Obama reigning in CRA

Submitted by slabmaster on 21. July 2010 - 12:31

US Domestic Politics

Looky here!

Something I agree with Obama on! The CRA was a driving force behind the housing bubble we just saw pop.

Quote:

Now the Obama administration is beginning to look for ways to gradually unwind the massive government programs supporting homeownership and restore the traditional role of the private sector. Three months ago, the Treasury Department and HUD released seven broad questions about the future of housing. Comments from the public are due Wednesday, and the administration is required by the financial overhaul legislation to offer a proposal for housing reform by early next year, including restructuring or replacing Fannie and Freddie.

http://www.washingtonpost.com/wp-dyn/content/article/2010/07/20/AR2010072005946.html

Comments

Art wrote 7 weeks 11 hours ago

Quote:Something I agree with

Quote:

Something I agree with Obama on! The CRA was a driving force behind the housing bubble we just saw pop.

I didn't find anything like that in what Obama said. What in the world are you talking about? I suspect that you must have accidentally linked the wrong article. I'm sure that there is a perfectly explainable way that this can happen. I didn't even find a single reference to the CRA. I did some reading on the CRA some time back, and it was clear to me that the CRA was in no way involved in creating the housing bubble. But perhaps you are using some highly sophisticated reasoning to come to your conclusion. I'm a fairly simple person. Please explain.

slabmaster wrote 7 weeks 10 hours ago

Art wrote: Quote:Something I

Art wrote:

Quote:

Something I agree with Obama on! The CRA was a driving force behind the housing bubble we just saw pop.

Read about it again Art. Try to retain what the CRA was trying to accomplish. That will help.

Quote:

The shift in approach could mean higher down payments and interest rates on loans, more barriers to lower-income people buying houses, and fewer homeowners overall, government officials said. But it could also pave the way for a more stable housing market, one with fewer taxpayer dollars on the line and less of a risk that homeowners will not be able to pay their mortgages.

De Duivel wrote 7 weeks 10 hours ago

And keep in mind CRA bank

And keep in mind CRA bank loans is only part of the equation. the Other is the Fannie/Freddie buying up boat loads of Subprime loans under Government back approval.

Art wrote 7 weeks 6 hours ago

Quote:Read about it again

Quote:

Read about it again Art. Try to retain what the CRA was trying to accomplish. That will help.

Now you have me at a complete disadvantage. I read this article a number of times. It seems clear that the sole purpose of the CRA was to combat red-lining.

Here's what the CRA was trying to accomplish.

Quote:

The Act mandates that all banking institutions that receive 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 perSection 802(b) and Section 804(1)) in all communities in which they are chartered to do business.[3 ]

We know that this is true because the language comes directly from the act itself.

The CRA was a regulatory act. Fannie Mae and Freddie Mac were private corporations. All the shenanigans took place during the Bush years. We all know how Republicans handle regulatory matters.

As many times as I've read it, I find no reference whatsoever to Fannie Mae or Freddie Mac or any other loan-guarantee institution. It is not helpful to tell me to re-read the article. Your quote doesn't appear to have anything whatsoever to do with the CRA. How is the CRA related to Fannie Mae or Freddie Mac? Please tell me specifically what you are talking about. Did you even read the article?

Quote:

And keep in mind CRA bank loans is only part of the equation

What is a CRA bank loan? As far as I know, the CRA is not any kind of a lending institution, nor did it provide any guidance to any lending institution beyond discouraging red-lining.

This is your chance to really educate me. Should I be reading some other source-authority? Is the Wikipedia article in some way deficient? It would be a shame if your were to waste this opportunity to set me straight.

meljomur wrote 7 weeks 2 hours ago

But gosh, what about these

But gosh, what about these folks. Something tells me they didn't take out Fannie and Freddie loans, yet the damage they must be doing to real estate in more affluent areas is appalling. How will they be reigned in?

Quote:

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

jeffbiss wrote 6 weeks 6 days ago

Quote:Something I agree with

Quote:

Something I agree with Obama on! The CRA was a driving force behind the housing bubble we just saw pop.

You really don't know what you're talking about while Art does. The CRA had little to nothing to do with the housing bubble. It pertains to regulated banks, which had to follow rules while the bubble was caused by the unregulated mortgage loan industry. The CRA is part of the problem only insofar as Republican deregulation loosened the lending market as a whole.

rbs wrote 6 weeks 6 days ago

slabmaster wrote:Something I

slabmaster wrote:

Something I agree with Obama on! The CRA was a driving force behind the housing bubble we just saw pop.

It can't be denied that the CRA forced banks to make loans to some that they otherwise would not have, but I wouldn't consider it the driving force behind the bubble. The driving force was the artificial credit expansion orchestrated by the fed. In an inflationary bubble, the money always has to go somewhere. Last time it was tech stocks; this time it was housing. I DO agree that the CRA was one of the factors pushing money into the housing market, but there were many more such influences. I would say that the financial advantage of closing loans and selling them to fannie vs. closing and servicing was probably a much bigger factor in the generation of subprime loans. As long as fannie and freddie were willing to buy loans on essentially a no-questions-asked policy, the new money kept pouring into real estate, driving up the prices.

