Accuracy in Media

As someone who spent the majority of his life as an international bank analyst and executive, I learned, that to fix a problem, one needs to understand what caused it.  It can be difficult to see because sometimes it takes time for the effects of bad decisions to manifest themselves.  It also requires that we examine the facts rather than our emotional biases.

The facts are that approximately 6% of all mortgage loans in United States are in default.  Historically, defaults were less than one-third of that, i.e., from 0.25% to 2%.

A huge portion of the increased mortgage loan defaults are what are referred to as ‘sub-prime’ loans.  Most of the sub-prime loans have been made to borrowers with poor credit ratings, no down payment on the home financed, and/or no verification of income or assets (Alt-A’s). Close to 25% of sub-prime and Alt-A’s loans are in default.

These loans increased dramatically as a 9/30/99 New York Times article explained, “In a move that could help increase homeownership rates among minorities and low income consumers, the Fannie Mae Corp. is easing the credit requirements on loans that it will purchase from banks and other lenders.”

Why would banks make such risky loans? The answer is that the Clinton administration pressured the banks to help poor people become homeowners, a noble liberal idea.  Also the Clinton Justice Department threatened banks with lawsuits and fines ($10,000 per application) for redlining (discrimination) if they did not make these loans. Also ACORN (Obama’s community service organization) was instrumental in providing borrowers and pressuring the banks to make these loans.

To allow Fannie Mae to make more loans, President Clinton also reduced Fannie Mae’s reserve requirement to 2.5%. That means it could purchase and/or guarantee $97.50 in mortgages for every $2.50 it had in equity to cover possible bad debts. If more than 2.5% of the loans go bad, the taxpayers (us) have to pay for them. That is what this bailout is all about. It is not the government paying the banks for the bad loans, it is us!!

Principally Senate Democrats demanded that Fannie Mae & Freddie Mac (FM&FM) buy more of these risky loans to help the poor.  Since the mortgages purchased and guaranteed by FM&FM are backed by the U.S. government, the loans were re-sold primarily to investment banks which in turn bundled most of them, taking a hefty fee, and sold the mortgages to investors all over the world as virtually risk free.

As long as the Federal Reserve (another government created agency) kept interest rates artificially low, monthly mortgage payments were low and housing prices went up. Many home owners got home equity loans to pay their first mortgages and credit card debt.

Unfortunately home prices peaked in the winter of 2005-06 and the house of cards started to crumble. People could no longer increase their mortgage debt to pay previous debts. Now, we taxpayers are being told we have to bail out the banks and everyone in the world who bought these highly risky loans. The politicians in Congress (mostly Democrats) do not want you to know they caused the mess.

During the past eight years, the Bush administration made 17 attempts to reform FM&FM, having been made aware by whistleblowers that the books had been cooked by Clinton appointees, James Johnson and Franklin Raines (most recently Barack Obama financial advisors) who gave large bonuses to themselves and other Clinton appointees by falsely showing huge profits.

In 2005, John McCain submitted a Fannie Mae reform bill. Democrats blocked it in Committee from getting to the Senate floor for a vote.

By 2006 there was enough evidence of malfeasance that Raines was forced out. He had paid himself over $90 million. Recently the court ordered him to pay back $40 million in fines, bonuses and stock options that he gave himself based on false financial statements of Fannie Mae profits.

In the 2006 elections, the Democrats took control of the House and Senate. There are plenty of videos on the Internet showing many Democrats including Senate Banking Committee Chairman Democrat Christopher Dodd and House Banking Committee Chairman Barney Frank, responsible with overseeing FM&FM, assuring us that there were no problems with FM&FM right up to their collapse.

Not surprisingly, virtually all the investment banks that are in trouble and being bailed out are run by financial supporters of Obama and other Democrats. Secretary of the Treasury Paulsen was head of Goldman Sachs. The new head of the $700 million bailout is also from Goldman Sachs. This is like letting the fox be in charge of hen house security.

