Banks should never be forced to give subprime loans.

[RandomPoster]

Banks make their money by lending money, charging a legal amount interest, and getting paid back. They like to lend money. However, they do not like to lend money to people who look like a bad investment on paper. It's nothing personal. We need to repeal Jimmy Carter's Community Reinvestment Act. Let the banks run their business as a business and stop forcing them to give out subprime loans. That is what created the housing bubble, which finally burst and caused a meltdown. Too many people were taking out loans they shouldn't be taking out and that should not be offered to them. This caused a bubble in housing prices, which spawned more housing market activity and caused it all to swell until it finally burst. Carter, Clinton, and even Bush were guilty. Deregulate the banks and let them worry about the bottom line instead of forcing them to follow a bad business model for socio-political reasons. We will all benefit from it. Fanny Mae and Freddie Mac should be repealed as well.

 

[MACAULAY]

Bill Clinton weaponized the Carter Community Reinvestment Act and brought on the economic collapse at the end of the George Bush Presidency. Bush tried to rein it in but the criminal homosexual Barney Frank called him a Raaaacist and assured us that Fannie Mae and Freddie Mac were fully solvent, so Bush folded and a couple of years later Fannie Mae and Freddie Mac collapsed.

Clinton's thinking was that he could not raise taxes any more---for Reparations---so he used the Community Reinvestment Act to force banks to make loans to people who could not pay them back---as a hidden tax on the shareholders of banks. Shrewd but the financial consequences from this pre-Socialist Power Grab were disastrous.

The Scam should have been the biggest scandal since Watergate, but the Pravda-like Media is completely in the pocket of the Democratic Party controlled Deep State.

We are in the midst of the most corrupt period in the history of this Country. 2020 will say if it can be brought under control. It is not likely.

But, we can console ourselves in the knowledge that it happens to all civilizations--corruption, alien invasion, pussification--ultimately decay it from within just as we are witnessing every day right now.....in spite of the valiant efforts of Don Trump.

Sanctuary Cities? Are you kidding? Mayors would have gone to jail in any other period of our History, but no, not now, for Democrats have determined that they can't win---that Socialism cannot prevail---without a complete change of voters---into a more needy demographic, one that needs the Big Government Handouts.

American Culture as we have known it for about 220 years is going going---gone. The Media is lost, the Colleges are lost. The major cities are rotting. The Heartland will stay strong for a few more decades, but the American Culture---the greatest so far in Human History is about gone.

Sad!

 

[TroglocratsRdumb]

The Dems drive the vital middle class out of cities, then whole states, next will be the whole country

 

[TroglocratsRdumb]

Texas will flip by 2028 and then they will have lock on power. They will elect cretins such as AOC.

 

[danielpalos]

Banks make their money by lending money, charging a legal amount interest, and getting paid back. They like to lend money. However, they do not like to lend money to people who look like a bad investment on paper. It's nothing personal. We need to repeal Jimmy Carter's Community Reinvestment Act. Let the banks run their business as a business and stop forcing them to give out subprime loans. That is what created the housing bubble, which finally burst and caused a meltdown. Too many people were taking out loans they shouldn't be taking out and that should not be offered to them. This caused a bubble in housing prices, which spawned more housing market activity and caused it all to swell until it finally burst. Carter, Clinton, and even Bush were guilty. Deregulate the banks and let them worry about the bottom line instead of forcing them to follow a bad business model for socio-political reasons. We will all benefit from it. Fanny Mae and Freddie Mac should be repealed as well.

Unemployment compensation for simply being unemployed on an at-will basis in our at-will employment States can solve simple poverty and help correct this market in a market friendly manner.

What if, the unemployed could obtain unemployment compensation at the equivalent to fourteen dollars an hour with a fifteen dollar an hour minimum wage to actual provide labor input to the economy?

 

[ReinyDays]

Title VIII - Community Reinvestment
Section 804 - In connection with its examination of a financial institution, the appropriate Federal financial supervisory agency shall—
Subsection 1 - assess the institution's record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of such institution;

[emphasis mine]

This act applies to credit-worthy folks looking to get a mortgage and being denied because of the poor neighborhood the house is in ... this makes poor neighborhoods poorer for no real reason ... the text of this law clearly states banks don't have to lend to folks who don't otherwise qualify for a mortgage, these sub-prime borrowers ... whatever the reasons for the housing bubble, this act isn't ... no bank was forced to loan money to anyone who didn't fully qualify ... indeed, my bank claimed they weren't and didn't get hit at all with the bubble burst ...

