According to Palin, "You're darn right it was those predatory lenders..."

10/3/2008 12:16:37 AM

For those on the right trying to scream Clinton and the CRA, can we just put that to rest? There have been many different takes on the data about it, and you just have to shut your mouth about it. It's a dead issue

http://feedproxy.google.com/~r/TheBigPicture/~3/mBzuz3SRKVk/federal-reserve.html

10/4/2008 10:04:46 PM

can we put it to rest, so we can stop placing the blame where it belongs on my beloved liberal? PLEASE!

10/5/2008 3:29:21 PM

I am not convinced that the federal government had a direct role in any of this. I am more convinced it was greed on Wall St. taking advantage of unregulated areas.

10/6/2008 10:53:02 AM

although this is damning....

http://www.youtube.com/watch?v=_MGT_cSi7Rs

10/6/2008 10:56:23 AM

http://www.factcheck.org/elections-2008/who_caused_the_economic_crisis.html

10/6/2008 11:13:46 AM

Quote :

"So who is to blame? There's plenty of blame to go around, and it doesn't fasten only on one party or even mainly on what Washington did or didn't do. As The Economist magazine noted recently, the problem is one of "layered irresponsibility ... with hard-working homeowners and billionaire villains each playing a role." Here's a partial list of those alleged to be at fault: The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap. * Home buyers, who took advantage of easy credit to bid up the prices of homes excessively. * Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses. * Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes. * The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families. * Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates. * Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages. * Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral. * The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market. * An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic. * Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up. The U.S. economy is enormously complicated. Screwing it up takes a great deal of cooperation. Claiming that a single piece of legislation was responsible for (or could have averted) the crisis is just political grandstanding. We have no advice to offer on how best to solve the financial crisis. But these sorts of partisan caricatures can only make the task more difficult."

noooooooooo!!
It makes too much sense!!! MUST FIND ONE PERSON TO BLAME!!

10/6/2008 11:24:20 AM

Well, it seems the Australians are jumping on the bandwagon of explaining what Americans have done wrong.

http://online.wsj.com/article/SB122325772150706655.html?mod=djemEditorialPage

Quote :

"The editorial points out some significant differences between mortgage lending in the U.S. and Australia - the U.S. has nonrecourse, 30-year fixed rate mortgage loans, typically without prepayment penalties, and we also passed the CRA, and all of these uniquely American features of mortgage lending serve to "stack the cards against lenders and in favor of risky homeownership." And it's safe to say that all or most of these pro-borrower, anti-lender mortgage policies in the U.S. are government-mandated. In contrast, mortgage loans in Australia are recourse, so "When Australians borrow money to buy a house, they know that if they default and the mortgaged property doesn't cover the debt, they will be responsible for the shortfall. And the lender will chase them for it. It's a neat way of reminding Australians to borrow responsibly." Australian mortgages have either variable rates of interest, or fixed rates for periods of a maximum of five years, and they face a prepayment penalty when refinancing a mortgage to compensate the lender for the "lost interest the loan would have brought in had it been carried to term." Bottom Line: One part of fixing our credit crisis is to consider reversing the pro-borrower, anti-lender mortgage policies in the U.S. Moving towards the Australian system would go a long way towards solving our mortgage troubles, and would stabilize our credit market and banking system and make them less vulnerable to credit shocks in the future."

http://mjperry.blogspot.com/2008/10/mortgage-lessons-from-down-under-us.html

10/6/2008 12:28:30 PM

Yah, doesn't everyone know it's McCain's/Phil Gramm's/George Bush's/Alan Greenspan's/Any Republican's fault!?!?!?!



partisan politics are bullshit

10/6/2008 1:14:05 PM

I'm not sure if I agree with the notion of a pre-payment penalty. The bank shouldn't really have a right to dictate how long it must take you to pay it off, but they certainly can say how long they are willing to wait. Just doesn't sit well with me.

Now, a refinancing penalty, I can get behind that. At the very least, I can get behind that far more than I can get behind a pre-payment penalty.

10/6/2008 7:30:19 PM

I don't think Alan Greenspan is a republican.

10/6/2008 8:44:21 PM

Many people will claim that Greenspan has been a “life-long Republican,” but he has not. He has been a lifelong Opportunist with Republican undertones.

Alan thought that we should of funneled our budget surpluses to reduce the federal debt even more so during the Clinton years.

This is done by purchasing government-initiated Treasury securities, which is not a typical Republican viewpoint.

In my opinion, Greenspan was a Republican before he took the important job and then he eventually realized that most Republicans are dangerously short-sighted in regards to managing government.

