Posted on 09/27/2008 4:10:18 PM PDT by sirchtruth
What has really caused the current financial crisis?
I know I've heard the term "redlining" how does this relate?
An excess of vanity posts sucking up liquidity?
Look up CAR, Freddie & Fanny, etc., etc. There are plenty of threads right here to fill you in.
Short answer: Congress.
Excellent video that is factually based.
In their own words...
At this 2004 Congressional hearing, Democrat leaders dismissed the calls for the reform of Fannie Mae and Freddie Mac. They later killed legislation that would have reformed these entities.
http://www.youtube.com:80/watch?v=_MGT_cSi7Rs&eurl=http://gatewaypundit.blogspot.com/
Anyone who didn’t LOL at your post has a heart of stone!
This explains it all.
More to it than just this but...In a nutshell, clinton threatened banks for being “racist”. It could not be that many inner city folks had bad credit and therefore could not get loans..it had to be racism. The banks were forced to make subprime loans and what do you know...low income people had a hard time paying them back. Thus it is all the republicans fault.
No article, no contribution, nonsense.
A lot of things did. For example:
The oil price shock wave going through the economy. That was probably the final straw that tanked a number of weak financial institutions.
The failure of Freddie-Mae and Fanny-Mac financial institutions. These government backed institutions were not backed with enough capital. So when the housing prices fell and the markets when south they were the first to sink.
This was in turn caused by our corrupt Senators and Representatives who set the rules for these institutions so that they could profit.
See the mandatory community reinvestment acts and ACORN.
Reportedly these rules required banks to invest a certain amount of money with low income people and neighborhoods (defeating ‘redlining’) or pay hefty financial penalties.
These rules caused the banks (backed by Freddie and Fanny) to issue a lot of bad loans - to people with no income and no jobs (nija loans).
You will also want to check out the securitization of mortgage, the FASB "Mark to Market" rules on valuing assets, and the developing of Credit Default Swaps.
I think factually what caused this situation is, Redlining. Banks had to lend to ARM's to high risk, high debt to income clients.
In other words - OVER REGULATION.
1. Democrats enacted and enforced Community Reinvestment Act making banks lend to people who shouldn’t get fund. Most were minorities.
2. Fannie Mae and Freddie Mac, the GSEs, lowered their underwriting and purchase standards to expand lending and make $$$. Congress and HUD forced Fannie and Freddie to purchase subprime ABS in order to meet HUD affordability goals. Which are CRA goals.
3. As with any business, Fannie and Freddie tried to compete with the private market subprime market by lowering their standards in order to increase market share.
4. Banks and other financial entities bought subprime ABS because of the attractive yields.
5. When the housing market slowed and turned down, defaults increased SO FAST that banks couldn’t unload the loans on someone else (e.g., foreign funds, banks and insurance companies).
So, even if we bail out the banks, all legislation is still in place. So, it will happen again!
Thanks for your participation. I'm sure other freepers and the like appreciate it.
I’m usually nicer than that, but honestly! Don’t read any of the articles on FR posted in the last week; don’t go to Investor’s Business Daily, Forbes, or even Fox News’s websites for some intelligent analysis. Just post a thread asking the question de novo, as if this is the kind of site where people do that kind of thing.
Okay, I feel better now.
Vanity without freep moderation.
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