The government set the conditions for the housing collapse …

One of the proximate causes of the mortgage meltdown was the government’s interference in the housing markets. Setting the conditions which favored those who could not afford to purchase a home (minorities, women and the poor) with relaxed underwriting conditions that sequentially reduced the sound lending principles of lenders to the absurd point of NINJA (No Income, No Job or Assets) loans where the borrower need not produce verification of income, job or assets -- or more colloquially known in the industry as “liar loans.”

Using the government’s regulatory agencies to coerce lending institutions to make unsound loans in areas of decaying neighborhoods and impoverished borrowers. Refusing to detect or deter outright fraud by borrowers, lenders, and the Wall Street Wizards who packaged the dodgy paper into mortgage-backed securities and threatened to withdraw their lucrative business from the ratings agencies who did not offer at least a portion of these “engineered” securities packages a Triple-A, investment grade, rating which allowed the mortgage contagion to spread into the broader economy.

Then there were the democrat piggy banks, Fannie Mae and Freddie Mac (and their associated foundations with interlocking directors) who securitized the crappy mortgages originated by others until the security packages collapsed when borrowers were unable to make loan payments. Barney Frank telling us that both institutions were instruments of public policy while touting their safety and soundness – almost up to the time they were technically insolvent and had to be placed under government conservatorship.

It got so bad, that even when it was discovered that the democrat-connected executives of Fannie and Freddie were cooking the books and taking home tens of millions in bonuses, nobody went to jail and the punishment was a proverbial slap on the wrist. 

To their credit, the Republicans tried to reform Fannie Mae and Freddie Mac, but were rebuffed by the two most corrupt players in the mortgage market,  Barney Frank (D-MA) of the House Financial Services Committee and Christopher Dodd (D-CT) -- whose names grace the corrupt and ineffective Dodd-Frank Wall Street Reform and Consumer Protection Act. Under Dodd-Frank, the “too big to fail” financial institutions have grown bigger and the consumers have no new protections. Only new forms which disclose the onerous terms of their loans. Somehow the government believing that getting screwed with full disclosure in the fine print crafted by lawyers (allowed loopholes crafted by industry lobbyists and their paid-for legislators) is legal where screwing a consumer without disclosure is illegal. Full well knowing that the average consumer does not understand the pages of fine print that is offered on a “take it or leave it basis.”

BOHICA: Bend Over Here It Comes Again …

You think that the government would have learned a painful lesson. Regulatory agencies that did not regulate. Fannie Mae and Freddie Mac privatizing profits and socializing the losses. Technically insolvent financial institutions being kept alive by the Federal Reserve who is loaning good funds against dodgy securities. And, worst of all, screwing with the credit rating mechanism that allows financial institutions to accurately assess credit risks and earn a decent return on their investment.

Apparently not …

Credit Scores Relaxed Under Obama Pressure

Standards: Bullied by President Obama's new consumer watchdog, the Big Three consumer credit bureaus have curved credit scores for deadbeats. The capitulation is a bad omen for the economy. The credit-scoring system underpins our economy. If lenders and insurers can't rely on it, they can't make sound judgments about the risks involved in millions of transactions each day. Yet the system is being socialized thanks to a campaign by the administration to falsely smear it as inaccurate and biased against minorities.

The campaign began in 2011 when the Consumer Financial Protection Bureau investigated scoring models used by the consumer credit-reporting agencies. They include the VantageScore owned by the three biggest credit bureaus — Experian, Equifax and TransUnion — which provide scores and reports to underwriters.

Then last summer, the administration fed a front-page story to the Washington Post lamenting how "credit scores of black Americans have been systematically damaged" by subprime foreclosures, "haunting their financial futures." A week later, CFPB announced in Detroit that it would start policing Experian, Equifax and TransUnion.

"These companies have never before been subject to any federal supervision program," CFPB chief Richard Cordray said in July. "Now, they will be monitored just as big banks are monitored." By that, he meant his diversity cops will subject them, as well, to "disparate impact" investigations. Under that dubious doctrine, policies found to have an adverse impact on minorities are deemed racist, even if they're racially neutral and applied evenly.

