FACTS on Dubya's great recession

1. Salon? From someone who grouses about AEI? Priceless. 2. The above is a lie, a plain lie of omission. ALL the Republicans dissented from the report as released. Not one of the 4 GOP appointees to the Commission adopted the report. One even wrote a lengthy detailed dissent linked below. Only because the Commission consisted of 6 Democrats and 4 GOP was the majority report even released. So the above "myth" is actually true as a matter of irrefutable fact. There was and is no official bipartisan consensus on the causes of the financial crisis.

SO, readers, what do you think of people who lie to your face, who omit the very necessary context that the report was released under UNIVERSAL DISSENT from every Republican on the Committee? Wouldn't you think that a balanced source would mention this? If I tell you that literally ALL of the Complex narratives on the mortgage collapse are based on similar cherrypicking and lies, would you believe me? Here's a Fox story from the other side to balance Salon's LIE. NOTE THE DIFFERENCE, AND ESPECIALLY HOW BALANCED THE FOX ARTICLE IS ON AIRING ALL SIDES AND NOT LEAVING OUT ANY NECESSARY CONTEXT:

http://www.foxnews.com/us/2011/02/16/republicans-report-financial-crisis-biased/

Here's a lead-in and link to the Wallison dissent. Read and draw your own conclusions EDUCATE YOURSELVES, don't be easy prey for manure peddlers like OP:

http://www.aei.org/publication/diss...t-of-the-financial-crisis-inquiry-commission/

http://www.aei.org/wp-content/uploads/2011/01/Wallisondissent.pdf

The gov-edu-union-contractor-grantee-lawyer-MSM Complex desperately needs you to believe their blame-shifting "BUSHDIDIT, WALLSTREETDIDIT" narrative because the truth is far more condemning of the Complex at large, there are literally BILLIONS of government graft involved in the mortgage crisis, half the government should be in jail, and blaming political opposition kills two birds with one stone, deflect from the real, and tar the opposition.

1. Oh so NOW we mention the dissent. Interesting how the above proves the "Myth #1" above to be fraudulent on Salon/OP's part. There was NO bipartisan consensus after all. These lefties, not too gifted in the logic and consistency departments, are they? Luckily for you readers, I am. Who do they think they are fooling? Note also the slanted language here.
2. The characterization of the CRA above as mostly a shield, "preventing discrimination and redlining" is a MOUNTAINOUS distortion in light of what the law actually did and how it was enforced in the Clinton Administration. It was a very large SWORD at the time, brandished by regulators from the FTC to the EEOC.. Banks were TERRIFIED of CRA. I personally, working for one of the largest banks in the country, had to sit in weekly marathon CRA sessions trying to beat the bushes for qualifying loans, even though I wasn't even a mortgage officer. It was a big deal. Here's the CRA wiki page:

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

Looks pretty "shieldlike" right? Not much sword. But we are missing huge context. Here's the sword, an act you will NEVER see discussed in the union label lie narratives. Never ever ever. (You see, unlike the names Gramm, Leach and Bliley, with an "R" after, Riegle and Neal had a different letter after their names. See if you can guess that letter!!)

http://en.wikipedia.org/wiki/Riegle-Neal_Interstate_Banking_and_Branching_Efficiency_Act_of_1994

This little piece of graft 1. enhanced the already lax Clinton antitrust enforcement (Guess how much Billy gets per speech? Guess what industry has paid most of those speaking fees? Guess how much Billy is worth today after leaving office bankrupt and millions in the hole. GUESS GUESS, IT'S EASY I PROMISE JUST GUESS!) that had allowed many banks to grow outside the bounds of all fiscal and fiduciary reason. Here's two of the biggest culprits, I was working for one of these in an executive capacity during the CRA heyday. You can't really blame them that much, they are just trying to compete. Who can you blame for allowing these banks to merge over 200 times? GOVERNMENT!! We have PAID billions and billions of dollars over 100 years for ANTITRUST LAWS to prevent this sort of thing.

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

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

Probably TWO HUNDRED GWHB/Clinton era mergers just with these TWO banks. Back to Riegle Neal, "We will flout our antitrust laws and let you merge for some quid pro quo down the road (WHO PAYS THOSE SPEAKING FEES TODAY?), and PROVIDED you comply with our CRA policies."

So what's the upshot, newly centralized (far from Mr Borrower's flawless personal financial statement... and his coke and drinking habits) credit committees (full of freshly minted, cheap, callow, profit driven as opposed to fiduciary MBAs) in freshly merged megabanks told 1. Keep merging, 2. Do CRA... or else. 3. See we are making Freddy and Fanny do it, it's OK, nothing bad will happen, we are the federal gubmint.

