The Democrats destroyed the world economy! (Here is how!)
To all you brain-washed sheep out there that refuse to look at the reality of our economic situation, this disaster was caused by the democrats, NOT BUSH! Do the republicans share in the blame? Yes, but by far the majority of blame rests with the democrats.
First of all I keep getting this A.P. story shoved in my face as "proof" of Bush's incompetence, http://abcnews.go.com/Business/wireStory?id=6364464 .Did anyone read this article? This story blames Bush at the beginning then states that "Bowing to aggressive lobbying-along with assurances from banks that the troubled mortgages were OK, regulators delayed action for nearly one year". The regulators are congress! More specifically the House Financial Services Committee, http://financialservices.house.gov/jurisdiction.html
Every person on this committee is a democrat, every one of them thwarted all attempts at regulation and it was their responsibility led by Barney Frank. Everybody has seen the Utube videos of Barney bad ass telling congress there is no issue here at Fannie and Freddie.
http://www.youtube.com/watch?v=iW5qKYfqALE&eurl=http%3A%2F%2Fwww%2Epapamiket%2Ecom%2F%3Fp%3D17810&feature=player_embedded#t=108
Bush had no authority to regulate the housing industry, even though he tried many times.
http://gatewaypundit.blogspot.com/2008/09/bush-called-for-reform-of-fannie-mae.html
I can't believe all you delusional liberals think this disaster was caused by the same things:
1. runaway greed ("market failure") on the part of lenders is the cause of the subprime crisis;
2. these same greedy lenders routinely ignore billions of dollars in potential profits in lower-income communities because of their systemic racism, stupidity, or both — hence the need for the CRA; (Community Reinvestment Act) and
3. No government agency, especially not the Fed, had anything to do with either the creation or bursting of the housing market bubble and the subprime crisis.
At least you were on to something when you brought up that lax mortgage underwriting and relaxed income standards as being a factor, but this is just a symptom, not the disease.
Did you ever wonder why the banks and brokers lowered their standards? I'm sure it never occurred to you to even ask that question.
The Community Reinvestment Act and other government fair lending laws such as the Home Mortgage Disclosure Act amended to force banks to collect racial data on mortgage applicants, required and encouraged lax lending standards that contributed to the later mortgage boom and bust.
http://www.businessinsider.com/sorry-folks-the-cra-really-did-require-crap-lending-standards-2009-6
The private sector (brokers and banks), were "pushed" into making these loans, if you look at the evidence, the fed. And local community groups (Acorn) forced banks to meet benchmarks in their performance to comply with the Community Reinvestment Act.
Banks that fell short had to deal with the consequences:
http://www.usnews.com/money/blogs/capital-commerce/2009/03/17/yes-the-community-reinvestment-act-really-did-help-cause-the-housing-crisis.html
Or how about this article:
http://boston.bizjournals.com/boston/stories/2009/03/16/story3.html
But really, don't take my word for any of this, read this speech given by Chairman Ben S. Bernanke at the Community Affairs Research Conference, Washington, D.C.March 30, 2007
Allow me to highlight my favorite part: "Further attention to CRA was generated by the surge in bank merger and acquisition activities that followed the enactment of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. As public scrutiny of bank merger and acquisition activity escalated, advocacy groups increasingly used the public comment process to protest bank applications on CRA grounds. In instances of highly contested applications, the Federal Reserve Board and other agencies held public meetings to allow the public and the applicants to comment on the lending records of the banks in question. In response to these new pressures, banks began to devote more resources to their CRA programs. Many institutions established separate business units and subsidiary community development corporations to facilitate lending that would be given favorable consideration in CRA examinations. Local and regional public-private partnerships and multibank loan consortia also gained more prominence as banks developed strategies for expanding and managing CRA-related activities".
http://www.federalreserve.gov/newsevents/speech/Bernanke20070330a.htm
This is extortion, this is how the Community Reinvestment Act was enforced! Did you read the part about " In response to these new pressures, banks began to devote more resources to their CRA programs. Many institutions established separate business units and subsidiary community development corporations to facilitate lending that would be given favorable consideration in CRA examinations".
