Could be the biggest news story so far this decade.

[kwc57]

My wife and I have both worked in the banking industry for over 30 years now. What few people realize is that banking is one of the most heavily regulated industries in the country. The other thing that people don't realize about the mortgage side of banking is that banks were forced by the government to make loans to people who didn't qualify and couldn't pay them back. If you want to get to the root cause of the mortgage crisis, it is the government and not the banks. When it comes to lending money, the vast majority of banks are very conservative. They want to make loans to people and businesses that will actually pay the loans back as they make money off the interest payments. When forced to loan some high school dropout who is flipping burgers the money to buy a two bedroom house, they know they will most likely never get paid and the property will wind up in foreclosure.

you and the wifey obviously work in a small bank verses a Bank of America...

Actually.......you'd be surprised.

 

[California Girl]

Actually, it all started under Ronald Reagan.


true story

Maybe, maybe not. The truth is that who was President is of absolutely no importance. It was, and remains, flaws in the entire system. You want to play partisan politics with it, that's cool. But those of us with an actual brain know that it didn't matter who the President was, it was decade after decade of bad government, crap oversight, piss poor regulation, stupidity, and pure fucking greed that brought us to the brink of ruin. I would rather solve the problem than assign blame. Because there is a HUGE list of people to blame for this mess.

The President is not the lawmaker, Congress is. You are right, the president is inconsequential for the most part in these decisions. Sure they have the right to veto but they rely on Congress to make the regulations for the most part.

Apportioning 'blame' in this fuck up is actually really funny. I find it just hysterical that the Democrats try and blame the GOP and the GOP blame the Democrats. They were ALL responsible. Both sides, the banks, and the American people all have a chunk of mea culpa in this clusterfuck.

 

[Steve Hanson]

Maybe, maybe not. The truth is that who was President is of absolutely no importance. It was, and remains, flaws in the entire system. You want to play partisan politics with it, that's cool. But those of us with an actual brain know that it didn't matter who the President was, it was decade after decade of bad government, crap oversight, piss poor regulation, stupidity, and pure fucking greed that brought us to the brink of ruin. I would rather solve the problem than assign blame. Because there is a HUGE list of people to blame for this mess.

The President is not the lawmaker, Congress is. You are right, the president is inconsequential for the most part in these decisions. Sure they have the right to veto but they rely on Congress to make the regulations for the most part.

Apportioning 'blame' in this fuck up is actually really funny. I find it just hysterical that the Democrats try and blame the GOP and the GOP blame the Democrats. They were ALL responsible. Both sides, the banks, and the American people all have a chunk of mea culpa in this clusterfuck.

I made more money off of AIG these last few years than I did working. A real good friend told me to bet the farm on AIG when they were under $10 and appearing like they were going under. It was a gamble, but I trusted him and did. He told me it was safe because of pending gov't investments. More than safe, a sure thing. So I put in everything I had and sold at over $50, making over 5 times my investment. It just shows you exactly how invested in them government is. Both sides.

 

[daveman]

"Sub-prime lending started off as a good idea -- helping Americans buy homes, who previously couldn't afford to."

-- Barack Obama

Under the Clinton administration, federal regulators began using the act to combat “red-lining,” a practice by which banks loaned money to some communities but not to others, based on economic status. “No loan is exempt, no bank is immune,” warned then-Attorney General Janet Reno. “For those who thumb their nose at us, I promise vigorous enforcement.”

The Clinton-Reno threat of “vigorous enforcement” pushed banks to make the now infamous loans that many blame for the current meltdown, Richman said. “Banks, in order to not get in trouble with the regulators, had to make loans to people who shouldn’t have been getting mortgage loans.”

This threat combined with the government backing of Fannie and Freddie set the stage for the current uncertainty, because the “banks could just sell the loans off to Fannie or Freddie,” who could buy them with little regard for negative financial outcomes, Richman said.​

[ame=http://www.youtube.com/watch?v=PFlYmLAMbrw]YouTube - Andrew Cuomo: CRA Should be Abused to Force Banks to Give Risky Loans[/ame]

CUOMO: To take a greater risk on these mortgages, yes. To give families mortgages that they would not have given otherwise, yes.

Q: [unintellible] … that they would not have given the loans at all?

