Saturday, May 4, 2013

How can a man who was on the team that ushered in the economic crisis now be qualified to lead that team?

Mel Watt faces tough confirmation & mixed reviews

U.S. President Barack Obama names U.S. Representative Mel Watt as his choice for director of the Federal Housing Finance Agency.

Please note – at the 3:00 to 4:05 portion of this video, President Obama mentions that Mel Watt has spent 20 years in the Congress and that during EVERY ONE of them he was on the federal committee that oversees housing policy. (The second half of the video is about the nomination of Tom Wheeler to head up the FCC, and not relevant to this post).

Congressman Mel Watt

I have spent considerable time in the last five years studying the history and outcomes of the finance committees that were headed up by Barney Frank and Chris Dodd. What I have uncovered to date is absolutely irrefutable proof that the policies that came out of these committees lead to the reckless lending the created the housing bubble and subsequent economic collapse. In particular it goes back to the Community Reinvestment Act, which went through a series of Legislative Changes particularly those which were promoted and signed into law by President Bill Clinton in the 1990’s.

The meltdown was the consequence of a combination of the easy money and low interest rates engineered by the Federal Reserve and the easy housing engineered by a variety of government agencies and policies. Those agencies include the Department of Housing and Urban Development (HUD) and two nominally private “government-sponsored enterprises” (GSEs), Fannie Mae and Freddie Mac. The agencies — along with laws such as the Community Reinvestment Act , eventually leading to a requirement that banks make loans to people with poor and nonexistent credit histories — made widespread homeownership a national goal. This all led to a home-buying frenzy and an explosion of subprime and other non-prime mortgages, which banks and the GSEs bundled into dubious securities and peddled to investors worldwide (investment vehicles called ‘Credit Default Swaps’). Hovering in the background was the knowledge that the federal government would bail out troubled “too-big-to-fail” financial corporations, including Fannie and Freddie.

(For proof of this accepted knowledge, please see Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System--and Themselvesby Andrew Ross Sorkin).

More history and irony – it was Senators Dodd and Frank who were at the head of the spear in the years just before the collapse – steering the Senate Finance committee and pushing banks to make these loans. Barnie Frank is even on the record of calling bankers, fiscal conservatives and republicans “the killers of the American Dream” – by denying access to mortgage loans for lower income citizens. They encouraged and manipulated many of the banks to make these loans via Fannie & Freddie.  The banks knowing these loans were more risky; and fearing holding on to the risk within their portfolios; got creative and developed a new investment vehicle called “Credit Default Swaps”. These were essentially portfolios made up of a mix of good loans packaged with the more risky loans and then sold off over and over again to pools of investors worldwide. The theory was simply this – As bankers we must play by the government’s rules; right… (Fannie – Freddie – senate finance; regulatory, etc.); so if there is too much risk – we will repackage the risky loans, sell them and then spread the risk across the financial investment community – in order to dilute or mitigate our individual risk. This makes sense – except there were so many of these bad loans across the system that it collapsed the entire economy. The irony is – that Dodd & Frank; their political colleagues and corporate cronies - together created the policies that led to the collapse – and today, they are taking the lead role in the Dodd-Frank new regulations to fix the problem. (Simply crazy; I know they can’t be possible be qualified, right)?

So... I give you this context in order to broach the following questions?

Who of you out there on Blogosphere can help me source more background information on Mel Watt and his involvement on these committees? Is it too much for me to have some skepticism about Mel Watt being appointed to the Federal Housing Finance Agency by President Obama, if he for twenty years he sat on the very same committees who's policies ushered in the economic collapse in the first place?

Resources & Links

Democrats in their own words covering up Fannie Mae, Freddie Mac scandal (2004)

Democrats were WARNED of Financial crisis and did NOTHING

Nancy Pelosi and Barney Frank, Complicit in Financial Crisis (Republicans DID ask for more Regulatory Oversight for Fannie, Freddie & the Banks – but Pelosi, Reid, Dodd & Frank would not allow it).

Tim Geithner to Paul Ryan: "We don't have a definitive solution... We just don't like yours"

Barney Frank in 2005: What Housing Bubble?

For a full history of the aforementioned belief that the Government would in fact bailout huge investment corporations; please see the detailed book titled Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System--and Themselves– by Andrew Ross Sorkin. I read this book in its entirety. I heavily recommend every American citizen read this book!

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