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RE: More reading for liberals - economic crash of 2009 - 5/10/2016 10:30:24 AM   
Phydeaux


Posts: 4828
Joined: 1/4/2004
Status: offline
quote:

ORIGINAL: MrRodgers

quote:

ORIGINAL: Phydeaux


quote:

ORIGINAL: MrRodgers


quote:

ORIGINAL: Phydeaux

I've addressed all of mnotter's points previously. He's merely repeating crap at this point. But this article at business insider does a pretty good job at recapping, including the fact that clinton force the non-cra lenders to comply voluntarily with cra standards.

http://www.businessinsider.com/the-cra-debate-a-users-guide-2009-6

Look, I don't care about any of the politics involved or the push or talk. The entire CRA portfolio wasn't a hill-of-beans compared to the Countrywide portfolio of shit paper alone, they themselves either held on their own books voluntarily or couldn't sell because of the smell. not to mention the countless billion$ in other shit paperboys, who gladly joined the party.

Plus, we are forced to use the English language and nobody 'forces' anyone to 'voluntarily do something. Furthermore, the failure of the entire CRA portfolio wouldn't come close to causing Goldman Sachs, JP Morgan, Lehman bros. Citi, BaC to go bankrupt as they surely did technically and would have vanished if it were not for Bush, Paulsen & Co. and TARP.

They just had a guy this AM on C-Span named Dennis Kelleher Pres. & CEO pf from Better Markets Inc. listen to the whole think...great insight. HERE


Right. So the guy that was Senator Kennedy's General counsel is a non biased source. The same person who served for Barbar McCulski - one of the most liberal members of the Senate. And this is a creditable, non biased source for you. Despite the fact that Kennedy's staff drafted one of the changes to the CRA hmm?

http://www.haas.berkeley.edu/groups/finance/CRA_version27_final.pdf

The evidence therefore
shows that around CRA examinations, when incentives to conform to CRA standards are
particularly high, banks not only increase lending rates but appear to originate loans that are
markedly riskier.

we find that large lending institutions drive our main findings on the impact of
CRA exams on the quantity and quality of extended loans. This is to be expected: federal
regulatory agencies consider depository institutions’ CRA scores when considering applications
for deposit facilities, including branch openings as well as mergers and acquisitions. To the
extent that larger banks are more heavily engaged in mergers and acquisitions activity and
expansion through branch openings, they will have a greater incentive to maintain a high CRA
score and thus to adjust their lending behavior to satisfy CRA exams.


we find that the reduction in loan standards associated with elevated lending
around CRA exams is based primarily on unobservable characteristics. In other words, there is
no meaningful change in the observable characteristics of loans made by treatment group banks
relative to the control group banks around the CRA exam. This, again, is to be expected under
our interpretation of the results, since banks have an incentive to convince regulators that loans
extended to meet CRA criteria are not overly risky.

I don't care what the criteria was and what banks did or didn't do to adjust their lending criteria to accommodate. As I've written and study after study has shown, take every single CRA compliant or even adjusted loan and add them all up and they don't make any single bank on wall street say even Lehman Bros....go bankrupt.


So you keep saying without providing a single citation. I'm happy to show you why you are wrong, but first you have to provide the cites. I'm familiar with the faults in the 5-6 main studies, including Kenner.





quote:


It was the leveraging, the swap and securities (derivatives) market that was deregulated, the packing of the remaining 98% of loans into new securities and how they went bad that then fell on the swap guarantors that couldn't pay up. Not having that hedge payable, their debts couldn't be paid and that caused the big banks to technically...go under.


Certainly marketing grade F swill as Class A securities contributed to the problem. But the problem doesn't happen if the banks aren't required to make Grade F swill - securities that Merrill Lynch KNEW were crap. The securitizations don't happen if Fannie and Freddie under democratic control don't back stop the mortgages. Fanny and Freddie backstopped somewhere between 70-80% of all loans. In fact this is why non-conforming loans always have a risk premium. Because they cannot be bought / sold via primary markets.

quote:


Just how and what grounds is any man supposed to be biased based on who they worked for and as I continue to say...CRA loans weren't enough to make the biggest 6 banks or more (AIG and others) go bankrupt ? Especially given that there were no enforcement mechanisms i.e., no fines, no crimes and the DOJ never even got involved, never got any recommendations.


I've provided two studies that rigorously proved that banks that were subject to CRA review within 60 days made riskier loans with higher defaults. The fact that there were no prosecutions doesn't prove there were no crimes. Thats like saying a murder never happened because no one was ever caught. When in fact it only points to a corrupt enforcement, covering for corrupt democrats.

The idea that there was no enforcement is just counterfactual. Banks were not allowed to offer new services, open new branches or merge, if they did not get an adequate CRA score.

To argue that it is not is ridiculous. The same enforcement mechanism is used throughout the country for building permits. If you don't build according to code, a violation will be put on your house. You won't be able to sell (buy, expand) until lien/hold/violation is cleared. You know what its called.. code enforcement.

quote:


How is it that you think you can convince anybody that federal wants & desires, resolutions, promotions, chin music without so much as any actions with the actual force of law with criminal penalties, was responsible for the bankruptcy of all of those wall street firms and especially given that on 100's of billion$ of non-CRA loans, securities and fraud that was taking place...did represent violations of law ?


Because contrary to your claims, after modification of the CRA subprime loans went from 350 billion to 1.3 trillion per year. You think that it was fraud, that these were marketed as investment worthy securities. I agree.

But I go much much further. I think it criminal governmental policy to require sub-prime mortgages. You can't securitize a product if you never made it legal in the first place. If you didnt have government insert itself into the lending process and say - you will make these loans. If you didn't have quasi governmental bodies backing mortgages.

Talk about the privatization of profit and the socialization of risk - thats all the democrats were doing - forcing the banks to make loans to minorities - letting the big banks profit - and having the US government and things like fannie and freddie pick up the risks and losses.

Finally. As far as I know, every single bailout recipient that was a bank was under CRA review. Do you have any figures to suggest that wasn't true?

< Message edited by Phydeaux -- 5/10/2016 10:33:16 AM >

(in reply to MrRodgers)
Profile   Post #: 41
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 10:55:50 AM   
mnottertail


Posts: 60698
Joined: 11/3/2004
Status: offline 		Just ignorant asswipe from nutsucker slobber blogs.

http://fortune.com/2015/06/17/subprime-mortgage-recession/
http://www.federalreservehistory.org/Events/DetailView/55
https://business.cch.com/images/banner/subprime.pdf


https://fcic.law.stanford.edu/
Financial Crisis Inquiry Commission:
The Commission reached nine main conclusions (directly quoted)

We conclude this financial crisis was avoidable.
"There was an explosion in risky subprime lending and securitization, an unsustainable rise in housing prices, widespread reports of egregious and predatory lending practices, dramatic increases in household mortgage debt, and exponential growth in financial firms' trading activities, unregulated derivatives, and short-term "repo" lending markets, among many other red flags. Yet there was pervasive permissiveness; little meaningful action was taken to quell the threats in a timely manner." The Commission especially singles out the Fed's "failure to stem the flow of toxic mortgages."

