It's all good fellas. The Fed will lower rates once again today and flood us with even more money to create new, more adventurous bubbles (waiting to burst in a decade or 2...).
Why not lynch the borrowers?
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Yahoo!! The party's back on fellas!!!! YA-HOOO!!!!
(I'll use a different frame this time)
(I'll use a different frame this time)
Quote:
Financiers did create those piles of debt, and they certainly deserve some blame for today’s crisis. But was the financiers’ miscalculation caused by deregulation? Not really.
The key financiers in this game were not the mortgage lenders, the ratings agencies or the investment banks that created those now infamous mortgage securities. In different ways, these players were all peddling financial snake oil, but as Columbia University’s Charles Calomiris observes, there will always be snake-oil salesmen. Rather, the key financiers were the ones who bought the toxic mortgage products. If they hadn’t been willing to buy snake oil, nobody would have been peddling it.
Who were the purchasers? They were by no means unregulated. U.S. investment banks, regulated by the Securities and Exchange Commission, bought piles of toxic waste. U.S. commercial banks, regulated by several agencies, including the Fed, also devoured large quantities. European banks, which faced a different and supposedly more up-to-date supervisory scheme, turn out to have been just as rash.
By contrast, lightly regulated hedge funds resisted buying toxic waste for the most part – though they are now vulnerable to the broader credit crunch because they operate with borrowed money.
If that doesn’t convince you that deregulation is the wrong scapegoat, consider this: The appetite for toxic mortgages was fueled by Fannie Mae and Freddie Mac, the super-regulated housing finance companies. Mr. Calomiris calculates that Fannie and Freddie bought more than a third of the $3 trillion in junk mortgages created during the bubble and that they did so because heavy government oversight obliged them to push money toward marginal home purchasers.
There’s a vigorous argument about whether Mr. Calomiris’ number is too high. But everyone concedes that Fannie and Freddie poured fuel on the fire to the tune of hundreds of billions of dollars.
Quote:
Greed was indeed a problem, but not just on Wall Street and in the mortgage industry. It also motivated buyers who thought they could get something for nothing. Don’t omit the political greed, although politicians want to mask this by holding hearings about the faults of others but not of themselves. Thanks to politics, our government was not only an enabler, but actually required lenders to issue something-for-nothing loans.
As noted by George Mason University economics professor Russell Roberts, “For 1996, HUD [Department of Housing and Urban Development] required that 12 percent of all mortgage purchases by Fannie and Freddie be ’special affordable’ loans, typically to borrowers with income less than 60 percent of their area’s median income. That number was increased to 20 percent in 2000 and 22 percent in 2005. The 2008 goal was to be 28 percent.”
http://blog.heritage.org/2008/10/09/what-didnt-cause-the-financial-crisis/
Financiers did create those piles of debt, and they certainly deserve some blame for today’s crisis. But was the financiers’ miscalculation caused by deregulation? Not really.
The key financiers in this game were not the mortgage lenders, the ratings agencies or the investment banks that created those now infamous mortgage securities. In different ways, these players were all peddling financial snake oil, but as Columbia University’s Charles Calomiris observes, there will always be snake-oil salesmen. Rather, the key financiers were the ones who bought the toxic mortgage products. If they hadn’t been willing to buy snake oil, nobody would have been peddling it.
Who were the purchasers? They were by no means unregulated. U.S. investment banks, regulated by the Securities and Exchange Commission, bought piles of toxic waste. U.S. commercial banks, regulated by several agencies, including the Fed, also devoured large quantities. European banks, which faced a different and supposedly more up-to-date supervisory scheme, turn out to have been just as rash.
By contrast, lightly regulated hedge funds resisted buying toxic waste for the most part – though they are now vulnerable to the broader credit crunch because they operate with borrowed money.
