Capitalism Guarantees Rising Inequality

[Contumacious]

The loans to poor people were not the cause of the crash. The government played some role in the crash but there is plenty of blame to go around and the vast majority comes down to common problems markets can have..

BULLSHIT

The Government-Created Subprime Mortgage Meltdown

by Thomas J. DiLorenzo

.........is the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers. The policy in question is the 1977 Community Reinvestment Act (CRA), which compels banks to make loans to low-income borrowers and in what the supporters of the Act call "communities of color" that they might not otherwise make based on purely economic criteria.

.

The idea that low income borrowers can crash the largest economy in the world is hilarious. All of these highly paid financial experts foiled by poor people! Hate to break it to you but you need to get past the emotional rhetoric and ask yourself if the math makes sense.

"The original lobbyists for the CRA were the hardcore leftists who supported the Carter administration and were often rewarded for their support with government grants and programs like the CRA that they benefited from. These included various "neighborhood organizations," as they like to call themselves, such as "ACORN" (Association of Community Organizations for Reform Now). These organizations claim that over $1 trillion in CRA loans have been made, although no one seems to know the magnitude with much certainty. A U.S. Senate Banking Committee staffer told me about ten years ago that at least $100 billion in such loans had been made in the first twenty years of the Act."

.

 

[RKMBrown]

The loans to poor people were not the cause of the crash. The government played some role in the crash but there is plenty of blame to go around and the vast majority comes down to common problems markets can have..

BULLSHIT

The Government-Created Subprime Mortgage Meltdown

by Thomas J. DiLorenzo

.........is the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers. The policy in question is the 1977 Community Reinvestment Act (CRA), which compels banks to make loans to low-income borrowers and in what the supporters of the Act call "communities of color" that they might not otherwise make based on purely economic criteria.

.

The idea that low income borrowers can crash the largest economy in the world is hilarious. All of these highly paid financial experts foiled by poor people! Hate to break it to you but you need to get past the emotional rhetoric and ask yourself if the math makes sense.

Perhaps you are simply "confused" by the numbers.

The bubble was created by a large number of speculators and "new" home buyers who did not have the income to back up their loans. They were instead hoping the bubble never popped. Prior to the CRA speculators and new home buyers had to prove income. The CRA not only ended that, in some cases it resulted in fining banks for requiring borrowers had proof of income. In response some lenders lowered, and in some cases eliminated, lending requirements. Prior to these actions America's home lending market was pretty stable, given that the lending requirements were so stiff. In very short time bundles of risky loans were mixed with good loans hiding the risk to investors in the previously very good market with decent rates of returns.

Then the bubble popped in the home sales market because of the recession. Then the people who did not have income to pay for their risky loans had to pay, and they went belly up.. forcing even more homes on the depressed market... boom bubble explodes. And now even good borrowers and investors are impacted... then everyone finds out about the risk mixing that occurred, thus resulting in cascade failure.

So was it just the CRA? No, but it sure as hell started it.

 

[Indeependent]

The overwhelmingly number of Sub-Prime loans to non-qualified borrowers was under GW.
Plus the Sub-Primes were <3% of the crash
I would say, "Nice try.", but the idiocy of the statement doesn't deserve such.

 

[Bombur]

bullshit

the government-created subprime mortgage meltdown

by thomas j. Dilorenzo

.........is the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers. The policy in question is the 1977 community reinvestment act (cra), which compels banks to make loans to low-income borrowers and in what the supporters of the act call "communities of color" that they might not otherwise make based on purely economic criteria.

.

the idea that low income borrowers can crash the largest economy in the world is hilarious. All of these highly paid financial experts foiled by poor people! Hate to break it to you but you need to get past the emotional rhetoric and ask yourself if the math makes sense.

"the original lobbyists for the cra were the hardcore leftists who supported the carter administration and were often rewarded for their support with government grants and programs like the cra that they benefited from. These included various "neighborhood organizations," as they like to call themselves, such as "acorn" (association of community organizations for reform now). these organizations claim that over $1 trillion in cra loans have been made, although no one seems to know the magnitude with much certainty. A u.s. Senate banking committee staffer told me about ten years ago that at least $100 billion in such loans had been made in the first twenty years of the act."

.

lol

 

[Bombur]

BULLSHIT

The Government-Created Subprime Mortgage Meltdown

by Thomas J. DiLorenzo

.........is the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers. The policy in question is the 1977 Community Reinvestment Act (CRA), which compels banks to make loans to low-income borrowers and in what the supporters of the Act call "communities of color" that they might not otherwise make based on purely economic criteria.

.

The idea that low income borrowers can crash the largest economy in the world is hilarious. All of these highly paid financial experts foiled by poor people! Hate to break it to you but you need to get past the emotional rhetoric and ask yourself if the math makes sense.

Perhaps you are simply "confused" by the numbers.

The bubble was created by a large number of speculators and "new" home buyers who did not have the income to back up their loans. They were instead hoping the bubble never popped. Prior to the CRA speculators and new home buyers had to prove income. The CRA not only ended that, in some cases it resulted in fining banks for requiring borrowers had proof of income. In response some lenders lowered, and in some cases eliminated, lending requirements. Prior to these actions America's home lending market was pretty stable, given that the lending requirements were so stiff. In very short time bundles of risky loans were mixed with good loans hiding the risk to investors in the previously very good market with decent rates of returns.

Then the bubble popped in the home sales market because of the recession. Then the people who did not have income to pay for their risky loans had to pay, and they went belly up.. forcing even more homes on the depressed market... boom bubble explodes. And now even good borrowers and investors are impacted... then everyone finds out about the risk mixing that occurred, thus resulting in cascade failure.

So was it just the CRA? No, but it sure as hell started it.

The only thing you said that was on point was that the risk was hidden to investors.

Your attempt to talk about the failure rate of these loans is not based in reality. The idea that the CRA started it is not based in reality.

 

[RKMBrown]

The idea that low income borrowers can crash the largest economy in the world is hilarious. All of these highly paid financial experts foiled by poor people! Hate to break it to you but you need to get past the emotional rhetoric and ask yourself if the math makes sense.

Perhaps you are simply "confused" by the numbers.

The bubble was created by a large number of speculators and "new" home buyers who did not have the income to back up their loans. They were instead hoping the bubble never popped. Prior to the CRA speculators and new home buyers had to prove income. The CRA not only ended that, in some cases it resulted in fining banks for requiring borrowers had proof of income. In response some lenders lowered, and in some cases eliminated, lending requirements. Prior to these actions America's home lending market was pretty stable, given that the lending requirements were so stiff. In very short time bundles of risky loans were mixed with good loans hiding the risk to investors in the previously very good market with decent rates of returns.

Then the bubble popped in the home sales market because of the recession. Then the people who did not have income to pay for their risky loans had to pay, and they went belly up.. forcing even more homes on the depressed market... boom bubble explodes. And now even good borrowers and investors are impacted... then everyone finds out about the risk mixing that occurred, thus resulting in cascade failure.

So was it just the CRA? No, but it sure as hell started it.

The only thing you said that was on point was that the risk was hidden to investors.

Your attempt to talk about the failure rate of these loans is not based in reality. The idea that the CRA started it is not based in reality.

Wrong.

Government pushing new home ownership was DIRECTLY related to the bubble, the CRA being a HUGE part of the Federal Government actions taken to create the bubble. Perhaps you don't understand what cause bubbles to start with or what makes them go pop?

Artificially inflating a sector by infusing government regulations and redistributing income.. almost always leads to an artificial price bubble that pops.

 

[gnarlylove]

DBlack, I think our differences are more perceived than actual. We apparently agree on the bulk of what's going on and have at least a few ideas that align on how to tackle it. This is welcomed news since this thread is littered with opposition. How do you propose moving beyond this mire?

Opponents are "right" given the information (ie much is media propaganda) they have but their information is lacking in serious aspects. Who the real culprits are for civilizations' discontent is not the poor who lack opportunities (and are often underfed which leads to developmental issues as kids). Would you agree? I think the responsibility is on our part (ie everyone) to seek truth and empathy over ego. These are hard decisions but must be made if we wish to advance society to a state where everyone benefits more from non-zero sum games, not just the wealthy elite. Of course we all have benefits but its disproportionate on scales that simply do not compute in the realm of justice. like 85 richest ppl=3.5billion poor (USA Today).

 

[Bombur]

Perhaps you are simply "confused" by the numbers.

The bubble was created by a large number of speculators and "new" home buyers who did not have the income to back up their loans. They were instead hoping the bubble never popped. Prior to the CRA speculators and new home buyers had to prove income. The CRA not only ended that, in some cases it resulted in fining banks for requiring borrowers had proof of income. In response some lenders lowered, and in some cases eliminated, lending requirements. Prior to these actions America's home lending market was pretty stable, given that the lending requirements were so stiff. In very short time bundles of risky loans were mixed with good loans hiding the risk to investors in the previously very good market with decent rates of returns.

Then the bubble popped in the home sales market because of the recession. Then the people who did not have income to pay for their risky loans had to pay, and they went belly up.. forcing even more homes on the depressed market... boom bubble explodes. And now even good borrowers and investors are impacted... then everyone finds out about the risk mixing that occurred, thus resulting in cascade failure.

So was it just the CRA? No, but it sure as hell started it.

The only thing you said that was on point was that the risk was hidden to investors.

Your attempt to talk about the failure rate of these loans is not based in reality. The idea that the CRA started it is not based in reality.

Wrong.

Government pushing new home ownership was DIRECTLY related to the bubble, the CRA being a HUGE part of the Federal Government actions taken to create the bubble. Perhaps you don't understand what cause bubbles to start with or what makes them go pop?

Artificially inflating a sector by infusing government regulations and redistributing income.. almost always leads to an artificial price bubble that pops.

Yeah none of that is true.

If you want to blame the housing bubble on a part of government then look no further than the Federal Reserve lowering interest rates which had a direct impact on the prices of homes. Lower interest rates mean lower monthly payments which means people can afford a higher cost house. Ergo prices went up fast.

Once home prices started going up fast people started treating them like financial instruments which only inflated their prices more. In order for this bubble to happen there has to be a massive capital inflow into these investments. Once again we can look at the Federal Reserve for why that happened.

I am not one to blame the Federal Reserve for private citizens making bad financial choices even if they had a part in the changes in prices.

 

[Contumacious]

the idea that low income borrowers can crash the largest economy in the world is hilarious. All of these highly paid financial experts foiled by poor people! Hate to break it to you but you need to get past the emotional rhetoric and ask yourself if the math makes sense.

"the original lobbyists for the cra were the hardcore leftists who supported the carter administration and were often rewarded for their support with government grants and programs like the cra that they benefited from. These included various "neighborhood organizations," as they like to call themselves, such as "acorn" (association of community organizations for reform now). these organizations claim that over $1 trillion in cra loans have been made, although no one seems to know the magnitude with much certainty. A u.s. Senate banking committee staffer told me about ten years ago that at least $100 billion in such loans had been made in the first twenty years of the act."

.

lol

"Banks have been placed in a Catch 22 situation by the CRA: If they comply, they know they will have to suffer from more loan defaults. If they don't comply, they face financial penalties and, worse yet, their business plans for mergers, branch expansions, etc. can be blocked by CRA protesters, which can cost a large corporation like Bank of America billions of dollars. Like most businesses, they have largely buckled under and have surrendered to their bureaucratic masters."

.

 

[Bombur]

"the original lobbyists for the cra were the hardcore leftists who supported the carter administration and were often rewarded for their support with government grants and programs like the cra that they benefited from. These included various "neighborhood organizations," as they like to call themselves, such as "acorn" (association of community organizations for reform now). these organizations claim that over $1 trillion in cra loans have been made, although no one seems to know the magnitude with much certainty. A u.s. Senate banking committee staffer told me about ten years ago that at least $100 billion in such loans had been made in the first twenty years of the act."

.

lol

"Banks have been placed in a Catch 22 situation by the CRA: If they comply, they know they will have to suffer from more loan defaults. If they don't comply, they face financial penalties and, worse yet, their business plans for mergers, branch expansions, etc. can be blocked by CRA protesters, which can cost a large corporation like Bank of America billions of dollars. Like most businesses, they have largely buckled under and have surrendered to their bureaucratic masters."

.

 

[itfitzme]

Capitalism is flawless. It's flawless because it is freedom. The employer is free to make what he/she feels is the best decisions for their business, the employee is free to work where they want. They are not "exploited" (that is just the desperate Dumbocrat battle cry to demonize through lies what they cannot demonize through facts) - they freely choose to work where they do and are compensated for their time. If they don't like it, they can quit any time they want and go work somewhere else. Better still, they are even free to quit their job and start their own business!

The reason we have the problems that we do is because we don't have capitalism. We have the government Dumbocrats unconstitutionally interfering with the markets and collapsing what ever they touch (see housing market, investment market, etc.).

"Capitalism is flawless. It's flawless because it is freedom. " and "The reason we have the problems that we do is because we don't have capitalism." are statements made by someone that doesn't understand economics.

If markets met the criteria for an ideal market, then capitalism might be "flawless." The real economy has what are called inefficiencies. There are no real markets that are ideal markets. The problem rests in the fact that real markets are inefficient.

There is simply no such thing as "flawless capitalism".

 

[itfitzme]

The housing bubble was exactly what can be expected of a inefficient free market. The bubble and it's subsequent collapse were the result of "flippers". Individuals purchasing three or more homes with the expectation of gaining a return on rising prices, due to demand, drove the rising prices. This is a typical free market process. When the prices began to decelerate, they began walking away from the mortgages they held. The result was futher decelleration in prices.

 

[itfitzme]

The reason that capitalism guaranteed rising inequality is the imbalance in market power between supply and demand within a single market and between different markets. This can be quantified in terms of the elasticities of demand and supply.

The labor market seldomly has high market power on the supply side. Obviously, wages are driven down. There are a number of product markets that have high market power on the supply side. The demand side has low price elasticity and high price elasticity of supply. The price elasticity of supply is estimated at 1.61 for gasoline.

The imbalance of market power and other market inefficiencies results in an uneven flow of money. Imbalance of market power is a market inefficiency. The uneven flow of monies away from the majority of markets causes monies to accumulate in small "regions". "Regions" may be taken litterally, as in N.Y. It also includes particular products, companies, and occupations.

The economy is dependent on the free flow of monies. When monies become "choked off", due to market power imbalances, it causes the general economy to "wind down".

Google "price elasticity and market power"

 

[Contumacious]

lol

"Banks have been placed in a Catch 22 situation by the CRA: If they comply, they know they will have to suffer from more loan defaults. If they don't comply, they face financial penalties and, worse yet, their business plans for mergers, branch expansions, etc. can be blocked by CRA protesters, which can cost a large corporation like Bank of America billions of dollars. Like most businesses, they have largely buckled under and have surrendered to their bureaucratic masters."

.

But this is discriminatory!, complained the "community organizations." Thus, if one browses the ACORN web site, one can read of their boasts of having "predatory lending laws" passed in numerous states which outlaw such fees, prohibiting banks from protecting themselves from the added risk involved in making forced loans to "subprime" borrowers.

.

 

[Contumacious]

The housing bubble was exactly what can be expected of a inefficient free market. .

Excuse me dingle berry, Sir:

Explain clearly and succinctly why is the GOVERNMENT MANDATED CRA considered "free market"?!?!?!?!?

 

[P@triot]

The loans to poor people were not the cause of the crash. The government played some role in the crash but there is plenty of blame to go around and the vast majority comes down to common problems markets can have..

BULLSHIT

The Government-Created Subprime Mortgage Meltdown

by Thomas J. DiLorenzo

.........is the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers. The policy in question is the 1977 Community Reinvestment Act (CRA), which compels banks to make loans to low-income borrowers and in what the supporters of the Act call "communities of color" that they might not otherwise make based on purely economic criteria.

.

The idea that low income borrowers can crash the largest economy in the world is hilarious. All of these highly paid financial experts foiled by poor people! Hate to break it to you but you need to get past the emotional rhetoric and ask yourself if the math makes sense.

When banks hand millions of people hundreds of thousands of dollars, but not only do not get the interest on that back, they don't even the principle back - yes, that collapses housing markets.

Ask yourself if you can do basic math!

 

[itfitzme]

The housing bubble was exactly what can be expected of a inefficient free market. .

Excuse me dingle berry, Sir:

Explain clearly and succinctly why is the GOVERNMENT MANDATED CRA consider "free market"?!?!?!?!?

Your big font with no actual information just makes you look really stupid.

First, CRA didn't cause the housing bubble.

Second, the entire economy is entirely dependent on the continuous borrowing of capital to create the money supply. This includes home loans. CRA simply balances the flow of monies through the economy.

CRA loans were not the loaned that defaulted.

Additionally, the bubble and subsequent collapse was driven by speculation.

Speculation driven bubbles are a normal and expected free market effect.

The biggest conceptual issue appears to be a lack of understanding of what an ideal free market is and what real inefficient markets are. Ideal free markets have perfect competition and perfect information. There is no real perfect or ideal "free markets".

And additional error is in the belief that market regulation means it isn't a free market. Regulation is often designed to create and maintain free markets. It often maintains a balance that is required for it to be a free market. The most basic is contract law. Without contract law there would be no free markets and trust completely collapsed. CRA doesn't mean "no free market".

A big problem that led to the housing speculation bubble collapse was speculators receiving "no doc" and "low doc" loans. "No doc" and "low doc" are, precisely, less information and thus a market inefficiency.

In the end, it was the speculative bubble that burst, taking down the financial system as the mortgages were part of MBS and insured by credit default swaps.

The fact is that

""While banks did engage in subprime lending in their [CRA] assessment areas, they did so at a lower rate than the market in general and accounted for only a small fraction of subprime loans to lower-income borrowers and lower-income neighborhoods. The data suggest that far from being forced into risky corners of the market, the institutions under the scrutiny of the CRA were crowded out by unregulated lenders."

Inequality and crash: How exactly did inequality fuel the crisis? | The Economist

And it was flippers that defaulted.

investors likely helped push prices up during 2004-06; but when prices turned down in early 2006, they defaulted in large numbers and thereby contributed importantly to the intensity of the housing cycle’s downward leg.

?Flip This House?: Investor Speculation and the Housing Bubble - Liberty Street Economics

know-nothings blame the subprime crisis on the Community Reinvestment Act

Community Reinvestment Act had nothing to do with subprime crisis - BusinessWeek

But, hey, if you don't want to learn about economics from actual economist, it's a free country.

Given the choice of the writers at The Economics, researchers at The Federal Reserve Bank, and experts at business at Business Week or a dingle berry like you, I'll go with the educated professionals.

 

[itfitzme]

BULLSHIT

The Government-Created Subprime Mortgage Meltdown

by Thomas J. DiLorenzo

.........is the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers. The policy in question is the 1977 Community Reinvestment Act (CRA), which compels banks to make loans to low-income borrowers and in what the supporters of the Act call "communities of color" that they might not otherwise make based on purely economic criteria.

.

The idea that low income borrowers can crash the largest economy in the world is hilarious. All of these highly paid financial experts foiled by poor people! Hate to break it to you but you need to get past the emotional rhetoric and ask yourself if the math makes sense.

When banks hand millions of people hundreds of thousands of dollars, but not only do not get the interest on that back, they don't even the principle back - yes, that collapses housing markets.

Ask yourself if you can do basic math!

Again, you can't do math because you can't measure reality.

 

[P@triot]

The idea that low income borrowers can crash the largest economy in the world is hilarious. All of these highly paid financial experts foiled by poor people! Hate to break it to you but you need to get past the emotional rhetoric and ask yourself if the math makes sense.

Perhaps you are simply "confused" by the numbers.

The bubble was created by a large number of speculators and "new" home buyers who did not have the income to back up their loans. They were instead hoping the bubble never popped. Prior to the CRA speculators and new home buyers had to prove income. The CRA not only ended that, in some cases it resulted in fining banks for requiring borrowers had proof of income. In response some lenders lowered, and in some cases eliminated, lending requirements. Prior to these actions America's home lending market was pretty stable, given that the lending requirements were so stiff. In very short time bundles of risky loans were mixed with good loans hiding the risk to investors in the previously very good market with decent rates of returns.

Then the bubble popped in the home sales market because of the recession. Then the people who did not have income to pay for their risky loans had to pay, and they went belly up.. forcing even more homes on the depressed market... boom bubble explodes. And now even good borrowers and investors are impacted... then everyone finds out about the risk mixing that occurred, thus resulting in cascade failure.

So was it just the CRA? No, but it sure as hell started it.

The only thing you said that was on point was that the risk was hidden to investors.

Your attempt to talk about the failure rate of these loans is not based in reality. The idea that the CRA started it is not based in reality.

That is a blatant LIE which I have debunked many times already on USMB and which I am getting damn tired of hearing liberals spread because of their own failures.

Nothing was "hidden" from investors. Just ask Dr. Michael Burry who created the Credit Default Swaps. He made over $700 million when the housing market bubble burst.

How? Because every last detail was clearly and thoroughly documented in the investment prospectus's. Unlike the lazy liberals and the greedy Republicans, he actually read the prospectus's and saw that the loans kept getting riskier and riskier and kept getting rolled up into more and more "investments" to "hedge" against the risk.

So he went to Wall Street and said "will you sell me insurance against these rolled up housing loan investments". Wall Street, of course, said hell yeah! Enter "Credit Default Swaps". This has been well documented in a book called "The Big Short: inside the doomsday machine" and was also covered in depth by 60 Minutes.

When you claim that anything was "hidden" from investors - you prove you are talking out of your ass, making shit up, and completely ignorant of the subject matter.

Michael Burry - Wikipedia, the free encyclopedia

[ame=http://youtu.be/FMt_ZczGmEU]60 Min. episode - Wall Street- Inside the Collapse P-1 - YouTube[/ame]

 

[P@triot]

The idea that low income borrowers can crash the largest economy in the world is hilarious. All of these highly paid financial experts foiled by poor people! Hate to break it to you but you need to get past the emotional rhetoric and ask yourself if the math makes sense.

When banks hand millions of people hundreds of thousands of dollars, but not only do not get the interest on that back, they don't even the principle back - yes, that collapses housing markets.

Ask yourself if you can do basic math!

Again, you can't do math because you can't measure reality.

We've backed up everything we've said with facts, links, and hard data. What have you got, junior? Nothing but uninformed opinion. You're so far removed from "reality" in your immature daydream of utopia you don't even recognize reality any more. Sad.