Wall Street or the Government Caused the Housing Colapse?

[rushmc 18]

The article concludes

Quote

The fair-lending task force's original policy paper undercuts the notion the financial crisis was all about banker "greed," though it certainly played a role after the fact. Rather, it offers compelling evidence that the crisis evolved chiefly from government mandates and threats to increase lending to applicants who could not afford them.

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[Andrewwhyte 1]

What article?

[marks2065 0]

Quote

The article concludes

Quote

The fair-lending task force's original policy paper undercuts the notion the financial crisis was all about banker "greed," though it certainly played a role after the fact. Rather, it offers compelling evidence that the crisis evolved chiefly from government mandates and threats to increase lending to applicants who could not afford them.

I think it was the government twisting the bankers arms to give loans to unqualified people was the start and all that wall street did was find a way to make money off it and ran with the idea. What the government does not understand is that the free market will find ways to use what is gievn them and if they had not pushed for unqualified people to get these bad loans the issue would not have happened.
This is just one more reason the government needs to step aside and not try to control things they do not understand. everything the feds do ends up a corrupt mess.

[beowulf 1]

Please post a link to the article.

[billvon 2,466]

>Wall Street or the Government Caused the Housing Colapse?

Neither. People getting mortgages they could not afford caused the housing collapse. Both banks and the government encouraged sketchy loans - but in the end we are responsible for our actions, no matter how much the "victim culture" wants to find someone else to blame.

[NewGuy2005 51]

Quote

>Wall Street or the Government Caused the Housing Colapse?

Neither. People getting mortgages they could not afford caused the housing collapse. Both banks and the government encouraged sketchy loans - but in the end we are responsible for our actions, no matter how much the "victim culture" wants to find someone else to blame.

Agreed.

There were not enough unqualified people to loan money to to have cause this crisis. A broad spectrum of players are responsible.

[rushmc 18]

Sorry, thought I did

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[rushmc 18]

http://news.investors.com/Article/589858/201110310805/Housing-Crisis-Obama-Clinton-Subprime.htm

Quote

Smoking-Gun Document Ties Policy To Housing Crisis
By PAUL SPERRY, FOR INVESTOR'S BUSINESS DAILY
Posted 08:05 AM ET


President Obama says the Occupy Wall Street protests show a "broad-based frustration" among Americans with the financial sector, which continues to kick against regulatory reforms three years after the financial crisis.

"You're seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on the abusive practices that got us into this in the first place," he complained earlier this month.

But what if government encouraged, even invented, those "abusive practices"?

Rewind to 1994. That year, the federal government declared war on an enemy — the racist lender — who officials claimed was to blame for differences in homeownership rates — and launched what would prove the costliest social crusade in U.S. history.

At President Clinton's direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties.

and

Quote

It took private analysts, as well as at least one FDIC economist, little time to determine the Boston Fed study was terminally flawed. In addition to finding embarrassing mistakes in the data, they concluded that more relevant measures of a borrower's credit history — such as past delinquencies and whether the borrower met lenders' credit standards — explained the gap in lending between whites and blacks, who on average had poorer credit and higher defaults.

The study did not take into account a host of other relevant data factoring into denials, including applicants' net worth, debt burden and employment record. Other variables, such as the size of down payments and the amount of the loans sought to the value of the property being bought, also were left out of the analysis. It also failed to consider whether the borrower submitted information that could not be verified, the presence of a cosigner and even the loan amount.

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[DanG 1]

It is not at issue whether the banks were lending to unqualified people. No one argues that they weren't. The question is why. Some people believe the reason was government mandates and threats, and these people often point to CRA (Community Reinvestment Act). That may have been part of the reason for the bad lending practices, but it doesn't explain the collapse. In fact, CRA loans on average outperformed other subprime loans. I believe the overiding reason for bad lending practices was the money. The banks who made the original bad loans would package these loans into bundles, often with a mix of bad loans and good loans, and sell the bundles to other investors. Normally, if a bank makes a bad loan, they end up losing money on it in the long run. Using newly developed financial instruments involving bundling, the banks no longer took the risk themselves, and made just as much money off bad loans as good ones. When the bad loans started going bad, people realized that all the housing related investments weren't the AAA rated goldmines they thought they were, and the housing bubble popped.