We conclude widespread failures in financial regulation and supervision proved devastating to the stability of the nation's financial markets.
"More than 30 years of deregulation and reliance on self-regulation by financial institutions, championed by former Federal Reserve chairman Alan Greenspan and others, supported by successive administrations and Congresses, and actively pushed by the powerful financial industry at every turn, had stripped away key safeguards, which could have helped avoid catastrophe. This approach had opened up gaps in oversight of critical areas with trillions of dollars at risk, such as the shadow banking system and over-the-counter derivatives markets. In addition, the government permitted financial firms to pick their preferred regulators in what became a race to the weakest supervisor."

We conclude dramatic failures of corporate governance and risk management at many systemically important financial institutions were a key cause of this crisis.
"Too many of these institutions acted recklessly, taking on too much risk, with too little capital, and with too much dependence on short-term funding. ... [Large investment banks and bank holding companies] took on enormous exposures in acquiring and supporting subprime lenders and creating, packaging, repackaging, and selling trillions of dollars in mortgage-related securities, including synthetic financial products." The report goes on to fault "poorly executed acquisitionand integration strategies that made effective management more challenging," narrow emphasis on mathematical models of risk as opposed to actual risk, and short-sighted compensation systems at all levels.

We conclude a combination of excessive borrowing, risky investments, and lack of transparency put the financial system on a collision course with crisis.
"In the years leading up to the crisis, too many financial institutions, as well as too many households, borrowed to the hilt. ... [A]s of 2007, the leverage ratios [of the five major investment banks] were as high as 40 to 1, meaning for every $40 in assets, there was only $1 in capital to cover losses. Less than a 3% drop in asset values could wipe out a firm. To make matters worse, much of their borrowing was short-term, in the overnight market—meaning the borrowing had to be renewed each and every day. ... And the leverage was often hidden—in derivatives positions, in off-balance-sheet entities, and through "window dressing" of financial reports available to the investing public. ... The heavy debt taken on by some financial institutions was exacerbated by the risky assets they were acquiring with that debt. As the mortgage and real estate markets churned out riskier and riskier loans and securities, many financial institutions loaded up on them."

We conclude the government was ill prepared for the crisis, and its inconsistent response added to the uncertainty and panic in the financial markets.
"[K]ey policy makers ... were hampered because they did not have a clear grasp of the financial system they were charged with overseeing, particularly as it had evolved in the years leading up to the crisis. This was in no small measure due to the lack of transparency in key markets. They thought risk had been diversified when, in fact, it had been concentrated. ... There was no comprehensive and strategic plan for containment, because they lacked a full understanding of the risks and interconnections in the financial markets. ... While there was some awareness of, or at least a debate about, the housing bubble, the record reflects that senior public officials did not recognize that a bursting of the bubble could threaten the entire financial system. ... In addition, the government's inconsistent handling of major financial institutions during the crisis—the decision to rescue Bear Stearns and then to place Fannie Mae and Freddie Mac into conservatorship, followed by its decision not to save Lehman Brothers and then to save AIG—increased uncertainty and panic in the market."

We conclude there was a systemic breakdown in accountability and ethics.
"In our economy, we expect businesses and individuals to pursue profits, at the same time that they produce products and services of quality and conduct themselves well. Unfortunately ... [l]enders made loans that they knew borrowers could not afford and that could cause massive losses to investors in mortgage securities. ... And the report documents that major financial institutions ineffectively sampled loans they were purchasing to package and sell to investors. They knew a significant percentage of the sampled loans did not meet their own underwriting standards or those of the originators. Nonetheless, they sold those securities to investors. The Commission's review of many prospectuses provided to investors found that this critical information was not disclosed.

We conclude collapsing mortgage-lending standards and the mortgage securitization pipeline lit and spread the flame of contagion and crisis.
"Many mortgage lenders set the bar so low that lenders simply took eager borrowers' qualifications on faith, often with a willful disregard for a borrower's ability to pay. ... While many of these mortgages were kept on banks' books, the bigger money came from global investors who clamored to put their cash into newly created mortgage-related securities. It appeared to financial institutions, investors, and regulators alike that risk had been conquered. ... But each step in the mortgage securitization pipeline depended on the next step to keep demand going. From the speculators who flipped houses to the mortgage brokers who scouted the loans, to the lenders who issued the mortgages, to the financial firms that created the mortgage-backed securities, collateralized debt obligations (CDOs), CDOs squared, and synthetic CDOs: no one in this pipeline of toxic mortgages had enough skin in the game. When borrowers stopped making mortgage payments, the losses—amplified by derivatives—rushed through the pipeline. As it turned out, these losses were concentrated in a set of systemically important financial institutions."

We conclude over-the-counter derivatives contributed significantly to this crisis.
"The enactment of legislation in 2000 to ban the regulation by both the federal and state governments of over-the-counter (OTC) derivatives was a key turning point in the march toward the financial crisis. ... OTC derivatives contributed to the crisis in three significant ways. First, one type of derivative—credit default swaps (CDS) fueled the mortgage securitization pipeline. CDS were sold to investors to protect against the default or decline in value of mortgage-related securities backed by risky loans. ... Second, CDS were essential to the creation of synthetic CDOs. These synthetic CDOs were merely bets on the performance of real mortgage-related securities. They amplified the losses from the collapse of the housing bubble by allowing multiple bets on the same securities and helped spread them throughout the financial system. ... Finally, when the housing bubble popped and crisis followed, derivatives were in the center of the storm. AIG, which had not been required to put aside capital reserves as a cushion for the protection it was selling, was bailed out when it could not meet its obligations. The government ultimately committed more than $180 billion because of concerns that AIG's collapse would trigger cascading losses throughout the global financial system. In addition, the existence of millions of derivatives contracts of all types between systemically important financial institutions—unseen and unknown in this unregulated market—added to uncertainty and escalated panic, helping to precipitate government assistance to those institutions."

We conclude the failures of credit rating agencies were essential cogs in the wheel of financial destruction.
"The three credit rating agencies were key enablers of the financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval. Investors relied on them, often blindly. In some cases, they were obligated to use them, or regulatory capital standards were hinged on them. ... [T]he forces at work behind the breakdowns at Moody's ... includ[ed] the flawed computer models, the pressure from financial firms that paid for the ratings, the relentless drive for market share, the lack of resources to do the job despite record profits, and the absence of meaningful public oversight."

