My view on why our economy is pure shit.

[samjones]

You're out of your element here. I'd suggest you move to the General forum and post on things like gardening and what song you're listening to. In the mean time, you can educate yourself. Here, I'll even give you your first reading assignment.

http://research.stlouisfed.org/conferences/gse/White.pdf

You can thank me later.

It's too simplistic to explain the Housing Bubble. I'm not disputing anything in the link that you provided and I'm not saying that subprime loans weren't a problem. I'm only pointing out that the Housing Bubble appears to be a much larger problem, pretty much destroying the housing market for everybody - subprime or not.

 

[kwc57]

You're out of your element here. I'd suggest you move to the General forum and post on things like gardening and what song you're listening to. In the mean time, you can educate yourself. Here, I'll even give you your first reading assignment.

http://research.stlouisfed.org/conferences/gse/White.pdf

You can thank me later.

It's too simplistic to explain the Housing Bubble. I'm not disputing anything in the link that you provided and I'm not saying that subprime loans weren't a problem. I'm only pointing out that the Housing Bubble appears to be a much larger problem, pretty much destroying the housing market for everybody - subprime or not.

Yes, when the government meddles in things like good sound banking practices and forces banks to make unsound loans in the name of "fairness" with the promise to guarantee said unsound loans, the shit is going to run downhill to everyone. There is plenty of blame to go around, but it was the good old government that got the ball rolling and kept kicking it even when some told them what was coming.

 

[samjones]

Yes, when the government meddles in things like good sound banking practices and forces banks to make unsound loans in the name of "fairness" with the promise to guarantee said unsound loans, the shit is going to run downhill to everyone. There is plenty of blame to go around, but it was the good old government that got the ball rolling and kept kicking it even when some told them what was coming.

Alot of people make the mistake of assuming that all subprime loans were made because of CRA. Factually, a very small percentage of subprime loans were CRA required.

FURTHERMORE, alot of loans in CRA neighborhoods were made by banks that were not bound by CRA... if you understand the actual requirements of CRA you'll understand what that means.... and comparing loans in (I'll say Harlem) made by banks who take deposits in Harlem vs. those that do not - i.e. those that had to make the loans vs those that merely chose to will show that the banks not bound by CRA had a far higher default rate than those that were. Something about having that local presence I think gives banks insight as to which loans are good and bad throughout the process.

The conclusion that you can draw is that banks were aggressively pursuing subprime borrowers only for their own benefit.

 

[Uncensored2008]

Alot of people make the mistake of assuming that all subprime loans were made because of CRA. Factually, a very small percentage of subprime loans were CRA required.

Which is utterly irrelevant.

I keep pointing to the match. The Clinton administration struck the match, they created the pyramid scheme. That greed took over and fueled the conflagration doesn't alter that the match which started this was CRA. It doesn't matter that the idiot Bush thought the whole thing was wonderful and warming, the match that started it all was CRA, with a few million gallons of gasoline poured on by Janet Reno.

FURTHERMORE, alot of loans in CRA neighborhoods were made by banks that were not bound by CRA... if you understand the actual requirements of CRA you'll understand what that means.... and comparing loans in (I'll say Harlem) made by banks who take deposits in Harlem vs. those that do not - i.e. those that had to make the loans vs those that merely chose to will show that the banks not bound by CRA had a far higher default rate than those that were. Something about having that local presence I think gives banks insight as to which loans are good and bad throughout the process.

It makes no difference.

Item 1. Many banks that were not required to comply by the federal government were still required to comply by their backers. No one dared buck up against CRA/LMI, lest they be painted as "racist."

Item 2. A lot of execs at big banks made a lot of big bonuses for making a lot of bad loans. Rape and run is the general term.

Item 3. Most banks signing the loan did not have the ultimate liability for said loans. It's easier to make bad decisions that bring short-term profits when long-term losses are carried by underwriters.

The conclusion that you can draw is that banks were aggressively pursuing subprime borrowers only for their own benefit.

And that changes the equation in WHAT way?

Your logic is akin to; "Janet opened her cash drawer and stole $1,000. Bob saw her and stole $5,000. Clearly Bob is the problem, not Janet."

 

[samjones]

Item 1. Many banks that were not required to comply by the federal government were still required to comply by their backers. No one dared buck up against CRA/LMI, lest they be painted as "racist."

It's almost like you have no idea what CRA is....

You don't have to be any particular race to benefit from CRA lending.

