Your quote says nothing about the time line. In fact, you should read the last quote on the page you cited. No doubt mortgage lenders found the market lucrative and tried to capitalize on it. That does nothing to get to the root of the problem and just describes the symptom.
It does not change what I said, you are still attempting to blame Fannie and HUD for this, it was not that simple nor the original/main reason.
And this all happened between 2002 and 2006? Who the heck are you trying to fool?
Cite please. I know the CRA evolved but nowhere do I remember it evolving so that it required or effectively required making mortgages that could not be bought by Fannie Mae and Freddie mac. Your argument seems to be that banks were naturally very very risk averse and then all of a sudden they were forced to contemplate riskier mortgages and that in effect compelled them to continue to make even riskier mortgage but this tie with zero down, reverse amortization and no documentation. PFFT!!!
The ONLY way in which the CRA might have contributed was that the CRA helped create a database of how non-conforming mortgages performed and then Wall Street took that historical data derived from mortgages that were conforming in every way but the credit score of the borrower and superimposed it on borrowers who were putting no money down, with no documentation and no income verification, reverse amortization and sketchy appraisal practices. Its a REAL FUCKING STRETCH but it seems to be fact in some people’s books.
I think you fail to understand the difference between kind of loans that were made under the CRA and the kinds of loans that drove the bubble. The bubble did not occur because we had too many overpriced houses in poor black neighborhoods. :smack:
Cite plz.
What percentage of FNMA nd FHLMC’s mortgage portfolio was subprime? What was it at other lenders? What percentage of the entire mortgage market did these entities control, what percentage of the subprime market did they control?
Sure it was my government but it was a Republican controlled government.
Please tell me how many Fannie Mae loans were made with little or nothing down.
Please tell me what the lending standards were at Fannie Mae and Freddie Mac.
It wasn’t Fannie and Freddie with the loose lending standards, it was private lenders like Countrywide and other private lenders who suddenly had access to the securitization market and could therefore circumvent the natural speedbumps that FNMA and FHLMC conforming standards imposed on the industry.
All you are doing is repeating Dick Armey’s talking points, try to get some facts independently rather than rely on a single source for all your “facts”
Yes because the alternative is to blame the folks that gaveled down the bureaucrats that raised red flags. I’ll give you one guess which adminstration gaveled down those freeloading government employees that said that something was wrong.
Here here, but Greed is good:)
Seriously though, they were playing hot potato by packaging up the loans into CDS’s and rating them triple AAA and passing them off to the next sucker. Then when the whole shebang came down, they act like the unexpected happened, being the financial geniuses they are and held their hand out to Uncle Sam saying, you made us do it
The government can not force bankers to do anything. They are trying to get them to start lending to small business now and they refuse to.
John Carney has a FAQ here:
The short answer to OP is: Inadequate Government Regulation.
It’s futile to look for which specific regulation was weak or missing. The whole deregulation philosophy is wrong.
While the Democrat Party is far from faultless, only a moron could miss which is the Party of Deregulation. Remember that one of Bush’s contributions to the philosophy of governance was to lay-off inspectors and regulators to save money!! :smack:
Hope this helps. 
No actually, that didn’t help at all. Unless you can point to a regulation that was there in 2001, that the Bush administration removed, you post is entirely meaningless.
We can barely get people to agree on factors that caused the melt down, and even after two pages people in other threads still drop the Freddy and Fanny turd, along with the usual sub-prime mortgage cliche.
So it’s futile to blame the Party of Deregulation if you neither point to a regulation they removed, or to a regulation they should have implemented.
As far as bullshit partisan politics go: Democrats really need to smarten the hell up because this entire clusterfuck is going to happen again in about 4 years, and it might be your guy holding the potato.
I’m sorry but to me that is complete horseshit, and amounts to little more than an attempt to blame poor people. If only the government didn’t encourage the banks to lend to poor people.
1 in 7 mortgages over $1million are in delinquency. Is that part of the CRA?
Subprime mortgages have been around a long, long time. And they have ALWAYS made up the majority of foreclosures. The recent crisis had PRIME mortgages suddenly representing 50% of foreclosures.
None of what that guy said had any baring on reality.
Even if you assume what he said was 100% true, why would housing prices in CRA areas cause prices to fall in, well, you know, rich white areas? Have you considered that part of it?
Nothing changes as far as the CRA aspect was concerned. What changed was that middle class white Americans were buying houses on the expectation that they would appreciate for ever. And then they bought second houses hopping to flip them.
It really benefits no one to sit around yelling “blame Bush” or “blame Clinton” or “blame Obama.” At least have the decency to point to something they did or could have done.
You’re wrong, unless you reject the presumption that rational governance is a possibility.
For one thing your comment presupposes that 2001 regulations were adequate. With hindsight this is clearly false. Admittedly, imagining that GOP might have imposed needed regulations is an absurd assumption.
Just Google for “Bush’s SEC Let Madoff Run Free” or some such if you didn’t know how irrational Bushian regulation policies were.
(Pointing blame at 1990’s Democrats is beside the point. Clinton was being driven by GOP and, anyway, on financial and regulatory issues Demos already stand about where GOP was in saner days.)
I had a longer post that I lost. I’ll be brief this time.
That FAQ makes no case against the CRA.
The CRA loans were not a cause of the meltdown. They were good, dependable, profitable loans. But he tries to blur the distinction between the quality and crap.
No, it bloody well isn’t.
The CRA loans were mostly good. Many sub-prime loans went bad to terrible results. The existence of good loans does not justify bad loans. The fact that some low-income people can be trusted with loans, given the proper precautions that the CRA comes with, does not justify giving out money to anyone who shows up, regardless of whether they can pay it back. This is not a hard concept. The existence of good assets does not mean that creating bad assets is justified. I mean, Christ, no one would claim that the safety of the Golden Gate Bridge is a reason to trust a rusty bridge out in the boonies that hasn’t been maintenanced in years. Different bridges must be evaluated differently.
