True Cause of House-Market Crash

We all hear what the media and public feeds us of the housing market crash a couple years ago. Unfortunately the media isn't right and isn't telling the story how it is, but beating around the bush. Many believe that bush and republicans destroyed the economy during their term, many believe is was caused by wall street, many think it was caused by irresponsible bank actions, and many believe it was due to irresponsible loaners. Well lets see what really happened. This is my theory, and I have facts and hard evidence combined with logic to prove it and defend it. I'll show a list of steps in numbers showing the accumulation of the events that led up to the crisis.

1) 1977, the CRA was passed by democratically controlled congress and presidency (Jimmy Carter I believe). Designed to encourage banks to give loans to previously unqualified people.

2) Clinton Revised this act and forced banks to give out loans or pay penalties in 1995. A democratic president.

3) Two major GSE's who have been around for a while become loan buyers. Private banks had no risk when making loans to unqualified borrowers, because Fannie/Freddie bought off loans making a no risk environment for private banks. Since banks are publicly owned, they work for the shareholders and therefore make moves for profit as required by law. The GSE's Fannie Mae and Freddi Mac were created by democrats.

3.5) In 2003, Republican President George W. Bush attempted to pass a bill to stop the current actions, because he saw what was occuring and new the consequencies in the end. The democrats once again, blocked it.

4) Teaser rates for interest were used. So a person on a $30k yearly salary for example (not real numbers) was able to get a $500k loan for a house under almost no interest for the first months of years. Then interest skyrocketed up a huge percentage. The person couldn't afford it and just walked away from the house. The person loses money and gets screwed, the bank loses money and gets screwed.

5) Housing prices before went up based on a bubble, and this bubble wasn't based on capitol like it should, but based on credit...non existant credit. It was a way of using a loan to pay off another loan kind of deal in the end. Houses went for prices above what they were truly worth. The bubble bursted...

6) The housing market crashes which is the main caused of the entire recession we just had.

7) Now the same people (not same people but same party) who caused the housing market crash and entire economic recession are trying to fix their mistakes by making even worse mistakes such as the stimulus bill.

Yes, people shouldn't have borrowed more money than they can pay back and live in homes out of their reach, but the government should have never allowed such a thing to happen, because they interfered in private affairs between loaners and borrowers.

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So final conclusion, say what you want, but Democrats are almost solely responsible for the housing market crash and economic recession. They created the GSE's that caused the recession and they stopped the republicans from trying to fix it. Yes bush was a bad president and I agree, he got into too many wars and did a bad job, but he nor the republicans in government caused the recession.

Stop watching the communist news network and msnbc, and do some research people, this is what happened and why it happened. And if you can't believe your ears what I said, i'll say it again and in bold words:


THE DEMOCRATS CAUSED THE RECESSION!

 

It was caused by the deregulation of Wall Street who received privileges from Acts of Congress; namely the Commodity Futures Modernization Act and Graham Leach Bliley. Watch Inside Job and educate yourself.

 

I think both parties can share some of the blame. But I agree the Democratic party did encourage bad lending practices.

 

A simple search of wikipedia debunks this racist myth the the CRA ( legislation intended to increase minority home ownership) had something to do with the mortgage industry collapse.

A few facts.

1) No expert in any of these congressional hearings after the collapse ever testified this was a partial cause.
2) Experts in congressional testimony did, in fact say, the CRA had nothing to do with the collapse.
3) Only local banks and savings & loans were covered under CRA rules. Only 6% of all sub-prime mortgages.
4) These CRA loans had LOWER rates of delinquency than standard mortgage company loans not covered by CRA rules.
5) None of these right wingers that repeat this myth can ever produce detailed, data showing how CRA loans contributed to the collapse. It doesn't exist.

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#Government_policies

 

You are correct.

The Act requires the appropriate federal financial supervisory agencies to encourage regulated financial institutions to help meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation (Section 802.)

Banks were encouraged, not forced, to lend to low-income communites. The Act itself specifically states the banks lend money 'consistent with safe and sound operation'. If banks gave out poorly collateralized loans, it was their own fault.

 

How......?

 

deleted...misread the quote

 

Without Government Mortgage Inc.......the mortgage meltdown and recession were entirely avoidable.

XLR8 is right.........the Democrat Party deserves the Lion's share of the blame......for F&F was and remains their lovechild.......and the root cause of the meltdown.

Reads like a prophecy.......
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Responsible, yes. Solely responsible, far from it.

The housing crash was caused by a lot of different factors, all deriving from trusting the system too much.

Banks offered mortgages because they thought housing prices would keep rising; they screwed up. When they realized housing prices wouldn't keep rising, they paid credit agencies to keep assuming they would. Their investors didn't notice any problem because they trusted that management would keep doing what was best; they screwed up. Consumers kept buying houses because they trusted credit agencies; they screwed up. The government noticed the bubble, and both the Democrats and Republicans offered acceptable solutions, but they were too gridlocked and unwilling to compromise to reach a deal; they underestimated the problem and screwed up. Other countries thought the USA was doing fine and kept trading with us; they screwed up.

The groundwork for the initial problem was laid by a variety of governmental factors, stemming from both the Carter presidency and the Reagan presidency (and several others).

The whole scheme ended with the global economy in recession and a few American CEOs running away with absurd amounts of money. It really was the perfect plan, and it only worked because every level of the system let its guard down and trusted that the other levels of the system would be fine.

 

Fannie Mae made bad choices just like the private lenders did. Your links prove nothing.

 

No, not actually.

 

Wrong again.

Wall Street Led the Toxic Market

Facts You Should Know About Fannie Mae and Freddie Mac

Fact: The GSEs were prohibited from buying subprime mortgages.

