Fannie Mae Eases Credit To Aid Mortgage Lending
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posted by Bob at Sunday, October 12, 2008
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71 Comments:
By STEVEN A. HOLMES
Published: September 30, 1999
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.
Bob, how about making the person who wrote this stand behind it. Step back while I deconstruct the myth that the poor are behind the downfall of the world markets.
The above article is a well known zombie myth is the credit crisis is due to Fannie Mae and Freddie Mac. This 1999 article from the New York Times about the GSE's role in subprime mortgages has been circulating as if its the rosetta stone of the credit crisis.
Here's what you on A-Democracy need to know: this tripe is by those who have been pushing for greater and greater deregulation, and are now attempting to disown the results of their handiwork. While throwing the blame on the vulnerable.
Let's clarify the causes of current circumstances. Ask yourself the following questions about the impact of the Community Reinvestment Act and/or the role of Fannie & Freddie:
• Did the 1977 legislation, or any other legislation since, require banks to not verify income or payment history of mortgage applicants?
• 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision; another 30% were made by banks or thrifts which are not subject to routine supervision or examinations. How was this caused by either CRA or GSEs ?
• What about "No Money Down" Mortgages (0% down payments) ? Were they required by the CRA? Fannie? Freddie?
• Explain the shift in Loan to value from 80% to 120%: What was it in the Act that changed this traditional lending requirement?
• Did any Federal legislation require real estate agents and mortgage writers to use the same corrupt appraisers again and again? How did they manage to always come in at exactly the purchase price, no matter what?
• Did the CRA require banks to develop automated underwriting (AU) systems that emphasized speed rather than accuracy in order to process the greatest number of mortgage apps as quickly as possible?
• How exactly did legislation force Moody's, S&Ps and Fitch to rate junk paper as Triple AAA?
• What about piggy back loans? Were banks required by Congress to lend the first mortgage and do a HELOC for the down payment -- at the same time?
• Internal bank memos showed employees how to cheat the system to get poor mortgages prospects approved that shouldn't have been: Titled How to Get an "Iffy" loan approved at JPM Chase. (Was circulating that memo also a FNM/FRE/CRA requirement?)
• The four biggest problem areas for housing (by price decreases) are: Phoenix, Arizona; Las Vegas, Nevada; Miami, Florida, and San Diego, California. Explain exactly how these affluent, non-minority regions were impacted by the Community Reinvesment Act ?
• Did the GSEs require banks to not check credit scores? Assets? Income?
• What was it about the CRA or GSEs that mandated fund managers load up on an investment product that was hard to value, thinly traded, and poorly understood
• What was it in the Act that forced banks to make "interest only" loans? Were "Neg Am loans" also part of the legislative requirements also?
• Consider this February 2003 speech by Countrywide CEO Angelo Mozlilo at the American Bankers National Real Estate Conference. He advocated zero down payment mortgages -- was that a CRA requirement too, or just a grab for more market share, and bad banking?
The answer to all of the above questions is no, none, and nothing at all.
Eric
Eric,
What was deregulated? The supervision of Fannie & Freddie?
I advise Eric not to post on this thread again.
He put the case out that beat this post by Bob and unless someone can answer 'yes' to any of the questions he asked, then its over. Any other questions like the one above will only nickpick the issue dive into a debate that has nothing to do with the topic.
Can anyone answer yes with citation?
Yeah they expanded home ownership for millions allright. Now millions of taxpayers have to clean up the mess.
This Eric guy is plagerizing my work. Click on my name above to see I wrote this -- not Eric.
Can Eric think on his own?
Shameful.
hey did bob write the first post too?
this seems to be about research, and both have presented both sides.
if this wsa about what somebody thinks or a commentary, then 9:01 would be right.
Dear 9:37,
Bob did not write the first part. He properly gave credit to "Steven A. Holmes" published on "September 30,1999."
On the otherhand, Eric wrote "Step back while I deconstruct the myth" and then used, word for word, Ritholtz's argument.
Very different and very unprofessional.
Eric but your side blames Bush for everything.Maybe you should step back and see that its both parties fault.But don't worry Barack Hussein Obama will fix it all with his magic wand.Eric your an empty suit just like Barack and I hope he wins just to get it over with.He'll be out in 4.See ya fool!
Randy W
Not the site I got the original info from. I emailed Barry and will comment further after hearing back from him.
I saw the link and some writings from a Jeff Manning write up in the Oregonian.
Point is, its laid out for anyone who wants to see some truth and logic to see.
11:43
This is not a professional presentation. Its the internet fighting back on misinformation.
Kicking the messenger around is par for the course, read the content. Read the content.
Randy W.,
You're and empty head if I'm an empty suit. Obama doesn't need a magic wand, he's had an economic plan for two years up on his website- in detail:
http://www.barackobama.com/issues/economy/
Obama's post Wall Street bailout proposals include:
-- A temporary $3,000 tax credit to companies for each new job created in the United States over the next two years.
-- Penalty free withdrawals from 401(k) and IRA retirement accounts up to a maximum of $10,000 this year and next.
-- A 90-day moratorium on foreclosures for homeowners who are living in their homes and making good-faith efforts to make their mortgage payments.
-- A call for the Treasury to help unfreeze markets for individual mortgages, student loans, car loans, loans for multifamily dwellings and credit card loans.
The plan also calls for temporarily eliminating taxes on unemployment insurance benefits and having the Fed and Treasury prepare for guaranteeing a broader range of liabilities of the banking system.
--------
I don't think Freddie and Fannie are 'innocent' in this. I think the evidence presented and the current breakdown in markets across the globe cannot be blamed on Freddie and Fannie.
Why? Because out of billions of bad loans, not one of those originated with Freddie and Fannie. Not one.
Anyone with counter proof?
Eric
Eric,
I went to Ritholtz’s website and felt “Mark” had pretty good responses to Ritholtz’s questions. I copied his response below.
Bill Cullen.
• Did the 1977 legislation, or any other legislation since, require banks to not verify income or payment history of mortgage applicants?
-- Doesn't matter as long as the loan was able to get the blessing of the government endorsed ratings agencies and thus able to be sold off to the GSEs or other institution required by law to purchase debt blessed by the ratings agencies.
• 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision; another 30% were made by banks or thrifts which are not subject to routine supervision or examinations. How was this caused by either CRA or GSEs ?
-- GSE's bought their packaged loans thus creating a cottage industry of mortg. service companies and/or their loans were blessed by the government endorsed ratings agencies and thus they were able to sell off their loans to institutions.
• What about "No Money Down" Mortgages (0% down payments) ? Were they required by the CRA? Fannie? Freddie?
-- Doesn't matter, as long as the loans received the blessing of the ratings agencies and thenwere subsequently purchased by GSEs or other institutions.
• Explain the shift in Loan to value from 80% to 120%: What was it in the Act that changed this traditional lending requirement?
-- Who cares. The market will a game a bad system. But don't blame the market for that. Blame the bad system for creating the bad incentives.
