Peel that rotten onion

[Mr. Peepers]

E-Mails Imply JPMorgan Knew Some Mortgage Deals Were Bad

Of course, anyone who thinks the banks didn't know what they were doing is incredibly naive. Ugh. Of course, just like Barclays and Sachs, nothing will probably happen. *sigh*

 

[g5000]

E-Mails Imply JPMorgan Knew Some Mortgage Deals Were Bad

Of course, anyone who thinks the banks didn't know what they were doing is incredibly naive. Ugh. Of course, just like Barclays and Sachs, nothing will probably happen. *sigh*

No no no NO NO NO NO!!!

It was the CRA, man! CRA. All that money given to millions of negroes to buy millions of houses all around the world.

Oops. Did I say negroes? I meant "low income people".

Didn't you notice all the ne-, er, low income people moving into your town? And when all those houses in your town foreclosed, weren't you, like, "I had NO IDEA Biff was a negro!"

It couldn't have been securities fraud and a quest to create and sell as many derivatives products to as many suckers on a global scale that caused this gigantic mess. No, it had to be a tiny minority of borrowers. Those white people who borrowed astronomically more money than the "low income people" even dreamed of borrowing to buy McMansions and used their HELOCs to buy SUVs and Disney vacations had NOTHING to do with it.

Bad guys on Wall Street? Frauds? IMPOSSIBLE!!!! It was those damned nig-, er, you know who I mean.

 

[jwoodie]

E-Mails Imply JPMorgan Knew Some Mortgage Deals Were Bad

Of course, anyone who thinks the banks didn't know what they were doing is incredibly naive. Ugh. Of course, just like Barclays and Sachs, nothing will probably happen. *sigh*

No no no NO NO NO NO!!!

It was the CRA, man! CRA. All that money given to millions of negroes to buy millions of houses all around the world.

Oops. Did I say negroes? I meant "low income people".

Didn't you notice all the ne-, er, low income people moving into your town? And when all those houses in your town foreclosed, weren't you, like, "I had NO IDEA Biff was a negro!"

It couldn't have been securities fraud and a quest to create and sell as many derivatives products to as many suckers on a global scale that caused this gigantic mess. No, it had to be a tiny minority of borrowers. Those white people who borrowed astronomically more money than the "low income people" even dreamed of borrowing to buy McMansions and used their HELOCs to buy SUVs and Disney vacations had NOTHING to do with it.

Bad guys on Wall Street? Frauds? IMPOSSIBLE!!!! It was those damned nig-, er, you know who I mean.

Your sarcasm is getting better, but it still betrays a complete lack of understanding regarding economics and the securities markets. Do you honestly think that a "greed" virus suddenly infected Wall Street and caused people to start making subprime loans?

Prior to the CRA, banks were essentially prevented from making subprime loans because they were not eligible for federal mortgage insurance and were not resellable in the securities markets. What changed? In an effort to increase minority home ownership, banks were pressured into making "subprime" loans to people who did not otherwise qualify for "conforming" mortgages. This was done by refusing to approve expansion plans of banks which did not "voluntarily" comply with this new program. At the same time, federal housing agencies began buying up these loans, bundling them and reselling them as if they were all conventional loans. This created a demand for these securities, were were bought and sold on the open market. With implied governmental backing and bogus AAA ratings, they were sold worldwide as safe, high yield investments.

When these subprime loans started defaulting, the real estate market collapsed and banks were unable to establish the value of their loan portfolios for asset reserve purposes. As a result, they became unable to borrow new money from the federal reserve for relending purposes, and commercial credit suddenly dried up, thereby causing a business liquidity crisis and economic recession.

In order to evade their responsibility in this disaster, Democrats invented the narrative of "Wall Street Greed" as the reason and, to give it the appearance of legitimacy, they passed new laws (e.g., Dodd-Frank) to further regulate banking functions and restrict the issuance of subprime loans. Although politically beneficial, these laws have had the effect of making it more difficult to make legitimate loans to businesses and individuals.

These actions have made the recession longer and deeper than necessary, and will slow any recovery.

