On MSNBC tonight, both Chris Matthews and President Obama stated that Obama "inherited" the economic mess from the Republicans. Of course, since this was MSNBC, that statement goes completely unchallenged.

Can one of the liberals here explain how the Democrats inherited this mess from Republicans? Here are some irrefutable facts...

The United States is a democracy, not a dictatorship. The legislative branch has more influence on the legislative agenda than the executive branch.

Since January 2006, the Democrats have controlled the legislative branch. When they took over the legislature from the GOP in January 2006 , the Dow was at 12,600, and unemployment was at 4.6%.

The president (Obama), vice president (Biden) and Secstate (Clinton) were all prominent, influential senators in the majority party. As such, it seems to me that they have a great deal of ownership of economic performance since their party took control.

The financial de-regulation that allowed things like derivitives, credit default swaps, and collaterized debt obligations, was passed by a republican legislature in the late 1990's, and signed into law by President Clinton.

Before the economy collapsed, the GOP introduced a bill that would have prevented Fannie Mae and Freddie Mac from writing so many subprime mortgages. That bill was fillibustered by 2 senators named Chris Dodd and Barack Obama, 2 senators who got more campaign contributions from Fannie and Freddie than anyone else.

The GOP, when they controlled the legislature for the 1st 6 years of the Bush presidency, allowed Bush to rack up a ton of debt. My point is, the GOP is not without fault here.

OK, what am I missing? How were the Democrats innocent bystanders to all this?

Look at liberal policies of taxing, spending, borrowing, and saying "yes" to every demand ever made by a labor union. What has that gotten us?

I don't get it, I just don't get where guys like Spence are coming from...

I consider myself a Clinton Democrat which is moderate. Full Disclosure - I did NOT vote for Obama. He was not ready

As someone in the financial sector I really think the deficit is mostly a result of 10 years of fighting 2 wars and rebuilding 2 countries and not because of the Bush tax cuts.

I also believe the financial mess is strictly from poorly regulated greedy sob's who probably bribed their accountants to look the other way. Shame on those CPA firms too.

I understand small business should not be regulated, but Financial Institutions should be. Lehman Bros, Madoff, etc. were allowed to do their thing also because of shoddy work by the SEC. No one approved the SEC to cut corners.

We invest our money with them, there should be a higher level of trust which van only result from regulation by the letter of the law.

Bottom line is Obama wanted to be president, he knew the state of the economy. By pointing a finger now he is waving the white flag.

stcroixman, the subprime mortgages contributed nothing?

Those wars started in 2002 and 2003, I believe. The economy did just fine until October 2008, when the subprime mortgages rocked Lehman Brothers and Bear Sterns, and the rest fell like dominoes.

I agree with you 100% that we need some smart regulation of these banks and financial instututions. I also feel that Sarbanes Oxley goes way too far, we spend a lot of time on meaningless compliance with that law.

P.S. I'm a moderare Republican who voted for Clinton and I think he was a pretty good president...

You can also trace a significant amount of economic decline to both NAFTA and China Free Trade which took away a significant amount of jobs in the manufacturing sector. Those jobs paid well compared to service industry jobs and also kept a significant amount of professionals employed in manufacturing companies.

The second hit from both of these policies is downward pricing pressure put on manufacturers "but I can get it for XXX cheaper from China" which in turn forces wages even lower. I'm happy to be working, but back to what I earned in 2006 with a significant increase in healthcare cost, more responsibility and longer hours.

I don't know why Obama can't just tax his "inheritance" at a confiscatory rate and then redistribute it.....:confused:

I don't know why Obama can't just tax his "inheritance" at a confiscatory rate and then redistribute it.....:confused:

LMAO...

On MSNBC tonight, both Chris Matthews and President Obama stated that Obama "inherited" the economic mess from the Republicans. Of course, since this was MSNBC, that statement goes completely unchallenged.
What were you doing watching MSNBC?

The United States is a democracy, not a dictatorship. The legislative branch has more influence on the legislative agenda than the executive branch.
Depends...Quite often the Executive branch is quite assertive to ensure the Congressional agenda is in alignment with the President's objectives.

Since January 2006, the Democrats have controlled the legislative branch. When they took over the legislature from the GOP in January 2006 , the Dow was at 12,600, and unemployment was at 4.6%.
Hmmm, if things were so good why did the Democrats take over the legislature?

The president (Obama), vice president (Biden) and Secstate (Clinton) were all prominent, influential senators in the majority party. As such, it seems to me that they have a great deal of ownership of economic performance since their party took control.
You're talking about 3% of the Senate...and not any of them sat on committees with direct impact to the economy.

The financial de-regulation that allowed things like derivitives, credit default swaps, and collaterized debt obligations, was passed by a republican legislature in the late 1990's, and signed into law by President Clinton.
I recall reading some time ago "The legislative branch has more influence on the legislative agenda than the executive branch." If you subscribe to this they it sounds like the GOP should be the target of your wagging finger.

Before the economy collapsed, the GOP introduced a bill that would have prevented Fannie Mae and Freddie Mac from writing so many subprime mortgages. That bill was fillibustered by 2 senators named Chris Dodd and Barack Obama, 2 senators who got more campaign contributions from Fannie and Freddie than anyone else.
I'm not aware of any Dem filibuster just before the economy tanked. Most of this story is from 2003-2005 and when looked at in detail reveals mistakes by both sides of the leadership. This has been discussed in detail in older threads.

The GOP, when they controlled the legislature for the 1st 6 years of the Bush presidency, allowed Bush to rack up a ton of debt. My point is, the GOP is not without fault here.
That's because despite what they pretend to aspire to, the GOP has a really chronic debt problem. Google up the rate of debt change as a percentage of GDP for the past 60 years and look at the parties in charge.

OK, what am I missing? How were the Democrats innocent bystanders to all this?

Nobody has said they were innocent bystanders...but the economy was under Bush's watch for 8 years and he left Obama with a massive recession. I'm not sure this is really in dispute.

Generally speaking, in the media Presidents get to take credit for success and blame for failures regardless of the trends or systemic actions that actually drive them. Examples of this may be the tech boom, 9/11, lack of terrorism after 9/11, the 2009 recession etc...

I work in Sales and I'll tell you the best factor that determines the success or failure of a salesperson is the TIMING of when they take their job given the product and market needs.

Look at liberal policies of taxing, spending, borrowing, and saying "yes" to every demand ever made by a labor union. What has that gotten us?
I think you confuse the word "liberal" with "irresponsible". Borrowing beyond your means isn't a Liberal tendency, it's an irresponsible tendency that both parties too often suffer from.

I don't get it, I just don't get where guys like Spence are coming from...
I come from the pragmatic center where we try to balance ideology with observation.

-spence

I come from the pragmatic center where we try to balance ideology with observation.

-spence

"The proper bafflers are the ambiguists. Their flashes of insights are frequent enough; but in the end the fog closes down. They are great ones for the facts, against the fundamentalists, and great ones of "conscience," against the cynics. They insist on the values of pragmatism against the absolutists; but they resent the suggestion that they push pragmatism to the point of relativism of moral values."
"For the pragmatists there are, properly speaking, no truths; there are only results."
-- John Courtney Murray, S.J. (September 12, 1904-August 16, 1967)

Neat quote but it doesn't make a lot of sense.

"The proper bafflers are the ambiguists. Their flashes of insights are frequent enough; but in the end the fog closes down. They are great ones for the facts, against the fundamentalists, and great ones of "conscience," against the cynics. They insist on the values of pragmatism against the absolutists; but they resent the suggestion that they push pragmatism to the point of relativism of moral values."
"For the pragmatists there are, properly speaking, no truths; there are only results."
-- John Courtney Murray, S.J. (September 12, 1904-August 16, 1967)
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stcroixman, the subprime mortgages contributed nothing?

Those wars started in 2002 and 2003, I believe. The economy did just fine until October 2008, when the subprime mortgages rocked Lehman Brothers and Bear Sterns, and the rest fell like dominoes.

I agree with you 100% that we need some smart regulation of these banks and financial instututions. I also feel that Sarbanes Oxley goes way too far, we spend a lot of time on meaningless compliance with that law.

P.S. I'm a moderare Republican who voted for Clinton and I think he was a pretty good president...


My firm does Sarbanes Oxley work. The word is it is on the chopping block. It is needless BS to the businesses. The best thing that could happen is a flat corporate tax (10% ) like in Ireland, but only for the portion of goods/services made or performed in USA. That will bring back jobs.

I am tired of every politician saying he/she will create 5 million good paying jobs. Exactly how? By giving out tax credits? Cut the tax and cut out the stupid credits.

There are millions out there who would accept 30K($15/hour)- 40K($20/hour) to work in a blue collar job I mean that respectfully too as my day did it for 40+ years, but not everyone is a President or CFO. With the economy hurting, any job is a good job.

I think the blame for the economic mess we are in goes to both parties. As far back as the Clinton administration Rubin and Summer were pushing for less regulation over the financial markets. Under then HUD Secretary Cuomo the regulations regarding qualifying mortgages for Fannie and Freddie and the FHA were greatly relaxed to included sub-prime and other things which we now regret. The Republicans were no better. Phil Gramm pushed through regulations exempting the electronic trading of off exchange energy derivatives form the review of the CFTC. Even after Enron these transactions were not subject to reporting or review. Under Bush, the light or no touch continued at the SEC and other regulatory agencies. The investment banks were able to lobby the SEC to have credit default swaps deemed not to be insurance and removing any review from state insurance administrators. Unregulated credit default swaps are what brought AIG down.
Bottom line: Wall Street has both parties in their back pocket and we as an electorate need to curb their power. I am all for capitalism and innovation but time and time again we have found that left to their own devices greedy participants will hurt the economy and the average taxpayer gets the bill.

Neat quote but it doesn't make a lot of sense.


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to one who claims....

I come from the pragmatic center where we try to balance ideology with observation.
-spence

it wouldn't.....:)

to one who claims....

I come from the pragmatic center where we try to balance ideology with observation.
-spence

it wouldn't.....:)
Not in the context you used it.

-spence

Not in the context you used it.

-spence

thanks for the chuckle this morning anyway....pragmatic center :rotf2:

What were you doing watching MSNBC?


Depends...Quite often the Executive branch is quite assertive to ensure the Congressional agenda is in alignment with the President's objectives.


Hmmm, if things were so good why did the Democrats take over the legislature?


You're talking about 3% of the Senate...and not any of them sat on committees with direct impact to the economy.


I recall reading some time ago "The legislative branch has more influence on the legislative agenda than the executive branch." If you subscribe to this they it sounds like the GOP should be the target of your wagging finger.


I'm not aware of any Dem filibuster just before the economy tanked. Most of this story is from 2003-2005 and when looked at in detail reveals mistakes by both sides of the leadership. This has been discussed in detail in older threads.


That's because despite what they pretend to aspire to, the GOP has a really chronic debt problem. Google up the rate of debt change as a percentage of GDP for the past 60 years and look at the parties in charge.



Nobody has said they were innocent bystanders...but the economy was under Bush's watch for 8 years and he left Obama with a massive recession. I'm not sure this is really in dispute.

Generally speaking, in the media Presidents get to take credit for success and blame for failures regardless of the trends or systemic actions that actually drive them. Examples of this may be the tech boom, 9/11, lack of terrorism after 9/11, the 2009 recession etc...

I work in Sales and I'll tell you the best factor that determines the success or failure of a salesperson is the TIMING of when they take their job given the product and market needs.


I think you confuse the word "liberal" with "irresponsible". Borrowing beyond your means isn't a Liberal tendency, it's an irresponsible tendency that both parties too often suffer from.


