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The article lionizes prosecutors and demonizes Wall Street, even to the point of quoting Eliot Spitzer on honesty. It also goes on and on about the ethnicity of

by temphn 15y ago

The article lionizes prosecutors and demonizes Wall Street, even to the point of quoting Eliot Spitzer on honesty. It also goes on and on about the ethnicity of the accused in this case without ever mentioning the ethnicity of many of the players in the mortgage crisis. Finally, it puts the entirety of the blame for the crisis on Wall Street and cites Dodd Frank as good legislation...and puts zero blame on the shoulders of Barney Frank, the CRA, and the Bush/Clinton/Obama push for "affordable" minority housing. George Packer has an agenda, and that agenda is not truth.

dr_ 15y ago
You are correct that it lionizes prosecutors and demonizes Wall Street. The article keeps shifting focus way too much - first it's about Galleon, then about Preet, then the financial crisis, and it ends with a comment about Goldman Sachs, with some implied cynicism on the part of the author. I'm not sure if the blame should be put on Clinton/Bush for pushing affordable housing however. At the end of the day, no one forced people to purchase a home beyond their means, just like no one forced people to purchase stocks during the late 90's tech bubble. It's a decision people made on their own.
- shareme 15y ago
  incorrect..sir.. When the regulatory bodies allow a no-doc loan for a house to be entered into by the consumer they are in-fact complicit in fraud.. Uniform Commercial Code already implies that such a loan as a contract is extremely leaning towards fraud. The biggest entities involved Bank lobbyists encouraging others to look the other way rather than enforce laws and rules laready on the books
  - mdda 15y ago
    This makes no sense. A no-doc loan is precisely that. If an applicant chooses to lie, the government is not responsible. If your claim is that the applicants are being encouraged to commit fraud (by their local mortgage broker), then the government should start with regulating mortgage brokers. That's where the rot started. While it's natural for politicians to point fingers at their opponents, or the Wall Street bogeymen, the reality is that neither party caused the massive run-up in housing prices, and nor did Goldman Sachs.
- prodigal_erik 15y ago
  Some people bought houses they couldn't afford because they were betting on a quick sale at an appreciated value to bail them out (and for a while they got away with it). But some people literally didn't understand that their mortgage payments were going to skyrocket after the "teaser" rate expired in a few years, nor that the fast-talking broker actually expected them to default but had perverse incentives to offer them a stupid deal anyway.
NY_USA_Hacker 15y ago
NICE summary.
coolgeek 15y ago
Anybody who cites the CRA as a proximal cause of the financial crisis is either a) profoundly ignorant of what the CRA requires of financial institutions, or b) has an agenda, (and that agenda is not truth). "The Act requires the appropriate federal financial supervisory agencies to encourage regulated financial institutions to help meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation (Section 802.)" http://en.wikipedia.org/wiki/Community_Reinvestment_Act http://en.wikipedia.org/wiki/Community_Reinvestment_Act
- temphn 15y ago
  Huh? Are you arguing that the italicized passage disproves what happened? The actual practice associated with the CRA had nothing to do with safe/sound operation, and everything to do with a system of penalties and incentives intended to artificially juice minority homeownership. Mergers were denied and anti-redlining probes were launched if you didn't make a certain percentage of ultra high risk loans. This was a bipartisan thing, Bush pushed for this just as hard as Frank. Read Gretchen Morgenson's new book; what happened indicts Democrats and Republicans alike. The textual literalist argument you offer is reminiscent of those who denied that the Soviet Union could be killing people by the million. After all, the Soviet Constitution spelled out all these great rights!
  - coolgeek 15y ago
    Mergers were denied and anti-redlining probes were launched if you didn't make a certain percentage of ultra high risk loans. Since neither I nor most other readers have access to Morgenson's book, would you please provide links to documented examples of agencies forcing financial institutions to make "ultra high risk loans"? (And by documented, I don't mean some guy on National Review asserting that it happened. Agencies are required by law to document such actions and, in most cases, that documentation is public record.) Just to be clear, I've analyzed this issue in more depth than the typical person making assertions (on either side of the issue), though I am by no means an expert on the issue. As such, your assertions do not comport with my understanding of ether the CRA's imposed requirements on financial institutions, or the CRA as a cause of the financial crisis (to any degree). Also, at the risk of sending this off onto a tangent, please also explain why it took 30 years for the CRA to cause the financial crisis.
RockyMcNuts 15y ago
If you don't like X, then X caused the financial crisis, where X = [bankers | ACORN | CRA | Fannie Mae | regulation | deregulation | going off the gold standard | minorities | taxes | deficits | the Fed]. without going into too much detail, the crisis was the result of 1) excess leverage 2) moral hazard 3) MIA laissez-faire regulators who relied on nonexistent common sense and self-interest to contain moral hazard 4) complex and opaque interconnections between financial institutions leading to contagion and domino effects limit those, and people will still find ways to lose money, but the whole system won't go down in flames.
- temphn 15y ago
  Regulators were not MIA, they were all too present, forcing banks to extend risky loans by threatening anti-redlining lawsuits. The non-existent common sense was the premise that you shouldn't loan to people who can't pay. This common sense got suspended by government/NGO fiat because many of those who couldn't pay were minorities. No securitization hijinks could have happened if those mortgages hadn't been forced into the system in the first place.
  - RockyMcNuts 15y ago
    That's ridiculous and beside the point. It's ridiculous, because CRA loans were a tiny fraction of delinquent loans, they didn't go bad at meaningfully higher rates, the non-bank mortgage lenders like New Century that made the worst loans weren't covered by the CRA, something like 15% of loans over $1m were delinquent. It's beside the point, because a well-designed financial system wouldn't blow up insurance companies, S&Ls, brokers, all because banks are required/encouraged to make a small percentage of their loans in underserved areas. It's called confirmation bias, humans can and will believe what makes them comfortable.