 

[g5000]

E-Mails Imply JPMorgan Knew Some Mortgage Deals Were Bad

Of course, anyone who thinks the banks didn't know what they were doing is incredibly naive. Ugh. Of course, just like Barclays and Sachs, nothing will probably happen. *sigh*

No no no NO NO NO NO!!!

It was the CRA, man! CRA. All that money given to millions of negroes to buy millions of houses all around the world.

Oops. Did I say negroes? I meant "low income people".

Didn't you notice all the ne-, er, low income people moving into your town? And when all those houses in your town foreclosed, weren't you, like, "I had NO IDEA Biff was a negro!"

It couldn't have been securities fraud and a quest to create and sell as many derivatives products to as many suckers on a global scale that caused this gigantic mess. No, it had to be a tiny minority of borrowers. Those white people who borrowed astronomically more money than the "low income people" even dreamed of borrowing to buy McMansions and used their HELOCs to buy SUVs and Disney vacations had NOTHING to do with it.

Bad guys on Wall Street? Frauds? IMPOSSIBLE!!!! It was those damned nig-, er, you know who I mean.

Your sarcasm is getting better, but it still betrays a complete lack of understanding regarding economics and the securities markets. Do you honestly think that a "greed" virus suddenly infected Wall Street and caused people to start making subprime loans?

New derivatives led Wall Street to believe it had eliminated risk. This led to subprime lending exploding.

There was $70 trillion of investor money out there, and derivatives offered Wall Street the opportunity to garner billions in fees selling these products to investors.

But these derivatives required underlying assets. Loans. Car loans, credit card balances, home mortages, corporate bonds, sovereign debt, you name it. You think the euro crisis is unrelated? Well it is related. Sovereign debt was rolled into these same derivatives. Greece is a subprime borrower.

But middle class borrowers were also made into subprime borrowers, not just low income people. If you are borrowing more than you can afford, you are a subprime borrower. You can have an 800 credit rating, but that does not mean you are a safe bet to borrow five times more than you have ever borrowed before.

And that is exactly what happened. Middle class borrowers can borrow way more money than low income borrowers. McMansions, HELOCs, SUV loans, vacation loans, you name it the middle class piled it onto their household debt. And those larger loans meant larger assets to bundle into the derivatives being sold to investors.

So don't give me any shit about not know what I am talking about. I do. And I have a mountain of evidence I have been posting for years to back me up.

The dumbasses on Wall Street believed their derivative products had eliminated risk. THAT is why there was an explosion of debt.

 

[g5000]

There is a long list of frauds which were perpetrated by Wall Street. But the idiots who swallowed the CRA meme clamp their hands over their ears. The CRA meme was invented within days of Lehman Brothers collapsing by people who had no clue what was going on. By people who denied a bubble even existed.

Lehman Brothers was not subject to the CRA. Neither was Iceland, or Spain, or England, or Germany. Goldman Sachs was not subject to the CRA. Neither was JP Morgan, the subject of this topic. Neither was Bear Stearns.

The CRA had fuck-all to do with the global derivatives bubble. What, you think the negroes of Iceland caused IceSave to collapse? The negroes of Ireland brought down those banks?

It wasn't negro loans jammed into CDOs. It was middle class debt for the most part. Just look around your own goddammed town, for fuck's sake. Look at all the foreclosures in your white towns.

There are none so blind as those who will not see.

 

[jwoodie]

I'm waiting for the third in your series of idiotic posts: Perhaps you could expound on your definition of "subprime" as you (and no one else in the universe) understand the term. I am also interested in your theory that defaulting on SUV loans and Greek debt were the cause of the mortgage crisis in the U.S.

 

[g5000]

The subprime bubble began during Bush's first term. Do you bozos think Bush and the Republican Congress suddenly started enforcing the CRA and that is why subprime loans took off?

BWA-HA-HA-HA!!!

It was the creation of the CDO and the CDS that did it.

The perceived elimination of risk.

2003:
Not exactly prime: the secondary market for loans not in prime condition is growing.

Wall Street has gotten involved in subprime securitization "in a very large way," says Brendan Keane, managing director of CS First Boston, New York. * CSFB and many of its peers on Wall Street have become subprime buyers in recent years. The group includes Merrill Lynch, Lehman Bros., Morgan Stanley, Greenwich Capital, UBS and Bank of America. More recently, Goldman Sachs has entered the competition through its purchase of Household International's collateral, which it securitized for the firm.

