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KC native
08-06-2011, 03:50 PM
Barry Ritholz wrote a great column in the Wa Post last week. This is great for all the near term historical revisionist RWNJ's. Emphasis added by me.




The debt ceiling is hanging heavy over our heads. But that’s not the only reason it looks dark down here. We’ve got some major and prolonged challenges: ongoing debt issues, structural unemployment, a housing overhang and continued economic frailty.

How did we get here? Well, by way of a financial crisis, stock market collapse, bank bailouts and, of course, the Great Recession — and a good many moments of poor judgment.

Given the drama of the debt-ceiling debate, this is a good moment for investors and policymakers alike to look back over the past decade at the mistakes made by our institutions, private sector and government.

If this were a college final exam, it would be in essay form. But because it’s summer, and most of you are out of school, consider this the answer key to that exam.

1 Rates: After the dot-com implosion and 2000 market crash, the Federal Reserve lowered rates to 2 percent for three years, including a 1 percent rate for more than a year. That monetary policy was unprecedented. It had an enormous impact on various asset classes, including dollars, real estate, bonds, oil and gold. A more “traditional” interest rate between 4 and 6 percent would likely not have started the inflationary spiral we saw in commodities during the 2000s. Had rates been “normal,” it is doubtful we would have seen a 41 percent drop in the dollar from 2001 to 2008.

2 The rating agencies: Moody’s Investors Service, Standard & Poor’s and Fitch Ratings — all originally served bond investors, who paid for their research. But that model changed in the 1990s to one that was funded by the syndicators and underwriter of structured financial products such as mortgage-backed securities. Essentially, bankers “purchased” the rating they desired. As a result, the performance of the rating agencies decayed, as they were no longer judged on the quality of their analytical reviews. Second, the underwriting quality of syndicators fell, as they —not a neutral third party — were, in effect, picking their own credit ratings. The real question for the financial markets is why we even require rating agencies to evaluate complex financial products any more.

3 The radical deregulation of derivatives: The Commodity Futures Modernization Act of 2000 was a highly unusual piece of deregulatory legislation. It created a new world of uniquely self-regulated financial instruments — the credit derivative. Unlike traditional financial instruments — bonds, stocks, futures, options, mutual funds — it did not require anything from underwriters or traders. No reserve requirements against future obligations, no counter-party disclosure, no exchange trading needed, no capital minimums. This had an enormous impact on risk management, leverage and mortgage underwriting. AIG, for example, wrote $3 trillion of credit derivatives with a grand total loss reserves against any payout of zero dollars. Bear Stearns and Lehman Brothers were able to expand dramatically into the mortgage-backed security space using very little capital and lots and lots of leverage. You remember how that worked out.

4 Subprime loans: More than 50 percent of subprime loans were made by nonbank mortgage underwriters not subject to comprehensive federal supervision; another 30 percent were made by thrifts also not subject to routine supervision. With this, traditional lending standards disappeared. Millions of unqualified borrowers poured into the residential housing market as overleveraged buyers.

The irony is that dropping credit standards is a key factor in just about every bubble and financial crisis in history. Call it a lesson never learned.

5 Leverage rules: In 2004, the Securities and Exchange Commission issued the “Bear Stearns exemption,” replacing the existing Net Capitalization Rule — that is a 12 to 1 leverage limit — with essentially unlimited leverage for the five largest investment houses. Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns were given carte blanche to pile as much obligation onto their capital base as they saw fit. Following the rule exemption, they leveraged up 25, 35 even 45 to 1.

Less than five years after the exemption was granted, none of these companies existed in the same structure as before the rule change.

6 Mortgage underwriting standards: Beyond the subprime mortgages, lending standards dropped for home purchases in the 2000s. Many lenders stopped verifying income, payment history and credit scores. The 20 percent down standard disappeared. No money down loans rose up. “Piggyback mortgages” piled on a second mortgage. Not to mention “innovations” such as adjustable-rate mortgages. What followed? Rising home prices, housing overstock and booming defaults and foreclosures.

