patrick.net

4X, I agree with your reasoning.

I actually "blame" the removal of lending standards - and however that was done is the "cause", I would guess. In the thread where we all laid out how we felt this thing got done to us, I put loose lending as the first action required for this bubble.

Some people could not be bothered to read what Krugman said before disagreeing, so I will post what he said for the record:

Zombies, zombies, everywhere. One of the enduring myths of the financial crisis has been the claim that it was the result of (a) Fannie and Freddie (b) the Community Reinvestment Act, which forced poor, helpless bankers to make loans to you-know-who. It’s a myth that won’t go away — I get asked about it almost every time I give a public lecture — even though it has been extensively debunked. (See, e.g., here.)

But reading this scary piece about commercial real estate, I realized that CRE offers yet another debunking. After all, there was no federal act driving banks to lend money for office parks and shopping malls; Fannie and Freddie weren’t in the CRE loan business; yet 55 percent — 55 percent! — of commercial mortgages that will come due before 2014 are underwater.
The lenders didn’t need government urging to dive deep into a property bubble, and drown.

You can stick that in your pipe and smoke it. Or take it to the bank. Or whatever. Just don't ignore the obvious truth.

BAP -please don't try to use common sense to make any point here. Many simply can't handle it.

kRuGmAns OPINION is just that - an opinion. Government mandated loose lending policies like CRA were at the root of our financial meltdown no matter how much liberal spin is put on the issue.

Social, feel good, programs are designed to help the poor, pander for votes and warm the hearts of the gullible...but what they really do is put more power in the hands of sociopathic bureaucrats.

Honest Abe is another person that cannot be bothered with facts. In fact, when he disagrees with fact, he tries to get around the fact by labeling the fact as "opinion".

Is that not Dishonest, Abe?

Honest Abe says

kRuGmAns OPINION is just that - an opinion. Government mandated loose lending policies like CRA were at the root of our financial meltdown no matter how much liberal spin is put on the issue

True, he states an opinion. But unlike you, he backs it up with facts. See below:

justme says

After all, there was no federal act driving banks to lend money for office parks and shopping malls; Fannie and Freddie weren’t in the CRE loan business; yet 55 percent — 55 percent! — of commercial mortgages that will come due before 2014 are underwater.

If the CRA had anything to do with the bubble, why are we seeing the same thing in commercial real estate?

@BAP

OK, you agree that loose lending standards were a cause--that's not exactly going out on a limb there. Even after seeing all the evidence here, you still refuse to admit that the CRA was a non-event in the housing bubble?

well .. yes, I refuse to admit the CRA was a non-event .. until I am shown what the CRA did do. Share with me what the CRA "HAS DONE" 100% unavoidable actual action atributed to ONLY the CRA 100% (since the Clinton changes were put into affect) .. please do that for me so I can see what you ARE willing to give the CRA credit for ... and then, if I can see what you do feel the CRA has done since Clinton's changes, then - maybe - we can get someplace.

I also notice you did not say you agree with the "loose lending was the start of this problem". Do you agree? No limbs needed. lol

justme says

Honest Abe is another person that cannot be bothered with facts. In fact, when he disagrees with fact, he tries to get around the fact by labeling the fact as “opinion”.

warning - that quote is just an opinion. Irony rocks!! lmao

Bap33 says

well .. yes, I refuse to admit the CRA was a non-event .. until I am shown what the CRA did do. Share with me what the CRA “HAS DONE” 100% unavoidable actual action atributed to ONLY the CRA 100% (since the Clinton changes were put into affect) .. please do that for me so I can see what you ARE willing to give the CRA credit for … and then, if I can see what you do feel the CRA has done since Clinton’s changes, then - maybe - we can get someplace

I give the CRA credit for basically nothing. I think it had VERY little to no effect at all on creating the housing bubble. I thought I had already posted this several times, but I can do it again. Also not sure how that helps your understanding...

Once more, greatly simplified--Once mortgages were bundled and sold as securities with AAA ratings, there was a huge demand for them because their risk was understated. This demand created an environment where lending standards were slowly eroded creating the housing bubble.

Bap33 says

justme says

Honest Abe is another person that cannot be bothered with facts. In fact, when he disagrees with fact, he tries to get around the fact by labeling the fact as “opinion”.

warning - that quote is just an opinion. Irony rocks!! lmao

Bap33, only in your opinion.

