A growing 'amnesia' of the Economic Crisis

[zeke]

Then you want to blame the government housing programs.

You do know that the hated government programs like FHA have been making loans to low income, poorer credit quality borrowers for a long time. With no problems. You never hear of FHA loans being the culprit of the collapse. How about those 100% financing VA loans? Govenment administered and funded. No problem.

How could that be?

So you go ahead and tell me about the big brokerage sub prime operations. Like Countrywide. And Washington Mutual. Tell me how they solicited sub prime loans and what credit quality guidelines they followed and who wrote those guidelines. ( A little hint; it wasn't Fannie or Freddie)

There are only two real culprits in the housing collapse. Greed and the deregulation allowing brokers and hedge fund managers to move into the real estate lending arena.

EVERYTHING THAT FOLLOWED WAS THE RESULT OF THAT ONE DEREGUALTING DECISION. Combined with unbelievable greed.

 

[lynn63]

To add further insult to the American people, according to the Bloomberg economic report Fannie Mae is making a profit but the government doesn't want them too because they will have to pay the tax payers back on profits more then 3 billion.

 

[BlindBoo]

You know what shady? Saying the same thing over and over like you right wing whackos tend to do, does not change any facts.

Did Fannie and Freddie play a part. Absolutley. But the alt A program that they came out with was not the culprit. Their purchasing sub prime loans chasing big returns was a huge mistake.

Matter of fact, do you even know the difference between A paper, alt A paper and sub prime loans?
If you think you do, it might be funny to hear it.

Were politicians stupid about what was going on. Absolutley. Dems in particular. Rethugs were just devious and underhanded about what they were doing.

And do you know what CRA means. And how it mattered. And what it was intended to do?

And finally, what was the name of that legislation that Rethugs worked years to get overturned. And what was the purpose of that legislation and what happened after that legislation was repealed? You know, that legilation that Bill Clinton signed. Fool that he was for doing it.

If you can answer any of those questions accurately, maybe we should talk.

I wrote mortgage loans for 20 years. And what you want to believe happened and what really happened is not the same thing.

And Franklin Raines should have gone to jail. Along with a lot of other heads of banks, brokerages and hedge fund managers.

How come you aren't calling out the heads of the banks? Or Countrywide? Bear Sterns? Chase?
You probably think they did nothing wrong.

And did you know that there were a group of regional banks whose leadership didn't play the games that the big boys did. And you know what. They didn't lose a dime on their mortgage operations. They were true bankers and understood risk management. And they still sold loans to Fannie and Freddie. Loans that didn't default. How could that be?

Yes I spoke on the subject of the CRA, the Congressional testimony is only one piece of the puzzle. This was to nullify any attempt to say this economic problem is the result of simply the Republicans and President Bush, simply untrue and unfounded. The CRA included a set of regulations, passed under President Clinton, that forced banks to lend out to poor lower income families that would otherwise not be able to obtain a home. Issues like credit background checks, employment history (those areas banks would normally use as a standard for loan approval) was overlooked - as it was more important (for political reasons) that people obtain a home than could afford one. I could provide some links that support this new government regulation of "bank policy" if you like?

Yes, links to the law that force banks to overlook credit checks and employment history on CRA loans, please?

 

[BlindBoo]

Yes I spoke on the subject of the CRA, the Congressional testimony is only one piece of the puzzle. This was to nullify any attempt to say this economic problem is the result of simply the Republicans and President Bush, simply untrue and unfounded. The CRA included a set of regulations, passed under President Clinton, that forced banks to lend out to poor lower income families that would otherwise not be able to obtain a home. Issues like credit background checks, employment history (those areas banks would normally use as a standard for loan approval) was overlooked - as it was more important (for political reasons) that people obtain a home than could afford one. I could provide some links that support this new government regulation of "bank policy" if you like?

That's total and unmitigated bullshit.

What the CRA did was to end the practice of Redlining.

No banks were ever forced into loans they did not want to make.

Is it? Lets look into the Community Reinvestment Act [CRA] side of the discussion.

