patrick.net

tatupu70 says

Are you still on the CRA bullshit?

Facts are a bitch, aren't they?

"During one of the Congressional hearings addressing the proposed changes in 1995, William A. Niskanen, chair of the Cato Institute, criticized both the 1993 and 1994 sets of proposals for political favoritism in allocating credit, for micromanagement by regulators and for the lack of assurances that banks would not be expected to operate at a loss to achieve CRA compliance. He predicted the proposed changes would be very costly to the economy and the banking system in general. Niskanen believed that the primary long-term effect would be an artificial contraction of the banking system. Niskanen recommended Congress repeal the Act."

tatupu70 says

Huh? They DID make bad loans. The reason and incentive was short term gain. This is not up for debate. It is fact. The question is why did the free market fail and allow this obviously poor behavior to occur? Why were bank managers allowed to put their short term gain ahead of the corporations long term health??

They are always allowed to do that, however they were not only allowed, but ENCOURAGED to do so. Significant difference. In a free market without bailouts they could do that exactly once. Everybody is free to wreck their company once, then they're screwed. Unless they get bailed out of course.

Let's be realistic here, however. Bank Executives are the poster children for Moral Hazard, as are the Investors. The worst most banksters experienced was deferred bonuses.

What should have happened is the banks were bailout out in return AFTER they had been seized by the government and then later resold on the private market at a profit. I mean BOA should have had the board purged and controlled by government, and investors forced to give up shares at whatever price the government wanted to pay and count themselves lucky to get anything over $0.00. Now the lesson is: IF you fuck up real bad because of your greed, the taxpayer will save your ass.

However, the bailout DID work.

mell says

Facts are a bitch, aren't they?

"During one of the Congressional hearings addressing the proposed changes in 1995, William A. Niskanen, chair of the Cato Institute, criticized both the 1993 and 1994 sets of proposals for political favoritism in allocating credit, for micromanagement by regulators and for the lack of assurances that banks would not be expected to operate at a loss to achieve CRA compliance. He predicted the proposed changes would be very costly to the economy and the banking system in general. Niskanen believed that the primary long-term effect would be an artificial contraction of the banking system. Niskanen recommended Congress repeal the Act."

lol--do you think your quoted paragraph is a fact?? You're kidding, right? That is the incorrect opinion of someone from the Cato Institute. This may be a shock to you, but the Cato Institute frequently skews very conservative...

mell says

are always allowed to do that, however they were not only allowed, but ENCOURAGED to do so. Significant difference. In a free market without bailouts they could do that exactly once. Everybody is free to wreck their company once, then they're screwed. Unless they get bailed out of course.

Except that the VAST majority of the bad loans were made to non-CRA areas. The government did NOT encourage those loans. In a free market, why would banks make those loans even once?? That is my question? Bailout or no bailout, why would bank owners choose to lose lots of money?

Because they flipped them right over into securitized assets for sale by investment banks, frequently, a division of their own bank.

The other side of the story is Rocket Dockets, which didn't give a shit whether you paid or not, or to whom the loan was due - esp. in Florida.

For those who say that CRA did not create risky loans, purposely please read:

http://www.gpo.gov/fdsys/pkg/FR-1997-10-17/html/97-27518.htm

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

Looks like these REPCONTEAS did warn that loans and banks could get into trouble. Austrians saw the cause and effect in 1995-1997, DEMLOBBYLAWYERMBAS cant see it even now.

The answer is that when you mix politics and banking regulation it does not end well. Including the influence the CRA had in conjunction with the tacit and literal understanding that the government was backstopping all loans. The same thing as the current Bernanke put has on the stock market.

Entitlemented says

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

Looks like these REPCONTEAS did warn that loans and banks could get into trouble. Austrians saw the cause and effect in 1995-1997, DEMLOBBYLAWYERMBAS cant see it even now.

Did you actually read the wiki that you posted? Like the entire section where almost everyone said CRA didn't affect the housing bubble?

tatupu70 says

Bailout or no bailout, why would bank owners choose to lose lots of money?

Three words . . . O P M

bob2356 says

CRA didn't affect the housing bubble

conservatives and trolls roll CRA out like a second soccer ball at a kids' game

it is inconceivable to them that the private business could elect to engage in outright fraud in the trillions, when unregulated.

well, they probably understand this perfectly but can't admit it because ideology.

Bellingham Bill says

tatupu70 says

Bailout or no bailout, why would bank owners choose to lose lots of money?

