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Qtec
10-10-2010, 05:46 AM
Inside Job (http://seminal.firedoglake.com/diary/75625)

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Charles Ferguson has made a documentary that must be seen if you want to understand why the same people who let the housing bubble and the 2008 financial meltdown happen are still in charge. </div></div>

Article.

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Summers remained close to Rubin and to Alan Greenspan, a former chairman of the Federal Reserve. When other economists began warning of abuses and systemic risk in the financial system deriving from the environment that Summers, Greenspan, and Rubin had created, Summers mocked and dismissed those warnings. In 2005, at the annual Jackson Hole, Wyo., conference of the world's leading central bankers, the chief economist of the International Monetary Fund, Raghuram Rajan, presented a brilliant paper that constituted the first prominent warning of the coming crisis.<span style='font-size: 14pt'> Rajan pointed out that the structure of financial-sector compensation, in combination with complex financial products, gave bankers huge cash incentives to take risks with other people's money, while imposing no penalties for any subsequent losses. Rajan warned that this bonus culture rewarded bankers for actions that could destroy their own institutions, or even the entire system, and that this could generate <span style='font-size: 20pt'>a "full-blown financial crisis" and a "catastrophic meltdown."</span></span>

When Rajan finished speaking, Summers rose up from the audience and attacked him, calling him a "Luddite," dismissing his concerns, and warning that increased regulation would reduce the productivity of the financial sector. (Ben Bernanke, Tim Geithner, and Alan Greenspan were also in the audience.) </div></div>

link (http://chronicle.com/article/Larry-Summersthe/124790/)

Q

Gayle in MD
10-10-2010, 08:08 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"> Inside Job (http://seminal.firedoglake.com/diary/75625)

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Charles Ferguson has made a documentary that must be seen if you want to understand why the same people who let the housing bubble and the 2008 financial meltdown happen are still in charge. </div></div>

Article.

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Summers remained close to Rubin and to Alan Greenspan, a former chairman of the Federal Reserve. When other economists began warning of abuses and systemic risk in the financial system deriving from the environment that Summers, Greenspan, and Rubin had created, Summers mocked and dismissed those warnings. In 2005, at the annual Jackson Hole, Wyo., conference of the world's leading central bankers, the chief economist of the International Monetary Fund, Raghuram Rajan, presented a brilliant paper that constituted the first prominent warning of the coming crisis.<span style='font-size: 14pt'> Rajan pointed out that the structure of financial-sector compensation, in combination with complex financial products, gave bankers huge cash incentives to take risks with other people's money, while imposing no penalties for any subsequent losses. Rajan warned that this bonus culture rewarded bankers for actions that could destroy their own institutions, or even the entire system, and that this could generate <span style='font-size: 20pt'>a "full-blown financial crisis" and a "catastrophic meltdown."</span></span>

When Rajan finished speaking, Summers rose up from the audience and attacked him, calling him a "Luddite," dismissing his concerns, and warning that increased regulation would reduce the productivity of the financial sector. (Ben Bernanke, Tim Geithner, and Alan Greenspan were also in the audience.) </div></div>

link (http://chronicle.com/article/Larry-Summersthe/124790/)

Q

</div></div>
<span style="color: #FF0000"> Yes, and even before that time, warnings were squelched, by the same group of Free Market, Deregulatory Zealots.

Democratics are always blocked by Republicans, when they work for more regulations, and reasonable oversight.

IMO, The Meltdown, proves that Republican Policies, FAILED. Both Foreign military policies, and domestic economic policies, and hence, the rich, get richer, as they steal from the rest, and pollute the environment.

Everyone should also read The Shock Docttrine which thoroughly lays out Reublican fear mongering, and intended collapse in many levels, including the Bush/Cheney, intended efforts to completely ignore the warnings of 9/11.

G.</span>

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?" (more »)


In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."

Born's battle behind closed doors was epic, Kirk finds. The members of the President's Working Group vehemently opposed regulation -- especially when proposed by a Washington outsider like Born.

"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was [former Assistant Treasury Secretary] Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'"

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."

Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.

