Morality of Wealth Redistribution

[Dad2three]

There were multiple causes of the Balloon/Crash, but the most important was government fiscal and monetary policy OF WHICH THE CRA WAS JUST PART.

yes very well put!! And lets not forget Fanny/Fredie, huge huge GSE's designed to subvert the free market to get people into homes the free market said they could not afford!

RIGHT WING LIAR. I'm shocked, I've already spanked you on that nonsense here


http://www.usmessageboard.com/economy/362889-facts-on-dubya-s-great-recession.html

Examining the big lie: How the facts of the economic crisis stack up


•The boom and bust was global. Proponents of the Big Lie ignore the worldwide nature of the housing boom and bust.

A McKinsey Global Institute report noted “from 2000 through 2007, a remarkable run-up in global home prices occurred.” It is highly unlikely that a simultaneous boom and bust everywhere else in the world was caused by one set of factors (ultra-low rates, securitized AAA-rated subprime, derivatives) but had a different set of causes in the United States. Indeed, this might be the biggest obstacle to pushing the false narrative.

•Nonbank mortgage underwriting exploded from 2001 to 2007, along with the private label securitization market, which eclipsed Fannie and Freddie during the boom.

http://www.ritholtz.com/blog/wp-content/uploads/2011/11/fannieFreddie2.jpg




Private lenders not subject to congressional regulations collapsed lending standards.

Only one of the top 25 subprime lenders in 2006 was directly subject to the housing laws overseen by either Fannie Mae, Freddie Mac or the Community Reinvestment Act — Source: McClatchy

Examining the big lie: How the facts of the economic crisis stack up | The Big Picture

 

[boedicca]

Question: what percentage of subprime loans were overseen by FM/FM?

And why did FM/FM get bailed out?

 

[Pete7469]

 

[M.D. Rawlings]

What the left wing extremists refuse to admit is, wealth is not a zero sum game. Yes, as you stated at any specific point in time there is a specific amount of wealth. But in the very next moment wealth can go up, or down. The point is, over time wealth can be increased by increased production or decreased by reductions of productions. It is asinine to contend that the rich are taking from the less wealthy. Their investments pay off more, and it does not detract from lessor earning people. It is one of the most basic economic principles. Production causes wealth. It is as simple as that.

One other thing that our current left wing extremist will not admit, it is easy to prove that under the proper conditions supply side economics does improve the economy. It is very difficult to prove that demand side economics improves the economy.

If the government choses to engage in Keynesian economics, they would do better concerning themselves only about government spending which directly increased demand across the board. Effectively like following Eisenhower's example and put the $500 billion Obama threw at the poor and spend it on true shovel ready infrastructure projects.

FDR tried for 8 years to buy our way out of the great depression by hiring people for the CCW and the WPA for minimum wages and giving to the poor. None of it worked. It took a war time mobilization, huge sums of money spent to buy war machinery, which got us out of the depression.

Indeed, while wealth creation is potentially limitless given the discovery and application of new technologies, especially, the level of wealth creation does rise and fall as a result of the rise and fall in the level of production. That's axiomatic. Good eye. Some might mistake my observation to preclude the ups and downs of the economic cycle.

I'm a Lockean, so I'm not keen on the historical concerns of socialist societies.

The Swedish model is indeed all you say it is and more, though as a Christian I can't abide the encroachments on the individual's natural rights and the moral compromises that go along with it. Notwithstanding, it works not only because the benefits are universally distributed in Sweden, but because the work ethic is strong there, its economy is competitive, its government is tolerant of educational choice and other partially privatized services, and the composition of Sweden's population is among the most homogenous on Earth. (Yes, I know there are those who argue that the latter is exaggerated, but Sweden is more racially and, more importantly, ideologically homogenous than America, and has, shall we say, a more selective immigration policy.) It would never work here, but, as you suggest, significant, "across the board" investments in genuinely durable infrastructure serve to promote the factors of production to the benefit of all the people. That's the way to go here sans punitive and insanely complicated income and corporate tax structures.

As for the barking madness that the higher returns of investment enjoyed by the wealthy somehow cheat the less wealthy out of their portion of the pie, that finite pie in the sky as if the production of wealth were a zero-sum game . . . what can a fella do but reiterate the obvious. As you say:

Production causes wealth. It is as simple as that.

Just curious, what precisely in your mind constitutes right-wing extremism to the detriment of the economy?

I'm not looking for a fight, mind you, and we might even agree depending on what you have in mind. You strike me as a reasonable fella.

I'm one of those mad-dog conservatives, you know . . . according to left-wing extremists. A fascist. LOL!