The banking industry is powerful in this country ... it's very powerful in Washington DC ... if they didn't like this law, they'd had it repealed decades ago ...

AOC won't be eligible to run for President until 2028, but that'll be midterm for the next Democrat ... I figure 2040 before we see her name on the ballot ...

 

[basquebromance]

income inequality is the result of effort inequality, my friends!

 

[RandomPoster]

Title VIII - Community Reinvestment
Section 804 - In connection with its examination of a financial institution, the appropriate Federal financial supervisory agency shall—
Subsection 1 - assess the institution's record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of such institution;

[emphasis mine]

This act applies to credit-worthy folks looking to get a mortgage and being denied because of the poor neighborhood the house is in ... this makes poor neighborhoods poorer for no real reason ... the text of this law clearly states banks don't have to lend to folks who don't otherwise qualify for a mortgage, these sub-prime borrowers ... whatever the reasons for the housing bubble, this act isn't ... no bank was forced to loan money to anyone who didn't fully qualify ... indeed, my bank claimed they weren't and didn't get hit at all with the bubble burst ...

The banking industry is powerful in this country ... it's very powerful in Washington DC ... if they didn't like this law, they'd had it repealed decades ago ...

AOC won't be eligible to run for President until 2028, but that'll be midterm for the next Democrat ... I figure 2040 before we see her name on the ballot ...

The bank is the only institution that should be defining who "qualifies". It is their money being lent. The government should not be involved in saying who qualifies and the government should never pressure them into giving loans or promising to bail them out when the loans are defaulted on. Get the government out of it. It should not be threatening banks and accusing them of discrimination for following sound business practices.

You can add the Community Reinvestment Act, Fanny Mae, and Freddie Mac to the long list of things that should be repealed.

 

[ReinyDays]

Community Reinvestment Act doesn't deal with "who" ... it deals with "what" ... read the law itself, it doesn't say what you think it says ... do you have a court case that says otherwise, please port the reference and I'll read it ...

Fanny Mae and Freddie Mac can go ... more trouble than they're worth ... and that goes for the banks that got bail-outs ... they all deserve to be dissolved in bankruptcy court ... thanks Obama ...

 

[RandomPoster]

Community Reinvestment Act doesn't deal with "who" ... it deals with "what" ... read the law itself, it doesn't say what you think it says ... do you have a court case that says otherwise, please port the reference and I'll read it ...

Fanny Mae and Freddie Mac can go ... more trouble than they're worth ... and that goes for the banks that got bail-outs ... they all deserve to be dissolved in bankruptcy court ... thanks Obama ...

"The Act mandates that all banking institutions that receive Federal Deposit Insurance Corporation (FDIC) insurance be evaluated by Federal banking agencies to determine if the bank offers credit (in a manner consistent with safe and sound operation as per Section 802(b) and Section 804(1)) in all communities in which they are chartered to do business."

Banks should be able to make whatever loans they deem appropriate. There should be no guidelines regarding who, what, where, when, how, or why. They should only be concerned with making money. They are not Social Justice Institutions. The only color they care about is green and that's how it should be.

 

[ReinyDays]

That only works if the banks are making money ... when they lose money, they just take the deposits and shut down ... this is US history ...

Sounds like you want all civil rights suspended when it comes to money ... and that's not really a politically viable position ... We the People can issue business guidelines any time we want to ... which is the main reason our booze isn't cut with wood alcohol, for example ... here, we have the business of writing mortgages and we've set some guidelines for these businesses ...

If the borrower is good for the money ... then it's the same profit for the bank no matter the neighborhood ... best business practice ...

 

[RandomPoster]

That only works if the banks are making money ... when they lose money, they just take the deposits and shut down ... this is US history ...

Sounds like you want all civil rights suspended when it comes to money ... and that's not really a politically viable position ... We the People can issue business guidelines any time we want to ... which is the main reason our booze isn't cut with wood alcohol, for example ... here, we have the business of writing mortgages and we've set some guidelines for these businesses ...