So, absolutely ZERO of the Complex lie narrative on CRA is relevant. None of it, not the dirty handed Fed's blameshifting and denial (we all know gov Complex circles the wagons when they sht in the floor, old news, quote the Fed some more LOL) not any of it. The only thing you need to know about CRA is that it created a general environment of higher risk lending as not only OK, but expected. CRA BIRTHED THE SUBPRIME INDUSTRY, not greedy Wall St, not Goldman, not faceless private mortgage brokers, not GWB. Government did it via CRA jawboning and threats, and mostly CLINTON era crooks. It doesn't matter that CRA loans had only this failure rate, or were this % of the market, or all the other irrelevant cowflop the Complex tries to fool you with. Jawboning and threats of EEOC and other enforcement, not the TAME TEXT of the law or program itself, hit the unwisely consolidated central credit committees full of kids like a TSUNAMI. It became instantly apparent that CRA loans were unprofitable, hard to dig up and dig out, too much paperwork, just another chowderhead, incompetent, one size fits all gubmint fiasco with a gun barrel attached. The end result, after most of a decade of it, was "F IT, they want us to loan to anyone, WE WILL!" This rippled throughout the mortgage industry, not just banks. Once those young MBAs got their training under Fast Eddie at First Union or McColl at Nationsbank, out the door they went to hit it rich in the private mortgage business. The Complex likes to pretend that the private mortgage industry was this sequestered group of people. LOL, no, they were the SAME people who were POLLUTED by CRA credit standard dilution, and then left to hang out their own shingle once they got trained.

CRA was a material cause of the mortgage collapse, in combination with another material cause, unwisely consolidated, young, inexperienced central credit committees, the unholy union birthed the subprime industry. Both of these material factors at the door of government, not GWB, not Reagan, not Goldman, G-O-V-E-R-N-M-E-N-T. And to relink, the BIG factor, was overall government housing policy for decades:

https://www.youtube.com/watch?v=T31UlBnkQr0

https://www.youtube.com/watch?v=dGmDSXN9N5Q

See CRA above, see Allison above. The amount of F&F loans that were subprime at the crash is utterly inescapable. Here is the other side of the Complex narrative on F&F, read it and draw your own conclusions.

http://object.cato.org/sites/cato.org/files/pubs/pdf/bp120.pdf

The above is a highly factual, comprehensive, detailed analysis. Contrast it to what we get from the other side... cherrypicks and factoids repeated ad infinitum.

This one is... surprise surprise... accurate, and again, was directly caused by flouting the antitrust laws and turning the previously fiduciary oriented, gray-haired, boring mortgage banking industry into a nifty fifty growth industry overnight.... FOR GRAFT. Once again, GOVDIDIT. Of course the individuals are responsible, as well as any of us ordinary borrowers who fudged an application and bought more than we could afford. But government overall laid out the shots at the AA meeting, the alkys just fell to temptation. A common theme in government graft and bungling social engineering attempts.

BS on the "securitization/derivative boogedy boogedy" we constantly hear from Complex idiots trying to fool greater idiots (neither of whom have any experience or understanding whatsoever of what they are talking about, just parroting cut pasters and the ilk). After being a stockbroker selling some of the first MBOs (we called them CMOs then) in the 80s, banker in the 90s, I switched careers to financial law and got my training on Wall Street at the top securitization firm in the country (I hated the bank I worked for in the 90s, and the law firm too, lest anyone think I'm biased towards those (*)(*)(*)(*)(*)s). There is nothing weird, complicated or inherently risky about securitizations. It was done in the 80s under the auspices of GNMAs. It's just a "mutual fund" of mortgages. If you want the investment grade, you buy it, if you want the growth, you buy that. It's bonds composed of mortgages carrying various risk parameters. Same thing for derivatives, easy for the Complex to fool laymen, hard to fool anyone with any finance experience. Neither of those things were anything other than paltry tangential factors, and only as they related to RATERS of same... surprise surprise... the raters are a monopoly approved by the government. Once again NOT a free market in raters.

Read this brilliant woman and her blog for more for anyone who wants to actually learn about real banking and real regulatory issues, not union label partisan claptrap from the leftist sewer pipe:

http://www.forbes.com/sites/frances...nks-is-pointless-but-it-will-go-ahead-anyway/

Focus on the second part where she describes why it's plain old bad loans, not securitizations or derivatives, we need to worry about.

Utter BS. FACT: The US banking industry has been the most heavily regulated industry in human history for over a century. The repeal of Glass S had nothing to do with the mortgage crash, GLB that replaced GS was more strict in many ways, GS is a total red herring. Riegle Neal WAS boneheaded deregulation (by Democrats), as already linked, and that's about it. The BIG regulatory issue in the mortgage collapse, as already developed was nonenforcement of our foundational and perfectly good antitrust laws during several administrations but mostly Clinton. What are we supposed to do about expensive preexisting laws we have paid billions for when they mysteriously just AREN'T ENFORCED? What amount of further regulatory bloat will "cure" that? IT WON'T.

We bankers and private sector saw it coming. I saw it coming sitting in those CRA meetings in the mid 90s. "This is going to kill banking" was heard over and over and over at those meetings. When I opened the paper and saw "Megabank to merge with megabank" I saw it coming. "Surely they will scrutinize this one... surely that one won't go through, this is getting absurd." But they all went through >>>>> Megabank mergers then, mega$$speaking fees today. So interesting how that works.

