Capitalism Guarantees Rising Inequality

[dnsmith35]

The current crisis is rooted in poor performing mortgage loans made between 2005-07. The CRA was passed decades ago and hadn't been changed substantively since 1995. Nothing in CRA legislation required banks to make loans to people incapable of repaying the loans. Independent nonbank lenders like Ameriquest and Countrywide originated a substantial share of subprime mortgages yet were not directly influenced by CRA obligations. The CRA was not the cause of the current crisis; an epidemic of mortgage fraud at the behest of Wall Street banks was.

Did the CRA cause the mortgage market meltdown? - Community Dividend - Publications & Papers | The Federal Reserve Bank of Minneapolis

You are correct that the law has not been changed substantively. But, Clinton and Bush policies forced bank regulators to pressure mortgage lenders to push loans to less credit worthy people. The mortgage fraud follows bad fiscal/monetary policy and the misuse of the CRA a distant 3rd. We know that the CRA as it dealt with financing multi family dwellings in red lined areas was not a problem. It was the push for more single family homes in the lower wage families that did help heat up the market. It was not even those who lost their homes, but the sheer quantity of new buyers, and speculators taking advantage of cheap loans that caused the bubble. The bubble was not caused by mortgage fraud.

What caused parallel bubble-bust cycles occurring outside residential housing markets (commercial real estate and consumer credit) as well as similar financial crises in other countries which did not have analogous affordable housing policies?

Causes of the United States housing bubble - Wikipedia, the free encyclopedia

"What caused parallel bubble-bust cycles outside of the housing markets?" You should ask me something difficult, this question is simpleton in nature. The housing crash occurred and a huge number of construction workers lost their jobs. It became a chain reaction causing building material vendors and suppliers to go bust as well. Taking that many employed people out of jobs then caused a chain reaction in all of the industries depending on the demand from those people. I would have thought that a person like who has posted so many assertions about economics would understand such a simple situation.

BTW, I like your link.

the housing crisis was "created by reckless government policies.”[20][21] Republican appointee to the Financial Crisis Inquiry Commission Peter J. Wallison and coauthor Edward Pinto believed that the housing bubble and crash was due to federal mandates to promote affordable housing. These were applied through the Community Reinvestment Act and "government sponsored entities" (GSE's) "Fannie Mae" (Federal National Mortgage Association) and "Freddie Mac" (Federal Home Loan Mortgage Corporation).[22] Journalist Daniel Indiviglio argues the two GSE's played a major role, while not denying the importance of Wall Street and others in the private sector in creating the collapse.[4]

The Housing and Community Development Act of 1992 established an affordable housing loan purchase mandate for Fannie Mae and Freddie Mac, and that mandate was to be regulated by HUD. Initially, the 1992 legislation required that 30 percent or more of Fannie’s and Freddie’s loan purchases be related to affordable housing. However, HUD was given the power to set future requirements. In 1995 HUD mandated that 40 percent of Fannie and Freddie’s loan purchases would have to support affordable housing. In 1996, HUD directed Freddie and Fannie to provide at least 42% of their mortgage financing to borrowers with income below the median in their area. This target was increased to 50% in 2000 and 52% in 2005. Under the Bush Administration HUD continued to pressure Fannie and Freddie to increase affordable housing purchases – to as high as 56 percent by the year 2008.[22] To satisfy these mandates, Fannie and Freddie eventually announced low-income and minority loan commitments totaling $5 trillion.[23] Critics argue that, to meet these commitments, Fannie and Freddie promoted a loosening of lending standards - industry-wide.[24]

Regarding the Community Reinvestment Act (CRA), Economist Stan Liebowitz wrote in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry. He also charged the Federal Reserve with ignoring the negative impact of the CRA.[25] American Enterprise Institute Scholar Edward Pinto noted that, in 2008, Bank of America reported that its CRA portfolio, which constituted only 7 percent of its owned residential mortgages, was responsible for 29 percent of its losses.[26] A Cleveland Plain Dealer investigation found that "The City of Cleveland has aggravated its vexing foreclosure problems and has lost millions in tax dollars by helping people buy homes they could not afford." The newspaper added that these problem mortgages "typically came from local banks fulfilling federal requirements to lend money in poorer neighborhoods."​

 

[dnsmith35]

Economists use what every profession use...nomenclature.
Sometimes referred to as reverse engineering what actually occurred.

Economists also have a concern called "being published"...tell the dirty truth and stop getting calls to write articles and speaking engagement.

Sorry, I lived through the era and know hundreds of people who got the "cold" call to receive their "gift".

The polite explanation doesn't pass muster because it completely fails to explain why the software rejected the majority of the applications and the Loan had to be "Approved" on paper.
Please attempt to explain the plethora of manual Rubber Stamp Approvals that are to this day being examined by Auditors.

However you choose to understand or not, is not relevant to the issues.

Yep, I lived through the end of the great depression, and through every boom and bust cycle and recession since. I also have an MBA with a major in Economics: as well as an Ed.S in Psychology, because understanding human behavior is imperative in understanding economics. What I have posted about the housing crash, the great recession, and its "recovery".

......

carefully explained and produced citations which caused many of those "rubber stamp" issues very well.

 

[Andylusion]

The current crisis is rooted in poor performing mortgage loans made between 2005-07. The CRA was passed decades ago and hadn't been changed substantively since 1995. Nothing in CRA legislation required banks to make loans to people incapable of repaying the loans. Independent nonbank lenders like Ameriquest and Countrywide originated a substantial share of subprime mortgages yet were not directly influenced by CRA obligations. The CRA was not the cause of the current crisis; an epidemic of mortgage fraud at the behest of Wall Street banks was.

Did the CRA cause the mortgage market meltdown? - Community Dividend - Publications & Papers | The Federal Reserve Bank of Minneapolis

You are correct that the law has not been changed substantively. But, Clinton and Bush policies forced bank regulators to pressure mortgage lenders to push loans to less credit worthy people. The mortgage fraud follows bad fiscal/monetary policy and the misuse of the CRA a distant 3rd. We know that the CRA as it dealt with financing multi family dwellings in red lined areas was not a problem. It was the push for more single family homes in the lower wage families that did help heat up the market. It was not even those who lost their homes, but the sheer quantity of new buyers, and speculators taking advantage of cheap loans that caused the bubble. The bubble was not caused by mortgage fraud.

What caused parallel bubble-bust cycles occurring outside residential housing markets (commercial real estate and consumer credit) as well as similar financial crises in other countries which did not have analogous affordable housing policies?

Causes of the United States housing bubble - Wikipedia, the free encyclopedia

Why did the price bubble effect commercial property? Isn't that really obvious?

Commercial real estate, and residential real estate both require the same underlining commodity.... real estate. Land. If the cost of a plot of ground drastically goes up because of a boom in residential property, it obviously costs a commercial property developer more money to buy a plot of land.

Additionally, plots of land are rezoned constantly. If there is a massive demand for residential property, builders will be incentivized to rezone for residential, thus reducing the supply of commercial property. Supply and Demand again. Supply goes down, demand remains the same, price goes up.