• Did any Federal legislation require real estate agents and mortgage writers to use the same corrupt appraisers again and again? How did they manage to always come in at exactly the purchase price, no matter what?
-- Who cares. The ratings agencies blessed these loans anyhow. The blame goes to the ratings agencies and the GSEs who purchased the loan packages.
• Did the CRA require banks to develop automated underwriting (AU) systems that emphasized speed rather than accuracy in order to process the greatest number of mortgage apps as quickly as possible?
-- Again, doesn't matter. The loans still got the blessing of the ratings agencies/GSEs.
• How exactly did legislation force Moody's, S&Ps and Fitch to rate junk paper as Triple AAA?
-- As government regulated/endorsed/blessed entities, the problems existing in these agencies have only the government to blame. By giving special endorsement to certain national ratings agencies, the government thwarted the natural market that would have punished the ratings agencies for shoddy work.
• What about piggy back loans? Were banks required by Congress to lend the first mortgage and do a HELOC for the down payment -- at the same time?
-- Obviously, the banks were allowed to do this as the loans packaged were rated AAA by the ratings agencies and thus able to be sold off to GSEs or institutions.
• Internal bank memos showed employees how to cheat the system to get poor mortgages prospects approved that shouldn't have been: Titled How to Get an "Iffy" loan approved at JPM Chase. (Was circulating that memo also a FNM/FRE/CRA requirement?)
-- The market will game a bad system. So what's new? It's a failure of government, once again.
• The four biggest problem areas for housing (by price decreases) are: Phoenix, Arizona; Las Vegas, Nevada; Miami, Florida, and San Diego, California. Explain exactly how these affluent, non-minority regions were impacted by the Community Reinvesment Act ?
-- The CRA is part of a bigger picture of bad government regulation and interference in the marketplace.
• Did the GSEs require banks to not check credit scores? Assets? Income?
-- Obviously, they implicitly did, yes. Otherwise, the banks would not have gotten AAA ratings from the ratings agencies and thus be able to sell them off to the GSEs.
• What was it about the CRA or GSEs that mandated fund managers load up on an investment product that was hard to value, thinly traded, and poorly understood
-- They all got caught up in the game created by government (Fed, GSEs, ratings agencies) to make a buck. Eventually, as it always does, the house of cards come tumbling.
• What was it in the Act that forced banks to make "interest only" loans? Were "Neg Am loans" also part of the legislative requirements also?
-- Who cares -- the banks were obviously able to sell off the loans with the blessing of the ratings agencies.
• Consider this February 2003 speech by Countrywide CEO Angelo Mozlilo at the American Bankers National Real Estate Conference. He advocated zero down payment mortgages -- was that a CRA requirement too, or just a grab for more market share, and bad banking?
-- Who cares -- it's all part of the bigger picture of the corrupt tangled web of government regulation and quasi government agencies that created a perverted marketplace with perverted incentives.
In a later post, it appears the same guy added this:
It's the GSEs and government endorsed ratings agencies that enabled this. The ratings agency gave the securities the seal of approval; then the GSEs bought them up with the full implicit backing of the federal gov't. Absent the GSEs or the gov't endorsed ratings agencies, this could NEVER have happened.
Eric,
if you had read all of Barry Ritholtz’s blog, you would have come upon a pretty good response from “dave.” I copied the response here – although it has now lost the http links that really make the post powerful – you might want to go to Ritholtz’s blog and look up the original post.
Bill Cullen.
Dave’s Oct 2, 2008 2:03 PM post:
Barry, I think you miss the point that some of us moderate nuts are trying to make. We don't think the CRA or Fannie/Freddie are the only causes. We just ask that you be honest about the impact of government distortions to the housing market. I’ve commented on this a few times before, but you seem to ignore the facts that I have presented to you. I will try one more time.
mark's post at Oct 2, 2008 12:12:51 PM does a decent job summing up why this is not to be completely blamed on the free market - it wasn't a free market, and some of the poor incentives were created by government intervention. There were other deregulation-related factors that also contributed, and you’ve named many of them. You seem to want evidence that the CRA, Fannie, and Freddie (and presumably HUD) were the complete causes. They were not. But they contributed in a significant way both in the early stages of the bubble and the later ones.
What I argue is that the government helped get housing bubble underway with regulations that artificially increased demand by giving financial incentives to Fannie and Freddie to support the secondary market for low income mortgages, and later allowed them to count subprime securities towards affordable housing goals.
First, let’s establish when home prices started accelerating. It looks to me as if it started in the 1997/1998 time frame. From 1989-1997, real home prices were flat/down. The Fed funds rate in the mid to late 1990’s wasn’t particularly low. The effect of the Fed that you are referring to had to have caused only the portion of the housing bubble that occurred AFTER rates were taken down in 2001. That may help explain why prices accelerated again, but the upward trend was already underway.
So what did change in 1997? Well, according to this press release, that was the year the first CRA loans were securitized by Bear Stearns, and guaranteed by Freddie (the guarantee is what gave these particular securities the “AAA” rating).
But why would Freddie (and Fannie) be so interested in guaranteeing CRA loans, or any low income mortgages, in particular? It seems that HUD gave them quotas for affordable housing with the authority to punish them for failure to do so:
“Since HUD became their regulator in 1992, Fannie and Freddie each year are supposed to buy a portion of ‘affordable’ mortgages made to underserved borrowers. Every four years, HUD reviews the goals to adapt to market changes.
In 1995, President Bill Clinton's HUD agreed to let Fannie and Freddie get affordable-housing credit for buying subprime securities that included loans to low-income borrowers.”
So what kind of goals are we talking about and when were they actually set? Here’s an account of how HUD set its affordable housing goals:
“Cuomo's predecessor, Henry Cisneros, did that for the first time in December 1995, taking a cautious approach and moving the GSEs toward a requirement that 42 percent of their mortgages serve low- and moderate-income families. Cuomo raised that number to 50 percent and dramatically hiked GSE mandates to buy mortgages in underserved neighborhoods and for the ‘very-low-income.’ Part of the pitch was racial, with Cuomo contending that Fannie and Freddie weren't granting mortgages to minorities at the same rate as the private market.”
So the goals were set at the end of 1995, and we start to see real prices increase in 1997. The GSEs met these quotas first by buying conforming loans that met their standards (note: this gave lenders/brokers the incentive to bend the rules since it was easier to sell off a conforming loan, especially when it met the GSE affordable housing quota requirements). And later, they filled their quotas by buying subprime securities:
“Eager to put more low-income and minority families into their own homes, the agency required that two government-chartered mortgage finance firms purchase far more ‘affordable’ loans made to these borrowers. HUD stuck with an outdated policy that allowed Freddie Mac and Fannie Mae to count billions of dollars they invested in subprime loans as a public good that would foster affordable housing.
…
The agency neglected to examine whether borrowers could make the payments on the loans that Freddie and Fannie classified as affordable. From 2004 to 2006, the two purchased $434 billion in securities backed by subprime loans, creating a market for more such lending. Subprime loans are targeted toward borrowers with poor credit, and they generally carry higher interest rates than conventional loans.”
