More on the housing collapse -- the government **DID** cause it

[DBT]

If low income families could not afford housing it would seem that either income/pay rate for a significant sector of society was too low or the price of housing, even a modest property, was still too high to be affordable for this sector.

 

[Canard DuJour]

You're still missing the sequence of events:

1) The Feds mandate low-income loans.

(..etc)

At no point were low-income loans mandated. Not by the CRA or the legislation the OP author refers to, or in other countries which saw the same subprime lending.

So what do you call the situation I just described? Monty Python, perhaps?

No one cares what you describe assert. I was refering to the linked article describing legislation that applied exclusively to GSEs which do not originate or provide mortgages to borrowers at all. The legislation "mandated" no actual lending whatsoever, subprime or otherwise.

Nor does the author actually make that claim if you read carefully. Because it'd be untenable. Rather, he claims that Barney Frank was "the principal advocate in Congress for using the government's authority to force lower underwriting standards in the business of housing finance", and that the 1992 legislation was the closest he got.

In this, the author neglects to mention that any mortgages ending up on GSE books had to be more conservatively underwritten than - and actually performed better than - many remaining in private sector. The biggest growth of mortgage debt during the boom came from borrowers (increasingly speculators) with credit scores in the middle and top of the credit score distribution, who subsequently accounted for a disproportionate share of defaults. The proportion of low credit score home buyers remained fairly constant during the boom. And while they usually default at relatively higher rates, they didn’t when the bubble burst. The lowest quartile in the credit score distribution accounted for 70% of foreclosures during the boom years, falling to just 35% during the crisis.

The only coherent claim the author could make is that opportunistic private lenders gamed the system. But that'd be right outside his ideological agenda, and anything else has already been debunked six ways to Sunday.

 

[Loren Pechtel]

If low income families could not afford housing it would seem that either income/pay rate for a significant sector of society was too low or the price of housing, even a modest property, was still too high to be affordable for this sector.

True. Unfortunately, nobody has found a good solution to affordable housing.

 

[Loren Pechtel]

So what do you call the situation I just described? Monty Python, perhaps?

No one cares what you describe assert. I was refering to the linked article describing legislation that applied exclusively to GSEs which do not originate or provide mortgages to borrowers at all. The legislation "mandated" no actual lending whatsoever, subprime or otherwise.

No. What it said is write crap or go out of business. Of course the banks chose to write crap.

In this, the author neglects to mention that any mortgages ending up on GSE books had to be more conservatively underwritten than - and actually performed better than - many remaining in private sector. The biggest growth of mortgage debt during the boom came from borrowers (increasingly speculators) with credit scores in the middle and top of the credit score distribution, who subsequently accounted for a disproportionate share of defaults. The proportion of low credit score home buyers remained fairly constant during the boom. And while they usually default at relatively higher rates, they didn’t when the bubble burst. The lowest quartile in the credit score distribution accounted for 70% of foreclosures during the boom years, falling to just 35% during the crisis.

The only coherent claim the author could make is that opportunistic private lenders gamed the system. But that'd be right outside his ideological agenda, and anything else has already been debunked six ways to Sunday.

You're still ignoring the real problem: Most places followed the lead of the government. If those standards are acceptable mortgages then they are acceptable mortgages. That's what really blew things up. The original mandate to write crap was merely the spark.

 

[DBT]

If low income families could not afford housing it would seem that either income/pay rate for a significant sector of society was too low or the price of housing, even a modest property, was still too high to be affordable for this sector.

True. Unfortunately, nobody has found a good solution to affordable housing.

Why do you think that is the case?

 

[Canard DuJour]

No one cares what you describe assert. I was refering to the linked article describing legislation that applied exclusively to GSEs which do not originate or provide mortgages to borrowers at all. The legislation "mandated" no actual lending whatsoever, subprime or otherwise.

Nor does the author actually make that claim if you read carefully. Because it'd be untenable. Rather, he claims that Barney Frank was "the principal advocate in Congress for using the government's authority to force lower underwriting standards in the business of housing finance", and that the 1992 legislation was the closest he got.

