Jackson Free Press

The New York Times had the must-read story of the month Sunday, dissecting how the policies of Bush and friends created the deep mortgage crisis we're facing today:

From his earliest days in office, Mr. Bush paired his belief that Americans do best when they own their own home with his conviction that markets do best when let alone. He pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent — and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards.

Mr. Bush did foresee the danger posed by Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants. The president spent years pushing a recalcitrant Congress to toughen regulation of the companies, but was unwilling to compromise when his former Treasury secretary wanted to cut a deal. And the regulator Mr. Bush chose to oversee them — an old prep school buddy — pronounced the companies sound even as they headed toward insolvency.

As early as 2006, top advisers to Mr. Bush dismissed warnings from people inside and outside the White House that housing prices were inflated and that a foreclosure crisis was looming. And when the economy deteriorated, Mr. Bush and his team misdiagnosed the reasons and scope of the downturn; as recently as February, for example, Mr. Bush was still calling it a "rough patch."

The result was a series of piecemeal policy prescriptions that lagged behind the escalating crisis.

"There is no question we did not recognize the severity of the problems," said Al Hubbard, Mr. Bush's former chief economics adviser, who left the White House in December 2007. "Had we, we would have attacked them."

Looking back, Keith B. Hennessey, Mr. Bush's current chief economics adviser, says he and his colleagues did the best they could "with the information we had at the time." But Mr. Hennessey did say he regretted that the administration did not pay more heed to the dangers of easy lending practices. And both Mr. Paulson and his predecessor, John W. Snow, say the housing push went too far.

"The Bush administration took a lot of pride that homeownership had reached historic highs," Mr. Snow said in an interview. "But what we forgot in the process was that it has to be done in the context of people being able to afford their house. We now realize there was a high cost."

Previous Comments

ID

142493

Comment

Bush pardons housing scammer Isaac Toussie. You know, as in this guy. Sigh.

Author

DonnaLadd

Date

2008-12-23T15:40:45-06:00

ID

142494

Comment

How that 2002 Business Week story ended: Banks' lax practices bear a heavy share of the blame for creating this anything-goes climate. They promote "125% mortgages" that let people borrow the full price of their house plus extra cash to "pay for a vacation, college tuition, whatever you need it for!", in the words of one ad. Then there's the proliferation of "lo doc" and "no doc" loans requiring little or no documentation of income or employment status and often carry high rates. The process has become so automated that a borrower can get preapproval in "five minutes or less" on some Web sites. Borrowers can apply for a loan through eloan.com, a portal backed by legitimate banks such as Wells Fargo & Co. (WFC ) that abide by fair lending practices. But there are plenty of Web sites that pitch preapprovals to people with bad credit. Many, say experts, are backed by unscrupulous mortgage brokers or lenders. Securitization, in which banks package mortgages and sell them to insurers and pension funds, has played a big role in the industry's sagging standards. As risk has shifted from their balance sheets, the nation's biggest blue-chip banks have become wholehearted participants in the subprime lending market--a market they avoided in the past and one that has become notorious for abusive practices. Citigroup (C ) recently agreed to pay $215 million, the largest consumer mortgage settlement in the history of the FTC. Associates First Capital Corp., which Citigroup bought in 1998, allegedly required thousands of customers to buy unnecessary credit insurance on high-interest-rate mortgages. Citi didn't admit or deny guilt, saying the charges predate the acquisition. Citi isn't the only one facing such complaints. When a Household Finance Corp. salesman came knocking on the door of one couple's modest Natchez (Miss.) house last year, they invited him in. Within minutes, the salesman had persuaded them to take out a second mortgage and pay off their credit cards. The pitch sounded good: He could consolidate all their bills and reduce their monthly payment. Allegedly, there was one other little thing: They would have to purchase $15,000 in credit insurance. "He told them: `It's the only way you can get the loan,"' says Methvin, their lawyer. But it turns out credit insurance wasn't required. And the refinancing will cost them twice as much in the long run than if they had simply paid down their credit-card bills, according to their lawyer. They, along with 16 others, are suing Household Finance. Megan Hayden, a Household Finance spokeswoman, says: "The credit insurance these customers purchased was optional and clearly disclosed as such and reinforced through our loan-closing video and satisfaction survey." Many of the problems, say experts, could be remedied if current laws were enforced--by one regulatory body. The fact is, fraud costs plenty. Who pays for it? "It winds up back in the consumer's pocket in the form of higher fees and rates," says the Mortgage Bankers Assn.'s Duncan. And that's perhaps the biggest scam of all.

Author

DonnaLadd

Date

2008-12-23T15:42:59-06:00

ID

142505

Comment

Bush reversed himself on Toussie's pardon, according to an AP report. "White House press secretary Dana Perino said the new decision was ''based on information that has subsequently come to light,'' including on the extent and nature of Toussie's prior criminal offenses. She also said that neither the White House counsel's office nor the president had been aware of a political contribution by Toussie's father that ''might create an appearance of impropriety.'' ''Given that, this was the prudent thing to do,'' she said.

Author

Ronni_Mott

Date

2008-12-24T17:12:42-06:00

ID

142507

Comment

President Bush did the right thing revoking this pardon (albeit after the media exposed it). He and his legal counsel should have looked over this guy's record more carefully. Then again, proper oversight isn't a trademark of this administration.

Author

Jeff Lucas

Date

2008-12-25T09:39:38-06:00