They clearly contributed to the demand for subprime mortgages. And it was because of HUD quotas. Of course there are others at fault, including lax oversight, and some inappropriate deregulation.
The last point to make (slightly off the topic of CRA/Frannie/Freddie/HUD, but on the topic of government intervention), the Taxpayer Relief Act of 1997 gave exemptions to the capital gains tax earned on homes up to $500K. It’s another example of the government trying to distort the market through incentives. Hmm... 1997, eh?
Barry, please do not ignore these facts. No, the CRA/HUD/Fannie/Freddie were not the only reasons for the bubble and current financial crisis. But please be honest as to how they contributed.
How about Chris Dodd and Barney Frank.Eric they opposed regulating fanny and freddie.
Rick
You people are despicable.
Your hatred for the poor is not only obvious in the way you fight against regulation on housing here in the city but, your weak attempt to blame them for the shyster organizations that took advantage of government backed loans.
Drive down Jessemine east of Arcade and see what lax regulation gets. Blight. So, I'm not surprised at all to see the tap dance and distraction.
Thomas Frank lays it out:
There is no doubt that Fannie and Freddie enabled the subprime neurosis, but for certain conservatives they are virtually the only malefactors worth noting. The dirge goes like this: Fannie and Freddie were buying up subprime mortgages, and they were doing it for (liberal) political reasons. Mortgage originators thus had no choice but to hand out mortgages like candy. Had market forces been in charge, loans would, no doubt, have been administered with a rigor and sternness to make John Calvin blanch.
I asked Bill Black, a professor of economics and law at the University of Missouri-Kansas City and an authority on the Savings and Loan debacle of the 1980s, what he thought of the latest blame offensive. He pointed out that, for all their failings, Fannie and Freddie didn't originate any of the bad loans -- that disastrous piece of work was done by purely private, largely unregulated companies, which did it for the usual bubble-logic reason: to make a quick buck.
Most of the mistakes for which we are paying now, Mr. Black told me, were actually made "by four entities that under conservative economic theory should have exercised effective market discipline -- the appraisers, the originators of the mortgages, the rating agencies, and the investment banking firms that packaged the subprime mortgage-backed securities." Instead of "disciplining" the markets, these private actors "served as the four horsemen of the financial apocalypse, aiding the accounting fraud and inflating the housing bubble." It is they, Mr. Black says, who "turned a crisis into a catastrophe."
So, now everyone- or all of you, was for regulating Freddie and Fannie so that the loan originators (mortgage businesses), appraisers, rating agencies and investment banking firms would not take advantage of the system and game the tax payer?
I agree.
Now lets go and make some arrests- and instill safeguards.
An entity went on with lose regulations (Freddie and Fannie) and naturally, the 'free-marketers' took advantage of it and now want socialist-type help from the government to save their capitalism.
Eric
Maybe despicable and hatred are too strong. Anyway, here's the link:
http://online.wsj.com/article/SB122282690823092989.html
Eric
"Why? Because out of billions of bad loans, not one of those originated with Freddie and Fannie. Not one.
Anyone with counter proof?"
They didn't have to originate them you fool. Fannie and Freddie under orders to increase their portfolio of junk loans to 50% and when the market saw they were buying these things like there was no tomorrow, the market just increased the supply to meet the demnad. Fannie and Freedie3 are as much of the problem as the "john" or drug users" who make the illegal activity so profitable for gangsters.....the street type gangsters Eric, not the ones in city hall.
Thanks for the tip on Jessamine Eric. I'm going to get right over there in the morning and see if I can't get some rock bottom deals. Any other areas you've seen that are ripe enough to be picked yet?
6:54
The Arlington Hills and Lower Payne neighborhoods are full of those deals. Good Luck if you're serious. Hell, if you're serious, email Bob on how to contact me and I'll help move what I can to get some of that property in your hands.
6:45
I'm no fool. I said Freddie and Fannie absolutely have some responsibility but, they come in at #5 behind the first four culprits,
1. Mortgage businesses
2. Appraisers
3. Rating Agencies
4. Investment Banking Firms
5. Freddie and Fannie loosened
This argument we're having is exactly what happened in Congress. The Democrats were protecting the agency that gives opportunities for low-income people to get homes and going after the sub-prime lenders. Republicans protecting the investment culture went after Freddie and Fannie to out that backing behind private lending institutions.
Its circular in a sense.
Know this, if the Republicans wanted to, they could have done whatever they wanted. For six years they had the Presidency, House, Senate, and all of the regulatory agencies heads were appointed by Bush.
You'd have to go back to 1992 when the Democrats had that kind of control. Even now, they don't have enough to get anything through the Senate- yet.
Eric
Go down Jessamine?Why?I thought the citys NHPI program to target landlords and tougher code enforcement cleaned up these pockets.I thought Dawkins,Kelly Lantry amd gang had this all figured out.In a nut shell some people should rent and some should buy.The logic on the left is everybody should own a home.Well that doesn't work Einstein Eric!
Randy W
Randy, this area of Jessamine is dominated by public housing tenants and is classified as a segraged area that the city has
left out of its code inspections.
If they targeted landlords in this area, they would have to go after public housing which they will not do.
So if someone was slumlord, maybe they could by property up over there and not have to worry about it.
Jeff Matiatos
Eric,
You blamed:
1. Mortgage businesses
2. Appraisers
3. Rating Agencies
4. Investment Banking Firms
5. Freddie and Fannie loosened
I agree. I think you should add real estate agents too – but maybe that is part of the “mortgage business.”
But, when one “blames” an industry, the only interesting question to me is what part of the industry should have stopped the nonsense? It seems to me two groups you “blamed”, should have stopped the non-sense. I ultimately blame them because their JOB is to assure sound practices are used. Those entities are “3. Rating Firms” and “5. Freddie and Fannie loosened”.
It seems obvious to me that a truly free market will always respond to a demand. When the rating agencies give crappy mortgages AAA ratings there will be a high demand because the MBS appear to pay a high return. Further, when Fannie/Freddie tell banks they want to loan on lower credit standards – and guarantee the debt – why wouldn’t the banks and mortgage business respond? They are filling a demand and that is how the free market works.
The rating agencies AND Fannie/Freddie failed us big time. I know the republicans experessed a lot of concern about Fannie/Freddie – and the democrats actively blocked it – but I don’t know why the ratings agencies failed us.
Before ya’all scream for gov’t regulated markets, know that countries with such markets frequently have product supply shortages because producers do not respond to the market demands – it responds to gov’t specifications.
This is hell of a mess and gov’t is the problem, not the solution.
Bill Cullen.
Take a lesson from Bill Eric.Sit on the sidelines why he schools ya.Shooting your mouth off doesn't mean you know crap.Just listen and learn.
Jim
Just remember the banks are the same people who gave us 28% interest credit cards (in the fine print they can sometimes go to maximum interest if your credit rating drops or it's late because they can change due date without notice).
I can't beleive these folks have our interest at heart.
this area of Jessamine is dominated by public housing tenants and is classified as a segraged area that the city has
left out of its code inspections.