No. What it said is write crap or go out of business. Of course the banks chose to write crap.

And what you said is just an unspported assertion no one cares about.

In this, the author neglects to mention that any mortgages ending up on GSE books had to be more conservatively underwritten than - and actually performed better than - many remaining in private sector. The biggest growth of mortgage debt during the boom came from borrowers (increasingly speculators) with credit scores in the middle and top of the credit score distribution, who subsequently accounted for a disproportionate share of defaults. The proportion of low credit score home buyers remained fairly constant during the boom. And while they usually default at relatively higher rates, they didn’t when the bubble burst. The lowest quartile in the credit score distribution accounted for 70% of foreclosures during the boom years, falling to just 35% during the crisis.

The only coherent claim the author could make is that opportunistic private lenders gamed the system. But that'd be right outside his ideological agenda, and anything else has already been debunked six ways to Sunday.

You're still ignoring the real problem: Most places followed the lead of the government. If those standards are acceptable mortgages then they are acceptable mortgages. That's what really blew things up. The original mandate to write crap was merely the spark.

There was no such mandate. And loans on GSE books were underwritten to higher standards.

 

[Canard DuJour]

If low income families could not afford housing it would seem that either income/pay rate for a significant sector of society was too low or the price of housing, even a modest property, was still too high to be affordable for this sector.

True. Unfortunately, nobody has found a good solution to affordable housing.

Sure they have. After WWII, the British govt put people to work building millions of houses. Voilà : affordable housing until about when Thatcher came along.

 

[DBT]

If low income families could not afford housing it would seem that either income/pay rate for a significant sector of society was too low or the price of housing, even a modest property, was still too high to be affordable for this sector.

True. Unfortunately, nobody has found a good solution to affordable housing.

Sure they have. After WWII, the British govt put people to work building millions of houses. Voilà : affordable housing until about when Thatcher came along.

It can be done and it should be done, but I wonder how property investors in the housing market would take such plan should it even be put on the table?

 

[Canard DuJour]

Sure they have. After WWII, the British govt put people to work building millions of houses. Voilà : affordable housing until about when Thatcher came along.

It can be done and it should be done, but I wonder how property investors in the housing market would take such plan should it even be put on the table?

It's just possible that they might lobby govt, fund conservative parties and "libertarian" think tanks, endow universities on condition they teach neoclassical or Austrian economics, set up universities specifically to teach Austrian economics, fund conservative media which incessantly spread deficit hysteria... that sort of thing.

 

[DBT]

Quite likely.

 

[SimpleDon]

Sure they have. After WWII, the British govt put people to work building millions of houses. Voilà: affordable housing until about when Thatcher came along.

It can be done and it should be done, but I wonder how property investors in the housing market would take such a plan should it even be put on the table?

It's just possible that they might lobby govt, fund conservative parties and "libertarian" think tanks, endow universities on condition they teach neoclassical or Austrian economics, set up universities specifically to teach Austrian economics, fund conservative media which incessantly spread deficit hysteria... that sort of thing.

... they would take over the economics journals to make sure that no papers are published that call neoclassical/Austrian/Libertarian economics into question ...

... they would devise a "neoliberalism for dummies" called "Econ 101" to teach to all undergraduate economics, business, and liberal arts majors that has no relationship to how our economy works and justify this academic malfeasance because these students don't have the math skills to be taught about the real economy ...

Neoliberalism is a thought collective where the researchers can work on anything as long as they don't question the core beliefs of the collective. These core beliefs are; a self-regulating free market, a truly free market for labor, return to a gold standard for money, the elimination of all forms of welfare for individuals, and free trade including the free movement of capital, all are the best for the economy. For example, they can study the causes of income inequality as long as the researchers don't come to the conclusion that the free market for labor and free trade keep middle-class wages down and profits up have anything at all to do with the current ever-increasing income inequality, which of course, they do.

You have your scare quotes in the wrong place. It should be libertarian "think" tanks.