Community Reinvestment Act prodded banks to take bad, costly risks in lending
COMMUNITY REINVESTMENT ACT December 28, 2012 By: Hans Bader


The Community Reinvestment Act was enacted in 1977, but it was not enforced stringently until regulations dramatically expanded its reach in the 1990s. It then became one of the factors that contributed to the financial crisis.

Banks and mortgage companies have long been under pressure from Congressmen and regulators to give loans to people with bad credit, in order to provide “affordable housing” and promote “diversity.” That played a key role in triggering the mortgage crisis, judging from a 2008 story in The New York Times. For example, “a high-ranking Democrat telephoned executives and screamed at them to purchase more loans from low-income borrowers.” The executives of government-backed mortgage giants Fannie Mae and Freddie Mac “eventually yielded to those pressures, effectively wagering that if things got too bad, the government would bail them out.” But they realized the risk: “In 2004, Freddie Mac warned regulators that affordable housing goals could force the company to buy riskier loans.” Ultimately, though, Freddie Mac’s CEO, Richard F. Syron, told colleagues that “we couldn’t afford to say no to anyone.”

Lenders also face the risk of being sued for discrimination if they fail to lend money to people with bad credit, which can have a racially-disparate impact. The Justice Department is now extorting multimillion dollar settlements from banks, by accusing them of racial discrimination because they use traditional, non-racist lending criteria that minority borrowers are, on average, less likely to satisfy, such as having a high credit score, or being able to afford a substantial downpayment. Its Civil Rights Division chief, Tom Perez, “has compared bankers to Klansmen.” The “only difference, he says, is bankers discriminate ‘with a smile’ and ‘fine print,’” calling their lending criteria “every bit as destructive as the cross burned in a neighborhood.” Investor’s Business Daily chronicles this attack on small banks in “DOJ Begins Bank Witch Hunt." (These lawsuits are brought under other laws regulating banks, not the CRA, which is but one of many tools the federal government used to promote risky lending).

Community Reinvestment Act prodded banks to take bad, costly risks in lending - Washington DC SCOTUS | Examiner.com

Here is the proof of the DOJ enforcing CRA through its lawsuits against banks, using the fear of racism, forcing banks to give in to lowering their home loan standards.

DOJ Begins Bank Witch Hunt
Investor's Business Daily – Fri, Jul 8, 2011 6:51 PM EDT


In what could be a repeat of the easy-lending cycle that led to the housing crisis, the Justice Department has asked several banks to relax their mortgage underwriting standards and approve loans for minorities with poor credit as part of a new crackdown on alleged discrimination, according to court documents reviewed by IBD.Prosecutions have already generated more than $20 million in loan set-asides and other subsidies from banks that have settled out of court rather than battle the federal government and risk being branded racist. An additional 60 banks are under investigation, a DOJ spokeswoman says.No Job, No ProblemSettlements include setting aside prime-rate mortgages for low-income blacks and Hispanics with blemished credit and even counting "public assistance" as valid income in mortgage applications.

DOJ Begins Bank Witch Hunt - Yahoo! Finance

Wrong again!

The Community Reinvestment Act requires federally insured banks and thrifts to lend in the low-income neighborhoods where they take deposits, but consistent with safe banking practices . It was created to stop redlining, the practice whereby banks refused to lend money in certain areas -- read minority neighborhoods -- regardless of their residents' credit histories.

The most obvious clue that CRA did not cause the mess is its date. The musical "Annie" opened in 1977, and the Eagles' "Hotel California"

was the No. 1 song. That was a long time ago, 31 years to be precise. If the CRA created this time bomb of lousy loans, why didn't it go off in 1980 or 1996?

The writing of crazy mortgages for low-income people -- loans with exploding interest rates, brutal fees and no demands for documentation

-- was a post-2003 phenomenon. In 2004, the Bush administration actually slashed CRA regulation, freeing small banks and thrifts from its toughest standards.

"These institutions no longer had to make subprime loans to low-income people," Mark Thoma, an economist at the University of Oregon told me. "That should have reduced the volume if the CRA was driving it." On the contrary, subprime lending increased.

