Question about the subprime mortgage mess

[beerftw]

I've never asserted that sub-prime lending started post 2000. It's a ridiculous straw man.

Still wondering how CRA, Cuomo, Reno and Clinton (of course) caused a worldwide credit and housing bubble that exploded and burst under Bush the II.

BTW, here's Bush touting all his administration did to expand home ownership for the poors.

https://georgewbush-whitehouse.archives.gov/infocus/achievement/chap7.html

Since your history ends in 2000, you keep ignoring this stuff.

The correct answer is clinton created and laid the framework for the bubble, and bush expanded upon it.

 

[iguanaman]

Clinton left in 2001 in january, not 1999, I somehow fail to see how almost an entire year is just weeks before he left.

The Commodity Futures Modernization Act of 2000 (CFMA) is United States federal legislation that officially ensured modernized regulation[1] of financial products known as over-the-counter derivatives. It was signed into law on December 21, 2000 by President Bill Clinton

https://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000

 

[eohrnberger]

Well, the two sides have pretty much identified themselves already, but I think that they are both missing the part of how all these actions that all these various people, both public sector and private sector took, was enabled by the de-regulation regulatory and economic conditions within which they operated. The onset of those conditions does go back to the Clinton administration.

Further, it always seems that everyone neglects the supply chain aspect of all this. Originators such as CountryWide originated bad risk mortgages, such as the NINJA mortgage (No Income, No Job or Assets) for well beyond what even the most optimistic value of the home was. These were sold to a middle man bank, which bundled them up, and eventually made it's way to the investment banksters, which carved them up into traunches, secured them against lost with CDO, had them rated as 'Class A investments' by rating agencies which didn't know what they were rating, and then sold world wide, spreading the toxin. At each step, there was easy money to be made. The same can be said for the house flippers, and those treating their houses like ATMs, re-mortgaging like every 3 months for ever larger a mortgage value (I was told of this from some tax preparers).

This house of cards that got built worked out just fine while all the housing evaluations kept going up and up and the mortgages amounts did the same, but reality has a way of putting a stop to that when either or both grew to the ridiculous level, which they did.

While all this was going on, both parties in the congress and the administration knew the excrement was going to hit the fan at sometime, and really thoroughly, and while there were a number of attempts to put sanity back in the driver seat, none of them succeeded for all the wrong reasons. So each of them has their fair share of blame for this mess as well, some for direct actions they took, and some for actions that they didn't take.

The banksters figured they were safe with their CDOs protecting them, but when the the CDO insurance company, AIG, went belly up they too had claims and demands made against them that weren't covered by AIG and their CDOs, so they went belly up as well, one by one.

The administration took it on themselves to 'rescue' everyone from their own folly (especially the bankserts), and tried to give the economy a softer landing, which it did, but the landing was a harsh one none the less, and panic ensued and a deep recession took hold, all the businesses were looking to save every scrap of cash they could to help them weather the recession and survive. Unfortunately, in many businesses, the workforce is the quickest and easiest thing to cut back. And that's why at the tail end of the Bush administration the economy was shedding some 800,000 jobs a month, not that this was typical in any way for all the rest of his administration.

So what have the following congresses and administrations done to prevent such a fiscal atom bomb from forming and going off again? Have those in power learned anything from the pain on mainstreet? Nope.

The promised of 'End of too big to fail' Dodd-Frank fiasco does exactly nothing to prevent banks and other financial institutions from becoming too large that their failure wouldn't sink the entire economy. If anything Dodd-Frank, with it's stupidly written regulations which are far too costly to comply with, have squeezed small banks out, forcing them to consolidate into larger banks in order to be able to afford the overhead. The result is a mono-culture of only large banks, and as everyone knows, mono-cultures are far more susceptible to the threats that changes in business condition and economic conditions present, rather than diversity which is inherently more more resilient. As is in biology, so is it in the economic world as well.

While the present administration and president laud how well the economy is doing, the reality is really far from that, as all the regulations they've instituted have dulled GDP growth from the more normal 3-5% to between 1-2%, hardly anything to write home about. But inconvenient facts such as these are ignored by the present administration and president such as they always have been, which is little more than being a used car salesmen.

 

[polgara]

Well, the two sides have pretty much identified themselves already, but I think that they are both missing the part of how all these actions that all these various people, both public sector and private sector took, was enabled by the de-regulation regulatory and economic conditions within which they operated. The onset of those conditions does go back to the Clinton administration.

Further, it always seems that everyone neglects the supply chain aspect of all this. Originators such as CountryWide originated bad risk mortgages, such as the NINJA mortgage (No Income, No Job or Assets) for well beyond what even the most optimistic value of the home was. These were sold to a middle man bank, which bundled them up, and eventually made it's way to the investment banksters, which carved them up into traunches, secured them against lost with CDO, had them rated as 'Class A investments' by rating agencies which didn't know what they were rating, and then sold world wide, spreading the toxin. At each step, there was easy money to be made. The same can be said for the house flippers, and those treating their houses like ATMs, re-mortgaging like every 3 months for ever larger a mortgage value (I was told of this from some tax preparers).

This house of cards that got built worked out just fine while all the housing evaluations kept going up and up and the mortgages amounts did the same, but reality has a way of putting a stop to that when either or both grew to the ridiculous level, which they did.

While all this was going on, both parties in the congress and the administration knew the excrement was going to hit the fan at sometime, and really thoroughly, and while there were a number of attempts to put sanity back in the driver seat, none of them succeeded for all the wrong reasons. So each of them has their fair share of blame for this mess as well, some for direct actions they took, and some for actions that they didn't take.

The banksters figured they were safe with their CDOs protecting them, but when the the CDO insurance company, AIG, went belly up they too had claims and demands made against them that weren't covered by AIG and their CDOs, so they went belly up as well, one by one.

The administration took it on themselves to 'rescue' everyone from their own folly (especially the bankserts), and tried to give the economy a softer landing, which it did, but the landing was a harsh one none the less, and panic ensued and a deep recession took hold, all the businesses were looking to save every scrap of cash they could to help them weather the recession and survive. Unfortunately, in many businesses, the workforce is the quickest and easiest thing to cut back. And that's why at the tail end of the Bush administration the economy was shedding some 800,000 jobs a month, not that this was typical in any way for all the rest of his administration.

So what have the following congresses and administrations done to prevent such a fiscal atom bomb from forming and going off again? Have those in power learned anything from the pain on mainstreet? Nope.

The promised of 'End of too big to fail' Dodd-Frank fiasco does exactly nothing to prevent banks and other financial institutions from becoming too large that their failure wouldn't sink the entire economy. If anything Dodd-Frank, with it's stupidly written regulations which are far too costly to comply with, have squeezed small banks out, forcing them to consolidate into larger banks in order to be able to afford the overhead. The result is a mono-culture of only large banks, and as everyone knows, mono-cultures are far more susceptible to the threats that changes in business condition and economic conditions present, rather than diversity which is inherently more more resilient. As is in biology, so is it in the economic world as well.

While the present administration and president laud how well the economy is doing, the reality is really far from that, as all the regulations they've instituted have dulled GDP growth from the more normal 3-5% to between 1-2%, hardly anything to write home about. But inconvenient facts such as these are ignored by the present administration and president such as they always have been, which is little more than being a used car salesmen.

Greetings, Erik. :2wave:

Very well stated! :thumbs:

 

[JasperL]

The correct answer is clinton created and laid the framework for the bubble, and bush expanded upon it.

Clinton, Bush, a whole slew of bought and paid for Senators and Reps in both parties, Greenspan and the Fed, banks whose lobbyists spent $billions pushing for the exact set of rules that allowed them to gamble with impunity, keep the winnings, and lay off the losses on the rest of us, the CEOs who paid themselves 8 figures while the bubble was blowing up then blamed the losses on everyone but themselves, BOD asleep at the wheel, etc.

Who most definitely were NOT to blame are poors and blahs in the inner cities who got a few crumbs from CRA and related. Anyone who actually believes the most powerful force in our country, the major banks, were "forced" to lend more than insignificant sums to the least powerful people in our country, in return for the other 99.9% of the banks' wish lists being crossed off is delusional.

 

[beerftw]

Clinton, Bush, a whole slew of bought and paid for Senators and Reps in both parties, Greenspan and the Fed, banks whose lobbyists spent $billions pushing for the exact set of rules that allowed them to gamble with impunity, keep the winnings, and lay off the losses on the rest of us, the CEOs who paid themselves 8 figures while the bubble was blowing up then blamed the losses on everyone but themselves, BOD asleep at the wheel, etc.

Who most definitely were NOT to blame are poors and blahs in the inner cities who got a few crumbs from CRA and related. Anyone who actually believes the most powerful force in our country, the major banks, were "forced" to lend more than insignificant sums to the least powerful people in our country, in return for the other 99.9% of the banks' wish lists being crossed off is delusional.

I used to believe the cra had a major impact, but a long time ago on this forum someone pointed me to the cfma, which was actually the law that did the most damage. It allowed mortgage companies to issue loans, then package them as derivatives and commodities. The cfma allowed them to profit off of toxic loans and push their loss elsewhere, atleast for a long time, since it caught up to them in 07.

 

[beerftw]

https://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000

I thought you were referring to the other gramm bill signed in 99. Usually they refer to the gramm leach bliley bill and the cfma as simply the cfma.

 

[Vern]

LOL, AZ and NV weren't hotbeds of 'CRA' lending. They were hotbeds of subprime lending but I doubt if 1 subprime loan in 10 in those states was covered at all by CRA.

And the man promoted the idea that unregulated financial markets were self correcting for nearly 20 years, and his actions as the regulator of last resort of the U.S. financial system reflected that viewpoint - he did nothing, raised no alarms, issued no objections, as the banks he is tasked to oversee the soundness of blew up the biggest credit bubble in at least modern history, nor did he once (AFAIK) so much as utter a note of concern as unregulated derivatives fueling all this reached $100s of TRILLIONS outstanding. In short, the guy spent his entire career cheerleading the policies that nearly brought down the world financial system, from his seat as Chairman of the Fed which was one of very few with the ability to do something about it.

I was joking about Arizona being a hot bead of CRA lending. I forgot to put a question mark.

Now Greenspan deserves all the criticism in the world but derivatives didn't create the Bush Mortgage Bubble. You can make a case that they made the Bush Financial Crisis worse but you could also say they didn't. they made it worse for AIG because they 'bet' that housing never goes down. But when AIG paid off, it mitigated the losses for people/companies that used them as insurance. Regardless if derivatives made the Bush Financial Crisis worse, there would have been no Bush Financial Crisis if it weren't for the Bush Mortgage Bubble. that was caused by "dramatically lower lending standards starting late 2004".

the Fed may have been the regulator of last resort but that's only because bush's regulators not only did nothing to stop it, they encouraged it. Here's the Inspector General's report for Indy Mac. they said regulators should have stepped in in 2005.

We believe that OTS should have taken enforcement action against IndyMac as early as 2005. In its 2005 ROE, OTS reported that IndyMac’s capital ratios continued to move lower due to significant asset growth, including growth in higher risk asset categories. OTS was concerned with IndyMac’s quarterly liquidity stress analysis. OTS also reported that IndyMac had several significant asset concentrations that warranted a higher level of capital in the current environment, such as nontraditional mortgage loans with negative amortization potential, Alt-A loans, and geographic concentration of loans in California and areas rated high-risk by several mortgage insurance companies. We found no evidence in the work papers that enforcement action was considered.

 

[Vern]

Well, the two sides have pretty much identified.......

I have to laugh eohrn, you whine so much about threads concerning the Bush Mortgage Bubble but you cant stop posting in them. and what a humongous word fort just to say "many actors". Extra words doesn't make it true.

 

[eohrnberger]

I have to laugh eohrn, you whine so much about threads concerning the Bush Mortgage Bubble but you cant stop posting in them. and what a humongous word fort just to say "many actors". Extra words doesn't make it true.

I will not engage with a dishonest poster such as yourself.

 

[JasperL]

I was joking about Arizona being a hot bead of CRA lending. I forgot to put a question mark.

Sorry, I was surprised you made the claim. Generally not like you.

Now Greenspan deserves all the criticism in the world but derivatives didn't create the Bush Mortgage Bubble. You can make a case that they made the Bush Financial Crisis worse but you could also say they didn't. they made it worse for AIG because they 'bet' that housing never goes down. But when AIG paid off, it mitigated the losses for people/companies that used them as insurance. Regardless if derivatives made the Bush Financial Crisis worse, there would have been no Bush Financial Crisis if it weren't for the Bush Mortgage Bubble. that was caused by "dramatically lower lending standards starting late 2004".

I disagree about derivatives not being one of several primary causes. Early in the 'crisis' lots of commentators kept saying things like, "Even if ALL the subprime mortgages default, the system can absorb that shock, and the risk is dispersed! etc..... " but what those comments didn't account for, perhaps because no one COULD know the numbers, is that a single mortgage might represent ten or 20 times that in outstanding bets, and that the "insurance" against defaults was backed by essentially nothing, and the chain of collapses as people relying on that insurance being good meant they couldn't pay their debts, etc. etc.

the Fed may have been the regulator of last resort but that's only because bush's regulators not only did nothing to stop it, they encouraged it. Here's the Inspector General's report for Indy Mac. they said regulators should have stepped in in 2005.

I agree with that 100%. My favorite picture of all time related to the crisis is this one:

It's essentially bank and insurance regulators promising not to regulate. And there is the SEC allowing the five biggest investment banks to ramp up leverage from 10-12 to 1 to 30-40 or 50 to 1 - to essentially self regulate.

And my problem with Greenspan is he provided immense political and intellectual cover to all of that, opposing any regulations at all on the financial industry believing that they had the self interest to self regulate, and he was "shocked, shocked" I tell you that people paid $millions for short term performance, and with little regard for long term stability, focus on.... short term performance and disregard risk to the extent it's in their "self interest" to do so. Which is why AIG execs paid out massive bonuses for writing $trillions in derivatives, banking the premiums as profits, while not putting aside essentially anything back in reserves. Why would they? It was Greenspan's job, essentially, to see this big picture and react and instead of tamping this stuff down, he poured gasoline on it and lit the fire whenever and however he could. He was disastrously wrong.

 

[Vern]

Sorry, I was surprised you made the claim. Generally not like you.

I disagree about derivatives not being one of several primary causes. Early in the 'crisis' lots of commentators kept saying things like, "Even if ALL the subprime mortgages default, the system can absorb that shock, and the risk is dispersed! etc..... " but what those comments didn't account for, perhaps because no one COULD know the numbers, is that a single mortgage might represent ten or 20 times that in outstanding bets, and that the "insurance" against defaults was backed by essentially nothing, and the chain of collapses as people relying on that insurance being good meant they couldn't pay their debts, etc. etc.

I agree with that 100%. My favorite picture of all time related to the crisis is this one:

It's essentially bank and insurance regulators promising not to regulate. And there is the SEC allowing the five biggest investment banks to ramp up leverage from 10-12 to 1 to 30-40 or 50 to 1 - to essentially self regulate.

And my problem with Greenspan is he provided immense political and intellectual cover to all of that, opposing any regulations at all on the financial industry believing that they had the self interest to self regulate, and he was "shocked, shocked" I tell you that people paid $millions for short term performance, and with little regard for long term stability, focus on.... short term performance and disregard risk to the extent it's in their "self interest" to do so. Which is why AIG execs paid out massive bonuses for writing $trillions in derivatives, banking the premiums as profits, while not putting aside essentially anything back in reserves. Why would they? It was Greenspan's job, essentially, to see this big picture and react and instead of tamping this stuff down, he poured gasoline on it and lit the fire whenever and however he could. He was disastrously wrong.

All good stuff. And don't forget Greenspan gave the "intellectual" cover for the Bush tax cuts. But I'm not seeing a connection between derivatives and dramatically lower lending standards which caused the mortgage bubble. Here's simple thing to understand about derivatives. they are a 'bilateral' transaction. literally just a bet between two parties. when billions more are bet on the super bowl than a normal football game. It doesn't affect the game and its not a bubble. AIG was just a casino that bet big that housing prices don't go down. That destroyed AIG. The financial crisis was money was loaned to borrowers to buy assets at inflated values. Nothing wrong with that as long as people pay their mortgage. But the flood of unqualified buyers who drove up the prices in the first place couldn't pay their mortgage. that started the credit crunch which caused the recession. That caused the crisis. But lower lending standards cause the bubble. I think AIG was more of a distraction than a problem. and the AIG bailout was just them paying off their counterparties which mitigated some of the crisis.

 

[Manc Skipper]

These two satirists nailed it back at the time.

 

[Fenton]

These two satirists nailed it back at the time.

No one " nailed it at the time " with maybe the exception of the GOP, Bush and Bloomberg

Bush warned in 2001 that the GSEs represented a systemic economic threat if they remained unregulated

It wasn't until 2011 that anyone really knew how corrupt the GSEs were when the SEC disclosed that both Fannie and Freddie omitted hundreds of billions of dollars of worthless debt from their 2004-2008 SEC quarterly filings.

 

[Manc Skipper]

They did it in 2008. Every quote verbatim.

 

[JasperL]

No one " nailed it at the time " with maybe the exception of the GOP, Bush and Bloomberg

Your blind partisanship is just hilarious. I mean, seriously, you can't make up that kind of nonsense so I'm wondering if you're just trolling there - if so, awesome effort!

:applaud

 

[Fenton]

Your blind partisanship is just hilarious. I mean, seriously, you can't make up that kind of nonsense so I'm wondering if you're just trolling there - if so, awesome effort!

:applaud

Your the one trolling. Look at that last pathetic post you made.

Its just ad hominem mindless spam. You haven't once tried to counter the data or linls or anything Ive posted.

Why? Because you cant, you're intensly uninformed and your embarrassing yourself.

 

[JasperL]

Your the one trolling. Look at that last pathetic post you made.

Its just ad hominem mindless spam. You haven't once tried to counter the data or linls or anything Ive posted.

Why? Because you cant, you're intensly uninformed and your embarrassing yourself.

If Bush and the GOP 'nailed it at the time' then why did Bush's SEC allow the biggest banks to expand their leverage from 10-12 to 1 to 30, 40, 50-1? Why did the Bush regulators fall asleep at the wheel and allow AIG (to pick one example) to write $trillions in what were essentially insurance contracts without really ANY reserves against those potential liabilities? What concrete steps did Bush's regulators do to rein in the GSEs? What legislation did the relevant GOP House and Senate committees pass that would do any of the above? Why did Bush's minions sue states to PREVENT them from reining in subprime lenders? Etc.

And it's really hilarious just in general that your narrative always focuses exclusively and entirely only on those with a D by their name, and I can't recall you ever mentioning anyone with an R by their name as culpable for anything. It's the most one sided, ideologically blind analysis I've ever seen of the financial crisis, day after day, every time you comment on the subject.

Finally, Bloomberg is just an apologist for Wall Street. He knows better but pretends that the "market" worked just fine and that the banks who spent $billions (literally) buying the regulatory environment they wanted, got about 99.9% of their wish list crossed off, made record profits and paid themselves record and kingly bonuses while the winnings were pouring in, then tapped taxpayers for their losses are somehow victims in this mess. It's pathetic and shameful, because he's not that stupid.

 

[Fenton]

If Bush and the GOP 'nailed it at the time' then why did Bush's SEC allow the biggest banks to expand their leverage from 10-12 to 1 to 30, 40, 50-1? Why did the Bush regulators fall asleep at the wheel and allow AIG (to pick one example) to write $trillions in what were essentially insurance contracts without really ANY reserves against those potential liabilities? What concrete steps did Bush's regulators do to rein in the GSEs? What legislation did the relevant GOP House and Senate committees pass that would do any of the above? Why did Bush's minions sue states to PREVENT them from reining in subprime lenders? Etc.

And it's really hilarious just in general that your narrative always focuses exclusively and entirely only on those with a D by their name, and I can't recall you ever mentioning anyone with an R by their name as culpable for anything. It's the most one sided, ideologically blind analysis I've ever seen of the financial crisis, day after day, every time you comment on the subject.

Finally, Bloomberg is just an apologist for Wall Street. He knows better but pretends that the "market" worked just fine and that the banks who spent $billions (literally) buying the regulatory environment they wanted, got about 99.9% of their wish list crossed off, made record profits and paid themselves record and kingly bonuses while the winnings were pouring in, then tapped taxpayers for their losses are somehow victims in this mess. It's pathetic and shameful, because he's not that stupid.

Seriously ?

New Agency Proposed to Oversee Freddie Mac and Fannie Mae - NYTimes.com

2005 S190 GSE reform which recived ZERO democrat votes in the Banking committee was pushed back through as s1100 in 2007 when the Dems had majority in the Senate

Guess what happened to s1100 ?

Bloomberg being right about what led to the Financial crisis doesn't make him a apologist, it just makes him informed which is more than I can say for you and your ilk.

And it wasn't the " Big banks " who were committing unprecedented Securities fraud, it was Fannie Mae and Freddie Mac who prior to 2004 were exempt from SEC reporting requirements

After 2004 both Fannie and Freddie omitted hundreds of billions of dollars each year of no doc loans and worthless debt from their SEC quarterly filings

SEC Charges Former GSE Executives with Securities Fraud - Dodd-Frank News Center

https://www.google.com/url?sa=t&sou...ggcMAA&usg=AFQjCNFlEdGk99RqKDyqu_B5OXO9bE2aWQ

Ive posted these links over and over and over yet ypu people refuse to educate yourselves and then proceed to troll through these Subprime threads

 

[JasperL]

Seriously ?

New Agency Proposed to Oversee Freddie Mac and Fannie Mae - NYTimes.com

2005 S190 GSE reform which recived ZERO democrat votes in the Banking committee was pushed back through as s1100 in 2007 when the Dems had majority in the Senate

Guess what happened to s1100 ?

Bloomberg being right about what led to the Financial crisis doesn't make him a apologist, it just makes him informed which is more than I can say for you and your ilk.

And it wasn't the " Big banks " who were committing unprecedented Securities fraud, it was Fannie Mae and Freddie Mac who prior to 2004 were exempt from SEC reporting requirements

After 2004 both Fannie and Freddie omitted hundreds of billions of dollars each year of no doc loans and worthless debt from their SEC quarterly filings

SEC Charges Former GSE Executives with Securities Fraud - Dodd-Frank News Center

https://www.google.com/url?sa=t&sou...ggcMAA&usg=AFQjCNFlEdGk99RqKDyqu_B5OXO9bE2aWQ

Ive posted these links over and over and over yet ypu people refuse to educate yourselves and then proceed to troll through these Subprime threads

First of all, you ignored every question, and then repeated from your stock of talking points. You must have them saved as a doc file so you can copy and paste them no matter what anyone else points out.

Remind me again - was the financial crisis limited to the GSEs? I didn't think it was, but for some reason you ignore everything else. Can you tell me the reason?

And in 2005, the House and Senate were controlled by the GOP. So I guess the House passed its version of that reform and the Senate did the same? Oh yeah, that legislation didn't get a vote in either chamber. But that's the democrats' fault because.... the GOP held the majority...or something....

And tell me, Bush appointed the regulators, what steps did they take to rein in the GSEs and the other financial institutions?

Finally, what did Bloomberg get right? I haven't seen a thing.