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It was affirmitive action lending and it tanked the economy.
A rather small subset of all subprime loans were CRA related (not to mention the default rate for CRA loans was lower than other non-CRA loans of similar risk). I notice you failed to mention the commercial housing bubble.
Fail!
I cant help but draw the conclusion that the 6% number is either false or gamed in some way. Im interested in another conclusion but Im not seeing it.
How so?
Also, what caused the commercial real estate bubble? Surely you will not make the claim that the CRA had anything to do with it!
The better the CRA rating of the bank, the more unstable they were.
The commercial real estate bubble was for some of the same reasons as the regular one---banks were given an outlet to dump toxic assets through the government, specifically GSEs. If risk cannot be securitized or sold, it won't be taken on. The mechanisms for getting rid of regular market risk were extended to the commercial market.
This does not make sense given that CRA justification was not a deterministic factor in regards to stability. As stated, there is no relationship between CRA rating and bank stability.
Pick your poison! In one hand you blame CRA provisions and in another you blame ulterior risk motives. You cannot have it both ways (without plaguing yourself with partisan subjectivity)!
It doesnt make sense, but it was a factor. The greater the compliance rating, the greater the instability. Only thing I can find is that they were examined less on other issues or given greater access to dumping risk to GSEs.
You misunderstand. Without the safety valve route provided by GSEs, ostensibly for CRA loans, they had nowhere to dump the high risk commercial. Im not blaming CRA, Im saying CRA provided the mechanisms to allow risk to be passed and banks naturally used it. Without a way to dump risk, it would never have been taken on.
Given that institutions that created the majority of Subprimes loans were not subject to the CRA regulations (Countrywide for example which was bought by BOA) and those institutions were securitising the loans they made with the same ease as the institutions that were subject to CRA regulations, does it not make more sense that the securitization and dumping of risk from the loans was a more significant factor in the growth of subprime loans then the CRA
Yes but they were securitizing them to the GSEs as well. Im arguing more that the method of securitizing was done through the government that allowed the unchecked risk to continue to grow. Im not sure how to separate CRA and GSE risk control but we need to, or rather, we need to control it better than we have been.
Of course
But to my knowledge the CRA has nothing to do with risk control or securitization.
It is the securitization which promoted the dramatic increase in Subprime loans (when state regs allowed it) (Texas regs were very tight and did not allow for many bad loans)
A rather small subset of all subprime loans were CRA related (not to
mention the default rate for CRA loans was lower than other non-CRA loans of similar risk). I notice you failed to mention the commercial housing bubble.
Fail!
AGAIN, it was regulatory pressure given to CRA and HUD to force private banks to lower the underwriting standards for loans.
Its all and continues to be, as things grow worse the fault of your principles.
Imagine, your ideology could cause so much suffering.
But again, it is as you and your ilk ignore the link to mass suffering in the past and currently.
Liberalism.
CRA is not about lowering underwriting standards. This is a either a lie, or you simply do not understand what you are talking about....
Now either present valid evidence that CRA loans came into existence via of lower underwriting standards.
CRA is not about lowering underwriting standards. This is a either a lie, or you simply do not understand what you are talking about....
This is not about me or ideology. It is about representing the truth.
This is not about me or ideology. It is about representing the truth.
This is not about me or my ilk. It is about representing the truth.
This is not about liberalism. It is about representing the truth.
Now either present valid evidence that CRA loans came into existence via of lower underwriting standards.
Kush cmon. You know as well as I do that the primary targets of CRA loans
were those that were not financially viable for mortgage loans before CRA regulation.
Im not sure how you ignore the primary purpose of the CRA program, but you seem to be doing so.
CRA loosened mortgage regulations across the board because those lower income mortgage were bundled and sold off with implied government backing or partial direct government underwriting. You know this, Im pretty sure. They allowed for lower standards because they were still selling off the mortgage bundles at the same rate.
GSEs gave the release valve for the risk, the regulation itself was not the problem but the semblence of coverage from government and opening of markets was responsible. There was a whole gamut of blame, valuation issues, credit default swap derivatives having bad valuation, optimistic default rates, belief that the housing market could never go down, pure greed, political gimmes, on and on.
Kush cmon. You know as well as I do that the primary targets of CRA loans were those that were not financially viable for mortgage loans before CRA regulation.
Im not sure how you ignore the primary purpose of the CRA program, but you seem to be doing so.
CRA loosened mortgage regulations across the board because those lower income mortgage were bundled and sold off with implied government backing or partial direct government underwriting. You know this, Im pretty sure. They allowed for lower standards because they were still selling off the mortgage bundles at the same rate.
GSEs gave the release valve for the risk, the regulation itself was not the problem but the semblence of coverage from government and opening of markets was responsible. There was a whole gamut of blame, valuation issues, credit default swap derivatives having bad valuation, optimistic default rates, belief that the housing market could never go down, pure greed, political gimmes, on and on.
The government does not set standards for lending in the mortgage market. It only provides standards for mortgages bought by GSE's. In a lot of the sub-prime mortgages they did NOT! meet GSE standards. They also had nothing to do with GSE's. The secondary mortgage market was essentially taken over as in Cardinal's post by private entities.
The loosening of lending standards was entirely the choice of lenders because no matter how far they delved into unsafe practices there was a secondary market for them. If the demand for sub-prime mortgages did not exist in the private markets there would of been no bubble...the sub-prime market would of continued on with GSE standards and liar loans and other fraudulant practices would not of been bought by the GSE's.
13 trillion dollar mortgage lending market since 2000 and GSEs held 7.5 trillion of it and they had nothing to do with it? How are we supposed to begin to buy that?
You just pointed out that a little under half the market had nothing to do with GSEs....Lenders changed practices to meet GSE standards to resell or bundle those mortgages---or banks would not be making them because they would have to endure the risk.
On the one hand you want to say banks took on these loans and government regs had nothing to do with it. On the other hand, Im saying banks would never had made the loans to comply if they didnt have a risk dump via GSEs and to have that valve they needed to meet regs on lending practices.
Sure...I don't think their size in the market implies guilt. Let's say
hypothetically :wink2:....that half the market had standards imposed on what was bought and sold in the secondary market and half the market had very low or nearly non-existent standards. Then yes....it's enitrely possible that entities that historically make up a larger share of the market had nothing to do with the mortgage bubble.
You just pointed out that a little under half the market had nothing to do with GSEs....
GSEs were not the only institutions bundling mortgages. As your stat shows GSEs made up a little over half of the secondary mortgage market. The rest were financial institutions such as investment banks. Nearly half of all mortgages bundled did NOT have to meet GSE standards because they were never sold to a GSE.
I'm saying they had a risk dump. Firms like Goldman Sachs were making tons of money off the bundling of mortgages and providing the same role GSEs generally do. GSEs were not the only game in time...in fact they were making up an increasingly shrinking part of the game.
Sure...I don't think their size in the market implies guilt. Let's say hypothetically :wink2:....that half the market had standards imposed on what was bought and sold in the secondary market and half the market had very low or nearly non-existent standards. Then yes....it's enitrely possible that entities that historically make up a larger share of the market had nothing to do with the mortgage bubble.
So when the anomoly in the process is greater government involvement and a questionable social program that changed lending standards, your hypothetical is that the market itself is the only culrpit?
You just pointed out that a little under half the market had nothing to do with GSEs....
GSEs were not the only institutions bundling mortgages. As your stat shows GSEs made up a little over half of the secondary mortgage market. The rest were financial institutions such as investment banks. Nearly half of all mortgages bundled did NOT have to meet GSE standards because they were never sold to a GSE.
CDS's and derivatives are regulated. If you want to toss some real blame, go look at S&Ps and Moody's who overvalued the bundles and the layered mortgages.
I'm saying they had a risk dump. Firms like Goldman Sachs were making tons of money off the bundling of mortgages and providing the same role GSEs generally do. GSEs were not the only game in time...in fact they were making up an increasingly shrinking part of the game.
How many times does this have to be explained? CRA required banks and S&L's that took federal deposit insurance to make honest efforts to meet the credit needs of the communities they took deposits from. They could take deposits alright, but they had to take credit applications as well and then actually read them. That's all CRA did. CRA did not require that a single loan be written. Only that an effort be made to find qualified local neighborhood borrowers.Kush cmon. You know as well as I do that the primary targets of CRA loans were those that were not financially viable for mortgage loans before CRA regulation. Im not sure how you ignore the primary purpose of the CRA program, but you seem to be doing so
Total blather and off-the-wall nonsense. Banks and S&L's did the underwriting of all their own loans, just as they always had. CRA did not affect any loan terms whatsoever. Like many with no knowledge, you further assume that low-income borrowers equate to low creditworthiness. In fact, nearly half of the applicants uncovered through CRA compliance were qualified at prime terms, and nearly all the rest were at Alt-A, the level just below prime. It is easy to make a fair profit by lending into such a community, and that's exactly what CRA institutions did. CRA loans issued through the 1990's performed better than industry averages. Meanwhile, property values in CRA-covered neighborhoods were rising, and investment in community infrastructure was increasing. Keep in mind that these people had been getting all their credit through the predatory finance companies (Household, Beneficial, etc.), so a loan from a traditional lender was like new money in the bank to them. It turned out that CRA was both good policy and good business.CRA loosened mortgage regulations across the board because those lower income mortgage were bundled and sold off with implied government backing or partial direct government underwriting. You know this, Im pretty sure. They allowed for lower standards because they were still selling off the mortgage bundles at the same rate.
Fact Check: The garbage loans were not securitized through the the GSE's, but through the private-label shops of Wall Street. Paper had to meet minimum underwriting standards for the GSE's to purchase it. Not so on Wall Street. They would buy and resell anything. That's where the junk that caused the credit crisis came from. Cowboy capitalists stripping off profit and selling off risk. They knew what they were doing. They knew the paper they were selling would fail once interest rates rose. They didn't care. They just wanted co collect their big fat profts and bonuses.GSEs gave the release valve for the risk, the regulation itself was not the problem but the semblence of coverage from government and opening of markets was responsible.
If this is complete understanding, the moon really is made of green cheese. Redlining is the practice of denying credit to a group of people based on street addess. Traditional lenders simply would not take or consider an application from anyone in neighborhoods they had drawn red lines around on a local map. Bill Gates could have lived there and no one would have taken his credit application. These LMI (low- and moderate-income) neighborhoods were simply consigned to the rapacious finance companies for all their credit needs. That's what redlining was.I understand completely what the CRA regulations were for. It was to fight redlining and redlining is basically proving someone can pay back aa loan. Its what they did to me when I bought my last home. You know, check my credit, insist on 20% down, make sure Im employed.
There was no path to a credit criss until the failure of Bush's tax cuts for the rich prompted the Fed to rush in as backstop and freeze interest rates at 1%, thereby causing institutional investors to go on a hunt for yield. That was the trigger, It happened in 2002.Its about liberalism and your twisted world beliefs because you fail to look sny further back than 2002 and insist its Bushs fault when in fact Bush warned the Congress in 2000 and tried to regulate the GSEs in 2005 to no avail.
Reactionary fear of big numbers. As noted, the GSE's were growing because the nation, the economy, and the residential real estate market were growing. A smarter President would have spent less time worrying about the GSE's and more time guarding against the excesses of Wall Street rather than aiding and abetting them. But we didn't get much of a smart guy out of that mess of 2000.Hell even the NYT in 1999 warned of the ever increasing size of the GSEs.
LOL! People who don't even know what the words mean still pretend to know what they are talking about. Pump out nothing but the standard, long-ago debunked right-wing swill, and you can only expect to be slapped down for it. Low-grade is low-grade, after all.Being stupid is one thing, but being selectively ignorant to defend a corrupt position is much worse and you and Cardinal do that on a daily basis. Then again maybe you two just dont possess the cognitive abilities to understand the SubPrime issue in totality. Thats not my problem, and no amount of your isolated diversions are going to wipe the slate clean of all of the damage the democrats under Clinton did to our long term economy.
A credit default swap IS a derivative. The first one was invented by Blythe Masters at JP Morgan in 1994 in the wake of the Exxon Valdez oil spill. A credit default swap is simply a promise to pay in the event that someone else does not. An MBS on the other hand is a participation in an income stream or pool -- just like a share of stock.Credit default swaps and derivitives are two seperate things and are nothing new. You cant blame this on derivitives if the GSEs themselves relied on bundling and selling those MBSs to fund the secondary market.
CDS's have no underlying asset value. They are insurance hedges that move risk off a lender's books, usually so that the lender will not have to set aside reserves against an newly created outstanding position. It appears that many here don't know anything at all about how this actually works.Credit Default Swaps HAD to be purchased by investment banks as collateral for those derivitives.
Why don't you inform us further on these supposed regulations.That was per Govt regulations that existed prior to the sub prime debacle.
Integrity is too typically non-existent on the right-wing, and scarcer still is any recognition or comprehension of what the facts and issues actually were and what the lot of that might actually have meant. Tall tales and phony stories get invented and passed around as if the right-wing were nothing but a bunch of old-time housewives gossipping over the back fence.You wont get Kushinator to agree to any of the facts surrounding the collapse because he doesn't possess the integrity to be objective.
How many times does this have to be explained? CRA required banks and S&L's that took federal deposit insurance to make honest efforts to meet the credit needs of the communities they took deposits from. They could take deposits alright, but they had to take credit applications as well and then actually read them. That's all CRA did. CRA did not require that a single loan be written. Only that an effort be made to find qualified local neighborhood borrowers.
Banks that wanted to make an aquisition, merge or be aquired by another banks had to have a green light on CRA rating to move forward with any of that. Thats the force part of the equation.
Total blather and off-the-wall nonsense. Banks and S&L's did the underwriting of all their own loans, just as they always had. CRA did not affect any loan terms whatsoever. Like many with no knowledge, you further assume that low-income borrowers equate to low creditworthiness. In fact, nearly half of the applicants uncovered through CRA compliance were qualified at prime terms, and nearly all the rest were at Alt-A, the level just below prime. It is easy to make a fair profit by lending into such a community, and that's exactly what CRA institutions did. CRA loans issued through the 1990's performed better than industry averages. Meanwhile, property values in CRA-covered neighborhoods were rising, and investment in community infrastructure was increasing. Keep in mind that these people had been getting all their credit through the predatory finance companies (Household, Beneficial, etc.), so a loan from a traditional lender was like new money in the bank to them. It turned out that CRA was both good policy and good business.
And of course, whether done one loan at a time (as was once the case) or as a hundred loans in a bundle, the sale of mortages into secondary markets as mortgage-backed securities is plain vanilla finance. It is how primary lenders recapitalize. There is nothing exotic or risky about it.
Really? The financial crisis we are discussing says otherwise. Of course they performed better in the 90s. No one really knew about how much money could be made and the streamlined underwriting to the GSEs wasnt in place. After it was, in about 2000, the process gathered steam and GSE involvement increased.
Fact Check: The garbage loans were not securitized through the the GSE's, but through the private-label shops of Wall Street. Paper had to meet minimum underwriting standards for the GSE's to purchase it. Not so on Wall Street. They would buy and resell anything. That's where the junk that caused the credit crisis came from. Cowboy capitalists stripping off profit and selling off risk. They knew what they were doing. They knew the paper they were selling would fail once interest rates rose. They didn't care. They just wanted co collect their big fat profts and bonuses.
Scroll back to that handy little chart in Post-261. That red line is the credit crisis being built...
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