CUOMO: They would not have qualified but for this affirmative action on the part of the bank, yes.

Q: Are minorities represented in that low and moderate income group?

CUOMO: It is by income, and is it also by minorities? Yes.

CUOMO: With the 2.1 billion, lending that amount in mortgages — which will be a higher risk, and I’m sure there will be a higher default rate on those mortgages than on the rest of the portfolio …​

Is there anyone who can explain rationally why ability to repay should not be the ONLY determining factor for making loan decisions?

 

[Steve Hanson]

"Sub-prime lending started off as a good idea -- helping Americans buy homes, who previously couldn't afford to."

-- Barack Obama

Under the Clinton administration, federal regulators began using the act to combat “red-lining,” a practice by which banks loaned money to some communities but not to others, based on economic status. “No loan is exempt, no bank is immune,” warned then-Attorney General Janet Reno. “For those who thumb their nose at us, I promise vigorous enforcement.”

The Clinton-Reno threat of “vigorous enforcement” pushed banks to make the now infamous loans that many blame for the current meltdown, Richman said. “Banks, in order to not get in trouble with the regulators, had to make loans to people who shouldn’t have been getting mortgage loans.”

This threat combined with the government backing of Fannie and Freddie set the stage for the current uncertainty, because the “banks could just sell the loans off to Fannie or Freddie,” who could buy them with little regard for negative financial outcomes, Richman said.​

YouTube - Andrew Cuomo: CRA Should be Abused to Force Banks to Give Risky Loans

CUOMO: To take a greater risk on these mortgages, yes. To give families mortgages that they would not have given otherwise, yes.

Q: [unintellible] … that they would not have given the loans at all?

CUOMO: They would not have qualified but for this affirmative action on the part of the bank, yes.

Q: Are minorities represented in that low and moderate income group?

CUOMO: It is by income, and is it also by minorities? Yes.

CUOMO: With the 2.1 billion, lending that amount in mortgages — which will be a higher risk, and I’m sure there will be a higher default rate on those mortgages than on the rest of the portfolio …​

Is there anyone who can explain rationally why ability to repay should not be the ONLY determining factor for making loan decisions?

It was a good idea until it was abused.

 

[daveman]

It was a good idea until it was abused.

Why is it a good idea to loan money to people who can't afford to pay it back?

 

[Care4all]

It was a good idea until it was abused.

Why is it a good idea to loan money to people who can't afford to pay it back?

you should ask the Banks that question! NONE of those banks or mortgage companies were FORCED to give ANYONE a loan that they could not afford..........yet they sold loans to millions of people without even a reference.

most homes foreclosed were to middle class people... btw.

 

[Steve Hanson]

It was a good idea until it was abused.

Why is it a good idea to loan money to people who can't afford to pay it back?

As i said before it was abused. Originially the loans were high risk and the ratings listed as poor. Investors put money in, with the understanding the risk was high, but theu had the opportunity for gain. Under this scenario theses type of loans were not wide spread. Government pressure forced loans to be offered to minorities and other high risks on a much larger scale. To attract investors and fund the increase they became falsely rated as lower risks and became a very high percentage of their portfolio. Banks and firms had to hi a percentage of high risk loans. When they defaulted they had more vacant properties than they could afford.

 

[daveman]

It was a good idea until it was abused.

Why is it a good idea to loan money to people who can't afford to pay it back?

you should ask the Banks that question! NONE of those banks or mortgage companies were FORCED to give ANYONE a loan that they could not afford..........yet they sold loans to millions of people without even a reference.

most homes foreclosed were to middle class people... btw.

From my earlier link:

Do you remember how we told you that the Democrats and groups associated with them leaned on banks and even sued to get them to make bad loans by abusing the Community Reinvestment Act (see HERE and HERE)? The abuse of this act by ACORN and officials like Janet Reno was a factor in causing the economic crisis. The harassment suits filed under this act were used to get banks to lower credit standards and hand out high risk loans. We have dug up the lawsuit below while researching Obama’s legal career. It is a typical example of an ACORN harassment lawsuit.