7 Automated underwriting: Loan demand became so great that bankers developed an automated underwriting system that emphasized speed and volume over accuracy and risk management. And the players all learned how to game the system. Real estate agents and mortgage brokers used corrupt appraisers to facilitate loan approval. Mortgage brokers learned how to tweak even the worst loan application to get it approved. Even bank loan officers circulated “unofficial” cheat memos on how to get lousy applications through the automated system.

8 Collateralized debt obligation (CDO): Here is an issue for those of you who believe markets are so efficient: CDO managers created trillions of dollars in mortgage-backed securities without really understanding what was going into these giant mortgage pools. The institutional investors — pensions, insurance firms, banks — who bought these appear to have failed to engage in effective due diligence. This teaches us just about everything we need to know about self-regulation of the financial industry. Indeed, given the outsize bonuses of bankers and the profit motive of banks themselves, financial self-regulation does not appear to be remotely possible.

9a. Glass Steagall: The Depression-era Glass Steagall legislation was effective in keeping Wall Street crises separate from Main Street. Think back to the 1987 crash — it had little impact on the broader banking industry. But the repeal of Glass Steagall in 1998 allowed FDIC-backed depository banks and Wall Street investment firms to become intertwined. It took less than 10 years for the entanglements to become extremely dangerous. By the time the 2008 credit crisis hit, the troubles on Wall Street were inseparable from Main Street. So banks and investment firms collapsed together.

9b State banking regulations: Many states had anti-predatory lending laws on their books. These prevented the making of loans or mortgages to borrowers who could not afford them. In 2005, these state laws were “federally preempted” by order of John Dugan, head of the Office of the Comptroller of the Currency. States with anti-predatory lending laws saw lower default and foreclosure levels than states that did not have them. Not surprisingly, after the preemption, default and foreclosure levels in those states rose.

10 Fannie and Freddie: In 2006, more than 84 percent of subprime mortgages were issued by private lending institutions not covered by government regulations, according to data from McClatchy. Indeed, before 2005, the government-backed private firms Fannie Mae and Freddie Mac were not allowed to buy nonconforming loans. But they were losing massive market share to Wall Street and, in response, petitioned their regulator for permission to buy alt A and subprime loans. Fannie and Freddie plunged headlong into the junk bond market just as the housing market peaked. But it was the profit motive and competition — not government policies — that led to this.

Where does this leave us? We have created an intensely concentrated financial industry, where a handful of banks control the majority of assets. Competition is less than it was before the crisis, and bank fees are creeping upwards.

While risk-taking remains rather subdued, history informs us it is likely to return as the crisis fades in the collective memory. The bailouts left us with a legacy of poor balance sheets and moral hazard. None of 10 factors discussed above have been, in any meaningful way, resolved.

The debt ceiling is the least of our worries.

orange
08-06-2011, 04:23 PM
Italy leading the charge! :thumb:

http://www.bigcat.pt/567.jpg

(I have a bad feeling about this. :doh!:)

Stewie
08-06-2011, 04:53 PM
This is news to you? No wonder you're such a dumbass.

NaptownChief
08-06-2011, 05:57 PM
The debt ceiling is the least of our worries.


The debt ceiling is not the problem, the problem is the debt. You can put the ceiling at $50 trillion but if there is zero debt then the ceiling is irrelevant.<O:p</O:p
<O:p</O:p

The real estate crisis was created largely by making a ton of mortgages in amounts to people who had no business getting them. This came about when Bill Clinton decided that home ownership was a "right" and not a earned privilege. The crazy levels of leverage taken by AIG, Lehman and the such only exasperated it.

No system can last very long when half the people take but contribute nothing. Per the IRS 2010 tax filings 48% didn't pay a single dollar of federal tax. That is not sustainable when you have huge amount of debt service to pay along with expensive sacred cows like SS and Medicare.

