Smoking-Gun Document Ties Policy To Housing Crisis

[edthecynic]

...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

But that merely lets you avoid having to admit that it was Bush's ADDI that made no down payment loans for more than the house was worth to unqualified borrowers with bad credit who could not make payments and who were at least 20% below the average income of the neighborhood they were buying into! Bush burst the shaky housing market with his ADDI and every CON$ervative knows it. It was ADDI's lower lending standards that pushed the precariously positioned housing market over the edge.

American Dream Downpayment Initiative - Affordable Housing - CPD - HUD
American Dream Downpayment Initiative
Summary

The American Dream Downpayment Initiative (ADDI) was signed into law on December 16, 2003. The American Dream Downpayment Assistance Act authorizes up to $200 million annually for fiscal years 2004 - 2007. ADDI will provide funds to all fifty states and to local participating jurisdictions that have a population of at least 150,000 or will receive an allocation of at least $50,000 under the ADDI formula. ADDI will be administered as a part of the HOME Investment Partnerships Program, a formula grant program.

Purpose

ADDI aims to increase the homeownership rate, especially among lower income and minority households, and to revitalize and stabilize communities. ADDI will help first-time homebuyers with the biggest hurdle to homeownership: downpayment and closing costs. The program was created to assist low-income first-time homebuyers in purchasing single-family homes by providing funds for downpayment, closing costs, and rehabilitation carried out in conjunction with the assisted home purchase.

Type of Assistance

ADDI will provide downpayment, closing costs, and rehabilitation assistance to eligible individuals. The amount of ADDI assistance provided may not exceed $10,000 or six percent of the purchase price of the home, whichever is greater. The rehabilitation must be completed within one year of the home purchase. Rehabilitation may include, but is not limited to, the reduction of lead paint hazards and the remediation of other home health hazards.

Eligible Customers

To be eligible for ADDI assistance, individuals must be first-time homebuyers interested in purchasing single family housing. A first-time homebuyer is defined as an individual and his or her spouse who have not owned a home during the three-year period prior to the purchase of a home with ADDI assistance. ADDI funds may be used to purchase one- to four- family housing, condominium unit, cooperative unit, or manufactured housing. Additionally, individuals who qualify for ADDI assistance must have incomes not exceeding 80% of area median income.

Eligible Activities

ADDI funds may be used for downpayment, closing costs and, if necessary, rehabilitation in conjunction with home purchase. ADDI funds used for rehabilitation may not exceed twenty percent of the participating jurisdiction's total ADDI allocation. The rehabilitation assisted with ADDI funds must be completed within one year of the home purchase.

 

[Toro]

...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.

"War on Lenders?"

Why don't you go find a graph of bank profits in the 90s then come back to me on this "war."

 

[expat_panama]

... 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

But that merely lets you avoid having to admit that it was Bush's ADDI that made no down payment loans ...

Exactly. You're smart to drop the phony "Your MessiahRushie" bit so we can get back on topic.

The ADDI's a good point; you can tell I care more about money-making than politics. A look at real estate costs in the above posts you can see prices went up faster after the ADDI was made law, and the Rep House and White House were morons to go along with that crazy bill coming out of the Dem. Senate. I never did like GW. Bush's 'new tone' for getting along with Democrats. We'd be a lot better off if he'd have fought them every step of the way.

 

[expat_panama]

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

"War on Lenders?".

It's in the article at the beginning of the thread--

...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...

Why don't you go find a graph of bank profits in the 90s then come back to me on this "war."

Anyone who thinks it's useful can make a graph, but they need to understand numbers well enough to dig out the data and plot them. Let me know if you need help and I'd be happy to show you how to find the records and make a .png of the graph.

 

[Toro]

"War on Lenders?".

It's in the article at the beginning of the thread--

Why don't you go find a graph of bank profits in the 90s then come back to me on this "war."

