http://query.nytimes.com/…

Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES

Published: September 30, 1999

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.

The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

…

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.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae’s and Freddie Mac’s portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

It was obvious to just about everyone… yet Democrats in particular… the likes of Dodd, Clinton, Schumer, Reid, Obama, etc. endorsed and in several cases explicitly benefited from the Community Reinvestment Act, Fannie Mae and Freddie Mac.

The CRA was not the only or even the most important aspect which lead to the current crisis. Bad lending couldn’t have been sustained or would have been possible if not for the Federal Reserves incredibly low interest rates and market manipulation. The CRA was the vehicle which the rode the low interest wave to creating the boom.

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http://reason.tv/video/show/333.html
When we go to the doctor’s office for a checkup, most of us get annoyed if we have to thumb through old waiting-room magazines for a half-hour. Yet many people wait much longer for something much more important.

Sally Satel, a researcher at The American Enterprise Institute, waited for new life in the form of a kidney transplant, until an unexpected someone stepped forward. Since giving Sally her right kidney, Virginia Postrel, former editor of Reason, has thought a lot about how to increase the supply of kidneys for people like Christina Deleon. Like 75,000 other Americans, Christina has no living donor and has no choice but to endure dialysis and wait-she’s been on the list since 2003.

Postrel and UCLA’s Dr. Gabriel Danovitch take on some common misconceptions about kidney donation, but they disagree sharply on the most controversial proposal-paying people to donate kidneys.

Each year more than 3,000 Americans-a figure comparable to the death tolls from the 9/11 attacks-die waiting for kidneys. Is it time to legalize the sale of kidneys?

Drew Carey investigates what could be done to end the wait for people like Christina, and give them the freedom they deserve.

http://www.forbes.com/feeds/ap/2008/03/17/ap4782535.html

Q. What exactly is the government contributing?

A. To protect JPMorgan from the greatest risks on Bear Stearns’ books, the Federal Reserve agreed to guarantee up to $30 billion of Bear’s most troubled assets - primarily mortgage securities that have plummeted in value and have become tough to sell.

Q: Why would the Fed do that?

A: Experts say the risks of inaction were far greater. With investors backing away from anything linked to the U.S. mortgage market, the Fed aims to prevent the value of those investments from plunging even further, which could cause widespread fallout among big banks. “The problem is that unless the major financial (companies) are kept solvent, the economy will suffer (so much) that everybody’s livelihood will be affected,” said Peter Walliston, a senior fellow at the American Enterprise Institute.

Q. Does this mean my tax dollars are being used to bail out Wall Street?

A. Not exactly. The Fed has vast resources on its own, thanks to its ability to sell Treasury securities that investors consider extremely safe. Still, some fear the mortgage crisis that engulfed Bear Stearns will soon spread to other companies and ultimately test the Fed’s resources, especially after the central bank last week said it would lend up to $200 billion in exchange for mortgage investments.

Q. Might taxpayers ultimately be on the hook?

A. Potentially. The Federal Reserve’s actions could augur much broader government action to stabilize the mortgage market. Calls are growing in Congress for government-funded efforts to help borrowers refinance out of troubled loans.

Not exactly? Potentially? ERRRR WRONG!! How about yes and yes. What are Treasury securities? They are bills of credit. Who pays the interest? Taxpayers do. Who gets hurt when the Federal Reserve inflates the currency to bailout Wall Street? Who pays the inflation tax? Those holding the currency. All the taxpayers hold at least some currency. These people are either ignorant (perhaps stupid is a better adjective given their business) or lairs.

In other news Lehman Brothers closed about 20% below opening. Apparently they have 5 times the liquid assets compared against stockholders equity and therefore better able to handle a drop like this whereas Bear Stearns had very little liquid assets.

http://www.usatoday.com/…

Some homeowners with risky “subprime” adjustable-rate mortgages will be able to refinance before they lose their home to foreclosure, with the help of steps President Bush will announce Friday, senior administration officials said Thursday night.

An estimated 80,000 homeowners with bruised credit and subprime ARMs they can no longer afford will be able to refinance loans, which the Federal Housing Administration (FHA) would insure.

The move marks a historic expansion of the role of the FHA, a Depression-era agency that has traditionally served low- and moderate-income families and first-time buyers, but not delinquent borrowers. Nearly 16% of subprime borrowers are behind on their ARMs, and an estimated 2 million subprime ARMs totaling about $600 billion will reset to higher rates through the end of next year.

The senior officials avoided using the word “bailout,” but the plan is sure to incite critics.

“If you’re going to help someone to refinance, you’re going to bail out the person who financed him in the first place,” Peter Wallison of the American Enterprise Institute said Thursday night. “This will only cause the problem to arise again.”

Wallison said the lenders who provided the financing in many of these cases likely knew that the borrowers couldn’t meet the financial obligations of the loan.

“If we’re going to allow (lenders) to be refinanced out, what we’re doing is saving them from their own greed. … It might be good politics, but it’s very bad policy.”

In another bold step, Bush will propose a temporary change in tax law. It would let homeowners avoid taxes on forgiven debt if a lender agrees to alter the terms of a loan.

All investments, all actions contain risk. How do you justify the federal government and Federal Reserve bailing out both those who make the risky investments? If I invested in SCO years ago would the government back me up because of my poor choices? Of course they won’t. But it seems that if some large mortgage companies and investment firms make bad investments the government will. And it only makes things worse. The large private firms will only take larger risks if they have less true risk because they know the government will bail them out when the shit hits the fan as it did a few weeks ago. The public primarily pays for these bail outs through our taxes and we also pay through the drop in the market in our 401K’s and other investments. The investors should be completely responsible for their investments. If they screw up and the market goes apeshit then it goes apeshit. That’s just how it goes.