A growing 'amnesia' of the Economic Crisis

[zeke]

And shady, I really have to laugh when you believe that Washington Mutual's CEO says he WANTED to tighted up his companies underwriting guidelines, but the CRA wouldn't let me. He just had to make all those shitty subprime loans so he could enjoy his millions of dollars of income. He just had to.

If you believe horseshit like that, you will evidentally believe anything.

 

[Toro]

Here is some of the proof you need, if you choose to take the time to read and care to follow the dots, there is a lot to digest. They actually flow quite nicely, from one article to the next, piecing together the BIG picture. Oh and I used government websites for two of the three sources.

Yeah, I get all that. But that's what I mean when I say "narratives and arguments but not much hard data to back it up." Back it up with some data. The data, thus far, doesn't really support the view that the CRA was a big cause of the financial crisis.

Yes, I'll try to remember that presenting actual pieces of government regulations (like those requirements on banks from regulators) or quoting from a government CBO investigation, is really speculative and not really a reliable source of information on facts. I'll just stick with your "dated" newspaper links on the subject as they must be a more reliable source of information with regard to concrete "facts". Right?

You have to demonstrate causality. That these events you posted happened is not in question. What you have to demonstrate is that these events led directly to the outcome. That you assume they did is not empirical evidence. All you're doing is posting a timeline which fits a convenient ideological narrative that supports your worldview.

If you honestly believe the CRA and Fannie Mae played absolutely no part in this economic housing mess, then you are simply choosing to be blinded by your big government ideology.

You can prove me wrong. I'm happy to change my mind. But narratives and arguments must be backed by empirical evidence. And thus far, the data and analysis is much greater that the CRA was not the cause of the financial crisis. If you want to take a run at it, answer this post.

I was once a diehard libertarian and Objectivist so my instincts are to trust free markets. I've spent 20 years in capital markets. I have learned that ideology is a killer in my profession. Too many guys get carried out because they are too biased and believe what they wanted to believe rather than be intellectually flexible when their thesis . It's human nature to reinforce cognitive biases rather than admit they are wrong. So people who deeply believe that the government messes things up and the free market is usually right will find narratives and arguments that reinforce their view and dismiss evidence otherwise. Ideologues on the right act no differently than ideologues on the left.

It's hard not to believe the GSEs didn't play a role in the financial crisis. Prior to the collapse, they were roughly 40% of the mortgage markets. But were they the primary drivers? Probably not. What you posted in the OP shows that the GSEs were behaving like a private bank. They were too leveraged, not regulated enough and incentives were poorly aligned. That's exactly the problem with Wall Street. If you want to bash the Democrats and the left, it's that they acted as a protector to the GSEs as they got too large and leveraged. As for the CRA, it was so small and the crisis so vast, it's not particularly credible that the CRA was the cause of it.

 

[zeke]

Shady, it is your thread. Your position is that the CRA was the culprit. I just want to see you post the number of CRA loans, the amount of the mortgages and how those numbers compared to the totals for the sub prime loans.

And you never said if you even know the difference between the various types of mortgages being offered even today. A paper all the way down to sub prime.

And do you still think that CRA guidelines apply to mortgage brokers?

 

[Rozman]

People should not be given loans for a home without having them put down some down payment.
Now it looks like we are going to start all that up again.

 

[ShaklesOfBigGov]

And shady, I really have to laugh when you believe that Washington Mutual's CEO says he WANTED to tighted up his companies underwriting guidelines, but the CRA wouldn't let me. He just had to make all those shitty subprime loans so he could enjoy his millions of dollars of income. He just had to.

If you believe horseshit like that, you will evidentally believe anything.

Actually these bank loans were all made secure by Fannie Mae now weren't they? How much incentives did these to big giants promise the banks for making risky loans, and why did Fannie and Freddie try to bury them while Fannie Mae later discloses $1.2 billion accounting error? Yet the democrats saw nothing wrong with the outstanding leadership of Mr Raines, right? Mr. Raines, 1.1 million bonus and a $526,000 salary. Jamie Gorelick, $779,000 bonus on a salary of 567,000. Sounds like there was plenty of big profits going around in Washington as well for all this CRA approved risk taking.

 

[zeke]

People should not be given loans for a home without having them put down some down payment.
Now it looks like we are going to start all that up again.

Really? Where can you get 100% home financing today? Except for VA loans.

And the 100% loans, if they are out there, are they being made by lenders who must comply with CRA guidelines?

Did you know that FHA has been making low down payment loans for years? Without any great problems. Sometimes the buyer can get a gift for the down payment. Maybe those are the loans you are thinking of with 100% LTV?

