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Greg

Peg,

If there were rules and regulations for these loans, do you think they would of been made? Trying to look back and blame those that received the loans, and not blaming those that made the loans is weak. This is the results of deregulation, something you have yet to acknowledge.

Let us review history over the last few years. In 2002 President Bush when introducing his “Homeownership Challenge”, he and Alphonso Jackson a set of policy initiatives that were supposed to sharply increase homeownership, especially for minority groups. At the time it is true that home ownership rose as the housing bubble inflated, temporarily giving the Bush Administration something to boast about. But this boom has now plunged. Today, the percentage of American families owning their own homes is no higher than it was six years ago, and it’s a good bet that by the time Bush leaves the White House home ownership will be lower than it was when he moved in.

Now how was Housing and Urban Development (HUD) ran in the Bush Administration? Under the watch of another Bush lackey, Alphonso Jackson it was ran into the ground. In late 2006, as economists warned of an imminent housing-market collapse, Jackson repeatedly insisted that the mounting wave of mortgage failures was a short-term "correction". Jackson continued to pushed for legislation that would make it easier for federally backed lenders to make loans to risky borrowers. Jackson issued a rules that were criticized by law enforcement because it could increase the difficulty of detecting and proving mortgage fraud.

Jackson also ignored warnings from within his agency HUD whose inspector general told Congress that some of the secretary's efforts were "ill-advised policy" and likely to put more families at risk. During his ill-fated time as HUD Secretary Jackson in speeches, urged loosening some rules to spur more home buying and borrowing. In June of 2007 Jackson was convinced that the market will soon begin to soar, he also told the press that he had no specific laws to recommend to prevent a repeat of the lending abuses that caused the mortgage crisis.

Now if you are going to go down the road of blaming those homeowners, you also need to examine those that offered those loans at this time, the reasons why they offered these loans, and what they stood to profit from these loans. The Wall Street Journal (owned by liberal hawk Rupert Murdoch) found that of more than $2.5 trillion in subprime loans made since 2000 shows that as the number of subprime loans mushroomed, an increasing proportion of them went to people with credit scores high enough to often qualify for conventional loans with far better terms.

Also in 2005, during the height of the sub-prime boom, the study found that borrowers with decent credit scores got more than half - 55 percent - of all the subprime mortgages that were ultimate packaged into securities and sold to investors. By the end of 2006, this increased to 61 percent.

So if the majority, that is more than 50% had met requirements for better loans, why were they steered to these other loans? Because loan brokers got more money for steering people into these other loans.Mortgage companies used hard sell techniques and mortgage lenders had compensation structures that rewarded brokers for persuading borrowers to take a loan with an interest rate higher than the borrower might have qualified for. What resulted from this was that these better-off borrowers may end up serving as a sort of "shock absorber" for the current mortgage crisis, since they are more likely than traditional subprime borrowers to survive the double whammy of declining home prices and adjustable rate mortgages soon due to reset at higher interest rates. Why? Because they included penalties for paying off loans early, and in many times forced homeowners to come back for another loan when the higher interests rate kicked in. Sort of like the way drug dealers work (I assume from watching some TV). Also as stated above, these mortgage's were packaged and sold off. So when a bank is not going to hang on to the loan for a long term manner, and instead sell it off to someone else, how much are they worried about the risk or the anything else about the loan? If the loan is going to be flip to Wall Street, why worry about who or how the loan will be paid off. I think this is probably why there were 23 dead people who were allowed to get a mortgage in the state of Ohio. Just as Enron, Worldcom, and Bear Sterns there was rapid fraud and misdoings.
Just to prove I am not a partisan hack I will link the Wall Street Journal story:

Subprime Debacle Traps Even Very Credit-Worthy
http://online.wsj.com/public/article_print/SB119662974358911035.html

Now do the people should take some credit in this mess. Yes of course they do. If they would of done some due diligence and some research they would not allowed themselves to be steered into these loans. But there also needs to be a huge amount of blame to those that pushed no to limited regulation, and those who pushed these loans. I do not believe many of these loans would have been made if the banks that made them were forced to hold on to them instead of being allowed to bundle them and sell them. Just the sheer fact that they knew they were going to sell them, left no incentive that the loans were valid. There was no reasons for them to care if they were to pass the buck to someone else.