What I am is a liberal, of course. The term conservative is a cultural label, referring, for the most part, to an American who holds to the Anglo-American tradition of classical liberalism on which this nation was founded, whether all self-identifying conservatives fully embrace or be fully aware of the foundational doctrines of that tradition, concerning natural law and the state of human nature, or not. Of course, the conservative label does refer to a different kind of political species in other parts of the world. Leftist extremists in American don't seem to grasp these subtleties, more at the term's broader connotations. Contemporary American conservatives generally agree on Locke's labor theory of property at the very least, which is as solid as a rock in my opinion. Give me some of that old time rugged individualism: the preservation of private property, the foundation of liberty.

 

[Dad2three]

Weird, so there was a housing bubble? AND?

BANKSTERS CREATED A WORLD WIDE CREDIT BUBBLE AND BUST. Dozens of nations. CRA? LOL

How about the subprime auto Biz and commercial real estate bubbles at the same time as Dubya's subprime bubble? lol

FACTS on Dubya's great recession
Q When did the Bush Mortgage Bubble start?

A The general timeframe is it started late 2004.

Nope, if you could read a graph you would see the upswing started in 1997. Are you blind as well as stupid?

From Bush’s President’s Working Group on Financial Markets October 2008

How strange, a leftist president wants to put the blame solely on a rightist president.It was definitely part of the problem.

A "Since 1995 there has been essentially no change in the basic CRA rules or enforcement process that can be reasonably linked to the subprime lending activity. This fact weakens the link between the CRA and the current crisis since the crisis is rooted in poor performance of mortgage loans made between 2004 and 2007. "

The bold was my emphasis. Who ever made the assertion that the enforcement process did not change between 1995 and 2004 was lying through his teeth. Not just an error, an outright bald faced lie.

Right-wingers Want To Erase How George Bush's "Homeowner Society" Helped Cause The Economic Collapse

Are you really that stupid? The primary cause of the housing bubble was low down payment or interest used to push housing to more people who could not previously qualify. That started during Clinton's term and the inflation cycle started in 1997.

It is obvious you can't read a graph or you wouldn't make such stupid comments.

I did not say CRA CAUSED the bubble. I said it contributed to it because the concept of providing home ownership to more of the less wealthy. CRA was not enforced during Carter's administration even though that is when it was passed. Clinton was the one who STARTED to push more home ownership BECAUSE OF CRA, but it was the government policies of low interest, low or no down payments continued into Bush's administration which fueled the inflation because of the heated housing market which led to the balloon and subsequent crash. Lenders were not necessarily covered by CRA, but when Fannie and Freddie allowed lower lending standards (sub prime) they had to follow suit to stay in business, and that was part of the deregulation.

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

Democrats and the media insist the Community Reinvestment Act, the anti-redlining law beefed up by President Clinton, had nothing to do with the subprime mortgage crisis and recession.

But a new study by the respected National Bureau of Economic Research finds, "Yes, it did. We find that adherence to that act led to riskier lending by banks."

Added NBER: "There is a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam. Moreover, the effects are larger for loans made within CRA tracts," or predominantly low-income and minority areas.​

Wait! Government did cause the housing bubble. - CSMonitor.com

In the 2000s, of course, malinvestment appeared largely in real estate, the result of government programs designed to relax underwriting standards and otherwise increase investment in particularly risky real-estate assets. In other words, ABCT tells us to look for malinvestment during the boom, but not where that malinvestment will show up.

Paul Krugman asserts, for example, that the “Community Reinvestment Act of 1977 was irrelevant to the subprime boom.” Actually, no. A new NBER paper (gated) on the CRA is causing quite a stir. Authored by four economists from NYU, MIT, Northwestern, and Chicago, the paper is the first to use instrumental-variables regression to distinguish changes in bank lending caused by the CRA from changes that would likely have happened anyway. (The authors use the timing of loan decisions relative to the dates of CRA audits to identify the effect of the CRA on lending.) The results suggest that CRA enforcement did, contra Krugman, lead banks to make substantially riskier loans than otherwise.

Rahan said, "“
The key then to understanding the recent crisis is to see why markets offered inordinate rewards for poor and risky decisions. Irrational exuberance played a part, but perhaps more important were the political forces distorting the markets. The tsunami of money directed by a US Congress, worried about growing income inequality, towards expanding low income housing, joined with the flood of foreign capital inflows to remove any discipline on home loans. And the willingness of the Fed to stay on hold until jobs came back, and indeed to infuse plentiful liquidity if ever the system got into trouble, eliminated any perceived cost to having an illiquid balance sheet."

I’d reverse the order of emphasis — credit expansion first, housing policy second — but Rajan is right that government intervention gets the blame all around.​

In other words Dad2three, you are looking at old guesses and opinions instead of the more recent ECONOMIC STUDIES which prove the typical left wing assertions were WRONG.

