financial crisis

The failure to hold central figures accountable for their actions sets a dangerous precident

1994 - Bill Clinton - More Americans should own their own homes.
Clinton launches (at the NAR in DC) the National Partners in Homeownership - private /public cooperative.
Goal: by the reay 2000 70% own their own homes.
Fannie Mae - under James A Johnson - beats regulators into the ground and changes rules to allow leneders to get loans with no credit checks or due dilligence. Other banks quickly follow using wall street financing.
Johnson left Fannie in 1999 - then served on boards of five major companies including Goldman Sachs.
Johnson donates millions directly to congress (100 million) between 1989 and 2009.  This was to ensure that congress would do what he wanted and not listen to his regulator (OFHEO).
Johnson skimmed all those dollars from the federal grants.
1977 - Congress passed the Community Reinvestment Act - force banks to lend broadly (Jimmy Carter)
1975 - Home Mortgage Disclosures Act - forced banks to give lending data to govt.
1991 - HMDA - added race to required data
           ACORN - now usses this data to say that blacks & hispanics discriminated against
1992 - Boston Fed reaserchers - Led by Alicia Munnell - dug in to HDMA data and concluded that  
            blacks & hispanics not getting loans.  Huge media attention
This was seen as a negative for Fannie but Johnson formed new 35 member group to attach problem
Members included ACORN, La RASA, and some banks .... He actuallty gave grants to the members (taxpayer dollars).
This group was the foundation for Clintons 1994 NPiH.
The fed analysis was flawed !!!!!!  ANyone who pointed this out was a racist.
If blacks were discriminated against then they would not default as often as whites .... this was not happening.
Forbes pointed this out but no one cared.
Franklin D Raines now takes the reigns at Fannie Mae. He begins to loosen regulations on loans:

1. No credit history
2. Don't worry if they have high obligations
3. No downpayments or down payments allowed from gifts and municipal agencies and non-profits
4. Banks were forced into this also - but they could sell any "issues type loans" to fannie or freddie

Moral Hazzard
  FDICIA was an act to reduce taxpayer risk to banks after the SNL crash.
  Chris Dodd slipped in a provision at the 12th hour to allow coverage of investment banks & insurance companies.  Most of the major insurance companies were in his home state of Conn.  This created a moral hazzard for Ins cos and investment banks because they would now take more risks knowing the govt would bail them out.  This was discovered by Walker F. Todd - a lowyer at the fed reserve bank of Cleveland.
Dodds amendment is what allowed GM, AIG and Citigroup (investement bank) to get bailouts. from FDIC

1992 - (Bill Clinton) The fed reserve bank of New york (the largest of the 12 that makeup the central banking system) ended the program "dealer surveylance" which it used to oversee wallstreet. 
Washington role
- had to relax regulations.
Barney Frank

1995 - (CLinton) CBO (Phaup) finds that Fannie keeps 1 in every 3 dollars it gets from the govt. All are supposed to be passed on to the borrowers ... now CBO sees how Fannie funds all it's payoffs. 7 billion in govt benefits in 1995.
1996 the CBO report was ready ... Raines and Zoelick demanded a meeting the O'Neill the head of CBO and she agreed.

Countrywide was the bigggest provider of loans to Fannie
in early 90s companies (banks) would get 50% down .. lend the rest ... combine mortgaes and seel them to investors.  Now they had the capitol to write more loans.  If lending to risky borrowers the 50% was needed
Wall street stepped in to become the investor .... the gave the banks warehouse lines of credit and then bundled and sold the mortgages as securities .. they charged fees allong the way and made millions.  They then took the ank public and sold shares in the bank making money again.

1999 - the end of Glass-Steagall opens up the doors for banks to once again become too big to fail.