If the borrower is good for the money ... then it's the same profit for the bank no matter the neighborhood ... best business practice ...

The banks were losing money because they were pressured into giving high risk loans that they would have preferred to reject and responsible borrowers and taxpayers wound up footing the bill.

 

[ReinyDays]

Bank America share prices are up 700% since 2012 ... that's an insane amount of money to be "losing" ... my heart bleeds for the share holders ... have to wait until next spring to re-engine the Lear Jet ...

You still haven't answered the question: My bank didn't make any sub-prime loans ... why do you think they were forced to? ... seems a blatant violation that one of the annual audits would have picked it up ...

 

[AntonToo]

Banks make their money by lending money, charging a legal amount interest, and getting paid back. They like to lend money. However, they do not like to lend money to people who look like a bad investment on paper. It's nothing personal. We need to repeal Jimmy Carter's Community Reinvestment Act. Let the banks run their business as a business and stop forcing them to give out subprime loans. That is what created the housing bubble, which finally burst and caused a meltdown. Too many people were taking out loans they shouldn't be taking out and that should not be offered to them. This caused a bubble in housing prices, which spawned more housing market activity and caused it all to swell until it finally burst. Carter, Clinton, and even Bush were guilty. Deregulate the banks and let them worry about the bottom line instead of forcing them to follow a bad business model for socio-political reasons. We will all benefit from it. Fanny Mae and Freddie Mac should be repealed as well.

What a bunch of horseshit.

CAR actually set standards for lending above subprime grade.

Loans under CAR program outperformed general market and most failures were actually in private lending.

 

[healthmyths]

Community Reinvestment Act doesn't deal with "who" ... it deals with "what" ... read the law itself, it doesn't say what you think it says ... do you have a court case that says otherwise, please port the reference and I'll read it ...

Fanny Mae and Freddie Mac can go ... more trouble than they're worth ... and that goes for the banks that got bail-outs ... they all deserve to be dissolved in bankruptcy court ... thanks Obama ...

Obama gets more blame starting in 1995!

Obama's role in the 1995 ACORN/Citibank decision that started this it was a great mistake to push lower-income people into housing they couldn't afford and couldn't really handle once they had it"!
in the Buycks-Roberson v. Citibank Fed. Sav. Bank, 1994 suit against redlining. Most significant of all, ACORN was the driving force behind a 1995 regulatory revision pushed through by the Clinton Administration that greatly expanded the CRA (Community Reinvestment Act) and laid the groundwork for the Fannie Mae, Freddie Mac borne financial
crisis we now confront. Barack Obama was the attorney representing ACORN in this effort.
With this new authority, ACORN used its subsidiary, ACORN Housing, to promote subprime loans more aggressively.
Democracy Forums - Login
Rham Emmanuel, NOW OBAMA CHIEF OF STAFF and Jamie Gorelick were employees and directors of Fannie and freddie took between the two took out over $20 million. Gorelick was appointed Vice Chairman of Federal National Mortgage Association (Fannie Mae) from 1997 to 2003. She served alongside former Clinton Administration official Franklin Raines During that period, Fannie Mae developed a $10 billion accounting scandal. Gorelick took home $26.46 million in the period from 1998 to 2002 (she left in that year, so she wasn’t there for the entire period under investigation). Of that figure, nearly $15 million came from EPS bonuses.
Fannie Mae and Freddie Mac Invest in Democrats - OpenSecrets News

 

[g5000]

Banks make their money by lending money, charging a legal amount interest, and getting paid back. They like to lend money. However, they do not like to lend money to people who look like a bad investment on paper. It's nothing personal. We need to repeal Jimmy Carter's Community Reinvestment Act. Let the banks run their business as a business and stop forcing them to give out subprime loans. That is what created the housing bubble, which finally burst and caused a meltdown. Too many people were taking out loans they shouldn't be taking out and that should not be offered to them. This caused a bubble in housing prices, which spawned more housing market activity and caused it all to swell until it finally burst. Carter, Clinton, and even Bush were guilty. Deregulate the banks and let them worry about the bottom line instead of forcing them to follow a bad business model for socio-political reasons. We will all benefit from it. Fanny Mae and Freddie Mac should be repealed as well.