None of that long diatribe of bad information negates the newer studies that the CRA DID HAVE A NEGATIVE IMPACT ON THE HOUSING BALLOON/CRASH.[/QUOTE]

How strange, a leftist president wants to put the blame solely on a rightist president.It was definitely part of the problem

YES, BUSH'S GROUP BLAMING BUSH, WEIRD RIGHT?

The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets MAY 2008
\



http://www.iasplus.com/en/binary/iosco/0805ioscosubprimereport.pdf





YOUR 'ECONOMIC STUDIES' ARE NOTHING BUT RIGHT WING (THINK AEI, PETER WALLISON, ED PINTO BULLSHIT!) IT'S BEEN DEBUNKED OVER AND OVER AND OVER AND OVER


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

LOL

THIS STUDY TEARS THE AEI (THE GUYS WHO WROTE IT FOR THE BIZ GROUP, APART!!!




Indeed, the “blame the CRA” story has been refuted by industry leaders and researchers time and time again. Unfortunately, this narrative refuses to go away


In this paper, center researchers review the research evidence on CRA and show that there is no credible research to support the assertion that CRA contributed to an increase in risky lending during the subprime boom. In particular, they present a detailed rebuttal of a recent paper published by the National Bureau of Economic Research, titled “Did the Community Reinvestment Act Lead to Risky Lending,” which purports to find evidence that “yes, it did.” The study is severely flawed, both in terms of the empirical analysis and in the authors’ interpretation of the results, and thus fails to contribute to the existing literature on both the strengths and weaknesses of CRA.


Debunking the CRA Myth – Again


UNC Center for Community Capital


Given CEOs' proclivity for government bashing, any lenders being driven to write bad loans by the CRA would have been on CNBC screaming at the top of their lungs.

But that dog that didn't bark.

 

[Dad2three]

Weird, so there was a housing bubble? AND?

BANKSTERS CREATED A WORLD WIDE CREDIT BUBBLE AND BUST. Dozens of nations. CRA? LOL

How about the subprime auto Biz and commercial real estate bubbles at the same time as Dubya's subprime bubble? lol

FACTS on Dubya's great recession
Q When did the Bush Mortgage Bubble start?

A The general timeframe is it started late 2004.

Nope, if you could read a graph you would see the upswing started in 1997. Are you blind as well as stupid?

From Bush’s President’s Working Group on Financial Markets October 2008

How strange, a leftist president wants to put the blame solely on a rightist president.It was definitely part of the problem.

A "Since 1995 there has been essentially no change in the basic CRA rules or enforcement process that can be reasonably linked to the subprime lending activity. This fact weakens the link between the CRA and the current crisis since the crisis is rooted in poor performance of mortgage loans made between 2004 and 2007. "

The bold was my emphasis. Who ever made the assertion that the enforcement process did not change between 1995 and 2004 was lying through his teeth. Not just an error, an outright bald faced lie.

Right-wingers Want To Erase How George Bush's "Homeowner Society" Helped Cause The Economic Collapse

Are you really that stupid? The primary cause of the housing bubble was low down payment or interest used to push housing to more people who could not previously qualify. That started during Clinton's term and the inflation cycle started in 1997.

It is obvious you can't read a graph or you wouldn't make such stupid comments.

I did not say CRA CAUSED the bubble. I said it contributed to it because the concept of providing home ownership to more of the less wealthy. CRA was not enforced during Carter's administration even though that is when it was passed. Clinton was the one who STARTED to push more home ownership BECAUSE OF CRA, but it was the government policies of low interest, low or no down payments continued into Bush's administration which fueled the inflation because of the heated housing market which led to the balloon and subsequent crash. Lenders were not necessarily covered by CRA, but when Fannie and Freddie allowed lower lending standards (sub prime) they had to follow suit to stay in business, and that was part of the deregulation.

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

Democrats and the media insist the Community Reinvestment Act, the anti-redlining law beefed up by President Clinton, had nothing to do with the subprime mortgage crisis and recession.

But a new study by the respected National Bureau of Economic Research finds, "Yes, it did. We find that adherence to that act led to riskier lending by banks."

Added NBER: "There is a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam. Moreover, the effects are larger for loans made within CRA tracts," or predominantly low-income and minority areas.​

Wait! Government did cause the housing bubble. - CSMonitor.com

In the 2000s, of course, malinvestment appeared largely in real estate, the result of government programs designed to relax underwriting standards and otherwise increase investment in particularly risky real-estate assets. In other words, ABCT tells us to look for malinvestment during the boom, but not where that malinvestment will show up.

