86 replies to this topic

[Merc14]

The Mule, on 09 October 2012 - 01:57 AM, said:

I didnt force you to implicate your idols. You did it all on your own.

Not sure who I am idolizing here.  Lot's of blame to go around but the main contention is that I think the subprime mortgages had a great deal to do with our current  economic problems and Tiggs disagrees.

[joc]

Quote

Tiggs, on 08 October 2012 - 07:25 PM, said:
Oh? Perhaps you'd like to walk us all through the mechanics of how the private asset book of a company caused the collapse of the international banking system?

Tiggs, on 08 October 2012 - 09:19 PM, said:

Looks like he can't. Over to you, Joc.

Okay, but can we call the bull what it is?  GSEs doesn't really mean anything in this discussion.  What does mean something is CRA  The Community Reinvestment Act.  Over the years the CRA encouraged banks to lend money to 'less than credit worthy' individuals for mortgages.  The lending institutions became a bit worried about having so many unsecured loans and began bundling them together and selling them off to other lending institutions.  Over the long haul these bundled assets began to fail and like any snow ball effect ended in disaster.  What more do you want to know?

Edited by joc, 09 October 2012 - 03:02 AM.

[Tiggs]

Merc14, on 09 October 2012 - 01:00 AM, said:

Simple version:  In the 90's it was decreed by congress that mortgages would be made available to people who were not qualified for those mortgages.  The loans would be guaranteed by the federal government through Fannie and Freddie.  Those loans became the seed of the massive housing bubble that grew through the next decade.  Many saw the dangers with this and the GSE's became dangerously overleveraged and little or no oversight was given by the feds.  See the videos above but hey, Uncle Sucker can just print money so who cares.  Derivatives and other strange financial entities came into being and loans that would never be aid back were packaged with government protected debt and traded internationally.  When the bubble finally burst it began the collapse of  the US economy.  There was other factors, of course, but the GSE backed mortgages which became the basis of the overinflated real estate market were a core factor.

So - the Community Reinvestment Act (CRA)?

From the official Government Inquiry:

The Commission concludes the CRA was not a significant factor in subprime lending or the crisis. Many subprime lenders were not subject to the CRA. Research indicates only 6% of high-cost loans—a proxy for subprime loans—had any connection to the law. Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law.

[Merc14]

Tiggs, on 09 October 2012 - 03:46 AM, said:

So - the Community Reinvestment Act (CRA)?

From the official Government Inquiry:

The Commission concludes the CRA was not a significant factor in subprime lending or the crisis. Many subprime lenders were not subject to the CRA. Research indicates only 6% of high-cost loans—a proxy for subprime loans—had any connection to the law. Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law.

You are cherry picking, read my posts and are you seriously contending that the housing bubble had little or nothing to do with the economic crisis?  I could post hundreds if not thousands of links disagreeing with you and a simple google search is all it takes.  If you want to argue that the burst housing bubble meant nothing then I am not going to debate with you any longer.  It would be like arguing with someone that believes the earth is 6200 years old.  When you hear that you say "Good for you!" roll your eyes and move on.

Edited by Merc14, 09 October 2012 - 04:01 AM.

[CommunitarianKevin]

My take on this issue...
I have not studied this topic in debt but I can tell you this...
I just bought a house that was owned by Fannie Mae...
THAT ARE A GARBAGE COMPANY AND SHOULD NOT EXIST.
Our closing was delayed and they blammed it on us, even though it was their issue. For example they listed the house in the wrong city and then blammed us for it. They told our bank one thing (email proof) and then the next day told them that was not true and would never happen. They do not respond to their clients and do not make the deadlines they set. The only thing that works on them is to put the pressure on them and threaten to stop the deal. We offered way more than they were asking and still could not work with is. It was the worse experience I have ever had...
Practices like this are the problem. They decieve people and string them along for the ride. They do not tell you things and then when they do, it appears they did not mean to tell you that. These jerk-offs are responsible for this mess regardless of what the goverment said. If you want to blame the government for hiring shiitty businesses, fine...but they were the problem.

[Tiggs]

Merc14, on 09 October 2012 - 03:54 AM, said:

You are cherry picking, read my posts and are you seriously contending that the housing bubble had little or nothing to do with the economic crisis?  I could post hundreds if not thousands of links disagreeing with you and a simple google search is all it takes.  If you want to argue that the burst housing bubble meant nothing then I am not going to debate with you any longer.  It wold be like arguing with someone that believes the earth is 6200 years old, you say good for you and move on.

I'm not claiming that the Financial crisis is not due to the US Housing Bubble bursting. What I'm claiming is that the financial crisis was neither caused by the GSE's or the CRA.

In short - what I'm claiming is that the official Government inquiry is correct.

[CommunitarianKevin]

joc, on 09 October 2012 - 02:54 AM, said:

Okay, but can we call the bull what it is?  GSEs doesn't really mean anything in this discussion.  What does mean something is CRA  The Community Reinvestment Act.  Over the years the CRA encouraged banks to lend money to 'less than credit worthy' individuals for mortgages.  The lending institutions became a bit worried about having so many unsecured loans and began bundling them together and selling them off to other lending institutions.  Over the long haul these bundled assets began to fail and like any snow ball effect ended in disaster.  What more do you want to know?

Crap...they are doing this with school loans...I have already said though that it will be the next bubble to burst. I think in the next 10-15 years...