All this investor interest in subprime loans is propelled by the mountain of money piling up on the sidelines of the stock market, fearing entry into that uninviting terrain.

"Mutual funds, hedge funds, private-equity funds are sitting on a tremendous amount of liquidity," says Kenneth Slosser, managing director of investment banking at Friedman, Billings, Ramsey & Co., Inc., Irvine, California.

"These companies have a lot of money to invest; they're waiting for the right opportunity to put the money to work, particularly in the financial services value sectors. As we start to see the bottom of this market," more investing will take place, Slosser predicts.

Wall Street saw all those fees all that investor money could provide if they would loosen up their lending standards. And there it is, straight from the horse's mouth.



Keep Eyes Fixed on Your Variable-Rate Mortgage

Someone now paying $350 a month for a $100,000 interest-only loan could be facing payments of $680 both because of the shift to the higher rate and because the borrower would have to start paying off the principal as well as the interest.

“You need a couple of good pay raises in order to afford it,” said Mark Fleming, chief economist with CoreLogic, which develops risk models for the mortgage lenders. “It’s pretty hard to deal with a payment shock of 80 percent or 90 percent,” he said.

The mortgage industry is not worried about payment shock. Why?

“It offers an opportunity,” said Brad Brunts, managing director of portfolio management at Citi Mortgage, a unit of Citigroup.

He, like others in the mortgage industry, sees the higher payments as a boost to the flagging mortgage refinancing business.

Again, straight from the horse's mouth. It's all about the fees. Lending fees, servicing fees, refinancing fees. Fees, fees, fees.

That's what propelled the derivatives bubble.

 

[g5000]

I defy anyone to find any bank CEO blaming the CRA for the real estate bubble. Find me one whining about the CRA before the crash, during the crash, or after the crash.

You won't find a single one.


Some bozo congressman asked Dick Fuld how much the CRA had to do with Lehman blowing up. Clearly the congressman had been watching too much Fox News and was clueless as to how Lehman operated.

Dick Fuld's answer? "De minimus."

The CRA did not apply to Lehman. They had their own independent supply chain of brokers feeding their derivatives machine. THEY set the lending standards, or complete lack of them. No one else.

 

[Oddball]

E-Mails Imply JPMorgan Knew Some Mortgage Deals Were Bad

Of course, anyone who thinks the banks didn't know what they were doing is incredibly naive. Ugh. Of course, just like Barclays and Sachs, nothing will probably happen. *sigh*

Where the fuck do you think that your Boiking's economic advisers come from, you rube?

 

[jwoodie]

A little reading material for the profoundly ignorant (from Wikipedia):

In 1970, the federal government authorized Fannie Mae to purchase private mortgages, i.e. those not insured by the FHA, VA, or FmHA, and created the Federal Home Loan Mortgage Corporation (FHLMC), colloquially known as Freddie Mac, to compete with Fannie Mae and thus facilitate a more robust and efficient secondary mortgage market.[12]

In 1981, Fannie Mae issued its first mortgage passthrough and called it a mortgage-backed security. The Fannie Mae laws did not require the Banks to hand out subprime loans in any way.[13] Ginnie Mae had guaranteed the first mortgage passthrough security of an approved lender in 1968[14] and in 1971 Freddie Mac issued its first mortgage passthrough, called a participation certificate, composed primarily of private mortgages.[14]
1990s

In 1992, President George H.W. Bush signed the Housing and Community Development Act of 1992.[15] The Act amended the charter of Fannie Mae and Freddie Mac to reflect Congress' view that the GSEs "... have an affirmative obligation to facilitate the financing of affordable housing for low- and moderate-income families in a manner consistent with their overall public purposes, while maintaining a strong financial condition and a reasonable economic return;"[16] For the first time, the GSEs were required to meet "affordable housing goals" set annually by the Department of Housing and Urban Development (HUD) and approved by Congress. The initial annual goal for low-income and moderate-income mortgage purchases for each GSE was 30% of the total number of dwelling units financed by mortgage purchases[17] and increased to 55% by 2007.