The minority dissent points out that it was worldwide.

One deregulator nutsucker blames it on the CRA.

The Housing bubble driver is a nutsucker.
https://georgewbush-whitehouse.archives.gov/news/releases/2002/06/20020617-2.html
http://www.nytimes.com/2008/12/21/business/worldbusiness/21iht-admin.4.18853088.html?_r=1
http://www.cnn.com/2002/ALLPOLITICS/06/17/bush.minority.homes/
http://web.mit.edu/cjpalmer/www/CPalmer_JMP.pdf

Defaults because of nutsuckers destroying the economy
https://www.federalreserve.gov/pubs/feds/2008/200859/200859pap.pdf
https://www.economicdynamics.org/meetpapers/2012/paper_751.pdf
https://www.ncsha.org/blog/unc-center-study-debunks-role-cra-housing-crisis

They were under CRA review to find out if that was what was wrong, as was being spouted by nutsuckers, it wasn't.

_____________________________

Have they not divided the prey; to every man a damsel or two? Judges 5:30


(in reply to Phydeaux)
Profile   Post #: 42
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 11:08:15 AM   
Phydeaux


Posts: 4828
Joined: 1/4/2004
Status: offline 		To which the reply is the same as the last time you posted that crap.

Quoting
quote:


The democrats had total control of the Senate in 2011. Architects of the disaster, they wanted the report to absolve them of any role in the debacle. So it did.
quote:


Regarding your FCIC report, Peter Wallison was a member of the commission. Here's what he said about it:
quote:



In any event, the FCIC acquitted the CRA from any responsibility for the crisis before it even began its study, and resisted all my efforts to find out more about the effect of the Act.



And repeating crap citations does not make them more accurate.

But let me quote from your federal reserve citation.


1. According to data
from the Mortgage Bankers Association, the share of mortgage loans that were “seriously
delinquent” (90 days or more past due or in the process of foreclosure) averaged 1.7 percent
from 1979 to 2006, with a low of about 0.7 percent (in 1979) and a high of about 2.4 percent (in
2002)

2. . In dollar terms, nonprime mortgages represented 32 percent of all
mortgage originations in 2005, more than triple their 10 percent share only two years earlier
(Inside Mortgage Finance, 2008)

3. The
share of subprime mortgages that were seriously delinquent increased from about 5.6 percent in
mid-2005 to over 21 percent in July 2008.


So before we move on - lets consider that. Historical defaul rates 1.7 percent.
Default rates on subprime - 21.8 percent, in 2008.
And subprime mortages were 32% of all mortgages.

Continuing.

4. As shown in Panel B of Table 2, the median combined loan-to-value ratio for subprime
purchase loans rose from 90 percent in 2003 to 100 percent in 2005

5. No docs rose to 38% of mortgages by 2007.

Payoff quote:

A. Slackened underwriting standards—manifested most dramatically by lenders allowing
borrowers to forego down payments entirely—combined with stagnant to falling house prices in
many parts of the country appear to be the most immediate contributors to the rise in mortgage
defaults

B. We suggest instead default rates were highest on these products
because they were originated to the borrowers with the lowest credit scores and highest loan-tovalue
ratios.
News accounts often suggested that borrowers were steered into subprime adjustable-rate
mortgages when they could have qualified for fixed-rate or prime mortgages (Brooks and Simon,
2007). Given the poor credit profiles of these borrowers and the high price of housing relative to
their incomes, however, it seems more likely that, in the absence of subprime adjustable-rate
mortgages, these borrowers would not have gotten credit at all.


In other words - your article says nothing to contradict my cites - and a great deal to corroborate it.

My cites showed that the CRA caused banks to make riskier loans, and an industry wide degredation of lending standards.
That corrupted standard, along with marketization by fannie et.al was the primary responsibility for causing the housing meltdown.

Your cites say supports mine by saying the primary cause was the degredation in lending standards.

Thanks for the assist. By the way - if you look at Table 1, you can see how significantly the degradation of lending standards occurs, quite graphically, between 2004 and 2007.


< Message edited by Phydeaux -- 5/10/2016 11:29:30 AM >

(in reply to mnottertail)
Profile   Post #: 43
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 11:19:33 AM   
MrRodgers


Posts: 10542
Joined: 7/30/2005
Status: offline 		Actually in previous posts on this matter, I did privide many cites but will do another. This one is from the liberal, democrat, socialist run federal reserve bank.

This article discusses key features of the CRA and presents results from our analysis of several data sources regarding the volume and performance of CRA-related mortgage lending. On balance, the evidence runs counter to the contention that the CRA lies at the root of the current mortgage crisis.

.....the CRA does not stipulate minimum targets or even goals for the volume of loans, services, or investments banking institutions must provide.

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. This fact weakens the potential link between the CRA and the current mortgage crisis.

Our second point is a matter of the originating entity. When considering the potential role of the CRA in the current mortgage crisis, it is important to account for the originating party. In particular, independent nonbank lenders, such as mortgage and finance companies and credit unions, originate a substantial share of subprime mortgages, but they are not subject to CRA regulation and, hence, are not directly influenced by CRA obligations.

.....loan originations, we determine which types of lending institutions made higher-priced loans, to whom those loans were made, and in what types of neighborhoods the loans were extended. This analysis therefore depicts the fraction of subprime mortgage lending that could be related to the CRA.

Using loan origination data obtained pursuant to the Home Mortgage Disclosure Act (HMDA), we find that in 2005 and 2006, independent nonbank institutions—institutions not covered by the CRA—accounted for about half of all subprime originations. Also, about 60 percent of higher-priced loan originations went to middle- or higher-income borrowers or neighborhoods, populations not targeted by the CRA.

In total, of all the higher-priced loans, only 6 percent were extended by CRA-regulated lenders (and their affiliates) to either lower-income borrowers or neighborhoods in the lenders' CRA assessment areas, which are the local geographies that are the primary focus for CRA evaluation purposes. The small share of subprime lending in 2005 and 2006 that can be linked to the CRA suggests it is very unlikely the CRA could have played a substantial role in the subprime crisis.

To the extent that banking institutions chose not to include their affiliates' lending in their CRA examinations, the 6 percent share overstates the volume of higher-priced, lower-income lending that CRA examiners would have counted.

It is possible, however, the examiners might have considered at least some of the lower-income lending outside of CRA assessment areas if institutions asked that it be considered in their CRA performance evaluations. No data are available to assess this possibility; however, the majority of the higher-priced loans made outside of assessment areas were to middle- or higher-income borrowers. In our view, this suggests it is unlikely that the CRA was a motivating factor for such higher-priced lending. Rather, it is likely that higher-priced lending was primarily motivated by its apparent profitability.

