FACTS on Dubya's great recession

[Toro]

Yes, underwriting standards declined substantially. That was a reason why the bubble happened.

However, the reason there was a decline in underwriting standards was because interest rates were lowered to levels that hadn't been seen in 60 years, which created a mismatch between assets and liabilities of financial entities. Those entities needed yield, and structured products gave them that return. So there was a huge demand for structured products. To fill the structured products, they turned to mortgages. Underwriting standards were lowered to fill the structures which were sold to investors demanding the products because bonds didn't yield enough. And bonds didn't yield enough because the price of fixed income was set too low.

 

[Dad2three]

Yes, underwriting standards declined substantially. That was a reason why the bubble happened.

However, the reason there was a decline in underwriting standards was because interest rates were lowered to levels that hadn't been seen in 60 years, which created a mismatch between assets and liabilities of financial entities. Those entities needed yield, and structured products gave them that return. So there was a huge demand for structured products. To fill the structured products, they turned to mortgages. Underwriting standards were lowered to fill the structures which were sold to investors demanding the products because bonds didn't yield enough. And bonds didn't yield enough because the price of fixed income was set too low.

You saying the 'markets' don't work?


Did the Fed Cause the housing Bubble?

According to research by Ambrogio Cesa-Bianchi and Alessandro Rebucci, the housing bubble was caused by "regulatory rather than monetary-policy failures"

Economist's View: Did the Fed Cause the housing Bubble?



Regulators and policymakers enabled this process at virtually every turn. Part of the reason they failed to understand the housing bubble was willful ignorance: they bought into the argument that the market would equilibrate itself. In particular, financial actors and regulatory officials both believed that secondary and tertiary markets could effectively control risk through pricing.


http://www.tobinproject.org/sites/tobinproject.org/files/assets/Fligstein_Catalyst of Disaster_0.pdf



Banks used cheap capital to create a bubble. Their lending strategies fueled and fed off the housing bubble, and they did so using mortgage products whose performance was premised on continued growth of that bubble.

 

[Dad2three]

Yes, underwriting standards declined substantially. That was a reason why the bubble happened.

However, the reason there was a decline in underwriting standards was because interest rates were lowered to levels that hadn't been seen in 60 years, which created a mismatch between assets and liabilities of financial entities. Those entities needed yield, and structured products gave them that return. So there was a huge demand for structured products. To fill the structured products, they turned to mortgages. Underwriting standards were lowered to fill the structures which were sold to investors demanding the products because bonds didn't yield enough. And bonds didn't yield enough because the price of fixed income was set too low.

… after the Fed started to tighten its monetary-policy stance and the prime segment of the mortgage market promptly turned around, the subprime segment of the mortgage market continued to boom, with increased perceived risk of loans portfolios and declining lending standards. Despite this evidence, the first regulatory action to rein in those financial excesses was undertaken only in late 2006, after almost two years of steady increases in the federal funds rate. …

When regulators finally decided to act, it was too late

Was it easy money or easy regulation that caused the housing bubble? | AEIdeas

 

[EdwardBaiamonte]

Banks used cheap capital to create a bubble.

exactly, it was huge Fed interventionist liberal policy to stimulate the economy through the housing market with cheap capital that created and sustained the bubble!! Thanks

 

[EdwardBaiamonte]

Their lending strategies fueled and fed off the housing bubble,

it was a strategy forced upon them by the Fed and Fanny/Freddie. They had to "keep dancing till the music stopped". If one bank did not participate it would have seen its market share plummet.

 

[EdwardBaiamonte]

they did so using mortgage products whose performance was premised on continued growth of that bubble.

exactly!! housing prices had never gone down thanks to liberal interventionist inflation. In fact it was called "The Greenspan Put". He was there for them if things went south so you had to keep dancing till the music stopped to stay competitive!.

It was all just another case of liberal soviet Veterans Administration regulation. Its no wonder China switched away from liberal regulation to freedom and capitalism. A liberal will simple lack the ability to understand.

I will await Dadto3 to change the subject once again!

 

[Rshermr]

Yes, underwriting standards declined substantially. That was a reason why the bubble happened.