(fer old times sake :-))

@justme .lol

@tatupu, I did not ask for CRA's actions specific to bubble ... sorry if that is how it reads ... what I want is to know what action, any action / effect / whathaveyou would you point to and say, "THIS was done due to the CRA in the time since Clinton changed the goverening mandates." Anything at all, not just something bubble related. Tell me something that you feel the CRA is responsible for in the time frame since the changes Clinton made. And for extra help to my understanding, explain why Clinton made changes and what you feel those changes helped to attain. Thanks.

Bap33 says

@tatupu, I did not ask for CRA’s actions specific to bubble … sorry if that is how it reads … what I want is to know what action, any action / effect / whathaveyou would you point to and say, “THIS was done due to the CRA in the time since Clinton changed the goverening mandates.” Anything at all, not just something bubble related. Tell me something that you feel the CRA is responsible for in the time frame since the changes Clinton made. And for extra help to my understanding, explain why Clinton made changes and what you feel those changes helped to attain. Thanks.

Why do I feel like I'm back in school and this is my term paper assignment? I thought this board was in reference to the housing crash.

I could do some more research to better answer, but off the top of my head I don't think the CRA has done much of anything. Clinton made changes because it had no teeth--banks were ignoring it entirely. Some studies say it has modestly improved lending to inner cities, but most say its effect has been minimal.

tatupu70 says

Clinton made changes because it had no teeth–banks were ignoring it entirely. Some studies say it has modestly improved lending to inner cities, but most say its effect has been minimal.

Tatupu, sorry for the term paper thing. I was trying to tie stuff together with your answer. I agree, this site is bubble related, and I contend that the CRA played a role where you say no it did not. Your post says two things that we can go off of, and sneak over into the bubble arena. lol

#1) you say Clinton took action to give teeth to something that you say was doing nothing pre-Clinton and did nothing post-Clinton. Is that what you meant?
#2) You site "some studies" as having improved lending to "inner cities". Inner cities are locations, not people. No lender that I know of gives loans to locations, so maybe we can adjust that area of your point? Do you contend that there are boundaries that RE-lenders operate inside of? Thanks.

I agree, if the CRA can be absolved of any bubble involvement as soon as we can figure out what it can get credit for. Lets not forget, Barry and ACORN did sue the bank, so something must be somewhere. Right? lol

@Thomas.Wong

Are you saying that the GLB act is being used to extend CRA benefits through unethical coercion? Do you agree the act is the root cause of our problems?

Clarify your statement so I can better understand your point.

@BAP

No problem. I was just having nightmares about my youth...

Bap33 says

#1) you say Clinton took action to give teeth to something that you say was doing nothing pre-Clinton and did nothing post-Clinton. Is that what you meant?

Pretty much.

Bap33 says

#2) You site “some studies” as having improved lending to “inner cities”. Inner cities are locations, not people. No lender that I know of gives loans to locations, so maybe we can adjust that area of your point?

Sorry--how about I say "some studies say it slightly improved lending to people in inner cities." Does that help?

Bap33 says

Do you contend that there are boundaries that RE-lenders operate inside of? Thanks.

Well, that is the point of the CRA. To encourage lending within specific boundaries (usually inner cities).

tatupu70 says

Do you contend that there are boundaries that RE-lenders operate inside of? Thanks.
Well, that is the point of the CRA. To encourage lending within specific boundaries (usually inner cities).

Alrighty ... now we are getting someplace. Your point is that the CRA was "intended" (common liberal issue - good intentions. lol) to "encourage" banks to give risky loans. And, "some studies" indicate that Clinton made the changes he did inorder to help "mystery enforcement entities" better exact their "encouragement". This pretty much matches your point and view, correct?
Well ... if we repalce "mystery enforcement entities" with ACORN or B.O., then the story is still historicaly accurate, as that did happen.
But, when we look at "encourage" and it is replaced with "take legal action against", it sure seems much more direct and threatening ... but since ACORN and B.O> did do just exactly that, it too fits.
So, now that Clinton made changes, we have the "intentions" of the CRA being used to exact the will of particular groups and organizations and people upon lending banks .... as it was intended to do.

But wait, there is a little problem. You suggest there are boundries between banks, or at least that the CRA's supporters give that impression. I submit to you that THAT is absolute non-sense. And THAT is why the "intentions" of the CRA that were focused on subsidizing a particual group of risky loans were able to infect all lending standards at all institutions. You see, a few banks got taken to court because people that had no lending background were demanding that loans be given to unqualified buyers, and those same entities used the CRA as their step-stool (right or wrong). As soon as a few banks were taken to court under the CRA intentions, guess what ... ALL LENDERS had that as a reason to get busy writing loans to unqualified buyers. If any lender were to turn away any buyer they would be held responsible to ACORN or B.O. or B.Frank. And, as I pointed out, all lenders operate under the same laws in all areas or a state (pretty much), so there is no magical line that makes it legal for a lender to discriminate against a brown-buyer in Fresno and not discriminate against a black-buyer in Dos Palos. ANd because there is no magic boundries, the lenders WERE FORCED BY THE CRA's GOOD INTENTIONS to grant unqualified buyers loans in all areas. The end. Thanks.

Bap33 says

Alrighty … now we are getting someplace. Your point is that the CRA was “intended” (common liberal issue - good intentions. lol) to “encourage” banks to give risky loans.

Did I miss something? Please point out where in my post that I ever wrote the word "risky". I'll save you the time because you won't find it. That's you putting words in my mouth (or post).

The theory--whether you agree or not--was that banks were not lending to qualified applicants in inner cities. Perhaps because of discrimination, perhaps because they just weren't familar enough with the area, who knows the reasons. In any event, the CRA was designed to try to level the playing field. Not distort it. So banks would make loans to qualified people in inner cities just like they do in wealthier areas.

Bap33 says

You see, a few banks got taken to court because people that had no lending background were demanding that loans be given to unqualified buyers, and those same entities used the CRA as their step-stool (right or wrong).

Really? Are you sure they were unqualified? Do you have evidence?

Bap33 says

As soon as a few banks were taken to court under the CRA intentions, guess what … ALL LENDERS had that as a reason to get busy writing loans to unqualified buyers

That's where your logic just goes haywire. It makes zero sense. Countrywide is exempt from the CRA, but they would start making bad loans because a bank was sued? Why exactly would they do that? Countrywide couldn't be held accountable--they were exempt.

Bap33 says

And, as I pointed out, all lenders operate under the same laws in all areas or a state (pretty much), so there is no magical line that makes it legal for a lender to discriminate against a brown-buyer in Fresno and not discriminate against a black-buyer in Dos Palos.

I think you are confused about the CRA. It has zero to do with race. Here are some explanations from Wiki:

"The CRA was passed as a result of national pressure to address the deteriorating conditions of American cities—particularly lower-income and minority neighborhoods"

"The Community Reinvestment Act of 1977 seeks to address discrimination in loans made to individuals and businesses from low and moderate-income neighborhoods"

Now, you're right--there are other laws preventing discrimination against borrowers based on race. Fair Housing Act, Equal Credit Opportunity Act to name a couple. But not the CRA. That deals solely with particular areas.

So, again. Your argument is completely refuted by the facts. Look at where the foreclosures took place. Look at the commercial real estate bubble. Look at the rate of inner city foreclosures (CRA areas) versus the US in general. All of these stats show that the CRA had no effect on the housing bubble.

bap33, you are really grasping at straws here.

>>Alrighty … now we are getting someplace

No, we are not.

The fact that you cannot write an argument about housing prices without bringing ACORN into it shows once again that you have been listening to the crazy-talk of the right-wingnut AM radio stations and/or Fox News.

Apparently, you are not interested in any theory of housing prices that does not blame the bubble on poor brown people.

It is too bad that fact does not sway you.

All the wonderful arguments, and government provided "facts" do not change the results of yet another failed government intervention into the free market. Let me put in in a flow chart that even a government economist might understand:

Government mandated loose lending policies -> increased demand ->run up in prices and equity -> other lenders jumping inon the government created gravy train ->ripple effect to non-CRA type properties -> ripple effect continues to commercial property -> bubble -> bust.

For some, reality will not matter. Big Brother is watching.

tatupu70 says

Bap33 says
And, as I pointed out, all lenders operate under the same laws in all areas or a state (pretty much), so there is no magical line that makes it legal for a lender to discriminate against a brown-buyer in Fresno and not discriminate against a black-buyer in Dos Palos.
I think you are confused about the CRA. It has zero to do with race. Here are some explanations from Wiki:
“The CRA was passed as a result of national pressure to address the deteriorating conditions of American cities—particularly lower-income and minority neighborhoods”

justme says

Apparently, you are not interested in any theory of housing prices that does not blame the bubble on poor brown people.

ok you two, please clarify the difference between minorities in inner-cities and poor-brown-people. Thanks.

@tatupu,
If you do not feel lending standards had to be reduced inorder for banks to comply with the enforcement of Clinton's new CRA, then that's that. No reason to beat each other up over it.

And if you do not see that reduced lending standards to anyone, based on anything would result in reduced standards to everyone based on everything, due to fair lending laws on the books already, then that's that. We do not need to rehash our entire deal again. I'm cool with you having that view.

It is just my view that the mousetrap was built and designed by liberal intentions and the results are as plain as the scrowl on Pelosi's face. But, that's just me. No biggie.

Bap33 says

ok you two, please clarify the difference between minorities in inner-cities and poor-brown-people. Thanks.

There is a huge difference. Inner city is a place. Minority, poor-brown-people as you so eloquently put it are people. Again, one is a place, the other is a person. The CRA says NOTHING about race or country of origin. It only refers to red-lined neighborhoods. If a poor-white-person lives there, he too would qualify under the CRA.

Bap33 says

And if you do not see that reduced lending standards to anyone, based on anything would result in reduced standards to everyone based on everything, due to fair lending laws on the books already, then that’s that. We do not need to rehash our entire deal again. I’m cool with you having that view.

But we're not talking about what "would" happen. We're talking about what DID happen. Because there is ample evidence out there showing what DID happen. And all of it points to the same conclusion--the CRA had nothing to do with the bubble and crash.

Bap33 says

It is just my view that the mousetrap was built and designed by liberal intentions and the results are as plain as the scrowl on Pelosi’s face. But, that’s just me. No biggie.

Sure--you're welcome to believe what you like. There are lots of people who think 9/11 was a vast government conspiracy. And that the world will end in 2012. No amount of evidence showing you the truth is going to change that, is it?

Here's a copy of 12 USC 2903
(a) In general
In connection with its examination of a financial institution, the appropriate Federal financial supervisory agency shall—
(1) assess the institution’s record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of such institution; and
(2) take such record into account in its evaluation of an application for a deposit facility by such institution.

I guess people forget about that "local communities" and "consistent with the safe and sound operation of such institution" part. I'm sure many here give to charity. But, I'm fairly sure none of us here are bankrupting ourselves in the process. Providing for community development for low and moderate income people was not a significant cause the housing crash. Bank greed is. Look no further than the definition of community development found in the Regulations. "Community Development" creating affordable housing for low/moderate income households could have taken the form of "multifamily RENTAL housing." (I am taking the information from the Clinton Era regulations.)

Other than collecting information and giving ratings on how banks were doing servicing "low, moderate, MIDDLE, and UPPER income" individuals (yes, they had to report on how they were servicing those middle and upper incomes), one question that should probably be asked is; "What was the big, scary government penalty for getting an unsatisfactory rating?

Well, other than crashing an economy and not getting a government bailout, what do big banks fear most?

tatupu70 says

Bap33 says
ok you two, please clarify the difference between minorities in inner-cities and poor-brown-people. Thanks.
There is a huge difference. Inner city is a place. Minority, poor-brown-people as you so eloquently put it are people. Again, one is a place, the other is a person. The CRA says NOTHING about race or country of origin. It only refers to red-lined neighborhoods. If a poor-white-person lives there, he too would qualify under the CRA.

It was you that said CRA targeted minorities in inner-cities, not me. And if you are now saying you did not include people-of-color in "minorities", or that inner-city dwellers are not poor, then you need to explain that to me. Here is your most recient words, but earlier you actually used "inner cities", so I went with it. lol tatupu70 says

“The CRA was passed as a result of national pressure to address the deteriorating conditions of American cities—particularly lower-income and minority neighborhoods”

So, if that does not mention race, we are speaking different lingo's. And, by the way,
poor-brown-people was the words of justme, not mine, I just borrowed them. Cheers.

tatupu70 says

Bap33 says
And if you do not see that reduced lending standards to anyone, based on anything would result in reduced standards to everyone based on everything, due to fair lending laws on the books already, then that’s that. We do not need to rehash our entire deal again. I’m cool with you having that view.
But we’re not talking about what “would” happen. We’re talking about what DID happen. Because there is ample evidence out there showing what DID happen. And all of it points to the same conclusion–the CRA had nothing to do with the bubble and crash.

You honestly focus on my use of "would"?? Really?? It may be a literary error, but it sure seems to flow well with the "IF" at the begining of the sentence. EX: "If you do not see that "X" WOULD cause "Y", then that is that." Would could be could, should, did, might, possibly, likely, did, .... feel free to focus on the trees and miss the forest. What did happen was loose lending was forced on the banks due to Clinton's hopped-up CRA.

tatupu70 says

Bap33 says
It is just my view that the mousetrap was built and designed by liberal intentions and the results are as plain as the scrowl on Pelosi’s face. But, that’s just me. No biggie.
Sure–you’re welcome to believe what you like. There are lots of people who think 9/11 was a vast government conspiracy. And that the world will end in 2012. No amount of evidence showing you the truth is going to change that, is it

I did not mention CRA in this point. Perhaps thou doth protest too much? lol

Conservatives Unite !!!

@BAP

OK--this is getting tiring again. Yes, there was a mention of minority neighborhoods in the wiki quote I used. But the point is that the CRA refers to geographical areas, not people. It seemed like you were under the impression that it was designed to help minorities--I just wanted to emphasize that it is designed to help run-down and deteriorating areas. Not people.

And my focus on the word "would" was not meant to quibble with the word choice, but with the idea that you're hypothesizing what may happen. It already happened--let's look at data to show why instead of coming up with theories.

I reread your post and I think I may see why you are having such a hard time giving up your CRA theory.

Bap33 says

And if you do not see that reduced lending standards to anyone, based on anything would result in reduced standards to everyone based on everything, due to fair lending laws on the books already, then that’s that

Could you explain that a little more because I'm having a really hard time following the logic. So, if National City made a bad loan to Joe Smith in the Bay Area (mortgage amount 10X monthly salary, credit score of 580), you're saying there is a federal law on the books stating that all banks must also make bad loans too? Could you be more specific as to what law that is?

@ Elvis

The government doesn't set lending standards, so it obviously couldn't reduce them. So, how did the CRA create a lending frenzy exactly?

You're right about one thing--banks and loan companies saw a way to make a fast buck. But it had nothing to do with the CRA. And everything to do with their greed and poor understanding of the risks of the loans.

Is Obama proposing any legislation to reverse the GRAMM-LEACH-BLILEY act or increase regulation on the CRA?

ok Tatupu, I agree .. this gets redundant.
You contend that the CRA was wrote with some special loan rules created for helping specific areas, and without regard to those people that actually took the loan .. right?
And it did not work as intended, so Clinton "gave it teeth", and it still has not done anything you can point to and give the CRA credit for. Is that right?

So, is it safe to say that you feel the CRA is all about locations of property and has nothing to do with the standards required for buyers to buy those properties? Is that safe to say?

All of the links I shared a while ago showed my view pretty well. Your position of the CRA not being buyer specific, but instead being property specific is interesting. That just don't match any of the stuff I read in your links or mine, so we may as well just move along. No need to wade through the same poop. I'll watch from the side for a while. lol

The fair lending laws would dictate that all loan qualification standards be known and applied evenly without regard to race, sex, ect ect. Whatever force that made the standards change and a bad loan to be wrote by National Credit will MANDATE a bad loan be wrote at County Bank. Period. If you say that loan changes under CRA are property specific, well then I see why you do not give CRA any credit for the bubble. And once again, I would really like you to share what CRA has 100% made happen since Clinton's changes. Yes, it does matter, that;s why I keep trying to get you to commit on something ... lol. Gnite.

@BAP--

No special loan rules. No loan rules peiriod. It says the government will check the percentage of loans made to red-lined areas versus the total loans originated.

Nope--nothing that I can point to.

CRA *is* all about location of property. That is a fact--not my opinion. Read the actual Act if you want verification--Ryan posted a portion of it earlier. I really encourage you to read it, because it is location specific--that's a very basic part of the Act.

And your interpretation of the fair lending laws is a little off. No judge would rule based on one loan. They'd look at the indrustry standards for loan approvals.

ok, thanks.

4X says

Is Obama proposing any legislation to reverse the GRAMM-LEACH-BLILEY act or increase regulation on the CRA?

Obama isn't supposed to propose legislation. That job belongs to the Congressman or Senator you voted for. You would be better taking it up with them.

While we are at it, lets vote out those legislators who:

1. Voted to reverse GRAMM-LEACH-BLILEY in the first place
2. Voted for the bail outs
3. Voted to abdicate Congressional responsibility to declare war by passing it off to the President

Nope--doesn't help.

GOD

From what I read on the housing crash homepage the Gramm-Leach-Bliley act created the avenues how is it the fault of the CRA?

Nomo,

Well put.

Nomograph says

It’s AM talk radio nonsense and a complete waste of time.

unbiased views abound

tatupu70 says

You’re right about one thing–banks and loan companies saw a way to make a fast buck. But it had nothing to do with the CRA. And everything to do with their greed and poor understanding of the risks of the loans

Under fixed rate 30 year loan, the banks would recognize greater interest revenue from payment than the other flavors of ARM loans, which had lower payments.

thomas.wong87 says

Under fixed rate 30 year loan, the banks would recognize greater interest revenue from payment than the other flavors of ARM loans, which had lower payments.

Of course. But I think we all agree that most of the bad loans were to people who wouldn't qualify for a 30 year fixed rate loan.

@tatupu,
well, one thing is fur sure, we agree on the "what" portion of the bubble cause.

The CRA was an anit-discrimination law intended to "encourage" lending to minorities. (Since I'm married to a "minority" don't play the race card with me). Okay, if a minority, or anyone else for that matter, doesn't qualify for a loan...exactly what does it mean lenders were "encouraged" to make loans??? Could that possibly be newspeak for "lower the lending standards to make loans to people who don't qualify" ???

Further, banks would not be able to move into new lines of business unless they had "satisfactory" CRA lending practices. Okay, what does "satisfactory" lending practices mean??? Could that mean making loans to people who where unqualified but were "minorities"???

Many on this site refuse to acknowledge cause and effect. Irresponsisble government mandated regulations were the cause and economic disaster is the effect. Something we are ALL paying the price for (except the good news is that house prices are declining)

Many of you are probably foaming at the mouth, right about... now - haha. For a look into the future read George Orwell's 1984.

President Obama ... the agent for " change " has just signed into law the extension until June, 2010 of the First Time Homebuyer's Tax Credit. Being that he is an agent of " change ", he also signed the bill that now EXTENDS the tax credit for those that want to upgrade their home by purchasing another. Wisely, you mean & nasty capitalists are limited to a purchase price of $800,000 in order to qualify for the $6,500 tax credit.

Off the subject, but, doesn't it make you wonder why Obama kept Bush's Secretary of Defense Gates? I could go on, but won't because it's off the subject.

Honest Abe ... " encouraged " in real, practical terms in this case means "pressured" by the Feds. Keep in mind that the Federal Government became the lender of last resort for Fannie Mae and Freddie Mac, which naturally encouraged sloppy processing of loans that were then sold to unsuspecting investors on the secondary market. In economic terms it's known as "moral hazzard", i.e, once lenders know the Federal Government will back them, they will not hold to strict standards on underwriting. That's what really happened. The lowered underwriting standards of the CRA spread like a cancer throughout the entire system. Fannie & Freddie processed an amazing 85% of all loans packaged and sold on the secondary market, with the Federal Government behind the scenes there to back them up. Political friends of both parties were put into postions at Fannie & Freddie that walked away with HUNDREDS of millions .... of this Obama says and does NOTHING. But of course, he's too busy limiting the salaries of those rotten capitalists on Wall Street.

Honest Abe says

The CRA was an anit-discrimination law intended to “encourage” lending to minorities.

Wrong.
Honest Abe says

Many on this site refuse to acknowledge cause and effect.

That's because it's been proven on this board that there was no cause and effect.