But again, these were just factors that pushed the money into housing. Had it not gone into housing, the bubble would have appeared somewhere else. Heck, in the 1600s, an inflationary bubble in Holland manifested itself in a boom and bust in tulip prices. The boom-bust in housing was just a symptom of the fed's inflationary bubble.

jeffbiss wrote 6 weeks 6 days ago

Quote:It can't be denied that

Quote:

It can't be denied that the CRA forced banks to make loans to some that they otherwise would not have, but I wouldn't consider it the driving force behind the bubble.

Well, yeah, as some banks wouldn't loan to Blacks.

rbs wrote 6 weeks 6 days ago

jeffbiss wrote: Quote:It

jeffbiss wrote:

Quote:

It can't be denied that the CRA forced banks to make loans to some that they otherwise would not have, but I wouldn't consider it the driving force behind the bubble.

Well, yeah, as some banks wouldn't loan to Blacks.

Those who refuse to do business with another person based on race are not only morally repugnant but are also economic fools. They are sending potential paying customers directly to the competition. They are giving away market share to their competition (or potential competition). Hopefully, such businesses will suffer the fate they deserve and go bankrupt. Racism, in addition to being wrong, is definitely not good business practice.

#10

meljomur wrote 6 weeks 6 days ago

I wonder if those who

I wonder if those who defaulted on second homes and investment properties will have problems getting mortgages in the future?

Its interesting how the housing market in the US has collapsed at every level. But I guess that is what happens.

So much for the idea that those with money are the most responsible.

#11

lil rawr wrote 6 weeks 6 days ago

The right wingers love to

The right wingers love to propagate this lie that poor people and minority groups caused the Bush housing bubble and the Bush depression.

Poor people didn't invent mortage-backed securities nor did they invent derivatives. They didn't invent subprime loans and they didn't bundle bad loans.

I know that the right wing's hatred for poor people and minorities is literally without end and that these groups will be blamed for every problem we ever have (welfare queens anyone?).

#12

Art wrote 6 weeks 5 days ago

Hey guys!! Mr. Slabmaster!!

Hey guys!! Mr. Slabmaster!! Where did you go??!! I've waited a couple of days now thinking, "Boy, I'm really going to get my head handed to me on this one". What is it that you want me to know? What is it that I'm not understanding?

Here's what George W Bush did with Fannie and Freddie.

#13

jeffbiss wrote 6 weeks 5 days ago

Art, slab's got nothing to

Art,

slab's got nothing to say. He doesn't know what he's talking about as his statement alleging that the CRA was the "driving force" behind the housing bubble shows. He's a con who looks for any excuse to blame something progressive, such as ensuring that all Americans are afforded equal opportunity as in the CRA, for conservative problems, the housing bubble that was caused by conservative ideology that was deregulation of the financial industry. This is his calling if not job.

#14

meljomur wrote 6 weeks 5 days ago

Besides he may just be a bit

Besides he may just be a bit shell shocked that some of his "peers" are the biggest defaulters on mortgages.

Bringing down property values on the million (plus) housing market doesn't look good, does it? And to think those getting Freddie and Fannie loans had NOTHING to do with this trend!

#15

drew013 wrote 6 weeks 5 days ago

Maybe he got whacked. Seems

Maybe he got whacked. Seems the ol' moderation crew has been going all Yosemite Sam with the ban button lately.

I wouldn't be surprised to see some FFI's at some point.

#16

meljomur wrote 6 weeks 5 days ago

Don't worry drew, slabmaster

Don't worry drew, slabmaster has not been banned.

He just tends to shy away from topics once it becomes over his head. Nothing new I have seen it happen numerous times over the years.

#17

DRC wrote 6 weeks 5 days ago

I really laugh when poor

I really laugh when poor people get blamed for the housing bubble, and when it is all about Fannie and Freddie instead of those who used these governmental programs to underwrite their bad investments in future housing construction.

The bonuses for putting people in bad mortgages for houses that could not be sold for the pricetag necessary to pay off the investment so the treasury could pay off the investor class did not go to poor people. Only the bad paper went to poor people.

Are Liberals supposed to bear the resopnsibility for the failed government sabotaged by the GOP ever since Reagan as well as for the debts generated by their "voodoo" economics? Of course government has been complicit with the worst corporations under the Cheney culture of government. That Fannie and Freddie were corrupted and misused by these creeps is par for the course.

They also steal from Social Security. And then bemoan how it is about to fail. These "real" Americans.

The Black Panthers need to give up the commando uniforms and waving guns around. If they want to bring down the Man, open a mortgage loan company. Swing that briefcase, then rock that portfolio. Up Against the Wall St. MF!!