Anyone who thinks it's useful can make a graph, but they need to understand numbers well enough to dig out the data and plot them. Let me know if you need help and I'd be happy to show you how to find the records and make a .png of the graph.

Some war.

Phoney War maybe.

 

[edthecynic]

... 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

But that merely lets you avoid having to admit that it was Bush's ADDI that made no down payment loans ...

Exactly. You're smart to drop the phony "Your MessiahRushie" bit so we can get back on topic.

The ADDI's a good point; you can tell I care more about money-making than politics. A look at real estate costs in the above posts you can see prices went up faster after the ADDI was made law, and the Rep House and White House were morons to go along with that crazy bill coming out of the Dem. Senate. I never did like GW. Bush's 'new tone' for getting along with Democrats. We'd be a lot better off if he'd have fought them every step of the way.

What a typical MessiahRushie answer, blame the Dems for what CON$ did and fabricate a Bush fault for trying to get along with Dems. You parrot your MessiahRushie perfectly. You must be very proud of yourself.

There was no Dem Senate in 2003, it was a GOP majority! And the Bush bill was sponsored by Sen Wayne Allard R-CO. And every co-sponsor in the Senate was a Republican.
Samuel Brownback [R-KS]
Conrad Burns [R-MT]
Ben Campbell [R-CO]
Michael Crapo [R-ID]
Michael Enzi [R-WY]
Charles Hagel [R-NE]
Lisa Murkowski [R-AK]
Richard Santorum [R-PA]
Jefferson Sessions [R-AL]

 

[expat_panama]

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

Some war. Phoney War maybe.

What we got is you feel strongly about something and you're not saying what it is. It's almost like you feel bank profits (after tax? inventory adj.?) meant that mortgages for people that couldn't pay created a real estate crash but the profits prove that the mortgages were good anyway. That doesn't make any sense.

You feel it but you're not saying it. That makes sense.

 

[expat_panama]

... You're smart to drop the phony "Your MessiahRushie" bit so we can get back on topic....

What a typical MessiahRushie answer...

Ah. Old habits die hard. Let me know when you want to rejoin the housing thread.

 

[edthecynic]

But that merely lets you avoid having to admit that it was Bush's ADDI that made no down payment loans ...

Exactly. You're smart to drop the phony "Your MessiahRushie" bit so we can get back on topic.

The ADDI's a good point; you can tell I care more about money-making than politics. A look at real estate costs in the above posts you can see prices went up faster after the ADDI was made law, and the Rep House and White House were morons to go along with that crazy bill coming out of the Dem. Senate. I never did like GW. Bush's 'new tone' for getting along with Democrats. We'd be a lot better off if he'd have fought them every step of the way.

What a typical MessiahRushie answer, blame the Dems for what CON$ did and fabricate a Bush fault for trying to get along with Dems. You parrot your MessiahRushie perfectly. You must be very proud of yourself.

There was no Dem Senate in 2003, it was a GOP majority! And the Bush bill was sponsored by Sen Wayne Allard R-CO. And every co-sponsor in the Senate was a Republican.
Samuel Brownback [R-KS]
Conrad Burns [R-MT]
Ben Campbell [R-CO]
Michael Crapo [R-ID]
Michael Enzi [R-WY]
Charles Hagel [R-NE]
Lisa Murkowski [R-AK]
Richard Santorum [R-PA]
Jefferson Sessions [R-AL]

... You're smart to drop the phony "Your MessiahRushie" bit so we can get back on topic....

What a typical MessiahRushie answer...

Ah. Old habits die hard. Let me know when you want to rejoin the housing thread.

Just like your MessiahRushie when caught lying you dodge by accusing others what you are at present doing, namely HABITUALLY editing my posts.

I have never left the housing thread and just nailed you in a lie about Bush's ADDI being a Dem Senate bill that Bush went along with to "get along" with the Dems he never attempted to "get along" with in the first place.