Paul Krugman asserts, for example, that the “Community Reinvestment Act of 1977 was irrelevant to the subprime boom.” Actually, no. A new NBER paper (gated) on the CRA is causing quite a stir. Authored by four economists from NYU, MIT, Northwestern, and Chicago, the paper is the first to use instrumental-variables regression to distinguish changes in bank lending caused by the CRA from changes that would likely have happened anyway. (The authors use the timing of loan decisions relative to the dates of CRA audits to identify the effect of the CRA on lending.) The results suggest that CRA enforcement did, contra Krugman, lead banks to make substantially riskier loans than otherwise.

Rahan said, "“
The key then to understanding the recent crisis is to see why markets offered inordinate rewards for poor and risky decisions. Irrational exuberance played a part, but perhaps more important were the political forces distorting the markets. The tsunami of money directed by a US Congress, worried about growing income inequality, towards expanding low income housing, joined with the flood of foreign capital inflows to remove any discipline on home loans. And the willingness of the Fed to stay on hold until jobs came back, and indeed to infuse plentiful liquidity if ever the system got into trouble, eliminated any perceived cost to having an illiquid balance sheet."

I’d reverse the order of emphasis — credit expansion first, housing policy second — but Rajan is right that government intervention gets the blame all around.​

In other words Dad2three, you are looking at old guesses and opinions instead of the more recent ECONOMIC STUDIES which prove the typical left wing assertions were WRONG.

None of that long diatribe of bad information negates the newer studies that the CRA DID HAVE A NEGATIVE IMPACT ON THE HOUSING BALLOON/CRASH.[/QUOTE]



Loans that were under government regulation did better than private loans, especially if they were regulated by the "Community Reinvestment Act."



Center for Public Integrity reported in 2011, mortgages financed by Wall Street from 2001 to 2008 were 4½ times more likely to be seriously delinquent than mortgages backed by Fannie and Freddie.

Nobody forced the big five investment banks to do what they did; they were not subject to CRA or other regulations common to depository banks. In fact, they mainly bought and sold loans rather than originate them. They did it because they thought they would make money.



FACTS on Dubya's great recession
Q When did the Bush Mortgage Bubble start?

A The general timeframe is it started late 2004.

MAY 2008

“The Presidents Working Group’s March policy statement acknowledged that turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007.”

At an FCIC hearing in January 2010, JPMorgan Chase CEO Jamie Dimon told the Commission, “I blame the management teams 100% . . . and no one else.”



Bank of America CEO Brian Moynihan told the FCIC: “Over the course of the crisis, we, as an industry, caused a lot of damage. Never has it been clearer how poor business judgments we have made have affected Main Street.”


Alan Greenspan:

"I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms," said Greenspan.


It is clear to anyone who has studied the financial crisis of 2008 that the private sector’s drive for short-term profit was behind it.






...The nonbank underwriters made more than 12 million subprime mortgages with a value of nearly $2 trillion. The lenders who made these were exempt from federal regulations.


Lest We Forget: Why We Had A Financial Crisis - Forbes




Jun 16th 2005




The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops



According to estimates by The Economist, the total value of residential property in developed economies rose by more than $30 trillion over the past five years, to over $70 trillion, an increase equivalent to 100% of those countries' combined GDPs



The global housing boom: In come the waves | The Economist

Community Reinvestment Act had nothing to do with subprime crisis



GROW A BRAIN BUBBA!

 

[Dad2three]

There's an interesting new paper out on the role of the Community Reinvestment Act and the housing bubble. The paper, called "Did the Community Reinvestment Act (CRA) Lead to Risky Lending?" is by Sumit Agrawal, Efraim Benmelech, Nittai Bergman, and Amit Seru (ABBS). It is a serious economic analysis, which is a major departure from much of the post-2008 grumbling about the CRA. By exploiting the differences in lending behavior within census tracts between banks that are undergoing CRA exams and those that aren't, ABBS find that undergoing a CRA exam is correlated with a rise in mortgage lending and that those loans perform more poorly than those made in the same census tract by institutions not undergoing CRA exams. In other words, the CRA encouraged more lending and as a result it resulted in less prudent lending.

CRA and the Housing Bubble - Credit Slips

YEAH, AEI'S BULLSHIT HAS BEEN DEBUNKED, OVER AND OVER

It’s telling that, amid all the recent recriminations, even lenders have not fingered CRA. That’s because CRA didn’t bring about the reckless lending at the heart of the crisis. Just as sub-prime lending was exploding, CRA was losing force and relevance. And the worst offenders, the independent mortgage companies, were never subject to CRA — or any federal regulator. Law didn’t make them lend. The profit motive did. And that is not political correctness. It is correctness.

