiences affect judicial outcomes…
“In the same speech, which she has given numerous times, Judge Sotomayor goes one step further: ‘I willingly accept that we who judge must not deny the differences resulting from experience and heritage but attempt… continuously to judge when those opinions, sympathies and prejudices are appropriate.’
“[In the New Haven firefighters case], Judge Sotomayor’s panel held the firefighters who worked hard and passed the test did not even deserve a trial on this issue…
“I would just point out that she spent a number of years working on litigation with the Puerto Rican Legal Defense Fund (PRLDEF), where she spent much effort challenging exactly these types of objective tests…
“So under her leadership, PRLDEF litigated a series of cases designed to attack promotional exams because the group decided after-the-fact that not enough minorities were being promoted… As a result, we are left to wonder: What role did Judge Sotomayor’s personal experience play when she heard this case? … We are left to wonder, and will need to ask her about this at her hearing…”
Sotomayor’s confirmation hearing begins Monday, July 13th.
For video of the floor speech by Sen. Sessions, go here.
Democrats Use Intel Bill to Continue Pelosi Cover-up
House Democrats are gearing up this week to pass legislation that focuses on political cover for House Speaker Nancy Pelosi (D-Calif.) at the expense of CIA and other intelligence community professionals.
The FY 2010 Intelligence Authorization Act contains a watered down version of the disclosure and oversight language authored and passed by the Democrat majority setting standards for the Bush administration last year. Democrats diluted the disclosure requirements for fear that the application of the disclosure standards required of the Bush administration would allow for the release of an unclassified version of CIA briefing notes at the center of the Pelosi controversy.
These notes, if released, could disprove Pelosi’s allegations that the CIA engaged in a systematic pattern of lying to Congress.
Pelosi at first agreed the notes should be released but has since fallen silent on the issue, hiding behind Democrat maneuvers to block their disclosure.
Rep. Pete Hoekstra (R-Mich.), the ranking Republican member of the House Committee on Intelligence, expressed concerns over the bill up for consideration on the floor this week.
“The committee had a strong, bipartisan notification provision in last year’s intelligence bill and it should have been reintroduced this year,” Hoekstra said. “Unfortunately Democrats felt they needed to propose new legislative language in response to the deep, political troubles caused by the Speaker’s still unsubstantiated claims against the CIA. They did nothing, however, to address or follow-up on her claim that the CIA lies to Congress ‘all the time,’ which was echoed again in committee deliberations by Congresswoman Anna Eshoo.”
The intelligence bill also fails to address the administration’s proposed closure of the Guantanamo Bay terrorist detention facility in January, despite obvious national security implications and the impact the movement or release of these terrorist detainees will have on intelligence apparatus.