Maybe what "we" need to do is to find the addresses of PHA homes - especially big pockets/"ghettoes" of them - and go through them, systematically, and enter complaints into DSI's "complaint" website. Maybe team up and go over these properties with fine-toothed combs, and then make sure EVERYTHING gets complained about to the city.
Then, we'll have some data to compare with enforcement against private-sector landlords.
Wouldn't it be cool if someone organized this?
Jim,
The irony of your post is that you basically piped up to be a cheerleader for Bill. From the sidelines.
Bill,
If three men needed a pair of pants and government gives each of them a pair but, government being government, the pants has a hole in the pocket. Every week three more men in the neighborhood need a pair of pants- every week they get a pair with a hole in the pocket. Everyday the men go to work they put money in their pocket for lunch. After three blocks, some of the money makes its way through the pants and on the street right in front of a bar. A couple of guys start noticing the money in the same spot everyday and begin spending it in the bar. The bar tender knows where the money is coming from and laughs about it with the guys. Pretty soon, the guys are counting on that money and begin to run up a tab, the bartender allows it because he knows where the money is coming from. The guys began running a tab ahead of the money. After about a year of this, the guys tell the bartender their tab has gotten in front of them, the men with the hole in their pants are working everyday but falling behind on their money and the bar owner has to file for bankruptcy.
In that analogy above, you blame the guys with hole in their pocket for shutting down the bar.
The investment banks (who were deregulated so they could get involved in the mortgage business) knew that many of these loans would not be paid back but bought them and sold them, the appraisers knew they were pushing home values through the roof because they made a profit from it and the people would get financed anyway from the banks backed up by Fannie and Freddie.
Democrats would have been OK with sewing up the hole in the pocket- not discontinuing the pants givaway. Republicans wanted to do away with the pants givaway so that the bar could sell pants with holes in the pockets directly.
It wasn't regulation alone Republicans pursued, it was a line to deregulated the investment banking industry even more by allowing them to offer government secured loans. So, then you have a one stop shop for fraud.
Enron and others learned that you can't have the auditors and accountants working from the same company, corporation, entity. Unbridled capitalism leads to to corruption and the people being scammed.
Bill, they are all to blame.
Eric
Fuzz Torstein,
I don't know which is PHA and which is private. I just know they're an eyesore and according to cops, makeshift flophouses, bordellos and drug houses. This is also the case on the West Side.
The city or district council can give you quick stats on the number of calls to each of those addresses. I say go for it. You'll find that neighbors don't care that much that its PHA or private owned if it looks like crap.
Eric
You'll find that neighbors don't care that much that its PHA or private owned if it looks like crap.
Right. I understand that completely.
But it's not the neighbors that can summarily condemn a house and order it bulldozed - presuming it's not PHA.
If PHA is not held to the same standards real people are, then something is very wrong.
Isn't it federally linked?
My understanding is that PHA has tougher requirements for tenants and when caught in illegal activity, on PHA grounds especially, you're out of the system.
Is that correct?
Eric
So banks are going to get billions in government (the peoples) money to bail them out ?
My idea would be to just let the banks that have been the cause of this mess go broke and require them to liquidate and forefite the bank and property to the government in exchange for a light criminal sentence to the executives and others that cheated the people.
Then, the government would slap a sign on the bank that said :
" 1st National Bank of the United States of America "
Jeff Matiatos
"Then, we'll have some data to compare with enforcement against private-sector landlords.
Wouldn't it be cool if someone organized this?"
The landlords already did this and they have the data. Not only did they look at the PHA stuff, they went after the political supporters of city officials and none of them had action taken against them.....suprise suprise!
Since yo know it all Eric what reglations did the republicans lift in the last 20 years to get us in this crisis?Please no spin.I'm serious,tell us all.
Jim
Eric,
I agree with you that everyone involved in this great fraud made money and does not deserve our compassion.
But, the question I am asking is what caused the problem versus who foolishly depended on the problem. In your example, the gov’t created the bad pants and an industry popped up around it. Fix gov’t and the industry never exists or, if it already exists, disappears (tough on those who depended on it). I draw the same conclusion with regard to the failure of our rating agencies and Fannie/Freddie. They created the market for bad loans and industries popped up around it.
You ask two great questions – first, why did banks get so depended on this bad collateral if they knew the loans were bad? For some reason, these bad loans got AAA credit ratings so investment banks thought they were buying very safe securities. Now we find the ratings were a crock and everyone holding these instruments are screwed. Last night, I heard a conservative talk show host claim the AAA ratings came because the underlying loans are guaranteed by the gov’t. I have not confirmed that by independent sources, so am still unsure. On the surface, I struggle to believe our banks just foolishly purchased what they knew was junk. I suspect the investment banks did not know or something else encouraged this. Time will tell.
Your second question: How to fix this? As a strong believer in capitalism, I propose:
a) the gov’t should stop creating markets for questionable securities.
b) The gov’t MUST FIX the rating agencies. These are not AAA rated securities!
c) Let the bad banks fail and help fund the surviving banks with significant access to cash so the economy doesn’t collapse due to lack of liquidity.
d) Stop this gov’t takeover of our financial institutions. That scares me a lot.
Bill Cullen.
Since yo know it all Eric what reglations did the republicans lift in the last 20 years to get us in this crisis?Please no spin.I'm serious,tell us all.
Jim
I don't know it all but I'll try to answer the question. The crisis is complex in that there are several main players.
In 26 years, there has been many pieces of legislation chipping away protective regulation.
Remember, we regulate to make fraud less likely. De-regulating is trusting the business will act in the consumers best interest instead of their bottom line.
Anyway, McCain campaign co-Chair, former republican Senate Phil Gram had a piece of legislation in the late 90's called the Gramm-Leach-Bliley Act (all republicans). In short, this legislation repealed part of the Glass-Steagall Act of 1933. Allowing banks to offer investment, commercial banking, and insurance services. The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services.
Wall Street firms that carelessly securitized mortgage loan pools without appropriate diligence and attention to the quality of the underlying loans, acting under the right granted to them under Gramm-Leach-Billey Act.
Eric
Bill said, "They created the market for bad loans and industries popped up around it."
Yes. Gramm-Leach-Billey created the atmosphere for this after being lobbied by investment banking industry at the tune of the $300 million, driving that deregulation was more about facilitating mergers.
Banks had the legal ability sell rights to the mortgage payments and related credit risk to investors, through a process called securitization. Investors bought these mortgage backed securities.
So now there is a greater interdependence now between the U.S. housing market and global financial markets due to mortgage backed securities. When homeowners default, the amount of cash flowing into mortgage backed securities does down and becomes uncertain.
Investors and businesses holding mortgage backed securities have been significantly affected. The effect is magnified by the high debt levels maintained by individuals and corporations, called financial leverage.
The government staying out of this one, would lead us to an economic credit and access downfall.
Many big and small businesses would be eliminated from borrowing money and thus not making payroll, buying equipment and materials, thus cutting back on the work available.