#18

slabmaster wrote 6 weeks 5 days ago

You guys crack me up. Slab

You guys crack me up.

Slab has had a very busy Friday morning. I've got more shit going than 3 of me can do. Twiddling my thumbs on the internet comes and goes. Priorities ya know. I could tell ya about the last 3 hours of capitalism heaven, but it would just cause you to grind your teeth. And to think I was contemplating taking the day off to ride my Road King in the sunshine.....

CRA helped to cause what we see now. It's why Obama is going to scale back on government programs such as CRA because even he realizes what effect it has had. Fannie and Freddie will get chopped as well as he wises up to reality. Doesn't it make liberals furious to watch their "hope and change" savior start to understand reality? I feel for you guys. There is plenty of blame to go around. No one involved in loaning money is innocent.

In the next year I predict, Obama slashes government programs such as CRA showing how defaults skyrocketed due in part to people attaining loans they had no hope of paying for. It's one part of a bad design perpetuated and corrupted by government and the banking industry.

#19

Art wrote 6 weeks 5 days ago

Quote:CRA helped to cause

Quote:

Where do you get this stuff? I would think you would be providing some credible source-authorities if you really believe any of this.

There has been no mention of scaling back the provisions of the CRA and there shouldn't be. (Did you bother to read my citations)? Fannie and Freddie will be restored to their original intents, which were perverted under the Bush administration.

You have asserted twice now that "CRA helped to cause what we see now". Just repeating the phrase doesn't make it so. Show us your work. explain why you believe this.

#20

meljomur wrote 6 weeks 5 days ago

Slab, I would wait till you

Slab, I would wait till you had more free time, this isn't one of the things you are very good at multi-tasking.

Art, Slab is one of those fellows that if he hears it on Fox news he believes it must be fact. I marvel at the right wing ability to think because it is written on a blog or in a right wing paper it must be the truth. I think you will find that to be the case 99.9% of the time with conservatives.

Which is why it gets boring after a bit attempting to "debate" them.

#21

Art wrote 6 weeks 5 days ago

Guess I just never learn.

#22

slabmaster wrote 6 weeks 5 days ago

I've never had alot of free

I've never had alot of free time Mel. Seems to be a pattern. This year could very well blow us outa the water. New people all over the place makes more work for me.

While I find this board entertaining and a different look at a different set of ideologies, in depth research on differences of opinions take a lower priority sometimes. I'll do the best I have time for. Some debates are a circlejerk and devoting time to lengthy blathering is good for people that don't have anything better to do I guess, just not me. Frankly, when I see 1,000 word essays written by unemployed ego-maniacs, I skip to the next thread.

I'll get back to the CRA issue tonight when I have a couple hours and a cocktail. Right now, this is one of 6 screens open, so it's hit and miss. Sorry.

#23

jeffbiss wrote 6 weeks 5 days ago

Quote:CRA helped to cause

Quote:

CRA helped to cause what we see now.

It didn't. It was deregulation of banking. Where do you get this nonsense. If this is how careful you are I can see why you're so busy, undoing messes you created by not thinking things through or just assuming.

#24

drew013 wrote 6 weeks 5 days ago

slabmaster wrote: While I

slabmaster wrote:

While I find this board entertaining and a different look at a different set of ideologies, in depth research on differences of opinions take a lower priority sometimes. I'll do the best I have time for. Some debates are a circlejerk and devoting time to lengthy blathering is good for people that don't have anything better to do I guess, just not me. Frankly, when I see 1,000 word essays written by unemployed ego-maniacs, I skip to the next thread.

I tend to feel the same way here. Especially the part I boldfaced. Except I really don't care who writes them.

Good to see you're still around, Slab. I'll crack one open tonight and raise a toast. Cross swords with you again soon.

#25

jeffbiss wrote 6 weeks 5 days ago

Quote:I tend to feel the same

Quote:

I tend to feel the same way here. Especially the part I boldfaced. Except I really don't care who writes them.

I don't know why more people don't just provide links to their source and perhaps a quote, to show the point. I guess some people have a lot of time to post, rather than grabbing a moment here and there.

#26

writerofwrongs wrote 6 weeks 5 days ago

The banksters invented risky

The banksters invented risky loan products and heavily marketed them: zero down conventional mortgages @ 125 LTV, buydowns, Ameridream loans, many other creative risky loan products all designed to artifically inflate the housing industry and jack up prices.. all of which required the borrowers to obtain and pay for PMI--> private mortgage insurance to protect ( who else) the banksters, and when foreclosure occured, the banksters not only made a claim on the private mortgage insurance (PMI) thru companies such as AIG , they kept the houses and got a taxpayer funded bailout !!!! Eliot Spitzer knew this and when he tried to warn the GWB, he himself became the subject of investigations ( he has a weakness of the flesh and the banksters knew it..likely provided him with his *drug* of choice as long as ES was their goto guy..)

