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Financial
Institutional Failure:
How The Process Worked |
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A sub-prime mortgage is a mortgage to a
person who has a poor credit history, has little
to no income, and has not met previous payment obligations.
The mortgages were often provided with little to no
documentation of income and assets. |
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These mortgages were often provided by
national, regional, and local banks, as well as lenders such
as Countrywide Financial. These mortgages were often
provided to minorities who could not otherwise have afforded them.
Their lack of genuine credit-worthiness is being
verified by the current proportion of defaults among
sub-prime mortgages. |
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Starting in 1977, under the Community
Reinvestment Act, CRA, banks were mandated to provide
sub-prime mortgages and loans in order to be allowed by the
US government to continue operating and performing other
business such as expansions, mergers, and developing new
business and branches. |
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The world's financial system is crumbling
under the weight of sub-prime mortgage defaults. People who
were given mortgages they could not afford are walking away
and defaulting on those mortgages -- yes, their homes. |
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ACORN is likely not troubled
by today's credit problems. Nor are ACORN's founders and
leadership likely concerned that many minority homeowners
could lose their homes. This is because the ideological goal
of ACORN’s radical founders has always been to destroy
capitalism and replace it with socialism. In today's
financial situation, the resolution will involve the
government getting larger. Free markets will become less
free. Large amounts of capital will shift from private
investment into government. |
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This mechanism works in
ACORN's favor. Those poor minority homeowners who get
displaced will be that much more easily led to support
ACORN's class war against capitalism. |
ACORN, the Obama-affiliated community
organizing group, had demanded through its Democrat
Congressional legislators that it be included in the
original $700 billion financial bailout package. ACORN
demanded and was set to receive its wish in the first
bailout package. That bill was defeated by House
Republicans.
Republican defeat of the original $700 billion bailout
bill saved taxpayers $20 billion. |
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Obama's campaign paid ACORN
affiliates during the 2008 Democratic primary race.
Leading up to the 2008 Ohio Democratic Primary, Obama’s
campaign paid Citizens Services, Inc., a subsidiary of
ACORN, $832,598, between February 25 and March 17,
apparently for get-out-the-vote activities. |
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The Congressional so-called
stimulus package of February, 2009, includes $4.1
billion of funding for community groups such as ACORN. |
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Financial Breakdown 2008: |
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Today's financial problems originated with
the misconception that basic laws of economics can be violated by
politicians intent upon redistributing wealth from those who earn it to
those who are not able to earn enough to justify their reaping rewards
as if they had earned it. And those politicians -- using the powers we,
the voters, gave them -- dictate how much of our money we may keep...
and how much we must pass along to those minorities earning less than
they want. This debacle did not start on Wall Street. It was born in
Congress, in the Carter administration, and, when it started to fail, it
was given new life during the early years of the Clinton administration. |
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ACORN's leadership strong-armed its Washington lawmakers
into forcing banks and mortgage lenders to lend mortgage money to
financially unqualified minorities and others who everyone knew would
never continue to pay their mortgage payments over time. Because these
lender institutions were forced to lend to unqualified home buyers, they did what any business would do under similar circumstances:
They found a way to sell off those likely bad loans to other investors.
Since no one in their right mind would buy a
package of bad loans, the only way to sell them to investors
was to mix them in with good loans and sell pre-packaged
goodies that had both good and bad in them. Thus was
invented specialized derivatives. These loan derivatives are
the CDOs and other instruments that today have no value to
the marketplace, are therefore causing huge bank writedowns,
and in turn, bank defaults.
Fannie Mae and Freddie Mac using their
implicit government guarantees, purchased packages of bad and good
mortgages known as Mortgage Backed Securities, MBSs. Banks also packaged
bad and good mortgages into other forms known as Collateralized Debt
Obligations, CDOs. These huge debt obligations were then resold to Wall
Street investment banking houses, including Lehman, Bear Stearns,
Goldman Sachs, and others, as well as investors around the world. Once
the financial house of cards began to fail, banks refused to do business
with other banks and investment banking institutions. That refusal shut
down and locked up the short-term interbank credit and lending markets.
It is today these final purchasers -- those left holding the bag of
derivatives -- that are having to writedown and write off
tens-of-billions of dollars of debt. |
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Enforcement of laws including
the CRA has come to mean that once ACORN accuses a bank of
racial discrimination and unleashes protestors against it --
no matter how unjustly -- any bank could suddenly face
unfriendly government regulators. Thus banks were placed in
the position of being easy targets for ACORN shakedowns and
paying protection money became necessary for many large and
local banks' survival. |
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Having a heavy political arm
weighing upon their business operations, banks started
making hundreds of thousands of what became known as
"Ninja", translating to" No income, No job, No assets. These
loans went to minorities who would have been deemed
un-creditworthy. Banks, knowing that a relatively high
portion of Ninja loans that they had been coerced to make
would turn bad, many lending institutions grouped them into
new types of investment packages. They were then sold to
shed risk to the originating institutions. |
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The huge quasi-governmental
lending institutions Freddie Mac and Fanny Mae have both
been run by Democrat appointees. Both Fannie Mae and Freddie
Mac became sources of funding for groups -- including ACORN
-- that supported Democrat politicians who then often
promoted high-risk subprime home loans. |
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Most Americans who pay taxes are justifiably disgusted with
the US government's $700 billion wall street bailout package. The root
causes of this unseemly solution are buried in the Carter years with
enactment of its Community Reinvestment Act in 1977, and were continued with
enthusiasm by the Clinton administration, Representative Barney Frank,
Senator Chris Dodd, Chuck Schumer, other Democrat lawmakers and -- most especially --
by groups like ACORN, which was Obama's favorite client over the
years. As mortgages and loans to the unworthy became less attainable
ACORN lobbied these same legislators and other Democrats in
Congress to expand the implicit government guarantees provided by Fannie
Mae and Freddie Mac. |
Hence the government (actually the taxpayers) has to step
in to fill the holes caused by Democrat government do-gooders who told
banks to lend to minorities with poor credit ratings regardless of what their credit qualifications,
income, and FICO scores. |
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Handing out housing loans and mortgages to
financially-unqualified minorities that did not make good economic sense
might have made you feel good during boom times. How does it feel today?
How does it feel after your stock portfolio where you carefully placed
your "buy-and-hold-sure-thing investments" has decreased significantly
in value... and in many cases investments have become more worthless
than those mortgage holders? |
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