Posted on 10/04/2008 6:27:45 AM PDT by Hillary'sMoralVoid
I'm watching Dems spin the financial crisis on such shows as Oprah. They cite a lack of regulation of Wall Street and 'greedy" banks that wanted to take on sub-prime loans to somehow increase their bottom line, and then sell them to other banks.
The argument against the Democrats that I hear is that Freddie and Fannie pushed the sub-prime loans on banks and, were it not for that policy and the subsequent collapse of Frannie and Freddie, there would be no crisis.
My question is: What possible incentive would there be for large banks to take on high volumes of sub-prime loans? What possible benefits could they gain from carrying a lot of this type of paper? How is greed a factor here?
Any economists out there?
Supposedly banks that rejected a higher percentage of subprime loan applicants were subjected to penalties.
They might have been sued also. The other day here on FR there was a story about some Chicago minorities who sued Citibank over mortgage issues. Obama was their lawyer.
This article describes it better than any I have seen
Why? Because Janet Reno threatened them. Then, of course, when Raines got it, it was simple corruption.
Fanny and Freddy to not make loans, they buy them, package them and sell them. What they did was to signal the banks they would accept very much less qualified applicants then was normal. This incited a lending frenzy among the banks since selling their mortgages is a good source of income for them.
You have listened to way to much spin. The banks sold them, derivatives, then they ran out and made more bogus loans so they could sell them, they did this over and over again and drove up the price of homes and made 150% loans so they could sell them. Man they were rolling in the money. Paid themselves millions in bonuses because they were so good at making money. But in the end there were not enough fraud to go around so the whole thing collapsed.
See:The main use of derivatives is to reduce risk for one party. The diverse range of potential underlying assets and pay-off alternatives leads to a wide range of derivatives contracts available to be traded in the market. Derivatives can be based on different types of assets such as commodities, equities (stocks), residential mortgages, commercial real estate loans, bonds, interest rates, exchange rates, or indexes (such as a stock market index, consumer price index (CPI) — see inflation derivatives — or even an index of weather conditions, or other derivatives). Their performance can determine both the amount and the timing of the pay-offs. Unregulated Credit derivatives have become an increasingly large part of the derivative market.
The Community Reinvestment Act under Carter leaned on banks to make mortgage money much more available to low-income borrowers than the banks thought was prudent. Who in the world would want to lend to poor candidates for repayment? Well, the banks were “forced” to.
By the time Clinton rolled around, the community activists and ACORNs of this country were clamoring for even looser standards. The Dem politicians, in their lust to buy votes and increase dependency upon their party, landed squarely in their corner. Ultimately, the reno Justice department threated investigations and possible criminal action against the banks if they thought there might even be a whiff of redlining.
Not wanting to attract the attention of the DOJ, banks started to make sub-prime loans. what made it palatable is that they were allowed to bundle up packages of these loans and “securitze” them, that is, sell the package of loans as if it were a security.
Concurrently, the dem congress mandated that fannie and freddie should be able to buy tons of this crap - well beyond the limits set in their charter. So now, the banks were off the hook and free to enjoy the profits of making any old crap loan while knowing that someone was there to buy it.
I think I got it right, anyway. The point being that if some sucker was their to buy up packages of bad loans, the banks didn’t worry about making them.
An anagram for you:
Sub-prime mortgage = Most impure beggar
Simple answer - not good for the banks, but very good for short-term bonuses to democrat operatives who had no intentions of still being at the bank when the stuff hit the fan.
Ponzi schemes work well for the first few people, who make a lot of money off of everyone else’s losses. That is why they are illegal - unless you are protected by your party in Congress.
The world is awash with money. I mean, never in history, ever. The worlds money is desperate to find a place to go. Further, there is so much( I know this is hard to fathom, but true never the less ) that the world was desperate to find places to spend checks that start at 10 billion.
The US was one of those places. The US Government was offering to tax 10 billion, 100 billion and give you 3 percent. Guaranteed.
Lots of people where happy, relived to do it.
Further, lots of people wanted to get higher returns, like 100 percent higher. This is were money just flooded into the mortgage market. Fannie Mae or not, it was coming.
And you know what? We all liked it.
So far, so good. We are still in (relatively) free market here (not really, but let's go on).
Now comes Fannie, Freddy and the Democrats.
The Democrats looked back at the disaster of Public Housing Projects and wanted to, as always, ‘do something’.
So the notion was that people that couldn't handle public housing, couldn't maintain it, and more or less were just warehoused would bloom into functional, daisy growing, lawn cutting home owners if they could sign up for 30 years of home payments. How people who by and large couldn't graduate from dreg high schools, hold a job, stay off crack or figure out who daddy was, were supposed to make 30 years of mortgage payments, taxes, upkeep, repairs, escapes me, but that's Democrats for you.
So the Democrats with RINO support do the Community Reinvestment Act. This commanded banks to loan to people that they would never loan to.
Now you would think outside of conviction and orders of a judge, no free person would have to obey orders. You are wrong. We don't live in that kind of country. You do as you are told, with out compensation. Period.