The cons twisted this around too blame acorn and CRA which had nothing to do with any of this but provides convenient and handy targets while feeding iinto the rightwing nuts need for racial targeting and pablum news bytes.

Washington Mutual was accused in senate hearings of inventing mortgage time bombs while Sacks O' Gold ( Goldman Sachs ) was fined 500 million recently..so there. Wondering if Sacks O' Gold paid their fine with TARP money ?????

#27

meljomur wrote 6 weeks 5 days ago

slab, you started this

slab, you started this thread, and if I may say so you haven't done a very good job of defending (or evenly adequately explaining) your position.

I do have a question. If the MAJORITY of those who have defaulted on their mortgages are people who did NOT take out Fannie and Freddie loans (I don't think you are eligible for these on a million dollar plus homes), than how will cracking down on low income home buyers help this whole scenario?

Its tough when you can't blame the poor, "lazy" b**tards for every economic crisis!

#28

babbaramma wrote 6 weeks 12 hours ago

Blaming the CRA for any of

Blaming the CRA for any of this is like blaming California for Enron. Now that I mention it, you can blame both Enron and the housing meltdown on the same thing... the CFMA..and Greenspan as well.

#29

Peter.P wrote 6 weeks 10 hours ago

A Government-Mandated Housing

A Government-Mandated Housing Bubble

#30

babbaramma wrote 6 weeks 6 hours ago

The 2005 Bankruptcy Bill was

The 2005 Bankruptcy Bill was the key to the bubble, behind the CFMA, repeal of glass-steagle, and the changes in leverage rules. Rather than allowing the states to stop predatory lending in 2004 the Bush Adminstration used a civil war era law to maintain control over banks and lending. Then pushed through the 2005 Bankruptcy Bill that amounted to a steroid shot for predatory lending and the sub-prime market. There is a long list of things that caused the bubble. I have listed them before, but among them is not the CRA. Freddie and Fannie were one of many "marks" in this ponzi scheme, not the cause.

Most pundits like to point there finger at one incident or sector as the cause of this now second republican great depression in 100 years, but only a complete moron would believe that. Just in the last 10 years, every time the supply side pyramid started to slow down we have had to deregulated or cut even more taxes to get the pyramid growing again, all the while, hollowing out our economic foundation in pursuit of short term profits and greed. Greenspan was at the center of it all, but Bernanke has also been a major player for most of the last 10 year, and so was Goldman Sachs.

Major Causes and Time Line of the Economic Meltdown (post ronnie raygun)

1. Graham, Leach, Bliley (Repeal of Glass Steagle) -1999
2. Commodities Futures Act, CMFA (Enron Loop Hole) – 2000
3. Enron begins manipulating gas and electric prices in the west – 2000
4. Enron collapses exposing flaws and loop holes in CFA – 2001
5. Bush Tax Cuts 2001-2003 (inflation and looting begins)
6. Double Digit inflation in housing market begins -2003
7. Elliot Spitzer and state AG's file lawsuit to stop predatory lending practices, looses. 2003-2004
8. Fed goes on unprecedented series of rate hikes trapping people in bad loans/credit lines 2004-2007
9. SEC and Fed allow changes in bank capitalization rules in overheated market (40 to 1), 2004
10. Banks pull out all stops on lending with Ninja and liar loans – 2005
11. Bankruptcy Reform Bill (Usury credit practices, removing judges ability to settle debts) - 2005
12. Mark to Market Accounting rules begin bank runs and triggering CDS payouts – 2007
13. Housing Market Begins to Collapse begins recession – 2007
14. Oil Hits $140 a barrel – 2008
15. U.S Economy Collapses, followed by the world economy- 2009

#31

babbaramma wrote 6 weeks 6 hours ago

writer of wrongs (WOW)....

writer of wrongs (WOW).... yep that pretty much covers it.

#32

drew013 wrote 5 weeks 6 days ago

jeffbiss wrote: Quote:I tend

jeffbiss wrote:

Quote:

I tend to feel the same way here. Especially the part I boldfaced. Except I really don't care who writes them.

I'm pretty sure many of these long-winded posts that show up here are cut and pasted from various sites, sometimes without accreditation. That I find really boring. No time to read that much at a time, considering that I usually do the internet in 3 fifteen minute chunks a day.

#33

douglaslee wrote 5 weeks 6 days ago

http://Bernanke is now still

http://Bernanke is now still trying to protect the banks. They have so much property that should be written off, they just hold on to the houses for years instead of going to auction.

Quote:

Look at housing. The facts are grim. This is from Charles Hugh Smith:

“About two-thirds of U.S. households own a house (75 million); 51 million have a mortgage and 24 million own homes free and clear (no mortgage). Most of the other 36 million households are moderate/low income and have limited or no access to credit and limited or no assets.

