A superb essay from Talkimag.com
The Diversity Recession, or How Affirmative Action Helped Cause the Housing Crisis
In 1992, Congress passed the Government Sponsored Enterprises bill, which set “targets” (i.e., quotas) for Fannie Mae and Freddie Mac, which are quasi-governmental publicly-traded for-profit thing-a-ma-bobs, to encourage “affordable” and “underserved” (more or less minority) home loans.
Both the Clinton and Bush departments of Housing and Urban Development raised the quotas repeatedly. For example, initially, the Clinton Administration required 21% of these quasi-governmental mortgages must go to ”underserved areas” (which are officially defined as “low-income census tracts or in low- or middle-income census tracts with high minority populations"), but the quota for 2008 established by the Bush Administration is 39 percent.
Reuters reported October 13, 1999:
The mortgage industry intends to pursue minorities with greater intensity as federal regulators turn up the heat to increase home ownership in underserved groups. ‘We need to push into these underserved markets as much as we can,’ said David Glenn, president and chief operating officer of Freddie Mac. …
In September, Freddie Mac launched a new lending program, based on research done in collaboration with five black colleges, to bring more African-Americans into the market.
The federal government in the meantime has increased pressure on lenders to seek out minorities, as well as low-income groups and borrowers with poor credit histories.
Fannie Mae recently reached an agreement with the U.S. Department of Housing and Urban Development to commit half its business to low-and moderate-income borrowers. That means half the mortgages bought by Fannie Mae would be from those income brackets.
Read the entire article at Talkimag.com
Others saw it coming- From 2004:
Stop Franklin Raines’ Rape of Fannie Mae — and Taxpayers
Contact: Peter Flaherty 703-237-1970
Date: December 29, 2004
Peter Flaherty, President of the National Legal and Policy Center, today expressed surprise and disgust at the current attempt by fired Fannie Mae Chairman and CEO Franklin Raines to walk away with millions despite his central role in the accounting scandal rocking the company.
NLPC promotes ethics in public life, and sponsors the Corporate Integrity Project.
Flaherty said, “Let me get this straight. Raines apparently cooks the books, brings disgrace to the company, and imperils Fannie Mae’s standing with regulators, the Congress and administration. So for his punishment he is made wealthy for the rest of his life?”
According to a December 27 Form 8-K filing with the Securities and Exchange Commission, Raines is entitled to:
•“Deferred compensation” of $8.7 million
•Stock options currently worth $5.5 million, and potentially millions more
•”Performance Share Payouts” through 2006, potentially worth millions more
•A monthly pension of $114,393 for the rest of his life, and the for life of his spouse should she survive him
•Free medical and dental coverage for the rest of his life, as well as for his wife for the rest of her life, and his children until age 21
•Free life insurance in the amount of $5 million until age 60, and $2.5 million thereafter
The agreement even allows for Raines to receive a “cash bonus” for 2004.
Raines stated that, “By my early retirement, I have made myself accountable.” Flaherty reacted by saying, “It is like Enron and Tyco never happened. I cannot even fathom the level of arrogance and self-delusion necessary for Raines to claim he’s been made accountable for his mistakes.”
Flaherty continued, “The OFHEO regulators have taken the right step in reviewing Raines compensation. But if Fannie Mae executives inflated profits to increase their own bonuses, that is fraud. Political connections should not insulate corrupt executives from criminal prosecution, if it is warranted.”
“This is not a case of foolish or captive directors rewarding a failed executive with a golden parachute. Fannie Mae is not really a private company. It has been granted advantages in the marketplace by Congress, that are worth billions of dollars. Raines is not only fleecing Fannie Mae, but also the taxpayer.”
“Raines was paid $20 million in 2003 but was never really a private-secter corporate executive. His CEO position was more of a political plum. Most of his career was spent in political appointments or at Fannie Mae itself.”