SEC makes it official-Liberalsim caused the housing crisis

[EdwardBaiamonte]

After the SEC suit it is now clearer than ever that liberalism as manifested through Fanny/Freddie and the Federal Reserve caused the current housing based Great Recession. Does anyone still doubt this?

 

[waltky]

Obama gonna fix housing problem...

Fed pushes for government action to help revive housing
Wednesday, January 18, 2012 - Ideas include big roles for Freddie, Fannie

Top Federal Reserve officials are prodding the White House and Congress to take more aggressive action to stop the free-fall in the housing market, warning that the U.S. economy will remain sluggish and vulnerable and will not fully recover until housing returns to better health. Having failed to revive the housing market from its deep slump by driving interest rates to record lows and taking the unprecedented step of buying up many of the country’s mortgages, Fed officials have concluded that vigorous action by the executive branch is needed to overcome legal and institutional obstacles to a recovery.

In speeches and staff studies issued since the beginning of the year, the Fed has been urging such ambitious steps as setting up low-cost, streamlined mortgage-refinancing programs for millions of creditworthy borrowers, regardless of whether they have equity in their homes or previous backing from the federal government. To blunt the impact of an expected deluge of foreclosed properties hitting the housing market and further depressing housing prices this year and next, the Fed says, the government should take advantage of a budding renaissance in the rental-housing market to create programs for investors to easily purchase and rent out thousands of foreclosed properties now owned by banks and the government.

While such steps have been debated in housing circles for months, the Fed’s push for action is touching off controversy in part because most of its recommendations involve using Fannie Mae and Freddie Mac, the giant mortgage agencies taken over by the government in 2008, to carry out the housing assistance programs. Republican legislators are particularly piqued because the proposals would cause further losses at the agencies over and above the $165 billion already paid out by taxpayers, at least in the short term, at a time when Congress has been single-mindedly focused on limiting the taxpayer bailout of the mortgage giants.

Nevertheless, Fed Chairman Ben S. Bernanke quietly forwarded a staff paper at the beginning of the year offering a dozen or so ideas for jump-starting the housing market, saying he gets many requests from legislators for advice on housing. “Continued weakness in the housing market poses a significant barrier to a more vigorous economic recovery,” said the paper, which noted that the 33 percent drop in housing prices on average since 2006 has eviscerated the main source of wealth for middle-class households while leaving millions of homeowners “underwater” with loans worth more than their houses. Even the most diligent borrowers, unable to move or refinance when faced with joblessness or other adversities, are thrown into a dilemma that makes them more prone to default in the future, the Fed argued.

Failed efforts

 

[DSGE]

Another substanceless inflammatory display of ignorance.

 

[EdwardBaiamonte]

Another substanceless inflammatory display of ignorance.

of course if true you would not be so afraid to present your most substantive example of ignorance for the whole world to see. What does your fear tell you?

 

[JakeStarkey]

Another substanceless inflammatory display of ignorance.

of course if true you would not be so afraid to present your most substantive example of ignorance for the whole world to see. What does your fear tell you?

edward, you failed at the get go on this one, so no banana for you.

 

[EdwardBaiamonte]

Another substanceless inflammatory display of ignorance.

of course if true you would not be so afraid to present your most substantive example of ignorance for the whole world to see. What does your fear tell you?

edward, you failed at the get go on this one, so no banana for you.

of course if true you would be very happy to point out exactly where the failure is. Did you learn to lie while playing basketball?

 

[JakeStarkey]

If we were playing hoop, I would have rejected your shot in your face and slam dunked before you got up.

Offer something decent, I mean truly decent stuff, and we can talk. But until then . . . no banana.

 

[EdwardBaiamonte]

If we were playing hoop, I would have rejected your shot in your face and slam dunked before you got up.

Offer something decent, I mean truly decent stuff, and we can talk. But until then . . . no banana.

did you learn to lie while playing basketball?

 

[code1211]

Another substanceless inflammatory display of ignorance.

of course if true you would not be so afraid to present your most substantive example of ignorance for the whole world to see. What does your fear tell you?

edward, you failed at the get go on this one, so no banana for you.

