Bill Clinton, Barney Franks, Chris Dodd = Housing Collapse...

[Joeybagadonuts]

An insider interviewed today described the coercion and intimidation used by Fannie and Freddie and the Federal Reserve to force private banks to take on 'sub prime mortgages'; loans they knew would not be paid back. They wrote off the loans and sold them in bundles, all over the world.

So...if you want a reason and a cause for the current world financial difficulties, you have them: Clinton, Franks, Dodd, Fannie & Freddie, and the social engineering of the Democrats who destroyed the housing market and with it, the economy at large, here and abroad.

Just thought you should know who to blame.

And, oh, yes, Bush tried to stop the process...the Democrats in Congress voted him down.

Amicus

Wow, and all this time I was blaming deregulation and those scum sucking pigs on Wall St.

 

[Sean]

I was just wondering, which government agency forced the banks to create and trade derivatives that were valued at ten thousand times the value of every sub-prime loan ever made? At the time Lehman's went under, credit default swaps and other like derivatives were valued at FIVE TIMES THE ANNUAL GDP OF THE ENTIRE WORLD. Which government agency forced them to do that?

 

[Ishmael]

The idea you should have a place to live is a fantasy. I just want to know how well you intend to treat your slaves when we get back to having them.

What the fuck are you talking about?

Ishmael

 

[VaticanAssassin]

I was just wondering, which government agency forced the banks to create and trade derivatives that were valued at ten thousand times the value of every sub-prime loan ever made? At the time Lehman's went under, credit default swaps and other like derivatives were valued at FIVE TIMES THE ANNUAL GDP OF THE ENTIRE WORLD. Which government agency forced them to do that?

This is the first intelligent post I have ever seen you make...everything else seems to be you calling someone a name.

To find the true beginning of the housing crisis go back to the mid 70's. Also take a long hard look at Salomon Brothers.

This is just in case anyone cares. I would educate you, but it seems most of you are unable to hear anything other than your own opinion.

A book called Liars Poker sums it up pretty nice and is a easy read for you lazy people.

 

[unregistered]

 

[RightField]

An insider interviewed today described the coercion and intimidation used by Fannie and Freddie and the Federal Reserve to force private banks to take on 'sub prime mortgages'; loans they knew would not be paid back. They wrote off the loans and sold them in bundles, all over the world.

So...if you want a reason and a cause for the current world financial difficulties, you have them: Clinton, Franks, Dodd, Fannie & Freddie, and the social engineering of the Democrats who destroyed the housing market and with it, the economy at large, here and abroad.

Just thought you should know who to blame.

And, oh, yes, Bush tried to stop the process...the Democrats in Congress voted him down.

Amicus

Good summary.

The new "bundling" approach to dealing with the loans (that some of you blame) was merely a way of trying to minimize the risk. It was actually a reasonably ingenious way of mitigating risk. If you put 100 loans together with 95 good and 5 that had higher risk, then your expected return on investment is still decent even if one or all of the risky loans default. The whole thing fell apart when housing costs started decreasing as a result of the "bubble bursting" and a higher % of the bundled loans became negative or risky.

Blaming the "bundling" process for the real estate crash is like blaming the Betty Ford Clinic for patients' alcoholism.

As described above, the bankers were only following the "social engineering" mandates of the liberals and the loan bundling was a smart way of dealing with the risk that the politicians were forcing upon them. The bubble burst because of the unnaturally high demand caused by the loans and 'free money' that elevated prices to an unsustainable level.

The democrats, with their press on social engineering crusades, always find themselves subject to the law of unintended consequences.

 

[JohnnySavage]

Good summary.

The new "bundling" approach to dealing with the loans was merely a way of trying to minimize the risk. It was actually a reasonably ingenious way of mitigating risk. If you put 100 loans together with 95 good and 5 that had higher risk, then your expected return on investment is still decent even if one or all of the risky loans default. The whole thing fell apart when housing costs started decreasing as a result of the "bubble bursting" and a higher % of the bundled loans became negative or risky.

As described above, the bankers were only following the "social engineering" mandates of the liberals and the loan bundling was a smart way of dealing with the risk that the politicians were forcing upon them. The bubble burst because of the unnaturally high demand caused by the loans and 'free money' elevated prices to an unsustainable level.

