Posted on 09/14/2008 8:05:20 PM PDT by bruinbirdman
I dislike the socialist, big govt., weak kneed democrats as much as the next guy.
But the over leveraging of the US financial system is NOT specifically the fault of the democrats or the republicans. It is the fault of the people of the United States and its business leaders.
AIG was one of the strong insurance companies. What happens when the other goes. And the problem is that with Fannie and Freddie having 5 trillion of home loans on their books, it calls into question whether even the US govt can bail everyone out who needs bailed out.
The Democrats (with the help of a few RINOS) were responsible for forcing lower lending standards in order to increase minority home ownership and give a carrot to their contributors like BOA. The Bush administration tried several times to tighten lending requirements, to no avail.
The Fed is pulling out the stops to prevent a depression. If I felt a depression was in the offing, I would be pulling out the stops as well.
Yes, Lehman filed.
2002 was filled with Home ownership Month and other kumbaya from President Bush wanting Minorities to get Homes. When it's not the frickin job of the Gov’t to create Homeowners.
Stop the D Vs. R crap. It's the dam Central Planners at all levels.
Am I getting the talking point down yet?
Mega bump to post #47. The cheerleaders are living in a fantasy world.
People really need to WAKE UP to the debt destruction in this economy and not pretend everything is just peachy and it is just the MSM talking down the economy to get Hitlery elected.
Sorry, we can’t pin this in any part on the Community Reinvestment Act. That’s been on the books for 30 years without this sort of repercussion. When nonprofit groups lend to the poor, they demand all sorts of safeguards—financial education, limits on the value of the houses sold, and so forth. The mortgage companies that have lended did not—they loaned to everybody, and lots of times, not even poor people—just people who bought more house than they could afford.
You’ve got to be kidding me! The CRA was a bad law that kept getting ratcheted up over the last 30 years. Banks were forced to abandon their sound lending practices of requiring good incomes, good credit, and significant down payments. A ‘financial education’ class is hardly a compensation for homebuyers who don’t have any of the above.
Sure. The fine folks at Lehman Brothers were totally innocent pawns in the Democrats plan. Poor babies.
None, I suspect. Though this may be a cathartic moment for finance, the pain will likely be quite severe for us "little people".
Sorry, but a lot of bad loans had nothing to do with CRA. They were not even to poor people. Banks abandoned their “sound lending practices” all on their own. And investment houses kept creating bad investment instruments with bad loans. That was a choice not dictated by CRA.
I’m not sure if you just have a limited understanding of the industry or if you are purposely promulgating misinformation. The Boston Fed published a study in 1992 that led to banks being pressured to lower their mortgage standards in order to avoid disparate effects within different racial groups. That is, banks holding to high mortgage lending standards was itself deemed to be discriminatory. Here’s an excerpt that’s available online: http://www.fdic.gov/regulations/resources/side/partthree.html and indeed subprime lending (disproportionately to minority borrowers) is a large part of this crisis.
Banks were forced to make the loans, and then they took available steps to move them off their balance sheets.
FDIC COMPLIANCE EXAMINATION MANUAL
Available by Subscription from the FDIC
Fair Housing Section
In the previous section of this guide, A Comparative Analysis of Residential Loan Applications, we stressed the importance of reviewing loan policies and procedures for any disparate impact implications, i.e., where policies and practices may appear neutral on their face but have the net effect of a disparate impact on a protected group. If an adverse effect or impact on a prohibited bases group is shown, it is the responsibility of the institution to justify the particular policy or practice by a “business necessity.” Some policies or practices that may raise disparate impact questions include, but are not limited to, the following excerpted from the”FDIC Compliance Examination Manual”
* A requirement that the property securing a mortgage loan must not exceed a particular age, or appraisal practices that establish unrealistically low values for older properties
* Restricting mortgage lending to loans for certain types of properties, such as single family homes, properties having no more than two floors, those with large lots, garages, or with large square footage requirements
* A policy of not making loans on properties in certain locations or appraisal practices that arbitrarily discount the value of a property because of its location
* A policy of making mortgage loans only to applicants who have previously owned a home
* Establishing highly restrictive downpayment or income requirements, e.g., requiring a 25 percent downpayment or setting a very low (such as 20 per-cent) maximum monthly mortgage payment to income ratio
* Setting high minimum mortgage loan amounts that effectively exclude low-income borrowers or low maximum loan amounts that limit the financial institution’s participation in the mortgage market
* Arbitrarily excluding FHA or VA mortgage loans
In addition, general and not specific subjective lending criteria may raise effects test or disparate impact questions. Examples of subjective lending criteria that may lead to possible unlawful discrimination include:
* The property should be in a “stable” or “rising” area, should be “well-maintained” and have an “attractive appearance” or “good curb appeal”
* The neighborhood should be “desirable”; there should be “homogeneity of residents and structures”; or the neighborhood should reflect “satisfactory pride of ownership”
* Applicants must not be of “questionable” character; must have an “excellent” credit rating; or must have “adequate” longevity on the job
Such subjective criteria may allow lending personnel to arrive at differing interpretations. Also, they may have the effect of discouraging creditworthy applicants.
From the BBC:
Lehman Bros files for bankruptcy
The fourth-largest investment bank in the US, Lehman Brothers, has filed for bankruptcy protection, amid a growing global financial crisis.
Lehman had incurred losses of billions of dollars in the US mortgage market.
The chance that the 158-year-old institution could collapse increased sharply after the strongest potential buyers pulled out at the weekend.
The move threatens to deal a further blow to the global financial system, as banks unwind their deals with Lehman.
If Bank of America acts like some other banks have with brokerage firm buyouts and doesn’t know what to do with its new division then there potentially is big trouble. Suppose they lay off all of the Merrill stockbrokers. Then the clients would be without brokers. Those that remain invested in stocks and mutual funds now without stockbrokers might decide to sell. This would potentially lead to more of a selloff. Are there terms in the “buyout” to prevent the “laying off” of the Merrill brokers?
Otherwise what happens when Bank of America decides to lay all of the brokers off?
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