Anybody watching the Goldman hearing?

[WillowTree]

What he leaves out is the role the government played via CRA to force banks to make No Doc Loans to begin with, and how they financed Fannie Mae and Freddie Mac to buy them up (who then proceeded to lie on their financial statements about them).

This hearing is incomplete. Without testimony from the Boston Federal Reserve that wrote the paper recommending "subjective standards", the bank regulators who threatened to pull bank charters if they didn't increase minority lending, Barney Frank and Chris Dodd, the rating agencies that scored subprime portfolios as high investment grade instruments, and the various execs at FM/FM - this is Just A Witch Hunt.

AGAIN with this debunked LIE. The government did not FORCE anyone to lower loan requirements. A few lenders said no, but most were greedy and saw how much money could be made in predatory lending. When Wall Street and lenders realized they could both make big profits bundling mortgages, they BEGGED and CRIED for Congress to loosen standards even more and get more and more loans flowing their way. 83% of the toxic mortgages were issued by PRIVATE LENDERS - not government backed entities. Freddy and Fanny held onto their loan requirements much longer than all other private lenders. This is on Wall Street, deregulation and GREED. Period. I'm glad they're going after these investors. I hope they catch all that they can and that they go to jail for fraud. THE CRA DID NOT FORCE ANYONE to issue subprime mortgages. You need to research and think for yourself for a change.

Community Reinvestment Act had nothing to do with subprime crisis - BusinessWeek

It's Still Not CRA | New America Blogs

you are full of shit, the congressional black caucus.. h

 

[boedicca]

Mr. Peepers lives in a little fantasy world. It's nice he has something to give him comfort as it is clear he is unable to grok reality.

 

[Toro]

I watched this briefly. It was brutal.

I stopped watching these things a long time ago. The politicians are either clueless or are playing for the cameras or both.

 

[Mr. Peepers]

Mr. Peepers lives in a little fantasy world. It's nice he has something to give him comfort as it is clear he is unable to grok reality.

I live in a world where I read, listen and do objective research on issues I care about and I don't rely on partisan blogs and sources to spoon-feed me talking points. Ain't no fantasy about it.

 

[CrusaderFrank]

Can anyone guess how the Kennedy Family made their fortune?

Running booze during prohibition.

Somehow or another, that seems like honest work in comparison to what's going on in the District of Criminals today.

Joe Kennedy sold the market short during the collapse in '29. He lived high off the pain and suffering of the little guy

 

[Mr. Peepers]

you are full of shit, the congressional black caucus.. h

Please feel free to refute what I said with reliable sources. Please read about the history and scope of the CRA. I dare you. I'll be waiting.

 

[Xenophon]

These guys are literally bullshitting the panel and smiling about it.

They have better answers than politicians.

Anyone who's watching this ought to know what I'm talking about.

It was also funny to hear Levin say "shitty" like 50 times

No good guys in that hearing from any side.

Rather funny to watch crooks grill other crooks though.

 

[CrusaderFrank]

What he leaves out is the role the government played via CRA to force banks to make No Doc Loans to begin with, and how they financed Fannie Mae and Freddie Mac to buy them up (who then proceeded to lie on their financial statements about them).

This hearing is incomplete. Without testimony from the Boston Federal Reserve that wrote the paper recommending "subjective standards", the bank regulators who threatened to pull bank charters if they didn't increase minority lending, Barney Frank and Chris Dodd, the rating agencies that scored subprime portfolios as high investment grade instruments, and the various execs at FM/FM - this is Just A Witch Hunt.

AGAIN with this debunked LIE. The government did not FORCE anyone to lower loan requirements. A few lenders said no, but most were greedy and saw how much money could be made in predatory lending. When Wall Street and lenders realized they could both make big profits bundling mortgages, they BEGGED and CRIED for Congress to loosen standards even more and get more and more loans flowing their way. 83% of the toxic mortgages were issued by PRIVATE LENDERS - not government backed entities. Freddy and Fanny held onto their loan requirements much longer than all other private lenders. This is on Wall Street, deregulation and GREED. Period. I'm glad they're going after these investors. I hope they catch all that they can and that they go to jail for fraud. THE CRA DID NOT FORCE ANYONE to issue subprime mortgages. You need to research and think for yourself for a change.