“If we look up all the gory details in the fed Flow of Funds, we find that [the value of] household real estate fell from $23 trillion in 2006 to $16.5 trillion at the end of 2009. That is a decline of $6.5 trillion, more than half the total $11 trillion lost in the credit/housing bust. Home mortgages have fallen a negligible amount, from $10.48 trillion in 2007 to $10.26 trillion at the end of 2009. As of the end of 2009, total equity in household real estate was a paltry $6.24 trillion of which about $5.25 trillion was held in free-and-clear homes (32 per cent of all household real estate, i.e. 32 per cent of $16.5 trillion).

“That leaves about $1 trillion--a mere 1.85 per cent of the nation's total net worth-- of equity in the 51 million homes with mortgages. ...$6 trillion in wealth is gone ("What we know--and don't want to know-- about housing", Charles Hugh Smith, of two minds.com)

What this spells out is that the bursting of the housing bubble wiped out the middle class. The nest-eggs they had stored up in the valuations of their properties volatilized in the crash. Now--even in the best case scenario--private sector deleveraging will continue for years to come. Baby boomers are not nearly as wealthy as they believed; they must slash spending and save for the future. US household debt as a share of disposable income, remains historically high (122 per cent) and will have to return-to-trend (100 per cent) before consumers loosen the purse-strings and resume spending. Repeat: 51 million homeowners have a meager $1 trillion in home equity. We're a nation of paupers.

More than 7 million homeowners are presently in some stage of foreclosure. Obama's mortgage modification program (HAMP) has been an utter failure. More than half the applicants default within the year. At the same time, mortgage purchase applications have fallen off a cliff. "The weekly applications index is at the lowest level since December 1996, and and the four week average is at the lowest level since September 1995 - almost 15 years ago." (calculated risk)

This is from the Wall Street Journal:

"How much should we worry about a new leg down in the housing market? If the number of foreclosed homes piling up at banks is any indication, there’s ample reason for concern.

As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20 per cent from a year earlier, according to estimates from LPS Applied Analytics. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That “shadow inventory” was up 30 per cent from a year earlier.

Based on the rate at which banks have been selling those foreclosed homes over the past few months, all that inventory, real and shadow, would take 103 months to unload. That’s nearly nine years. Of course, banks could pick up the pace of sales, but the added supply of distressed homes would weigh heavily on prices — and thus boost their losses." ("Number of the Week: 103 Months to Clear Housing Inventory", Mark Whitehouse Wall Street Journal)

Trump says it's a good time to buy, uh huh.

#34

douglaslee wrote 5 weeks 6 days ago

According to the American

According to the American Enterprise Institute, the gov't forced S&P, Moody's, Fitch to commit accounting fraud, they just made them assign AAA to crap.

Quote:

The FBI correctly identified the epidemic of mortgage control fraud at such an early point that the financial crisis could have been averted had the Bush administration acted with even minimal competence. To understand the crisis we have to focus on how the mortgage fraud epidemic produced widespread accounting fraud.

Don't ask; don't tell: book profits, "earn" bonuses and closet your losses

The first document everyone should read is by S&P, the largest of the rating agencies. The context of the document is that a professional credit rater has told his superiors that he needs to examine the mortgage loan files to evaluate the risk of a complex financial derivative whose risk and market value depend on the credit quality of the nonprime mortgages "underlying" the derivative. A senior manager sends a blistering reply with this forceful punctuation:

Any request for loan level tapes is TOTALLY UNREASONABLE!!! Most investors don't have it and can't provide it. [W]e MUST produce a credit estimate. It is your responsibility to provide those credit estimates and your responsibility to devise some method for doing so.

Fraud is the principal credit risk of nonprime mortgage lending. It is impossible to detect fraud without reviewing a sample of the loan files. Paper loan files are bulky, so they are photographed and the images are stored on computer tapes. Unfortunately, "most investors" (the large commercial and investment banks that purchased nonprime loans and pooled them to create financial derivatives) did not review the loan files before purchasing nonprime loans and did not even require the lender to provide loan tapes.

The rating agencies never reviewed samples of loan files before giving AAA ratings to nonprime mortgage financial derivatives. The "AAA" rating is supposed to indicate that there is virtually no credit risk -- the risk is equivalent to U.S. government bonds, which finance refers to as "risk-free." We know that the rating agencies attained their lucrative profits because they gave AAA ratings to nonprime financial derivatives exposed to staggering default risk. A graph of their profits in this era rises like a stairway to heaven [PDF]. We also know that turning a blind eye to the mortgage fraud epidemic was the only way the rating agencies could hope to attain those profits. If they had reviewed even small samples of nonprime loans they would have had only two choices: (1) rating them as toxic waste, which would have made it impossible to sell the nonprime financial derivatives or (2) documenting that they were committing, and aiding and abetting, accounting control fraud.