In these lawsuits, ACORN makes a bogus claim of Redlining (denying poor people loans because of their ethnic heritage). They protest and get the local media to raise a big stink. This stink means that the bank faces thousands of people closing their accounts and get local politicians to lobby to stop the bank from doing some future business, expansions and mergers. If the bank goes to court, they will win, but the damage is already done because who is going to launch a big campaign to get the bank’s reputation back?

It is important to understand the nature of these lawsuits and what their purpose is. ACORN filed, or threatened to file, tons of these lawsuits and ALL CRA suits allege racism (usually the press involved and such with the threat of the CRA lawsuit is enough to get the bank to give in and put them in a catch 22, they also had a willing Janet Reno Justice Department to work with – see below for more on Reno). As we have said in our series or articles analyzing every aspect of this story (links at the very bottom of this post), the series of ACORN harassment lawsuits and intimidation against banks to lower credit standards was not the sole reason for the mortgage crisis, it was one important layer of many that brought us to the mortgage crisis and the largest financial scandal in the history of the world.

Case Name
Buycks-Roberson v. Citibank Fed. Sav. Bank Fair Housing/Lending/Insurance
Docket / Court 94 C 4094 ( N.D. Ill. ) FH-IL-0011
State/Territory Illinois
Case Summary
Plaintiffs filed their class action lawsuit on July 6, 1994, alleging that Citibank had engaged in redlining practices in the Chicago metropolitan area in violation of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691; the Fair Housing Act, 42 U.S.C. 3601-3619; the Thirteenth Amendment to the U.S. Constitution; and 42 U.S.C. 1981, 1982. Plaintiffs alleged that the Defendant-bank rejected loan applications of minority applicants while approving loan applications filed by white applicants with similar financial characteristics and credit histories. Plaintiffs sought injunctive relief, actual damages, and punitive damages.

U.S. District Court Judge Ruben Castillo certified the Plaintiffs’ suit as a class action on June 30, 1995. Buycks-Roberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 322 (N.D. Ill. 1995). Also on June 30, Judge Castillo granted Plaintiffs’ motion to compel discovery of a sample of Defendant-bank’s loan application files. Buycks-Roberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 338 (N.D. Ill. 1995).​

So, yes, they were forced to by bullshit lawsuits brought by ACORN and "community organizer" lawyers...including Barack Obama.

 

[daveman]

It was a good idea until it was abused.

Why is it a good idea to loan money to people who can't afford to pay it back?

As i said before it was abused. Originially the loans were high risk and the ratings listed as poor. Investors put money in, with the understanding the risk was high, but theu had the opportunity for gain. Under this scenario theses type of loans were not wide spread. Government pressure forced loans to be offered to minorities and other high risks on a much larger scale. To attract investors and fund the increase they became falsely rated as lower risks and became a very high percentage of their portfolio. Banks and firms had to hi a percentage of high risk loans. When they defaulted they had more vacant properties than they could afford.

So the answer to my question is "It's NOT a good idea to loan money to people who can't afford to pay it back -- so the government should force institutions to do so."

 

[Steve Hanson]

Why is it a good idea to loan money to people who can't afford to pay it back?

you should ask the Banks that question! NONE of those banks or mortgage companies were FORCED to give ANYONE a loan that they could not afford..........yet they sold loans to millions of people without even a reference.

most homes foreclosed were to middle class people... btw.

From my earlier link:

Do you remember how we told you that the Democrats and groups associated with them leaned on banks and even sued to get them to make bad loans by abusing the Community Reinvestment Act (see HERE and HERE)? The abuse of this act by ACORN and officials like Janet Reno was a factor in causing the economic crisis. The harassment suits filed under this act were used to get banks to lower credit standards and hand out high risk loans. We have dug up the lawsuit below while researching Obama’s legal career. It is a typical example of an ACORN harassment lawsuit.

In these lawsuits, ACORN makes a bogus claim of Redlining (denying poor people loans because of their ethnic heritage). They protest and get the local media to raise a big stink. This stink means that the bank faces thousands of people closing their accounts and get local politicians to lobby to stop the bank from doing some future business, expansions and mergers. If the bank goes to court, they will win, but the damage is already done because who is going to launch a big campaign to get the bank’s reputation back?

