patrick.net

control point says

Private banks and investors could (and did) buy up all kinds of paper from these guys based upon a faulty credit rating. All government intervention did was possibly make the interest rate on this paper lower. But make no mistake - private entities were misjudging risk too. If the investors were willing to buy the debt at 5% they would have bought it at 7% too.

I checked (glanced) that the majority of the loans countrywide passed were bought by Freddy and Fannie. It appears you are equating all of the buyers of the paper as equal in the volume of purchases?

Again it does not matter what dumb ass idea anyone comes up with if they cannot finance it.

And again the enabler was the FED. If you bothered to read any of the links I made you will see that this is fact based.

thomaswong.1986 says

The GSEs had a pioneering role in expanding the use of subprime loans: In 1999, Franklin Raines first put Fannie Mae into subprimes, following up on earlier Fannie Mae efforts in the 1990s, which reduced mortgage down payment requirements. At this time, subprimes represented a tiny fraction of the overall mortgage market

Thank Billy Bob Clinton..

Flashback 1999: Fannie Mae Eases Credit To Aid Mortgage Lending(Bailout-Bill Clinton's Real Legacy)
New York Times ^ | September 30, 1999

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae’s and Freddie Mac’s portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

CL says

Are you feeling okay? There were only a few jokes in there, and you seem extraordinarily erudite. :)

Why do liberals hate erudite?

indigenous says

And again the enabler was the FED. If you bothered to read any of the links I made you will see that this is fact based.

The Fed did not require banks to abandon their underwriting standards. The Fed did not force them to make subprime loans. Or liar loans.

The banks did it to make money. They made huge fees on those loans. Capitalism at its best....

tatupu70 says

indigenous says

And again the enabler was the FED. If you bothered to read any of the links I made you will see that this is fact based.

The Fed did not require banks to abandon their underwriting standards. The Fed did not force them to make subprime loans. Or liar loans.

The banks did it to make money. They made huge fees on those loans. Capitalism at its best....

Regulation is an extension of the rule of law, I object to too much regulation.

Clearly there wasn't enough with Fanny and Freddy, again the core problem was the FED. I know this strikes at the heart of your religion but my job is to learn you stuff.

SoftShell says

Looks like Mr Bull's advice was ignored...

ELC says

Heraclitusstudent says

by the end of this decade we'll increase the number of minority homeowners by at least 5.5 million families. "

(Bush 2002)

"Beware of white man bearing gifts." (Chief Sitting Bull 1889)

Even Indians aren't exempt from Federal income tax.

"What caused the past, and current housing bubbles"

Dumbass ,follow the herd buyers overpaying for overpriced shacks.

This lovely home has an listing price of ONLY $450,000 but you will surely get it if you offer $535.000. There is an investment property that would be great for landlording with a listing price of $125,000. The seller might accept $165,500. The profit on this rental could help you pay for your overpriced residence.

Why do you hate the truth?

HEY YOU says

Dumbass ,follow the herd buyers overpaying for overpriced shacks.

Seems many with an interest in RE would dispute it was the Public..
therefore they keep pointing to the Banks and Wall Street...

They just dont want to levy any blame on the buying public..

Quote of the day people... in regards to QE:
“We still don’t have well-developed macro models that incorporate a realistic financial sector,” said William Dudley, president of the New York Federal Reserve, at the American Economic Association’s 2014 annual meeting. “We don’t understand fully how large-scale asset purchase programs work to ease financial market conditions — is it the effect of the purchases on the portfolios of private investors or, alternatively, is the major channel one of signaling?”

APOCALYPSEFUCKisShostikovitch says

control point says

The government set up rules under which the GSEs would operate - conforming loans and all that. Guys like Mozillo found loopholes and skirted the rules to take an advantage

GSEs were no angels... heck they were more criminals than Mozillo could ever be... the Dems did alot of block and tackling over regulation..
its all on video...

http://www.youtube.com/embed/NQXbT5ZMYaY

indigenous says

Why do liberals hate erudite?

That was re: Apocalypsefuck, not you.