If that doesn’t convince you that deregulation is the wrong scapegoat, consider this: The appetite for toxic mortgages was fueled by Fannie Mae and Freddie Mac, the super-regulated housing finance companies. Mr. Calomiris calculates that Fannie and Freddie bought more than a third of the $3 trillion in junk mortgages created during the bubble and that they did so because heavy government oversight obliged them to push money toward marginal home purchasers.
There’s a vigorous argument about whether Mr. Calomiris’ number is too high. But everyone concedes that Fannie and Freddie poured fuel on the fire to the tune of hundreds of billions of dollars.
Quote:
Greed was indeed a problem, but not just on Wall Street and in the mortgage industry. It also motivated buyers who thought they could get something for nothing. Don’t omit the political greed, although politicians want to mask this by holding hearings about the faults of others but not of themselves. Thanks to politics, our government was not only an enabler, but actually required lenders to issue something-for-nothing loans.
As noted by George Mason University economics professor Russell Roberts, “For 1996, HUD [Department of Housing and Urban Development] required that 12 percent of all mortgage purchases by Fannie and Freddie be ’special affordable’ loans, typically to borrowers with income less than 60 percent of their area’s median income. That number was increased to 20 percent in 2000 and 22 percent in 2005. The 2008 goal was to be 28 percent.”
http://blog.heritage.org/2008/10/09/what-didnt-cause-the-financial-crisis/
- Joined
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Yes, there you have it. Useless eating welfare recipients did the whole thing to us just for the income tax advantages of home ownership.
Thanks for that.
Thanks for that.
Good info. I was just now reading this (first heard it on the radio, yeah I know, we are supposed to listen to the radio anymore):
Quote:
The Reregulation Mantra?
By John Stossel
"It's deregulation's fault!"
That's the conventional explanation for the economic mess.
You know who said, "This is a final verdict on the failed economic policies of the last eight years ... that essentially said that we should strip away regulations, consumer protections, let the market run wild, and prosperity would rain down on all of us".
Is deregulation is the culprit? It can't be. There was no relevant deregulation in the last 25 years. Meanwhile, highly regulated institutions eagerly bought risky government-guaranteed mortgages, stimulating excessive housing construction and an unsustainable price bubble.
Deregulation wasn't the problem, and reregulation isn't the solution.
It's intuitive to assume that regulation prevents problems, but it's rarely true. First, how would regulators know what to do? Leaving aside the bias they might have and the brutal fact that regulation is physical force, how can a small group of people understand the workings of a market sufficiently to regulate sensibly? Markets, especially financial markets, are far more complicated than any mind can grasp. They consist of many millions of participants making countless decisions on the basis of unarticulated know-how and intuition. To attempt to regulate such activity requires knowledge no one can possess.
To seriously regulate those markets you'd have to impose the "precautionary principle," a favorite idea of some environmentalists, especially in Europe. The principle prohibits any product or activity not proven 100 percent safe. It sounds so reasonable. But Ron Bailey of "Reason" points out what it really means: Don't do anything for the first time.
Bad idea. The world needs innovators and inventors. We need people who try things for the first time.
Nobel Laureate F.A. Hayek emphasized that government planners suffer from a "knowledge problem" because "the knowledge of the circumstances of which [they] must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess."
In other words, the planner or regulator can't possibly know what the multitude in a market "knows." So what regulators really do is straitjacket market participants, preventing innovators from creating prosperity for us all.
Another "Austrian school" economist, Israel Kirzner, applied Hayek's insights to typical regulation, showing how it must interfere with the market's discovery process, the profit-and-loss system that uncovers information vital to making consumers better off:
"Even if current market outcomes in some sense are judged unsatisfactory, intervention ... cannot be considered the obviously correct solution. Deliberate intervention by the state not only might serve as an imperfect substitute for the spontaneous market process of discovery; but also might impede desirable processes of discovery, the need for which has not been perceived by the government. "
Kirzner's point is that even if our problems are the result of market failures -- and with so much intervention, how could they be? -- there is no reason to believe that government could do a better job. Quite the contrary.