Discriminating against a borrower on the basis of race is illegal for several reasons that have nothing to do with CRA.

Bill Clinton didn't start CRA. George W. Bush had plenty of time to kill it if he thought it was going to be a problem.

And it wasn't a problem. Besides the fact that an inconsquential percentage of subprime loans claimed to meet CRA requirements and despite the fact that those loans defaulted half as often as other subprime loans by lenders in the same neighborhoods who weren't bound by CRA..... Besides those facts, it's also reasonable to assume that the loans for the small number (6%) of subprime loans in CRA neighborhoods were signifcantly smaller than those not and besides all that I see no cause and effect between sinking property values in Harlem and sinking property values on the Upper West Side.

Your analysis just totally fails.

Unless you prefer to blame it on bank execs, short term profits, developers and Bob and Janet instead.

 

[Uncensored2008]

It's almost like you have no idea what CRA is....

You don't have to be any particular race to benefit from CRA lending.

Yeah.....

CRA had nothing to do with minority home buying....

{The most significant regulatory efforts to expand home ownership have centered on
influencing private mortgage market institutions by creating goals for their performance in meeting the credit needs of low-income minority households.22 Intended to prevent and reverse the effects of decades of redlining—the practice of not lending to particular geographic areas based on racial composition—and urban disinvestment, the Community Reinvestment Act (CRA), enacted in 1977, required federally insured depository institutions to meet the credit needs of the communities in which they are chartered, including low- and moderate-income neighborhoods.}

http://www.brookings.edu/es/urban/knight/chapter3.pdf

Discriminating against a borrower on the basis of race is illegal for several reasons that have nothing to do with CRA.

CRA was designed to make credit available to minority applicants - this is simply a matter of fact.

Bill Clinton didn't start CRA. George W. Bush had plenty of time to kill it if he thought it was going to be a problem.

Jimmy Carter started CRA. Clinton vastly expanded it and used the Justice department to attack any FDIC lender who failed to meet CRA minority goals.

And it wasn't a problem.

ROFL

Are you ignorant, or just duplicitous?

Besides the fact that an inconsquential percentage of subprime loans claimed to meet CRA requirements and despite the fact that those loans defaulted half as often as other subprime loans by lenders in the same neighborhoods who weren't bound by CRA..... Besides those facts, it's also reasonable to assume that the loans for the small number (6%) of subprime loans in CRA neighborhoods were signifcantly smaller than those not and besides all that I see no cause and effect between sinking property values in Harlem and sinking property values on the Upper West Side.

Inconsequential, huh?

HuggingGlue and the other hate sites are getting bold with the utter bullshit they have the troops spewing.

Every FDIC insured lender was/is required to comply with CRA. This means that Wall Street and non-bank investors were exempt, but to claim that those who were required to comply were insignificant is laughable in the chutzpah required.

Your analysis just totally fails.

Unless you prefer to blame it on bank execs, short term profits, developers and Bob and Janet instead.

Facts are your enemy.

 

[samjones]

CRA was designed to make credit available to minority applicants - this is simply a matter of fact.

It seems to be the fact that bothers you the most. You can look up the other facts from the bipartisan Angelides Commission. They're going to to tell you that CRA did not play a significant role in the subprime mortgage crisis. Sam Jones will tell you that is played absolutely ZERO role in the Housing Bubble.

While is is true that FDIC lenders were all bound by CRA, those same lenders only had to make loans in communities that they took deposits in. Which makes sense. You don't want to make loans in Harlem, don't open a branch there.

Now you will go look up Angelides Commission and then we can move on to some other topic that I'm sure your all ticked off at me about.

 

[kwc57]

Yes, when the government meddles in things like good sound banking practices and forces banks to make unsound loans in the name of "fairness" with the promise to guarantee said unsound loans, the shit is going to run downhill to everyone. There is plenty of blame to go around, but it was the good old government that got the ball rolling and kept kicking it even when some told them what was coming.

Alot of people make the mistake of assuming that all subprime loans were made because of CRA. Factually, a very small percentage of subprime loans were CRA required.

FURTHERMORE, alot of loans in CRA neighborhoods were made by banks that were not bound by CRA... if you understand the actual requirements of CRA you'll understand what that means.... and comparing loans in (I'll say Harlem) made by banks who take deposits in Harlem vs. those that do not - i.e. those that had to make the loans vs those that merely chose to will show that the banks not bound by CRA had a far higher default rate than those that were. Something about having that local presence I think gives banks insight as to which loans are good and bad throughout the process.