The banking meltdown was GLOBAL. The CRA had fuck-all to do with it. That was a myth invented two weeks after Lehman by some bigoted asshole trying to blame the darkies for the banks' crimes.

Sit back. You are about to get an education in the TRUTH.

PART I

In the beginning, a person who wanted to buy a house had to be connected to someone who had the necessary cash to buy that house. The person buying the house is the "borrower". The person with the money is an "investor" or a "lender".

How do these two people find each other? Well, one way is for the borrower to go to a bank for the money. Another way is for the borrower and investor to be connected to each other by a middle man, the "broker".

In reality, the bank is a broker, too. It is not their money they are lending. It is other people's money.

Let's say you are the investor. You have $200,000 you want to put to work. So you lend the money to a homebuyer for a 30 year mortgage. You will hold that mortgage, which I am going to call the "paper" for that loan.

Now you have to wait 30 years to garner the total profit from that loan. Over that 30 year period, let's say at current interest rates you would get back $400,000. That is the original $200,000 (the "principal"), and another $200,000 in interest payments.

You come out with $200,000 in profit.

One problem: You don't want to wait 30 years to get the principal and interest.

Along comes another "broker" who can sell the paper you are holding to another investor who is willing to receive monthly payments for 30 years. Maybe those investors are a group of retirees.

The total value of your paper is $400,000 but only if you wait 30 years. So you agree to sell the paper to these other investors for $250,000.

You have recouped your $200,000 and made an instant $50,000 profit, minus the small slice the broker takes for being the middle man. The investors will make a $150,000 profit over 30 years. That's because they paid you $250,000 and will get back $400,000.


Follow me so far?

All right.

The very root of the 2007-2009 crash is that little slice the broker received for being the middle man in this deal. His fees.

Remember that.

More later.

 

[g5000]

Part II
What if the only money on the entire planet which was available for lending was $200,000? Whoever held that teeny bit of money would be able to charge an almost infinite amount of interest.

The more money that is sloshing around looking for work to do, the easier it is to access that cash for borrowing. Therefore, the lower interest rates get. Since there are a lot of people who want to throw their money at borrowers, the borrowers have a universe of options, and thus are able to borrow at bargain basement rates.

So guess how much money was sloshing around looking for work at the dawn of the Millennium?



A lot.



And I mean...a lot.






We're talking seventy trillion dollars of loose cash.


$70,000,000,000,000



And all that money was looking for hands to thrust itself into. All that money was looking for borrowers.


Who had all that money, you may be wondering.

Retirees, Middle Eastern princes, teachers unions, labor unions, firefighter unions, municipal funds, college endowment funds, trust fund kids, Donald Trump, George Soros, the Rockefellers, and so forth and so on.

Not just here. All over the world. Ireland had cash. Iceland had cash. Germany had cash. Sweden, Switzerland, Italy...you get the idea.

And some of that seventy trillion was YOURS. Your 401k, your IRA, your stock options, your whole life insurance policy. And so forth.

You wanted your money to be put to work and made bigger, right? Right?

But you don't know how to do that. So you hired a money manager to figure it out for you.

A funny thing about money managers. As they started to manage more and more of other people's money, the smarter they thought they were.

But they weren't that smart. Not really. They were pretty stupid, actually. They were bought off by the brokers for the price of some hookers and blow and box seats at the World Series and shit.

No, really. I am not kidding.

These guys took your money and gave it to some greedy brokers who swore they had the world's safest investments.

Because even a tiny slice of $70,000,000,000,000 in fees is still a shit ton of money.

The brokers were making a killing off fees moving all that sloshing cash around and putting it to work. That's all they cared about.

 

[g5000]

Part III

We have to talk about securitisation now.

You lend $200,000 to a borrower. Each month, that borrower sends you a payment, for the next 30 years. I'm going to refer to that monthly payment henceforth as a "revenue stream".

You then sell the paper on that loan to a group of investors.

Most likely, you sell the paper to a broker-dealer. The broker-dealer collects thousands and thousands and thousands of such paper.

The broker-dealer is now sitting on a massive revenue stream. A river that is deep and wide.

