Smoking-Gun Document Ties Policy To Housing Crisis

[California Girl]

...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".

I once did a post outlining, step by step, how both clusterfuck decisions from both parties opened the door for this. Guess what? No one paid any attention to it. Color me shocked. People prefer bullshit to fact. It's easier, saves them having to think for themselves, and saves them from having to admit their own responsibility for voting for corrupt politicians.

 

[expat_panama]

...What are you trying to demonstrate with this thread?

Exactly!!!

You sure know how to ask those rhetorical questions of yours!

 

[Toro]

...What are you trying to demonstrate with this thread?

Exactly!!!

You sure know how to ask those rhetorical questions of yours!

Since you didn't answer the question, I will make it clearer. Are you implying that this "smoking gun" caused the financial crisis?

 

[expat_panama]

...People prefer bullshit to fact. It's easier, saves them having to think for themselves, and saves them from having to admit their own responsibility...

It seems that way at times but we know it's generally not true.

The way it works is that people don't act on logic. OK, we say we do but we make most decisions on an emotional level and use logic to back up what we decide. (Most of the time.) Salesmen know this and put almost all the effort into the first impression, and then have a bunch of info handy to help steady the buyer when both know the sale's been made. What's going on now is everyone's falling out of love with Obama and we're here to steady the masses that are fleeing.

That, and I'm using this thread for researching economic trends here at work. Nothing like getting paid for goofing off on the web...

 

[edthecynic]

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

First of all IBD is nothing but a Right-wing hack publication with no credibility.

But more revealing is the right chart of less than 5% down payment mortgages. The bill cited in the hack piece went into effect in 1994. but the less than 5% down payment mortgages didn't jump until 2004, something does not add up. Obviously something had to have happened closer to 2004 to have been the cause, not what happened in 1994.

So what happened near 2004? Why it was Bush's ADDI, signed into law in 2003!!!!!!

It was Bush's Dec 2003 American Dream Downpayment Initiative (ADDI) that changed the rules to allow no downpayment loans for more than the house was worth to people with bad credit who could not keep up with the payments and who were at least 20% below the standard of living for the neighborhood they were buying into.

The ADDI was passed in Dec 2003 and everything in housing started to go bad in 2004. Even your MessiahRushie admits 2004 was the turning point for the Bush Housing Crash.

July 7,2010
BREAK TRANSCRIPT

RUSH: To illustrate my point even further: "Subprime mortgages accounted for 9 percent of all mortgage originations from 1996 through 2004." But that 9% became 21% from 2004 to 2006, 21% of all mortgages were subprime. Twenty-one percent of all mortgages were essentially money given away to people because they were loans made to people that everybody knew going in would never pay them back. And that 21% of the mortgage market being subprime equaled about $600,000 billion in 2006, which was at the time one-fifth of the US home loan market.

 

[expat_panama]

...You sure know how to ask those rhetorical questions of yours!

Since you didn't answer the question, I will make it clearer. Are you implying that this "smoking gun" caused the financial crisis?

Ah, hard to tell whether you're asking a question to get info or to give effect. Actually it's still hard to tell because we both know in murder mysteries no one's ever killed by a 'smoking gun' ---that appears after the crime. Dang! You got me off topic into silly word games again --we need to focus.

Housing crisis. Maybe we can start here:

Please tell me that we're together on the fact that in the mid 90's real estate values increased above long term trends and crashed a decade later.

 

[Toro]

...You sure know how to ask those rhetorical questions of yours!

Since you didn't answer the question, I will make it clearer. Are you implying that this "smoking gun" caused the financial crisis?

Ah, hard to tell whether you're asking a question to get info or to give effect. Actually it's still hard to tell because we both know in murder mysteries no one's ever killed by a 'smoking gun' ---that appears after the crime. Dang! You got me off topic into silly word games again --we need to focus.

Housing crisis. Maybe we can start here:

Please tell me that we're together on the fact that in the mid 90's real estate values increased above long term trends and crashed a decade later.

RE began rising in the mid 90s after stagnating or falling in the late 80s early 90s.

What matters more than trend is valuation. A bubble us defined by valuation, not trend. RE was not overvalued in the 90s. The rapid ascent in home prices which led to the egregious overvaluation began in the early 00s.

 

[expat_panama]

...Please tell me that we're together on the fact that in the mid 90's real estate values increased above long term trends and crashed a decade later.

RE began rising in the mid 90s after stagnating or falling in the late 80s early 90s...

Overall RE values were still increasing after the S&L bit but it sounds like we're pretty much together.

