Obama's destruction of the economy continues!

[Playball40]

The feds wanted to make sure more people got more house, middle class entitlement and all. The bankers were happy to comply with their government backed guarantees. Who wouldn't?

What government back guarantees? The mortgage companies outrightly sold the high risk mortgages to free up principal to make another high risk mortgage, the rating agencies pretended they were low risk and banks all over the world bought the investments.

don't you know the housing bubble was 100% Fannie and Freddie? :rolleyes

The reality of course is that Fannie and Freddie got in the game very LATE and were actually held hostage by the subprime lenders. It was a no-win situation for them - sadly they took the greater of the two evils.

 

[coloradoatheist]

What government back guarantees? The mortgage companies outrightly sold the high risk mortgages to free up principal to make another high risk mortgage, the rating agencies pretended they were low risk and banks all over the world bought the investments.

don't you know the housing bubble was 100% Fannie and Freddie? :rolleyes

The reality of course is that Fannie and Freddie got in the game very LATE and were actually held hostage by the subprime lenders. It was a no-win situation for them - sadly they took the greater of the two evils.

Government bonuses and goals were based on the percentages of mortgages that were minority owned so they had a big stake in the games. It was HUD who wrote the new underwriting standards. Everybody was happy. Bankers didn't all of a sudden get greedy since they've known to be greedy throughout time. It was a snowball affect with a lot of pieces adding to it.

 

[Nice Squirrel]

don't you know the housing bubble was 100% Fannie and Freddie? :rolleyes

The reality of course is that Fannie and Freddie got in the game very LATE and were actually held hostage by the subprime lenders. It was a no-win situation for them - sadly they took the greater of the two evils.

Government bonuses

Bonuses to who?

 

[untermensche]

don't you know the housing bubble was 100% Fannie and Freddie? :rolleyes

The reality of course is that Fannie and Freddie got in the game very LATE and were actually held hostage by the subprime lenders. It was a no-win situation for them - sadly they took the greater of the two evils.

Government bonuses and goals were based on the percentages of mortgages that were minority owned so they had a big stake in the games. It was HUD who wrote the new underwriting standards. Everybody was happy. Bankers didn't all of a sudden get greedy since they've known to be greedy throughout time. It was a snowball affect with a lot of pieces adding to it.

What was new were the banks suddenly and for no economic reason or governmental mandate not checking mortgage loan information. The so-called liars loans. Very high risk loans.

What was also new was the bundling of these highly risky loans together with less risky investments and selling them as if they were good investments, when in fact most would default.

What was also new were the insurance policies, the credit default swaps. When everything crashed it was as if the entire nation was hit with a hurricane at once. There was not enough money to pay off the insurance policies.

All of these combined to decimate and destroy the economy. Trillions vanished.

That is what Obama walked into.

And of course in our rationality the situation today is worse than it was then. The too big to fails are bigger.

 

[Playball40]

don't you know the housing bubble was 100% Fannie and Freddie? :rolleyes

The reality of course is that Fannie and Freddie got in the game very LATE and were actually held hostage by the subprime lenders. It was a no-win situation for them - sadly they took the greater of the two evils.

Government bonuses and goals were based on the percentages of mortgages that were minority owned so they had a big stake in the games. It was HUD who wrote the new underwriting standards. Everybody was happy. Bankers didn't all of a sudden get greedy since they've known to be greedy throughout time. It was a snowball affect with a lot of pieces adding to it.

You are incorrect. Fannie and Freddie were losing too much of the market to PRIVATE companies. The subprime lenders no longer needed freddie to purchase their bundles to sell to the secondary market. Fannie and Freddie were operating with two opposing mandates (not their fault) as well.

In fact, as abundant data show, Fannie and Freddie’s affordable lending programs had virtually nothing to do with the recent crisis. The crisis was caused by Wall Street’s bad bets on complex securities based on subprime mortgages. These bets were mostly placed during the mid-2000s.

Claims that Johnson’s Fannie Mae caused the 2007-2008 crisis by meeting affordable lending goals that were first established and had primary effect in the 1990s are so far-fetched that they require time travel. Home ownership increased during Johnson’s tenure, as did subprime lending, but the surge of risky private lending and securitization that nearly brought down the financial system did not occur until the 2000s, when Johnson was gone.