Simply put, the government didn't force banks to make bad loans. The banks made bad loans because there was great financial gain and little risk.

- Dan G

[rushmc 18]

Quote

>Wall Street or the Government Caused the Housing Colapse?

Neither. People getting mortgages they could not afford caused the housing collapse. Both banks and the government encouraged sketchy loans - but in the end we are responsible for our actions, no matter how much the "victim culture" wants to find someone else to blame.

Worked out well that I somehow missed the first post I made

Dont you think?

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[rushmc 18]

Quote

It is not at issue whether the banks were lending to unqualified people. No one argues that they weren't. The question is why. Some people believe the reason was government mandates and threats, and these people often point to CRA (Community Reinvestment Act). That may have been part of the reason for the bad lending practices, but it doesn't explain the collapse. In fact, CRA loans on average outperformed other subprime loans. I believe the overiding reason for bad lending practices was the money. The banks who made the original bad loans would package these loans into bundles, often with a mix of bad loans and good loans, and sell the bundles to other investors. Normally, if a bank makes a bad loan, they end up losing money on it in the long run. Using newly developed financial instruments involving bundling, the banks no longer took the risk themselves, and made just as much money off bad loans as good ones. When the bad loans started going bad, people realized that all the housing related investments weren't the AAA rated goldmines they thought they were, and the housing bubble popped.

Simply put, the government didn't force banks to make bad loans. The banks made bad loans because there was great financial gain and little risk.

Glad I missed the articel so you could post this first

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[DanG 1]

Quote

Glad I missed the articel so you could post this first

Huh? Are you trying to "gotcha" me? My explanation is not refuted by your article.

- Dan G

[rushmc 18]

Quote

Simply put, the government didn't force banks to make bad loans.

You didnt read it?

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[DanG 1]

I did read it. Did you? I doubt it, so I'll summarize:

Your article claims that the Federal fair lending intitiative, started under Clinton, coerced banks to reduce their lending standards to combat perceived racism in lending pratices. It goes on for three pages without much in the way of evidence, but a lot of opinion. The real "smoking gun" in the article is buried at the very end of the last page, where it says:

Quote

The fair-lending task force's original policy paper undercuts the notion the financial crisis was all about banker "greed," though it certainly played a role after the fact. Rather, it offers compelling evidence that the crisis evolved chiefly from government mandates and threats to increase lending to applicants who could not afford them. emphasis added

It's the, "although it certainly played a role after the fact," that opens up a huge hole. It's a weasel line from the author. I agree that the Feds forced banks to reduce their lending standards for minority applicants. What I disagree with is the proportional role that had in the ensuing crisis. The banks started lending indiscriminately to everyone, minority or not, when they found they could make just as much money off the bad loans as the good. That happened because they packaged the loans up, got the ratings agencies to sign off on them, and then sold them to third party investors. The banks now had no financial interest in the bad loans, so they kept reducing their lending standards until anyone could get any loan they wanted. The Feds didn't mandate that. A reduction of standards for minority applicants by itself would not have created the large scale crisis we had. There just aren't enough minorities.

- Dan G

[kallend 1,672]

Why don't you tell us what % of bad loans were due to the CRA mandates, what % of lending institutions making loans were subject to CRA rules, and what % of loans had nothing whatsoever to do with government mandates? I think you'll find it enlightening.

...

The only sure way to survive a canopy collision is not to have one.

[CanuckInUSA 0]

The documentary Inside Job does a good job outlining what happened. Basically a lot of people had their hands in this whole mess. Wall Street, lobbyists, politicians and some academics ... oh and yes people who took loans on houses they could not afford. Definitely worth the watch for those who have not seen the documentary. The best part being it is a non-partisan documentary. Unfortunately YouTube blocked the version I watched a few months ago and I don't know about you people where you live, but video stores pretty much have gone the way of the dinosaur where I live (a city of over one million people if you can believe it). So you might need to find a download site to watch the documentary.

Try not to worry about the things you have no control over

[kallend 1,672]

Quote

The documentary Inside Job does a good job outlining what happened. Basically a lot of people had their hands in this whole mess. Wall Street, lobbyists, politicians and some academics ... oh and yes people who took loans on houses they could not afford. Definitely worth the watch for those who have not seen the documentary. The best part being it is a non-partisan documentary. Unfortunately YouTube blocked the version I watched a few months ago and I don't know about you people where you live, but video stores pretty much have gone the way of the dinosaur where I live (a city of over one million people if you can believe it). So you might need to find a download site to watch the documentary.