If you read his articles and/or comments about the current situation, he is very disappointed in the GOP.

[Edited on October 6, 2008 at 9:08 PM. Reason : -]

10/6/2008 8:49:31 PM

anyone care to guess when and by whom this was said?

Quote :

""One other thing I've done, is I've called on private sector mortgage banks and banks to be more aggressive about lending money to first-time home buyers. And the response has been really good. There's a lot of people in this -- our communities around the country that deeply care about the issue of homeownership, and they've been responsive." "

10/8/2008 8:06:02 AM

Here is a good idea:
We should encourage the immigration of prime-age individuals. Beginning in 2007, net immigration fell to half of its level over the previous five years. Increasing immigration would increase the demand for housing and raise home prices. And note that the benefit would be immediate. Home prices -- and the value of subprime obligations -- would rise in anticipation of a higher population base. The U.S. particularly needs highly skilled workers. These workers not only would purchase homes, but would generate higher living standards for all Americans.
http://online.wsj.com/article/SB122342618776613613.html

10/9/2008 1:03:46 PM

^ DAY TOOK ERR JERBS

10/9/2008 1:11:33 PM

wow, it looks like NC AG Roy Cooper is actually justified in saying "i told you so" about the whole housing crisis. Apparently he went to DC in 2003 to sound some alarm bells, and was ignored

Quote :

""More than five years ago, in April 2003, the attorneys general of two small states traveled to Washington with a stern warning for the nation's top bank regulator. Sitting in the spacious Office of the Comptroller of the Currency, with its panoramic view of the capital, the AGs from North Carolina and Iowa said lenders were pushing increasingly risky mortgages. Their host, John D. Hawke Jr., expressed skepticism. Roy Cooper of North Carolina and Tom Miller of Iowa headed a committee of state officials concerned about new forms of "predatory" lending. They urged Hawke to give states more latitude to limit exorbitant interest rates and fine-print fees. "People out there are struggling with oppressive loans," Cooper recalls saying. "

http://bigpicture.typepad.com/comments/2008/10/ignored-warning.html

10/11/2008 1:39:52 PM

http://bigpicture.typepad.com/comments/2008/10/goal-increase-m.html

Quote :

"Guess who's goal this was? You might be surprised: >> "More and more people own their homes in America today. Two-thirds of all Americans own their homes, yet we have a problem here in America because few than half of the Hispanics and half the African Americans own the home. That's a home ownership gap. It's a -- it's a gap that we've got to work together to close for the good of our country, for the sake of a more hopeful future. We've got to work to knock down the barriers that have created a home ownership gap. I set an ambitious goal. It's one that I believe we can achieve. It's a clear goal, that by the end of this decade we'll increase the number of minority homeowners by at least 5.5 million families . . . Home ownership is also an important part of our economic vitality. If -- when we meet this project, this goal, according to our Secretary of Housing and Urban Development, we will have added an additional $256 billion to the economy by encouraging 5.5 million new home owners in America; the activity -- the economic activity stimulated with the additional purchasers, the additional buyers, the additional demand will be upwards of $256 billion. And that's important because it will help people find work." - George W. Bush, U.S. President, October 15, 2002 1:55 P.M. > Last week, we mentioned this speech from 2004. Fast forward to today's excerpt, from an even earlier, 2002 speech. Why keep bringing these up? Because it derails the false argument brewing amongst those on the right who blame the 1977 CRA or the 1938 Fannie Mae for the current housing and credit problem. I have zero patience for this nonsense, and am unafraid to call people on it. Nothing in any of these Bush speeches that pushed for more lending to minorities and increased lower income home ownership caused the problem. Neither did any similar Clinton speeches. Nor did related the legislation related to the Bush speeches, nor did the CRA, nor Fannie Mae or Freddie Mac. Indeed, none of these actions required the sort of reckless lending that we saw from 2002-2007. Understand this simple fact: In an ultra-low rate environment, where prices are appreciating rapidily, and mortgaes are being securitized, ALL THAT MATTERS IS THAT THE BORROWER NOT DEFAULT IN 90 days (or 6 Months). The goal was to make a loan that did not default in that period of time, it cannot be put back to the originator. As a mortgage salesman, you only lose your a fee if a borrower defaults within 3 or 6 months. What do you do to maximize your returns? The best way to do that -- to put people in houses that would not default in 90 days -- was the 2/28 ARM mortgages. Cheap teaser rates for 24 months, then the big reset. By then, it was no longer your problem. Can you grasp what a monumental change this was? Instead of making sure that borrowers could pay back ALL OF THE 30 YEAR FIXED MORTGAGE, you only had to find people who could afford the teaser rate for a a few months. THIS WAS AN ENORMOUS AND UNPRECEDENTED SHIFT IN LENDING. This is the key to the hosuing boom and bust, anbd ultimately underlies the entire credit freeze. And, it would not have been possible without the Greenspan ultra-low rates, which made the teaser portion (the "2" of the 2/28) of these mortgages so attractive. ~~~ Those who continue to blame the CRA, Fannie Mae, etc. reveal their fundamental misunderstanding of how credit operates in general, what the financing process was like from 2002-07, and how this situation came to pass. Or worse, they understand it, and choose to lie about it anyway for partisan political purposes. You either understand these simple facts, or you don't. If you cannot comprehend this, you are a low functioning moron. If you understand it, but spit out nonsense anyway, you are a liar. And those are the only people blaming the CRA or Fannie/Freddie for the credit/housing crisis -- idiots and liars . . ."