It is important to understand the nature of these lawsuits and what their purpose is. ACORN filed, or threatened to file, tons of these lawsuits and ALL CRA suits allege racism (usually the press involved and such with the threat of the CRA lawsuit is enough to get the bank to give in and put them in a catch 22, they also had a willing Janet Reno Justice Department to work with – see below for more on Reno). As we have said in our series or articles analyzing every aspect of this story (links at the very bottom of this post), the series of ACORN harassment lawsuits and intimidation against banks to lower credit standards was not the sole reason for the mortgage crisis, it was one important layer of many that brought us to the mortgage crisis and the largest financial scandal in the history of the world.

Case Name
Buycks-Roberson v. Citibank Fed. Sav. Bank Fair Housing/Lending/Insurance
Docket / Court 94 C 4094 ( N.D. Ill. ) FH-IL-0011
State/Territory Illinois
Case Summary
Plaintiffs filed their class action lawsuit on July 6, 1994, alleging that Citibank had engaged in redlining practices in the Chicago metropolitan area in violation of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691; the Fair Housing Act, 42 U.S.C. 3601-3619; the Thirteenth Amendment to the U.S. Constitution; and 42 U.S.C. 1981, 1982. Plaintiffs alleged that the Defendant-bank rejected loan applications of minority applicants while approving loan applications filed by white applicants with similar financial characteristics and credit histories. Plaintiffs sought injunctive relief, actual damages, and punitive damages.

U.S. District Court Judge Ruben Castillo certified the Plaintiffs’ suit as a class action on June 30, 1995. Buycks-Roberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 322 (N.D. Ill. 1995). Also on June 30, Judge Castillo granted Plaintiffs’ motion to compel discovery of a sample of Defendant-bank’s loan application files. Buycks-Roberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 338 (N.D. Ill. 1995).​

So, yes, they were forced to by bullshit lawsuits brought by ACORN and "community organizer" lawyers...including Barack Obama.

Part of the point I was making about abuses that made the practice poor.

 

[California Girl]

It was a good idea until it was abused.

Why is it a good idea to loan money to people who can't afford to pay it back?

you should ask the Banks that question! NONE of those banks or mortgage companies were FORCED to give ANYONE a loan that they could not afford..........yet they sold loans to millions of people without even a reference.

most homes foreclosed were to middle class people... btw.

The whole point is that the banks WERE forced to loan money to people they couldn't afford. This clusterfuck goes waaaay deeper than bad banking practices, Care. Really, it does.

 

[daveman]

Part of the point I was making about abuses that made the practice poor.

 

[Steve Hanson]

Why is it a good idea to loan money to people who can't afford to pay it back?

you should ask the Banks that question! NONE of those banks or mortgage companies were FORCED to give ANYONE a loan that they could not afford..........yet they sold loans to millions of people without even a reference.

most homes foreclosed were to middle class people... btw.

The whole point is that the banks WERE forced to loan money to people they couldn't afford. This clusterfuck goes waaaay deeper than bad banking practices, Care. Really, it does.

And the result was an extremely high percentage of high risk loans that crippled banks when they faulted. What was happening prior to the crash was smaller, weaker banks were failing. They were the precursors to the larger mess. Their assest, along with the bad debt were purchased by solvent entities. These solvent entities aquired more and more bad debt with their aquisitions to compund the ones they had issued on their own. They got stuk woth the hot potatoes when the market crashed.

 

[Flopper]

didn't we go thru this with GS bundling and welling what they knew was crap via e mails etc.? Its legal, I am sorry but there it is, unless I am missing something from this article......

the real culprits, imho are S&P, Moodys and Dun & Bradstreet, they awarded the ratings...

Right on Trajan, because that is how people invest, on the ratings.

All the major bond rating services blew it. They didn't take into account the risks in real estate and like the investors that bought mortgage backed bonds, the rating services didn't know what they were worth.

When the rating services rate municipal bonds, they automatically assign their highest rating to bonds that are insured. Most of the AAA bonds are insured by just a few companies. If we have another deep recession before state and local governments recover from the current recession, there could be a lot of defaults. If one of those insurers goes under, it could be really messy. The services are publishing the underlying ratings which is helpful for risk averse investors.

I think the services are bit more conservative since the recession which is good.

 

[newpolitics]

I surely hope it ferrets out the real theifs.