So why commercial and apartment properties increased in price right along with residential, should be obvious.

There was no real bubble in consumer credit.

People claim there was, because when the economic down turn hits, people couldn't pay their debts. But that would be true in any economic down turn. People take out loan in accordance with their current fiscal situation. (which is bad practice, but there it is).

When the their fiscal situation changes, due to bad policy, or just an economic down turn, the result is that consumer debt that was practical during the boom, is considered irresponsible in the down turn.

People are looking at bad consumer loans, that were given in a prior economic situation, with a current day back drop. But neither the loaner, nor the loanee, could know in the future, the loan would be bad.

This is why you should teach your kids, to not borrow money. A litmus test of whether or not you can afford something you want to buy, is whether or not you have to borrow to buy it. If you must borrow, then you are not able to afford it. Move on. Save up. Buy stuff when you have the money.

So why were their bubbles in other countries?

First off, I disagree with the implication of the question. The implication is that If Country B, does not have the same Policy X as Country A, and both countries have a similar crash, then Policy X could not be the cause.

This is a false illogical claim. You would instinctively understand this when applied to any other situation.

Person A smokes. Person B does not. Both Person A and Person B get lung cancer and die. Obviously smoking can not possibly be the cause of lung cancer, because Person B did not smoke, and still got lung cancer.

Clearly that line of logic is false. So is the idea that just because some other country had a price bubble and didn't have the same exact bad policies we did, means those policies were not a cause.

There are several reasons why other countries could have price bubbles. One possibility is that other countries had different policies that still had negative consequences.

For example Spain had government officials on the boards of banks. Those officials pushing the line that building infrastructure automatically results in economic growth, pushed for the white elephant projects that were built all across Spain. The worst of these was a multi-million dollar airport project, built in an isolated town in the middle of Spain, that was open for only about 2 years, and never received one single commercial flight during it's entire operating life.

The white elephant projects were the result of Spanish political policy. Completely different policy than the US, but it had the exact same effect. A growing real estate investment bubble, that crashed.

Now I have not investigated each and every single country with a real estate bubble, to determine the exact cause of each countries price bubble. But as I said before, I don't think it matters. Just because another country had a different cause, doesn't mean that our Policy X here in the US, isn't the cause of the problem here. That is not a dependable claim.

 

[Andylusion]

I just LOVE that "Overheated Market" phrase.
How about?...
People being called left and right by Mortgage Bankers and Brokers offering The Sky at Basement Rates?
Please stop using vague language and simply admit that GW's overtly stated desire for a nation of home owners resulted in Lenders bypassing Vendor software and reaping the associated Fees and Commissions.

No one is denying that GWB supporting more home ownership. In fact, every president including the current one, has supported more home ownership, all the way back to Carter.

In the 1970s, Americans lost their minds, and bought into the idea of 'free love' and the sexual revolution.

As one would expect, divorce rates shot up to the sky.

Divorce drastically lowered the home ownership rate very quickly, because you take one family, with two people living in one home they own, and split them into two separate families, each renting.

Carter passed the Community Reinvestment act, believing that the problem with dropping home ownership rates, was caused by lack of investment into homes, rather than a problem societal family break down. It's much easier to regulate the banks, than to convince people to stay true to their wedding vows.

In 1977, the CRA was signed into law, promoting investment into home ownership, encouraging lending.

Now you tell me.... Does that look like home prices after World War 2, were 'fairly' stable and consistent.... until when? 1977. Look at the chart. In 1977, prices started climbing, until they crashed.

Because of this... the CRA was virtually ignored for a decade. Community groups were complaining that the CRA was not enforced. (and it wasn't... for good reason).

In 1990s, Clinton came along, and vowed to fix things. He instructed his government to start pushing banks.... which they did.

[ame=http://youtu.be/gpj4gcdm_JQ]HowThe Democrats Caused The Financial Crisis Starring HUD Sec Andrew Cuomo & Barack Obama - YouTube[/ame]

In 1998, the Clinton government sued in court, banks to give out $2.1 Billion in unqualified loans. Andrew Cuomo, at 3 minutes in, directly states they will be a higher risk, and higher default rate.

First Union Capital Markets Corp., Bear, Stearns & Co. Price Securities Offering... -- re> CHARLOTTE, N.C., Oct. 20 /PRNewswire/ --

But it doesn't end there.... In 1997, Freddie Mac agrees to Securitize Sub-prime loans, for the first time in American history.

First Union Capital Markets Corp.
and Bear, Stearns & Co. Inc. have priced a $384.6 million offering of
securities backed by Community Reinvestment Act (CRA) loans - marking the industry's first public securitization of CRA loans.

The $384.6 million in senior certificates are guaranteed by Freddie Mac
and have an implied "AAA" rating. First Union Capital Markets Corp. is the investment banking subsidiary of First Union Corporation (NYSE: FTU).

People asked "how did these junk sub-prime mortgages get a 'AAA' rating? This is how. Freddie Mac, gave it to them.

Between the government directly suing banks to make sub-prime loans, and Freddie Mac securing them, what do you think that did to sub-prime lending?

and what do you think all those previously unqualified buyers flooding the market did to home prices?

From the prior picture.....

Notice the exact year that prices started spiking up? 1997.

Bottom line.... yes Bush did support more home ownership. That's true, and no one I know, denies it.

The problem is.... the price bubble, and sub-prime bubble, started in 1997. The facts clearly show this. It's not ambiguous in any way.

And by the way.... Obama himself, was involved in the lawsuits against banks, to force them to engage in sub-prime lending. We have court documents, with his name on them.

So Obama, was directly involved back in the late 90s, in what caused the crash in 2008.

It's just a fact.

I'd like an answer to ONE simple question...
When did the first Blue Collar working making 30K/year or less get approved for a 500K/30 year mortgage?
I know the answer and it blows the 1997 answer out of the water.

What part of my post, does one single Blue Collar worker earning $30K, getting a huge loan, disprove? What part does it contradict? I suggest nothing.

But go ahead. Make your claim and prove it. I am curious to the answer.

 

[dnsmith35]

I just LOVE that "Overheated Market" phrase.
How about?...
People being called left and right by Mortgage Bankers and Brokers offering The Sky at Basement Rates?
Please stop using vague language and simply admit that GW's overtly stated desire for a nation of home owners resulted in Lenders bypassing Vendor software and reaping the associated Fees and Commissions.

No one is denying that GWB supporting more home ownership. In fact, every president including the current one, has supported more home ownership, all the way back to Carter.

In the 1970s, Americans lost their minds, and bought into the idea of 'free love' and the sexual revolution.

As one would expect, divorce rates shot up to the sky.

Divorce drastically lowered the home ownership rate very quickly, because you take one family, with two people living in one home they own, and split them into two separate families, each renting.

Carter passed the Community Reinvestment act, believing that the problem with dropping home ownership rates, was caused by lack of investment into homes, rather than a problem societal family break down. It's much easier to regulate the banks, than to convince people to stay true to their wedding vows.

In 1977, the CRA was signed into law, promoting investment into home ownership, encouraging lending.