Health Care providers would have to make due with what's on hand, cutting out procedures. Foreign debt shoots up, military contracts go unpaid and etc, etc etc.
Bill, have you paid attention to central banks across the globe trying to work with us on this as their economies take a dive? Socialist countries AND democracies are under the credit capital crunch.
You got a lot of buzz words that makes one want to get on their horse wave their hat in the air and charge at the issue. However, it doesn't begin to address the problem.
I struggle to believe our banks just foolishly purchased what they knew was junk. I suspect the investment banks did not know or something else encouraged this.
Really? After all of that and the close to half a billion spent to deregulate the laws that put perimeters around them?
How about a memo? If you saw an official memo that was circulated to senior management on how to get their hands on the fraudulent loans?
The memo’s title says it all: “Zippy Cheats & Tricks.”
It is a primer on how to get risky mortgage loans approved by Zippy, Chase’s in-house automated loan underwriting system. The secret to approval? Inflate the borrowers’ income or otherwise falsify their loan application.
Click here for article on the memo and the memo itself
Anyone remember JP Morgan buying Chase bank a while back? How about buying Bears Stearns after it became the first investment banking firm to fail huge back in March? What about JP Morgan buying the largest mortgage holding bank in the country (after it failed of course) WaMu (Washington Mutual)?
JP Morgan is FIRST in line to receive handout- I mean, bailout money.
Hopefully this will bust your trust in these financial institutions. You republicans have enabled them enough.
Eric
Many big and small businesses would be eliminated from borrowing money and thus not making payroll, buying equipment and materials, thus cutting back on the work available.
Eric stated whats above.
I find it complicated,conflicting and confusing that you liberal democrats want to tax businesses income and don't worry how less money in their hands will affect how the conduct day to day business.But then in the same breath say they need money lended to them so they can make payroll buy equipment and so on.How about letting them keep their profits so they can expand their business without banks and government handouts.
So we have different ways about how to put money in their hands but should be able to agree that more money available to those hands are better for business,employees and consumers.
No new taxes at this time!
Joe
It's about control. When they tax and have all of our money they then have all of your freedom. Money is the option to choose. When you can no longer choose, then you take what the government gives you.
Joe,
We are in this position because of just that you dolt. Most of these corporations we're bailing out are actually paying the lowest taxes of any business. Most pay no federal taxes. Now, the taxpayer is on the hook for about a trillion dollars and you're bitching about leaving them more money for their pockets.
Get a clue and save the talking points for Soucheray or Hannity. You've brought nothing to this discussion. Hell, you've set us back eight months.
How do you lower taxes for businesses that already pay zero in federal taxes at a rate of 2 to 1?
Anonymous,
These companies and banks were broke. They've been operating without money for years post deregulation (Slowly read through my last two posts), if we do nothing its no only that entity that fail. It affects our entire economy and the economic well-being of countries across the globe.
They didn't pay federal taxes and now they have taken our taxes because they actually hold us hostage. We've live through a federal and state government shut down, apparently the financial institutions got a bigger hold on us.
Eric
Eric why don't you shut the fuck up?I didn't come on here to hear your ass talking chump.So sit back open your ears and listen dipshit!Lets just keep raising taxes and keep spending more like your ass clown buddies of St.Paul are doing.Obviously the tax payer and businesses in St.Paul are doing so good that St.Paul increased spending 50+ million.Yeah thats great business sense.
By the way small business in America pay some of the highest taxes in the world.
Don't come at me like I'm one of your bros that you can bully around.I won't take it.So know your place debate the issues and quit comming at people like a eastside thug.
Until you learn how to talk shut the fuck up.
Joe
And by the Eric I'm a democrat sick of you liberal wienies who blame everyone else but yourself for the problems.These problems were caused by both parties and as far as I care are both shit that only care for their selves.
This problem that we are having is more complexed then Gramm-Leach-Billey Act.This is a bi-partisan issue that just happened to happen when a republican in office and Democrats held the House and Senate.
What did Bush do?And it would also be fair if we ask what did the house and senate do?
You liberals give us democrats a bad name!
Joe
Eric,
I did read a response about the losening of credit at Fannie and Freddie. I assume you agree with me then? The demand they created for low income loans drove much of this.
I am still reading and researching how these crappy mortgages became AAA rated debt. I read about Glass-Steagall a few weeks ago. I found the PBS website linked to my name above to be pretty good. It points blame all around, especially at Clinton (who forced changes for CRA). PBS, can't call them right wing...
I don't see a problem with mortgage backed securities as long as the ratings accurately reflect the underwriting standards (which is NOT the case today).
Joe,
Save the tough talk for the call-in show.
Small businesses do not pay the highest taxes in the world. This is another talking point which someone dumber than you said, and you took it and ran. You got any links or anything for that stat, or should I just assume that stink is from you butt, of which you pulled that from.
We just raised our debt to 11 trillion and set another record deficit.
How do you supposed we pay for toward that AND pay for this bailout? Taxes.
So if we do nothing (no taxpayer handout)and cut taxes, what will happen?
Congress has a job of oversight. They do this through regulation and control through commission appointments and hearings when the time comes. For 12 years, the republican congress did nothing. In the year and a half since the Democrats took over there has been over a dozen hearings and proposed regulations and laws, both died in the Senate where the Republicans still have enough to kill legislation.
Bush has six years of a Republican Congress that walked march-step with him and did nothing. Well, they did nothing except lie us into an unnecessary war, kill our surplus they inherited, run up energy prices to record levels (what do we expect when two oilmen take over and their buddies write the energy policies), and lowered respect around the world.
The weenies are the republicans who sat back and went along and now want to cry foul.
Don't worry, in about 20 days, we'll be sending enough of them home for good.
If you're here to talk about Saint Paul business, wrong thread. Buzz off until you read the bold print.
Eric
My comment: "I struggle to believe our banks foolishly purchased what they knew was junk. I suspect the investment banks did not know or something else encouraged this."
Was not intended to be about making questionable loans, but rather why investment banks purchased MBS's based on bad loans.
There is NO question in my mind that banks and mortgage brokers worked hard to write questionable loans over the past few years. But, I maintain that they did this ONLY because they had a channel to sell the bad loans (via Fannie, Freddie and poorly rated securities). If the banks were required to own the junk loans they created, they would never have written the bad loans (IMHO).
I have some sympathy for investment banks that genuinely thought they were buying AAA rate MBSs and now own this junk.
Bill Cullen
From last nights debate:
Senator McCain: "The fact is that businesses in America today are paying the 2nd highest tax rate of anywhere in the world."
Channel 5 Truth test (which I linked to with my name): True & False. "the US corporate tax rate is among the highest in the world, but here is the catch, there are so many tax loop holes, the general accouting office says 61% of US corporations paid no Federal Income taxes from 1996 to 2000."
"For the record, the US corporate tax rate is 35%"
The feds and the city of St Paul have something in common. They both loosened the Fanny. Now they both have a diarrhea situation to content with.
