Posted on 11/24/2008 7:17:21 AM PST by illiniwek
How did we get here? Here is a detailed analysis as I see it today and have seen it for the last nearly seven years from inside the mortgage industry.
At the end of 1999, Alan Greenspan first began raising the Prime Rate. Many have speculated as to his motivation, however there is no doubt the result, he popped the internet bubble. By the time the damage was done roughly three trillion dollars had been lost in the stock market by the end of 2000. This jarring economic event was followed by the jarring economic events of 9/11 and the revelations of malfeasance at Enron, Worldcom, et al. As such, by the end of 2001, our nation was on the brink of economic disaster. Ironically, one of the by products of the weak economy was a strong housing sector. That's because the weak economy helped usher in a low mortgage rates. (interest rates, in their simplest form which of course rarely happens, work in the opposite way of the health of the economy) While President Bush was cutting taxes, Alan Greenspan was busy furiously lowering interest rates. By the time he was done, Alan Greenspan had dropped the Fed Funds Rate below 1%. I put most of the blame on this crisis on Greenspan himself as a result of this irresponsible rate decrease. As you will see, what happened afterwards was the culmination of the monster started by this rate decrease.
(Excerpt) Read more at theeprovocateur.blogspot.com ...
This article is an old one, and not telling the whole story.
It leaves out the critical fact that all that mortgage money looking for a mortgagee found fertile ground in the housing needs for 20-40 million illegal aliens.
All data points to the uncomfortable fact that the bulk of subprime mortgages going into foreclosure are in the same neighborhoods where illegal aliens are found (Pew Hispanic Trust, Realtytrak, etc.). Without illegal aliens, the subprime fiasco would have never taken off.
Let’s kill the nonsense that this started because of boomers buying McMansions. It was the eagerly marketed loans to illegal aliens to finance the CDOs and Bonds (and the great commissions they got with them) that started all this mess.
Economists are destroying our country; they all have their pet ideas of how to manage an economy and we are the sorry losers as a result of their failed models.
This is not unlike Algore selling the other idiots on the plan to control our climate. We would do better to shake our fists at the sun for not cooperating with man’s plans to control the universe.
A little humility is in order here.
Nonsense. Sub-prime mortgages were made at every level of income. There is no data supporting illegal aliens as having received the bulk of sub-prime mortgages, and there is no data supporting the 'fact' that the bulk of the mortgage defaults are in neighborhoods where illegals are found (whatever the hell that means).
Without illegal aliens, the subprime fiasco would have never taken off.
Arguably one of the dumbest commnets I've seem on the mortgage/financial crisis so far.
“Arguably one of the dumbest commnets I’ve seem on the mortgage/financial crisis so far.”
Arguably!? I think there is no argument.
that’s just silly. ITIN loans, loans to illegals, were a tiny fraction, one tenth of one percent. To blame this crisis on loans done for illegals is to show a stunning lack of understanding about how this happened.
Even if most defaults were in areas where illegals roamed it wouldn’t prove anything.
First, illegals couldn’t get sub prime mortgages. Most mortgages require proof of citizenship, like a w2, which requires having a social security number.
the only loans that illegals could get were ITIN loans. These made up no more than one tenth of one percent of all loans.
to try and blame illegals is the height of conservative partisanship.
Video of Schiff when he predicted this. I saw him predict this on Cavuto/FNC business and the others all laughed. Something told me he was making sense.
Watch the other guy offer him a bet that the economy is on the upturn (2006-2008 predictions).
http://www.youtube.com/watch?v=2I0QN-FYkpw
By the end of 2006, a lot of people within the mortgage industry were predicting this. That said, it was accurate.
In some ways, this was very easily predictable because the real estate boom had all the hallmarks of a speculative market. This ended like all speculative markets, badly.
He is making a larger point. The whole economy was a deck of cards based on borrowing, consuption, and imports, lawyers and other self service..) A nation of stock brokers, real estate agents, lawyers, and pizza delivery men all funded by borrowing and the resulting inflation (boom).