The relevance of his ideas to what ails the economy now should be clear. The current interventions prevent market participants from adjusting to new conditions. Banks might be willing to sell their shaky loans to investors at a steep discount, but why do that if the government might bail them out? Why not wait to see if you can get a better price? With the politicians constantly changing the details of the bailout, selling at a discount today might get you accused of fiduciary malpractice later.
Uncertainty over what further new regulations may be imposed only stifles the market's search for solutions.
Markets are never perfect. They are made up of people making their best judgments, and people's judgments are never perfect. Yes, under some circumstances market activity such as speculation and short-selling could harm innocent bystanders. But those who say government is the best protector are wrong because the knowledge problem is an insurmountable obstacle.
There is only one genuine protection for the public: the discipline of profit and loss. Nothing concentrates the mind like the prospect of bankruptcy.
Copyright 2008, Creators Syndicate Inc.
Page Printed from: (well you can find it by googling John Stossel) October 28, 2008 - 03:28:53 PM EDT
Quote:
The Reregulation Mantra?
By John Stossel
"It's deregulation's fault!"
That's the conventional explanation for the economic mess.
You know who said, "This is a final verdict on the failed economic policies of the last eight years ... that essentially said that we should strip away regulations, consumer protections, let the market run wild, and prosperity would rain down on all of us".
Is deregulation is the culprit? It can't be. There was no relevant deregulation in the last 25 years. Meanwhile, highly regulated institutions eagerly bought risky government-guaranteed mortgages, stimulating excessive housing construction and an unsustainable price bubble.
Deregulation wasn't the problem, and reregulation isn't the solution.
It's intuitive to assume that regulation prevents problems, but it's rarely true. First, how would regulators know what to do? Leaving aside the bias they might have and the brutal fact that regulation is physical force, how can a small group of people understand the workings of a market sufficiently to regulate sensibly? Markets, especially financial markets, are far more complicated than any mind can grasp. They consist of many millions of participants making countless decisions on the basis of unarticulated know-how and intuition. To attempt to regulate such activity requires knowledge no one can possess.
To seriously regulate those markets you'd have to impose the "precautionary principle," a favorite idea of some environmentalists, especially in Europe. The principle prohibits any product or activity not proven 100 percent safe. It sounds so reasonable. But Ron Bailey of "Reason" points out what it really means: Don't do anything for the first time.
Bad idea. The world needs innovators and inventors. We need people who try things for the first time.
Nobel Laureate F.A. Hayek emphasized that government planners suffer from a "knowledge problem" because "the knowledge of the circumstances of which [they] must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess."
In other words, the planner or regulator can't possibly know what the multitude in a market "knows." So what regulators really do is straitjacket market participants, preventing innovators from creating prosperity for us all.
Another "Austrian school" economist, Israel Kirzner, applied Hayek's insights to typical regulation, showing how it must interfere with the market's discovery process, the profit-and-loss system that uncovers information vital to making consumers better off:
"Even if current market outcomes in some sense are judged unsatisfactory, intervention ... cannot be considered the obviously correct solution. Deliberate intervention by the state not only might serve as an imperfect substitute for the spontaneous market process of discovery; but also might impede desirable processes of discovery, the need for which has not been perceived by the government. "
Kirzner's point is that even if our problems are the result of market failures -- and with so much intervention, how could they be? -- there is no reason to believe that government could do a better job. Quite the contrary.
The relevance of his ideas to what ails the economy now should be clear. The current interventions prevent market participants from adjusting to new conditions. Banks might be willing to sell their shaky loans to investors at a steep discount, but why do that if the government might bail them out? Why not wait to see if you can get a better price? With the politicians constantly changing the details of the bailout, selling at a discount today might get you accused of fiduciary malpractice later.
Uncertainty over what further new regulations may be imposed only stifles the market's search for solutions.
Markets are never perfect. They are made up of people making their best judgments, and people's judgments are never perfect. Yes, under some circumstances market activity such as speculation and short-selling could harm innocent bystanders. But those who say government is the best protector are wrong because the knowledge problem is an insurmountable obstacle.
