Bernanke saw ‘relatively soft landing’ in housing in 2006

Irresponsible loans and low interest rates are not mutually exclusive.

Both increase the number of people buying homes. Supply being fixed, demand being high, home prices increased.

Interest rates being low, combined with high demand, resulted in a flood of new building, which created high paying construction jobs.

High home prices and low interest rates increased the rate of cash-out refi's. That extra cash was spend, fueling the economy.

With home prices increasing, equity was generated very quickly, so low / no down payment loans appear less risky (irresponsible loans?).

The problem occured when supply met demand. Homes were being built, prices were reduced so they would sell. People couldn't pay when variable loans increased, and they couldn't refi. People with good paying construction jobs were out of work, and there was nothing that paid enough to keep them from defaulting on their homes. People with liar loans started to default.

Supply exceeded demand, and the already low interest rates couldn't be lowered enough to slow the fall.

Are you kidding? Who bought up all the liar loans? The banks didn't keep them, that would be irresponsible.

 

Really?

http://www.forbes.com/2009/02/13/ho...ibutors_0216_peter_wallison_edward_pinto.html

 

[ame="http://www.youtube.com/watch?v=vXwB7_dOtA4"]KNOWING plane crash - YouTube[/ame]

Hahah "relatively soft landing"...

 

Incorrect Irresponsible loans/low interest rates do not increase the number of people buying homes. Low rates only increase the number of loans. Irresponsible loans only increase the number of loans that will most likely never be paid back.

 

Yep it was a mistake that private banks made on their own by themselves.

This suggests that new regulations that started in 1992 caused banks to start making fraudulent and poor loans 10 years after the regulations started.
Do you not see how illogical that is?

That FICO score is way better than the ones that would have been granted to the loans that actually caused the crisis. The fraudulent and poor loans started around 2003, and during that time it was illegal for Mae and Mac to make those loans because those loans did not meet government set standards.

The actually data proves this whole paragraph as a lie. (Note I posted the data in a previous post)


One thing I do want to mention is that you were responding to a post of mine that was talking about the CRA. The CRA isn’t Fannie Mae and Mac. The CRA was laws that were enacted by Carter which barred banks from discriminating against people for being black and so forth.
The ironic thing is that banks subject to the CRA did not make fraudulent and poor loan, because of CRA regulations that limited those loans. This means that if the CRA had applied to all banks the crisis would of most likely never of occurred

 

fannie and freddie function as the secondary market.

 

You are telling me that a few bad banks and dialing back regulation by Bush is all it took to take down the US, and global, economy?

 

i think I remember Bush signing Gramm-Leach-Bliley

 

Almost



Legislative history

Introduced in the Senate as Financial Services Modernization Act of 1999 by Phil Gramm on Apr 28, 1999

Committee consideration by: Committee on Banking, Housing, and Urban Affairs

Passed the Senate on May 6, 1999 (54-44)

Passed the House as the Financial Services Act of 1999 on Jul 30, 1999 (241-132)

Reported by the joint conference committee on Nov 2, 1999; agreed to by the Senate on Nov 4, 1999 (90- and by the House on Nov 4, 1999 (362-57)

Signed into law by President Bill Clinton on Nov 12, 1999

 

No that is what history is telling you

 

My ex-post naritive is quite different.

 

That is because your ex-post narrative is created by partisan hacks who've had their heads in the sand for the past 100 years

 

A hundred years, where capitalism has increased the entire populations wealth until regulation, taxation, entitlements, and hatred for business, hit critical mass.

 

is that Bush smiling at the center of the Gramm Leach Bliley signing ceremony, with the pen in his hand ?

"Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century," Summers said.[19] "This historic legislation will better enable American companies to compete in the new economy." -Larry Sumners.

 

On July 30, 1998, then-Deputy Secretary of the Treasury Summers testified before the U.S. Congress that "the parties to these kinds of contract are largely sophisticated financial institutions that would appear to be eminently capable of protecting themselves from fraud and counterparty insolvencies."

"to date there has been no clear evidence of a need for additional regulation of the institutional OTC derivatives market, and we would submit that proponents of such regulation must bear the burden of demonstrating that need."