patrick.net

"ALL loans made in the last 35 years required (1) 20% down, (2) a fixed interest rate, (3) prudent lending requirements and (4) no CRA…would we in America have our current economic meltdown? "

Of course not. The point is 1, 2, and 3 had nothing to do with CRA, and your 'pebble in the pond' is just hand waving nonsense without explaining cause and effect.

I'm not sure what happened to the other thread. Vanished into the either. What's to point of going to the trouble to post anything? I'm done here.

Abe what are you talking about? Subprime, low income, and CRA are not synonyms. Many subprime mortgages were pretty high up on the income ladder. http://seekingalpha.com/article/49701-subprime-mortgages-crossing-income-and-credit-strata gives a pretty good read about this. How can CRA be the cause of the housing bubble in the US but have nothing to do with the housing bubble in the rest of the world? You are saying there were 2 independent simultanious housing bubbles (the USA and the rest of the world) created by entirely different causes. Really? That's very interesting theory.

There is one and only one cause of the housing and economic crash everywhere in the world. The people who signed on the bottom line for houses they could not afford gambling they would cash in on the housing lottery. No one forced people to carry unaffordable mortgages with no savings in case of a downturn. Renting or buying a smaller more affordable house was always an option. I did and bitterly resent anyone or any irresponsible company being bailed out with my tax money. What happened to being responsible for your own actions?

bob2356 says

There is one and only one cause of the housing and economic crash everywhere in the world. The people who signed on the bottom line for houses they could not afford gambling they would cash in on the housing lottery. No one forced people to carry unaffordable mortgages with no savings in case of a downturn. Renting or buying a smaller more affordable house was always an option. I did and bitterly resent anyone or any irresponsible company being bailed out with my tax money. What happened to being responsible for your own actions?

Excellent post.

bob2356 says

There is one and only one cause of the housing and economic crash everywhere in the world. The people who signed on the bottom line for houses they could not afford gambling they would cash in on the housing lottery. No one forced people to carry unaffordable mortgages with no savings in case of a downturn. Renting or buying a smaller more affordable house was always an option. I did and bitterly resent anyone or any irresponsible company being bailed out with my tax money. What happened to being responsible for your own actions?

I also agree that this is an excellent post. Even though I am retired, I am forced by the state of California to pay absurd taxes every quarter. I know that even though I do not work, I am paying for the f***ing flakes who did not buy responsibly. I am their freaking bailout!!!!

Don't even get me started on how I am forced to pay for the illegals...

I understand the frustration with the individual loanowner but what the hell were the banks thinking lending so much money to folks who obviously couldn't afford it?!?! Hey, I make 40K and support my family of four, would you as an individual loan me $400K? Hell NO! So why did the banks do it?

Elvis--

Could you explain how you came to the conclusion that

elvis says

(1) Its pretty clear the feeding frenzy was started by CRA and the gov’t required lax lending requirements. Banks that had standards exceeding that of Regulators were considered to have “unfair lending practices.”

I've read through the same articles and come to the exact opposite conclusion. Help me out. How does a loan in one of the CRA approved zip codes cause a bank to make a reckless loan in an affluent area? Regulators would only complain if they were not approving loans in the CRA approved zips--they wouldn't have anything to say about loans in non-CRA zips. And non-CRA zips is where the bubble and crash occured.

elvis says

(2) CRA is a great concept BUT is unworkable in reality. It would also be great to let everyone fly around the country for almost nothing…but not so great if regulators forced the airlines to gut their safety standards. Do you see the similarity?

No. I don't. I assume you're implying that the CRA forced banks to give away money like an airline letting everyone fly for free. But that assumption is false. So the anala]ogy is poor.

elvis says

(3) Loans needing down payments, strict lending requirements and the like prevent run-a-way price increases (a bubble).
In other words CRA is the cause, devastation is the effect.

You're right that down payments, strict lending requirements will prevent run-a-way price increases... but that has nothing to do with the CRA.

Elvis--

You still haven't made the connection between lowered lending standards and CRA. You say:

elvis says

Mortgage companies did too, all over the place, since they were not regulated to stay in any particular zip code.

How is that statement connected to CRA?? Mortgage companies DID lower their standards, but it had nothing to do with CRA. It had everything to do with the fact that there was a huge market for bundled mortgages. There was an insatiable appetite for them on Wall St., and as long as they could easily resell the mortgages for a large profit, the brokers were only too happy to write the crappy loans.

