Smoking-Gun Document Ties Policy To Housing Crisis

[expat_panama]

President Obama says the Occupy Wall Street protests show a "broad-based frustration" among Americans with the financial sector, which continues to kick against regulatory reforms three years after the financial crisis.

"You're seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on the abusive practices that got us into this in the first place," he complained earlier this month.

But what if government encouraged, even invented, those "abusive practices"?

Rewind to 1994. That year, the federal government declared war on an enemy — the racist lender — who officials claimed was to blame for differences in homeownership rate, and launched what would prove the costliest social crusade in U.S. history.

At President Clinton's direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties.

Bubble? Regulators Blew It

The threat was codified in a 20-page "Policy Statement on Discrimination in Lending" and entered into the Federal Register on April 15, 1994, by the Interagency Task Force on Fair Lending. Clinton set up the little-known body to coordinate an unprecedented crackdown on alleged bank redlining.

The edict — completely overlooked by the Financial Crisis Inquiry Commission and the mainstream media — was signed by then-HUD Secretary Henry Cisneros, Attorney General Janet Reno, Comptroller of the Currency Eugene Ludwig and Federal Reserve Chairman Alan Greenspan, along with the heads of six other financial regulatory agencies.

"The agencies will not tolerate lending discrimination in any form," the document warned financial institutions.

Ludwig at the time stated the ruling would be used by the agen cies as a fair-lending enforcement "tool," and would apply to "all lenders" — including banks and thrifts, credit unions, mortgage brokers and finance companies.

The unusual full-court press was predicated on a Boston Fed study showing mortgage lenders rejecting blacks and Hispanics in greater proportion than whites. The author of the 1992 study, hired by the Clinton White House, claimed it was racial "discrimination." But it was simply good underwriting.

It took private analysts, as well as at least one FDIC economist, little time to determine the Boston Fed study was terminally flawed. In addition to finding embarrassing mistakes in the data, they concluded that more relevant measures of a borrower's credit history — such as past delinquencies and whether the borrower met lenders credit standards — explained the gap in lending between whites and blacks, who on average had poorer credit and higher defaults.

From Smoking-Gun Document Ties Policy To Housing Crisis - Latest Headlines - Investors.com

 

[expat_panama]

While the left has been trying to blame crisis on the greed of the rich, the facts show it was really the confused altruism of government.

 

[editec]

It took the government working with the BANSTERS to screw things up this bad, that is clearly true.

Trying to blame this whole thing on the CSA is, of course, nothing but WISHFUL thinking.

 

[Mad Scientist]

While the left has been trying to blame crisis on the greed of the rich, the facts show it was really the confused altruism of government.

You got here in April so I guess you missed most of the flame threads about this. And you're right, the gov't encouraged this but blame can also be laid at the feet of lenders as well.

They gave out loans they knew that wouldn't be repaid and either ensured them multiple times against default (in effect shorting their own loans) or bundled them into "derivatives" (with the blessing of the US Gov't and S&P who graded them "AAA") and sold them multiple times.

How can you sell a house multiple times?

 

[expat_panama]

... the gov't encouraged this but blame can also be laid at the feet of lenders as well...

LOL! Reminds me of when our cottage caught fire, the kids with me were standing around blaming each other while I was yelling at them to help me put the fire out. When the fire was out they kept blaming each other while I was telling them what was going to be different so it wouldn't catch fire again.

Blame sucks. Let's think about what we're doing. In this case the fire was the falling bad mortgages. Bankers didn't start the bad mortgages until being threatened by legal attacks. Whether we blame the bankers or the gov't, the bad mortgages are stopped with removing the threat.

......loans they knew that wouldn't be repaid and either ensured them multiple times against default (in effect shorting their own loans) or bundled them into "derivatives" (with the blessing of the US Gov't and S&P who graded them "AAA") and sold them multiple times. How can you sell a house multiple times? : confused:

Great question, how can I sell a house multiple times? No wonder you're confused, the answer is I can't, but that's irrelevant because a house is not a derivative. Insuring a default is a derivative. Insurance can be bought and sold many times on one house mortgage.

 

[PLYMCO_PILGRIM]

President Obama says the Occupy Wall Street protests show a "broad-based frustration" among Americans with the financial sector, which continues to kick against regulatory reforms three years after the financial crisis.

"You're seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on the abusive practices that got us into this in the first place," he complained earlier this month.

But what if government encouraged, even invented, those "abusive practices"?