What else would make a bank push through bad loads?
http://www.nytimes.com/1993/11/17/business/fed-stops-bank-merger-cites-lending-concerns.html
This was the first time the Fed had ever taken this kind of action, and it had profound effects through the banking sector. It sent a strong signal to the banks that the Fed would closely scrutinize lending practice, limiting the ability of banks to grow or make acquisitions if they were found to have insufficient low income or minority lending. Banks immediately responded by lowering down payment requirements and using more flexible income criteria.
You have to ask yourself one question: Why would any bank lend money to people with poor credit histories and low incomes? Greed? Hardly. There was the carrot of Fannie and Freddie buying up the mortgages and the stick of the Justice Department prosecuting the banks for redlining. No greedy person I know would lend his money to bad credit risks! Private businesses acting on their own would never lend themselves into bankruptcy across an entire industry without government policy interfering.
The left states "More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions". Yes, but you have to realize, independent mortgage companies are middlemen who arrange mortgage loans for borrowers — including "subprime" borrowers — with banks, including CRA-regulated banks. The private institutions did make most of the sub-prime loans, but that was because (a) they were intimidated into doing so by the CRA and the politicians, and (b) Freddy Mac and Fanny Mae were waiting anxious to buy them from the private businesses as soon as they were made. And Banks lacking the equity capital needed to hold large volumes of these risky loans in their portfolios were glad to sell them to Fannie and Freddie, this gave them more capital to lend to the next guy, and so on. And lenders of all types couldn't originate and then sell these loans to investors (Wall Street) in the form of residential mortgage-backed securities, or RMBS—at least not without added protection against defaults.
.
This is where Fannie and Freddie comes in, These GSE (Government -sponsored enterprises) Fannie Mae, Freddie Mac, and the 12 federal home loan banks (FHLBs). Using information as of September 30, 2006 these 14 firms have total assets of $2.67 trillion; given their thin capital positions, their total liabilities are only a little smaller. Just two firms—Fannie Mae and Freddie Mac—account for $1.65 trillion of the assets, or 62 percent of all housing GSE assets. Moreover, Fannie Mae and Freddie Mac have guaranteed mortgage-backed securities outstanding of $2.82 trillion. Thus, the housing GSE liabilities on their balance sheets and guaranteed obligations off their balance sheets are about $4.47 trillion, which may be compared with U.S. government debt in the hands of the public of $4.83 trillion! It is estimated that 75 percent of outstanding first-lien residential mortgages are held by securitization trusts, and that two-thirds are in GSE MBS.
Fannie Mae and Freddie Mac are the largest GSEs, with Ginnie Mae being smaller. These enterprises guarantee the loans and pool large groups of them into RMBS. They're then sold to investors, who receive a share of the payments on the underlying mortgages. Because the GSEs are federally chartered, investors perceive an implicit government guarantee of them. Having confidence in the ability of quantitative models to accurately measure nonprime default risk, a brisk market emerged for securities backed by nonprime loans.
http://www.dallasfed.org/research/eclett/2007/el0711.html#1
You people keep saying" Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law" that doesn't matter when Fannie and Freddie wanted subprime or Alt-A loans, the mortgage markets would produce them. Andrew Cuomo, Secretary of HUD between 1997 and 2001, actively pushed Fannie Mae and Freddie Mac into backing the enormous expansion of the nonprime mortgage market.11 In the short run, Fannie Mae and Freddie Mac found that their new flexible lending lines were profitable, and they continued to expand their purchases of nonprime mortgages under the rising goals set by subsequent HUD Secretaries.
The hyper expansion of Fannie Mae and Freddie Mac was made possible by their implicit backing from the U.S. Treasury. To fund their enormous growth, Fannie Mae and Freddie Mac had to borrow huge sums in wholesale financial markets. Institutional investors were willing to lend to the government-sponsored mortgage companies cheaply—at rates only slightly above those on the Treasury's risk-free securities and well below those paid by other financial intermediaries—despite the risk of default that would normally attach to private firms holding such highly leveraged and poorly diversified portfolios. The investors were so willing only because they thought that the Treasury would repay them should Fannie or Freddie be unable. As it turns out, they were right. The Treasury did explicitly guarantee Fannie's and Freddie's debts when the two giants collapsed and were placed into conservatorship.