Fannie and Freddie could not guarantee or securitize subprime mortgages because subprime loans were outside the prescribed GSE guidelines. All subprime mortgage-backed securities were created by Wall Street firms—not the GSEs.

Fact: Although the GSEs did purchase subprime mortgage-backed securities as investments, they never did so in a volume that matched Wall Street’s.

The GSEs’ investment in subprime mortgage-backed securities was far less than Wall Street’s.

Fact: The GSEs eventually guaranteed and created investments with “Alt-A” loans—which were not affordable housing loans.

Alt-A loans went to relatively wealthier borrowers with higher credit scores, though often these loans had risky features such as limited documentation.

Fact: Mortgage loans purchased by Fannie Mae and Freddie Mac—including loans to lower-income borrowers—are performing better than the private market.

As of June 2010, about 13% of GSE loans to borrowers with credit scores under 660 were 90+ days delinquent or in foreclosure. By comparison, the serious delinquency rate for subprime loans was over 28%.

Fact: Affordable housing loans were not the problem. The GSEs’ losses were caused by risky mortgages that generally went to borrowers with higher incomes.

The GSEs’ financial losses stem primarily from Alt-A mortgages, which are not connected to affordable housing. Abusive loan terms, rather than risky borrowers, bear the greatest responsibility for the foreclosure crisis. Studies show that “risky borrowers” who received sensible loan terms had significantly lower foreclosure rates than those who received dangerous subprime loans made by non-bank lenders.

Fact: The vast majority of subprime loans, 94 percent of them, were made by lenders who were not subject to the Community Reinvestment Act (CRA). The CRA covers banks and thrifts, which didn't make many subprime loans.

http://www.responsiblelending.org/mo...annie-mae.html

http://en.wikipedia.org/wiki/Center_...nsible_Lending

When will you people learn???

 

It's right-winger logic. If you completely ignore reality and toss out rationality and sanity...it all just kind of makes sense, you know?

They don't call the righties' approach to economics "voodoo economics" for nothing.

 

Yeah, wasn't that George Herbert Walker Bush who coined that phrase?

 

Yes Fannie Mae made bad choices just like the private lenders did.......

....except when your F&F--The Largest Mortgage Underwriter in the World.....

.....who made the bad choices possible.
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Simply being the largest mortgage underwriter doesn't automatically make it the largest backer of bad loans.

Re-read post #12 for the facts.

 

The Largest Mortgage Underwriter in the world.....at one time holding over $5 trillion worth of mortgage liability......

The Largest Recipient of Tarp Funds........

.....the lion's share of the blame.......
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It seems its more opinion then fact........

Got Subprime Government Mortgage Inc?
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Yes.

No

Only to the ignorant and those who refuse to assess the real blame to the true root of the problem (Gramm-Leach-Bliley, artificially low interest rates, lack of oversight, lack of enforcement, deliberate ratings manipulation etc).

 

So who was the largest recipient of TARP funds?

The reality and root of the problem is a lot of people bought homes they couldnt afford....in a wave that turned into a bubble...the worlds largest mortgage underwriter made that possible.....
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Yep. And also remember that while this is happening, the Federal Reserve was 'setting' the interest rates low, so that there was really easy and cheap credit. This made the problem even worse.

 

[ame="http://www.youtube.com/watch?v=iW5qKYfqALE&feature=feedf"]‪Barney Frank in 2005: What Housing Bubble?‬‏ - YouTube[/ame]

[ame="http://www.youtube.com/watch?v=2UZ9l_AxKjA&feature=related"]‪Barney Frank Caught Lying About Fannie Mae‬‏ - YouTube[/ame]

 

How anyone with half a brain can believe such nonsense is beyond me...

I guess millions of Americans just become irresponsible simultanously, huh? Just like the huge wave of unemployed Americans who all decided to become lazy and quit their jobs recently, all at the same time, right?

Who has the upper hand in home buying transaction? Which party knows better if the purchaser can pay for the loan? Who has greater understanding of the written contract? The banks/lenders have the upper hand. Most people who qualified for fixed, 30-year loans, were not even given the option, but were sold sub-prime, no money down, interest only loans (these loans carried higher interest rates overtime and bankers received higher bonuses for selling them). Banks did this because they knew they could package off the bad loans and sell the junk to somebody else. If banks operated traditionally, prior to the passing of Graham-Leach-Bliley Act (which opened the market among banking companies, securities companies and insurance companies), banks would not have been able to 'gamble' with these loans and kick the problem down the road to somebody else; they would have been responsible for the bad asset.

Stop defending loan sharks.

 

How interesting that you leave out that the people to whom they could 'sell the junk' were Fannie Mae and Freddie Mac. If they didn't exist, then the banks wouldn't have taken the loans in the first place.

That combined with Janet Rino (Clinton appointee) saying that if the banks didn't make the loans, she'd hit them with discrimination.

Additionally, these people did not suddenly become 'irresponsible'. The Federal Reserve set the interest rates low which made credit cheaper and easier to come by. People mistook this for more real available funds, and spread themselves a bit too thin.

But that makes too much sense. I think the liberals are right: it was the Bush tax cuts!

 

Well arent you saying hundreds of banks became irresponsible simultanously?

The banks played their role.......and sold excrement sandwhiches to We The People.

But to sell excrement sandwhiches........means someone has to be underwriting said excrement sandwhiches........enter F&F--The World's Largest Mortgage Underwriter.

Over 5 trillion worth of mortgage liability........the next closest was mortgage "giant" Bear Stearns with around 440 Billion.....and yet you blame the latter.
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