The Mortgage Bubble Was The Democrat's Fault

[OpportunityCost]

The secondary market wasn't "gamed". What was "gamed" were the assets sold on that market. And those assets were backed by subprimes, starting in 2004, that had dramatically weakened standards.

I'm sorry, do you understand how mortgages are graded? Do you get that when they are bundled and the rating is based upon the best mortgages in the tranche rather than an average, you have false value being indicated. Do you think I linked all those fraudulent raters and sellers for ****s and grins? They were gaming the secondary and tertiary market.

 

[Critter7r]

It's a chicken-and-egg thing, although there were subprimes issued prior to 2004 and the secondary mortgage market existed prior to 2004. So I guess it's not a chicken-and-egg thing after all. It's a subprime thing.

Somewhere around 2004, banks realized they could write shoddy loans and then package them in such a way that they were recognized as being as good as conforming loans on the secondary market. As more and more banks found this mechanism for making money, more and more utilized it, creating the bubble.

 

[jaeger19]

The evidence it wasn't being enforced is the dramatic increase in subprimes issued beginning in 2004, and the default rates of those subprimes being 3-5 times higher than those of the subprimes prior. To me, that speaks to a lack of regulation and enforcement.

THAT IS NOT EVIDENCE... not at all.

We've been over this.

IF we used your reasoning.. the fact that we have had more terrorist attacks under Obama.. than Bush.. MUST MEAN that OBama has decreased anti terrorist activity.

You sir are using faulty reasoning.

 

[OpportunityCost]

And yet, that's exactly what they did. It's why the banks met with Bush's team in April 2004 to rewrite leveraging requirements for banks. That way, they could keep adding risk.

You realize you are making my argument for me? They wanted to invest more heavily in the secondary market. They were not lenders, they were buying mortgage bundles and securitized instruments related to mortgages.

 

[Incisor]

Explain how they were weakened, in what way?

Simple; the Bush Administration's approach to regulation was to "let the industry police itself". So when left to their devices, they of course reduce standards so they can generate securities to sell. Conservatives always think that capitalism works in benevolent ways, but it doesn't. Capitalism is not benevolent and never will be. Capitalism will seek to achieve profits by any means necessary. In this case, those means were to issue a flood of subprimes, coupled with a laissez-faire attitude toward regulation, to create securities to sell on the secondary mortgage market. That's what they wanted to do and Bush let them do that a number of ways; chief among them is letting the industry "police itself" which someone linked to earlier in this thread.

No, the CRA was not a factor in the subprime lending. Only 1 of the top 25 lending institutions from 2004-7 were subject to CRA rules. CRA loans also performed much better than non-CRA loans. Also, the CRA does not apply to non-bank lenders, who were the overwhelming majority of lenders who issued subprimes.

When it came to "selling of the risk", that's where the ratings agencies came in and faked better ratings on securities in order to increase their value on the secondary mortgage market. Again, this is a consequence of "letting the industry police itself" since ratings agencies are so closely aligned with the banks.

As for the actual requirements on the borrowers, this is where no-doc and NINJA loans come into play. Those loans, issued by non-bank lenders largely, were not subject to CRA requirements and were the "low standards" you're seeking.

 

[OpportunityCost]

You're arguing the other side of Incisor's coin.

He's saying that if the subprime isn't written, it can't be sold.

You're saying that if there was nowhere to sell it, it wouldn't be written.

And so the snowball begins.

My point is the problem would not have been so big without the secondary and tertiary market. It would have been localized at the main street banks writing the mortgages. Not the entire financial system. It would have still been bad, just not catastrophic.

 

[Incisor]

there was no mechanism in 2004. .

Right, so what that means is that in 2004, the banks suddenly lowered their requirements for subprimes, and the regulators let them do that because they work for the Executive Branch and the Executive Branch's approach to business was to "let the industry police itself".

It's not difficult to see how Bush and the Conservatives generated a housing bubble for the sake of growing the economy in time for the 2004 election.

 

[Incisor]

THAT IS NOT EVIDENCE... not at all.

Ummm...it's called "empirical evidence" for a reason.

You seem to think the fact that the number of subprimes more than doubled and their default rates spiked 3-5 times high is not evidence that a bubble was being inflated? OK, weirdo!