Now you tell me.... Does that look like home prices after World War 2, were 'fairly' stable and consistent.... until when? 1977. Look at the chart. In 1977, prices started climbing, until they crashed.

Because of this... the CRA was virtually ignored for a decade. Community groups were complaining that the CRA was not enforced. (and it wasn't... for good reason).

In 1990s, Clinton came along, and vowed to fix things. He instructed his government to start pushing banks.... which they did.

[ame=http://youtu.be/gpj4gcdm_JQ]HowThe Democrats Caused The Financial Crisis Starring HUD Sec Andrew Cuomo & Barack Obama - YouTube[/ame]

In 1998, the Clinton government sued in court, banks to give out $2.1 Billion in unqualified loans. Andrew Cuomo, at 3 minutes in, directly states they will be a higher risk, and higher default rate.

First Union Capital Markets Corp., Bear, Stearns & Co. Price Securities Offering... -- re> CHARLOTTE, N.C., Oct. 20 /PRNewswire/ --

But it doesn't end there.... In 1997, Freddie Mac agrees to Securitize Sub-prime loans, for the first time in American history.

First Union Capital Markets Corp.
and Bear, Stearns & Co. Inc. have priced a $384.6 million offering of
securities backed by Community Reinvestment Act (CRA) loans - marking the industry's first public securitization of CRA loans.

The $384.6 million in senior certificates are guaranteed by Freddie Mac
and have an implied "AAA" rating. First Union Capital Markets Corp. is the investment banking subsidiary of First Union Corporation (NYSE: FTU).

People asked "how did these junk sub-prime mortgages get a 'AAA' rating? This is how. Freddie Mac, gave it to them.

Between the government directly suing banks to make sub-prime loans, and Freddie Mac securing them, what do you think that did to sub-prime lending?

and what do you think all those previously unqualified buyers flooding the market did to home prices?

From the prior picture.....

Notice the exact year that prices started spiking up? 1997.

Bottom line.... yes Bush did support more home ownership. That's true, and no one I know, denies it.

The problem is.... the price bubble, and sub-prime bubble, started in 1997. The facts clearly show this. It's not ambiguous in any way.

And by the way.... Obama himself, was involved in the lawsuits against banks, to force them to engage in sub-prime lending. We have court documents, with his name on them.

So Obama, was directly involved back in the late 90s, in what caused the crash in 2008.

It's just a fact.

I'd like an answer to ONE simple question...
When did the first Blue Collar working making 30K/year or less get approved for a 500K/30 year mortgage?
I know the answer and it blows the 1997 answer out of the water.

Actually, your question is irrelevant to the discussion. Many people making $30K a year were approved for smaller loans, and were unable to afford them as they were lulled into buying too much house at the low initial interest. Then the ARM went up at the first interest adjustment period.

 

[dnsmith35]

Well first off, the idea that regulation can prevent or stabilize anything, is a joke.

Glass–Steagall was no joke, we wouldn't have had a severe recession as we did with it in place.

Regulation is the cause of instability and crashes, not the solution to it.

Hardly, the biggest time of economic growth was during the 1940s to 1960s period. This took place under Dirigisme (or state-directed economics) in Europe and the New Deal policies in America. China to some extent still follows Dirigisme.

But not in the right areas. A banking system doesn't have to have heavy regulation to manage the banking system - but it does need the right kind of regulations to keep it under control. Though both the US and European banking system both struggled and had to be bailed out to keep them afloat, an expense that tax payers couldn't really afford. That doesn't suggest that deregulation is the answer, rather it just proves that had the right sort of regulations been in place, that were relevant (and not out of date) with financial activities, the recession would have been a lot less severe.

Not true, during the financial crisis Canadian banks were shored up by $114 billion in liquidity; it just implies better planning. But China, Australia, and New Zealand didn't have substantial banking collapses either, because again they had the right regulations in place.

Yet, deregulation policies ironically got rid the best parts of regulation, notability Glass-Steagall, and corporations lobbied for regulation to suit their interests. We don't have a 'free market', rather a state-capitalist economy, so the 'deregulation fits all' strategy doesn't work - the trick is balancing the right amount of regulation with right amount of deregulation.

Would beg to differ, as even sound investments are indirectly tied into bad ones, as was proven when even reputable and conservative banks were hit.

Yet, none of that trading on bad-sub primes and so forth has stopped, would counter that it has probably increased, but at a much lesser rate as it did during the 2000s. You can't stop bad loans, as property values and the like can dive without warning.

If they lose their jobs or fall into bankruptcy they can't, and if the value of their property dives, a previously easily repayable debt becomes impossible to pay. The banks got greedy, and actually went out of their way to encourage loans to people that could't afford them, but at the same time a lot of houses went under that were owned by people that re-mortgaged their house knowing they were in good financial state at the time. There is no way for a bank to truly prepare, it can only limit the fallout.

One of the reason Canada had almost no massive housing bubble, and no sub-prime crash, and no bank failures because of it..... is simply because in Canada they have full recourse mortgages by law. There is no 'foreclosure' and walk away from the debt.

No, the reason it didn't have issues. was a massive $114 billion dollar shore up of liquidity in 2008, some of which by the US Federal Reserve. There were bank failures, and issues with Canadian banks, but they were bailed out before they reached a state of technical collapse.

In Canada, if you sign a mortgage for $100,000... you pay back the entire note down to the penny.

So do most other countries, but even under non-bust conditions, if a house goes from $400,000 to $380,000 in value, it makes borrowing for that house more expensive. There is always going to be bankruptcy and the like, and the reality is that there will always be bad loans.

Your post reflects a total misunderstanding of economics. You name things, but have no idea if it was the correct point or how it occurred. At least try to learn something before embarrassing yourself. If you would have submitted a paper like that to me when I was a university professor, you would have gotten an F-.

 

[Toddsterpatriot]

Well first off, the idea that regulation can prevent or stabilize anything, is a joke.

Glass–Steagall was no joke, we wouldn't have had a severe recession as we did with it in place.

Regulation is the cause of instability and crashes, not the solution to it.

Hardly, the biggest time of economic growth was during the 1940s to 1960s period. This took place under Dirigisme (or state-directed economics) in Europe and the New Deal policies in America. China to some extent still follows Dirigisme.

But not in the right areas. A banking system doesn't have to have heavy regulation to manage the banking system - but it does need the right kind of regulations to keep it under control. Though both the US and European banking system both struggled and had to be bailed out to keep them afloat, an expense that tax payers couldn't really afford. That doesn't suggest that deregulation is the answer, rather it just proves that had the right sort of regulations been in place, that were relevant (and not out of date) with financial activities, the recession would have been a lot less severe.

Not true, during the financial crisis Canadian banks were shored up by $114 billion in liquidity; it just implies better planning. But China, Australia, and New Zealand didn't have substantial banking collapses either, because again they had the right regulations in place.

Yet, deregulation policies ironically got rid the best parts of regulation, notability Glass-Steagall, and corporations lobbied for regulation to suit their interests. We don't have a 'free market', rather a state-capitalist economy, so the 'deregulation fits all' strategy doesn't work - the trick is balancing the right amount of regulation with right amount of deregulation.