In 1999, Fannie Mae came under pressure from the Clinton administration to expand mortgage loans to low and moderate income borrowers by increasing the ratios of their loan portfolios in distressed inner city areas designated in the CRA of 1977.[18] Additionally, institutions in the primary mortgage market pressed Fannie Mae to ease credit requirements on the mortgages it was willing to purchase, enabling them to make loans to subprime borrowers at interest rates higher than conventional loans.[18]

In 1999, The New York Times reported that with the corporation's move towards the subprime market "Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980s."[19] Alex Berenson of The New York Times reported in 2003 that Fannie Mae's risk is much larger than is commonly held.[20] Nassim Taleb wrote in The Black Swan: "The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deem these events 'unlikely'".[21] In his 2006 book, America's Financial Apocalypse, Mike Stathis also warned about the risk of Fannie Mae helping to trigger the financial crisis: “With close to $2 trillion in debt between Freddie Mac and Fannie Mae alone, as well as several trillion held by commercial banks, failure of just one GSE or related entity could create a huge disaster that would easily eclipse the Savings & Loan Crisis of the late 1980s. This would certainly devastate the stock, bond and real estate markets. Most likely, there would also be an even bigger mess in the derivatives market, leading to a global sell-off in the capital markets. Not only would investors get crushed, but taxpayers would have to bail them out since the GSEs are backed by the government. Everyone would feel the effects. At its bottom, I would estimate a 30 to 35 percent correction for the average home. And in ‘hot spots’ such as Las Vegas, selected areas of Northern and Southern California and Florida, home prices could plummet by 55 to 60 percent from peak values.” [22][23][24]
2000s

In 2000, because of a re-assessment of the housing market by HUD, anti-predatory lending rules were put into place that disallowed risky, high-cost loans from being credited toward affordable housing goals. In 2004, these rules were dropped and high-risk loans were again counted toward affordable housing goals.[25]

The intent was that Fannie Mae's enforcement of the underwriting standards they maintained for standard conforming mortgages would also provide safe and stable means of lending to buyers who did not have prime credit. As Daniel Mudd, then President and CEO of Fannie Mae, testified in 2007, instead the agency's underwriting requirements drove business into the arms of the private mortgage industry who marketed aggressive products without regard to future consequences: "We also set conservative underwriting standards for loans we finance to ensure the homebuyers can afford their loans over the long term. We sought to bring the standards we apply to the prime space to the subprime market with our industry partners primarily to expand our services to underserved families.

"Unfortunately, Fannie Mae-quality, safe loans in the subprime market did not become the standard, and the lending market moved away from us. Borrowers were offered a range of loans that layered teaser rates, interest-only, negative amortization and payment options and low-documentation requirements on top of floating-rate loans. In early 2005 we began sounding our concerns about this "layered-risk" lending. For example, Tom Lund, the head of our single-family mortgage business, publicly stated, "One of the things we don't feel good about right now as we look into this marketplace is more homebuyers being put into programs that have more risk. Those products are for more sophisticated buyers. Does it make sense for borrowers to take on risk they may not be aware of? Are we setting them up for failure? As a result, we gave up significant market share to our competitors."[26]

On January 26, 2005, the Federal Housing Enterprise Regulatory Reform Act of 2005 (S.190) was first introduced in the Senate by Sen. Chuck Hagel.[27] The Senate legislation was an effort to reform the existing GSE regulatory structure in light of the recent accounting problems and questionable management actions leading to considerable income restatements by the GSE's. After being reported favorably by the Senate's Committee on Banking, Housing, and Urban Affairs in July 2005, the bill was never considered by the full Senate for a vote.[28] Sen. John McCain's decision to become a cosponsor of S.190 almost a year later in 2006 was the last action taken regarding Sen. Hagel's bill in spite of developments since clearing the Senate Committee. Sen. McCain pointed out that Fannie Mae's regulator reported that profits were "illusions deliberately and systematically created by the company's senior management" in his floor statement giving support to S.190.[29][30]

At the same time, the House also introduced similar legislation, the Federal Housing Finance Reform Act of 2005 (H.R. 1461), in the Spring of 2005. The House Financial Services Committee had crafted changes and produced a Committee Report by July 2005 to the legislation. It was passed by the House in October in spite of President Bush's statement of policy opposed to the House version.[31] The legislation met with opposition from both Democrats and Republicans at that point and the Senate never took up the House passed version for consideration after that.[32]
The mortgage crisis from late 2007