Nor did Fannie Mae contribute as much to the subprime bubble after Johnson left as is widely thought. The market for home loans shifted away from the traditional, conservative, fixed-rate mortgages backed by Fannie Mae to riskier, subprime, adjustable-rate mortgages sold by private firms such as Countrywide and New Century. In order to meet affordable lending requirements, Fannie Mae did buy some of the subprime mortgages that private lenders made to low-income people with poor credit scores. But even Fannie Mae and Freddie Mac’s purchases combined were always a minority of the subprime mortgage market, and their subprime stake declined substantially as a proportion of the market after 2004.

The simple fact is although, not blameless for their activities, they did not create the housing crash/bubble with affordable lending standards, nor did they 'create' the subprime market BS. Your timeline is inaccurate.

http://www.nybooks.com/blogs/nyrblog/2011/jul/13/why-fannie-and-freddie-are-not-blame-crisis/

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Government bonuses

Bonuses to who?

I think he is referring to Johnson who headed up fannie in the 1990's

 

[Jimmy Higgins]

I do find it a little odd that those on the right want to blame government (George W Bush was President during the bubble), yet the left wing doesn't really attribute a large portion of the blame on George W Bush for the collapse of the global economy.

don't you know the housing bubble was 100% Fannie and Freddie? :rolleyes

The reality of course is that Fannie and Freddie got in the game very LATE and were actually held hostage by the subprime lenders. It was a no-win situation for them - sadly they took the greater of the two evils.

Government bonuses and goals were based on the percentages of mortgages that were minority owned so they had a big stake in the games. It was HUD who wrote the new underwriting standards. Everybody was happy. Bankers didn't all of a sudden get greedy since they've known to be greedy throughout time. It was a snowball affect with a lot of pieces adding to it.

So if the underwriting rules made it so simple, why did mortgage lenders like Countrywide get into trouble for having applicants lie on their mortgage papers?

 

[coloradoatheist]

This one will be argued about for a hundred years, the same way the Great Depression is still being debated. It was all the factors that lead to it, not one

Here is a testimony from Greenspan in 2005 which talked about how GSE portfolio in the primary mortgage went from 5% in the 90s to 25% in 2003. How can you say that's not a big increase?

http://www.federalreserve.gov/boarddocs/testimony/2005/20050406/default.htm

The government never came out and said, "Housing ownership is bad and we don't want people to buy houses"

 

[Jimmy Higgins]

This one will be argued about for a hundred years, the same way the Great Depression is still being debated. It was all the factors that lead to it, not one

Firstly, you seem to be concentrating on a one cause platform.

Secondly, not really. The causes are quite well known.

Deregulation of derivatives trading planned by Republican Phil Gramm, passed by Congress, signed by Bill Clinton. This would allow for completely unregulated investments (some extremely complicated) and liquidity required to cover them.

A slow economy led to the Fed trying to speed things up by making money a bit easier to get. This helped the housing industry boom, however, it still remained the only thing booming (along with car sales thanks to low rates). The housing market kept booming and was obviously going into a bubble. It was talked about by many here and in the media. But it was the only driver during the W Admin. So they didn't want to stop it. So there was no pressure from them to increase rates to stop that bubble.

Ridiculous loans (ARM) were given to people in order to pretend they could afford a mortgage, what were meant to be short-term were given as long-term. It only worked while housing values continued increasing. Once they stopped increasing, it would become impossible to refinance.

Mortgage banks were lying on the mortgage forms to get people qualified for loans they couldn't afford. So that whole, "new underwriting" stuff causing the crash is garbage, because Countrywide still needed people to lie about their income, jobs, etc...

Severely complicated investments were created with mortgages and Ratings agencies treated them like safe investments. Large corporate banks who thought they were buying very safe yielding long-term investments, were actually buying investments that were junk bonds.

The Producers effect. Thanks to deregulation of the derivatives market, it actually became possible to create investments that would make money for the creator if it failed!

Credit default swaps were something that was created for a "just in case" scenario and seemed like incredibly safe bets on large corporations like Lehman Brothers who'd never go down.

So deregulation and criminally poor monitoring by the ratings agencies are the main causes of the collapse.

The government never came out and said, "Housing ownership is bad and we don't want people to buy houses"

In fact, it was part of W's campaign in '04 regarding the "Ownership Society".

 

[coloradoatheist]

Firstly, you seem to be concentrating on a one cause platform.

Secondly, not really. The causes are quite well known.

Deregulation of derivatives trading planned by Republican Phil Gramm, passed by Congress, signed by Bill Clinton. This would allow for completely unregulated investments (some extremely complicated) and liquidity required to cover them.

