US 1 Year Adjustable Rate Mortgage Rate data by YCharts
Posted on 12/08/2012 10:50:16 AM PST by SeekAndFind
President Obama argues Republicans want to go back to pre-recession policies of cutting "taxes for the folks at the very top" and rolling back "regulations on big banks."
He warned: "We tried that top-down approach. It's what caused the mess in the first place."
Did it, though?
Most economists agree the recession was caused by the subprime mortgage crisis, which had little if anything to do with tax policies.
In fact, real economic growth accelerated after 2003, when the Bush tax cuts for top earners and small businesses fully went into effect. The 73-month economic boom of the 2000s didn't end until December 2007, when the housing market collapsed.
So what killed housing?
To hear Obama, greedy bankers were allowed to run amok, rubber-stamping loans for practically anyone with a pulse.
He's right that underwriting was a joke, and as someone who advocated for easier home lending, he would know. Clinton's Role
Only, it wasn't because regulators looked the other way. Quite the opposite; they encouraged lenders to make risky loans.
Shoddy subprime lending expanded due in large part to federal housing regulations that institutionalized "flexible" mortgage underwriting standards for loan originators and government-backed mortgage giants Fannie Mae and Freddie Mac.
And they, under pressure from Congress and their Housing and Urban Development "mission" regulators, wound up underwriting nearly half the risky subprime and other nonprime mortgages outstanding, fueling the financial market for subprime securities.
While Bush is commonly blamed for the historic housing bubble that burst in 2007, housing experts now agree it began 10 years earlier in 1997 — under a Democratic administration.
The easy-credit orgy that took place over that decade was fed by federal housing policies designed to pump up homeownership rates.
It had a name: the National Homeownership Strategy.
(Excerpt) Read more at news.investors.com ...
Bush just happened to be president when the world went through a serous cyclical deflation and deleveraging. Bush wasn't perfect, but a president can't be held responsible for an international economy. It's too big.
It all began with a change in the Community Reinvestment Act [CRA] - backed by Clinton, Frank, et al.
Then, they pressured the banks to give loans to unqualified people, and said that Fannie and Freddie would back the loans.
Things then spun out of control and soon, Fannie and Freddie wouldn't accept responsibility for the loans. Thats when the banks came up with the CDO's and CDS's - to spread the risk out.
The head of the Commodity Futures Trading Commission [Brooksley E. Born] under Clinton tried to warn Alan Greenspan et al about the looming mortgage crisis, but was undermined by them when the when the Commission sought to initiate regulation of derivatives. Ultimately, it was the collapse of a specific kind of derivative, the mortgage-backed security years later, that triggered the economic crisis of 2008.
After Bush came into office - his oversight people tried to tell Congress that Fannie and Freddie were built on a house of cards as far as the sub-prime mortgage mess was concerned. Frank, Waters, and a few more libs told them that they were liars and racists. [See video mentioned in this thread].
The most expensive meal of all is the free lunch.
You betcha. His putting China on the permanent favorite trading nation can only be blamed on him. Now about everything you buy is made elsewhere - hence our permanent recession. The Bush tax cuts sure didn't create jobs in this country.
You just have no idea what you’re talking about if you don’t think the feds were coercing banks to make bad loans. W’s big pushes included increasing zero-down mortgages and increasing minority home ownership. So he added on to then in-place bad policies and did nothing to unwind them:
http://georgewbush-whitehouse.archives.gov/infocus/achievement/chap7.html
http://isteve.blogspot.com/2008/09/2002-bushs-speech-to-white-house.html
Barney Frank and the Democrats started this mess, but they have all the idiots convinced it was Bush.
Obama Wrong! But I repeat myself!
Lets climb out of the housing mess using the same rates as incentives...
3.5% downpayments until July 1, 1013
4.5% downpayments until January 1, 2014
5.5% downpayments until July 1, 2014
7.5% downpayments until January 1, 2015
10.0% downpayments thereafter...
Sorry, pal, but check my links: Bush was pushing further in the bad direction we already were in. If he’d done the responsible thing, he’d have pulled back in the other direction.
Nobody here suggested he had dictatorial powers—and you shouldn’t be misrepresenting as such.
Exactly right. He may not have started it but Bush did little to nothing to stop it.
US 1 Year Adjustable Rate Mortgage Rate data by YCharts
Bush never forced any banker to make any loans. Bankers made loans (and made loans they later acknowledged were risky) because they were able to sell those loans to Wall Street firms who securitized them and sold them to invetors. Wall Street was able to sell them to investors because rating agencies labeled many toxic securities as AAA investment grade securities.
From top to bottom, those participating in that sales chain did so because their activities were profitable. As long as they were paid to rate crap as AAA, the rating agencies labeled crap as AAA. As long as rating agencies labeled crap as AAA, ignorant investors would buy that crap . As long as investors were willing to buy securities, Wall Street was willing to create and sell them. And, as long as Wall Street would purchase loans, lenders were willing to create them.
See if you can find one banker in this country who will say that Bush forced him to make any loan, ever.
First, there were all kinds of coercive efforts forcing banks to make bad loans: from the need for high CRA scores to get acquisitions approved, to the government funded ACORN forcing banks to make lending commitments, to the Federal Reserve’s claims that banks were discriminating if they didn’t make loans representative by racial category and therefore determining that it was discriminatory to require traditional metrics for lending, to the subsidized Fannie, Freddie, etc., making it only practical for banks to sell to them (or the parallel securitization network that the investment banks finally went through the full value chain on)—there were all kinds of coercive efforts forcing banks not to apply sound traditional standards. Again, the reasoning was that such standards were discriminatory. Bush not only did nothing to reverse that, but he further pushed zero-down loans, with the focus on that as a tool for lifting minority homeownership.
I’ve had bankers tell me how reliably their banks lost money on the minority lending programs that the regulators forced them to inact.
bttt
Bankers and mortgage companies are the main culprits for our financial meltdown. When the CRA was implemented, the bankers legitimately complained about the risks of waiving lending requirements. Clinton placate them by having Fannie Mae and Freddie Mac buy these subprime notes along with other mortgage notes after the banks held them for six months or more. When the bankers discovered that FMFM were not auditing the mortgage notes, because the fed gov assumed bankers would not jeopardize themselves via fraud and losses from mortgages based on false applicant data. The gov was deadly wrong, because their policy of buying all the mortgage notes unaudited meant bankers can make tons of money in the six month holding period just on application fees and points. Bankers no longer cared about loan integrity and more on how much volume of mortgages they can get in the six month period. Encouraging prime applicants to falsify income so they can use their good credit history and new false income to qualify for larger loans (and larger dream house) became widespread practice. Subprime loans did not hurt as severely as false application prime loans because the subprime are clearly marked while liar loans are hidden toxic assets sold as AAA rated investments. Country Wide and WaMu were not the few rotten apples, nearly all the large US banks were involve with liar loans and selling it to FMFM. Conservatives need to stop spreading the myth that gov is the major cause of the real estate and financial collapse of 2008. If the bankers knew the gov was not auditing the mortgage notes they were buying, they at least should not have taken advantage of the gov blindspot and flooded the market with liar loans.
No mention here of the disasterous monetary policy pursued by Greenspan.
Bush is NOT GUILTY. Again, you cannot name one banker in this country who was forced by Bush to make one loan. That was never necessary.
And, whenever investors again show a willingness to unwittingly spend good money to buy crap that isn't transparent (and that day will come), all of this will happen again.
And, I'm sure there will be folks who will blame it on Bush again.
True, since the Fed is independent of "gov". The only one cause of all booms and busts is loose money.
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