Worse, the S&P document demonstrates that the investment and commercial banks that purchased nonprime loans, pooled them to create financial derivatives, and sold them to others engaged in the same willful blindness. They did not review samples of loan files because doing so would have exposed the toxic nature of the assets they were buying and selling. The entire business was premised on a massive lie -- that fraudulent, toxic nonprime mortgage loans were virtually risk-free. The lie was so blatant that the banks even pooled loans that were known in the trade as "liar's loans" and obtained AAA ratings despite FBI warnings that mortgage fraud was "epidemic." The supposedly most financially sophisticated entities in the world -- in the core of their expertise, evaluating credit risk -- did not undertake the most basic and essential step to evaluate the most dangerous credit risk. They did not review the loan files. In the short and intermediate-term this optimized their accounting fraud but it was also certain to destroy the corporation if it purchased or retained significant nonprime paper.

FBI said it, they are guvmint, so can't believe them.

#35

slabmaster wrote 5 weeks 6 days ago

Peter.P wrote:A

Peter.P wrote:

A Government-Mandated Housing Bubble

"From 1994 to 2003, Fannie and Freddie's purchases of mortgages, as a percentage of all mortgage originations, increased from 37% to an all-time high of 57%, effectively cornering the conventional conforming market. With leverage ratios that averaged 75-to-1, and funds raised with implicit government backing, the GSEs were pouring money into the housing market. This in itself would have driven the housing bubble.

But it also appears that, perhaps as early as 1993, Fannie Mae began to offer easy financing terms and lowered its loan standards in order to meet congressionally mandated affordable housing goals and fulfill the company's trillion-dollar commitment. For example, in each of the years 2000 and 2001, the first years for which data are available, 18% of Fannie's originations--totaling $157 billion--were loans with FICO scores of less than 660 (the federal regulators' cut-off point for defining subprime loans). There is no equivalent data available for Freddie, but it is likely that its purchases were proportionately the same, amounting to an estimated $120 billion."

#36

Peter.P wrote 5 weeks 6 days ago

Quote: 1. Graham, Leach,

Quote:

1. Graham, Leach, Bliley (Repeal of Glass Steagle) -1999

I am really starting to dislike this blanant talking point.

The truth is, however, the Gramm-Leach-Bliley Act had little if anything to do with the current crisis. In fact, economists on both sides of the political spectrum have suggested that the act has probably made the crisis less severe than it might otherwise have been.

Quote:

Observers as diverse as former Clinton Treasury official and current Berkeley economist Brad DeLong and George Mason University's Tyler Cowen, a libertarian, have praised Gramm-Leach-Bliley has having softened the crisis.

#37

Peter.P wrote 5 weeks 6 days ago

How HUD Mortgage Policy Fed

How HUD Mortgage Policy Fed The Crisis

Quote:

In 2004, as regulators warned that subprime lenders were saddling borrowers with mortgages they could not afford, the U.S. Department of Housing and Urban Development helped fuel more of that risky lending.

Eager to put more low-income and minority families into their own homes, the agency required that two government-chartered mortgage finance firms purchase far more "affordable" loans made to these borrowers. HUD stuck with an outdated policy that allowed Freddie Mac and Fannie Mae to count billions of dollars they invested in subprime loans as a public good that would foster affordable housing.

Housing experts and some congressional leaders now view those decisions as mistakes that contributed to an escalation of subprime lending that is roiling the U.S. economy.

The agency neglected to examine whether borrowers could make the payments on the loans that Freddie and Fannie classified as affordable. From 2004 to 2006, the two purchased $434 billion in securities backed by subprime loans, creating a market for more such lending. Subprime loans are targeted toward borrowers with poor credit, and they generally carry higher interest rates than conventional loans.

cont...

How Government Stoked the Mania

Quote:

Beginning in 1992, Congress pushed Fannie Mae and Freddie Mac to increase their purchases of mortgages going to low and moderate income borrowers. For 1996, the Department of Housing and Urban Development (HUD) gave Fannie and Freddie an explicit target -- 42% of their mortgage financing had to go to borrowers with income below the median in their area. The target increased to 50% in 2000 and 52% in 2005.

For 1996, HUD required that 12% of all mortgage purchases by Fannie and Freddie be "special affordable" loans, typically to borrowers with income less than 60% of their area's median income. That number was increased to 20% in 2000 and 22% in 2005. The 2008 goal was to be 28%. Between 2000 and 2005, Fannie and Freddie met those goals every year, funding hundreds of billions of dollars worth of loans, many of them subprime and adjustable-rate loans, and made to borrowers who bought houses with less than 10% down.

Fannie and Freddie also purchased hundreds of billions of subprime securities for their own portfolios to make money and to help satisfy HUD affordable housing goals. Fannie and Freddie were important contributors to the demand for subprime securities.

Congress designed Fannie and Freddie to serve both their investors and the political class. Demanding that Fannie and Freddie do more to increase home ownership among poor people allowed Congress and the White House to subsidize low-income housing outside of the budget, at least in the short run. It was a political free lunch.