The future? Inflation and devaluing of dollar and price controls?
Peter Schiff on Wika : In an August 2006 interview Schiff generated much controversy when he repeated his long-held investment thesis: “The United States economy is like the Titanic and I am here with the lifeboat trying to get people to leave the ship ...I see a real financial crisis coming for the United States.” On May 16, 2006 in debate on Fox News, Schiff accurately had forecast that the U.S. housing market was a bubble that would soon come to bust.[6] On December 13, 2007 in a Bloomberg interview on the show Open Exchange, Schiff further added that he felt that the crisis would extend to the credit card lending industry.[7] Following this observation, it was soon reported on December 23, 2007 by the Associated Press that “The value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the AP... At the same time, defaults — when lenders essentially give up hope of ever being repaid and write off the debt — rose 18 percent to almost $961 million in October, according to filings made by the trusts with the Securities and Exchange Commission.”[8]Schiff also references the role of the US consumer in the world, saying that the US consumer thinks he’s doing the world a favor by consuming what the rest of the world produces. He is quick to point-out that this relationship will come to an end, in his view, much sooner than people imagine, and with negative consequences for the US. Schiff has been quoted as saying: “Consumption is its own reward for Production” — meaning that without production, the US cannot indefinitely sustain its ongoing consumption. Schiff, and other adherents of Austrian economics, promote savings and production as “the engine of economic growth — not consumption.”[citation Schiff points to the low savings rates of the United States as its worst malady, citing the transformation from being the world’s largest creditor nation in the ‘70s to the largest debtor nation at the turn of 2000. His extremely bearish views on the U.S. Dollar, the United States stock market, bond market, and the United States economy have earned him the nickname “Dr. Doom.” [3]He was an economic adviser for the Ron Paul campaign in the 2008 Republican Party primaries. Schiff also hosts a live Internet/shortwave radio show called “Wall Street Unspun.”[4]His father is tax protester Irwin Schiff.
http://en.wikipedia.org/wiki/Peter_Schiff
He is making a larger point. The whole economy was a deck of cards based on borrowing, consuption, and imports, lawyers and other self service..) A nation of stock brokers, real estate agents, lawyers, and pizza delivery men all funded by borrowing and the resulting inflation (boom).
The future? Inflation and devaluing of dollar and price controls?
Peter Schiff on Wika : In an August 2006 interview Schiff generated much controversy when he repeated his long-held investment thesis: “The United States economy is like the Titanic and I am here with the lifeboat trying to get people to leave the ship ...I see a real financial crisis coming for the United States.” On May 16, 2006 in debate on Fox News, Schiff accurately had forecast that the U.S. housing market was a bubble that would soon come to bust.[6] On December 13, 2007 in a Bloomberg interview on the show Open Exchange, Schiff further added that he felt that the crisis would extend to the credit card lending industry.[7] Following this observation, it was soon reported on December 23, 2007 by the Associated Press that “The value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the AP... At the same time, defaults — when lenders essentially give up hope of ever being repaid and write off the debt — rose 18 percent to almost $961 million in October, according to filings made by the trusts with the Securities and Exchange Commission.”[8]Schiff also references the role of the US consumer in the world, saying that the US consumer thinks he’s doing the world a favor by consuming what the rest of the world produces. He is quick to point-out that this relationship will come to an end, in his view, much sooner than people imagine, and with negative consequences for the US. Schiff has been quoted as saying: “Consumption is its own reward for Production” — meaning that without production, the US cannot indefinitely sustain its ongoing consumption. Schiff, and other adherents of Austrian economics, promote savings and production as “the engine of economic growth — not consumption.”[citation Schiff points to the low savings rates of the United States as its worst malady, citing the transformation from being the world’s largest creditor nation in the ‘70s to the largest debtor nation at the turn of 2000. His extremely bearish views on the U.S. Dollar, the United States stock market, bond market, and the United States economy have earned him the nickname “Dr. Doom.” [3]He was an economic adviser for the Ron Paul campaign in the 2008 Republican Party primaries. Schiff also hosts a live Internet/shortwave radio show called “Wall Street Unspun.”[4]His father is tax protester Irwin Schiff.