Although we lack definitive information on banks' CRA-induced secondary market activity, the HMDA data provide information on the types of institutions to which mortgages are sold. The data suggest that the link between independent mortgage companies and banks through direct secondary market transactions is weak, especially for lower-income loans. In 2006, only about 9 percent of independent mortgage company loan sales were to banking institutions. And among these transactions, only 15 percent involved higher-priced loans to lower-income borrowers or neighborhoods. In other words, less than 2 percent of the mortgage originations sold by independent mortgage companies in 2006 were higher-priced, CRA-credit-eligible, and purchased by CRA-covered banking institutions.

Had enough ?

Specifically, we focus only on ZIP Codes right above and right below the CRA eligibility threshold. (two neighborhoods) As such, the only major difference between these two sets of neighborhoods should be that the CRA focuses on one group and not the other. This analysis indicates that subprime loans in ZIP Codes that are the focus of the CRA (those just below the threshold) have performed virtually the same as loans in the areas right above the threshold

To gain further insight into the risks of lending to lower-income borrowers or areas, we also compared the performance of first mortgages originated and held in portfolio under the nationwide affordable lending programs operated by the NeighborWorks® America (NWA) partners to the performance of loans of various types as reported by the Mortgage Bankers Association of America. Many loans originated through NWA programs are done in conjunction with banking institutions subject to the CRA, so the performance of these loans provides another basis to address the relationship between the CRA and the subprime crisis. Along any measure of the severity of loan delinquency or the incidence of foreclosure, the loans originated under the NWA program have performed better than subprime loans.

Data made available by RealtyTrac on foreclosure filings from January 2006 through August 2008 indicate that most foreclosure filings (e.g., about 70 percent in 2006) have taken place in middle- or higher-income neighborhoods. More important, foreclosure filings have increased at a faster pace in middle- or higher-income areas than in lower-income areas that are the focus of the CRA.

Two basic points emerge from our analysis of the available data. First, only a small portion of subprime mortgage originations is related to the CRA. (as I've been trying to tell you) Second, CRA-related loans appear to perform comparably to other types of subprime loans. Taken together, the available evidence seems to run counter to the contention that the CRA contributed in any substantive way to the current mortgage crisis. HERE

You want to stress policy while I've tried to stress what really happened and that CRA lending did not cause the banking meltdown and the need for TARP. Oh and as for Freddie and Fannie, they were operated under the GWB admin. for years and [it] did nothing to stop those GSE's from going outside their normal mortgage purchasing criteria and furthermore...leveraging billion$ in an attempt to cash in.

Now it is also being fair and objective rather than trying to cherry pick what really are partisan blogs,is that in my area in No. Va. there would have been no CRA sensitive areas with household income being way above [its] threshold and therefore not a single CRA loan was needed. Still, with all of what was done during that time and the studies since, even if anyone did qualify for CRA mortgage, in total, they would have had absolutely no influence in the subprime mortgage default mess.

< Message edited by MrRodgers -- 5/10/2016 11:29:04 AM >

_____________________________

You can be a murderous tyrant and the world will remember you fondly but fuck one horse and you will be a horse fucker for all eternity. Catherine the Great

Under capitalism, man exploits man. Under communism, it's just the opposite.
J K Galbraith

(in reply to Phydeaux)
Profile   Post #: 44
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 11:27:04 AM   
Phydeaux


Posts: 4828
Joined: 1/4/2004
Status: offline 		provide the cite, not just the quote. Although the words are familiar, I can't place the report, although I know I have responded to that tripe previously.

Never mind. I recall - thats the piece by two economists out of minneapolis. Answer in a moment.

< Message edited by Phydeaux -- 5/10/2016 11:37:57 AM >

(in reply to MrRodgers)
Profile   Post #: 45
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 11:31:33 AM   
mnottertail


Posts: 60698
Joined: 11/3/2004
Status: offline 		yeah, you mean you responded to your own tripe?

http://fortune.com/2015/06/17/subprime-mortgage-recession/
http://www.federalreservehistory.org/Events/DetailView/55
https://business.cch.com/images/banner/subprime.pdf


https://fcic.law.stanford.edu/
Financial Crisis Inquiry Commission:
The Commission reached nine main conclusions (directly quoted)

We conclude this financial crisis was avoidable.
"There was an explosion in risky subprime lending and securitization, an unsustainable rise in housing prices, widespread reports of egregious and predatory lending practices, dramatic increases in household mortgage debt, and exponential growth in financial firms' trading activities, unregulated derivatives, and short-term "repo" lending markets, among many other red flags. Yet there was pervasive permissiveness; little meaningful action was taken to quell the threats in a timely manner." The Commission especially singles out the Fed's "failure to stem the flow of toxic mortgages."

We conclude widespread failures in financial regulation and supervision proved devastating to the stability of the nation's financial markets.
"More than 30 years of deregulation and reliance on self-regulation by financial institutions, championed by former Federal Reserve chairman Alan Greenspan and others, supported by successive administrations and Congresses, and actively pushed by the powerful financial industry at every turn, had stripped away key safeguards, which could have helped avoid catastrophe. This approach had opened up gaps in oversight of critical areas with trillions of dollars at risk, such as the shadow banking system and over-the-counter derivatives markets. In addition, the government permitted financial firms to pick their preferred regulators in what became a race to the weakest supervisor."

We conclude dramatic failures of corporate governance and risk management at many systemically important financial institutions were a key cause of this crisis.
"Too many of these institutions acted recklessly, taking on too much risk, with too little capital, and with too much dependence on short-term funding. ... [Large investment banks and bank holding companies] took on enormous exposures in acquiring and supporting subprime lenders and creating, packaging, repackaging, and selling trillions of dollars in mortgage-related securities, including synthetic financial products." The report goes on to fault "poorly executed acquisitionand integration strategies that made effective management more challenging," narrow emphasis on mathematical models of risk as opposed to actual risk, and short-sighted compensation systems at all levels.

We conclude a combination of excessive borrowing, risky investments, and lack of transparency put the financial system on a collision course with crisis.
"In the years leading up to the crisis, too many financial institutions, as well as too many households, borrowed to the hilt. ... [A]s of 2007, the leverage ratios [of the five major investment banks] were as high as 40 to 1, meaning for every $40 in assets, there was only $1 in capital to cover losses. Less than a 3% drop in asset values could wipe out a firm. To make matters worse, much of their borrowing was short-term, in the overnight market—meaning the borrowing had to be renewed each and every day. ... And the leverage was often hidden—in derivatives positions, in off-balance-sheet entities, and through "window dressing" of financial reports available to the investing public. ... The heavy debt taken on by some financial institutions was exacerbated by the risky assets they were acquiring with that debt. As the mortgage and real estate markets churned out riskier and riskier loans and securities, many financial institutions loaded up on them."