Well not to worry. Those FHA loans have a pretty good history of not defaulting.

 

[zeke]

Hey shady, did you read the part where I wrote that Franklin Raines should have gone to jail?

But now you are changing the message shady. Fannie and Freddie got in trouble how shady? Buy purchhasing pools of mortgages filled with shitty sub prime loans. Not CRA loans.

Have you yet to find out the difference between sub prime loans and A paper loans. It is important that you understand the difference. If you want to talk with any knowledge.

 

[ShaklesOfBigGov]

Hey shady, did you read the part where I wrote that Franklin Raines should have gone to jail?

But now you are changing the message shady. Fannie and Freddie got in trouble how shady? Buy purchhasing pools of mortgages filled with shitty sub prime loans. Not CRA loans.

Have you yet to find out the difference between sub prime loans and A paper loans. It is important that you understand the difference. If you want to talk with any knowledge.

You missed that post didn't you when I mentioned about risky loan ratings, shows me how much you are paying attention on this thread, just raving on and on about your opinions. As well as you missed the big discussion about how bank regulators enforced CRA policy onto banks, how Fannie Mae assisted with those banks with government regulations by lowering the standards on mortgage loans.

Heck, you didn't even know what the CRA regulations had to do with 1995 and all the changes the administration made?? Yet you go on and on about all this expert knowledge on the CRA you have. I'm still waiting on you to provide me with all kinds of resources, documented facts, and links from your vast expert knowledge of the CRA. No one as far as I can tell has been holding you back. Show me the links.

 

[Dugdale_Jukes]

More and more I'm finding the left rebutting the efforts of President Obama to stabilize the economy, by siting blame for this whole economic mess on President Bush...

Was President Bush solely to blame for the economic mess we are experiencing?

[attempts to mitigate presidential culpability deleted to cut to the chase]

[/QUOTE]

No.

Presidents Reagan and Clinton bear much of the blame for degrading the United States to the point where a smarmy little doped out halfwit inheritor could even be considered for the oval office.

Reagan tripled the debt advocating a debt-fueled fake economy described at the time as a "new economy". For good measure Reagan pioneered financial bailouts (S&L, 1st QE), and granted amnesty to about FOUR MILLION illegal aliens (estimated total beneficiaries from reduced scrutiny is AT LEAST EIGHT MILLION ILLEGALS).

The filthy god damned ReagaNUT scum of the earth, aka "free market" nuts, TRIPLED the national debt in peace time, something never EVER done in peacetime by a western nation, building a debt-fueled fake economy that Clinton took to the bank in the 1990s.

Clinton signed NAFTA, continued to award no-bid defense contracts to Halliburton and Blackwater, further opened the borders including setting up China to undermine blue collar wages in the US, ended Glass Steagall, deregulated low margin no margin speculation in essential commodities, then pardoned Marc Rich before sailing off into the sunset to collect about a hundred million dollars earned in office but paid out as speech fees and consulting fees. Clinton is despicable scum, almost worse than Reagan.

Junebug Bush followed those policies off every economic cliff in sight, PLUS the smarmy little halfwit inheritor was a cocksucking war mongering lying scum. By 2004 when white trash America re elected the most obviously failed first term president in US history, re electing Bush made some kind of calamity inevitable. Junebug wasn't up to the job is the bottom line. He was a functional fool.

As were Reagan and Clinton - and Obama.

People get the government they deserve.

Congress is complicit.

Presidents are the cause.

The buck stops at the oval office.

 

[editec]

Hey Shady. You believe what ever floats your boat. I think I will go with the facts. CRA was not the culprit that you and others claim.

Sub prime loans made by lenders not under CRA requirement were the biggest problem.

But what the hell. Rewrites of history are a part of American folklore. No reason to stop now. Carry on.

Well I think you're right about that, too Zeke.

And the reality of who ended up writing so many subprime paper certainly supports your POV, too.

The problem you are having, as I see it, is that many people here totally WANT a simply explanation to why such a highly complex system broke down.

They want ONE villain piece of legislation or ONE party to pin the blame on.

And the reason they THINK this is how the world works is because if you listen to TV or radio's talking heads this is TYPICALLY how the world is explained to them.

Many of them truly do NOT understand the concept of a TRAGEDY of the COMMONS.

They're so filled with bullshit about individualism and morality that they truly must deny the reality that its ALL CONNECTED, that no single part of the economy acts ALONE.