 

[Dad2three]

YES, the "only" institutions which were regulated by CRA were large commercial banks, BUT that CREATED the DEMAND that small mortgage companies happily filled. CRA loans were bundled as securities and sold all around the world...but the starting point of the entire food chain was the government forcing commercial banks to make unwise loans.

What happens to prices when suddenly MILLIONS of people can now buy the same product? Thats right - bidding wars -and prices skyrocketed, didn't they? With skyhigh prices many conventional borrowers chose Alt-A and Option Arm loans for the following reasons: (1) to get into the house, and (2) cope with skyhigh payments. Other's with equity borrowed in order to buy commercial properties. The cancer spread and it all started with CRA, kinda like when you toss a pebble into a pond - the ripple effect. By some estimates all this housing activity accounted for more than 40% of ALL jobs in the U.S. since 2001. Its ALL inter-related.

CRA caused the housing crash

YES, the "only" institutions which were regulated by CRA were large commercial banks, BUT that CREATED the DEMAND that small mortgage companies happily filled.


WHY THE FUCK WOULD THE SMALL (OR LARGE) MORTGAGE COMP'S GIVE A FUCK ABOUT CRA OR THEIR GOALS? THEY WEREN'T INCLUDED IN IT. Oops

CRA AROUND FOR 30 YEARS CAUSED THE SUBPRIME MARKET TO EXPLODE IN 2004? LOL



FACTS on Dubya's great recession
Q When did the Bush Mortgage Bubble start?

A The general timeframe is it started late 2004.

From Bush’s President’s Working Group on Financial Markets October 2008

“The Presidents Working Group’s March policy statement acknowledged that turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007.”



Q Did the Community Reinvestment Act under Carter/Clinton caused it?


A "Since 1995 there has been essentially no change in the basic CRA rules or enforcement process that can be reasonably linked to the subprime lending activity. This fact weakens the link between the CRA and the current crisis since the crisis is rooted in poor performance of mortgage loans made between 2004 and 2007. "


http://www.federalreserve.gov/newsevents/speech/20081203_analysis.pdf



Q Why is it commonly called the “subprime bubble” ?

A Because the Bush Mortgage Bubble coincided with the explosive growth of Subprime mortgage and politics. Also the subprime MBS market was the first to collapse in late 2006. In 2003, 10 % of all mortgages were subprime. In 2006, 40 % were subprime. This is a 300 % increase in subprime lending. (and notice it coincides with the dates of the Bush Mortgage bubble that Bush and the Fed said)

“Some 80 percent of outstanding U.S. mortgages are prime, while 14 percent are subprime and 6 percent fall into the near-prime category. These numbers, however, mask the explosive growth of nonprime mortgages. Subprime and near-prime loans shot up from 9 percent of newly originated securitized mortgages in 2001 to 40 percent in 2006


https://www.dallasfed.org/assets/documents/research/eclett/2007/el0711.pdf


Q. Er uh, didn’t you notice your link said the explosive growth of subprime mortgages started in 2001?

A. It did kinda say that didn’t it? However, the link below clearly states subprime was 10 % in 2003. 9% in 2001 to 10% in 2003 is only a 1% increase. A 1 % increase over 3 years is flat not explosive. 10 % in 2003 to 40% in 2006 is explosive. So the explosive growth started in 2004 which lines up pretty good but not exactly with the timeframe of the Bush Mortgage Bubble.


“In dollar terms, nonprime mortgages represented 32 percent of all mortgage originations in 2005, more than triple their 10 percent share only two years earlier

FRB: Finance and Economics Discussion Series: Screen Reader Version - 200899



Q Well there was a 300 % increase in subprime loans. Why not call it a “Subprime Bubble”?

A Subprime loans refers to the credit score of the borrower. It doesn’t make it a bad loan if proper underwriting standards are used. Bush’s working group said it was “triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages,”. He leaves out the part where it “quickly spread to all mortgages”. In 2004, 4.3 % of all mortgages were No Doc loans. In 2006 over 50% of all loans were No Doc loans. That’s over a 1000 % increase in loans where the borrowers income was not fully documented or documented at all. “Another form of easing” is a nice way of saying “lower lending standards”. And notice it lines up with the dates already posted. In addition to No Docs, banks allowed piggyback loans, teaser rates, I/0 and even negative amortization loans.

(from Dallas Fed link above)

"Another form of easing facilitated the rapid rise of mortgages that didn't require borrowers to fully document their incomes. In 2006, these low- or no-doc loans comprised 81 percent of near-prime, 55 percent of jumbo, 50 percent of subprime and 36 percent of prime securitized mortgages."

