"Profit is private and individual. Loss is public and social"

[FaninAma]

That is the result of current government policies with big banks and other corporations. Where have we heard that philosophy expressed before?

http://en.wikipedia.org/wiki/Economics_of_fascism


Fascism operated from a Social Darwinist view of human relations. Their aim was to promote superior individuals and weed out the weak.[6] In terms of economic practice, this meant promoting the interests of successful businessmen while destroying trade unions and other organizations of the working class.[7] Historian Gaetano Salvemini argued in 1936 that fascism makes taxpayers responsible to private enterprise, because "the State pays for the blunders of private enterprise... Profit is private and individual. Loss is public and social."[8] Fascist governments encouraged the pursuit of private profit and offered many benefits to large businesses, but they demanded in return that all economic activity should serve the national interest.[9]

[RUSH LIMBAUGH is my clone!]

The big danger to any economy/society is government control of the economy, whether it be by direct ownership of the resources(socialism/communism), or by authoritarian control of people's economic activities(fascism). Some on this board have pointed out that fascism is more nationalistic, while socialism/marxism/communism is more world oriented. Well, socialist control comes from the head of a specific government, and is in effect the same blunder as fascism. The long range goal for socialism may be for some sort of world government or world authority, but it always starts as authoritarianism by a specific country's leader or group of leaders. So far the world hasn't yet(thankfully) had to bow to any world control of the whole planet. I for one do not wish that on anyone, let alone myself.

[jkjsooner]

Let's be a little careful. I believe in the case of Wall Street bailouts, stock holders lost their shirts. That means the owners were punished.

However stock holders don't have the power they should. Decisions were made by the boards and executives and in way too many cases they profited handsomely by the bailouts. It didn't help that conservatives fought for the CEO bonuses. Our failures were a culmination of failed policies on the left and right.

Say what you want about whether the bailouts were necessary or proper but it's hard to argue that those who caused the mess deserved to profit from it.

[Sooner Eclipse]

Let's be a little careful. I believe in the case of Wall Street bailouts, stock holders lost their shirts. That means the owners were punished.

However stock holders don't have the power they should. Decisions were made by the boards and executives and in way too many cases they profited handsomely by the bailouts. It didn't help that conservatives fought for the CEO bonuses. Our failures were a culmination of failed policies on the left and right.

Say what you want about whether the bailouts were necessary or proper but it's hard to argue that those who caused the mess deserved to profit from it.

Conservatives did not want the bail outs to occur. However, once done, illegally voiding or ignoring contracts is even more angering. The better solution would have been to allow those businesses and banks who are failing to fail. But that would be too American for the statists in power. BTW the government was far more the cause of all of this than any bank or CEO.

[FaninAma]

Keyensian deficit spending to stimulate the economy which simultaneously leads to bigger corporate profits may seem like a recent development. This economic policy isn't a post WW2 phenomenon. Germany was using the same gameplan before WW2 under the Nazis. The policy failed and to keep the economy from collapsing the Nazis unveiled the military option to stimulate the economy.


It seems the players on the world stage may change but the actions they take in response to crisises resulting from normal economic cycles remains the same. Keyenes wasn't an innovator, he was a recycler of an old, failed economic theory that has been around sine the dawn of organized governments and organized societies.

[jkjsooner]

Conservatives did not want the bail outs to occur. However, once done, illegally voiding or ignoring contracts is even more angering. The better solution would have been to allow those businesses and banks who are failing to fail.

Apparently Bush did. So did Paulson. Ninety one (slightly under half) of Republicans in the house voted for TARP.

The ones who did vote against TARP were fortunate because they wouldn't have been blamed for the cascading bank failures. That would have fallen on Bush and Pauson.

It's easy to place blame on those who actually had to make the decisions. If you're sitting in a meeting with people telling you, "Lehman failed. Bear Sterns failed. They're all tied together. The dominoes are set up for a cascading failure. If all of our major banks and investment houses fail we're going into a depression. Mom and pop shops and large corporations will lose funding overnight."

Ever wonder why so many conservatives pushed for TARP? The situation scared the bejeezus out of everyone.


BTW the government was far more the cause of all of this than any bank or CEO.

I think we're just going to have to agree to disagree on that. I think the actual facts do not support your assertion. Governments didn't force the creation of mortgage backed securities and CDOs and didn't force the buyers from buying them.

There was a pool of money that had nowhere to go and it found its way into the housing market via these instruments. CEO's were negligent in actually evaluating the risk.

And remember the whole subprime thing? Thing is the GSE's didn't own nearly as much of them as private banks. Also the GSE's couldn't buy jumbo loans which were almost required in very bubbly areas during the boom.

[jkjsooner]

I'll say this. I didn't own a house right before the economic crisis. I wanted to own a home sometime but I knew that houses were grossly overpriced as compared to historical norms. I was completely against propping up the housing bubble and any sort of bailout.

Then I started reading housing bubble blogs not to mention listening to Bloomberg, NPR, and other sources that had indepth discussions on the economy. There were people in those blogs who worked for investment houses. They started telling stories about the excessive risk, the CDO's, etc. (These were people who predicted the crash long before it happened.) They explained how all of these banks were tied together and how it was going to be a cascade of failures.

I went from being a person who was completely against any government intervention to understanding that we were on the edge of a cliff. Once the chain of events started I realized that everything that they were predicting was coming true. Then the more mainstream media started confirming this.

I also understood that Wall Street wasn't just some people sitting in their ivory tower. Whether we like it or not, what happens there affects main street. If they can't provide funding my Fortune 500 employer won't stay in business. The mom and pop store will also go out of business. Those who don't rely on funding will lose their customers as they lose their jobs.

I think we avoided a depression. I really do. The only thing is that you can never prove you avoided a catastrophe.

[FaninAma]

JK, the only way we avoid a depresssion is the same way we got out of the last depression. Apparently those in charge feel that war is the preferrable alternative to allowing a depression to run its course naturally.

I think they feel this way because creating a military crisis to handle the economic crisis prevents the liklihood of the current political class/structure from being fundamentally altered with true safegards being put into place to reign in the politicians and corporate gangsters who led the country into crisis in the first place.

[Sooner Eclipse]

Apparently Bush did. So did Paulson. Ninety one (slightly under half) of Republicans in the house voted for TARP.

You are conflating republican with conservative. Not the same thing. Bush was a lot of things, but the best thing Bush did was teach a lot of people the difference between the two.

[Sooner Eclipse]

I think we're just going to have to agree to disagree on that. I think the actual facts do not support your assertion. Governments didn't force the creation of mortgage backed securities and CDOs and didn't force the buyers from buying them.

There was a pool of money that had nowhere to go and it found its way into the housing market via these instruments. CEO's were negligent in actually evaluating the risk.

And remember the whole subprime thing? Thing is the GSE's didn't own nearly as much of them as private banks. Also the GSE's couldn't buy jumbo loans which were almost required in very bubbly areas during the boom. I disagree, the gov't encouraged the practice by allowing (no encouraging and forcing) unsafe lending practices. The only reason these private banks had loans they had to get rid of was because of the rules and regulations that the gov't set up that forced them to buy high risk loans. These unsafe practices are all based on ideas surrounding social engineering and social justice rather than sound economic principles. The only one ultimately responsible is the one that makes the rules. And that IS THE GOV'T.