Now if all of this sounds like deja vu well it is not. We debated this a while ago when you posted
Krugman Never Disappoints
http://moot.typepad.com/what_if/2008/06/krugman-never-disappoints.html#more

Peg

Greg - first of all, subprime loans are only part of the problem we're experiencing today.

Second - don't you realize that there is an immense amount of blame to go around to all? Don't you realize that Democrats are quite culpable for wanting to extend credit to those who truly should not have been receiving it?

While I am of the opinion that their goal was noble: extension of home ownership to more minority individuals with modest incomes - the conclusion is what we are seeing today.

Of course, don't get me wrong. Republicans are guilty; Wall Street is guilty - and a great many average Joes are guilty. Too many of us got swept up in the easy-credit, buy buy buy mentality.

If you want to peddle: "It's the Republicans fault" - please go do it on someone else's blog.

jammen

Peg, why did lenders loan money to people that couldn't afford the terms?

Peg

Jammen - the terms were forced upon lenders by changes from Congress. They wanted to extend home ownership to those who previously were shut out.

In any case - that is not the way of looking at it. "The terms" were "affordable" when the people purchased. But in many cases, "the terms" changed in time, and later people were not able to afford them. Or - they wanted to move and they could no longer sell their home for what their purchase price was.

There are a variety of reasons why this happened with many homeowners. Not one answer for each one.

And - I might remind you that the borrowers in trouble still remain a minority of homeowners. But - it's a significant minority and has impacted the entire process.

Greg

I am not sure why I am responding to this, because I am sure I will get either no response, or one that is not backed with any facts. But anyway let me give it a shot.

Peg, you are either purposely distorting, spinning, or have very little clue as to what was, and has gone on. This financial crisis was created by Republican deregulation and covered up by the Bush Administration. You can spin it all you want, but this was brought on by Republican policies and ideology. This is the same stuff and reasons why you claim you vote Republican. Why after you all wreck the car or drive it in the ditch you are trying to lay blame on someone else? It is like the dog ate my homework excuse. Last, there is no way that I am not going to challenge you when you falsely claim that the financial turmoil was the "Democrats" fault, or for you to try and blame minority borrowers.

Let's go back into history and see how this thing came upon us

"Those who fail to learn from history are doomed to repeat it"
George Santayana

Back in 2003 the Office of Federal Housing Enterprise Oversight (OFHEO) released a report that the housing market was in grave danger. Armando Falcon, then the director OFHEO was ultimately forced by the Bush administration to resign, but not before issuing a prophetic and detailed report showing the underlying weakness of the U.S. housing market and financial system. The firing of Falcon was best described here in Executive Intelligence Review, March of 2003. Here is a short except:

Thus, Wall Street's reckless rush to fire Armando Falcon, whose only "crime" is that he warned of a seismic crisis; and his replacement with Mark Brickell, whose only qualification is 25 years of service at J.P. Morgan and other banks, slavishly pushing derivatives and other speculative instruments. Brickell's assignment at OFHEO would be not to regulate, but to act as a control point for Wall Street to crisis-manage the derivatives, mortgage, and other problems at Fannie, Freddie, and the roiled housing financial markets.

http://www.larouchepub.com/other/2003/3010ofheo_rpt.html

What does all this mean? This makes a to any reasonable person that the Bush Administration was aware of the crisis and attempted to cover it up by this firing and burying of the report. On Sept. 22, 2004, OFHEO released results of an ongoing investigation. The "Special Examination of Fannie Mae" was 211 pages of technical accounting details that "accused Fannie Mae of both willfully breaking accounting rules and fostering an environment of "weak or nonexistent" internal controls". Some Congressional Democrats were worried that OFHEO was trying to break these FDR institutions on behalf of the White House so they could be privatized. There is some proof to that claim as OFHEO leaked ongoing investigation details to the public, damaging the institutions.

