Collapse of the Housing Market.

Collapse of the Housing Market. The subprogram of self-governing is to make regime work better by allowing hatful to attention govern themselves. And the bulk do that by electing Representative to talk for them, to protect life, shore leave and personal properties. The absolute right ons of individuals may be resolved into the right of personal security, the right of personal liberty, and the right to acquire and enjoy property and that consists in existence protected and governed by laws make, or assented to, by the representatives of the good deal, and conducive to the general welfare (James Kent, Commentaries on American Law, Lecture XXIV).Yes I believe that the congress lived up to protect life, liberty and personal properties, because they utilise Federal monetary supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are undertake consistent w ith the safe and sound operation of such institutions (Community rulevestment Act, October 12, 1977) They did this so everyone could get a house. They also treasured to get much people into house so the economy could move.Because of that the demand for houses increase and so did the prices and some people were non able to afford and could non get a loan form the bank. Because of that the government in 1995 gave the CRA serious teeth regulators could now deny a bank with a low CRA rank approval to merge with an some other bankat a time when the arrival of interstate banking make such approvals especially valuableor even to open new branches. Complaints from community organizations would now forecast against a banks CRA rating. (Lawrence H. White, How Did We kick the bucket into This Financial Mess? Cato Institute, November 18, 2008). HUD also actively pushed Fannie Mae and Freddie Mac into approve the enormous expansion of the nonprime mortgage market place. To fund thei r enormous growth, Fannie Mae and Freddie Mac had to borrow huge sums in in large quantities financial markets. Institutional investors were leave behinding to lend to the government-sponsored mortgage companies cheaply because they thought that the Treasury would pass them should Fannie or Freddie be unable. (Lawrence H. White, How Did We Get into This Financial Mess? , Cato Institute, November 18, 2008).Congress seek to help the people by position out more funds care The American Dream Down payment Initiative (ADDI). ADDI helped showtime time house misdirecters by paying their down payment or the closing cost. This helps more people to spoil a house. The American Dream Downpayment Assistance Act authorized up to $200 one million million million annually. Funds were appropriated for fiscal years 2004-2008. ADDI helped first-time homebuyers with the biggest hurdle to homeownership downpayment and closing costs The original purpose of the president was to prolong out any decisions that congress made, but the president was not independent of Congress.Congress still remained completely in charge of how their decisions were carried out. The president is part of the executive who was to look up to congress so there is not a person making all the decision. All the powers of government, legislative, executive, and judiciary, result to the legislative body in the Virginia Constitution of 1776. The concentrating these in the same hands is precisely the definition of despotic government. It will be no alleviation that these powers will be exercised by a plurality of hands, and not by a single one. 73 despots would for sure be as oppressive as one. (Thomas Jefferson, Notes on the State of Virginia, Query 13, 1784). But when it came to the housing market the president/ executive department and agencies did not live up to their purpose in their actions in the commonwealth of housing. For example President Bill Clintons HUD agreed to let Fannie and Freddie g et affordable-housing credit for buying subprime securities that included loans to low-income borrowers. The whim was that subprime lending benefited many borrowers who did not qualify for conventional loans. (Carol D.Leonnig, How HUD Mortgage Policy Fed the Crisis, capital of the United States Post, June 10, 2008). In 1999 the Clinton administration viewed Fannie Mae as a hazard move to prevent the housing bubble and collapse. Treasury repository Lawrence Summers issued a warning, saying, Debates to the highest degree systemic risk should also now include government-sponsored enterprises, which are large and exploitation rapidly. It was a sign of the zodiac moment. An administration official had said in reality that Fannie Mae and Freddie Mac could be a hazard (How Washington Failed to Rein in Fannie, Freddie, Washington Post, September 4, 2008).The Clinton administration really didnt like Fannie because they tried to discouraged Fannie and Freddie from buying predatory sub prime loans. Department of Housing and Urban Development called for Congress to consecrate legislation to prohibit the purchase by each of these entities of predatory loans. Fannie Mae was designed to help people. The sole purpose of them were to get banks to sell loans to people that would not always be able to get loans and then Fannie and Freddie would buy those loans form the bank giving back the cash back to banks. The U. S. government had created Fannie Mae in 1938 to buy mortgages from banks that loaned property to homebuyers. It was a Depression-era creation designed to ease financing costs for borrowers still recovering from the