The CEOs knew the risk. Thats why these products were created. To try to hide and bundle the riskier loans in with the more stable ones. The tactic worked until the GOV'T continued to change the rules to allow more and more risk. Eventually the risky portion of the product outweighed the sound portion. At this point the CEOs had no where else to hide the risk and the bubble burst, as it always will eventually.

Which leads us back to your approval of TARP. TARP again sealed the crack in the money bubble that was about to burst. This ensures that when it does burst, the pressure will be much higher and the damage more severe. Its always prudent to lance that boil sooner rather than later.

[Sooner Eclipse]

I think we avoided a depression. I really do. The only thing is that you can never prove you avoided a catastrophe.

We didn't avoid anything. We only delayed it and ensured it will be deeper, longer and more damaging than anything ever seen before.

[RUSH LIMBAUGH is my clone!]

I disagree, the gov't encouraged the practice by allowing (no encouraging and forcing) unsafe lending practices. The only reason these private banks had loans they had to get rid of was because of the rules and regulations that the gov't set up that forced them to buy high risk loans. These unsafe practices are all based on ideas surrounding social engineering and social justice rather than sound economic principles. The only one ultimately responsible is the one that makes the rules. And that IS THE GOV'T.

The CEOs knew the risk. Thats why these products were created. To try to hide and bundle the riskier loans in with the more stable ones. The tactic worked until the GOV'T continued to change the rules to allow more and more risk. Eventually the risky portion of the product outweighed the sound portion. At this point the CEOs had no where else to hide the risk and the bubble burst, as it always will eventually.

Which leads us back to your approval of TARP. TARP again sealed the crack in the money bubble that was about to burst. This ensures that when it does burst, the pressure will be much higher and the damage more severe. Its always prudent to lance that boil sooner rather than later.Not real complicated, is it?

[RUSH LIMBAUGH is my clone!]

We didn't avoid anything. We only delayed it and ensured it will be deeper, longer and more damaging than anything ever seen before.The big question. When?

[Sooner Eclipse]

The big question. When?

Hell IDK. If I knew I wouldn't be wasting time on this board. :)

[jkjsooner]

I disagree, the gov't encouraged the practice by allowing (no encouraging and forcing) unsafe lending practices. The only reason these private banks had loans they had to get rid of was because of the rules and regulations that the gov't set up that forced them to buy high risk loans.

That is just flat out untrue. You have been fed a lie. The private market was happy to buy up subprime loans. Nobody forced wall street into packaging these and selling them to investors.

I can't say how wrong you are on this. Read any objective analysis of the crisis.


The CEOs knew the risk. Thats why these products were created. To try to hide and bundle the riskier loans in with the more stable ones. The tactic worked until the GOV'T continued to change the rules to allow more and more risk.

Allow more and more risk? Are you a liberal? I thought the government was supposed to allow as much risk as the private sector wants?

As for the CEO's, I think some probably knew there were risks but their compensation structure encourages excessive risk. If I'm a CEO and maximizing my bonuses is the only thing that matters, I'd rather have 5 or 6 years of explosive growth followed by a devastating crash. Slow growth isn't going to make me rich with stock options.

That being said, the CEO's were relying on flawed assumptions. Their computer models assumed that national housing prices would never fall. They assumed that since it hadn't happened in recent history that it couldn't possibly happen this time. However, they failed to realize that the situation that they created made that assumption wrong.

There were conservative banks. They were the ones who grew steadily, acted responsibly, and didn't buy risky loans. These should be the ones that rule our world. In that respect I agree with you. The bailouts created winners out of those who should have been losers. That's why we needed a way to shore up the system without inadvertantly rewarded those who failed.

For example, we could have made good on AIG's obligations (or a percentage of them) without actually making AIG whole.

[jkjsooner]

Not real complicated, is it?

Why don't you leave this discussoin to the adults who actually have something to say?

[RUSH LIMBAUGH is my clone!]

Why don't you leave this discussoin to the adults who actually have something to say?how long have you held in this latest personal insult, Sherlock? BTW, you're wrong about the subprime mortgages and the state of the economy. Don't you worry your pretty little head.

[jkjsooner]

We didn't avoid anything. We only delayed it and ensured it will be deeper, longer and more damaging than anything ever seen before.

I'll never be able to prove that we did avoid a catasrophe as that is an impossible task without a time machine. If we could go back in time I'd love to replay the last few years without TARP - so long as I'm not stuck in that alternate reality.

Some things are pretty clear. We were close to a cascade failure of the banks. In economic terms that would have been disastrous.

Bush opposed government intervention. It was said he did so even as Lehman Bros. was failing. Once they saw Lehman fail and they analyzed the consequences of its failure and how the collateral damage was not being contained, they were forced to change their stance.

Bush can be criticized for many things. However, prior to the TARP, he was known as being a champion of deregulation and for the government taking a hands off approach. The events of 2007 and 2008 made him go against everything he believed in and push for TARP. Think about that for a moment...

[sappstuf]

That is just flat out untrue. You have been fed a lie. The private market was happy to buy up risky subprime loans that had the full backing of the United States government. Nobody forced wall street into packaging these and selling them to investors.

That is true..

[Midtowner]

Maybe we would have been better off (long term) not doing the TARP, but it's done. I had a friend at that time who was a corporate board jet setting type who was attending law school and was in my class. He explained in no uncertain terms that the collapse would be pretty disastrous. Here we are, 2013, Glass Steagall still repealed, the markets actually LESS regulated than they were before TARP and I'm wondering if it's still going to be a good idea to bail the banks out the next time they eff up on such a massive scale.

There's something to be said for huge calamity--from the ashes, good things can happen. My greatest concern would be that if we truly had big time economic collapse, we could be looking at public unrest, maybe even revolution if the parasite class isn't kept fat and happy.

Our government's biggest problem is that no one in it is ever able to focus on long-term issues--only what happens tomorrow. It's always in everyone's interest to kick the can down the road. We haven't seen what happens yet when we run out of road.

[RUSH LIMBAUGH is my clone!]

I am saying that it was the government that forced the subprime mortgage loans. The govt. is therefore responsible for starting the downward slide of the economy. Also, that the economy is not rebounding. It is making some minor moves that are necessary in the opinions of the private sector, but will not truly rebound into growth until the government behaves drastically differently than it presently does.

[Midtowner]

I am saying that it was the government that forced the subprime mortgage loans. The govt. is therefore responsible for starting the downward slide of the economy. Also, that the economy is not rebounding. It is making some minor moves that are necessary in the opinions of the private sector, but will not truly rebound into growth until the government behaves drastically differently than it presently does.

Okay, please explain to us how the CRA caused the economic collapse all by itself and be prepared for Kanto or diver to school you (again) on the basics.

[jkjsooner]

That is true..

The derivatives and CDO's that fueled the housing bubble were not backed by the US government - either explicitly or implicitly.

The percentage of loans held by the GSE's declined sharply leading up to the crisis. The private sector held a lot higher percentage of subprime loans than did the GSE's. The GSE's could not even buy the jumbo loans that were so prevalent and troublesome.

The facts simply don't back up anything you're saying.

[Sooner Eclipse]

That is just flat out untrue. You have been fed a lie. The private market was happy to buy up subprime loans. Nobody forced wall street into packaging these and selling them to investors.

I can't say how wrong you are on this. Read any objective analysis of the crisis.



Allow more and more risk? Are you a liberal? I thought the government was supposed to allow as much risk as the private sector wants?