APOCALYPSEFUCKisShostikovitch says

t's worth pointing out that HUD/HEO could have stepped in at any time and disciplined Fannie and Freddie and instructed the agencies to reject all but conventional notes regardless of spurious, opportunistic interpretations of rules - but they looked the other way, even in the knowledge of the skunkiness of the non-banks' paper. As doctrinaire as the Reagan Administration could be, when Ed Grey and the FHLBB of SF pointed out the damage Garn-St. Germain had wrought, they turned around and re-regulated the S&Ls and held the losses to under a trillion. They had their, ahem, ideas but they weren't so enthralled by them to become strangers to reason and fact. The administration owned up to calamity and formed the RTC (under Bush I, I believe) to sell off the fruits of this mistake to the public at a discount to correct a market anomaly deregulation had introduced by auctioning off the foreclosed homes.

And he did it again! I'm not complaining; it's just an interesting facet of an otherwise colorful personality here.

APOCALYPSEFUCKisShostikovitch says

Right, if only the Democrats had not abused and shouted down the Godly counsel of noble Republicans, ever stalwart advocates of financial regulation, if only Barney Frank had not given himself over to teen boys and male prostitutes and invented the CRA, every American would have had their choice of high paying jobs, homes paid for and a tidy investment income ready for their Golden Years. If only.

That is a two street, if only the Koch brothers, BP oil, the frackers, Hewlett Packard, Michael Milken had not...

APOCALYPSEFUCKisShostikovitch says

Right, if only the Democrats had not abused and shouted down the Godly counsel of noble Republicans, ever stalwart advocates of financial regulation, if only Barney Frank had not given himself over to teen boys and male prostitutes and invented the CRA, every American would have had their choice of high paying jobs, homes paid for and a tidy investment income ready for their Golden Years. If only.

Barney Frank also invented the Glory Holes...

thomaswong.1986 says

Barney Frank also invented the Glory Holes...

At least it gave you something to do on your way to work.

Keynesian economics dictate zero bond growth in a low interest high value housing market.
One would be wise to move nest eggs into precious metals, the bulwark against infaltion.

tovarichpeter says

and current housing bubbles

stopped reading here.

Analyzer says

QE is lowering the unemployment rate. As I posted on another thread my favorite

Lowering or raising?

"Sure it is, it is forcing down household income (through a loss of purchasing power) it is creating savings to the government and those who benefit from inflation."

A weaker currency does not necessarily result in inflation.

We also need jobs, and for that, we need a weaker currency, so our workers can compete with the ROW.

http://research.stlouisfed.org/fred2/series/MANEMP

Housing -- everyone's dominate life expense -- is up 10% since the economy bottomed:

http://research.stlouisfed.org/fred2/graph/?g=qK2

and QE has had fuck-all to do with that.

indigenous says

Analyzer says

QE is lowering the unemployment rate. As I posted on another thread my favorite

Lowering or raising?

"The FOMC last month renewed its pledge to press on with bond purchases until the outlook for the labor market has “improved substantially.”

control point says

Basically you have a misalignment of incentive. As AF notes - the incentive (profit) for the Countrywides of the world was big profits by taking short-term risks - and passing off the long-term risks to someone else.

Countrywide's game was to sell 100% financing to the homebuyer, giving the 80% piece to the GSEs and finding suckers to buy the CDOs of the 20% piece.

Plus all the negative-am / teaser-rate NINJA crap that allowed thousands and thousands of infomercial geniuses like Casey Serin to take out millions in suicide loans, each.

Loans that set the market prices of 2004-2007, but required continued appreciation to actually pay back.

When the appreciation music stopped in 2006, the system was going to crash, hard.

http://research.stlouisfed.org/fred2/graph/?g=qK3

shows a ~$4T overhang that we're still trying to work our way out of.

Another factor nobody understands is that everyone was doing cash-out refis 2002-2007. This was a significant stealth stimulus to the overall economy.

Wallison, btw, was the dissenter in the financial crisis commission.

http://www.americanprogress.org/issues/housing/report/2011/07/12/10011/why-wallison-is-wrong-about-the-genesis-of-the-u-s-housing-crisis/

guy's full of shit on everything. That he's an AEI man should be enough of a tell.

Analyzer says

"The FOMC last month renewed its pledge to press on with bond purchases until the outlook for the labor market has “improved substantially

So you buy the government figures?

indigenous says

Analyzer says

"The FOMC last month renewed its pledge to press on with bond purchases until the outlook for the labor market has “improved substantially

So you buy the government figures?