by temphn 15y ago

dr_ 15y ago

You are correct that it lionizes prosecutors and demonizes Wall Street. The article keeps shifting focus way too much - first it's about Galleon, then about Preet, then the financial crisis, and it ends with a comment about Goldman Sachs, with some implied cynicism on the part of the author. I'm not sure if the blame should be put on Clinton/Bush for pushing affordable housing however. At the end of the day, no one forced people to purchase a home beyond their means, just like no one forced people to purchase stocks during the late 90's tech bubble. It's a decision people made on their own.

shareme 15y ago
incorrect..sir.. When the regulatory bodies allow a no-doc loan for a house to be entered into by the consumer they are in-fact complicit in fraud.. Uniform Commercial Code already implies that such a loan as a contract is extremely leaning towards fraud. The biggest entities involved Bank lobbyists encouraging others to look the other way rather than enforce laws and rules laready on the books
- mdda 15y ago
  This makes no sense. A no-doc loan is precisely that. If an applicant chooses to lie, the government is not responsible. If your claim is that the applicants are being encouraged to commit fraud (by their local mortgage broker), then the government should start with regulating mortgage brokers. That's where the rot started. While it's natural for politicians to point fingers at their opponents, or the Wall Street bogeymen, the reality is that neither party caused the massive run-up in housing prices, and nor did Goldman Sachs.
prodigal_erik 15y ago
Some people bought houses they couldn't afford because they were betting on a quick sale at an appreciated value to bail them out (and for a while they got away with it). But some people literally didn't understand that their mortgage payments were going to skyrocket after the "teaser" rate expired in a few years, nor that the fast-talking broker actually expected them to default but had perverse incentives to offer them a stupid deal anyway.

NY_USA_Hacker 15y ago

NICE summary.

coolgeek 15y ago

Anybody who cites the CRA as a proximal cause of the financial crisis is either a) profoundly ignorant of what the CRA requires of financial institutions, or b) has an agenda, (and that agenda is not truth). "The Act requires the appropriate federal financial supervisory agencies to encourage regulated financial institutions to help meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation (Section 802.)" http://en.wikipedia.org/wiki/Community_Reinvestment_Act http://en.wikipedia.org/wiki/Community_Reinvestment_Act

temphn 15y ago
Huh? Are you arguing that the italicized passage disproves what happened? The actual practice associated with the CRA had nothing to do with safe/sound operation, and everything to do with a system of penalties and incentives intended to artificially juice minority homeownership. Mergers were denied and anti-redlining probes were launched if you didn't make a certain percentage of ultra high risk loans. This was a bipartisan thing, Bush pushed for this just as hard as Frank. Read Gretchen Morgenson's new book; what happened indicts Democrats and Republicans alike. The textual literalist argument you offer is reminiscent of those who denied that the Soviet Union could be killing people by the million. After all, the Soviet Constitution spelled out all these great rights!
- coolgeek 15y ago
  Mergers were denied and anti-redlining probes were launched if you didn't make a certain percentage of ultra high risk loans. Since neither I nor most other readers have access to Morgenson's book, would you please provide links to documented examples of agencies forcing financial institutions to make "ultra high risk loans"? (And by documented, I don't mean some guy on National Review asserting that it happened. Agencies are required by law to document such actions and, in most cases, that documentation is public record.) Just to be clear, I've analyzed this issue in more depth than the typical person making assertions (on either side of the issue), though I am by no means an expert on the issue. As such, your assertions do not comport with my understanding of ether the CRA's imposed requirements on financial institutions, or the CRA as a cause of the financial crisis (to any degree). Also, at the risk of sending this off onto a tangent, please also explain why it took 30 years for the CRA to cause the financial crisis.

RockyMcNuts 15y ago

If you don't like X, then X caused the financial crisis, where X = [bankers | ACORN | CRA | Fannie Mae | regulation | deregulation | going off the gold standard | minorities | taxes | deficits | the Fed]. without going into too much detail, the crisis was the result of 1) excess leverage 2) moral hazard 3) MIA laissez-faire regulators who relied on nonexistent common sense and self-interest to contain moral hazard 4) complex and opaque interconnections between financial institutions leading to contagion and domino effects limit those, and people will still find ways to lose money, but the whole system won't go down in flames.

temphn 15y ago
Regulators were not MIA, they were all too present, forcing banks to extend risky loans by threatening anti-redlining lawsuits. The non-existent common sense was the premise that you shouldn't loan to people who can't pay. This common sense got suspended by government/NGO fiat because many of those who couldn't pay were minorities. No securitization hijinks could have happened if those mortgages hadn't been forced into the system in the first place.
- RockyMcNuts 15y ago
  That's ridiculous and beside the point. It's ridiculous, because CRA loans were a tiny fraction of delinquent loans, they didn't go bad at meaningfully higher rates, the non-bank mortgage lenders like New Century that made the worst loans weren't covered by the CRA, something like 15% of loans over $1m were delinquent. It's beside the point, because a well-designed financial system wouldn't blow up insurance companies, S&Ls, brokers, all because banks are required/encouraged to make a small percentage of their loans in underserved areas. It's called confirmation bias, humans can and will believe what makes them comfortable.