We conclude the government was ill prepared for the crisis, and its inconsistent response added to the uncertainty and panic in the financial markets.
"[K]ey policy makers ... were hampered because they did not have a clear grasp of the financial system they were charged with overseeing, particularly as it had evolved in the years leading up to the crisis. This was in no small measure due to the lack of transparency in key markets. They thought risk had been diversified when, in fact, it had been concentrated. ... There was no comprehensive and strategic plan for containment, because they lacked a full understanding of the risks and interconnections in the financial markets. ... While there was some awareness of, or at least a debate about, the housing bubble, the record reflects that senior public officials did not recognize that a bursting of the bubble could threaten the entire financial system. ... In addition, the government's inconsistent handling of major financial institutions during the crisis—the decision to rescue Bear Stearns and then to place Fannie Mae and Freddie Mac into conservatorship, followed by its decision not to save Lehman Brothers and then to save AIG—increased uncertainty and panic in the market."

We conclude there was a systemic breakdown in accountability and ethics.
"In our economy, we expect businesses and individuals to pursue profits, at the same time that they produce products and services of quality and conduct themselves well. Unfortunately ... [l]enders made loans that they knew borrowers could not afford and that could cause massive losses to investors in mortgage securities. ... And the report documents that major financial institutions ineffectively sampled loans they were purchasing to package and sell to investors. They knew a significant percentage of the sampled loans did not meet their own underwriting standards or those of the originators. Nonetheless, they sold those securities to investors. The Commission's review of many prospectuses provided to investors found that this critical information was not disclosed.

We conclude collapsing mortgage-lending standards and the mortgage securitization pipeline lit and spread the flame of contagion and crisis.
"Many mortgage lenders set the bar so low that lenders simply took eager borrowers' qualifications on faith, often with a willful disregard for a borrower's ability to pay. ... While many of these mortgages were kept on banks' books, the bigger money came from global investors who clamored to put their cash into newly created mortgage-related securities. It appeared to financial institutions, investors, and regulators alike that risk had been conquered. ... But each step in the mortgage securitization pipeline depended on the next step to keep demand going. From the speculators who flipped houses to the mortgage brokers who scouted the loans, to the lenders who issued the mortgages, to the financial firms that created the mortgage-backed securities, collateralized debt obligations (CDOs), CDOs squared, and synthetic CDOs: no one in this pipeline of toxic mortgages had enough skin in the game. When borrowers stopped making mortgage payments, the losses—amplified by derivatives—rushed through the pipeline. As it turned out, these losses were concentrated in a set of systemically important financial institutions."

We conclude over-the-counter derivatives contributed significantly to this crisis.
"The enactment of legislation in 2000 to ban the regulation by both the federal and state governments of over-the-counter (OTC) derivatives was a key turning point in the march toward the financial crisis. ... OTC derivatives contributed to the crisis in three significant ways. First, one type of derivative—credit default swaps (CDS) fueled the mortgage securitization pipeline. CDS were sold to investors to protect against the default or decline in value of mortgage-related securities backed by risky loans. ... Second, CDS were essential to the creation of synthetic CDOs. These synthetic CDOs were merely bets on the performance of real mortgage-related securities. They amplified the losses from the collapse of the housing bubble by allowing multiple bets on the same securities and helped spread them throughout the financial system. ... Finally, when the housing bubble popped and crisis followed, derivatives were in the center of the storm. AIG, which had not been required to put aside capital reserves as a cushion for the protection it was selling, was bailed out when it could not meet its obligations. The government ultimately committed more than $180 billion because of concerns that AIG's collapse would trigger cascading losses throughout the global financial system. In addition, the existence of millions of derivatives contracts of all types between systemically important financial institutions—unseen and unknown in this unregulated market—added to uncertainty and escalated panic, helping to precipitate government assistance to those institutions."

We conclude the failures of credit rating agencies were essential cogs in the wheel of financial destruction.
"The three credit rating agencies were key enablers of the financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval. Investors relied on them, often blindly. In some cases, they were obligated to use them, or regulatory capital standards were hinged on them. ... [T]he forces at work behind the breakdowns at Moody's ... includ[ed] the flawed computer models, the pressure from financial firms that paid for the ratings, the relentless drive for market share, the lack of resources to do the job despite record profits, and the absence of meaningful public oversight."

The minority dissent points out that it was worldwide.

One deregulator nutsucker blames it on the CRA.

The Housing bubble driver is a nutsucker.
https://georgewbush-whitehouse.archives.gov/news/releases/2002/06/20020617-2.html
http://www.nytimes.com/2008/12/21/business/worldbusiness/21iht-admin.4.18853088.html?_r=1
http://www.cnn.com/2002/ALLPOLITICS/06/17/bush.minority.homes/
http://web.mit.edu/cjpalmer/www/CPalmer_JMP.pdf

Defaults because of nutsuckers destroying the economy
https://www.federalreserve.gov/pubs/feds/2008/200859/200859pap.pdf
https://www.economicdynamics.org/meetpapers/2012/paper_751.pdf
https://www.ncsha.org/blog/unc-center-study-debunks-role-cra-housing-crisis

_____________________________

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(in reply to Phydeaux)
Profile   Post #: 46
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 11:32:21 AM   
MrRodgers


Posts: 10542
Joined: 7/30/2005
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quote:

ORIGINAL: Phydeaux

provide the cite, not just the quote. Although the words are familiar, I can't place the report, although I know I have responded to that tripe previously.

I did and if anyone is spewing tripe here and while I never try to be insulting with that rare exception...it is you. The federal reserve had no partisan motives while it seems just just about every single one of your OP's...does. This OP is just another.

_____________________________

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Under capitalism, man exploits man. Under communism, it's just the opposite.
J K Galbraith

(in reply to Phydeaux)
Profile   Post #: 47
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 11:39:45 AM   
Phydeaux


Posts: 4828
Joined: 1/4/2004
Status: offline
quote:

ORIGINAL: MrRodgers


quote:

ORIGINAL: Phydeaux

provide the cite, not just the quote. Although the words are familiar, I can't place the report, although I know I have responded to that tripe previously.

I did


No, of course you did not. No link listed, no source provided. But I found it. Rebuttal in a moment.


(in reply to MrRodgers)
Profile   Post #: 48
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 11:41:02 AM   
MrRodgers


Posts: 10542
Joined: 7/30/2005
Status: offline
quote:

ORIGINAL: Phydeaux


quote:

ORIGINAL: MrRodgers


quote:

ORIGINAL: Phydeaux

provide the cite, not just the quote. Although the words are familiar, I can't place the report, although I know I have responded to that tripe previously.