The conclusion that you can draw is that banks were aggressively pursuing subprime borrowers only for their own benefit.

But what made that possible? The government telling them they didn't need to worry about it, they would back the loans. A bank is a business. Businesses exist to turn a profit. Give them a guaranteed means to turn a profit and they'd be fools to turn it down. It all goes back to the government. Anger at the banks is misplaced by the media and most people who have no clue how things work.

 

[samjones]

But what made that possible? The government telling them they didn't need to worry about it, they would back the loans. A bank is a business. Businesses exist to turn a profit. Give them a guaranteed means to turn a profit and they'd be fools to turn it down. It all goes back to the government. Anger at the banks is misplaced by the media and most people who have no clue how things work.

It's okay to sell out the USA for a profit????

Okay - I'll admit that I'm being overly idealistic to assume that anybody but God would care about the best interests of Freddie, Fannie, fools and drunks, but the facts, from either side, show that there was a huge TON of subprime lending that had nothing to do with CRA or Fannie/Freddie. Granted, when Freddie/Fannie is buying subprime it would give the entire sector the impression that subrprime was safe, but Freddie/Fannie was divesting in subprime way before '06.

 

[Uncensored2008]

It seems to be the fact that bothers you the most.

And you retreat to ad hom - now that the distortion no longer works.

You can look up the other facts from the bipartisan Angelides Commission. They're going to to tell you that CRA did not play a significant role in the subprime mortgage crisis. Sam Jones will tell you that is played absolutely ZERO role in the Housing Bubble.

Sam Jones is an idiot.

CRA is the catalyst that created the sub-prime market.

While is is true that FDIC lenders were all bound by CRA, those same lenders only had to make loans in communities that they took deposits in. Which makes sense. You don't want to make loans in Harlem, don't open a branch there.

Until the left files suit for not serving minority communities.

Now you will go look up Angelides Commission and then we can move on to some other topic that I'm sure your all ticked off at me about.

Phil Angelides is a partisan sack of shit. I'd take the word of Willy Brown before I lent credence to ANYTHING Angelides said.

Even HuffingGlue noted it was theater - a farce.

Robert Teitelman: On the Report of the Angelides Commission

 

[kwc57]

But what made that possible? The government telling them they didn't need to worry about it, they would back the loans. A bank is a business. Businesses exist to turn a profit. Give them a guaranteed means to turn a profit and they'd be fools to turn it down. It all goes back to the government. Anger at the banks is misplaced by the media and most people who have no clue how things work.

It's okay to sell out the USA for a profit????

Okay - I'll admit that I'm being overly idealistic to assume that anybody but God would care about the best interests of Freddie, Fannie, fools and drunks, but the facts, from either side, show that there was a huge TON of subprime lending that had nothing to do with CRA or Fannie/Freddie. Granted, when Freddie/Fannie is buying subprime it would give the entire sector the impression that subrprime was safe, but Freddie/Fannie was divesting in subprime way before '06.

A business owner does not start a business to provide jobs or to serve the USA. They start a business to make a profit and provide a living for themselves and their family. If they are good at what they do, they have the potential to accumulate wealth. Jobs are a byproduct of a successful business, but not the purpose for it's existence. Whether or not the business owner wants to be patriotic in his business decisions is up to him and not required.

 

[samjones]

CRA is the catalyst that created the sub-prime market.

No - that's not a fair assessment. But the same political agenda that encourages home ownership for all socioeconomic classes has pushed the CRA agenda and also pushed Fannie to buy subprimes. And it would be fair to say that Bill Clinton and Jimmy Carter both definitely backed that agenda.

Personally I think that having the capacity to buy your own home if you work hard and live right is just part of the American value system. Owning one's home is, after all, The American Dream and I can't see why Megabank can't be asked to sacrifice a bit to finance that at a profit with the Treasury's money.....

But there is the financial crisis of '08 where this shitstorm happened because all the houses had that number on the left reduced by one and the poor people said fuck it and went back to renting from The Man.

The market was overvalued. That's the problem. It hit the subprimers hard, but it affected all of us..... which takes me back to the fact that the banks were systematically overvaluing the homes that they were lending on based on flawed accounting principles.

Fannie and Freddie were too. The flaws are still there but it doesn't pose a problem when the market sucks.