The financial crisis was unavoidable. ANY time central government meddles in basic consumption markets there will be repercussions, there will be bubbles, there will be crashes. NO MATTER WHAT MARKET and no matter what the ostensible good intentions and social goals. Government lied to the American people for decades, "You need a house! It's the American Dream! and we are here to help!" was always and only about "False stimulus is good for incumbents! Buy a house, fill it with junk, and keep ME in office!" It's really that simple, and trying to pin the mortgage crash on this or that partisan approved cause is moronic, transparently so to anyone with actual experience who knows what they are talking about.

 

I remember driving to work during the Clinton administration and hearing bank after bank merger and wondering why none of it was ever challenged.

 

Might as well stop,arguing with a democrat is like mud 'rasslin a pig.

Doesn't take too long to realize the pig LIKES it.

 

Right, you mean the SAME privatee sector guys who like 1880's, 1920's and 2000's ran a credit bubble? In 2000's there was a $20 TRILLION DOLLAR SUBPRIME MARKET worldwide?Who they hell thinks that was US Gov't? lol

Yes DUBYUA IGNORED THE WARNINGS AND CHEERED THEM ON, BUT THIS WAS A MAINLY PRIVATE SECTOR PONZI SCHEME!!!


Abstract:

U.S. policymakers often treat market competition as a panacea. However, in the case of mortgage securitization, policymakers’ faith in competition is misplaced. Competitive mortgage securitization has been tried three times in U.S. history - during the 1880s, the 1920s, and the 2000s - and every time it has failed.



Most recently, competition between mortgage securitizers led to a race to the bottom on mortgage underwriting standards that ended in the late 2000s financial crisis. This article provides original evidence that when competition was less intense and securitizers had more market power, securitizers acted to monitor mortgage originators and to maintain prudent underwriting. However, securitizers’ ability to monitor originators and maintain high standards was undermined as competition shifted market power away from securitizers and toward originators. Although standards declined across the market, the largest and most powerful of the mortgage securitizers, the Government Sponsored Enterprises (“GSEs”), remained more successful than other mortgage securitizers at maintaining prudent underwriting



http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1924831


It is clear to anyone who has studied the financial crisis of 2008 that the private sector’s drive for short-term profit was behind it. More than 84 percent of the sub-prime mortgages in 2006 were issued by private lending. These private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year. Out of the top 25 subprime lenders in 2006, only one was subject to the usual mortgage laws and regulations.

The nonbank underwriters made more than 12 million subprime mortgages with a value of nearly $2 trillion. The lenders who made these were exempt from federal regulations.


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

 

" Affordable housing was based on sub-prime loans to expand loans for housing. "

BZZ, NO THEY THERE WERE NOT BUBBA. Never. Unless you count Dubya REQUIRING F/F to purchase $440 billion of MBS's in the SECONDARY (PRIVATE MARKETS)...

Subprime is and generally was NOT guaranteed by Gov't. Affordable housing was


"Barney Frank, you can look up his involvement yourself."

The boogie man to right wingers that MINORITY MEMBER OF THE GOP MAJORITY HOUSE 1995-JAN 2007 WHERE BARNEY COULDN'T STOP A SINGLE GOP BILL, lol

 

Unresponsive to anything in the Allison Harvard speech I posted. Try again.

And incidentally, the latest securitization wave began in the 80s, making your law review blurb obviously erroneous and laughable.

 

To Establish Fiscal Discipline, President Clinton:

Enacted the 1993 Deficit Reduction Plan without a Single Republican Vote.


"The deficit has come down, and I give the Clinton Administration and President Clinton himself a lot of credit for that. [He] did something about it, fast. And I think we are seeing some benefits."
— Paul Volcker, Federal Reserve Board Chairman (1979-1987), in Audacity, Fall 1994


"Clinton's 1993 budget cuts, which reduced projected red ink by more than $400 billion over five years, sparked a major drop in interest rates that helped boost investment in all the equipment and systems that brought forth the New Age economy of technological innovation and rising productivity."
— Business Week, May 19, 1997



Weird how much power Obama has in right wing world, but as REGULATOR of F/F, SEC, OCC, FBI, etc Dubya was helpless

 

Weird, you do know, like how Clinton had policies related to F/F (and HUD, OCC, VA, etc), Dubya did too right???

DUBYA FOUGHT ALL 50 STATE AG'S IN 2003, INVOKING A CIVIL WAR ERA RULE SAYING FEDS RULE ON "PREDATORY" LENDERS!

Dubya was warned by the FBI of an "epidemic" of mortgage fraud in 2004. He gave them less resources. Later in 2004 Dubya allowed the leverage rules to go from 12-1 to 33-1 which flooded the market with cheap money!


Bush drive for home ownership fueled housing bubble

He insisted that Fannie Mae and Freddie Mac meet ambitious new goals for low-income lending.

Concerned that down payments were a barrier, Bush persuaded Congress to spend as much as $200 million a year to help first-time buyers with down payments and closing costs.

And he pushed to allow first-time buyers to qualify for government insured mortgages with no money down



June 17, 2004

Builders to fight Bush's low-income plan

Groups ask HUD to rethink plan that would increase financing of homes to low-income people

(CNN/Money) - Home builders, realtors and others are preparing to fight a Bush administration plan that would require Fannie Mae and Freddie Mac to increase financing of homes for low-income people, a home builder group said Thursday.