Bill,
Your second post leads to what I was pointing out. On paper, businesses have the highest taxes to deal with (I could argue that its appropre since America is the best place on earth) but, in reality almost 2/3rd of them pay no federal tax. The last third utilizes loopholes to pay les than what's expected. So, where do you think the tax burden is shifted when corporate taxes come up way short? That's right, the individual tax payer.
To make it fair, close the loop holes and then lower the tax rate. If the loopholes were close and the corporate federal taxes were cut in half- we'd still come out ahead enough to fund the country and programs that will be helpful in the long term (energy investments) and cut individual taxes. Only one candidate is offering to do that and its not the guy that graduated at the bottom of the Naval Academy.
f the banks were required to own the junk loans they created, they would never have written the bad loans (IMHO).
I have some sympathy for investment banks that genuinely thought they were buying AAA rate MBSs and now own this junk.
Bill, they knew. The proof is far and wide and its in the previous posts of mine. Have you forgotten that many of the rating agencies were subsidiaries owned by the investment banks themselves thanks to Gramms-Leach that deregulated laws that kept them separate.
The best example I can give is the Enron scandal. Deregulation allowed the corporate accounting practices to be audited by the same company therefore establishing a practice of cooking the books to encourage more investment and it cost investors, mostly retirement savings- billions. Billions lost. Congress passed the Sarbanes-Oxley Act to address this.
Removing or loosening the oversight of corporate actions has proven to lead to greed and corruption time and time again. You name a decade in the 20th century post WWI and I'll give you an example of deregulation leading to corruption and a bigger burden on the tax payer.
You can't blame a snake for being snake. But, you can blame the snakehandler for allowing the snake to bite people. The snake handler was supposed to be Congress and the President- congress more so. The President makes appointments to the regulatory agencies, and congress provides oversight to the industries, supposedly in the name of the consumer. Right now, the consumer is in the hole by a trillion dollars.
Bill, investment banks aren't your friend, they abused the 'free market' reforms they lobbied for. They are now costing us and our children undue burden.
Eric
I could argue that its appropre since America is the best place on earth)
Taxation equals virtue?
What a strange, strange world you must live in.
Taxation equals virtue?
No. There is a price to pay everywhere and you get what you pay for.
There are other countries that don't charge a dime in national tax.
However, the countries that any schmoe can start a company and become successful are far and few in between. The wealth of resources from our well-trained and educated workforce to the infrastructure to help companies grow to the regulations that protect against unfair practices are not found anywhere else.
That's what you pay for. Or, should be since 2/3 are skipping out on taxes.
Eric
"(what do we expect when two oilmen take over and their buddies write the energy policies), and lowered respect around the world"
Betty get used to it Eric because "Big Beer" will be taking over in January.
Eric what is the difference if a small bussiness owner has knows he is going to have 120k in the bank at the end of the year so he pays himself 10k a month leaving 0 that the corporation has made at the end of the year.Who the hell cares if the guy pays it on the corporate side or his personal side.How many of the 2/3s you say are skipping are paying on their personal side?
Joe
Zero Joe.
I'll leave it to you to figure out how. We've been talking about it for years.
BTW, 120,000 is not a lot and the guy should be getting a tax break in this economy.
Eric
A favorite trick of the Corporations is that they pay out in dividends which are not taxable. As they eventually pay through enough different Corporations with dividends coming out of each one, the tax a due turns to zero! Your too dumb to figure that out Eric so you just keep paying your share and more. Keep on paying brother.......we need it.
What is this? Kick Eric around day. 9:10,
Don't you mean Joe? I agree with you on that and alluded to it in my last post.
I swear some of just come on here and don't read any thing that has more than five sentences.
That's exactly what they do. They hide their compensation in dividends and other tax shelters so tens of millions go untaxed but your tens of thousands is taxed before you see it.
And, they got some of you out here yelling for more tax cuts for them.
Suckers.
Eric
By the way, I think this thread has been one of the most informative and well-researched discussions we've had on here with minimum emotional outbursts (I said minimum, not void).
I have come around to see the Freddie, Fannie and some of the Democrats are responsible too. Hopefully others are coming around to see that unbridled capitalism without checks, is a recipe for corruption and hurts the everyday taxpayer.
Anyway, some good points have been made all around- minus the talk radio wannabes who had nothing to add but the same ol' insults and spend and cut policies that led us to where we are today.
Eric
Lets face it no matter the loop holes you go through or income that is shifted, one way or another good old government will get their hands on it.To make money in this country you should have to get off your lazy ass if you can(excluding special people) and make a living to support yourself and your family.Taking more money from the guy or gal that has busted their hump for the past 15 years 15 hour days to make the 250k his 16th year only to be taxed at a different rate then the guy who works 40 hours a week is just dead wrong.Whats the inncentive to work hard and try to make a successful business?All working class people should pay the same percentage across the board.If you make 100k you pay 30k if you make 200k you pay 60k.The guy making 200k still pays more for the same services as the guy making 100k but fair is fair.
Just think if all private services were ran like our government.If you went to a movie and made 50k a year a ticket to spiderman would cost you 7.00 and if you made 100k that same ticket would cost you 14.00. When you put it this way does that sound fair?Same service, different incomes.
Joe
It's not about fair Joe.....it's about DFL control. They want your freedom. Just like thier crime control strategy of going after the landlord and spreading the crime around so veeryone gets some of the pain, they want to take the money and spread the wealth around to people who don't work. Nothin new about this. They'll give money to Repke too so he can build another project like that miserable eyesore down on Maryland.
Joe,
Some of us have suggested across the board taxes. 30% is too high if everyone, I mean everyone pays. If everyone pays, 12 to 18% would be sufficient.
The problem is that tax code allows for loopholes. The country looses billions a year to these loopholes and billions more to tax cheats (I separate the two because loopholes are legal.)
Fairness would lower the tax burden across the board. But, because its easier to pledge a 'tax cut' that's what we get while those who pay nothing or next to nothing continue to do so and those of who work may pay less in federal taxes, we take on the other end in fees or less services.
Eric
Eric et al,
Fannie and Freddie were a problem; glad you are on board.
There is no doubt the free market failed us – we can see it! The question I struggle with is Why? The market has always been free and many of the companies failing today have been around for 100s of years. Why did these massive banks start buying boat loads of questionable loans at the same time? It might be the elimination of regulation as you say; but I struggle to understand why large, powerful entities would take on such risk just because the gov’t no longer stops them. It doesn’t make sense to me.
I keep going back to the rating agencies. Why -- WHY did these agencies rate this junk as AAA? Something encouraged the aggressive/dishonest ratings and I believe it is another underlying cause of this problem.
Bill Cullen.
Wow. Now we will take on tax models too!? Next world peace! :)
I understand the desire to increase corporate taxes, but the danger of doing so is they are most mobile tax paying entities. If the tax rates get out of control, jobs and entire enterprises move.
Personally, I like the fair tax. Move all taxes to a sales tax, issue reimbursement checks to everyone as a way to cover taxes on necessities. This frees up our exports from taxes (great for the economy) and taxes imports at the same rate as domestic products. I am not sure the current proposals are not perfect, but I think it is the right idea. Click on the link above to read about it.
