Corruption and Lies: Democrats built the Sub-Prime Bubble

Like a typical Republican you continue to propagate the Goebbels-esque lie that the loans to low-income borrowers are what caused the collapse. The first loans that imploded did not belong to poor minorities, they were exotic private-sector loans that middle class americans were using as tools to turn their increasing equity into income, with the false belief that they'd always be able to refinance before that bubble payment or rate adjustment came to pass.

 

Investment banks have always speculated. The repeal of Glass-Steagall led to a frenzy of mergers in which commercial banks became bloated speculative gambling houses indistiguishable from investment banks. They competed with with one another to profit from an explosion of mortgage-backed securities and related financial instruments instead of practicing the kind of sound banking they would have been required to practice under Glass-Steagall. Right? How can that have nothing to do with what followed?

 

It was a "subprime" mortgage crisis. Subprime loans are given to people with bad credit ratings ie usually poor people. If someone is taking out a second loan on a house they have to be current with their payments which means they would have good credit ratings. It was in fact in part the push to get poor undeserving people into homes alongside the other stuff I mentioned that led to this disaster. The banks buried the subprime loans deep inside convoluted securities exchanges in order to hide their high risk nature and then the ratings agencies played along.

The ARM loans were another stupid idea but I put all of that blame on the individual who signed up for them. How stupid do you have to be to get a loan where you don't know that the interest rate will be in 10 or 20 years but you will agree to pay it. I hope those morons never own a home again, they are more deserving people than idiots like that.

 

Great post. Very educational. No argument. I'll add this:

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

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

 

People were sold by our leaders that home ownership was the American Dream, that you'd made it. Unscrupulous brokers said all kinds of things to get people to sign up and fatten their fees. Folks were told real estate was a good investment, housing prices were going up and they figured their salaries would too.

In a deregulated marketplace, the hucksters thrive.

 

If you are referring to predatory loans that was another issue as laws pertaining to them were rolled back if I recall. However, that does not excuse someone taking an ARM loan out. You have to ride the short bus to school if you think that its a good idea to sign a loan that changes with the current rate for 15 or 30 years down the road. Who the hell thinks its a good idea to bet their main portion of their wealth (for most people) on something that they have no control over decades out. I don't care how good a sales job it is its just nuts.

 

I don't disagree, but in through there are lots of people who are not financially sophisticated and easily fall prey in an unregulated environment to the unscrupulous brokers eager to close the loan to make their fee. Banks shouldn't be making loans to people who aren't likely to have the ability to pay it back.

 

It's imperative you watch the Documentary " Park Avenue " on Netflix

 

Bear Stearns, Lehman Brothers, and Merrill Lynch were the 3 main institutions at the heart of the crisis and were pure investment banks that had never crossed over the line into commercial banking. You can throw Goldman Sachs in there as well. What about AIG? That is an insurance firm. No Glass Steagall there.

Lets look at the Banks. The biggest to actually go under were Washington Mutual and Wachovia. They got in trouble the traditional way, making bad loans to homeowners. How about BOA? Their troubles didn't come from "becoming a bloated speculative gambler," it came from buying Countrywide Financial, a plain old vanilla mortgage lender. The two biggest banks that actually do have investment arms, J.P Morgan and Wells Fargo, were the only ones at the table resisting Gov't capital injections. They would have weathered the storm without them

I am not a zero regulation guy, but Glass-Steagall would not have prevented the crisis.

 

Timeline

Feb 27, 2007: Freddie Mac announces it will no longer buy the most risky subprime loans.

April 2, 2007: Subprime mortgage lender New Century Fianancial filed for bankruptcy.

http://timeline.stlouisfed.org/index.cfm?p=timeline

So, it was a mortgage bank that went belly-up before any investment bank.


This article was posted earlier in this thread. Note the Timeline. Item 1:

"In 1998, banks got the green light to gamble: The Glass-Steagall legislation, which separated regular banks and investment banks was repealed in 1998. This allowed banks, whose deposits were guaranteed by the FDIC, i.e. the government, to engage in highly risky business."

http://www.forbes.com/sites/stevedenning/2011/11/22/5086/

 

The link provided is not working. Would you please provide the link?

 

I found the link that you posted on another forum. It is fraudulent. You are troll. http://www.redstate.com/moe_lane/fil...ic-reality.pdf

 

Ridiculous. That link takes you directly to the ACTUAL document signed by 72 Democrats sent to the President. So, no, I'm not a "Troll", now the next question is are you intelligent enough to tell the difference between legitimate resources and subjective opinions ?