But the groups will warn in the letter that the proposed rules requiring the two GSEs to finance more "affordable housing" may have "unintended consequences,"


http://money.cnn.com/2004/06/17/real...wcost_housing/

Predatory Lenders' Partner in Crime

Predatory lending was widely understood to present a looming national crisis.

What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge?

Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye

In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative



http://www.washingtonpost.com/wp-dyn...021302783.html

 

Define predatory lending.

 

"And the HOusing Buble didn't even begn to become apparent until mid 2006 when the wheels started to come off"





DUBYA FOUGHT ALL 50 STATE AG'S IN 2003, INVOKING A CIVIL WAR ERA RULE SAYING FEDS RULE ON "PREDATORY" LENDERS!

Q I couldn’t help but notice all caps when posting the Bush Preemption policy. Can you tell me more about this ‘preemption’ rule from the OCC?

A Yes, states noticed an increase in predatory and abusive loans in the early 2000s. more than 30 states passed laws of varying degrees restricting certain types of loans. Banks complained to the OCC and the OCC enacted its Preemption policy

“Rapid growth in subprime lending over the past decade has led to rising concerns about abusive practices by subprime lenders. By early 2004, those concerns prompted Georgia and more than 30 other states to pass laws designed to eliminate abusive or predatory lending practices by the financial services firms, including those with federal charters, operating within their boundaries. In 2003, the OCC concluded that federal law preempts the provisions of the Georgia Fair Lending Act (GFLA) that would otherwise affect national banks’ real estate lending. In early 2004, the OCC adopted a final rule providing that state laws that regulate the terms of credit are preempted. “




Q Why would they do that?

A To increase subprime lending

(same link above)

“ In addition, clarification of the applicability of state laws to national banks should remove disincentives to subprime lending and increase the supply of credit to subprime borrowers. “



Q Wow, Bush preempted all state laws against predatory lending.

A thats not a question.

Q Sorry, er uh what did all 50 State Attorney Generals and all 50 State Banking Supervisors think of Bush's preemption?

A They didnt like it.

"The Conference of State Bank Supervisors (CSBS) along with a number of prominent organizations, including the National Governors Association (NGA), the National Association of Attorneys General (NAAG), the National Conference of State Legislatures (NCSL), and the North America Securities Administrators Association (NASAA), have voiced their opposition to the OCC's proposed rule that would effectively preempt all state laws that apply to the activities of national banks and their state-licensed subsidiaries. The groups are asking OCC to withdraw the controversial proposal."

States Unite to Fight Sweeping OCC Preemption

Q What did all 50 State Attorney Generals and all 50 State Banking Supervisors say would happen?

A Bad things



"Concentrating regulatory control at the OCC ensures that regulatory and consumer protection problems that emerge will be solved with a one-size fits all approach," CSBS President and CEO Neil Milner wrote in his comment letter, adding that the proposed rule would concentrate regulatory power in the hands of a single individual, the Comptroller, with virtually no direct congressional oversight until problems or scandals emerge."



http://www.occ.gov/publications/publ...er-2004-4.html



Q Did they predict in 2003 exactly what happened?
A Yes


http://www.politicalforum.com/showthread.php?t=394878&p=1064711650#post1064711650

 

INFLATION ADUSTED? LOL

WHY WOULDN'T DUBYA'S OWN GROUP AGREE WITH THE RIGHT WING NONSENSE???


From Bush's President's Working Group on Financial Markets March 2008

"The Presidents Working Group’s March policy statement acknowledged that turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007."




Q Did the Community Reinvestment Act under Carter/Clinton caused it?


A "Since 1995 there has been essentially no change in the basic CRA rules or enforcement process that can be reasonably linked to the subprime lending activity. This fact weakens the link between the CRA and the current crisis since the crisis is rooted in poor performance of mortgage loans made between 2004 and 2007. "

http://www.federalreserve.gov/newsev...3_analysis.pdf



US HOUSEHOLD DEBT DOUBLED 2001-2007, THAT CLINTON'S FAULT TOO?


PLEASE look at the SUBPRIME origination graph

View attachment 33377





November 27, 2007

A Snapshot of the Subprime Market



Dollar amount of subprime loans outstanding:

2007 $1.3 trillion

Dollar amount of subprime loans outstanding in 2003: $332 billion

Percentage increase from 2003: 292%


Number of subprime mortgages made in 2005-2006 projected to end in foreclosure:

1 in 5



Proportion of subprime mortgages made from 2004 to 2006 that come with "exploding" adjustable interest rates: 89-93%


Proportion approved without fully documented income: 43-50%


Proportion with no escrow for taxes and insurance: 75%



Proportion of completed foreclosures attributable to adjustable rate loans out of all loans made in 2006 and bundled in subprime mortgage backed securities: 93%


Subprime share of all mortgage originations in 2006: 28%


Subprime share of all mortgage origination in 2003: 8%


http://www.responsiblelending.org/mortgage-lending/tools-resources/a-snapshot-of-the-subprime.html



James Kennedy and Alan Greenspan, on the effect of mortgage equity withdrawals (MEWs) on the growth of the US economy.

