The smoking gun of the current economic Crisis we are all going to pay for

Discussion in 'Economy' started by Charles_Main, Sep 28, 2008.

  1. Charles_Main
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    Charles_Main AR15 Owner

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    While there are many causes of the current problems we face. A large part of the root cause of the credit crisis is the Community Reinvestment Act.

    A high minded law wrote and passed into law by Democrats, and Pushed on lenders. Billed as help for the poor and minorities to get a home, and to stop what the Dems called unfair lending policies.

    Basically what it did was force lenders to make bad loans to people who could not afford them, in the name of fairness.

    The Dems claimed the Banks were only lending to the wealthy. Of course what this ignores is that for the most part they were only lending to "the wealthy" was because those are the people who can afford to pay back loans.

    Now I know on this Liberal dominated board I will simply be dismissed and attacked for this post, but I suggest any of you who are open minded google the CRA and really read about it.

    If you do you will see that it is really a map of point to Point of how we got to the place we are now. The instructions it made to Fanny and Freddy are the smoking gun. It instructed them to do what ever it took to enable low income people to secure loans for homes. It also laid out the instructions on how to put those loans into securities to be traded on the market.

    The CRA is why when Nancy Pelosi says the Dems hold no responsibility in this Crisis she is telling you a bold faced lie. The CRA is surely a large part of the cause.
     
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  2. dilloduck
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    dilloduck Diamond Member

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    You will probably be ignored like everyone else who has pointed out the disaster caused by affirmative action lending.
     
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  3. Care4all
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    Care4all Warrior Princess Supporting Member

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    it was forced on to no one...(you really think the very banks that have the POWER to force both dems and pubs to give them 700 BILLION, didn't have the power to push back on this act?)

    it was USED as an excuse to make alot of money for alot of people, thru their own BAD and GREEDY negligent to their stock holders, business decisions...
     
  4. dilloduck
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    dilloduck Diamond Member

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    You don't have to force cheap money on anyone---the banks were happy to borrow it and pass it on to those it was intended for. Now Congress will pay the bankers back. Do you see what happened there ?
     
  5. Care4all
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    Care4all Warrior Princess Supporting Member

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    if the people kept their homes u might have a point...but nothing happened here, other than those on wall street, getting bailed out...AFTER they made a bundle
     
  6. dilloduck
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    dilloduck Diamond Member

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    right--tricky how they swipe taxpayer money isn't it ?
     
  7. Care4all
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    Care4all Warrior Princess Supporting Member

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    it's always been this way, taking from the poor and middle class and giving it to the influential rich....but you used to deny such was their plan?
     
  8. dilloduck
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    dilloduck Diamond Member

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    I disagreed with you about who and how it was being done. It's the money changers. Sound familiar?
     
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  9. jreeves
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    jreeves Senior Member

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    Fannie and Freddie were able to take on this bad paper because everyone believed they federally backed. Well it turns out, this is true.
    Freddie Mac: A Mercantilist Enterprise - Paul Cleveland - Mises Institute
    While these institutions have been privatized to a degree, they still remain tied to the federal government in some important respects. In fact, Fannie Mae and Freddie Mac have access to a guaranteed line of credit of $2.25 billion with the U.S. treasury.[4] This guarantee, coupled by the perception that federal money would be used beyond the extent of the credit limit, allows both companies to maintain lower borrowing costs than would otherwise be the case. In many cases, the companies are able to sell bonds yielding only a few dozen basis points above U.S. treasury benchmarks. If the government's guarantee disappeared, the borrowing spreads for both companies would widen. Beyond the government's line of credit, these companies are also exempt from state and local income taxation and are exempt from SEC filings. Moreover, their securities are listed as government securities and can be held by banks and thrifts as low-risk bonds.[5] These benefits provide a significant advantage since such privileges are not offered to other financial institutions.
    For the most part, Fannie Mae and Freddie Mac have affected private mortgage markets by securitizing mortgages through the selling of bonds based. Freddie Mac veered from this strategy in the early 1990s when the company's management sought to generate higher profits. Though its business of securitizing mortgages was growing steadily, managers determined that the company could generate greater profitability by holding mortgages in a portfolio rather than by merely securitizing them through issuing bonds.[6]

    However, as with any investment, a higher return typically entails accepting greater risk and this fact applies as much to Freddie Mac as it does to any other enterprise. In its original form of operation, securitizing mortgage contracts by selling bonds in the debt market passed on any interest rate risk to the bondholders. But, this situation changed dramatically when Freddie Mac began to hold mortgages in its own portfolio. Since most of the mortgages pay a fixed rate of interest, any change in interest rates can significantly affect the value of the portfolio. For this reason, Freddie Mac's management decided to hedge their exposure to fluctuations in the market rate of interest by using derivatives. One of the main instruments that the company uses is the over-the-counter derivative product called an interest rate swap.[7] The swap market is used by global banks, brokers, and insurance companies everyday, and its usefulness is immeasurable. It allows financial companies to reduce risk. It also provides a means of financial speculation.[8]

    Freddie Mac manages a portfolio valued in the hundreds of billions of dollars. Furthermore, the portfolio contains mortgages at different interest rates with different durations. The task of successfully hedging such a portfolio is monumental, and Freddie Mac is forced to engage in numerous interest rate swaps in an effort to attempt to protect itself from interest rate fluctuations.
     
  10. Ravi
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    Ravi Diamond Member

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    Charles, can you show me where this is written:

    Basically what it did was force lenders to make bad loans to people who could not afford them, in the name of fairness.

    The bill you are talking about made it illegal for banks to charge more bank fees and to charge higher interest rates to people that didn't happen to be white. Show me where banks were forced to do anything.

    If you are interested in knowing what led to this crisis, read my short explanation here: http://www.usmessageboard.com/curre...-ing-deregulation-you-peons-3.html#post808614.

    It saddens me dillo, that you buy into this shit. But I guess it doesn't really surprise me.
     

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