Congress was repeatedly warned by credible observers about the growing dangers posed by Fannie Mae's and Freddie Mac's implicit federal backing. A leading critic was William Poole, then president of the Federal Reserve Bank of St. Louis, who as far back as 2003 pointedly warned that the companies had insufficient capital to survive adverse conditions, and that the problem would continue to fester unless Congress explicitly removed the federal backing from the two companies so that they would face market discipline.12
Congress did nothing. http://www.downsizinggovernment.org/hud/housing-finance-2008-financial-crisis
By late 2004, Fannie and Freddie very much wanted subprime and Alt-A loans. In order to curry congressional support after their accounting scandals in 2003 and 2004, Fannie Mae and Freddie Mac committed to increased financing of "affordable housing." They became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. In doing so, they stimulated the growth of the subpar mortgage market and substantially magnified the costs of its collapse
.http://online.wsj.com/article/SB122212948811465427.html
So don't give me this crap about Phil Gramm and his Commodity Futures Modernization Act of 2000 as a source of all these recent problems. Credit Default Swaps would not have killed Lehman Brothers if all of its assets weren't toxic! That's the only thing you could even begin to blame the right for, and why hasn't it been repealed?
Or the repeal of the bipartisan Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act, That act opened the door for financial firms to diversify: a holding company that owns a commercial bank subsidiary may now also own insurance, mutual fund, and investment bank subsidiaries. Far from contributing to the recent turmoil, the greater freedom allowed by the 1999 act has been a blessing in containing the fallout. Without it, JPMorgan Chase could not have acquired Bear Stearns, nor could Bank of America have acquired Merrill Lynch—acquisitions that avoided losses to Bear's and Merrill's bondholders. (It is not the Act's fault that the Fed sweetened the Bear Stearns acquisition at taxpayer expense and forced Bank of America to acquire Merrill Lynch when the bank wanted to scotch the deal). Without it, Goldman Sachs and Morgan Stanley could not have switched specialties to become bank holding companies when it became clear that they could no longer survive as investment banks.
So you can believe me or you can believe Ben Bernanke either way, it's the same!
The democrats (Carter administration)brought the Community Reinvestment Act into law in 1977, Bill Clinton gave it wings in 1997, they then spent the last 12 years abusing the system and defending its practices until the whole thing collapsed under rising interest rates in 2008.
First of all I keep getting this A.P. story shoved in my face as "proof" of Bush's incompetence, http://abcnews.go.com/Business/wireStory?id=6364464 .Did anyone read this article? This story blames Bush at the beginning then states that "Bowing to aggressive lobbying-along with assurances from banks that the troubled mortgages were OK, regulators delayed action for nearly one year". The regulators are congress! More specifically the House Financial Services Committee, http://financialservices.house.gov/jurisdiction.html
Every person on this committee is a democrat, every one of them thwarted all attempts at regulation and it was their responsibility led by Barney Frank. Everybody has seen the Utube videos of Barney bad ass telling congress there is no issue here at Fannie and Freddie.
http://www.youtube.com/watch?v=iW5qKYfqALE&eurl=http%3A%2F%2Fwww%2Epapamiket%2Ecom%2F%3Fp%3D17810&feature=player_embedded#t=108
Bush had no authority to regulate the housing industry, even though he tried many times.
http://gatewaypundit.blogspot.com/2008/09/bush-called-for-reform-of-fannie-mae.html
I can't believe all you delusional liberals think this disaster was caused by the same things:
1. runaway greed ("market failure") on the part of lenders is the cause of the subprime crisis;
2. these same greedy lenders routinely ignore billions of dollars in potential profits in lower-income communities because of their systemic racism, stupidity, or both — hence the need for the CRA; (Community Reinvestment Act) and
3. No government agency, especially not the Fed, had anything to do with either the creation or bursting of the housing market bubble and the subprime crisis.
At least you were on to something when you brought up that lax mortgage underwriting and relaxed income standards as being a factor, but this is just a symptom, not the disease.
Did you ever wonder why the banks and brokers lowered their standards? I'm sure it never occurred to you to even ask that question.