I did


No, of course you did not. No link listed, no source provided. But I found it. Rebuttal in a moment.



It's in there, you just missed it. I always put my link at the end of the source material I use. There is no rebuttal. The fed summed it up perfectly.

< Message edited by MrRodgers -- 5/10/2016 11:42:48 AM >

_____________________________

You can be a murderous tyrant and the world will remember you fondly but fuck one horse and you will be a horse fucker for all eternity. Catherine the Great

Under capitalism, man exploits man. Under communism, it's just the opposite.
J K Galbraith

(in reply to Phydeaux)
Profile   Post #: 49
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 11:43:53 AM   
mnottertail


Posts: 60698
Joined: 11/3/2004
Status: offline 		https://www.minneapolisfed.org/publications/community-dividend/did-the-cra-cause-the-mortgage-market-meltdown

I found it, of course I can read and I am not interested in re-felching ignorant nutsucker slobber blogs when facts are so close by, credibly cited, expert and numerous.

But you hid it under HERE. LOL.

< Message edited by mnottertail -- 5/10/2016 11:44:18 AM >

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Profile   Post #: 50
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 12:16:25 PM   
Phydeaux


Posts: 4828
Joined: 1/4/2004
Status: offline 		ORIGINAL: MrRodgers

quote:


.....the CRA does not stipulate minimum targets or even goals for the volume of loans, services, or investments banking institutions must provide.


Weasel wording. The CRA doesn't provide volume targets, but it does provide % targets.

quote:


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. This fact weakens the potential link between the CRA and the current mortgage crisis.


Answering this the same way I answered it before:

quote:


Throughout the nineties banks, as banks lowered their mortgage standards, mortgage rates remained high. The laxity was spreading but the incentives for borrowers to re-finance even under relaxed standards remained low. New buyers often still didn’t know that some of the loosey-goosey mortgages existed. Speculators had an internet bubble, so they weren’t yet attracted to real-estate. Treasury rates were not yet so low that investors seeking yield would pour into mortgage backed securities. Securitization levels were low enough that banks weren’t yet willing to fully embrace the loose standards. The historical data on default and loss rates from the lax lending were not yet available, so they weren’t embraced by banks or the broader market.

But as the years went by, these factors changed. The Fed pushed interest rates down. This made refinancing more attractive, and created an investor demand for yield. Fannie and Freddie popularized low-income securitization. Low defaults and loss rates from lax loans made them seem not as risky as previously expected. A shrinking consumer asset base thanks to the dot com bust created a demand for home-equity loans and high loan-to-value loans, as consumers exchanged high-interest credit card debt for low interest home debt. Speculators seeking higher returns and ordinary home buyers became aware that lax lending standards would allow them to buy bigger homes with little or no money down.

In short, the lax lending standards created in response to the CRA had dug a pit that was waiting to get filled when the circumstances were right.

What about "No Money Down" Mortgages? Were they required by the CRA?
Actually, yes they were. The regulators charged with enforcing the CRA praised the lowering of down payments and even their elimination. They told banks that lending standards that exceeded that of regulators would be considered evidence of unfair lending. This effectively meant that no money down mortgages were required. A Treasury Department study published in 2000 found that the CRA had successfully lowered down payments not just for CRA loans, but for all mortgages.
Explain the shift in loan to value away from the traditional lending requirement of 80%.
Again, the regulators told banks that much higher LTVs was an appropriate way to meet the CRA obligations.

What about the elimination of payment history? How about income requirements?
Regulators instructed banks to consider alternatives to traditional credit histories because CRA targeted borrowers often lacked traditional credit histories. The banks were expected to become creative, to consider other indicators of reliability.

Similarly, banks were expected by regulators to relax income requirements. Day labors and others often lack reportable income. Stated-income was a way of resolving the gap between actual income of borrowers and reported income. The problem, of course, comes when the con-artists and liars come into the game.

Did the CRA require banks to develop automated underwriting systems that emphasized speed rather than accuracy in order to process the greatest number of mortgage apps as quickly as possible?
This was another lending innovation praised by regulators to the point that it became mandatory for banks. Those who were not employing automated underwriting would be putting their CRA ratings at risk. Automated underwriting was seen as a way of eliminating bias in lending.

Point out to me where in the CRA or any regulation that any of this is required.
I cannot. But this kind of legislative fundamentalism misconstrues the way laws constrain business activity. An unenforced law exercises little constraint, regardless of how onerous it is worded. Think of the way anti-trust enforcement changes from presidential administration to presidential administration.

In the case of the CRA, it was the activity of the regulators that matters. And each of these credit innovations described above was put into place to satisfy the CRA regulators.


quote:


Our second point is a matter of the originating entity. When considering the potential role of the CRA in the current mortgage crisis, it is important to account for the originating party. In particular, independent nonbank lenders, such as mortgage and finance companies and credit unions, originate a substantial share of subprime mortgages, but they are not subject to CRA regulation and, hence, are not directly influenced by CRA obligations.


Bullshit.

quote:


Weren’t the majority of the subprime loans made by mortgage service companies not subject to the CRA?
This is true. But it is largely beside the point. A huge driver of the demand for subprime loans was the demand for CRA bonds. Banks operating under the CRA could meet their obligations by buying up CRA loans or MBS built from CRA loans. The CRA created a demand that the mortgage servicers were meeting.

What's more, many smaller mortage service companies hoped to be acquired by larger banks. Increasing their CRA lending made them more attractive take-over targets.

A study put out by the Treasury Department in 2000 found that the CRA was encouraging the mortgage servicers to provide loans to low-income borrowers, in part because the CRA loans had been so successful.

Finally, the Clinton adminstration threatened to subject the mortgage companies to the CRA if they didn't comply voluntarily. They promptly agreed to increase their CRA-type lending in order to escape the kind of public scrutiny that comes with official CRA regulated status.


quote:


.....loan originations, we determine which types of lending institutions made higher-priced loans, to whom those loans were made, and in what types of neighborhoods the loans were extended.


No one has ever said that the location of the loans was a material factor. This is irrelevant.

quote:


Although we lack definitive information on banks' CRA-induced secondary market activity, the HMDA data provide information on the types of institutions to which mortgages are sold. The data suggest that the link between independent mortgage companies and banks through direct secondary market transactions is weak, especially for lower-income loans. In 2006, only about 9 percent of independent mortgage company loan sales were to banking institutions. And among these transactions, only 15 percent involved higher-priced loans to lower-income borrowers or neighborhoods. In other words, less than 2 percent of the mortgage originations sold by independent mortgage companies in 2006 were higher-priced, CRA-credit-eligible, and purchased by CRA-covered banking institutions.


