True Cause of House-Market Crash

You post the same exact thing "Get some beginning of a clue" on all of the other threads you post on, its getting boring, and try supporting your statements with facts.

 

you are absolutely correct, XLR8TR.

Check this out.

Democrats were WARNED of Financial crisis and did NOTHING

^

[ame="http://www.youtube.com/watch?v=LPSDnGMzIdo"]‪Democrats were WARNED of Financial crisis and did NOTHING‬‏ - YouTube[/ame]

 

That video was from September 2003?
The Republicans controlled the House, the Senate AND the White House.
The Republicans controlled the House, the Senate AND the White House for the previous 2 years.
The Republicans controlled the House, the Senate AND the White House for the next 3 years.

Yet you still try to plant the subprime crisis in the Democrats' garden? Laughable.

 

You are funny, toddwv!

You wouldn't recognize the truth if you tripped over it.

Check this out!

Barney Frank in 2005: What Housing Bubble?

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

 

I think you're closer to right, and I think it's more both sides should share the blame.

Dems did push the issue with getting even high risk people into homes.

However, Republicans also made the situation much worse by deregulating too many areas, and in not allowing regulation on the derivatives markets that gobbled up so many toxic assets, and by also not regulating the rating agencies that said these toxic assets were gold.

Both sides should share equal blame, and do what they can to help those who got suckered, both banks and main street. Although I tend to blame the banks and brokers a bit more than your average home owner, have you ever read the mortgage contract? They have the lawyers and other professionals to back em up.

 

Again, you are very mistaken.

toddwv, you wouldn't recignize the truth if you tripped over it.


Check this out!



The Democrats took over the House and Senate after the elections in 2006. Since then, our thriving economy has gone to “hell in a handbasket” thanks to their very foolish tax and spend policies. And given this evidence, people correctly say liberals cannot think logically or rationally!

 

How about this for the cause of the bubble:

People thought that they needed a huge house. They know they can't afford it, but apply for the loan anyway. eventually thousands or even millions of people have foolishly bought houses that they knew they couldn't afford at rates that any idiot could have told them were waaay too good to be true. They discovered that they got an adjustable rate and couldn't afford the new rate.

In other words human greed and stupidity.

 

Without mentioning the allowance of the creation of credit default swaps and their abuse, you can't really account for the scale of what happened.

If it were just due to risky loans being coerced, all that would have happened is a bunch of foreclosures.....but the way the risk was bundled and dispersed allowed it to be a systemic failure...a macroeconomic failure.

If you want to simplify it, you have to couple bad lending practices with no regulation preventing this type of risk shifting by banks.

 

Because of that prick Frank Millions of retirees lost thousands and thousands in equity. Because,,,,,,,,,,,,,,,,,,,,,''They know better''
That guy should be in jail.....

 

When they usually want something done they figure out how to jam it in without it being noticed, as long as they get what they want they are happy, they then make something up later as to why it will work. They are really not interested if it is fiscally sound, only the goal of getting it is important. This is why everything they do fails, they are doing the same thing with HEALTH CARE,,,COST MATTERS NOT.

 

1) What percentage of bad loans were CRA loans?

2) If Bush was trying for regulation of F/F, why did he oppose the *only* bill ever passed by a chamber of the Republican controlled congress to regulate F/F in 2005, which was supported by over 90% of the Republicans?

 

Please explain what power Frank had in 2005 in the House which was in control of the Republicans which you contribute to the housing bubble.

Then explain why you blame Frank when he joined with the Republicans supporting a bill to regulate F/F.

 

Blaming one side or the other, or both sides, will not fix the problem. The problem and true cause of the bubble is perverse incentives.

You want to know who caused this mess, then just follow the money, nearly all of it is now in the pockets of landowners and bankers. As long as you leave these perverse incentives (private collection of land rent privileges and private creation of debt/money privileges) then this will happen again, you can bank on it. You can create new regulation, but as always, these special interests will figure a way around them, because there are massive profits to be made. Removing these privileges and the perverse incentives they create is the only way to stop this reoccurring nightmare.