Anyways, the banks were told that Freddy/Fanie would back up the morgages. Also investors were told that Uncle Sam would back the morgages. Also Europe, the UK, China was told we would back the morgages.
Remember I told you the world was flooded with money and looking for places to put it?
Gasoline, match, air.
So now the biggest ‘pass the buck’ or in this case ‘pass the mortgage’ operation starts rolling. And it rolled from the slums of LA to Banks in Germany, China and all over the world.
And nothing moves in this world without everyone along the way getting something to make it worth their while to move it.
Everybody made, or ‘got’, money.
So we got to the point where a single welfare mom with five kids was getting $300,000 for a dump triple decker in Detroit that needed another $300,000 to rehab it.
She bails. Sob story in the paper, news at 11. You know the drill.
She bails, her neighbor bails, Joe six pack with the new pickup truck, the center console with the twin 200hp outboards and the vaction house bails and so forth.
Now all of sudden all those bankers, all over the world look at those papers in their desk and see that they are worthless. They know it and they don't want it and they can not find a sucker to take it. It is worth zero.
But, everyone remembers that 15 years earlier, that Chris Dodd, Barny Frank, President Bush, Congress said it was backed up by the Uncle Sam. You and me.
And that is why this bill went through.
And that is why if, and I believe it will, this blow up continues, Uncle Sam will have to do this again, and again.
........
The Dems are half right. The Repbus are half right. Together they are all wrong, but Hitler was wrong and the German people had to pay. Stalin was wrong and the eastern Europeans had to pay. Mao was wrong but the Chinese had to pay.
We are chained, tied, roped, glued to the government. And now we pay.
Rinse, lather, repeat.
Young run away girl can be put on the street for ten years of prostitution.
Young men can trade their lives for a few years of camaraderie in foreign lands.
Lots of opportunities for decades of ‘recovery schemes’, ‘rebuilding’, and my favorite meaning less phrase, “re-investment in the community’.
It's kind of fitting that events associated with the ‘Community Reinvestment Act’ will give us a ‘Community Organizer”.
It's like Karma.
“Should have added that this was all made possible by the change in law made by Mr Gram of Texas, allowing banks to be more than just a bank.”
correct.
And in libland - this is the “only” cause (well, according to my local congress critter anyway)
Forget Clinton signed that bill into law, and the libs simply don’t want to discuss fannie/freddie anyway.
Remember - Oprah is not going to give the truth on this one - no way no how!
Her guy is up to his neck in the fannie/freddie mess, and they will do their very best to distract distract distract.
Has Al Sharpton of old’ Jesse boy weighed in on all of this mess? Wonder Why, after all they are the master’s of extortion.
“Ponzi schemes work well for the first few people, who make a lot of money off of everyone else’s losses. That is why they are illegal - unless you are protected by your party in Congress.”
exactly.
A well disguised sophisticated Ponzi scheme - but a Ponzi scheme nonetheless.
And as always happens with Ponzi schemes - the originators make off with a ton of $$ leaving behind a group of poor ripped-off saps. Us.
Very nice. Thank you.
This is nonsense. Facts to counter these lies:
1. The Gramm-Leach-Bliley Act of 1999 that the Democrats say caused these problems had nothing to do with the creation of subprime risky loans. Clinton and Robert Rubin made the changes to Freddie/Fannie making these loans possible.
2. Democrats supported and voted overwhelmingly for the 1999 deregulation bill. Clinton signed it into law.
3. To get dem support for the combined (house/senate) final version of the 1999 deregulation bill dems and Clinton insisted (even threatened veto) at adding CRA requirements to companies merging under the bill. This probably did accelerate the risky subprime loans but was something that dems demanded.
4. Deregulation had nothing to do with and had no affect to Fannie/Freddie loan rules.
5. When problems were brought to the attention of congress as early as 2001 the dems blocked any attempts to fix them. Numerious times warnings were issued, legislation proposed, about the coming problems. Every time dems insisted that there were no problems with Fannie/Freddie.
6. Legislation co-sponsored by McCain in 2005 was to regulate and oversee Fannie/Freddie. A vote in committee resulted in all Republicans voting for and all Democrats voting against. At that time the R's had a small majority in the senate, it never went to the full senate for a vote because dems opposed and it was far short of the 60 vote support required to pass.
Greed is/was indeed a factor: When Raines, Johnson, et al cooked the books to show they hit certain "profits" it triggered incentives to line their pockets. They were packing their own (stolen) platinum-plate, golden parachutes.
Corruption: The linkage between the housing agencies and ACORN is both incestuous and smelly. The housing agencies are, by all measures, a well choreographed RICO organization in bed with the Democrat party. Investigative interrogatories with Raines, Johnson, Dodd, Obama, Gorelick, Clinton, Frank, and others would produce many "process crimes" that would make Scooter Libby look like a jaywalking infraction. The DC Federal holding pen would not be able to contain all the bureaucrats and elected officials that SHOULD be there.
One 1000 percent wrong, up until this time banks were not allowed to co mingle their funds in stocks and bonds. Banks were banks, not investment stock brokers and stock clearing houses nor were they mortgage brokers. And this needs to be reversed, banks should be banks, and that is all.
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