Bill Cullen.
To Bill Cullen
The banks bought the bad paper because the US governemnt insured it.
11:22
Wrong.
They bought these because they were able to use them and leverage for other investments with LITTLE risk on paper. It increased their portfolios which increased and expanded their client investments into their entity. Once one started getting leverage with the MBSs, others could not sit back an not do the same just to remain competitive.
Aside from greed, I believe the actually main reason most of them began buying up these mortgage backed securities and using them for leverage is because others did it.
Wall Street is all about competition. If you don't keep up, you get bought up. Again, JP Morgan Chase is a textbook example of this.
Eric
Statement taken from Pioneer Press 10/18/2008:
Families seek housing outside of St. Paul, because of the lack of shelter space and affordable housing in the city.
The article;
St. Paul Public Schools, especially on the East Side, report a jump in the number of homeless kids
By Doug Belden dbelden@pioneerpress.com
Article Last Updated: 10/18/2008 09:33:02 PM CDT
Jeronimo Mercado has had a tough few months.
The St. Paul second-grader and his family lost their home in July, and they spent the summer and early fall in two temporary shelters.
It was difficult for him, especially at first, said his mother, Honey. He had trouble talking with new people and getting used to the rules, and he didn't seem to understand why his family had to be in a shelter. "Why can't we have our own house?" he would ask, or "When are we getting our own apartment, Mom?"
"Going through that was hard for him," Honey Mercado said.
Jeronimo and his sister and their mom were fortunate to find longer-term shelter in St. Paul about three weeks ago, but school district officials say the ongoing foreclosure crisis is creating more and more homeless families who have to "double-up" with friends or relatives and/or seek housing outside of St. Paul, because of the lack of shelter space and affordable housing in the city.
"Families are having to make decisions about splitting up their family, because there's just no place to go," said Carol Stauffer, a district social worker.
Homelessness is a growing problem in this tough economy, and caught up in the turmoil are St. Paul's children. The number of homeless kids in the city's schools started growing significantly last spring and was up about 30 percent in the first month of school compared with the same period last year, district data show. Administrators expect the number of homeless students to
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top 2,000 by the end of this school year.
St. Paul educators find themselves facing the challenge of meeting their needs — from preventing absenteeism to making sure they get proper meals to helping them focus on their studies.
The problem seems acute on the East Side.
"It's an area in crisis right now," said Joan Schlecht, director of the East Side Family Center, which works in East Side schools to support families in need.
"Renting is the biggest way of having housing on the East Side of St. Paul," she said, and as landlords get caught up in the housing collapse, tenants feel it as well.
The center is getting 30 to 35 phone calls a day from people with housing and/or utility-bill problems, Schlecht said, far more than in a typical year.
"Even if there was housing stock," Schlecht said, "this is a very poor neighborhood."
Jayne Ropella, principal at Eastern Heights Elementary — where Jeronimo and his sister are enrolled — said in 12 years she has never seen a homelessness problem this severe.
"I've never started a school year with this many (homeless) kids," she said.
Last year, Ropella said, it was not until the middle of the year that she had any children needing to arrange special transportation after becoming homeless. Already this year, she has had 11.
"It's bad," she said. "It hurts my heart."
Homelessness can affect schoolchildren in a variety of ways, educators say: absenteeism; a lack of basics such as sleep, nutrition and proper clothing; stress and scattered attention that can lead to behavior problems and academic struggles.
Even those who have a roof over their heads at night can be affected during the day at school, said Linda Parker, assistant principal at Bruce F. Vento Elementary on the East Side. She said one kindergartner talks about having to sleep on the floor and feeling mice run over him and bite him during the night.
A study last summer found that homeless children and children without permanent homes in Minneapolis Public Schools performed worse in reading and math than other low-income students as well as more-advantaged students.
More troubling, some say, is the potential for long-term effects.
"The loss of the promise that these kids have ... that's what's really costly," said Elizabeth Hinz, liaison for homeless and highly mobile students in the Minneapolis district. "We ignore these children at their future peril and ours."
A Wilder Research survey of homelessness in Minnesota in 2006 found 23 percent of homeless adults said they first experienced homelessness at age 17 or younger.
Some of the increase in homelessness numbers in St. Paul might be the result of better identification and reporting procedures, said Matthew Mohs, the school district's director of Title I/Funded programs, but mostly it seems to reflect the rising number of families in distress.
"We're seeing a lot more homeless students, one way or the other," he said.
The district recently hired an additional home-school liaison to deal with the rising demand, Mohs said.
And the number of homeless students requiring new busing arrangements to make sure they can stay in their original school — a requirement of federal law — continues to grow.
Years ago, the district could provide transportation for homeless kids with a couple of vans, transportation coordinator Gary Cox said. Now, it can take 40 to 50 buses a day, he said.
Last year, more than a third of homeless students in St. Paul Public Schools lived outside the district, primarily in Minneapolis and Maplewood. The district paid $175,000 to transport roughly 800 homeless students last year, according to district accountant David Peterson. There is no federal money to offset those costs, Peterson said, though the state provides partial reimbursement.
Despite efforts to retain students who become homeless, the district — which is facing steep enrollment drops the next several years — doesn't always manage to hold on to them.
Becky Hicks, homelessness liaison for the district, tells the story of two homeless students at Jackson Elementary. Their parents were able to find shelter locally for three nights, but then there were no more beds available, so the county gave the family bus tickets to Wisconsin to move in with someone they knew.
"So much of that is out of our control," Hicks said.
Minneapolis also is experiencing an increase in homeless students, said Hinz, the liaison for homeless and mobile students in Minneapolis. The wave of foreclosures is continuing, she said, and "I don't see that this is going to get better any time soon."
To Honey Mercado, though, the future looks bright.
Her kids are happy with their new home at the Naomi Family Residence in downtown St. Paul. Jeronimo likes his bedroom, and he's excited that on recent outings with building staff, he has seen a deer and a fox.
Mercado, 27, is working on her GED and hopes to enter the culinary program at St. Paul College and get a job in the food and restaurant industry.
She's on a wait list for transitional housing, she said, and is looking forward to being able to get her own place with her kids.
As for the possibility that a worsening economy could leave her unable to support her family when her time at Naomi is up, she said: "You know, I don't even think about it."
Doug Belden can be reached at 651-228-5136.
A RISING PROBLEM
Yearly totals of homeless students in St. Paul Public Schools:
2003-04: 985
2004-05: 1,051 (7 percent increase)
2005-06: 1,259 (20 percent increase)
2006-07: 1,295 (3 percent increase)
2007-08: 1,592 (23 percent increase)
2008-09: More than 2,000 projected (26 percent increase)
The affects of Dawkins,Lantry and Kellys plan finially taking its toll huh Repke?Target landlords and put them out of business.Wasn't it the citys plan to reduce the number of rentals on the eastside and target teetering neighborhoods that had more rentals the home owner occupied.Looks like the chickens have come home to roost!
