Posted on 02/09/2012 1:55:08 PM PST by Tailgunner Joe
Madcow: Wear the Penis.
He’s right, you know.
The banks had redlined bad loan areas, and the gov’t forced this to end. 20% down was deemed racist. Once banks were Mau-Maued into granting these 3% loans, the financial system did it’s thing... Capitalize on the system. The enormous drive to profit figured out by many will always trump the controlling rules of the few elites.
“20% down was deemed racist.”
Google “American Dream Downpayment Initiative” and you may be able to find Dubya’s 2003 speech to HUD praising this bit of idiocy, which he enthusiastically signed into law. It appears to be one more instance of the latino-pandering that his administration was heavily invested in.
“Once banks were Mau-Maued into granting these 3% loans,”
I’ve never run across these 3% loans although they may indeed exist. Either way the CRA applied only to deposit taking banks, what we normally think of as banks. It didn’t apply at all to the ‘shadow banking system’, that is Wall Street investment banks and hedge funds that raise their money from investors.
Wall Street firms entered the subprime market solely out of profit opportunity. Subprime loans had existed for years in a tiny way, as hard-money personal household lending by Aames and HFC.
Wall Street firms needed a much larger pool to absorb the money they wanted to invest. Lending to the universe of potential home buyers with poor credit was what they hit upon. A history of how they entered this market is in the book “Chain of Blame”. By the top of the bubble in 2007 shadow bank lending in the US had reached 10 trillion dollars.
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