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Tiggs

Bush, Mae and the Financial Crisis

87 posts in this topic

I already know the answer. You just blamed the GOP. Nice playing.

I blamed the act itself and both sides had a hand in it but having lived through the thing, and knowing it was a disaster in the making, the finger pointing you are doing is disingenuous. The press was crucifying reps who didn't back this Clinton initiative and congress folded.

1977 - Democratic President Jimmy Carter Passes "Community Reinvestment Act," or CRA, designed to encourage banks to reach out to low income communities by offering loans to minorities and the poor.

1995 - Democratic President Bill Clinton revises CRA by making banks meet a quota for a certain number of low income loans. He also increases punishment for banks that dont loan enough money to low income borrowers. This forces banks to write lots of loans that they would not otherwise have written, because the government is forcing them to.

1999 - Democratic President Bill Clinton signs and endorses the "Gramm-Leach-Bliley Act," or GLBA, designed to make banks profitable in good economic times, as well as poor economic times. The bill allows consumer banks (think checking accounts, savings accounts, etc..) to merge with insurance companies and investment companies, so they all can make money. BUT for a bank to qualify to be a part of the program, you had to have a high CRA score, meaning that you had to have a lot of loans written to low income people. The government was effectively telling banks that if they wanted to be allowed to make money off of the investments of the rich, that they had to also be lending money to the poor. Nice in theory, but look where it has gotten us. Now we are a nation with a bunch of people losing homes they never could afford, and a bunch of banks collapsing bc nobody can pay them back! Thanks Democrats!y

Note: Gramm Leach and Bliley are Republicans. This Republican sponsored bill was voted for in the majority by Republicans. It may be therefore disingenuous to characterize this Republican bill as a Democratic leadership failure given that it would not have existed without Republicans.

Now, are you trying to say that the democrats had nothing to do with subprime mortgages?

Edited by Merc14

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You want to go back and blame Columbus while your at it?

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You want to go back and blame Columbus while your at it?

Umm what? Do you have a point to make or are you just trying to...well, I don't exactly know what you are trying to do. :hmm: Some people's kids, I tell ya. LMAO

Are you suffering from Post Debate Stress Disorder by any chance?? There is a lot of that going around.

http://nation.foxnews.com/jay-leno/2012/10/06/tonight-show-mock-video-chris-matthews-being-taken-away-straight-jacket

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

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trying to blame this on one party or another is waste of time and is wrong quite frankly. the american people are to blame for extravagant living which existed on borrowed funds and crazy optimism....a bubble. it happened in japan in the late 80's.

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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.

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snapback.pngTiggs, 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?

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
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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.

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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

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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.

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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.

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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...

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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.

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?

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I do believe crony capitalism is very bad...

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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

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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.

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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...

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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.

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
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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?

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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.

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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.

Then what are you saying? That all subprime mortgages are CRA associated by default?

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Then what are you saying? That all subprime mortgages are CRA associated by default?

Of course all subprime mortgages are associated with CRA Not by 'default'....by design. Originally the CRA didn't discriminate among lending institutions.

So...let me ask you a question...why do you think that they Reformed the CRA to only scrutinize the loans of banks holding over a billion dollars in assets?

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Of course all subprime mortgages are associated with CRA Not by 'default'....by design.

One of us is very confused. What do you think a subprime mortgage is, exactly?

So...let me ask you a question...why do you think that they Reformed the CRA to only scrutinize the loans of banks holding over a billion dollars in assets?

To reduce compliance burden, I'd imagine.

What confuses me is why you think that exempting financial organisations with having to comply with the CRA - a law that requires a proportional number of loans to be made to low-income neighbourhoods - would lead to those 94% of subprime loans that no-one was mandating them to make - the CRA's fault?

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If you guys ever want to stop wasting time making fake partisan political hay out of this crisis and some day want to understand it correctly, turn to people who understood it so well they saw it coming years in advance.

http://youtu.be/2I0QN-FYkpw

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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.

Certainly contributed but only as part of the bigger scam.

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