"It'll happen again if we don't take the appropriate steps," Born warns. "There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience."

The financial system … terribly failed the American public. And the financial regulatory system failed the American public. And there are many parts of that failure, but one of the failures is that we have not been regulating the over-the-counter derivatives marketplace. …

The people in [the CFTC] are thinking nearly every day about the derivatives marketplace, whether it's the derivatives marketplace we call futures or the derivatives marketplace we call swaps or over-the-counter derivatives. They're thinking about both.

And if I can just use a term -- the reason it's called "over the counter" is because it's not on an exchange. It's as if you walked into a store and you just personally bought something over the counter. In this case you go to a large Wall Street firm and do a transaction, currently not regulated. It wasn't regulated in the 1990s; it's not regulated now. We should regulate them.

What should be and not be on the exchanges?

I believe strongly that we need two complementary regimes. We need to regulate the dealers, these 20 or 30 large global financial firms that issue these derivatives. How should we regulate them? We should make sure there's a lot lower risk, and we do that by capital and having margin requirements. Capital means money put to the side in case of crisis and so forth.

We're going to enhance the integrity of markets by business conduct standards, protecting the public against fraud and manipulation, and lastly, [promoting] transparency by record keeping and reporting. …

But I don't think that's enough. I think we also need to mandate that the standard product, the product that can be put onto an exchange and put onto what's called centralized clearing, be done.

Why is that? An exchange, just like the New York Stock Exchange or the Chicago Board of Trade for agricultural commodities, brings transparency. That means anyone in the public could know what the price is, what somebody is willing to buy or sell this risk contract [for]. And even though they're very complicated contracts, if it's a small hospital in your township, if it's a small school, or even a large business in your state, they could then look to this exchange and say, "This is where it's priced." They'd get the benefit of that.

Some people will argue … that these deals are being done between two very savvy organizations. These are not private citizens; you don't need the government overview. Your point of view on that?

… Every end user, every institution, even if they're big and savvy, would benefit from knowing what some other institution just paid for just one of these things. We would promote economic activity, I believe, if we brought a lot of sunlight into this area. ...

Why is this important?

It's very important because we can't let this happen again. … You could be living in Iowa as a farmer, or you could be living in Maryland as a doctor and have no relationship with a company called AIG, and wake up one day and $180 billion of your money -- this is the American public's money; this isn't Wall Street's money -- had to go into an insurance company that was so lightly regulated that the system might have come down if they failed.

Brooksley Born Chair, CFTC (1996-1999)

Read the full interview »
I think we have to close the regulatory gap. ... We need to take a lesson from the existing futures markets where exchange trading has been safe. As much as possible of the over-the-counter (OTC) derivatives market should be traded on a regulated derivatives exchange. The transaction should be cleared on a regulated clearinghouse. There should be robust federal regulation of any remaining OTC derivatives market. And personally, I think that remaining market should be limited as much as possible to no more than the customized contracts that are needed for specific businesses to hedge particular business risks. ...

If this moment passes again, the consequences are what from your perspective?

I think we will have continuing danger from these markets and that we will have repeats of the financial crisis. It may differ in details, but there will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience. …




http://www.pbs.org/wgbh/pages/frontline/warning/view/


REPUBLICAN POLICIES, SINCE REAGAN, aka, DEREGULATION, CAUSED THE MELTDOWN, AND GREENSPAN, AND THE OTHER 'FREE MARKET ZEALOTS' WERE MOST RESPONSIBLE.

pooltchr
10-10-2010, 08:13 AM
Bush tried to impose more regulation and restrictions on Fannie and Freddy to try and head off some of these problems, <u>but the Democrat controlled congress stopped him.</u>

And nobody called the Dems "the party of no"


Steve

jimmyg
10-10-2010, 10:42 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: pooltchr</div><div class="ubbcode-body">Bush tried to impose more regulation and restrictions on Fannie and Freddy to try and head off some of these problems, <u>but the Democrat controlled congress stopped him.</u>

And nobody called the Dems "the party of no" Steve </div></div>

There is more than enough blame to go around here. As long as the federal reserve controls our financial destiny, asset inflation is required in order to keep their worldwide system solvent. To that, add the insane obsession of BOTH political parties with economic "growth", which prevents the required economic cyclical adjustments to take place, stir in a large amount of the "TBTF" unregulated institutions, and we we will have have the perfect recipe for neverending financial disaster.