 

[bripat9643]

Timing and Temporary Exemption
As adopted, Regulation R provides banks with a transitional exemption until the first day of their first fiscal year commencing after Sept. 30, 2008. This will give banks time to make any necessary changes in their systems and compliance programs and should ensure that banks have time to come into compliance with the Exchange Act provisions relating to the broker definition. This exemptive rule will become effective on the date that the Commission's current order expires, Sept. 28, 2007.

why did they hold back the broker rules on the banks that was WRITTEN into the laws of this country?

Only imbeciles like you believe some obscure broker rule was the cause of the sub-prime debacle. Forcing banks to give mortgages to people who couldn't pay them is obviously the cause.

 

[bripat9643]

hey dummy those TOO BIG TOO FAIL idiots were private industry allowed to get so BIG that their duplicity would kill the country when they got caught cheating.



jesus you will conflate anything

No one was caught "cheating," you witless turd. Following the rules is what caused the problem.

 

[Mr. Shaman]

More and more I'm finding the left rebutting the efforts of President Obama to stabilize the economy, by siting blame for this whole economic mess on President Bush and the Republicans. HOWEVER, the evidence I've seen shows an economic meltdown could have been avoided ... had the ideological views and self interests of certain members of Congress not gotten in the way. For those unfamiliar with what actually went on in Congress, I've included a "smaller" timeline of events as well and a source (to get an even MORE detailed view of what actually went on that led to this whole economic crisis).

I was always a bigger-fan o'.....

....the FACTS!!

[ame=http://www.youtube.com/watch?v=rudI1gkjqFM]Spooky Tooth - Things Change - YouTube[/ame]

Too Big To Fail...
NO MORE!!!

"For the past year, a special team of U.S. bank regulators has been on a quiet mission to end the belief on Wall Street that large banks are "too big to fail."

The team from the Federal Deposit Insurance Corp has hosted more than two dozen meetings with bond investors, analysts and other stakeholders to lay out in detail how a failing firm would be liquidated.

One of the goals of the roadshow was to warn Wall Street not to count on a repeat of the government bailouts of the 2007-2009 financial crisis, when Washington stepped in to rescue AIG and other financial institutions out of fear that a collapse would be disastrous for the world economy.

People present at these meetings say the FDIC makes a compelling case, and there are signs that the roadshow is gradually succeeding in shifting market perceptions."​

 

[American_Jihad]

Who Caused the Economic Crisis?
MoveOn.org blames McCain advisers. He blames Obama and Democrats in Congress. Both are wrong.
By Joe Miller
Posted on October 1, 2008

Summary
A MoveOn.org Political Action ad plays the partisan blame game with the economic crisis, charging that John McCain’s friend and former economic adviser Phil Gramm “stripped safeguards that would have protected us.” The claim is bogus. Gramm’s legislation had broad bipartisan support and was signed into law by President Clinton. Moreover, the bill had nothing to do with causing the crisis, and economists – not to mention President Clinton – praise it for having softened the crisis.

A McCain-Palin ad, in turn, blames Democrats for the mess. The ad says that the crisis “didn’t have to happen,” because legislation McCain cosponsored would have tightened regulations on Fannie Mae and Freddie Mac. But, the ad says, Obama "was notably silent" while Democrats killed the bill. That’s oversimplified. Republicans, who controlled the Senate at the time, did not bring the bill forward for a vote. And it’s unclear how much the legislation would have helped, as McCain signed on just two months before the housing bubble popped.

In fact, there’s ample blame to go around. Experts have cited everyone from home buyers to Wall Street, mortgage brokers to Alan Greenspan.

...

The Real Deal

So who is to blame? There’s plenty of blame to go around, and it doesn’t fasten only on one party or even mainly on what Washington did or didn’t do. As The Economist magazine noted recently, the problem is one of "layered irresponsibility … with hard-working homeowners and billionaire villains each playing a role." Here’s a partial list of those alleged to be at fault:

• The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.
• Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.
• Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.
• Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.
• The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.
• Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.
• Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.
• Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.
• The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.
• An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.
• Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.

The U.S. economy is enormously complicated. Screwing it up takes a great deal of cooperation. Claiming that a single piece of legislation was responsible for (or could have averted) the crisis is just political grandstanding. We have no advice to offer on how best to solve the financial crisis. But these sorts of partisan caricatures can only make the task more difficult.

Who Caused the Economic Crisis?

 

[amrchaos]

I'm still trying to figure out how the banks, and not all the banks mind you, were forced into giving out risky loan.

I remember Rush said that the banks were threatened with protests, so the banks conceded to the demands of the left!!

However, that idea was quickly tested by OWS---all the banks did was laugh at the protesters and sic the police on them.

So, how did the left, or the government, or whomever forced banks,not all of them mind you, into given out risky loans.

To be honest, I don't think you could force the bank to give out a loan without a means for the bank to profit from it. That is true of any loan.......