The democrats, with their press on social engineering crusades, always find themselves subject to the law of unintended consequences.

It had more to do with removing the loans from it's portfolio so it could take a profit, then loan the money again, and without needing to worry about reserves.

Quit looking for some conspiracy.

 

[Sean]

Good summary.

The new "bundling" approach to dealing with the loans (that some of you blame) was merely a way of trying to minimize the risk. It was actually a reasonably ingenious way of mitigating risk. If you put 100 loans together with 95 good and 5 that had higher risk, then your expected return on investment is still decent even if one or all of the risky loans default. The whole thing fell apart when housing costs started decreasing as a result of the "bubble bursting" and a higher % of the bundled loans became negative or risky.

Blaming the "bundling" process for the real estate crash is like blaming the Betty Ford Clinic for patients' alcoholism.

As described above, the bankers were only following the "social engineering" mandates of the liberals and the loan bundling was a smart way of dealing with the risk that the politicians were forcing upon them. The bubble burst because of the unnaturally high demand caused by the loans and 'free money' that elevated prices to an unsustainable level.

The democrats, with their press on social engineering crusades, always find themselves subject to the law of unintended consequences.

You really don't understand derivatives, do you? I'll quote the chairman of Barclay's:
"If you insure your house against burning down, that's sensible. If ten thousand people bet on whether your house will burn down or not, that's insane."

 

[unregistered]

 

[mercury14]

Bush II continued with the Clinton policies...

Actually he continued with Clinton's policies and then expanded upon them greatly. Remember Bush's "Ownership Society"? It was all designed to get people to buy homes they couldn't afford.

 

[mercury14]

As described above, the bankers were only following the "social engineering" mandates of the liberals and the loan bundling was a smart way of dealing with the risk that the politicians were forcing upon them. The bubble burst because of the unnaturally high demand caused by the loans and 'free money' that elevated prices to an unsustainable level.

The democrats, with their press on social engineering crusades, always find themselves subject to the law of unintended consequences.

Want to see some epic-level social engineering? Look no further than your friendly neighborhood Republican party! All because certain social classes own fewer assets than Bush and the Republicans wanted them to. So they engaged in massive social engineering to further their ideology.



"Such a country would be more stable, Bush argued, and more prosperous. "America is a stronger country every single time a family moves into a home of their own," he said in October 2004. To achieve his vision, Bush pushed new policies encouraging homeownership, like the "zero-down-payment initiative," which was much as it sounds—a government-sponsored program that allowed people to get mortgages without a down payment. More exotic mortgages followed, including ones with no monthly payments for the first two years. Other mortgages required no documentation other than the say-so of the borrower. Absurd though these all were, they paled in comparison to the financial innovations that grew out of the mortgages—derivatives built on other derivatives, packaged and repackaged until no one could identify what they contained and how much they were, in fact, worth."

http://www.thedailybeast.com/newsweek/2008/10/10/end-of-the-ownership-society.html

 

[RightField]

Actually he continued with Clinton's policies and then expanded upon them greatly. Remember Bush's "Ownership Society"? It was all designed to get people to buy homes they couldn't afford.

While at the same time pushing Barney Frank and others to tighten up the loan origination standards to ensure that there were fewer risky loans (and met with cries of "racist" for his troubles).

 

[Joeybagadonuts]

the right never acknowledges any responsibility...

funny that

 

[mercury14]

So then the Republican ownership society idea failed. Here's why:

People became poorer during the Bush years. Median income dropped each year Bush was president. Yes the rich got much much richer but the average American made less money. Even with the Bush tax cuts people median income decreased each year. It's hard to own more stuff when your income keeps dropping. (though the Republicans tried their best anyway)

 

[Sean]

While at the same time pushing Barney Frank and others to tighten up the loan origination standards to ensure that there were fewer risky loans (and met with cries of "racist" for his troubles).

Out of the bad debts and liabilities on the banks' books, what percentage were due to defaulted mortgages?

I'll wait while you Google.

 

[mercury14]

the right never acknowledges any responsibility...

funny that

Going back to circa 2004, the term 'Ownership Society' was a huge buzzword among the Republican Party. Now the right refuses to even take ownership of their very own ownership term. They almost pretend like it never happened.