Bush was just as bad as anyone else, maybe worse in some respects. His "ownership" society was a socialistic failure, and his fed chairman Greenspan, with his 1% interest rates, was perfect fuel for an already smoldering fire.

And yes, we can, without a doubt, go back several more administrations and find other causal connections, including CRA, Fannie and Freddie, irresponsible deregulation, and off base, liberal anti-discrimination lending policies. But what has really happened is that our entire political and financial systems have been corrupted to the core, and neither party has the will, or the power, to change it. Right now, the powers in place and their puppets, both Bush and Obama, are doing nothing but wasting our nations resources and future trying to hold on to the established, corrupt, system, rather than acknowledge and correct it. Unless this happens, nothing will change and the future looks very dim.

J

Gayle in MD
10-10-2010, 11:43 AM
<span style='font-size: 20pt'>But these loans, and those to low- and moderate-income families represent a small portion of overall lending. And at the height of the housing boom in 2005 and 2006, Republicans and their party's standard bearer, President Bush, didn't criticize any sort of lending, frequently boasting that they were presiding over the highest-ever rates of U.S. homeownership.</span>
<span style='font-size: 26pt'>Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.

During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.</span>

In 1999, the year many critics charge that the Clinton administration pressured Fannie and Freddie, the private sector sold into the secondary market just 18 percent of all mortgages.

<span style='font-size: 26pt'>Fueled by low interest rates and cheap credit, home prices between 2001 and 2007 galloped beyond anything ever seen, and that fueled demand for mortgage-backed securities, the technical term for mortgages that are sold to a company, usually an investment bank, which then pools and sells them into the secondary mortgage market.</span>

<span style='font-size: 26pt'>
About 70 percent of all U.S. mortgages are in this secondary mortgage market, according to the Federal Reserve.</span>\
<span style='font-size: 26pt'>
Conservative critics also blame the subprime lending mess on the Community Reinvestment Act, a 31-year-old law aimed at freeing credit for underserved neighborhoods.

Congress created the CRA in 1977 to reverse years of redlining and other restrictive banking practices that locked the poor, and especially minorities, out of homeownership and the tax breaks and wealth creation it affords. The CRA requires federally regulated and insured financial institutions to show that they're lending and investing in their communities.

Conservative columnist Charles Krauthammer wrote recently that while the goal of the CRA was admirable, "it led to tremendous pressure on Fannie Mae and Freddie Mac — who in turn pressured banks and other lenders — to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity."

Fannie and Freddie, however, didn't pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market.

What's more, only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.

These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.</span>


In a speech last March, Janet Yellen, the president of the Federal Reserve Bank of San Francisco, debunked the notion that the push for affordable housing created today's problems.

<span style='font-size: 26pt'>"Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans," she said. "The CRA has increased the volume of responsible lending to low- and moderate-income households."

In a book on the sub-prime lending collapse published in June 2007, the late Federal Reserve Governor Ed Gramlich wrote that only one-third of all CRA loans had interest rates high enough to be considered sub-prime and that to the pleasant surprise of commercial banks there were low default rates. Banks that participated in CRA lending had found, he wrote, "that this new lending is good business."</span>
McClatchy Newspapers 2008


Read more: http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#ixzz11yjplIAG

Gayle in MD
10-10-2010, 11:45 AM
1. The Community Reinvestment Act of 1977 was irrelevant to the subprime boom, which was overwhelmingly driven by loan originators not subject to the Act.

2. The housing bubble reached its point of maximum inflation in the middle years of the naughties:

Robert Shiller
3. During those same years, Fannie and Freddie were sidelined by Congressional pressure, and saw a sharp drop in their share of securitization:

FCIC
while securitization by private players surged:

FCIC
Of course, I imagine that this post, like everything else, will fail to penetrate the cone of silence. It’s convenient to believe that somehow, this is all Barney Frank’s fault; and so that belief will continue.