However, the reason there was a decline in underwriting standards was because interest rates were lowered to levels that hadn't been seen in 60 years, which created a mismatch between assets and liabilities of financial entities. Those entities needed yield, and structured products gave them that return. So there was a huge demand for structured products. To fill the structured products, they turned to mortgages. Underwriting standards were lowered to fill the structures which were sold to investors demanding the products because bonds didn't yield enough. And bonds didn't yield enough because the price of fixed income was set too low.

… after the Fed started to tighten its monetary-policy stance and the prime segment of the mortgage market promptly turned around, the subprime segment of the mortgage market continued to boom, with increased perceived risk of loans portfolios and declining lending standards. Despite this evidence, the first regulatory action to rein in those financial excesses was undertaken only in late 2006, after almost two years of steady increases in the federal funds rate. …

When regulators finally decided to act, it was too late

Was it easy money or easy regulation that caused the housing bubble? | AEIdeas

Some one posted after you. Trying to end the thread by being stupid. Just ignore him. He is a congenital idiot, incapable of conversation or rational argument. Lives in his own imaginary world.

 

[EdwardBaiamonte]

Yes, underwriting standards declined substantially. That was a reason why the bubble happened.

However, the reason there was a decline in underwriting standards was because interest rates were lowered to levels that hadn't been seen in 60 years, which created a mismatch between assets and liabilities of financial entities. Those entities needed yield, and structured products gave them that return. So there was a huge demand for structured products. To fill the structured products, they turned to mortgages. Underwriting standards were lowered to fill the structures which were sold to investors demanding the products because bonds didn't yield enough. And bonds didn't yield enough because the price of fixed income was set too low.

… after the Fed started to tighten its monetary-policy stance and the prime segment of the mortgage market promptly turned around, the subprime segment of the mortgage market continued to boom, with increased perceived risk of loans portfolios and declining lending standards. Despite this evidence, the first regulatory action to rein in those financial excesses was undertaken only in late 2006, after almost two years of steady increases in the federal funds rate. …

When regulators finally decided to act, it was too late

Was it easy money or easy regulation that caused the housing bubble? | AEIdeas

Some one posted after you. Trying to end the thread by being stupid. Just ignore him. He is a congenital idiot, incapable of conversation or rational argument. Lives in his own imaginary world.

yes, Milton Friedman lived in his own world when he became the most important economist in human history by explaining that freedom works better the liberal socialism!

 

[Dad2three]

Their lending strategies fueled and fed off the housing bubble,

it was a strategy forced upon them by the Fed and Fanny/Freddie. They had to "keep dancing till the music stopped". If one bank did not participate it would have seen its market share plummet.

lol, WORLD WIDE CREDIT BUBBLE AND BUST? Just once, get honest!!!



Regulators and policymakers enabled this process at virtually every turn. Part of the reason they failed to understand the housing bubble was willful ignorance: they bought into the argument that the market would equilibrate itself. In particular, financial actors and regulatory officials both believed that secondary and tertiary markets could effectively control risk through pricing.


http://www.tobinproject.org/sites/tobinproject.org/files/assets/Fligstein_Catalyst of Disaster_0.pdf



A McKinsey Global Institute report noted “from 2000 through 2007, a remarkable run-up in global home prices occurred.” It is highly unlikely that a simultaneous boom and bust everywhere else in the world was caused by one set of factors (ultra-low rates, securitized AAA-rated subprime, derivatives) but had a different set of causes in the United States.

Examining the big lie: How the facts of the economic crisis stack up | The Big Picture

 

[edthecynic]

Bush tried 17 times to stop the community reinvestment act. He could never overcome Franklin Raines being black.

That's pure bullshit! Bush had his puppet in charge from 2005 on, Raines retired in 2004.

 

[Dad2three]

they did so using mortgage products whose performance was premised on continued growth of that bubble.

exactly!! housing prices had never gone down thanks to liberal interventionist inflation. In fact it was called "The Greenspan Put". He was there for them if things went south so you had to keep dancing till the music stopped to stay competitive!.

It was all just another case of liberal soviet Veterans Administration regulation. Its no wonder China switched away from liberal regulation to freedom and capitalism. A liberal will simple lack the ability to understand.

I will await Dadto3 to change the subject once again!