Community Reinvestment Act had nothing to do with subprime crisis - BusinessWeek

It's Still Not CRA | New America Blogs

LOL Fannie and Freddie were buying no income/no asset verification paper. If there was no buyer for the crappy paper the banks would NEVER have owned them. LOL

Again, we turn to Jeff Spicoli

[ame=http://www.youtube.com/watch?v=n7zfnbdyAW8]YouTube - Sean Penn/Jeff Spicoli - You dick![/ame]

 

[boedicca]

you are full of shit, the congressional black caucus.. h

Please feel free to refute what I said with reliable sources. Please read about the history and scope of the CRA. I dare you. I'll be waiting.

You must be reading Bawney Fwank's "Rewritten History For Dummies".

Steve Malanga is one of the best analysts of the housing bubble:

Ignoring the import of such data, federal officials went on a campaign to encourage banks to lower their lending standards in order to make more minority loans. One result of this campaign is a remarkable document produced by the Federal Reserve Bank of Boston in 1998 titled "Closing the Gap: A Guide to Equal Opportunity Lending".

Quoting from a study which declared that "underwriting guidelines may be unintentionally racially biased," the Boston Fed then called for what amounted to undermining many of the lending criteria that banks had used for decades. It told banks they should consider junking the industry's traditional debt-to-income ratio, which lenders used to determine whether an applicant's income was sufficient to cover housing costs plus loan payments. It instructed banks that an applicant's "lack of credit history should not be seen as a negative factor" in obtaining a mortgage, even though a mortgage is the biggest financial obligation most individuals will undertake in life. In cases where applicants had bad credit (as opposed to no credit), the Boston Fed told banks to "consider extenuating circumstances" that might still make the borrower creditworthy. When applicants didn't have enough savings to make a down payment, the Boston Fed urged banks to allow loans from nonprofits or government assistance agencies to count toward a down payment, even though banks had traditionally disallowed such sources because applicants who have little of their own savings invested in a home are more likely to walk away from a loan when they have trouble paying.

Of course, the new federal standards couldn't just apply to minorities. If they could pay back loans under these terms, then so could the majority of loan applicants. Quickly, in other words, these became the new standards in the industry. In 1999, the New York Times reported that Fannie Mae and Freddie Mac were easing credit requirements for mortgages it purchased from lenders, and as the housing market boomed, banks embraced these new standards with a vengeance. Between 2004 and 2007, Fannie Mae and Freddie Mac became the biggest purchasers of subprime mortgages from all kinds of applicants, white and minority, and most of these loans were based on the lending standards promoted by the government.

Article | The Long Road to Slack Lending Standards


He is also a regular on RealClearMarkets. I recommend him for your proper education on this topic.


Congress passed CRA in 1977 as legislation designed to prompt banks to lend more in lower income areas which advocates claimed were being ignored. Gradually over time community groups learned they could use the law as leverage to negotiate new inner-city lending programs with banks based on lower underwriting standards, which the groups demanded when banks complained that one reason they weren't doing more lending in some neighborhoods was because few applicants in those areas qualified for loans under traditional criteria.

Acorn led the way in this movement. In 1986, for instance, it protested a potential acquisition by Louisiana Bancshares, a Southern institution, until the bank agreed to new, "flexible credit and underwriting standards" for minority borrowers which included counting public assistance and food stamps as income in mortgage applications.

Acorn also put pressure on the two quasi-government purchasers of mortgages, Fannie Mae and Freddie Mac, to lower their standards, complaining that they were "strictly by-the-book interpreters" who stood in the way of new lending programs. Under pressure both organizations committed to backing billions of dollars in affordable housing loans under so-called "alternative qualifying" programs which approved loans to individuals who didn't qualify under traditional standards, including those who agreed to go to mortgage counseling classes run by community groups like Acorn.