Would beg to differ, as even sound investments are indirectly tied into bad ones, as was proven when even reputable and conservative banks were hit.

Yet, none of that trading on bad-sub primes and so forth has stopped, would counter that it has probably increased, but at a much lesser rate as it did during the 2000s. You can't stop bad loans, as property values and the like can dive without warning.

If they lose their jobs or fall into bankruptcy they can't, and if the value of their property dives, a previously easily repayable debt becomes impossible to pay. The banks got greedy, and actually went out of their way to encourage loans to people that could't afford them, but at the same time a lot of houses went under that were owned by people that re-mortgaged their house knowing they were in good financial state at the time. There is no way for a bank to truly prepare, it can only limit the fallout.

One of the reason Canada had almost no massive housing bubble, and no sub-prime crash, and no bank failures because of it..... is simply because in Canada they have full recourse mortgages by law. There is no 'foreclosure' and walk away from the debt.

No, the reason it didn't have issues. was a massive $114 billion dollar shore up of liquidity in 2008, some of which by the US Federal Reserve. There were bank failures, and issues with Canadian banks, but they were bailed out before they reached a state of technical collapse.

In Canada, if you sign a mortgage for $100,000... you pay back the entire note down to the penny.

So do most other countries, but even under non-bust conditions, if a house goes from $400,000 to $380,000 in value, it makes borrowing for that house more expensive. There is always going to be bankruptcy and the like, and the reality is that there will always be bad loans.

Glass–Steagall was no joke, we wouldn't have had a severe recession as we did with it in place.

Really? Why is that?

 

[Toddsterpatriot]

US taxpayers handed over $11.2 billion to the board of directors and major shareholders of GM. Are you mad the majority of Americans got nothing in return?

GM shareholders got bailed out? Can you prove it?

Start here:

Economic Update: Corporations, Wages and Jail | Professor Richard D. Wolff

No proof of your claim there.

Try again?

 

[Andylusion]

Well first off, the idea that regulation can prevent or stabilize anything, is a joke.

Glass–Steagall was no joke, we wouldn't have had a severe recession as we did with it in place.

Mr Hipeter, I am not trying to insult you in any way, but in truth, you don't appear to know what you are talking about.

For historical accuracy, there is no Glass-Steagal Act. In reality, it's the 1933 Banking Act. People call it the "Glass Steagal Act" because the sponsors of the 1933 Banking Act were Carter Glass, and Henry B. Steagall.

Ironically, the 1933 Banking Act contained several key provisions for FDIC and Federal Deposit Insurance, which people claim to be part of the New Deal.

The provision of the 1933 Banking Act, that people call the Glass-Steagal Act, is the provision for separation of Retail banks, Commercial bank, Investment Banks, and Insurance Companies. Investment, Retail, Commercial and Insurance, were prohibited from operating together.

The claim that these prohibitions would have prevented the melt down are just simply not true.

First, the rest of the world does not have these prohibitions, and most never did. Canada didn't, and never has. They have not had a problem.

Second, the vast majority of the banks that failed in the recent crash, would not have been covered under the Glass-Steagal prohibitions. Countrywide Financial would not. Bear Stearns would not. Indymac would not. The vast majority of the bank failures, had Glass Steagall been enforced, would have not been affected in any way.

Third, the majority of the 'fixes' that government pushed, were only allowed with Glass-Steagal repealed. Bank of America buying out Countrywide, would have been illegal under GSA. JP Morgan Chase buying Bear Stearns, would have been illegal under GSA.

So this idea that "repealing Glass Steagal Act caused everything" in just flat out bogus. If anything, getting rid of that regulation helped solve the crisis.

Regulation is the cause of instability and crashes, not the solution to it.

Hardly, the biggest time of economic growth was during the 1940s to 1960s period. This took place under Dirigisme (or state-directed economics) in Europe and the New Deal policies in America. China to some extent still follows Dirigisme.

By any objective measure, the New Deal policies are what dragged out the recession, into the great depression.

How does paying people to destroy food, during a hunger crisis, result in great economic growth? If you look at the standard of living under the New Deal, and World War 2, the standard declined at best. There was no great economic growth.

Not true, during the financial crisis Canadian banks were shored up by $114 billion in liquidity; it just implies better planning. But China, Australia, and New Zealand didn't have substantial banking collapses either, because again they had the right regulations in place.

Ah, I don't buy it. Most of the Canadian government programs existed before the crisis in the US every happened. Further, there was no sub-prime melt down in Canada, which would have caused the need for a bailout. No one can even point to a bank that was at risk of bankruptcy.

The basic argument I've read thus far, is that 'banks had taken advantage of money the government gave out..... thus they were bailed out'. Sorry, that's not true. If you provide a program today, to hand out money to people like me, I'm going to ask for your address and come get some cash. Doesn't mean you bailed me out... just means I was more than happy to take your money.

Would beg to differ, as even sound investments are indirectly tied into bad ones, as was proven when even reputable and conservative banks were hit.

That doesn't change the point. Yes, if you tie bad investments to good investments, that doesn't make the bad investments good. If the Carpathia had reached the Titanic before she sank, and tied itself to the hull, that would not have kept the Titanic afloat, it would have just sank the Carpathia too.

Again, the problem wasn't derivatives. The problem was the sub-prime loans. If the sub-prime loans had not been sold to begin with, or had not been bundled into the derivatives, there would never have been a problem with derivatives.

And again.... it was government that pushed sub-prime loans, and it was government that pushed them to be bundled into derivatives. If you watched the video, Obama himself says the whole point of bundling those loans, was to get more investment. The government pushed this whole thing.

Yet, none of that trading on bad-sub primes and so forth has stopped, would counter that it has probably increased, but at a much lesser rate as it did during the 2000s. You can't stop bad loans, as property values and the like can dive without warning.

Yes, property values could dive without warning, even without sub-prime lending. But in this case, it was directly because of sub-prime loans that values went up, and it was directly because of sub-prime melt down, that they went down.

Just because X can happen without Y, doesn't mean X did happened without Y.

If they lose their jobs or fall into bankruptcy they can't, and if the value of their property dives, a previously easily repayable debt becomes impossible to pay. The banks got greedy, and actually went out of their way to encourage loans to people that could't afford them, but at the same time a lot of houses went under that were owned by people that re-mortgaged their house knowing they were in good financial state at the time. There is no way for a bank to truly prepare, it can only limit the fallout.

Yes, AFTER the bubble got started, banks found they could make risky loans, and if the buyer defaulted, they could get the house back, which had a higher value than when it was purchased. Thus the risky loan was considered very safe, because if the buyer paid back the loan, they win. If the buyer defaults, and they get back a house worth more than the original loan, they win.

It was a win-win for the banks.

But here's the problem.... that situation was only true AFTER the bubble got started.

What started the bubble? Answer? Government through Freddie Mac, encourage banks to make sub-prime loans that Freddie Mac would guarantee.

