Weird, so you're going to rail on the government, but ignore the stockholders

Quote :

"and felt pressure from stock holders to maintain its phenomenal growth in profits"

The governments plan was good for those who could AND DID make payments on homes where they didn't qualify for traditional loans due to any number of reasons. Believe it or not, bad luck happens and people can get smarter about their finances. The CRA program pushed the banks to do even more due diligence on those with bad credit to find out whether they could afford a home. And not surprisingly, the numbers show once you go past the surface of 20% down and 700+ FICO, there are people that can still make the payments. They defaulted at the same rates as traditional prime mortgage borrowers. How do you stretch that into a CRA caused problem?

Blame it on homeowners who were fraudulent about their income.
Blame it on brokers who lied about a borrowers income, told the borrower that they could afford a home, and only needed to see them not default for 90 days before they got paid fat commissions for filling out paperwork a monkey could do (indeed, former convicts took jobs as brokers at the height of the bubble).
Blame it on Fannie may for not caring what loans they were buying from underwriters who didn't perform this due diligence.
Blame it on the regulators who removed traditional leverage ratios and let these institutions become TBTF.
Blame it on the Fed for keeping interest rates too low for too long and deregulating the CDS industry.
Blame it on the rating agencies for slapping AAA ratings on shit, literally shit.

Plenty of blame to go around.

But putting any more than a teeny bit of blame on CRA is like blaming the gun makers every time someone is killed with a gun.

9/29/2009 5:18:03 PM

Quote :

"Blame it on Fannie may for not caring what loans they were buying from underwriters who didn't perform this due diligence."

This is the problem. Anytime someone says this, someone else screams "DON'T YOU DARE BLAME CRA!!!!" As if the two are inextricable.

The fact is, Fannie and Freddie were implicitly backed by the government all along, while being A) Pressured politically to make loans more available, and B) Continue making more profits. This meant that they were inherently going to buy up more loans, and riskier loans, than otherwise would have occurred.

This does not excuse the blame of any other actor, nor does it assign it to a relatively academic policy point (CRA). But the CRA preemptive rebuttal seems to ignore the fact that A) Fannie and Freddie were a serious part of the problem, B) This problem with these two was due in large part due to an implicit government guarantee against default, and C) The two entities were under political pressure to expand lending.

9/29/2009 5:33:50 PM

Quote :

"Plenty of blame to go around."

I know. But those private actors do not answer to me, they answer to their own conscience and God. What the government did, however, is MY problem and should be dealt with.

9/29/2009 7:06:19 PM

So are those who support Michael Moore in agreement with his thesis that Capitalism is, in fact, evil?

http://abcnews.go.com/Nightline/michael-moore-capitalism-love-story/story?id=8638789
And speaking of the over-use of Hitler, Moore makes use of it himself.

9/29/2009 8:05:08 PM

Perhaps this video best explains where the blame truly lies:

http://www.youtube.com/watch?v=UYc875zkDxg

9/29/2009 8:10:17 PM

Quote :

"This is the problem. Anytime someone says this, someone else screams "DON'T YOU DARE BLAME CRA!!!!" As if the two are inextricable."

You're going to have to show a real direct correlation. You could start here

http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Effectiveness

but the only thing you'll find is information that thoroughly discredits your position.

Quote :

"The fact is, Fannie and Freddie were implicitly backed by the government all along"

Mutually exclusive from the CRA. You can talk about government intervention in the implicit guarantee causing reckless behavior and you aren't going to get any arguments, but you can't use CRA as a crutch in this regard.

Quote :

"Continue making more profits."

Maybe you have an answer, but were they pressured by shareholders or the government in this department?

Quote :

"But the CRA preemptive rebuttal seems to ignore the fact that A) Fannie and Freddie were a serious part of the problem, B) This problem with these two was due in large part due to an implicit government guarantee against default"

Not at all. The CRA argument starts from conservative and completely uninformed blowhards like aaronburro who want to trumpet the left pushing for low income and minority ownership as some sort of well spring where this whole mess got started.

Quote :

"The two entities were under political pressure to expand lending."

So? All the data shows that this expanded lending resulted in benefits for the previously under-served community and default rates the same as prime products.


The reality is, in the face of ultra low interest rates for too long, Wall Street would have figured out the subprime thing (which is just one in a long line of financial 'innovation' like CDOs, CDSs, dark pools, HFT, and basically anything to skim money from the masses) without any sort of CRA. I hate to deal in analogies, but this is simply a case of blaming the gunmaker for the person that pulled the trigger.


Can you find a good paper damning the CRA? Even your own Cato institute seems to disagree.

9/29/2009 11:42:38 PM

Quote :

"You're going to have to show a real direct correlation. You could start here http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Effectiveness but the only thing you'll find is information that thoroughly discredits your position."

Thank you for proving my point; I wasn't even talking about the CRA, I was talking about Freddie/Fannie, and you immediately leap to the defense of CRA, as if this is what I was blaming. This is precisely the problem I am pointing out.