Got it, another conservative who parrots the brain trusts of the right, Limpballs, Insaaniity and cry baby Beck

 

[Dad2three]

banks used cheap capital to create a bubble.

exactly, it was huge fed interventionist liberal policy to stimulate the economy through the housing market with cheap capital that created and sustained the bubble!! Thanks

WORLD WIDE ? lol

 

[Dad2three]

Bush tried 17 times to stop the community reinvestment act. He could never overcome Franklin Raines being black.

That's pure bullshit! Bush had his puppet in charge from 2005 on, Raines retired in 2004.

Not only that, Bush WAS the regulator of the GSE's (F/F) and HE forced them to buy $440 BILLION in MBS's in 2002 to meet HIS goals and n 2004 dropped Clinton's rule that bad loans not be counted towards the housing goals! Then in 2005 AS REGULATOR he allowed F/F to chase the 'free markets' to the bottom BECAUSE they had lost so much market share to the Banksters!


Add it all up, Dubya's REGULATOR FAILURE!

 

[Dad2three]

they did so using mortgage products whose performance was premised on continued growth of that bubble.

exactly!! housing prices had never gone down thanks to liberal interventionist inflation. In fact it was called "The Greenspan Put". He was there for them if things went south so you had to keep dancing till the music stopped to stay competitive!.

It was all just another case of liberal soviet Veterans Administration regulation. Its no wonder China switched away from liberal regulation to freedom and capitalism. A liberal will simple lack the ability to understand.

I will await Dadto3 to change the subject once again!

China huh?

1. Jun 16, 2005

- Property markets have been frothing from America, Britain and Australia to France, Spain and China.



The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops

According to estimates by The Economist, the total value of residential property in developed economies rose by more than $30 trillion over the past five years, to over $70 trillion, an increase equivalent to 100% of those countries' combined GDPs.


The global housing boom: In come the waves | The Economist

 

[EdwardBaiamonte]

they did so using mortgage products whose performance was premised on continued growth of that bubble.

exactly!! housing prices had never gone down thanks to liberal interventionist inflation. In fact it was called "The Greenspan Put". He was there for them if things went south so you had to keep dancing till the music stopped to stay competitive!.

It was all just another case of liberal soviet Veterans Administration regulation. Its no wonder China switched away from liberal regulation to freedom and capitalism. A liberal will simple lack the ability to understand.

I will await Dadto3 to change the subject once again!

China huh?

1. Jun 16, 2005

- Property markets have been frothing from America, Britain and Australia to France, Spain and China.



The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops

According to estimates by The Economist, the total value of residential property in developed economies rose by more than $30 trillion over the past five years, to over $70 trillion, an increase equivalent to 100% of those countries' combined GDPs.


The global housing boom: In come the waves | The Economist

we can all provide millions of links to one another. Do you understand that? You've got to learn to think for yourself based on your reading and or thinking. Do you understand??

 

[Dad2three]

exactly!! housing prices had never gone down thanks to liberal interventionist inflation. In fact it was called "The Greenspan Put". He was there for them if things went south so you had to keep dancing till the music stopped to stay competitive!.

It was all just another case of liberal soviet Veterans Administration regulation. Its no wonder China switched away from liberal regulation to freedom and capitalism. A liberal will simple lack the ability to understand.

I will await Dadto3 to change the subject once again!

China huh?

1. Jun 16, 2005

- Property markets have been frothing from America, Britain and Australia to France, Spain and China.



The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops

According to estimates by The Economist, the total value of residential property in developed economies rose by more than $30 trillion over the past five years, to over $70 trillion, an increase equivalent to 100% of those countries' combined GDPs.


The global housing boom: In come the waves | The Economist

we can all provide millions of links to one another. Do you understand that? You've got to learn to think for yourself based on your reading and or thinking. Do you understand??

Sure, that you can't critically think OR be honest? Got that a long time ago. And?

You really need to get off hate talk radio., it's destroying your tiny brain....

 

[Toro]

You saying the 'markets' don't work?

Markets work most of the time. Sometimes they don't work all the time. I've spent nearly 20 years in capital markets and have seen first hand how markets break down.

Did the Fed Cause the housing Bubble?

According to research by Ambrogio Cesa-Bianchi and Alessandro Rebucci, the housing bubble was caused by "regulatory rather than monetary-policy failures"

Economist's View: Did the Fed Cause the housing Bubble?