This is so clear a point that it shouldn’t even have to be argued.
Again, everything you wrote comes across as trying to score political points, especially bringing up Madoff.
With that said, I wholeheartedly welcome actual high-sight evaluation, such as a specific regulation that was repealed, or a specific regulation that could have been applied.
I personally look back and see a lot of room for government intervention to slow things down, but I’m also a Canadian which makes me used to that sort of government intervention. House prices were rising way too fast–a type of inflation that should never have been allowed. At any point during the run up, tax policies could have been adjusted to discourage speculation in the housing industry.
There is a lot of talk now about “fear Obama will suddenly raise taxes.” That’s precisely the sort of uncertainty Bush needed to put into the housing market–BEFORE it popped. People should never have felt so certain that their house would appreciate so fast.
I have a feeling we’re in close agreement, with you objecting to my tone. I’m not trying to “score political points” although it’s true I have bitterness and anger against short-sighted policies (which were pervasive, not just GOP).
That stricter regulations were appropriate should be obvious, if only in hindsight, but underlying problems are still not being addressed. I could try to offer a list of specific regulations that should have been imposed but that’s beside the point: it’s not my area of expertise, and anyway I might be branded a leftist advocate of planned economy! I will say:
(1) Some regulations, e.g. poss. Sarbanes–Oxley, were more in the nature of counter-productive bandaids than solutions.
(2) Regulations were already available without legislation had regulatory agencies been dedicated and conscientious rather than emasculated stooges.
On the topic of slowing house price rise, I am not an economist but have long wondered if the following is true:
Federal Reserve policies should consider (and to some extent oppose) rapid inflation of asset prices, as well as consumer and producer goods. This doesn’t necessitate interest rises: tools like margin requirement can mitigate stock enthusiasm, and there were many ways to reduce housing price inflation had there been the will to do so.
Instead, there was a mass hypnosis that housing price inflation was a perpetual money-tree. This wide-spread confusion constitutes a major answer to OP, but it may not be clear how to assign the blame for that.
I’m buying a Fanny Mae owned condo through the Homepath program right now. Sadly, I’ve been homeless for the past month because of it. Fanny Mae has “Homepath Renovation” on one of their documents and refused to change it. Their other hand, Homepath refused to finance unless they changed it. Finally after almost going elsewhere for financing, Fanny Mae agreed at the 11th hour to fix their paperwork. Damn thing is a mess.
Amazingly, everyone is suffering financially but me. Thanks to hotel points from travelling for work and some friends who let me crash, I saved a bundle. Meanwhile Fanny Mae has an empty condo still on the books and no one else has been paid. The incompetence stuns me.
The cause of the mortgage meltdown was the large number of mortgages on homes where the principal of the mortgage exceeded the value of the house. That’s about all there is to it. The factors involved in that were simply the willingness of people to purchase homes for more money than they were worth, and for lenders to provide them the money to do that with.
It may seem like oversimplification, but it was nothing but bad decisions. Home buyers did not question the appraised values of houses, which were based on prevailing market conditions, rather than the actual value of properties. Had people used reason instead of greed when making purchase decisions, they would have realized that there is no advantage in purchasing anything at the highest possible price. But love of money causes people to act as foolishly as love for a mate does. Blinded by such love, people were ready to believe that there would be an endless stream of people continuing to repeat the same mistake. The lenders were motivated in the same way.
The true wonder is the number of people continuing to pay the mortagages on ‘underwater’ properties. It is the lenders who assumed the risk, and should suffer the losses. But borrowers worried about a credit rating, established by incompetent lenders, continue to throw their money out the window.
It is no wonder that the absurd system of government approved appraisers valuing houses based on other over-valued houses, and laws designed to free lenders from incurring losses due to a lack of collateral, are rejecting their traditional representatives in the voting booth. It is a wonder though, the people continue to find appeal in the politicians who demonstrate the highest degree of dishonesty, and expect the economy to improve as a result.
Partly. But that was allowed by the mass-hypnotic-like belief that house price inflation was some perpetual-motion machine that would continue indefinitely. And this was caused by a climate of greed and deregulation. It was astounding so many were deluded. And those who did know better often just exploited others’ ignorance for their own short-term gains.
All especially astounding since a stock-market crash just a few years before should have reminded folks that such perpetual money-trees are delusions.
OP and others seem to seek some specific regulatory mistake. Perhaps I’m alone in seeing the failure as more systemic. I won’t offer specific remedies; first step would just be to agree on the problems. If after all this, we still can’t look at some of Wall Street’s “Greed is Good” excesses and agree that something is wrong, then I give up.
The details of what allowed it to happen are unimportant. Without the over valued houses, there would have been no meltdown. Once the over valuation happened, the meltdown was inevitable.
If you are looking for a causative factor for the over valuation, it was the lack of any regulatory structure to prevent it. None of the interest rate, credit, bank, debt, and fuzzy mortgage factors would have existed if not for the over valuation to start with.
I don’t want to waste each other’s time quibbling about semantics, but your statement “does not compute”. What is “it” in the first sentence?
As far as I can tell we seem to be in complete agreement that overvaluation was the problem. But you say the cause of that (“details of what allowed it to happen”) are unimportant, and mention seeking “a causative factor” incidentally as though diagnosing and preventing a major financial crisis would be of only mild academic interest. :dubious: :smack:
‘It’ was the mortgage meltdown. But since we agree, I sense that you are wise, intelligent, and well cultured.
The part about other factors was more of a rant. I had in my mind an image of the future where lenders had found another set of gimmicks to snare the foolish and greedy.