4 ms·

Ugh, this tired idea. Ask yourself this: if the law was created in 1994, why didn't the bubble take off then? The CRA had nothing to do with the crisis as mos

Ugh, this tired idea. Ask yourself this: if the law was created in 1994, why didn't the bubble take off then? The CRA had nothing to do with the crisis as most of the subprime loans were made by non-CRA governed companies. The housing bubble could have been avoided entirely if the Fed had just placed tighter restrictions on the loans that could be made. Greenspan famously decided that he didn't want to do that - which lead to companies like Countrywide creating the loans for packaging by Wall Street, allowing them to offload all risk immediately. My true disappointment with Obama has been his lack of real, strong re-regulation of Wall Street and a pursuit of criminal charges against many on Wall Street, but at least, immediately after he came into office, added the simple language of requiring lenders to confirm income as part of the lending process. That simple language, which would seem obvious to anyone who would lend money, could have stopped the whole thing in its tracks in my opinion.

anamax 15y ago
> Ask yourself this: if the law was created in 1994, why didn't the bubble take off then? We were running another bubble then. Note that W also encouraged home ownership, so I'm not blaming Clinton alone. > The CRA had nothing to do with the crisis as most of the subprime loans were made by non-CRA governed companies. The posted link wasn't the CRA, but a policy that applied to every company that made/makes home loans. Also, you're ignoring the role of Fannie/Freddie. A large fraction of loans are made to be sold. As the largest buyer, Fannie/Freddie have a huge effect.
- inthewoods 15y ago
  >We were running another bubble then. Doesn't follow - if the banks were forced, as you say, to make loans, the bubble should have started then. >The posted link wasn't the CRA, but a policy that applied to every company that made/makes home loans. That's fine, but there is no indication, in the actual mortgage data, that banks were being forced to issue subprime mortgages. The data shows that it was mainly mortgage companies were issuing subprimes, then offloading them for packaging into CDOs by Wall Street. If you want to make that argument, it isn't enough to produce a document - the data has to support the argument and it doesn't. >Also, you're ignoring the role of Fannie/Freddie. A large fraction of loans are made to be sold. As the largest buyer, Fannie/Freddie have a huge effect. Not true - Fannie/Freddie were late to the subprime game and had lost marketshare. In 2006, they got started buying subprimes. Bottom line, Fannie/Freddie had an impact, but they were not the driving force behind the housing bubble. "Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble. During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data." http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#ixzz1cvYnjvcB http://www.mcclatchydc.com/2008/10/12/53802/private-sector-l...
  - anamax 15y ago
    > Doesn't follow - if the banks were forced, as you say, to make loans, the bubble should have started then. The housing price data shows a run-up then. Like I said, there were other factors, but without the "encouragment" to issue subprime, things would likely have been different. > That's fine, but there is no indication, in the actual mortgage data, that banks were being forced to issue subprime mortgages. The data shows that it was mainly mortgage companies were issuing subprimes, "banks" in this context is shorthand for anyone offering mortgages, which includes, by definition, mortgage companies. (It doesn't include banks that didn't do mortgages.) The policy cited explicitly said that.
    - inthewoods 15y ago
      >The housing price data shows a run-up then. Price data isn't what we're looking at here - we're looking at subprime mortgage origination. >Like I said, there were other factors, but without the "encouragment" to issue subprime, things would likely have been different. It is a bit laughable that you think companies like Countrywide had to be forced or encouraged into issuing subprime. Nothing could further from the truth - they were issuing the loans hand over fist, and constantly pushing the boundaries of acceptable loan documentation (such as giving loans to illegal immigrants). No one forced these guys to give loans - they did it because they were making a ton of money. But let's say what your saying is true - show me documentation that shows banks actually being forced to give loans where they didn't want to. What you have is a document outlining a policy, but no data or evidence showing that it actually happened. You really need to read this: http://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story.html http://www.washingtonpost.com/business/what-caused-the-finan...
      - anamax 15y ago
        I've read it. Did you? It's interesting that you think that the fed isn't part of govt and that repealing Glass-Steagall isn't either. Also, the ratings monopoly is also a govt creation. (Yes, folks could consider other things, but their ratings determine what counts for "assets" for regulated entities.) Most items in the list in that article have govt's fingerprints all over it, and it's hardly complete. For example, it ignores fannie and freddie, the various efforts to encourage home ownership, and the like. > What you have is a document outlining a policy, but no data or evidence showing that it actually happened. Are you really arguing that regulated entities don't follow the rules? If so, you don't get to argue that different rules would have made a difference.