If you don't buy the government figures you are considered to believe in the 'conspiracy theory' and a doomsdayer.....

Analyzer says

If you don't buy the government figures you are considered to believe in the 'conspiracy theory' and a doomsdayer.....

Just the two choices?

indigenous says

Analyzer says

If you don't buy the government figures you are considered to believe in the 'conspiracy theory' and a doomsdayer.....

Just the two choices?

How could you not believe everything the government tells us?.................NSA spying, IRS scandal, Benghazi, "if you like your plan you can keep it, period".

Bellingham Bill says

and QE has had fuck-all to do with that.

Say what, the entire purpose is to prop up the price of housing?

The thing that creates economic activity and jobs is investment. Currently we have mal investment which does not create jobs.

indigenous says

The thing that creates economic activity and jobs is investment. Currently we
have mal investment which does not create jobs.

Wrong again, kemo sahbee.

GDP vs. Private Investment
http://research.stlouisfed.org/fred2/graph/?g=qKu
Private Investment vs. Jobs
http://research.stlouisfed.org/fred2/graph/?g=qKt

control point says

indigenous says

The thing that creates economic activity and jobs is investment. Currently we

have mal investment which does not create jobs.

Wrong again, kemo sahbee.

GDP vs. Private Investment

http://research.stlouisfed.org/fred2/graph/?g=qKu

Private Investment vs. Jobs

http://research.stlouisfed.org/fred2/graph/?g=qKt

Good articles.

control point says

Wrong again, kemo sahbee.

No I'm not

I will give you the one about the CRA that was not true.

The Fed did increase the money supply causing the housing bubble. I noticed you just faded on this one, don’t get too smug.

What your graphs don’t show is malinvestment. This is where the money is overinvested in things that do not have value.

Such as “shovel ready jobs”, minimum wage forcing inexperienced workers into unemployment, bridges to nowhere, high speed trains to Fresno, solyndra , GM, worthless degrees, democracy in Iraq, weapons beyond what is needed for national defense, etc., etc., etc.

Investments that do create jobs are home computers, Macintosh home computers, mp3 players, cell phones, smart phones, computer controlled equipment, digital cameras, gopro digital cameras, electric cars, cars that drive themselves, hydrogen cars, led lights, lasers, bio engineering, a search engine that finds relevant items, etc.

The problem with the above is that as soon as the money quits flowing so does the economic activity, you might say .5 economic activity from government investment, which is what you see in your graphs.

I think that more than a few government officials were in on lending fraud and intentionally didn't do anything to stop it. First because they needed to create the illusion of wealth so that the minions would generate wealth effect from equity paper wealth and more insidiuously government officials would execute insider trades to short banks/homebuilders knowing that the house of cards was gonna fall. This was not a case of govt vs business, this was classic alliance of government and business.

indigenous says

Such as “shovel ready jobs”, minimum wage forcing inexperienced workers into
unemployment, bridges to nowhere, high speed trains to Fresno, solyndra , GM,
worthless degrees, democracy in Iraq, weapons beyond what is needed for national
defense, etc., etc., etc.

The graphs show private investment, none of your examples of malinvestment above are private investment.

http://en.wikipedia.org/wiki/Gross_private_domestic_investment

You could make the argument that the housing bubble (ie jobs created by and materials purchases for housing starts) was malinvestment.

But what does that have to do with the price of tea in China? You said private investment, I showed a graph of private investment and jobs and GDP, and you start talking about government malinvestment? WTF?

control point says

But what does that have to do with the price of tea in China? You said private investment, I showed a graph of private investment and jobs and GDP, and you start talking about government malinvestment? WTF?

So you don't think that out of 6 trillion dollars spent by the FED, none of it made it's way into the market? How come the high end retailers have been exploding in recent years, the current housing bubble, collectibles, all this while the credit market has shrunk.

Real asset price histories show bubbles very well.
Real Homes, Real Dow
http://www.showrealhist.com/RHandRD.html
But these histories are rarely shown to the people — what do you call this?
I call it “The Establishment are conpersons first.”

indigenous says

So you don't think that out of 6 trillion dollars spent by the FED, none of it
made it's way into the market?

