The Great Depression - why did it end?

[Kevin_Kennedy]

Correct. Sorry, but your simple "its all the fed's fault" view of things so you can get your gold standard on just doesn't fly with the facts.

It flies quite well actually, being as it's true.

Thanks for your opinion.

No problem, it seemed like the rational part of our discussion was over.

 

[mash107]

They weren't coerced into making loans. None of those banks had to make one damn loan if they thought it was too risky.

They made those shitty loans because they were making shitloads of money at the time and that is the only reason they did it.

You just contradicted yourself. You say that they weren't forced. And you are also saying that issuing shitty loans is profitable event. Now why would CRA be at all necessary to legislate?

The CRA was necessary because banks would just redline out entire neighborhoods, and not consider loans simply becaue black folk lived there irrespective of their income history and pay back ability. The CRA made that practice illegal and said you could not discriminate simply because someone lived in a certain neighborhood.

It did not require banks to make bad loans in the neighborhood.



How about them?



Of course that is what happened. They made shitty loans because others were doing it and making beaucoup profit. They just didn't appreciate the risk.

Because, clearly, making shitty loans loses you money... and, for political gain, the government legislated that all banks make shitty loans. It was enforced whenever banks wanted to expand, merge or otherwise conduct business. It had to prove to regulators that enough shitty loans were made. Fannie Mae and Freddie Mac carried the bulk, and that's how securitization began; to enable Fannie and Freddie to issue more and more shitty loans.

Shitty loans only lose money if they go bad.

What specific government legislation required that all banks make shitty loans? It wasn't the CRA, that didn't require you make shitty loans.

What was making everything appear black on all the banks' balance sheet was this unnatural growth in the housing market. The prices got inflated because of Federal Reserve artificially easy credit, and this made every bank seem solvent, whereas they were really not.

As long as the loans were being paid everything looked peachy and everyone got big bonuses. That's why they did it, not because the Govt forced them too.

Let's study the chronology of events...

1. Banks didn't make shitty loans before government interference.

2. Government passed regulations requiring them to do so.

3. Banks make shitty loans, and banks are all insolvent. This insolvency is covered up by a huge, artificial bubble in housing prices for decades.


Now, of course, all banks are profit seekers. Why would they want to go bankrupt? So they would look at all and any avenues to make money. They, concluded, prior to government interference, that shitty loans go sour more often than not; therefore, they loaned only to those with steady incomes and a track record of paying back loans, as common sense dictates. The balance of failed shitty loans vs. profits off the slim group of shitty loans that were actually paid off was clearly examined, not pursued by the banks until government forced them to. If they were money makers, they would have been in the business of making shitty loans since the very beginning, but, as reality has shown us, they really aren't.

 

[Iriemon]

Let's study the chronology of events...

1. Banks didn't make shitty loans before government interference.

Well actually they have, but not on this scale.

2. Government passed regulations requiring them to do so.

That's BS. No regulation required them to buy subprimes bundles. They did it because they were making shitloads of money and didn't realize how shitty the loans were.

3. Banks make shitty loans, and banks are all insolvent. This insolvency is covered up by a huge, artificial bubble in housing prices for decades.

The banks weren't insolvent if the real estate market didn't crash. Had the market pulled in the reins in 05/06 things probably would have been fine. But it is not in the nature of greed to halt activity when you are getting rich.

Now, of course, all banks are profit seekers. Why would they want to go bankrupt? So they would look at all and any avenues to make money. They, concluded, prior to government interference, that shitty loans go sour more often than not; therefore, they loaned only to those with steady incomes and a track record of paying back loans, as common sense dictates. The balance of failed shitty loans vs. profits off the slim group of shitty loans that were actually paid off was clearly examined, not pursued by the banks until government forced them to. If they were money makers, they would have been in the business of making shitty loans since the very beginning, but, as reality has shown us, they really aren't.

The Govt didn't force the banks to invest in securitized subprime loans. Sorry.

 

[mash107]

Let's study the chronology of events...

1. Banks didn't make shitty loans before government interference.

Well actually they have, but not on this scale.

2. Government passed regulations requiring them to do so.

That's BS. No regulation required them to buy subprimes bundles. They did it because they were making shitloads of money and didn't realize how shitty the loans were.