What most people don't realize is that the even if we had a balanced budget(which will never happen as long as Dems have a say)we still wouldn't be in good shape. Because interest rates being so low that we would actually need to be at a big surplus budget right now for things to be in good shape. Cause even if we were at a balanced budget now as interest rates work their way back to 8-9% range which will happen over the next decade then the interest expense will double and have us back to running large deficits again. The path we are currently on with the debt heading over $20 trillion in the next 10 years due to the current spending and soon to be further increased spending because of Obamacare will put this country in complete collapse.

KC native
08-06-2011, 07:38 PM
This is news to you? No wonder you're such a dumbass.

Grabbing for straws eh? I've been posting about this shit since I joined.

KC native
08-06-2011, 07:38 PM
The debt ceiling is not the problem, the problem is the debt. You can put the ceiling at $50 trillion but if there is zero debt then the ceiling is irrelevant.<O:p</O:p
<O:p</O:p

The real estate crisis was created largely by making a ton of mortgages in amounts to people who had no business getting them. This came about when Bill Clinton decided that home ownership was a "right" and not a earned privilege. The crazy levels of leverage taken by AIG, Lehman and the such only exasperated it.

No system can last very long when half the people take but contribute nothing. Per the IRS 2010 tax filings 48% didn't pay a single dollar of federal tax. That is not sustainable when you have huge amount of debt service to pay along with expensive sacred cows like SS and Medicare.

What most people don't realize is that the even if we had a balanced budget(which will never happen as long as Dems have a say)we still wouldn't be in good shape. Because interest rates being so low that we would actually need to be at a big surplus budget right now for things to be in good shape. Cause even if we were at a balanced budget now as interest rates work their way back to 8-9% range which will happen over the next decade then the interest expense will double and have us back to running large deficits again. The path we are currently on with the debt heading over $20 trillion in the next 10 years due to the current spending and soon to be further increased spending because of Obamacare will put this country in complete collapse.


Did you even read the article?

HonestChieffan
08-06-2011, 07:51 PM
KCNitwit strikes again.

Back to the mail room.

KC native
08-06-2011, 07:53 PM
KCNitwit strikes again.

Back to the mail room.

I know the article is above your reading level but you could at least pretend you tried to read it.

KCTitus
08-06-2011, 10:05 PM
Interesting that point 4 and 6 wasnt bolded...who were those nonbank underwriters and why were the standard lifted giving mortgages to those who couldnt afford them. The basic problem to the real estate bubble was the community reinvestment act.

Aside from that, when did the government start monetizing its debt? Do you think this is a problem? I do.

KC native
08-07-2011, 12:50 PM
Interesting that point 4 and 6 wasnt bolded...who were those nonbank underwriters and why were the standard lifted giving mortgages to those who couldnt afford them. The basic problem to the real estate bubble was the community reinvestment act.

Aside from that, when did the government start monetizing its debt? Do you think this is a problem? I do.

I didn't bold 4 and 6 because I've been over those several times out here.

The nonbank underwriters were companies like Countrywide.

The standards were lowered because Fannie and Freddie were losing a ton of market share to companies like Countrywide, so due to concern for profits, they lowered standards to gain market share again.

The CRA had nothing to do with the housing bubble.

ThatRaceCardGuy
08-07-2011, 04:41 PM
Good Article. Thanks for the post. Obviously the Baggers and the radical right will ignore this because it wont support their mindless zombie beliefs.

Chocolate Hog
08-07-2011, 06:45 PM
Good Article. Thanks for the post. Obviously the Baggers and the radical right will ignore this because it wont support their mindless zombie beliefs.

Really how so?

1. Supports Ron Pauls position


5. Government meddling in the markets

9. Overreaching federal government

And lol @ #10 not being government policies.

NaptownChief
08-07-2011, 08:47 PM
Did you even read the article?


Despite the stench of a leftist spin piece I did read it.

