Capitalism Guarantees Rising Inequality

[gnarlylove]

I also wanted to challenge your notion of Absolute Truth is Real.

Truth is a function of language. And language is a product of humanity. That isn't to say truth isn't useful but it can also lead to harm when you fight for Truth (capital T Truth) over someone's own life or right to pursue liberty. Then you value a made up thing over a concrete thing. You are committing the fallacy of reification.

Richard Rorty offers a succinct defense of this claim on pg 5:
Truth cannot be out there—cannot exist independently of the human mind—because sentences cannot so exist, or be out there. The world is out there, but descriptions of the world are not.

I don't expect you to agree, but given how I've been mentally damaged by thinking the Truth is out there is worth sharing. It's a tool used to get you to do things in the name of Truth. I always say capital T Truth is just "recommendation on steroids." Once you move beyond Truth you can start realizing we are animals in need. That all we have is each other and there is no Truth going to rescue us. We die and that's it. So either help others attain liberation or pursue your selfish interest. Your choice.

 

[Toddsterpatriot]

Androw, your stock increases offer nothing to half the country that doesn't play that game. It's odd how about 59% of Americans will experience poverty and that coincides with the stock ownership.

So as people like yourself and make money, it takes away money from those at the bottom. That's why it matters that the top 1% earn so much more. There is a limited amount of money in the system at one time and since 40% of the global wealth is owned by the top 1%, that leaves a lot less for the rest to share doesn't it? Not in your world since you have capital to back up your capital investments. What about the average household whose debt is exceeding their annual income now? I guess these people are to be written off in your equation and ignored "since they clearly haven't shown the earning power."

This American Dream is propaganda and advertisement for the US. While a few can break through the bonds of poverty, what tends to happen for those in poverty is they stay there. Not because a lack of motivation (poverty sucks!!!) but because a sheer lack of opportunity and quality education.

Read here about what American's think of the American Dream now-a-days. It ain't what it use to be...

The survey, MetLife’s 5th annual, uncovers emerging trends that show Americans are
less concerned with material issues, and that life’s traditional markers of
success — getting married, buying a house, having a family, building wealth — do not
matter as much today. Rather, achieving a sense of personal fulfillment is more
important toward realizing the American Dream than accumulating material wealth.

This tells the story that Americans have forsaken the idea of personal wealth (car, house family ownership) and is being traded in for a more feasible alternative: accepting what you have and aiming to not be a pay check away from poverty/couch surfing.

The economic policy are so evidently stacked against the poor its just dim-wittedness to miss it. War on the Poor is real and is happening. To deny it is to protect yourself in your isolated bubble of your well-to-do affluent friends. Such snobbery is easy to come by when poverty is a concept and not a reality for yourself.

So as people like yourself and make money, it takes away money from those at the bottom.

How? Show all your work.

 

[gnarlylove]

Todders, you simply don't read what is written--a typical strategy of yours. You are commonly unable to make basic connections. This is not a criticism, it is an observation.

There is a limited amount of money in the system at one time and since 40% of the global wealth is owned by the top 1%, that leaves a lot less for the rest to share doesn't it?

Take 100%. That represents the whole money supply (not credit ). if 40% is owned by the top 1% how much does that leave the 99%? 60% to divvy up among the rest of the population (99%). If you need to see the math done you take 100-40=60.

 

[Andylusion]

There were housing bubbles in other nations in 97 too. There are a lot of reasons why there can be a bubble starting in 97 but a lot of things happened between 97 and the crash that caused this historic bubble besides what was going on in 97.

There is no doubt that F&F played a part in the MBS problem. The thing is the market is not set up to depend on them to make all the decisions. The market is not set up to allow a government institution to be a ratings agency or manage the risk portfolios of these financial institutions.

The risk that was taken on by these institutions was in no way limited to what the government was mandating. I have said this multiple times and it is important. The demand for sub-prime mortgages far outstripped the requirements of the government. The claim that these institutions failed because of risk that was forced upon them is simply false.

Secondly the institutions lowered their standards far below what the CRA asked for. In fact one of the major faults you can place at the feet of government is the failure to regulate the markets both in terms of loan standards and balance sheet requirements.

If you don't understand that private institutions are in charge of their own financial security then I don't know what to tell you. There were plenty of banks that met CRA guidelines and didn't crash. The ones that crashed generally tried to maximize their profits by betting on the AAA rating of MBS.

You are overstating the backing of F&F by the Federal government which was a mistake many investors made. They equated F&F to the federal government beyond what the law actually establishes. The bailout of F&F went beyond what the Federal government was legally required to do.

The whole reason F&F exists isn't to make financial decisions for the entire market. Those decisions to go above and beyond the federal requirements were their own. F&F was not regulated enough either btw.

Glass Steagall mattered because it played a major part in the amount of capital flowing into the bubble and the assets that were put at risk. Glass Steagall is important when talking about the size of the bubble and the need for a bailout.

Name these reasons. Saying 'there could be', doesn't mean anything. If there was some other reason, name the reason. I'm open to this theory, but you have to provide something more than an ambiguous "something somewhere might have done it".

As for other countries, yes, and if you wish to look at individual policies of those countries, and analysis the cause of those bubbles, fine. A few countries did have bubbles that started in the late 90s, early 2000s. Whether they started exactly in 1997, as our did, I don't know, but that wouldn't make any difference to the cause of our bubble, anymore than it would make a different to the cause of their bubble.

Doesn't matter how the market is setup, or not. Those institutions, by virtue of the fact they are the largest players in the market, and by virtue of the fact they have the backing of the Federal Government, do influence the market, whether "the market is setup" to be influenced or not.

