US Housing policy: Cut the Daisys, Keep the Weeds

Discussion in 'Economy' started by CrusaderFrank, Oct 14, 2010.

  1. CrusaderFrank
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    CrusaderFrank Diamond Member

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    It should be obvious by now that the effect of Government, TARP and the FED was to kill off the private mortgage finance business and have the government essentially nationalize the US residential Real estate market.

    As the market melted down, key decisions were made to liquidate the Investment banks that competed with Goldman Sachs and Chase, who were kept afloat, while Bear Stearns, Lehman and Merrill Lynch were essentially liquidated.

    Worse yet, the two firms that were the epicenter of the meltdown, Fannie and Freddie were the ones that were save and allowed to be kept in business.

    In a sane, educated, free society, Fannie and Freddie would have been liquidated, and Chris Dodd, Barney Frank, the entire US Federal Reserve and a host of others hauled off to Gitmo as financial traitors.
     
    Last edited: Oct 14, 2010
  2. CrusaderFrank
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    CrusaderFrank Diamond Member

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    Will this make it easier for Obama to turn Freddie and Fannie over to China so they will own all the real estate?
     
  3. loosecannon
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    loosecannon Senior Member

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    Fannie and Freddie are the quasi federal agencies that insure the rest of the mortgage industry at their own peril and the taxpayer's expense.

    If anything should have been killed it was the private mortgage industry that wrote illegal mortgages, fucked up the paper trail, pawned off fraudulent mortgage securities on the rest of the world and that still won't refi distressed mortgages.

    Fannie and Freddie were just institutions sucked into the riptide.

    The mortgage business was nationalized not so long ago and it performed far far better. Perhaps we should revisit that model.
     
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  4. CrusaderFrank
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    CrusaderFrank Diamond Member

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    Fannie and Freddie set the underwriting standards for the mortgages they wanted to buy, they kept lowering their requirements until they hit No income no asset and the banks complied.

    If there was no patsy there saying, "I want to buy No Income No Asset mortgage" nobody would have underwritten them that way.

    Fannie and Freddie need to be liquidated
     
  5. loosecannon
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    loosecannon Senior Member

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    Absolute bullshit. They made profits insuring sound mortgages. To insinuate that they would only accept mortgages destined to destroy their own balance sheets and send the world economy into a tailspin is like saying that Obama eats Haitian babies raw.

    It may feel good to say it but you know it is a bald faced lie.
     
  6. Baruch Menachem
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    Baruch Menachem '

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    Fannie and Freddie bought the loans the banks wanted to dump. They would eat any paper of any quality.

    They also coerced the banks into making doubtful loans in order to comply with the neighborhood reinvestment act.

    There is no way the banks would have made those loans without being jawboned into them, and fannie and freddie made a convient dumping place once they were made, and Goldman made out like a bandit in the repacking market on these.

    Lehman and Merril shouldn't have bought them. That was just plain bad business buying something without due diligence, but they were sold as being next best things to US treasuries, which they weren't . You would think that the folks at Lehman and Merril would know better.
     
  7. CrusaderFrank
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    CrusaderFrank Diamond Member

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    Progressives can't get away with their lies anymore

    Fannie and Freddie lowered the standards of the mortgages they wanted to buy to No Income/No Asset, the banks had to comply.
     
  8. william the wie
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    william the wie Gold Member

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    The Fed is the only possible causative factor of the bubble. The housing boom started in the mid-80s, 86 actually. So with a huge upsurge in asset values, remember the 87 crash and the S&L mess, the fed poured gasoline on the fire for 30 freaking years! Other mistakes were made but having the Fed around to create another Great Depression as its same policy in the 20s caused the 1930s GD. Read the citation for Hayek's Nobel prize on this subject or read the writings of Friedman, the Fed caused the bubble and the bust this time same as it did previously in the 1930s. Abolish the Fed.
     
  9. CrusaderFrank
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    CrusaderFrank Diamond Member

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    The Fed refuses to disclose who they loaned $2 TRILLION to during the meltdown.

    In any civilized educated country it would be torches and pitchfork time
     
  10. PoliticalChic
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    PoliticalChic Diamond Member

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    "a. In 1987, Acorn led a coalition of advocacy groups calling for industry-wide changes in lending standards. Among the demanded reforms were the easing of minimum down-payment requirements and of the requirement that borrowers have enough cash at a closing to cover two to three months of mortgage payments (research had shown that lack of money in hand was a big reason some mortgages failed quickly).

    b. ACORN then attacked Fannie Mae, the giant quasi-government agency that bought loans from banks in order to allow them to make new loans. Its underwriters were “strictly by-the-book interpreters” of lending standards and turned down purchases of unconventional loans, charged Acorn. The pressure eventually paid off. In 1992, Congress passed legislation requiring Fannie Mae and the similar Freddie Mac to devote 30 percent of their loan purchases to mortgages for low- and moderate-income borrowers.

    c. Clinton Administration housing secretary, Henry Cisneros, declared that he would expand homeownership among lower- and lower-middle-income renters. His strategy: pushing for no-down-payment loans; expanding the size of mortgages that the government would insure against losses; and using the CRA and other lending laws to direct more private money into low-income programs.

    d. Shortly after Cisneros announced his plan, Fannie Mae and Freddie Mac agreed to begin buying loans under new, looser guidelines. Freddie Mac, for instance, started approving low-income buyers with bad credit histories or none at all, so long as they were current on rent and utilities payments. Freddie Mac also said that it would begin counting income from seasonal jobs and public assistance toward its income minimum, despite the FHA disaster of the sixties.

    e. Freddie Mac began an “alternative qualifying” program with the Sears Mortgage Corporation that let a borrower qualify for a loan with a monthly payment as high as 50 percent of his income, at a time when most private mortgage companies wouldn’t exceed 33 percent. The program also allowed borrowers with bad credit to get mortgages if they took credit-counseling classes administered by Acorn and other nonprofits. Subsequent research would show that such classes have little impact on default rates.

    f. In July 1999, HUD proposed new levels for Fannie Mae’s and Freddie Mac’s low-income lending; in September, Fannie Mae agreed to begin purchasing loans made to “borrowers with slightly impaired credit”—that is, with credit standards even lower than the government had been pushing for a generation.

    g. In 2004 Congress pressed new affordable-housing goals on the two mortgage giants, which through 2007 purchased some $1 trillion in loans to lower- and moderate-income buyers. The buying spree helped spark a massive increase in securitization of mortgages to people with dubious credit.

    h. In October 1994, Fannie Mae head James Johnson had reminded a banking convention that mortgages with small down payments had a much higher risk of defaulting. (A Duff & Phelps study found that they were nearly three times more likely to default than conventional mortgages.) Yet the very next month, Fannie Mae said that it expected to back loans to low-income home buyers with a 97 percent loan-to-value ratio—that is, loans in which the buyer puts down just 3 percent—as part of a commitment, made earlier that year to Congress, to purchase $1 trillion in affordable-housing mortgages by the end of the nineties. According to Edward Pinto, who served as the company’s chief credit officer, the program was the result of political pressure on Fannie Mae trumping lending standards."
    Obsessive Housing Disorder by Steven Malanga, City Journal Spring 2009
    (emphasis mine)
     
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