 

[Harry Bosch]

It's just possible that they might lobby govt, fund conservative parties and "libertarian" think tanks, endow universities on condition they teach neoclassical or Austrian economics, set up universities specifically to teach Austrian economics, fund conservative media which incessantly spread deficit hysteria... that sort of thing.

... they would take over the economics journals to make sure that no papers are published that call neoclassical/Austrian/Libertarian economics into question ...

... they would devise a "neoliberalism for dummies" called "Econ 101" to teach to all undergraduate economics, business, and liberal arts majors that has no relationship to how our economy works and justify this academic malfeasance because these students don't have the math skills to be taught about the real economy ...

Neoliberalism is a thought collective where the researchers can work on anything as long as they don't question the core beliefs of the collective. These core beliefs are; a self-regulating free market, a truly free market for labor, return to a gold standard for money, the elimination of all forms of welfare for individuals, and free trade including the free movement of capital, all are the best for the economy. For example, they can study the causes of income inequality as long as the researchers don't come to the conclusion that the free market for labor and free trade keep middle-class wages down and profits up have anything at all to do with the current ever-increasing income inequality, which of course, they do.

You have your scare quotes in the wrong place. It should be libertarian "think" tanks.

Those neo-libs meanies are just plain evil. But it's fun having a group that we blame everything on...

 

[DBT]

Blame where blame is due?

 

[SimpleDon]

It's just possible that they might lobby govt, fund conservative parties and "libertarian" think tanks, endow universities on condition they teach neoclassical or Austrian economics, set up universities specifically to teach Austrian economics, fund conservative media which incessantly spread deficit hysteria... that sort of thing.

... they would take over the economics journals to make sure that no papers are published that call neoclassical/Austrian/Libertarian economics into question ...

... they would devise a "neoliberalism for dummies" called "Econ 101" to teach to all undergraduate economics, business, and liberal arts majors that has no relationship to how our economy works and justify this academic malfeasance because these students don't have the math skills to be taught about the real economy ...

Neoliberalism is a thought collective where the researchers can work on anything as long as they don't question the core beliefs of the collective. These core beliefs are; a self-regulating free market, a truly free market for labor, return to a gold standard for money, the elimination of all forms of welfare for individuals, and free trade including the free movement of capital, all are the best for the economy. For example, they can study the causes of income inequality as long as the researchers don't come to the conclusion that the free market for labor and free trade keep middle-class wages down and profits up have anything at all to do with the current ever-increasing income inequality, which of course, they do.

You have your scare quotes in the wrong place. It should be libertarian "think" tanks.

Those neo-libs meanies are just plain evil. But it's fun having a group that we blame everything on...

I don't blame the neoliberals for everything. It just seems like it because I only comment on threads that I know something about and economics is something that I know about.

The neoliberals are responsible for the slow erosion of academic economics from the study of the economy that actually exists back to the neoclassical economists' study of the economy they wish that we could have, the fantasy of the self-regulating free market.

This blurs the line between the economy that exists and the economy that the neoliberals wish that we could have in the minds of most of the people here on this discussion board. For example, the neoliberals wish that we could have a truly free market for labor where workers are paid what they are worth. But we don't. People aren't generally paid what they are worth, they are paid the minimum amount that keeps them working, which is different.

And yet how many times have people here told us that the lower the wages are the more people will be hired? Which isn't true in the real economy and isn't even true in the theory of the neoliberals' fantasy economy. It is only true if you want to justify paying workers as little as possible. Which is the bottom line for the people who sponsor the neoliberals, who don't give a damn about economic theory.

And you don't want to get me started on the neocons, the poststructuralists/postmodernists, the anti-vaxers, the Washington Consensus, the austerians, the climate change deniers, the anti-nuclear power people, the anti-frackers, the anti-GMOs, the people who vote for candidates who claim that government doesn't work to run the government, etc. There are a lot of people to blame for the mess that we are in and yet I still believe that these things aren't that important, that usually, the truth wins in the long run. Witness the success of the half baby step to UHC, hapless ACA.