Q HOLY JESUS! DID YOU JUST PROVE THAT OVER 50 % OF ALL MORTGAGES IN 2006 DIDN’T REQUIRE BORROWERS TO DOCUMENT THEIR INCOME?!?!?!?

A Yes.




Q WHO THE HELL LOANS HUNDREDS OF THOUSANDS OF DOLLARS TO PEOPLE WITHOUT CHECKING THEIR INCOMES?!?!?

A Banks.

Q WHY??!?!!!?!

A Two reasons, greed and Bush's regulators let them.


MUCH,MUCH MORE HERE

http://www.usmessageboard.com/economy/362889-facts-on-dubya-s-great-recession.html

 

[Dad2three]

'twas Wall Street greed what done it, some folks say, when it comes to explaining the spectacular housing meltdown of recent years, which had its roots in a great many astonishingly risky loans. Other folks suggest that the federal government just may have played something of a role in inducing, even strong-arming, banks to take risks they otherwise would have avoided. Specifically, the Community Reinvestment Act and related policy pressures are pointed to as culprits, part of a government effort to extend home-ownership in lower-income neighborhoods. Now comes a new study from the National Bureau of Economic Research that says, quite bluntly. that the CRA played a major role.

Study Says Community Reinvestment Act Induced Banks To Take Bad Risks - Hit & Run : Reason.com

WORLD WIDE CREDIT BUBBLE AND BUST, LOL



I never meant to say that the conservatives are generally stupid. I meant to say that stupid people are generally Conservative. I believe that is so obviously and universally admitted a principle that I hardly think any gentleman will deny it.

John Stuart Mill, in a letter to the Conservative MP, John Pakington

 

[TakeAStepBack]

Explain how a US sub-prme mortgage crisis went world wide by itself or STFU, 2,350th tier partisan hack.

 

[Dad2three]

Why did the Housing Market Crash? There are many people who are asking this question and most of them did not recognize the irrationality during the housing bubble nor had the foresight that the housing bubble would collapse.

Contrary to the misconception that it was the free market that made the housing bubble possible it was interference in the market place that distorted the demand and supply variables for credit and real estate. The Federal Reserve greatly distorts the supply and availability of money with its anti-free market loose interest rate manipulation. The Government also interferes in the market place with non-sense guarantees of home loans made through Fannie Mae, Freddie Mac, USDA, and VA.

It wasn’t the free market that encouraged malinvestment and speculation. It was the Government guaranteeing home loans through various agencies such as Fannie Mae and Freddie Mac that eliminated risk as the lender would have the ability to make loans while the Government guaranteed its potential losses.


Why Did The Housing Market Crash?*|*WTF Finance

It wasn’t the free market that encouraged malinvestment and speculation. It was the Government guaranteeing home loans through various agencies such as Fannie Mae and Freddie Mac that eliminated risk as the lender would have the ability to make loans while the Government guaranteed its potential losses.


WEIRD, SO YOU DON'T KNOW WHAT A GOV'T GUARANTEE IS OR DOES? IF THAT WAS THE CASE WHY DID THE BANKS LOSE MONEY? LOL


STOP BEING SO IGNORANT OLD MAN!!!




It is clear to anyone who has studied the financial crisis of 2008 that the private sector’s drive for short-term profit was behind it.


No, the GSEs Did Not Cause the Financial Meltdown (but thats just according to the data)


1. Private markets caused the shady mortgage boom: The first thing to point out is that the both the subprime mortgage boom and the subsequent crash are very much concentrated in the private market, especially the private label securitization channel (PLS) market. The Government-Sponsored Entities (GSEs, or Fannie and Freddie) were not behind them. The fly-by-night lending boom, slicing and dicing mortgage bonds, derivatives and CDOs, and all the other shadiness of the mortgage market in the 2000s were Wall Street creations, and they drove all those risky mortgages.

Here’s some data to back that up: “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.”

As Center For American Progress’s David Min pointed out to me, the timing doesn’t work at all: “But from 2002-2005, [GSEs] saw a fairly precipitous drop in market share, going from about 50% to just under 30% of all mortgage originations. Conversely, private label securitization [PLS] shot up from about 10% to about 40% over the same period. This is, to state the obvious, a very radical shift in mortgage originations that overlapped neatly with the origination of the most toxic home loans.”

2. The government’s affordability mission didn’t cause the crisis


4. Conservatives sang a different tune before the crash: Conservative think tanks spent the 2000s saying the exact opposite of what they are saying now


Hey Mayor Bloomberg! No, the GSEs Did Not Cause the Financial Meltdown (but thats just according to the data) | The Big Picture


...The nonbank underwriters made more than 12 million subprime mortgages with a value of nearly $2 trillion. The lenders who made these were exempt from federal regulations.