Three words . . . O P M

Bank owners didn't choose anything. Banks are corporations. Bank executives chose to take high levels of risk in order to get high levels of compensation without understanding what the true risks were.

bob2356 says

Bank owners didn't choose anything. Banks are corporations. Bank executives chose to take high levels of risk in order to get high levels of compensation without understanding what the true risks were.

I agree and that's a big part of the problem. When the owners don't have power over the executives, stuff like this happens.

Entitlemented says

Looks like these REPCONTEAS did warn that loans and banks could get into trouble. Austrians saw the cause and effect in 1995-1997, DEMLOBBYLAWYERMBAS cant see it even now.

As the CRA had nothing to do with the housing bubble and bust, I'll add that warning as another example of Rep/Con/Teas getting it wrong on the economy. It's a long list.

tatupu70 says

I agree and that's a big part of the problem. When the owners don't have power over the executives, stuff like this happens.

What are you talking about? Corporations don't work that way. How could they? Are all the stockholders going to get together to vote on business decisions? That's what the directors are for, to provide guidance and make sure that risks are reasonable. Unfortunately boards have become a tangle of interlocking ceo's patting each other on the back.

Funny that this "stuff" didn't happen from WWII until the reagan era, a period of strong corporate regulation and very progressive personal/corporate taxes. American corporations had unbelievable growth with manufacturing reaching it's peak in american history.

bob2356 says

What are you talking about? Corporations don't work that way. How could they? Are all the stockholders going to get together to vote on business decisions? That's what the directors are for, to provide guidance and make sure that risks are reasonable. Unfortunately boards have become a tangle of interlocking ceo's patting each other on the back.

I'm talking about exactly what you said. Directors are supposed to represent owners' interest and make sure executives are making decisions that are in the best interest of the corporation (and its owners). They no longer serve this function.

bob2356 says

Funny that this "stuff" didn't happen from WWII until the reagan era, a period of strong corporate regulation and very progressive personal/corporate taxes. American corporations had unbelievable growth with manufacturing reaching it's peak in american history.

Agreed.

bob2356 says

Funny that this "stuff" didn't happen from WWII until the reagan era, a period of strong corporate regulation and very progressive personal/corporate taxes.

Banks became centralized in the 80s with deregulation. The framers wanted banks to be decentralized because of their fear of banks getting too much power. But this made bank too prone to one market place as all of their loans would be dependant on one area. Centralizing the banks made them more stable.

Until that is that the Fed had to approve M & As. To achieve this the banks had to prove the were "good citizens", this was accomplished by social organizations vouching for their "character", in return the banks would donate lots of money to these organizations, IIRC around 2 something trillion dollars to them over the past few decades.

The perversion of the (under Clinton, AKA Captain Corruption) CRA was an offshoot of this process and helped to create this sort of thinking. Along with backstopping bad loans was persuasive in this mentality.

indigenous says

Until that is that the Fed had to approve M & As. To achieve this the banks had to prove the were "good citizens", this was accomplished by social organizations vouching for their "character", in return the banks would donate lots of money to these organizations, IIRC around 2 something trillion dollars to them over the past few decades.

The perversion of the (under Clinton, AKA Captain Corruption) CRA was an offshoot of this process and helped to create this sort of thinking. Along with backstopping bad loans was persuasive in this mentality.

I have to give you credit for tenacity. You won't give up on the CRA no matter what data and proof is shown that it had no bearing on the financial crisis, huh?

Although I will give you credit for creativity. Your theory is that charitable donations led to financial crisis? That's a new one.

tatupu70 says

You won't give up on the CRA no matter what data and proof is shown

That is a two way street.

indigenous says

That is a two way street.

OK great--I'm ready to see all of your data showing exactly how the very small % of loans made in CRA areas caused banks to make bad loans everywhere else.

tatupu70 says

OK great--I'm ready to see all of your data showing exactly how the very small % of loans made in CRA areas caused banks to make bad loans everywhere else.

Buy the book "Fragile by Design", and you will see all of the data.

tatupu70 says

To be clear--bailout = loan that must be repaid with interest. Is that a reward?

You are insolvent. Your credit rating is in the toilet. You are allowed to borrow at ridiculously low interest rates, essentially given a money machine. The head of your cartel keystrokes money into your account. The head of your cartel buys your toxic assets at face value. Neither you nor any of your cronies face criminal charges for massive fraud which brings down the economy.