CRA was a minor player in the mortgage orgy. Since the late '90s, half of subprime loans have been made by independent mortgage companies not subject to CRA rules, University of Michigan Law School professor Michael Barr told Congress in February. Another 30 percent came from affiliates of banks or thrifts with little CRA supervision. That left only one in five subprime loans fully governed by CRA.

Furthermore, companies not covered by CRA made subprime loans at more than twice the rate of lenders that were, according to Janet Yellin, president of the San Francisco Federal Reserve Bank. The idea that CRA brought the banks down is "just ridiculous," Thoma said.

Law for Poor Didn't Cause Meltdown - Rasmussen Reports?

 

[Truthmatters]

why did the BUSH SEC hold back the parts of gramm leach beliely act of 1999 that the banks didnt like?


what was their reasoning for that?

 

[Truthmatters]

SEC Votes for Final Rules Defining How Banks Can Be Securities Brokers
Eight Years After Passage of the Gramm-Leach-Bliley Act, Key Provisions Will Now Be Implemented
FOR IMMEDIATE RELEASE
2007-190
Washington, D.C., Sept. 19, 2007 - Ending eight years of stalled negotiations and impasse, the Commission today voted to adopt, jointly with the Board of Governors of the Federal Reserve System (Board), new rules that will finally implement the bank broker provisions of the Gramm-Leach-Bliley Act of 1999. The Board will consider these final rules at its Sept. 24, 2007 meeting. The Commission and the Board consulted with and sought the concurrence of the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Office of Thrift Supervision.




where is the lie in this Bush SEC release?

why did they do this?

 

[Mr. Shaman]

Was President Bush solely to blame for the economic mess we are experiencing? I'm finding that there is a growing case of amnesia towards the events that led up to this crippling recession, perhaps it's just a lack of knowledge.

Absolutely....and, recognizing your lack of knowledge is your first-step towards "healing"!!

*

[ame=http://www.youtube.com/watch?v=rKKvMJeBBSA]Q&A: Leslie & Andrew Cockburn - YouTube[/ame]


See: 4:45 thru 12:00​

 

[zeke]

Boo, you were either in the industry or really did your homework. But it doesn't matter what info was presented to shades, he will only believe it was the CRA that caused the housing collapse. Sad. But true.

 

[editec]

It is becoming a real pleasure to see some of you people posting here who have a fairly good handle (probably better than mine) on the complex interplay of banks screwing up the real estate market and by doing so screwing up the world's economy.

For a while here I felt like nobody was interested in how thing went so very very badly except if they could pin all the blame on the OTHER party.

Thanks for renewing my faith in American scholarship, citizens.

Ya'lk know who you are, and ya'll also know who the others are who also have clue, so I don't need to name names.

But thanks for posting here.

 

[Mr. Shaman]

You know what shady? Saying the same thing over and over like you right wing whackos tend to do, does not change any facts.

Did Fannie and Freddie play a part. Absolutley. But the alt A program that they came out with was not the culprit. Their purchasing sub prime loans chasing big returns was a huge mistake.

Matter of fact, do you even know the difference between A paper, alt A paper and sub prime loans?
If you think you do, it might be funny to hear it.

Were politicians stupid about what was going on. Absolutley. Dems in particular. Rethugs were just devious and underhanded about what they were doing.

And do you know what CRA means. And how it mattered. And what it was intended to do?

And finally, what was the name of that legislation that Rethugs worked years to get overturned. And what was the purpose of that legislation and what happened after that legislation was repealed? You know, that legilation that Bill Clinton signed. Fool that he was for doing it.

If you can answer any of those questions accurately, maybe we should talk.

I wrote mortgage loans for 20 years. And what you want to believe happened and what really happened is not the same thing.

And Franklin Raines should have gone to jail. Along with a lot of other heads of banks, brokerages and hedge fund managers.

.....Not to mention the credit-rating agencies!!!!!

[ame=http://www.youtube.com/watch?v=1u4NpD_sZy0]credit rating agencies - YouTube[/ame]​

 

[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).