Finally--show me where the CRA states that banks must lower their lending standards...

So why would a bank want to make a bad loan? I'm really not seeing the connection here.

Once again, what was the reward for making a loan to someone within a red lined neighborhood?

Giving so much blame to CRA and ignoring FHA/VA demonstrates significant ignorance. And how again did New Zealand and other countries get impacted by our CRA?

Its not financially bad if they can sell that loan to someone else at an immediate profit then make another and sell, then another, etc.

Fireballsocal says

Its not financially bad if they can sell that loan to someone else at an immediate profit then make another and sell, then another, etc.

When CRA was initiated that was not possible. Your statement can be made about the other 99.9% of the loans that were not CRA credits.

CRA caused this too! http://www.katu.com/news/business/64613107.html

"NEW YORK (AP) - One of America's wealthiest men was among six hedge fund managers and corporate executives arrested Friday in a hedge fund insider trading case that authorities say generated more than $25 million in illegal profits and was a wake-up call for Wall Street.

Baseline Scenario has some great tutorials: http://baselinescenario.com/financial-crisis-for-beginners/

Keep reading and turn off the opinion pieces disguised as journalism.

Securitization boom with mortgages being tossed into CDO/CDS blender, and the "Great Moderation" idiots like Greenspan, leading people to believe risk had evaporated and they could hire a Risk Manager for appearances and just put them in a basement office..... yeah you can see this is pretty simple really and actually repeats history. In the late 1920's they had invented securitization then too and followed it off a cliff, but nobody wants to read about financial history it's boring eh?

CRA conspiracy theorists will unshakeably believe what they want and there is no point in arguing with them IMO.

Vicente says

In the late 1920’s they had invented securitization then too and followed it off a cliff, but nobody wants to read about financial history it’s boring eh?

That just interferes with all the babble about "financial innovation", because you know...1929 was Then, and this is Now. ;-) Obviously, people were too busy "saving the economy" to notice the parallels--or even care. Now we're back to re-runs of "famous last words" from the 20s, as seen by Wall Street's current gloat-fest.

FYI, the Clinton Administration made changes to CRA which ultimately forced banks to issue $1 TRILLION in subprime loans. How did it force banks to do this? By introducing a federal requirement that banks either make the loans or face penelties. Bank examiners would use federal home loan data, broken down by neighborhood, income and race, to rate bank "performance." In 1994, for example, Barack Hussain Obama sued Citibank on behalf of a client who claimed that the bank "systematically denied loans to African America applicants and others from minority neighborhoods."

Even though Wikipedia states "the [CRA] law...does not require institutions to make high-risk loans" the reality of government pressure from regulators and a potential for a blizzard of lawsuits says otherwise. [BTW, all this information is on-line].

Ultimately, the very people the government sought to help, through "compassionate legislation" are the very same people who are hurt the most. The law of unintended consequences strikes again - it always does. Abe

Yes Abe, Al Greenspan lowering interest rates to historic lows and telling regulators to stay in the donut shop means zip.

It's the KONSPIRACY of libruls eh? The poor bankers were FORCED to drive off the cliff! A trillion dollars really? Based on....?

Your 1994 reference leads me to Snopes discrediting this particular Bankster-friendly Falsehood.

Snopes: Obama vs Citi

"How did it force banks to do this?"

You want to add Andy Cuomo to that with his goverment affirmative action charges against Citi and several other banks.
Clinton's HUD Secretary Andrew Cuomo ... "$2.1B in mortgages otherwise not qualified. Higher risk and
higher defualt.. " right out of his mouth...

http://www.youtube.com/watch?v=Lr1M1T2Y314

"Subprime lending started as a good idea.. distribute risk for ... and get loans to people who otherwise were unable to.."
Obama 2007...

OMG, and they called Nixon a crook! makes Nixon look like chump change..

http://www.youtube.com/watch?v=Lr1M1T2Y314

"In the late 1920’s they had invented securitization then too and followed it off a cliff, but nobody wants to read about financial history it’s boring eh? "

Would have been very difficult since all corporations pre- SEC act of 33/34 whose stock was traded on the Wall Street
didnt even publish financial statements to the public ( or anyone else as a matter ).. not to mention financial statements
were made in different formats and different accouning standards applied. This also applied to private companies.

But for the public back in the 20s were all to happy to buy up and keep bidding up stock prices. It was pure speculation on stock appreciation without any knowledge what the actual revenue or earnings were on their ownership stake.