Let me give you a clear cut example. Name the rating agencies. Can you name them? Standards & Poor (S&P), Moody's, and Fitch. Right? You ask most people what the rating agencies are, you'll get these three. S&P, Moody's and Fitch.

But those are not the only rating agencies. There are actually dozens of rating agencies. And there were dozens of rating agencies before. It was the "Nationally Recognized Statistical Rating Organization", issued by the Government, which forced out competition. Even though many rating agencies were perfectly fine in giving out their ratings, since they didn't have the government seal of approval, they lost out to the big three.

But the NRSRO seal, was only required for government purchases of government bonds and securities. Had nothing to do with private markets. Yet the private markets followed suit.

In fact, consider this. Before the NRSRO was passed in the 1970s, all rating agencies were running on the buyer pays model, where the buyer of the security, paid to have it rated. But after the government seal of approval, and the demand moved towards getting securities rated by the government approved rating agencies, and because of that the big three moved towards an issuer pays model.

Before, the issuer of the securities never paid to have their securities rated, because it was the customer who determined whose rating they wanted to use, and thus they paid to have it rated by who they wanted.

But since the government gave their seal of approval, the agencies knew they were in demand. They started charging the issuer of the securities, knowing they had no choice but to pay, or their securities wouldn't be bought, without a government approved rating agency giving the rating, even private buyers wouldn't buy their securities.

None of that was intended. Nor is there any law, requiring the private market to follow the public. Yet the market follows government... and always has, and always will. It's simply the nature of the beast.

Same with Fannie and Freddie. Doesn't matter that there's no requirement to follow Freddie and Fannie. They have the influence, and backing of the government, and the private market does follow them. Period.

As far as banks that met CRA guidelines, and didn't crash.... who?

Because can I name several that met those guidelines perfectly, and crashed really hard. CountryWide, was following CRA guides perfectly, as far as I can tell. Bear Stearns was an avid follower of the CRA. Wachovia, was completely in line with the government, from everything I read on the matter.

Countrywide tends to follow the most flexible underwriting criteria permitted under GSE and FHA guidelines. Because Fannie Mae and Freddie Mac tend to give their best lenders access to the most flexible underwriting criteria, Countrywide benefits from its status as one of the largest originators of mortgage loans and one of the largest participants in the GSE programs. …

When necessary—in cases where applicants have no established credit history, for example—Countrywide uses nontraditional credit, a practice now accepted by the GSEs.​

This report was issued in 2000 by the Fannie Mae Foundation. It is widely cited and vetted. There are numerous books that detail how Fannie Mae, and Freddie Mac, supported exactly this. Countrywide, is a clear cut example of a bank following the government influence, and following the CRA to the letter.

Glass Steagall has absolutely nothing to do with capital flows, or the size of the bubble. Not one single provision of Glass Steagall relates to that, nor was there any repeal of a provision that relates to that. Completely wrong.

I can't even figure out what provision you would even think applies to capital flows, or the bubble. I'd love to hear your claim.

 

[Toddsterpatriot]

Todders, you simply don't read what is written--a typical strategy of yours. You are commonly unable to make basic connections. This is not a criticism, it is an observation.

There is a limited amount of money in the system at one time and since 40% of the global wealth is owned by the top 1%, that leaves a lot less for the rest to share doesn't it?

Take 100%. That represents the whole money supply (not credit ). if 40% is owned by the top 1% how much does that leave the 99%? 60% to divvy up among the rest of the population (99%). If you need to see the math done you take 100-40=60.

There is a limited amount of money in the system at one time

You know money is only a small part of wealth, right?
No, obviously your simple economic understanding doesn't reach that far.

Just prove your claim about mean rich people making money in the market somehow leaving less money for the poor folks.

Show all your work. Omit your feelings.

 

[gnarlylove]

no matter your gauge it is finite. as long as wealth is finite it is limited. why is this such a hard concept to understand? you are unwilling to accept anything I say so what's the point? i even offered the perspective in terms of global wealth, not just money. you just refuse to read/understand what you don't want to. its like you drag your heels as your being carried out of the store by mommy.

It's called the Distribution of Wealth.

A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. The bottom half of the world adult population owned 1% of global wealth. Moreover, another study found that the richest 2% own more than half of global household assets.

btw, economics is a narrow and terribly biased system. Too bad we operate our ethics and politics on it. it calls oceans and rainforests externalities. it places no value on the biosphere--THE ONE AND ONLY SOURCE OF LIFE and true affluence. as if the biosphere is not essential to the creation of civilization or to the existence of our institutions. current economics is a lens to perceive the world as 20th century greed has made complex. although it uses math economics itself is a way of looking at the world. it does not offer a definitive understanding of our world and humanity and should not be the only lens we use to arrive at morals/how to treat one another.

 

[Andylusion]

Not all of the sub-prime loans were mandated by government. The government created regulations that forced banks to create sub-prime mortgages for poor people. When MBS became profitable there was a large market demand for sub-prime loans. Not all sub-prime loans are to poor people or those that the law was intended to help. Not all sub-prime loans were created under the regulations of the program either.

There are a lot of regulations so I know it isn't clear when I am not differentiating between them. The Federal Reserve has regulatory authority over the balance sheets of financial institutions. That is different then the regulations concerning the creation of mortgages.

This is a little wacky.

Most of what you say is true.... but irrelevant.

It doesn't matter if the sub-prime loans were directly under the mandates of the CRA or not.

The mandates themselves, lowered the lending standards. Once that is done, it effects the entire market, not just the specific CRA market.

The reason why, is because there is no "CRA Market".

Government, through Freddie and Fannie, created Mortgage Backed Securities.