10/14/2008 10:53:53 AM

^Does the blogger you're quoting even have a name? If so, it's not made obvious anywhere in the general vicinity of his post. Also, it's hard to take seriously someone who, at the end of their partisan argument, accuses those who disagree with them of being morons or partisan hacks (it's like reading a post from hooksaw, they always end in some variation of "you fucking far-left moonbat").

I hope you don't actually agree with him, agentlion, because you've always struck me as someone who is smarter than that.


I can post opinions from the internet, too... good thing the opinion I found is from a professor of economics:
http://myslu.stlawu.edu/~shorwitz/open_letter.htm

[Edited on October 14, 2008 at 11:30 AM. Reason : hyperlink formatting... T-dub doesn't like the ~]

10/14/2008 11:30:09 AM

Of course the blogger is simplifying the argument, but what he claims as the cause actually was a HUGE part of what went wrong.

It's funny that the right is constantly complaining about class warfare when democrats do it, but when they are the ones essentially placing blame on the whole economic mess on a few initiatives that gave the lower class and minorities ways to own a home, it is ok.

I guess class warfare only sucks when it is being waged on rich people.

10/14/2008 11:38:15 AM

Quote :

"^Does the blogger you're quoting even have a name? If so, it's not made obvious anywhere in the general vicinity of his post."

uhh, yeah, he does - Barry L. Ritholtz
http://bigpicture.typepad.com/cv/2006/02/curriculum_vita.html
He's also the CEO of http://www.fusioniqrank.com/
He posts videos almost weekly on the blog where he's interviewed by CNBC, MSNBC, Forbes, PBS, etc

I don't know how you can argue with this:

Quote :

"Understand this simple fact: In an ultra-low rate environment, where prices are appreciating rapidily, and mortgaes are being securitized, ALL THAT MATTERS IS THAT THE BORROWER NOT DEFAULT IN 90 days (or 6 Months). The goal was to make a loan that did not default in that period of time, it cannot be put back to the originator."

the risk and reward of selling home mortgages has become completely decoupled. The mortgage brokers at the front line don't give a shit if people default on their mortgages. By the time they do, the brokers have already received their commission, and the mortgage was packaged and sent up the line. The packaged securities keep going up and up the line, and it's just a big fucking game of hot potato, but in this case, we all lose when the music stops because the bad loans have crept into every crevice of our economy.

10/14/2008 12:03:00 PM

Quote :

"As a mortgage salesman, you only lose your a fee if a borrower defaults within 3 or 6 months. What do you do to maximize your returns? The best way to do that -- to put people in houses that would not default in 90 days -- was the 2/28 ARM mortgages."

agentlion, that was not how it worked before and your article fails to explain WHY the incentives were changed. Just because it became legal to change them does not make them change. Mortgage salesmen create mortgages investors want to buy. Why were investors willing to accept terms which to anyone appear designed to create bad mortgages? These are highly educated people which understood what they were buying, so calling them stupid is not an explanation.

What is an explanation is the fact that Fannie and Freddie became willing buyers of these mortgages which were designed to go bad and therefore became a back-stop: investors were too smart for their own good and knew if the mortgages went bad, then they could sell them to Fannie or Freddie which would then be bailed out by Uncle Sam.

So why did Fannie and Freddie start buying up so many of these loans that they would alone constitute a market in them? Easy, they were directed to do so by the politicians guarantying their debt.

[Edited on October 14, 2008 at 12:14 PM. Reason : ,.]

10/14/2008 12:12:29 PM