...The rapid ascent in home prices which led to the egregious overvaluation began in the early 00s.

Let's look more closely at the record:

The ascent in home prices that began in the '90's and was actually slightly more rapid than that of early 00's. Regardless, the trend was unsustainable and steadily led to the crash we've had since '08 to now.

 

[expat_panama]

First of all IBD is nothing but a Right-wing hack publication with no credibility... ...The ADDI was passed in Dec 2003 and everything in housing started to go bad in 2004. Even your MessiahRushie admits...

Huh. Your take is Rush is on target but IBD is too right-wing. Whatever.

fwiw, IBD tracks investors, and they were the first to point out that most investors voted for Obama. Regardless, we're better off thinking for ourselves and doing our own research. Like, the idea that "everything in housing started to go bad in 2004" is really hard to accept without some facts to back it up especially while we look at real estate values for the past three decades.

 

[Toro]

...The rapid ascent in home prices which led to the egregious overvaluation began in the early 00s.

Let's look more closely at the record:

The ascent in home prices that began in the '90's and was actually slightly more rapid than that of early 00's. Regardless, the trend was unsustainable and steadily led to the crash we've had since '08 to now.

Yes. You can see the slope of the line steepen at 2000.

 

[Toro]

Here is the ratio of home prices to rent

It gets out of range in 2000-01 then accelerates.

 

[Toro]

Here is another one.

Remember, what matters is valuation, not trend. Stocks were not in a bubble from 1981 to 1998 simply because the trend was up.

You can see from these graphs that homes started becoming egregiously overvalued in the early 00s.

 

[expat_panama]

...ascent in home prices that began in the '90's and was actually slightly more rapid than that of early 00's. Regardless, the trend was unsustainable and steadily led to the crash we've had since '08 to now.

Yes. You can see the slope of the line steepen at 2000.

Agreed. The yr/yr change in real estate values was more in 2000 and was less the in 2001.

fwiw, here are the Fed's numbers for total real estate values:
1980 3,142,948 1990 7,561,547 2000 12,181,110 2010 19,024,381
1stq 3,229,699 1stq 7,587,190 1stq 12,633,851 1stq 19,107,722
2ndq 3,354,365 2ndq 7,632,112 2ndq 13,042,874 2ndq 18,529,903
3rdq 3,413,987 3rdq 7,605,601 3rdq 13,445,513 3rdq 18,523,418
1981 3,459,682 1991 7,615,884 2001 13,877,152 2011 18,251,110
1stq 3,638,139 1stq 7,688,682 1stq 14,176,536 1stq 18,160,657
2ndq 3,744,251 2ndq 7,693,553 2ndq 14,563,365
3rdq 3,804,396 3rdq 7,731,288 3rdq 14,826,714
1982 3,904,132 1992 7,816,378 2002 15,113,842
1stq 3,935,701 1stq 7,840,921 1stq 15,484,500
2ndq 3,949,219 2ndq 7,909,412 2ndq 15,875,531
3rdq 3,990,417 3rdq 7,969,305 3rdq 16,179,510
1983 4,040,226 1993 7,976,143 2003 16,542,939
1stq 4,084,347 1stq 8,053,524 1stq 16,900,260
2ndq 4,130,714 2ndq 8,134,130 2ndq 17,375,062
3rdq 4,176,711 3rdq 8,214,247 3rdq 17,891,558
1984 4,352,814 1994 8,288,954 2004 18,553,440
1stq 4,487,220 1stq 8,381,518 1stq 19,254,687
2ndq 4,615,845 2ndq 8,467,242 2ndq 19,857,789
3rdq 4,734,250 3rdq 8,531,215 3rdq 20,524,209
1985 4,865,993 1995 8,584,693 2005 21,550,092
1stq 5,016,740 1stq 8,653,857 1stq 22,517,506
2ndq 5,179,587 2ndq 8,760,647 2ndq 23,301,321
3rdq 5,340,583 3rdq 8,843,408 3rdq 24,032,198
1986 5,441,728 1996 8,948,279 2006 24,760,870
1stq 5,574,683 1stq 9,055,031 1stq 24,667,583
2ndq 5,704,282 2ndq 9,162,126 2ndq 24,676,632
3rdq 5,826,754 3rdq 9,270,055 3rdq 25,042,300
1987 5,959,269 1997 9,377,756 2007 24,885,846
1stq 6,093,077 1stq 9,519,645 1stq 24,462,856
2ndq 6,218,680 2ndq 9,653,559 2ndq 23,841,015
3rdq 6,309,472 3rdq 9,808,778 3rdq 23,272,310
1988 6,447,445 1998 10,017,755 2008 22,497,317
1stq 6,625,576 1stq 10,263,941 1stq 21,592,390
2ndq 6,755,823 2ndq 10,496,529 2ndq 20,820,870
3rdq 6,876,492 3rdq 10,750,769 3rdq 19,599,419
1989 7,001,483 1999 10,970,252 2009 18,765,417
1stq 7,139,009 1stq 11,234,571 1stq 18,557,419
2ndq 7,335,596 2ndq 11,506,700 2ndq 18,789,880
3rdq 7,443,170 3rdq 11,776,400 3rdq 18,851,081