The threat of CRA proved an effective tool in gathering non-bank lenders into this affordable lending maelstrom, too. In late 1993 President Clinton's Secretary of Housing and Urban Development, Henry Cisneros, announced a plan to boost homeownership in the U.S. through a series of government initiatives, including having government subsidize mortgages that required no down payments. To produce more of these new, riskier loans Cisneros proposed expanding CRA to cover mortgage lenders and other financial institutions that were not chartered banks. In Congress Rep. Maxine Waters dubbed mortgage companies "egregious redliners" who needed to be corralled by CRA.

http://www.realclearmarkets.com/articles/2009/09/16/acorns_a_creature_of_the_cra_97409.html

 

[Toro]

LOL Fannie and Freddie were buying no income/no asset verification paper. If there was no buyer for the crappy paper the banks would NEVER have owned them. LOL

Absolute fantasy.

I saw this shit pass across my desk. Wall Street tried to sell us AAA subprime mezzanine CDOs to backstop equity swaps. They saw this crap on our fixed income desk every day.

Most of it was underwritten by the private market who had nothing to do with the GSEs. It was "the market" that demanded this shit because they were reaching for an extra 30 bps of crap AAA paper.

Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.

Federal Reserve Board data show that:

* More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

* Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

* Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

...Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.

During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.

Private sector loans, not Fannie or Freddie, triggered crisis | McClatchy

 

[boedicca]

Toro is spreading bull manure.

Fannie Mae and Freddie Mac played a huge part in enabling the market for subprime loans. Nobody claimed they were solely responsible. As a huge purchaser backed by taxpayers, they distorted the market and helped fuel the bubble.

 

[boedicca]

Heh.

A financial regulatory reform bill has at least one supporter outside of Congressional Democrats, Lloyd Blankfein, the head of investment bank Goldman Sachs.

"I'm generally supportive," Blankfein told the Senate Permanent Subcommittee on Investigations.

Wall Street will benefit from the bill because it will make the market safer, Blankfein said.

"The biggest beneficiary of reform is Wall Street itself," he said. "The biggest risk is risk financial institutions have with each other."

Blankfein supports financial reform legislation - The Hill's On The Money

 

[Toro]

Toro is spreading bull manure.

Fannie Mae and Freddie Mac played a huge part in enabling the market for subprime loans. Nobody claimed they were solely responsible. As a huge purchaser backed by taxpayers, they distorted the market and helped fuel the bubble.

Feel free to back it up. All you've done is spout right-wing talking points.

 

[boedicca]

I already did.

 

[Zander]

 

[Toro]

I already did.

You posted stories demonstrating no empirical causal link.

Freddie and Fannie were too leveraged and posed a systemic risk, just like the big banks, but Freddie and Fannie loans performed better than private loans. Also, the CRA played virtually no role.

Feel free to refute it.

http://www.usmessageboard.com/economy/70006-cra-not-to-blame-for-housing-debacle.html

 

[boedicca]

If they weren't a systemic risk, why Taxpayers are having to bail out Fannie Mae and Freddie Mac with $400B (which is more than all of the TARP funds loaned to banks combined)?

The federal government yesterday doubled its commitment to Fannie Mae and Freddie Mac, promising to reimburse the companies for up to $400 billion in losses on their investments in mortgage loans.

The massive expansion of the government backstop is a response to mounting strains on the two companies, officials said.

It was announced as part of the Obama administration's broad plan to reduce foreclosures, which will further squeeze the companies' revenue by requiring the pair to refinance or modify millions of loans to lower monthly payments.

And it comes as a souring economy is pushing more borrowers to default. Fannie and Freddie estimate they will need up to $65 billion from the original $200 billion backstop to cover their losses on mortgage-related investments in the second half of 2008.

"It is crucial to maintain confidence in these institutions even under worse-than-expected economic conditions," Treasury Secretary Timothy F. Geithner said yesterday in a statement announcing the new aid package.

The companies, both based in the Washington area, were seized by the government in September to stabilize their role as the main funding source for mortgage lending. Fannie and Freddie buy loans from originators such as banks, allowing new loans to be made before existing ones are repaid.

