Posted on 02/05/2008 5:42:47 AM PST by OESY
...From the current hand-wringing, you'd think that the banks came up with the idea of looser underwriting standards on their own, with regulators just asleep on the job. In fact, it was the regulators who relaxed these standards- at the behest of community groups and "progressive" political forces.
In the 1980s, groups such as the activists at ACORN began pushing charges of "redlining"- claims that banks discriminated against minorities in mortgage lending. In 1989, sympathetic members of Congress got the Home Mortgage Disclosure Act amended to force banks to collect racial data on mortgage applicants....
In fact, minority mortgage applications were rejected more frequently than other applications- but the overwhelming reason wasn't racial discrimination, but simply that minorities tend to have weaker finances.
Yet a "landmark" 1992 study from the Boston Fed concluded that mortgage-lending discrimination was systemic....
No sooner had the ink dried on its discrimination study than the Boston Fed, clearly speaking for the entire Fed, produced a manual for mortgage lenders stating that: "discrimination may be observed when a lender's underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants."
Some of these "outdated" criteria included the size of the mortgage payment relative to income, credit history, savings history and income verification. Instead, the Boston Fed ruled that participation in a credit-counseling program should be taken as evidence of an applicant's ability to manage debt....
Banks that got poor reviews were punished; some saw their merger plans frustrated; others faced direct legal challenges by the Justice Department....
These days, everyone claims to favor strong lending standards. What about all those self-righteous newspapers, politicians and regulators who were intent on loosening lending standards?
As you might expect, they are now self-righteously blaming those, such as Countrywide, who did what they were told.
(Excerpt) Read more at nypost.com ...
I am fully aware of the fact that sometimes people who have good or even excellent credit can fall behind on their bills and lose their houses. However, this isn't what is going on here.
If a bank sees that someone has a shoddy credit record and gives that person a huge loan anyway, knowing full well that this person is most likely not going to pay back the loan, then how is it possible to conclude that the bank isn't acting irresponsibly here?
Absolutely correct. That is all what this bailout BS is about... to create a new permanent voting bloc that is dependent entirely on the government. To be fair though, the GOP is just as guilty of pandering to this bloc as the Democrat Party.
SHE has already proposed the first step in this process. SHE has demanded a freeze on foreclosures and interest rates.
Don't forget that Sen. Chris Dodd has already introduced legislation that would have us purchase these bad mortgages and essentially give the borrowers free houses.
Lol. Ron Paul is a fool. /s The guy is spot on.
Don’t Blame the Market for Housing Bubble
March 19, 2007
The U.S. housing market, long considered vulnerable by many economists, is now on the verge of suffering a serious collapse in many regions. Commodities guru and hedge fund manager Jim Rogers warns that real estate in expensive bubble areas will drop 40 or 50%. Mainstream media outlets like the New York Times are reporting breathlessly about the possibility of widespread defaults on subprime mortgages.
When the bubble finally bursts completely, millions of Americans will be looking for someone to blame. Look for Congress to hold hearings into subprime lending practices and “predatory” mortgages. We’ll hear a lot of grandstanding about how unscrupulous lenders took advantage of poor people, and how rampant speculation caused real estate markets around the country to overheat. It will be reminiscent of the Enron hearings, and the message will be explicitly or implicitly the same: free-market capitalism, left unchecked, leads to greed, fraud, and unethical if not illegal business practices.
But capitalism is not to blame for the housing bubble, the Federal Reserve is. Specifically, Fed intervention in the economy— through the manipulation of interest rates and the creation of money— caused the artificial boom in mortgage lending.
The Fed has roughly tripled the amount of dollars and credit in circulation just since 1990. Housing prices have risen dramatically not because of simple supply and demand, but because the Fed literally created demand by making the cost of borrowing money artificially cheap. When credit is cheap, individuals tend to borrow too much and spend recklessly.
This is not to say that all banks, lenders, and Wall Street firms are blameless. Many of them are politically connected, and benefited directly from the Fed’s easy money policies. And some lenders did make fraudulent or unethical loans. But every cent they loaned was first created by the Fed.
The actions of lenders are directly attributable to the policies of the Fed: when credit is cheap, why not loan money more recklessly to individuals who normally would not qualify? Even with higher default rates, lenders could make huge profits simply through volume. Subprime lending is a symptom of the housing bubble, not the cause of it.
Fed credit also distorts mortgage lending through Fannie Mae and Freddie Mac, two government schemes created by Congress supposedly to help poor people. Fannie and Freddie enjoy an implicit guarantee of a bailout by the federal government if their loans default, and thus are insulated from market forces. This insulation spurred investors to make funds available to Fannie and Freddie that otherwise would have been invested in other securities or more productive endeavors, thereby fueling the housing boom.