There is only one genuine protection for the public: the discipline of profit and loss. Nothing concentrates the mind like the prospect of bankruptcy.
Copyright 2008, Creators Syndicate Inc.
Page Printed from: (well you can find it by googling John Stossel) October 28, 2008 - 03:28:53 PM EDT
Quote:
The nation’s largest provider of mortgage funds, moving to increase homeownership among minorities and low-income citizens, unveiled a program Thursday to loosen lending standards for people with “slightly impaired” credit.
The Federal National Mortgage Assn. said it will encourage banks and other financial institutions to accept borrowers with blemished credit who may not otherwise qualify for conventional loans.
The program will begin on a pilot basis in 15 states, including California, and the District of Columbia. It is expected to expand nationwide early next year.
It is designed to provide homeownership opportunities for “many borrowers whose credit is just a notch below” qualifying for a loan, said Franklin Raines, Fannie Mae’s chairman and chief executive.
Quote:
Fannie Mae, which has been under increased pressure from Housing and Urban Development chief Andrew Cuomo to step up its lending to lower-income consumers, buys mortgages of up to $240,000 from traditional lenders.
http://articles.latimes.com/1999/oct/01/business/fi-17374
From 1999.
The nation’s largest provider of mortgage funds, moving to increase homeownership among minorities and low-income citizens, unveiled a program Thursday to loosen lending standards for people with “slightly impaired” credit.
The Federal National Mortgage Assn. said it will encourage banks and other financial institutions to accept borrowers with blemished credit who may not otherwise qualify for conventional loans.
The program will begin on a pilot basis in 15 states, including California, and the District of Columbia. It is expected to expand nationwide early next year.
It is designed to provide homeownership opportunities for “many borrowers whose credit is just a notch below” qualifying for a loan, said Franklin Raines, Fannie Mae’s chairman and chief executive.
Quote:
Fannie Mae, which has been under increased pressure from Housing and Urban Development chief Andrew Cuomo to step up its lending to lower-income consumers, buys mortgages of up to $240,000 from traditional lenders.
http://articles.latimes.com/1999/oct/01/business/fi-17374
From 1999.
Originally Posted By: Tempest
http://articles.latimes.com/1999/oct/01/business/fi-17374
From 1999.
Interest rate wasn't that low until 2001 and later. If it is not because of the interest rate being so low, the banks and investors wouldn't buy these risky loans. Blame Greenspan on the interest rate instead because he said he didn't see a nation wide housing bubble, but only local pockets of bubble instead.
http://articles.latimes.com/1999/oct/01/business/fi-17374
From 1999.
Interest rate wasn't that low until 2001 and later. If it is not because of the interest rate being so low, the banks and investors wouldn't buy these risky loans. Blame Greenspan on the interest rate instead because he said he didn't see a nation wide housing bubble, but only local pockets of bubble instead.
repicked this from a post by VeeDub when he expressed incredulity at the idiocy of the sentiment back in April.
http://www.cnbc.com/id/23571419
http://www.cnbc.com/id/23571419
I was listening to a program on the mortgage meltdown which mentioned that bankers continued to make risky loans based on industry-wide database information which said the default rates on the low-documentation loans was no different than on conventional loans.
Apparently this did not raise a flag in the mind of the industry.
However, after the meltdown, they discovered that the data pool being analyzed did not actually contain the low-doc loans, so of course the reported default rates were identical! The best and brightest certainly earned their rewards in this instance.
Apparently this did not raise a flag in the mind of the industry.
However, after the meltdown, they discovered that the data pool being analyzed did not actually contain the low-doc loans, so of course the reported default rates were identical! The best and brightest certainly earned their rewards in this instance.
TMW - this is the first I read this. Do you have a link??? What program?
Pabs - The program was "This American Life", with Ira Glass. I will try to find a text reference.