Excellent charts here:

http://krugman.blogs.nytimes.com/2010/06/03/things-everyone-in-chicago-knows/

jimmyg
10-10-2010, 12:47 PM
Mandating loans to the financially unqualified, based upon race and other irrelevant criteria, which helped to flood the market with loans that were destined to default and also created false demand (one of the forces in bubble creation), had nothing to do with the credit default implosion? Are you serious? /forums/images/%%GRAEMLIN_URL%%/crazy.gif

If neither Krugman nor Shiller were knowledgeable enough to even know that there was a housing bubble at it's peak, why would anyone give them credit enough to know what caused it. Both were advocates of it's causes so they have a vested interest in protecting their positions.

If all you can do to support your ridiculous position is quote these two pawns, then you really don't have a clear understanding of the situation.

There were thousands of lesser known professionals that saw the entire situation coming, including me. The vested interests always protect their turf.

J

pooltchr
10-10-2010, 01:16 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Gayle in MD</div><div class="ubbcode-body">
1. The Community Reinvestment Act of 1977 was irrelevant to the subprime boom, </div></div>

How can you start a post with a statement like that, and expect to be taken seriously?

Steve

LWW
10-10-2010, 04:02 PM
Because the party agitprops told him this.

Only a doublethinker can believe that legislating lenders to be forced to make bad loans has nothing to do with lenders making bad loans.

LWW

cushioncrawler
10-10-2010, 04:46 PM
I am thinking that there shood be no such thing az mortgage loans.
A home shood be your castle.
mac.

LWW
10-10-2010, 05:13 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: cushioncrawler</div><div class="ubbcode-body">I am thinking that there shood be no such thing az mortgage loans.
A home shood be your castle.
mac. </div></div>

That should be between borrower and lender.

When left to that things are fine.

As always, gubmint meddling in markets leads to distortions which inevitably leads to market corrections.

LWW

Qtec
10-10-2010, 08:14 PM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Bush was just as bad as anyone else, maybe worse in some respects. His "ownership" society was a socialistic failure, and his fed chairman Greenspan, with his 1% interest rates, was perfect fuel for an already smoldering fire. </div></div>

How can <span style='font-size: 11pt'>promoting private ownership</span> be socialistic?

Q

Qtec
10-10-2010, 08:27 PM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Mandating loans to the financially unqualified, </div></div>

To get a mortgage you have to qualify. Are you seriously saying the banks gave loans to people they knew would default? Isn't that illegal? /forums/images/%%GRAEMLIN_URL%%/grin.gif

In my original post the answer to why this crisis came about was pretty clear to me.

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Rajan pointed out that <span style='font-size: 17pt'>the structure of financial-sector compensation, in combination with complex financial products, gave bankers huge cash incentives to take risks with other people's money, while imposing no penalties for any subsequent losses.</span> Rajan warned that this<span style='font-size: 20pt'> bonus culture</span> rewarded bankers for actions that <u>could destroy their own institutions, or even the entire system, and that this could generate a "full-blown financial crisis" and a "catastrophic meltdown."</u> </div></div>

Greed.

The Govt was giving away free money and everyone jumped on the band wagon of deception.


Q

jimmyg
10-10-2010, 08:33 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"> <div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Bush was just as bad as anyone else, maybe worse in some respects. His "ownership" society was a socialistic failure, and his fed chairman Greenspan, with his 1% interest rates, was perfect fuel for an already smoldering fire. </div></div>

How can <span style='font-size: 11pt'>promoting private ownership</span> be socialistic? Q </div></div>

When the "private ownership" is promoted through government programs that are ultimately supported by taxpayer funding it is no longer "private".

J

Qtec
10-10-2010, 09:08 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: jimmyg</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"> <div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Bush was just as bad as anyone else, maybe worse in some respects. His "ownership" society was a socialistic failure, and his fed chairman Greenspan, with his 1% interest rates, was perfect fuel for an already smoldering fire. </div></div>

How can <span style='font-size: 11pt'>promoting private ownership</span> be socialistic? Q </div></div>

When the "private ownership" is promoted through government programs that are ultimately supported by taxpayer funding it is no longer "private".