Federal studies show that blacks and Hispanics tend to have the lowest credit scores. So the bureau opened up a complaint line and portal for minorities with damaged credit, followed by on-site examinations at Experian, Equifax and TransUnion. Examiners last fall demanded they turn over data about their methods and practices.

Then the administration created a crisis in confidence about credit reporting overall, releasing a study claiming less than 80% of credit reports are accurate, which in turn triggered an avalanche of stories by Obama's press stenographers, followed by public outrage. "Can you trust your credit score?" went the typical headline.

In fact, 98% of reports contain no material errors. Also, a 2007 Fed study found no racial bias in credit scoring in a national sample of more than 300,000 credit bureau records. It found that scores typically underestimate the risk posed by black borrowers, who "show consistently higher incidences of bad (loan) performance than would be predicted" by their scores.

Still, Cordray insisted the private credit bureaus need to "reform." That's exactly what they've started to do. This week, Experian, Equifax and TransUnion announced a new scoring model — Vantage 3.0 — that excludes some negative credit information. Past collections on bad debt will no longer factor into scores. Nor will delinquencies or defaults related to a natural disaster, such as Hurricane Katrina.

The new system will for the first time use "nontraditional credit data," such as rent and utility payments, in standard scoring. This will help an estimated 30 million consumers who have no credit and pay their bills mostly in cash — many of them Hispanic immigrants — get a credit score, so they can apply for home loans and credit cards. Just in time for Obama's amnesty for illegals.

And who will pay for those additional delinquencies? The creditworthy, as banks pass on losses to all customers in the form of higher interest rates and fees. If lenders and insurers can no longer rely on credit scoring to accurately predict risk, they'll be flying blind when approving loans and credit cards. If you thought the last financial crisis was bad, wait till you see the fallout from the house of cards being built on Obama's socialized credit scores. Source: Experian, Equifax, Transunion Bow To Pressure, Degrade Credit Rules -

What the author does not mention is that Elizabeth Warren, the affirmative action faux Indian and radical socialist who designed the CFPB could not be confirmed by the Senate after at least three tries. Then Barack Obama appointed Richard Cordray as its first director – an illegal recess appointment because the Senate was technically in session. Of course, since the Senate is controlled by Obama’s fellow travelers in the democrat party, nothing was said about this deliberate slap in the face to our Constitution and to the Senate.

By eliminating negative items from credit reports, those who manipulated the system will be allowed, once again to do the same thing again; their credit rating artificially enhanced. The gold standard FICO scoring system will be similarly affected as it relies on the data of the three major credit repositories for its information. How many readers know that the so-called VantageScore score was created by the three credit repositories to screw Fair Isaacs Company (FICO) out of their well-deserved fees?

Bottom line …

What can we say about our corrupt politicians who are trying to buy a segment of the population with their social justice mantra and collapse the capitalist economy in favor of a centrally-planned and managed socialist economy? “Those who do not understand history are doomed to repeat it.” But, considering the starting point in our current economy, the pendulum will swing yet closer to financial peril and economic catastrophe.

If the government manipulation continues to prevent the housing market from finding its natural bottom, securities cannot be priced correctly and the market remains dangerous for all who do not operate on insider information. At some time the Federal Reserve will need to call those loans it made to the ailing financial institutions or sell off the dodgy paper itself. There will be a day of reckoning which the taxpayers, senior citizens, depositors and investors will rue. With nary a politician to take the responsibility for destroying the U.S. and global credit systems.

-- steve  

“Nullius in verba.”-- take nobody's word for it!

“Beware of false knowledge; it is more dangerous than ignorance.”-- George Bernard Shaw

“Progressive, liberal, Socialist, Marxist, Democratic Socialist -- they are all COMMUNISTS.”

“The key to fighting the craziness of the progressives is to hold them responsible for their actions, not their intentions.” – OCS

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