I come from the pragmatic center where we try to balance ideology with observation.

-spence

Spence -

"if things were so good why did the Democrats take over the legislature?"

Read a history book. It wasn't because of the economy, it was because of the Iraq war.

"You're talking about 3% of the Senate...and not any of them sat on committees with direct impact to the economy."

Spence, please put down the Kool Aid and think straight for 2 seconds. The chairman of the house banking committee was Barney Frank, the chairman of the Senate Banking committee was Chris Dodd, both Democrats. My point was (which you carefully avoided),is that the Democrats inherited a robust, thriving economy in 2006.

"I'm not aware of any Dem filibuster just before the economy tanked. "

None of us know everyihtng. In 2006, the GOp introduced legislation to regulate Fannie and Freddie, Senators Obama and Dodd fillibustered. I doubt it would have saved the economy anyway...

"Nobody has said they were innocent bystanders..."

Please Spence. Please. Obama blames EVERYTHING on the previous administration, and has said REPEATEDLY that the previous administration (NOT THE PREVIOUS CONGRESS) drove the car into the ditch.

Spence, you're going to say with a straight face that Obama and the Dems haven't placed all of the economic blame on the GOP?

"I come from the pragmatic center where we try to balance ideology with observation. "

Thanks, I needed a good laugh. Spence, every post you have ever written can be summed up thusly:

liberal = good
conservative = bad.

The only "middle" you occupy is the middle between Ted Kennedy and Mao Tse Tung.

thanks for the chuckle this morning anyway....pragmatic center :rotf2:
I think the center tends to be inherently more pragmatic by it's very nature, not in a pure sense mind you (there's still room for idealism) but with a nod to reality when illuminating a path forward.

Glad I could make you laugh.

-spence

I think the center tends to be inherently more pragmatic by it's very nature, not in a pure sense mind you (there's still room for idealism) but with a nod to reality when illuminating a path forward.

Glad I could make you laugh.

-spence

I'm sure that's what you see when you(and the "we") place yourselves on a pedestal in the "center" and look around and begin to illuminate forward paths....:)

reminds me of "WE are the ONES we've been waiting for"... creepy...


you didn't make me laugh as hard as my 12 year old who located the "yo mama so ....." joke app for her iPOD......

Spence, if you are in the "middle" as you claim, that must mean that there are some issues on which you think conservatives are right, and liberals are wrong.

I'm in the middle (slightly right leaning). I think conservatives are right on the economy, abortion, and national security. I think liberals are right on gay marriage, gun control, minimum wage, and the need for some regulation on Wall Street..

So Spence, on what issues do you side with conservatives?

I suspect that you think you're in the "middle" because you fall somewhere between Keith Oberman and his newphew Rachael Maddow. But remember, those 2 don't exactly cover the entire spectrum, just the entire spectrum at one network.

actually...he's in the "center"...which is the optimal point from which to look down :)...and illuminate the path forward with balanced ideology(just a tinge) and with observation while nodding at reality...or something...think about it :uhuh:

it was actually a brilliant quote:hihi:

I don't care who broke it!
all i want to know is who's gonna fix it? :smash:
THAT'S all the matters

i'm tired of getting the chit end of the stick

I don't care who broke it!
all i want to know is who's gonna fix it? :smash:
THAT'S all the matters

i'm tired of getting the chit end of the stick

I think it's important to figure out "what" broke it, so that we don't repeat the mistake. And "what" broke it is subprime mortgages (which in many cases banks were pressured to write by liberal social engineering policies) and a de-regulated financial sector that came up with crazy ways to rate those mortgages as "safe" investments, and then sell them and leverage them.

As for who will fix it? Not the liberals that the idiots in CT and MA elected to keep doing more of the same. In CT, the liberals have been running the show forever. Between income tax of the gazillionaires in Fairfield county, as well as the revenue we get from the 2 most profitable casinos in the world, CT has PLENTY of revenue. Revenue shortfall is not our problem...crazy spending is our problem.

When my state income tax is 10% (currently 5%), and my property taxes are $10,000 (currently $7700), that's when I move. And that day is coming.

which in many cases banks were pressured to write by liberal social engineering policies

Damn liberal mindset
"Over 75 percent of white Americans own their home, and less than 50 percent of Hispanos and African Americans don't own their home. And that's a gap, that's a homeownership gap. And we've got to do something about it." —George W. Bush, Cleveland, Ohio, July 1, 2002

CLOWARD - PIVEN STRATEGY

Strategy for forcing political change through orchestrated crisis

First proposed in 1966 and named after Columbia University sociologists Richard Andrew Cloward and his wife Frances Fox Piven (today Piven is an honorary chair for the Democratic Socialists of America), the "Cloward-Piven Strategy" seeks to hasten the fall of capitalism by overloading the government bureaucracy with a flood of impossible demands, thus pushing society into crisis and economic collapse.

The key to sparking this rebellion would be to expose the inadequacy of the welfare state. Cloward-Piven's early promoters cited radical organizer Saul Alinsky as their inspiration. "Make the enemy live up to their (sic) own book of rules," Alinsky wrote in his 1972 book Rules for Radicals. When pressed to honor every word of every law and statute, every Judaeo-Christian moral tenet, and every implicit promise of the liberal social contract, human agencies inevitably fall short. The system's failure to "live up" to its rule book can then be used to discredit it altogether, and to replace the capitalist "rule book" with a socialist one.

Damn liberal mindset
"Over 75 percent of white Americans own their home, and less than 50 percent of Hispanos and African Americans don't own their home. And that's a gap, that's a homeownership gap. And we've got to do something about it." —George W. Bush, Cleveland, Ohio, July 1, 2002

The "ownership society" was a big plank in the 2000 Bush platform. I remember reading a Bush speech from then praising all the efforts of the financial institutions to provide loans to low income borrowers.

What seems to be getting lost is the issue wasn't necessarily low income housing (i.e. where liberals -- and President Bush -- might want to defend populist interests) but also people with moderate to high income who took out massive ARMs to buy into housing they simply couldn't afford. I know first hand of some friends who were making at least 250K a year and blew it because of their own recklessness...ultimately loosing their house.

As has been discussed at length in older threads, this was a massive and systemic problem largely driven by sub prime and prime loans being bundled together without adequate regulation.

Plenty of blame to go all around...

-spence

Frances Fox Piven Rings in The New Year By Calling for Violent Revolution
Posted on December 31, 2010

She’s considered by many as the grandmother of using the American welfare state to implement revolution. Make people dependent on the government, overload the government rolls, and once government services become unsustainable, the people will rise up, overthrow the oppressive capitalist system, and finally create income equality. Collapse the system and create a new one. That‘s the simplified version of Frances Fox Piven’s philosophy originally put forth in the pages of The Nation in the 60s.

Now, as the new year ball drops, Piven is at it again, ringing in 2011 with renewed calls for revolution.

In a chilling and almost unbelievable editorial again in The Nation (”Mobilizing the Jobless,” January 2011 edition), she calls on the jobless to rise up in a violent show of solidarity and force. As before, those calls are dripping with language of class struggle. Language she and her late husband Richard Cloward made popular in the 60s.

“So where are the angry crowds, the demonstrations, sit-ins and unruly mobs?” she writes. “After all, the injustice is apparent. Working people are losing their homes and their pensions while robber-baron CEOs report renewed profits and windfall bonuses. Shouldn’t the unemployed be on the march? Why aren’t they demanding enhanced safety net protections and big initiatives to generate jobs?”

“Before people can mobilize for collective action, they have to develop a proud and angry identity and a set of claims that go with that identity,” she writes. “They have to go from being hurt and ashamed to being angry and indignant.”

“The out-of-work have to stop blaming themselves for their hard times and turn their anger on the bosses, the bureaucrats or the politicians who are in fact responsible.”

she says, the “protesters need targets.”

I think it's important to figure out "what" broke it, so that we don't repeat the mistake. And "what" broke it is subprime mortgages (which in many cases banks were pressured to write by liberal social engineering policies) and a de-regulated financial sector that came up with crazy ways to rate those mortgages as "safe" investments, and then sell them and leverage them.

When you say banks, you make it sound like all banks when it was the big banks.

Local banks were not pressured to write sub prime loans. Most local banks would not write a loan without twenty per cent down. Mortgage companies were the biggest culprit writing hundred percent loans or eighty-twenty percent loans, holding two mortgages.


If you want to know the root cause of the current subprime crisis, there are
three things you need to understand:
First, the problem was caused by politicians (primarily Democrats) pushing
their "entitlement" agenda in to the free market. It started with "The
Community Reinvestment Act" (CRA) which required banks to make high risk
loans to minorities and others who could not have qualified for a home loan
or business loan under normal circumstances.

Second, Bill Clinton further liberalized the CRA and signed a bill to repeal
the Glass-Stengal Act. This Act was put in place in the 1930s following the
bank failures during the Great Depression. It was designed to keep banks
out of the speculation business.

Third, George Bush proposed major changes in the CRA, FMAE and FMAC in 2003
that would have tightened requirements for these business loans and subprime
home mortgages. The vote went along party lines, the Democrats won and the
proposed changes were defeated.

Why does Spence want to keep blaming Bush?

Damn liberal mindset
"Over 75 percent of white Americans own their home, and less than 50 percent of Hispanos and African Americans don't own their home. And that's a gap, that's a homeownership gap. And we've got to do something about it." —George W. Bush, Cleveland, Ohio, July 1, 2002

That's very intellectually dishonest, either that or you're an idiot. George Bush never suggested that the way to increase minority homeownership was to throw out all known guidelines for deciding who gets mortgages.

Conservatives, like me, want minorities to own their own homes. We believe the way to accomplish that is for them to get off welfare, work hard and get good jobs.


I cannot stand that kind of dishonesty, suggesting that Bush liked the idea of subprime mortgages.

The "ownership society" was a big plank in the 2000 Bush platform. I remember reading a Bush speech from then praising all the efforts of the financial institutions to provide loans to low income borrowers.

What seems to be getting lost is the issue wasn't necessarily low income housing (i.e. where liberals -- and President Bush -- might want to defend populist interests) but also people with moderate to high income who took out massive ARMs to buy into housing they simply couldn't afford. I know first hand of some friends who were making at least 250K a year and blew it because of their own recklessness...ultimately loosing their house.

As has been discussed at length in older threads, this was a massive and systemic problem largely driven by sub prime and prime loans being bundled together without adequate regulation.

Plenty of blame to go all around...

-spence

Spence, just because you know some well-fto-do folks that bit off morethan they could chew, means NOTHING. The problem, as everyone who can think rationally knows, was subprime mortgages. I'm not saying that wealthy folsk had no foreclosures. But what brought the system down was mortgages to poor folks who had no business getting those loans.

You keep telling yourself that it was something else. That way you'll make the same exact mistake.

This is why liberalism is a mental disorder. The complete, willful unwillingness to recognize irrefutable fact, unless those facts serve your current agenda. Unbelievable.

You are right, trhere is plenty of blame on both sides. But I have never, ever heard Obama suggest that liberal policies played any role. All he ever says is that the republicans drove the car into the ditch. Or am I wrong Spence?

Why does Spence want to keep blaming Bush?

Because he's aliberal, and liberalism is a mental disorder. I cannot provide better evidence than his last post.

I believe it starts from the top down. That being said, Bush left Obama an economy problem. Instead of fixing the problem, Obama made that problem a whole lot worse.
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I believe it starts from the top down. That being said, Bush left Obama an economy problem. Instead of fixing the problem, Obama made that problem a whole lot worse.
Posted from my iPhone/Mobile device

It starts from the top down, but we have a republic, not a dictatorship, which means the legislature has more say in deciding the agenda than the president.