This was a win-win for the banks, because of government. If the buyer paid back, the bank wins. If the buyer defaults, Freddie Mac pays back, and the bank wins. Win-win for the bank BEFORE the bubble started.

Government started the bubble. Yes, the banks continued the bubble. But Government created the bubble to begin with.

 

[gnarlylove]

You will have to produce a link to prove the practicality of the Chicago/Denver link. I have travelled Amtrak on that route, and it will only justify 1 train load a day, which will make Rapid/high speed train service too expensive to be practical on that run. As it is, during the summer, trains have to slow down to 30MPH because the heat warps the tracks; and yes, I know new and much more improved tracks must be installed for high speed. Another issues is, the current rail system is private enterprise, and if a freight train is coming the Amtrak passenger train must pull off onto a side track while it passes. It would be a great way to travel, far better than current train travel or air travel, but it will have to pay for itself or the American people won't stand for it.

The current rail system for passenger travel is publicly owned by the US treasury, called Amtrak.

You accurately account for one trip per day via rail. But many who fly and drive would certainly be happier to utilize speedy, efficient and cheap transport (not to mention far less pollutants). Thus making it's swift travel useful for a wide array of people. I believe Americans can recognize this as a great benefit in connectivity etc. to society as well as job creation if guidelines are followed. Paying for itself is a good point and I'd have to do more analysis but generally speaking current economics does not account for costs to the environment like what it costs to create and use cars for everyone, planes etc yet those costs are huge. Lite rail would reduce these unaccounted expenditures significantly through the sheer amount of people it can transport each day.

I base this off years of traveling back and forth from California to Ohio and various places in between using ride shares--which were a-plenty. The roads are always in use, most commonly by single passenger vehicles. If you have been on an interstate, you know cars are always moving.

 

[dnsmith35]

.....

He, Hipeter, hasn't got the least idea about that or any other economic issue. He is still crying about a 2008 shore up of some financial institutions, which was an after effect need, and not a cause of anything. The culprit in the housing crash was mostly caused by the inflation of price over value in an over heated real estate market, which over heated because of low interest rates and insufficient leadership in credit justification, mostly by government and quasi government institutions. When the real estate bubble crashed it caused the recession, which was mostly over by 2009.

Most analysts find former Fed Chairman Alan Greenspan at fault, though for a variety of reasons. Conservative economists—ever worried about inflation—tend to fault Greenspan for keeping interest rates too low between 2003 and 2005 as the real estate and credit bubbles inflated. This is the view, for instance, of Stanford economist and former Reagan adviser John Taylor, who argues that the Fed's easy money policies spurred a frenzy of irresponsible borrowing on the part of banks and consumers alike.​

There were obviously other minor reasons the market crashed, but the government monetary and fiscal policy was at the head of it all while other issues fell into place.

The Great Recession

The Great Recession—which officially lasted from December 2007 to June 2009—began with the bursting of an 8 trillion dollar housing bubble. The resulting loss of wealth led to sharp cutbacks in consumer spending. This loss of consumption, combined with the financial market chaos triggered by the bursting of the bubble, also led to a collapse in business investment. As consumer spending and business investment dried up, massive job loss followed. In 2008 and 2009, the U.S. labor market lost 8.4 million jobs, or 6.1% of all payroll employment. This was the most dramatic employment contraction (by far) of any recession since the Great Depression. By comparison, in the deep recession that began in 1981, job loss was 3.1%, or only about half as severe.
- See more at: http://stateofworkingamerica.org/great-recession/#sthash.GBFUz529.dpuf​

 

[dnsmith35]

quote=dnsmith35You will have to produce a link to prove the practicality of the Chicago/Denver link. I have travelled Amtrak on that route, and it will only justify 1 train load a day, which will make Rapid/high speed train service too expensive to be practical on that run. As it is, during the summer, trains have to slow down to 30MPH because the heat warps the tracks; and yes, I know new and much more improved tracks must be installed for high speed. Another issues is, the current rail system is private enterprise, and if a freight train is coming the Amtrak passenger train must pull off onto a side track while it passes. It would be a great way to travel, far better than current train travel or air travel, but it will have to pay for itself or the American people won't stand for it.

The current rail system for passenger travel is publicly owned by the US treasury, called Amtrak.

The government owns Amtrak. It does not own the rail system on which the Amtrak trains travel.

You accurately account for one trip per day via rail. But many who fly and drive would certainly be happier to utilize speedy, efficient and cheap transport (not to mention far less pollutants). Thus making it's swift travel useful for a wide array of people. I believe Americans can recognize this as a great benefit in connectivity etc. to society as well as job creation if guidelines are followed.

I am sure it would work on shorter and larger metropolitan areas, but not cross country.

Paying for itself is a good point and I'd have to do more analysis but generally speaking current economics does not account for costs to the environment like what it costs to create and use cars for everyone, planes etc yet those costs are huge. Lite rail would reduce these unaccounted expenditures significantly through the sheer amount of people it can transport each day.

I am not willing to put our economy in jeopardy to try this, at least not until the systems exist in the more densely populated areas and show a marked increase in use.

I base this off years of traveling back and forth from California to Ohio and various places in between using ride shares--which were a-plenty. The roads are always in use, most commonly by single passenger vehicles. If you have been on an interstate, you know cars are always moving.[/QUOTE]Yes, albeit very slowly in congested areas.

BTW, when we discussed unions, I did not make it clear to you I have nothing against union members. I detest union leaders, and because the 12% of our labor force is all that is now unionized, it is obvious that they are the elitist labor force in our country. I darn sure will help anyone who is destitute before I help those elitist wage earners who tend to build products which others sometimes can't afford. The answer is not to unionize all of labor. We must recognize the right of our labor force to choose, and not be forced at the expense of their freedom and rights. As it is, one of the reasons unions are not as popular as earlier in our history is because the government has taken over most, if not all, of the labor issues once the province of unions.

As I told you before, I will send what money I can to take care of little old ladies pounding big rocks into little ones, or destitute children in India before I throw money at the higher paid groups in America simply because I live here. (The least of his people)

 

[georgephillip]

You are correct that the law has not been changed substantively. But, Clinton and Bush policies forced bank regulators to pressure mortgage lenders to push loans to less credit worthy people. The mortgage fraud follows bad fiscal/monetary policy and the misuse of the CRA a distant 3rd. We know that the CRA as it dealt with financing multi family dwellings in red lined areas was not a problem. It was the push for more single family homes in the lower wage families that did help heat up the market. It was not even those who lost their homes, but the sheer quantity of new buyers, and speculators taking advantage of cheap loans that caused the bubble. The bubble was not caused by mortgage fraud.

What caused parallel bubble-bust cycles occurring outside residential housing markets (commercial real estate and consumer credit) as well as similar financial crises in other countries which did not have analogous affordable housing policies?

Causes of the United States housing bubble - Wikipedia, the free encyclopedia

"What caused parallel bubble-bust cycles outside of the housing markets?" You should ask me something difficult, this question is simpleton in nature. The housing crash occurred and a huge number of construction workers lost their jobs. It became a chain reaction causing building material vendors and suppliers to go bust as well. Taking that many employed people out of jobs then caused a chain reaction in all of the industries depending on the demand from those people. I would have thought that a person like who has posted so many assertions about economics would understand such a simple situation.