Rewind to 1994. That year, the federal government declared war on an enemy — the racist lender — who officials claimed was to blame for differences in homeownership rate, and launched what would prove the costliest social crusade in U.S. history.

At President Clinton's direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties.

Bubble? Regulators Blew It

The threat was codified in a 20-page "Policy Statement on Discrimination in Lending" and entered into the Federal Register on April 15, 1994, by the Interagency Task Force on Fair Lending. Clinton set up the little-known body to coordinate an unprecedented crackdown on alleged bank redlining.

The edict — completely overlooked by the Financial Crisis Inquiry Commission and the mainstream media — was signed by then-HUD Secretary Henry Cisneros, Attorney General Janet Reno, Comptroller of the Currency Eugene Ludwig and Federal Reserve Chairman Alan Greenspan, along with the heads of six other financial regulatory agencies.

"The agencies will not tolerate lending discrimination in any form," the document warned financial institutions.

Ludwig at the time stated the ruling would be used by the agen cies as a fair-lending enforcement "tool," and would apply to "all lenders" — including banks and thrifts, credit unions, mortgage brokers and finance companies.

The unusual full-court press was predicated on a Boston Fed study showing mortgage lenders rejecting blacks and Hispanics in greater proportion than whites. The author of the 1992 study, hired by the Clinton White House, claimed it was racial "discrimination." But it was simply good underwriting.

It took private analysts, as well as at least one FDIC economist, little time to determine the Boston Fed study was terminally flawed. In addition to finding embarrassing mistakes in the data, they concluded that more relevant measures of a borrower's credit history — such as past delinquencies and whether the borrower met lenders credit standards — explained the gap in lending between whites and blacks, who on average had poorer credit and higher defaults.

From Smoking-Gun Document Ties Policy To Housing Crisis - Latest Headlines - Investors.com

Its about time someone put what I've been saying for the last 3 years into an article.

Thanks for posting this!

 

[editec]

Did the government ALSO order the folks bundling those mortgages into BONDS to LIE about the risk involved with them?


Because it is pretty clear SOMEBODY did.

 

[Mad Scientist]

......loans they knew that wouldn't be repaid and either ensured them multiple times against default (in effect shorting their own loans) or bundled them into "derivatives" (with the blessing of the US Gov't and S&P who graded them "AAA") and sold them multiple times. How can you sell a house multiple times? : confused:

Great question, how can I sell a house multiple times? No wonder you're confused, the answer is I can't, but that's irrelevant because a house is not a derivative. Insuring a default is a derivative. Insurance can be bought and sold many times on one house mortgage.

I'm not confused, it's a rhetorical question. Subprime Mortages WERE bundled and sold as derivatives, multiple times.

That makes them "Derivatives".
What Are Mortgage Derivatives? | eHow.com

But again I ask; How can you sell a house multiple times? Who owns the note? And if multiple people or "entities" own the note, who can foreclose?

Only the owner of the note can foreclose.

But who owns the note if it was sold multiple times? That's why I tell any one of my friends who are having problems with their mortgage to sue in Federal Court. That stops the foreclosure immediately and forces the foreclosing "entity" to "show the note" because:

Only the owner of the note (and the owner of record) can foreclose.

 

[PLYMCO_PILGRIM]

Did the government ALSO order the folks bundling those mortgages into BONDS to LIE about the risk involved with them?


Because it is pretty clear SOMEBODY did.

The govt (both parties) passed the laws that allowed for the bundling to be legal.

 

[PLYMCO_PILGRIM]

Did the government ALSO order the folks bundling those mortgages into BONDS to LIE about the risk involved with them?


Because it is pretty clear SOMEBODY did.

The govt (both parties) passed the laws that allowed for the bundling to be legal.

[ame=http://www.youtube.com/watch?v=K8E_zMLCRNg]Cricket Sound - YouTube[/ame]

 

[expat_panama]

...I'm not confused, it's a rhetorical question. Subprime Mortages WERE bundled and sold as derivatives, multiple times. That makes them "Derivatives". What Are Mortgage Derivatives? | eHow.comBut again I ask; How can you sell a house multiple times?...

Hard to tell if this is another rhetorical question or whether you don't know and you're asking me to please explain it to you because you'd be grateful for my help on this. Something else is we're mixing up home sales, mortgages, derivatives, and CDS's. We might be able to get farther along here if we worked with just one of them at a time.

 

[expat_panama]

Did the government ALSO order the folks bundling those mortgages into BONDS to LIE about the risk involved with them? Because it is pretty clear SOMEBODY did.

