Here's a photo of an odd sign:
So the tunnels were for the patients' use! I developed this image of these poor mad folk stumbling through the tunnels...it was something out of an Edgar Allen Poe story. Confirming my vision, there was this one:
"Ambition, succeed in anxious, jet blast, foot and door, dictionary..." Perhaps I should have begun this piece with "On a dark, stormy night as I ventured past the gates of the silent sentinel..." I was roused from this exploration by the sudden realization that this was all a metaphor for our Congress.To wit, let me draw your attention to two bills that will NEVER see the light of day: HR 7264 and HR 7094. Both bills have been "Introduced" but it is what is inside those bills that make them deader than that Thanksgiving turkey I smoked last week. Let's take them one at a time.
HR 7264 would repeal the CRA - also known as the "Community Reinvestment Act of 1977." No biggie, right? Wrong! The CRA is at the epicenter of the current financial meltdown. The CRA, according to Investor's Business Daily, "coerces banks into making loans based on political correctness, and little else to people who can't afford them." Though this was originally passed in 1977, under our first black President, Bill Clinton, it was dramatically reinforced. Starting in 1994, the Clinton team of Cisneros, Reno, and Cuomo began a staunch anti-redlining campaign. As a result, minority homeownership rates rose sharply. Economist William T. Gavin, a vice president at the St. Louis Fed wrote in 2006:
One of the stated goals of current and past administrations since the Great Depression has been to increase home ownership. After remaining relatively stable around 64 percent, the rate of home ownership has risen to 69 percent in the past decade. This uptrend has been driven by a sharp rise in the rate of home ownership among young, minority and low-income households. (Hat tip, Taki)This idea of giving away mortgages (aka subprime mortgages) is supported by the false assumption that real estate values will appreciate forever. When that ceases to be the case, or when other spending priorities overwhelm the purchasing power of the mortgage holder...can you say $4 per gallon gasoline?...thought you could, the defaults begin. With over $1 Trillion in subprime mortgages out there, there was going to be some hurt. Here's a headline from 2001:
Fannie Mae's Targeted Community Reinvestment Act Loan Volume Passes $10 Billion Mark; Expanded Purchasing Efforts Help Lenders Meet Both Market Needs and CRA Goals
This is from a press release by Fannie Mae...wait, it gets better:
Fannie Mae (FNM/NYSE), the nation's largest source of financing for home mortgages, today announced that its acquisition volume of specially-targeted Community Reinvestment Act (CRA) loans passed the $10 billion threshhold in the second quarter of 2001, reaching that milestone more than one and a half years ahead of schedule.
In the spring of 1999, Fannie Mae pledged to purchase at least $10 billion in CRA loans by the end of the year 2002.
The progress of Fannie Mae's CRA transactions volume was announced today by Jamie Gorelick, Vice Chairman of Fannie Mae, at the Mortgage Bankers Association (MBA) Annual Secondary Mortgage Conference in Orlando, Florida.
"Our approach to our lenders is `CRA Your Way'," Gorelick said. "Fannie Mae will buy CRA loans from lenders' portfolios; we'll package them into securities; we'll purchase CRA mortgages at the point of origination; and we'll create customized CRA-targeted securities. This expanded approach has improved liquidity in the secondary market for CRA product, and has helped our lenders leverage even more CRA lending. Lenders now have the flexibility to use their own, customized loan products," Gorelick said.
Q: So Fannie Mae was buying up the CRA forced mortgages...and in 2001 they passed $10 BILLION? And why is Jamie Gorelick's name in there???? WTF?????
A: I see you are upset, sir, please put the weapon down.
That's right. Fannie bought up the CRA loans regardless of the type of loan product that had been created. So did Freddie. The Clinton administration pressured Fannie and Freddie to "socialize the risk and guarantee the profit from the subprime loans" (IBD, 12/1/08) and this in turn got Wall Street interested as these instruments were securitized, bundled up and re-sold. That is where HR7094 comes in.
HR 7094 states in it's opening paragraph that the purpose of the bill is:
To establish a term certain for the conservatorships of Fannie Mae and Freddie Mac, to provide conditions for continued operation of such enterprises, and to provide for the wind down of such operations and the dissolution of such enterprises.
Wind up and dissolution. To borrow from Joseph Schumpeter, it is time for some "creative destruction." This is the process where capitalism heals itself. By allowing institutions that have become ineffective or downright destructive to die instead of being nursed along by the government, markets create demand for new products, services, jobs and growth.
But back to the tunnels. Congress, especially a Democrat controlled one, cannot see what they have done. Bringing these two bills to the floor where they can be openly discussed and debated will take us back in time to the beginning of our troubles...the Donks simply cannot afford to go there. Instead, they will keep wandering through the tunnels, scribbling incoherent statements on the wall and allowing a pliant press to cover it all up.
Einstein once said that "you can't solve problems with the same mind-set that got you into the problem in the first place." To bail out Fannie and Freddie without planning for their dissolution and to leave the CRA in place is to invite a repeat of the current disaster somewhere down the road. Put another way, it's no use in bailing out the row boat if you don't plug the leak first.
I don't advocate for action much in these posts, but I will in this instance. Go here - find your Congressman and send them a note demanding that HR 7264 and HR 7094 be brought to the floor and debated publicly immediately.
Don't expect immediate action...I have lobbied on the Hill in my past. Maybe that's why this seemed so familiar:
Rumble on!
Post note: Danvers has been "re-used" - it is now a luxury condo community called Avalon Danvers...call me superstitious, but I'm not sure I could live there...here's a pic:
