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Question about the subprime mortgage mess

Johnson

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So I was a passenger in a carpool to a seminar today, where the driver was listening to Rush. He was talking about how Hillary was worried Trump would deregulate banks too much and possible create another subprime mortgage-esque mess. Limbaugh then stated how the people most to blame for that happening in the first place were Bill Clinton and Jimmy Carter. Now I'd put my understanding of the subprime mortgage mess and subsequent bank bailouts and about a 6 out of 10...more knowledgeable than the average Joe but certainly not an expert. However this is the first time I've heard someone bring up Carter as a responsible party. So my question is 2-fold. 1.) Is there any accuracy to the statement that Carter should bear some responsibility for the events (please disregard the fact that the statement came from Limbaugh, a persons feelings on him are irrelevant to this question) and 2.) Which specific actions/polices of Carters administration made it so he is correctly named as a responsible party (assuming the answer to question 1 is "yes")

Thanks in advance!
 
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blaxshep

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So I was a passenger in a carpool to a seminar today, where the driver was listening to Rush. He was talking about how Hillary was worried Trump would deregulate banks too much and possible create another subprime mortgage-esque mess. Limbaugh then stated how the people most to blame for that happening in the first place were Bill Clinton and Jimmy Carter. Now I'd put my understanding of the subprime mortgage mess and subsequent bank bailouts and about a 6 out of 10...more knowledgeable than the average Joe but certainly not an expert. However this is the first time I've heard someone bring up Carter as a responsible party. So my question is 2-fold. 1.) Is there any accuracy to the statement that Carter should bear some responsibility for the events (please disregard the fact that the statement came from Limbaugh, a persons feelings on him are irrelevant to this question) and 2.) Which specific actions/polices of Carters administration made it so he is correctly named as a responsible party (assuming the answer to question 1 is "yes")

Thanks in advance!

In 1999, Congress passed and Bill Clinton signed the Gramm-Leach-Bliley Act, overturning Glass-Steagall, I don't see how Carter could have anything to do with it unless the liberal idea that everyone should have a home regardless if they can afford it started under Carter???
 

Fenton

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So I was a passenger in a carpool to a seminar today, where the driver was listening to Rush. He was talking about how Hillary was worried Trump would deregulate banks too much and possible create another subprime mortgage-esque mess. Limbaugh then stated how the people most to blame for that happening in the first place were Bill Clinton and Jimmy Carter. Now I'd put my understanding of the subprime mortgage mess and subsequent bank bailouts and about a 6 out of 10...more knowledgeable than the average Joe but certainly not an expert. However this is the first time I've heard someone bring up Carter as a responsible party. So my question is 2-fold. 1.) Is there any accuracy to the statement that Carter should bear some responsibility for the events (please disregard the fact that the statement came from Limbaugh, a persons feelings on him are irrelevant to this question) and 2.) Which specific actions/polices of Carters administration made it so he is correctly named as a responsible party (assuming the answer to question 1 is "yes")

Thanks in advance!

The CRA was passed under Carter but the regulations that were supposed to force Banks to meet the credit needs of low to moderate income borrowers never had any teeth until Clinton changed them in 1995

Clintons CRA changes including publishing Banks CRA scores which allowed community activist groups like ACORN to target and sue Banks for supposed " discriminatory lending practices ".

Prior to Clintons 1995 CRA changes Clinton created the 10 Federal Agency strong " Fair lending task force ". Banks were threatened with DOJ and HUD lawsuites if they refused to abandon the standards used for decades to vet the ability of a lender to repay their loan.

Add in Clinton's co-opting of the GSEs into buying these subprime loans via HUD " affordable lending quotas " ( started at 42% in 1995 ) and you have the beginnings of the Subprime fiasco

Prior to 1993 Fannie and Freddie never held more than 10% in risky mortgages. Its why agency MBSs used to be such a safe investment
 

Fenton

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In 1999, Congress passed and Bill Clinton signed the Gramm-Leach-Bliley Act, overturning Glass-Steagall, I don't see how Carter could have anything to do with it unless the liberal idea that everyone should have a home regardless if they can afford it started under Carter???

Which had very little to do with the Subprime crisis.

The first large scale securitization of subprime loans happened in 1997 when Freddie Mac guaranteed 380 million dollars worth of MBSs backed by Subprime loans

Thats 2 years before Graham Leach Act. In 1999, Franklin Raines celebrated Fannie Mac reaching their 1 Trillion dollar " affordable lending " goal.

A goal set in 1993 by James Johnson. It was the GSEs, not the Banks
 

Johnson

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The CRA was passed under Carter but the regulations that were supposed to force Banks to meet the credit needs of low to moderate income borrowers never had any teeth until Clinton changed them in 1995

Clintons CRA changes including publishing Banks CRA scores which allowed community activist groups like ACORN to target and sue Banks for supposed " discriminatory lending practices ".

Prior to Clintons 1995 CRA changes Clinton created the 10 Federal Agency strong " Fair lending task force ". Banks were threatened with DOJ and HUD lawsuites if they refused to abandon the standards used for decades to vet the ability of a lender to repay their loan.

Add in Clinton's co-opting of the GSEs into buying these subprime loans via HUD " affordable lending quotas " ( started at 42% in 1995 ) and you have the beginnings of the Subprime fiasco

Prior to 1993 Fannie and Freddie never held more than 10% in risky mortgages. Its why agency MBSs used to be such a safe investment

Excellent info, it gives me a couple good starting points to do a little independant research
 

blaxshep

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Which had very little to do with the Subprime crisis.

The first large scale securitization of subprime loans happened in 1997 when Freddie Mac guaranteed 380 million dollars worth of MBSs backed by Subprime loans

Thats 2 years before Graham Leach Act. In 1999, Franklin Raines celebrated Fannie Mac reaching their 1 Trillion dollar " affordable lending " goal.

A goal set in 1993 by James Johnson. It was the GSEs, not the Banks

You know your sheet! :applaud
 

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Which had very little to do with the Subprime crisis.

The first large scale securitization of subprime loans happened in 1997 when Freddie Mac guaranteed 380 million dollars worth of MBSs backed by Subprime loans

Thats 2 years before Graham Leach Act. In 1999, Franklin Raines celebrated Fannie Mac reaching their 1 Trillion dollar " affordable lending " goal.

A goal set in 1993 by James Johnson. It was the GSEs, not the Banks

Wasn't it both though? I see those CDO's of bundled subprimes as akin to fraud. That's what sent the investment banks under.
 

tres borrachos

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Excellent info, it gives me a couple good starting points to do a little independant research

Everything he said in those 2 posts are pretty accurate. I don't really agree with anyone who makes the case that it started with Carter. Yes the CRA was passed then but it didn't really become what it is today until Clinton was POTUS, primarily due to the efforts of Henry Cisneros who was the head of HUD under Clinton.
 

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Everything he said in those 2 posts are pretty accurate. I don't really agree with anyone who makes the case that it started with Carter. Yes the CRA was passed then but it didn't really become what it is today until Clinton was POTUS, primarily due to the efforts of Henry Cisneros who was the head of HUD under Clinton.

I was just straggling to understand how someone that was president that long before the subprime crap could be that responsible
 

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I was just straggling to understand how someone that was president that long before the subprime crap could be that responsible

Don't struggle too hard because it wasn't any Presidents fault but G.W.Bush. Clinton's signing of Phil Gramm's bill as a lame duck in his last weeks of office was only 1 piece in the puzzle. It required a willing partner for the banks to pull the thing off and that partner was Bush. He kicked off the housing bubble in 2002 with his Minority Housing Initiative which pushed Fannie Mae into buying 550 Billion in worthless paper. He latter lowered lending standards to legalize the new "No Doc" subprime motgages and then used Federal power to block the States from regulating the predatory mortgages with their own laws. I'de say those things made him indispensable to the banks who are the ultimate cause of their own demise and the world financial collapse that some nations are still reeling from.

http://archives.hud.gov/remarks/martinez/speeches/presremarks.cfm
Eliot Spitzer - Predatory Lenders' Partner in Crime
 

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So I was a passenger in a carpool to a seminar today, where the driver was listening to Rush.
Here we go


He was talking about how Hillary was worried Trump would deregulate banks too much and possible create another subprime mortgage-esque mess. Limbaugh then stated how the people most to blame for that happening in the first place were Bill Clinton and Jimmy Carter.
:roll:


1.) Is there any accuracy to the statement that Carter should bear some responsibility for the events
No.

(please disregard the fact that the statement came from Limbaugh, a persons feelings on him are irrelevant to this question)
I will not disregard it, because it is relevant. He has zero credibility, no one holds him accountable for his falsehoods, his comments are fantastical rather than factual, and a key part of his show is whipping up the faithful into a frenzy by blaming Democrats for everything that he claims has gone wrong.


and 2.) Which specific actions/polices of Carters administration made it so he is correctly named as a responsible party (assuming the answer to question 1 is "yes")
None.

There are literally a dozen causes, and millions of people, responsible for the bubble. The removal of Glass-Steagall was a bipartisan choice. Appointing Greenspan was a bipartisan choice. Refusing to regulate derivatives, CDSs, CDOs etc was a bipartisan choice. The rise of inaccurate valuation and risk modeling for MBSs and other derivatives was not a political choice, that was done by mortgage originators and banks. The ability of the mortgage originators and banks to dump disastrous loans on suckers was not a political choice either. And of course, millions of Americans who should have known better bought homes that on some level, they should have known they could not afford.

Blaming all this on Carter (!!!) who left office in 1980, while completely ignoring Reagan and Bush 41 and Bush 43, is beyond absurd. It's obvious partisan hackery, with no basis in reality.

This is why you shouldn't take anything he says even remotely seriously.
 

blaxshep

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Don't struggle too hard because it wasn't any Presidents fault but G.W.Bush. Clinton's signing of Phil Gramm's bill as a lame duck in his last weeks of office was only 1 piece in the puzzle. It required a willing partner for the banks to pull the thing off and that partner was Bush. He kicked off the housing bubble in 2002 with his Minority Housing Initiative which pushed Fannie Mae into buying 550 Billion in worthless paper. He latter lowered lending standards to legalize the new "No Doc" subprime motgages and then used Federal power to block the States from regulating the predatory mortgages with their own laws. I'de say those things made him indispensable to the banks who are the ultimate cause of their own demise and the world financial collapse that some nations are still reeling from.

http://archives.hud.gov/remarks/martinez/speeches/presremarks.cfm
Eliot Spitzer - Predatory Lenders' Partner in Crime

Clinton killed the guard but its Bush's fault for robing the bank :lamo
 

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Excellent info, it gives me a couple good starting points to do a little independant research

I won't get drug into this discussion again, but fair warning - Fenton blames everything entirely on democrats, and on the GSEs, and completely ignores that the banks, home mortgage lenders, dealers in MBS and all the associated products, not to mention home builders, appraisers, the ratings agencies who sold their souls and credibility, etc. made money hand over fist and needed no government mandate to make any loans because each loan they made and then sold off to be bundled into a MBS made everybody in the chain wealthy. So the basic argument is the CRA and Clinton initiatives (that weren't touched by a republican president with a republican house and senate) somehow "forced" banks to make loans on which they all got wealthy and earned 7 and 8 figure bonuses. The banks and investment houses were like Brer Rabbit - "Oh please, Uncle Fed, don't 'force' us to make loans to poor people so we can make money hand over fist and earn massive bonuses!!"

Furthermore, the housing and credit bubble was a worldwide phenomenon, with bubbles all over Europe. And the bank apologists have no explanation at all how a worldwide phenomenon was caused by loose lending standards mandated only in the U.S. and only in a relatively small part of the U.S. - generally inner cities. Somehow CRA caused housing and credit bubbles all over the world!

Etc.
 

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Clinton killed the guard but its Bush's fault for robing the bank :lamo

Clinton did what every lame duck President does when the other party wins. He signs their parties bills as a courtesy to the incoming President. Bush would have signed it anyway so it made no difference.I already outlined what Bush personally did and without those the scam would have failed.
 

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Wasn't it both though? I see those CDO's of bundled subprimes as akin to fraud. That's what sent the investment banks under.

Yes, the investment Banks weren't blameless, but without Governments unprecedented intervention we never would have had a Subprime mortgage crisis.

This intervention included co-opting the GSEs into purchasing Subprime loans

The Clinton administration fist declared that the decades old standards used by Banks to vet the ability of a borrower to pay back their loan were inherently racist.

Banks that refused to lower their standards were targeted by the DoJ, HUD and Community activist groups like ACORN.

Janet Reno bragged about suing lenders in 1998 in a speech she gave before the Community Reinvestment Coalition and counted 13 successful DOJ lawsuites and vowed to target more lenders.

And the DOJ wasn't the only one suing Banks. HUD sued Banks and so did groups like ACORN. Obama, when he was a Chicago Plaintiffs attorney sued CitiBank for " discriminatory lending practices ".

Banks HAD to make a certain amount of risky loans or else

The GSEs purchased these subprime loans and then turned them into MBSs that were sold off to investment Banks and Capital markets all over the world as " AAA " rated securities

Since US Treasuries had a " AAA " rating at the time so did Agency debt. People think Banks created the majority of these MBSs.

Not so, Fannie and Freddie were the primary issuers of MBSs backed by Subprime loans and the primary consumer of lower tranche MBSs and essentially created demand for a toxic product that made its way out to Capital markets all over the world

In 1999, Fannie Mae started its partnership with CountryWide Financial when CountryWide created a loan process exclusively for Fanie Mae called the " Fast and EZ " loan

In 2000, Fannie Mae started using " Desktop Underwriter", which was their new automated underwriting software

In 2004 Fannie Mae was buying up close to 50 % of all of Country Wide financials no doc loans. These loams were being bundled and sold off as " AAA " rated agency securities. And the GSEs weren't just buying Country Wides trash loans.

In 2008 the GSEs were declared insolvent holding over 5 Trillion dollars in Securities and Subprime loans. Thats just what they had on their books.

That doesn't include all of the GSE " AAA " rated MBSs that had made its way out to Capital markets and investor portfolios

In 2011, the SEC started a investigation into unprecedented securities fraud at the GSEs. Prior to 2004, the GSEs were exempt from SEC quarterly fillings laws. All publicly traded Corporations have to submit their quarterly reports to the SEC.

As a consequence of the 2004 SEC investigation into Fannie Maes corrupt accounting, the GSEs, as a show of good faith agreed to start submitting their reports to the SEC

According to the 2011SEC filings, from 2004-2008 both Fannie and Freddie ommited hundreds of Billions of dollars in worthless Subprime debt for their reports.

Hundreds of Billions of dollars in No-doc loans were simply left out of their SEC reports. This is while the two agencies were the primary consumer and issuer of MBSs
 

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Here we go



:roll:



No.


I will not disregard it, because it is relevant. He has zero credibility, no one holds him accountable for his falsehoods, his comments are fantastical rather than factual, and a key part of his show is whipping up the faithful into a frenzy by blaming Democrats for everything that he claims has gone wrong.



None.

There are literally a dozen causes, and millions of people, responsible for the bubble. The removal of Glass-Steagall was a bipartisan choice. Appointing Greenspan was a bipartisan choice. Refusing to regulate derivatives, CDSs, CDOs etc was a bipartisan choice. The rise of inaccurate valuation and risk modeling for MBSs and other derivatives was not a political choice, that was done by mortgage originators and banks. The ability of the mortgage originators and banks to dump disastrous loans on suckers was not a political choice either. And of course, millions of Americans who should have known better bought homes that on some level, they should have known they could not afford.

Blaming all this on Carter (!!!) who left office in 1980, while completely ignoring Reagan and Bush 41 and Bush 43, is beyond absurd. It's obvious partisan hackery, with no basis in reality.

This is why you shouldn't take anything he says even remotely seriously.

The only reason I put the caveat of not discussing Limbaugh is because it wasn't my choice to listen to him and I didn't want this to turn into anyonr expecting me to defend what he thinks or says, because I'm not a fan by any means. All I wanted to know was wether or not his specific statement had any factual basis, which according to the lions share of responses, I'm gathering that it really doesn't.
 

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So I was a passenger in a carpool to a seminar today, where the driver was listening to Rush. He was talking about how Hillary was worried Trump would deregulate banks too much and possible create another subprime mortgage-esque mess. Limbaugh then stated how the people most to blame for that happening in the first place were Bill Clinton and Jimmy Carter. Now I'd put my understanding of the subprime mortgage mess and subsequent bank bailouts and about a 6 out of 10...more knowledgeable than the average Joe but certainly not an expert. However this is the first time I've heard someone bring up Carter as a responsible party. So my question is 2-fold. 1.) Is there any accuracy to the statement that Carter should bear some responsibility for the events (please disregard the fact that the statement came from Limbaugh, a persons feelings on him are irrelevant to this question) and 2.) Which specific actions/polices of Carters administration made it so he is correctly named as a responsible party (assuming the answer to question 1 is "yes")

Thanks in advance!

We really don't need yet another Mortgage Bubble / Financial Collapse thread that retreads the same ground once again. Really we don't.

I'd refer you to the following thread: http://www.debatepolitics.com/us-pa...-bush-mortgage-bubble-faqs-w-1083-1531-a.html for reference, it's pretty much all been said in there.

One word of caution before reading this thread, there is a bad case of rampant Bush Derangement Syndrome in there. You've been warned on that now.

Cheers. :cheers:
 

SenorXm/Sirius

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In 1999, Congress passed and Bill Clinton signed the Gramm-Leach-Bliley Act, overturning Glass-Steagall,

3 REPUBLICAN Senators. Yes, obviously Clinton deserves some blame for signing the bill. But the Republicans were falling over themselves trying to deregulate Wall Street. Especially Phil Gramm.

If people look at what happen without partisan glasses on(something that Fenton especially does NOT do) they'll see BOTH parties were the blame for the bubble and crash. Clinton, Bush, both Congresses, etc. Along with the banks, Wall Street, the rating agencies who were happily stamping the garbage mortgage packages with AAA ratings, the mortgage banks like Coutrywide, (read up on what they were doing, amazing), and yes the borrowers too.

Jimmy Carter. nah.
 

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We really don't need yet another Mortgage Bubble / Financial Collapse thread that retreads the same ground once again. Really we don't.

I'd refer you to the following thread: http://www.debatepolitics.com/us-pa...-bush-mortgage-bubble-faqs-w-1083-1531-a.html for reference, it's pretty much all been said in there.

One word of caution before reading this thread, there is a bad case of rampant Bush Derangement Syndrome in there. You've been warned on that now.

Cheers. :cheers:

Haha fair enough...I'll take a look at that and do my best to digest the information as unbiasedly (is that a real word?) As possible
 

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I won't get drug into this discussion again, but fair warning - Fenton blames everything entirely on democrats, and on the GSEs, and completely ignores that the banks, home mortgage lenders, dealers in MBS and all the associated products, not to mention home builders, appraisers, the ratings agencies who sold their souls and credibility, etc. made money hand over fist and needed no government mandate to make any loans because each loan they made and then sold off to be bundled into a MBS made everybody in the chain wealthy.

The GSE's were the one's bundling those Subprime mortgages, so yes, it sort of was a " Government mandate ".


So the basic argument is the CRA and Clinton initiatives (that weren't touched by a republican president with a republican house and senate) somehow "forced" banks to make loans on which they all got wealthy and earned 7 and 8 figure bonuses. The banks and investment houses were like Brer Rabbit - "Oh please, Uncle Fed, don't 'force' us to make loans to poor people so we can make money hand over fist and earn massive bonuses!!"

Banks were forced but hey, you dont have to take it from me. Here's Janet Reno bragging about forcing banks in 1998....

03-20-98: REMARKS OF THE HONORABLE JANET RENO TO THE NATIONAL COMMUNITY REINVESTMENT COALITION
" The new Community Reinvestment Act regulations enable lenders to develop customized strategic plans for meeting their obligations under the Act, and many have been developed in partnership with your local organizations. In this way you are not only helping to rebuild your communities, but you are showing bankers how to be responsible corporate citizens. In short, you can't do it just with capital, you can't do it just with people who care; we can do it together.

We want to see equal credit being offered by banks because it is the right thing to do, because the law requires it, because it is good business, because people accept it.

You've noted that since the inception of our fair lending initiative in 1992 the Department has filed and settled 13 major fair lending lawsuits. We are going to continue these efforts under the Acting Assistant Attorney General Bill Lann Lee in every way that we possibly can. We will continue to focus on discrimination in underwriting, the process of evaluating the qualifications of credit applicants. This was the issue in our suits against Shawmut in Boston, Northern Trust Company in Chicago, and First National Bank of Donna Anna in New Mexico. "


Furthermore, the housing and credit bubble was a worldwide phenomenon, with bubbles all over Europe. And the bank apologists have no explanation at all how a worldwide phenomenon was caused by loose lending standards mandated only in the U.S. and only in a relatively small part of the U.S. - generally inner cities. Somehow CRA caused housing and credit bubbles all over the world!

Etc.

Yes we know, your'e too overwhelmed by world events to the point of confusion when it comes to the Subprime crisis but dont assume everyone else is.

Believe it or not, its possible through a thorough and well researched analysis to explain exactly what led up to the 2008 Financial crisis.
 

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We really don't need yet another Mortgage Bubble / Financial Collapse thread that retreads the same ground once again. Really we don't.

I'd refer you to the following thread: http://www.debatepolitics.com/us-pa...-bush-mortgage-bubble-faqs-w-1083-1531-a.html for reference, it's pretty much all been said in there.

One word of caution before reading this thread, there is a bad case of rampant Bush Derangement Syndrome in there. You've been warned on that now.

Cheers. :cheers:

Man isn't that the truth. I dont even have to reference my notes anymore Erik. It's all in my head and I only open up my dropbox to post links.
 

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Is there any accuracy to the statement that Carter should bear some responsibility for the events (please disregard the fact that the statement came from Limbaugh, a persons feelings on him are irrelevant to this question) and 2.) Which specific actions/polices of Carters administration made it so he is correctly named as a responsible party (assuming the answer to question 1 is "yes")

Thanks in advance!
This is Nevada's home prices. That is exactly what a bubble looks like. Nevada was one of the 4 bubble states. the other three were California, Arizona and Florida.

Nevada.jpg

You can just go to FRED (Federal Reserve Economic Data) and put in "All-Transactions House Price Index for "x" to see the other bubble states. And pick states at random. Texas is a good one to look at. As you can see, the curve changes direction in 2004. The key thing is to ask people responding with their 'theories' is how did something from 1977, 1995, 1999 or any year other than 2003 or 2004 cause that bubble. they simply wont answer the question because they cant. Here's an interesting policy from 2004 based on a decision from 2003. It seems Bush preempted all state laws against predatory lending in 2004. the reason given seems relevant

Acting on a request from a national bank, the OCC in 2003 concluded that federal law preempts the provisions of the Georgia Fair Lending Act (GFLA) that would otherwise affect national banks’ real estate lending. At this same time, the OCC also proposed a final rule to clarify the types of state laws that are applicable to national banks. In early 2004, the OCC adopted a final rule providing that state laws that regulate the terms of credit are preempted. The main features of state anti-predatory lending statutes are typically provisions that restrict or prohibit certain loan terms....

In addition, clarification of the applicability of state laws to national banks should remove disincentives to subprime lending and increase the supply of credit to subprime borrowers.


http://www.occ.gov/publications/publications-by-type/economics-working-papers/2008-2000/wp2004-4.pdf
 

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Man isn't that the truth. I dont even have to reference my notes anymore Erik. It's all in my head and I only open up my dropbox to post links.

It certainly is Fenton. It certainly is.

Aaaannnnndddd RRriiiggghht on que.. . . . .
 

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It certainly is Fenton. It certainly is.

Aaaannnnndddd RRriiiggghht on que.. . . . .

It wasn't my intention to retread anything, I just heard something that was a point I had never heard before and wanted some feedback from some people on here who assuredly know more about this subject than I do. Mea Culpa.
 

eohrnberger

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It wasn't my intention to retread anything, I just heard something that was a point I had never heard before and wanted some feedback from some people on here who assuredly know more about this subject than I do. Mea Culpa.

No worries. Just that you stepped into the quicksand around here. You'll be OK. It won't be fatal (yikes! At least it hasn't been so far).
 
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