BTW, I like your link.

the housing crisis was "created by reckless government policies.”[20][21] Republican appointee to the Financial Crisis Inquiry Commission Peter J. Wallison and coauthor Edward Pinto believed that the housing bubble and crash was due to federal mandates to promote affordable housing. These were applied through the Community Reinvestment Act and "government sponsored entities" (GSE's) "Fannie Mae" (Federal National Mortgage Association) and "Freddie Mac" (Federal Home Loan Mortgage Corporation).[22] Journalist Daniel Indiviglio argues the two GSE's played a major role, while not denying the importance of Wall Street and others in the private sector in creating the collapse.[4]

The Housing and Community Development Act of 1992 established an affordable housing loan purchase mandate for Fannie Mae and Freddie Mac, and that mandate was to be regulated by HUD. Initially, the 1992 legislation required that 30 percent or more of Fannie’s and Freddie’s loan purchases be related to affordable housing. However, HUD was given the power to set future requirements. In 1995 HUD mandated that 40 percent of Fannie and Freddie’s loan purchases would have to support affordable housing. In 1996, HUD directed Freddie and Fannie to provide at least 42% of their mortgage financing to borrowers with income below the median in their area. This target was increased to 50% in 2000 and 52% in 2005. Under the Bush Administration HUD continued to pressure Fannie and Freddie to increase affordable housing purchases – to as high as 56 percent by the year 2008.[22] To satisfy these mandates, Fannie and Freddie eventually announced low-income and minority loan commitments totaling $5 trillion.[23] Critics argue that, to meet these commitments, Fannie and Freddie promoted a loosening of lending standards - industry-wide.[24]

Regarding the Community Reinvestment Act (CRA), Economist Stan Liebowitz wrote in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry. He also charged the Federal Reserve with ignoring the negative impact of the CRA.[25] American Enterprise Institute Scholar Edward Pinto noted that, in 2008, Bank of America reported that its CRA portfolio, which constituted only 7 percent of its owned residential mortgages, was responsible for 29 percent of its losses.[26] A Cleveland Plain Dealer investigation found that "The City of Cleveland has aggravated its vexing foreclosure problems and has lost millions in tax dollars by helping people buy homes they could not afford." The newspaper added that these problem mortgages "typically came from local banks fulfilling federal requirements to lend money in poorer neighborhoods."​

Glad you like the link:

"Excessive consumer housing debt was in turn caused by the mortgage-backed security, credit default swap, and collateralized debt obligation sub-sectors of the finance industry, which were offering irrationally low interest rates and irrationally high levels of approval to subprime mortgage consumers because they were calculating aggregate risk using gaussian copula formulas that strictly assumed the independence of individual component mortgages, when in fact the credit-worthiness almost every new subprime mortgage was highly correlated with that of any other because of linkages through consumer spending levels which fell sharply when property values began to fall during the initial wave of mortgage defaults.[133][134]

"Debt consumers were acting in their rational self-interest, because they were unable to audit the finance industry's opaque faulty risk pricing methodology.[135]

"Low interest rates, high home prices, and flipping (or reselling homes to make a profit), effectively created an almost risk-free environment for lenders because risky or defaulted loans could be paid back by flipping homes.

"Private lenders pushed subprime mortgages to capitalize on this, aided by greater market power for mortgage originators and less market power for mortgage securitizers.[18]

"Subprime mortgages amounted to $35 billion (5% of total originations) in 1994,[136] 9% in 1996,[137] $160 billion (13%) in 1999,[136] and $600 billion (20%) in 2006.[137][138][139].

"The recent use of subprime mortgages, adjustable rate mortgages, interest-only mortgages, and stated income loans (a subset of 'Alt-A' loans, where the borrower did not have to provide documentation to substantiate the income stated on the application; these loans were also called 'no doc' (no documentation) loans and, somewhat pejoratively, as 'liar loans') to finance home purchases described above have raised concerns about the quality of these loans should interest rates rise again or the borrower is unable to pay the mortgage.[71][140][141][142]

"In many areas, particularly in those with most appreciation, non-standard loans went from almost unheard of to prevalent.

"For example, 80% of all mortgages initiated in San Diego region in 2004 were adjustable-rate, and 47% were interest only."

Causes of the United States housing bubble - Wikipedia, the free encyclopedia

Feel free to provide examples of government mandates that required liars loans or any other fraudulent activities in pursuit of private profits.

 

[georgephillip]

GM shareholders got bailed out? Can you prove it?

Start here:

Economic Update: Corporations, Wages and Jail | Professor Richard D. Wolff

No proof of your claim there.

Try again?

You missed it.
Try harder.
Economic Update: Corporations, Wages and Jail | Professor Richard D. Wolff

 

[Toddsterpatriot]

Start here:

Economic Update: Corporations, Wages and Jail | Professor Richard D. Wolff

No proof of your claim there.

Try again?

You missed it.
Try harder.
Economic Update: Corporations, Wages and Jail | Professor Richard D. Wolff

No, still no proof the GM shareholders were bailed out.

 

[gnarlylove]

As I told you before, I will send what money I can to take care of little old ladies pounding big rocks into little ones, or destitute children in India before I throw money at the higher paid groups in America simply because I live here. (The least of his people)

I read your Mister A-D example and I know the point you have been driving at. If one can help only through sending money, then I suppose your principle holds and thus I agree.

However, if one can assist a human being face to face whether having made them food/buying it and distributing it (soup kitchens, on the street encounters) or simply offering a smile, hello, perhaps some dignity goes a longer way than impersonal bills that afford the recipient the choice to spend it to harm themselves. But if you don't find yourself doing these things, ask yourself why not? If the answer is it is difficult for you to do so, then I suppose assisting the poorest in India is justifiably a top priority over those who live beyond your neighborhood therefore may have a shot at some other person helping them more than those in India.

But it should be duly noted that humanitarian aide can go to monsters. Examples include some who run refugee camps siphoning funds to support their excesses, to support military aide under the guise of humanitarian causes/stopping genocide etc., and can simply be mismanaged without malicious intent. It is a risk that is preventable through action in your community; but barring that opportunity, it may be worth the risk.

 

[Andylusion]

Start here:

Economic Update: Corporations, Wages and Jail | Professor Richard D. Wolff

No proof of your claim there.

Try again?

You missed it.
Try harder.
Economic Update: Corporations, Wages and Jail | Professor Richard D. Wolff

Then we're both missing it, because I'm not seeing anything on that link, that supports your claim either.

 

[Andylusion]

Paying for itself is a good point and I'd have to do more analysis but generally speaking current economics does not account for costs to the environment like what it costs to create and use cars for everyone, planes etc yet those costs are huge. Lite rail would reduce these unaccounted expenditures significantly through the sheer amount of people it can transport each day.

Most of the 'cost to the environment', is made up. It's fabricated numbers, based on estimates, based on fictional assessments of eco-nutz with a bias.