Correct. Because 70% of all conforming mortgages were sold to Fannie and Freddie. The fact that loans were made to conformed to Fannie / Freddie and then securitized is a symptom of a problem and supports my contention.



quote:


Had enough ?


You clearly don't understand how and why the data are being sliced to lie. Pity. I accept that you don't mean to repeat bullshit - you just lack the understanding that it is bullshit.


quote:

Specifically, we focus only on ZIP Codes right above and right below the CRA eligibility threshold. (two neighborhoods) As such, the only major difference between these two sets of neighborhoods should be that the CRA focuses on one group and not the other. This analysis indicates that subprime loans in ZIP Codes that are the focus of the CRA (those just below the threshold) have performed virtually the same as loans in the areas right above the threshold


Again, zip codes having nothinig to do with the CRA inspired degredation in lending standards, which happened across zip codes and housing types. Banks were encourage to provide no income, no verificaiton, interest only loans to people that would never be able to make the principle payments. The fact that they choose to buy outside of low income areas is hardly surprising is it?

quote:


Data made available by RealtyTrac on foreclosure filings from January 2006 through August 2008 indicate that most foreclosure filings (e.g., about 70 percent in 2006) have taken place in middle- or higher-income neighborhoods. More important, foreclosure filings have increased at a faster pace in middle- or higher-income areas than in lower-income areas that are the focus of the CRA.


Again. Irrelevant. The CRA caused the degredation of loan standards that went across all housing segments.
The geographical distrbituion has NO relevance to the question. But there is no question that foreclosures were higher and higher as time went on (as shown in table 1 previously alluded to; and that the CRA caused the erosion of those loan standards.

In other words, while distribution of loans shows low or weak causality - that is a straw man. People, but especially low income people, were steered into sub prime loans. And those sub prime loans defaulted at rates exceeding 21%. No income verification loans defaulted at 29%.

quote:


Two basic points emerge from our analysis of the available data. First, only a small portion of subprime mortgage originations is related to the CRA. (as I've been trying to tell you)


True. And absolutely immaterial as I've been trying to explain to you time and time again.

quote:


Second, CRA-related loans appear to perform comparably to other types of subprime loans.


True. And again misleading and irrelevant.

CRA forced a relaxation of loan standards, that occurred industry wide.
Comparing CRA loan defaults to industry wide defaults thus has NO BEARING on the question.

I do want to say at some point you put the link in - but by then I'd already found it. So thanks for that anyway.


quote:


You want to stress policy while I've tried to stress what really happened


If you won't bother to understand the actual argument, then you will never understand what happened.


quote:


and that CRA lending did not cause the banking meltdown and the need for TARP.


Except of course that it did.

quote:


Oh and as for Freddie and Fannie, they were operated under the GWB admin. for years and [it] did nothing to stop those GSE's from going outside their normal mortgage purchasing criteria and furthermore...leveraging billion$ in an attempt to cash in.


Are you kidding. I've argued several times, forcefully that Bush insanely compounded the problem by trying to help minorities capitalize on the housing boom.
Bush increased the CRA percent to 55% from 50%. Bush was an idiot.

It is only here that you, just a start to show a trinkle of understanding. But the fact that bush did it too doesn't change the fact that the CRA was a primary cause of this debacle.

quote:


,is that in my area in No. Va. there would have been no CRA sensitive areas with household income being way above [its] threshold and therefore not a single CRA loan was needed. Still, with all of what was done during that time and the studies since, even if anyone did qualify for CRA mortgage, in total, they would have had absolutely no influence in the subprime mortgage default mess.


Again. Wrong. Did you even bother to read the quotes I provided?

< Message edited by Phydeaux -- 5/10/2016 12:18:06 PM >

(in reply to MrRodgers)
Profile   Post #: 51
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 12:33:09 PM   
mnottertail


Posts: 60698
Joined: 11/3/2004
Status: offline 		So, the nutsuckers are lying about what the nutsuckers did during a nutsucker administaration and nutsucker legislature by blaming it on the nutsuckers so that nutsuckers could say it was clintons fault?


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(in reply to Phydeaux)
Profile   Post #: 52
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 12:43:25 PM   
Nnanji


Posts: 4552
Joined: 3/29/2016
Status: offline
quote:

ORIGINAL: ThatDizzyChick

quote:

2003 they attempted to prevent fannie/freddie from accepting sub-prime loans; asked for hearings to change the CRA.
Held hearings on the threats and protests by democrat organizaitions which tried and succeeded in forcing banks to issue certain % of their loans as subprime.

So nothing really. Thanks for admitting that.

http://www.theatlantic.com/business/archive/2011/12/hey-barney-frank-the-government-did-cause-the-housing-crisis/249903/

(in reply to ThatDizzyChick)
Profile   Post #: 53
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 12:44:43 PM   
Nnanji


Posts: 4552
Joined: 3/29/2016
Status: offline
quote:

ORIGINAL: Lucylastic

is this revisionist history part 2 after being taunted about bush in the other thread??????? or to get away from having to defend the teflon don., LMFAO


As usual, nothing of interest to anyone.

(in reply to Lucylastic)
Profile   Post #: 54
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 12:49:47 PM   
Nnanji


Posts: 4552
Joined: 3/29/2016
Status: offline
quote:

ORIGINAL: MrRodgers


quote:

ORIGINAL: Phydeaux

quote:


https://en.wikipedia.org/wiki/Wall_Street_and_the_Financial_Crisis:_Anatomy_of_a_Financial_Collapse


The democrats had total control of the Senate in 2011. Architects of the disaster, they wanted the report to absolve them of any role in the debacle. So it did.
Your contention that the CRA had nothing to do with it is laughable.

Unsustainable subprime lending jumped to $350 billion a year after doing so was FORCED by the CRA. Those mortgages had triple the default rate of conventional mortgages.



Look, once and for all, if one takes the entire CRA portfolio and adds it up, study after study after study has shown that [they] represented less than 3% of ALL bad loans and fewer than that, that were legally described as loans that did fall well withing Freddie and Fannie mortgage warehouse guidelines...that were actually being paid back. So NO, CRA loans and in particular BAD CRA loans...had absolutely nothing to do with the MBS meltdown.

Also as we have discussed and you seem to want to continue to ignore and yes, for seemingly continued partisan reasons, there simply is no and was no and there still is NO enforcement mechanism for again...NOT MAKING A SINGLE CRA loan.

The only banks that may have if you really played your cards wrong, was that geee, your big bank, couldn't merge with another big bank. Research that one will you ?

So NO. NO loans were ever FORCED by the CRA. I was in real estate at the time and not single mortgage co., mortgage bank or mortgage financier was ever audited, received any communication from or any enforcement action ever taken and with NO...Repeat NO CRA loans ever on their books. Give...It...Up.

Post links to a couple of those studies after studies after studies.