This American Life has done several programs on the meltdown, and I can't find any transscripts to see which one I heard.
I do remember they were referring to the major rating agencies, Moodies and S&P. Doing a little Googling I found - an article critical of Moody's .
This article says they are now illogically bearish, but his overall tone, and that of the comments, is that they don't know what they are doing.
Edit - Here we go - Coding Error Causes Artificially High Debt Rating
I do remember they were referring to the major rating agencies, Moodies and S&P. Doing a little Googling I found - an article critical of Moody's .
This article says they are now illogically bearish, but his overall tone, and that of the comments, is that they don't know what they are doing.
Edit - Here we go - Coding Error Causes Artificially High Debt Rating
Last edited:
More, excerpted from - http://www.ft.com/cms/s/0/65892340-9b1a-...0779fd2ac.html. This is separate from the computer error. Neither of these stories actually contain a smoking gun - I think they raise more questions than they answer.
From January 2007, the Moody’s US residential mortgage bond team began tracking a disturbing rise in the number of subprime mortgages going delinquent. The delinquency rate is the first of three key measures that rating agencies use to assess the soundness of a mortgage-backed bond. The second key measure shows the number of people delinquent for more than 90 days and the third shows the number of foreclosures. The trio form the danger-alert system on any mortgage bond: if homeowners miss a payment, they make it into the first category. If they miss three payments in a row, they fall into the ignominy of the second. After that, they lose their home; the mortgage loan defaults. Green, amber, red.
What shocked the Moody’s analysts about the delinquency rate they were watching – the green lights – was that it had moved up very fast. And it was happening not just in isolated regions but all over the US. More worrying still: in some cases, mortgage loans were jumping the lights and moving straight from green into red. This was not in their models – nor anyone else’s.
The agency’s chief economist, Mark Zandi, had been warning of a US housing downturn for some time. In May 2006, he wrote that the housing environment “feels increasingly ripe for some type of financial event”. But Moody’s triple-A rated bonds were thought safe – as were those highly rated by other agencies. According to a report in March 2007, the risks of the defaults in subprime mortgage bond pools climbing further up the structured finance chain were “mild to moderate”. Nothing needed be done unless the second warning – the amber lights – lit up.
Pretty soon they did. The same people who missed one mortgage payment had now missed three. Outwardly, the rating agencies were sanguine. “Over the past several years, Moody’s rating changes in the second half of the year have greatly outnumbered actions in the first half,” said Moody’s, trying to explain the large number of downgrades it seemed to be making.
But behind the scenes, Moody’s was already taking steps which would drastically revise its outlook.
At the end of July, the company decided it needed to update its rating methodology. The review was publicly announced on August 2. Five days later, Clarkson was appointed chief executive of the company, replacing Raymond McDaniel. Meanwhile, the new delinquency assumptions were calibrated, and the analysts typed the revised data into their machines. When they came back to their desks, they realised, one bond at a time, the severity of the mortgage crisis. On August 16, on a mild, rainy day in New York, Moody’s released the results of its revised methodology. In one fell swoop, it downgraded 691 mortgage bonds. The two biggest other rating agencies – Fitch and S&P – were issuing unprecedented downgrade notices too.
The action was the first in a series of surprises for the credit markets. In each of the succeeding weeks, it seemed, Moody’s and the other rating agencies had more bonds to downgrade. And each set of downgrades was a convulsive shock. In the final few months of 2007, Moody’s downgraded more bonds than it had over the previous 19 years combined. Panic gripped trading floors. Titanic structured vehicles, created by banks to warehouse their “riskless” mortgage bonds, became untouchable for short-term investors. As a result, two big German banks revealed that they were within a whisker of collapse, and virtually overnight all the world’s banks stopped lending to one another.