J </div></div>

Supported, not paid for.

How many companies in the USA get Govt subsidies? Are they no longer private companies?

How many farms?

The military complex is almost totally funded by the tax payer and THEY are all private companies.



Q

jimmyg
10-10-2010, 09:40 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: jimmyg</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"> <div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Bush was just as bad as anyone else, maybe worse in some respects. His "ownership" society was a socialistic failure, and his fed chairman Greenspan, with his 1% interest rates, was perfect fuel for an already smoldering fire. </div></div>

How can <span style='font-size: 11pt'>promoting private ownership</span> be socialistic? Q </div></div>

When the "private ownership" is promoted through government programs that are ultimately supported by taxpayer funding it is no longer "private".

J </div></div>

Supported, not paid for.

How many companies in the USA get Govt subsidies? Are they no longer private companies?

How many farms?

The military complex is almost totally funded by the tax payer and THEY are all private companies. Q </div></div>

"Supported by taxpayer funding" = paid for.

Taxpayer subsidized businesses are socialized.

Most large military industrial complex, like Northrop Grumman Corporation, are "public" companies and are socialistic by definition.

Why the word games?

J

pooltchr
10-10-2010, 10:20 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body">
To get a mortgage you have to qualify. Are you seriously saying the banks gave loans to people they knew would default? Isn't that illegal?
Q </div></div>

Where do you think the term "high risk loans" comes from.
Banks were "encouraged" to make loans that they normally would have not approved, because the government wanted more loans going to low income neighborhoods? To cover their potential losses, many of those loans were written at higher interest rates, giving us the sub prime mortgages that actually set up people to be paying more for a house than it was worth.

So, someone saw it coming....the banks that were forced into making the high risk loans.

Steve

LWW
10-11-2010, 12:53 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"> <div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Mandating loans to the financially unqualified, </div></div>

To get a mortgage you have to qualify. Are you seriously saying the banks gave loans to people they knew would default? Isn't that illegal? /forums/images/%%GRAEMLIN_URL%%/grin.gif

Q </div></div>

You are again close to an epiphany.

Banks were making loans where they didn't care if the people defaulted or not be cause with the tacit taxpayer guarantee being issued by FANNIE/FREDDIE the loans were marketable as securities.

F/F set the standards as to what they would and would not guarantee ... the banks merely followed those standards.

Prior to the CRA the standards were higher and such loans would never have happened because the lender making the loan would be stuck with it on their books for 30 years.

The arguments from the left should an abject lack of knowledge on how the mortgage market works.

Prior to the existence of F/F mortgage loans were very similar to car loans in that 5 years or so was the standard term. Thirty year loans were unthinkable because lenders weren't interested in having their capital tied up for so long.

The creation of F/F allowed lenders to make loans within F/F guidelines which they immediately resold at a profit. This allowed lenders to recapiyalize their accounts and allowed home buyers affordable payments and allowed conservative investors to invest in uber safe mortgage securities ... until the standards were lowered to meet political standards.

The entire sub prime debacle came to be when investors saw the cooked books of FANNIE and FREDDIE and assumed that the junk paper was actually performing as A paper and assumed they could make slightly riskier loans at a higher rate and still be profitable.

The left can use all the weasel words they want ... but the CRIA brought this problem to life. The abandonment of Glass-Stegall gave the investment and commercial banks both FDIC coverage. The Obama/Frank/Waters/Dodd cabal gave the criminals cover. The American, and even world, people are paying the price.

LWW

Qtec
10-11-2010, 04:20 AM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> The narrative gained steam with an influential op-ed in the Wall Street Journal by Peter Wallison, a fellow with the American Enterprise Institute (who, according to his bio, “had a significant role in the development of the Reagan administration’s proposals for the deregulation of the financial services industry”). Wallison found that “Almost two-thirds of all the bad mortgages in our financial system, many of which are now defaulting at unprecedented rates, were bought by government agencies or required by government regulations.”