It was announced that our government will infuse capital into the troubled banks. This gives whoever is in power of our government the ability to force the same kind of abuses that have caused this massive banking crisis in the first place.

Barack Obama has received more campaign donations that any other politician in the past three years from Fannie Mae and Wall Street. FM&FC have been virtually private piggy banks of campaign contributions for Democrats for the past 10 years. Yes, a token amount went to some Republicans.

And there is plenty of blame to go around in this financial crisis, but the reason it happened was 100% caused by a Democrat run government that forced a liberal policy initiated by President Clinton and reforms primarily blocked by Democrats.  One would never know this by watching the news or reading newspapers.

Until the majority of our citizens understand whom (government liberals) and what (liberalism/socialism) caused this mess, we will allow our elected officials, through massive inflation, to lower the standard of living of those of us who are financially prudent and give our earnings to those who are not prudent.

The big excuse for the bailout is that credit markets have frozen up. But it is not true.  There is plenty of credit available for good credit risks.

The only way this can be rectified is to allow the people who made the mistakes to take their losses. It is called taking personal responsibility for one’s actions.

Already we see that the bailout has had virtually no effect on the markets other than to cause huge sell offs because smart investors see that the U.S. is adopting failed liberal socialist policies. Our government is following in the footsteps of Hoover and Roosevelt.

We do not need to have another depression, but the government is taking the steps to make it happen. The taxpayer financed bailout should be reversed immediately as it will only encourage more irresponsible fraudulent behavior.


Mr. Davis can be contacted at (JavaScript must be enabled to view this email address)

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    is it real article????? i am confused………

  • matt

    So how do you figure the Community Reinvestment Act caused the housing crisis when according to the FCIC report, the CRA had no impact on the crisis? I guess if the real culprit (deregulation) is the cause we can just ignore it because that troublesome fact clashes with our ideology.

  • James F. Davis

    The Federal Reserve Bank (FED) is not technically a government agent. It is comprised of 12 regional Federal Reserve District banks and is owned and funded by American private banks. Together the 12 district banks implement monetary policy set by its Federal Open Market Committee whose Chairman is the Chairman of the FED, Ben Bernanke.
    They have at least four meetings a year in Washington, DC. The only legislated requirement I know of is that the FED chairman must report what the FED is doing to Congress at least twice a year.
    Presidential candidate Ron Paul has demanded a full audit of the FED as part of his campaign. The problem is that no legislation exists that gives the Congress the authority to audit the FED.
    Many other Congressmen also have demanded an audit of the FED and this has been partially done. It was discovered that over a trillion dollars was given to banks, many of them foreign, in the aftermath of the Financial Crisis of 2008. Where this money came from is not clear.
    Since the US dollar is the world reserve currency of most countries, the FED has the unique ability to electronically create money out of thin air and send it to whoever they wish and people will honor that money as legal tender. All other countries have to borrow or earn their money by giving something of value in return.
    As the former Superintendent of Banks in New York, Muriel Siebert, succinctly told me back in early 1982 during the Latin American banking crisis, the USA is the only country in the world that has a checkbook in which it can write checks that will be honored even though there is no money in the account.
    Technically the FED is not controlled by the Federal government. Since FED chairmen are appointed by the President, they have had a habit of doing the President’s bidding.
    Our present FED chairman, Ben Bernanke, is an academic who never worked in the private bank or in the private sector for that matter. He had no hands on banking experience when he became a member of the Board of Governors of the Federal Reserve System in 2002.
    He has a long history going back to his college thesis that the FED can decrease the volatility of the business cycle by increasing the monetary supply or by changing interest rates at the FED. He is a believer in Keynesian economics.
    Essentially, Keynesian economists believe the government can spend money to get a country’s private sector businesses out of a recession or depression by taking money away from the productive private sector businesses that provide jobs and giving it to failed institutions. That is like standing on top of a suitcase and trying to pick it up.
    Therefore you can understand why Bernanke made these wildly inaccurate predictions below:
    • July 1, 2005: “We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize.” (N.B: He does not know his history.)
    • March 28, 2007: “[T]he impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.”
    • July 16, 2007: [Freddie Mac and Fannie Mae] “will make it through the storm” [and are] “adequately capitalized.”
    In summart, since Bernanke has become the Chairman of Federal Open Market Committee and directing US monetary policies there has been a net loss of over eight million jobs in the USA. Yes the FED’s intervention in the world economy needs to be stopped but what would most likely happen happen is the subject of another essay.