The Community Reinvestment Act and other government fair lending laws such as the Home Mortgage Disclosure Act amended to force banks to collect racial data on mortgage applicants, required and encouraged lax lending standards that contributed to the later mortgage boom and bust.
http://www.businessinsider.com/sorry-folks-the-cra-really-did-require-crap-lending-standards-2009-6
The private sector (brokers and banks), were "pushed" into making these loans, if you look at the evidence, the fed. And local community groups (Acorn) forced banks to meet benchmarks in their performance to comply with the Community Reinvestment Act.
Banks that fell short had to deal with the consequences:
http://www.usnews.com/money/blogs/capital-commerce/2009/03/17/yes-the-community-reinvestment-act-really-did-help-cause-the-housing-crisis.html
Or how about this article:
http://boston.bizjournals.com/boston/stories/2009/03/16/story3.html
But really, don't take my word for any of this, read this speech given by Chairman Ben S. Bernanke at the Community Affairs Research Conference, Washington, D.C.March 30, 2007
Allow me to highlight my favorite part: "Further attention to CRA was generated by the surge in bank merger and acquisition activities that followed the enactment of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. As public scrutiny of bank merger and acquisition activity escalated, advocacy groups increasingly used the public comment process to protest bank applications on CRA grounds. In instances of highly contested applications, the Federal Reserve Board and other agencies held public meetings to allow the public and the applicants to comment on the lending records of the banks in question. In response to these new pressures, banks began to devote more resources to their CRA programs. Many institutions established separate business units and subsidiary community development corporations to facilitate lending that would be given favorable consideration in CRA examinations. Local and regional public-private partnerships and multibank loan consortia also gained more prominence as banks developed strategies for expanding and managing CRA-related activities".
http://www.federalreserve.gov/newsevents/speech/Bernanke20070330a.htm
This is extortion, this is how the Community Reinvestment Act was enforced! Did you read the part about " In response to these new pressures, banks began to devote more resources to their CRA programs. Many institutions established separate business units and subsidiary community development corporations to facilitate lending that would be given favorable consideration in CRA examinations".
What else would make a bank push through bad loads?
http://www.nytimes.com/1993/11/17/business/fed-stops-bank-merger-cites-lending-concerns.html
This was the first time the Fed had ever taken this kind of action, and it had profound effects through the banking sector. It sent a strong signal to the banks that the Fed would closely scrutinize lending practice, limiting the ability of banks to grow or make acquisitions if they were found to have insufficient low income or minority lending. Banks immediately responded by lowering down payment requirements and using more flexible income criteria.
You have to ask yourself one question: Why would any bank lend money to people with poor credit histories and low incomes? Greed? Hardly. There was the carrot of Fannie and Freddie buying up the mortgages and the stick of the Justice Department prosecuting the banks for redlining. No greedy person I know would lend his money to bad credit risks! Private businesses acting on their own would never lend themselves into bankruptcy across an entire industry without government policy interfering.
The left states "More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions". Yes, but you have to realize, independent mortgage companies are middlemen who arrange mortgage loans for borrowers — including "subprime" borrowers — with banks, including CRA-regulated banks. The private institutions did make most of the sub-prime loans, but that was because (a) they were intimidated into doing so by the CRA and the politicians, and (b) Freddy Mac and Fanny Mae were waiting anxious to buy them from the private businesses as soon as they were made. And Banks lacking the equity capital needed to hold large volumes of these risky loans in their portfolios were glad to sell them to Fannie and Freddie, this gave them more capital to lend to the next guy, and so on. And lenders of all types couldn't originate and then sell these loans to investors (Wall Street) in the form of residential mortgage-backed securities, or RMBS—at least not without added protection against defaults.
.
This is where Fannie and Freddie comes in, These GSE (Government -sponsored enterprises) Fannie Mae, Freddie Mac, and the 12 federal home loan banks (FHLBs). Using information as of September 30, 2006 these 14 firms have total assets of $2.67 trillion; given their thin capital positions, their total liabilities are only a little smaller. Just two firms—Fannie Mae and Freddie Mac—account for $1.65 trillion of the assets, or 62 percent of all housing GSE assets. Moreover, Fannie Mae and Freddie Mac have guaranteed mortgage-backed securities outstanding of $2.82 trillion. Thus, the housing GSE liabilities on their balance sheets and guaranteed obligations off their balance sheets are about $4.47 trillion, which may be compared with U.S. government debt in the hands of the public of $4.83 trillion! It is estimated that 75 percent of outstanding first-lien residential mortgages are held by securitization trusts, and that two-thirds are in GSE MBS.