 

[Incisor]

My point is the problem would not have been so big without the secondary and tertiary market.

But those markets existed for decades without incident. It wasn't until Conservatives got in power that things went sideways on those markets.

 

[jaeger19]

Right, so what that means is that in 2004, the banks suddenly lowered their requirements for subprimes, and the regulators let them do that because they work for the Executive Branch and the Executive Branch's approach to business was to "let the industry police itself".

It's not difficult to see how Bush and the Conservatives generated a housing bubble for the sake of growing the economy in time for the 2004 election.

nope. There was no mechanism in 2004. The bubble.. as many booms and busts.. were the natural occurrence from a series of events that occurred well before 2004. The only way you can arrive at your conclusion is to ignore all the pertinent facts and use faulty reasoning.

 

[Incisor]

A weakening of standards by the lenders.. does not mean that regulators turned a blind eye.

Well, let's see...who is supposed to make sure the standards for the loans are strong and adequate?

 

[jaeger19]

But those markets existed for decades without incident. It wasn't until Conservatives got in power that things went sideways on those markets.

And we had fewer terrorist attacks under Bush than Obama. so using your logic.. it wasn't until Obama got into power that things went sideways in terrorism enforcement.

 

[Incisor]

I'm sorry, do you understand how mortgages are graded? Do you get that when they are bundled and the rating is based upon the best mortgages in the tranche rather than an average, you have false value being indicated. Do you think I linked all those fraudulent raters and sellers for ****s and grins? They were gaming the secondary and tertiary market.

Right...but they wouldn't have been able to do that without those securities being falsely rated.

 

[jaeger19]

Well, let's see...who is supposed to make sure the standards for the loans are strong and adequate?

the investors in the secondary market makes sure.

 

[Incisor]

nope. There was no mechanism in 2004.

Right...these banks decided in 2004 to start issuing junky subprimes because of the demand in the secondary mortgage market for securities backed by those subprimes. Now, my question to you is; why did they start in 2004, and why did the Bush Administration let them?

 

[Incisor]

And we had fewer terrorist attacks under Bush than Obama.

No we didn't.

 

[Moderate Right]

So what mechanism was it that said "starting in 2004, lending standards can be dramatically weakened"? Things don't just happen for no reason.

You guys already admitted this stuff was already happening at lower levels before 2004. The plant reached maturity in 2004. It's like saying that the Great Recession is 100% Obama's fault because he was the one at the helm when the plant matured.

 

[Critter7r]

Well.. its hard to prove a negative. YOU claim that regulators turned a blind eye. Yet you again... offer no proof.

So you keep repeating that investigators turned a blind eye.. certainly doesn't make it true.

A weakening of standards by the lenders.. does not mean that regulators turned a blind eye.

But at least I've shown you others knowledgeable in such things saying the same thing. Yes, I know, an appeal to authority, but you've brought nothing to prove that they were being diligent in their work. In auditing, the failure to find the systemic issues leading up to the housing bust would be more accurately described as failing to do one's job than that of having done it to the best of their ability.

Nobody was checking out the thousands of individual mortgages contained within the MBSs and they kept getting rated as if there was nothing wrong with them. And since lenders were taking on ever-riskier loans and throwing ever-increasing numbers of them into MBSs, it stands to reason that they'd eventually dilute the pool enough to cause them to become toxic.

 

[Incisor]

the investors in the secondary market makes sure.

The investors in the secondary market make sure the loan is secure before they even buy the security? I don't think you know what you're talking about. It wasn't on the investors in the secondary market to make sure the mortgages were safe, that's why they were rated before they were sold on the market. So you're dancing around the process without admitting to it; a lender issues a loan subject to their standards, regulators are supposed to make sure those standards are good, then the loan is securitized, rated by the agency, and put on the market. So in that process, two things happened that shouldn't have; regulators didn't enforce those standards and the agencies lied about the rating of the security. But the agencies wouldn't have had to lie if the standards by which the mortgages backing the securities they rated were safe. They weren't. The lenders knew they weren't. The agencies knew they weren't. So the regulators had to have known they weren't either...unless they were not doing their job, or were colluding, or were too busy watching porno at work to notice. In any case, it all comes down to the responsibility of the Administration in charge.

