• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Morning Bell: A Legacy That Matters

    The Bush administration is hopping mad at the New York Times for a story the Gray Lady published Sunday, “White House Philosophy Stoked Mortgage Bonfire.” The White House will have to defend itself on this one, but we are concerned that the Times, in its partisan desire to tarnish President Bush, provides far too narrow a focus on the government’s central role in creating the current crisis. By pretending troublesome government policies that contributed to the housing bubble began with Bush, the Times makes it easier for those inclined to make the same policy mistakes again.

    Government-sponsored entities Fannie Mae and Freddie Mac are at the core of the current housing crisis. Fannie and Freddie make no actual loans; instead they buy loans from banks, and then bundle and repackage them as securities. For years Fannie and Freddie leveraged their government-sponsored advantages — including exemptions from state and federal taxes, lower capital requirements, and the ability to borrow at rates well below those paid by private companies — to create a co-monopoly in the housing finance sector.

    Fannie and Freddie partnered with lenders to expand the subprime market. With Fannie and Freddie’s help, subprime giant Countrywide Financial grew from a tiny institution to the largest mortgage lender in the country. At the height of the boom, Fannie and Freddie bought 44% of the entire subprime market. Long before Bush took office, Heritage warned about the systemic risk Fannie and Freddie posed to the American taxpayer. In 1991, following the Savings and Loan disaster, Heritage pushed for the full privatization of Fannie and Freddie, predicting that “maintaining secondary mortgage firms in a twilight zone between the public and private sectors … may be a recipe for an eventual taxpayer bailout.” No one listened.

    Even the New York Times noticed the risks posed by Fannie and Freddie in September 1999, a full 16 months before Bush took office. The Times reported:

    In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders. …

    Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. …

    In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980′s.

    The debate over Fannie and Freddie is much more important than Bush’s legacy. Fannie and Freddie existed before Bush came to office, they were instrumental in worsening the housing bubble, and now some want to make sure they continue to exist long after Bush leaves. Who on earth would want Fannie and Freddie to continue to exist in their current form? Senate Banking Chairman Sen. Chris Dodd (D-CT) and Sen. Charles Schumer (D-NY)? That’s who.

    Quick Hits:

    Posted in Ongoing Priorities [slideshow_deploy]

    3 Responses to Morning Bell: A Legacy That Matters

    1. Mayme, NY says:

      Bush's push to be re-elected, to show growth in a failing market led to a big part of this crisis! Freddie & Fannie were privatized, that's why the deals got made like they did. Get over it, Bush is not and never was a fiscal conservative, he simply came in to serve the oil companies.

      Mayme

      ?

      President's Remarks to the National Association of Home Builders

      Greater Columbus Convention Center

      Columbus, Ohio

      Oct. 2004

      http://www.whitehouse.gov/news/releases/2004/10/2

      "Home ownership rates are an all-time high in America, nearly 70 percent. I love that statistic. (Laughter.) Think about that. More and more people own a home in America. More and more people have a chance to realize the great dream of our country. Minority home ownership is at record levels, as well. In 2002, I set a clear goal, 5.5 million new minority homeowners by the end of the decade. And in just two years, more than 1.6 million minorities have become homeowners. (Applause.)

      To help low- to moderate-income rural families purchase homes, I've requested $2.7 billion in loan guarantees, and $1.1 billion for direct loans to low-income borrowers that can't get bank loans. These initiatives will help thousands in rural communities across America achieve the dream of home ownership. Adding more qualified buyers won't accomplish much if there are no affordable homes to buy. My administration has set a goal of 7 million more affordable homes in the next 10 years. To help reach that goal, I've asked Congress to pass the single family housing affordable tax credit to help you build between 40 and 50 thousand new affordable homes every year. (Applause.)

      my administration has worked to expand home ownership in other ways. Last December, I signed the American Dream Down Payment Act, which will help thousands of low-income families afford the down payment and closing costs on their first home. We want people in every corner of America owning a home. (Applause.)

      I understand that the regulatory barriers at the federal, state, and local levels can add as much as 35 percent of the cost to the homes. In order to make sure there's more affordable homes, we must remove the regulatory barriers on our home builders. (Applause.)