KC native
08-07-2011, 09:13 PM
Despite the stench of a leftist spin piece I did read it.

The author isn't even close to being a leftist. He's an asset manager. Care to show again that you haven't read the article?

NaptownChief
08-07-2011, 09:40 PM
The author isn't even close to being a leftist. He's an asset manager. Care to show again that you haven't read the article?


I don't care what his profession maybe...I can smell a leftist twist from a mile away.

I just looked him up and no shocker but a Chuck Schumer contributor:

<TABLE id=top class=datadisplay><TBODY><TR style="BACKGROUND-COLOR: #feffcc" class=rowTint><TD>RITHOLZ, BARRY
PORT WASHINGTON,NY 11050</TD><TD>GOLDEN TREE ASSET MANAGEMENT/ATTORN</TD><TD class=number>6/15/09</TD><TD class=number>$500</TD><TD>Schumer, Charles E (D</TD></TR></TBODY></TABLE>

KC native
08-07-2011, 09:46 PM
I don't care what his profession maybe...I can smell a leftist twist from a mile away.

I just looked him up and no shocker but a Chuck Schumer contributor:

<TABLE id=top class=datadisplay><TBODY><TR style="BACKGROUND-COLOR: #feffcc" class=rowTint><TD>RITHOLZ, BARRY
PORT WASHINGTON,NY 11050</TD><TD>GOLDEN TREE ASSET MANAGEMENT/ATTORN</TD><TD class=number>6/15/09</TD><TD class=number>$500</TD><TD>Schumer, Charles E (D</TD></TR></TBODY></TABLE>

And? He lives in New York City. Is he not allowed to give to politicians he supports?

If you had taken the time to read his stuff, you would realize he's pretty nonpolitical.

edit: and it's still painfully obvious that you haven't really read the article. Keep up with non sequitors though, it really makes your argument strong.

petegz28
08-07-2011, 09:48 PM
Interesting that point 4 and 6 wasnt bolded...who were those nonbank underwriters and why were the standard lifted giving mortgages to those who couldnt afford them. The basic problem to the real estate bubble was the community reinvestment act.

Aside from that, when did the government start monetizing its debt? Do you think this is a problem? I do.

That was a part of it. The bigger part was they were stamped AAA and sold off in bulk as "securities". The bad loans that is. Had those banks thought for a minute they were going to have to hold that paper, the majority of those loans don't ever get made, imo.

BucEyedPea
08-07-2011, 10:24 PM
Italy leading the charge! :thumb:

:thumb:

KCTitus
08-10-2011, 07:42 PM
I didn't bold 4 and 6 because I've been over those several times out here.

The nonbank underwriters were companies like Countrywide.

The standards were lowered because Fannie and Freddie were losing a ton of market share to companies like Countrywide, so due to concern for profits, they lowered standards to gain market share again.

The CRA had nothing to do with the housing bubble.

At least Countrywide is dead and gone...a failed private organization. Fannie and Freddie are still here...still taking money from taxpayers for their failure to limit loans who can afford to repay.

The CRA had everything to do with the housing bubble. One doesnt just give loans to individuals who cannot repay them unless their threatened by the government. It's ludicrous to suggest otherwise.

I still want to know when the government/Fed started monetizing our debt? It's basically stealing from everyone who holds Dollars or Treasuries.

KCTitus
08-10-2011, 07:44 PM
That was a part of it. The bigger part was they were stamped AAA and sold off in bulk as "securities". The bad loans that is. Had those banks thought for a minute they were going to have to hold that paper, the majority of those loans don't ever get made, imo.

If you were forced to make bad loans that you knew were worthless, what would you do? I agree, if the banks had the option, they wouldnt give loans to those that had no business applying for them...the operative legislation in this case was the Community Reinvestment Act.

KC native
08-10-2011, 08:51 PM
At least Countrywide is dead and gone...a failed private organization. Fannie and Freddie are still here...still taking money from taxpayers for their failure to limit loans who can afford to repay.