Quote :

"Mutually exclusive from the CRA. You can talk about government intervention in the implicit guarantee causing reckless behavior and you aren't going to get any arguments, but you can't use CRA as a crutch in this regard."

Wasn't talking about the CRA. This is my point.

Quote :

"Not at all. The CRA argument starts from conservative and completely uninformed blowhards like aaronburro who want to trumpet the left pushing for low income and minority ownership as some sort of well spring where this whole mess got started."

Actually, I think you've demonstrated my point here for me. The CRA pre-emptive rebuttal tends to rear up as it did just now: when someone mentions Freddie/Fannie for buying up every mortgage in sight under a pressure to expand lending, this inherently exerted downward pressure on lending standards. It was easier to make bad loans, because they could be sold off easily - the two entities created an eager secondary market where one might not exist (at least to its degree). Meanwhile, the extra risk was absorbed by a Freddie/Fannie's implicit guarantee.

Quote :

"So? All the data shows that this expanded lending resulted in benefits for the previously under-served community and default rates the same as prime products."

Not-talking-about-CRA-not-talking-about-CRA-not-talking-about-CRA.

Fannie and Freddie made very little direct loans themselves; they bought up loans from banks. Ergo, when they were under political pressure to expand lending, this meant buying more loans. This is different than pressure on banks via CRA, which is not what I am implicating. Do you see the difference?

Quote :

"The reality is, in the face of ultra low interest rates for too long, Wall Street would have figured out the subprime thing (which is just one in a long line of financial 'innovation' like CDOs, CDSs, dark pools, HFT, and basically anything to skim money from the masses) without any sort of CRA. I hate to deal in analogies, but this is simply a case of blaming the gunmaker for the person that pulled the trigger."

I actually don't disagree that artificially low interest rates encouraged a housing bubble. Just look at popular culture, if you need evidence of that: "flip this house." Or that gawd-awful "Rich Dad, Poor Dad" whose chief premise was, "Speculate on real estate!" (Perhaps I am being unfair to it, but this is a primary message coming away from it).

Couple that with regulatory arbitrage - that is, evading capital requirements and so forth by finding new, exotic investment instruments, and then furthermore the extra "pull" on lending (i.e., the ability to make more loans) via Fannie/Freddie, and you have what amounts to a vicious circle. Low interest rates feed demand for housing, along with a popular culture that believes housing is an iron-clad investment that will never decrease in value, banks and investors seeking to maximize returns by getting around capital requirements who figure out the idea of repackaging loans, and then Fannie and Freddie who in turn drive the demand for loans way more than they otherwise would by a distorted risk profile due to their implicit guarantees, which in turn drives more lending, more home buying, raising prices, etc.

Quote :

"Can you find a good paper damning the CRA? Even your own Cato institute seems to disagree."

For the last time: noooooooot talking about CRA. Talking about Freddie and Fannie, and the fact that they get conflated with CRA. I thought I made this clear in the first post.

[Edited on September 30, 2009 at 10:32 AM. Reason : ,]

9/30/2009 10:27:32 AM

You'll have to figure my confusion if you quote me talking about FNM/FRE without mentioning CRA and lead off your commentary with

"This is the problem"

then you go on to say

"But the CRA preemptive rebuttal seems to ignore the fact that"

even though I said no such things. It seems you agreed with me, but couldn't bring yourself to admit it.

Quote :

"The CRA pre-emptive rebuttal tends to rear up as it did just now: when someone mentions Freddie/Fannie for buying up every mortgage in sight under a pressure to expand lending, this inherently exerted downward pressure on lending standards. It was easier to make bad loans, because they could be sold off easily - the two entities created an eager secondary market where one might not exist (at least to its degree). Meanwhile, the extra risk was absorbed by a Freddie/Fannie's implicit guarantee."

Again, way to be obtuse. You say that CRA is a pre-emptive rebuttal, but you really don't make any commentary on if you agree with it or not. You seem to imply that the CRA is the genesis for FNM/FRE buying up loans of shitty standards, but this is contrary to what you are saying before.

Quote :

"Ergo, when they were under political pressure to expand lending, this meant buying more loans."

That question is still in the air. Was there a threat of the removal of the implicit guarantee? Was there a law mandating the GSEs to purchase loans? Or, was it shareholders wanting more profits. The popular convention (at least on the right) is it was political pressure to expand the lending. But was it really? Or was it Wall Street doing what it does?

Quote :

"Just look at popular culture, if you need evidence of that: "flip this house." Or that gawd-awful "Rich Dad, Poor Dad" whose chief premise was, "Speculate on real estate!" (Perhaps I am being unfair to it, but this is a primary message coming away from it)."

Chicken and the egg. The home shows popped up AFTER housing was a bubble. They were just capitalizing on the sudden interest from all corners about housing and real estate.

Quote :

"For the last time: noooooooot talking about CRA. Talking about Freddie and Fannie, and the fact that they get conflated with CRA. I thought I made this clear in the first post."