(in reply to MrRodgers)
Profile   Post #: 55
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 12:52:19 PM   
mnottertail


Posts: 60698
Joined: 11/3/2004
Status: offline 		So if we accept this bit of hallucinatory statistics, that then leads us to the very vexing question: why a law in 1977 and revised in 1995 caused a meltdown of mortgages less than two years old in the years 2007 thru 2009?

The cause and effect is not apparent. And, it never will be, given the actual facts presented. Compared and contrasted to conjured assumptions and statistical prestidigitation.

You know statistically, if the election were held today (its not going to be) trump would win ohio (he wont) and lose florida and pennsylvania (he wont win them) and hillary would still be president. So the statistics are assumptions that are not causal or correlated to the meltdown. There is a 5 year leap of faith that is nutsuckers and deregulation, and asleep at the wheel that doesn't figure into the magic numbers.

< Message edited by mnottertail -- 5/10/2016 12:54:28 PM >

_____________________________

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(in reply to mnottertail)
Profile   Post #: 56
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 12:58:51 PM   
Nnanji


Posts: 4552
Joined: 3/29/2016
Status: offline
quote:

ORIGINAL: MrRodgers

Actually in previous posts on this matter, I did privide many cites but will do another. This one is from the liberal, democrat, socialist run federal reserve bank.

This article discusses key features of the CRA and presents results from our analysis of several data sources regarding the volume and performance of CRA-related mortgage lending. On balance, the evidence runs counter to the contention that the CRA lies at the root of the current mortgage crisis.

.....the CRA does not stipulate minimum targets or even goals for the volume of loans, services, or investments banking institutions must provide.





And yet bubba Clinton had Janet Reno write lending institutions threatening to sue them if they didn't raise their CRA score. Also threatened with various other actions.

(in reply to MrRodgers)
Profile   Post #: 57
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 1:01:10 PM   
Phydeaux


Posts: 4828
Joined: 1/4/2004
Status: offline 		That question has been asked and answered three times now.


Throughout the nineties banks, as banks lowered their mortgage standards, mortgage rates remained high. The laxity was spreading but the incentives for borrowers to re-finance even under relaxed standards remained low. New buyers often still didn’t know that some of the loosey-goosey mortgages existed. Speculators had an internet bubble, so they weren’t yet attracted to real-estate. Treasury rates were not yet so low that investors seeking yield would pour into mortgage backed securities. Securitization levels were low enough that banks weren’t yet willing to fully embrace the loose standards. The historical data on default and loss rates from the lax lending were not yet available, so they weren’t embraced by banks or the broader market.

But as the years went by, these factors changed. The Fed pushed interest rates down. This made refinancing more attractive, and created an investor demand for yield. Fannie and Freddie popularized low-income securitization. Low defaults and loss rates from lax loans made them seem not as risky as previously expected. A shrinking consumer asset base thanks to the dot com bust created a demand for home-equity loans and high loan-to-value loans, as consumers exchanged high-interest credit card debt for low interest home debt. Speculators seeking higher returns and ordinary home buyers became aware that lax lending standards would allow them to buy bigger homes with little or no money down.

In short, the lax lending standards created in response to the CRA had dug a pit that was waiting to get filled when the circumstances were right.

What about "No Money Down" Mortgages? Were they required by the CRA?
Actually, yes they were. The regulators charged with enforcing the CRA praised the lowering of down payments and even their elimination. They told banks that lending standards that exceeded that of regulators would be considered evidence of unfair lending. This effectively meant that no money down mortgages were required. A Treasury Department study published in 2000 found that the CRA had successfully lowered down payments not just for CRA loans, but for all mortgages.
Explain the shift in loan to value away from the traditional lending requirement of 80%.
Again, the regulators told banks that much higher LTVs was an appropriate way to meet the CRA obligations.

What about the elimination of payment history? How about income requirements?
Regulators instructed banks to consider alternatives to traditional credit histories because CRA targeted borrowers often lacked traditional credit histories. The banks were expected to become creative, to consider other indicators of reliability.

Similarly, banks were expected by regulators to relax income requirements. Day labors and others often lack reportable income. Stated-income was a way of resolving the gap between actual income of borrowers and reported income. The problem, of course, comes when the con-artists and liars come into the game.

Did the CRA require banks to develop automated underwriting systems that emphasized speed rather than accuracy in order to process the greatest number of mortgage apps as quickly as possible?
This was another lending innovation praised by regulators to the point that it became mandatory for banks. Those who were not employing automated underwriting would be putting their CRA ratings at risk. Automated underwriting was seen as a way of eliminating bias in lending.

Point out to me where in the CRA or any regulation that any of this is required.
I cannot. But this kind of legislative fundamentalism misconstrues the way laws constrain business activity. An unenforced law exercises little constraint, regardless of how onerous it is worded. Think of the way anti-trust enforcement changes from presidential administration to presidential administration.

In the case of the CRA, it was the activity of the regulators that matters. And each of these credit innovations described above was put into place to satisfy the CRA regulators.

(in reply to mnottertail)
Profile   Post #: 58
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 1:02:19 PM   
Phydeaux


Posts: 4828
Joined: 1/4/2004
Status: offline 		The affordable housing law required Fannie and Freddie to meet government quotas when they bought loans from banks and other mortgage originators.

At first, this quota was 30%; that is, of all the loans they bought, 30% had to be made to people at or below the median income in their communities. HUD, however, was given authority to administer these quotas, and between 1992 and 2007, the quotas were raised from 30% to 50% under Clinton in 2000 and to 55% under Bush in 2007.

(in reply to Phydeaux)
Profile   Post #: 59
RE: More reading for liberals - economic crash of 2009 - 5/10/2016 1:02:44 PM   
mnottertail


Posts: 60698
Joined: 11/3/2004
Status: offline
quote:

ORIGINAL: Nnanji


quote:

ORIGINAL: ThatDizzyChick

quote:

2003 they attempted to prevent fannie/freddie from accepting sub-prime loans; asked for hearings to change the CRA.
Held hearings on the threats and protests by democrat organizaitions which tried and succeeded in forcing banks to issue certain % of their loans as subprime.

So nothing really. Thanks for admitting that.

http://www.theatlantic.com/business/archive/2011/12/hey-barney-frank-the-government-did-cause-the-housing-crisis/249903/


Peter Wallison, nutsucker deregulator extraordinaire and wrote a sole opinion dissent on the findings of the FCIC. Couldn't even agree with the dissent.

Yeah, no. Again, for all the innumerate imbeciles of the nutsucker party, who caused this: time; as we understand it, does not flow from present to past.



_____________________________

Have they not divided the prey; to every man a damsel or two? Judges 5:30


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Profile   Post #: 60
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