Trump

[shocka khan]

This is false, and we've talked about it before. There's just no evidence that the CRA caused the bubble. Check out this article: https://thinkprogress.org/no-lending...s-8ba95ce23015



If "ThinkProgress" isn't the kind of place you are willing to trust for this type of conclusion, check out its cited sources:

https://www.federalreserve.gov/pubs/feds/2011/201136/index.html

http://ccc.unc.edu/contentitems/debunking-the-cra-myth-again/

http://www.frbsf.org/community-devel...meltdown11.pdf

Thanks so much for setting the record straight. At one time I was a regulator with the Texas Department of Insurance, and one of my counterparts had been a commissioned federal bank examiner (his parents used to own a community bank just northwest of Tulsa). I remember vividly us having discussions regarding this. It could have been avoided if President Bush had ordered the OCC to focus on loan underwriting during safety and soundness examinations, we had these discussions as far back as 2003.

Of course if this had happened, the economy would have tanked (but not as bad as it did) and George did not want that, as that was part of the reason his father became so unpopular (he presided over a recession).

And, as always, in the interest of equal time, it must be pointed out that most of these rules were relaxed during the Clinton presidency, he was aided and abetted by Phil Gramm, who, after he retired from the Senate, was rewarded with an executive-level job at UBS.

Hope you have a great day, jdshock!

[shocka khan]

Congressional interference with underwriting in the 90s played a role in the '08 meltdown, but it was one of many contributing factors. Banks and institutional investors absolutely threw caution to the wind and gorged themselves in the blow-off stage when the most damage was done. It's easy to gamble with money when you believe you enjoy limitless reimbursability. The moral hazard aspect among issuers, ratings agencies and bond insurers was also a ticking time bomb.

Dodd Frank predictably aimed the government's bullets at most of the wrong heads in the ensuing "let's fix this" stage.

And that, in itself, speaks volumes about the need for effective and efficient regulation of our banks. To ensure the banks don't go to the casino and play with someone else's (i.e. your) money.

Note I disagree with you about Dodd-Frank, but I do not disagree it couldn't use tweaking. However, like the Affordable Healthcare Act, Trump is determined that it be erased.

Which means that someday all this **** will happen all over again.

[wufan]

Congressional interference with underwriting in the 90s played a role in the '08 meltdown, but it was one of many contributing factors. Banks and institutional investors absolutely threw caution to the wind and gorged themselves in the blow-off stage when the most damage was done. It's easy to gamble with money when you believe you enjoy limitless reimbursability. The moral hazard aspect among issuers, ratings agencies and bond insurers was also a ticking time bomb.

Dodd Frank predictably aimed the government's bullets at most of the wrong heads in the ensuing "let's fix this" stage.

This is correct. It was one of many causes of the final fail, but the stage was set when the gov started issuing mandates for lenders to finanace subprime mortgages.

[wufan]

This is false, and we've talked about it before. There's just no evidence that the CRA caused the bubble. Check out this article: https://thinkprogress.org/no-lending...s-8ba95ce23015



If "ThinkProgress" isn't the kind of place you are willing to trust for this type of conclusion, check out its cited sources:

https://www.federalreserve.gov/pubs/feds/2011/201136/index.html

http://ccc.unc.edu/contentitems/debunking-the-cra-myth-again/

http://www.frbsf.org/community-devel...meltdown11.pdf

I STILL disagree. I lived it. It was at my home everyday. It was predicted and known many years before it occurred within the industry. My father won a multi-million dollar lawsuit in fact in which the government had to pay his company for the losses it incurred due to mandated subprime lending. Now, as I mentioned above, that wasn't the only thing that caused the failure. The hedge funds and shadow banks ignored the fact that the risks were huge. So too did the gov. Everyone was happy so long as the economy was booming.

[jdshock]

I STILL disagree. I lived it. It was at my home everyday. It was predicted and known many years before it occurred within the industry. My father won a multi-million dollar lawsuit in fact in which the government had to pay his company for the losses it incurred due to mandated subprime lending. Now, as I mentioned above, that wasn't the only thing that caused the failure. The hedge funds and shadow banks ignored the fact that the risks were huge. So too did the gov. Everyone was happy so long as the economy was booming.

Your belief has two potential problems, though.

First, you're extrapolating the one experience as if it's the only experience. Bill Self probably thinks EW is the greatest offensive talent we've ever had. The full data suggest otherwise. You can't refute studies that say 6% of subprime mortgages applied for the CRA by saying 100% of my dad's customers were CRA eligible. You have to respond with data.

Second, you are giving too much meaning to winning a lawsuit. If I blow through a stop sign and you hit me going 80, I can still recover for the injuries that are caused by you speeding. The data suggests 6% were CRA eligible. That would definitely cause some injuries. 94% of the damages were caused by something else.

[wufan]

Your belief has two potential problems, though.

First, you're extrapolating the one experience as if it's the only experience. Bill Self probably thinks EW is the greatest offensive talent we've ever had. The full data suggest otherwise. You can't refute studies that say 6% of subprime mortgages applied for the CRA by saying 100% of my dad's customers were CRA eligible. You have to respond with data.

Second, you are giving too much meaning to winning a lawsuit. If I blow through a stop sign and you hit me going 80, I can still recover for the injuries that are caused by you speeding. The data suggests 6% were CRA eligible. That would definitely cause some injuries. 94% of the damages were caused by something else.

While you are correct on both counts, your argument (posted above and from the article) also has issues. The CRA and similar loans, which was over 50% of the Freddie/Fannie were 94% non subprime. They don't show up in the statistics for subprime lending. That doesn't mean that they were credit worthy, it means that they qualified for low interest loans despite not being able to repay them. It also means that underwriters had to relax their standards in order to meet the needs. This relaxation in underwriting went across the board and furthered the issue.