So your thesis is that it is not a Liberal idea to make housing available to those who cannot afford to buy it for themselves? (note: if they could have afforded it, they would have qualified for the loans and not needed the Sub Prime Vehicles to get the cash.)

This seems like it is compassionate, short sighted, wealth redistributing and poorly thought out. All of these are Liberal trademarks.

It is not cold hearted, mean spirited, skewed to favor the Rich or racist. According to Liberals, all of these are Conservative trademarks.

If it's note a Liberal idea, what is it?

 

[Toro]

After the SEC suit it is now clearer than ever that liberalism as manifested through Fanny/Freddie and the Federal Reserve caused the current housing based Great Recession. Does anyone still doubt this?

You realize that the SEC is staffed almost exclusively by lawyers, right?

 

[EdwardBaiamonte]

So your thesis is that it is not a Liberal idea to make housing available to those who cannot afford to buy it for themselves?

thesis is that it is liberal idea to make housing available to those who cant buy it by themselves

 

[JakeStarkey]

Do you mean the guaranteeing of loans, Edward?

 

[EdwardBaiamonte]

Do you mean the guaranteeing of loans, Edward?

what????????

 

[JakeStarkey]

Edward, come in from the out house and tells us what you really want.

 

[Toro]

Another substanceless inflammatory display of ignorance.

of course if true you would not be so afraid to present your most substantive example of ignorance for the whole world to see. What does your fear tell you?

OK, cause --> effect.

Effect --> Global housing bubble. There were many countries that had as big or bigger housing bubbles than the US. If the GSEs caused the housing bubble, how did it cause home prices to soar in Ireland, the UK, Holland, Spain, Portugal, South Africa, Australia, Canada, New Zealand, Singapore, China, Norway, etc.?

Effect --> Biggest price gains in home prices with non-qualifying mortgages rose more than those with qualifying mortgages. The biggest collapses were also in those areas with non-qualifying mortgages. If you believe in the total efficacy of markets, then if the GSEs were the driving force behind the housing bubble, homes financed by GSEs should have gone up more than homes not financed by GSEs. That didn't happen. The opposite happened. Underwriting standards were higher for the GSEs than non-qualifying underwriters, and they were losing share into the end of the Housing Bubble.

Of course, the GSEs had some effect. You can't be 40% of the mortgage market and not have an effect, especially when you leverage yourself up 50-100:1. But they weren't the primary driver of the Housing Bubble.

I do agree with you that the Fed was the primary culprit, however.

 

[EdwardBaiamonte]

[
Of course, the GSEs had some effect. You can't be 40% of the mortgage market and not have an effect, especially when you leverage yourself up 50-100:1. But they weren't the primary driver of the Housing Bubble.

I do agree with you that the Fed was the primary culprit, however.

1) good for you about liberal Fed

2) you should read "Reckless Endangerment" to learn how FanFred set the standards ever lower for the entire industry always proclaiming to the liberals how their hearts bled for the poor so they would get protection from the saintly conservatives. Yes Fan Fred always took the best, but because they had the power and the subsidy, but in so doing created and then left the scraps for the
competition.

 

[Toro]

[
Of course, the GSEs had some effect. You can't be 40% of the mortgage market and not have an effect, especially when you leverage yourself up 50-100:1. But they weren't the primary driver of the Housing Bubble.

I do agree with you that the Fed was the primary culprit, however.

1) good for you about liberal Fed

2) you should read "Reckless Endangerment" to learn how FanFred set the standards ever lower for the entire industry always proclaiming to the liberals how their hearts bled for the poor so they would get protection from the saintly conservatives. Yes Fan Fred always took the best, but because they had the power and the subsidy, but in so doing created and then left the scraps for the
competition.

Yeah, I get that argument. But if you truly believe in the efficacy of the free market all the time, then market participants should have seen and known that the lowering of standards would have mispriced assets and acted accordingly. This is an underlying premise of the Efficient Market Hypothesis. In rigid free market dogma, positive feedback loops don't exist, i.e. if price gets too far away from fundamental value, then market participants will arbitrage away the discrepancy between price and value. This is why the economics profession generally engaged in epic massive fail and did not see the Housing Bubble for what it was. If you believe that the free market always works, and the market will push prices back to equilibrium, people won't go nuts and lose their heads and pay any price for an asset.