View attachment 33378

Notice that in both 2001 and 2002, the US economy continued to grow on an annual basis (the "technical" recession was just a few quarters). Their work suggests that this growth was entirely due to MEWs. In fact, MEWs contributed over 3% to GDP growth in 2004 and 2005, and 2% in 2006. Without US homeowners using their homes as an ATM, the economy would have been very sluggish indeed, averaging much less than 1% for the six years of the Bush presidency. Indeed, as a side observation, without home equity withdrawals the economy would have been so bad it would have been almost impossible for Bush to have won a second term.

The Economic Blue Screen of Death - Thoughts From The Frontline - Investment Strategies Analysis Intelligence for Seasoned Investors.


http://www.investorsinsight.com/blo.../10/17/the-economic-blue-screen-of-death.aspx


Yeah, Clinton *shaking head*

 

Please cite this "Deficit Reduction Plan." If you are talking about OBRA, the large tax increase, why not just accurately state as such? This isn't your union label echo chamber full of low-info morons, or a socialist sciences class full of junior college kids you can fool and manipulate with weasel words. Republicans voted against a huge TAX INCREASE, not against a "deficit reduction plan."

1. Volcker is a Democrat. 2. Volcker is a mainline Complex central policy statist, government apologist, so absent any MEAT behind the above conclusory, partisan opinion, it's meaningless. 3. Once again from you, just a soundbite. There are MILLIONS of those on the internet, on every topic from banjos to bigfoot. Your OP and subsequent are long on free-floating factoids, fatally short on interstitial analysis and reasoning.

"Business Week" can't write. Go ahead and cite the actual source before I have to because I already KNOW exactly what I'm going to find when I do. The above is as laughable as Algore taking credit for creating the internet. I especially like the weasel phrasing "reduced PROJECTED ??!! red ink??!! more than $400 billion over five years." ROFL, did this hackery come straight off DeeDee Myers' desk? Likely. The DEBT increased significantly during the Clinton Administration, any claims of Clinton fiscal sagacity outside that necessary context are asinine, partisan horseflop.

No causal reasoning between the "projected ??!!red ink??!! reduction" and lower interest rates offered. News for you and other statists, the internet boom was 98% private sector and 2% government policy. And "New Age economy?" I REALLY, REALLY want to see the actual source for this, will wait.

Oh, and PS, paragraph structure is your friend.

 

"Predatory lending" is what "equal credit opportunity" miraculously becomes when government is trying to shift blame for its own doodoo onto the private sector. Used in a sentence, "You remember that 'equal credit opportunity' loan we forced you to make five years ago that defaulted last week? We are blaming that entirely on you because we are now calling it 'predatory lending'."

 

GAWWWD Useless talking points


The first part was a lengthy majority report endorsed by the six Democratic appointees. This was followed by two much shorter dissents. Reading the three parts together, it is clear that all ten commissioners agreed that the collapse of the U.S. housing bubble was the proximate cause of the crisis.

In addition, there was substantial consensus among nine of the commissioners. For these nine—including three of the four Republican appointees—the centerpiece of the consensus was that poor risk management at U.S. financial institutions was a chief contributor to the crisis. For example, all nine agreed that risk management failures at financial institutions led to insufficient capital and a reliance on short-term borrowing.


"Banks were TERRIFIED of CRA"


lol

Community Reinvestment Act, blamed for home market crash, didn't apply to the banks that did the most lending.



A Register analysis of more than 12 million subprime mortgages worth nearly $2 trillion shows that most of the lenders who made risky subprime loans were exempt from the Community Reinvestment Act.And many of the lenders covered by the law that did make subprime loans came late to that market - after smaller, unregulated players showed there was money to be made.



Among our conclusions:

Nearly $3 of every $4 in subprime loans made from 2004 through 2007 came from lenders who were exempt from the law.

State-regulated mortgage companies such as Irvine-based New Century Financial made just over half of all subprime loans. These companies, which CRA does not cover, controlled more than 60 percent of the market before 2006, when banks jumped in.


Another 22 percent came from federally regulated lenders like Countrywide Home Loans and Long Beach Mortgage. These lenders weren't subject to the law, though some were owned by banks that could choose to include them in their CRA reports.


Among lenders that were subject to the law, many ignored subprime while others couldn't get enough.

Among those standing on the sidelines: Bank of America, which made no subprime loans in 2004 and 2005; in 2006 and 2007 subprime accounted for just 2 percent of its loan portfolio. Washington Mutual, meanwhile, raised its subprime bet by 20 times to $5.6 billion in 2006 - on top of its already huge exposure through its ownership of Long Beach Mortgage.

BANKSTER:

Bob Davis, executive vice president of the American Bankers Association, which lobbies Congress to streamline community reinvestment rules, said "it just isn't credible" to blame the law CRA for the crisis.