When the Democrats took control of congress in January 2006, unemployment was at 4.6%, the Dow was at 12,600, and the GDP had been growing like crazy since Clinton balanced the budget. In other words, what the democrats "inherited" in 2006 was a thriving, robust economy. Since 2006, the Democrats had control of all the committees.

It was Democrats who pushed subprime mortgages. In my opinion, the worst you can say about the GOP was that they proposed the de-regulation of financial markets in 1999 (I think it was 99) that Clinton signed. However, no one knew what was going on with those crazy mortgage-backed securities. If it was so clear that Wall Street was abusing the de-regulation, why didn't the Democrats propose to re-regulate Wall Street when they took control in 2006? Answer? No one had a clue what Wall Street was doing. But everyone knew that banks were being reckless by writing so many subprime mortgages, which was based on liberal doctrine that everyone is entitled to a home, even if they can't afford one.

Spence is 100% right when he says there is blame on both sides. I'd love to know what Spence thinks when he sees Obama, time and time again, putting all the blame on the Republicans, who had been out of power for almost 3 years when the economy collapsed. If Spence is right (and he is), then Obama is either an idiot or a liar, and there simply isn't another option. (In my opinion, Obama is BOTH an idiot and a liar).

When the Democrats took control of congress in January 2006, unemployment was at 4.6%, the Dow was at 12,600, and the GDP had been growing like crazy since Clinton balanced the budget. In other words, what the democrats "inherited" in 2006 was a thriving, robust economy. Since 2006, the Democrats had control of all the committees.
Ummm, I think that's why they called it a "bubble" as it had yet to burst.

It was Democrats who pushed subprime mortgages. In my opinion, the worst you can say about the GOP was that they proposed the de-regulation of financial markets in 1999 (I think it was 99) that Clinton signed. However, no one knew what was going on with those crazy mortgage-backed securities. If it was so clear that Wall Street was abusing the de-regulation, why didn't the Democrats propose to re-regulate Wall Street when they took control in 2006? Answer? No one had a clue what Wall Street was doing. But everyone knew that banks were being reckless by writing so many subprime mortgages, which was based on liberal doctrine that everyone is entitled to a home, even if they can't afford one.
I love it, so the GOP is responsible for de-regulation "the reason why nobody knew what was happening" but it's the insane liberals that really must be under it all...

Think of a big reason why the economy in the mid 2000's was doing well to begin with. A rise in International investment combined with low rates made credit easy to obtain and plenty of investors wanting to cash in on mortgage backed securities which seemed magical considering the housing market which continued to grow. Everybody was in on this, not just the minorities or poor, in fact they represented a fraction of the market.

This drove the bubble that eventually got as big as it could and housing prices -- across the board -- started to decline rapidly for everyone, which resulted in the sub-prime ARM's to ratchet up their rates. Many of which were a result of predatory lending and people not knowing what they were really getting into.

If properly regulated perhaps this could have been controlled (there still would have been a lot of sub-prime foreclosures) but considering the risky loans had been bundled with good loans (and sold off as AAA) nobody knew where the risk really was...and everybody pulled out.

Crash...

When the Dem's took Congress in 2006 they inherited this time bomb waiting to go off.

Not a lot of liberal ideology here, unless you think the entire house of cards was build to satisfy some government mandate, largely during a period where the GOP held both the Executive and Legislative branches of our government.

Oh wait, didn't President Bush push hard for more sub-prime lending because he felt that home "ownership" was good for America? Wasn't this conservative thinking? That the people owning their own home is more stable and responsible than looking for a government handout?

"Fannie Mae, Freddie Mac and the federal Home Loan Banks -- the government-sponsored corporations that handle home mortgages -- will increase their commitment to minority markets by more than $440 billion, Bush said."

Source: Bush aims to boost minority home ownership - CNN (http://articles.cnn.com/2002-06-17/politics/bush.minority.homes_1_home-ownership-home-buyers-american-dream-down-payment-fund?_s=PM:ALLPOLITICS)

And shortly after the rate of sub prime lending goes through the roof.

The primary Dem opposition to reform (in 2003 and 2006) was driven more by the accounting scandals rather than concerns over sub-prime lending. Some of their issue were valid, some not...but I don't believe much of this reform would have had an impact on the derivatives market and mortgage backed securities.

And when Dems took over in 2007 they immediately pushed for more regulation to help ensure the same issues wouldn't arise again. Bush, focused on the present, was pushing taxpayer funded subsidies to help mortgage holders in over their head! What a RINO :hihi:

The net is you're basing opinion off of a portion of the story...only a crazy person (i.e. mental disorder) would do this in good faith.

Spence is 100% right when he says there is blame on both sides.

First thing in 3 weeks you've said that's made any sense.

I'd love to know what Spence thinks when he sees Obama, time and time again, putting all the blame on the Republicans, who had been out of power for almost 3 years when the economy collapsed.
I don't believe Obama was sworn in until Jan 2009. By your reconing that would make today January 2nd 2012!

If Spence is right (and he is), then Obama is either an idiot or a liar, and there simply isn't another option. (In my opinion, Obama is BOTH an idiot and a liar).
It's called politics.

If you want someone to blame for this mess blame your neighbor for pulling equity from his house to buy a boat he can't afford, the short-term'ism of our markets, shady lenders out to make a quick buck, politicians trying to hold their power, Wall Street, a lack of personal responsibility etc... etc... etc...

Like I've said, there's plenty of blame to go around...

-spence

[Spence -

"didn't President Bush push hard for more sub-prime lending "

No, he did not. He pushed banks to make loans to minorities that could be paid back, based on traditional qualifying criteria. Spence, let's put it out there, OK? If you have evidence to suggest that Bush was a fan of reckless mortgages (subprime), either post it, or admit that you made it up. For the 10th time, Bush was so alarmed by the recklessness of subprime mortgages, that he wanted to regulate Fannie and Freddie, with rules that they couldn't buy those crappy pieces of paper. The Democrats blocked that legislation. I'm sorry, Spence, if that fact doesn't support your personal agenda, but it's a fact nonetheless.

"And when Dems took over in 2007 they immediately pushed for more regulation to help ensure the same issues wouldn't arise again. "

Can you support that please? You may well be right, I have no knowledge. But you seem to take great liberties, at times, in creating your own realities which promote your agenda. If you can't back that up, please admit you made it up.

"I don't believe Obama was sworn in until Jan 2009. By your reconing that would make today January 2nd 2012!"

Do you ever, ever get tired of being 100% wrong? When I say the "Republicans" were out of power, I mean because they LOST CONTROL OF CONGRESS IN JANUARY 2006.

You see, Spence, this country is not a totalitarian dictatorship. It's a democracy with seperation of powers and checks and balances. In our system of government, the LEGISLATURE, not the executive branch, writes legislation.

I also see that once again, you cowardly dodged my other question, which was this. If you say there's blame on both sides (although you go on and on and on about the GOP, I haven't seen you post anything you think the libs did wrong), what do you think of Obama repeatedly saying it was all the Republican's fault?

Spence -

I read that CNN link that you posted. If you had read that link before assuming that it supported your inane conclusion that Bush pushed subprime mortgages, you'd see that the bill called for the feds helping minorities come up with down payments. The bill would have subsidized down poayments for folks that could afford the monthly payment, but who didn't yet have a large enough down payment.

You see Spence, the notion that sufficient down payments be part of a mortgage is NOT what the subprime mortgages were about. That's traditional financial underwriting.

Spence, when the GOP proposed the bill to regulate Fannie and Freddie, here is what senator John Mccain said in support of the bill...

"If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.”

Here is the link...

The Squeaky Wheel: S. 190 - “Federal Housing Enterprise Regulatory Reform Act of 2005” (http://getsgreased.blogspot.com/2008/09/s-190-federal-housing-enterprise.html)

Here was Barney Frank's response to the proposed bill:

""These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

Here is a link...

Barney Frank's Fannie and Freddie Muddle - Sam Dealey (usnews.com) (http://www.usnews.com/opinion/blogs/sam-dealey/2008/9/10/barney-franks-fannie-and-freddie-muddle.html)

And Barney Frank gets re-elected over a brilliant patriotic hero like Sean Bielat!! Kudos to the voters in Frank's district...

Spence, you also say it's just "politics" that Obama puts all the blame on the GOP, even though you think there is blame on both sides. I agree, it's just politics, and most politicians do stuff like that.

But remember, Obama campaigned on some vague notion called "change". He had no accomplishments he could point to, so he promised that HE would be the one to bring change to Washington, HE would be the one to put "politics as usual" aside, He, and only HE, could do things differently.

So I really, really love it when Obama defenders say things like "all politicians do that". Because that should NOT be an acceptable excuse from someone whose entire campaign was based on the promise of "change".

Your response???

When you say banks, you make it sound like all banks when it was the big banks.

Local banks were not pressured to write sub prime loans. Most local banks would not write a loan without twenty per cent down. Mortgage companies were the biggest culprit writing hundred percent loans or eighty-twenty percent loans, holding two mortgages.


If you want to know the root cause of the current subprime crisis, there are
three things you need to understand:
First, the problem was caused by politicians (primarily Democrats) pushing
their "entitlement" agenda in to the free market. It started with "The
Community Reinvestment Act" (CRA) which required banks to make high risk
loans to minorities and others who could not have qualified for a home loan
or business loan under normal circumstances.

Second, Bill Clinton further liberalized the CRA and signed a bill to repeal
the Glass-Stengal Act. This Act was put in place in the 1930s following the
bank failures during the Great Depression. It was designed to keep banks
out of the speculation business.

Third, George Bush proposed major changes in the CRA, FMAE and FMAC in 2003
that would have tightened requirements for these business loans and subprime
home mortgages. The vote went along party lines, the Democrats won and the
proposed changes were defeated.

Why does Spence want to keep blaming Bush?

You're missing the biggest piece. There was a market for the bunding of these loans. Global cash needs to go somewhere and the US housing market was the place to be. The more demand for mortgages resulted in more demand to sell mortgages and it created a vicous cycle. Big banks were packaging and selling, but sophisticated investors were BUYING. Everyone should have known better but, its like fishing in an endless bluefish blitz, eventually you lose all your plugs. Funs over.
Was it Bush's fault? Not directly, but he was the president at the time so he'll get the blame. Was it republican policies? I have seen NO reregulation initiated by repubs that had any impact to the recession. None.

I've posted this link before - excellent read

Angelo Mozilo - 25 People to Blame for the Financial Crisis - TIME (http://www.time.com/time/specials/packages/article/0,28804,1877351_1877350_1877339,00.html)

No, he did not. He pushed banks to make loans to minorities that could be paid back, based on traditional qualifying criteria. Spence, let's put it out there, OK? If you have evidence to suggest that Bush was a fan of reckless mortgages (subprime), either post it, or admit that you made it up.
Nobody is going to propose lending to people who "can't" pay it back. What the politicians on both sides did was encourage lending into the poorer and minority communities to expand home ownership. This is where the sub-primes exploded as people refinanced into ARMs.

For the 10th time, Bush was so alarmed by the recklessness of subprime mortgages, that he wanted to regulate Fannie and Freddie, with rules that they couldn't buy those crappy pieces of paper. The Democrats blocked that legislation. I'm sorry, Spence, if that fact doesn't support your personal agenda, but it's a fact nonetheless.
If it's a fact then it should be easy to find a link to a Bush proposal to ban Freddie and Fannie from taking sub-prime loans. Please help me out here because I can't find one...