 

[OpportunityCost]

Simple; the Bush Administration's approach to regulation was to "let the industry police itself". So when left to their devices, they of course reduce standards so they can generate securities to sell. Conservatives always think that capitalism works in benevolent ways, but it doesn't. Capitalism is not benevolent and never will be. Capitalism will seek to achieve profits by any means necessary. In this case, those means were to issue a flood of subprimes, coupled with a laissez-faire attitude toward regulation, to create securities to sell on the secondary mortgage market. That's what they wanted to do and Bush let them do that a number of ways; chief among them is letting the industry "police itself" which someone linked to earlier in this thread.

No, the CRA was not a factor in the subprime lending. Only 1 of the top 25 lending institutions from 2004-7 were subject to CRA rules. CRA loans also performed much better than non-CRA loans. Also, the CRA does not apply to non-bank lenders, who were the overwhelming majority of lenders who issued subprimes.

When it came to "selling of the risk", that's where the ratings agencies came in and faked better ratings on securities in order to increase their value on the secondary mortgage market. Again, this is a consequence of "letting the industry police itself" since ratings agencies are so closely aligned with the banks.

As for the actual requirements on the borrowers, this is where no-doc and NINJA loans come into play. Those loans, issued by non-bank lenders largely, were not subject to CRA requirements and were the "low standards" you're seeking.

1. The Community Reinvestment Act of 1977 sought to address discrimination in loans made to individuals and businesses from low and moderate-income neighborhoods. The Act mandates that all banking institutions that receive Federal Deposit Insurance Corporation (FDIC) insurance be evaluated by Federal banking agencies to determine if the bank offers credit (in a manner consistent with safe and sound operation as per Section 802(b) and Section 804(1) ) in all communities in which they are chartered to do business---so that 1 in 25 number is false.

2. The ratings agencies committed FRAUD. They weren't policing themselves, they got caught.

3. You still aren't explaining the ways in which lending standards were relaxed. Please do so.

4. Countrywide and other non bank lenders were contributing heavily Congressman and Senators, especially those in Finance and Banking Committees, what does that indicate to you?

Again I am looking at everything, you are convinced its just one thing, I am not.

 

[Critter7r]

THAT IS NOT EVIDENCE... not at all.

We've been over this.

IF we used your reasoning.. the fact that we have had more terrorist attacks under Obama.. than Bush.. MUST MEAN that OBama has decreased anti terrorist activity.

You sir are using faulty reasoning.

Except that terrorism isn't a function that is regulated by the Executive Branch of the US government.

Otherwise, yes, perfect analogy. :roll:

 

[OpportunityCost]

The investors in the secondary market make sure the loan is secure before they even buy the security? I don't think you know what you're talking about. It wasn't on the investors in the secondary market to make sure the mortgages were safe, that's why they were rated before they were sold on the market. So you're dancing around the process without admitting to it; a lender issues a loan subject to their standards, regulators are supposed to make sure those standards are good, then the loan is securitized, rated by the agency, and put on the market. So in that process, two things happened that shouldn't have; regulators didn't enforce those standards and the agencies lied about the rating of the security. But the agencies wouldn't have had to lie if the standards by which the mortgages backing the securities they rated were safe. They weren't. The lenders knew they weren't. The agencies knew they weren't. So the regulators had to have known they weren't either...unless they were not doing their job, or were colluding, or were too busy watching porno at work to notice. In any case, it all comes down to the responsibility of the Administration in charge.

Your approach shows you have no idea how regulation works. You don't look at every single piece of data. You sample unless you have information to investigate specific incidents. Your understanding of regulation is faulty.

 

[Incisor]

You guys already admitted this stuff was already happening at lower levels before 2004.

Right, but each action has a specific reaction in this scenario. There was no action, law, or mandate that said starting in 2004, lenders could lower standards for subprimes.

 

[OpportunityCost]

Right...but they wouldn't have been able to do that without those securities being falsely rated.

...

...

...

THE RATINGS AGENCIES WERE COMMITTING FRAUD. I didn't link those settlements for the hell of it. It shows a pattern.

 

[OpportunityCost]

Right, but each action has a specific reaction in this scenario. There was no action, law, or mandate that said starting in 2004, lenders could lower standards for subprimes.

Please explain the details of these lower lending standards, 3rd time. Please reply with factual information about HOW they were lowered and what government agency okayed the issue.