The CRA had everything to do with the housing bubble. One doesnt just give loans to individuals who cannot repay them unless their threatened by the government. It's ludicrous to suggest otherwise.

I still want to know when the government/Fed started monetizing our debt? It's basically stealing from everyone who holds Dollars or Treasuries.

The CRA had nothing to do with the housing bubble. How does a 30 year old law cause a housing bubble in 2003-2005?

Again, Fannie and Freddie didn't get into the game until really late. The bubble was about to burst when Fannie and Freddie jumped on the non-conforming mortgages bandwagon.

The banks and nonbank lenders were making loans to anyone they could because they weren't concerned with whether they would be paid back because the banks were securitizing the loans. They got fees at every step of the process. As bad as this was alone, there was systemic fraud too. Lenders knew how to tweak applications to get approvals, hell there were even cheat sheets passed out on how to get applications through at some of these places.

Also, most of the subprime loans were made by entities who were NOT subject to the CRA.

There is no evidence (other than right wing gas bags) to show that the CRA is in any way responsible for the housing bubble.

As far as monetizing the debt, they've been doing that since the first bailout. That has been the plan the whole time. Monetize the debt and inflate our way out of this mess.

KC native
08-10-2011, 08:54 PM
At least Countrywide is dead and gone...a failed private organization. Fannie and Freddie are still here...still taking money from taxpayers for their failure to limit loans who can afford to repay.

The CRA had everything to do with the housing bubble. One doesnt just give loans to individuals who cannot repay them unless their threatened by the government. It's ludicrous to suggest otherwise.

I still want to know when the government/Fed started monetizing our debt? It's basically stealing from everyone who holds Dollars or Treasuries.

Oh, and countrywide isn't dead and gone. It was bought by Bank of America.

KCTitus
08-10-2011, 08:56 PM
The CRA had nothing to do with the housing bubble. How does a 30 year old law cause a housing bubble in 2003-2005?

Again, Fannie and Freddie didn't get into the game until really late. The bubble was about to burst when Fannie and Freddie jumped on the non-conforming mortgages bandwagon.

The banks and nonbank lenders were making loans to anyone they could because they weren't concerned with whether they would be paid back because the banks were securitizing the loans. They got fees at every step of the process. As bad as this was alone, there was systemic fraud too. Lenders knew how to tweak applications to get approvals, hell there were even cheat sheets passed out on how to get applications through at some of these places.

Also, most of the subprime loans were made by entities who were NOT subject to the CRA.

There is no evidence (other than right wing gas bags) to show that the CRA is in any way responsible for the housing bubble.

As far as monetizing the debt, they've been doing that since the first bailout. That has been the plan the whole time. Monetize the debt and inflate our way out of this mess.

How does a law from 1992 effect the 2003-2005 bubble? By forcing private organizations give loans to those who could not afford them, thus increasing demand for housing and rising demand increases housing prices. It's quite simple, really.

The first bailout, as I recall, was in 2008...if that was the plan the whole time, the 'plan' was to destroy the economy and the dollar. Not exactly something to be proud about.

KC native
08-10-2011, 09:02 PM
How does a law from 1992 effect the 2003-2005 bubble? By forcing private organizations give loans to those who could not afford them, thus increasing demand for housing and rising demand increases housing prices. It's quite simple, really.

The first bailout, as I recall, was in 2008...if that was the plan the whole time, the 'plan' was to destroy the economy and the dollar. Not exactly something to be proud about.

No one was forced to make any loan. The CRA doesn't force anyone to make an uneconomical loan.

The CRA is also much older than 1992. It was passed in 1977.

It's hard to take any point you make serious when you don't even have the basic facts right.

The plan has always been to monetize the debt and inflate our way out of it. The Fed is fighting deflation. Inflation penalizes savers. Deflation penalizes everyone.