 

[Old_Liberal]

But what made that possible? The government telling them they didn't need to worry about it, they would back the loans. A bank is a business. Businesses exist to turn a profit. Give them a guaranteed means to turn a profit and they'd be fools to turn it down. It all goes back to the government. Anger at the banks is misplaced by the media and most people who have no clue how things work.

It's okay to sell out the USA for a profit????

Okay - I'll admit that I'm being overly idealistic to assume that anybody but God would care about the best interests of Freddie, Fannie, fools and drunks, but the facts, from either side, show that there was a huge TON of subprime lending that had nothing to do with CRA or Fannie/Freddie. Granted, when Freddie/Fannie is buying subprime it would give the entire sector the impression that subrprime was safe, but Freddie/Fannie was divesting in subprime way before '06.

A business owner does not start a business to provide jobs or to serve the USA. They start a business to make a profit and provide a living for themselves and their family. If they are good at what they do, they have the potential to accumulate wealth. Jobs are a byproduct of a successful business, but not the purpose for it's existence. Whether or not the business owner wants to be patriotic in his business decisions is up to him and not required.

Business has a social responsibility, and they used to exercise that. There has always been dirt poor folks in the world who would work for pennies on the buck. Cheap labor is not new. What is new are the free trade agreements that sent manufacturing to cheap labor, and then to be able to sell those goods back into the same market they had a big hand in creating. Parasitic capitalism is what this is.

What we have today is irresponsible capitalism, that is immoral, and only driven by age old human greed. There is more to capitalism than taking advantage of poor people who will work for cents an hour. This is evil capitalism, but we are so evil ourselves we cannot see it these days.

This will eventually push the masses towards socialism, real socialism. That should be your worry. You cannot allow capitalism to only enrich the top. That is something that the people will not stand for, as more join the poverty stricken folks. Enjoy the maximation of profits by cheap commie labor while you have it. It cannot last, and the entire nation is at risk because of this insanity.

 

[Uncensored2008]

No - that's not a fair assessment.

Fair is irrelevant.

It is a fact.

But the same political agenda that encourages home ownership for all socioeconomic classes has pushed the CRA agenda and also pushed Fannie to buy subprimes. And it would be fair to say that Bill Clinton and Jimmy Carter both definitely backed that agenda.

Pushed, mandated - all semantics, right?

When Carter pushed CRA, it was the typical stupid, feel-good crap that the left is so well known for.

But Clinton took it seriously, and made it into the monster that crashed our entire economy.

The left excuses it because his intentions were good. I don't give a fuck about his intentions, which I believe to be nothing more than pandering for votes anyway.

CRA created the sub-prime market, brought forth the concept of high interest for unqualified buyers. Then the greedy got clever, and rolled the sub-primes into ARM's and securitized the loans. Did CRA mandate this? Nope. Were all the sub-prime loans CRA? Nope. But CRA created the market, compliance to CRA is what brought lending institutions to the decision to create these new, sleazy ways of lending. CRA is to blame.

Personally I think that having the capacity to buy your own home if you work hard and live right is just part of the American value system.

That's nice.

Whether you can pay for the home is something not to worry about, though.

Owning one's home is, after all, The American Dream and I can't see why Megabank can't be asked to sacrifice a bit to finance that at a profit with the Treasury's money.....

Yeah, they should just give the homes to those who default.

But there is the financial crisis of '08 where this shitstorm happened because all the houses had that number on the left reduced by one and the poor people said fuck it and went back to renting from The Man.

ROFL

Are you a Shitter? I mean, did you spend months at an "Occupy?"

The financial crises happened because the financial institutions were convinced that increased property values would cover the losses of the toxic loans they were writing. After all, property never LOSES value - right?

The market was overvalued. That's the problem.

Why was it overvalued?

I know you of the left don't grasp concepts like the invisible hand, but when unqualified buyers have the same ability to purchase homes as those who will actually pay for them, the prices are going to shoot through the roof - which they did.

Oh, one minor problem, the CRA and other Toxic loans? The borrowers never had any intention of paying the money back. Once that happened, sales dropped through the floor and suddenly, property values fell to match.

It hit the subprimers hard, but it affected all of us..... which takes me back to the fact that the banks were systematically overvaluing the homes that they were lending on based on flawed accounting principles.

ROFL

The banks don't value anything. Sellers ask for the most they can get. In a SANE system, price/equity is calculated on an appraisers estimate of the actual value of the property. But CRA prohibited the use of P/E, with sub-primes in general soon following suit.