If it can manage that then maybe the people will completely understand why we need to regulate this industry and in what way.

Thieves, not theifs, you ignorant septic tank. Here is a little helpful tip for you... 'I before E, except after C'. Got that? Good.

And... there is no value in the US regulating banking if other countries do not. All that will happen is that the banks will move their HQs overseas, and carry on. If we are to address the whole banking system, it must be a global regulation or it will not help.

seeing as there is no one world government,yet...you're notion is pointless... and seeing how our economy is so significant in the global economy, regulating our own industry to prevent another collapse is very prudent, but apparently, to you, its not enough. You want the whole world... what hypocrisy you pose

 

[newpolitics]

Why is it a good idea to loan money to people who can't afford to pay it back?

you should ask the Banks that question! NONE of those banks or mortgage companies were FORCED to give ANYONE a loan that they could not afford..........yet they sold loans to millions of people without even a reference.

most homes foreclosed were to middle class people... btw.

The whole point is that the banks WERE forced to loan money to people they couldn't afford. This clusterfuck goes waaaay deeper than bad banking practices, Care. Really, it does.

Haha... the banks were victims... you've got to be kidding me

 

[Flopper]

you should ask the Banks that question! NONE of those banks or mortgage companies were FORCED to give ANYONE a loan that they could not afford..........yet they sold loans to millions of people without even a reference.

most homes foreclosed were to middle class people... btw.

The whole point is that the banks WERE forced to loan money to people they couldn't afford. This clusterfuck goes waaaay deeper than bad banking practices, Care. Really, it does.

And the result was an extremely high percentage of high risk loans that crippled banks when they faulted. What was happening prior to the crash was smaller, weaker banks were failing. They were the precursors to the larger mess. Their assest, along with the bad debt were purchased by solvent entities. These solvent entities aquired more and more bad debt with their aquisitions to compund the ones they had issued on their own. They got stuk woth the hot potatoes when the market crashed.

Actually, most small community banks were not not hurt as bad as big ones. In general, the small community banks are more conservative. They didn't buy into the sub prime mortgage fiasco. I bank with a small community bank. Most of their home mortgages are 30 and 15 year fixed rate with 20% down. They also hold their mortgages so they are much more interested in the credit worthiness of the customer.

 

[Steve Hanson]

didn't we go thru this with GS bundling and welling what they knew was crap via e mails etc.? Its legal, I am sorry but there it is, unless I am missing something from this article......

the real culprits, imho are S&P, Moodys and Dun & Bradstreet, they awarded the ratings...

Right on Trajan, because that is how people invest, on the ratings.

All the major bond rating services blew it. They didn't take into account the risks in real estate and like the investors that bought mortgage backed bonds, the rating services didn't know what they were worth.

When the rating services rate municipal bonds, they automatically assign their highest rating to bonds that are insured. Most of the AAA bonds are insured by just a few companies. If we have another deep recession before state and local governments recover from the current recession, there could be a lot of defaults. If one of those insurers goes under, it could be really messy. The services are publishing the underlying ratings which is helpful for risk averse investors.

I think the services are bit more conservative since the recession which is good.

I'm in total agreement.

 

[Steve Hanson]

I surely hope it ferrets out the real theifs.

If it can manage that then maybe the people will completely understand why we need to regulate this industry and in what way.

Thieves, not theifs, you ignorant septic tank. Here is a little helpful tip for you... 'I before E, except after C'. Got that? Good.

And... there is no value in the US regulating banking if other countries do not. All that will happen is that the banks will move their HQs overseas, and carry on. If we are to address the whole banking system, it must be a global regulation or it will not help.

seeing as there is no one world government,yet...you're notion is pointless... and seeing how our economy is so significant in the global economy, regulating our own industry to prevent another collapse is very prudent, but apparently, to you, its not enough. You want the whole world... what hypocrisy you pose

She made a very valid point there. I don't think she was saying there is a single world government. What she was saying was pressure from foreign lending institutions forced US banks to be in the game. And that is exactly what happened. Foriegn banks were giving high risk loans and cutting heavily into more secure loans as a result. US banks had to compete. And that's the reason so many foriegn banks took a hit when the US housing market collapsed. They were the frontrunners over here.