As for the CEO's, I think some probably knew there were risks but their compensation structure encourages excessive risk. If I'm a CEO and maximizing my bonuses is the only thing that matters, I'd rather have 5 or 6 years of explosive growth followed by a devastating crash. Slow growth isn't going to make me rich with stock options.

That being said, the CEO's were relying on flawed assumptions. Their computer models assumed that national housing prices would never fall. They assumed that since it hadn't happened in recent history that it couldn't possibly happen this time. However, they failed to realize that the situation that they created made that assumption wrong.

There were conservative banks. They were the ones who grew steadily, acted responsibly, and didn't buy risky loans. These should be the ones that rule our world. In that respect I agree with you. The bailouts created winners out of those who should have been losers. That's why we needed a way to shore up the system without inadvertantly rewarded those who failed.

For example, we could have made good on AIG's obligations (or a percentage of them) without actually making AIG whole.


"Allow" was a poor choice of wording. Should have read "Forced". Read the "Community Reinvestment Act" and subsequent expansions. What about "who wrote the rules" do you not understand. The economic laws of risk no longer applied because of the government intervention in sound loan principles. Participants were insulated against the risk and those that refused to go along with the fleecing were penalized by rule of law.

[Sooner Eclipse]

The derivatives and CDO's that fueled the housing bubble were not backed by the US government - either explicitly or implicitly. No, but the Gov't created the regulations that caused them to become necessary.

[RUSH LIMBAUGH is my clone!]

Okay, please explain to us how the CRA caused the economic collapse all by itself and be prepared for Kanto or diver to school you (again) on the basics.Massive numbers of unsound, doomed to fail mortgage loans entered the financial market, required by the social justice seekers in congress. If you don't remember that or acknowledge that, I understand.

[sappstuf]

The derivatives and CDO's that fueled the housing bubble were not backed by the US government - either explicitly or implicitly.

The percentage of loans held by the GSE's declined sharply leading up to the crisis. The private sector held a lot higher percentage of subprime loans than did the GSE's. The GSE's could not even buy the jumbo loans that were so prevalent and troublesome.

The facts simply don't back up anything you're saying.


The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) are government-sponsored enterprises (GSEs) that were chartered by the Congress to provide a stable source of funding for
residential mortgages across the country. They carry out that mission in the secondary, or resale, mortgage market. They purchase home loans from originators and package those loans into mortgage-backed securities (MBSs); those securities then can be sold to investors, along with a guarantee against losses from defaults on the underlying mortgages, or held as portfolio investments financed by issuing debt of the GSEs themselves, so-called “agency debt.”

Until recently, the obligations of Fannie Mae and Freddie Mac had no official backing from the federal government, nor were any costs associated with them reflected in the federal budget. However, because of the GSEs’ size, federal charter, and major role in the mortgage market, most observers believed that the government would not allow Fannie Mae and Freddie Mac to default on their obligations. That implicit federal guarantee, which lowered their borrowing costs and increased the price that investors
paid for their guarantees, represented a federal subsidy to the GSEs.

http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/122xx/doc12213/06-02-gses_testimony.pdf

I'll take the CBO's facts over your "facts".

It is very clear that banks thought they had a guarantee from feds. Look at what happened... They were right.

[sappstuf]

The derivatives and CDO's that fueled the housing bubble were not backed by the US government - either explicitly or implicitly.

The percentage of loans held by the GSE's declined sharply leading up to the crisis. The private sector held a lot higher percentage of subprime loans than did the GSE's. The GSE's could not even buy the jumbo loans that were so prevalent and troublesome.

The facts simply don't back up anything you're saying.

What was the cost of TARP? About $700 billion total, I think. CBO estimates the true cost of the Fannie and Freddie bailouts to be about $300 billion...

Sounds like they were pretty big players to me.

[Midtowner]

Massive numbers of unsound, doomed to fail mortgage loans entered the financial market, required by the social justice seekers in congress. If you don't remember that or acknowledge that, I understand.

Compared to the non-CRA loans which failed, how massive were those CRA numbers?

Compared with the CRA loans which are doing fine, how are those numbers?

[Sooner Eclipse]

Compared to the non-CRA loans which failed, how massive were those CRA numbers?

Compared with the CRA loans which are doing fine, how are those numbers? Regardless of the origination of the loan, the rules were changed to promote social engineering over economic principles. The loan rules did not just apply to GSEs.

[RUSH LIMBAUGH is my clone!]

someday, you'll figure it out. if not, I understand.

[diverdog]

That is the result of current government policies with big banks and other corporations. Where have we heard that philosophy expressed before?

http://en.wikipedia.org/wiki/Economics_of_fascism


Bet I can make your head explode.

Read this:

http://m.rollingstone.com/?redirurl=/politics/news/everything-is-rigged-the-biggest-financial-scandal-yet-20130425

[Midtowner]

Regardless of the origination of the loan, the rules were changed to promote social engineering over economic principles. The loan rules did not just apply to GSEs.

I asked pretty simple questions.

Why not answer 'em? 'cuz you don't like the answers?

[jkjsooner]

http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/122xx/doc12213/06-02-gses_testimony.pdf

I'll take the CBO's facts over your "facts".

It is very clear that banks thought they had a guarantee from feds. Look at what happened... They were right.

You just went out in left field. I've already discussed that most of the mortgage debt was not through the GSE's and the percentage of GSE loans was in decline leading up to the financial crisis.

I pointed this out because everyone knows there is a implicit backing of the GSE loans.

Everything you addressed was already discussed or understood to be true. Pointing this out added nothing to the conversation.


As for the non-GSE debt, people who owned that stuff lost their shirts. Ask them if they had government backing. Any backing they had was very indirect. Bailing out AIG might have reduced some of their losses but they were not made whole by any stretch.

[jkjsooner]

someday, you'll figure it out. if not, I understand.

Again, you add nothing to the discussion. Everyone else here is adding in their opinions and trying to back them up. As usual you are incapable of adding anything but snide remarks.

[jkjsooner]

What was the cost of TARP? About $700 billion total, I think. CBO estimates the true cost of the Fannie and Freddie bailouts to be about $300 billion...

Sounds like they were pretty big players to me.

No doubt. The GSE's were a big player but they didn't cause the problem. They held fewer subprime loans as a percentage than did the purely private sector. They held no jumbo loans (by definition of the term).


As for the CRA, I'm not a fan in that type of social engineering. I won't deny that it might have nudged us slightly closer to the edge but its impact was marginal at best. Trillions of dollars of risky loans were made by entities that were not even subject to the CRA rules.

There were trillions of dollars looking for a place to stay. Wall Street created all sorts of mortgage based securities that were promised to be safe. These were rated AAA. Even the people who did the mathematical analysis of these securities failed to realize how dangerous they were. In the 2000's these investors were looking for more and more places to go. They pushed the limit on who was credit worthy to bring more any more people into the market so they could sell more and more securities. The assumption was that housing prices would keep rising and therefore the credit worthiness of the borrower didn't matter. It was assumed that the way these were sliced and diced that that spread the risk out enough that the risk essentially evaporated.

This was all done in the private sector!

To say that the private sector would have never done this without the little nudge from government programs is naive.


If you think the government did this, then why were trillions of dollars lost in mortgage backed securities? Why did investment companies double down on their bets? Why did so many people make such poor decisions when they weren't forced to do so? Because they didn't know they were poor decisions. The participants in the private market (as well as most economists and politicians) were clueless.