MBSs are mortgage bundles. When someone buys an MBS, they don't get a "CRA MBS" or a "Traditional MBS". They have no direct idea of what specific mortgages make up that bundle.

What that means is, to the MBS buyers and investors, they have no idea if that specific loan in there is a loan from a CRA Sub-prime loan, or a Regular Sub-prime loan.

Once it was established that Sub-prime loans are good, because government signed their name to it, through Freddie Mac, and later Fannie Mae securitizing it.... buyers have no way to distinguish one sub-prime from another.

Further, what RKMBrown said is dead on right, and a completely valid point.

You are telling us, that banks should have made sub-prime loans that fell under the CRA, and should not have made sub-prime loans that did not fall under the CRA.

How would you propose doing that? Think about that.....

Two guys walk into a bank. Both have completely identical incomes, credit scores, credit history, and both do not qualify for a loan because of bad credit.

So person A qualifies for the Sub-prime loan, because... why?
Person B does not qualify for the sub-prime loan, because.... why?

The CRA does not distinguish between loans. The CRA only requires that they be 'low and moderate income', and that they do not qualify for a prime rate mortgage.

No prime rate mortgage, is a "CRA Loan". The whole point is to give loans to people who don't qualify. If you can show me a prime rate CRA loan, I'd love to see it.

Now what does moderate income mean? Well according to HUD, moderate income is $54,300 or less, for a family of 4.

That means roughly half the country qualifies for a CRA loan.

So what would you suggest the banks do to deny one person a loan, while accepting the other?

 

[Andylusion]

They were used to create the largest Wall Street ponzi scheme ever (securities, swaps, derivatives)

Those aren't "ponzi" schemes. If you want to slam Wall Street because you trust government, that's up to you. But at least use words that make sense.

Are you fucking kidding me?

A Ponzi scheme is a form of pyramid scheme in which new investors must continually be sucked in at the bottom to support the investors at the top. In this case, new borrowers must continually be sucked in to support the creditors at the top.

When the banks ran out of creditworthy borrowers, they had to turn to uncreditworthy “subprime” borrowers; and to avoid losses from default, they moved these risky mortgages off their books by bundling them into “securities” and selling them to investors. To induce investors to buy, these securities were then “insured” with credit default swaps. But the housing bubble itself was another Ponzi scheme, and eventually there were no more borrowers to be sucked in at the bottom who could afford the ever-inflating home prices. When the subprime borrowers quit paying, the investors quit buying mortgage-backed securities. The banks were then left holding their own suspect paper; and without triple-A ratings, there is little chance that buyers for this “junk” will be found. The crisis is not, however, in the economy itself, which is fundamentally sound – or would be with a proper credit system to oil the wheels of production. The crisis is in the banking system, which can no longer cover up the shell game it has played for three centuries with other people’s money. - Credit Default Swaps: Evolving Financial Meltdown and Derivative Disaster Du Jour | Global Research

Then why didn't they turn to unworthy borrowers back in the 60s? 70s? 80s? 90s?

There were some nasty economic down turns back in those days, and surely the number of credit worthy borrowers would have fallen then.

Why did the number of credit worthy borrowers dry up in the late 90s? Was the economy just so bad all during the 90s, and no one knew it?

But instead they turned to unworthy borrowers in the middle of one of the longest periods of stable peace time growth, with low inflation, and stable interest rates? Really?

It's not a ponzi scheme, and your claim doesn't match up with the history.

 

[Andylusion]

Androw, your stock increases offer nothing to half the country that doesn't play that game.

Whose fault is that? You don't take the risk, you don't win. Welcome to how life works.

So as people like yourself and make money, it takes away money from those at the bottom.

Oh bull crap. How does me, investing my money, make other people poorer? How does me not investing my money, make them richer? Such garbage.

That's why it matters that the top 1% earn so much more. There is a limited amount of money in the system at one time and since 40% of the global wealth is owned by the top 1%, that leaves a lot less for the rest to share doesn't it?

No, it doesn't. Wealth is not dollars. Wealth is dynamic and changes. Wealth can be consumed, or grown. If you removed money from the people who invest, and gave it to the people who consume, wealth would be consumed, and the country would be poorer.

Not in your world since you have capital to back up your capital investments. What about the average household whose debt is exceeding their annual income now? I guess these people are to be written off in your equation and ignored "since they clearly haven't shown the earning power."

Don't borrow. Live within your means. Pay off your debts. That's exactly what I have done. It was hard. But I did it. Do the same, you'll end up with similar results.

Not because a lack of motivation (poverty sucks!!!) but because a sheer lack of opportunity and quality education.

And yet I know people right now, that spend their time living in poverty by choice.

And no, I refuse to accept the absolute BS argument that there is no quality education or opportunity. There are MILLIONS of examples where people come here from other countries, with far less opportunities, and less education than born Americans have, and they succeed.

Simply not true. Just garbage claim. You are flat out wrong. Sorry... wrong.

 

[Bombur]

Not all of the sub-prime loans were mandated by government. The government created regulations that forced banks to create sub-prime mortgages for poor people. When MBS became profitable there was a large market demand for sub-prime loans. Not all sub-prime loans are to poor people or those that the law was intended to help. Not all sub-prime loans were created under the regulations of the program either.

There are a lot of regulations so I know it isn't clear when I am not differentiating between them. The Federal Reserve has regulatory authority over the balance sheets of financial institutions. That is different then the regulations concerning the creation of mortgages.

This is a little wacky.

Most of what you say is true.... but irrelevant.

It doesn't matter if the sub-prime loans were directly under the mandates of the CRA or not.

The mandates themselves, lowered the lending standards. Once that is done, it effects the entire market, not just the specific CRA market.

