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What caused the housing crisis?

MaggieD

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What caused the housing crisis? Should it have been foreseen? Could the crisis have been "headed off at the pass?" Are we still making the same mistakes?

My opinion: President Clinton's National Homeownership Strategy (1994) began the mess that's led us to where we are today. With the help of an historic meeting of public and private lenders/bankers/public-private housing industry moguls convened at the White House in August 1994, the NHS was born. It's underlying intent: "Everybody ought to be able to buy a home. So, lenders, come up with some creative ways to make that happen!" And they did. Bill Clinton's drive to increase homeownership went way too far - BusinessWeek

Voila! The housing crisis -- and the worst economy our country has seen since 1939.

Do we have Democrats to thank for this housing crisis? More importantly, is the current Administration doing the same thing all over again in the business sector?

Discussion?
 

lizzie

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Imo, it was two primary factors: government (primarily on the D side of the aisle) pushing for home ownership for all, and the repeal of Glass-Stegal in 1999. Add that to a banking/lending feeding frenzy with an implied promise of government backing, and voila!
 

Gipper

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50% American public, 50% banks. 0% government.

Bush was stupid in his big "home ownership is the American dream" push, but that had nothing to do with people stupid enough to have an income of 30K a year buying a 750K house with 1% down, and the banks giving them the money to do it with.
 

MaggieD

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50% American public, 50% banks. 0% government.

Bush was stupid in his big "home ownership is the American dream" push, but that had nothing to do with people stupid enough to have an income of 30K a year buying a 750K house with 1% down, and the banks giving them the money to do it with.
Bush? Did you even read my post?? Gads. Thanks for your input. No offense, but . . .
 

Lord Tammerlain

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Realistically

The housing crisis was caused by low interest rates, and increasing leverage by the banks

One was a policy pushed by the fed, the other by the federal government. The Glass Stegal act repel had a part, the CRA, the Clinton homeownership and even the Bush homeownership played smalll parts

Recall that the housing bubble begin in earnest in the early 2000s, not in 1994. While prices were increase at abover average levels in the 90s, untill around 2002-2004 they were not outrageous. What occured in the early 2000's but historically low interest rates (historic untill now), BASELII which relaxed capital requirements for banks (both US and international) and the repel of the Glass Stegal act

All of which combined to form the perfect conditions for a bubble to occur. Said bubble would not have occured if potential homeowners were rational or the individual banks were realistic

If it was the US governments fault directly, what would explain a housing bubble in the Uk, Spain, Ireland and many parts of Canada during the same time frame? Housing in parts of Canada increased at similar rates to that in the US, despite not having the Clinton NHS, or CRA or Bush's homeownership push. The only thing in common was vast amounts of cheap credit
 
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Kali

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People trying to live well above their means.
 

lizzie

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If it was the US governments fault directly, what would explain a housing bubble in the Uk, Spain, Ireland and many parts of Canada during the same time frame?
Huge amounts of foreign money invested in the US mortgage and credit default swapping frenzy.
 

Kernel Sanders

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Government policies encouraged subprime lending leading to a great deal of bad debt. A lack of regulation in the derivatives market allowed the finance industry to package that bad debt into complex vehicles which destabilized the market. Ratings agencies gave the bad derivatives good ratings, which encouraged the industry to invest heavily in them. Weak enforcement of existing regulation allowed financial entities to over leverage themselves with bad debt, magnifying the fallout of the crisis many times over.
 

Manc Skipper

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Many of the techniques employed by the bankers in their ever more complex web of fraudulent dealings originated with Enron, whose staff took their expertise with them when they found employment throughout the financial sector when it imploded.
 
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