He can now sell pieces of that revenue stream to money managers (the guy managing your 401k) or to a college endowment fund, or a union, or the comptroller of a town or city.

Anywhere on the planet. The broker-dealer acquires investor cash from all over the planet, and he acquires borrowers from all over the planet.

For a fee.

The broker-dealer sits in the middle of this raging river of $70 trillion, directing the flow of cash from the investors to the borrowers.

For lots and lots and lots and lots of fees.

The broker-dealer bundles all those loans together into a "security". The investors are not buying specific loans. They are buying pieces of the total revenue stream.

Here's another key part of the crash. Pay attention.

I repeat: The investors are not buying specific loans. They are buying pieces of the total revenue stream. They do not know whence the money comes. They know the money is coming from loan payments, but that's about it.

Got it? This is very important.


Now a good and proper money manager is supposed to do "due diligence". They aren't just supposed to take the word of the broker-dealer that all those loans are solid. They are supposed to ask questions, and examine the quality of the loans.

But what REALLY happened is the broker-dealers took your money manager out to the World Series, and tossed him some hookers and blow. The broker-dealers became the money manager's best friend.

And you trust your best friend, right? Right? No need to ask too many questions. We're buddies!

Not only that, you have demanded your money manager increase your money by a lot. A lot, dammit! Or else!

And your money manager makes his living off the service fees he charges you for managing your money.

You want results. BIG results.

And that puts some pressure on your money manager to start taking some risks. Because only high risk investments get BIG results.

 

[g5000]

Part IV

The borrowers: Homebuyers, corporations, car buyers, college students, credit card users, governments (local, state, federal, countries), Donald Trump, etc.

The lenders/investors: Saudi princes, the Rockefellers, college endowment funds, banks, unions, governments (local, state, federal, countries), Donald Trump, etc.

The broker-dealers: Goldman Sachs, Lehman Brothers, Merrill Lynch, Bear Stearns, JP Morgan, Morgan Stanley, Wellington Management, PGIM Limited, N M Rothschild & Sons, LANDESBANK, etc.


Mortgages can be and are securitized. Corporate loans can be and are securitized. College loans can be and are securitized.

Just about any revenue stream can be securitized.

Hell, you can even securitize a hooker's future income. Seriously! It would be illegal here, but it could be done. I giggle whenever I think about it.

Anything which can be securitized can be sold to investors.

A security made up of mortgages is called a "mortgage backed security". MBS. (Not to be confused with Mohammed bin Salman).

MBS revolutionized mortgage lending. It opened up the market to millions and millions and millions of people around the world who otherwise would never have been able to own a home.

And it worked pretty well for a very long time.

Every once in a while, someone would fuck things up out of greed, and the markets would crash.

But we never learned, and we didn't send the biggest crooks to jail. And this emboldened succeeding generations to even greater fraud.

 

[g5000]

Part V

I'm going to talk about mortgages and corporate loans from here on. I am putting aside all the other revenue streams out of convenience. They played only a small part in the crash, and are not important.

Okay.


For decades, the biggest players in the MBS market were "Fannie and Freddie". These were Government Sponsored Entities (GSEs) established a long time ago. I think Freddie was established during the Great Depression, and Fannie came along in the 70s. I'm too busy to look it up right now.

Fannie is short for Fannie Mae. Freddie is short for Freddy Mac.

Basically, any security sold by the GSEs had the backing of the full faith and credit of the United States government. Even though they are private corporations, the GSEs had an implicit guarantee that their securities would never let you down. You would always get your investment back, and make a tidy profit to boot.

No. Matter. What.

Here's the thing the hacks don't tell you: The GSEs were supported by both major parties. Bigly. In fact, just about every big name in politics was on the board of the GSEs, or were paid consultants to the GSEs, or had some other fiduciary connection to the GSEs.

The GSEs ensured not only their survival, but their very dominance, by owning all of Washington.

After the crash, during the 2012 election cycle, Newt Gingrich tried to pretend he had always been an enemy of the GSEs. When you have time, read this post: Newt's a lying sack of shit.


Aaaaaanyhoo...the GSEs dominated the MBS market for decades.

And Wall Street was jealous of that.

Then one day, someone invented the CDO...