"I should also add that CRA was passed in the 70s. What took so long?"

http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act#Controversy

Crucial to the passing of this Act was an amendment made to the GLBA, stating that no merger may go ahead if any of the financial holding institutions, or affiliates thereof, received a "less than satisfactory [sic] rating at its most recent CRA exam", essentially meaning that any merger may only go ahead with the strict approval of the regulatory bodies responsible for the Community Reinvestment Act (CRA).[17] This was an issue of hot contention, and the Clinton Administration stressed that it "would veto any legislation that would scale back minority-lending requirements." [18]

The CRA Konspiracy also faked the moon landings, their reach is astounding.

Only slightly less astounding than SPIN attempts of people who turn Obama once serving as legal aid on a minor lawsuit that was SETTLED, into a decades long plan to wreck America. Those brown people are crafty eh bap33..... I mea Thomas...or abe....

How can we find if particular house we were following has gone under contract or the agent just took it off the market? We were following one house in our neighbor and suddenly the house doesn't show up at all in redfin / realtor.com. It doesn't show anything like pending etc and not even come in search for any history data on redfin.

Pretty confusing,

Let us just put this straight: Blaming CRA for the housing bubble is blatantly false.

The effort to do so is nothing but a massive propaganda campaign by the political right to try and confuse feeble-minded people with libertarian delusions of grandeur that the bubble was caused by "too much regulation".

Yeah, right. And the pigs on Wall St might fly (out the window, with any luck).

I can be found on here in many different places telling folks in the past that The Sodomite B. Frank, along with his boy friend at Fanny, (still makes me laugh to write that) was the beginnings of the end .... and the illegal and immoral CRA ofcourse ..... but, nothing can make it more obvious that we neo-conservo-right-wing-tea-bagger-AM radio-nut-jobs hit right on the truth-button better than the rantings found just above this post.

With Love,
Feeble Minded

Leigh says

Seems like blaming the CRA is like blaming my great grandma for my frustrations with this country. .

hmmmm, not sure ... maybe a crack addicted single mother of 5 (each with a different daddy) that is a 6th generations-removed slave could explain how to retain that historical blaming ability you mention - maby the key is using hope-n-change?

Many people in America are not aware that regulation IS the cause of bubbles, economic downturns, jobs moving off-shore, etc. Thats not a propaganda campaign - thats reality. The most efficient way to distribute anything is through a willing buyer and a willing seller [also known as The Free Market]. Period. When a third party (government) steps in and says "STOP - you can't do that until you [fill in the blank]." Thats when any economic problem starts. When that interference is multiplied on a massive scale all kinds of negative unintended economic consequences occur.

As far as CRA...it is just as easy to find information, on-line, to support my claim about CRA as yours. Sarcastic remarks do nothing to support your point.

I will restate my position...GOVERNMENT caused the Housing crash and CRA was a major contributor, along with other government players like Fannie Mae, Freddie Mac, Barney Frank, The Fed, Alan Greenspan and others.

The game is always the same: (1) Government (in exchange for votes) tries to "help the deowntrodden" (2) The poor get something for nothing by putting the taxpayer at risk (3) The taxpayer gets it in the shorts when things go wrong - as they always do because government cannot allocate anything better than the free market. (4) Since that government program didn't go as planned that is another justification for even more regulation.

This continues until the free market puts on the brakes, all by itself, to stop the insanity. [Like it just did with skyrocketing housing prices]. Then a period of correction occurs - called a recession. This is when the free market makes the necessary corrections to clean up all the previous mistakes made by...thats right, the Government. Then the process starts all over again.

The reason America is on the verge of total collapse is because of too much government internvention, by politicians who are dumber and more messed up than any of us, by militant unions, by predatory greedy lawyers, and by liberal thinking and the shredding of the law of the land - The Constitution. We're in trouble, not because of too many conservative ideas and policies, we're in trouble because of too many liberal ideas and policies.

I'm sure you will agree America was in GREAT SHAPE in the conservative 1950's...and we're totally messed up now, thanks to so much liberalsim. It's pretty obvious - isn't it? Any other questions? Abe.

Honest Abe says

Many people in America are not aware that regulation IS the cause of bubbles, economic downturns, jobs moving off-shore, etc.

NAFTA & GATT were DE-REGULATION moves to help move all the middle-class jobs off-shore to increase corporate profits. Trying to cast it as LIBRULS TERK OUR JERBS eh? Up is down, good is bad, heads is tails, keep up the flood of propaganda about the BROWN PEOPLE THREAT from your multiple accounts Bap33!