Assigning a dollar number, to something that you can't quantify, and can't empirically test, is just another way of saying "I used a sophisticated method, to make up a number".

It's the same as those "cutting trees causes flooding". When? Where? Who? Then you find out, it's a flood plain the floods nearly every year. "But it was worse this time!" So? How do you know it didn't rain more this time? How do you know it wasn't because of that dike breaking? How do you know they didn't have more snow during the winter, which in melting contributed?

"Well that wouldn't help our fabricated 'cost to the environment' number, so we didn't look."

You post your link to the mythical "cost to environment" number, and I'll tear it apart.

Further, paying for itself matters.

When a company engages in commerce, or any business conducts business.... how do you know that society is more wealthy, or less wealthy because of that action?

All business consumes some amount of wealth. If for nothing else, the value of building which the business occupies. Or the value of the electricity used to turn on the lights.

How do you know that more wealth is created, than was consumed?

Answer? It's profitable. Profit is how we know wealth was created. Profit is how we know society is better off, instead of worse off, because of the business.

Say you open a business taking wood and making it until a widget, and then you sell the widget on Ebay, and you find that no one is willing to pay more than $20 for it, and then you realize it costs you $25 in wood to make the widget.... what is happening?

You are taking wood of $25 worth of value, and making it into something of $20 of value. The entire country was more wealthy by $5, before you made the widget.

Now, of course businesses don't consider these ramifications, which is why the Free-market Capitalist system is such a wonderful thing. The system inherently incentivizes companies to do what is best for the entire country.

You are either going to find a way to make the widget more valuable or reduce the value of materials used, so that you are now created a something worth more to the public than the cost of the materials to make it, thus a profit, and generating wealth for the country. You either do one of those two things, or you end up going out of business. Regardless of the outcome, in the end a Free-market Capitalist system is self correcting, and the destruction of wealth under that system will end.

The same is true of services. If the service is worth less to the public, than the cost of the materials used to provide the service... then society is less wealthy. The country would be more wealthy, if the service had never existed.

Light Rail, consumes vastly more wealth, than is created in the service. This is why they are never profitable. This is why they don't exist without government support. Government subverts the natural system, that prevents destruction of wealth.

You take money from the public, and spend it on services and products that consume wealth, to keep them going. Thus the destruction of wealth continues.

If Light Rail produced more wealth than it consumed then it would not need government. In fact, it would have never gone away to begin with. Remember, it used to be that everyone traveled everywhere, by rail. The reason rail disappeared, is because the cost of the wealth used to provide that service, was greater than the value of the service to the public.

Further, the "sheer amount of people" the train can carry, is nifty, but largely irrelevant.

First off, most of the people who talk about the efficiency of Light Rail, are miserably poor at looking at the whole cost.

If you look at just the power used to run the trains... oh sure.... yeah a full train of people, verses the power used is a great trade off.

Ok, so what about all the lighting throughout all the tunnels, and all the stations? What about all those escalators running? What about all those high powered fans keeping fresh air in the subway? Ticket machines, turn styles, automatic voice systems? What about all the signal systems, track switches, all the monitoring equipment, and the control systems, plus the Control Center?

Look at all that electricity and computer systems. Did the massive efficiency of the Light Rail include that 24-hour powered control center?

In fact..... did all that efficiency, include power bleed from the tracks?

You think no power is lost pumping 110 miles of track, with 1,200 amps of power 24 hours a day?

And all of that ignores the fact, that trains are rarely operating at an efficient speed. The BART system boasts a top speed of 80 MPH. Want to know what the average is? 33 MPH.

And how often do you see a train going past, with a single person, or no people at all? Every single day. And I didn't even mention the loss of the land, all confiscated, and displaced people, which could have been used for homes, businesses, or anything else of value to society.

It's not efficient, and never was. You want to be efficient, get yourself a small car, and drive to work, no faster than the speed limit. That uses the least amount of resources, and will save you the most money.

 

[gnarlylove]

I specifically stated "reducing" the demands on energy. The plans are to power them via electricity, which is mostly fossil fuels at present.

And assuming you are right about concerns of the environment being largely made up, then you are right. But how accurate is your assessment? It could be true, partially so or false. What does the Bible, I mean Jesus, I mean scientists say?

There's about 2% of people who study this issue with a alleged scientific lens and agree with you; there's another segment that says it will matter increasingly (usually identified as 97-8%); but there's another group among scientists that assert the cost to the environment and hence to humanity is much more disastrous a situation then any of the mainstream reports like IPCC. Notably an MIT group of scientists among many others: MIT Joint Program on the Science and Policy of Global Change

Just based on intelligent guesses we can determine your accusation that climate concern is largely made up is itself made up--for what creature besides man actually thinks he can survive without utmost concern for his habitat? Only people bent towards personal excess and greed can ignore the most fundamental truth about humans: that we are of this earth and depend on its providence alone. But when all your peers agree with you and ignores this truth, it makes you feel like you have a valid point. Don't let groupthink deceive you into invalid views. Do your own homework and think about it.

 

[dnsmith35]

What caused parallel bubble-bust cycles occurring outside residential housing markets (commercial real estate and consumer credit) as well as similar financial crises in other countries which did not have analogous affordable housing policies?

As was posted earlier, just because two similar things happen does not mean they were all caused by the same issue.

Causes of the United States housing bubble - Wikipedia, the free encyclopedia

"What caused parallel bubble-bust cycles outside of the housing markets?" You should ask me something difficult, this question is simpleton in nature. The housing crash occurred and a huge number of construction workers lost their jobs. It became a chain reaction causing building material vendors and suppliers to go bust as well. Taking that many employed people out of jobs then caused a chain reaction in all of the industries depending on the demand from those people. I would have thought that a person like who has posted so many assertions about economics would understand such a simple situation.

BTW, I like your link.

the housing crisis was "created by reckless government policies.”[20][21] Republican appointee to the Financial Crisis Inquiry Commission Peter J. Wallison and coauthor Edward Pinto believed that the housing bubble and crash was due to federal mandates to promote affordable housing. These were applied through the Community Reinvestment Act and "government sponsored entities" (GSE's) "Fannie Mae" (Federal National Mortgage Association) and "Freddie Mac" (Federal Home Loan Mortgage Corporation).[22] Journalist Daniel Indiviglio argues the two GSE's played a major role, while not denying the importance of Wall Street and others in the private sector in creating the collapse.[4]​

Yep! I like it too. Low interest and pushing for more housing in the poor sectors.

