Posted on 01/25/2009 8:47:56 AM PST by wartman
We’ve all heard it. In the last couple months, the refrain of “deregulation and lack of government intervention” caused the financial crisis we’re currently working through. However, a quick look back shows that this wasn’t the case. In fact, it’s pretty clear that the real cause is the exact opposite: the crisis was caused by too much government intervention.
The fairy tale usually goes like this: greedy financial companies gave unfair subprime loans to borrowers who couldn’t qualify for standard mortgages and hid in the fine print the real terms of the mortgage in an attempt to fraudulently enrich themselves.
There are so many logical fallacies and outright laughable stupidity in that above fairy tale it’s almost hard to take seriously anyone who actually believes that. But, I’ll try.
1) The first fallacy that needs to get out of the way is that the mortgage companies handed out the subprime loans because they didn’t care whether the person would be able to stay in the home or not. That idea shows a strong ignorance of the way credit institutions work. No one wanted the borrowers to stay in their homes more than the lending companies. If the mortgage goes into default, the lending company stands to lose a lot of money. Foreclosure is a losing proposition for the lending company.
2) The subprime loans we’re given out in the first place because the Democrats demanded it. This is a historical fact. It shouldn’t be hard to follow the logic:
* Democrats demand that poor borrowers be given access to mortgages. * Because they have poor credit, these borrowers cannot qualify for standard mortgages. Hence subprime interest rates. * The banks then bundle these mortgages into securities which are purchased by a government sponsored entities nicknamed Fannie Mae and...
(Excerpt) Read more at jeffwartman.com ...
I understand this. Banks are not going to lend to people who can not afford a loan. Why did they lend to these people who clearly showed they could not afford the mortgage.
CRA has nothing to do with affordability.
Post them again. Push it in these peoples faces.
Then show them photos of millions of people in the country illegally, marching through our streets making threats and demands....All under Bush's watch...
You're right - and the bast..ds are trying to blame the whole thing on home owners losing their homes...
They were not. That's B.S. SP loans were just a means to an end.
as the regulator of bank the government could and did pressure banks to make loans (mortgages) to were credit risks. If a bank did not bow to the pressure the government could make their life difficult.
In 1992 there were articles in the Charlotte Observer about “communty organizers” who were pressuring NCNB (who was later absorbed by Bank of America) to stop “redlining” certain areas of Charlotte, and start writing mortgages to people in those areas-they of course caved in to the pressure. One bank that didn’t was BB&T-who I understand is still pretty strong today. Just like the ICC with trucking companies, and the FCC with radio stations-if you were a private entity that was regulated by the government-you do what you’re told or the regualtors will put pressure on you.
As Rush says, ignorance is our most expensive commodity.
If you need help finding the audio of these speeches, let me know.
What people don't understand, is CRA does not stipulate you have to sell to people who can not afford the loans.
Conservatives think idealistically ... the rest think about how to move people's thoughts.
Watch again the movie, "Wag The Dog"
At all levels.
Lots of restaurants in the UK I noticed, after a couple of times back this year, were using "Local staff"...as in Chinese restaurants would use Chinese "Labourers". Indian the same.
Furthermore,
The majority of Asians to make it have done it on slave labour.
Not necessarily their "own" people.
Preferably from poorer nations.
true they can’t be forced to do it, but there are repercussions if you do not. NCNB was at a point where they had to have regualatory approval of expansion and accuistions-in order to execute their business plan they had to have the approval of the federal banking regulators-who left them no choice but to make the loans.
Everyone should listen to this speech.
http://www.youtube.com/watch?v=eW9viaJatpo
Until the Clinton years, CRA compliance wasn’t a difficult matter for banks, which could get an A for effort simply by advertising loan availability in certain newspapers. Then the Clinton Treasury Department changed matters in 1995, requiring banks that wanted “outstanding” CRA ratings to demonstrate statistically that they were lending in poor neighborhoods and to lower-income households.
But banks, engaged in a frenzy of mergers and acquisitions, soon learned that outstanding CRA ratings were the coin of the realm for obtaining regulators’ permission for such deals. Further, nonprofit advocacy groups—including the now famous Acorn and the Neighborhood Assistance Corporation of America (NACA)—demanded, successfully, that banks seeking regulatory approvals commit large pools of mortgage money to them, effectively outsourcing the underwriting function to groups that viewed such loans as a matter of social justice rather than due diligence.
http://www.city-journal.org/2008/eon1030hh.html
The information is there if you want to look.
Indeed, pick up any big-city newspaper circa the late 1990's or early 2000's and you'll see that most large cities were using every tool available to push banks into loaning to people who didn't have the financial means and history necessary. I remember when I moved from northern Ohio, Cleveland was in a legal struggle trying to force Third Federal Savings and Loan to lower their lending standards, accusing the outfit of "redlining" neighborhoods. ACORN was in on this debacle as well. Freddie and fannie provided cover to protect the institutions.
But the problem grew, and it wasn't just low-income borrowers riding the train of easy credit. Interest rates that were too low for too long compounded the situation - Greenspan dropped the prime rate after 9/11 but kept it down way too long, encouraging more leveraging (borrowing). There's many other factors involved, but suffice to say that the housing bubble rode on the credit bubble and when credit ran out, housing was bound to fall. Unfortunately, the fall has taken many responsible people with it.
Everyone should listen to this speech.
http://www.youtube.com/watch?v=eW9viaJatpo
Greenspan to Bernanke- the fed was pumping out dollars at a rate where people had no choice but to take it, and park 'it' somewhere (turned out to be housing and 2nd mortgages). "POP!"
Why all the surprise? Nothing can go up forever. Bad loans within the bubble may have pierced it, however, at some point it would have blowed-up under it's own weight.
Absolutely right! He promoted the silly idea "everybody should own a home" and the % of home ownership went up from around 62% to 68% and now we are seeing the market drop back to the 62% area. The longer the govt acts to prevent this fallback, the deeper the recession.
Wall street and banks also have their share of blame in this mess with their stupid CDS's and lack of integrity of notifying the public of the problem.
Speaking of silly.
Let’s not forget the Bush Policy of ‘helping’ islamics adopt democracy.
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