Was President Bush solely to blame for the economic mess we are experiencing? I'm finding that there is a growing case of amnesia towards the events that led up to this crippling recession, perhaps it's just a lack of knowledge. This "blame Republicans" appears to be just rooted in opinions by those who share an overall hatred of the right, as they just happen to be the party that stands in the way of further government entitlement programs that the left loves so much.

September 1999

With pressure from the Clinton Administration, Fannie Mae eased credit requirements on loans it would purchase from lenders, making it easier for banks to lend to borrowers unqualified for conventional loans. Raines explained that "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," reported the New York Times.

With this action, Fannie Mae put itself at substantial risk in the event of an economic downturn. "From the perspective of many people, including me, this is another thrift industry growing up around us," warned Peter Wallison. "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." The danger was known.

March 2000

Rep. Richard Baker (R-Louisiana) proposed a bill to reform Fannie and Freddie's oversight in a House Subcommittee on Capital Markets.

Rep. Frank (D-Massachusetts) dismissed the idea, saying concerns about the two were "overblown" and that there was "no federal liability there whatsoever."

June 2000

Rep. Marge Roukema (R-New Jersey): "very few banks or S&Ls could, even in this day and age, even now, meet the stress-testing requirements which Fannie and Freddie are required to meet."

Rep. Carolyn Maloney (D-New York) regarding the Treasury Department line of credit: "It is really symbolic, it is obsolete, it has never been used." "Would you explain why it would be important to repeal something that seems to be of little use?"

Smith: "as long as the pipeline is there, it is like it is very expandable. . . . It is only $2 billion today. It could be $200 billion tomorrow."

Because of Democrat obfuscation, Smith's "tomorrow" arrived in 2008 when Treasury Secretary Henry Paulson put Fannie and Freddie into conservatorship.

February 2003

OFHEO reports that "although investors perceive an implicit Federal guarantee of [GSE] obligations . . . the government has provided no explicit legal backing for them," warning that unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market, according to a White House release.

June 2003

Freddie Mac reported it had understated its profits by $6.9 billion. OFHEO director Armando Falcon Jr. requested that the White House audit Fannie Mae.

July 2003

Sens. Chuck Hagel (R-Nebraska), Elizabeth Dole (R-North Carolina) and John Sununu (R-New Hampshire) introduced legislation to address Regulation of Fannie Mae and Freddie Mac. The bill was blocked by Democrats.


September 2003

In an interview with Ron Insana for CNN Money, Rep. Baker warned, "I have concerns that if appropriate resources aren't allocated for internal risk management, the consequences will be far more severe than just a real estate slowdown. The losses would fall quickly through the capital these companies have and down to shareholders and taxpayers. These companies have some of the lowest capital margins of any financial institution in the nation, yet, at the same time, they are two of the largest. The concern is that if something doesn't work out the way they predict, the American taxpayer could be called on to pay off the debt in some sort of bailout."

Rep. Barney Frank (D-Massachusetts): "These two entities - Fannie Mae and Freddie Mac - are not facing any kind of financial crisis. . . . The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."


October 2003

Fannie Mae discloses $1.2 billion accounting error.


November 2003

Council of the Economic Advisers Chairman Greg Mankiw warned, "The enormous size of the mortgage-backed securities market means that any problems at the GSEs matter for the financial system as a whole. This risk is a systemic issue also because the debt obligations of the housing GSEs are widely held by other financial institutions. The importance of GSE debt in the portfolios of other financial entities means that even a small mistake in GSE risk management could have ripple effects throughout the financial system," from a White House release.


February 2004

Mankiw cautions Congress to "not take [the financial market's] strength for granted." Again, the call from the Administration was to reduce this risk by "ensuring that the housing GSEs are overseen by an effective regulator," says a White House release.