The reason why, is because there is no "CRA Market".

Government, through Freddie and Fannie, created Mortgage Backed Securities.

MBSs are mortgage bundles. When someone buys an MBS, they don't get a "CRA MBS" or a "Traditional MBS". They have no direct idea of what specific mortgages make up that bundle.

What that means is, to the MBS buyers and investors, they have no idea if that specific loan in there is a loan from a CRA Sub-prime loan, or a Regular Sub-prime loan.

Once it was established that Sub-prime loans are good, because government signed their name to it, through Freddie Mac, and later Fannie Mae securitizing it.... buyers have no way to distinguish one sub-prime from another.

Further, what RKMBrown said is dead on right, and a completely valid point.

You are telling us, that banks should have made sub-prime loans that fell under the CRA, and should not have made sub-prime loans that did not fall under the CRA.

How would you propose doing that? Think about that.....

Two guys walk into a bank. Both have completely identical incomes, credit scores, credit history, and both do not qualify for a loan because of bad credit.

So person A qualifies for the Sub-prime loan, because... why?
Person B does not qualify for the sub-prime loan, because.... why?

The CRA does not distinguish between loans. The CRA only requires that they be 'low and moderate income', and that they do not qualify for a prime rate mortgage.

No prime rate mortgage, is a "CRA Loan". The whole point is to give loans to people who don't qualify. If you can show me a prime rate CRA loan, I'd love to see it.

Now what does moderate income mean? Well according to HUD, moderate income is $54,300 or less, for a family of 4.

That means roughly half the country qualifies for a CRA loan.

So what would you suggest the banks do to deny one person a loan, while accepting the other?

Of course it matters if they under the mandate or not. It completely negates any claim the institutions have that they were somehow forced to crash the market. They chose to take these risky loans.

I already said the MBS created a market that created demand for sub-prime loans. You are not contradicting anything I said by pointing that out again.

The CRA establishes minimum amounts of a certain type of loan. Once the bank meets the minimum they are covered under the guidelines of the law. The sub-prime loans that were made were not necessarily to poor people like the program was about. The rise of MBS impacted all markets and not just the market for mortgages to the poor.

MBS used a formula that everyone relied on, not just F&F. This formula is what made it possible to turn subprime mortgages into AAA securities. The problem is that no one that was making decisions really understood it.

The major distinction I am trying to make is that there is a huge difference between saying loans to poor people crashed the economy and saying that MBS that hid risk crashed the economy. F&F most definitely shares the blame for the MBS crash but they are not holding all the blame for that.

 

[Toddsterpatriot]

no matter your gauge it is finite. as long as wealth is finite it is limited. why is this such a hard concept to understand? you are unwilling to accept anything I say so what's the point? i even offered the perspective in terms of global wealth, not just money. you just refuse to read/understand what you don't want to. its like you drag your heels as your being carried out of the store by mommy.

It's called the Distribution of Wealth.

A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. The bottom half of the world adult population owned 1% of global wealth. Moreover, another study found that the richest 2% own more than half of global household assets.

btw, economics is a narrow and terribly biased system. Too bad we operate our ethics and politics on it. it calls oceans and rainforests externalities. it places no value on the biosphere--THE ONE AND ONLY SOURCE OF LIFE and true affluence. as if the biosphere is not essential to the creation of civilization or to the existence of our institutions. current economics is a lens to perceive the world as 20th century greed has made complex. although it uses math economics itself is a way of looking at the world. it does not offer a definitive understanding of our world and humanity and should not be the only lens we use to arrive at morals/how to treat one another.

you are unwilling to accept anything I say so what's the point?

You're right, I reject your idiocy.

I await your explanation for how the rich's gains in the stock market come out of the pocket of the poor.

Try to answer, instead of whining and deflecting.

 

[bripat9643]

WHY are they different things?

You forced Mr Lender to lend to a deadbeat?

How does the banker make a buck in the transaction?

.

Fair point.

I'm not talking about the loans themselves, but who bought the loans and what they did with them free of Government intervention..

It makes little difference, once the loans were made, what was done with the loans afterwards. The loan shouldn't have been made in the first place, and they wouldn't have been made if government bureaucrats weren't pointing guns at bankers.

Nobody forced private Wall Street firms to build a trillion dollar profit industry from a corruptly managed mortgage industry.

The government managed the mortgage industry. So in a manner of speaking, you are correct. It was corruptly managed, and that's the whole point.

At the end of the day, those Wall Street firms did not properly evaluate those mortgages. .

Fannie Mae and Freddie Max also didn't evaluate the mortgages property, and their fiduciary duty is much greater than any Wallstreet bank. However, in the end, the bankers did evaluate the mortgages property. They concluded that if the mortgages all went South that the government would bail them out, and they were correct.

If AIG lacked crucial information about the deadbeat's ability to service the corrupt government mortgage, than they should have stayed away. However, they did the opposite. Wall Street wanted those mortgages because they were able to turn them into gold. This is why so many non-government mortgage companies got in the game (-I'm talking about the 65% of the mortgages sold to deadbeats not because of government, but because they could sell those mortgages to Wall Street without assuming any liability if the loan became non-performing.

Whose fault is that they wouldn't assume any liability? Why, it's the government's fault, of course. But you're trying to tell us that we should blame the Wallstreet bankers rather than the government.

Meaning: deregulation, by protecting the loan's originator from liability if the deadbeat failed to service the loan, removed the entire mortgage industry's incentive to loan exclusively to credit-worthy borrowers).

How would the originator be responsible for the deadbeat's failure to pay if they sold the mortgage? The purchaser was privy to all information supplied by the applicant.