The Housing and Community Development Act of 1992 established an affordable housing loan purchase mandate for Fannie Mae and Freddie Mac, and that mandate was to be regulated by HUD. Initially, the 1992 legislation required that 30 percent or more of Fannie’s and Freddie’s loan purchases be related to affordable housing. However, HUD was given the power to set future requirements. In 1995 HUD mandated that 40 percent of Fannie and Freddie’s loan purchases would have to support affordable housing. In 1996, HUD directed Freddie and Fannie to provide at least 42% of their mortgage financing to borrowers with income below the median in their area. This target was increased to 50% in 2000 and 52% in 2005. Under the Bush Administration HUD continued to pressure Fannie and Freddie to increase affordable housing purchases – to as high as 56 percent by the year 2008.[22] To satisfy these mandates, Fannie and Freddie eventually announced low-income and minority loan commitments totaling $5 trillion.[23] Critics argue that, to meet these commitments, Fannie and Freddie promoted a loosening of lending standards - industry-wide.[24]

Regarding the Community Reinvestment Act (CRA), Economist Stan Liebowitz wrote in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry. He also charged the Federal Reserve with ignoring the negative impact of the CRA.[25] American Enterprise Institute Scholar Edward Pinto noted that, in 2008, Bank of America reported that its CRA portfolio, which constituted only 7 percent of its owned residential mortgages, was responsible for 29 percent of its losses.[26] A Cleveland Plain Dealer investigation found that "The City of Cleveland has aggravated its vexing foreclosure problems and has lost millions in tax dollars by helping people buy homes they could not afford." The newspaper added that these problem mortgages "typically came from local banks fulfilling federal requirements to lend money in poorer neighborhoods."

Glad you like the link:

"Excessive consumer housing debt was in turn caused by the mortgage-backed security, credit default swap, and collateralized debt obligation sub-sectors of the finance industry, which were offering irrationally low interest rates and irrationally high levels of approval to subprime mortgage consumers because they were calculating aggregate risk using gaussian copula formulas that strictly assumed the independence of individual component mortgages, when in fact the credit-worthiness almost every new subprime mortgage was highly correlated with that of any other because of linkages through consumer spending levels which fell sharply when property values began to fall during the initial wave of mortgage defaults.[133][134]

"Debt consumers were acting in their rational self-interest, because they were unable to audit the finance industry's opaque faulty risk pricing methodology.[135]

It didn't really matter what the industry's risk pricing methodology to the consumer. The consumer could either buy or not buy what they wanted at low interest rates and with a lack of acceptable credit.

"Low interest rates, high home prices, and flipping (or reselling homes to make a profit), effectively created an almost risk-free environment for lenders because risky or defaulted loans could be paid back by flipping homes.

Yep! If you look back I have stated all of that, yet the biggest culprit was low interest which heated up the market forcing HIGH HOME PRICES inflated about value. Thanks for proving my point (which one of you called a rant.)

"Private lenders pushed subprime mortgages to capitalize on this, aided by greater market power for mortgage originators and less market power for mortgage securitizers.[18]

"Subprime mortgages amounted to $35 billion (5% of total originations) in 1994,[136] 9% in 1996,[137] $160 billion (13%) in 1999,[136] and $600 billion (20%) in 2006.[137][138][139].

"The recent use of subprime mortgages, adjustable rate mortgages, interest-only mortgages, and stated income loans (a subset of 'Alt-A' loans, where the borrower did not have to provide documentation to substantiate the income stated on the application; these loans were also called 'no doc' (no documentation) loans and, somewhat pejoratively, as 'liar loans') to finance home purchases described above have raised concerns about the quality of these loans should interest rates rise again or the borrower is unable to pay the mortgage.[71][140][141][142]

Yep, all part of the government's push to get more relatively poor people to buy their own homes. Sounds like you have chosen to paraphrase my past assertions.

"In many areas, particularly in those with most appreciation, non-standard loans went from almost unheard of to prevalent.

"For example, 80% of all mortgages initiated in San Diego region in 2004 were adjustable-rate, and 47% were interest only."

Causes of the United States housing bubble - Wikipedia, the free encyclopedia

Feel free to provide examples of government mandates that required liars loans or any other fraudulent activities in pursuit of private profits.

It has already been posted in spades by Androw.

I just LOVE that "Overheated Market" phrase.
How about?...
People being called left and right by Mortgage Bankers and Brokers offering The Sky at Basement Rates?
Please stop using vague language and simply admit that GW's overtly stated desire for a nation of home owners resulted in Lenders bypassing Vendor software and reaping the associated Fees and Commissions.

No one is denying that GWB supporting more home ownership. In fact, every president including the current one, has supported more home ownership, all the way back to Carter.

In the 1970s, Americans lost their minds, and bought into the idea of 'free love' and the sexual revolution.

As one would expect, divorce rates shot up to the sky.

Divorce drastically lowered the home ownership rate very quickly, because you take one family, with two people living in one home they own, and split them into two separate families, each renting.

Carter passed the Community Reinvestment act, believing that the problem with dropping home ownership rates, was caused by lack of investment into homes, rather than a problem societal family break down. It's much easier to regulate the banks, than to convince people to stay true to their wedding vows.

In 1977, the CRA was signed into law, promoting investment into home ownership, encouraging lending.

Now you tell me.... Does that look like home prices after World War 2, were 'fairly' stable and consistent.... until when? 1977. Look at the chart. In 1977, prices started climbing, until they crashed.

Because of this... the CRA was virtually ignored for a decade. Community groups were complaining that the CRA was not enforced. (and it wasn't... for good reason).

In 1990s, Clinton came along, and vowed to fix things. He instructed his government to start pushing banks.... which they did.

[ame=http://youtu.be/gpj4gcdm_JQ]HowThe Democrats Caused The Financial Crisis Starring HUD Sec Andrew Cuomo & Barack Obama - YouTube[/ame]

In 1998, the Clinton government sued in court, banks to give out $2.1 Billion in unqualified loans. Andrew Cuomo, at 3 minutes in, directly states they will be a higher risk, and higher default rate.

First Union Capital Markets Corp., Bear, Stearns & Co. Price Securities Offering... -- re> CHARLOTTE, N.C., Oct. 20 /PRNewswire/ --

But it doesn't end there.... In 1997, Freddie Mac agrees to Securitize Sub-prime loans, for the first time in American history.

First Union Capital Markets Corp.
and Bear, Stearns & Co. Inc. have priced a $384.6 million offering of
securities backed by Community Reinvestment Act (CRA) loans - marking the industry's first public securitization of CRA loans.

The $384.6 million in senior certificates are guaranteed by Freddie Mac
and have an implied "AAA" rating. First Union Capital Markets Corp. is the investment banking subsidiary of First Union Corporation (NYSE: FTU).

People asked "how did these junk sub-prime mortgages get a 'AAA' rating? This is how. Freddie Mac, gave it to them.

Between the government directly suing banks to make sub-prime loans, and Freddie Mac securing them, what do you think that did to sub-prime lending?

and what do you think all those previously unqualified buyers flooding the market did to home prices?

From the prior picture.....

Notice the exact year that prices started spiking up? 1997.

Bottom line.... yes Bush did support more home ownership. That's true, and no one I know, denies it.

The problem is.... the price bubble, and sub-prime bubble, started in 1997. The facts clearly show this. It's not ambiguous in any way.

And by the way.... Obama himself, was involved in the lawsuits against banks, to force them to engage in sub-prime lending. We have court documents, with his name on them.

So Obama, was directly involved back in the late 90s, in what caused the crash in 2008.

It's just a fact.

This was a great post. However, if you believe the left wing extremists will accept the FACTS you posted, I have a bridge over the Atchafalaya Swamp to sell