  • simple troll


  • It just goes to show that throwing money at the problem is not the solution

  • 123

    ur an idiot

  • Ladytank42

    this is a terrible article and deserves to be burned

  • You_me1122

    Go figure here goes the RP supporters if he was elected president he would do the exact same thing go play with Obama you know that is what it would come down to….. and if you were to vote for RP then you are throwing your vote towards Obama……

  • Ron45

    A knee jerk republiban radical. The sleazy phrase manufactures doubt comes to mind.  I guess ten years of bush deregulation had nothing to do with it. Glass/Steagall had plenty to do with it but fiscal 2008 was bushes watch not bambam.  The greed metastasized to both parties but it was the bankers who wanted to dip their snouts in the trough. Most bankers are not demorats. People on Wall Street designed the sleaze that designed the liars mortgages, again not the usual demorat territory.  

  • sean

    you are actually retarted

  • sean

    this seems true. I just have to question the legitimateness of the facts in this article

  • respectful

    I don’t buy this. Yes, Clinton bears responsibility for signing into law a terrible Republican bill repealing Glass-Steagal. But that doesn’t exonerate the banksters from all their shenanigans. Lots of buzzwords here like “liberal” “socialist” “democrat”, but no mention of the defective Mortgage Backed Securities bundled by GS and others, the massive fraud committed by the banks & ratings agencies, the inflation of home values mandated by banks, the gutting of the SEC by the GW Bush administration, and the stagnation or declining of real wages that caused people to become insolvent due to outsourcing of manufacturing jobs. And why the heck shouldn’t people with modest income be able to afford a home in this “richest nation in the world”? This is a complex story but don’t expect to learn the truth from a banker.

  • Demetris Voudouris

    I wish the Romney campaign would point everyone to this article when Prez O flippantly claims that the cause of the financial crisis were the same old Republican policies of tax breaks for the millionaires and billionaires. See also “Reckless Endangerment” by Gretchen Morgenson.

  • Hear, hear Mr. Voudouris!

  • Why?

  • Typical ‘knee-jerk’ liberal reaction to the truth.

  • Wolfhounddennis1

    This guy is so far off base. Phil Graham was the first to push for homeownership for all in America under Bush senior term in office. This guy needs to get his facts straight and correct. They let any moron write an article without checking its accuracy is just nuts. International banker is what he says he did for 20 years? Right?

  • PMDU

    Most of the loans that defaulted were home purchases from 2001 to 2006. These is the period of the real estate boom. The home values during these doubled in most areas.

  • PMDU

    Majority of the loans that defaulted were home purchases from 2001 to 2006. The home values during these years doubled in most areas.

  • It doesn’t matter we liked or disliked the facts; but facts are facts. This article states the reality which is irrationally unacceptable to most of us.

  • Marco Ramirez

    Very objective your article sir….. lol!!

  • Pete

    This guy was an “international banker” (what the hell does that mean??) for 20 years? I’ve had first year economics students be able to more accurately explain the Great Recession’s roots. OK, so he is a partisan hack, big deal. What scares me is his clear lack of understanding of the events of 2007-2008 – or his inability to express them in a concise and clear manner. The fact that someone – anyone – might read this article and actually believe some of the things the writer insinuates is a sorry reflection on the convoluted and twisted mind of a former “international banker”.

    There is plenty of credit available for “good credit risks”?? You wrote that in October of 2008???? Were you on the moon during the crisis??! The FED is a government entity?! 100% of the blame lies on the democrats during Clinton’s presidency?! Were you asleep for 4 years during Bush 43’s first term?!