KCTitus
08-10-2011, 09:04 PM
No one was forced to make any loan. The CRA doesn't force anyone to make an uneconomical loan.

The CRA is also much older than 1992. It was passed in 1977.

It's hard to take any point you make serious when you don't even have the basic facts right.

The plan has always been to monetize the debt and inflate our way out of it. The Fed is fighting deflation. Inflation penalizes savers. Deflation penalizes everyone.


True..it started in 77, was 'improved' in the mid 90's...sorry I missed on the exact year.

You are correct, however, I dont take much from you seriously, when you ignore basic facts as well.

If the plan was, all along, to monetize the debt, it was a horrible plan.

KC native
08-10-2011, 09:09 PM
True..it started in 77, was 'improved' in the mid 90's...sorry I missed on the exact year.

You are correct, however, I dont take much from you seriously, when you ignore basic facts as well.

If the plan was, all along, to monetize the debt, it was a horrible plan.

ROFL Ok dumbass. Please show me any instance where lenders were forced to make a loan.

KCTitus
08-10-2011, 09:20 PM
ROFL Ok dumbass. Please show me any instance where lenders were forced to make a loan.

*sigh*...is your argument so superior, that you need to resort to that? Seriously.

First, in the Freddie Mac was behind the securitization or bundling program that you blame on the banks.

Securitization of affordable housing loans expanded, as did the secondary market for those loans, in part reflecting a 1992 law that required the government-sponsored enterprises, Fannie Mae and Freddie Mac, to devote a percentage of their activities to meeting affordable housing goals (HUD, 2006). A generally strong economy and lower interest rates also helped improved access to credit by lower-income households. - from the below link.

Here: http://www.federalreserve.gov/newsevents/speech/Bernanke20070330a.htm

A good portion for you review is here:

Further attention to CRA was generated by the surge in bank merger and acquisition activities that followed the enactment of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. As public scrutiny of bank merger and acquisition activity escalated, advocacy groups increasingly used the public comment process to protest bank applications on CRA grounds. In instances of highly contested applications, the Federal Reserve Board and other agencies held public meetings to allow the public and the applicants to comment on the lending records of the banks in question. In response to these new pressures, banks began to devote more resources to their CRA programs. Many institutions established separate business units and subsidiary community development corporations to facilitate lending that would be given favorable consideration in CRA examinations. Local and regional public-private partnerships and multibank loan consortia also gained more prominence as banks developed strategies for expanding and managing CRA-related activities.

tl;dr -- in order for banks to merge, they were forced to comply that they were giving bad loans to people who couldnt afford them.

I understand the intent of the CRA, but like all other government solutions, they fail. Their intentions were good, but lending to people who cannot afford them fails in the end.

KCTitus
08-10-2011, 09:21 PM
Aside from the obvious, inflating the money supply by buying its own debt hurts everyone.

HonestChieffan
08-10-2011, 09:33 PM
KCNitwit has lost this discussion before.

KCTitus
08-10-2011, 10:11 PM
More data to support my argument that government policy impacted the housing boom...

http://www.aei.org/docLib/PintoFCICTriggers.pdf

Some relevant passages:
These facts set the housing bubble that ended in 2006 apart from all others and, as I will show, caused the financial crisis that followed. At this point, however, the important question for the FCIC’s inquiry is: how did it happen that almost half of all outstanding loans were high risk? An important clue is found in what institutions ended up holding most of these bad loans and the securities containing bad loans by the middle of 2008. Over seventy percent of the 26.7 million high risk loans—19.25 million loans--were owned or guaranteed by (a) Fannie Mae and Freddie Mac (11.9 million), (b) the Federal Housing Administration and other federal agencies (4.8 million); (c) FHLB investments in Alt-A and Subprime Private MBS (0.3 million) or (d) banks and other lenders originating loans pursuant to Community Reinvestment Act (CRA) requirements and HUD’s best practices program (2.2 million, net of CRA loans already accounted for in (a) and (b)19. These numbers suggest that government policies and requirements were the source of the high risk loans, and thus the cause of the financial crisis. In my view, these policies and requirements were the “triggers” that the FCIC staff is looking for.