Can you support that please? You may well be right, I have no knowledge. But you seem to take great liberties, at times, in creating your own realities which promote your agenda. If you can't back that up, please admit you made it up.
H.R. 1427, 313-104

Do you ever, ever get tired of being 100% wrong? When I say the "Republicans" were out of power, I mean because they LOST CONTROL OF CONGRESS IN JANUARY 2006.
Earlier you said I was 100% right. I can't be both...

You see, Spence, this country is not a totalitarian dictatorship. It's a democracy with seperation of powers and checks and balances. In our system of government, the LEGISLATURE, not the executive branch, writes legislation.
Yes, I did see School House Rock. Loosing Congress didn't mean that Bush was out of power, just as the GOP taking the House doesn't mean that Obama is not still ultimately in charge. i.e. the buck stops there.

I also see that once again, you cowardly dodged my other question, which was this. If you say there's blame on both sides (although you go on and on and on about the GOP, I haven't seen you post anything you think the libs did wrong), what do you think of Obama repeatedly saying it was all the Republican's fault?
It's always funny when people throw words like "cowardly" around in an Internet discussion without knowing much about the other people.

The fact is (search able in old threads) that I've mentioned mistakes by Democrats many times. And have pretty much described this as a systemic problem in every instance, counter to the assertion that liberal ideology and (gasp) Barney Frank are the root cause of the financial meltdown. This simple isn't founded in the reality you claim is the basis for a clean bill of mental health.

Obama gets to point the finger at the Republicans because he's the President and they're doing it to him. Hell, Obama wasn't even sworn in yet before the GOP was branding it his recession, and has blamed Obama for not being able to magically fix it every since.

Do we really think that a hallmark of Republican party -- lower regulation -- is the answer to preventing a similar calamity with our economy? I'm not sure I know anyone who seriously thinks so.

-spence

From Spence "Yes, I did see School House Rock. Loosing Congress didn't mean that Bush was out of power, just as the GOP taking the House doesn't mean that Obama is not still ultimately in charge. i.e. the buck stops there" The king of blame Bush.:rotf2:LMAO

Mortgage companies were the biggest culprit writing hundred percent loans or eighty-twenty percent loans, holding two mortgages.
I thought liberal ideology was to blame?

If you want to know the root cause of the current subprime crisis, there are three things you need to understand: First, the problem was caused by politicians (primarily Democrats) pushing their "entitlement" agenda in to the free market.

Oh good lord...

It started with "The Community Reinvestment Act" (CRA) which required banks to make high risk loans to minorities and others who could not have qualified for a home loan or business loan under normal circumstances.
The CRA was meant to keep banks from blindly discriminating against poor communities, but did not legally mandate they take actions that would harm their own operations. I believe studies have shown that lending in poor or minority communities isn't inherently any more risky when proper standards are in place.

I also remember reading a study that showed lending enhanced by CRA wasn't found to be any more risky than prime.

Second, Bill Clinton further liberalized the CRA and signed a bill to repeal the Glass-Stengal Act. This Act was put in place in the 1930s following the bank failures during the Great Depression. It was designed to keep banks out of the speculation business.
The repeal of parts of the Glass-Sengal Act was sponsored by three Republicans. I think Clinton struck a deal that he would sign it, and the Republicans agreed to let Clinton expand the reach of the CRA. I'm not sure how this is further liberalizing the CRA though, unless you think discrimination based on where someone lives is a good thing for development.

Third, George Bush proposed major changes in the CRA, FMAE and FMAC in 2003 that would have tightened requirements for these business loans and subprime home mortgages. The vote went along party lines, the Democrats won and the proposed changes were defeated.

I think you're mixing the 2003 and 2005 proposals. In 2003 given the scandals Bush wanted to move oversight to the Treasury department. Democrats didn't think there was economic risk and therefore didn't see the value. Being politicians I'm sure they didn't want to loose their oversight privileges as well. Frank has openly said this was a mistake.

I do question how serious Bush was about reform though. Considering in 2003 and 2005 the GOP was in control of Congress you'd think they could have gotten something passed if they really wanted.

Additionally, you can't ignore other regulatory changes to the SEC made in 2004 under Bush that allowed all the giant banks to increase their leverage as well. From everything I've read, this pretty much created a pump between F/F and the banks to crank out loans, obfuscate all the risk and make a hell of a lot of money in the process.

Why does Spence want to keep blaming Bush?
Because you just read what you want to hear. I've been pretty consistent that this was a systemic problem. Both sides have pushed for more lending to poor and minority communities. Both sides have opposed regulation and reform.

-spence

Spence -

"Do we really think that a hallmark of Republican party -- lower regulation -- is the answer to preventing a similar calamity with our economy? I'm not sure I know anyone who seriously thinks so."

Spence, I don't think less regulation is what's needed. We need regulation to prevent financial institutions from selling mortgage-backed cecurities the way it was done before.

But your memory is unbelievably selective. Part o fthe problem was subprime mortgages. I posted a link to a bill that the GOP proposed that would have tightened the controls a bit at Fannie and Freddie. That bill was defeated by the Democrats. Therefore, it seems to me that "less regulation" isn't an ide athat the GOP has a monopoly on.

You keep bending over like a contortionist to avoid criticizing Obama. Obama has never conceded that the Democratic party did anything to cause the recession. All he does is blame Democrats. Yet you do admit that both sides were at fault. If you think the Democrats were partly to blame, but Obama says it was all the GOP's fault, why can't you criticize Obama for his stance?

Answer? You are not rational. There is no fairy tale or excuse you won't hang your hat on to avoid critizing the Messiah. Obama's party controlled the legislature since January 2006, yet in his inauguration speech, all he did was blame Bush.

Guys, does anyone think the people who signed up for these mortgages should be the ones to blame the most? I'm sick of hearing people saying they were mislead and they didn't know what they were signing up for. They are the ones most at fault. When you sign something, you have to do some due diligence and look into what you are signing. I bought my current house during the high peak of the market, I looked at what I made and what I could afford. Could I have bought a bigger house then? sure I could have but I didn’t get greedy and take a gamble on an adjustable rate staying where it was. I went with a fixed rate and a monthly payment I could afford (even re-financed since to a much lower fixed rate). Many people these days don’t take ownership for their actions and when things change (adjustable interest rates going up for example), they cry poor me and blame someone else (mostly looking to the Government to fix their problem). If they took 20 minutes to read about adjustable rates and how it effects monthly payments they should have been able to figure out the enormous risk. We wouldn’t need regulation and Government intervention if it weren’t for all these idiots running around buying houses they can’t afford. Since we have too many people in this Country without a clue, we now need the Government to step in once again and manage the rules. What a shame.
Am I being unreasonable here?

Guys, does anyone think the people who signed up for these mortgages should be the ones to blame the most? I'm sick of hearing people saying they were mislead and they didn't know what they were signing up for. They are the ones most at fault. When you sign something, you have to do some due diligence and look into what you are signing. I bought my current house during the high peak of the market, I looked at what I made and what I could afford. Could I have bought a bigger house then? sure I could have but I didn’t get greedy and take a gamble on an adjustable rate staying where it was. I went with a fixed rate and a monthly payment I could afford (even re-financed since to a much lower fixed rate). Many people these days don’t take ownership for their actions and when things change (adjustable interest rates going up for example), they cry poor me and blame someone else (mostly looking to the Government to fix their problem). If they took 20 minutes to read about adjustable rates and how it effects monthly payments they should have been able to figure out the enormous risk. We wouldn’t need regulation and Government intervention if it weren’t for all these idiots running around buying houses they can’t afford. Since we have too many people in this Country without a clue, we now need the Government to step in once again and manage the rules. What a shame.
Am I being unreasonable here?

I agree that the folks who took out these mortgages bear a big part of the blame. However, part of the problem wasn't just the mortgages themselves, but the complex financial instruments that were created to bundle and sell these mortgages (credit default swaps, collateralized debt obligations, really complicated stuff), and the homeowners obviously had no idea this was going on.

What ticks me off is that these people acted stupidly, and now there are govt programs to modify those loans so those idiots can afford them. I get no pleasure from seeing someone lose their house. That being said, it's not fair that those who did the right thing still have to work our fingers to the bone to stay in our homes, and those that acted stupidly get rewarded.

Many people these days don’t take ownership for their actions and when things change (adjustable interest rates going up for example), they cry poor me and blame someone else (mostly looking to the Government to fix their problem).

You just summed up the liberal agenda in a nutshell. As long as someone belongs to a protected class of "victims", they are not responsible for their actions.

Instead, Democrats create massive entitlement programs for these "victims" that must be paid for by those who did absolutely nothing wrong. Then when the next election comes around, democrats (and the media, with the exception of one TV network) tell those victims that the scary republicans want to take away their welfare, so they better get out and vote democrat.

It's a very effcetive political strategy. It's so effective that our culture takes it for granted that liberals care more about the poor than conservatives. That's despite the fact that (1) study after study shows that conservatives give more time and money to charity than liberals, and (2) conservatives want poor people to become successful; liberals want the poor to stay poor, so that there is a permanent underclasss (of democrat voters) that's addicted to the welfare that liberals promise. The last thing that liberals want is for poor people to get wealthy, because if they did...they'd vote Republican!

Spence, I don't think less regulation is what's needed. We need regulation to prevent financial institutions from selling mortgage-backed cecurities the way it was done before.
I believe the Democrats have delivered on a lot of this this summer.

But your memory is unbelievably selective. Part o fthe problem was subprime mortgages. I posted a link to a bill that the GOP proposed that would have tightened the controls a bit at Fannie and Freddie. That bill was defeated by the Democrats. Therefore, it seems to me that "less regulation" isn't an ide athat the GOP has a monopoly on.
The 2005 proposal was abandoned. By what I've read the Dems on the Senate committee objected to a cap on the size of Fannie/Freddie holding but agreed to the increased oversight. Instead of negotiating the issue the Senate Republicans dropped it rather than take to the floor.

Considering that Bush had a majority in the Senate and the House, it would seem odd that they would drop such a substantial issue as they could have clearly gotten something passed had they wanted.

The only reasonable analysis is that both sides still didn't get it.



You keep bending over like a contortionist to avoid criticizing Obama. Obama has never conceded that the Democratic party did anything to cause the recession. All he does is blame Democrats.
I think you meant Republicans.


Yet you do admit that both sides were at fault. If you think the Democrats were partly to blame, but Obama says it was all the GOP's fault, why can't you criticize Obama for his stance?
You need to post some quotes in context to make an accusation like this. Considering your propensity to just regurgitate baseless talking points I'm not sure I'd trust any of your assertions.

Answer? You are not rational. There is no fairy tale or excuse you won't hang your hat on to avoid critizing the Messiah. Obama's party controlled the legislature since January 2006, yet in his inauguration speech, all he did was blame Bush.

And there you go again...

-spence

You need to post some quotes in context to make an accusation like this. Considering your propensity to just regurgitate baseless talking points I'm not sure I'd trust any of your assertions.

-spence

OK Spence, let's be really, really clear. You're going to honestly claim that you have no idea what I'm talking about, when I say that Obama has repeatedly blamed Republicans for the economic situation? You have never, not once, heard Obama say that the GOP "drove the car into the ditch"?

Spence, go ahead and google this...

" Obama republicans drove car into ditch", and see how many hits you get.

Obama: GOP Drove The Country Into A Ditch. 'Now They Want The Keys Back' (VIDEO) | TPM LiveWire (http://tpmlivewire.talkingpointsmemo.com/2010/05/obama-gop-drove-the-country-into-a-ditch-now-they-want-the-keys-back-video.php/)

OK, Spence. Time to see if you have a shred of intellectual honesty. Since you claim that both sides are to blame (and I agree), and you now know that Obama blames only the GOP (unless syou can show me a link where admits that liberal policies were also at fault), what do you think? What do you think of Obama putting all the blame on the GOP?