Then the Bush Administration nominated Mark Brickel as Falcon's replacement. Brickel was well known in the financial community for spearheading the growth of highly speculative derivatives trading. Fortunately Democrats managed to kill the nomination. Finally the Bush Administration appointed James Lockhart to OFHEO in 2006. Lockhart was a classmate of Bush at Andover and Yale, as well as a loyal campaign contributor. Before Bush appointed him in 2006 to oversee the OFHEO and Fannie/Freddie, Lockhart was with the Social Security Administration and spent a few road trips with Rick Santorum and other public officials trying to sell the nation on what else? Privatization. With Lockhart in place there was the move to try and further the privatization of Fanny and Freddie.

But I am getting too far ahead. In June 2003, problems were detected with both Freddie and Fanny, that lead to pressure to provide stronger regulation and oversight. The OFHEO which largely bore the regulatory burden stated they would enact stronger regulation, and requested and received additional funding from Congress for this purpose. About the same time as this report was published, Wall Street and the large credit lenders successfully lobbied Congress for punitive consumer reforms that made it much harder for individuals to file for bankruptcy protection under The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Effectively this forced many more homeowners to file under Chapter 13 vs. filing under Chapter 7. This was of course while the housing bubble was still in full upward swing. The industry and the White House were aware of the mess that was being made of the financial lending markets, but rather than regulate or intervene, they quietly worked with Congress (pressured by lobbyists) to protect their interests in these mortgages when the day of reckoning ultimately arrived. Every Republican in the House voted for this bill, along with 73 Democrats with 125 opposed. In the Senate again every Republican voted in favor, with 25 Democrats opposed and the remainder voting with the Republicans. To be fair the industry spent hundreds of millions of dollars over a number of years lobbying and pressuring Congress for these votes, so while gravely disappointing it is not a shock that some Democrats voted with the Republican majority.

The Clinton Years

The Democrats in Congress during the Clinton Presidency, the Senate voted for de-regulation along party lines in 1999, with Republicans voting in favor, and Democrats voting against. The Congress was split with some Democrats crossing party lines to support deregulation. Research into campaign contributions will probably shed light as to why. Bill Clinton as we know did not veto the legislation when it went across his desk. It is clear from the voting record in Congress that he would not of been able to maintain his veto were he inclined to do so.

In general Democrats supported legislation to correct perceived or actual inequity in lending practices to minority home owners. That did not mean they were for deregulation or that they opposed attempts to regulate. The two party positions on this matter have been essentially distinct since the Reagan era with Replublicans coming down strongly in support of deregulation of financial markets (among others), and Democrats opposed to deregulation (supporting regulation).
Democrats opposed a 2003 Bush plan to "regulate" Fanny and Freddie for three substantive reasons:

1) It did "not repeal the significant government subsidies granted to the two companies".

2) alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enables them to issue debt at significantly lower rates than their competitors.

3) Failed to "remove the companies' exemptions from taxes and anti-fraud provisions of federal securities laws."

Last and Final Point

I do not know why I have to repeat this, but this point has been raised at least 3 times. As you and the right wing pundits try to blame minority home loans as the culprit they should know as I already have noted that the Wall Street Journal in the that 50% to 64% of those subprime borrowers were actually qualified for much better quality, PRIME mortgages. A lack of regulation and unscrupulous and in some cases illegal lending practices contributed to widespread abuse of these borrowers. The FBI is investigating now, after the fact. Minority ownership actually increased significantly during the 1990's, and those loans were not subprime loans and not part of the current economic crisis. There is no indication of a large spike in minority home ownership trends from 2000 to 2008 where total home ownership in the U.S. rose to about 68%.

Peg

Greg - you can leave all the 7 page comments you wish on my blog. Nevertheless, you bring "partisanship" to a new level.