This was accomplished as a result of the 1992 Government Sponsored Enterprises Safety and Soundness Act (“GSE Act”). The GSE Act, for the first time, set formal affordable housing goals for Fannie and Freddie. The GSEs were mandated to “lead the market” (a market which included FHA) and HUD was authorized to set annual low and moderate income goals which over time grew from 30% (1993) to 56% (2008). Congress made clear that wanted it Fannie and Freddie to get much more active in high LTV lending (>=95% LTV). The GSE Act mandated that Fannie and Freddie examine:
“[t]he extent to which the underwriting guidelines prevent or inhibit the purchase or securitization of mortgages for housing located in mixed-use, urban center, and predominantly minority neighborhoods and for housing for low- and moderate-income families;”33 Congress provided Fannie and Freddie a roadmap for that review by requiring the examination of a number of underwriting standards including:
“the implications of implementing underwriting standards that—
(A) establish a downpayment requirement for mortgagors of 5 percent or less;34 The significance of this request was two fold. In 1992 a conventional loan with less than 5% down did not exist. Only FHA (and VA) insured such loans. By Congress’ mandate for the GSEs to compete directly with FHA, the development of this highly risky loan product was preordained.
By mid-1993 Fannie had developed its Community Home Buyer Program to compete directly with FHA’s core 203(b) insurance program. It had a 3% down payment provided by the borrower and 2% from other sources.35 By 1994 Fannie introduced a 97% LTV with private mortgage insurance, which was implemented over the objection of Fannie’s chief credit officer:
“Some senior executives, including the company's chief credit officer at the time, were opposed to the loans, in large part because a Fannie Mae experiment with 5%-down loans in Texas in the early 1980s was disastrous, with one in four borrowers defaulting.”36 As noted earlier, in 1995 HUD formalized the provision of low downpayment loans as a national
policy.

There's more, Im just too tired to keep reading.

KC native
08-11-2011, 12:43 AM
*sigh*...is your argument so superior, that you need to resort to that? Seriously.

First, in the Freddie Mac was behind the securitization or bundling program that you blame on the banks.

- from the below link.

Here: http://www.federalreserve.gov/newsevents/speech/Bernanke20070330a.htm

A good portion for you review is here:



tl;dr -- in order for banks to merge, they were forced to comply that they were giving bad loans to people who couldnt afford them.

I understand the intent of the CRA, but like all other government solutions, they fail. Their intentions were good, but lending to people who cannot afford them fails in the end.


sigh....so no proof that they were forced to loan anyone money? :thumb: The CRA just made sure that banks don't red line certain areas of cities (which they had been doing). It just ensures that banks don't open branches in shitty parts of town so they can suck up deposits but not lend in that area.

CRA applicants still have to meet credit worthy standards.

As far as the securitization, EVERYONE was in on that game. The investment banks, Fannie, Freddie, banks, non-bank lenders. Everyone was in on that. With that being said securitization isn't a bad thing when the ratings agencies aren't selling ratings and the banks are concerned with credit worthiness.

Also, Fannie and Freddie are peanuts on the grand scale of the 05-08 crisis.

KC native
08-11-2011, 12:44 AM
More data to support my argument that government policy impacted the housing boom...

http://www.aei.org/docLib/PintoFCICTriggers.pdf

Some relevant passages:




There's more, Im just too tired to keep reading.

Anything out of AEI is garbage. They are a hack partisan group. Cite investment professionals if you're going to cite anyone. AEI are a bunch of charlatans.

KC native
08-11-2011, 12:46 AM
KCNitwit has lost this discussion before.

Captain Cut N Paste from my inbox rides in to show he still doesn't know what the fuck I'm talking about. Bravo jackass.