It is clear to anyone who has studied the financial crisis of 2008 that the private sector’s drive for short-term profit was behind it.





...The nonbank underwriters made more than 12 million subprime mortgages with a value of nearly $2 trillion. The lenders who made these were exempt from federal regulations.



Lest We Forget: Why We Had A Financial Crisis - Forbes




Government data show Fannie and Freddie didn’t take the same risks that Wall Street’s mortgage-backed securities machine did. Mortgages financed by Wall Street from 2001 to 2008 were 4½ times more likely to be seriously delinquent than mortgages backed by Fannie and Freddie.



“The idea that they were leading this charge is just absurd,” said Guy Cecala, publisher of Inside Mortgage Finance, an authoritative trade publication. “Fannie and Freddie have always had the tightest underwriting on earth…They were opposite of subprime.”


Wall Street, Not Fannie and Freddie, Led Mortgage Meltdown - The Daily Beast

 

[Dad2three]

Explain how a US sub-prme mortgage crisis went world wide by itself or STFU, 2,350th tier partisan hack.

No Bubba, it was a WORLD WIDE CREDIT BUBBLE BUBBA. In the US Dubya's REGULATOR failure allowed it to happen here


Regulators and policymakers enabled this process at virtually every turn. Part of the reason they failed to understand the housing bubble was willful ignorance: they bought into the argument that the market would equilibrate itself. In particular, financial actors and regulatory officials both believed that secondary and tertiary markets could effectively control risk through pricing.


http://www.tobinproject.org/sites/tobinproject.org/files/assets/Fligstein_Catalyst of Disaster_0.pdf



The historical "originate and hold" mortgage model was replaced with the "originate and distribute" model. Incentives were such that you could get paid just to originate and sell the mortgages down the pipeline, passing the risk along. The big investment banks simply connected the investors to the originators, helped by the AAA ratings.

 

[Dad2three]

Question: what percentage of subprime loans were overseen by FM/FM?

And why did FM/FM get bailed out?

Very few, they didn't meet their underwriting standards, but WHY they got bailed out? Dubya REQUIRED them to buy $440 BILLION in MBS's starting in 2002

He then changed Clinton's rules and allowed them to count the MBS's from the PRIVATE markets (that didn't meet F/F underwriting standards) to against his 'affordable housing goals from 50% to 56%



"(In 2000, CLINTON) HUD restricted Freddie and Fannie, saying it would not credit them for loans they purchased that had abusively high costs or that were granted without regard to the borrower's ability to repay."

How HUD Mortgage Policy Fed The Crisis

"In 2004 (BUSH), the 2000 rules were dropped and high‐risk loans were again counted toward affordable housing goals."

http://www.prmia.org/sites/default/files/references/Fannie_Mae_and_Freddie_Mac_090911_v2.pdf


“The idea that they were leading this charge is just absurd,” said Guy Cecala, publisher of Inside Mortgage Finance, an authoritative trade publication. “Fannie and Freddie have always had the tightest underwriting on earth…They were opposite of subprime.”

Wall Street, Not Fannie and Freddie, Led Mortgage Meltdown - The Daily Beast

 

[TakeAStepBack]

The global housing boom: In come the waves | The Economist

The global boom in house prices has been driven by two common factors: historically low interest rates have encouraged home buyers to borrow more money; and households have lost faith in equities after stock markets plunged, making property look attractiveAs a built in historic wealth containment mechanism. Will prices now fall, or simply flatten off? And in either case, what will be the consequences for economies around the globe? The likely answers to all these questions are not comforting.

 

[TakeAStepBack]

Your own link makes you look like a farkin' tard, fella.

 

[Dad2three]

Yep! That law contributed to the problem as the more recent study proves. If you are not smart enough to recognize a legitimate study after the defensive sounds from the Fed, they you are too stupid to exist in this world. I don't have to try more, I have proved my point in spades, and you continue to parrot your left wing extremist propaganda.

SO YOU IGNORE THE STUDY THAT RIPPED THE AEI STUDY APART?


YEAH, A LAW AROUND FOR 30 YEARS AND WEAKENED ENFORCEMENT UNDER DUBYA, CAUSED A WORLD WIDE CREDIT BUBBLE, LOL

Debunking the CRA Myth – Again

One of the pernicious myths surrounding CRA is that it encouraged banks to make risky loans to low‐ and moderate‐income borrowers.

This argument has been made primarily by conservative think tanks, like American Enterprise Institute, who find it convenient to include CRA in their general position against governmental intervention in the private market.

But efforts to blame CRA for the most recent crisis reflect a deep misunderstanding of the scope and scale of CRA and its implementation. Indeed, the “blame the CRA” story has been refuted by industry leaders and researchers time and time again. Unfortunately, this narrative refuses to go away.