Also, while a single lawsuit does not mean that the problem caused an entire failure, it does show that the government WAS requiring the issuance of high risk loans, at least on one instance.

Finally, I've stated multiple times that there were multiple factors. The housing act did not do this alone, but it does serve to show how regulation with good intentions can have negative consequences.

[ShockingButTrue]

On banking reform; much of the housing bubble was caused by the federal requirement to underwrite loans for people with bad credit or for people that just wanted more house than they could afford. The goal of every American a home owner, was bad legislation. There were many other problems in lending, but it was created with the banking business in cahoots with the Feds. Regulation needs to be done with the same responsibility as business. Dodd-Frank took it too far.

Yep. It started when this guy signed off on the repeal of the Glass-Steagall Act, and replaced it with the Gramm-Leach-Bliley Act, thereby bringing investement and commercial banks together:


It appears predatory lending oversight measures, among many other things, was a political sacrifice, yet again. I can't believe people wanted this guy in the White House again!

Oh, BTW: "Innovative"

[BOBB]

Fired Comey today. I am sure a more compliant director focusing more on leaks and less on Russia and corruotion is in the offing.

[ShockingButTrue]

Fired Comey today. I am sure a more compliant director focusing more on leaks and less on Russia and corruotion is in the offing.

Disgraceful in anyone's book.

[DUShock]

Whatever your political ilk, the optics is bad. Very bad.

[DUShock]

Best case scenario for our nation is just bad optics.

Worse case scenario for our nation is a constitutional crisis.

The investigations will continue but a new one, possibly two, will likely be added.

[Aargh]

There were too many people making too much money off of the runup of housing prices. The ability to lend more than the buyer could afford to pay opened a door. Mortgage lenders working on commissions quickly figured out that a higher amount on the mortgage led to a higher amount on their commission checks. Appraisers figured out that all they had to do was ask whoever hired them what amount was needed. If they provided that number, they would get more business.

I know of an appraiser in KC who was banned from doing appraisals because he was consistently fudging the numbers on comparables. He was still able to sign off as the certified appraiser, he just wasn't allowed to do the actual appraisals. He set up his step-daughter (my niece) to do the appraisals. She didn't have the necessary years in the industry to be the final signer, so she just had her stepdad do it - for a fee. See a problem here?

My niece guaranteed a 24-hour turnaround on appraisals and hired her sister, whose previous job was as a bartender, to do appraisals. She made incredible amounts of money. Unfortunately, she believed her own numbers and qualified for a very expensive house, which bankrupted her when the housing market crashed, the demand for appraisals dried up, and the demand for fudged appraisals disappeared.

A lot of people made incredible sums of money by running up housing prices..

Then the industry took all those mortgages and bundled them into unregulated packages and started selling them to each other, always at a profit, which drove the prices of those packages up way past any reasonable amount they could possibly be worth.

It was kind of like you went to an art gallery and bought a painting for $1,000. Then you and a few of your buddies started selling the thing back and forth to each other, paying for a small part of it, and writing IOU's. Eventually you or one of your buddies ends up with a painting worth $1,000,000 and can't find a buyer. It's time to call the IOUs. The only problem is that you and all your buddies spent all your money running the price of that painting up and don't have the money to pay the debts.

When the housing market crashed, the financial industry owed each other more in short-term debt (due in one year or less) than the amount of money that existed in US currency. The entire financial industry was, essentially, bankrupt.

Any "real" money (not counting new credit) that hit the financial industry immediately went to other members of the industry for debt payment. That effectively pulled huge chunks of currency out of the economy, which led to the recession.

That wasn't enough, so the government had to run the printing presses and just create money with nothing to back it and throw that into the economy. The inflationary effect of that much "new" money had the potential to kick off incredible inflation. Possibly as high as 100% if the amount of currency in circulation had to be doubled. To avoid that problem, the government borrowed a boatload of money. And that was one very large boat. I believe the current term for that is that they kicked the can down the road.

It's a bit disingenuous to blame Obama for the massive rise of the national debt, when it was Fannie Mae, Freddie Mac, Wall Street, and a few big banks that mortgaged their futures on some buddy-buddy trading that created assets that weren't worth half of the value at which they were trading. They were booking paper profits which could never be realized. That boosted their stock values and management cashed in their bonuses for raising their stock prices.

Lots of people made lots and lots of money by artificially raising prices that couldn't be maintained. When the housing market crashed, that money was available to buy stocks at the lowest prices they had been in years and then just watch as the government spent massive amounts of money to save the economy, which created one of the greatest Wall Street recoveries of all time.

[wufan]

Pretty good take! I don't believe anyone was trying to scam anyone else. Most of these people believed that what they were doing was for the greater good. Unfortunately the opposite was true for the majority of those impacted.

[Dan]

Pretty good take! I don't believe anyone was trying to scam anyone else. Most of these people believed that what they were doing was for the greater good. Unfortunately the opposite was true for the majority of those impacted.

. Plenty of people knew they were scamming. Mortgage brokers were intentionally putting customers in bad mortgages, whatever paid the most fees. Plenty of blame to go around.

[Aargh]

I believe the "greater wallet" was taking precedence over the "greater good". Not that there's anything wrong with that. I think anyone who would have been in position to take advantage of that situation would have hit it for every penny they could put in their pockets.

The ability to make loans based on projected future earnings instead of current or demonstrated earnings was probably not a good policy. Mortgage lenders were allowed to be incredibly optimistic with projected future earnings, even though many businesses had pretty much switched to token raises that didn't cover COLA prior to 2007.

Sitting down with a mortgage lender in 2006 was the best news you were ever going to hear. In a few years you were going to be making lots and lots of money and you could live in the house that money would buy today, instead of waiting.