Markets usually work. They don't always work. People are emotional beings, not hyper-rational automatrons calculating infinite risk/reward probabilities to always and everywhere arrive at the proper, rational price. Sometimes, people lose their heads and markets go off the rails. And that played a part in the Housing Bubble.

 

[EdwardBaiamonte]

[
Of course, the GSEs had some effect. You can't be 40% of the mortgage market and not have an effect, especially when you leverage yourself up 50-100:1. But they weren't the primary driver of the Housing Bubble.

I do agree with you that the Fed was the primary culprit, however.

1) good for you about liberal Fed

2) you should read "Reckless Endangerment" to learn how FanFred set the standards ever lower for the entire industry always proclaiming to the liberals how their hearts bled for the poor so they would get protection from the saintly conservatives. Yes Fan Fred always took the best, but because they had the power and the subsidy, but in so doing created and then left the scraps for the
competition.

Yeah, I get that argument. But if you truly believe in the efficacy of the free market all the time, then market participants should have seen and known that the lowering of standards would have mispriced assets and acted accordingly. This is an underlying premise of the Efficient Market Hypothesis. In rigid free market dogma, positive feedback loops don't exist, i.e. if price gets too far away from fundamental value, then market participants will arbitrage away the discrepancy between price and value. This is why the economics profession generally engaged in epic massive fail and did not see the Housing Bubble for what it was. If you believe that the free market always works, and the market will push prices back to equilibrium, people won't go nuts and lose their heads and pay any price for an asset.

Markets usually work. They don't always work. People are emotional beings, not hyper-rational automatrons calculating infinite risk/reward probabilities to always and everywhere arrive at the proper, rational price. Sometimes, people lose their heads and markets go off the rails. And that played a part in the Housing Bubble.

of course thats absurd. Yes people can always be counted on to lose their heads , but the more capitalism you have the less harm they can do themselves. This is because capitalism is self correcting and so tends to show small problems quickly, whereas liberal monopoly hides them until the entire system collapses.

 

[Ravi]

After the SEC suit it is now clearer than ever that liberalism as manifested through Fanny/Freddie and the Federal Reserve caused the current housing based Great Recession. Does anyone still doubt this?

I doubt it.

But if Fanny/Freddie was responsible they were only acting on Newt's advice.

 

[Toro]

1) good for you about liberal Fed

2) you should read "Reckless Endangerment" to learn how FanFred set the standards ever lower for the entire industry always proclaiming to the liberals how their hearts bled for the poor so they would get protection from the saintly conservatives. Yes Fan Fred always took the best, but because they had the power and the subsidy, but in so doing created and then left the scraps for the
competition.

Yeah, I get that argument. But if you truly believe in the efficacy of the free market all the time, then market participants should have seen and known that the lowering of standards would have mispriced assets and acted accordingly. This is an underlying premise of the Efficient Market Hypothesis. In rigid free market dogma, positive feedback loops don't exist, i.e. if price gets too far away from fundamental value, then market participants will arbitrage away the discrepancy between price and value. This is why the economics profession generally engaged in epic massive fail and did not see the Housing Bubble for what it was. If you believe that the free market always works, and the market will push prices back to equilibrium, people won't go nuts and lose their heads and pay any price for an asset.

Markets usually work. They don't always work. People are emotional beings, not hyper-rational automatrons calculating infinite risk/reward probabilities to always and everywhere arrive at the proper, rational price. Sometimes, people lose their heads and markets go off the rails. And that played a part in the Housing Bubble.

of course thats absurd. Yes people can always be counted on to lose their heads , but the more capitalism you have the less harm they can do themselves. This is because capitalism is self correcting and so tends to show small problems quickly, whereas liberal monopoly hides them until the entire system collapses.

That's merely dogma. Markets are self correcting over the long run but can go off the rails in the near term. That should be very apparent after the past 15 years. We would never have bubbles otherwise.