I'm just used to always being on the other side of the fence from you, and I assumed as much this time.

9/30/2009 10:54:37 AM

Quote :

"You'll have to figure my confusion if you quote me talking about FNM/FRE without mentioning CRA and lead off your commentary with "This is the problem" then you go on to say "But the CRA preemptive rebuttal seems to ignore the fact that" even though I said no such things. It seems you agreed with me, but couldn't bring yourself to admit it."

I was pointing out a common phenomenon more general than yourself; this was my point. I was agreeing with the caveat that whenever this point is brought up, someone shows up to preemptively defend CRA - in this case, yourself. You'll notice that, outside of pointing out this phenomenon, I myself never said a word about CRA, aside from the fact that it was essentially an academic matter. That is, too insignificant to matter, regardless, compared to the whole of the problem.

Quote :

"Again, way to be obtuse. You say that CRA is a pre-emptive rebuttal, but you really don't make any commentary on if you agree with it or not. You seem to imply that the CRA is the genesis for FNM/FRE buying up loans of shitty standards, but this is contrary to what you are saying before."

No, not at all. In fact, I go out of my way to imply the contrary.

Quote :

"As if the two are inextricable."

Quote :

"This does not excuse the blame of any other actor, nor does it assign it to a relatively academic policy point (CRA)."

My point is that people preemptively bring up an objection that somehow one is blaming CRA whenever anyone points out the culpability of Fannie/Freddie, as if there is now a transitive property of government, or in this case, government sponsored enterprises. Simply because CRA is a moot point (as has been discussed endlessly) does not mean that it is the same issue as Fannie and Freddie. That is my point.

Quote :

"That question is still in the air. Was there a threat of the removal of the implicit guarantee? Was there a law mandating the GSEs to purchase loans? Or, was it shareholders wanting more profits. The popular convention (at least on the right) is it was political pressure to expand the lending. But was it really? Or was it Wall Street doing what it does?"

The two explanations are hardly incompatible - in fact, I would argue there's an element of both. It's clear investors wanted a steady stream of profits from new mortgage purchases - there's really no argument there. However, there is more than adequate evidence that several administrations leaned on Freddie and Fannie to expand the availability of home credit by purchasing more mortgages - going from Clinton to Bush. Home ownership was a pretty big political issue, going well beyond CRA (which again, is not what I am targeting).

Quote :

"Chicken and the egg. The home shows popped up AFTER housing was a bubble. They were just capitalizing on the sudden interest from all corners about housing and real estate."

I point to them as examples of what perpetuated and exacerbated the bubble. Even before these, there was an implicit understanding that somehow real estate was a rock-solid investment; your home will never decrease in value. Basically, a link in the vicious cycle.

Quote :

"I'm just used to always being on the other side of the fence from you, and I assumed as much this time."

I'll just say this, Fail Boat - despite what you may think, I actually tend to agree with you on more than you'd probably believe. It is simply that when I disagree with you on a part of your analysis that you tend to become incredibly hostile that you therefore believe I must always be opposed to you.

9/30/2009 11:17:53 AM

10/2/2009 9:32:19 AM

man that design style has been run into the ground to the point it doesn't even mean anything specific anymore

10/2/2009 10:00:48 AM

it is actually a still from the filming of the new Red Dawn movie . . . just thought it was appropriately ironic, I guess? I think it just seemed to fit the absurdity that is Michael Moore.

10/2/2009 10:15:22 AM

10/2/2009 10:24:30 AM

Moore... Champion of the Working Man??

Quote :

"Michael Moore, champion of the working class, used non-union stagehands to film "Capitalism: A Love Story." The porcine provocateur is promoting his anti-Wall Street jeremiad by giving free tickets to unions, but the American Federation of Teachers has turned them down because Moore didn't hire any members of the International Alliance of Theatrical Stage Employees. "Michael Moore and one of our sister unions, IATSE, are in discussions about concerns the union has," the AFT told ABC News. "The AFT has decided against accepting tickets until those issues are resolved." Moore's agent, Ari Emanuel, seems to blame the IATSE for treating documentarians as "second-class filmmakers." "This is a Writers Guild, Screen Actors Guild and Directors Guild film, as all Michael's films are," Emanuel said. "He is a proud, dues-paying member of all three of these unions." "

http://www.nypost.com/p/pagesix/union_teaches_moore_lesson_sCK9AXSEsqhAtwpyoUkv5K

10/2/2009 10:52:46 AM

Quote :

" Michael Moore tells it like it is takes things out of context and uses fiery rhetoric based on questionable facts"

Fixed.

P.S. Republicans do it too. I got it. Drive on, Hero.

10/5/2009 12:48:23 PM

Here's my review, for those who care:

http://www.somethingawful.com/d/current-movie-reviews/capitalism.php

10/5/2009 1:11:25 PM

Capitalism - The Real Story
http://mjperry.blogspot.com/2009/10/capitalism-real-story.html

10/5/2009 2:39:27 PM