Former Fannie Mae chief: Don't blame homeowners for bust
Franklin Raines, who left Fannie in 2004, says investors, not homeowners or the government, are responsible for the crisis. Others disagree, and some blame Fannie Mae.
Investors, not homeowners, were responsible for the real-estate crash, according to the former chief executive of Fannie Mae.
Franklin Raines, who left Fannie Mae in 2004, made his comments last week at a National Community Reinvestment Coalition challenge.
He challenged the contention that the crisis was caused by homeowners who bought when they shouldn't have or bought more home than they could afford. Government policies to encourage homeownership also were not to blame, he said.
Post continues below
"This has nothing to do with the average American family wanting to own a home," Raines said, according to The Wall Street Journal. "This was rank speculation that was being financed out of Wall Street with no questions asked. That is what caused this crisis. Blaming people — ordinary people — who tried to own a home for this crisis is simply wrong."
Numerous politicians, pundits and organizations have sought to place the blame for the crisis on various players: homeowners, lenders, the government, Fannie Mae and others. U.S. Housing Update lists 10 reasons for the bust, including speculators and loose lending.
A Financial Crisis Inquiry Commission report issued in January 2011 blamed "widespread failures in financial regulation; dramatic breakdowns in corporate governance; excessive borrowing and risk-taking by households and Wall Street; policymakers who were ill-prepared for the crisis; and systemic breaches in accountability and ethics at all levels."
But commission member Peter Wallison wrote a dissent casting blame on Fannie Mae. He wrote in an op-ed in The Wall Street Journal: "Far from being a marginal player, Fannie Mae was the source of the decline in mortgage underwriting standards that eventually brought down the financial system. It led rather than followed Wall Street into risky lending."
Another speaker at the conference, Richard Cordray, director of the Consumer Financial Protection Bureau, took issue with the assertion that the Community Reinvestment Act, passed in 1977 in an effort to make credit available for home purchases in low-income neighborhoods, was the cause of the bust. He said: "Some have argued that the Community Reinvestment Act is responsible for the mortgage crisis. We disagree. Sound underwriting and reasonable access to credit are both worthy goals and they can and should go hand in hand as we build stronger communities."
What do you think? What role, if any, did homeowners and government policy to encourage homeownership have in causing the bust?
| Tags: | foreclosuresloans |
Everyone is to blame the greedy homeowners make me sick. They apparently were forced to go get a mortgage above their means and cry when they can't pay for it. What a sad of sh*t heads who can't take responsibilty for their out of control spending. Greed has become the American way of life. I'm sure there will be lots of babies upset by the truth but IDC. I am not gonna pamper you when you ruin a great country. Learn some self control and teach your kids some values you gutless, worthless, useless postule. I am a very pleasant person, but when you people...and you know who you are...ruin this country for greed I get angry. Reply all you want deep down you know I am right. Go cry to your new ipad...oh that's right you don't own that out right either. I own my house out right, my cars and have a summer home. Why because I work hard and pay my bills on time AND most importantly I live within my means. I did this all by myself... I didn't need to cry to anyone or blame anyone. It;s called working hard and getting a good education. i was never handed anything...SO STOP CRYING AND STOP PAYING BILLS WITH PLASTIC. ENTERTAIN YOUR OWN KIDS RATHER THAN TAKING THEM TO MOVIES, EXPENSIVE VACATIONS, AND NUMEROUS AFTER SCHOOL ACTIVITIES. WHAT THE HELL IS WRONG YOU PEOPLE. TAKE YOUR HEAD OUT OF THE PLACE WHERE THE SUN DON'T SHINE...TAKE A FRESH BREATH OF AIR...AND START LIVING WITHIN YOUR MEANS LOSERS!!!!!
what a joke.... wake up people and youtube fannie mae crisis... this guy, as well as Nancy, barney and friends are crooks.... They were warned over and over that giving people loans who have no credit, no responsibility may not be a good thing.... but barney still cried "affordable housing for evewy one. including my gerbil"......
We will miss you mr. fwank!!!!
Everyone SHOULD blame the greedy homeowners they make me sick. They apparently were forced to go get a mortgage above their means and cry when they can't pay for it. What a sad bunch of sh*t heads who can't take responsibilty for their out of control spending. Greed has become the American way of life. I'm sure there will be lots of babies upset by the truth but IDC. I am not gonna pamper you when you ruin a great country. Learn some self control and teach your kids some values you gutless, worthless, useless postule. I am a very pleasant person, but when you people...and you know who you are...ruin this country for greed I get angry. Reply all you want deep down you know I am right. Go cry to your new ipad...oh that's right you don't own that out right either. I own my house out right, my cars and have a summer home. Why because I work hard and pay my bills on time AND most importantly I live within my means. I did this all by myself... I didn't need to cry to anyone or blame anyone. It;s called working hard and getting a good education. i was never handed anything...SO STOP CRYING AND STOP PAYING BILLS WITH PLASTIC. ENTERTAIN YOUR OWN KIDS RATHER THAN TAKING THEM TO MOVIES, EXPENSIVE VACATIONS, AND NUMEROUS AFTER SCHOOL ACTIVITIES. WHAT THE HELL IS WRONG YOU PEOPLE. TAKE YOUR HEAD OUT OF THE PLACE WHERE THE SUN DON'T SHINE...TAKE A FRESH BREATH OF AIR...AND START LIVING WITHIN YOUR MEANS LOSERS!!!!!
I come from a family of 12, thats right, 2 parents and 10 kids. We made do with what we had, and got things AT CHRISTMAS. Like new clothes, and a few toys Money was your best friend, so you had to get a job, and then you got the extras, which you paid for yourself, CASH, a system that works, save up for it, and by the time you have the money, it will probably be obsolete, so you will still have a wad of cash, to your own benefit, and peace of mind. Dont own a i - anything, dont need it ,or want it.
In my opinion a lot of this is about responsibility. Too many businesses, banks and private citizens have been bailed out for financially irresponsible behavior. If our goverment was to take a real stand and allow these entities to actually suffer the consequeces for their finanacially irresponsible decisions maybe the effect of these busts would not be as widespread.Oh.and Mr. Raines is wrong everyone is at fault for this one with the goverment having the largest share.
About Teresa Mears
Teresa Mears is a veteran journalist who has been interested in houses since her father took her to tax auctions to carry the cash at age 10. A former editor of The Miami Herald's Home & Design section, she lives in South Florida where, in addition to writing about real estate, she publishes Miami on the Cheap to help her neighbors adjust to the loss of 60% of their property value.
msn real estate is social
FIND YOUR DREAM HOME OR APARTMENT