3. Banks make shitty loans, and banks are all insolvent. This insolvency is covered up by a huge, artificial bubble in housing prices for decades.

The banks weren't insolvent if the real estate market didn't crash. Had the market pulled in the reins in 05/06 things probably would have been fine. But it is not in the nature of greed to halt activity when you are getting rich.

Now, of course, all banks are profit seekers. Why would they want to go bankrupt? So they would look at all and any avenues to make money. They, concluded, prior to government interference, that shitty loans go sour more often than not; therefore, they loaned only to those with steady incomes and a track record of paying back loans, as common sense dictates. The balance of failed shitty loans vs. profits off the slim group of shitty loans that were actually paid off was clearly examined, not pursued by the banks until government forced them to. If they were money makers, they would have been in the business of making shitty loans since the very beginning, but, as reality has shown us, they really aren't.

The Govt didn't force the banks to invest in securitized subprime loans. Sorry.

I'm talking about issuing loans. There wouldn't be any subprime loans to securitize, if there were no subprime loans being issued. The whole reason there were subprime loans are because of government interference. But to address your point, Fannie Mae did, in fact, get the apocalyptic snowball rolling, at the behest of government, on securitizing these subprime loans in order to allow more capital to flow into subprime markets. Many private banks did follow suit, with the implicit guarantees the government was issuing. Government, absolutely, guaranteed Fannie Mae and Freddie Mac securitized subprime debt, and it was implied this guarantee carried over to all subprime loans.

 

[Iriemon]

Let's study the chronology of events...

1. Banks didn't make shitty loans before government interference.

Well actually they have, but not on this scale.

That's BS. No regulation required them to buy subprimes bundles. They did it because they were making shitloads of money and didn't realize how shitty the loans were.


The banks weren't insolvent if the real estate market didn't crash. Had the market pulled in the reins in 05/06 things probably would have been fine. But it is not in the nature of greed to halt activity when you are getting rich.

Now, of course, all banks are profit seekers. Why would they want to go bankrupt? So they would look at all and any avenues to make money. They, concluded, prior to government interference, that shitty loans go sour more often than not; therefore, they loaned only to those with steady incomes and a track record of paying back loans, as common sense dictates. The balance of failed shitty loans vs. profits off the slim group of shitty loans that were actually paid off was clearly examined, not pursued by the banks until government forced them to. If they were money makers, they would have been in the business of making shitty loans since the very beginning, but, as reality has shown us, they really aren't.

The Govt didn't force the banks to invest in securitized subprime loans. Sorry.

I'm talking about issuing loans. There wouldn't be any subprime loans to securitize, if there were no subprime loans being issued. The whole reason there were subprime loans are because of government interference. But to address your point, Fannie Mae did, in fact, get the apocalyptic snowball rolling, at the behest of government, on securitizing these subprime loans in order to allow more capital to flow into subprime markets. Many private banks did follow suit, with the implicit guarantees the government was issuing. Government, absolutely, guaranteed Fannie Mae and Freddie Mac securitized subprime debt, and it was implied this guarantee carried over to all subprime loans.

To the contrary. "Subprime" were loans that *didn't* meet Fannie/Freddie underwriting requirements, and hence were more risky. No Govt regulation required financial institutions to invest these things. Securitization developed as a way to package these riskier loans and the thought was that they were less risky because of diversification. What was underappreciated was the market risk.

No Govt agency rule or regulation required the financial institutions to invest trillions in these things. And if you claim they did I'd like to see the regulation that required it. Because I haven't yet.

 

[Toro]

Fannie and Freddie were small players in the subprime mortgage market. Most subprime mortgages were written outside of the GSEs. They were being propelled by the market, not by the government.

 

[mash107]

Well actually they have, but not on this scale.

That's BS. No regulation required them to buy subprimes bundles. They did it because they were making shitloads of money and didn't realize how shitty the loans were.


The banks weren't insolvent if the real estate market didn't crash. Had the market pulled in the reins in 05/06 things probably would have been fine. But it is not in the nature of greed to halt activity when you are getting rich.