We call this a "ponzi scheme."

Fannie and Freddie were too. The flaws are still there but it doesn't pose a problem when the market sucks.

The "market sucked" because CRA/LMI unleashed shitstorm that brought the US Economy crashing down.

Obama wants to go right back into it - but anyone who missed that he is a fucking moron, just isn't paying any attention at all.

 

[samjones]

CRA created the sub-prime market, brought forth the concept of high interest for unqualified buyers. Then the greedy got clever, and rolled the sub-primes into ARM's and securitized the loans. Did CRA mandate this? Nope. Were all the sub-prime loans CRA? Nope. But CRA created the market, compliance to CRA is what brought lending institutions to the decision to create these new, sleazy ways of lending. CRA is to blame.

94% of subprime loans had nothing to do with CRA. Subprime simply refers to your FICO score and your downpayment.

Lending institutions had a very simple reason for making so many subprime loans..... they were profitable. You are simply barking up the wrong tree. You're so hellbent on blaming this crisis on minorities that you can't think logically.

The financial crises happened because the financial institutions were convinced that increased property values would cover the losses of the toxic loans they were writing. After all, property never LOSES value - right?

I agree. And borrowers were convinced that the rising value of the home would allow them to refinance on more favorable terms.

when unqualified buyers have the same ability to purchase homes as those who will actually pay for them, the prices are going to shoot through the roof - which they did.

I agree with that sentiment. Even qualified buyers were simply paying too much for homes. Banks were simply accepting valuations on homes that they knew to be incorrect. Banks financed the bubble and the Fed made sure that they had plenty of easy money to do it. The subprimers were the only ones who really had the ability to just walk away from the arrangement because they didn't really have any scratch in the game. The rest of us have equity that probalby exceeds the value of the note, even if you do knock 100k off the price of the home.

CRA/LMI unleashed shitstorm that brought the US Economy crashing down.

Not really. Subprimes were just the canary in the coal mine. We all lost a bunch of money - those of us who weren't and aren't couting on it because we weren't and aren't about to sell may not feel any poorer, but we are. The valuation of homes in the CRA neighborhoods had no affect on the value of my home. Those places were always speculative with sucky schools, a changing cultural demographic, a lack of basic services and inevitable transportation woes.

The subprimers probably had some impact on the value of my home.... they were probably actually willing to pay a little more than the primers and that may have affected the market a bit.

The biggest problem is that the bank didn't use historical valuations for home prices and instead used and still use fair value meaurements which incents them to lend more than they should when houses are overvalued and less than they should when houses are undervalued - this provides both a positive feedback loop problem and a negative feedback loopback problem....

 

[EdwardBaiamonte]

The biggest problem is that the bank didn't use historical valuations for home prices

of course thats 100% wrong. All the banks risk management models were based on historical valuations all of which showed that home prices generally do not go down!!

 

[samjones]

The biggest problem is that the bank didn't use historical valuations for home prices

of course thats 100% wrong. All the banks risk management models were based on historical valuations all of which showed that home prices generally do not go down!!

They were based on fair value measuerements. If they were based on historical valuations then they would have shown that home prices generally do not *rise so quckly*.

 

[EdwardBaiamonte]

They were based on fair value measuerements. If they were based on historical valuations then they would have shown that home prices generally do not *rise so quckly*.

why not bring up an important topic. You're always on trivia!!

Houses have gone down 30% so far. If the had risen quickly or slowly over the last 5 years there would have been no recession at all.

 

[samjones]

why not bring up an important topic. You're always on trivia!!

Houses have gone down 30% so far. If the had risen quickly or slowly over the last 5 years there would have been no recession at all.

If they had used historical valuation for determine the size of the loan and the value of the assett on the books then a good measure of volatiity would have been removed from the housing market... How is that trivial?

 

[DSGE]

why not bring up an important topic. You're always on trivia!!

Houses have gone down 30% so far. If the had risen quickly or slowly over the last 5 years there would have been no recession at all.

If they had used historical valuation for determine the size of the loan and the value of the assett on the books then a good measure of volatiity would have been removed from the housing market... How is that trivial?

Well it's not true. They didn't keep housing loans on their books. They were securitized and bundled into asset backed securities, of which there wasn't any historical trends to go off. If there were no mark to market then everything would have happened exactly the same. So much money was being pumped into housing not because of mark to market, but because housing derivatives were returning high yields for supposedly being default risk free (they were rated AAA).