[Things like the CRA worked fine for decades until crucial regulations were removed by Clinton and Bush, who both caved to Wall Street pressure ("donations"). ).

ROFL! Bernie Madoff's "investments" worked fine for decades until a few of his customers wanted to cash out. Everything is always fine until just before the collapse.

[Anyway, it sounds like your news sources haven't talked much about Bear, Lehman, and AIG - the companies that very directly fueled the mortgage explosion but had nothing to do with the government loans you're talking about. Had the problem been just about government-influenced loans to deadbeats, it would have been containable. But Wall Street got involved, which created a fee based incentive system that pulled in the entire mortgage industry, which meant that over 50% of the loans made to deadbeats had nothing to do with government. At the end of the day, Wall Street should not have purchased those mortgages if they didn't have certainty about the people who received those loans.

All the loans were "government influenced," numbnuts. If Wall Street hadn't purchased the mortgages, then Barney Frank's dream of "affordable housing" would never have come to pass.

 

[gnarlylove]

I want to say I used money and wealth interchangeably when this is not true. By money I really meant wealth all along. But reading the same replies from different people over and over, we clearly start from different values. So we clash at am impasse and we are talking about the clash without ever mentioning where we start from, that is, our values.

Your values, as any good capitalist, center around yourself/nuclear family and as you go further away from yourself the values/affinity become less strong until the outer most circle from you, the homeless, are despised as dirt and are blamed for their own problems (whether you have any knowledge about this group or not).

My values start with compassion. This recognizes from the inner most circles I tread to the outter most I value any as human first. Then particulars attributes (networking) takes a secondary place. So that I am not seeking gain first but connection. This viewpoint does not lend itself to capitalism and certain is anathema among Republicans, even though they consider themselves "The Family Party."

This exemplifies my point, from FOX
11/28/2013:
HARRIS FAULKNER: I'm down with the closing the stores on Thanksgiving. It's enough already. I'm serious.

GREGG JARRETT: Really? Seriously?

HARRIS FAULKNER: Why are you surprised?

GREGG JARRETT: Free enterprise?

HARRIS FAULKNER: You know, look, people should be at home with their families. That's just my little opinion. I'm not the law in this.

GREGG JARRETT: OK. I just was thinking of capitalism and free markets and letting people do what they want to do.

Until we can realize we are working from very different places, we won't even listen to each other. I try but am aghast at how little agreement goes on. This demonstrates the problem of the nation being unwilling to compromise or work together. I've heard the same mantras rehashed in one form or another and it's truly sickening because that's how successful the propaganda machine (mass media) really is. And you simply will never take a second to investigate the validity of your own points since you're so busy coming up with reasons why the other side is wrong.

You're just seeking competition: go play kickball instead of bringing the country down because no one wants to listen to each other.

 

[Toddsterpatriot]

I want to say I used money and wealth interchangeably when this is not so. But we clearly start from different values.

Your values center around yourself and as you go further away from yourself the values/affinity become less strong until the outer most circle from you, the homeless, are despised as dirt and are blamed for their own problems (whether you have any knowledge about this group or not).

My values start with compassion. This recognizes from the inner most circles I tread to the outter most I value any as human first. Then particulars attributes (networking) takes a secondary place. So that I am not seeking gain first but connection. This viewpoint does not lend itself to capitalism and certain is anathema among Republicans, even though they consider themselves "The Family Party."

This exemplifies my point, from FOX
11/28/2013:
HARRIS FAULKNER: I'm down with the closing the stores on Thanksgiving. It's enough already. I'm serious.

GREGG JARRETT: Really? Seriously?

HARRIS FAULKNER: Why are you surprised?

GREGG JARRETT: Free enterprise?

HARRIS FAULKNER: You know, look, people should be at home with their families. That's just my little opinion. I'm not the law in this.

GREGG JARRETT: OK. I just was thinking of capitalism and free markets and letting people do what they want to do.

Until we can realize we are working from very different places, we won't even listen to each other. I try but am aghast at how little agreement goes on. This demonstrates the problem of the nation being unwilling to compromise or work together. I've heard the same mantras rehashed in one form or another and it's truly sickening because that's how successful the propaganda machine (mass media) really is. And you simply will never take a second to investigate the validity of your own points since you're so busy coming up with reasons why the other side is wrong.

You're just seeking competition: go play kickball instead of bringing the country down because no one wants to listen to each other.

Thanks for admitting your error.

 

[Bombur]

There were housing bubbles in other nations in 97 too. There are a lot of reasons why there can be a bubble starting in 97 but a lot of things happened between 97 and the crash that caused this historic bubble besides what was going on in 97.

There is no doubt that F&F played a part in the MBS problem. The thing is the market is not set up to depend on them to make all the decisions. The market is not set up to allow a government institution to be a ratings agency or manage the risk portfolios of these financial institutions.

The risk that was taken on by these institutions was in no way limited to what the government was mandating. I have said this multiple times and it is important. The demand for sub-prime mortgages far outstripped the requirements of the government. The claim that these institutions failed because of risk that was forced upon them is simply false.

Secondly the institutions lowered their standards far below what the CRA asked for. In fact one of the major faults you can place at the feet of government is the failure to regulate the markets both in terms of loan standards and balance sheet requirements.

If you don't understand that private institutions are in charge of their own financial security then I don't know what to tell you. There were plenty of banks that met CRA guidelines and didn't crash. The ones that crashed generally tried to maximize their profits by betting on the AAA rating of MBS.

You are overstating the backing of F&F by the Federal government which was a mistake many investors made. They equated F&F to the federal government beyond what the law actually establishes. The bailout of F&F went beyond what the Federal government was legally required to do.