All of this said, my personal opinion was that the financial crisis was caused by a toxic mix of liberal and conservative policies. But to blame everythign on the CRA and the GSE's is simply ignoring reality.

[RUSH LIMBAUGH is my clone!]

Again, you add nothing to the discussion. Everyone else here is adding in their opinions and trying to back them up. As usual you are incapable of adding anything but snide remarks.I and others have state that the government, through social engineering, required that bad mortgage loans be made. That started the economic collapse. If you call that a snide remark, I'll understand. This is not complicated, and argue it if you like.

[Midtowner]

I and others have state that the government, through social engineering, required that bad mortgage loans be made. That started the economic collapse. If you call that a snide remark, I'll understand. This is not complicated, and argue it if you like.

Again,

Compared to the non-CRA loans which failed, how massive were those CRA numbers?

Compared with the CRA loans which are doing fine, how are those numbers?

[RUSH LIMBAUGH is my clone!]

Again,

Compared to the non-CRA loans which failed, how massive were those CRA numbers?

Compared with the CRA loans which are doing fine, how are those numbers?You can repeat questions, but I already addressed them above .

[jkjsooner]

I and others have state that the government, through social engineering, required that bad mortgage loans be made. That started the economic collapse. If you call that a snide remark, I'll understand. This is not complicated, and argue it if you like.

Yes, you did. My apologies. You had one post that actually added to the discussion.

[Midtowner]

No you didn't. You just repeated your incorrect dogmatic BS. If you won't answer the very simple questions, we can assume you are simply unwilling to answer because you googled it and couldn't find anything matching your dogma?

[RUSH LIMBAUGH is my clone!]

Yes, you did. My apologies. You had one post that actually added to the discussion.Thanks for the long overdue personal insult. That post you quoted above is really all that was needed in this thread to address the tragedy of subprime mortgages and the equally tragic current economic and political state of America.

[Sooner Eclipse]

I asked pretty simple questions.

Why not answer 'em? 'cuz you don't like the answers?

Because your question is irrelevent and intended to sidetrack the conversation.

Stick your 1st year law school subterfuge up your ***. You still want to argue secondary results and refuse to acknowledge or discuss root cause.

[Midtowner]

Because your question is irrelevent and intended to sidetrack the conversation.

Irrelevant? RLIMC's statement was that the federal government forced these poor banks to give loans to the undeserving and that was the cause of the collapse.

I'm just wanting him to back that up with something.... it really shouldn't be that hard if it's true.

[Sooner Eclipse]

Irrelevant? RLIMC's statement was that the federal government forced these poor banks to give loans to the undeserving and that was the cause of the collapse.

I'm just wanting him to back that up with something.... it really shouldn't be that hard if it's true.

You want him to come back an re-argue the entire purpose of the community reinvestment act, despite the fact that the politicians that wrote it and those that expanded it freely admit it is social engineering. They just won't admit that the lending principles are unsound. We all know they are, you included if you'd quit lying to yourself.

[RUSH LIMBAUGH is my clone!]

Because your question is irrelevent and intended to sidetrack the conversation.

Stick your 1st year law school subterfuge up your ***. You still want to argue secondary results and refuse to acknowledge or discuss root cause.There are those here that maybe don't understand that is the fault with the nature of this thread?

[Midtowner]

You want him to come back an re-argue the entire purpose of the community reinvestment act, despite the fact that the politicians that wrote it and those that expanded it freely admit it is social engineering. They just won't admit that the lending principles are unsound. We all know they are, you included if you'd quit lying to yourself.

Reading comprehension fail.

I asked:

Compared to the non-CRA loans which failed, how massive were those CRA numbers?

Compared with the CRA loans which are doing fine, how are those numbers?

[jkjsooner]

Here you go. The data simply does not back up your claims.

http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4136

One additional point... The majority of the loans were packaged into securities and sold to investors. The CRA did not force these investors to buy these securities. They did so on their own.

[pphilfran]

I haven't done **** for research but that won't stop me from tossing out my two cents

CRA had a minimal impact...the meltdown would have happened without CRA...

The list of possible causes is endless

Little or nothing down loans

Low teaser rates

Those last two items allowed borrowers to buy more home and that in itself added to the problem...

Artificially low interest rates that caused housing prices to climb into the stratosphere...

Then, when the inevitable recession hits, not only do we lose the normal poor performing loans we also lose those that are underwater due to buying too much home and having no equity...

[sappstuf]

Here you go. The data simply does not back up your claims.

http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4136

One additional point... The majority of the loans were packaged into securities and sold to investors. The CRA did not force these investors to buy these securities. They did so on their own.

From your article:


The first point is a matter of timing. The current crisis is rooted in the poor performance of mortgage loans made between 2005 and 2007. If the CRA did indeed spur the recent expansion of the subprime mortgage market and subsequent turmoil, it would be reasonable to assume that some change in the enforcement regime in 2004 or 2005 triggered a relaxation of underwriting standards by CRA-covered lenders for loans originated in the past few years. However, the CRA rules and enforcement process have not changed substantively since 1995.2/ This fact weakens the potential link between the CRA and the current mortgage crisis.

This is absurb logic. The potential for explotation could have always existed, but not been found by those who would exploit it until 2005.

But I do like the phrase "reasonable to assume"..

wg4trPZFUwc

[pphilfran]

Glass–Steagall Act

[jkjsooner]

From your article:



This is absurb logic. The potential for explotation could have always existed, but not been found by those who would exploit it until 2005.

But I do like the phrase "reasonable to assume"..

wg4trPZFUwc

I'll go ahead and rely on the vast amounts of data pointing to the myriad of structural problems the caused the financial meltdown.

You can live in ignorance and insist that the CRA caused the meltdown. It's okay. You'll always be able to find a few political hacks that will reinforce your view.

[jkjsooner]

And, again, I'm no fan of social engineering. Just like you I find that these things always have unintended consequences.

But focusing a disproportional amount of attention on the CRA ignores the structural problems that helped create the financial crisis and that is dangerous.

How can you completely ignore the unregulated derivates market, the explosion of credit default swaps, the high leveraging of Wall Street firms, the failure of rating agencies to accurately rate mortgage back securities, the failure of Wall Street firms to assess their risk, the failure of Gramm-Leach-Bliley, ...? The list goes on and on.


Or let me put it a different way. Let's say the CRA was responsible for the default on many mortgages. Should that have caused our economic system to almost collapse?

[SanJoaquinSooner]

I haven't done **** for research but that won't stop me from tossing out my two cents

CRA had a minimal impact...the meltdown would have happened without CRA...

The list of possible causes is endless

Little or nothing down loans

Low teaser rates

Those last two items allowed borrowers to buy more home and that in itself added to the problem...

Artificially low interest rates that caused housing prices to climb into the stratosphere...

Then, when the inevitable recession hits, not only do we lose the normal poor performing loans we also lose those that are underwater due to buying too much home and having no equity...


One other cause which is inherent in most bubbles: The widespread euphoric belief that the value of the property will be greater tomorrow than it is today, regardless of fundamental valuations.

[SoonerAtKU]

From your article:



This is absurb logic. The potential for explotation could have always existed, but not been found by those who would exploit it until 2005.

But I do like the phrase "reasonable to assume"..



I think the part you bolded was supposed to be followed up by the sentence after. It starts with a "However" which indicates that it's going to contradict the logic or the veracity of the preceding statement. Example: I assume this discussion to be full of rational and reasonable debate among respectful peers. However, it ain't.