A slow economy led to the Fed trying to speed things up by making money a bit easier to get. This helped the housing industry boom, however, it still remained the only thing booming (along with car sales thanks to low rates). The housing market kept booming and was obviously going into a bubble. It was talked about by many here and in the media. But it was the only driver during the W Admin. So they didn't want to stop it. So there was no pressure from them to increase rates to stop that bubble.

Ridiculous loans (ARM) were given to people in order to pretend they could afford a mortgage, what were meant to be short-term were given as long-term. It only worked while housing values continued increasing. Once they stopped increasing, it would become impossible to refinance.

Mortgage banks were lying on the mortgage forms to get people qualified for loans they couldn't afford. So that whole, "new underwriting" stuff causing the crash is garbage, because Countrywide still needed people to lie about their income, jobs, etc...

Severely complicated investments were created with mortgages and Ratings agencies treated them like safe investments. Large corporate banks who thought they were buying very safe yielding long-term investments, were actually buying investments that were junk bonds.

The Producers effect. Thanks to deregulation of the derivatives market, it actually became possible to create investments that would make money for the creator if it failed!

Credit default swaps were something that was created for a "just in case" scenario and seemed like incredibly safe bets on large corporations like Lehman Brothers who'd never go down.

So deregulation and criminally poor monitoring by the ratings agencies are the main causes of the collapse.

The government never came out and said, "Housing ownership is bad and we don't want people to buy houses"

In fact, it was part of W's campaign in '04 regarding the "Ownership Society".

Except it was bipartisan. During the committee meetings it was the Democratic leadership who was saying we can't stop this because minority ownership will go down and we don't want that. It was a joint effort, everybody was happy until the boom and then finger pointing began.

The CRA was put into place originally because banks were too cautious giving out loans.

 

[Jimmy Higgins]

Firstly, you seem to be concentrating on a one cause platform.

Secondly, not really. The causes are quite well known.

Deregulation of derivatives trading planned by Republican Phil Gramm, passed by Congress, signed by Bill Clinton. This would allow for completely unregulated investments (some extremely complicated) and liquidity required to cover them.

A slow economy led to the Fed trying to speed things up by making money a bit easier to get. This helped the housing industry boom, however, it still remained the only thing booming (along with car sales thanks to low rates). The housing market kept booming and was obviously going into a bubble. It was talked about by many here and in the media. But it was the only driver during the W Admin. So they didn't want to stop it. So there was no pressure from them to increase rates to stop that bubble.

Ridiculous loans (ARM) were given to people in order to pretend they could afford a mortgage, what were meant to be short-term were given as long-term. It only worked while housing values continued increasing. Once they stopped increasing, it would become impossible to refinance.

Mortgage banks were lying on the mortgage forms to get people qualified for loans they couldn't afford. So that whole, "new underwriting" stuff causing the crash is garbage, because Countrywide still needed people to lie about their income, jobs, etc...

Severely complicated investments were created with mortgages and Ratings agencies treated them like safe investments. Large corporate banks who thought they were buying very safe yielding long-term investments, were actually buying investments that were junk bonds.

The Producers effect. Thanks to deregulation of the derivatives market, it actually became possible to create investments that would make money for the creator if it failed!

Credit default swaps were something that was created for a "just in case" scenario and seemed like incredibly safe bets on large corporations like Lehman Brothers who'd never go down.

So deregulation and criminally poor monitoring by the ratings agencies are the main causes of the collapse.

In fact, it was part of W's campaign in '04 regarding the "Ownership Society".

Except it was bipartisan.

Nothing in my post indicated there was a single party to blame.

If one must blame individuals, it'd be Gramm and Greenspan.

During the committee meetings it was the Democratic leadership who was saying we can't stop this because minority ownership will go down and we don't want that. It was a joint effort, everybody was happy until the boom and then finger pointing began.

Actually, you are the one doing the finger pointing. In fact, as I noted in a previous post, W rarely gets blamed for the economic crash by liberals. Though liberals find it astounding that Obama is blamed for a terrible economy today.

The CRA was put into place originally because banks were too cautious giving out loans.

Mortgage lenders were committing fraud. Ratings agencies were committing gross acts of negligence. Unless you can demonstrate the Government encouraged lenders to commit fraud and rating agencies to look the other way, you really need to be putting the Government atop the pyramid for the crash.

 

[Playball40]

Except it was bipartisan.