    The idea that you equated Paulson to a position of being a democrat operative and insinuating the idea of Goldman Sachs being a firm Obama supporter clearly demonstrated your lack of understanding of the events or the people involved.

    You Sir, are a hack, an inept social moron, who should be banned from ever engaging anyone in any topic concerning finance, economics or anything related to the field of credit, money or rendering any kind of a financial commentary! In a profession in which people are looked upon like vermin by the general population for being “greedy Wall Street” guys, you perpetuate a false stereotype for which whatever license you held or currently hold should be indefinitely suspended, never to be returned to you again to spare us from having to experience any more of your delusional, incoherent and just plain idiotic ramblings, which have bearing on reality no more than a tea spoon of water having the effect of increasing the level of the Pacific in a meaningful way.

  • Pete

    I don’t know where you got your education from, what financial institution you worked for, what you did in “international banking”, I am unfamiliar with any papers you have published or any theories you have put forth or defended and in front of what committee, but I do know this based solely on this short article. You are a very dangerous person and your clearly showing ineptitude or worse, deliberate misrepresentation of so many crucial facts serves only one purpose. To manipulate with falsehood and to entice people towards accepting your fallacies as truths. I understand your need to shed light on facts in a favorable manner towards accomplishing your goal, which I assume to be based on your comments advancing a hatred of democrats. That’s your right. I don’t care about politics and nor do I agree or disagree with you in that arena. But your inability to separate economic fact from partisanship and you lacking the ability of portraying the crisis and your follow up in a neutral setting concentrating solely on data is beyond contempt for the field of economics and finance.

  • Bill

    To all those bitching and moaning about how inaccurate this article is, without providing any facts themselves, watch the movie Inside Job. It does a great job explaining the entire financial collapse without showing bias towards political parties. From what I got out of it, no one party, one person, or one institution was to blame for this. It was several poor and unethical decisions made by several different people. From the banks, to the the president, to the ratings companies, there are LOTTTTTSSSS of people to blame.

  • Dustin

    “Accuracy In Media”… Yeah. Bullshit. So much bias

  • Bob Oliver

    You’re an idiot

  • Heather NH

    This was supposed to be not bias? HAHAAHAHAHAH

  • JonasC

    “…Why shouldn’t people with modest incomes be able to afford a home in this richest nation in the world?” Says Respectful. There you have it. It’s not about what is with liberal leftests, it’s always about what should be. They got their stinking bachelor’s degree in art history and criminal justice and they want to be paid the same as a chemical engineer. Look, the banks that you cite were accessories after the fact. Sure they cashed in. The article says that. But what about the fines the administration was going to levy on them if they didn’t make the loans. Respectful kind of forgot about that.

  • Curtis Cashen

    So who is saying this ball did not get rolling because of sub-prime loans and the governments pressure to make them happen?

