Gambling with Other People's Money by Roberts Russ

Author:Roberts, Russ
Language: eng
Format: epub
Tags: Wall Street, Main Street, 2008, financial crisis, bailout, money, markets, government, regulation, deregulation
Publisher: Hoover Institution Press
Published: 2019-01-02T00:00:00+00:00

NOTES

  1.  There’s a problem with taking out a loan for 103 percent of the price of the house when the price of the house exceeds the value that would be there without the opportunity to get into this lottery. That problem is the appraisal. There are numerous media accounts of how the appraisal process was corrupted—lenders stopped using honest appraisers and stuck with those who could “hit the target,” the selling price. Why would a lender want to inflate the appraised value? Normally they wouldn’t. But if you’re selling to Fannie or Freddie, you don’t have an incentive to be cautious. Andrew Cuomo, the former US Department of Housing and Urban Development (HUD) secretary who increased Fannie and Freddie’s affordable housing goals, and currently the attorney general of New York, investigated Washington Mutual and Fannie and Freddie’s roles in corrupting the appraisal process. Fannie and Freddie ended up making a $24 million commitment over five years to create an independent appraisal institute. Cuomo has not revealed what he found at Fannie and Freddie that got them to make that commitment. See Kenneth R. Harney, “Fighting Back Against Corrupt Appraisals,” Washington Post, March 15, 2008, http://www.washingtonpost.com/wp-dyn/content/article/2008/03/14/AR2008031402007.

  2.  See Taxpayer Relief Act of 1997, Library of Congress, THOMAS, http://thomas.loc.gov/cgi-bin/bdquery/z?d105:HR02014.

  3.  Federal Reserve Bank of New York, “Federal Funds Data,” http://www.newyorkfed.org/markets/omo/dmm/fedfundsdata.cfm.

  4.  John Taylor blames poor monetary policy for much of the crisis. See Taylor, Getting Off Track. Greenspan’s “theya culpa” (in which he blames everyone but himself) can be found in Alan Greenspan, “The Crisis,” Brookings Papers on Economic Activity, March 9, 2010, http://www.brookings.edu/~/media/Files/Programs/ES/BPEA/2010_spring_bpea_papers/spring2010_greenspan.pdf.

  5.  See Noelle Knox, “43% of First-Time Home Buyers Put No Money Down,” USA Today, January 17, 2006; and Daniel H. Mudd, “Remarks at the NAR Regional Summit on Housing Opportunities,” Vienna, VA, April 24, 2006.

  6.  Mudd, “Remarks.”

  7.  This was the growth in the middle tier (the middle one-third by price) in Washington, DC, in the Case-Shiller index for DC: http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----.

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