The Federal Reserve provides the mother’s milk for the booms and busts wrongly associated with a mythical “business cycle.” Imagine a Brinks truck driving down a busy street with the doors wide open, and money flying out everywhere, and you’ll have a pretty good analogy for Fed policies over the last two decades. Unless and until we get the Federal Reserve out of the business of creating money at will and setting interest rates, we will remain vulnerable to market bubbles and painful corrections. If housing prices plummet and millions of Americans find themselves owing more than their homes are worth, the blame lies squarely with Alan Greenspan and Ben Bernanke.
You're saying the same thing with more and different words. Not every case is like that. Where I live there are four foreclosures. Two are due to divorce and not being able to sell the place for what they paid for it, but they could afford the loan when they got it. The others are investors who've decided they can't afford it after getting big tax and insurance increases after they bought. But they could afford it when they bought it.
There is a common misconception on FR that the mortgage meltdown is comprised of “the poor and minorities” on whose behalf the Government twisted the arms of lenders. This article reinforces that point of view.
That’s a portion of it, and probably a way overrepresented portion in MSM sob stories.
There was also plenty of bad loaning to white middle class folks who: “bought” a $700,000 house on a $60,000 income, “bought” second and third houses to flip based on fairy-tale projections of home values, or were serial refinancers, turning paper equity into cash to buy shiny toys or make other bad investments.
Think again...bankers are just as greedy as the rest of Wall Street, esp. when they can securetize and sell the risk.
Can it possibly that THIS CONGRESS which had non-stop oversight hearings during this last session, completely lost sight of this problem? Say it ain’t so, Pilosi/Reid and your despicable oversight committees.
It's illegal to discriminate, except when it's in favor of the minorities.
...and if you’re looking for the “9/11” of the subprime mess, it’s probably the Congressional Black Caucuss’ “With Ownership Wealth” program, targeting 1 million new black homeowners in 5 years after 2001:
http://realtytimes.com/rtnews/rtcpages/20010924_wealth.htm
Then in 2002, President Bush (and Vincente Fox) added 4.5 million Hispanics, etc to the mix resulting in the “Ownership Society”.
http://www.whitehouse.gov/news/releases/2004/08/20040809-9.html
Let the market take care of itself.
Right! Where’s Congress’ involvement in this?
When are we going to learn that these incompetents
in the F-Maes/Macs are being prosecuted for their criminal malfeasance??
so then they should reform bankrupcy to allow reformation “cram down” of over valued collateral mortgages.
Article from 2004:
~~~~
Jamie Gorelick’s law firm represents Fannie Mae, which cooked books, gave Gorelick big bonus (2004)
http://www.freerepublic.com/focus/f-news/1310839/posts
“Here is one source: Fannie Fallout: Who Gets Hurt? (link no longer works)
“Stockholders may be upset with a $14-billion decline in the value of Fannie Mae’s stock, but what may end up being more interesting is the rise and fall of careers amid allegations that the company cooked its books to justify big executive bonuses.
Three of those who profited from the bonuses are Franklin Raines, Jim Johnson, and Jamie Gorelick; all three looked to be important Cabinet members should John Kerry be elected president. Gorelick has since left Fannie Mae and joined the law firm Wilmer Cutler Pickering Hale and Dorr, which is the main law firm representing Fannie Mae.”
~~~~
Hang ‘em!
As a retired Real Estate Broker, I was aghast at the laxity in qualifying for a mortgage loan since 1989, along with the enormous price increases in housing!
I fully expected just what is now occurring to come about. This HAD to have been deliberately planned, in concert with other economic and political manipulations; the Communist takeover of the MSM, not to mention Congress.
But what’s an old gal to do?
But here -- the cure is in these forums and the self-education of all good citizens participating on them, and of the few with us and from us who push themselves into running for office and gaining it.
What Alan Greenspan and the rest did not for see was that the media would tank our economy to win an election. Why was there a sudden drop in values when our economy was pumping along with lower taxes and interest rates than anytime in recent history? Inflation was nil, and unemployment was very low. The drop in values came because the media incited a panic. How could the left get their candidate elected if the economy was good?
This would have never happened if the government kept their hands out of the economy.
Nationalized Banking (we are almost there with Fannie and Freddie)
Nationalized Healthcare (We are almost there with Obama and McCain)
Nationalized Oil (The lynch mob on the left is crying for this)
That ladies and gentlemen is the Holy Trinity that the Messiah will bring to us, and it will be the death of our capitalist republic.
You missed the point of the article. The government told them if they were in the lending business then they had to do these things. And be sure the government sat back and said they would protect them if things went bad. They do that by allowing the write downs. Yeh!
So do you follow what the government says, or be shut down?
Small banks didn’t invest in this because they are not part of the national pool of money. They maintain only a small portfolio that they participate with other smaller banks. One of my banks has $230 million in loans. Countrywide was doing more than 4 times that in a month.
The government wanted companies like Countrywide to employ people to lend out these huge pools of money. Someone has to make money to pay taxes.
Obama will fix all that though. Low taxes, no income, government bread line. Yeh!
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