The data shows that the principal buyers were insured banks, government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, and the FHA—all government agencies or private companies forced to comply with government mandates about mortgage lending.

<span style='font-size: 14pt'>The sleight-of-hand here is pretty straightforward. The U.S. government regulates lenders and provides deposit insurance to banks, which means that a large chunk of all home loans—good, bad, and in between—have some connection to a government program.<u> It’s like saying that the government is responsible for pollution because the EPA regulates industrial emissions.</u></span></div></div>

The reality is somewhat different.

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Yet <span style='font-size: 14pt'>no bank has ever been “forced to comply with government mandates about mortgage lending.”</span> There are <span style='font-size: 14pt'>no “government mandates,” and there never were.</span> In order to qualify for government-backed deposit insurance—a benefit that<span style='font-size: 14pt'> banks aren’t forced to accept</span> but enjoy having—the Community Reinvestment Act and similar measures designed to prevent discrimination in lending (to qualified individuals) only encourage banks to lend in all of the areas where they do business. <span style='font-size: 20pt'>And Section 802 (b) of the Act stresses that all loans must be “consistent with safe and sound operations”—it’s the opposite of requiring that lenders write risky mortgages. </span></div></div>



I agree with a lot you say but this collapse in the housing market was not caused by Joe six-pack.

Q.......... this is a good article on the subject..... <a href="http://www.alternet.org/economy/148454/conservatives_push_absurd_lie_that_wall_street_hus tlers_were_innocent_victims_..._of_poor_people/?page=1" target="_blank">
Conservatives Push Absurd Lie that Wall Street Hustlers Were Innocent Victims ... of Poor People
Deregulation allowed Wall Street to build a house of cards on America's mortgage industry, but many conservatives live in a parallel universe in which the banks are blameless. </a>

pooltchr
10-11-2010, 06:56 AM
While it may be accurate to say there were no government mandates, that doesn't mean there weren't some strong arm tactics in play.

If a squad of police officers surround you and tell you it would be a good idea for you to lay down on the ground and shut your mouth, that isn't a mandate. It's a suggestion that carries some implications that your non-complience might not be in your best interest.

Remember how the government had off the record meetings with the CEO of BofA regarding buying Countrywide? There was no mandate issued, but they were told that if it didn't happen, it could cause huge economic issues for the country, and that if Lewis couldn't make it happen, there would be a management team put in place that could.

Our government can be very convincing, without issuing a "mandate".

Steve

Gayle in MD
10-11-2010, 08:02 AM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.
</div></div>

Deregulation in a REPUBLICAN POLICY! Has been since RR.
End of story.
G.

jimmyg
10-11-2010, 09:57 AM
I agree with a lot you say but this collapse in the housing market was not caused by Joe six-pack. [/quote]

Never said it was. Mainly said that it was government and FED intervention in markets, and TBTF financial institutions...both parties. J

Said:
"There is more than enough blame to go around here. As long as the federal reserve controls our financial destiny, asset inflation is required in order to keep their worldwide system solvent. To that, add the insane obsession of BOTH political parties with economic "growth", which prevents the required economic cyclical adjustments to take place, stir in a large amount of the "TBTF" unregulated institutions, and we we will have have the perfect recipe for neverending financial disaster.

Bush was just as bad as anyone else, maybe worse in some respects. His "ownership" society was a socialistic failure, and his fed chairman Greenspan, with his 1% interest rates, was perfect fuel for an already smoldering fire.

And yes, we can, without a doubt, go back several more administrations and find other causal connections, including CRA, Fannie and Freddie, irresponsible deregulation, and off base, liberal anti-discrimination lending policies. But what has really happened is that our entire political and financial systems have been corrupted to the core, and neither party has the will, or the power, to change it. Right now, the powers in place and their puppets, both Bush and Obama, are doing nothing but wasting our nations resources and future trying to hold on to the established, corrupt, system, rather than acknowledge and correct it. Unless this happens, nothing will change and the future looks very dim."