The whole reason F&F exists isn't to make financial decisions for the entire market. Those decisions to go above and beyond the federal requirements were their own. F&F was not regulated enough either btw.

Glass Steagall mattered because it played a major part in the amount of capital flowing into the bubble and the assets that were put at risk. Glass Steagall is important when talking about the size of the bubble and the need for a bailout.

Name these reasons. Saying 'there could be', doesn't mean anything. If there was some other reason, name the reason. I'm open to this theory, but you have to provide something more than an ambiguous "something somewhere might have done it".

As for other countries, yes, and if you wish to look at individual policies of those countries, and analysis the cause of those bubbles, fine. A few countries did have bubbles that started in the late 90s, early 2000s. Whether they started exactly in 1997, as our did, I don't know, but that wouldn't make any difference to the cause of our bubble, anymore than it would make a different to the cause of their bubble.

Doesn't matter how the market is setup, or not. Those institutions, by virtue of the fact they are the largest players in the market, and by virtue of the fact they have the backing of the Federal Government, do influence the market, whether "the market is setup" to be influenced or not.

Let me give you a clear cut example. Name the rating agencies. Can you name them? Standards & Poor (S&P), Moody's, and Fitch. Right? You ask most people what the rating agencies are, you'll get these three. S&P, Moody's and Fitch.

But those are not the only rating agencies. There are actually dozens of rating agencies. And there were dozens of rating agencies before. It was the "Nationally Recognized Statistical Rating Organization", issued by the Government, which forced out competition. Even though many rating agencies were perfectly fine in giving out their ratings, since they didn't have the government seal of approval, they lost out to the big three.

But the NRSRO seal, was only required for government purchases of government bonds and securities. Had nothing to do with private markets. Yet the private markets followed suit.

In fact, consider this. Before the NRSRO was passed in the 1970s, all rating agencies were running on the buyer pays model, where the buyer of the security, paid to have it rated. But after the government seal of approval, and the demand moved towards getting securities rated by the government approved rating agencies, and because of that the big three moved towards an issuer pays model.

Before, the issuer of the securities never paid to have their securities rated, because it was the customer who determined whose rating they wanted to use, and thus they paid to have it rated by who they wanted.

But since the government gave their seal of approval, the agencies knew they were in demand. They started charging the issuer of the securities, knowing they had no choice but to pay, or their securities wouldn't be bought, without a government approved rating agency giving the rating, even private buyers wouldn't buy their securities.

None of that was intended. Nor is there any law, requiring the private market to follow the public. Yet the market follows government... and always has, and always will. It's simply the nature of the beast.

Same with Fannie and Freddie. Doesn't matter that there's no requirement to follow Freddie and Fannie. They have the influence, and backing of the government, and the private market does follow them. Period.

As far as banks that met CRA guidelines, and didn't crash.... who?

Because can I name several that met those guidelines perfectly, and crashed really hard. CountryWide, was following CRA guides perfectly, as far as I can tell. Bear Stearns was an avid follower of the CRA. Wachovia, was completely in line with the government, from everything I read on the matter.

Countrywide tends to follow the most flexible underwriting criteria permitted under GSE and FHA guidelines. Because Fannie Mae and Freddie Mac tend to give their best lenders access to the most flexible underwriting criteria, Countrywide benefits from its status as one of the largest originators of mortgage loans and one of the largest participants in the GSE programs. …

When necessary—in cases where applicants have no established credit history, for example—Countrywide uses nontraditional credit, a practice now accepted by the GSEs.​

This report was issued in 2000 by the Fannie Mae Foundation. It is widely cited and vetted. There are numerous books that detail how Fannie Mae, and Freddie Mac, supported exactly this. Countrywide, is a clear cut example of a bank following the government influence, and following the CRA to the letter.

Glass Steagall has absolutely nothing to do with capital flows, or the size of the bubble. Not one single provision of Glass Steagall relates to that, nor was there any repeal of a provision that relates to that. Completely wrong.

I can't even figure out what provision you would even think applies to capital flows, or the bubble. I'd love to hear your claim.

The point about 1997 is that you are just throwing out a reason and deciding something with no analysis other than "name something else" which really isn't all that meaningful. Actually other countries do matter because it suggests it was economic.

I am sorry but there is no comparison between the private industry following suit with ratings standards and the private industry and the ratings agencies not doing their job because of F&F.

There were plenty of local banks and credit unions that did fine even with the large economic crash. In fact the banks that did the worst were ones who were mixed institutions, something now possible since Glass Steagall.

Yes the combination of commercial banking and investment banking meant more capital flowing into the MBS market. It took a lot of capital flowing into the market for the bubble to grow so big. It also played a major part in the reason we bailed them out.

 

[bayoubill]

Where is Democracy to be found in a world where the three richest individuals have assets that exceed the combined GDP of 47 countries?

A world where the richest 2% of global citizens "own" more than 51% of global assets?

Ready for the best part?

Capitalism ensures an already bad problem will only get worse.

"The Organization for Economic Cooperation and Development (OECD) states that income inequality 'first started to rise in the late ‘70s and early ‘80s in America and Britain (and also in Israel)'.

"The ratio between the average incomes of the top 5 per cent to the bottom 5 per cent in the world increased from 78:1 in 1988, to 114:1 in 1993..."

"Stiglitz relays that from 1988 to 2008 people in the world’s top 1 per cent saw their incomes increase by 60 per cent, while those in the bottom 5 per cent had no change in their income.

"In America, home to the 2008 recession, from 2009 to 2012, incomes of the top 1 per cent in America, many of which no doubt had a greedy hand in the causes of the meltdown, increased more than 31 per cent, while the incomes of the 99 per cent grew 0.4 per cent less than half a percentage point."