If you took the first part of that out of context, I'd seem pretty foolish for assuming something that clearly isn't true.

[jkjsooner]

One other cause which is inherent in most bubbles: The widespread euphoric belief that the value of the property will be greater tomorrow than it is today, regardless of fundamental valuations.

Absolutely. But you're missing the point. The CRA required investors to believe this - the forced expectation clause. ;-)

It's funny reading the anti-CRA articles. The honest ones know darn well that the numbers don't back them up so they fill their argument with chains of causation. Things like the following:


Most subprime loans had nothing to do with the CRA but the lending behavior caused by the CRA spread to non-CRA regulated entities.
The huge non GSE mortgage securitization industry had nothing to do with the CRA but the virus of the CRA spread to it.


Even if you took these types of arguments at face value (and that is a big stretch), the inescapable conclusion is that there were many structural problems in the market.

[Midtowner]

Because your question is irrelevent and intended to sidetrack the conversation.

Stick your 1st year law school subterfuge up your ***. You still want to argue secondary results and refuse to acknowledge or discuss root cause.

There's no subterfuge involved. RLIMC's premise is that government social engineering is what caused this. He doesn't get into specifics because the data doesn't back him up at all. He is, of course, referring to the CRA. So, if he can't answer:

Compared to the non-CRA loans which failed, how massive were those CRA numbers?

Compared with the CRA loans which are doing fine, how are those numbers?

Then he admits to a flawed premise. Ain't no subterfuge--it's a simple couple of questions, the answers for which are easily attainable.

[SoonerAtKU]

My google skills are way below my own previous estimation. I have no idea where I would find those numbers if asked.

Mid, if you have them, I'd honestly like to know.

[Midtowner]

http://www.ccc.unc.edu/images/defaultChart.jpg

http://www.ccc.unc.edu/images/debtShareChart.jpg

http://www.ccc.unc.edu/cra.php

[Bourbon St Sooner]

I don't think CRA can be considered a main driver of the sub-prime crisis. The bubble didn't occur in CRA neighborhoods. I don't recall hearing stories of $500,000 row houses in the ghetto. This was an event in mainstream middle class and upper class neighborhoods in several markets across the country.

That said, it would be a huge mistake to blame everything on Wall St and leave out the culpability of the gov't. The GSE's are the chief market-maker of mortgage backed securities. They certainly knew what was going on and the fact that they required bailouts shows that they actively participated. Bush was touting the "ownership society" and Barney Frank and Chris Dodd were imploring lenders to lend, all the while Dodd is taking a sweetheart mortgage from one of the chief perpetrators of poor lending practices, Countrywide Mortgage.

This is what happens when gov't regulates. It gets in bed with the regulatees and creates market distortions. Glass Steagall was a nice simple law. You're either in the business of deposits and lending or you are in the investment banking business. Banks shouldn't be pumping up their profits by taking on excessive risks, but bank executives were paid handsomely to do just that.

[jkjsooner]

This is what happens when gov't regulates. It gets in bed with the regulatees and creates market distortions. Glass Steagall was a nice simple law.

The first two sentences contradicts the third. Glass-Steagall is regulation.

I agree with a lot of what you said. What we had is a combination of the worst liberal policies (also championed by Bush) with the worst conservative policies (also championed by Clinton).

[SoonerAtKU]

That's the part that's confusing to me. Both sides can claim that "regulation" or "lack of oversight" was the problem, and they're both right. I don't think it's just spin, either. I think we've gotten far too good as a society at finding partial truths that support our position rather than a search for a best solution.

It's more profitable to be "right" than to solve the problem.

[RUSH LIMBAUGH is my clone!]

How can the government(democrats)be at fault for economic collapse? They are the defenders of the little guy, those who bring social justice. By definition, it is not their fault...and, don't even entertain that they don't have the answers for a better America.

Victims of their edicts are to be blamed instead, for trying to rid themselves of losses. Those people haven't the right to avoid loss. If unreasonable laws have victims, after all, the designated victims haven't the right to squirm and avoid the damage intended for them.

[jkjsooner]

How can the government(democrats)be at fault for economic collapse? They are the defenders of the little guy, those who bring social justice. By definition, it is not their fault...and, don't even entertain that they don't have the answers for a better America.

As far as this issue goes, they had the answers in the aftermath of the Great Depression. The regulations that were put into place did a great job in preventing many of the problems that we saw. Luckily some of those regulations (such as insider trading laws) are still in place. Unfortunately, we forgot some of the lessons we learned and had some disastrous deregulation of the financial system.


Victims of their edicts are to be blamed instead, for trying to rid themselves of losses. Those people haven't the right to avoid loss. If unreasonable laws have victims, after all, the designated victims haven't the right to squirm and avoid the damage intended for them.

I'm not sure where you're going so I'll take a guess. The push to get minorities in homes - especially when those homes were wildly overpriced and the mortgages were toxic - was a failure. But personal responsibility applies, and minorities (in higher percentages) failed themselves by making poor decisions.

The conservative side of me comes out when I hear people claim that the subprime crisis targeted minorities. No it didn't. Those brokers were making tons of money pushing subprime loans and Wall Street made tons of money packaging these up and selling the debt to unsuspecting investors. They'd sell that junk to anyone who happened to buy it.

[jkjsooner]

I think we've gotten far too good as a society at finding partial truths that support our position rather than a search for a best solution.

Absolutely.

[RUSH LIMBAUGH is my clone!]

The conservative side of me comes out when I hear people claim that the subprime crisis targeted minorities. Your conservative side SHOULD have told you the subprime loans were simply unsound, destined to mostly fail, and were another example of braindead government meddling in the economy, which as we know, happens far too often, and usually results in the kinds of problems the entire society faces today.

[Midtowner]

Or how 'bout the subprime laws were only possible because of lax regulation of the lending markets and a glut of cash to loan out due to the repeal of Glass Steagall?

In other words, not enough government meddling.

[REDREX]

Or how 'bout the subprime laws were only possible because of lax regulation of the lending markets and a glut of cash to loan out due to the repeal of Glass Steagall?

In other words, not enough government meddling.---- Freddie and Fannie were the main reasons for the subprime mess----Way Too much Gov't inviolvement

[Midtowner]

---- Freddie and Fannie were the main reasons for the subprime mess----Way Too much Gov't inviolvement

The Fed would disagree with you. It played a part, but was certainly not the "main reason."

http://research.stlouisfed.org/wp/2012/2012-005.pdf

That myth has been thoroughly debunked. Next.

[olevetonahill]

The Fed would disagree with you. It played a part, but was certainly not the "main reason."

http://research.stlouisfed.org/wp/2012/2012-005.pdf

That myth has been thoroughly debunked. Next.

You the smartest person on this board.

[REDREX]

The Fed would disagree with you. It played a part, but was certainly not the "main reason."

http://research.stlouisfed.org/wp/2012/2012-005.pdf

That myth has been thoroughly debunked. Next.----Freddie and Fannie were the enablers that allowed it to happen--- attempts have been made at a whitewash but it is far from debunked

[Midtowner]

Show your work then. Avoid sites like The Blaze.

[diverdog]

----Freddie and Fannie were the enablers that allowed it to happen--- attempts have been made at a whitewash but it is far from debunked

No Wall Street was the enablers. Freddie and Fannie just stupid enough to believe their snake oil promises.

[RUSH LIMBAUGH is my clone!]