Now stop parroting your MessiahRushie and explain your bullshit!

 

[expat_panama]

...Just like your MessiahRushie...

It makes a lot of sense though, the fact that your input is focused on Limbaugh/personal attacks and not Clinton setting off the housing crisis. It's called 'using what you're good at'. Ordinarily that approach wouldn't be healthy either for you and the country as a whole, but in this case your hits are keeping the thread going

 

[edthecynic]

...Just like your MessiahRushie...

It makes a lot of sense though, the fact that your input is focused on Limbaugh/personal attacks and not Clinton setting off the housing crisis. It's called 'using what you're good at'. Ordinarily that approach wouldn't be healthy either for you and the country as a whole, but in this case your hits are keeping the thread going

Clinton had nothing to do with ADDI, which burst the Bush housing bubble, or your lying about Bush's ADDI being a Dem Senate bill.
Lie .... er .... er .... try again.

 

[Toro]

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

Some war. Phoney War maybe.

What we got is you feel strongly about something and you're not saying what it is. It's almost like you feel bank profits (after tax? inventory adj.?) meant that mortgages for people that couldn't pay created a real estate crash but the profits prove that the mortgages were good anyway. That doesn't make any sense.

You feel it but you're not saying it. That makes sense.

You'd make a lousy psychologist. Let's stick to the facts, shall we?

You're in here saying that there was this "war" on lenders. Did the government promote policies to increase credit? Yes. Was this a hostile act? Given that bank profits increased by 9x during this time, it seems the banks were more than a little willing to dive right in and participate wildly.

Let's also discuss this "smoking gun." Prices for homes rose less for houses financed by qualifying mortgages. When the market collapsed, those prices also fell less. The rate of defaults was lower for homes financed by qualifying mortgages. Now, if you believe in the efficacy of markets - as dogmatic adherents to free market capitalism usually do - one would expect supply and demand to work efficiently. If, as this meme implies, loosening credit through government dictate caused the financial crisis, then one would have expected homes financed by mortgages backstopped by government agencies to have risen more then collapsed harder with higher delinquency rates through the bubble and collapse. But that's not what happened. Instead, the areas of the market that went up the most and were hit the hardest were those sitting mainly outside of the government mortgage market.

So the dogmatic ideologues pushing this meme have an intellectual problem. If supply and demand always works, then the homes financed by qualifying mortgages should have risen the most then crashed the hardest. But the opposite happened. If the ideologues wish then to continue promoting this meme despite this fact, then the market is not efficacious, and their ideology has a fundamental problem.

Now, did the government affect the housing bubble? Of course! How could it not? It was financing half the market. But was it driving the housing bubble? Not in the way the OP argues. There is no smoking gun in legislation that caused the bubble.

The government is primarily responsible for the financial crisis, but not in the manner of legislation. The government did interfere drastically in the market. I will let the ideologues try and figure it out.

 

[expat_panama]

... Did the government promote policies to increase credit? Yes. Was this a hostile act?...

The 'hostile act' was forcing banks to make bad loans on pain of prosecution and scandal. It cost the mortgage lenders dearly.

...Given that bank profits increased by 9x during this time...

Graphs are easy. Knowing what's going on is hard. We don't know what whoever made the graph that you posted is calling 'financial industry profits' and how it relates to banks' returns on mortgages. It's neither transparent nor credible.

The Fed, BLS and the BEA are examples of both, and here are the Fed's numbers (from United States - FRED - St. Louis Fed) on banks' return on assets along with loan losses and non-performing loans--

--telling us that banks reported to the Fed that from '94 to '07, loan profits (return on assets) were flat, and then they plummeted with the crash. Banks also reported to the Fed that non-performing loans and loan losses were also flat while property values soared because of all the high risk loans the banks were forced to give out. No extra profits from the high risk loans, but heavy losses when the crash flushed out the bad loans.

 

[Toro]

... Did the government promote policies to increase credit? Yes. Was this a hostile act?...