Please Spence, don't say "that's what politicians do", OK? Because Obama, remember, campaigned on some vague notion called "change". So he can't do that stuff and say it's "just politics", because he said he'd be different.

Good luck with this one. And good luck convincing yourself that you didn't already know what I was talking about.

OK Spence, let's be really, really clear. You're going to honestly claim that you have no idea what I'm talking about, when I say that Obama has repeatedly blamed Republicans for the economic situation? You have never, not once, heard Obama say that the GOP "drove the car into the ditch"?

Spence, go ahead and google this...

" Obama republicans drove car into ditch", and see how many hits you get.

Obama: GOP Drove The Country Into A Ditch. 'Now They Want The Keys Back' (VIDEO) | TPM LiveWire (http://tpmlivewire.talkingpointsmemo.com/2010/05/obama-gop-drove-the-country-into-a-ditch-now-they-want-the-keys-back-video.php/)

OK, Spence. Time to see if you have a shred of intellectual honesty. Since you claim that both sides are to blame (and I agree), and you now know that Obama blames only the GOP (unless syou can show me a link where admits that liberal policies were also at fault), what do you think? What do you think of Obama putting all the blame on the GOP?

Please Spence, don't say "that's what politicians do", OK? Because Obama, remember, campaigned on some vague notion called "change". So he can't do that stuff and say it's "just politics", because he said he'd be different.

Good luck with this one. And good luck convincing yourself that you didn't already know what I was talking about.

Finally Spence, you claim to not understand why, in 2005, the GOP couldn't get the regulation of Fannie and Freddie through, since they had the majority? The Dems fillibustered it, as I pointed out. And at the time, the loons in the media weren't calling the Democrats the "party of no", back then it was patriotic to fillibuster. Now it's obstructionist.

The repeal of parts of the Glass-Sengal Act was sponsored by three Republicans. I think Clinton struck a deal that he would sign it, and the Republicans agreed to let Clinton expand the reach of the CRA. I'm not sure how this is further liberalizing the CRA though, unless you think discrimination based on where someone lives is a good thing for development.



-spence

Phil Gramm, a democrat, was responsible for pushing this through. See my link above.

Phil Gramm, a democrat, was responsible for pushing this through. See my link above.

Huh? He switched parties in 1983.
Posted from my iPhone/Mobile device

Guess I am late to the thread.

In my opinion, which I'd be happy to back up with a !@#$load of facts :rotf2:, President Obama did indeed inherit this mess.

Culprits: Jimmy Carter, Bill Clinton and Alan Greenspan.

Guess I am late to the thread.

In my opinion, which I'd be happy to back up with a !@#$load of facts :rotf2:, President Obama did indeed inherit this mess.

Culprits: Jimmy Carter, Bill Clinton and Alan Greenspan.

great article:

January 11, 2011

Let Them Eat Widescreen TVs and I-Phones
Monty Pelerin

The disparities in income between the lower and middle income Americans and those doing well continues to widen. In addition to the debt time-bomb, these income disparities represent another potential explosion.

Ambrose Evans Pritchard provides some data:
The retail data can be quirky but it fits in with everything else we know. The numbers of people on food stamps have reached 43.2m, an all time-high of 14pc of the population. Recipients receive debit cards - not stamps -- currently worth about $140 a month under President Obama's stimulus package.

The actual number of jobs contracted by 260,000 to 153,690,000. The "labour participation rate" for working-age men over 20 dropped to 73.6pc, the lowest the since the data series began in 1948. My guess is that this figure exceeds the average for the Great Depression (minus the cruellest year of 1932).

The US Conference of Mayors said visits to soup kitchens are up 24pc this year. There are 643,000 people needing shelter each night.

Jobs data released on Friday was again shocking. The only the reason that headline unemployment fell to 9.4pc was that so many people dropped out of the system altogether.

This schism continues to widen in American society. The well-off are doing just fine thank you. Many of the rest continue to descend into the abyss of joblessness, hopelessness, homelessness, poverty and bankruptcy. Social cohesion will not hold on our current path.

A thesis that I offered several years ago is that the credit expansion was a deliberate attempt to cover up America's structural decline. Ironically, by not facing up to the structural and incentive problems ten to twenty years ago when they were tractable (economically if not politically), the political elite created this current crisis. It was not their intent to create a crisis, merely to avoid hard decisions. They did so by "kicking the can down the road" using credit as their vehicle.

This "solution" enabled people to live beyond their means. "Let them buy widescreen TVs and I-phones" was the modern version of "bread and circuses." Pritchard points out a similar view:

Raghuram Rajan, the IMF's former chief economist, argues that the subprime debt build-up was an attempt - "whether carefully planned or the path of least resistance" - to disguise stagnating incomes and to buy off the poor.

"The inevitable bill could be postponed into the future. Cynical as it might seem, easy credit has been used throughout history as a palliative by governments that are unable to address the deeper anxieties of the middle class directly," he said.

Now, "let them eat widescreen TVs and I-phones" appears to be the solution. It is equivalent to the "let them eat cake" remedy, with the same potential ending.

The clock is ticking on the debt burden. It is only a matter of time before we are openly recognized as just another version, albeit a very large one, of the PIIGS. Just as important, however, is the ticking clock on social cohesion in this country.

The sense of entitlement cultivated by government over the years may be as intractable as the debt problem. It has corrupted the spirits and souls of men. It has destroyed the family structure. It has left a generation or two without skills and no reason to obtain them. It has transformed human beings into zombie-like creatures with little purpose in their lives. Removing them from the government teat is equivalent of separating a new-born from its mother.

There is no way out, as Pritchard alludes:

There is no easy solution to creeping depression in America and swathes of the Old World. A Keynesian `New Deal' of borrowing on the bond markets to build roads, bridges, solar farms, or nuclear power stations to soak up the army of unemployed is not a credible option in our new age of sovereign debt jitters. The fiscal card is played out.


The government is insolvent, both financially and morally.

great article:
A thesis that I offered several years ago is that the credit expansion was a deliberate attempt to cover up America's structural decline. Ironically, by not facing up to the structural and incentive problems ten to twenty years ago when they were tractable (economically if not politically), the political elite created this current crisis. It was not their intent to create a crisis, merely to avoid hard decisions. They did so by "kicking the can down the road" using credit as their vehicle.


I don't think this entirely the case. Parts of it ring true.

History will show (has shown?) that Alan Greenspan's extraodinarily accommodative monetary policy was the fuel for the crisis (which, by the way, is not over). The dry tinder poised to set off the fuel was a dumbing down of lending standards via "Affordable Housing" goals, starting with the enforcement of the Community Reinvestment Act late in Bush I, and then even more aggressively through Clinton's term.

CRA and affordable housing ultimately led to bad loans being made. Low interest rates led to a lot of bad loans being made. And, low interest rates led to massive leverage in the corporate sector as well. But it started with housing and consumer spending.

As far as the Federal Reserve (which is neither, by the way), people have been trying to figure out why Alan Greenspan acted so recklessly, bringing interest rates to near zero percent from 2001-2004, even as the recession ended in 2001. Did he abandon his free market beliefs? Was he just plain dumb? Or was there another reason?

John Williams of Shadowstats posits an interesting theory, and it is worth posting here:



Shadow Government Statistics : Home Page (http://www.shadowstats.com)

Crises Brewed by Federal Government and Federal Reserve Malfeasance.

The crises have been generated out of and are centered on the United States financial system, triggered by the collapse of debt excesses actively encouraged by the Greenspan Federal Reserve. Recognizing that the U.S. economy was sagging under the weight of structural changes created by government trade, regulatory and social policies — policies that limited real consumer income growth — Mr. Greenspan played along with the political and banking systems. He made policy decisions to steal economic activity from the future, fueling economic growth of the last decade largely through debt expansion. The Greenspan Fed pushed for ever-greater systemic leverage, including the happy acceptance of new financial products, which included instruments of mis-packaged lending risks, designed for consumption by global entities that openly did not understand the nature of the risks being taken. Complicit in this broad malfeasance was the U.S. government, including both major political parties in successive Administrations and Congresses.

As with consumers, the federal government could not make ends meet while appeasing that portion of the electorate that could be kept docile by ever-expanding government programs and increasing government spending. The solution was ever-expanding federal debt and deficits.

Purportedly, it was Arthur Burns, Fed Chairman under Richard Nixon, who first offered the advice that helped to guide Alan Greenspan and a number of Administrations. The gist of the wisdom imparted was that if you ran into problems, you could ignore the budget deficit and the dollar. Ignoring them did not matter, because doing so would not cost you any votes.

Back in 2005, I raised the issue of a then-inevitable U.S. hyperinflation with an advisor to both the Bush Administration and Fed Chairman Greenspan. I was told simply that "It’s too far into the future to worry about."

Indeed, pushing the big problems into the future appears to have been the working strategy for both the Fed and recent Administrations. Yet, the U.S. dollar and the budget deficit do matter, and the future is at hand. The day of ultimate financial reckoning has arrived, and it is playing out.




Takeaway: Alan Greenspan acted the way he did to foil the encroachment of increasing government regulation that was, in his mind, stifling economic growth.

"It's too far into the future to worry about."

And there in lies the problem.

Politicians only look out over 4 years
and what they need to do to get re-elected,
afraid to take bold and courageous stands for the benefit of the country.

Not even a 5 year plan. :(

[COLOR="Red"]Recognizing that the U.S. economy was sagging under the weight of structural changes created by government trade, regulatory and social policies — policies that limited real consumer income growth


ask yourself: has the "weight of structural changes created by government trade, regulatory and social policies —
increased...or decreased.....and what does that mean for the future and real consumer income growth :confused:

We can definitely show that real incomes are down ... if you're using a true cost deflator (i.e., measure of inflation).

The CPI as published by BLS sure as hell ain't it.

http://i215.photobucket.com/albums/cc10/fishweewee/hyperinflation-5.gif

The dry tinder poised to set off the fuel was a dumbing down of lending standards via "Affordable Housing" goals, starting with the enforcement of the Community Reinvestment Act late in Bush I, and then even more aggressively through Clinton's term.

CRA and affordable housing ultimately led to bad loans being made. Low interest rates led to a lot of bad loans being made. And, low interest rates led to massive leverage in the corporate sector as well. But it started with housing and consumer spending.
Here's the Barney Frank response to this point...

I've not found a video of the testimony to assess the context, but I do know that David John is a die hard conservative in the Heritage Foundation. I'd like to see a detailed analysis of this...

Conservatives who push an anti-regulatory agenda on America are trying to avoid blame for the financial crisis brought about by that lack of regulation.

Turning reality on its head, they are claiming that it was caused by too much government intervention -- specifically liberal opposition to unfair discrimination in bank lending. In their myth, the Community Reinvestment Act, enacted in 1977, forced institutions to make the irresponsible subprime loans that are a major factor in this crisis.

In fact, the CRA mandates no such thing, and covers only those regulated banks which were not the institutions which made the subprime loans. Every bank regulator, including those in the Bush administration, repudiated this idea.

But myths die hard when they are in the service of an ideology. It’s therefore important to note that in the Financial Services Committee hearing on how best to protect consumers from unfair financial practices, the witness selected by the Republican members of the committee, from the conservative Heritage foundation, reaffirmed his repudiation of this fallacy.