Where do you get this 6 trilliion number?

http://research.stlouisfed.org/fred2/graph/?g=qLO

11T-8.3T = $2.7T

Do I think that it all has not gotten into the market? No, if it all hadn't gotten into the market there would be zero inflation. But I think most of it has not.

indigenous says

How come the high end retailers have been exploding in recent years, the current
housing bubble, collectibles,

Capitalism flows wealth up. Luxury goods are largely dependent on high earners with disposable income - high earners earn from the rest of us. Growth is driven by demand from the rest of us.

Take a look at corporate earnings in general and wages and salaries, post crash.

http://research.stlouisfed.org/fred2/graph/?g=qLL

indigenous says

all this while the credit market has shrunk.

Consumer credit market has remained stable and is ticking up since mid-2010. We are 2.5 years after this, now.

http://research.stlouisfed.org/fred2/graph/?g=qLV

dublin hillz says

This was not a case of govt vs business, this was classic alliance of government and business.

regulatory capture at least, yes.

"In the summer of 2003, leaders of the four federal agencies that oversee the banking industry gathered to highlight the Bush administration's commitment to reducing regulation. "

http://dorkmonger.blogspot.com/2008/11/cutting-red-tape.html

whether they were "banking" on a resulting crash is more dubious. After all, the crash came on their watch, which wasn't very helpful to their overall cause.

But they certainly haven't lost any money on this policy disaster, so it's all good for them I guess.

indigenous says

It was both the prior is covered in this article, that you won't read,

http://mises.org/daily/2936

You can fetch the latter.

I read through it, every word. Mr. Murphy is trying to draw distinction between the rate of change of Vault Cash and Bank Reserves and demand deposits - and causing the housing bubble.

Using a chart to show an increasing rate of change (essentially the change in a change) as "irresponsibly fueling the housing boom from 2000 to 2004" is silly. Its bush league.

The rate of change in the money supply most likely averaged 5% from 2000 to 2004. It peaked at 10% around 2002, falling to around 5% in 2004.

The rate of change in the money supply went from 5% to 11% to 5% from 1990 to 1996. It went from 5% to 11% to 5% to 11% to 5% every 2 or so years from 1980 to 1988. The average rates of increase in the money supply were higher in the 80s and 90s, ie the derivative of this function from 1980 to 2006 would be downward sloping.

I don't recall a housing bubble in the 80s or early/mid 90s. FWIW, the acceleration of the stock market bubble STARTED in 1996.

Therefore, just because the change in the rate of change in money supply is sloping upward from 2000 to 2004, does not mean that money supply was expecially loose. It was more restrictive, on the average, than previous decades.

Happy to explain to you what this article is trying to say. It is complete and total hogwash.

control point says

Where do you get this 6 trilliion number?

I don't remember maybe I read it in the NYC or heard it on NBC for Chris Matthews. control point says

Capitalism flows wealth up. Luxury goods are largely dependent on high earners with disposable income - high earners earn from the rest of us. Growth is driven by demand from the rest of us.

The wealth comes from inflation trough the low interest rates in other words they can buy ahead of the inflation. Which is why you see an expansion in high end retailers. In an organic economy you are right the wealth would flow up from commerce. In this economy it flows down from the FED. This is what is meant by the inflation is not even.

control point says

Take a look at corporate earnings in general and wages and salaries, post crash.

How could it not go up after 2008?

control point says

Consumer credit market has remained stable and is ticking up since mid-2010. We are 2.5 years after this, now.

that is a 3 year window with a .16 spread which applies only to consumer credit. What about commercial credit. That does not indicated anything.

control point says

Happy to explain to you what this article is trying to say. It is complete and total hogwash.

Professor Murphy has a doctorate in economics, I don't know your credentials.

What I do know is that a bubble was created and it was not created by the market.

It may be that the money came from foreign lending. It may be that a lower interest rate would not require more money immediately.

Ok lets try this one:

http://mises.org/daily/3130

indigenous says

Ok lets try this one:

http://mises.org/daily/3130

Whoever set up their registration form is an idiot so I tend to distrust the content too.

Bellingham Bill says

clearly rising M2 is more than just printing, since the yen strengthened in
the late 80s . . .

http://research.stlouisfed.org/fred2/series/M2V

http://research.stlouisfed.org/fred2/graph/?g=qP9

(look of astonishment)

FYI I added 100 to GDP because you couldn't see both lines if I didn't as they overlapped.