Posted on 09/23/2009 5:20:54 PM PDT by Kaslin
In an alleged effort to protect against a recurrence of the financial collapse of 2008, Congress is considering a slew of new mandates, regulations and agencies.
At the top of the list is an expansion of the very government mandate that is at the heart of the financial collapse, the Community Reinvestment Act.
It appears that rather than learning from mistakes of the past, Congress is taking steps that could exacerbate the problems in the future.
The CRA has been credited by many experts as a key contributor to the financial meltdown of 2008. Originally introduced in 1977, it was established to ensure that low-income individuals and minorities were receiving fair and equal access to credit.
A laudable goal, but like many well-intentioned government mandates, many unintended consequences have resulted.
Too Many Loans
One of the lessons we learned from the financial crisis was that too many people were approved for loans they couldn't afford, and plenty were originated due to pressure to meet CRA mandates.
(Excerpt) Read more at investors.com ...
At the end of yet another discouraging and fruitless day checking his Computer
(made in MALAYSIA),
John decided to relax for a while. He put on his sandals
(MADE IN BRAZIL),
poured himself a glass of wine
(MADE IN FRANCE)
and turned on his TV
(MADE IN INDONESIA),
and then wondered why he can't find a good paying job in AMERICA
AND NOW HE'S HOPING HE CAN GET HELP FROM A PRESIDENT MADE IN KENYA
Long Term Capital, S&L Bailout?
Some more durn Republican revisionism. The CRA had almost nothing to do with this meltdown, but the GOP is wetting its pants over the fact that the average American might actually blame WALL STREET and greedy WHITE FOLKS.
Read what even the GOP committee said:
http://republicans.oversight.house.gov/media/pdfs/20090707HousingCrisisReport.pdf
Read what a Wall Street insider has to say about the scam:
parsy, who hopes against hope the GOP will quit lying
Government caused it. It is going to fix it? Who is kidding who?
The author argues that the investment banks going public was the reason they made these risky bets, but those risky bets were bundles of subprime loans masquerading as solid investments.
Yes, and the guys were selling the dickens out of these things. I have one story, maybe this one, where they go into how even people with good credit were being shoved into subprime because the fees were higher.
On top of all this, derivatives were then sold on top of these, which apparently is what caused AIG to go bust.
The GOP report states that CRA loans were never more than about 3% of originations, and that the success with the poor folks not defaulting, encouraged them to go faster on loans to middle and upper classes. That appears to be the chief contribution of CRA to this mess. The fact that it worked.
parsy, who is still trying to put all the pieces together.
Thanks
I find it impossible to believe that the government's implicit sanction of these loans had nothing to do with the go-for-broke attitudes among the IB's. I know nothing about Wall Street other than the bits I casually read here and there, but it's hard to believe that these guys were as clueless as Eisman says.
I think Eismann’s point was that they were not clueless. They just didn’t care. Here is another insider, and not quite as long a read:
http://www.npr.org/templates/story/story.php?storyId=102325715
I love Partnoy’s analysis of manure.
parsy, who says the Wall Street guys knew what they were doing
I agree they knew what they were doing, and I think theyfelt they had the backing of govt, along the lines of "they can't push us to make these loans and then leave us hanging when it all blows up."
Certainly, Bush did his part to screw things, letting lenders accept the matricula consular card as ID for home loans, but it's just my fairly ignorant opinion that the reckless atmosphere on Wall Streetreached warp speed in the mid-90's, culminating in 1999:
Crucial to the passing of this Act was an amendment made to the GLBA, stating that no merger may go ahead if any of the financial holding institutions, or affiliates thereof, received a "less than satisfactory [sic] rating at its most recent CRA exam", essentially meaning that any merger may only go ahead with the strict approval of the regulatory bodies responsible for the Community Reinvestment Act (CRA).[17] This was an issue of hot contention, and the Clinton Administration stressed that it "would veto any legislation that would scale back minority-lending requirements." [18]
Rubin went to Citigroup after the negotiations on GLBA were finished, like right after, days after.
Is that you, Bawney?
parsy, who is an economic illiterate.
Everyone now knows the economic system had been strained to the brink by, among other things, bad policy forced on the financial industry by corrupt politicians abusing their power to push political correctness on the housing industry.
George Soros then pushed it over the brink to ensure Obama won the election.
When will the indictments be handed down?
That we're going down the same road again is particularly disgusting in that there were predictions even back when the mortagages were first being written that they could lead to ruin. Here's a 1999 article from the NY Times making just such a prediction..... Link
I highly recommend the CNBC special “House of Cards” about the mortgage
boondoggle.
While not comprehensive, there are plenty of good interviews with
some of the losers and the Wall Street Winners that walked away
with plenty of money after nearly burning down the world of finance.
Two of the most interesting are one of the Wall Street players that
you tell has at least a conscience about his role in the mess.
And the interview with the guy who shorted, having perceived the
housing bubble was “a house of cards”.
ping
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