 

[expat_panama]

...homes started becoming egregiously overvalued in the early 00s.

Right, after homes became less affordable in the '90's as the federal government began intervening in the market.

 

[edthecynic]

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

First of all IBD is nothing but a Right-wing hack publication with no credibility.

But more revealing is the right chart of less than 5% down payment mortgages. The bill cited in the hack piece went into effect in 1994. but the less than 5% down payment mortgages didn't jump until 2004, something does not add up. Obviously something had to have happened closer to 2004 to have been the cause, not what happened in 1994.

So what happened near 2004? Why it was Bush's ADDI, signed into law in 2003!!!!!!

It was Bush's Dec 2003 American Dream Downpayment Initiative (ADDI) that changed the rules to allow no downpayment loans for more than the house was worth to people with bad credit who could not keep up with the payments and who were at least 20% below the standard of living for the neighborhood they were buying into.

The ADDI was passed in Dec 2003 and everything in housing started to go bad in 2004. Even your MessiahRushie admits 2004 was the turning point for the Bush Housing Crash.

July 7,2010
BREAK TRANSCRIPT

RUSH: To illustrate my point even further: "Subprime mortgages accounted for 9 percent of all mortgage originations from 1996 through 2004." But that 9% became 21% from 2004 to 2006, 21% of all mortgages were subprime. Twenty-one percent of all mortgages were essentially money given away to people because they were loans made to people that everybody knew going in would never pay them back. And that 21% of the mortgage market being subprime equaled about $600,000 billion in 2006, which was at the time one-fifth of the US home loan market.

First of all IBD is nothing but a Right-wing hack publication with no credibility... ...The ADDI was passed in Dec 2003 and everything in housing started to go bad in 2004. Even your MessiahRushie admits...

Huh. Your take is Rush is on target but IBD is too right-wing. Whatever.

fwiw, IBD tracks investors, and they were the first to point out that most investors voted for Obama. Regardless, we're better off thinking for ourselves and doing our own research. Like, the idea that "everything in housing started to go bad in 2004" is really hard to accept without some facts to back it up especially while we look at real estate values for the past three decades.

Your MessiahRushie gave you the facts, which is why you edited them out in your reply. You fool no one but yourself.

 

[expat_panama]

...Your MessiahRushie gave you the facts, which is why you edited them out in your reply. You fool no one but yourself.

LOL! Hey guy, he's your "MessiahRushie" because the only one quoting and agreeing with him here is you. Something else is I'd bet we'd both be better off if we cut the flame war here and just quoted the parts we're responding to. mho

 

[Toro]

...homes started becoming egregiously overvalued in the early 00s.

Right, after homes became less affordable in the '90's as the federal government began intervening in the market.

Housing got more affordable in the 90s, not less.

 

[expat_panama]

...homes became less affordable in the '90's as the federal government began intervening in the market.

Housing got more affordable in the 90s, not less.

What your data show is---

---that homes had been getting more affordable since Reagan was president, and with the war on lenders homes started becoming less affordable.

 

[PLYMCO_PILGRIM]

...homes became less affordable in the '90's as the federal government began intervening in the market.

Housing got more affordable in the 90s, not less.

What your data show is---

---that homes had been getting more affordable since Reagan was president, and with the war on lenders homes started becoming less affordable.

I think toro meant that the govt passed laws, under clinton in the 90's, that made it easier for banks to give out loans to higher risk individuals than the laws had previously let them.

Bill Clinton's drive to increase homeownership went way too far - BusinessWeek

 

[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.

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

That is an excellent question.

The answer is (if there even is one, which I doubt) the FASB.

1. <H3 class=r>

   FASB: Financial Accounting Standards Board

   
   
   
   
   
   www.fasb.org/Cached - Similar
   You +1'd this publicly. Undo
   The designated private sector organization in the U.S. that establishes financial accounting and reporting standards
   

   . </H3>