Vicente--

You had it right earlier. It's no use arguing with these nutjobs. If they want to believe that the CRA is the cause of all of their ills, so be it. Obviously critical thinking is not among their strengths, so it's no use wasting time and energy trying to explain the fallacies of their logic.

I think I'll invest in Alcoa--tinfoil sales seem like they are poised to increase...

Vicente says

NAFTA & GATT

Interesting. I heard Bob Brinker ("Money Talk") praise Bill Clinton for being instrumental in getting NAFTA and GATT passed. Bob Brinker credited NAFTA and GATT as contributing to Bill Clinton's balanced budget.

CRA was a big nothing-burger. Period, end of story, and changing the subject when confronted with this just points out there is no THERE, there. You can't admit for even a second that we DID IT TO OURSELVES. It's always gotta be a Commie plot, gotta have some LIBRULS to blame never anyone else, just like flouride poisoning our water supply and our precious bodily fluids....

Vicente says

changing the subject

Not changing the subject.

I just thought it ironic that you imply hat NAFTA/GATT was a "bad" thing done by Republicans, while someone else sees NAFTA/GATT as a "good" thing done by a Democrat.

Heh. I actually read this whole thread so I'd at least know the "CRA argument"
Like somebody put a regulatory gun to the banker's heads to drive the mort volume for their toxic MBS.
Or, that Greenspan "over-regulated" the money supply when he kicked the Fed rate into the gutter.
Take the under-regulated liquidity away, and the "free market" hyperbole will simmer down.

Vincente, I'm guessing you are a liberal. You are attempting to race bait using the "brown person threat." I guess that shows your ignorance because my wife is a "brown person" and that won't work with me. Furthermore, jobs move off-shore due to massive overregulation, punitive taxation, militant unions and greedy lawyers. If you have ever owned a business or a company you would know this to be true.

Tatup70...tinfoil, nutjobs...is that the extent of your contribution?

I couldn't help but notice an absence of comment about the government game plan of helping the downtrodden, in exchange for votes. Or what a free market is and how it (always) wroks. Or the fact that this once great nation is on the verge of collapse, not because of conservative ideals and principals, but because of failed liberal experiments for the past 40 + years.

I'm not going to throw stones back at you, however I am going to point out failed policies which got us to this sad state of affairs. May I suggest you at least log onto mwhodges.com and read unbiased information about government policies and the negative effect its having on all of us, our children and grandchildern. Seems kinda unfair, that children not even born will have to carry a financial burden created by our generation. I'd call that moral bankrupcy, what would you call it? Abe

Vincente/Honest Abe

Honest Abe says: Many people in America are not aware that regulation IS the cause of bubbles, economic downturns, jobs moving off-shore, etc. NAFTA & GATT were DE-REGULATION moves to help move all the middle-class jobs off-shore to increase corporate profits. Trying to cast it as LIBRULS TERK OUR JERBS eh? Up is down, good is bad, heads is tails, keep up the flood of propaganda about the BROWN PEOPLE THREAT from your multiple accounts Bap33!

Clinton passed NAFTA and GRAMM-LEACH-BLILEY. The more you grow the more you understand that this isnt about REPUBLICAN versus DEMOCRAT. This isnt about LIBERAL versus CONSERVATIVE. This is about THE GOVERNMENT against THE PEOPLE OF THE UNITED STATES OF AMERICA Stop with your partisan antics and claims of liberalism destroying the world markets because a liberal president got us into this mess using conservative policies.

YES, NAFTA was written to allow American businesses the opportunity to compete in the global market place
YES, we have lost jobs because of NAFTA

But what if we had never passed NAFTA....would we sit idle while CHINA, or JAPAN lead the charge to increase the global market share of their businesses?

4X

and yes

DEY TUK OUR JERBS!!!!!!....LOL...I love SOUTH PARK.

Honest Abe says

Vincente, I’m guessing you are a liberal. You are attempting to race bait using the “brown person threat.”

No I'm not a "LIBRUL" except as defined by the current set of NeoCons. When I started voting, I voted for Reagan. I am a fiscal conservative unlike 90+% the morons who call themselves Republicans these days, who seem to just want control of the ship so they can hand out favors to THEIR friends & contractors instead of the other guys.