Netflix has it.

...

The only sure way to survive a canopy collision is not to have one.

[marks2065 0]

Quote

I did read it. Did you? I doubt it, so I'll summarize:

Your article claims that the Federal fair lending intitiative, started under Clinton, coerced banks to reduce their lending standards to combat perceived racism in lending pratices. It goes on for three pages without much in the way of evidence, but a lot of opinion. The real "smoking gun" in the article is buried at the very end of the last page, where it says:

Quote

The fair-lending task force's original policy paper undercuts the notion the financial crisis was all about banker "greed," though it certainly played a role after the fact. Rather, it offers compelling evidence that the crisis evolved chiefly from government mandates and threats to increase lending to applicants who could not afford them. emphasis added

It's the, "although it certainly played a role after the fact," that opens up a huge hole. It's a weasel line from the author. I agree that the Feds forced banks to reduce their lending standards for minority applicants. What I disagree with is the proportional role that had in the ensuing crisis. The banks started lending indiscriminately to everyone, minority or not, when they found they could make just as much money off the bad loans as the good. That happened because they packaged the loans up, got the ratings agencies to sign off on them, and then sold them to third party investors. The banks now had no financial interest in the bad loans, so they kept reducing their lending standards until anyone could get any loan they wanted. The Feds didn't mandate that. A reduction of standards for minority applicants by itself would not have created the large scale crisis we had. There just aren't enough minorities.

It would be discrimination to not offer the weaker leanding standards to all. So just weakening the lending standards for the poor was not an option. This is the issue that caused the collapse. The mortgage bundles would not have been needed to cover their asses if the had not lowered the lending standards. The banks were put in a no win situation knowing that these bad loans were going to fail and used mortgage backed securities to cover their ass, then when it became to much to cover they doubled down and bet against these knowing they would fail. this has been going on for a long time by bookies to cover bets, wall street just used the same idea.
The government opened the door and we lost. How many people lost their jobs, homes, and retirements so a few thousand undeserving people could own a house?

[CanuckInUSA 0]

Quote

Quote

The documentary Inside Job does a good job outlining what happened. Basically a lot of people had their hands in this whole mess. Wall Street, lobbyists, politicians and some academics ... oh and yes people who took loans on houses they could not afford. Definitely worth the watch for those who have not seen the documentary. The best part being it is a non-partisan documentary. Unfortunately YouTube blocked the version I watched a few months ago and I don't know about you people where you live, but video stores pretty much have gone the way of the dinosaur where I live (a city of over one million people if you can believe it). So you might need to find a download site to watch the documentary.

Netflix has it.

Unfortunately "Netflix" and "Netflix Canada" are two separate entities and for those of us who's heads split in two when we talk, we only get a fraction of what "Netflix" serves it's customers (we can thank the CRTC for censoring us, but that is our problem). I believe iTunes also has it and yes YouTube/videos is now gotten into renting downloadable movies.

Try not to worry about the things you have no control over

[Amazon 7]

Quote

Quote

I did read it. Did you? I doubt it, so I'll summarize:

Your article claims that the Federal fair lending intitiative, started under Clinton, coerced banks to reduce their lending standards to combat perceived racism in lending pratices. It goes on for three pages without much in the way of evidence, but a lot of opinion. The real "smoking gun" in the article is buried at the very end of the last page, where it says:

Quote

The fair-lending task force's original policy paper undercuts the notion the financial crisis was all about banker "greed," though it certainly played a role after the fact. Rather, it offers compelling evidence that the crisis evolved chiefly from government mandates and threats to increase lending to applicants who could not afford them. emphasis added

It's the, "although it certainly played a role after the fact," that opens up a huge hole. It's a weasel line from the author. I agree that the Feds forced banks to reduce their lending standards for minority applicants. What I disagree with is the proportional role that had in the ensuing crisis. The banks started lending indiscriminately to everyone, minority or not, when they found they could make just as much money off the bad loans as the good. That happened because they packaged the loans up, got the ratings agencies to sign off on them, and then sold them to third party investors. The banks now had no financial interest in the bad loans, so they kept reducing their lending standards until anyone could get any loan they wanted. The Feds didn't mandate that. A reduction of standards for minority applicants by itself would not have created the large scale crisis we had. There just aren't enough minorities.