      To build an ownership society, we'll help even more Americans buy homes. Some families are more than able to pay a mortgage, but just don't have the savings to put money down. We'll continue to help them realize their dreams with a down payment. So I'm asking Congress to pass my Zero Down Payment Initiative. We should remove the 3 percent down payment rule for first time home buyers with FHA-insured mortgages. (Applause.) This change could help as many as 150,000 people become homeowners in the first year alone."

      ?

      The American Dream Downpayment Initiative (ADDI) was signed into law on December 16, 2003. The American Dream Downpayment Assistance Act authorizes up to $200 million annually for fiscal years 2004 – 2007. ADDI will provide funds to all fifty states and to local participating jurisdictions that have a population of at least 150,000 or will receive an allocation of at least $50,000 under the ADDI formula. ADDI will be administered as a part of the HOME Investment Partnerships Program, a formula grant program.

      http://www.hud.gov/offices/cpd/affordablehousing/
      ?

      Zero-down mortgage initiative by Bush is hit

      Budget office says plan likely to spur more loan defaults

      By Chris Reidy, Globe Staff | October 5, 2004
      http://www.boston.com/business/articles/2004/10/0
      ?

      HUD SECRETARY JACKSON ANNOUNCES $161.5 MILLION IN DOWNPAYMENT ASSISTANCE FOR FIRST-TIME HOMEBUYERS

      American Dream funding launches National Homeownership Month

      For Release

      Wednesday

      June 2, 2004

      WASHINGTON – Thousands of low-income families will be able to realize the 'American Dream' and purchase their first home because of $161.5 million in funding announced today by Housing and Urban Development Secretary Alphorns Jackson.

      "During the Bush Administration, a record number of new homeowners, specifically minority families, have achieved a home of their own," said Jackson. "I encourage Congress to fully support the President's request to continue this important new homeownership tool so even more families can realize their American Dream."

      http://www.hud.gov/news/release.cfm?content=pr04-
      ?

      In June 2002, President Bush announced an aggressive homeownership agenda to remove the barriers that block American families from achieving homeownership with the goal of creating 5.5 million new minority homeowners by the end of this decade. The Zero Down Payment Program would move the nation significantly closer toward this goal.

      http://www.hud.gov/offices/cir/test032404.cfm

    2. Mayme, NY says:

      President's Remarks to the National Association of Home Builders

      Greater Columbus Convention Center

      Columbus, Ohio

      Oct. 2004

      http://www.whitehouse.gov/news/releases/2004/10/2

      The American Dream Downpayment Initiative (ADDI) was signed into law on December 16, 2003.

      http://www.hud.gov/offices/cpd/affordablehousing/

      Zero-down mortgage initiative by Bush is hit

      Budget office says plan likely to spur more loan defaults

      By Chris Reidy, Globe Staff | October 5, 2004
      http://www.boston.com/business/articles/2004/10/0

      HUD SECRETARY JACKSON ANNOUNCES $161.5 MILLION IN DOWNPAYMENT ASSISTANCE FOR FIRST-TIME HOMEBUYERS

      American Dream funding launches National Homeownership Month

      For Release

      Wednesday

      June 2, 2004

      WASHINGTON – Thousands of low-income families will be able to realize the 'American Dream' and purchase their first home because of $161.5 million in funding announced today by Housing and Urban Development Secretary Alphorns Jackson.

      "During the Bush Administration, a record number of new homeowners, specifically minority families, have achieved a home of their own," said Jackson. "I encourage Congress to fully support the President's request to continue this important new homeownership tool so even more families can realize their American Dream."

      http://www.hud.gov/news/release.cfm?content=pr04-

      In June 2002, President Bush announced an aggressive homeownership agenda to remove the barriers that block American families from achieving homeownership with the goal of creating 5.5 million new minority homeowners by the end of this decade. The Zero Down Payment Program would move the nation significantly closer toward this goal.

      http://www.hud.gov/offices/cir/test032404.cfm

    3. Pingback: A Legacy That Matters « Conservative Thoughts and Profundity

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×