From January 2007, the Moody’s US residential mortgage bond team began tracking a disturbing rise in the number of subprime mortgages going delinquent. The delinquency rate is the first of three key measures that rating agencies use to assess the soundness of a mortgage-backed bond. The second key measure shows the number of people delinquent for more than 90 days and the third shows the number of foreclosures. The trio form the danger-alert system on any mortgage bond: if homeowners miss a payment, they make it into the first category. If they miss three payments in a row, they fall into the ignominy of the second. After that, they lose their home; the mortgage loan defaults. Green, amber, red.
What shocked the Moody’s analysts about the delinquency rate they were watching – the green lights – was that it had moved up very fast. And it was happening not just in isolated regions but all over the US. More worrying still: in some cases, mortgage loans were jumping the lights and moving straight from green into red. This was not in their models – nor anyone else’s.
The agency’s chief economist, Mark Zandi, had been warning of a US housing downturn for some time. In May 2006, he wrote that the housing environment “feels increasingly ripe for some type of financial event”. But Moody’s triple-A rated bonds were thought safe – as were those highly rated by other agencies. According to a report in March 2007, the risks of the defaults in subprime mortgage bond pools climbing further up the structured finance chain were “mild to moderate”. Nothing needed be done unless the second warning – the amber lights – lit up.
Pretty soon they did. The same people who missed one mortgage payment had now missed three. Outwardly, the rating agencies were sanguine. “Over the past several years, Moody’s rating changes in the second half of the year have greatly outnumbered actions in the first half,” said Moody’s, trying to explain the large number of downgrades it seemed to be making.
But behind the scenes, Moody’s was already taking steps which would drastically revise its outlook.
At the end of July, the company decided it needed to update its rating methodology. The review was publicly announced on August 2. Five days later, Clarkson was appointed chief executive of the company, replacing Raymond McDaniel. Meanwhile, the new delinquency assumptions were calibrated, and the analysts typed the revised data into their machines. When they came back to their desks, they realised, one bond at a time, the severity of the mortgage crisis. On August 16, on a mild, rainy day in New York, Moody’s released the results of its revised methodology. In one fell swoop, it downgraded 691 mortgage bonds. The two biggest other rating agencies – Fitch and S&P – were issuing unprecedented downgrade notices too.
The action was the first in a series of surprises for the credit markets. In each of the succeeding weeks, it seemed, Moody’s and the other rating agencies had more bonds to downgrade. And each set of downgrades was a convulsive shock. In the final few months of 2007, Moody’s downgraded more bonds than it had over the previous 19 years combined. Panic gripped trading floors. Titanic structured vehicles, created by banks to warehouse their “riskless” mortgage bonds, became untouchable for short-term investors. As a result, two big German banks revealed that they were within a whisker of collapse, and virtually overnight all the world’s banks stopped lending to one another.
Originally Posted By: PandaBear
Originally Posted By: Tempest
http://articles.latimes.com/1999/oct/01/business/fi-17374
From 1999.
Interest rate wasn't that low until 2001 and later. If it is not because of the interest rate being so low, the banks and investors wouldn't buy these risky loans. Blame Greenspan on the interest rate instead because he said he didn't see a nation wide housing bubble, but only local pockets of bubble instead.
Greenspan has his role in this for sure. The funny thing about his comments is that it is a tantamount admission that the FED = a centralized economy and the perils and follies that come with it.
Originally Posted By: Tempest
http://articles.latimes.com/1999/oct/01/business/fi-17374
From 1999.
Interest rate wasn't that low until 2001 and later. If it is not because of the interest rate being so low, the banks and investors wouldn't buy these risky loans. Blame Greenspan on the interest rate instead because he said he didn't see a nation wide housing bubble, but only local pockets of bubble instead.
Greenspan has his role in this for sure. The funny thing about his comments is that it is a tantamount admission that the FED = a centralized economy and the perils and follies that come with it.
Originally Posted By: Pablo
Originally Posted By: oilyriser
Mortgage officers who deny loans to low income people get threatened with racial discrimination, ethnic discrimination or gender discrimination lawsuits.
Ding ding ding!! We have a winner.