It would be discrimination to not offer the weaker leanding standards to all. So just weakening the lending standards for the poor was not an option. This is the issue that caused the collapse. The mortgage bundles would not have been needed to cover their asses if the had not lowered the lending standards. The banks were put in a no win situation knowing that these bad loans were going to fail and used mortgage backed securities to cover their ass, then when it became to much to cover they doubled down and bet against these knowing they would fail. this has been going on for a long time by bookies to cover bets, wall street just used the same idea.
The government opened the door and we lost. How many people lost their jobs, homes, and retirements so a few thousand undeserving people could own a house get fabulously wealthier?

There fixed that for you

[DanG 1]

Quote

this has been going on for a long time by bookies to cover bets, wall street just used the same idea.

I think we should hold financial institutions to higher standards than bookies, but that's just me.

- Dan G

[jonstark 8]

In 1992 I moved from Georgia to Los Angeles. Once there my wife and I went to get "pre-qualified" for a loan. We knew we'd be good for a certain amount with our existing assets, job/income and pain threshold. Countrywide said we were good for at least twice that amount.

We borrowed half of what they said we could and paid it off over the next 15 years always wondering "Why did they say we could borrow so much???"

Now we know and pity the fools who believed the lenders who told them they were good for twice the amount they probably knew in their hearts they should borrow.

jon

[billvon 2,466]

>The government opened the door and we lost.

Hmm. So you advocate the government not allow us to make such mistakes in the future? Lots of nanny laws in your future, then.

[marks2065 0]

Quote

>The government opened the door and we lost.

Hmm. So you advocate the government not allow us to make such mistakes in the future? Lots of nanny laws in your future, then.

the government was the institution that forced the banks to reduce qualifications under presure from the left to give everybody a house. Once again the left and their entitlement attitude cause the financial mess. seems to be broken record with the left.

[marks2065 0]

Quote

Quote

Quote

I did read it. Did you? I doubt it, so I'll summarize:

Your article claims that the Federal fair lending intitiative, started under Clinton, coerced banks to reduce their lending standards to combat perceived racism in lending pratices. It goes on for three pages without much in the way of evidence, but a lot of opinion. The real "smoking gun" in the article is buried at the very end of the last page, where it says:

Quote

The fair-lending task force's original policy paper undercuts the notion the financial crisis was all about banker "greed," though it certainly played a role after the fact. Rather, it offers compelling evidence that the crisis evolved chiefly from government mandates and threats to increase lending to applicants who could not afford them. emphasis added

It's the, "although it certainly played a role after the fact," that opens up a huge hole. It's a weasel line from the author. I agree that the Feds forced banks to reduce their lending standards for minority applicants. What I disagree with is the proportional role that had in the ensuing crisis. The banks started lending indiscriminately to everyone, minority or not, when they found they could make just as much money off the bad loans as the good. That happened because they packaged the loans up, got the ratings agencies to sign off on them, and then sold them to third party investors. The banks now had no financial interest in the bad loans, so they kept reducing their lending standards until anyone could get any loan they wanted. The Feds didn't mandate that. A reduction of standards for minority applicants by itself would not have created the large scale crisis we had. There just aren't enough minorities.

It would be discrimination to not offer the weaker leanding standards to all. So just weakening the lending standards for the poor was not an option. This is the issue that caused the collapse. The mortgage bundles would not have been needed to cover their asses if the had not lowered the lending standards. The banks were put in a no win situation knowing that these bad loans were going to fail and used mortgage backed securities to cover their ass, then when it became to much to cover they doubled down and bet against these knowing they would fail. this has been going on for a long time by bookies to cover bets, wall street just used the same idea.
The government opened the door and we lost. How many people lost their jobs, homes, and retirements so a few thousand undeserving people could own a house get fabulously wealthier?

There fixed that for you

It would not have happened if the left didn't start the issue. Capitalism will check itself until the left and the government involved. All so a few thousand could buy a house that couldn't afford a house, see the mess people like you started.