Congressman Brad Miller of North Carolina, who has done a good deal of research on this subject and who has been a leader in opposing unfair lending practices, asked the Republicans’ witness, David John, if he agreed with a statement he had made in a previous hearing, in which John said that the CRA had a negligible effect on the financial crisis.

John’s answer – “Absolutely.”

See the entire exchange below.



Mr. Miller: Thank you Mr. Chairman.

Mr. Castle said in his opening statement that the worst sub-prime loans, the bulk of the bad sub-prime loans, were not made by depository institutions that were fairly closely regulated but by non-depository institutions, independent lenders.

Mr. John, you testified earlier, a few months ago, before the Investigation and Oversight Subcommittee of the Science and Technology Committee which I chair, on the role and ne issue that came up was the role of the Community Reinvestment Act. Mr. Castle is right. A relatively small number of the bad sub-prime loans were made by depository institutions subject to the Community Reinvestment Act, and in fact, a study by the Federal Reserve Board found that only about 6% of all the sub-prime loans were made in “assessment” areas, or in the neighborhoods where CRA encouraged lending, or to borrowers that CRA encouraged lending to.

You agreed then that CRA had a negligible effect on the sub-prime crisis and the financial crisis generally. Is that still your view?



Mr. John : Absolutely.

-spence

been waiting for a follow up to this...not sure I've seen the loans as a result of the expansion of the CRA cited as the cause of the crash but the expansion of the CRA is certainly the turning point that can be cited as the beginning of government forcing banks to abandon long held lending practices in order to expand home ownership and in order to not be punished by the government...lenders became creative and translated that to the rest of the market, the government was essentially insuring their risk.....Fannie and Freddie became a repository for questionable loans...the sheer number of loan writing institutions and the risky instruments grew exponentially out of that...

as your friend Thomas Sowell said recently...banks were doing fine for nearly a hundred years prior with established lending practices...

"Prior to the rapid escalation of home prices, federal bank regulators began using the 1977 Community Reinvestment Act (CRA) to press for racial equality. The issue was the statistical difference in approval rates, not a claim that most blacks could not get mortgage loans. New regulations required that the banks not just look for qualified buyers, but make a requisite number of loans to low and moderate income buyers (quotas). Then, when legislation was proposed in 1999 to permit banks to diversify into selling investment securities, the Clinton White House urged "banks given unsatisfactory ratings under the CRA be prohibited from enjoying the new diversification privileges." The Congress happily obliged. Another factor was HUD's beginning legal action in 1993 against mortgage bankers that declined a higher percentage of minority applicants. HUD also set a 42% target for Freddie Mac and Fannie Mae (FM & FM) to buy mortgages for people whose income were less than an area's median. Banks, sensing that FM & FM were implicitly guaranteed, where only too happy to not only issue these mortgages, but to buy FM & FM debt as well. (In 2003, about 3,000 banks held FM & FM debt for 100% of their capital requirements.) The "icing" was FM & FM's creative accounting that misclassified $11 trillion of sub-prime assets. Then in 2002, Bush II urged Congress to pass the American Dream Down Payment Act, subsidizing down payments of prospective buyers with incomes below a certain level.

Sowell has now set the stage, and readers have no problem understanding what happened. Interest-only teaser rate ARMs rose to counter rising prices and down-payments. By 2005, interest-only mortgages had risen to 31% of all new mortgages, up from less than 10% in 2002. In Denver, Seattle, and Phoenix it was 40%, and 66% in the S.F. Bay area. Speculators jumped into the fray (28% in 2005, 22% in 2006) adding further fuel to the fire, and happy homeowners took out $1.13 trillion in home equity loans in 2007. However, the storm on the horizon was the rise of interest rates to avoid inflation (1% in 2004, to 5.25% in 2006), making monthly payments more expensive and reducing the demand and prices for housing, and everyone takes a loss - including the banks (about $40,000 per foreclosed house), and especially speculators, minorities, and those with ARMs and interest-only loans. (Interesting Note: As of October, 2008, 7% of Bank of America's mortgages were CRA lendings, and 24% of its defaults.) Bailing out FM & FM, with their sub-prime laden inventories, cost the government more than that for all the private banks put together.

Sowell also has no problems believing that many sub-prime loans were foisted upon unaware and uninformed buyers by predatory lenders - especially involving contracts for repairs or remodeling on credit.

Bottom Line: The law of unintended consequences strikes again - helping minorities was a good intention, but backfired. We're all to blame, though admittedly some more than others. Deregulation was not the problem, rather misguided regulation.

the government is now doing the same thing for healthcare:uhuh:

Here's the Barney Frank response to this point...

I've not found a video of the testimony to assess the context, but I do know that David John is a die hard conservative in the Heritage Foundation. I'd like to see a detailed analysis of this...



-spence

Barney is full of mancustard. As one of the fiercest proponents and protectors of affordable housing, he of course has a vested interest in passing the blame.

The CRA itself was a fairly innocuous law signed by Jimmy Carter in '77. It wasn't until the Boston Federal Reserve came out with a flawed study in 1992 (late in Bush I's term) that banks were discriminating against Black people re: home loans, that it began to be enforced.

There were a slew of lawsuits that accelerated after that Fed report came out, under the auspices of the CRA.

For example, AG Reno (Clinton I) sued several banks in 1993 (First National Bank of Vicksburg and Blackpipe State Bank for racial discrimination and in 1994 sued Chevy Chase Federal Savings Bank.

Furthermore, the fed was under pressure to use CRA as a stick for banks seeking to open new branches and ATM machines and merge with other banks. For example, in 1993, the federal reserve denied an application by Shawmut to acquire New Dartmouth Bank. The transaction was only allowed to proceed after it paid a million fine to compensate minority applicants who may have been denied loans. This arrangement was squeezed out of the bank by AG Reno.

And so on (I won't list all the lawsuits and enforcement actions here).

Most people don't know this, but in 1995, at the behest of Pres Clinton, CRA regulations were revamped to give it more teeth.

The rules became more performance-based and established clearer and more objective performance standards for determining whether a bank was in compliance with CRA standards. “The new rules went into effect January 31, 1995 and featured: strictly numerical assessments to get a satisfactory CRA rating; using federal home-loan data broken down by neighborhood, income group, and race; encouraging community groups [like ACORN – FWW] to complain when banks were not loaning enough to specified neighborhood, income group, and race; allowing community groups that marketed loans to target to groups to collect a fee from the banks (as of 2000 $9.5 billion had been paid to such nonprofit groups). The new rules, during a time when many banks were merging and needed to pass the CRA review process to do so, substantially increased the number and aggregate amount of loans to low- and moderate-income borrowers for home loans, some of which were ‘risky mortgages.’” Clinton Administration Changes of 1995 (http://www.homesalesnetwork.com/article/details/213)

I could on and on and on ... but the enforcement of CRA, that really began in earnest with Clinton, basically bullied banks into lending to deadbeats.

I could on and on and on ... but the enforcement of CRA, that really began in earnest with Clinton, basically bullied banks into lending to deadbeats.
I'm not sure the data really demonstrates this though. Clearly that's not the position of the Heritage Foundation expert I quoted above. My assumption is that he's undertaken a very thorough and conservative analysis of the situation.

There are a good number of articles by economists (i.e. not pundits or pundit economists :hihi:) that basically come to the same conclusion. That the CRA hasn't changed much since 1995, yet the sub-prime issue didn't inflate until a decade later, that the default rate of sub-prime loans originated under CRA regulation was about the same as prime, and that a huge % of sub-prime lending was actually made by banks outside of CRA regulation.

Sowell is being a bit misleading when he tosses out numbers like "HUD also set a 42% target for Freddie Mac and Fannie Mae (FM & FM) to buy mortgages for people whose income were less than an area's median."

This was certainly true from 1997-2000, although lending "below median" is a pretty big group and doesn't necessarily indicate sub-prime borrowers. The target for those actually considered "low income" was only 14% and nothing in the CRA stipulates a bank has to knowingly make a bad loan.

Interestingly enough, both these numbers were actually raised in 2001 (50% and 20% respectively) while Denny Hastert was Speaker.

Further, the act that started these targets was put into place in 1992. I believe the general idea is to keep the GSE's aligned with what they believe the market will actually be doing over the coming few years. In other words, it's reactive rather than proactive.

The net being that these regulations have been around for a while, but didn't seem to cause any problems until just recently. While the CRA may certainly be a factor -- as any regulation impacting the mortgage market would be -- it doesn't seem to deserve the "root cause" status that pundits like to give it.

Sowell is going to oppose anything that smells of free market intervention, although I'd note that the first commercial bank in the USA was a government run institution :soon:

-spence

The net being that these regulations have been around for a while, but didn't seem to cause any problems until just recently.

Spence, that is consistent with what I've been saying.

1) The crisis had its roots in the dumbing down of lending standards via CRA and broader "affordable housing" policies.

2) Low interest rates, beginning in 2001, provided the fuel for the underwriting.

CRA enforcement and amendments were only part of the hilarity that ensued prior to the housing bubble. You allude to HUD quotas (which were ultimately adopted by GSE's after HUD established them, not the other way around as you indicate).

By the way, I am an economist and do my own research.

But it doesn't take a rocket scientist to read a chart. Mortgage originations exploded fivefold after the federal reserve dropped rates to imprudently low levels from 2001-2004, even though the economy was recovering by late 2001. The data is publicly available if you want to verify.

http://i215.photobucket.com/albums/cc10/fishweewee/OriginationsvsRates.png

Spence, that is consistent with what I've been saying.

1) The crisis had its roots in the dumbing down of lending standards via CRA and broader "affordable housing" policies.

2) Low interest rates, beginning in 2001, provided the fuel for the underwriting.

CRA enforcement and amendments were only part of the hilarity that ensued prior to the housing bubble. You allude to HUD quotas (which were ultimately adopted by GSE's after HUD established them, not the other way around as you indicate).

By the way, I am an economist and do my own research.

But it doesn't take a rocket scientist to read a chart. Mortgage originations exploded fivefold after the federal reserve dropped rates to imprudently low levels from 2001-2004, even though the economy was recovering by late 2001. The data is publicly available if you want to verify.

I'm well aware of your background.

But all the chart indicates is the relationship between lending and interest rates. This relationship seems pretty obvious. The issue at hand is how much the CRA enabled this growth. Most of the non-political analysis I've read doesn't seem to support the argument that it had a major impact in new loans or defaults.

And my statement on HUD quotes isn't as you indicate. Reading the actual HUD charter, it looks like they're set in anticipation of where the market is going and then set upon the GSE's. My interpretation could be wrong though as I've just read the one HUD document and it's not completely clear.

-spence

I'm well aware of your background.

But all the chart indicates is the relationship between lending and interest rates. This relationship seems pretty obvious. The issue at hand is how much the CRA enabled this growth. Most of the non-political analysis I've read doesn't seem to support the argument that it had a major impact in new loans or defaults.
-spence

Spence, most of the analysis is pretty straightforward and implicates declining underwriting standards. I'll save you the headache of going through all the federal reserve documents. Here is a snapshot of what happened.

Issuance by year, comparing 2006 vs. 2001:

2001: Traditional 30 year fixed rate mortgages = 57%
2001: Subprime = 7%
2001: Non-traditional loans: 3%

2006: Traditional 30 year fixed rate mortgages = 33%
2006: Subprime =19%
2006: Non-traditional: 14%

This is common-sense stuff. Remember that overall issuance quintupled from 2000. The growing mix of risky loans (as % of total underwriting) on sharply rising loan issuance was a recipe for disaster, as evidenced by sharply deteriorating loan delinquencies after 2004.

And my statement on HUD quotes isn't as you indicate. Reading the actual HUD charter, it looks like they're set in anticipation of where the market is going and then set upon the GSE's. My interpretation could be wrong though as I've just read the one HUD document and it's not completely clear.