OFHEO reported that Fannie Mae and CEO Raines had manipulated its accounting to overstate its profits. Congress and the Bush administration sought strong new regulation and authority to put the GSEs under conservatorship if necessary. As the Washington Post reports, Fannie Mae and Freddie Mac responded by orchestrating a major campaign "by traditional allies including real estate agents, home builders and mortgage lenders. Fannie Mae ran radio and television ads ahead of a key Senate committee meeting, depicting a Latino couple who fretted that if the bill passed, mortgage rates would go up." Again, GSE pressure prevailed.

October 2004

In a subcommittee testimony, Democrats vehemently reject regulation of Fannie Mae in the face of dire warning of a Fannie Mae oversight report. A few of them, Black Caucus members in particular, are very angry at the OFHEO Director as they attempt to defend Fannie Mae and protect their CRA extortion racket.

Rep. Maxine Waters (D-California): "Through nearly a dozen hearings where, frankly, we were trying to fix something that wasn't broke."

Rep. Maxine Waters (D-California): "Mr. Chairman, we do not have a crisis at Freddie Mac, and particularly at Fannie Mae, under the outstanding leadership of Mr. Frank Raines."

Rep. Ed Royce (R-California): "In addition to our important oversight role in this committee, I hope that we will move swiftly to create a new regulatory structure for Fannie Mae, for Freddie Mac, and the federal home loan banks."

Rep. Lacy Clay (D-Missouri): "This hearing is about the political lynching of Franklin Raines."

Rep. Ed Royce (R-California): "There is a very simple solution. Congress must create a new regulator with powers at least equal to those of other financial regulators, such as the OCC or Federal Reserve."

Rep. Barney Frank (D-Massachusetts): "Uh, I, this, you, you, you seem to me saying, ‘Well, these are in areas which could raise safety and soundness problems.' I don't see anything in your report that raises safety and soundness problems."

Rep. Maxine Waters (D-California): "Under the outstanding leadership of Mr. Frank Raines, everything in the 1992 Act has worked just fine. In fact, the GSEs have exceeded their housing goals. What we need to do today is to focus on the regulator, and this must be done in a manner so as not to impede their affordable housing mission, a mission that has seen innovation flourish from desktop underwriting to 100% loans."

Rep. Don Manzullo (R-Illinois): "Mr. Raines, 1.1 million bonus and a $526,000 salary. Jamie Gorelick, $779,000 bonus on a salary of 567,000. This is, what you state on page eleven is nothing less than staggering."

Rep. Don Manzullo (R-Illinois): "The 1998 earnings per share number turned out to be $3.23 and 9 mills, a result that Fannie Mae met the EPS maximum payout goal right down to the penny."

Rep. Don Manzullo (R-Illinois): "Fannie Mae understood the rules and simply chose not to follow them that if Fannie Mae had followed the practices, there wouldn't have been a bonus that year."

"The bill prohibited the GSEs from holding portfolios, and gave their regulator prudential authority (such as setting capital requirements) roughly equivalent to a bank regulator. In light of the current financial crisis, this bill was probably the most important piece of financial regulation before Congress in 2005 and 2006," reports the Wall Street Journal.

Greenspan testified that the size of GSE portfolios "poses a risk to the global financial system. It would be difficult, if not impossible, to bail out the lenders [GSEs] . . . should one get into financial trouble." He added, "If we fail to strengthen GSE regulation, we increase the possibility of insolvency and crisis . . . We put at risk our ability to preserve safe and sound financial markets in the United States, a key ingredient of support for homeownership."

Greenspan warned that if the GSEs "continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road . . . We are placing the total financial system of the future at a substantial risk."

Bloomberg writes, "If that bill had become law, then the world today would be different. . . . But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter. That such a reckless political stand could have been taken by the Democrats was obscene even then."

April 2007

In "A Nightmare Grows Darker," the New York Times writes that the "democratization of credit" is "turning the American dream of homeownership into a nightmare for many borrowers." The "newfangled mortgage loans" called "affordability loans" "represent 60 percent of foreclosures."

2007-2008

The housing bubble began to burst, bad mortgages began to default, and finally the Fannie Mae and Freddie Mac portfolios were revealed to be what they were, in collapse. And the testimony is evident as to why. As Wallison noted, "Fannie and Freddie were, I would say, the poster children for corporate welfare."