Fannie Mae and Freddie Mac are the largest GSEs, with Ginnie Mae being smaller. These enterprises guarantee the loans and pool large groups of them into RMBS. They're then sold to investors, who receive a share of the payments on the underlying mortgages. Because the GSEs are federally chartered, investors perceive an implicit government guarantee of them. Having confidence in the ability of quantitative models to accurately measure nonprime default risk, a brisk market emerged for securities backed by nonprime loans.
http://www.dallasfed.org/research/eclett/2007/el0711.html#1
You people keep saying" Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law" that doesn't matter when Fannie and Freddie wanted subprime or Alt-A loans, the mortgage markets would produce them. Andrew Cuomo, Secretary of HUD between 1997 and 2001, actively pushed Fannie Mae and Freddie Mac into backing the enormous expansion of the nonprime mortgage market.11 In the short run, Fannie Mae and Freddie Mac found that their new flexible lending lines were profitable, and they continued to expand their purchases of nonprime mortgages under the rising goals set by subsequent HUD Secretaries.
The hyper expansion of Fannie Mae and Freddie Mac was made possible by their implicit backing from the U.S. Treasury. To fund their enormous growth, Fannie Mae and Freddie Mac had to borrow huge sums in wholesale financial markets. Institutional investors were willing to lend to the government-sponsored mortgage companies cheaply—at rates only slightly above those on the Treasury's risk-free securities and well below those paid by other financial intermediaries—despite the risk of default that would normally attach to private firms holding such highly leveraged and poorly diversified portfolios. The investors were so willing only because they thought that the Treasury would repay them should Fannie or Freddie be unable. As it turns out, they were right. The Treasury did explicitly guarantee Fannie's and Freddie's debts when the two giants collapsed and were placed into conservatorship.
Congress was repeatedly warned by credible observers about the growing dangers posed by Fannie Mae's and Freddie Mac's implicit federal backing. A leading critic was William Poole, then president of the Federal Reserve Bank of St. Louis, who as far back as 2003 pointedly warned that the companies had insufficient capital to survive adverse conditions, and that the problem would continue to fester unless Congress explicitly removed the federal backing from the two companies so that they would face market discipline.12
Congress did nothing. http://www.downsizinggovernment.org/hud/housing-finance-2008-financial-crisis
By late 2004, Fannie and Freddie very much wanted subprime and Alt-A loans. In order to curry congressional support after their accounting scandals in 2003 and 2004, Fannie Mae and Freddie Mac committed to increased financing of "affordable housing." They became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. In doing so, they stimulated the growth of the subpar mortgage market and substantially magnified the costs of its collapse
.http://online.wsj.com/article/SB122212948811465427.html
So don't give me this crap about Phil Gramm and his Commodity Futures Modernization Act of 2000 as a source of all these recent problems. Credit Default Swaps would not have killed Lehman Brothers if all of its assets weren't toxic! That's the only thing you could even begin to blame the right for, and why hasn't it been repealed?
Or the repeal of the bipartisan Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act, That act opened the door for financial firms to diversify: a holding company that owns a commercial bank subsidiary may now also own insurance, mutual fund, and investment bank subsidiaries. Far from contributing to the recent turmoil, the greater freedom allowed by the 1999 act has been a blessing in containing the fallout. Without it, JPMorgan Chase could not have acquired Bear Stearns, nor could Bank of America have acquired Merrill Lynch—acquisitions that avoided losses to Bear's and Merrill's bondholders. (It is not the Act's fault that the Fed sweetened the Bear Stearns acquisition at taxpayer expense and forced Bank of America to acquire Merrill Lynch when the bank wanted to scotch the deal). Without it, Goldman Sachs and Morgan Stanley could not have switched specialties to become bank holding companies when it became clear that they could no longer survive as investment banks.
So you can believe me or you can believe Ben Bernanke either way, it's the same!
The democrats (Carter administration)brought the Community Reinvestment Act into law in 1977, Bill Clinton gave it wings in 1997, they then spent the last 12 years abusing the system and defending its practices until the whole thing collapsed under rising interest rates in 2008.
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