 

In 1999, Andrew Cuomo, the then Secretary of HUD, issued new rules that allowed the GSE's to basically hide their massive levels of sub-prime debt. Cuomo increased the housing goals to 50% and also allowed Brokers to take advantage of YSP's, which are " Yield Spread Premiums"

Those rules allowed Fannie and Freddie to subjectively qualify their own debt and collateral internally and made it extremely difficult for their regulator to find out just how corrupted those two agencies had become. It removed the transparency needed to make sure Fannie and Freddie stayed within their charter, which according to a 2011 SEC investigation, they didn't.

Fannie and Freddie's inventory of Sub-Prime Debt exploded under Cuomo's HUD tenure, and his decision to allow the use of YSP's meant that Mortgage Brokers could charge higher rates to their customers, without having to divulge any information of this practice, and then receive kick backs depending on just how much higher the rate was away from the base rate at that time.

Fannie and Freddie, after Cuomo's statement on YSP's, used these to steer borrowers into specific tranches interest rates.

 

But it was deregulated by the Democrats.

Look up Andrew Cuomo's impact on Sub-Prime Lending, and how how his 1999 new rule for HUD, made Yield Spread Premiums Legal. Those rules also removed transparency from Fannie and Freddie, and they responded with buying up Trillions in Sub-Prime Loans, and then lying about their profits.

http://www.sec.gov/news/press/2011/2011-267.htm

 

That link takes you to some idiots blog where if you perform a search, the paper does not even exist. Try again. Please provide a link! Do you have another source.

 

LOL !! It exist alright. Here, I'll post it again and this one DOES work. http://www.redstate.com/moe_lane/files/2010/09/economic-reality.pdf

 

I got it, you are trying to spin/deflect people away from the actual criminals (banks/greed) for people making an honest attempt to provide affordable housing for folks. That is criminal in itself. Do you really think people are stupid?

 

Why do Freddie and Fannie have to be regulated? After all they only follow political marching orders found in the Affordable Housing Goals. They were, after all unconstitutionally created by Democrats to manipulate the housing mortgage markets and CREATE the secondary mortgage market, right?

Again, why the NEED to regulate Freddie and Fannie? Were they not following their poltical orders, or maybe they were!

 

I agree that "banks/greed" are the reason for the mess, but that doesn't excuse GSE corruption.

 

Again you post nothing but Democrat Propaganda! Yes, it is all the Democrats fault! Why do the unconstitutionally Democrat creations of Freddie and Fannie need to be regulated when they only fallow political orders usually given by Democrats, and CERTIANLLY by Democrats during the time in question?

You post "citations" of Bush involvement from 2003 - 2008.
We've been through all this on other threads. Again I will post the price chart graph below. Again the bubble started under Democrat Clinton in 1997-1998, and was well on its way to being fully inflated by 2003 as the line was already going almost straight up like a rocket during the time of your fist citation, showing everything you cite DID NOT cause the bubble, yet you continue to post Democrat Propaganda!

 

Ah, Freddie and Fannie make no loans and only buy already made loans through "private banks." Freddie and Fannie are the banks largest customers and the banks therefore make the KIND of loans Freddie and Fannie wanted to buy.

Since Freddie and Fannie MAKE no loans, and I know of no "public bank" making loans, I have no idea what your post even means, do you? It sounds like you are simply squawking Democrat Propaganda you once heard.

 

People sold themselves on that after WW2 and it still is an American Dream. When you own a home you own an asset and one sign that you have "made it" is you have wealth and assets.

What do you have against homeownership?

And everyone of them got a truth in lending doc to sign at closing which fully explained the load they were signing. If an agent or lending firm made false promises or claims they can be sued. But what did they do to "fatten their fees"?

It is a good investment especially over time.

They were going up.

Most people do that.

So what?

Which of the above are not being said now and don't most people expect their incomes to go? You are ardent claimer that things are just rosy and getting better and Obama has us on the right track. So which of your claims do not apply now?

What needed more regulation real estate and banking two of the most regulate markets we have.

 

See I disagree. The existence of Freddie and Fannie IS regulation! Freddie and Fannie were unconstitutionally created BY DEMOCRATS to manipulate the housing mortgage market and CREATE the secondary mortgage market so banks would not have to hold 30 year mortgages for 30 years. Freddie and Fannie always basically followed political marching orders to achieve political goals. At one time during the bubble, Freddie and Fannie owned or guaranteed HALF the entire mortgage market. How can such politically motivated involvement NOT be considered "regulation?" What ever it is, it is not the "free market."

The "free market" did not fail us. Democrat violations of the Constitution did!

 

I thought you libs were fighting for the middle class? Now the middle class is just "greedy white people". So who cares. Right?