At the time, the government promised to cover the companies' losses, injecting money in any quarter when the companies' liabilities exceed their assets, up to $100 billion each. Fannie and Freddie raise money from private investors to fund their loan purchases, and the government wanted to reassure those investors that the companies would be able to repay their debts.

Officials said in September that $200 billion was much more money than the companies would need. Officials now acknowledge that won't be enough to calm investors. Yesterday, they said that $400 billion would be much more money than the companies would need. ...

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/18/AR2009021801467.html

 

[CrusaderFrank]

Fannie and Freddie announcing their desire to acquire no income/no asset paper played no role at all? Yeah?

 

[Toro]

If they weren't a systemic risk, why Taxpayers are having to bail out Fannie Mae and Freddie Mac with $400B (which is more than all of the TARP funds loaned to banks combined)?

The federal government yesterday doubled its commitment to Fannie Mae and Freddie Mac, promising to reimburse the companies for up to $400 billion in losses on their investments in mortgage loans.

The massive expansion of the government backstop is a response to mounting strains on the two companies, officials said.

It was announced as part of the Obama administration's broad plan to reduce foreclosures, which will further squeeze the companies' revenue by requiring the pair to refinance or modify millions of loans to lower monthly payments.

And it comes as a souring economy is pushing more borrowers to default. Fannie and Freddie estimate they will need up to $65 billion from the original $200 billion backstop to cover their losses on mortgage-related investments in the second half of 2008.

"It is crucial to maintain confidence in these institutions even under worse-than-expected economic conditions," Treasury Secretary Timothy F. Geithner said yesterday in a statement announcing the new aid package.

The companies, both based in the Washington area, were seized by the government in September to stabilize their role as the main funding source for mortgage lending. Fannie and Freddie buy loans from originators such as banks, allowing new loans to be made before existing ones are repaid.

At the time, the government promised to cover the companies' losses, injecting money in any quarter when the companies' liabilities exceed their assets, up to $100 billion each. Fannie and Freddie raise money from private investors to fund their loan purchases, and the government wanted to reassure those investors that the companies would be able to repay their debts.

Officials said in September that $200 billion was much more money than the companies would need. Officials now acknowledge that won't be enough to calm investors. Yesterday, they said that $400 billion would be much more money than the companies would need. ...

U.S. Doubles Fannie, Freddie Backing to $400 Billion - washingtonpost.com

I didn't say they weren't a systemic risk. They were. I said it a few posts above. They were a systemic risk because they massively leveraged at 50:1 debt to equity, even higher. This is what one can fire away at the GSEs and their prime sponsors, the Democrats. The Democrats protected the GSEs and did not require them to hold more capital, as the Republicans wanted. But they weren't the ones fueling the liquidity. The loans they underwrote were better than non-guaranteed loans, the houses they underwrote did not rise as much nor crashed as far, and most of the bad loans written at the height of the bubble were written outside the GSEs.

The criticism of Freddie and Fannie and their role in the financial crisis from the right is mainly ideological. What the right points to were not the primary driver of the housing bubble. Perversely, the things the right criticizes are more relevant today as the Democrats told the GSEs in early 2009 to extend an additional $200 billion in loans in the midst of the housing collapse to people with bad credit, whose loans were essentially being monetized by the US government. The loans that are on the balance sheets of Freddie and Fannie are junkier now than they ever were at the height of the bubble.

 

[Toro]

Fannie and Freddie announcing their desire to acquire no income/no asset paper played no role at all? Yeah?

You cannot say that the GSEs had zero effect. You cannot have the government underwriting or guaranteeing nearly half of all the mortgages in the country and expect the market to be unaffected. But the GSEs were not the primary cause of this, and were dwarfed by the role of the Fed and Wall Street.

Most of those NINJA loans and most of the subprime loans were written outside of the GSEs. The primary buyers of RMBS and CDOs backed by these loans were big, sophisticated institutions. They knew what they were doing. They knew the difference between government backed mortgages and those that were not. They were yield pigs, reaching for an extra 30 bps, buying any shit that had a AAA rating wrapped around it, regardless of whether or not it was government backed. Yes, maybe an extra 5-10 bps was shaved off the GSE sponsored backed pools, but that is meaningless in the big scheme of things.