Actually, we have a very mistaken loser. I love how racial/ethnic/gender discrimination gets thrown around as if the sole purpose of the terms is to gain advantage, and of course it usually gets thrown around by those who are not discriminated against.
But, more to the point: what you both forget is that a case for racial/ethnic/gender discrimination will not fly if the lenders can show EQUALITY in their loan practices- that is, that they offer/deny loans to people solely based on their economic / loan risk status. For example, a white person and a black person of the same non-qualifying status are denied the loan an equal percentage of time.
Originally Posted By: oilyriser
Mortgage officers who deny loans to low income people get threatened with racial discrimination, ethnic discrimination or gender discrimination lawsuits.
Ding ding ding!! We have a winner.
Actually, we have a very mistaken loser. I love how racial/ethnic/gender discrimination gets thrown around as if the sole purpose of the terms is to gain advantage, and of course it usually gets thrown around by those who are not discriminated against.
But, more to the point: what you both forget is that a case for racial/ethnic/gender discrimination will not fly if the lenders can show EQUALITY in their loan practices- that is, that they offer/deny loans to people solely based on their economic / loan risk status. For example, a white person and a black person of the same non-qualifying status are denied the loan an equal percentage of time.
Even if a bank is totally objective, they will discriminate against minorities, since the minorities have a lower average income, which correlates with higher risk.
Another problem with minorities is that being a minority is non-objective. You choose your racial status, in a check off box, to some extent. Nobody goes around measuring your skin colour.
Another problem with minorities is that being a minority is non-objective. You choose your racial status, in a check off box, to some extent. Nobody goes around measuring your skin colour.
Originally Posted By: moving2
Actually, we have a very mistaken loser. I love how racial/ethnic/gender discrimination gets thrown around as if the sole purpose of the terms is to gain advantage, and of course it usually gets thrown around by those who are not discriminated against.
But, more to the point: what you both forget is that a case for racial/ethnic/gender discrimination will not fly if the lenders can show EQUALITY in their loan practices- that is, that they offer/deny loans to people solely based on their economic / loan risk status. For example, a white person and a black person of the same non-qualifying status are denied the loan an equal percentage of time.
I guess anything goes to protect the poor and downtrodden? First of all no one, not one person is saying this is the ONLY (sole) reason for the mess we are in.
I forget nothing. It seems like you put the straw man up with not much backbone. Lenders can show complete equality and still be strong armed. Especially when the data is fudged. And please, before you go shields up to protect the poor, I will acknowledge discrimination happens in all forms and manners.
I suggest you read this:
http://www.ibdeditorials.com/IBDArticles.aspx?id=310173877357981
Actually, we have a very mistaken loser. I love how racial/ethnic/gender discrimination gets thrown around as if the sole purpose of the terms is to gain advantage, and of course it usually gets thrown around by those who are not discriminated against.
But, more to the point: what you both forget is that a case for racial/ethnic/gender discrimination will not fly if the lenders can show EQUALITY in their loan practices- that is, that they offer/deny loans to people solely based on their economic / loan risk status. For example, a white person and a black person of the same non-qualifying status are denied the loan an equal percentage of time.
I guess anything goes to protect the poor and downtrodden? First of all no one, not one person is saying this is the ONLY (sole) reason for the mess we are in.
I forget nothing. It seems like you put the straw man up with not much backbone. Lenders can show complete equality and still be strong armed. Especially when the data is fudged. And please, before you go shields up to protect the poor, I will acknowledge discrimination happens in all forms and manners.
I suggest you read this:
http://www.ibdeditorials.com/IBDArticles.aspx?id=310173877357981
Originally Posted By: PandaBear
If it is not because of the interest rate being so low, the banks and investors wouldn't buy these risky loans.
It wasn't the low rates that enticed investors to buy the MBS's, it was the ludicrous ratings from Moody's, S&P and Fitch on them. Investors believed they were investing in high quality debt that had little chance of default when in fact they were investing in total junk.
