How Newt Gingrich and Official English would have saved Fannie Mae

freerepublic.com
by dangus
Posted on Saturday, November 19, 2011 8:43:58 AM

The real cause of the housing bubble and collapse is very simple: An Executive Order by Bill Clinton and enthusiastically championed by George Bush, 13166, forced banks to make bad loans or no loans at all. And Newt Gingrich was championing putting an end to EO 13166 years before the collapse of the banking industry.

In the late 1990s, a grand compromise was reached between President Clinton and Senate Banking Chairman Phil Gramm. Long ago, government types decided that home ownership was the key to fiscal stability, but too many blacks didn't qualify for loans. The banking industry argued that blacks were, on average, greater risks that non-blacks, based purely on economic data. The Clinton administration argued that nonetheless, the effect of these policies were discriminatory. Fannie Mae, being a creation of the government, could not engage in policies which had even an unintentional discriminatory effect. Since most housing loans involved Fannie Mae, the Clinton Administration used this leverage to argue that banks themselves, by participating with Fannie Mae, made themselves subject to such anti-discrimination laws.

The compromise was to spread the risk so the bank which made the higher-risk loan to a black family wouldn't absorb the full cost of the loan default, should the family actually default. The problem is that Sen. Gramm had been taken in: President Clinton soon signed an Executive Order ruling on 1964 Civil Rights Act' prohibition on discrimination against someone based on their national origin.

Congressional testimony had made very clear that what had been meant by "national origin" was their ethnic origin. Clinton was twisting it in a new way, equating ethnic origin with linguistic background, and by doing so finding that you could not discriminate against anyone based on their inability to speak English.

Here's the problem: American schools require English. Immigration requires English. Anyone who cannot speak English in America is likely to be either horribly poorly educated, or, more likely, an illegal immigrant. Under the E.O. 13166, the banking law passed to make home ownership feasible for blacks, was being used to demand loans to illegal aliens!

Try finding an illegal alien who qualifies for a loan. A bank is willing to give YOU money, because you can't just disappear. If you change your identity, you lose not only your down payment, but your college education, your professional work history, and thus, your future earning potential. An illegal alien simply goes back to Mexico, leaving the bank hanging.

So, the banks had to scrap loan requirements which differentiate you from an illegal alien. No money down! No work history, no problem, if you speak only Spanish! Home ownership rates exploded, and with them, home prices

The banks were willing to make bad loans for two reasons: If the loan defaulted, they took the house, which was now worth more than it was when the bank made the loan, so the loan really was a way for the bank to directly invest in real estate, not just merely the interest rate of the borrower. And if the bank actually DID take a loss, they could pass it on to other holders of CDOs, the creation of Gramm's law by which banks could trade loans on the open market, so long as no-one could see what the loans were actually on.

In 2007, the Bush administration, stinging from brutal losses in 2006, got the message that the American people wanted immigration enforcement. The explosive flow of illegal immigrants to America slowed to trickle, and even began to reverse. Certain specific counties in America... those with the highest percentages of illegal aliens making up their populations.. started experiencing their housing markets collapse. Prince William's County, imploded, while nearby Prince George's County continued to grow. The difference? "PW's" new homebuyers were illegal immigrants, while "PG's" were black Americans.

In 2008, Every one of the top 20 counties with the fastest real-estate depreciation was also among the counties with the highest rate of non-English-speaking home-owners. But then Bear Stearns fell. And AIG. And banks would no longer risk giving money to illegal aliens, and therefore couldn't loan money to anyone else. And so English-speaking Americans couldn't buy houses, and the housing collapse spread throughout America.

Long before the collapse, a very excellent organization named Pro-English was sounding the alarm about Executive Order 13166. And there was one politician willing to work with them: NEWT GINGRICH.

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