Nothing in my post indicated there was a single party to blame.

If one must blame individuals, it'd be Gramm and Greenspan.

During the committee meetings it was the Democratic leadership who was saying we can't stop this because minority ownership will go down and we don't want that. It was a joint effort, everybody was happy until the boom and then finger pointing began.

Actually, you are the one doing the finger pointing. In fact, as I noted in a previous post, W rarely gets blamed for the economic crash by liberals. Though liberals find it astounding that Obama is blamed for a terrible economy today.

The CRA was put into place originally because banks were too cautious giving out loans.

Mortgage lenders were committing fraud. Ratings agencies were committing gross acts of negligence. Unless you can demonstrate the Government encouraged lenders to commit fraud and rating agencies to look the other way, you really need to be putting the Government atop the pyramid for the crash.

Agree!

 

[Loren Pechtel]

Subprime loans are strongly suggestive of buying too much house.

You're basically blaming the bankers for writing the loans the borrowers should have known they couldn't afford. The usual leftist world: Comprised of a population of morons being exploited by the few intelligent people around.

Um, excuse me, the banks didn't care who they wrote the loans to because they were selling these mortgages to stupid investors and lying about how safe they were. Also many of these people could afford their loans until they fucking lost their jobs or savings because of the crooked mortgage derivative scam. So no this is not some usual "Lefsa" world, but what really happened.

Your reply has nothing to do with my point.

It sounds like you are another person who thinks people are idiots.

 

[Loren Pechtel]

The feds wanted to make sure more people got more house, middle class entitlement and all. The bankers were happy to comply with their government backed guarantees. Who wouldn't?

Show me where the "feds" ever once told bankers to stop checking information on mortgage applications.

They told the banks to reach out and try to bring in people who have historically been denied mortgages based on racial hatreds and prejudice.

It is only the banks and their scheme to pass bad loans on to others that decided to stop checking loan information.

And this was a massive scheme that involved the banks, the insurers, the appraisers, the ratings agencies.

It demonstrated how an under-regulated capitalist market behaves.

Of course the government didn't come out and say that.

What they did do is put far more emphasis on thou-shalt-loan-to-minorities than thou-shalt-write-prudent-loans.

Banks followed this.

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What government back guarantees? The mortgage companies outrightly sold the high risk mortgages to free up principal to make another high risk mortgage, the rating agencies pretended they were low risk and banks all over the world bought the investments.

don't you know the housing bubble was 100% Fannie and Freddie? :rolleyes

The reality of course is that Fannie and Freddie got in the game very LATE and were actually held hostage by the subprime lenders. It was a no-win situation for them - sadly they took the greater of the two evils.

No, they were part of the cause. They relaxed their standards on the loans they would buy--the government trying to get minorities into their own houses.

 

[Nice Squirrel]

Of course the government didn't come out and say that.

What they did do is put far more emphasis on thou-shalt-loan-to-minorities than thou-shalt-write-prudent-loans.

Banks followed this.

We'll need you to actually cite your source this because this is blatantly illegal and these people need to be prosecuted.

 

[fromderinside]

So because the banks elected to not review loan applications because they wanted to comply with the Bush Administration's want for them to enroll more minority persons that is a justification for not following the law? Fact is banks and other lenders ignored the law in their rush to bring in application bucks. Whatever lenders thought they needed to do they weren't told to do what they did do. Guilty with jail terms and huge fines should be proper response.

The 'justification' isn't one.

 

[Loren Pechtel]

So because the banks elected to not review loan applications because they wanted to comply with the Bush Administration's want for them to enroll more minority persons that is a justification for not following the law? Fact is banks and other lenders ignored the law in their rush to bring in application bucks. Whatever lenders thought they needed to do they weren't told to do what they did do. Guilty with jail terms and huge fines should be proper response.

The 'justification' isn't one.

The only way the banks could have complied with the law is to get out of the loan business entirely.

They chose to comply with the aspect of the rules where the enforcement was: thou-shalt-loan-to-minorities.

I've already pointed out how locally the banks got in trouble for "redlining" when it's obvious what they really were doing is looking at expected future appreciation when writing low-down mortgages. If the intent was to discriminate why is it entirely absent in the 80/20 loans? The direction the winds were blowing was totally obvious, the banks obeyed.

Now, that's not to excuse the scum that jumped on the bandwagon once there was a flood of mortgages being written with poor documentation etc. It was a government bandwagon they were jumping on, though.