The Community Reinvestment Act (CRA) did the same thing with traditional banks. It encouraged banks to serve two masters -- their bottom line and the so-called common good. First passed in 1977, the CRA was "strengthened" in 1995, causing an increase of 80% in the number of bank loans going to low- and moderate-income families.

Fannie and Freddie were part of the CRA story, too. In 1997, Bear Stearns did the first securitization of CRA loans, a $384 million offering guaranteed by Freddie Mac. Over the next 10 months, Bear Stearns issued $1.9 billion of CRA mortgages backed by Fannie or Freddie. Between 2000 and 2002 Fannie Mae securitized $394 billion in CRA loans with $20 billion going to securitized mortgages.

By pressuring banks to serve poor borrowers and poor regions of the country, politicians could push for increases in home ownership and urban development without having to commit budgetary dollars. Another political free lunch.

Cont..

#38

douglaslee wrote 5 weeks 6 days ago

Quote: But it also appears

Quote:

But it also appears that, perhaps

Quote:

There is no equivalent data available for Freddie, but it is likely that its purchases were proportionately the same, amounting to an estimated $120 billion."

It appears, perhaps likely estimated, because there is no data. But it sounds good, the same way AAA signifying no risk sounds good.

#39

slabmaster wrote 5 weeks 6 days ago

" Fannie and Freddie were

#40

douglaslee wrote 5 weeks 6 days ago

The CRA Reader Quote: I

The CRA Reader

Quote:

I thought we had dispensed with this discredited argument, but Carney brings it up, so here’s his smackdown.

First, if you must, read Carney’s posts here, here, here, and here.

Salmon’s posts are here and here. He says at one point:

The fact is that the CRA did not encourage banks to extend the kind of toxic loans which ended up being such an important component of the financial crisis. Indeed, most of those loans weren’t made by banks at all — they were made by unregulated subprime lenders who had no CRA responsibilities whatsoever.

Salmon does a good enough job of demolishing Carney’s argument, but let’s see how deep we can bury it.

Barry Ritholtz of The Big Picture goes off on Carney here with a “CRA Thought Experiment”:

In reality, the precise opposite of what a CRA-induced collapse should have looked like is what occurred. The 345 mortgage brokers that imploded were non-banks, not covered by the CRA legislation. The vast majority of CRA covered banks are actually healthy.

The biggest foreclosure areas aren’t Harlem or Chicago’s South side or DC slums or inner city Philly; Rather, it has been non-CRA regions — the Sand States — such as southern California, Las Vegas, Arizona, and South Florida. The closest thing to an inner city foreclosure story is Detroit – and maybe the bankruptcy of GM and Chrysler actually had something to do with that.

KY has a creation museum that proves existence of Noah's Ark, and dinosaurs were on it. So really the CRA was the devil, and we are paying the price.

#41

slabmaster wrote 5 weeks 6 days ago

CRA was part of the devil.

#42

Peter.P wrote 5 weeks 6 days ago

Quote:The fact is that the

Quote:

The fact is that the CRA did not encourage banks to extend the kind of toxic loans which ended up being such an important component of the financial crisis.

To open up with a patently false statement. It's not starting out good.

" United States federal law designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods"

In essence, loan to people that can't afford it.

"Subprime borrowers typically have weakened credit histories and reduced repayment capacity. Subprime loans have a higher risk of default than loans to prime borrowers"

Clinton started in on the CRA in 1993 signing the bill in 1995.
ironically..
"The USA home ownership rate increased from 64% in 1994 (about where it had been since 1980) to an all-time high of 69.2% in 2004.[43] Subprime lending was a major contributor to this increase in home ownership rates and in the overall demand for housing, which drove prices higher."

Policy + Tools = Outcome

Seems to me that people only want to look directly at the CRA and say "see it wasn't them" without looking around at the wider devastation CRA policy brought upon the system. Fannie Mae while not directly associoated with CRA, Acted on behalf of the CRA agenda. thus creating the bulk of the market for Subprime loans.

#43

lil rawr wrote 5 weeks 6 days ago

Those nasty poor people

Those nasty poor people tricked the sweet naive unscrupulous unregulated subprime lenders!

#44

babbaramma wrote 5 weeks 6 days ago

Slabby, Slabby, Slabby The

Slabby, Slabby, Slabby

The mortgages issued prior to 2003 are not the problem. Bear and Lehman brothers were also neck deep in oil helping to drive it to $140 a barrel putting the final nail in economic bubble as well as their firms. I guess they did not realize they had double hedged on the wrong side.’’…..so much for "sophisticated investors".

If you have not seen this, it may open your eyes a bit on how we got here.

http://www.cbsnews.com/stories/2009/01/08/60minutes/main4707770.shtml

#45

babbaramma wrote 5 weeks 6 days ago

Peter Pipe smoker on Glass

Peter Pipe smoker on Glass Steagle, you do know that the point made by Fact Check was not about the cause but a completely bogus point on how it helped soften the blow of the collapse. That’s like saying the gas we put around the house that caused the fire helped it burn down faster, saving water in the long run.