Spotlight on Worldwide Inequality

There are alternatives that don't require infinite "growth."

so... what...? state-imposed socialism is the cure...?

 

[Andylusion]

Not all of the sub-prime loans were mandated by government. The government created regulations that forced banks to create sub-prime mortgages for poor people. When MBS became profitable there was a large market demand for sub-prime loans. Not all sub-prime loans are to poor people or those that the law was intended to help. Not all sub-prime loans were created under the regulations of the program either.

There are a lot of regulations so I know it isn't clear when I am not differentiating between them. The Federal Reserve has regulatory authority over the balance sheets of financial institutions. That is different then the regulations concerning the creation of mortgages.

This is a little wacky.

Most of what you say is true.... but irrelevant.

It doesn't matter if the sub-prime loans were directly under the mandates of the CRA or not.

The mandates themselves, lowered the lending standards. Once that is done, it effects the entire market, not just the specific CRA market.

The reason why, is because there is no "CRA Market".

Government, through Freddie and Fannie, created Mortgage Backed Securities.

MBSs are mortgage bundles. When someone buys an MBS, they don't get a "CRA MBS" or a "Traditional MBS". They have no direct idea of what specific mortgages make up that bundle.

What that means is, to the MBS buyers and investors, they have no idea if that specific loan in there is a loan from a CRA Sub-prime loan, or a Regular Sub-prime loan.

Once it was established that Sub-prime loans are good, because government signed their name to it, through Freddie Mac, and later Fannie Mae securitizing it.... buyers have no way to distinguish one sub-prime from another.

Further, what RKMBrown said is dead on right, and a completely valid point.

You are telling us, that banks should have made sub-prime loans that fell under the CRA, and should not have made sub-prime loans that did not fall under the CRA.

How would you propose doing that? Think about that.....

Two guys walk into a bank. Both have completely identical incomes, credit scores, credit history, and both do not qualify for a loan because of bad credit.

So person A qualifies for the Sub-prime loan, because... why?
Person B does not qualify for the sub-prime loan, because.... why?

The CRA does not distinguish between loans. The CRA only requires that they be 'low and moderate income', and that they do not qualify for a prime rate mortgage.

No prime rate mortgage, is a "CRA Loan". The whole point is to give loans to people who don't qualify. If you can show me a prime rate CRA loan, I'd love to see it.

Now what does moderate income mean? Well according to HUD, moderate income is $54,300 or less, for a family of 4.

That means roughly half the country qualifies for a CRA loan.

So what would you suggest the banks do to deny one person a loan, while accepting the other?

Of course it matters if they under the mandate or not. It completely negates any claim the institutions have that they were somehow forced to crash the market. They chose to take these risky loans.

I already said the MBS created a market that created demand for sub-prime loans. You are not contradicting anything I said by pointing that out again.

The CRA establishes minimum amounts of a certain type of loan. Once the bank meets the minimum they are covered under the guidelines of the law. The sub-prime loans that were made were not necessarily to poor people like the program was about. The rise of MBS impacted all markets and not just the market for mortgages to the poor.

MBS used a formula that everyone relied on, not just F&F. This formula is what made it possible to turn subprime mortgages into AAA securities. The problem is that no one that was making decisions really understood it.

The major distinction I am trying to make is that there is a huge difference between saying loans to poor people crashed the economy and saying that MBS that hid risk crashed the economy. F&F most definitely shares the blame for the MBS crash but they are not holding all the blame for that.

We already discussed whether or not MBS created a demand for sub-prime loans. That is false. MBS was created all they way back in the 1960s. Sub-prime loans have existed since the early 1970s.

There were no sub-prime Mortgage backed Securities between the 1960s, and 1997.

That claim is false.

What created the demand for sub-prime mortgages was the CRA, which in 1997, Freddie Mac securitized sub-prime Mortgage Back Securities for the very first time since MBSs existed.

That action legitimized the sub-prime market to the rest of the market, regardless of CRA minimums.

And I still don't get your claim that 'loans to poor people' did, or didn't do anything.

Has nothing to do with "loans to poor people", has to do with loans to people who didn't qualify. And that most certainly did cause the crash. Banks that didn't engage in these kinds of loans, didn't fail. Banks that did, did.

You simply have no basis to make such a strange claim, when the banks that directly worked with Freddie and Fannie to make CRA style loans, were some of the biggest failures of the crash, namely Bear Stearns, Wachovia, and CountryWide.

 

[Bombur]

This is a little wacky.

Most of what you say is true.... but irrelevant.

It doesn't matter if the sub-prime loans were directly under the mandates of the CRA or not.

The mandates themselves, lowered the lending standards. Once that is done, it effects the entire market, not just the specific CRA market.

The reason why, is because there is no "CRA Market".

Government, through Freddie and Fannie, created Mortgage Backed Securities.

MBSs are mortgage bundles. When someone buys an MBS, they don't get a "CRA MBS" or a "Traditional MBS". They have no direct idea of what specific mortgages make up that bundle.

What that means is, to the MBS buyers and investors, they have no idea if that specific loan in there is a loan from a CRA Sub-prime loan, or a Regular Sub-prime loan.

Once it was established that Sub-prime loans are good, because government signed their name to it, through Freddie Mac, and later Fannie Mae securitizing it.... buyers have no way to distinguish one sub-prime from another.

Further, what RKMBrown said is dead on right, and a completely valid point.

You are telling us, that banks should have made sub-prime loans that fell under the CRA, and should not have made sub-prime loans that did not fall under the CRA.

How would you propose doing that? Think about that.....

Two guys walk into a bank. Both have completely identical incomes, credit scores, credit history, and both do not qualify for a loan because of bad credit.