Bundling mortgages has been around for hundreds of years. So is telling lies. Telling lies to defraud investors however, is a crime. If you know of criminal activity and you fail to report it, you become an accessory after the fact. That's also a criminal act.

 

[Toro]

A few simple questions regarding this meme.

1.) Cause ---> Effect. The housing bubble was global. There were many countries which experienced housing bubbles, some much greater than America's. How did an increase in credit to the American poor cause housing bubbles in the UK, Ireland, Holland, Canada, Spain, Portugal, South Africa, China, Singapore, Australia, etc.?

2.) There were no appreciable differences in default rates in poor areas than wealthier areas. In fact, price appreciation in middle and upper middle class areas that have been prone to housing booms and busts in the past - i.e. Arizona, Florida, California - far outstripped price appreciation in any demographically poor area in America. If all this supposed irresponsible and rampant credit creation to the poor occurred, why were the affects much more muted than in the middle and upper classes, especially those in areas which are frequently subject to housing booms and busts?

3.) 24 of the 25 largest subprime lenders were not subject to the CRA. What is the causal affect of a policy to a bubble for which virtually all of the largest lenders were not subject?

More here.

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

 

[The Infidel]

President Obama says the Occupy Wall Street protests show a "broad-based frustration" among Americans with the financial sector, which continues to kick against regulatory reforms three years after the financial crisis.

"You're seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on the abusive practices that got us into this in the first place," he complained earlier this month.

But what if government encouraged, even invented, those "abusive practices"?

Rewind to 1994. That year, the federal government declared war on an enemy — the racist lender — who officials claimed was to blame for differences in homeownership rate, and launched what would prove the costliest social crusade in U.S. history.

At President Clinton's direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties.

Bubble? Regulators Blew It

The threat was codified in a 20-page "Policy Statement on Discrimination in Lending" and entered into the Federal Register on April 15, 1994, by the Interagency Task Force on Fair Lending. Clinton set up the little-known body to coordinate an unprecedented crackdown on alleged bank redlining.

The edict — completely overlooked by the Financial Crisis Inquiry Commission and the mainstream media — was signed by then-HUD Secretary Henry Cisneros, Attorney General Janet Reno, Comptroller of the Currency Eugene Ludwig and Federal Reserve Chairman Alan Greenspan, along with the heads of six other financial regulatory agencies.

"The agencies will not tolerate lending discrimination in any form," the document warned financial institutions.

Ludwig at the time stated the ruling would be used by the agen cies as a fair-lending enforcement "tool," and would apply to "all lenders" — including banks and thrifts, credit unions, mortgage brokers and finance companies.

The unusual full-court press was predicated on a Boston Fed study showing mortgage lenders rejecting blacks and Hispanics in greater proportion than whites. The author of the 1992 study, hired by the Clinton White House, claimed it was racial "discrimination." But it was simply good underwriting.

It took private analysts, as well as at least one FDIC economist, little time to determine the Boston Fed study was terminally flawed. In addition to finding embarrassing mistakes in the data, they concluded that more relevant measures of a borrower's credit history — such as past delinquencies and whether the borrower met lenders credit standards — explained the gap in lending between whites and blacks, who on average had poorer credit and higher defaults.

From Smoking-Gun Document Ties Policy To Housing Crisis - Latest Headlines - Investors.com

Its about time someone put what I've been saying for the last 3 years into an article.

Thanks for posting this!

The BIGGEST problem I have with the "smoking gun" aspect of it...... It no smoking gun!!!

The smart ones among us have known this for years!!!!

 

[The Infidel]

Did the government ALSO order the folks bundling those mortgages into BONDS to LIE about the risk involved with them?


Because it is pretty clear SOMEBODY did.

Who made the laws for the allowance of these actions???

 

[expat_panama]

...How did an increase in credit to the American poor cause housing bubbles in the UK, Ireland, Holland, Canada, Spain, Portugal, South Africa, China, Singapore, Australia, etc.?

There's no question that the world is big and has a lot going on. Let's also remember that America is a very big part of it --a third of the worlds activity and half the worlds wealth. Just the same, let's not change the subject, we're talking about what happened in the US not what happened in "the UK, Ireland, Holland, Canada, Spain, Portugal, South Africa, China, Singapore, Australia, etc.".

...There were no appreciable differences in default rates in poor areas than wealthier areas...

That was true when we compared black neighborhood default rates to those of white neighborhoods before Clinton's edict. This is not the case now.

...24 of the 25 largest subprime lenders were not subject to the CRA. What is the causal affect of a policy to a bubble for which virtually all of the largest lenders were not subject?...