Following their mission to meet federal Housing and Urban Development (HUD) housing goals, GSEs such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks) have striven to improve home ownership of low and middle income families, underserved areas, and generally through special affordable methods such as "the ability to obtain a 30-year fixed-rate mortgage with a low down payment... and the continuous availability of mortgage credit under a wide range of economic conditions." (HUD 2002 Annual Housing Activities Report) Then in 2003-2004, the subprime mortgage crisis began.[33] The market shifted away from regulated GSE's and radically toward Mortgage Backed Securities (MBS) issued by unregulated private-label securitization conduits, typically operated by investment banks.

As mortgage originators began to distribute more and more of their loans through private label MBS's, GSE's lost the ability to monitor and control mortgage originators. Competition between the GSEs and private securitizers for loans further undermined GSEs power and strengthened mortgage originators. This contributed to a decline in underwriting standards and was a major cause of the financial crisis.[34]

Investment bank securitizers were more willing to securitize risky loans because they generally retained minimal risk. Whereas the GSE's guaranteed the performance of their MBS's, private securitizers generally did not, and might only retain a thin slice of risk.[34] Often, banks would offload this risk to insurance companies or other counterparties through credit default swaps, making their actual risk exposures extremely difficult for investors and creditors to discern.[35]

The shift toward riskier mortgages and private label MBS distribution occurred as financial institutions sought to maintain earnings levels that had been elevated during 2001-2003 by an unprecedented refinancing boom due to historically low interest rates. Earnings depended on volume, so maintaining elevated earnings levels necessitated expanding the borrower pool using lower underwriting standards and new products that the GSE's would not (initially) securitize. Thus, the shift away from GSE securitization to private-label securitization (PLS) also corresponded with a shift in mortgage product type, from traditional, amortizing, fixed-rate mortgages (FRM's) to nontraditional, structurally riskier, nonamortizing, adjustable-rate mortgages (ARM's), and in the start of a sharp deterioration in mortgage underwriting standards.[33] The growth of PLS, however, forced the GSEs to lower their underwriting standards in an attempt to reclaim lost market share to please their private shareholders. Shareholder pressure pushed the GSEs into competition with PLS for market share, and the GSEs loosened their guarantee business underwriting standards in order to compete. In contrast, the wholly public FHA/Ginnie Mae maintained their underwriting standards and instead ceded market share.[33]

The growth of private-label securitization and lack of regulation in this part of the market resulted in the oversupply of underpriced housing finance[33] that led, in 2006, to an increasing number of borrowers, often with poor credit, who were unable to pay their mortgages - particularly with adjustable rate mortgages (ARM), caused a precipitous increase in home foreclosures. As a result, home prices declined as increasing foreclosures added to the already large inventory of homes and stricter lending standards made it more and more difficult for borrowers to get mortgages. This depreciation in home prices led to growing losses for the GSEs, which back the majority of US mortgages. In July 2008, the government attempted to ease market fears by reiterating their view that "Fannie Mae and Freddie Mac play a central role in the US housing finance system". The US Treasury Department and the Federal Reserve took steps to bolster confidence in the corporations, including granting both corporations access to Federal Reserve low-interest loans (at similar rates as commercial banks) and removing the prohibition on the Treasury Department to purchase the GSEs' stock. Despite these efforts, by August 2008, shares of both Fannie Mae and Freddie Mac had tumbled more than 90% from their one-year prior levels.

On Oct 21, 2010 FHFA estimates revealed that the bailout of Freddie Mac and Fannie Mae will likely cost taxpayers $224–360 billion in total, with over $150 billion already provided.[36]

 

[Charles_Main]

E-Mails Imply JPMorgan Knew Some Mortgage Deals Were Bad

Of course, anyone who thinks the banks didn't know what they were doing is incredibly naive. Ugh. Of course, just like Barclays and Sachs, nothing will probably happen. *sigh*

Oh I Agree, However I think that anyone who thinks our Government did not know, and have a hand in causing it (Both Parties) is also Naive.