Hillary Clinton's ties to Fannie Mae, Freddie Mac loom as liabilities ...
- Washington Times-Jul 20, 2015She hasn't addressed it or what her plans would be for Fannie Maeor ... in 2000 and to 55 percent under [President George W.] Bush in 2007.”.
The one-two punch could prove a political liability for Mrs. Clinton’s presidential bid, portraying her and her husband as facilitators for highly compensated mortgage brokers and undercutting her argument that she has been a longtime champion of the middle class.
“I certainly think we’re going down the path of another bailout of the mortgage market. If we keep on this path, it’s inevitable. It’s a concern people have,” said Mark Calabria, director of financial regulation studies at the Cato Institute. “It’s going to be a tough needle for her to thread — people on the left still believe Fannieand Freddie was a good model and that the housing crisis was all about Wall Street greed. She’s got a tough road to walk on this.”
Complicating the picture, the Clintons were benefiting politically from Freddie and Fannie’s largesse. Mrs. Clinton was among the biggest recipients of donations from the mortgage giants in all of Congress, and Mr. Clinton’s charitable foundation received a sizable donation from Freddie Mac in the mid-2000s as the mortgage firm was teetering financially.
Homes for the poor
The Clintons’ mortgage policy saga began two decades ago during the booming early Internet era, when concern grew in Washington that minorities and the working poor weren’t reaping the benefits of an improving economy, especially in the housing market.
In a bid to create affordable housing for minorities and low-income residents, Mr. Clinton in 1995 ordered new bank regulations to encourage lending in poor neighborhoods. The Community Reinvestment Act gave banks higher ratings if they lent more in credit-deprived localities.
Maintaining a high CRA score was essential to the banks, pressuring them to give more loans to riskier clients, studies have shown. A lowered CRA rating would make it more difficult for a bank to become licensed to conduct business in other parts of the country, participate in other government lending programs, or complete mergers and acquisitions that needed the government’s approval.
The CRA was the channel through which “a U.S. Congress, worried about growing income inequality, towards expanding low income housing, joined with the flood of foreign capital inflows to remove any discipline on home loans,” Raghuram Rajan, a former chief economist and director of research at the International Monetary Fund, wrote in the Financial Times in 2010.
The National Bureau of Economic Research, a nonprofit organization, examined the impact of the CRA on risky mortgage lending. In a 2012 study, it found “that adherence to the act leads to riskier lending by banks: in the six quarters surrounding the CRA exams, lending is elevated on average by about 5 percent and these loans default about 15 percent more often.”
Three years before Mr. Clinton altered the CRA to encourage investment in lower-income communities, Rep. Barney Frank, Massachusetts Democrat, pushed to impose an “affordable housing” requirement on Fannie Mae and Freddie Mac.
The thought was that minorities were being shut out of the housing market because Fannie Mae and Freddie Mac were underwriting loans only to banks that were issuing prime mortgages — 30-year fixed mortgages that required healthy down payments. Minorities and the working poor often didn’t have the cash or creditworthiness to qualify for such loans.
Read more: http://www.washingtontimes.com/news/2015/jul/20/hillary-clintons-ties-to-fannie-mae-freddie-mac-lo/#ixzz3gadUO5BV
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