If it is not because of the interest rate being so low, the banks and investors wouldn't buy these risky loans.
It wasn't the low rates that enticed investors to buy the MBS's, it was the ludicrous ratings from Moody's, S&P and Fitch on them. Investors believed they were investing in high quality debt that had little chance of default when in fact they were investing in total junk.
"Is deregulation is the culprit? It can't be. There was no relevant deregulation in the last 25 years."
View from a pretty small pond don't you think ? See below for what the all knowing Wizard himself had to say;
http://www.nytimes.com/2008/10/24/business/economy/24panel.html?hp
Greenspan Concedes Error on Regulation
WASHINGTON — For years, a Congressional hearing with Alan Greenspan was a marquee event. Lawmakers doted on him as an economic sage. Markets jumped up or down depending on what he said. Politicians in both parties wanted the maestro on their side.
Greenspan Prepared RemarksBut on Thursday, almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.
“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.
..............“You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Representative Henry A. Waxman of California, chairman of the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”
Mr. Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”
On a day that brought more bad news about rising home foreclosures and slumping employment, Mr. Greenspan refused to accept blame for the crisis but acknowledged that his belief in deregulation had been shaken.
He noted that the immense and largely unregulated business of spreading financial risk widely, through the use of exotic financial instruments called derivatives, had gotten out of control and had added to the havoc of today’s crisis. As far back as 1994, Mr. Greenspan staunchly and successfully opposed tougher regulation on derivatives.
................Many Republican lawmakers on the oversight committee tried to blame the mortgage meltdown on the unchecked growth of Fannie Mae and Freddie Mac, the giant government-sponsored mortgage-finance companies that were placed in a government conservatorship last month. Republicans have argued that Democratic lawmakers blocked measures to reform the companies.
But Mr. Greenspan, who was first appointed by President Ronald Reagan, placed far more blame on the Wall Street companies that bundled subprime mortgages into pools and sold them as mortgage-backed securities. Global demand for the securities was so high, he said, that Wall Street companies pressured lenders to lower their standards and produce more “paper.”
View from a pretty small pond don't you think ? See below for what the all knowing Wizard himself had to say;
http://www.nytimes.com/2008/10/24/business/economy/24panel.html?hp
Greenspan Concedes Error on Regulation
WASHINGTON — For years, a Congressional hearing with Alan Greenspan was a marquee event. Lawmakers doted on him as an economic sage. Markets jumped up or down depending on what he said. Politicians in both parties wanted the maestro on their side.
Greenspan Prepared RemarksBut on Thursday, almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.
“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.
..............“You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Representative Henry A. Waxman of California, chairman of the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”
Mr. Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”
On a day that brought more bad news about rising home foreclosures and slumping employment, Mr. Greenspan refused to accept blame for the crisis but acknowledged that his belief in deregulation had been shaken.
He noted that the immense and largely unregulated business of spreading financial risk widely, through the use of exotic financial instruments called derivatives, had gotten out of control and had added to the havoc of today’s crisis. As far back as 1994, Mr. Greenspan staunchly and successfully opposed tougher regulation on derivatives.
................Many Republican lawmakers on the oversight committee tried to blame the mortgage meltdown on the unchecked growth of Fannie Mae and Freddie Mac, the giant government-sponsored mortgage-finance companies that were placed in a government conservatorship last month. Republicans have argued that Democratic lawmakers blocked measures to reform the companies.
But Mr. Greenspan, who was first appointed by President Ronald Reagan, placed far more blame on the Wall Street companies that bundled subprime mortgages into pools and sold them as mortgage-backed securities. Global demand for the securities was so high, he said, that Wall Street companies pressured lenders to lower their standards and produce more “paper.”
Slightly OT. It's official - Art Laffer is the most clueless "expert" on the planet. He has no peers.
http://www.youtube.com/watch?v=IU6PamCQ6zw&eurl=http:/
http://www.youtube.com/watch?v=IU6PamCQ6zw&eurl=http:/
- Status