Yes, that is how it works for every business.

indigenous says

Buy the book "Fragile by Design", and you will see all of the data.

If you have the book, why not just detail the relevant passages?

tatupu70 says

If you have the book, why not just detail the relevant passages?

I don't have it, I want you to buy it and read it and explain it to me. Besides you ask endless questions that are a nuisance.

indigenous says

Buy the book "Fragile by Design", and you will see all of the data.

Oh yes, fragile by design. I looked at that once in a bookstore, a brief peruse told me it was just crap. Here's what one of the really nice reviewers said about it, many other reviews were considerably less kind.

Fragile By Design: The Political Origins of Banking Crises and Scarce Credit is a tour de force, and not in a good way. The book’s history of U.S. banking is troubling. The narrative covering the period from the Civil War until the 1990s is highly selective and misleading. Worse, the section that covers U.S. banking over the past 25 years is a set of distortions and falsehoods that should be obvious to anyone with a basic knowledge of the recent financial crisis.

Yet you think it's up there with the holy grail. Amazing. Are you so brainwashed that objective thinking isn't possible at all or do you simply lack any basic knowledge? Maybe, just maybe everyone else isn't wrong.

Blurtman says

You are insolvent. Your credit rating is in the toilet. You are allowed to borrow at ridiculously low interest rates, essentially given a money machine. The head of your cartel keystrokes money into your account. The head of your cartel buys your toxic assets at face value. Neither you nor any of your cronies face criminal charges for massive fraud which brings down the economy.

OK let's analyze these point by point. First--the bailout did allow companies to borrow money at below market rates. This money was used to make them solvent and fund operations. Not sure how this was a money machine, however, unless you are saying their normal operations created lots of profit.

If you are saying that banks borrowed from the Fed overnight window to make money on the spread, I've seen no evidence this happened. In fact, the data I've seen showed very little domestic activity at the Fed window. If you have other data, please share.

I'm not a big fan of the toxic asset purchases. And I would like nothing more than for bank execs to face criminal charges, but I fear the burden of proof would be tough and we'd be spending more money on the prosecutions that lead to nothing.

indigenous says

I don't have it, I want you to buy it and read it and explain it to me. Besides you ask endless questions that are a nuisance.

Yes, I know. Asking you to support your assertions is a nuisance, isn't it?

tatupu70 says

OK let's analyze these point by point.

There's nothing to analyze, if you're insolvent, you go through BK procedures and reorganize or dissolve. If you commit fraud, you go to jail (proof will be established during the prosecution and trial phase). What happened here was the abolition of the rule of law. Repeatedly.

bob2356 says

Yet you think it's up there with the holy grail. Amazing. Are you so brainwashed that objective thinking isn't possible at all or do you simply lack any basic knowledge? Maybe, just maybe everyone else isn't wrong.

I use you as a touchstone, if you believe it is bad that is a sure fire sign that it is good.

Gee you see a bad review in glib general overtones and you decide it is garbage. IOW you found something that agrees with your religious views.

BTW I have yet to see you make an origination about anything just more of the same carping with little to "enlighten" anyone.

I will say however that that comment the other day about Rockefeller having a crony advantage by taxation was indeed enlightening.

This CRA was not "Capitolism" nor were the mimicks that followed. The banks were forced to make innovative and creative loans, at the risk of Bill Clinton and his minions stipping the bank of their FDIC status.

http://www.gpo.gov/fdsys/pkg/FR-1998-12-01/pdf/98-31152.pdf

This shows unequivically that unless these local banks would knuckle down to CRA ponzi rules, the banks would be closed. This is effectively political extortion, and is 180 degrees away from any measure of capitolistic behavior.

Entitlemented says

This CRA was not "Capitolism" nor were the mimicks that followed. The banks were forced to make innovative and creative loans, at the risk of Bill Clinton and his minions stipping the bank of their FDIC status.

http://www.gpo.gov/fdsys/pkg/FR-1998-12-01/pdf/98-31152.pdf

This shows unequivically that unless these local banks would knuckle down to CRA ponzi rules, the banks would be closed. This is effectively political extortion, and is 180 degrees away from any measure of capitolistic behavior.