anamax 15y ago

> Ask yourself this: if the law was created in 1994, why didn't the bubble take off then? We were running another bubble then. Note that W also encouraged home ownership, so I'm not blaming Clinton alone. > The CRA had nothing to do with the crisis as most of the subprime loans were made by non-CRA governed companies. The posted link wasn't the CRA, but a policy that applied to every company that made/makes home loans. Also, you're ignoring the role of Fannie/Freddie. A large fraction of loans are made to be sold. As the largest buyer, Fannie/Freddie have a huge effect.

inthewoods 15y ago
>We were running another bubble then. Doesn't follow - if the banks were forced, as you say, to make loans, the bubble should have started then. >The posted link wasn't the CRA, but a policy that applied to every company that made/makes home loans. That's fine, but there is no indication, in the actual mortgage data, that banks were being forced to issue subprime mortgages. The data shows that it was mainly mortgage companies were issuing subprimes, then offloading them for packaging into CDOs by Wall Street. If you want to make that argument, it isn't enough to produce a document - the data has to support the argument and it doesn't. >Also, you're ignoring the role of Fannie/Freddie. A large fraction of loans are made to be sold. As the largest buyer, Fannie/Freddie have a huge effect. Not true - Fannie/Freddie were late to the subprime game and had lost marketshare. In 2006, they got started buying subprimes. Bottom line, Fannie/Freddie had an impact, but they were not the driving force behind the housing bubble. "Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble. During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data." http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#ixzz1cvYnjvcB http://www.mcclatchydc.com/2008/10/12/53802/private-sector-l...
- anamax 15y ago
  > Doesn't follow - if the banks were forced, as you say, to make loans, the bubble should have started then. The housing price data shows a run-up then. Like I said, there were other factors, but without the "encouragment" to issue subprime, things would likely have been different. > That's fine, but there is no indication, in the actual mortgage data, that banks were being forced to issue subprime mortgages. The data shows that it was mainly mortgage companies were issuing subprimes, "banks" in this context is shorthand for anyone offering mortgages, which includes, by definition, mortgage companies. (It doesn't include banks that didn't do mortgages.) The policy cited explicitly said that.
  - inthewoods 15y ago
    >The housing price data shows a run-up then. Price data isn't what we're looking at here - we're looking at subprime mortgage origination. >Like I said, there were other factors, but without the "encouragment" to issue subprime, things would likely have been different. It is a bit laughable that you think companies like Countrywide had to be forced or encouraged into issuing subprime. Nothing could further from the truth - they were issuing the loans hand over fist, and constantly pushing the boundaries of acceptable loan documentation (such as giving loans to illegal immigrants). No one forced these guys to give loans - they did it because they were making a ton of money. But let's say what your saying is true - show me documentation that shows banks actually being forced to give loans where they didn't want to. What you have is a document outlining a policy, but no data or evidence showing that it actually happened. You really need to read this: http://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story.html http://www.washingtonpost.com/business/what-caused-the-finan...
    - anamax 15y ago
      I've read it. Did you? It's interesting that you think that the fed isn't part of govt and that repealing Glass-Steagall isn't either. Also, the ratings monopoly is also a govt creation. (Yes, folks could consider other things, but their ratings determine what counts for "assets" for regulated entities.) Most items in the list in that article have govt's fingerprints all over it, and it's hardly complete. For example, it ignores fannie and freddie, the various efforts to encourage home ownership, and the like. > What you have is a document outlining a policy, but no data or evidence showing that it actually happened. Are you really arguing that regulated entities don't follow the rules? If so, you don't get to argue that different rules would have made a difference.