----Freddie and Fannie were the enablers that allowed it to happen--- attempts have been made at a whitewash, including some in this thread, but it is far from debunkedFIFY

[jkjsooner]

----Freddie and Fannie were the enablers that allowed it to happen--- attempts have been made at a whitewash but it is far from debunked

The majority of toxic loans were handled by mortgage brokers, sold to wall street, diced and packaged into "AAA" securities, and sold to investors. The only way the GSE's can be blamed is if you argue that since they were doing it then others assumed it must be okay. That is very shaky logic.

Then you have the explosion of jumbo loans which fueled the bubble in places like California which by the very definition of jumbo loans couldn't be touched by the GSE's.

[jkjsooner]

Your conservative side SHOULD have told you the subprime loans were simply unsound, destined to mostly fail, and were another example of braindead government meddling in the economy, which as we know, happens far too often, and usually results in the kinds of problems the entire society faces today.

Should have? I was telling anyone who would listen in 2005 that the thing was going to blow up.

And by the fact that you only mention subprime tells me you don't understand the full problem. Many of people who had good credit bought way beyond what they could afford and others who could technically afford their mortgage still paid way too much for their house because they lost the historical perspective. In every case they were fooled by "experts" such as the NRA chief economists (who clearly has bias) into believing the most absurd and ridiculous justifications for the explosion in house prices.

Anyway, your "should have" comment was entirely wrong and the reason I saw it coming had nothing to do with conservative or liberal. It had to do with common sense - something most economists lost sight of probably because they had their head in too many spreadsheets and formulas.

[Sooner Eclipse]

I haven't done **** for research but that won't stop me from tossing out my two cents

CRA had a minimal impact...the meltdown would have happened without CRA...

The list of possible causes is endless

Little or nothing down loans

Low teaser rates

Those last two items allowed borrowers to buy more home and that in itself added to the problem...

Artificially low interest rates that caused housing prices to climb into the stratosphere...

Then, when the inevitable recession hits, not only do we lose the normal poor performing loans we also lose those that are underwater due to buying too much home and having no equity...

All of the lending practices mentioned above were not in sigificant use before the CRA and were products created to deal with the demand once CRA was put into place. Are all of those items expressly due to CRA, no. Do they trace back to the conditions put in place by CRA and other programs of gov't intrusion in the free market, yes.

[Sooner Eclipse]

Reading comprehension fail.

I asked:

Compared to the non-CRA loans which failed, how massive were those CRA numbers?

Compared with the CRA loans which are doing fine, how are those numbers?

You are so small minded. You can't see the loan forrest for the CRA tree. Quit trying to define the classification as CRA and non CRA loans. You don't seem to understand that the entire lending climate was undermined by CRA and similar programs. At that point, loans of all sort were competing with the lowest common denominator whether you define them as CRA or non-CRA.

[Sooner Eclipse]

Here you go. The data simply does not back up your claims.

http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4136

One additional point... The majority of the loans were packaged into securities and sold to investors. The CRA did not force these investors to buy these securities. They did so on their own.

Wow, proof from gov't statists that gov't wasn't the cause of massive damage done to an economic market being manipulated by gov't statists.

[Midtowner]

You are so small minded. You cant see the loan forrest for the CRA tree. Quit trying to define the classification as CRA and non CRA loans. You don't seem to understand that the entire lending climate was underminded by CRA and similar programs. At that point, loans of all sort were competing with the lowest common denomonator whether you define them as CRA or non-CRA.

Jesus... you're calling me small minded, but that has to be some of the poorest grammar I've seen here.

Can't, not cant.

Undermined, not underminded.

Denominator, not denomonator.

You drunk?

Are you suggesting that because there were a minority of loans which fell under the CRA, which has been in place since the 70s, that everyone went apescat and that deregulation was irrelevant?

Grasping...for...straws...

[Sooner Eclipse]

Jesus... you're calling me small minded, but that has to be some of the poorest grammar I've seen here.

Can't, not cant.

Undermined, not underminded.

Denominator, not denomonator.

You drunk?

Are you suggesting that because there were a minority of loans which fell under the CRA, which has been in place since the 70s, that everyone went apescat and that deregulation was irrelevant?

Grasping...for...straws...

I won't deny a drink or two. And the grammar smack usually indicates defeat. Thanks, I'll take it because you bore me. I'm not laying sole blame at the CRA's feet. I'm saying it was used as a format for lessening lending standards across the board. As lending standards were lowered demand skyrocketed and massively inflated prices followed shortly afterward. Yes, many of the strictly defined CRA loans were OK. They were also very small $ loans for the most part. The problem is those same guidelines were expanded to govern loans given to people who had no business buying homes valued at 10+ times their annual incomes. The 70s version of the CRA was largely irrelevent. Clintons 90s era vast expansion of its principles and further lowering of its standards created the bubble.

[olevetonahill]

Jesus... you're calling me small minded, but that has to be some of the poorest grammar I've seen here.

Can't, not cant.

Undermined, not underminded.

Denominator, not denomonator.

You drunk?

Are you suggesting that because there were a minority of loans which fell under the CRA, which has been in place since the 70s, that everyone went apescat and that deregulation was irrelevant?

Grasping...for...straws...


I won't deny a drink or two. And the grammar smack usually indicates defeat. Thanks, I'll take it because you bore me. I'm not laying sole blame at the CRA's feet. I'm saying it was used as a format for lessening lending standards across the board. As lending standards were lowered demand skyrocketed and massively inflated prices followed shortly afterward. Yes, many of the strictly defined CRA loans were OK. They were also very small $ loans for the most part. The problem is those same guidelines were expanded to govern loans given to people who had no business buying homes valued at 10+ times their annual incomes. The 70s version of the CRA was largely irrelevent. Clintons 90s era vast expansion of its principles and further lowering of its standards created the bubble.

Matlock You sorry POS leave MY Grammer alone She was a Nice lady that Cooked and canned fer us all:redface:

[jkjsooner]

Wow, proof from gov't statists that gov't wasn't the cause of massive damage done to an economic market being manipulated by gov't statists.

So basically you have your mind made up and will ignore the actual facts.

[Midtowner]

I won't deny a drink or two. And the grammar smack usually indicates defeat. Thanks, I'll take it because you bore me. I'm not laying sole blame at the CRA's feet. I'm saying it was used as a format for lessening lending standards across the board. As lending standards were lowered demand skyrocketed and massively inflated prices followed shortly afterward. Yes, many of the strictly defined CRA loans were OK. They were also very small $ loans for the most part. The problem is those same guidelines were expanded to govern loans given to people who had no business buying homes valued at 10+ times their annual incomes. The 70s version of the CRA was largely irrelevent. Clintons 90s era vast expansion of its principles and further lowering of its standards created the bubble.

CRA loans failed at a MUCH lower rate than ordinary subprime non-CRA loans. Any proof?

[Bourbon St Sooner]

The first two sentences contradicts the third. Glass-Steagall is regulation.

I agree with a lot of what you said. What we had is a combination of the worst liberal policies (also championed by Bush) with the worst conservative policies (also championed by Clinton).

Glass Steagall is regulation that doesn't need regulators. It's more like rule setting. To me that's the role of gov't. Set rules that hopefully sets a level playing field.

Now actually you can go to unfettered markets, but we've decided we don't like to live with the boom and bust cycles than can come of that. More to the point, we don't want to live with the busts. Without the busts you've taken away the "stick" from the marketplace. These bank executives have learned that they can fatten their wallets during the booms and the taxpayers take the hit in the busts.