Nothing you write will convince me that where we are today is not a confluence of many factors, with both parties, the government, the private sector - and WE THE PEOPLE complicit in what happened. I don't know why you seem to ignore half of what I write; not my issue. If you would pay a little more attention to it, however, you might feel less of a need to spend half your day writing some of these comments that make little sense in light of my posts.

jammen

"Peg, why did lenders loan money to people that couldn't afford the terms?"
------------------------------------------
"Jammen - the terms were forced upon lenders by changes from Congress"
------------------------------------------

Oh those poor banks. They were forced by law to give loans to people who couldn't afford them.
But gee, some banks must break the law because they don't make risky loans.

Peg

Yes - "oh poor banks" - and now - "oh poor us." In part, lending standards were relaxed to include some who had previously been unable to purchase homes.

Most lenders did change their standards in the past decade. And yes; they would be subject to lawsuits if they did not follow the law.

State laws differed. Our state did not expand as much as some others, thus our lenders were more protected.

Of course, these days, almost all loans are packaged and re-sold. So it is not really "oh, poor banks" - but more "oh, poor investors" and now "oh, poor taxpayers and public."

I do not understand why people like you and Greg want to reduce this subject to a simple "oh, those evil Republicans were at it again." This scenario was not created by one party nor just a few events. Many of us are culpable for where we are today - and many of us had good intentions that went awry.

jammen

Peg, it is difficult sometimes not to be sacastic when you print drivel like this:

"Because all the (well, most of) the troubles Wall Street is currently facing can be traced directly back to the dimwit making $35,000 per year who just absolutely fell in love with that 1800 square foot $400,000 bungalow in Tangletown with its $8000 per year in property taxes"

There are plenty of detailed analyses on the greed and fraud in Wall St (currently being investigated by the FBI) which helped cause this debacle.

I agree a balanced viewpoint is most helpful, but i sure don't see it in the items you print.

Peg

You can call it drivel if you wish, Jammen. The fact remains, however, that if far fewer people got caught up in the bubble, and instead said: "Are you kidding? No way am I paying that price for that house" we might not have gotten to where we are.

I am a Realtor and I tried to put some brakes on. But - I was whistling into the wind, for the most part. Until, of course, as my manager said "the beginning of the end" occurred.

By then, however, it was too late.

If it weren't for the public - this would not have happened. We weren't the only part of the problem. We were, however, contributory.

Greg

Peg you wrote:

"I don't know why you seem to ignore half of what I write; not my issue. If you would pay a little more attention to it, however, you might feel less of a need to spend half your day writing some of these comments that make little sense in light of my posts."

I ignore 90% of what you say because you back it up with nothing No facts, no nothing. Just pure right wing talking points. You are college educated, if you wrote a paper, turned it in to your professor and offered not a hint of substance to support your position the professor would of handed it back to you. Heck, most high school teachers would not except this either.

Now you claim I bring "partisanship to a new level". Yet it is amazing that you never can list where anything I presented was wrong. You just do not like the facts and points I make, and are unable to dispute them. That's not being a partisan, that's just being able to articulate a point or position and backing it up with some facts. You know what they say

"It is well know the facts have a liberal bias"

Now am I saying that my positions are completely correct? No, they might not be. I would love to hear an intelligent, fact base position from the other side. But when you offer no concrete proof to anything you state, and criticize me for having the ability to somehow substantiate the things I am saying. How can I take most of what you write seriously? You may have some valid points, all I ask is that you somehow back up what you say when some sort of fact, or at least counter what I write with something more than you are wrong. I would think that with issues such as these you could be able to formulate a better position than you do.

Are you stating that asking this much makes me a partisan?

Peg

Greg. Your stating that I never back anything up with facts does not make it so. I posted a 9+ minute video that was chock full of original source material: bills, articles, etc. with documentation. Look under "for my liberal readers" and actually watch the darn thing.

While I actually think that Mr. Dilletante overstated the case above, that some people overextended themselves is surely the case. I saw it with my own eyes.

When you have your own blog, supply the documentation that you wish. I'll do what I wish for mine.

I realize that people like you and Jammen think that we got to where we are today because of a bunch of greedy Wall Street folks and some Republicans who refused to rein them in. You're entitled to your opinions.

