patrick.net

GNOMO,

I fail to see how your family portrait has anything to do with the CRA?

Subtlety is lost on you, huh?

Oh, well by all means. If some crackpot has a blog and says the CRA caused the bubble, then it must be true. Never mind that all objective evidence disproves that theory...

I guess Portland, Oregon is one big red-lined 'hood as banks were FORCED, THREATENED, BROWBEATENED, and INTIMIDATED to loan all those well-to-do, excellent credit upper income folks $billions$ in Option ARM, Neg Am, and Interest Only loans.....Portland had very few sub-prime loans, we drank the more potent Kool-Aide!

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

But thanks for the past debates 'cuz when my father-in-law brought up the CRA over the holidays I had plenty of facts to dispute it and he finally conceded that it played just a minor role in the bubble.

Mr. Abe, what role did MBS's play?

I think you would have a much, much better argument if you stated FHA was the root of this bubble, but still...

Home Mortgages Q108: $10.6T
Home Mortgages Q101: $5.0T

What about $5T in new lending in 7 years don't you understand?

Government actions intented to “help people” are historically counter-productive. Social utopia cannot be achieved by big intrusive government, socialistic redistribution of wealth, or FORCING private businesses to do anything.

The industry did immense damage to itself by relatively unregulated lending. FIVE TRILLION worth of it during the Bush years.

CRA losses are a drop in the bucket compared to the losses banks are suffering to PRIME borrowers allowed to get in over their heads via Alt-A lending during the Bush-era experiment in letting the mortgage industry go unsupervised and unregulated.

Leigh, thanks for your response. The wiki link you provided states the C.R.A law "ENCOURAGED" banks to meet the needs of blah,blah, blah. I used the word FORCE, wiki uses the word ENCOURAGED - you do realize the two different words extract the same outcome, don't you? Paying taxes are not mandatory...paying taxes are voluntary, right?

In NEWSPEAK the word encouraged means forced, and the word mandatory means voluntary. After World War 2, the Department of War was "renamed" the Department of Defense...get it?

Read another one of Patricks posts - this one was on Thursday March 11, 2010: "US Taxpayer on the hook for 5 Trillion $$ of Fanny and Freddie". This confirms part of my original post where I stated: "GOVERNMENT ACTIONS INTENDED TO 'HELP PEOPLE' ARE HISTORICALLY COUNTER-PRODUCTIVE".

OBVIOUSLY Freddie and Fannie are PERFECT EXAMPLES of benevolent government intentions going horribly wrong. ALWAYS at TAXPAYER expense and the politicians DON'T CARE - its not their money.

Isn't it time for freedom? Freedom from government trying to control everyone's lives??? Freedom from meddling politicians. Freedom from being financially burdened by unconstitutional government "entities"?

People are finally starting to wake up to this type of nonsense. People don't want their children and grandchildren to be burdended by the never ending "hair-brained" schemes of the current batch of dim-witted politicians. They are not working for us, they clearly are working financially against us, UGH.

Horsehockey. Tax cheats are in courts and jail cells all the time. Name one banker jailed or giant fine given to a bank over CRA. This is a toothless paper tiger. Our disaster spanned far beyond the subrime market anyhow, if CRA were THE cause we wouldn't be in the soup.

I encouraged Nomo to say that, using the Force.

Like Vicente said, what were the consequences for NOT lending to less than stellar clients? Did the banks make any money off of these folks in the red-lined 'hoods?

I repeat, what were the consequences for not lending....please enlighten me!!!!

Hi Leigh - You stated: "I repeat, what were the consequences for not lending...please enlighten me !!!!".
OK, log onto the link at wiki that YOU, yourself provided, and read the last sentence of the very first paragraph, and you'll answer your own question. But to get the real answer you'll need to put on your "Newspeak" glasses to see through the double-talk (but remember, encouraged means forced, voluntary means mandatory, war means peace, etc).

Nomo, THANKS for grouping me with some of the other American Patriots on this site. I am proud to be assoiciated with others who have common sense, respect for the Constitution and a healthy distrust of big intrusive government. We, unlike YOU PEOPLE, don't mindlessly accept and follow a corupt government sucking society dry, in countless ways, without any protest whatsoever.

"You can't strengthen the poor by tearing down the rich", Abe Lincoln.

Actually I believe the people I refer to as "You People" are exactly the people referred to in the oath of office of the President, the military and all law enforcement establishments in America. You know, the part that says that they will "protect and defend the Constitution from enemies, foreign AND DOMESTIC..."

"You People" are the domestic part. You People plus: Harry Reid, Nancy Pelosi, B.O., Henry Waxman, Al Gore, George Bush(s), the Clintinistas, Barney Frank, Barbara Boxer, Diane Finestein, Timothy Giethner, Chuck Schumer, Ben Bernanke, Eric Holder, Maxine Waters and the rest of the politicians actively engaged in dismantling America.

I don't listen to AM, I like that FM station called "Smooth Jazz", but thank you for the congratulations anyway. That means you agree about the domestic enemies part, right?

So H.A., did the banks make any money off of these loans?

And why did it take 25 years to come to fruition?

And you seemed to gloss over this on wikipedia: The law, however, emphasizes that an institution's CRA activities should be undertaken in a safe and sound manner, and does not require institutions to make high-risk loans that may bring losses to the institution.[3][4] An institution's CRA compliance record is taken into account by the banking regulatory agencies when the institution seeks to expand through merger, acquisition or branching. The law does not mandate any other penalties for non-compliance with the CRA.[6][9]

The OP is accurate in that the government was the main driver of the housing bubble. The banks would never have been able to sell packaged "risk free" mortgage bonds by the hundreds of billions without the massive Fannie and Freddie liquidity, together with cheap FED rates driving prices higher year after year.

The CRA was a comparatively small factor in the housing bubble. Ditto for the FHA.

"In 2008 alone, the United States government allocated over $900 billion to special loans and rescues related to the US housing bubble, with over half going to the quasi-government agencies of Fannie Mae, Freddie Mac, and the Federal Housing Administration."

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

So what role did the trading of MBS's play? Heck, make a bad loan or a thousand then bundle and sell and repeat. This was going on much longer before the gov stepped in with their bailout. And doesn't that bailout end soon?!?!

CBOEtrader, did you ever watch "The Warning" on PBS. Great stuff that will make you wanna throw a brick at these guys in charge.

http://www.pbs.org/wgbh/pages/frontline/warning/

Leigh says

So what role did the trading of MBS’s play? Heck, make a bad loan or a thousand then bundle and sell and repeat. This was going on much longer before the gov stepped in with their bailout. And doesn’t that bailout end soon?!?!

I am glad that you agree with me. Fannie Mae and Freddie Mac were organized with the expressed purpose of providing capital and liquidity to the mortgage market, via buying and packing mortgages in MBS's. Without the smokescreen of ever rising prices due to pyramiding liquidity combined with implicit US govt backing, the Chinese would never have believed that the MBS crap bonds sold by FNM and FRE were risk free. The US government pioneered the MBS market. They gave the world's investors a taste, and the banks followed suit.

Leigh says

CBOEtrader, did you ever watch “The Warning” on PBS. Great stuff that will make you wanna throw a brick at these guys in charge.
http://www.pbs.org/wgbh/pages/frontline/warning/

I am watching it now. Very well done and interesting. This video deserves a thread of its own.

Doc Nomo,
Is it safe to assume there is a reason you have us trolls all naked in your play room? Am I the firetroll?

So help me out here, CBOEtrader, after watching the video and all your knowledge, how much can be blamed on the government backed loans and how much on lenders/mortgage brokers not using gov backed loans (I guess this would be the Alt-A's and more traditional loans with say 20% down)?

Did you catch "The Giant Pool of Money" and "The Return to the Giant Pool of Money" via This American Life:

http://www.thisamericanlife.org/radio-archives/episode/355/The-Giant-Pool-of-Money

http://www.thisamericanlife.org/radio-archives/episode/390/Return-To-The-Giant-Pool-of-Money

Leigh,

That video was fantastic! Brooksley Born should be our treasury secrectary.

Alan Greenspan is a walking and talking contradiction. On the one hand he tries to present himself as a libertarian free market believer, while he is at the same time the head of the Federal Reserve? At least Joe Stiglitz pointed out this obsurdity, lest people blame the "free" market for these financial blowups. (FYI: I am trying to be sarcastic on many levels.)

Leigh says

how much can be blamed on the government backed loans and how much on lenders/mortgage brokers

I don't really differentiate between the two. The same group of people control both institutions. Our government, and both parties have been hi-jacked by these crooks. This is the gift that fascism keeps on giving.

Unfortunately, these mobsters in ties, officially, have amazing resumes. Therefore they are still regarded as THE "experts" in their industry, thus duping naive politicians, like Obama, into nominating them to power positions again and again. This happens with every government regulatory agency, unfortunately.

The democrat vs republican argument is a smokescreen. They are both partially right, yet substantially wrong at the same time. Those that buy into the political talking points are missing the action going on behind the curtain. I do believe this is by design.

The only answer is to very strictly regulate certain aspects of major industries, like leverage and transparency in the financial business, for instance. Government, of course, is the most important industry that is lacking in proper regulation, which is why we should reinstitute strict constitutional limits on our federal govt.

Thems my 2 cents...

There is plenty of blame to be put on government, but it boggles my mind that some still bring up the CRA, when the evidence is overwhelming this had almost nothing to do with the credit bubble.

Please, Honest Abe. Tell us how CRA caused a bubble in commercial real estate.

As for Patrick putting it up, so what? He links to mostly good articles, but some of them are crap.

Honest Abe says

Actually I believe the people I refer to as “You People” are exactly the people referred to in the oath of office of the President, the military and all law enforcement establishments in America. You know, the part that says that they will “protect and defend the Constitution from enemies, foreign AND DOMESTIC…”

“You People” are the domestic part. You People plus: Harry Reid, Nancy Pelosi, B.O., Henry Waxman, Al Gore, George Bush(s), the Clintinistas, Barney Frank, Barbara Boxer, Diane Finestein, Timothy Giethner, Chuck Schumer, Ben Bernanke, Eric Holder, Maxine Waters and the rest of the politicians actively engaged in dismantling America.

You must have missed my last post on this "enemies, foreign AND DOMESTIC…" bit, so I'll paste it in...

------------

You do know where the "defend the Constitution of the United States, against all enemies, foreign and domestic" clause comes from, right?

It was enacted by the congress during the Civil War in 1862, and was a pledge that one was not against the constitutional, democratically elected government of the United States Most, but not all, versions of the oath since 1862 have had a similar clause.

Kind of ironic that that the wingnuts of today are now saying the constitutional, democratically elected government is actually a domestic enemy. Just today I was reading comments on Mish's blog and came across this:

Ms. Pelosi is a traitor. The fed gov has no lawful right to involve itself in health care. She should be prosecuted for treason.

(Score: 112 by 138 votes)

Treason? And astonishingly most of Mish's readers that care to comment agree. Somehow I suspect that both Honest Abe, and RayAmerica agree also.

And I also suspect they are completely oblivious to the irony of bringing up the "all enemies foreign and domestic" clause of the service oath.

MarkInSF says

You do know where the “defend the Constitution of the United States, against all enemies, foreign and domestic” clause comes from, right?
It was enacted by the congress during the Civil War in 1862, and was a pledge that one was not against the constitutional, democratically elected government of the United States Most, but not all, versions of the oath since 1862 have had a similar clause.

And yet the oath nonetheless does NOT say "defend the constitutional, democratically elected government," it says "the Constitution!" If the intent was the former, then why was it worded as the latter? Your argument boils down to the claim that the oath is to men, not to the rule of law, and once those people are voted into office, the actual Constitution itself does not matter. Is this your argument? If not, then what is it?

So you agree with Mark: the oath to the Constitution is not actually to the Constitution, but to the currently elected leaders? You claimed to be a retired reservist, and an officer no less. This is suprising!

Mark - the only reference I made it my original post to the CRA was the fact that the Act forced banks to make loans to unqualified borrowers. Oops - that banks were "encouraged" (newspeak for forced) to "meet the needs" of the local residents (newspeak for abolish normal lending standards). Thats all.

As you may know, since its ratification in 1789, the Constitution has secured our fundamental rights, providing for an unprecedented degree of human freedom and at the same time upholding the rule of law. The monumental irony, of course, is the constant chipping away of our rights and freedoms...not by foreign enemies - but by domestic politicians, UGH.

Paralithodes says

MarkInSF says

You do know where the “defend the Constitution of the United States, against all enemies, foreign and domestic” clause comes from, right?

It was enacted by the congress during the Civil War in 1862, and was a pledge that one was not against the constitutional, democratically elected government of the United States Most, but not all, versions of the oath since 1862 have had a similar clause.

And yet the oath nonetheless does NOT say “defend the constitutional, democratically elected government,” it says “the Constitution!” If the intent was the former, then why was it worded as the latter? Your argument boils down to the claim that the oath is to men, not to the rule of law, and once those people are voted into office, the actual Constitution itself does not matter. Is this your argument? If not, then what is it?

You make a good point. No, I think the rule of law is more important than loyalty to elected leaders.

No, I have never claimed to be a retired reservist, that must be someone else. The only time I signed the oath was in a unpaid volunteer capacity.

Honest Abe says

Mark - the only reference I made it my original post to the CRA was the fact that the Act forced banks to make loans to unqualified borrowers. Oops - that banks were “encouraged” (newspeak for forced) to “meet the needs” of the local residents (newspeak for abolish normal lending standards). Thats all.
As you may know, since its ratification in 1789, the Constitution has secured our fundamental rights, providing for an unprecedented degree of human freedom and at the same time upholding the rule of law. The monumental irony, of course, is the constant chipping away of our rights and freedoms…not by foreign enemies - but by domestic politicians, UGH.

Just curious-how do you know when a law is written in "newspeak" or when it's actually meant to be interpreted as written? Does the Constitution have some "newspeak" in it? Or the Bill of Rights?

Common sense.

I haven't found any newspeak in the Constitution or the Bill of Rights, have you?

MarkInSF says

No, I have never claimed to be a retired reservist, that must be someone else. The only time I signed the oath was in a unpaid volunteer capacity.

This was directed to someone else. My apology for not making that more clear.

Honest Abe says

Common sense.
I haven’t found any newspeak in the Constitution or the Bill of Rights, have you?

I obviously don't have the newspeak decoder. All laws (and acts) are taken at face value by me. If it says encouraged, then it means encouraged to me.

H.A. (also known as head ache in the medical field), did the banks make any money lending money in these red-lined 'hoods? And why did it take 25 years to come to fruition?

Bap33 says

Doc Nomo,
Is it safe to assume there is a reason you have us trolls all naked in your play room? Am I the firetroll?

Actually, Bap, even tho you & I have disagreed (many times) on politics, you've fair to me.

Tatupu - so does "voluntary taxes" mean you actually have a choice?

Honest Abe says

Tatupu - so does “voluntary taxes” mean you actually have a choice?

do you have a context for that?

Income tax?

you only pay income taxes if you:
earn money - and
earn above a certian amount that requires you to pay - and
want to avoid jail time

so, ya, that really is by choice. lol. But it is.

tatupu70 says

Honest Abe says

Common sense.
I haven’t found any newspeak in the Constitution or the Bill of Rights, have you?

I obviously don’t have the newspeak decoder. All laws (and acts) are taken at face value by me. If it says encouraged, then it means encouraged to me.

The constitution was written a long time ago. What seemed clear then, is not always so clear today? For instance, only congress has the power "to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures."

Some say that congress may transfer this right to the Fed, whereas some conclude the Fed to be unconstitutional. Unfortunately, the constitution is not clear.

CBOEtrader says

Unfortunately, the constitution is not clear.

It's clear when someone has a position to support.

CBOEtrader says

The constitution was written a long time ago. What seemed clear then, is not always so clear today? For instance, only congress has the power “to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.”
Some say that congress may transfer this right to the Fed, whereas some conclude the Fed to be unconstitutional. Unfortunately, the constitution is not clear.

It is not the age of the Constitution that is the issue on this one because this was not clear even back then. There were some big philosophical differences between two of the primary contributors to the Constitution in the first place: Madison and Hamilton.

"On December 15, 1790, Hamilton submitted a report to Congress making the case. He proposed a Bank of the United States with a $10 million capital ... The federal government would have a minority stake in the Bank, but its board of directors would be private individuals, thus ensuring a mix of public oversight and private enterprise."
...
"Madison ... noted that the Constitution conferred no power to establish a national bank or any other corporation; and if a power was not in the text, by what authority could it be done? ... Thomas Jefferson, who termed the banking industry "an infinity of successive felonious larcenies," also weighed in against it on constitutional grounds, urging a veto. So did Attorney General Edmund Randolph. "

"... Hamilton's central point was that the Constitution must confer implied powers along with those actually enumerated; the vehicle for this was the clause enabling Congress "to make all laws which shall be necessary and proper" to put expressly granted powers into effect. In Hamilton's view, later echoed by Chief Justice John Marshall in the landmark McCulloch v. Maryland case upholding the Bank's constitutionality, "necessary" did not mean absolutely essential so much as useful and appropriate, and the Bank certainly met that looser standard -- it would be a great help in enabling the government to carry out a number of powers explicitly granted it by the Constitution, including collecting taxes, regulating trade and creating a military. Persuaded by Hamilton's arguments, on February 25 Washington signed the Bank bill into law."

http://www.pbs.org/wgbh/amex/hamilton/peopleevents/e_bank.html