"Institutions that are subject to CRA - that is, banks and savings asociations - were largely not involved in subprime lending," Davis said. "The bulk of the loans came through a channel that was not subject to CRA."

http://www.ocregister.com/articles/loans-20542-subprime-banks.html


“Some 80 percent of outstanding U.S. mortgages are prime, while 14 percent are subprime and 6 percent fall into the near-prime category. These numbers, however, mask the explosive growth of nonprime mortgages. Subprime and near-prime loans shot up from 9 percent of newly originated securitized mortgages in 2001 to 40 percent in 2006

https://www.dallasfed.org/assets/documents/research/eclett/2007/el0711.pdf



Subprime lending surged from 2004 to 2006 during the height of the housing bubble. According to Kimberly Amadeo in an article titled "Did Freddie and Fannie Cause the Housing Crisis":

"Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. Even so, by 2007 only 17 percent of their total portfolio was either either subprime or Alt-A loans. Due to regulations, their percentage of these loans are actually better than many banks."

As David Goldstein and Kevin G. Hall write in the McClatchy Newspapers:

"During those same explosive three years, private investment banks -- not Fannie and Freddie -- dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data."

According to David M. Abromowitz and David Min writing for the Center of American Progress:

"If the conservative view was correct, one would expect to see mortgages originated for Fannie and Freddie securitization, as well as those originated for purposes of CRA, to default at higher rates, since these were the loans directly subject to affordable housing policies. In fact, we see quite the opposite, as these loans have performed exponentially better than those originated for private securitization, which the FCIC Republicans ignore."


The fact that the housing bubble occurred contemporaneously in other countries such as Iceland, Ireland, and the United Kingdom (AMONG DOZENS OF NATIONS) also dispels the conservative myth.

http://www.huffingtonpost.com/marvin-meadors/fannie-mae-freddie_b_1549411.html


Fed Study Debunks Conservative Myth That Affordable Housing Policies Caused Subprime Crisis


To test that theory — which New York Times columnist Joe Nocera dubbed the “Big Lie” — the Federal Reserve Bank of St. Louis recently investigated whether affordable housing policies had any influence on the price or proliferation of subprime mortgages in the mid-2000s. Spoiler alert — they didn’t:

We find no evidence that lenders increased subprime originations or altered pricing around the discrete eligibility cutoffs for the Government Sponsored Enterprises (GSEs) affordable housing goals or the Community Reinvestment Act. Our results indicate that the extensive purchases of risky private-label mortgage-backed securities by the GSEs were not due to affordable housing mandates.



http://thinkprogress.org/economy/2012/03/28/453978/fed-study-affordable-housing-myth/


McCains/Romney economic adviser:

Fannie and Freddie don’t deserve blame for bubble

http://www.washingtonpost.com/reale...e-for-bubble/2012/01/23/gIQAn3LZMQ_story.html


Between 2005-2007, most of the mortgages they bought or guaranteed were either subprime, interest-only or negative amortization (GOV'T POLICY??? LOL) . But that's because those were the types of loans being made by banks and unregulated mortgage brokers. Government regulations precluded Fannie and Freddie from buying mortgages that didn't meet down payment and credit requirements. This meant they bought, resold or guaranteed 50% of the mortgages made, but it was actually the most credible half. By 2007, only 17% of their portfolio was subprime or Alt-A loans. However, when housing prices declined, and homeowners began defaulting, this relatively small percentage of subprime loans contributed 50% of the losses.


http://useconomy.about.com/od/criticalssues/a/Fannie_Cause.htm

You wingnutters LOVE the TALKING point created by AEI, Ed Pinto, Peter Wallison AND CATO. I get it Buba

 

Lol, you know it's a joke of a thread when there is no back and forth even on PF.

No left leaning people in here to debate, at best a guy pointing out that both parties caused the problem (which is the truth).

It's incredibly stupid to post copy and pastes like you have here. It adds zero credibility and flat out proves you are just parroting some website.

Bush DID cause some of the problem, but you sound like your children your namesake takes off of when you post as such

 

Examining the big lie: How the facts of the economic crisis stack up


The big lie of the financial crisis, of course, is that troubling technique used to try to change the narrative history and shift blame from the bad ideas and terrible policies that created it.

Based on the scores of comments, people are clearly interested in understanding the causes of the economic disaster.

I want to move beyond what I call “the squishy narrative” — an imprecise, sloppy way to think about the world — toward a more rigorous form of analysis. Unlike other disciplines, economics looks at actual consequences in terms of real dollars. So let’s follow the money and see what the data reveal about the causes of the collapse.

Rather than attend a college-level seminar on the complex philosophy of causation, we’ll keep it simple. To assess how blameworthy any factor is regarding the cause of a subsequent event, consider whether that element was 1) proximate 2) statistically valid 3) necessary and sufficient.


Here are key things we know based on data. Together, they present a series of tough hurdles for the big lie proponents.

•The boom and bust was global. Proponents of the Big Lie ignore the worldwide nature of the housing boom and bust.


A McKinsey Global Institute report noted “from 2000 through 2007, a remarkable run-up in global home prices occurred.” It is highly unlikely that a simultaneous boom and bust everywhere else in the world was caused by one set of factors (ultra-low rates, securitized AAA-rated subprime, derivatives) but had a different set of causes in the United States. Indeed, this might be the biggest obstacle to pushing the false narrative. How did U.S. regulations against redlining in inner cities also cause a boom in Spain, Ireland and Australia? How can we explain the boom occurring in countries that do not have a tax deduction for mortgage interest or government-sponsored enterprises? And why, after nearly a century of mortgage interest deduction in the United States, did it suddenly cause a crisis?