Archived-Articles: Why the Mortgage Crisis Happened

That's quite a litany of why things happened the way they did.

Yeah.....how "artfully" ShaklesOfBigGov left Phil Gramm outta the equation!!!

*

[ame=http://www.youtube.com/watch?v=w2nZbo8SKbg]Byron Dorgan?s Crystal Ball - YouTube[/ame]
*
[ame=http://www.youtube.com/watch?v=Q_hbezbsJ8s]Rachel Maddow Show: Somebody Saw It Coming-Byron Dorgan - YouTube[/ame]
*
​

 

[ShaklesOfBigGov]

CRA = Community Reinvestment Act.

Do you know what "redlining" was.

All the act was designed to do was make bank loan products available to areas where they were soliciting bank deposits.

In other words, it was designed to keep a BANK from operating in an area where they received deposits from the area residents and offered little to no bank loans.


I was there, I watched it happen. Your version is bull shit.

Yes I already provided the definition to the term "redlining", if you even read my last post. As far as my version, I included SEVERAL facts and resources that back my argument which anyone can look up and review. Still awaiting yours however, something that actually supports your "opinion"..... I see you're still lacking in the area of supported facts

 

[ShaklesOfBigGov]

Wrong again!

The Community Reinvestment Act requires federally insured banks and thrifts to lend in the low-income neighborhoods where they take deposits, but consistent with safe banking practices . It was created to stop redlining, the practice whereby banks refused to lend money in certain areas -- read minority neighborhoods -- regardless of their residents' credit histories.

The most obvious clue that CRA did not cause the mess is its date. The musical "Annie" opened in 1977, and the Eagles' "Hotel California"

was the No. 1 song. That was a long time ago, 31 years to be precise. If the CRA created this time bomb of lousy loans, why didn't it go off in 1980 or 1996?

Did we miss the revision of the Community Reinvestment Act under President Clinton in 1995?

The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities
Howard Husock

until recently, the CRA didn't matter all that much. During the seventies and eighties, CRA enforcement was perfunctory. Regulators asked banks to demonstrate that they were trying to reach their entire "assessment area" by advertising in minority-oriented newspapers or by sending their executives to serve on the boards of local community groups. The Clinton administration changed this state of affairs dramatically. Ignoring the sweeping transformation of the banking industry since the CRA was passed, the Clinton Treasury Department's 1995 regulations made getting a satisfactory CRA rating much harder. The new regulations de-emphasized subjective assessment measures in favor of strictly numerical ones. Bank examiners would use federal home-loan data, broken down by neighborhood, income group, and race, to rate banks on performance. There would be no more A's for effort

This policy—"America's best mortgage program for working people," NACA calls it—is an experiment with extraordinarily high risks. There is no surer way to destabilize a neighborhood than for its new generation of home buyers to lack the means to pay their mortgages—which is likely to be the case for a significant percentage of those granted a no-down-payment mortgage based on their low-income classification rather than their good credit history. Even if such buyers do not lose their homes, they are a group more likely to defer maintenance on their properties, creating the problems that lead to streets going bad and neighborhoods going downhill. Stable or increasing property values grow out of the efforts of many; one unpainted house, one sagging porch, one abandoned property is a threat to the work of dozens, because such signs of neglect discourage prospective buyers.

The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities by Howard Husock, City Journal Winter 2000

Here is an article the New York Times wished it never released, that "specifically" mentions Fannie Mae having banks ease loan standards to those of low-income who would otherwise not be able to afford a home.

Fannie Mae Eases Credit To Aid Mortgage Lending

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 Eases Credit To Aid Mortgage Lending - NYTimes.com

 

[ShaklesOfBigGov]

It has become apparent that the conclusions of certain others on this thread, may have been made prematurely without a sufficient amount of actual research put into recent changes made under the CRA. The lack of resources provided behind some of these opposing opinions, demonstrates just how much we can rely on the media more to do our "homework" rather than a willingness to look into what our own government is doing. When we no longer show a real concern towards the affairs and proceedings within our own system of government, then the Federal Government truly has a hold over us instead of "we the people" controlling them.