-spence

The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ("GSE Act") was signed into law on October 28, 1992. The timing is interesting, given the October 8, 1992 Boston Federal Reserve study which purportedly showed lending discrimination against blacks.

Fannie and Freddie adopted affordable housing missions ... in, surprise surprise, 1992.



http://sec.gov/Archives/edgar/data/310522/000095013303001102/w82877exv3w1.htm

Not later than 4 months after October 28, 1992, the corporation shall appoint an Affordable Housing Advisory Council to advise the corporation regarding possible methods for promoting affordable housing for low- and moderate-income families.

The fleshing out of affordable housing policy implementation, apart from ad hoc DoJ enforcement actions, began in earnest in 1994 and kept going until 2007.

http://www.huduser.org/publications/pdf/gse.pdf

http://i215.photobucket.com/albums/cc10/fishweewee/GSE1992.png

We're going to fast forward through a LOT of stuff here, but by 1999, not only were banks bullied into lending to deadbeats, but the GSE's were as well, with very specific goals.


Fannie Mae Eases Credit To Aid Mortgage Lending - The New York Times (http://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage-lending.html?pagewanted=1&pagewanted=print)


September 30, 1999
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
WASHINGTON, Sept. 29— In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

double tap.

All the data you posted seems to validate is that a sub-prime explosion fueled by cheap money was a primary driver of the mortgage crisis.

And still, there's nothing that indicates the CRA was behind this, which is the context for this discussion, that the recession was caused by Liberal policies.

In fact, as I've mentioned several times now, conservative economists like David John have reported that the bulk of sub-prime loans didn't originate from CRA influenced areas nor did they suffer higher default rates.

Here's yet another analysis from someone with far better credentials than myself :hihi:

Federal Reserve governor Randall Kroszner, a conservative economist on leave from a teaching post at the University of Chicago Booth Graduate School of Business, says the Community Reinvestment Act isn’t to blame for the subprime mess, despite some accusations to the contrary.

“First, only a small portion of subprime mortgage originations are related to the CRA. Second, CRA- related loans appear to perform comparably to other types of subprime loans. Taken together… we believe that the available evidence runs counter to the contention that the CRA contributed in any substantive way to the current mortgage crisis,” he said in a speech today in Washington.

The Community Reinvestment Act, which dates to the 1970s, was crafted to combat discrimination and red-lining. It requires regulators to press banks to lend to low-income and minority neighborhoods. Kroszner’s speech summarized research the Fed has been doing on two basic questions: (1) What share of subprime loans were related to CRA? Answer: “Loans that are the focus of the CRA represent a very small portion of the subprime lending market, casting considerable doubt on the potential contribution that the law could have made to the subprime mortgage crisis.” (2) How have CRA-related subprime loans performed relative to other loans. Answer: “[D]elinquency rates were high in all neighborhood income groups, and that CRA-related subprime loans performed in a comparable manner to other subprime loans.”

Fed economists found that about 60% of higher-priced loan originations — the technical definition of subrpime — went to middle- or higher-income borrowers or neighborhoods who aren’t targeted by CRA. More than 20% of the higher-priced loans were extended to lower-income borrowers or borrowers in lower-income areas by institutions that aren’t banks — and aren’t covered by CRA.

The “striking result,” Kroszner said: “Only 6% of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes.”

“This result undermines the assertion by critics of the potential for a substantial role for the CRA in the subprime crisis. In other words, the very small share of all higher-priced loan originations that can reasonably be attributed to the CRA makes it hard to imagine how this law could have contributed in any meaningful way to the current subprime crisis.” Banks can also meet CRA obligations by buying loans from mortgage brokers, he noted. But less than 2% of the higher-priced loans (those would help banks meet CRA requirements) sold by independent mortgage companies were purchased by CRA-covered institutions.

Source: Fed’s Kroszner: Don’t Blame CRA - Real Time Economics - WSJ (http://blogs.wsj.com/economics/2008/12/03/feds-kroszner-defends-community-reinvestment-act/)

-spence

for the thousandth time Spence, it was not the CRA loans themselves but the culture created and fueled by the pracitces forced by government mandates and requirements....and threats....

There was another major change that has gotten little attention. Back in 1992, a Boston Federal Reserve study claimed to find evidence of racial discrimination -- claiming that minorities got denied mortgages at higher rates than whites even after important factors such as creditworthiness were accounted for. The data used in the study were riddled with typos and other serious errors. For example, of the 3,000 mortgages studied, 50 of the loans supposedly had the banks paying interest to the borrowers, 500 of the mortgages were not even in the data set from which the data was supposedly obtained, and some mortgages were supposedly approved for individuals who had negative net worth in the millions of dollars. When those mistakes were corrected, no evidence of discrimination remained.

Professor Liebowitz noted that Lawrence Lindsey, then a member of the Federal Reserve’s Board of Governors, "was warned about these errors in this study but the Fed ignored them."

The Boston Fed still used the study to produce a manual for mortgage lenders that said: "discrimination may be observed when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower–income minority applicants."

So what were some of the "outdated" criteria?

Credit History: Lack of credit history should not be seen as a negative factor.... In reviewing past credit problems, lenders should be willing to consider extenuating circumstances. For lower–income applicants in particular, unforeseen expenses can have a disproportionate effect on an otherwise positive credit record. In these instances, paying off past bad debts or establishing a regular repayment schedule with creditors may demonstrate a willingness and ability to resolve debts....

Down Payment and Closing Costs: Accumulating enough savings to cover the various costs associated with a mortgage loan is often a significant barrier to homeownership by lower-income applicants. Lenders may wish to allow gifts, grants, or loans from relatives, nonprofit organizations, or municipal agencies to cover part of these costs. . . .

Sources of Income: In addition to primary employment income, Fannie Mae and Freddie Mac will accept the following as valid income sources: overtime and part–time work, second jobs (including seasonal work), retirement and Social Security income, alimony, child support, Veterans Administration (VA) benefits, welfare payments, and unemployment benefits.Accepting these new criteria was hardly voluntary. The Fed warned the banks:

"Did You Know? Failure to comply with the Equal Credit Opportunity Act or Regulation B can subject a financial institution to civil liability for actual and punitive damages in individual or class actions. Liability for punitive damages can be as much as $10,000 in individual actions and the lesser of $500,000 or 1 percent of the creditor’s net worth in class actions."

And mortgage lenders followed these rules. Liebowitz explained that these changing financial standards "encouraged speculation -- potential homeowners could gamble on the price of homes going up without using any of their own money. Remember, 25 percent of homes being purchased were purchased for speculation."

Others dispute Liebowitz's claim that these changes in rules mattered. For example, James Carr notes that it "may seem on paper that these are a curious thing to count [welfare and unemployment benefits] as income, but they simply didn’t matter."

One lender singled out by Fannie Mae for special praise for following these new criteria was Countrywide:

Countrywide tends to follow the most flexible underwriting criteria permitted under [Government Sponsored Enterprises] and FHA guidelines. Because Fannie Mae and Freddie Mac tend to give their best lenders access to the most flexible underwriting criteria, Countrywide benefits from its status as one of the largest originators of mortgage loans and one of the largest participants in the [Government Sponsored Enterprises] programs. When necessary — in cases where applicants have no established credit history, for example — Countrywide uses nontraditional credit, a practice now accepted by the [Government Sponsored Enterprises].

Or take a 1998 sales pitch from Bear Stearns, which also followed the Boston Fed manual:

Credit scores. While credit scores can be an analytical tool with conforming loans, their effectiveness is limited with [Community Reinvestment Act] loans. Unfortunately, [Community Reinvestment Act] loans do not fit neatly into the standard credit score framework… Do we automatically exclude or severely discount … loans [with poor credit scores]? Absolutely not.

Given these lending practices mandated by the Fed and encouraged by Fannie Mae and Freddie Mac, the resulting financial problems for financial institutions such as Countrywide and Bear Stearns are not too surprising.

Liebowitz said "such reckless behavior by [Fannie Mae and Freddie Mac] has lead to their financial meltdown and to the financial problems for the whole country. During Franklin Raines' chairmanship of Fannie Mae, they were a major proponent of relaxing standards."

for the thousandth time Spence, it was not the CRA loans themselves but the culture created and fueled by the pracitces forced by government mandates and requirements....and threats....
Priceless. You should really read this a few more times :uhuh:

Next you're going to assert that interest rates didn't really go down, but rather Alan Greenspan was just moving backwards :jester:

-spence

[QUOTE=spence;829812]All the data you posted seems to validate is that a sub-prime explosion fueled by cheap money was a primary driver of the mortgage crisis. it was what eventually caused the crap to hit the fan

And still, there's nothing that indicates the CRA was behind this, which is the context for this discussion, that the recession was caused by Liberal policies. yes, LIBERAL POLICIES...giving people money with the approval and backing or threat of goverment reprisal with no accountability!

In fact, as I've mentioned several times now, conservative economists like David John have reported that the bulk of sub-prime loans didn't originate from CRA influenced areas no kidding??? nor did they suffer higher default rates

All the data you posted seems to validate is that a sub-prime explosion fueled by cheap money was a primary driver of the mortgage crisis. it was what eventually caused the crap to hit the fan

And still, there's nothing that indicates the CRA was behind this, which is the context for this discussion, that the recession was caused by Liberal policies. yes, LIBERAL POLICIES...giving people money with the approval and backing or threat of goverment reprisal with no accountability!

In fact, as I've mentioned several times now, conservative economists like David John have reported that the bulk of sub-prime loans didn't originate from CRA influenced areas no kidding??? nor did they suffer higher default rates
Good god man get a grip on yourself.

-spence

Good god man get a grip on yourself.

-spence

I guess I'm "all wee wee'd up" :jump1:

Full of crap is more like it.

-spence

Spence you're not listening.

Sub prime and CRA were the beginnings of the dumbing down of lending standards that contributed to this mess.

If you include everything done in the name of AFFORDABLE HOUSING policies, you would see how we got here.

Sub prime got the ball rolling for reduced down payment or no down payment loans, and reduced documentation loans, ALL of which were government creations in the wake of CRA.

CRA created moral hazard. If the federal government could force banks to lend to deadbeats and then GUARANTEE subprime loans, then why couldn't EVERYONE ELSE get hust as good of a deal?

Sub prime issuance was small relative to other products, but sub prime failures via the failure of two Bear Stearns hedge funds were the catalysts for the credit crisis.
Posted from my iPhone/Mobile device

once upon a time....

car repair shops were doing business in brake repair the way they'd always done and then one day a government official stopped in and told them that "too many people couldn't afford to have their brakes done" particularly in certain areas and that the car repair shops were going to be required to do brake jobs for much, much less, "we like to call it the CRA (Car Repair Act)", he said...the car repair shop was wondering how they could stay in business with these regulations and the government official told them that they could use much cheaper materials and parts and less qualified workers....the car repair shop said " that might not be safe and we can't guarantee the quality" but the government official said "don't worry, we'll stand behind you and guarantee your work as long as you go by our new guidelines", "just bundle your traditional warrantees together with your "newly improved" warrantees and send them along to our pseudo-government agency Freaky Mac..and we'll take care of everything"....well...years went by and the car repair shop did a brisk business and other brake specialty shops opened up doing the same and soon suppliers, repairers and everyone(even Freaky Mac through various book cooking exploits), involved profited greatly by being able to use the inferior materials and service to repair brakes not just on the cars in certain areas but on most cars and some really smart Ivy League grads invented even newer ways to fix brakes with cheaper materials, everyone was getting their car's brakes fixed for practically nothing and the business grew exponentially although some members of Congress were growing concerned about what they saw going in the braking business...they were told that there was no problem with the braking business and that the braking business regulators should be replaced(get it?:)) because they were racists.... and that removing the braking system from the list of things to check during an inspection would be a splendid idea....sadly, it soon became apparent that brake sysyems everywhere were failing and many, many people were dying in car accidents from failed brake systems....the government blamed the car repair shops, the shops blamed the government and their suppliers...the suppliers blamed the repair shops and the government...

and Spence claimed that the CRA had absolutely nothing to do with it :)

brakes fixed through the CRA(Car Repair Act) represent only a tiny number of deaths or brake failures compared to the the overall number of deaths or brake system failures attribute to changes in the way business was done and so therefore the CRA had no role in the ultimate overall failure of the braking systems....:smash:

Spence you're not listening.