http://en.wikipedia.org/wiki/Peter_Schiff
I’m not sure how that is necessarily a house of cards. The economy is based on a lot more than that. I am not so sure that the economy was a house of cards. The boom might have been a house of cards. The boom in the 1990’s was also a house of cards built on inflated values for paper thin internet companies. We survived that so called house of cards as well.
Rather than indicating illegals getting loans, it might indicate that citizens (often with marginal credit histories) saw an opportunity where they could buy a house and rent to illegals. When job opportunities for illegals evaporated, so did the cash flow for the people renting to them.
RE :We survived that so called house of cards as well.
In 1993-1999 End of cold war , huge spending cuts, tax increases due to deficit mania and responsible elected (republicans were key) . But we are just borrowing for more consumption now, such as UAW bailout.
Wow, one guy - Peter Shiff - got it right; the mobs are all dolts. Cavuto owes it to his viewers to show that clip on his show. So much for the FOX Saturday morning financial advice from that bunch of dummies.
No 1993-1999 was built entirely on the explosion of the internet and the cell phone. Eventually it became a house of cards. This had a lot more to do with time and place rather than any person, or group’s, specific policies.
Ben Stein is the worst. Back then 2006 on FNC laughing at Schiff for predicting ‘doom’ but this Saturday in a panic he was crying (in a panic)that we were in a depression and that even Obama is not planning enought deficit spending required, “... to keep people alive!”
RE : than any person, or group’s, specific policies.
I think is was both.
1993 There was a common belief that the debt deficit was hurting the economy. Now everyone (most voices) says that massive borrowing beyond everyones imaginations is required. I assume deficit mania will come later. This is why Obama may be a political success.
I wonder how much of this was credit card debt rolled into second mortgages obtained based on inflated real estate values.
Like the MSM who let this happen with no investigation, you are substituting your own opinion for facts, none of which you offer in rebuttal.
If you go back circa 2006 when the illegal alien invasion peaked along with the subprime mortgage gamesmanship and do a regular track of the Pew Hispanic and US Census reports, and match that with the monthly reports of sites like Realtytrak, you will find that those subprime mortgages going into default and foreclosure were issued to homes concentrated in areas with large illegal alien populations. They match to the ZIP code and neighborhood. Where the hell do you think a sudden inflow of 20-40 million illegals were going to live? In the streets?
If you live in one of these areas (I do) and print out the MLS data or bank data for these homes, and know who was living there while the homes were going into foreclosure, you will see that it was homes and dormitories for illegals, often 10 or more to a home.
The homes themselves were often not owned by illegals. Some were; others were owned by legal Hispanic landlords or realtors exploiting their own, and others by legal non-Hispanics who saw a good deal. These were not tenements, but homes in the $300,000 to $700,000 neighborhood. With 10 or more illegals paying $400/month rents, they were little profit centers. In conversations with some of these unscrupulous owners, you would even find that a foreclosure was built into the game plan - buy the home with nothing down and a teaser rate of 3%, collect the rents; when the teaser rates expire stop payments completely but continue taking the rent; allow the lengthy foreclosure process to take place which can be 6-18 months, collecting rents all the while with no money out for mortgage payments,; abandon the property and walk off with a good profit and someone else picking up the tab (YOU!).
I would guess that you live in neighborhoods not touched by this foreclosure mess, although the problem has now spread to other homes as the market turns their mortgages upside down and even middle class people find it better to walk away. The collapse in the financial markets has now spread worldwide to all banks and investments, but its start was the subprime loans to house illegals.
For mac_truck, if you can come up with better FACTS, do so, otherwise, don’t expose your own ignorance with unsubstantiated comentary. You have a promising career in journalism with your mindset.
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