The Govt didn't force the banks to invest in securitized subprime loans. Sorry.

I'm talking about issuing loans. There wouldn't be any subprime loans to securitize, if there were no subprime loans being issued. The whole reason there were subprime loans are because of government interference. But to address your point, Fannie Mae did, in fact, get the apocalyptic snowball rolling, at the behest of government, on securitizing these subprime loans in order to allow more capital to flow into subprime markets. Many private banks did follow suit, with the implicit guarantees the government was issuing. Government, absolutely, guaranteed Fannie Mae and Freddie Mac securitized subprime debt, and it was implied this guarantee carried over to all subprime loans.

To the contrary. "Subprime" were loans that *didn't* meet Fannie/Freddie underwriting requirements, and hence were more risky. No Govt regulation required financial institutions to invest these things. Securitization developed as a way to package these riskier loans and the thought was that they were less risky because of diversification. What was underappreciated was the market risk.

No Govt agency rule or regulation required the financial institutions to invest trillions in these things. And if you claim they did I'd like to see the regulation that required it. Because I haven't yet.

Given that all the loans that Freddie and Fannie make are loans that the free market wouldn't make, hence their existence; all loans made by those two companies are subprime. The entire market those two government entities engage in, as well as all the loans CRA legislated for private banks to make out, are subprime. That is, the return on all those loans would be net loss, otherwise banks would be doing it all along, and there would be no need for government interference.

 

[Iriemon]

I'm talking about issuing loans. There wouldn't be any subprime loans to securitize, if there were no subprime loans being issued. The whole reason there were subprime loans are because of government interference. But to address your point, Fannie Mae did, in fact, get the apocalyptic snowball rolling, at the behest of government, on securitizing these subprime loans in order to allow more capital to flow into subprime markets. Many private banks did follow suit, with the implicit guarantees the government was issuing. Government, absolutely, guaranteed Fannie Mae and Freddie Mac securitized subprime debt, and it was implied this guarantee carried over to all subprime loans.

To the contrary. "Subprime" were loans that *didn't* meet Fannie/Freddie underwriting requirements, and hence were more risky. No Govt regulation required financial institutions to invest these things. Securitization developed as a way to package these riskier loans and the thought was that they were less risky because of diversification. What was underappreciated was the market risk.

No Govt agency rule or regulation required the financial institutions to invest trillions in these things. And if you claim they did I'd like to see the regulation that required it. Because I haven't yet.

Given that all the loans that Freddie and Fannie make are loans that the free market wouldn't make, hence their existence; all loans made by those two companies are subprime. The entire market those two government entities engage in, as well as all the loans CRA legislated for private banks to make out, are subprime. That is, the return on all those loans would be net loss, otherwise banks would be doing it all along, and there would be no need for government interference.

Poppycock. Only a small percentage of F/F loans are subprime.

 

[editec]

The history lesson was sound, however the economics lesson was not. This recent downturn is not the product of an unregulated market, it is the product of a highly regulated market with a central economic planner that creates the business cycle. I'm not sure how you can say that the market was full of unregulated greed, and then boldly state that the free market isn't a free market. Those are opposing concepts. Of course the market hasn't been free, that's why this downturn can't possibly be chalked up to deregulation.

And while it's true that the founders did believe that the government should have its hand in infrastructure, which is why they authorized this under the Constitution, it doesn't change basic economics whatsoever. Government spending always hurts the economy.

'It is NOT a question of regulation or NO regulation, Kevin.

Its a question of GOOD regulation or BAD regulation.

We have plenty of regulations...bad regulation.

But as to this economic meldown?

Most of it is occurring thanks to the dereviatives market which had ZERO regulations governing it.

So get your facts straight and stop pretending that 10% of the story of this meltdown is the whole story.

You are smart enough to know that is not true.

 

[onecut39]

I guess technically this is history, but its so relevant to now I thought it best here.


Now that we're already into this recession, there's no point to playing the blame game any more. Especially when there is plenty of blame to be heaped on both sides.

The real question now, is how do we fix it?

Let's look to history.


The Great Depression - for what reasons did it end?

A better question ... Why is something from the 1930s posted in Current Events?

Those who ignore history will be forced to relive it.