[Merc14]

HuttonEtAl, on 09 October 2012 - 03:58 AM, said:

My take on this issue...
I have not studied this topic in debt but I can tell you this...
I just bought a house that was owned by Fannie Mae...
THAT ARE A GARBAGE COMPANY AND SHOULD NOT EXIST.
Our closing was delayed and they blammed it on us, even though it was their issue. For example they listed the house in the wrong city and then blammed us for it. They told our bank one thing (email proof) and then the next day told them that was not true and would never happen. They do not respond to their clients and do not make the deadlines they set. The only thing that works on them is to put the pressure on them and threaten to stop the deal. We offered way more than they were asking and still could not work with is. It was the worse experience I have ever had...
Practices like this are the problem. They decieve people and string them along for the ride. They do not tell you things and then when they do, it appears they did not mean to tell you that. These jerk-offs are responsible for this mess regardless of what the goverment said. If you want to blame the government for hiring shiitty businesses, fine...but they were the problem.

Dig a little bit and you will be even angrier.  A lot of people who were formerly power players in politics made a whole lot of bonus money while the whole thing was crashing.  Barney Frank suddenly leaving office speaks volumes.

Tiggs, on 09 October 2012 - 04:00 AM, said:

I'm not claiming that the Financial crisis is not due to the US Housing Bubble bursting. What I'm claiming is that the financial crisis was neither caused by the GSE's or the CRA.

In short - what I'm claiming is that the official Government inquiry is correct.

What do you think caused it?

[CommunitarianKevin]

I do believe crony capitalism is very bad...

[Merc14]

HuttonEtAl, on 09 October 2012 - 04:01 AM, said:

Crap...they are doing this with school loans...I have already said though that it will be the next bubble to burst. I think in the next 10-15 years...

The government owning the student loan business and determining who gets a loan and who doesn't plus the left owning the education system from top to bottom would make Saul Alinsky a proud Papa of his minions.  I am still waiting for the executive order that forgives all student debt before November 6th.  He could sign the thing and yes, it could be turned off later but he will have ignited a big part of his base that is fading away to nothing at the moment.prior to election day

[Tiggs]

Merc14, on 09 October 2012 - 04:06 AM, said:

What do you think caused it?

As the inquiry states - It was a combination of several things  - but the most obvious one is the Rating Agencies, who's badging of junk subprime mortgages as AAA securities was, IMO, quite frankly criminal.

Without that AAA rating, banks wouldn't have been able to hold them on their balance sheet as collateral. When the housing collapse came and those "AAA" securities failed, suddenly banks were in a position where they did not have enough collateral to cover their balance sheet and so were effectively bankrupt. Those bankruptcy events then triggered the Derivatives cascade.

In short - if the Ratings Agencies had rated the mortgages with the actual rating that they had deserved - then the entire international financial crisis would never have happened.

[CommunitarianKevin]

Merc14, on 09 October 2012 - 04:11 AM, said:

The government owning the student loan business and determining who gets a loan and who doesn't plus the left owning the education system from top to bottom would make Saul Alinsky a proud Papa of his minions.  I am still waiting for the executive order that forgives all student debt before November 6th.  He could sign the thing and yes, it could be turned off later but he will have ignited a big part of his base that is fading away to nothing at the moment.prior to election day

I don't think forgiving all student debt is the right route to take...even though my wife has 70K in student loans...

[joc]

Tiggs, on 09 October 2012 - 03:46 AM, said:

So - the Community Reinvestment Act (CRA)?

From the official Government Inquiry:

The Commission concludes the CRA was not a significant factor in subprime lending or the crisis. Many subprime lenders were not subject to the CRA. Research indicates only 6% of high-cost loans—a proxy for subprime loans—had any connection to the law. Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law.

Tiggs, on 09 October 2012 - 03:46 AM, said:

So - the Community Reinvestment Act (CRA)?

From the official Government Inquiry:

The Commission concludes the CRA was not a significant factor in subprime lending or the crisis. Many subprime lenders were not subject to the CRA. Research indicates only 6% of high-cost loans—a proxy for subprime loans—had any connection to the law. Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law.

Of course you believe the official Government report...you're a Government guy...but the truth is something other...
During the nineties  the  CRA was responsible for an increase of mortgages and small business loans to low income buyers to the tune of about a Trillion dollars.  In 1995 there were reforms written into the CRA.  The loans of large banks were under the scrutiny of the CRA while small banks just had to pass a simple lending test.  A 'small bank'  was redefined as any bank holding less than a billion dollars in assets.  This greatly encouraged lending to low income/moderate income buyers because if you held less than a billion dollars in your bank...you didn't have to report any of these loans.  The CRA has gone through a lot of changes since 1975.

Edited by joc, 09 October 2012 - 04:38 AM.

[Tiggs]

joc, on 09 October 2012 - 04:36 AM, said:

Of course you believe the official Government report...you're a Government guy...but the truth is something other...

So - are you saying that the official government inquiry is deliberately lying when it says that only 6% of those loans were associated with the CRA?

[joc]

Tiggs, on 09 October 2012 - 04:42 AM, said:

So - are you saying that the official government inquiry is deliberately lying when it says that only 6% of those loans were associated with the CRA?

Saying that six percent of those loans were associated with the CRA is actually saying that ninety-four percent of the loans were not under review by the CRA.  That is because most lending institutions hold less than a billion dollars in assets.  So, no, I am not saying they are lying at all.