 

[Ishmael]

it was all about repackaging financial instruments over and over into insane leverage, that's for sure.

There is more than enough blame to spread around.

Addressing several posters in one post;

The roots of the crisis go to the CRA act of 1977. A well intentioned piece of legislation that addressed, what turned out to be, a non-problem.

The nut of the act was that banks were to be 'scored' on how well they served the credit needs of low to moderate income communities. This 'score' was to be taken into consideration when the bank(s) applied for new depository locations (branches), mergers, or acquisitions. Seeing an opportunity community organizations cropped up to 'score' the banks. The best known of these is/was ACORN. The way it worked was ACORN would pressure the local bank/branch for more loans, usually higher risk. If those loans were not forthcoming ACORN would flood the FFIEC (Federal Financial Institution Examination Council) with complaints. There were other organizations beyond ACORN, but ACORN was the most successful due to it's organization and it's nationwide coverage of local areas.

So the answer to the question as to which federal agencies bullied the banks into making bad loans is, in fact, none. The bullying was done by ACORN by organized efforts to reduce a banks CRA rating if the bank(s) didn't accede to the organizations demands. In effect it was a form of blackmail.

As far as the insurance scheme sean brought up goes, the Barclays CEO is merely expression an opinion. The fact is is that ALL insurance is nothing more than gambling. In the example given (fire insurance), you are betting your house will burn down, the insurance company is betting it won't, and you're hoping they win. But the main point is that all insurance is is organized, legalized, gambling. Once you accept that fact then you see that the Barclays guy is merely saying that it's perfectly alright to step up to the roulette table and bet a number, but betting a color or odd/even should be illegal, or at least considered insane. Why is that? It's no different than a single policy versus bundled policies. <shrug>

The process took years to get a full head of steam up, but when it did you had the effect of a snake swallowing it's own tail. Easy loans created a demand for housing, which in turn created a demand for capital, more capital led to a further reduction in loan requirements, more demand for housing, higher real estate prices, more capital for construction, and so on.

The big acceleration in process really did start with Clinton's decision to use the home mortgage market as a vehicle to get the nation out of a recession that didn't exist.

Yes, there are several other elements that contributed to the process. But it still boils down to the fact that the government deeply enmeshed itself in a process which they had little business being involved in to begin with. Government policies set the stage that allowed the entire process to play out from boom to collapse.

Ishmael

 

[Sean]

As far as the insurance scheme sean brought up goes, the Barclays CEO is merely expression an opinion. The fact is is that ALL insurance is nothing more than gambling. In the example given (fire insurance), you are betting your house will burn down, the insurance company is betting it won't, and you're hoping they win. But the main point is that all insurance is is organized, legalized, gambling. Once you accept that fact then you see that the Barclays guy is merely saying that it's perfectly alright to step up to the roulette table and bet a number, but betting a color or odd/even should be illegal, or at least considered insane. Why is that? It's no different than a single policy versus bundled policies. <shrug>

No, the difference is that the banks were betting with money they didn't have on a game they didn't understand. The derivatives market was filled with products cooked up by whizkids that NO-ONE understood. Not even the maths geniuses that came up with them.

 

[VaticanAssassin]

There is more than enough blame to spread around.

Addressing several posters in one post;

The roots of the crisis go to the CRA act of 1977. A well intentioned piece of legislation that addressed, what turned out to be, a non-problem.

The nut of the act was that banks were to be 'scored' on how well they served the credit needs of low to moderate income communities. This 'score' was to be taken into consideration when the bank(s) applied for new depository locations (branches), mergers, or acquisitions. Seeing an opportunity community organizations cropped up to 'score' the banks. The best known of these is/was ACORN. The way it worked was ACORN would pressure the local bank/branch for more loans, usually higher risk. If those loans were not forthcoming ACORN would flood the FFIEC (Federal Financial Institution Examination Council) with complaints. There were other organizations beyond ACORN, but ACORN was the most successful due to it's organization and it's nationwide coverage of local areas.

So the answer to the question as to which federal agencies bullied the banks into making bad loans is, in fact, none. The bullying was done by ACORN by organized efforts to reduce a banks CRA rating if the bank(s) didn't accede to the organizations demands. In effect it was a form of blackmail.

