patrick.net

IIRC Dodd Frank has lowered the level of lending to small business. The big companies are unaffected, which has contributed to the slow recovery

Yea that is the story i.e. collecting interest on excess reserve fund and all, not sure how true that is or was?

Which is another question, what is the reserve ratio. I have read where it was infinity to one.

then where did the idea of infinity to one come from?

"These banks knowingly committed suicide?"

the banks were being run by people who got really really rich making bets with "other peoples' money" on housing loans.

annual growth of household indebtedness in mortgage, 2009 dollars

Banks are legal fictions and do not have human capabilities.

The people running "the banks" -- aka Wall Street knew what they were doing, mostly. "Heads I win, tails you lose" essentially

"

New comment by Bellingham Bill in Fed Rate Hikes Need More Inflation:
"These banks knowingly committed suicide?"

the banks were being run by people who got really really rich making bets with "other peoples' money" on housing.

Banks are legal fictions and do not have human capabilities.

The people running "the banks" -- aka Wall Street knew what they were doing, mostly. "Heads I win, tails you lose" essentially

"

And the people running "the government"-- aka the federal government knew what they were doing, mostly. "Heads I win, tails you lose" essentially

bgamall4 says

MERS.

?

turtledove says

Inflation is supposed to be good for debt holders. Unless you take on additional debt, the principal stays the same... but the ability to pay it off goes up as incomes rise. How is debt designed to grow with inflation?

It's inflation indexed, COLA, TIPS, etc...

besides if inflation happens, I'd be worried about us having anarchy revolt.

most debt does not grow with inflation.

Lost another MMT friend today! :-) Had to finally leave the group, these people have gone insane with Bernie running... a reality that no politician believes them even though their leader is the head economist of the senate...

EKKKKKKSSSSS!! :-)

what does MMT have to do with Sanders?

indigenous says

what does MMT have to do with Sanders?

Their main person or top 3 in America is Bernie economic adviser on economics

Once Bernie said he was going to pay for his stuff with tax increases, it drove the MMT people mad... They went ballistic,

I admit brought a smile to my face..... Their other head person Warren Mosler and I don't agree on this economic cycle, shocking right...

Side winder MMT people who are just old and cranky on facebook and then you have the Marxist lovers who hate America, well guess how that conversation went.

I really like the MMT jobs program for the poor and uneducated ... but man they can't get over themselves and try to make everything bigger than what it is

that is a paradox, a communist and free market guys.

Friedman has caused a lot of damage to the US with the floating exchange rate and a few other things. Stockman has some choice things to say about him.

OTOH I enjoy reading one of his students Thomas Sowell who is the 1st economics book I read, it was very enlightening. No matter what Lips says he makes a lot of sense.

indigenous says

Thomas Sowell

You would like Lee Adlers work and DiMartino Booth

Yea I follow Adler, I will have to check the other

"My goal is to shine a bright light on how policymaking within the Fed directly affects not just those on Wall Street, but every citizen of this country, and for that matter, the world."

I like it

Logan Mohtashami says

If the lending standards of today were allowed to take hold back in 1996 ... the housing market would have looked a lot different from 1996-2007

IOW CRA type regulations that were morphed back in the 90s caused the meltdown? Is that what you are saying?

indigenous says

Is that what you are saying?

All loans are different now. A lot A paper loans that had poor underwriting due to the debt structure of the loans. Sub Prime in itself isn't a big enough market to create that much damage velocity. A lot A paper label loans that can't be written up today

High Fico option arm loans with stated income, can't happen anymore, this is a good thing. Housing shelter is now back to capacity owning with hardly any exotic debt structure.

America Banker wrote any article with me on a new 80/10 loan that came out in California in 2014, even that loan is only set up for a high net income buyer..

This cycle is as clean as you can possible get in America

The story goes that the subprime loans lowered the standards or implied that lower standards were acceptable across the board.

You said "Greed is a sickness that all men can't see when $$$$$$$$$ are around..." that same thing applies to public servants, they are not immune to this. e.g. Barney Franks

indigenous says

"Greed is a sickness that all men can't see when $$$$$$$$$ are around..."

I believe that statement speaks for itself.

In any case, those days are long over and all the exotic loans are gone, that is a good thing for this country. Always have to be mindful of speculation.

Stock Market margin debt falls 1 to 1 when the market falls down, other types of debt don't have that type of efficient clearly system. we still have delinquent loans in the system today that were marked up during the bubble years that are in judicial states.

Logan Mohtashami says

I believe that statement speaks for itself.

Yup and it was the pathology of the "poor pathology".

There you have it boys a RE Lender by trade implies that yes it was lower standards, i.e. increased banking regulation that caused the melt down. Not the repeal of Glass Steagall.

CRA

bgamall4 says

Clean would be a preponderance of 20 percent down fixed loans

That is never going to happen, impossible for new home buyers to save enough in a normal length of time to have 20% down

I have clients who make over 250K and they didn't have 20% down and they're in the top 10% income and net wealth of Americans

20% model isn't a valid one to have in America, that shipped sailed a long time ago

indigenous says

Actually he said exactly the opposite. That it was decreased banking regulation. You should probably learn to read someday

Mr. Gilbert

Let me say this way.