But - the facts are that where we are today was the culmination of many programs, a huge number of people in a wide variety of fields - both parties - etc. The responsibilty for today's financial state cannot be put at the doorstep of just a few.

Greg

I saw the video and debunked that post already. I think that would be the post where Chris Cox the SEC Chairmen blamed the mess on deregulation. Here is a summary of the article.

Mr. Cox blamed the Gramm-Leach-Bliley Act which was constructed by former Sen. Phil Gramm (R-TX) in 1999 and deregulated the banking industry for contributing to the financial meltdown. He said that “the failure of the Gramm-Leach-Bliley Act to give regulatory authority over investment bank holding companies to any agency of government was, based on the experience of the last several months, a costly mistake.”

Nice try.

I do blog elsewhere (Democratic Underground, Open Left, Jack and Jill Politics, the Young Turks just to name a few places). As I stated before I visit right wing blogs (I find them not very fact based and more opinion oriented) to listen to a different prospective. If I only read and listen to people I agree with, I would learn or hear nothing new. How smart would that be. I am not so insecure in my thinking that I am not open to other opinions.

Now the reasons I disagree with you is that I think you are flat wrong. You can shift blame all you want, yet still have not heard you mention that perhaps all this deregulation you were in favor of might of been a cause of this mess. I also believe your premise is weak and has been debunked way too many times. In essence your argument is the one Republicans are using to shift blame for all the opinions and policies you and Republicans have pushed for before this crisis. I am not buying it, and the American people are not either.

By a 2-to-1 ratio, Americans blame Republicans over Democrats for the financial crisis that has swept across the country the past few weeks.
http://www.cnn.com/2008/POLITICS/09/22/cnn.poll/index.html

So spin all you want, most Americans disagree with you. I know blame it on the liberal slanted Americans. To add to it, I think your shifting blame is partially bias. You seem to be echoing some Michelle Bachmann. Then again you are both from Minnesota.

Why do I say that? During a Senate hearing on last Thursday, Michele Bachmann pinned blame for financial crisis on President Clinton, “blacks,” and “other minorities.” Does this sound familiar? You know the whole Republican mantra when something goes wrong, blame Clinton, blame the minorities. Is it any wonder why Republicans are having a hard time enticing minorities into their ranks?

To prove her point, Bachmann read from an article written by Terry Jones in the right-wing publication Investor’s Business Daily. In this article Jones criticized the Community Reinvestment Act (CRA) and said Clinton was misguided for pushing “homeownership as a way to open the door for blacks and other minorities to enter the middle class.” Sounds like the same stuff you been peddling. Is this a Republican talking point? Bachmann, Neil Cavuto, Rush, seems like a pattern to me. Call me crazy. As usual this has been debunked and Robert Gordon did so month's ago in the American Prospect. He clearly demonstrated why this right-wing talking point is nothing more than a pernicious myth.

Did Liberals Cause the Sub-Prime Crisis?

Conservatives blame the housing crisis on a 1977 law that helps-low income people get mortgages. It's a useful story for them, but it isn't true.

www.prospect.org/cs/articles?article=did_liberals_cause_the_subprime_crisis


If you care not to read the whole thing let me sum it up for you.

Mortgage lenders did not approve bad loans to comply with Community Reinvestment Act (CRA) they did so to make money:

1) Subprime loans intensified “at the very time when activity under CRA had slowed and the law had weakened,”

2) CRA doesn’t even apply to many of the loans behind the mortgage meltdown, and

3) The “lenders subject to CRA have engaged in less, not more, of the most dangerous lending.”

With that I will leave you alone. This is like shooting fish in a barrel. I never done it, but I am guessing after a while it get's monotonous.

Peg

I'm the one who says where we are today is a function of both parties, Wall Street, lenders, Realtors, the public, investors, yada yada yada. You say that where we are is the fault of Republicans. Yet I'm the partisan?

Yeah. Right.

As for polls; most of the Germans thought Hitler was right. Most of the South thought slavery was a good deal.

I rest my case on the rightness or wrongness of issues vis a vis polls.

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