As far as the insurance scheme sean brought up goes, the Barclays CEO is merely expression an opinion. The fact is is that ALL insurance is nothing more than gambling. In the example given (fire insurance), you are betting your house will burn down, the insurance company is betting it won't, and you're hoping they win. But the main point is that all insurance is is organized, legalized, gambling. Once you accept that fact then you see that the Barclays guy is merely saying that it's perfectly alright to step up to the roulette table and bet a number, but betting a color or odd/even should be illegal, or at least considered insane. Why is that? It's no different than a single policy versus bundled policies. <shrug>

The process took years to get a full head of steam up, but when it did you had the effect of a snake swallowing it's own tail. Easy loans created a demand for housing, which in turn created a demand for capital, more capital led to a further reduction in loan requirements, more demand for housing, higher real estate prices, more capital for construction, and so on.

The big acceleration in process really did start with Clinton's decision to use the home mortgage market as a vehicle to get the nation out of a recession that didn't exist.

Yes, there are several other elements that contributed to the process. But it still boils down to the fact that the government deeply enmeshed itself in a process which they had little business being involved in to begin with. Government policies set the stage that allowed the entire process to play out from boom to collapse.

Ishmael

Ding ding ding....We have a winner. Well, half a winner anyway. The CRA was part of the start. So I guess in a fashion you can blame it on Carter. But Regan/Clinton/ Bush(s) helped in there own fashion. Mostly by not doing anything about the CRA.

This in itself had no real teeth. But it did lead to Wall Street (specifically, Salomon Brothers), in to creating and getting rich on some of the most hideous (and brilliant), investment vehicles ever.

 

[RobDownSouth]

Going back to circa 2004, the term 'Ownership Society' was a huge buzzword among the Republican Party. Now the right refuses to even take ownership of their very own ownership term. They almost pretend like it never happened.

Republicans have mastered their collective inner Vettebigot in denying things they once proudly proclaimed.

No, the difference is that the banks were betting with money they didn't have on a game they didn't understand. The derivatives market was filled with products cooked up by whizkids that NO-ONE understood. Not even the maths geniuses that came up with them.

Exactly. Once banks began figuring out what they actually had in their portfolios, the market became illiquid in a hurry.

 

[Sean]

Oh, btw, you people want culprits that got off scott free that are still fucking with the world economy? Try the ratings agencies. Hanging every single one of those fuckers from a lamp post would do the world a favour.

 

[JohnnySavage]

This thread seems to have a disconnect between the Mortgage Backed Securities, and the derivatives that, essentially, insured them.

Two different things, two different origins, two different sets of problems.

 

[Sean]

This thread seems to have a disconnect between the Mortgage Backed Securities, and the derivatives that, essentially, insured them.

Two different things, two different origins, two different sets of problems.

But those derivatives didn't insure them. Not in any meaningful sense of the word. The banks could have worn every sub-prime mortgage in the US defaulting. They'd have taken a bath, but they'd have survived. What killed them was derivatives based on mathematical formulae with no connect to the real world.

 

[JohnnySavage]

But those derivatives didn't insure them. Not in any meaningful sense of the word. The banks could have worn every sub-prime mortgage in the US defaulting. They'd have taken a bath, but they'd have survived. What killed them was derivatives based on mathematical formulae with no connect to the real world.

That's true, and that's what led to a multiplier when the individual mortgages contained in the mortgage backed securities began to default. The people holding the "insurance" (the Credit Default Swaps) went to the "insurer" (Lehman Brothers) and asked to be paid. There was no money to pay the CDS because the CDS's were not regulated as an insurance product that would have been required to maintain reserves.

Those who issued the CDSs should be in jail.

 

[Sean]

That's true, and that's what led to a multiplier when the individual mortgages contained in the mortgage backed securities began to default. The people holding the "insurance" (the Credit Default Swaps) went to the "insurer" (Lehman Brothers) and asked to be paid. There was no money to pay the CDS because the CDS's were not regulated as an insurance product that would have been required to maintain reserves.

Those who issued the CDSs should be in jail.

No, no, no. It's all the fault of the liberals, the gubmint and ACORN. No greedy fuckwit bankers ever did anything wrong. Ever.