Sub prime and CRA were the beginnings of the dumbing down of lending standards that contributed to this mess.

If you include everything done in the name of AFFORDABLE HOUSING policies, you would see how we got here.

Sub prime got the ball rolling for reduced down payment or no down payment loans, and reduced documentation loans, ALL of which were government creations in the wake of CRA.

CRA created moral hazard. If the federal government could force banks to lend to deadbeats and then GUARANTEE subprime loans, then why couldn't EVERYONE ELSE get hust as good of a deal?


The data seems to indicate that when properly regulated this wasn't the case. In fact as I've noted, even in the run up to the crisis CRA regulated sub-prime loans weren't the problem.

The "slippery slope" argument is dubious as it ignores the regulatory side of the equation. Sub-prime isn't evil, but when firms like Countrywide run wild there's a problem. Mortgage backed securities aren't evil, but when they're sent into a derivative black hole there's a problem.

Interestingly enough, the most detailed study of this mess has just been completed.

http://www.nytimes.com/2011/01/26/business/economy/26inquiry.html?_r=1

While there's plenty of predictable blame to go around, here's on line that stuck out...

The report does knock down — at least partly — several early theories for the financial crisis. It says the low interest rates brought about by the Fed after the 2001 recession; Fannie Mae and Freddie Mac, the mortgage finance giants; and the “aggressive homeownership goals” set by the government as part of a “philosophy of opportunity” were not major culprits.

Should make for some interesting reading.

-spence

Spence you're not listening.

]

you could have ended your post there.

The data seems to indicate that when properly regulated this wasn't the case. In fact as I've noted, even in the run up to the crisis CRA regulated sub-prime loans weren't the problem.

The "slippery slope" argument is dubious as it ignores the regulatory side of the equation. Sub-prime isn't evil, but when firms like Countrywide run wild there's a problem. Mortgage backed securities aren't evil, but when they're sent into a derivative black hole there's a problem.

Interestingly enough, the most detailed study of this mess has just been completed.

http://www.nytimes.com/2011/01/26/business/economy/26inquiry.html?_r=1

While there's plenty of predictable blame to go around, here's on line that stuck out...



Should make for some interesting reading.

-spence

Spence, that is a political document.

The sad thing is, regulators won't pay heed to that report. They can ignore it, because, it is a political document.

All the bad loans came from somewhere, and if you bothered to even see where a few of them came from and what kind of loans they were, regardless of subprime or prime credit, you'd have a clue.

But nobody bothers to do their own work anymore.

Spence, that is a political document.

The sad thing is, regulators won't pay heed to that report. They can ignore it, because, it is a political document.

All the bad loans came from somewhere, and if you bothered to even see where a few of them came from and what kind of loans they were, regardless of subprime or prime credit, you'd have a clue.

But nobody bothers to do their own work anymore.
I got tired of all these economists saying the same thing so I figured we'd give the politicians a try :hihi:

What's most interesting are the dissenting opinions. The bulk of the Republican dissent (aside from Wallison who seems to think the market can do no wrong, guess that's why he works for the AEI) was that they felt the global nature of the credit bubble wasn't adequately included in the main findings. I didn't see any mention of the CRA in their dissent either.

I actually think the Republican dissent is more on the mark than the main findings. All together it's a pretty good look at how this happened.

Remember, the context of the discussion is how Liberal policy caused the crisis...The government forcing banks to make loans to dead beats remember? I still haven't seen any data that really backs this up...I guess I just don't have a clue.

-spence

Remember, the context of the discussion is how Liberal policy caused the crisis...The government forcing banks to make loans to dead beats remember? I still haven't seen any data that really backs this up...I guess I just don't have a clue.

-spence

can't argue with the last part...


by government forcing banks to change their established lending practices and standards for more "liberal" lending...and eventually encouraging the same be applied through the rest of the industry....

"Countrywide tends to follow the most flexible underwriting criteria permitted under [Government Sponsored Enterprises] and FHA guidelines. Because Fannie Mae and Freddie Mac tend to give their best lenders access to the most flexible underwriting criteria. Countrywide benefits from its status as one of the largest originators of mortgage loans and one of the largest participants in the [Government Sponsored Enterprises] programs. Countrywide uses nontraditional credit, a practice now accepted by the [Government Sponsored Enterprises].

Given these lending practices mandated by the Fed and encouraged by Fannie Mae and Freddie Mac, the resulting financial problems for financial institutions such as Countrywide and Bear Stearns are not too surprising.

can't argue with the last part...
Glad we can agree on something.

by government forcing banks to change their established lending practices and standards for more "liberal" lending...and eventually encouraging the same be applied through the rest of the industry....
That's a gross and misleading oversimplification.

The data shows is that a very small % of sub-prime lending can be attributed to the CRA, and even then, those loans didn't perform all that badly. Programs under the guise of "affordable housing" encouraged by both the Left and the Right certainly worked to lower standards to extend credit, but the data doesn't reflect a substantial negative impact to the overall system. If anything it actually increased home ownership which I'd think was a good thing.

That's not to say that deteriorated lending standards weren't a massive part of the problem...quite to the contrary...low rates and a demand for the mortgage backed securities started to drive the number of loans, but at the risk of increased defaults the products changed and we saw the explosion of ARMs with ultra low or no interest rates. This made it easy for anyone to get a loan that they could probably make payments on...at least long enough for the warranty to the underwriter to expire.

This deterioration in lending standards really didn't start until 2002 and combined with the other factors previously discussed led to the blow up...again, mostly of adjustable rate loans originated in just the last few years before the crisis. Affordable Housing mandates might have helped to build some of the infrastructure, but I've still yet to see any real data or thoughtful analysis that shows it was a signification contributor when put in context with the other factors.

"Countrywide tends to follow the most flexible underwriting criteria permitted under [Government Sponsored Enterprises] and FHA guidelines. Because Fannie Mae and Freddie Mac tend to give their best lenders access to the most flexible underwriting criteria. Countrywide benefits from its status as one of the largest originators of mortgage loans and one of the largest participants in the [Government Sponsored Enterprises] programs. Countrywide uses nontraditional credit, a practice now accepted by the [Government Sponsored Enterprises].

I would expect any business to do what it can within the law to create shareholder value. That firms like Countrywide did it in such a reckless manner would seem to put the blame on them first and foremost.

-spence

Glad we can agree on something.

I would expect any business to do what it can within the law to create shareholder value. That firms like Countrywide did it in such a reckless manner would seem to put the blame on them first and foremost.

-spence

The fault lies with the people who took out the crazy loans. They are the ones accountable as they are the ones that signed the loan/contract.
I agree that lending standards were lowered way too much by the banks and also agree that banks didn't have had the best "business practices". They didn't look out for the people but do any banks really do that with all the ATM fee’s, hidden charges, etc? All of that aside, they didn't actually FORCE anyone to take out these loans. Anyone who took a hour of their time and looked into what these loans were and how they were structured (risks involved) before signing them should have been smart enough to figure out that it was a gamble to say the least. Now they don’t want to be held accountable for their gamble.
I feel the responsible folks out there who educated themselves before making the “largest purchase of their life” and did the right thing are now stuck paying for the “poor me” people who won’t take responsibility but turn all of the blame on the banks.
Makes me shake my head whether it's a house, car, boat etc when people are only interested in "the monthly payment" but don’t look at the other details.

PS. I can't spell, this site needs SPELL CHECK

The fault lies with the people who took out the crazy loans. They are the ones accountable as they are the ones that signed the loan/contract.
I think we'd all agree that personal responsibility was a large contributing factor...as was predatory lending.

PS. I can't spell, this site needs SPELL CHECK
Get Firefox, spell check is built in and works pretty well.

-spence

I still haven't seen any data that really backs this up...I guess I just don't have a clue.

-spence

You haven't seen any of the data, period.

Get your facts and timelines correct, first.

Read the actual source documents for the articles you cut and paste with a jaundiced eye.

Have you even read the 500+ pages that constitute the latest congressional report?

Probably not.

Feel free though to actually provide a counter argument for specific points rather than just flip petty insults. I think this topic is pretty well documented already and I'm always up to gain another perspective.

Bump.

-spence

Get Firefox, spell check is built in and works pretty well.

-spence

Is that why every time you mean to type "lose" as in "not win", you type "loose" as in "not very tight"? I thought it was because you were a dummy, but maybe it's all the Firefox's fault. Is Firefox related to the Carfox?

Is that why every time you mean to type "lose" as in "not win", you type "loose" as in "not very tight"? I thought it was because you were a dummy, but maybe it's all the Firefox's fault. Is Firefox related to the Carfox?
Probably. I've caught spell check changing my misspelled word to the wrong word on several occasions. I'm not a great speller to begin with...

-spence

Probably. I've caught spell check changing my misspelled word to the wrong word on several occasions. I'm not a great speller to begin with...

-spence

spelling is so overated :)

As for actual data, I'm not qualified for analysis of raw numbers nor do I have the desire to make it a science project.

Then you have not earned the right to definitively adjudicate on the subject matter.

All you have is your opinion based on others cut and pastes.

Having said that, it doesn't take a rocket scientist to figure this all out, if you have the patience to weave through all the data and the gov't publications.

Spence said...

Feel free though to actually provide a counter argument for specific points rather than just flip petty insults. I think this topic is pretty well documented already and I'm always up to gain another perspective.

Bump...

-spence

At this point does it matter who's fault it is, except to
learn from the past ?

Point is he has had 2 years to fix it, but chose to spend his
time pushing his HC agenda. :(

At this point does it matter who's fault it is, except to learn from the past ?



By unofficial counts, there were about three dozen strategists, pundits and wordsmiths who visibly called the credit crisis before it happened. I am privileged to be one of them, although I don't put myself in the same category of a publishing market strategist.

I do this sort of stuff for a living. Generally, if you can predict something to happen, with any degree of accuracy, you have a pretty good idea of what caused it to happen, regardless of what other people might be thinking or speculating after the fact.

Of the rabble (bankers and politicians) who don't like to have fingers pointed at them ... I quote Lord Keynes, who for once said something sensible:


A sound banker (or politician), alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional and orthodox way along with his fellows, so that no one can really blame him.

Translation: "We didn't see it coming, everybody else didn't see it coming, so ya can't blame us because it happened."

For the love of God, folks, wake up. First rule of investing is ... don't lose money.

I'll quote a seasoned portfolio manager, a genuine stock market pro with decades of experience, with whom I had the privilege of having lunch with last week:

Folks nearing retirement age who bailed on the stock market when it blew up in '08 ... will NEVER earn their money back.

Let that sink in.

All great points FPP, and ones for all to learn from.

"Folks nearing retirement age who bailed on the stock market when it blew up in '08... will NEVER earn their money back."

Decisions made on emotion almost never work out.