economic forlornness of the 1930s (Gretchen Morgenson, Reckless Endangerment, 13). To bring compotation and have verity the government created Freddie Mac so more loans could be bought and more people would invest. from an agency of the government into a partially private entity that issued common stock to public investors.The presidents idea wa s to get the companys liabilities off the governments remnant sheet (Gretchen Morgenson, Reckless Endangerment, 13). To get Fannie and Freddie get going on it own, they would sell stock where people would be able to by one of loans that Fannie and Freddie would buy form the banks, but the good thing was if the person was not able to pay back to Fannie and Freddie, the person who bought the loan would get gainful back form the government. That got more people to invest in Fannie and Freddie. To fund their enormous growth, Fannie Mae and Freddie Mac had to borrow huge sums in wholesale financial markets. Institutional investors were willing to lend to the government-sponsored mortgage companies cheaply because they thought that the Treasury would repay them should Fannie or Freddie be unable. (Lawrence H. White, How Did We Get into This Financial Mess? , Cato Institute, November 18, 2008). Around 1999 Fannie and Freddie became so big that the government was losing more money then making money.The treasury did not like that they had to pay back to the people who invested in Fannie and Freddie. They went in public saying that they are hazard. In the fall of 1999, Treasury Secretary Lawrence Summers issued a warning, saying, Debates about systemic risk should also now include government-sponsored enterprises, which are large and growing rapidly. It was a signal moment. An administration official had said in public that Fannie Mae and Freddie Mac could be a hazard (How Washington Failed to Rein in Fannie, Freddie, Washington Post, September 4, 2008).After this one could see how strong Fannie and Freddie has become and more people decided to investigate but were never able to bring it up and who did were sued and lost a lot. Gensler and other Treasury officials feared the companies had grown so large that, if they stumbled, the damage to the U. S. economy could be staggering. Few officials had ever publically criticized Fannie Mae and Freddie Mac, but Gensler c oncluded it was time to urge Congress to rein them in.The bill failed (How Washington Failed to Rein in Fannie, Freddie, Washington Post, September 4, 2008). When the economy downturn in 2001 due to lots of mortgages not paid and more foreclosed houses, the Federal reserve tried to bring it up by expanding the U. S. money supply the mark was to bring up the economy by putting money into the economy and people start spending. In the recession of 2001, the Federal Reserve System, under Chairman Alan Greenspan, began aggressively expanding the U. S. money supply.The expansion was accompany by the Fed repeatedly lowering its target rate for the federal official funds (interbank short-term) interest rate. The federal funds rate began 2001 at 6. 25 percent and ended the year at 1. 75 percent. (Lawrence White, How Did We Get into This Financial Mess? , Cato Institute, November 18, 2008). But this did not help, low interest rates affect the behavior of investors. They halt buying bonds and The Federal Reserve Boards decision to slash interest rates to egg on the economy was hurting investors who lived on the income generated by their holdings. In 2001, mortgage lenders understood that the low interest-rate environment was driving force investors to securities that yielded more than Treasury bonds and other relatively conservative fixed-income instruments. Due to less people-buying bond, the federal reserve made the interest rate low but they had to raise the house price to balance it. That way people saw this as in opportunity to buy a house with low interest rate. model form 26D. In 2005 federal reserve desperately made the discount form 4. to 6. 5 to help get the house market rolling again. In August 2005, the Federal Reserve Board increased its discount rate to 4. 5 percent, up from 2 percent the summer before. The Fed was finally trying to tap on the brakes of a runway real estate market (Gretchen Morgenson, Reckless Endangerment, 286) What the feds trie d to fix by getting more blacks to buy because of people getting on them form being racist kicked them in the butt when more than half had there house foreclosed. In October 1992, Mortgage change in Boston Interpreting HMDA Data was published by the Boston Fed. Its authors were Alicia H. Munnell, Lynn E. Brown, and Geoffrey M. B. Tootell. Racial bias by mortgage lenders, Munnell and her colleagues wrote, not only existed it was pervasive. The HMDA data showed that black and Hispanic loan appliers were far more possible to be rejected by banks than were whites. The rejection ratio for minorities was 2. 8 to 1 compared with white applicants. There was only problem.The methods used by the Boston Fed researchers to prepare their report were flawed. The analysis did not consider whether an applicant met a lenders credit guidelines I was happy that congress precious to help anyone who wanted a house, there intensions were good by creating Fannie and Freddie but when people figured out that they can buy loans form Fannie and Freddie will be payed back when they know the owner of that mortgage will never be able to pay back. More community lost there value due to this.