The blame game is a diversion tactic...

 

Ah yes, the "true cause" of course being the devious cabal of Barney Frank, the GSEs, lazy poor people and whoever else is in on it these days.

1: If people, especially the lazy and poor people who are destroying America, are so stupid and impulsive, then why wasn't this a problem before subprime mortgages got popular before the bubble? What makes more sense: that the CRA, which has been law since 1977 suddenly became too much of a burden on lenders nationwide in 2007 or that the banks that lobbied for deregulation and got it in the form of Gramm-Leech-Bliley and The Commodities and Futures Modernization Act encouraged risky lending practices and carelessly leveraged their companies to the hilt? The CRA mainly regulated loans that were safe and profitable; to pretend that a firm like Goldman Sachs was being oppressed and constrained by the CRA is pure delusion.

2: Why don't the cases of mortgage failures show a bias to poor, uneducated people as the free-marketeers claim? Every kind of home buyer saw their mortgage fail, and many responsible homeowners saw their property values fall and found themselves unable to refinance at lower mortgage rates. You really want to argue that these people were "irresponsible" and deserve their lot simply because some banker gambled their money away? Yes, irresponsible debtors should probably not get loans but if you claim that these are the majority of the cases that caused the mortgage meltdown you have to provide some evidence for that assertion. The housing crash affected everyone, and anyone who says it didn't is a liar.

3: Home buyers take out mortgages on the assumption that the banks were doing their due diligence to protect themselves in case of default. That has been the basic architecture of a loan for centuries. But now, thanks to those wonderful pieces of legislation passed in 1999 and 2000, we have mortgage lenders who pass the loans to investment banks who slice and dice the loans up into thousands of pieces and bundle them into financial "instruments" like CDOs and MBSs and take bets on the loans to fail. You do not see the glaring problem here?

4: The public were being assured by the ratings agencies that the mortgages were safe because the investment banks paid them for those bogus ratings. The public was being "informed" by financial "experts" and business networks that buying a home was a completely safe and win-win situation. And yes, the government pitched the case for home-buying as well.

5: If the investment banks were actually interested in reducing their risk, they would have bundled various kinds of mortgages with different risk levels and what not. Instead, they were interested only in slapping a AAA rating on every (*)(*)(*)(*)ty mortgage and betting against them. They were NOT interested in reducing risk or protecting their investors, it was a casino and no rational person will argue otherwise.

6: The GSEs accounted for 1/3 of the subprime market and only a fraction of the riskiest exotic mortgages and they maintained the highest underwriting standards. At any time, Bush could have reduced or eliminated Fannie's and Freddie's exposure to new non-prime mortgages. Instead, he told them to go up their share of the market.

Ultimately, the political blame rests with the "Washington Consensus" people, Democrats and Republicans, who carelessly and recklessly pushed deregulation for decades but the meltdown would not have been nearly as bad if the volatility of Wall Street-created "financial instruments" had not been involved.

 

So you argument is that a 30 year old law prohibiting discrimination is what caused the housing bubble?

Shoot why not blame the civil rights act?

 

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Did you actually read anything I wrote? I argued the exact opposite of what you seem to think I wrote.

 

Who gave them the loan they couldn't afford?

 

Obviously not carefully enough. I retract.

 

This is an informative and educational movie that digs into the heart of the causes of the economic crisis and the problems of the financial industry.

 

Wallstreet was guilty of creating MBS's(mortgage backed securities/toxic assets) which defiled the banking and insuance industries.

These MBS's would never had been created and became toxic without the improper government policies through GSE's.

It would have served the free market well for the banks and other players to fail along with the GSE's. But instead, we still have all of the wrong doers running the show.

 

The CRA was only partially involved at that point. In 1995 Bill Clinton revised them and changed the word from "encourage" to "force".