If you look back up-thread it was YOU as Abe or Tom or whatever, the one bringing up race. Here it was:

"hmmmm, not sure … maybe a crack addicted single mother of 5 (each with a different daddy) that is a 6th generations-removed slave could explain how to retain that historical blaming ability you mention - maby the key is using hope-n-change?"

4X says

YES, we have lost jobs because of NAFTA
But what if we had never passed NAFTA….would we sit idle while CHINA, or JAPAN lead the charge to increase the global market share of their businesses?

NAFTA was North America.

GATT was when the globalization monster was unleashed.

Here's a good 1994 video that Patrick linked where it's laid out:

James Goldsmith interview

Corporations have long fought to be "persons" before the law, and now they are actually "more equal" pigs thanks to Bankruptcy Act of 2005 revisions which give you as an individual LESS rights than them. Globalization is another facet of the simple fact that corporations as "persons" would be judged sociopaths, owing allegiance to no country, and no ethos beyond more for them and less for us.

It's entirely irrelevant to me which administration got it passed actually. It could have been either one. Because government for decades now, is just the security guard working in the lobby. Endless struggle about getting the "right" security guard in the lobby does not change the CEO, and ultimately whoever it is they dance for the people that pay them. Until "Too Big To Fail" and globalization are unfashionable, it really doesn't matter much who is in charge that is just window-dressing.

CRA was just window-dressing maybe a few billion here and there in "feel good" just like John Rockefeller handing out nickels and dimes to the peasants to keep them happy while they are otherwise being robbed of their future. The videos linked about talk about what, 2 Billion dollars for example that Citibank was expected to "spend" on mortgages to lesser candidates? What does this money represent for them? POCKET CHANGE! Especially with fractional reserve lending where they manufacture the "money" and with vast reductions in capital reserve requirements and loosened accounting principles they came out way ahead.

Honest Abe says

I couldn’t help but notice an absence of comment about the government game plan of helping the downtrodden, in exchange for votes. Or what a free market is and how it (always) wroks. Or the fact that this once great nation is on the verge of collapse, not because of conservative ideals and principals, but because of failed liberal experiments for the past 40 + years.
I’m not going to throw stones back at you, however I am going to point out failed policies which got us to this sad state of affairs. May I suggest you at least log onto mwhodges.com and read unbiased information about government policies and the negative effect its having on all of us, our children and grandchildern. Seems kinda unfair, that children not even born will have to carry a financial burden created by our generation. I’d call that moral bankrupcy, what would you call it? Abe

You haven't really discussed anything. You've posted a bunch of your opinoins and passed them off as if they are fact. Which they are not. The US is not on the verge of collapse. The CRA did not cuase the housing bubble. Liberal experiments did not cause the problems we are now experiencing. If you'd like to explain WHY you think the way you do, then I'll be happy to refute your theories one by one. I have tried to explain why it is obvious that the CRA didn't cause the housing crash in previous posts, but you are unwilling to listen to any point of view other than your own. So, I'm not sure how else to convince you... If/when you'd like to rationally discuss it, let me know.

staynumz says

Do you honestly think it is a good idea to assist people that cant afford a house to “buy” one?

We're creating... an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, welcome to my house, welcome to my piece of property. - President George W. Bush, October 2004.

SEKRET Socialists everywhere!

elvis says

The US Postal Service was established in 1775, and have had 234 years to get it right but its broke, and even though heavily subsidized, it still can’t compete with the private sector (FedEx and UPS).

I'll disagree. The Package Nazis have damaged items in shipment and getting UPS to pay damages even though I bought their "insurance", was an 8 months battle in one case. They did their best to wear me down with pointless delays for lost forms or insufficient docs or some other BS. I've gone back to using USPS whenever possible. Do you spit on our Founders? Benjamin Franklin was first Postmaster General. Next you'll be talking about burning the Constitution or a flag or something.

SEKRET Socialists everywhere!

It's hard to grasp the implications, because people who spent years studying the housing bubble might not conclude its root cause was a devious socialist plot. In fact, residential RE was nothing but a boom to business and the liberal media until homeowners could not pay resetting morts. But that's the way your typical lefty conspirator works--he suckers you in with loose lending and easy mortgages so his lefty banking friends can make billions off the commie derivatives market. Then, before you know it, the banks are so deeply awash in debt that their only hope is to usher in a new age of socialism (for them) by brainwashing homedebtor Americans to elect Wall Street's very own euro-socialist candidate Obama, thus destroying the efficient free-market system

I know, it's all so hard to believe, but trust me—this is what happened! There's no limit to depraved socialist trickery.