[jkjsooner]

All of the lending practices mentioned above were not in sigificant use before the CRA and were products created to deal with the demand once CRA was put into place.

You are really reaching now. Are you saying that the explosion of collateralized debt obligation and credit default swaps (essentially insurance) was due to the CRA? These instruments which convinced everyone that all risk was removed from the system would not have existed without the CRA?

I'd suggest you go try to pass that off in an economics paper. Good luck with that.

I'm going to humor you for a minute and assume that these financial instruments would not have existed if it weren't for the CRA. Why did investors go crazy buying these mortgage backed securities? Because they assumed that these innovative structures removed all risk. By and large the industry thought they had outsmarted the basic economics. This goes from the individual investor to the guys evaluating risk up to the CEO's.

What this means is that the "invisible hand" championed by conservatives (and Clinton) and used to push for more deregulation was a failed concept. Clearly the summation of investors acted irrationally. Even if CRA played a role, according to the invisible hand theory investors as a group would have determined the risk and stayed away. They didn't because they began believing they were smarter than they were.



Clearly you bought the line from Rush or someone like him that CRA was to blame. Rather than look at the data objectively you've continued this desperate attempt to keep believing what it is you want to believe. To do so you've been forced to make these outlandish leaps that defy logic.

[jkjsooner]

I'll restate this. Did the CRA play a role? Yes, it very likely might have but any rational examination of the market would lead anyone to believe that you are overstating its role by many orders of magnitude.

The reason that this is important is because we have to learn the correct lessons from the financial crisis. If we accept the partisan idea that this financial crisis would not have happened without the CRA or GSE's then we have not learned our lesson.


I'll also point out that the real estate bubble was a global phenomenon. The reliance on complex financial instruments and too much trust in them was a global phenomenon.

[sappstuf]

I'll go ahead and rely on the vast amounts of data pointing to the myriad of structural problems the caused the financial meltdown.

You can live in ignorance and insist that the CRA caused the meltdown. It's okay. You'll always be able to find a few political hacks that will reinforce your view.

I'm sure you can find my exact post where I claimed that the CRA caused the meltdown thereby proving my ignorance.

Or don't look and continue to live in ignorance. It's okay. You'll always be able to find a few political hacks that will reinforce your view.

[TAFBSooner]

Victims of their edicts are to be blamed instead, for trying to rid themselves of losses. Those people haven't the right to avoid loss. If unreasonable laws have victims, after all, the designated victims haven't the right to squirm and avoid the damage intended for them.



I'm not sure where you're going so I'll take a guess.

I think he's saying that Wall Street was the victim of the subprime loan crisis. Hard to imagine anyone thinking that, but he can tell me if I'm reading him wrong.

[RUSH LIMBAUGH is my clone!]

I think he's saying that Wall Street was the victim of the subprime loan crisis. Hard to imagine anyone thinking that, but he can tell me if I'm reading him wrong.If one is prone to believing the government doesn't do braindead(at best), economically disastrous things, I suppose it is hard to imagine that Wall Street wasn't content to be holding the bag of bad loans that the govt. required lenders to make. That they would endeavor to pass them along.

The movie "Margin Call" is a very good one. It doesn't get at all preachy, but gives a picture of how things went down during the subprime crisis. Even a lib would enjoy it, I think. Jeremy Irons, Kevin Spacey, Demi moore, Simon Baker lead the cast.

[jkjsooner]

If one is prone to believing the government doesn't do braindead(at best), economically disastrous things, I suppose it is hard to imagine that Wall Street wasn't content to be holding the bag of bad loans that the govt. required lenders to make. That they would endeavor to pass them along.

Can someone translate this? I can't figure out what the heck RLIMC is trying to say.

"Hard to imagine that Wall Street was not content to be holding the bag..."

Why would it be hard to imagine that someone is not content to be holding the bag? It's easy for me to imagine someone would not be content to be holding the bag. It's hard to imagine someone would be content to be holding the bag.

[RUSH LIMBAUGH is my clone!]

Can someone translate this? I can't figure out what the heck RLIMC is trying to say.

"Hard to imagine that Wall Street was not content to be holding the bag..."

Why would it be hard to imagine that someone is not content to be holding the bag? It's easy for me to imagine someone would not be content to be holding the bag. It's hard to imagine someone would be content to be holding the bag.haha, then you shouldn't have wasted everyone's time pretending you didn't understand my original point

[pphilfran]

Can someone translate this? I can't figure out what the heck RLIMC is trying to say.

"Hard to imagine that Wall Street was not content to be holding the bag..."

Why would it be hard to imagine that someone is not content to be holding the bag? It's easy for me to imagine someone would not be content to be holding the bag. It's hard to imagine someone would be content to be holding the bag.

It is a confusion tactic...

[jkjsooner]

I'm sure you can find my exact post where I claimed that the CRA caused the meltdown thereby proving my ignorance.

Then please tell me all the things that did cause the meltdown. Maybe we'll find a lot of agreement.

Here are some from what I've read in no particular order. Some of these are liberal ideological failures, some conservative ideological failures, and some just plain stupidity.



Not enough perceived risk in GSE securities creating a moral hazard. While it's hard to imagine that this didn't play a role, the data shows that risky loans were held by GSE securities and non-GSE securities alike.

A public policy that put way too much emphasis on home ownership. This was favored by administrations on both sides. This includes but is definitely not limited to the CRA.

The repeal of Glass-Stegall. Starting with Clinton, this type of deregulation was favored by administrations on both sides.

A lack of regulation of the huge and complex derivatives market.

A general idea that markets (but not necessarily individual investors) act rationally. This was thoroughly disproven as even Greenspan had to admit.

The Fed (the guy that Reagan nominated and everyone loved) lowering interest rates too low and for too long.

Too much money looking for a place to park.

Too many people jumping into the market trying to make a quick buck. Way too many investors.

The terribly misguided idea that national housing prices could not decline. Maybe national declines aren't the norm but a huge national housing bubble isn't the norm either. (This is critical in the analytical failure that is described next.)

Too much reliance and faith in new innovative financial instruments. The thought that these innovative features somehow removed the risk. (You can dice up turds in 100 pieces, split the risk up, get insurance on it but it will still stink and when everyone's turd stinks the insurance will be worthless.)

A general failure of the economics profession. Too much reliance on economists who had reasons to be biased.

Too much complex interconnections between financial firms causing a domino effect.





As I said, it was a toxic mix of liberal and conservative policies that brought us to this mess.

[TAFBSooner]

If one is prone to believing the government doesn't do braindead(at best), economically disastrous things, I suppose it is hard to imagine that Wall Street wasn't content to be holding the bag of bad loans that the govt. required lenders to make. That they would endeavor to pass them along.

The movie "Margin Call" is a very good one. It doesn't get at all preachy, but gives a picture of how things went down during the subprime crisis. Even a lib would enjoy it, I think. Jeremy Irons, Kevin Spacey, Demi moore, Simon Baker lead the cast.

The government can do downright stupid things. The government can do downright evil things. It can also do smart things, and moral things. The same thing applies to private enterprise. It would be pretty tough to make the case that everything the government does is stupid and/or evil, but that seems to be the case that internet-forum conservatives have set themselves to make.