The 'hostile act' was forcing banks to make bad loans on pain of prosecution and scandal. It cost the mortgage lenders dearly.

...Given that bank profits increased by 9x during this time...

Graphs are easy. Knowing what's going on is hard. We don't know what whoever made the graph that you posted is calling 'financial industry profits' and how it relates to banks' returns on mortgages. It's neither transparent nor credible.

The Fed, BLS and the BEA are examples of both, and here are the Fed's numbers (from United States - FRED - St. Louis Fed) on banks' return on assets along with loan losses and non-performing loans--

--telling us that banks reported to the Fed that from '94 to '07, loan profits (return on assets) were flat, and then they plummeted with the crash. Banks also reported to the Fed that non-performing loans and loan losses were also flat while property values soared because of all the high risk loans the banks were forced to give out. No extra profits from the high risk loans, but heavy losses when the crash flushed out the bad loans.

You say "knowing what is going on is hard" yet you post a graph that is irrelevant to the argument. I mean, surely you must know that bank ROA and loan loss ratios have absolutely nothing to do with total profits.

 

[Toro]

Some more on how the "War" on the banks was so awful.

The Quiet Coup - Magazine - The Atlantic

This chart BTW comes from the Bureau of Economic Analysis.

U.S. Bank Profit

So yeah, we certainly know what happened. The banks made enormous profits. Once again, this was a Phoney War.

 

[expat_panama]

...This chart BTW comes from the Bureau of Economic Analysis...

These are serious issues and we'd be better off going beyond just saying things.

No, we both know that the chart does not come from the Bureau of Economic Analysis and that it comes from some Bloomberg blogger. OK, the chart's what some Bloomberg blogger says the BEA numbers are and you and I can make up stuff like that too.

We were talking about the real estate crisis and the blogger mixed all financial industries together; so we start out talking real estate and we now include insurance, equities, mutual funds, commodities --stuff that may score political points over beers but won't say squat about real life money on the job. The BEA issues data from http://bea.gov/iTable/index_nipa.cfm and the reason bank profits are hard to find is because they're not there. They got different categories for different years but with so many judgment calls the info ends up causing more heat than light.

That's what it's all about. Radical leftists hate profits. Profits are proof of wrong doing. Normal people like profits and know they indicate doing good.

 

[expat_panama]

...your lying about Bush's ADDI being a Dem Senate bill. Lie .... er .... er .... try again.

We've gone off the wrong direction here, and imho we'd have been a lot better off with 'you're mistaken' or 'why do you believe--'. Then again, anyone who wants to avoid attacks --or threats of violence from Obama's thugs even-- has no business talking with leftists.

Facts open to both of us show there was not one piece of legislation passed from 2001 to 2008 without Dem. signatures. The ADDI signed into law in 2004 was mostly Sen. Byrd's senate bill as the original House bill was stuck in committee. Stinking Byrd bill aside, we're still stuck with the fact that real estate prices were already soaring since '95. There's no 'there' with the ADDI.

 

[Toro]

...This chart BTW comes from the Bureau of Economic Analysis...

These are serious issues and we'd be better off going beyond just saying things.

No, we both know that the chart does not come from the Bureau of Economic Analysis and that it comes from some Bloomberg blogger. OK, the chart's what some Bloomberg blogger says the BEA numbers are and you and I can make up stuff like that too.

We were talking about the real estate crisis and the blogger mixed all financial industries together; so we start out talking real estate and we now include insurance, equities, mutual funds, commodities --stuff that may score political points over beers but won't say squat about real life money on the job. The BEA issues data from http://bea.gov/iTable/index_nipa.cfm and the reason bank profits are hard to find is because they're not there. They got different categories for different years but with so many judgment calls the info ends up causing more heat than light.

That's what it's all about. Radical leftists hate profits. Profits are proof of wrong doing. Normal people like profits and know they indicate doing good.