So person A qualifies for the Sub-prime loan, because... why?
Person B does not qualify for the sub-prime loan, because.... why?

The CRA does not distinguish between loans. The CRA only requires that they be 'low and moderate income', and that they do not qualify for a prime rate mortgage.

No prime rate mortgage, is a "CRA Loan". The whole point is to give loans to people who don't qualify. If you can show me a prime rate CRA loan, I'd love to see it.

Now what does moderate income mean? Well according to HUD, moderate income is $54,300 or less, for a family of 4.

That means roughly half the country qualifies for a CRA loan.

So what would you suggest the banks do to deny one person a loan, while accepting the other?

Of course it matters if they under the mandate or not. It completely negates any claim the institutions have that they were somehow forced to crash the market. They chose to take these risky loans.

I already said the MBS created a market that created demand for sub-prime loans. You are not contradicting anything I said by pointing that out again.

The CRA establishes minimum amounts of a certain type of loan. Once the bank meets the minimum they are covered under the guidelines of the law. The sub-prime loans that were made were not necessarily to poor people like the program was about. The rise of MBS impacted all markets and not just the market for mortgages to the poor.

MBS used a formula that everyone relied on, not just F&F. This formula is what made it possible to turn subprime mortgages into AAA securities. The problem is that no one that was making decisions really understood it.

The major distinction I am trying to make is that there is a huge difference between saying loans to poor people crashed the economy and saying that MBS that hid risk crashed the economy. F&F most definitely shares the blame for the MBS crash but they are not holding all the blame for that.

We already discussed whether or not MBS created a demand for sub-prime loans. That is false. MBS was created all they way back in the 1960s. Sub-prime loans have existed since the early 1970s.

There were no sub-prime Mortgage backed Securities between the 1960s, and 1997.

That claim is false.

What created the demand for sub-prime mortgages was the CRA, which in 1997, Freddie Mac securitized sub-prime Mortgage Back Securities for the very first time since MBSs existed.

That action legitimized the sub-prime market to the rest of the market, regardless of CRA minimums.

And I still don't get your claim that 'loans to poor people' did, or didn't do anything.

Has nothing to do with "loans to poor people", has to do with loans to people who didn't qualify. And that most certainly did cause the crash. Banks that didn't engage in these kinds of loans, didn't fail. Banks that did, did.

You simply have no basis to make such a strange claim, when the banks that directly worked with Freddie and Fannie to make CRA style loans, were some of the biggest failures of the crash, namely Bear Stearns, Wachovia, and CountryWide.

Yes the MBS created a market for sub-prime mortgages. A new formula was developed that allowed institutions to mix sub-prime mortgages with other mortgages to create a MBS. The way these MBS were created changed based on this formula. Everyone adopted this formula, not just F&F.

Comparing the MBS of 1960's to the crash is like comparing apples to oranges.

The CRA was set up to ensure a wide range of people were getting loans. That was the basis of the minimum standards. The extension of using sub-prime mortgages for loans that had nothing to do with the CRA minimum standards is a clear demonstration of the market acting on it's own.

You can blame F&F all you want. The claim that you are making which is demonstrably false is that everything else was just the market following along mindlessly so they are free of fault.

As for the institutions that failed, I am not denying that they had sub-prime loans and that they met MINIMUM standards. What I have been saying since post one is that meeting those minimum standards wouldn't crash any of them.

You keep pushing blame off of the market which is IMO hilarious. You do that and you basically say they are not making the very decisions they are being compensated to make. You put into question their entire existence and reduce their involvement to a bunch of lemmings. I assure you they don't consider themselves to be lemmings.

 

[kaz]

Banks made sub-prime loans because the Clinton administration decided it was the "American Dream" to own a home and they threatened to Spanish inquisition them if they didn't do it. W continued that policy. And the Fed pumped them with virtually interest free cash to fund it.

So the banks bend to the will of the government? Yeah I guess that's how you might view it but bankers make far more money than any government official.

And the government officials have guns and banks don't

Who lost in this scheme anyway? The way you make it sound the Banks loose

Actually you pulled that out of your ass because it's what you want it to sound like. Everyone who was effected by the recession loses, and that is everyone. Business owners, employes, producers, consumers lose. And our kids lose because we're piling more debt. Sure, the banks lose. They are part of "everyone."

Liberals live in a dream world. The problem is you make real laws based on your fantasies, and as your blame the victim approach shows now, you don't learn from your mistakes. Ever.

 

[kaz]

All you need to do is listen to Bush's words below. He wanted all Americans to buy homes, and borrow money against their homes so they could spend on main street and save the economy from long standing recessionary pressures. It looks like they were trying every trick in the book to stimulate the economy. If you want to blame government, check out the regulations surrounding Leverage. Government was asleep at the switch and over-trusted these firms to protect their investors.

One of my favorite liberal tricks.

Obama continued W's policy in Iraq. Who gets the blame? W, it was his policy.

So do you consistently apply that policy?

W continued Clinton's policy above. I keep saying he had the same policy BTW through this discussion, he did. But no, Clinton drops out now and W owns it.

You just shallowly blame Republicans, you are never responsible for what you did.

Government was not expecting banks to not make irresposible loans with the free money, they threatened them with Congressional subpoenas if they didn't do it. Everyone thought government would stand behind their own policy and back the mortgages and the mortgage securities, but it got too big for even them to do it and it collapsed.

Government drove this, but liberals want to endlessly blame free markets for government policy and say malignant government was "asleep at the switch" when the markets did what they forced them to do.

You're not going to stop repeating your lie, but I'm not going to stop calling you on it. The housing bubble was completely and entirely on government.