How changes in the CRA under President Clinton in 1995, forced banks into making more risky loans to lower income groups.

Up until 1995 the Community Reinvestment Act was largely a requirement to support "community groups" in poor neighborhoods. ... But after 1995 the scope of the law was dramatically increased.

Over the strenuous objections of the banks themselves and some Republicans in Congress, CRA was renewed and modified in such a way that it gave far more power to the federal government to punish banks for not lending more widely in poor neighborhoods. The classic "fair housing" laws from the Martin Luther King Jr. era of civil rights were deemed insufficient. ... Subprime loans to minority applicants exploded ten fold in the mid-1990s as a result. ...[/Color]

Under New Deal-era regulatory rules of Glass-Steagall, commercial banks and investment banks were separated. When that act was repealed as part of banking deregulation in 1999, commercial banks and investment banks were able to merge, subject to approval by regulators.

However, the banks' CRA rating was taken into account in the decision. This meant that a high CRA rating became an important prerequisite for mergers, which increased the pressure on the banks to make these risky loans. The banks also were given permission to put these loans into packages of securities that could then be sold into investment markets.

Economist's View: Yet Again, It Wasn't the Community Reinvestment Act...

How Government Regulators got their way through enforcement of "policy" in regards to banks meeting mortgage loan standards, to be based strictly on CRA performance rather than centered upon a QUALIFIED home mortgage lending criteria.

Federal Reserve Board: Merger Process Needs Guidelines for Community Reinvestment Issues
( letter report 9/24/1999 GAO/GGD-99-180 )

In 1993, the Clinton Administration instructed the federal bank regulators to revise the CRA regulations by moving from a process- and paperwork-based system to a performance-based system focusing on results, especially the results in LMI areas of an institution's communities. Based on these instructions, the federal banking agencies replaced the qualitative CRA examination system with a more quantitative system that is based on actual performance.

(PAGE 4)




After the performance-based CRA regulations were issued in 1995, FFIEC published Interagency Questions and Answers regarding Community Reinvestment in 1997 and 1999. The 1989 statement was withdrawn effective April 5, 1999, and replaced by the Interagency Questions and Answers regarding Community Reinvestment.13 The 1989 Statement, which was in effect during the mergers contained in our study, including guidance on the following issues: * the basic components of an effective CRA policy, * the role of examination reports on CRA performance in reviewing applications, * the need for periodic review and documentation by financial institutions of their CRA performance, and * the role of commitments in assessing and institution's performance. Most notably, the regulators concluded in the Statement that the CRA record of the institution, as reflected in its examination reports, would be given great weight in the application process. In the Interagency Questions and Answers for 1999, the regulators continued to stress the significants of the CRA examination in the application process, and they stated the examination is an important, and often controlling, factor in the consideration of an institution's record. 14 According to the 1989 Statement, the CRA examination is not conclusive evidence in the face of significant and supported allegations from a commenter. Moreover, the balance may be shifted further when the examination is not recent or the particular issue raised in the 13 Questions and Answers regarding Community Reinvestment, 64 Fed. Reg. 23618-23648 (1999). 14 64 Fed. Reg. at 23641.
GAO/GGD-99-180

( PAGE 9 )




Guidelines for Community of Reinvestment Issues B-280468 application preceding was not addressed in the examination. During the development of the performance-based CRA regulations, a number of commenters expressed concern that the regulators may provide a "safe harbor" to depository institutions from challenges to their CRA performance record in the application process if they achieved an outstanding CRA rating. However, in the preamble of the 1995 final rule on the CRA regulations, the regulators reconfirmed the importance of the public comments in the applications process by acknowledging that materials related to CRA performance received during the applications process can and do provide relevant and valuable information.

Federal Reserve Board: Merger Process Needs Guidelines for

 

[zeke]

Shady. Nothing you posted says word one about sub prime loans. Nothing.

And nothing you posted said anything about Fannie makeing loans with no income or asset verification and credit scores below 580. Which sub prime lenders would do and Fannie wouldn't touch.