1:07
You know we just had real discussion with some salient points all around. Then you come in here with the same ol' crybaby blues.
You're Sarah Palin and you just walked into a strategic arms meeting. Don't talk, just back up and shut the door as you leave.
Eric
Eric,
Brief correction here:
You're Barack Obama and you just walked into a strategic arms meeting.
There. That's more like it.
Bud Geegaw,
That would be funny if one of them didn't actually have a record of reaching across the aisle to work on finding and destroying thousands of nukes and weapons of mass destruction across Europe and Asia minor. Palin doesn't have anything like that does she?
I'm sure you're familiar with the Lugar-Obama initiative (signed by President Bush into law) that expanded the U.S. cooperation to destroy conventional weapons. It also expands the State Department’s ability to detect and interdict weapons and materials of mass destruction.
“The Lugar-Obama initiative will help other nations find and eliminate conventional weapons that have been used against our own soldiers in Iraq and sought by terrorists all over the world,” said Obama. “The Nunn-Lugar program has effectively disposed of thousands of weapons of mass destruction, but we must do far more to keep deadly conventional weapons like anti-aircraft missiles out of the hands of terrorists.”
“We want to ensure that our government has the capacity to deal quickly with vulnerable stockpiles of shoulder-fired anti-aircraft missiles, otherwise known as Man-Portable Air-Defense Systems (MANPADS). Such weapons could be used by terrorists to attack commercial airliners, military installations and government facilities here at home and abroad. Al Qaeda reportedly has attempted to acquire MANPADS on a number of occasions,” said Lugar.
The Lugar-Obama initiative would energize the U.S. program against unsecured, lightweight anti-aircraft missiles and other conventional weapons. There may be as many as 750,000 man-portable air defense systems in arsenals worldwide, and the State Department estimates that more than 40 civilian aircraft have been hit by such weapons since the 1970s. In addition, loose stocks of small arms and other weapons help fuel civil wars in Africa and elsewhere and provide the means for attacks on peacekeepers and aid workers seeking to stabilize war-torn societies. In Iraq, unsecured stockpiles of artillery shells and ammunition have been reconfigured into improvised explosive devices (IEDs) that have become an effective weapon for insurgents.
"Lugar-Obama would also strengthen the ability of America's allies to detect and interdict illegal shipments of weapons and materials of mass destruction, a critical step in securing these weapons before they ever fall into the hands of terrorists that has not been a focus of current anti-terrorism efforts," Obama said.
Lugar and Obama traveled together to Russia, Ukraine and Azerbaijan in August 2005 to oversee a number of Nunn-Lugar projects. In Ukraine they saw a conventional weapons facility that is typical of the focus of the new legislation.
The Lugar-Obama initiative is modeled after the Nunn-Lugar program that focuses on weapons of mass destruction in the former Soviet Union. Lugar and former Senator Sam Nunn (D-GA) authored the program in 1991. It has provided U.S. funding and expertise to help the former Soviet Union safeguard and dismantle its enormous stockpiles of nuclear, chemical and biological weapons, related materials, and delivery systems. Among many accomplishments, the program has deactivated 7,000 nuclear warheads and reemployed 58,000 scientists in peaceful research. Ukraine, Belarus and Kazakhstan are nuclear weapons free as a result of cooperative efforts under the Nunn-Lugar program. They otherwise would be the world’s the third, fourth and eighth largest nuclear weapons powers, respectively.
---taken from a January 11, 2007 press release from the Republican Senator----
That head scratching you're doing right now is what Sarah would be doing and why you and her should just hush up and back out of the room.
Unless you want to talk about the pro and cons of mortgage backed securities?
Didn't think so.
Eric
Obama may have worked out arms reduction deals with Russia but, Sara Palin can see Russia from her house- so beat that!
I thought this topic was on the Mortgage lending and the effects such as the raise in children that have been left homeless, these children are the future and need stability in thier life. I can not imagine what it must be like for these kids to live like this and the article states there is a shortage of affordable housing in St.Paul for families.
Eric you typically offer some great information here, how about some information on a resolution to solve and address the effects left behind to date on affordable housing?
Ryan,
Its a error filled train of thought that assumes I back the Senator because he's black. As most blacks, I backed another candidate when this all started off.
One year ago, most blacks were NOT for Obama and the media was writing stories on how he's not black enough and Jesse Jackson was kicking him for not going to Louisiana for a protest against some racial uproar. He has turned it around by earning the support of people who want to see a different path for our country. Chalking up to race is just insulting, racists and very uninformed.
Even if you ignore what I write, you can't ignore that Obama leads with white voters overall and white Independent voters. That means its not just liberals or blacks voting for Obama 'because' he's black.
I heard Rush Limbaugh say that about Colin Powell. He forget that Powell supported Governor Bush over Vice President Gore when Bush was kicked around for not having ANY foreign policy experience. Anyway, Powell laid out a clear argument why he was supporting Obama.
During about six minutes without notes, he stated McCain doesn’t understand the economic crisis, is erratic, is trying to foist an unqualified vice president on the nation and has shown questionable judgment.
Powell, who is of the same generation as McCain (Powell is a year younger), of the same party and of the same military background, criticizes McCain for his negative campaigning, for being “narrow,” and for aiding and abetting the “rightward shift” in Republican politics.
And then there is the Supreme Court. “I would have difficulty with two more conservative appointments to the Supreme Court, but that’s what we’d be looking at in a McCain administration,” Powell says.
Powell is a Republican, but a Republican who is troubled when he hears “senior members of my own party” suggest that Obama is “a Muslim and he might be associated [with] terrorists.”
“This is not the way we should be doing it in America,” Powell says, and then continues with a poignant defense of American Muslims and points out that some are buried in Arlington National Cemetery, having given their lives for their country.
Powell concludes by saying that he is voting for Obama not just because of Obama’s “ability to inspire” but because “he has met the standard of being a successful president, being an exceptional president. I think he is a transformational figure.”
--Roger Simon
Its not because he's just black. If that was the case, Jesse Jackson, Al Sharpton and Alan Keyes all ran for president and couldn't get more than 8% of the black vote.
Eric
9:50am
Solutions?
At this point, with about a trillion dollars of our money it appears the solution will be heavy on the government side.
With a Democratic President and Congress, the homeless population due to the mortgage issue should and better not increase- unless its full of former Wall Street brokers.
I don't have a solution because I haven't seen what the money will go for and who will benefit. I will be paying attention and try to research some proposals. Any answer I give now will be speculative and void of enough information.
Eric
The government should have stopped sitting on its Fanny.
I have been very busy the past few weeks. Sorry for the late response.
Eric, I still struggle to understand how these securities based on junk loans received AAA ratings. That, coupled with Fannie/Freddie, appears to create the market for banks to sell these junk loans.
I read recently about Credit Default Swaps. I don't fully understand them -- and am meeting a friend that knows this stuff better than I on Tuesday -- but I suspect these pusudo, unregulated, insurance policies had something to do with it. Still reading.
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