Only a complete idiot would refer to a statement like that by the very people who helped push the bill through. Are you that stupid? Bring a little something to the table will you please.

http://www.cbsnews.com/stories/2008/10/26/60minutes/main4546199.shtml?tag=contentMain;contentBody

#46

babbaramma wrote 5 weeks 6 days ago

Peter pipe smoker, what is in

Peter pipe smoker, what is in that pipe? First of all, the CRA was part of a 1977 bill. But why start letting facts get in your way? Second, there is nothing in the bill that directed anyone to use exploding mortgages or to give insane amounts of money to people who don't have jobs. You can thank W for opening that door, otherwise his supply side bubble would have probably hit a soft landing in 2004. Did the CRA cover Enron, Bear Sterns or Lehman Brothers no, just greed and stupidity.

That said I would like to agree with you on two points. First it was the Government that pushed banks and Wall Street to be completely reckless with borrowing practices via the 2005 Bankruptcy Reform Bill. Second, I do agree somewhat that Glass Steagle has been a bit over done, but that is more or less because most people, including yourself, are not versed in economics enough to understand the CFMA. Otherwise, we would not be having this conversation. I would highly recommend that you take a long look at the list I provided so you can speak on the subject with some coherent thought and understanding.

I see you like to take clips of half-truths and repeat them, but are you able to put anything in context? Do you know what Bucket Shops are? Did the CRA cause oil to go to $140 a barrel, the S&L scandal or Enron? The answer is no. This meltdown was caused by the same reckless Wall Street “Bucket Shop” gambling and leverage that caused the 1907 collapse as well as the collapse in 1928.

I am dumbfounded by idiots that try to explain away this now second great republican great depression in 100 years by ignoring all the scams Greenspan and Rubin revived from the first one.

#47

babbaramma wrote 5 weeks 6 days ago

Doug, I followed up on your

Doug, I followed up on your links but the problem is that they seem to omit some very big events and the housing industry itself. To this day no one has taken a real shot at the builders, many of whom had their own banks.

The two big events I would look at are the 2004 defeat of Elliot Spitzer, and most of the sate AG's, attempt to stop predatory lending. The other is the 2005 Bankruptcy Reform Bill which in every sense opened the flood gates to the worst of the worst loans and is still acting like an anchor around the neck of the housing industry. Then there is that whole issue of the 600-900 trillion dollar shadow banking system that AIG got into, changes in leverage rules...short selling...mark to market..

Lets face it, if it were not housing it would have been oil or natural gas. Oh, wait that already happened to. If Bush had his way, social security would have been there as well.

By the way, the American Enterprise Institute is a terrorist organization.

#48

Peter.P wrote 5 weeks 6 days ago

Quote:Peter pipe smoker, what

Quote:

Peter pipe smoker, what is in that pipe? First of all, the CRA was part of a 1977 bill. But why start letting facts get in your way?

Pure of mind and body. Mmmm Facts...

fact 1 - Clinton starts his CRA overhual 1993
fact 2 - Sub Prime Loans were created 1993
fact 3 - Home ownership remained constant from 1977 true 1994
fact 4 - Housing ownership exploded due it Subprime loans.
fact 5 - Subprime loans were designed for stupid people.
fact 6 - Fannie bought hundreds of billions of Subprime loans.
fact 7 - Fannie created subprime market bought loans from CRA banks and Countrywide.
fact 8 - first Securitisation of Subprime mortgages was in 1997 Between Fannie and Bear Sterns for 387 million.
fact 9 - 1999 Fannie Lowers the lending standard to encourge CRA/subprime type lending.

That is enough for now. None of those facts are disputable.

Quote:

First it was the Government that pushed banks and Wall Street to be completely reckless with borrowing practices via the 2005 Bankruptcy Reform Bill.

Gasoline to an already raging fire.

Quote:

Second, I do agree somewhat that Glass Steagle has been a bit over done, but that is more or less because most people, including yourself, are not versed in economics enough to understand the CFMA.

Are you calling Factcheck Pot smoking morons?

Quote:

I see you like to take clips of half-truths and repeat them, but are you able to put anything in context?

Is that what you see. I see a person who insults when challanged who uses his own clips of half-truths. you have a "fair" list with no context.. (first one being a blantant lie... Maybe I'll look at the others)

Quote:

I am dumbfounded by idiots that try to explain away this now second great republican great depression in 100 years by ignoring all the scams Greenspan and Rubin revived from the first one

I know I dumbfounded by your post also... you do have a gift for insults.

#49

slabmaster wrote 5 weeks 6 days ago

The insults come when

The insults come when the poster has no answers. It's par for the course. Seems to be a common trait.

#50

drew013 wrote 5 weeks 6 days ago

slabmaster wrote: The insults

slabmaster wrote:

The insults come when the poster has no answers. It's par for the course. Seems to be a common trait.

You would know.

Obama reigning in CRA

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