Even if what you say is true (which it isn't), it doesn't matter. The CRA didn't CAUSE anything. You're arguing that banks were forced to make slightly riskier loans to borrowers in specific areas. So what?? Those loans has absolutely NOTHING to do with the bubble and bust.

mell says

There's nothing to analyze, if you're insolvent, you go through BK procedures and reorganize or dissolve. If you commit fraud, you go to jail (proof will be established during the prosecution and trial phase). What happened here was the abolition of the rule of law. Repeatedly.

You're very dramatic. Yes, if you commit fraud, you should go to jail. But, if you MAY have committed fraud, it's up to the prosecutor to determine whether or not to prosecute. That is the rule of law. Just because you think someone committed fraud, doesn't mean the AG has enough evidence to prove it in a court of law.

Further more, it is clear that after seeking opinions of banks, that the Fed Register document was written by lobbyists and lawyers who sought to end run good faith and softly deny the claims that the banks said the law would have, for example:

"The commenters do not feel that banks
should now be subject to requirements the FDIC did not originally impose.Moreover, the commenters point outt hat the FDIC and state banking authorities routinely review investment portfolios as part of the supervisory process and can address any deficiencies on a case-by-case basis."

How can any due diligence be surmized when broad sweeping statements on FDICs, investment portfolios of MBS, deficiency checking on case by case basis.

We now know that the opposite happened, - all of the due diligence was reduced.

In fact those who overturned the banks inputs broke the law in multiple ways. An act to create more credit to people who had issues maintaining good credit surely must violate dozens of established laws and standards. A sweeping credit law change of this magnitude should have been voted on or had a minimum of due diligence. Slick Willie knew it could not pass through legitimate means, because this law is not sound.

Now many of the poorer people already shambled by Clintons NAFTA and the Giant job losses, have their credit ruined.

I wonder how many of the poor lost their homes, and what the total value of the losses were, and whether this CRA actually locked these lower income citizens into poverty for perpetuity? How many will ever have a home now?

Bill Clinton and his cronies should stand trial for this sham - but wait, all his cronies have been paid, and his Lawyer associated runs the US - they ran out Jobs with NAFTA and are now doing another Pan Pacific NAFTA mimic which will most likely amplify the effects.

Entitlemented says

In fact those who overturned the banks inputs broke the law in multiple ways. An act to create more credit to people who had issues maintaining good credit surely must violate dozens of established laws and standards. A sweeping credit law change of this magnitude should have been voted on or had a minimum of due diligence. Slick Willie knew it could not pass through legitimate means, because this law is not sound

Wow--you have no clue how the world works. This was not a sweeping credit law change. It was a very small, very minor Act that had almost no measurable effect on anything.

Entitlemented says

I wonder how many of the poor lost their homes, and what the total value of the losses were, and whether this CRA actually locked these lower income citizens into poverty for perpetuity? How many will ever have a home now?

I wonder how many poor were able to buy homes that they wouldn't have been able to in the past and were able to build equity and enjoy the benefits of home ownership.

tatupu70 says

I've seen no evidence this happened.

tatupu70 says

Not sure how this was a money machine

C'mon now. Money be fungible. My cocaine buying account is empty and I need to keep $100k in the Save the Choodren account. But you have given me $100k to save the choodren. You know what that means.

Blurtman says

C'mon now. Money be fungible. My cocaine buying account is empty and I need to keep $100k in the Save the Choodren account. But you have given me $100k to save the choodren. You know what that means.

Again--what are you implying? The banks didn't take any money from the Fed window so there was nothing to move around.

Arguing that CRA lead to the financial crisis has now become a "Crank Red Flag"

The financial crisis was caused by all of Real Merikin's money going to loans for the Nigres and the Spics!!!!!

(From the AEI website, unsurprisingly: http://www.aei.org/publication/moving-the-market-forward-principles-for-returning-fha-to-its-traditional-mission/ )

indigenous says

Gee you see a bad review in glib general overtones and you decide it is garbage. IOW you found something that agrees with your religious views.

No, the name of the book rang a bell. I'm pretty sure it was the one I looked at and said this is bullshit. Since you are holding it up as the holy grail I looked up reviews to see what other people thought. They all thought it sucked also. I didn't see one positive review. I guess a lot of other people attend my church. Here I'll save the the next comment, pretty much everyone other than you and entilted are mutts who don't know what you meme.

tatupu70 says

But, if you MAY have committed fraud, it's up to the prosecutor to determine whether or not to prosecute. That is the rule of law. Just because you think someone committed fraud, doesn't mean the AG has enough evidence to prove it in a court of law.

Especially when they don't look for any.