Show me a link to that bill btw, must have missed it. I know that in '03 and '05 two separate bills were attempted to be passed for to get a leash on freddie and fannie, but both were blocked by guess who....?

 

Some economists, politicians and other commentators[105][106] have charged that the CRA contributed in part to the 2008 financial crisis by encouraging banks to make unsafe loans. Up to 2007 FDIC has been criticising banks for having "a substantially deficient record of helping to meet the credit and community development needs (...) including low-and moderate-income neighborhoods" and "not making use of innovative and/or flexible lending practices"[107]

Economists, including those from the Federal Reserve and the FDIC, dispute this contention. The Federal Reserve, having examined the evidence, holds that empirical research has not validated any relationship between the CRA and the 2008 financial crisis.108] At the FDIC, Chair Sheila Bair delivered remarks noting that the majority of subprime loans originated from lenders not regulated by the CRA, calling it a "scapegoat" and declaring it "NOT guilty."[109]

However, many others dispute that the CRA was a significant cause of the subprime crisis. Nobel laureate Paul Krugman[112] noted in November 2009 that 55% of commercial real estate loans were currently underwater, despite being completely unaffected by the CRA.[113] According to Federal Reserve Governor Randall Kroszner, the claim that "the law pushed banking institutions to undertake high-risk mortgage lending" was contrary to their experience, and that no empirical evidence had been presented to support the claim.[108] In a Bank for International Settlements (BIS) working paper, economist Luci Ellis concluded that "there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust", relying partly on evidence that the housing bust has been a largely exurban event.[114] Others have also concluded that the CRA did not contribute to the financial crisis, for example, FDIC Chairman Sheila Bair,[109] Comptroller of the Currency John C. Dugan,[115] Tim Westrich of the Center for American Progress,[116] Robert Gordon of the American Prospect,[117] Ellen Seidman of the New America Foundation,[118] Daniel Gross of Slate,[119] and Aaron Pressman from BusinessWeek.[120]

Legal and financial experts have noted that CRA regulated loans tend to be safe and profitable, and that subprime excesses came mainly from institutions not regulated by the CRA. In the February 2008 House hearing, law professor Michael S. Barr, a Treasury Department official under President Clinton,[63][121] stated that a Federal Reserve survey showed that affected institutions considered CRA loans profitable and not overly risky. He noted that approximately 50% of the subprime loans were made by independent mortgage companies that were not regulated by the CRA, and another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. Barr noted that institutions fully regulated by CRA made "perhaps one in four" sub-prime loans, and that "the worst and most widespread abuses occurred in the institutions with the least federal oversight".[122] According to Janet L. Yellen, President of the Federal Reserve Bank of San Francisco, independent mortgage companies made risky "high-priced loans" at more than twice the rate of the banks and thrifts; most CRA loans were responsibly made, and were not the higher-priced loans that have contributed to the current crisis.[123] A 2008 study by Traiger & Hinckley LLP, a law firm that counsels financial institutions on CRA compliance, found that CRA regulated institutions were less likely to make subprime loans, and when they did the interest rates were lower. CRA banks were also half as likely to resell the loans.[124] Emre Ergungor of the Federal Reserve Bank of Cleveland found that there was no statistical difference in foreclosure rates between regulated and less-regulated banks, although a local bank presence resulted in fewer foreclosures.[125]

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

 

Excellent post!

 

Yes it does.

[ame="http://www.youtube.com/watch?v=cMnSp4qEXNM&feature=related"]&#x202a;Timeline shows Bush, McCain warning Dems of financial and housing crisis; meltdown&#x202c;&rlm; - YouTube[/ame]

[ame="http://www.youtube.com/watch?v=_MGT_cSi7Rs"]&#x202a;Shocking Video Unearthed Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis&#x202c;&rlm; - YouTube[/ame]

 

Lol, Irie... you deserved that facepalm.

That was an excellent post on the subject by SG Caligula.