Let's stick to the '20-page "Policy Statement on Discrimination in Lending"... ...entered into the Federal Register on April 15, 1994, by the Interagency Task Force on Fair Lending' and not blur our focus to include the "1977 Community Reinvestment Act". We're talking about a war on lenders that went far beyond the CRA to spread across "no fewer than 10 federal agencies".

 

[expat_panama]

...no smoking gun!!! The smart ones among us have known this for years!!!!

That's true and not relevant; the purpose of reopening the debate is so we can increase the number of "smart ones".

 

[Toro]

...How did an increase in credit to the American poor cause housing bubbles in the UK, Ireland, Holland, Canada, Spain, Portugal, South Africa, China, Singapore, Australia, etc.?

There's no question that the world is big and has a lot going on. Let's also remember that America is a very big part of it --a third of the worlds activity and half the worlds wealth. Just the same, let's not change the subject, we're talking about what happened in the US not what happened in "the UK, Ireland, Holland, Canada, Spain, Portugal, South Africa, China, Singapore, Australia, etc.".

...There were no appreciable differences in default rates in poor areas than wealthier areas...

That was true when we compared black neighborhood default rates to those of white neighborhoods before Clinton's edict. This is not the case now.

...24 of the 25 largest subprime lenders were not subject to the CRA. What is the causal affect of a policy to a bubble for which virtually all of the largest lenders were not subject?...

Let's stick to the '20-page "Policy Statement on Discrimination in Lending"... ...entered into the Federal Register on April 15, 1994, by the Interagency Task Force on Fair Lending' and not blur our focus to include the "1977 Community Reinvestment Act". We're talking about a war on lenders that went far beyond the CRA to spread across "no fewer than 10 federal agencies".

What are you trying to demonstrate with this thread?

 

[Annie]

A few simple questions regarding this meme.

1.) Cause ---> Effect. The housing bubble was global. There were many countries which experienced housing bubbles, some much greater than America's. How did an increase in credit to the American poor cause housing bubbles in the UK, Ireland, Holland, Canada, Spain, Portugal, South Africa, China, Singapore, Australia, etc.?

2.) There were no appreciable differences in default rates in poor areas than wealthier areas. In fact, price appreciation in middle and upper middle class areas that have been prone to housing booms and busts in the past - i.e. Arizona, Florida, California - far outstripped price appreciation in any demographically poor area in America. If all this supposed irresponsible and rampant credit creation to the poor occurred, why were the affects much more muted than in the middle and upper classes, especially those in areas which are frequently subject to housing booms and busts?

3.) 24 of the 25 largest subprime lenders were not subject to the CRA. What is the causal affect of a policy to a bubble for which virtually all of the largest lenders were not subject?

More here.

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

While those with 'bad mortgages' whatever the cause, were likely to default, I don't think that alone caused all the problems.

Seems to me that the 'causative' factor was the ability to bundle and sell and buy, without any oversight of what was in those bundles?

 

[California Girl]

...How did an increase in credit to the American poor cause housing bubbles in the UK, Ireland, Holland, Canada, Spain, Portugal, South Africa, China, Singapore, Australia, etc.?

There's no question that the world is big and has a lot going on. Let's also remember that America is a very big part of it --a third of the worlds activity and half the worlds wealth. Just the same, let's not change the subject, we're talking about what happened in the US not what happened in "the UK, Ireland, Holland, Canada, Spain, Portugal, South Africa, China, Singapore, Australia, etc.".
That was true when we compared black neighborhood default rates to those of white neighborhoods before Clinton's edict. This is not the case now.

...24 of the 25 largest subprime lenders were not subject to the CRA. What is the causal affect of a policy to a bubble for which virtually all of the largest lenders were not subject?...

Let's stick to the '20-page "Policy Statement on Discrimination in Lending"... ...entered into the Federal Register on April 15, 1994, by the Interagency Task Force on Fair Lending' and not blur our focus to include the "1977 Community Reinvestment Act". We're talking about a war on lenders that went far beyond the CRA to spread across "no fewer than 10 federal agencies".

What are you trying to demonstrate with this thread?

To me, it demonstrates that:

* those who deflect from the truth and try and hang this completely on the financial industry are fools.

* those who blame one party are fools.

* those who think that what happens in one country does not affect other countries are fools.

* that bad ideas spread globally

* that by continually focusing on bullshit serves only those who actually are responsible

* that anyone who repeats bullshit for partisan politics is a moron