The Big Lie of the Crisis, Called Out By the Press

Discussion in 'Politics' started by Synthaholic, Nov 12, 2011.

  1. Synthaholic
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    Synthaholic Platinum Member

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    The Big Lie of the Crisis, Called Out By the Press



    At CNBC’s GOP debate last night, Mitt Romney showed that he, like Michael Bloomberg, buys into the Big Lie of the financial crisis, one that’s unfortunately become conventional wisdom on the right: That the private sector only made hundreds of billions of dollars worth of toxic loans (and then made more than a hundred billion dollars worth of fake toxic loans because it couldn’t get enough toxic product) because the government made it.




    Here’s Romney:

    And the reason we have the housing crises we have is that the federal government played too heavy a role in our markets. The federal government came in with Fannie Mae and Freddie Mac, and Barney Frank and Chris Dodd told banks they had to give loans to people who couldn’t afford to pay them back.​

    This is flat false, as anyone who’s taken a cursory and intellectually half-honest look at the crisis knows. So how did the press cover it?
    Pretty darn good, actually.

    The Wall Street Journal quotes Romney in its piece and then all but says he’s empirically wrong (emphasis mine):
    “Markets work. When you have government play its heavy hand, markets blow up and people get hurt,” Mr. Romney said, blaming Democrats for rules that he said force banks to make ill-advised loans.

    Some conservative academics have said that Fannie Mae and Freddie Mac fueled the financial crisis because they had to meet federal quotas to finance low- and moderate-income homeowners.

    But academic research has shown that those mandates didn’t spur the types of exotic lending at the heart of the subprime-loan crisis. Many of the worst mortgage lenders weren’t banks and weren’t subject to federal regulation.

    The New York Times is even better, running a fact-check sidebar along with its main debate story, and it gives readers five full paragraphs on why these assertions are false. Here are three of them:


    Several candidates made the argument at the debate that the government forced mortgage lenders to make bad loans. But in reality, most subprime loans were made by companies that were not subject to any kind of federal regulation.

    Furthermore, there was no need to force anyone to make the loans. Financial companies jumped into the market. The major investment banks lined up to purchase subprime lenders, the major retail banks created subprime lending divisions, and a generation of upstart subprime lenders like Ameriquest and Countrywide were briefly celebrated as rising stars of American business.


    No executive of a major mortgage company said at the time that the government was forcing them to make subprime loans. They said they did it because they thought they would make money. And even now, after the crash of the housing market, with all the temptation to point fingers, it is awfully hard to find a mortgage executive who echoes the argument of the Republican candidates.

    And the Times debunks the “Fannie and Freddie Did It” meme to boot.
     
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  2. kyzr
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    kyzr Gold Member

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    You are incorrect. Please research the "Community Reinvestment Act"
    Then follow the money from Fannie & Freddie to their benefactor/protectors.

    the simple fact is that the government setup the financial crisis, and then tried to blame the banks.

    Socialism doesn't work, never has, never will.
     
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  3. skookerasbil
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    skookerasbil Gold Member

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    LOL.......its not even debatable........or course the government fcukked up the housing market. ANy time the government interferes with the market, things get fcukked up. Without the regulation, the risky investments never happen. Its that simple.

    YOU get forced to lend to total losers with no hope of repayment and then have somebody tell you what you can and cant do with your money!!!!!!!!!!!!!!!!!!:2up:
     
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    Last edited: Nov 12, 2011
  4. The Rabbi
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    The Rabbi Diamond Member

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    He actually didnt say the CRA caused the crisis. You have to read what he did say. What he did say is that gov't regulations caused the blow up. That is true: ultra low interest rates created bizarre incentives to buy real estate and invest in it via mortgages and MBSs. This drove rates low and criteria to junk. When the craze was over there was a reaction, which is why we are here.

    What has Obama done to make any of this any better? Fannie is still making loans. Rates are even lower. Obama is engineering plan after plan to get people to buy homes and stay in homes they can't afford. This is why the economy still sucks an unprecedented 3 years down the road.
     
  5. Intense
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    Intense Senior Member

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    Yep. Whatever they do the sharks gather. Ground Zero is probably traced to whom they spend their Holidays with. :lol: Let's just keep blaming Campaign Financing and continue to ignore their Investment Portfolios. :lmao:
     
  6. ladyliberal
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    ladyliberal Progressive Princess

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    Are you saying that the WSJ and NYT analyses are incorrect, or are you accusing the original poster of interpreting them incorrectly?

    How the subprime-loan crisis unfolded is, to a certain extent, a matter of historic fact. "Socialism doesn't work" cannot by itself possibly tell you what happened in that crisis.

    I've begun to look into the CRA. Based on the citations in Wikipedia, most economists seem to think that the CRA played little or no role: Community Reinvestment Act - Wikipedia, the free encyclopedia
     
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  7. skookerasbil
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    skookerasbil Gold Member

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    [​IMG]
     
  8. uscitizen
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    uscitizen Senior Member

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    Again lets not forget how the ratings agencies rated the subprime packages as AA or higher investments.
    How did the government make them do that?
     
  9. ladyliberal
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    ladyliberal Progressive Princess

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    Not to be contrary, but there actually is an answer to your question. A large contribution to the unfortunate rating was the pressure the agencies were under: Credit rating agencies and the subprime crisis - Wikipedia, the free encyclopedia. Much of the pressure came from the US federal government, which is of course a huge financial entity, and which uses the ratings provided by the agencies by statute.

    The big problem there is that the the agencies are paid by the entities which they are rating rather than by the investors which use the information. That's not the US government's fault, but they've participated in this system with all its perverse incentives.
     
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  10. kyzr
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    kyzr Gold Member

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    The root cause of the financial crisis was giving good money to bad risks. The CRA enabled that to happen. Read thru the bullshit and keep thinking, what if they only lent money to folks who could pay it back? Then you'd see what part the CRA had in causing the crisis.
    Subprime mortgage crisis - Wikipedia, the free encyclopedia
     

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