No, this is not what this is about. This is about understanding causes to the Financial Crisis. Hardcore ideologues are more interested in reinforcing their confirmation biases to comfort themselves about their own worldview instead of understanding the causes of the Financial Crisis.

Bank profits exploded over the past two decades. There was no "war against lenders." That's a joke. The share of the financial industry of total stock market capitalization was nearly 30% in 2006, up from the teens in 1990. And nearly two-thirds of that was banks, particularly big banks such as Bank of America, Citigroup, Wells Fargo, US Bancorp, etc. REITs share of market cap rose, but REITs in aggregate are small. Insurers didn't change much. Multiples of earnings had expanded a bit, but the driver was profit growth. Anyone who read reports from bank analysts over the prior decade saw this as plain as day.

Profits are good, not bad. But as it pertains to the OP, that there was a "war on lenders," its hard to say that with a straight face considering how much profits the banks made.

 

[Truthmatters]

the bush admin held up the laws surrounding who could be a broker for 8 years allowing the banks to pick, train and use ANYONE they wanted as a broker.

They could then train them as little as they wanted and teach them ONLY what they wanted them to know.

 

[Truthmatters]

SEC Votes for Final Rules Defining How Banks Can Be Securities Brokers
Eight Years After Passage of the Gramm-Leach-Bliley Act, Key Provisions Will Now Be Implemented
FOR IMMEDIATE RELEASE
2007-190
Washington, D.C., Sept. 19, 2007 - Ending eight years of stalled negotiations and impasse, the Commission today voted to adopt, jointly with the Board of Governors of the Federal Reserve System (Board), new rules that will finally implement the bank broker provisions of the Gramm-Leach-Bliley Act of 1999. The Board will consider these final rules at its Sept. 24, 2007 meeting. The Commission and the Board consulted with and sought the concurrence of the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Office of Thrift Supervision.

In addition, the Commission also voted to issue a second release concerning certain bank dealer activities and other related matters.

"A customer should be able to walk into a financial institution and get any financial product he or she needs — securities, insurance, banking or trust services," said SEC Chairman Christopher Cox. "But Congress recognized those benefits couldn't be achieved without new ways to safeguard investors that would be consistent with continued innovation. Today's historic action, coming eight years after the passage of the law, is long overdue but welcome news for investors who will now begin to see the benefits of broader services and lower costs that the law intended."

An important provision of the Gramm-Leach-Bliley Act amended the definition of "broker" in the Securities Exchange Act of 1934 so that banks would no longer be completely excluded from the broker-dealer registration requirements. At the same time, the new law created specific exceptions from those requirements. Proposed Regulation R would give effect to these bank broker exceptions, in a way that accommodates the traditional business practices of banks, and at the same time furthers our goal of better protecting investors.

One of the major promises of the Gramm-Leach-Bliley Act is to stimulate greater competition in the financial services industry, and give investors a wider array of services at lower prices. Much of that has occurred, but not as much as was expected, in part due to ambiguity in the governing legal rules. Today's action is especially important to help bring the legislative promise of the Gramm-Leach-Bliley Act to fulfillment.

The rule-writing process that culminated today in the Commission's vote of final approval has been an arduous one. After a series of interim proposals and regulatory actions that proved mostly fruitless between 1999 and 2005, the SEC made a fresh start 18 months ago. Chairman Cox convened a series of meetings that included the Board, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision, and together the agencies hammered out the final rules that the Commission approved today.

The Gramm-Leach-Bliley Act was signed into law by President Bill Clinton on Nov. 12, 1999. The Act provided an 18-month deadline for the adoption of implementing rules, but from 1999 until 2005, the rule-writing effort stalled repeatedly. On Oct. 13, 2006, President Bush signed into law the Regulatory Relief Act, which added the requirement that the Commission and the Board issue the proposed rules jointly, and seek the concurrence of the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation.