Capitalism Guarantees Rising Inequality

[Bombur]

You keep presenting incorrect facts and I keep correcting them. F&F are not ratings agencies. I am in no way denying that F&F thought that the MBS were AAA when they were not.

The practice was to create AAA rated MBS by mixing different types of loans together. They(Financial Institutions, F&F, and ratings agencies) used a formula(85:15 ratio) to justify this rating. In addition the ratings of the underlying mortgages was incorrect. The regulation of the creation of these mortgages and the creation of these MBS decreased during this time as well.

There were a lot of problems that contributed to the incorrect ratings of both the mortgages and the MBS but the biggest one was the fact that they were not taking into account the bubble that was created by the Federal Reserve lowering interest rates. This failure only lead to the bubble growing bigger as capital flowed to these MBS.

During this time there was a growth in sub-prime loans other than CRA loans in large part due to the fact that the financial institutions were making billions off of the market and were chasing the profit levels they had at the start of the bubble.

These financial institutions make a lot of money off of these MBS so I have to wonder if you live in a world where they are not responsible for making decisions then why are they making money in the first place?

First, back to interest rates. The housing price bubble started in 1997. The interest rate in 1997 was 7.6%. Is that really too low? Because the interest rate in 1993, was 7.3%, and the bubble didn't start for another 4 years.
Primary Mortgage Market Survey Archives - 30 Year Fixed Rate Mortgages - Freddie Mac

Again, if you have real evidence to support your claims, by all means post it. I'll be more than interested to see your evidence, because I'm not seeing that in the data. I used to believe your view on this, but I can't justify that position anymore.

Now to the "financial institutions make a lot of money" argument.

I'm not denying any of that. Yes, once a bubble starts, people start jumping on the speculation. People were buying homes, and selling them a month later for $100K more. Banks were making crazy loans, knowing that if the guy defaulted, they would get a house back that was worth more than the original loan.

I agree with ALL OF THIS. 100% correct! No question about it!

Here's the problem.... what started it? Yes, once the bubble got going, all that stuff you mentioned is going to happen.

WHAT WAS THE CAUSE?

That's where my issue comes in. Because if you say the cause was "greed", then you have to believe in black magic. Human nature hasn't changed in 6,000 years.

If "greed" was the cause, why didn't the sub-prime bubble start in the 1980s? Why not 1990? Why not 91, 92, 93, 94, 95, 96? Why not any of those years? Why didn't it wait until 1999? Or 2000? Or 01, 02, 03, 04, 05, 06?

Again, you can't tell me it was interest rates, because interest rates were lower in 1993, than in 1997. Why didn't it start in 1993? Besides, is one quarter of a point, that different? 7.8% is good, but 7.6% is bad? Not a logical argument.

So we're still left with the question.... why 1997? Did aliens come and zap all the bankers with greed guns?

Still not a logical argument. Something fundamental in the mortgage industry had to change, and until you can provide something.... anything... to support your position, my bet still remains on that deal with Freddie Mac, guaranteeing sub-prime loans, with an implied AAA rating.

If you have something else to suggest, by all means. Post your evidence. I'll consider it.

Housing goes up and down for all sorts of reasons as your own graph shows and in 1997 the economy was growing. That doesn't change the fact that this particular bubble resulted in home prices to keep increasing when the economy was tanking.

I see no point in further discussing the impact interest rates have on home prices because it is not a controversial point and I can only state the obvious so many times. 1997 through 2001 is not the anomaly, 2002 through the crash is.

You didn't address my point about making money, you just pretended to. My point wasn't about greed but the idea that everything is the decision of government even though it is private parties making all the money. You seem oblivious to the fact that private individuals made horribly bad financial decisions and having really bad information was a big part of that.

If CRA is to blame are you suggesting that there wasn't bad information? People know that CRA loans are more risky so why would they not only make risky CRA loans but other risky sub-prime loans and reduce their mortgage requirements independent of the CRA guidelines?

 

[georgephillip]

Pity that neither party is interested in breaking up monopolies or oligarchies, or performing any of their constitutionally assigned duties. Both parties would rather focus on redistributing our income and acting as morality police than doing their job.

It's impossible for me to imagine how we change this dynamic by continuing to "choose" between Democrat OR Republican for our congressional representatives; there are established third-party alternatives already appearing on many US ballots...?

I encourage you and all your friends to vote for the Communist Party candidate.

Communists are merely one among many options.
You can readily find a Nazi or two to vote for.

Politics1 - Director of U.S. Political Parties

 

[Bombur]

Guys, I'm open to the idea. By all means provide some evidence, or any evidence to support the idea that the rating agencies just randomly started giving sub-prime mortgages, a AAA rating.

Sub-prime mortgages don't have a AAA rating by definition. Care to clarify?

No, you are making *MY* point. There was no way that a sub-prime loan could get a AAA rating.... until Freddie Mac made it happen. When the government of the US, says through it's mortgage lending arm called Freddie Mac, that these loans have an "implied AAA rating", that the only way a sub-prime loan could end up being given a AAA rating.

What's why until 1997, there were no sub-prime mortgage backed securities. That's why before 1997, sub-prime mortgages were a niche market.

Look at the growth in sub-prime loans before that 1997 Freddie Mac deal..... looks flat..... because it is flat.... because sub-prime was a risky niche market.

What happened after 1997 and the Freddie Mac deal? Massive spike in sub-prime loans.

Freddie Mac is not a ratings agency. Freddie Mac did believe the AAA rating incorrectly. So did the ratings agencies and all the other financial institutions.

There is no doubt that Freddie Mac made the same mistake as the ratings agencies and the financial institutions. I have said this multiple times already.

Placing blame at the feet of MBS is a far cry from placing the blame at the feet of mortgages to poor people per the rules of the CRA. There was a lot of sub prime mortgages besides ones created because of the CRA that screwed up the MBS market. There was also a lot of low doc loans that fed the MBS crisis. There was also a lot of incorrect ratings of mortgages that went into those MBS.

The lesson of the crisis is that there is a lot of blame to go around including blame at the feet of Freddie Mac and MBS in general. In the end though the people making the money are also responsible. That is why they are making the money.

 

[Andylusion]

Sorry, but I have lots of people in my community who work(ed) as mortgage brokers and bankers; the standards were never lowered.
I know people who WOULDN'T override the standards due to religious reasons.
Some of them fell on hard times.

It's amazing how people can pull up the most archaic documents from SOMEWHERE in this great Internet age but still can't manage to find ONE civil published document top prove the standards were lowered.

Well perhaps your 'friends' really didn't know of any drop in standards. Does that mean no one else did?

I assume the "archaic documents" refers to the one I posted. I'm not sure how 'archaic' it is, since it came from the very year the housing bubble started, and the very year that sub-prime loans were taking off.

Further, I'm not sure what your issue is. Are you suggesting it didn't happen? Because if it did happen.... and it did.... then clearly that is in fact direct evidence that lending standards were being lowered, since none of those loans qualified to be securitized by Freddie Mac, under the prime rate standard.

But if that's nothing enough, there are dozens of other examples.

Obama, and ACORN, sued CitiGroup to make sub-prime loans.

Andrew Cuomo working for the Clinton administration, sued banks to make bad loans. And he admitted it on video!

[ame=http://youtu.be/x3Kgc-Du6UE]Andrew Cuomo, Obama, and Socialist Democrats Caused US Economic Crisis - YouTube[/ame]

He openly says these are people who would not qualify for mortgages otherwise, and at 3:00 in, he says these mortgages will have a higher default rate.

So clearly lend standards were being lowered.

Another source would be the book:
"The Financial Crisis and the Free Market Cure" by John A. Allison, who actually worked at BB&T bank, when Federal regulators in the late 90s, showed up and demanded they lower their lending standards, and he records the whole thing in the book.

There is tons of evidence direct real life evidence that lending standards were in fact lowered, regardless of us not searching through government archives for some memo somewhere. I'll take reality based examples over a memo any day.

 

[Indeependent]

Sorry, but I have lots of people in my community who work(ed) as mortgage brokers and bankers; the standards were never lowered.
I know people who WOULDN'T override the standards due to religious reasons.
Some of them fell on hard times.

It's amazing how people can pull up the most archaic documents from SOMEWHERE in this great Internet age but still can't manage to find ONE civil published document top prove the standards were lowered.

Well perhaps your 'friends' really didn't know of any drop in standards. Does that mean no one else did?

I assume the "archaic documents" refers to the one I posted. I'm not sure how 'archaic' it is, since it came from the very year the housing bubble started, and the very year that sub-prime loans were taking off.

Further, I'm not sure what your issue is. Are you suggesting it didn't happen? Because if it did happen.... and it did.... then clearly that is in fact direct evidence that lending standards were being lowered, since none of those loans qualified to be securitized by Freddie Mac, under the prime rate standard.

But if that's nothing enough, there are dozens of other examples.

Obama, and ACORN, sued CitiGroup to make sub-prime loans.

Andrew Cuomo working for the Clinton administration, sued banks to make bad loans. And he admitted it on video!

[ame=http://youtu.be/x3Kgc-Du6UE]Andrew Cuomo, Obama, and Socialist Democrats Caused US Economic Crisis - YouTube[/ame]

He openly says these are people who would not qualify for mortgages otherwise, and at 3:00 in, he says these mortgages will have a higher default rate.

So clearly lend standards were being lowered.

Another source would be the book:
"The Financial Crisis and the Free Market Cure" by John A. Allison, who actually worked at BB&T bank, when Federal regulators in the late 90s, showed up and demanded they lower their lending standards, and he records the whole thing in the book.

There is tons of evidence direct real life evidence that lending standards were in fact lowered, regardless of us not searching through government archives for some memo somewhere. I'll take reality based examples over a memo any day.

They were using automated systems that denied the mortgages that were eventually approved by bypassing the LAWS...Get it?
Of course not!

 

[georgephillip]

Yes, your idiocy is awesome!

"Extrapolate that profit-per-person to a big state like California and you're looking at an extra $3.8 billion a year in state revenues that could be used to fund education and infrastructure."

Where is California, or Illinois, going to get the money to start the bank?
Why put the taxpayer on the hook for crony loans?
Even if you somehow started out only making sane, conservative loans, political pressure would soon result in loans to green, that means money-losing, projects.

"As large as California's liabilities are, they are exceeded by its assets, which are sufficient to capitalize a bank rivaling any in the world.

"That's the idea behind Assembly Bill 750, introduced by Assemblyman Ben Hueso of San Diego, which would establish a blue ribbon task force to consider the viability of creating the California Investment Trust, a state bank receiving deposits of state funds.

"Instead of relying on Wall Street banks for credit -- or allowing Wall Street banks to enjoy the benefits of lending its capital -- California may decide to create its own, publicly-owned bank.

"On May 2, AB 750 moved out of the Banking and Finance Committee with only one nay vote and is now on its way to the Appropriations Committee. Three unions submitted their support for the bill -- the California Nurses Association, the California Firefighters and the California Labor Council.

"The state bank idea also got a nod from former Secretary of Labor Robert Reich in his speech at the California Democratic Convention in Sacramento the previous day.

"California joins eleven other states that have introduced bills to form state-owned banks or to study their feasibility.

"Eight of these bills were introduced just since January, including in Oregon, Washington State, Massachusetts, Arizona, Maryland, New Mexico, Maine and California. Illinois, Virginia, Hawaii and Louisiana introduced similar bills in 2010. For links, dates and text, see here."

Can't police your pols?
Move to Jersey.

Ellen Brown: What a Public Bank Could Mean for California

"As large as California's liabilities are, they are exceeded by its assets, which are sufficient to capitalize a bank rivaling any in the world.

Which assets should they use to "capitalize" this bank?

"That's the idea behind Assembly Bill 750, introduced by Assemblyman Ben Hueso of San Diego, which would establish a blue ribbon task force to consider the viability of creating the California Investment Trust, a state bank receiving deposits of state funds.

State funds? If they take in $104 billion and spend $106 billion, where is this extra money they can lend out coming from?

"Instead of relying on Wall Street banks for credit -- or allowing Wall Street banks to enjoy the benefits of lending its capital -- California may decide to create its own, publicly-owned bank.

Yes, more money for politicians to buy favors with!

"The state bank idea also got a nod from former Secretary of Labor Robert Reich in his speech at the California Democratic Convention in Sacramento the previous day.

If Robby is for it, it's clearly a bad idea.

Ellen Brown

Silly old hack.

So says the anonymous internet corporate troll

"In North Dakota (population 647,000), the Bank of North Dakota has $2.7 billion in deposits, or $4000 per capita. The majority of these deposits are drawn from the state's own revenues. The bank has nearly the same sum ($2.6 billion) in outstanding loans.

"California has 37 million people.

"If the California Investment Trust (CIT) performed like the BND, it might amass $148 billion in deposits.

"With $12 billion in capital, this $148 billion could generate $133 billion in credit for the state (subtracting 10%, or 14.8 billion, to satisfy reserve requirements).

"There are various ways the state could come up with the capital, but one possibility that would not require new taxes or debt would be to simply draw on the treasurer's existing pooled money investment account, which currently contains $65 billion in accumulated revenues dispersed to a variety of funds.

"This money is already invested; a portion could just be shifted to the CIT.

"Since it would be an investment in equity rather than an expenditure, it would not cost the state money.

"Rather, it would make money for the state.

"In recent years, the Bank of North Dakota has had a return on equity of 25-26%.

"Compare the 25-30% lost in the two years following the 2008 banking crisis by CalPERS, the California Public Employees' Retirement System, which invested its money on Wall Street.

Ellen Brown: What a Public Bank Could Mean for California

 

[georgephillip]

Such hate. I did, go back and read it. There are links that you can click on and the take you to the website. Only fools believe in spending your way into prosperity. I don't have a link for that, normal people know it.


I'll even post a picture since you have problems with words.

taxfoundation.org/blog/reagan-showed-it-can-be-done-lower-top-rate-28-percent-and-raise-more-revenue

Only ignorant trolls missed how the US spent its way to prosperity between 1941-45.
Command Economy maybe?
Why do you have problems with the words TOTAL REVENUES for the 1980s, which, of course, includes Corporate Ronnie's spike in FICA taxes which essentially shifted the tax burden from the richest individuals to actual workers. I suppose those ethically challenged enough to conflate tax hikes for the majority and tax cuts for the minority might be retarded enough to actually believe TOTAL REVENUE increases in the 80s came from tax cuts.

Effect of the Reagan, Kennedy, and Bush Tax Cuts

Prosperity? Are you kidding? But for the US entry into WW II, the Great Depression would have lasted past the 1950's where it ended, and well into the 60's.
Yes, WW II put a lot of people to work, but it also left the US with crushing debt. And with the post war baby boom, also in desperate need to spend even more to cover the needs of all those soldiers coming home to no jobs. Remember, we no longer needed aircraft, tanks and other materiel for the military. It was peace time. "Rosie the Riveter" lost her job and went back to being a house wife.
Look, you are a true believer in socialism. That's that.
If you find socialism more desirable, I am sure you can choose a more suitable country in which to live and head there. Preferably NOW.

Rosie helped end the Great Depression before WWII began:

"The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in 1930 and lasted until the late 1930s or middle 1940s.[1]

"It was the longest, deepest, and most widespread depression of the 20th century.[2]"

Great Depression - Wikipedia, the free encyclopedia

I'm not a true believer in anything except that capitalism has outlived its usefulness to 90% of the population in this country; if you have a problem with that, polish your Mandarin and move to China.

 

[Andylusion]

You keep presenting incorrect facts and I keep correcting them. F&F are not ratings agencies. I am in no way denying that F&F thought that the MBS were AAA when they were not.

The practice was to create AAA rated MBS by mixing different types of loans together. They(Financial Institutions, F&F, and ratings agencies) used a formula(85:15 ratio) to justify this rating. In addition the ratings of the underlying mortgages was incorrect. The regulation of the creation of these mortgages and the creation of these MBS decreased during this time as well.

There were a lot of problems that contributed to the incorrect ratings of both the mortgages and the MBS but the biggest one was the fact that they were not taking into account the bubble that was created by the Federal Reserve lowering interest rates. This failure only lead to the bubble growing bigger as capital flowed to these MBS.

During this time there was a growth in sub-prime loans other than CRA loans in large part due to the fact that the financial institutions were making billions off of the market and were chasing the profit levels they had at the start of the bubble.

These financial institutions make a lot of money off of these MBS so I have to wonder if you live in a world where they are not responsible for making decisions then why are they making money in the first place?

First, back to interest rates. The housing price bubble started in 1997. The interest rate in 1997 was 7.6%. Is that really too low? Because the interest rate in 1993, was 7.3%, and the bubble didn't start for another 4 years.
Primary Mortgage Market Survey Archives - 30 Year Fixed Rate Mortgages - Freddie Mac

Again, if you have real evidence to support your claims, by all means post it. I'll be more than interested to see your evidence, because I'm not seeing that in the data. I used to believe your view on this, but I can't justify that position anymore.

Now to the "financial institutions make a lot of money" argument.

I'm not denying any of that. Yes, once a bubble starts, people start jumping on the speculation. People were buying homes, and selling them a month later for $100K more. Banks were making crazy loans, knowing that if the guy defaulted, they would get a house back that was worth more than the original loan.

I agree with ALL OF THIS. 100% correct! No question about it!

Here's the problem.... what started it? Yes, once the bubble got going, all that stuff you mentioned is going to happen.

WHAT WAS THE CAUSE?

That's where my issue comes in. Because if you say the cause was "greed", then you have to believe in black magic. Human nature hasn't changed in 6,000 years.

If "greed" was the cause, why didn't the sub-prime bubble start in the 1980s? Why not 1990? Why not 91, 92, 93, 94, 95, 96? Why not any of those years? Why didn't it wait until 1999? Or 2000? Or 01, 02, 03, 04, 05, 06?

Again, you can't tell me it was interest rates, because interest rates were lower in 1993, than in 1997. Why didn't it start in 1993? Besides, is one quarter of a point, that different? 7.8% is good, but 7.6% is bad? Not a logical argument.

So we're still left with the question.... why 1997? Did aliens come and zap all the bankers with greed guns?

Still not a logical argument. Something fundamental in the mortgage industry had to change, and until you can provide something.... anything... to support your position, my bet still remains on that deal with Freddie Mac, guaranteeing sub-prime loans, with an implied AAA rating.

If you have something else to suggest, by all means. Post your evidence. I'll consider it.

Housing goes up and down for all sorts of reasons as your own graph shows and in 1997 the economy was growing. That doesn't change the fact that this particular bubble resulted in home prices to keep increasing when the economy was tanking.

I see no point in further discussing the impact interest rates have on home prices because it is not a controversial point and I can only state the obvious so many times. 1997 through 2001 is not the anomaly, 2002 through the crash is.

You didn't address my point about making money, you just pretended to. My point wasn't about greed but the idea that everything is the decision of government even though it is private parties making all the money. You seem oblivious to the fact that private individuals made horribly bad financial decisions and having really bad information was a big part of that.

If CRA is to blame are you suggesting that there wasn't bad information? People know that CRA loans are more risky so why would they not only make risky CRA loans but other risky sub-prime loans and reduce their mortgage requirements independent of the CRA guidelines?

First, again housing prices drastically increased after 1997. Before 1997, there was no housing price bubble, even with a growing good economy.

Further, the housing prices continued a steep climb from 1997 all the way to 2002, BEFORE the interest rates dropped below 7%.

If the anomaly was 2002 to the crash.... why did the housing price bubble start 5 years before that? You can claim to "state the obvious so many times", but until what you claim is obvious, actually matches up with the data, I'm going to have a problem. I don't go by "someone said this is obvious". I go by the facts. When what you say matches the facts, then I'll consider it.

If you have an explanation why the bubble started before the interest rates fell too low, let me hear it. I'll consider your perspective.

Now as to the 'bad information'.....

Yes, but *WHY* was there bad information? Was there bad information in 1996 and before? Nope. 1997? Yes. What changed? Government gave sub-prime loans a AAA rating, through Freddie Mac, securitizing sub-prime loans.

The market followed.

Should the market have followed? We of course know they should not have. But the fact is, the biggest influence on the market is the Government.

Between Freddie Mac giving sub-prime loans an implied AAA rating, and the government suing banks to make bad loans.... Why would you think they wouldn't?

 

[Andylusion]

Sorry, but I have lots of people in my community who work(ed) as mortgage brokers and bankers; the standards were never lowered.
I know people who WOULDN'T override the standards due to religious reasons.
Some of them fell on hard times.

It's amazing how people can pull up the most archaic documents from SOMEWHERE in this great Internet age but still can't manage to find ONE civil published document top prove the standards were lowered.

Well perhaps your 'friends' really didn't know of any drop in standards. Does that mean no one else did?

I assume the "archaic documents" refers to the one I posted. I'm not sure how 'archaic' it is, since it came from the very year the housing bubble started, and the very year that sub-prime loans were taking off.

Further, I'm not sure what your issue is. Are you suggesting it didn't happen? Because if it did happen.... and it did.... then clearly that is in fact direct evidence that lending standards were being lowered, since none of those loans qualified to be securitized by Freddie Mac, under the prime rate standard.

But if that's nothing enough, there are dozens of other examples.

Obama, and ACORN, sued CitiGroup to make sub-prime loans.

Andrew Cuomo working for the Clinton administration, sued banks to make bad loans. And he admitted it on video!

[ame=http://youtu.be/x3Kgc-Du6UE]Andrew Cuomo, Obama, and Socialist Democrats Caused US Economic Crisis - YouTube[/ame]

He openly says these are people who would not qualify for mortgages otherwise, and at 3:00 in, he says these mortgages will have a higher default rate.

So clearly lend standards were being lowered.

Another source would be the book:
"The Financial Crisis and the Free Market Cure" by John A. Allison, who actually worked at BB&T bank, when Federal regulators in the late 90s, showed up and demanded they lower their lending standards, and he records the whole thing in the book.

There is tons of evidence direct real life evidence that lending standards were in fact lowered, regardless of us not searching through government archives for some memo somewhere. I'll take reality based examples over a memo any day.

They were using automated systems that denied the mortgages that were eventually approved by bypassing the LAWS...Get it?
Of course not!

Does that change anything I said? Does that change that Government was suing banks to make those loans? Does that change the Freddie Mac gave sub-prime loans securitization? Does that change the fact regulators showed up at BB&T demanding they lower their standards?

Of course not!

 

[georgephillip]

Pity that neither party is interested in breaking up monopolies or oligarchies, or performing any of their constitutionally assigned duties. Both parties would rather focus on redistributing our income and acting as morality police than doing their job.

It's impossible for me to imagine how we change this dynamic by continuing to "choose" between Democrat OR Republican for our congressional representatives; there are established third-party alternatives already appearing on many US ballots...?

Can't happen with this voting system. The system must be changed to one in which you get to vote for the candidates in the order of your preference. The current system is designed to force you to pick from two opposing bad choices that each thrive by selling the idea that voting for anyone but them is a vote for the worst choice.

Prior to the arrival of the internet, you were exactly right.
If your local ballot offers third party congressional candidates along with the "choice" between Democrat OR Republican, you and millions of other voters can literally FLUSH the House in a single news cycle starting next November.

The technology exists to make such a FLUSH possible, and we're proving it with our dialogue on the subject right now.

All that's lacking is the will.

 

[Indeependent]

Well perhaps your 'friends' really didn't know of any drop in standards. Does that mean no one else did?

I assume the "archaic documents" refers to the one I posted. I'm not sure how 'archaic' it is, since it came from the very year the housing bubble started, and the very year that sub-prime loans were taking off.

Further, I'm not sure what your issue is. Are you suggesting it didn't happen? Because if it did happen.... and it did.... then clearly that is in fact direct evidence that lending standards were being lowered, since none of those loans qualified to be securitized by Freddie Mac, under the prime rate standard.

But if that's nothing enough, there are dozens of other examples.

Obama, and ACORN, sued CitiGroup to make sub-prime loans.

Andrew Cuomo working for the Clinton administration, sued banks to make bad loans. And he admitted it on video!

Andrew Cuomo, Obama, and Socialist Democrats Caused US Economic Crisis - YouTube

He openly says these are people who would not qualify for mortgages otherwise, and at 3:00 in, he says these mortgages will have a higher default rate.

So clearly lend standards were being lowered.

Another source would be the book:
"The Financial Crisis and the Free Market Cure" by John A. Allison, who actually worked at BB&T bank, when Federal regulators in the late 90s, showed up and demanded they lower their lending standards, and he records the whole thing in the book.

There is tons of evidence direct real life evidence that lending standards were in fact lowered, regardless of us not searching through government archives for some memo somewhere. I'll take reality based examples over a memo any day.

They were using automated systems that denied the mortgages that were eventually approved by bypassing the LAWS...Get it?
Of course not!

Does that change anything I said? Does that change that Government was suing banks to make those loans? Does that change the Freddie Mac gave sub-prime loans securitization? Does that change the fact regulators showed up at BB&T demanding they lower their standards?

Of course not!

Blue Lining...
The Government was suing banks over the issue of Blue Lining, NOT handing out Loans of 600K to bus drivers making 35K/year.
Please do not hyperbolize.

 

[Bombur]

First, back to interest rates. The housing price bubble started in 1997. The interest rate in 1997 was 7.6%. Is that really too low? Because the interest rate in 1993, was 7.3%, and the bubble didn't start for another 4 years.
Primary Mortgage Market Survey Archives - 30 Year Fixed Rate Mortgages - Freddie Mac

Again, if you have real evidence to support your claims, by all means post it. I'll be more than interested to see your evidence, because I'm not seeing that in the data. I used to believe your view on this, but I can't justify that position anymore.

Now to the "financial institutions make a lot of money" argument.

I'm not denying any of that. Yes, once a bubble starts, people start jumping on the speculation. People were buying homes, and selling them a month later for $100K more. Banks were making crazy loans, knowing that if the guy defaulted, they would get a house back that was worth more than the original loan.

I agree with ALL OF THIS. 100% correct! No question about it!

Here's the problem.... what started it? Yes, once the bubble got going, all that stuff you mentioned is going to happen.

WHAT WAS THE CAUSE?

That's where my issue comes in. Because if you say the cause was "greed", then you have to believe in black magic. Human nature hasn't changed in 6,000 years.

If "greed" was the cause, why didn't the sub-prime bubble start in the 1980s? Why not 1990? Why not 91, 92, 93, 94, 95, 96? Why not any of those years? Why didn't it wait until 1999? Or 2000? Or 01, 02, 03, 04, 05, 06?

Again, you can't tell me it was interest rates, because interest rates were lower in 1993, than in 1997. Why didn't it start in 1993? Besides, is one quarter of a point, that different? 7.8% is good, but 7.6% is bad? Not a logical argument.

So we're still left with the question.... why 1997? Did aliens come and zap all the bankers with greed guns?

Still not a logical argument. Something fundamental in the mortgage industry had to change, and until you can provide something.... anything... to support your position, my bet still remains on that deal with Freddie Mac, guaranteeing sub-prime loans, with an implied AAA rating.

If you have something else to suggest, by all means. Post your evidence. I'll consider it.

Housing goes up and down for all sorts of reasons as your own graph shows and in 1997 the economy was growing. That doesn't change the fact that this particular bubble resulted in home prices to keep increasing when the economy was tanking.

I see no point in further discussing the impact interest rates have on home prices because it is not a controversial point and I can only state the obvious so many times. 1997 through 2001 is not the anomaly, 2002 through the crash is.

You didn't address my point about making money, you just pretended to. My point wasn't about greed but the idea that everything is the decision of government even though it is private parties making all the money. You seem oblivious to the fact that private individuals made horribly bad financial decisions and having really bad information was a big part of that.

If CRA is to blame are you suggesting that there wasn't bad information? People know that CRA loans are more risky so why would they not only make risky CRA loans but other risky sub-prime loans and reduce their mortgage requirements independent of the CRA guidelines?

First, again housing prices drastically increased after 1997. Before 1997, there was no housing price bubble, even with a growing good economy.

Further, the housing prices continued a steep climb from 1997 all the way to 2002, BEFORE the interest rates dropped below 7%.

If the anomaly was 2002 to the crash.... why did the housing price bubble start 5 years before that? You can claim to "state the obvious so many times", but until what you claim is obvious, actually matches up with the data, I'm going to have a problem. I don't go by "someone said this is obvious". I go by the facts. When what you say matches the facts, then I'll consider it.

If you have an explanation why the bubble started before the interest rates fell too low, let me hear it. I'll consider your perspective.

Now as to the 'bad information'.....

Yes, but *WHY* was there bad information? Was there bad information in 1996 and before? Nope. 1997? Yes. What changed? Government gave sub-prime loans a AAA rating, through Freddie Mac, securitizing sub-prime loans.

The market followed.

Should the market have followed? We of course know they should not have. But the fact is, the biggest influence on the market is the Government.

Between Freddie Mac giving sub-prime loans an implied AAA rating, and the government suing banks to make bad loans.... Why would you think they wouldn't?

This isn't rocket science. Your graph clearly demonstrates the presence of sharp increases in prices in the 70's and the 80's. There isn't anything surprising based on your graph that a boom happened in 1997. What is surprising is that it kept going instead of stopping when the economy stopped growing around 2001. Right where one would expect the increase to have stopped and right about when interest rates started to go low.

There was bad information because EVERYONE thought those MBS were AAA. Companies make their own decisions. It is like you think they let Freddie Mac make their decisions for them and then take the profit but don't hold any responsibility for failure.

The fact is that the economy could have handled the CRA mortgages perfectly fine. Nothing you have said even comes close to demonstrating those loans had anything to do with the crisis. Nor have you said anything that has disputed what I have said.

 

[Toddsterpatriot]

Find me documentation where the lending standards were lowered.

Yes, it did. We use exogenous variation in banks’ incentives to conform to the standards of the Community Reinvestment Act (CRA) around regulatory exam dates to trace out the effect of the CRA on lending activity. Our empirical strategy compares lending behavior of banks undergoing CRA exams within a given census tract in a given month to the behavior of banks operating in the same census tract-month that do not face these exams. We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks. The effects are strongest during the time period when the market for private securitization was booming.


Did the CRA Lead to Risky Lending? | The Volokh ConspiracyThe Volokh Conspiracy

Once again, find me documentation where the lending standards were lowered.

Mortgage Brokers and Bankers had automated systems which denied loans; they then had to whip out PAPER to bypass the standards.

So once again, find me documentation where the lending standards were lowered.

We find that adherence to the act led to riskier lending by banks

Is English your second language?

 

[Indeependent]

Yes, it did. We use exogenous variation in banks’ incentives to conform to the standards of the Community Reinvestment Act (CRA) around regulatory exam dates to trace out the effect of the CRA on lending activity. Our empirical strategy compares lending behavior of banks undergoing CRA exams within a given census tract in a given month to the behavior of banks operating in the same census tract-month that do not face these exams. We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks. The effects are strongest during the time period when the market for private securitization was booming.


Did the CRA Lead to Risky Lending? | The Volokh ConspiracyThe Volokh Conspiracy

Once again, find me documentation where the lending standards were lowered.

Mortgage Brokers and Bankers had automated systems which denied loans; they then had to whip out PAPER to bypass the standards.

So once again, find me documentation where the lending standards were lowered.

We find that adherence to the act led to riskier lending by banks

Is English your second language?

An ad hominem is a sign that you have lost the exchange.
You are stating that because individuals behaved in an underhanded manner in order to profit that this behavior was sanctioned by legislation.

You've got to be kidding.

 

[Contumacious]

Once again, find me documentation where the lending standards were lowered.

Mortgage Brokers and Bankers had automated systems which denied loans; they then had to whip out PAPER to bypass the standards.

So once again, find me documentation where the lending standards were lowered.

We find that adherence to the act led to riskier lending by banks

Is English your second language?

An ad hominem is a sign that you have lost the exchange.
You are stating that because individuals behaved in an underhanded manner in order to profit that this behavior was sanctioned by legislation.

You've got to be kidding.

Yo retard

tell me when in our nations history , prior to the enactment of The Community Reinvestment Act (1977) did events like these occurred.

.

 

[georgephillip]

You are correct in pointing out the lending rate as a significant reason for the bubble. You are wrong to pretend the CRA was not also a significant reason for the very same bubble.

CRA loans were a tiny percentage of the defaulting loans. The loans did not perform any worse than anticipated and had no appreciable impact on the crash. If you think you are right show your math IMO.

It is well documented that the ratings agencies rated the MBS incorrectly. Once the truth came out things went bad fast.

There is no such designation as a "CRA loan." Every subprime loan is a CRA loan. Banks had to lower their criteria for all loans because of CRA. You don't actually think they had some specially earmarked loans that were designated for black people with bad credit histories, do you? The use of the term "CRA Loans" indicates only that you're a lying propagandist. It has no connection with the facts.

Government policies and the subprime mortgage crisis - Wikipedia, the free encyclopedia

"CPA Joseph Fried wrote that there is a paucity of CRA loan performance data, based on a response by only 34 of 500 banks surveyed.[105] Nevertheless, estimates have been attempted.

"Edward Pinto, former Chief Credit Officer of Fannie Mae (1987–89) and Fellow at the American Enterprise Institute, estimated that, at June 30, 2008, there were $1.56 trillion of outstanding CRA loans (or the equivalent). Of this amount, about $940 billion (about 6.7 million loans) was, according to Pinto, subprime.[106]

"Economist Paul Krugman notes the subprime boom 'was overwhelmingly driven' by loan originators who were not subject to the Community Reinvestment Act.[107]

"One study, by a legal firm which counsels financial services entities on Community Reinvestment Act compliance, found that CRA-covered institutions were less likely to make subprime loans (only 20-25% of all subprime loans), and when they did the interest rates were lower.

"The banks were half as likely to resell the loans to other parties."

 

[Toddsterpatriot]

"As large as California's liabilities are, they are exceeded by its assets, which are sufficient to capitalize a bank rivaling any in the world.

"That's the idea behind Assembly Bill 750, introduced by Assemblyman Ben Hueso of San Diego, which would establish a blue ribbon task force to consider the viability of creating the California Investment Trust, a state bank receiving deposits of state funds.

"Instead of relying on Wall Street banks for credit -- or allowing Wall Street banks to enjoy the benefits of lending its capital -- California may decide to create its own, publicly-owned bank.

"On May 2, AB 750 moved out of the Banking and Finance Committee with only one nay vote and is now on its way to the Appropriations Committee. Three unions submitted their support for the bill -- the California Nurses Association, the California Firefighters and the California Labor Council.

"The state bank idea also got a nod from former Secretary of Labor Robert Reich in his speech at the California Democratic Convention in Sacramento the previous day.

"California joins eleven other states that have introduced bills to form state-owned banks or to study their feasibility.

"Eight of these bills were introduced just since January, including in Oregon, Washington State, Massachusetts, Arizona, Maryland, New Mexico, Maine and California. Illinois, Virginia, Hawaii and Louisiana introduced similar bills in 2010. For links, dates and text, see here."

Can't police your pols?
Move to Jersey.

Ellen Brown: What a Public Bank Could Mean for California

"As large as California's liabilities are, they are exceeded by its assets, which are sufficient to capitalize a bank rivaling any in the world.

Which assets should they use to "capitalize" this bank?

"That's the idea behind Assembly Bill 750, introduced by Assemblyman Ben Hueso of San Diego, which would establish a blue ribbon task force to consider the viability of creating the California Investment Trust, a state bank receiving deposits of state funds.

State funds? If they take in $104 billion and spend $106 billion, where is this extra money they can lend out coming from?

"Instead of relying on Wall Street banks for credit -- or allowing Wall Street banks to enjoy the benefits of lending its capital -- California may decide to create its own, publicly-owned bank.

Yes, more money for politicians to buy favors with!

"The state bank idea also got a nod from former Secretary of Labor Robert Reich in his speech at the California Democratic Convention in Sacramento the previous day.

If Robby is for it, it's clearly a bad idea.

Ellen Brown

Silly old hack.

So says the anonymous internet corporate troll

"In North Dakota (population 647,000), the Bank of North Dakota has $2.7 billion in deposits, or $4000 per capita. The majority of these deposits are drawn from the state's own revenues. The bank has nearly the same sum ($2.6 billion) in outstanding loans.

"California has 37 million people.

"If the California Investment Trust (CIT) performed like the BND, it might amass $148 billion in deposits.

"With $12 billion in capital, this $148 billion could generate $133 billion in credit for the state (subtracting 10%, or 14.8 billion, to satisfy reserve requirements).

"There are various ways the state could come up with the capital, but one possibility that would not require new taxes or debt would be to simply draw on the treasurer's existing pooled money investment account, which currently contains $65 billion in accumulated revenues dispersed to a variety of funds.

"This money is already invested; a portion could just be shifted to the CIT.

"Since it would be an investment in equity rather than an expenditure, it would not cost the state money.

"Rather, it would make money for the state.

"In recent years, the Bank of North Dakota has had a return on equity of 25-26%.

"Compare the 25-30% lost in the two years following the 2008 banking crisis by CalPERS, the California Public Employees' Retirement System, which invested its money on Wall Street.

Ellen Brown: What a Public Bank Could Mean for California

"With $12 billion in capital,

California has hundreds of billions in debt.
Hundreds of billions in unfunded liabilities.
Where are they going to get $12 billion in capital?

"If the California Investment Trust (CIT) performed like the BND, it might amass $148 billion in deposits.

That is an awesome idea! They can lend out their deposits to political cronies.
What could go wrong?

"There are various ways the state could come up with the capital, but one possibility that would not require new taxes or debt would be to simply draw on the treasurer's existing pooled money investment account, which currently contains $65 billion in accumulated revenues dispersed to a variety of funds.

Even better! They can put money already pledged for schools and infrastructure into a political bank.

"Since it would be an investment in equity rather than an expenditure, it would not cost the state money.

Since banks that make idiotic loans never lose money.

"Rather, it would make money for the state.

Stop it, you're killing me!

"In recent years, the Bank of North Dakota has had a return on equity of 25-26%.

They obviously don't make California type idiotic loans.

Thanks for the laughs. Keep it up.

 

[Indeependent]

We find that adherence to the act led to riskier lending by banks

Is English your second language?

An ad hominem is a sign that you have lost the exchange.
You are stating that because individuals behaved in an underhanded manner in order to profit that this behavior was sanctioned by legislation.

You've got to be kidding.

Yo retard

tell me when in our nations history , prior to the enactment of The Community Reinvestment Act (1977) did events like these occurred.

.

Yo retard...

Tell me when in our nations history did we off-shore thousands of factories, invite 3 million business visas to replace US citizens and have our White House administration look the other way when everyone making less than 50K/year was being handed a mortgage for 600K?

Prior to the retard GW, it never happened.

And your hero, Rush, was LAUGHING about what a GENIUS GW was!

Once again, please link to the legislation.
But you CAN'T...It DOESN'T exist.

 

[Toddsterpatriot]

Once again, find me documentation where the lending standards were lowered.

Mortgage Brokers and Bankers had automated systems which denied loans; they then had to whip out PAPER to bypass the standards.

So once again, find me documentation where the lending standards were lowered.

We find that adherence to the act led to riskier lending by banks

Is English your second language?

An ad hominem is a sign that you have lost the exchange.
You are stating that because individuals behaved in an underhanded manner in order to profit that this behavior was sanctioned by legislation.

You've got to be kidding.

Riskier lending. Why?
How is that possible?
Because they lowered standards to get poor folks into homes.

 

[Indeependent]

We find that adherence to the act led to riskier lending by banks

Is English your second language?

An ad hominem is a sign that you have lost the exchange.
You are stating that because individuals behaved in an underhanded manner in order to profit that this behavior was sanctioned by legislation.

You've got to be kidding.

Riskier lending. Why?
How is that possible?
Because they lowered standards to get poor folks into homes.

Fees, Commissions, Raises, that better position at the competition.

As you quite ambiguously post...
"they lowered standards to get poor folks into homes"
Who is "they"?
Be precise and don't be stupid.