These questions show why proximity and statistical validity are so important. Let’s get more specific.The Community Reinvestment Act of 1977 is a favorite boogeyman for some, despite the numbers that so easily disprove it as a cause.It is a statistical invalid argument, as the data show.

For example, if the CRA was to blame, the housing boom would have been in CRA regions; it would have made places such as Harlem and South Philly and Compton and inner Washington the primary locales of the run up and collapse. Further, the default rates in these areas should have been worse than other regions.



CRA were less likely to default than Subprime Mortgages — Source: University of North Carolina at Chapel Hill
>

What occurred was the exact opposite: The suburbs boomed and busted and went into foreclosure in much greater numbers than inner cities. The tiny suburbs and exurbs of South Florida and California and Las Vegas and Arizona were the big boomtowns, not the low-income regions. The redlined areas the CRA address missed much of the boom; places that busted had nothing to do with the CRA.




The market share of financial institutions that were subject to the CRA has steadily declined since the legislation was passed in 1977. As noted by Abromowitz & Min, CRA-regulated institutions, primarily banks and thrifts, accounted for only 28 percent of all mortgages originated in 2006.

•Nonbank mortgage underwriting exploded from 2001 to 2007, along with the private label securitization market, which eclipsed Fannie and Freddie during the boom.




Nonbank mortgage underwriting exploded from 2001 to 2007, along with the private label securitization market, which eclipsed Fannie and Freddie during the boom – Source: University of North Carolina at Chapel Hill
>

•Private lenders not subject to congressional regulations collapsed lending standards.




Taking up that extra share were nonbanks selling mortgages elsewhere, not to the GSEs. Conforming mortgages had rules that were less profitable than the newfangled loans. Private securitizers — competitors of Fannie and Freddie — grew from 10 percent of the market in 2002 to nearly 40 percent in 2006. As a percentage of all mortgage-backed securities, private securitization grew from 23 percent in 2003 to 56 percent in 2006


Only one of the top 25 subprime lenders in 2006 was directly subject to the housing laws overseen by either Fannie Mae, Freddie Mac or the Community Reinvestment Act — Source: McClatchy
>

These firms had business models that could be called “Lend-in-order-to-sell-to-Wall-Street-securitizers.” They offered all manner of nontraditional mortgages — the 2/28 adjustable rate mortgages, piggy-back loans, negative amortization loans. These defaulted in huge numbers, far more than the regulated mortgage writers did.



http://www.ritholtz.com/blog/2011/1...ow-the-facts-of-the-economic-crisis-stack-up/

 

Right


•Nonbank mortgage underwriting exploded from 2001 to 2007, along with the private label securitization market, which eclipsed Fannie and Freddie during the boom.

Check the mortgage origination data: The vast majority of subprime mortgages — the loans at the heart of the global crisis — were underwritten by unregulated private firms. These were lenders who sold the bulk of their mortgages to Wall Street, not to Fannie or Freddie. Indeed, these firms had no deposits, so they were not under the jurisdiction of the Federal Deposit Insurance Corp or the Office of Thrift Supervision. The relative market share of Fannie Mae and Freddie Mac dropped from a high of 57 percent of all new mortgage originations in 2003, down to 37 percent as the bubble was developing in 2005-06.


OOPS



http://www.ritholtz.com/blog/2011/1...ow-the-facts-of-the-economic-crisis-stack-up/

 

"“Rapid growth in subprime lending over the past decade has led to rising concerns about abusive practices by subprime lenders. By early 2004, those concerns prompted Georgia and more than 30 other states to pass laws designed to eliminate abusive or predatory lending practices by the financial services firms, including those with federal charters, operating within their boundaries. "


Predatory lending is any lending practice that imposes unfair or abusive loan terms on a borrower. It is also any practice that convinces a borrower to accept unfair terms through deceptive, coercive, exploitative or unscrupulous actions for a loan that a borrower doesn't need, doesn't want or can't afford.

http://www.debt.org/credit/predatory-lending/



DEFINITION of 'Predatory Lending'

Unscrupulous actions carried out by a lender to entice, induce and/or assist a borrower in taking a mortgage that carries high fees, a high interest rate, strips the borrower of equity, or places the borrower in a lower credit rated loan to the benefit of the lender. As with most things of a dishonest nature, new and different predatory lending schemes frequently arise.


http://www.investopedia.com/terms/p/predatory_lending.asp







Fun With Predatory Lending


“There was always a big financial incentive to make a subprime loan wherever one could.”

-affadavit of Wells Fargo Loan officer

http://www.ritholtz.com/blog/2012/06/fun-with-predatory-lending/

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Got it. Opinion...

 

cut n paste BS.