In this paper, center researchers review the research evidence on CRA and show that there is no credible research to support the assertion that CRA contributed to an increase in risky lending during the subprime boom. In particular, they present a detailed rebuttal of a recent paper published by the National Bureau of Economic Research, titled “Did the Community Reinvestment Act Lead to Risky Lending,” which purports to find evidence that “yes, it did.” The study is severely flawed, both in terms of the empirical analysis and in the authors’ interpretation of the results, and thus fails to contribute to the existing literature on both the strengths and weaknesses of CRA.

January 2013

UNC Center for Community Capital




Fannie & Freddie Mac & CRA didn’t cause the Mortgage Crisis



A study by the Joint Center for Housing Studies Harvard University on the Subprime Lending and the Community Reinvestment Act concluded that: data provided by the Home Mortgage Disclosure Act (HMDA) reveal that loans covered by the CRA accounted for only a fraction of mortgage lending to lower-income borrowers and neighborhood



Their data clearly shows that the vast majority (94%) of subprime lending was conducted by lenders outside of CRA scrutiny, and therefore under no government ‘coercion’ to lend to lower income and/or higher risk borrowers.


http://www.factandmyth.com/wp-content/uploads/2011/09/cra-assessment-image.gif

Fannie & Freddie Mac & CRA didn?t cause the Mortgage Crisis | Fact and Myth


US GOV'T POLICY HUH?


JUNE 16, 2005

The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops


The global housing boom: In come the waves | The Economist


GROW A BRAIN!!!


According to estimates by The Economist, the total value of residential property in developed economies rose by more than $30 trillion over the past five years, to over $70 trillion, an increase equivalent to 100% of those countries' combined GDPs.

Oh... right...

The Ecommunist...


That's not a leftist rag...


Get a grip bed wetter.

BLOW ME!! Bubba

 

[TakeAStepBack]

Explain how a US sub-prme mortgage crisis went world wide by itself or STFU, 2,350th tier partisan hack.

No Bubba, it was a WORLD WIDE CREDIT BUBBLE BUBBA. In the US Dubya's REGULATOR failure allowed it to happen here


Regulators and policymakers enabled this process at virtually every turn. Part of the reason they failed to understand the housing bubble was willful ignorance: they bought into the argument that the market would equilibrate itself. In particular, financial actors and regulatory officials both believed that secondary and tertiary markets could effectively control risk through pricing.


http://www.tobinproject.org/sites/tobinproject.org/files/assets/Fligstein_Catalyst of Disaster_0.pdf



The historical "originate and hold" mortgage model was replaced with the "originate and distribute" model. Incentives were such that you could get paid just to originate and sell the mortgages down the pipeline, passing the risk along. The big investment banks simply connected the investors to the originators, helped by the AAA ratings.

A credit bubble doesn't originate from lenders, it originates from those who mandate lending; the Federal Reserve and the initiatives of the congress of both wings.

 

[TakeAStepBack]

Who controls interest rates, Derp2three?

 

[Dad2three]

The global housing boom: In come the waves | The Economist

The global boom in house prices has been driven by two common factors: historically low interest rates have encouraged home buyers to borrow more money; and households have lost faith in equities after stock markets plunged, making property look attractiveAs a built in historic wealth containment mechanism. Will prices now fall, or simply flatten off? And in either case, what will be the consequences for economies around the globe? The likely answers to all these questions are not comforting.

Cool and?

Did the Fed Cause the housing Bubble?

According to research by Ambrogio Cesa-Bianchi and Alessandro Rebucci, the housing bubble was caused by "regulatory rather than monetary-policy failures":

Economist's View: Did the Fed Cause the housing Bubble?




Was it easy money or easy regulation that caused the housing bubble?


… after the Fed started to tighten its monetary-policy stance and the prime segment of the mortgage market promptly turned around, the subprime segment of the mortgage market continued to boom, with increased perceived risk of loans portfolios and declining lending standards. Despite this evidence, the first regulatory action to rein in those financial excesses was undertaken only in late 2006, after almost two years of steady increases in the federal funds rate. …

When regulators finally decided to act, it was too late:

Was it easy money or easy regulation that caused the housing bubble? | AEIdeas



Regulators and policymakers enabled this process at virtually every turn. Part of the reason they failed to understand the housing bubble was willful ignorance: they bought into the argument that the market would equilibrate itself. In particular, financial actors and regulatory officials both believed that secondary and tertiary markets could effectively control risk through pricing.


http://www.tobinproject.org/sites/tobinproject.org/files/assets/Fligstein_Catalyst of Disaster_0.pdf

 

[TakeAStepBack]

Who controls interest rates?