Counterfactually, suppose the CRA did require banks to make loans that violated color-blind credit-worthiness standards. Those CRA loans were a minority of the defaulted loans. The government didn't require anybody to make the rest (the majority) of those bad loans. The conservative posters, early in the thread, abandoned the claim that the government required all the liar's loans, jumbo loans, and other loans that were stupid to make*, by going to the squishy "CRA set the tone" argument. Now comes RLIMC circling back to saying the government required all the bad loans.


"The Giant Pool of Money" is a very good audio program that doesn't get preachy, but gives a good picture of the real root causes of the subprime crisis. I don't know if a conservative would enjoy it or not.
http://www.thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money



*These loans were stupid to make if you were on the hook for them. But the mortgage industry severed that by inventing collateralized debt obligations, mixing up all these loans, and selling them to investors. The broker makes a killing, and gets off the hook when the whole house of cards crashed (see thread title). These loans were intelligent (although evil) to make if you were early enough in the chain.

[RUSH LIMBAUGH is my clone!]

Response to post #94:

holy smokes dere! Looks like your take on things is a-callin' for more government oversight of those non-govt. folks!

[pphilfran]

Then please tell me all the things that did cause the meltdown. Maybe we'll find a lot of agreement.

Here are some from what I've read in no particular order. Some of these are liberal ideological failures, some conservative ideological failures, and some just plain stupidity.



Not enough perceived risk in GSE securities creating a moral hazard. While it's hard to imagine that this didn't play a role, the data shows that risky loans were held by GSE securities and non-GSE securities alike.

A public policy that put way too much emphasis on home ownership. This was favored by administrations on both sides. This includes but is definitely not limited to the CRA.

The repeal of Glass-Stegall. Starting with Clinton, this type of deregulation was favored by administrations on both sides.

A lack of regulation of the huge and complex derivatives market.

A general idea that markets (but not necessarily individual investors) act rationally. This was thoroughly disproven as even Greenspan had to admit.

The Fed (the guy that Reagan nominated and everyone loved) lowering interest rates too low and for too long.

Too much money looking for a place to park.

Too many people jumping into the market trying to make a quick buck. Way too many investors.

The terribly misguided idea that national housing prices could not decline. Maybe national declines aren't the norm but a huge national housing bubble isn't the norm either. (This is critical in the analytical failure that is described next.)

Too much reliance and faith in new innovative financial instruments. The thought that these innovative features somehow removed the risk. (You can dice up turds in 100 pieces, split the risk up, get insurance on it but it will still stink and when everyone's turd stinks the insurance will be worthless.)

A general failure of the economics profession. Too much reliance on economists who had reasons to be biased.

Too much complex interconnections between financial firms causing a domino effect.





As I said, it was a toxic mix of liberal and conservative policies that brought us to this mess.

Good stuff....

#4 - Lack of regs....far too complicated and no one really understood the things....and our auditing systems suck....

[RUSH LIMBAUGH is my clone!]

All of the lending practices mentioned above were not in sigificant use before the CRA and were products created to deal with the demand once CRA was put into place. Are all of those items expressly due to CRA, no. Do they trace back to the conditions put in place by CRA and other programs of gov't intrusion in the free market, yes.Hey there, subprime apologists, this deserves rereading.

[TAFBSooner]

Hey there, subprime apologists, this deserves rereading.

Ha! Nobody is writing apologia for subprime mortgages or the resulting meltdown. Oversimplified, we are either CRA-blamers or Wall Street-blamers.

[RUSH LIMBAUGH is my clone!]

Ha! Nobody is writing apologia for subprime mortgages or the resulting meltdown. Oversimplified, we are either CRA-blamers or Wall Street-blamers.the originator of the abandonment of standards. the one who has power of government

[jkjsooner]

the originator of the abandonment of standards. the one who has power of government

If the government forced your friend to jump off a bridge would you an three other friends willingly jump off as well? Of course not. Private parties (the ones who were actually on the hook) were convinced that they couldn't lose. If you think they needed the government to set the example then we'll just have to agree to disagree.

In either case they jumped off the bridge and contributed to the problem without being forced to do so. You simply can't deny that the private markets played a large role and claiming that the government gave them the idea (a stretch) doesn't alleviate their guilt.

[jkjsooner]

Counterfactually, suppose the CRA did require banks to make loans that violated color-blind credit-worthiness standards. Those CRA loans were a minority of the defaulted loans. The government didn't require anybody to make the rest (the majority) of those bad loans. The conservative posters, early in the thread, abandoned the claim that the government required all the liar's loans, jumbo loans, and other loans that were stupid to make*, by going to the squishy "CRA set the tone" argument. Now comes RLIMC circling back to saying the government required all the bad loans.

I've been trying to say this but you did it much more eloquently than I could.

I will add one thing. Conservatives want us to believe that investors in the aggregate always behave rationally yet the same investors only needed the government to set the tone before they went bat crazy buying up toxic mortgage backed securities. I guess that's what you call rationally irrational...

[sappstuf]

I've been trying to say this but you did it much more eloquently than I could.

I will add one thing. Conservatives want us to believe that investors in the aggregate always behave rationally yet the same investors only needed the government to set the tone before they went bat crazy buying up toxic mortgage backed securities. I guess that's what you call rationally irrational...

How did they know they were toxic at the time? Many subprime and high risk individual mortgages were bundled into MBS that the credit agencies rated as AAA. This increased the demand and people were buying them up.

I believe you are using the advantage of hindsight in calling them toxic.

[Midtowner]

Did the government rate those securities as AAA?

If the S&P has a "buy" opinion on a stock, is it always safe to buy the stock without further investigation?

[sappstuf]

Did the government rate those securities as AAA?

If the S&P has a "buy" opinion on a stock, is it always safe to buy the stock without further investigation?

What a silly question. The SEC investigated Bernie Madoff 3 seperate times and found no evidence of fraud. In 2005 a guy even wrote a 17-page memo to the SEC, entitled The World's Largest Hedge Fund is a Fraud... They still cleared him at the time.

Your question is meaningless.

[Midtowner]

The SEC is meaningful oversight? Do professional investors really think that?

[TAFBSooner]

If the government forced your friend to jump off a bridge would you an three other friends willingly jump off as well? Of course not. Private parties (the ones who were actually on the hook) were convinced that they couldn't lose. If you think they needed the government to set the example then we'll just have to agree to disagree.

In either case they jumped off the bridge and contributed to the problem without being forced to do so. You simply can't deny that the private markets played a large role and claiming that the government gave them the idea (a stretch) doesn't alleviate their guilt.

They certainly are in denial, because their world view depends on the goverment being the root of all* evil. Therefore they can't accept that poor widdle Goldman Sachs and J P Morgan might have contributed to the financial meltdown.

*(more or less)

[jkjsooner]

How did they know they were toxic at the time? Many subprime and high risk individual mortgages were bundled into MBS that the credit agencies rated as AAA. This increased the demand and people were buying them up.

I believe you are using the advantage of hindsight in calling them toxic.

Whether they should have known is a different issue. There were people who were expressing concerns and warning us about them long before the economic crisis.

The average non-institutional investor probably shouldn't have known because they're buying things that they couldn't possibly understand and probably saw these things as ultra safe investments - especially considering the AAA credit ratings.

But that is beside the point. Even if you argue that investors should not have known the danger, that further undermines "invisible hand" argument which assumes that the market always allocates resources efficiently and where needed. This has also been stated (or maybe misstated) that in the aggregate investors will behave rationally.

I suppose you could argue that in the long term (decades) the invisible hand concept is perfectly valid...