 

Yes those AG's in states like Georgia, Mississippi, Texas, Arkansas, HELL ALL 50 STATES SUED DUBYA WHEN HE INVOKED A CIVIL ERA RULE SAYING BIG FEDERAL GOV'T GOT TO REGULATE THOSE BANKSTERS, NOT YOU SMALL STATERS, lol

They won, in 2009, to late to stop the Bankster WORLD WIDE CREDIT BUBBLE AND BUST. Remember the commercial AND subprime auto loan bubble in the 200's? CRA AND F/F RESPONSIBLE FOR THAT TOO? lol'

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So the best you can do is ad hominems. Got it

 

So NO you can't refute a single word of the LOGICAL post, and instead of nothing but an ad hom. Must be a conservative

 

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I guess you prefer OPINIONS like CATO, AEI, ETC PROVIDE? LOL

 

Clearly you're only capable of spamming the same partisan bull(*)(*)(*)(*) over and over and are not capable of debating in good faith. You won't last long on this forum. Good riddance.

 

O the sweet sweet irony.

And seriously, start using standard paragraph structure and put sentences together instead of a stream of spun factoids. We all already know the Complex is desperate to shift the blame for the mortgage collapse away from itself. As draco says, you aren't fooling anyone. This is supposedly an opinion forum, not a googling competition. Your sources are supposed to support your argument, but you are real short on anything resembling rational argument.

No, this is not at all what your SALON source said right in the thread for all to see. It was very clearly slanted to give the impression that there was universal consensus as to the causes of the mortgage collapse. It started on a lie, which any reasonable reader can ascertain. There was and is no "bipartisan, unanimous consensus" on the causes of the mortgage collapse.

Yes, -we- bankers were.

Dealt with in great detail previously, irrelevant, unresponsive.

1. CRA was -a- factor, as I developed thoroughly, in conjunction with other factors also developed. My analysis, and Allison's couldn't be more clear as to government housing policy -generally- as being the primary cause. 2. I can go and google up just as many sources blaming CRA, but am not going to do that. Once again, readers are encouraged to do THEIR OWN research, and certainly not accept cherrypicked quotes and factoids devoid of any actual knowledge from a Complex hack who knows how to use a search engine. Once again, you aren't fooling any reasonable people here.

I believe Allison, Wallison and my own extensive experience and knowledge moreso than Kimberly Amadeo. Readers are certainly free to draw their own conclusions.

The takeaway here beneath all the datamining is that F&F were indeed a significant locus of credit quality deterioration. It's no wonder at all that the larger industry followed suit and the GOVERNMENT'S LEAD into a riskier credit environment. You can parse numbers and %s all you like, the fact remains that government housing policy was materially responsible for lower credit standards in the US mortgage industry.

"If F&F will buy it, we should write it, or else our competition will," and that's a completely reasonable stance for any originator to take.

OK then, you have just placed yourself on the horns of a dilemma in a thread YOU created and YOU titled "FACTS on Dubya's great recession." Are you 1. using the above to exonerate CRA? or MORE IMPORTANTLY 2. USING IT TO EXONERATE GWB and disprove your own thread premise? Can't have it both ways, so which? See if you can google yourself past that.

Oh, and quote Huffpuff and NYT some more and then have the GALL to complain about AEI, Cato, Allison, Wallison. Better yet, readers peruse all the sources linked here and decide for yourselves what looks solid and what looks vaporous.

Now you are repeating yourself. We are all well aware of the government Complex wagon-circling exercise with respect to the mortgage collapse. "It wasn't the government's fault because... the government says so" doesn't cut it outside the echo chamber. Try again. And "think progress? WaPO?" You really have lots of nerve to come in here calling people wingnuts, bubbas, etc. based on the quality and objectivity of your own sources.

Yeah, this "bubba wingnutter" has 28 years of high profile financial industry experience in many facets, and forgets more about finance, banking and financial law every day than you will ever know. People like Allison forget more every day than -I- will ever know. So that leaves you where exactly? Bubba indeed.

 

"Here's a lead-in and link to the Wallison dissent. Read and draw your own conclusions EDUCATE YOURSELVES, don't be easy prey for manure peddlers like OP:"


THIS GUY:

Peter Wallison in 2004: “In recent years, study after study has shown that Fannie Mae and Freddie Mac are failing to do even as much as banks and S&Ls in providing financing for affordable housing, including minority and low income housing.”



LOL

1. Private markets caused the shady mortgage boom
2. The government’s affordability mission didn’t cause the crisis

3. There is a lot of research to back this up and little against it: This is not exactly an obscure corner of the wonk world — it is one of the most studied capital markets in the world.

4. Conservatives sang a different tune before the crash: Conservative think tanks spent the 2000s saying the exact opposite of what they are saying now


5. Expanding the subprime loan category to say GSEs had more exposure makes no sense: Some argue that the GSEs had huge subprime exposure if you create a new category that supposedly represents the risks of subprime more accurately. This new “high-risk” category is associated with a consultant to AEI named Ed Pinto, and his analysis deliberately blurs the wording on “high-risk” and subprime in much of his writings.

...So even those who blame the GSEs can’t get the numbers to work when they make up categories.



No, the GSEs Did Not Cause the Financial Meltdown (but thats just according to the data)


http://www.ritholtz.com/blog/2011/1...ampaign=Feed:+TheBigPicture+(The+Big+Picture)