The sadness that is America

[AtheismIsReality]

Why would a Wall Street bank think twice about buying an asset with a AAA credit score which is implicitly backed by the Federal government? Especially on the heels of the 1995 Mexican bailout?

Thanks for confirming the private sector is not our savior.

And ask Lehman Brothers and Bear Stearns about bailouts.

 

[BigRob]

Thanks for confirming the private sector is not our savior.

Before the government decided to basically back all of these CRA loans with Fannie and Freddie, the private sector did not get involved in such risky loans or leverage themselves in such a big way very often. And if they did, they knew if the investment failed, they were on the hook. Through now decades of bank bailouts, we have effectively changed this mentality, and banks figure why not.

If the government makes it advantageous to take big risks, and ensures that there will be no penalty, then why wouldn't a bank try to make money? Heaven forbid a company work to turn a profit.

And ask Lehman Brothers and Bear Stearns about bailouts.

As for Bear Stearns, they were basically bailed out to the tune of $30 billion. In the case of Lehman Brothers, that is how the market is supposed to function, you make mistakes, you suffer the consequences, not the taxpayer.

The mentality of investment banks leading up to that clearly showed why it is no surprise Lehman thought they would be bailed out.

JP Morgan has been bailed out numerous times, same with Citi, same with Goldman Sachs etc etc.

The problem here is that the lack of a bailout is not the exception rather than the norm. How is this going to change the mentality on Wall Street? It will not. And the government bailing everyone out is the reason that mentality will not change.

 

[AtheismIsReality]

Before the government decided to basically back all of these CRA loans with Fannie and Freddie, the private sector did not get involved in such risky loans or leverage themselves in such a big way very often. And if they did, they knew if the investment failed, they were on the hook. Through now decades of bank bailouts, we have effectively changed this mentality, and banks figure why not.

I posted the CRA fallacy. Go read it.

Everyone who handed out subprime loans isn't covered by CRA. Do you know who Countrywide is?

CRA doesn't call for stated income loans. Do you know what those are?

 

[BigRob]

I posted the CRA fallacy. Go read it.

Everyone who handed out subprime loans isn't covered by CRA. Do you know who Countrywide is?

CRA doesn't call for stated income loans. Do you know what those are?

I have not blamed the crisis solely on the CRA, I have stated the CRA was a contributing factor that led to the situation in which loans were made to people who had no business getting a loan, be it under CRA guidelines or another scenario.

The reason Countrywide collapsed was due to handing out bad loans, which were then packaged to Fannie and Freddie and sold with a AAA credit rating and implicit government backing. The reason that they did this was because they government enabled such a thing to take place, originating from doing the same thing under the CRA.

 

[AtheismIsReality]

I have not blamed the crisis solely on the CRA, I have stated the CRA was a contributing factor that led to the situation in which loans were made to people who had no business getting a loan, be it under CRA guidelines or another scenario.

The reason Countrywide collapsed was due to handing out bad loans, which were then packaged to Fannie and Freddie and sold with a AAA credit rating and implicit government backing. The reason that they did this was because they government enabled such a thing to take place, originating from doing the same thing under the CRA.

No one made banks hand out bad loans. That's a fact.

But it's true. There were no guarantees on those loans, but corporations acted like there were. They did it because they banked on the government bailing them out.

And it happened. Because we were sold out to corporate interests a long time ago.

 

[Dr.Who]

No one made banks hand out bad loans. That's a fact.

Actually the banks were forced to make bad loans. That is why so many of the loans defaulted and the banks were in so much trouble. Who made them do it? The government that now wants to "fix" the problem.

 

[AtheismIsReality]

Actually the banks were forced to make bad loans. That is why so many of the loans defaulted and the banks were in so much trouble. Who made them do it? The government that now wants to "fix" the problem.

Sure. We have CRA under Carter, supposedly made worse by Clinton.

Yet, where does the subprime market explode? Why under Bush when the tax cuts are working so well that we need a bubble to make things prosperous.

How many times do we have to see it?

Can anyone not see the bubble? Raise your hand.

Show me the legislation that made banks take stated income loans. DO IT!!!

 

[Dr.Who]

Sure. We have CRA under Carter, supposedly made worse by Clinton.

Yet, where does the subprime market explode? Why under Bush when the tax cuts are working so well that we need a bubble to make things prosperous.

How many times do we have to see it?

Can anyone not see the bubble? Raise your hand.

Show me the legislation that made banks take stated income loans. DO IT!!!

This from a person who doubted that the CRA was to blame but then changed his/her mind. I assume this person is a liberal who saw the light. I added the bold.

" * 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."

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

 

[AtheismIsReality]

This from a person who doubted that the CRA was to blame but then changed his/her mind. I assume this person is a liberal who saw the light. I added the bold.

" * 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."

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

What percentage of CRA loans were involved in the meltdown?

 

[Dr.Who]

What percentage of CRA loans were involved in the meltdown?

Actually the wrong question.

There was no crisis and therefore no need for big stimulus bills to fix it.

About half of the defaulted loans were subprime loans and just about all of the subprime loans were the result of the CRA.

BUT!!!

The foreclosure rate was far less than 1% before the "crisis" and then it doubled. Which means that the total amount of foreclosures was only a little bit more than 1%. A 1% foreclosure rate in the US was never going to cause a financial crisis that allegedly went worldwide.

 

[AtheismIsReality]

Actually the wrong question.

There was no crisis and therefore no need for big stimulus bills to fix it.

About half of the defaulted loans were subprime loans and just about all of the subprime loans were the result of the CRA.

BUT!!!

The foreclosure rate was far less than 1% before the "crisis" and then it doubled. Which means that the total amount of foreclosures was only a little bit more than 1%. A 1% foreclosure rate in the US was never going to cause a financial crisis that allegedly went worldwide.

Then where are Bear Stearns and Lehman Brothers?

 

[Dr.Who]

Then where are Bear Stearns and Lehman Brothers?

New York

 

[AtheismIsReality]

New York

Not anymore...