And finally, there is nothing that could be said to change your weird opinion.

But at least you present your bull shit in a nice way. Thanks.

btw, you never did say if you know the difference between Fannie A paper, Alt A paper and brokerage sub prime paper? Or even if you understand why the CRA was implemented?

Do you know the difference or do you think that all loan products are the same?

And why do you continully ignore the results of having broke down the seperation between commercial banks and investment houses. How come?

 

[zeke]

My other question shady.

Why are you going back to 1995? There were no crazy sub prime loans being made yet. They didn't really start until after 1999.

You know what happened in 1999 that set the whole thing in motion to collapse? Look it up.
Start with Grahm Leach.

 

[editec]

Zeke?

The first no income verification loans were approved in about 1990 or so.

I was a mortgage broker in Connecticut when it happened.

I don't doubt it got even crazier over time, but that's when this crap started at least as far as I know.

 

[zeke]

Zeke?

The first no income verification loans were approved in about 1990 or so.

I was a mortgage broker in Connecticut when it happened.

I don't doubt it got even crazier over time, but that's when this crap started at least as far as I know.

Yes sir. They did show up about that time where I was writing loans as well. With 720 credit and several months reserves and job stability and so forth. And at least a 75% LTV.


No 580 score and with no asset or job verifications came about untill well after 1999. At least in my market.( SW Ohio)

 

[ShaklesOfBigGov]

Shady. Nothing you posted says word one about sub prime loans. Nothing.

And nothing you posted said anything about Fannie makeing loans with no income or asset verification and credit scores below 580. Which sub prime lenders would do and Fannie wouldn't touch.

And finally, there is nothing that could be said to change your weird opinion.

But at least you present your bull shit in a nice way. Thanks.

btw, you never did say if you know the difference between Fannie A paper, Alt A paper and brokerage sub prime paper? Or even if you understand why the CRA was implemented?

In short, they refer to the amount of credit risk that's associated with a mortgage loan. I have also already MANY TIMES, explained the definition of "redlining" to you.

Do you know the difference or do you think that all loan products are the same?

And why do you continully ignore the results of having broke down the seperation between commercial banks and investment houses. How come?

I've included plenty of articles that include subprime loans. I also chosen a liberal newspaper The New York Times that covers Fannie Mae losening its loan standards on banks, then there's the government document specifically talking about regulators pushing CRA performance, and lending to more low-income home buyers, then ENFORCING those CRA regulations as a "condition" to bank mergers. There's also the DOJ article, going after banks using CRA and laying claims of "discrimination" if they don't comply with the new regulations. I have presented several resources with each post that only strengthens what I have been saying, including a recent article in 2012 given below.


For a bunch of "bull shit" I seem to hold a more convincing hand based on all the supported documented evidence presented. You are sitting here trying to convince me that the CRA and government regulations played no part in what happened to banks and all the risky home mortgages. Yet... you consistently hide from presenting me with anything other than just "talk". When you find yourself unable to back up your view with any resources of facts, in the world that's commonly referred to as just mere "conjecture". In the hand of poker, I'd say that means I'm calling your bluff - show me what your hand of proof [facts] towards your point or simply remain elusive in having to present any.

Do you have any knowledge of the more "recent" CRA regulation changes , passed just 1977 I'm referring to the 90's? I'm uncertain that you do.

Can you give detailed accounts of what the government regulators wanted out of banks with respect to CRA in 1995, and how they managed to achieve that? Don't just talk to me about "redlining", like its 1977. If that's all you can tell me, you might want to research further.


New Study Blames Community Reinvestment Act For Mortgage Defaults - Investors.com

The article above is dated in 2012, talking about the effects CRA had on the housing market and banks. Pay clear attention to the graph showing the drastic increase in the total number of CRA loan commitments following 1995.

 

[ShaklesOfBigGov]

Oh Zeke,

Are you familiar with the bank giving out CRA scores to the public, when that started, and what the overall purpose of the government having the banks provide such CRA rating? Why exactly the need for public knowledge of a banks CRA rating?