Freddie/ Fannie-Barney Frank Liberal conspiracy to sell poor people too much house.

RJ Eskow wrote a piece in the Huffington Post on the Administration’s proposal to clean up the foreclosure mess. I will comment on it separately later. But I want to use it to deal with a long conversation I had with a friend about how the ideology from people on the right seems to try to blame a liberal conspiracy of Fannie/Freddie and Barney Frank forcing banks to convince poor people into buying too much house. The question is how could so much fraud be result of this liberal conspiracy?

Eskow points out:

A number of crimes fall under the “foreclosure fraud” heading, including the illegal transfer of home ownership from one bank to another, fraudulently misrepresenting the terms of a loan to borrowers, collusion to mislead home buyers about the current and expected value of their homes, concealing information from the authorities, perjury, and fraudulently deceiving both stockholders and securities investors.

The size of the hole in the economy and the size of the overall bailout of financial institutions has been far greater than the size of all sub-prime. Wikipedia quote:

The value of American subprime mortgages was estimated at $1.3 trillion as of March 2007,  with over 7.5 million first-lien subprime mortgages outstanding.

Compare this to what the overall effect of the meltdown is to all loans, per Eskow:

The U.S. housing market has lost nearly ten trillion dollars of value since the housing bubble collapsed, according to reliable data. The homes were never really “worth” all that money, but banks helped convince people that they were. And the Wall Street casino helped artificially pump up real estate values, setting homeowners up for a fall.

It’s not just poor people in “too much house.”

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