Smoking-Gun Document Ties Policy To Housing Crisis

Discussion in 'Economy' started by expat_panama, Nov 1, 2011.

  1. expat_panama
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    expat_panama Silver Member

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    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.

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    From Smoking-Gun Document Ties Policy To Housing Crisis - Latest Headlines - Investors.com
     
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  2. expat_panama
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    expat_panama Silver Member

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    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.
     
  3. editec
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    editec Mr. Forgot-it-All

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    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.
     
  4. Mad Scientist
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    Mad Scientist Deplorable Gold Supporting Member Supporting Member

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    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? :confused:
     
  5. expat_panama
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    expat_panama Silver Member

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    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.

    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.
     
  6. PLYMCO_PILGRIM
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    PLYMCO_PILGRIM Gold Member

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

    Thanks for posting this!
     
  7. editec
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    editec Mr. Forgot-it-All

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    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.
     
  8. Mad Scientist
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    Mad Scientist Deplorable Gold Supporting Member Supporting Member

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    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.
     
  9. PLYMCO_PILGRIM
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    PLYMCO_PILGRIM Gold Member

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

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

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