Speculation needs access to it needs and it needs high $$ velocity

Now, a lot of the loans were actually A paper loans that allowed speculation to happen. That is due to the exotic nature of debt structure, so in theory you can have an exotic loan put the person would have an over 700 fico score

Because Fico scores are in real terms the last of the big 3 in terms of capacity to own the debt.

It took everyone to work together as a team for the housing bubble to mess up that bad....

However, if the lenders standards of today were placed in 1996 and I use 1996 because that was the time frame of the big demographic push in housing, the speculation would have been less, a lot less. It would have been a traditional cycle and really the FHA DPA loans would have had the only high default ratios

The rest would have had the capacity to own the debt because the debt is tagged to debt to income ratios .... meaning you only lose your home if you lose your job or have a financial emergency

the trope that the Libbys sing is that deregulation caused the meltdown, it did not. Bank has always been heavily regulated.

All of them. are you implying that there were no regulations on banks in 2006?

Here is the core on the qualified mortgage rules now, none were in place before on a national level.

Below are the Ability to Repay Determinations:

1. Current or reasonably expected income or assets; income capacity and showing liquid assets to buy a home.

2. Current employment status. (The person should have a job and show stability in the same line of work for a certain length of time).

3. Monthly payment on the covered transaction.

4. Monthly payment on any simultaneous loan.

5. Monthly payment for mortgage related items.

6. Current debt obligations, alimony and child support.

7. Monthly debt-to-income ratio or residual income . ( 3-7 debt to income ratio)

8. Credit history (history or credit that prove timely payments have been made and not too much revolving credit card debt is a good thing)

If you follow this, you get legal protection going forward

It is hard to believe that banks did not do this with out any regulation.

I have read that the banking industry has always been heavily regulated, are you saying this is not true?

indigenous says

I have read that the banking industry has always been heavily regulated, are you saying this is not true?

Regulations and then their is regulations with teeth...

Those Qualified Mortgage Laws above and not allowing 40-1 Leverage which was the S.E.C. allowed in 2004

Housing speculation would not have happened.

That is the core that allowed the speculation factor to happen. Obviously people had to make the choice to do what they wanted to do. However, you take away a core aspect of speculation off the Grid with those 2 items above I mention

Why do you think I have fought against easing lending standards all these years. Humans by nature have it in them to speculate and want to make more $$$

It feeds off itself.... Issac Newton knew of this as well...

Madness of Men

That madness will always bring death on the pale horse

Speculation follows liquidity. Your friend Professor Sufi indicated that this was partly from HELOCs, others indicate it was from loose money policies that were created by CRA, not that actual laws but by the disposition of the lenders created by government implying that they were backstopping the loans.

Logan Mohtashami says

I have clients who make over 250K and they didn't have 20% down and they're in the top 10% income and net wealth of Americans

Than what the hell are they doing with all the money? Plenty of people make less and save a lot more.

indigenous says

Professor Sufi indicated that this was partly from HELOCs,

Cash out and equity extraction, a lot of that happened without income capacity to own the debt, none of that can happen now, even if you have plenty of equity in your home

FortWayne says

Than what the hell are they doing with all the money? Plenty of people make less and save a lot more.

Buying a home in so call $700K - 975K 20% down on that takes a lot of time to do, not to mention rent inflation is strong so shelter cost in So Cal is expensive.

indigenous says

Professor Sufi

House of Debt was a good book that he wrote

indigenous says

others indicate it was from loose money policies that were created by CRA, not that actual laws but by the disposition of the lenders created by government implying that they were backstopping the loans.

???

indigenous says

others indicate it was from loose money policies that were created by CRA, not that actual laws but by the disposition of the lenders created by government implying that they were backstopping the loans

:-) Not really, we are talking about 2nd lien loans and cash outs... like Professor Sufi talked in that conference video ( Not sure if you saw that) lending standards were very open to equity extraction and it went to low credit grade borrowers. If you haven't seen that video it's 20 plus minutes it was the conference in 2013 in Stanford

Seen it, he is sharp.

I'm getting two conflicting datums one of them or both are off.

Logan Mohtashami says

I have clients who make over 250K and they didn't have 20% down and they're in the top 10% income and net wealth of Americans

20% model isn't a valid one to have in America, that shipped sailed a long time ago

..if they can't save away $200k over a few years with 250k income then they are doing something wrong - have them talk to me :)

The economist for Trulia ran his own model and he said it would take 17 years for a first time home buyer to save 20% for a median price home using the cost of living index in high cost areas of CA.

Now, move up buyers have the equity of their home to put down for a home. However, as always if your home is going up in price so is the other home you're looking to buy and their simply isn't enough equity created by paying down in those first 5-9 years when you're paying down principal to make that much of difference