  • T.E. Sumner

    Only Bernanke involvement in bursting the mortgage/real estate bubble is missing.
    Bernanke became concerned with the 30% annual rise in real estate prices centered in California, but spreading throughout the country. In an attempt to keep inflation in check FOMC jacked up interest rates which appeared shortly thereafter in mortgage rates.
    As mortgage rates rose, buyers had less of an appetite to take on mortgage debt. The real estate market typically has a 3-6 month lag in closing contracts. Eventually closings dropped significantly but not before permits dropped.
    The construction pipeline dried up, putting future mortgage demand on a downtrend. With construction easing up, demand for home construction labor dropped. Bernanke kept the heat up on mortgage rates for months after demand for housing had cooled.
    Construction work and construction supply chains shriveled up under the heat of high mortgage rates. Speculators (or in California, those holding houses by Option ARM notes) starting to bail out of their investments before the bottom fell out.
    Whole subdivision in Nevada went unoccupied as speculators there simply walked away from those losing propositions. As prices dropped, foreclosures and short sales cropped up everywhere. Pricing simply pancaked. There was no new demand only pressure to sell out to minimize losses, but no one was buying those houses with rates so high.
    The recession gain strength and spread over the whole country, even out into international markets where FNMA-backed CMOs were marketed.
    Still, FOMC did nothing to reel in interest rates. Finally when it was clear that inflation was dead and instead recession had taken over, Bernanke began trying to cut rates to balance things out.
    Too late. Unemployment had hit all-time highs. Nothing was going to re-inflate housing prices to rescue underwater homeowners and speculators.
    Over the course of almost 10 years housing had reached stratospheric heights followed by disastrous lows.
    People blamed banks, who were only following FNMA’s loose rules. AIG begged for a bailout, since its Mortgage Insurance was bankrupted by the massive claims. Portfolios of speculative CMOs took down a major Wall Street player and Treasury didn’t blink. The Fed didn’t so much as yawn in the face of insolvencies. But the underpinnings of FNMA were AIG and a solvent secondary market.
    Someone had to step up and inject liquidity into AIG or else a worldwide collapse would ensue.
    Despite Bush’s previous attempts to reform the GSEs he was now stuck with a simple choice: propose to prop up AIG and enact a massive stimulus package or watch the whole world sink deep into depression.
    TARP was no cure-all but at least AIG survived which allowed GSEs to continue to offer insured loans into the secondary market.
    The sad news was that Democrats refused to establish a budget of their own and used the $900B increase from TARP as a new baseline budget to spend from.
    History will not be kind to those who profligately spent an extra $1T a year without a purpose in mind, other than spending, basically a pork-for-all. Our grandchildren will be saddled with the debt racked up during the 2009-2014 period.
    All because of some misguided attempt to thwart market mechanisms and boost home ownership by unqualified borrowers. Thanks, Clinton, Raines and Bernanke.
    And for all the debt, thanks, Obama, Reid & Co.

  • Geoffrey Fernandez

    Its even racist to assert that a large factor in the subprime loans defaulting is because they were made by the banks, under duress, to minorities.

  • Geoffrey Fernandez

    this writer is making another attempt at re-writing history and shifting the blame from where it rightly belongs. a fascist worthless piece of work, much like the author….

  • Carol Davidek-Waller

    The author certainly has a bankster (oops banker) mentality. Blame it on the poor. The lie that it was all well intentioned just doesn’t cut it..
    In fact private banks were handed out free money by the Federal Reserve (not Federal but a consortium of private banks; B of A Citicorp and JPM are the top shareholders)
    They played a dangerous game of increasing profits by concentrating on fees not on credit worthiness. They didn’t even try to do due diligence. Packaged the bad mortgages, colluding with the ratings agencies to label them AAA (the same as US treasury debt) and then sold them all over the world. School systems in Norway, pension funds, They created other financial ‘instruments’ that bet against the mortgage backed securities. They created a whole new industry of mechanized foreclosure that robbed thousands of their homes when they weren’t in default. They are criminals, guilty of fraud and deceit. Destroyers of wealth and not one of them has gone to jail for the wreckage they deliberately created. Suggested reading “Griftopia” Matt Taibbi.

  • Terri

    The Federal Reserve isn’t a government agency.

  • Floridatexan

    This “analysis” is crap.

  • Mr. Check Your Facts

    The Fed Reserve is private and was formed in 1913 on a bill passed through the senate on December 22 when most Senators (who were lied to that no vote was taking place) were home on holiday break…It was formed by the greedy banking elite who seek to control our economy for their own gain. This would be an important fact to not overlook when talking about an organization that has a strangle hold over our economy…

  • JackSnap

    It really is sad to read so many uneducated (or poorly educated) people commenting below. I could not find one person who dissented from the author’s position provide a single fact refuting his thesis. Saying the author’s facts are wrong without demonstrating specific examples reflects a person’s lack of intellectual maturity and instead shows they are only butt-hurt about being a Democrat and not being able to defend the indefensible.