Regulators and policymakers enabled this process at virtually every turn. Part of the reason they failed to understand the housing bubble was willful ignorance: they bought into the argument that the market would equilibrate itself. In particular, financial actors and regulatory officials both believed that secondary and tertiary markets could effectively control risk through pricing.


http://www.tobinproject.org/sites/tobinproject.org/files/assets/Fligstein_Catalyst of Disaster_0.pdf



Banks used cheap capital to create a bubble. Their lending strategies fueled and fed off the housing bubble, and they did so using mortgage products whose performance was premised on continued growth of that bubble.

In that paper, there is a an "if-then" argument. "If" the Federal Reserve had to lower interest rates, "then" the government should have increased regulation.

First, in theory, that's absolutely correct. Take an extreme example. Had the government changed the law to require a 50% or higher loan to value, there would have been no housing bubble. The housing market would have collapsed, but there would have been no bubble.

Second, the authors didn't argue that there shouldn't have been deregulation. They were arguing that there should have been more regulation to offset the abnormally low interest rate. I don't know of any economist who was arguing that we should increase taxes in 2003 or 04 as the authors suggested. Paul Krugman went on 60 Minutes to argue that the government should inflate the housing market as stimulus.

But the first order was that the Fed kept interest rates too low for too long. The second order required increased regulation. Had the first order not existed, i.e. interest rates not been kept too low, there would have been no argument for the second order, that there should not have been a need for regulation.

Also, the authors seem to mis-understand how asset markets work. That housing prices were rising when the Fed was increasing rates is what we'd expect in a normal market, and it's not a priori evidence that the Fed was not being too loose. Markets tip over usually when credit is tight, not when the short end of the curve begins to rise.

Yes, underwriting standards declined substantially. That was a reason why the bubble happened.

However, the reason there was a decline in underwriting standards was because interest rates were lowered to levels that hadn't been seen in 60 years, which created a mismatch between assets and liabilities of financial entities. Those entities needed yield, and structured products gave them that return. So there was a huge demand for structured products. To fill the structured products, they turned to mortgages. Underwriting standards were lowered to fill the structures which were sold to investors demanding the products because bonds didn't yield enough. And bonds didn't yield enough because the price of fixed income was set too low.

… after the Fed started to tighten its monetary-policy stance and the prime segment of the mortgage market promptly turned around, the subprime segment of the mortgage market continued to boom, with increased perceived risk of loans portfolios and declining lending standards. Despite this evidence, the first regulatory action to rein in those financial excesses was undertaken only in late 2006, after almost two years of steady increases in the federal funds rate. …

When regulators finally decided to act, it was too late

Was it easy money or easy regulation that caused the housing bubble? | AEIdeas

Bubbles happen for many reasons. For the Housing Bubble, I blame the following in this order

1. The Fed

Then way down

2. Wall Street
3. Deregulation

Deregulation in financial services is usually a good thing in the long-term, but in the short-term, it can create bubbles, asset mispricing and economic collapse. There is significant empirical evidence from around the world that both are the case.

The actions of the Fed and the mispricing of credit spurred the second two causes of the collapse.

 

[Toro]

banks used cheap capital to create a bubble.

exactly, it was huge fed interventionist liberal policy to stimulate the economy through the housing market with cheap capital that created and sustained the bubble!! Thanks

WORLD WIDE ? lol

Yes. In fact, the Fed is the primary reason for why there were simultaneous housing bubbles around the world. The level of deregulation varied widely between countries that experienced housing bubbles.

The Fed controls the short-end of the curve and influences the long-end. All fixed income and credit products are priced either directly and indirectly off the US Treasury curve. Therefore, the Fed forces prices down, it affects credit creation in other countries since sovereign bonds are priced relative to Treasuries, and credit is priced as a spread above the the local government rate.

 

[EdwardBaiamonte]

Sure, that you can't critically think OR be honest?..

can you present best example of this? Will await your next attempt to change subject

 

[EdwardBaiamonte]

You really need to get off hate talk radio., it's destroying your tiny brain....

actually conservatism began 2500 years ago with Aristotle Cicero Locke Jefferson Friedman. Did you know that was long before talk radio??